Daishin Securities Co., Ltd. Annual Report for the year ... · PDF fileStock Market Division of the Korea Exchange ... CEO’s Interview ... Daishin Securities will continue to uphold

Daishin Securities Co., Ltd.

Annual Report for the year ended on

31 March 2010 as filed with the UK Listing

Authority on 30 September 2010

Annual Report

(49th

Fiscal year)

Fiscal year: From April 1, 2009 to March 31, 2010

To: Financial Supervisory Service of Korea

Stock Market Division of the Korea Exchange

Daishin Securities Co., Ltd. herewith submits its annual report to the Financial Services Authority of the United

Kingdom. This annual report is the summary and translation of the annual report of Daishin Securities Co., Ltd.

submitted to the Financial Supervisory Service of the Republic of Korea pursuant to Financial Investment

Service and Capital Markets Act

September 30, 2010

Company Name : Daishin Securities Co., Ltd.

CEO : Chung Nam Roh

Head Office : 34-1, Youido-dong, Youngdungpo-ku, Seoul, 150-884, Korea

(Tel) 82-2-769-2000

Prepared by : (Position) Gneral Manager Strategic Planning & Coordination Dept.

(Name) Ho-Joon Kim

(Tel) 82-2-769-2215

0

Table of Contents

I. Business Report ........................................................................................................................................ 1

1. Corporate History ………….…………………………………………………………………………. 1

2. Chairwoman’s Message………………………………………………………………………………. 3

3. CEO’s Interview……………………………………………………………………………………… 4

4. General Corporate Information ………………………………………………………………………. 5

A. Business Objectives……………………………………………………………………………….. 5

B. Total Employee Status…………………………………………………………………………….. 7

C. Status of Domestic Branches and Overseas Representative Offices……………………………… 7

D.Organization Chart…………………………………………………………………………………. 8

E. Stock Information………………………………………………………………………………….. 9

5. Parent Company, Subsidiary Company and Consolidated Circumstances, etc……………………… 10

A. Parent Company Status……………………………………………………………………………. 10

B. Subsidiary………………………………………………………………………………………….. 10

C. Director’s Concurrent Office Position at Parent Company & Subsidiaries……………………….. 10

6. Management’s Discussion and Analysis……………………………………………………………. 11

A. Executive Summary……………………………………………………………………………….. 11

B. Operating Results…………………………………………………………………………………. 12

C. Financial Condition………………………………………………………………………………… 14

D. Business Outlook………………………………………………………………………………….. 16

7. Business Overview…………………………………………………………………………………… 17

A. New Concept Retail Service……………………………………………………………………… 17

B. Rebuilding Business Model on Based Core Competency………………………………………... 18

C. Sustainable Management System and Fulfilling CSR…………………………………………… 19

8. Major Shareholder Structure………………………………………………………………………… 20

9. Board of Directors and Audit Committee Member…………………………………………………... 20

II. Financial Report (Non-consolidated)……………………….………………………………………… 21

1. Balance Sheet…………………………………………………………………………………………. 21

2. Statement of Income………………………………………………………………………………….. 23

3. Statement of Appropriations of Retained Earnings…………………………………………………... 25

4. Statement of Changes in Shareholder’s Equity………………………………………………………. 26

5. Statement of Cash Flows……………………………………………………………………………... 27

III. Audit Report……………………………….…………………………………………………………... 30

1. Audit Report by the Audit Committee………………………………………………………………... 30

2. Report of Independent Auditors (Non-consolidated Financial Statements)………………………….. 31

V. Consolidated Financial Statements………..…………………………………………………………… 34

1

I. Business Report

1. Corporate History

1962 Jul. 27 Established as Sam-Lark Securities

1968 Jul. 08 Renamed Chung-Bo Securities

1975 Apr. 22

Oct. 01

Renamed Daishin Securities

Listed on Korea Stock Exchange (now Korea Exchange)

1984 Aug. 25

Sep. 22

Established Tokyo Representative Office

Established Daishin Economic Research Institute

1985 Mar. 06

Apr. 12

May 28

Forged capital alliance with W.I.C.O., Hong Kong

Forged capital alliance with Yamaichi Securities, Japan

Relocated headquarters to Yeoido, Seoul

1988 Mar. 24 Established Daishin Investment Consulting Co

1990 Jul. 20 Established Daishin Songchon Cultural Foundation

1996 Jul. 01

Nov. 23

Changed the name of Daishin Investment Consulting Co. to

Daishin Investment Trust Management Co.

Introduced Korea’s first “One Card System”

1997 Apr. 12

Launched home trading system (CYBOS DOS version)

1998 Jun. 09

Introduced Internet trading, the first among large brokers

1999 Aug. 31

Nov. 03

Capital increase (new share issue via third party placement) -

strategic alliance with Sumitomo Life Insurance, Japan

Capital increase (rights offering)

2002 Sep. 16

Retired 200,000 common shares of treasury stock

2003 Jul. 21

Sep. 04

Dec. 01

Selected as a component of KODI (Korea Dividend Stock Price Index,

an index of 50 component stocks)

Registered as insurance sales agent financial institution

Selected as a component of KOGI (Korea Corporate Governance Stock

Price Index)

2004 Mar. 10

Jun. 03

Jun. 23

Received Good Compliance Member Award given by Korea Exchange

Recognized for outstanding corporate governance by Korea Exchange

Registered to engage in investment advisory business

2005 Feb. 25

Sep. 26

Dec. 09

Dec. 09

Dec. 17

Received approval to deal in OTC derivatives products

Road shows (major US cities including New York)

Received approval to engage in trust business

Registered to engage in retirement pension business

Capital increase (new share issue via third party placement) -

strategic alliance with SPARX Asset Management, Japan

2006 Aug. 21

Aug. 29

Oct. 16

Launched next generation ARS system

Forged strategic alliance with Nikko Cordial Group of Japan

Forged capital alliance with Nikko Cordial Group

2007 Nov. 03

Listed 20 million GDS on London Stock Exchange (capital increase by

KRW 50 billion)

2

2008 Feb. 13

May. 26

Sep. 12

Established Daishin Securities Asia Limited, Hong Kong (overseas subsidiary)

Established Shanghai Representative Office in China

Added an affiliate with the establishment of private equity fund,

Daishin Pegasus No.1

2009 Feb. 04

Feb. 05

Apr. 22

May.04

Aug. 19

Oct. 20

Dec. 18

Shift to financial investment business with the implementation of Financial

Investment Services and Capital Markets Act

Daishin Securities Asia Limited, Hong Kong, launches operation

Participation in Korea Financial Telecommunications and Clearings Institute project

for fund transfer (Retail payment)

Opened next-generation financial system

Addition of a subsidiary after creation of Daishin MSB Private Equity Fund (PEF)

Selected as a component of the Dow Jones Sustainability Korea Index (DJSI Korea)

Addition to financial investment license: approval for trading/brokerage (domestic)

of exchange-traded derivatives

2010 Apr. 12 Addition of a subsidiary after creation of Daishin-Heungkuk Private Equity Fund No.

1 (PEF)

3

2. Chairwoman’s Message

Dear Sharehoders of Daishin Securiries,

Uncertainty continued to shadow the global economy in fiscal year 2009. As governments worldwide made concerted

efforts to resolve the economic crisis, ensuring growth and survival amid the turbulence posed a major challenge for

the corporate sector. As the year progressed, stimulus measures and low interest rates helped spark a gradual

improvement in economic indicators and confidence slowly returned to the financial markets.

In Korea, introduction of the Financial Investment Services and Capital Markets Act is changing the landscape of the

securities industry. The collapse of prominent global investment banks also led to a paradigm shift in the outlook for

financial institutions.

All of us at Daishin Securities combined our efforts to strengthen the company’s position in the market and prepare

for a new take-off in the midst of the changing environment.

To spearhead new market trends while maintaining priority on the customer, we launched an innovative hybrid

financial product called “Believe” service. In view of heightened emphasis on managing risks following the global

financial meltdown, we adopted more stringent risk management practices to ensure stable asset

structure and earnings.

Along with prudent risk management, we took steps to promote transparent corporate governance and mutual growth

with customers. As a result, Daishin Securities received a credit rating upgrade, was selected as a component of the

Dow Jones Sustainability Korea Index (DJSI Korea), and named the top-ranked well-being and premium brand

securities company by Japan Management Association Consultants (JMAC).

With the support of our shareholders, everyone at Daishin Securities spared no effort in trying to produce solid

operating results for fiscal 2009. Let’s take a closer look at the numbers.

Daishin Securities recorded total operating revenue of KRW 3,273.7billion. The amount includes KRW 361.6 billion

in commission income, KRW 1,876.0 billion in gains on valuation and disposal of marketable securities, and KRW

763.1 billion in gains on derivative transactions.

Operating expense was KRW 3,100.9 billion and operating income was KRW 172.8 billion. Non-operating income

totaled KRW 20.1 billion and non-operating expense reached KRW 43.8 billion. Pre-tax income was KRW 149.0

billion and net income amounted to KRW 91.4 billion.

We distributed cash dividends of KRW 1,000 per share for common stock and Class 2 preferred stock and KRW

1,050 for Class 1 preferred stock. With the dividend distribution, we maintained our commitment to enhancing

shareholder value and became the only major securities firm to pay out cash dividends for 12 consecutive years.

Daishin Securities will continue to uphold its profit-oriented approach in the fiscal year 2010 and strive to meet the

expectations of our valued shareholders.

Another difficult year lies ahead given fears that the European debt crisis will spill over into other regions, in addition

to expectations for revaluation of the Chinese yuan and implementation of exit strategies. While we anticipate a tough

environment, we will pursue a differentiated strategy and utilize our strengths to advance to the next level.

Our vision is to shape Daishin Securities into a trusted company that serves its customers with sincerity as a “financial

doctor”. To achieve this vision, we will implement a strategy based on the three themes of “financial growth,”

“enhanced operating efficiency” and “stronger relationship management.” We will expand and upgrade the “financial

health” service that was introduced last year and promote a new

financial culture.

Daishin Securities has unveiled a new CI (corporate identity) which upholds its management philosophy and tradition

shaped over the past five decades while embodying the company’s aspirations and values

for the future. We reaffirm our pledge to do our utmost to build a company that grows together with its customers and

shareholders.

In closing, I would like to thank our shareholders for their wholehearted support for Daishin Securities. We ask for

your continued trust and encouragement as we strive for new advances.


Chairwoman Auh-Ryung Lee

4

3. CEO’s Interview

Q. Please tell us about your performance in fiscal 2009 and business plans for fiscal 2010.

Despite a difficult environment created by the global financial crisis, we formulated a new strategy and prepared

various mechanisms to establish Daishin Securities as a specialized financial services provider

while pursuing change and innovation in 2009.

Daishin Securities’ operating income in fiscal 2009 grew by 72.6% year-on-year to KRW 172.8 billion. The growth

was largely attributable to an increase in commission received from brokerage operations, our

area of strength, and increased proprietary trading income due to rising stock prices and low interest rates. Earnings

were also boosted by new growth drivers from the wholesale segment including investment banking, wealth

management and retirement pension.

Over the past few years, we have been carrying out a major overhaul of our earnings structure. The percentage of

income from wealth management, principal investment, investment banking, and

proprietary trading is steadily climbing. This shift implies greater earnings diversification and stability.

We will achieve our business targets in fiscal 2010 by reinforcing our brokerage operation and new growth drivers,

namely investment banking, wealth management and retirement pension.

In addition to financial results, we plan to maximize management efficiency through the balanced scorecard. Under

this management system, we will check whether goals and strategies are achieved and

action plans are correctly implemented.

We will pay particular attention to promoting the “financial health” service which was launched last year. We will

provide differentiated services that allow us to satisfy customers and win their trust amid fierce competition.

Q. Tell us about the changes that have occurred since the FSCMA took effect and how things stand at this

point.

The Financial Investment Services and Capital Markets Act (FSCMA) greatly strengthened the customer protection

mechanism. Bearing that in mind, Daishin Securities has focused on increasing customers’ value. While competition

has heightened, we are upholding customer-oriented management to deliver services that protect and satisfy

customers rather than concentrating on short-term results.

It is vital to grow and generate profits. But at Daishin Securities, we believe it is more important to help our customers

enjoy true financial happiness. On that note, we will tighten risk management to protect customers’ assets and provide

reliable financial services based on expertise, integrity and consideration for the customer.

Daishin Securities has built an innovative retail business model. At the core of this model is the “financial health”

service designed to deliver value that meets customers’ demands. The service combines

brokerage and wealth management to offer unrivaled financial consulting. It encompasses all aspects of investment

and wealth management so that customers can enjoy financial happiness.

We will pursue triple-win value for customers, employees and the company to create happiness and ultimately

become a globally trusted company promoting harmony with customers.

Q. Daishin Securities has been included in DJSI Korea. What is the significance of this inclusion?

Daishin Securities was selected as a component of Dow Jones Sustainability Korea Index in October 2009. This

indicates that Daishin Securities has received external recognition for maintaining stable and efficient processes and

fulfilling its social and environmental responsibility.

Daishin Securities is a standalone securities company which is rare in Korea. We have grown over the past 48 years

through the ups and downs of the financial markets by turning crisis into opportunity based on preemptive and

strategic risk management. Stringent risk management is behind our reputation as a securities firm that shines brighter

in times of crisis.

We have presented diverse growth models for sustained growth and practice socially responsible management. We

are also taking the lead in environmental management with the launch of products to spearhead green finance such as

the “Global Warming Fund” while carrying out social contribution activities through Daishin Songchon Cultural

Foundation. These endeavors played a major role in our inclusion in DJSI Korea.


President & CEO Chung-Nam Roh

5

4. General Corporate Information

A. Business Objective

(1) The purposes of the Company shall be to engage in the following businesses:

1. Buying and selling securities;

2. Securities brokerage;

3. Acting as an intermediary or agent for sale or purchase of securities;

4. Acting as an intermediary, arranger or agent with respect to entrustment of a sale or purchase

transaction to be executed on the Stock Market Division or KOSDAQ Market Division of the Korea

Exchange or an exchange located in a foreign country which is similar to the Korea Exchange;

5. Securities underwriting;

6. Public offering of outstanding securities;

7. Arranging for a public offering of newly issued or outstanding securities;

8. Extending credit in relation to sale or purchase of securities;

9. Securities savings business;

10. Margin lending;

11. Securities lending and acting as an intermediary for securities lending or borrowing;

12. Securities business in foreign countries;

13. Engaging in business activities described in Items 1 through 4 above with respect to securities indexes;

14. Evaluating or appraising securities and equity securities;

15. Acting as an intermediary, arranger or agent for corporate mergers and acquisitions;

16. Buying and selling certificates of deposit and acting as an intermediary for sale or purchase of

certificates of deposit;

17. Trustee business for a public offering of bonds;

18. Acting as an agent in relation to securities transactions;

19. Providing advice or assistance in connection with management, restructuring and/or finance of

companies;

20. Acting as an intermediary or providing advisory services for lease, sale or purchase of real

properties owned by customers or clients during the course of conducting the business activities set out

in Item 15 or 19 above;

21. Leasing real properties to others;

22. Renting safe deposit boxes to others;

23. Lending its own securities to institutional investors;

24. Selling lottery tickets and admission tickets as an agent;

6

25. Providing training regarding securities;

26. Publishing publications and books;

27. Commuter service business, and leasing and selling computer systems or software related to the

securities business;

28. Securities lending and acting as an intermediary, arranger or agent for securities lending

transactions;

29. Underwriting business for securities issued in a manner other than through public offering of new

shares, and acting as an intermediary, arranger or agent for such business;

30. Selling and purchasing claims arising from loans, other transactions related thereto, and acting as

an intermediary, arranger or agent therefor;

31. Safe-keeping securities;

32. Acting as an asset manager or a servicer of a special purpose vehicle under the Act on Asset-

Backed Securitization;

33. Buying and selling foreign payment instruments for customers’ or clients’ exchange of investment

funds, and trading futures to hedge against foreign exchange risks;

34. Exchanging foreign currencies, etc.;

35. Acting as an intermediary for selling, buying, exchanging or lending foreign currencies or

conducting derivatives transactions, and other related businesses;

36. Over-the-counter derivatives transactions, and acting as an intermediary, arranger or agent for such

transactions;

37. Payment guarantee of principal and interest of corporate bonds;

38. Acting as an agent for holding in custody deposits for shares to be publicly offered;

39. Futures business;

40. Investment advisory business, discretionary investment management business, investment

management business, and selling various types of investment information;

41. Public offering or sale of shares of indirect investment companies;

42. Selling indirect investment securities;

43. Acting as an agent or intermediary for selling insurance products;

44. Retirement pension business;

45.Selling information on appraisal of securities, etc. to the public through publications, books,

electronic documents, etc.;

46. Acting as an intermediary, arranger or agent to cause financial institutions that formed a business

alliance to lend money to customers or clients;

47. Acting as an advertisement agent through publications, books, electronic documents, etc.;

7

48. Businesses set out as securities firms’ areas of business in the Securities and Exchange Act

(“SEA”) and other relevant laws and regulations;

49. Any and all activities incidental to any of the foregoing.

(2)The Company shall conduct the following businesses after obtaining approvals and authorizations from the

relevant agencies and authorities, including the government:

1. Conducting or providing credit investigation and services;

2. Forming an alliance with credit card companies, insurance companies and other financial institutions;

3. Foreign exchange businesses other than those set out in Items 33 through 35 of Paragraph (1) above;

4. Selling, purchasing, and acting as an intermediary or agent for selling or purchasing, derivatives products;

5. Any and all activities related to investment in venture companies;

6. Electronic finance business;

7. Trust business pursuant to the Trust Business Act;

8. Internet broadcasting business; and

9. Any and all activities incidental to any of the foregoing.

(3) In addition to the businesses set out in Paragraphs (1) and (2) above, the Company may concurrently engage in

other businesses after obtaining approvals and authorizations from the relevant agencies and authorities, including the

government.

B. Total Employee Status

(As of March 31st 2010)

Management Sales Others Total

Male 431 859 38 1,328

Female 673 172 8 853

Total 1,104 1,031 46 2,182

C. Status of Domestic Branches and Overseas Representative Offices

(As of March 31st 2010)

HQ Branches Rep. Offices Sales Office Total

Domestic 1 116 - - 117

Overseas - - 2* - 2

Total 1 116 3 - 119

* Overseas Offices

- Tokyo Representative Office

8/F, NAX Bldg., 1-3-2 Shinkawa, Chuo-ku, Tokyo, Japan

Tel : 81-3-3551-8088, Fax : 81-3-3551-5533

- Shanghai Representative Office

Office 1209-A07, 12/F Shui On Plaza Centre, 333 Huai Hai Zhong Road, Lu Wan District,

Shanghai 200021, P.R. China

Tel : 86-21-5116-0740, Fax : 86-21-5116-0742

8

D. Organization Chart

9

E. Stock information

(1) Type of stocks & total issuance

Types of shares Amount of

shares Capital

(Thousand won) Percentage Note

Registered

common shares 50,773,400 253,867,000 58.51%

200,000 stock cancellation through

profit

Registered

preferred shares 36,000,000 180,000,000 41.49%

Total 86,773,400 433,867,000 100%

(2) Change in capital

Date Types of shares Amount of

shares

Amount of capital

increase

(Thousand won)

Capital after

increase

(Thousand won)

Note

1987.7.19 Registered

common shares 8,800,000 44,000,000 Reverse stock split


common shares 4,400,000 22,000,000 66,000,000

Paid-in capital

increase

1988.8.4 Registered

preferred shares 6,600,000 33,000,000 99,000,000

Paid-in capital

increase



Paid-in capital

increase

1989.3.31

Registered

common shares 3,300,000 16,500,000 148,500,000 Stock issue

Registered


Capitalization of

excess reserves


common shares 3,166,493 15,832,465 180,832,465 Stock dividend

1989.12.9

Registered

common shares 1,129,240 5,646,200 186,478,665

Paid-in capital

increase

Registered


1989.12.12

Registered

common shares 5,204,267 26,021,335 233,978,665 Stock issue

Registered


Capitalization of

excess reserves








common shares 1,128,000 5,640,000 287,640,000

Paid-in capital

increase


common shares 17,258,400 86,292,000 373,932,000

Paid-in capital

increase


common shares 2,187,000 10,935,000 384,867,000

Paid-in capital

increase



Paid-in capital

increase

10

5. Parent Company, Subsidiary Company and Consolidated Circumstances.

A. Parent Company Status

- none

B. Subsidiary

Subsidiary Relations

Company Address Book Value

(billion KRW) Main business Stake %

Daishin Economic

Research Institute

34-8 Youido-dong

Youngdungpo-ku,

Seoul, 150-884, Korea

4.95 Service 495,000 99% Research

Daishin Investment

Trust Management

34-8 Youido-dong

Youngdungpo-ku,

Seoul, 150-884, Korea

39.46

Securities

investment trust

& advisory

6,000,000 100% -

Daishin Securities

Asia Limited,

Hong Kong

28/F, Queen's Road

Central 8, Central,

Hong Kong

12.91 Brokerage,

advisory 10,000,000 100% -

Pegasus PEF - 3.49 PEF - 26.1%

Daishin MSB PEF - - PEF - 0.9%

C. Director’s Concurrent Office Position in Parent Company & Subsidiaries

Position Name Concurrent office Notes

Risk Management

Group Yong-Hyun Cho

Daishin Investment Trust Management Independent

Auditor

11

6. Management’s Discussion and Analysis

A. Executive Summary

As the credit crisis swept the globe in 2009, governments worldwide introduced fiscal and monetary policies to

revive the ailing economy and restore stability in the financial markets. In addition to implementing a USD

787.9 billion fiscal stimulus package, the US authorities announced a rescue plan to bail out distressed financial

institutions and kept the benchmark interest rate at virtually zero. China unveiled a RMB 4 trillion (USD 580

billion, equivalent to 14% of China’s GDP) stimulus plan and subsidies for home appliance and automobile

purchases to boost domestic consumption. Consequently, most of the developed economies passed the trough

while emerging countries maintained growth.

Low interest rates and massive stimulus injections sparked a global economic recovery. The international capital

markets displayed huge advances spurred by a sense of relief that the worst was over and abundant liquidity.

The Korean stock market recovered at a fast pace with average daily turnover increasing by 14.0% for the

KOSPI market and 82.8% for the KOSDAQ market in FY2009. As a percentage of overall trading, trading by

retail investors climbed by 7.4%p to 67.3%, another indication of a market rally.

Average Daily Turnover (KRW billion)

FY08 FY09 % YoY

Stock KOSPI 5,113.0 5,823.2 14.0

KOSDAQ 1,272.7 2,326.3 82.8

Future 26,074.3 35,520.8 36.2

Option 1,167.4 1,048.0 -10.2

After tumbling below the 1,000 mark in October 2008, the KOSPI bounced back to 1,722 in January 2010.

Although recent jitters caused by debt woes in Europe led to a market correction, the KOSPI closed at 1,692.85

on March 31, 2010, up by 40.3% from a year earlier. The KOSDAQ rebounded from 421.44 at end-March 2009

to 562.57 in May 2009. It closed at 515.74 on March 31, 2010, to post an annual gain of 22.4%.

On the back of the market run-up, Daishin Securities recorded KRW 330.4 billion, up 21.1% in commission

income in FY2009 including KRW 286.6billion from stocks and KRW 43.0 billion from derivatives. Promotion

of the newly introduced “Believe” service and growth in trust management fees raised revenue from wealth

management by 17.9%. Low interest rates increased bond valuation gains, resulting in a 78.2% jump in revenue

from capital market operations. Investment banking commission surged 155.9% as IPO underwriting and private

equity funds gave a boost to underwriting and advisory fees received. With enhanced stability and

diversification in earnings, operating income grew by 72.6% to KRW 172.8 billion and pre-tax income by

19.3% to KRW 149.0 billion. However, equity method valuation losses were not recognized as losses for tax

purposes, which in turn raised the effective tax rate from 17.4% in the prior year to 38.7% in FY2009. As a

result, net income decreased by 11.5% to KRW 91.4 billion.

Total assets in FY2009 grew by 23.4% to KRW 8,003.2 billion. The holding of marketable securities expanded,

primarily in low-risk assets such as government bonds and monetary stabilization bonds. Loans receivable also

increased due to the widening spread between the funding rate and lending rate. The Company put particular

emphasis on preemptive risk management, securing liquidity through early recovery of principal investments

and making full recovery of investments related to real estate project financing. Accordingly, the net capital

ratio and the assets-toliabilities ratio respectively stood at 733.6% and 120.9% at the end of March 2010. Both

figures exceed the minimum required by the Financial Supervisory Service. Reflective of the Company’s

commitment to enhancing shareholder value, Daishin Securities became the first major securities company in

Korea to distribute cash dividends for 12 consecutive years and had the industry’s highest dividend yield of

5.9% for common stock

12

B. Operating Results

Net Operating Revenue

In FY2009, Daishin Securities made further strides in earnings diversification to establish a stable base of

operations. The Company displayed growth in brokerage commission fueled by a rising stock market, in

addition to solid growth in wealth management, capital market operations and investment banking. Daishin

realigned its business structure to upgrade and differentiate retail services while simultaneously reinforcing

wholesale operations. For the year, net operating revenue grew by 31.3% to KRW 520.3 billion. Net revenue

from brokerage rose by 14.4% to KRW 332.3 billion underpinned by an increase in average daily turnover and

stronger presence of retail investors in the stock market. Based on commissions received, Daishin Securities’

share of the stock brokerage market went up 0.2%p to 5.9%.

Revenue from capital markets grew by 78.2% to KRW 121.0 billion. The Company reduced its exposure to

stocks and focused on low-risk assets such as government bonds and monetary stabilization bonds, and the

government’s low interest rate policy led to a surge in bond valuation gains.

In line with the emphasis on liquidity and risk management, the Company has zero exposure to real estate

project financing and is concentrating on early recovery of principal investments.

Net Operating Revenue (KRW billion)

FY08 FY09 % YoY

Brokerage

Financial service (loan service)

Wealth management

Capital markets (proprietary trading income)

Investment Banking

Others

290.5

36.6

14.5

67.9

4.8

(18.1)

332.3

35.2

17.1

121.0

12.3

2.5

14.4

-3.9

17.9

78.2

155.9

-

Net operating revenues 396.1 520.3 31.3

Breakdown of Net Operating Revenues (%)

FY08 FY09

Brokerage

Financial service (loan service)

Wealth management

Capital markets (proprietary trading income)

Investment Banking

Others

70.1

8.8

3.5

16.4

1.2

-

63.9

6.8

3.3

23.3

2.4

0.5

Total 100.0 100.0

Owing to heightened uncertainty in the stock market in the wake of the global financial crisis, the domestic

equity-type fund market contracted by 12% to KRW 123 trillion. In contrast, Daishin Securities recorded a 3.3%

increase in equity-type funds to KRW 398.7 billion following the launch of its comprehensive tailored solution,

“Believe.” Growing investor preference for safe assets pushed up demand for MMF and bond-type beneficiary

certificates (BCs). As a result, the balance of BCs swelled by 24.8% to KRW 3,403.1 billion and revenue from

wealth management grew by 17.9% to KRW 17.1 billion

Commission Income from Wealth Management (KRW billion)

FY08 FY09 % YoY

Collective investment securities

Derivatives-combined securities

Other

8.0

5.9

0.6

8.2

7.5

1.4

2.7

26.6

135.7

Commission from wealth management 14.5 17.1 17.9

13

Balance of Beneficiary Certificates (KRW billion)

FY08 FY09 % YoY

Beneficiary certificates (year-end)

MMF

Bond-type

Hybrid-type

Equity-type

Others*

2,726.9

1,076.6

312.5

287.1

385.9

664.9

3,403.1

1,388.8

609.8

317.6

398.7

688.2

24.8

29.0

95.1

10.6

3.3

3.5

BC Commission income 8.0 8.2 2.5

* Others = overseas fund + derivatives fund + others

Interest-earning assets are primarily composed of bonds and broker loans which offer stability and sound returns.

Despite falling market interest rates, net interest income rose by 53.4% to KRW 120.3 billion, with an asset

portfolio comprising mainly low-risk assets such as government bonds, monetary stabilization bonds and loans

receivable. Broker loans are generating stable interest income with the spread exceeding 400bp because of a

decline in the funding rate. As part of risk management, the Company carries out real-time stock price

monitoring and requires a loan to collateral ratio of at least 140%.

Net Interest Income (KRW billion)

FY08 FY09 % YoY

Interest income

Interest on bonds

Interest on loans

Interest on deposits

Others

Interest expenses

209.1

128.5

45.7

26.7

8.2

130.7

230.5

153.5

46.3

16.7

14.0

110.2

10.2

19.5

1.1

-37.6

71.9

-15.7

Net interest income 78.4 120.3 53.4

General and Administrative Expenses

General and administrative (G&A) expenses rose by 17.4% to KRW 347.4 billion. The increase is attributable to

growth in commission income and launch of “Believe” service which respectively raised performance bonus

and advertising expenses, along with amortization. However, the growth in wages, which account for the largest

portion of G&A expenses, was limited to 9.6% and wages amounted to KRW 197.4 billion. Although

commission income increased at a double-digit rate, the Company exercised appropriate control over the

performance bonus. Depreciation jumped by 54.4% to KRW 36.1 billion due to recognition of amortization

expenses of KRW 9.0 billion related to development of the next-generation IT system and payment system

G&A Expenses (KRW billion)

FY08 FY09 % YoY

Salaries & employee benefits

IT operating expenses

Rental expenses

Miscellaneous commissions

Advertising expenses

Depreciation & amortisation expenses

Others

180.0

22.5

6.9

20.7

5.6

23.4

36.9

197.4

23.1

7.1

23.0

21.6

36.1

39.1

9.6

2.6

3.6

11.1

287.5

54.5

5.9

G&A expenses 296.0 347.4 17.4

Breakdown of G&A Expenses (%)

FY08 FY09

Salaries & employee benefits

IT operating expenses

Rental expenses

Miscellaneous commissions

Advertising expenses

Depreciation & amortisation expenses

Others

60.8

7.6

2.3

7.0

1.9

7.9

12.5

56.8

6.7

2.1

6.6

6.2

10.47

11.3

Total 100.0 100.0

14

Profitability and Shareholder Value

As globally concerted policy efforts and massive stimulus plans to tackle the global financial crisis helped to

revive the stock market, Daishin Securities’ operating income soared 72.6% to KRW 172.8 billion and the

operating income margin improved by 1.7%p to 5.3%. The improvements mainly stemmed from a boost in

commission income from brokerage, the Company’s area of strength, and a surge in proprietary trading income

driven by appreciating share prices and falling interest rates. Sound results from the wholesale business,

encompassing investment banking, wealth management and retirement pension, also contributed to enhancing

profitability.

Operating Profitability (KRW billion, %)

FY08 FY09 % YoY

Operating revenues

Operating income

2,823.7

100.1

3,273.7

172.8

15.9

72.6

G&A expenses 3.5 5.3 1.7%p

Non-operating income fell from the previous year to KRW 20.1 billion whereas non-operating expenses

increased to KRW 43.8 billion which included equity method losses from Daishin Asset Management. On the

whole, the Company recorded net non-operating expenses. For this reason, pre-tax income amounted to KRW

149.0 billion. The figure represents a year-on-year growth rate of 19.3% which is lower than the growth in

operating income.

Non-operating Balance (KRW billion, %)

FY08 FY09 % YoY

Non-operating income

Non-operating expenses

27.1

2.3

20.1

43.8

-25.9

1,824.7

G&A expenses 24.8 (23.8) -

Net income in FY2009 dropped by 11.5% to KRW 91.4 billion. The main culprit behind the decrease is that

equity method losses of KRW 39.8 billion were not recognized as losses for tax purposes. Consequently, the

effective tax rate climbed from 17.4% in FY2008 to 38.7% in FY2009.

Net Income (KRW billion, %)

FY08 FY09 % YoY

Net income

Net income margin

103.3

3.7

91.4

2.8

-11.5

-0.9%p

ROE 6.2 5.4 -0.8%p

Daishin Securities maintains an aggressive dividend policy as a way of enhancing shareholder value. Over the

past several years, the Company has upgraded its business model and diversified its income structure. This, in

turn, has strengthened its ability to distribute dividends and allowed Daishin to become the only major securities

firm in Korea to pay out cash dividends for the 12th straight year in FY2009. Akin to FY2008, the Company

distributed cash dividends of KRW 1,000 per share for common stock and Class 2 preferred stock and KRW

1,050 for Class 1 preferred stock. Moreover, Daishin had the industry’s highest dividend yields with 5.9% for

common stock, 9.8% for Class 1 preferred stock, and 10.6% for Class 2 preferred stock. Total dividends

amounted to KRW 79.0 billion and the payout ratio was 86.5%. Daishin Securities has continued to uphold

shareholder-oriented management and will pursue sustainable growth to maximize value for shareholders.

C. Financial Condition

Assets

In step with enactment of the Financial Investment Services and Capital Markets Act in February 2009, Daishin

Securities is looking beyond top-line growth and focusing on integrated and preemptive risk management and

comprehensive wealth management service to grow into a world-class financial service provider.

As of the end of March 2010, total assets stood at KRW 8,003.2 billion, up by 23.4% compared to a year earlier.

The Company’s asset portfolio is mostly composed of low-risk assets such as cash and deposits, government

bonds and monetary stabilization bonds. Cash and deposits increased by 14.4% to KRW 1,579.4 billion.

Marketable securities, mainly comprising safe and liquid bonds such as government and monetary stabilization

15

bonds, swelled by 30.4% to KRW 4,342.6 billion. A favorable stock market helped to boost derivatives and

loans receivable by 21.2% and 32.9% respectively to KRW 444.0 billion and KRW 837.3 billion. Assets Portfolio (KRW billion)

FY08 FY09 % YoY

Cash & deposits

Securities

Derivative assets

Loans receivable, net

Property & equipment, net

Other assets

1,381.1

3,329.7

366.3

630.2

547.3

232.7

1,579.4

4,342.6

444.0

837.3

521.7

278.2

14.4

30.4

21.2

32.9

-4.7

19.5

Total asssets 6,487.4 8,003.2 23.4

Assets Breakdown (%)

FY08 FY09

Cash & deposits

Securities

Derivative assets

Loans receivable, net

Property & equipment, net

Other assets

21.3

51.3

5.6

9.7

8.4

3.6

19.7

54.3

5.5

10.5

6.5

3.5

Total 100.0 100.0

Liabilities and Shareholders’ Equity

In tandem with asset expansion, total liabilities grew by 31.0% to reach KRW 6,325.4 billion as of the end of

March 2010. Customer deposits were largely unchanged from a year earlier, but borrowings expanded by 39.8%

to KRW 4,948.0 billion as the government’s low interest rate policy lowered the funding rate. In particular,

CMA holders increased as investors flocked to short-term vehicles and securities sold under repurchase

agreements rose by 56.0% to KRW 2,715.4 billion. Liabilities (KRW billion)

FY08 FY09 % YoY

Deposits from customers

Borrowings & securities sold

Other liabilities

1,134.3

3,538.1

157.3

1,092.9

4,948.0

284.5

-3.7

39.8

80.9

Total liabilities 4,829.8 6,325.4 31.0

Liabilities Breakdown (%)

FY08 FY09

Deposits from customers

Borrowings & securities sold

Other liabilities

23.5

73.3

3.3

17.3

78.2

4.5

Total 100.0 100.0

Although net income in FY2009 reached KRW 91.4 billion, total shareholders’ equity inched up just 1.2% to

KRW 1,677.8 billion due to cash dividends and share buyback. Daishin Securities has continued to distribute

dividends as a means of returning wealth to shareholders. With the distribution in FY2009, the Company

became the sole major securities firm in Korea to pay out cash dividends for 12 years in a row. In addition, the

Company spent KRW 13.4 billion to repurchase 1,500,000 shares of preferred stock in FY2009. Shareholders' Equity (KRW billion)

FY08 FY09 % YoY

Capital stock

Capital surplus

Capital adjustments

Accumulated other comprehensive income

Retained earnings

434.9

715.8

(139.0)

61.1

584.9

434.9

713.1

(1,41.2)

74.7

596.2

0.0

-0.4

-

22.4

1.9

Total shareholders' equity 1657.6 1677.8 1.2

16

Financial Soundness and Risk Management

At the end of March 2010, the Company’s net capital ratio stood at 733.6%, falling by 110.7%p from a year

earlier. But the figure was far above the 300% limit set by the Financial Supervisory Service (FSS) for

companies that deal with OTC derivatives. Conversion of KRW 16.6 billion in corporatebonds issued by

Kumho Industrial to equity reduced substandard or below loans and the coverage ratio for such loans improved

by 2.6%p to 96.6%. The assets-to-liabilities ratio was 120.9%, exceeding the requirement set by FSS.

Korea’s leading credit rating agencies (Korea Ratings, NICE Investors Service) upgraded the rating on corporate

bonds issued by Daishin Securities by one notch from A+ to AA- in 2009. The agencies gave the Company high

marks for asset quality and liquidity, market position and profit generation ability from brokerage, and capital

buffer. In October 2009, Daishin Securities was included as a component of the Dow Jones Sustainability Index

Korea (DJSI Korea). This indicates that Daishin Securities has received external recognition for maintaining

stable and efficient processes and fulfilling its social and environmental responsibility.

AssetQuality (%)

FY08 FY09 % YoY

Net capital ratio

Coverage ratio

844.3

94.0

733.6

96.6

-110.7%p

2.6%p

Assets-to-liabilities ratio 127.8 120.9 -6.9%p

Daishin Securities is bolstering financial stability based on ERM (Enterprise Risk Management). In addition, the

Company has adopted systems to manage risks related to derivatives and operational risks to prepare for greater

volatility in the financial markets. In 2009, the Credit Analysis Department was created by separating the review

function from the Risk Management Department for greater specialization of the review and risk management

functions. Then in 2010, the Settlement Department was placed under the Risk Management Group to

strengthen checks and balances on the ever diversifying front office operations.

D. Business Outlook

Competitive pressure is likely to intensify in FY2010. The possibility of Europe’s debt crisis spilling over into

other regions, yuan appreciation and implementation of exit strategies are expected to increase volatility in

global financial markets. Domestic concerns include further deterioration in inter-Korean relations, interest rate

hike, and the emergence of new small- to mid-size securities firms.

In spite of the anticipated hardships, Daishin Securities will pursue a differentiated strategy and focus on its core

competencies to develop into Korea’s premier financial and investment service company. The Company will

reinforce its brokerage operations while honing its capabilities in investment banking, wealth management and

retirement pension. In addition to financial results, Daishin plans to maximize management efficiency through

the balanced scorecard. Under this management system, the Company will check whether goals and strategies

are achieved and action plans are correctly implemented.

Furthermore, Daishin will upgrade and expand the “financial health service” service launched in FY2009 to

realize the vision of a trusted company that serves its customers with sincerity as a “financial doctor.” To

achieve this vision, the Company will implement a strategy based on the three themes of “financial growth,”

“enhanced operating efficiency” and “stronger relationship management” to emerge as an admired company

pursuing development with customers and shareholders.

17

7. Business Overview

A. New Concept Retail Service

Daishin Securities is committed to becoming a trusted company that serves customers with sincerity as their

financial doctor. We are making every effort to deliver financial happiness to customers by protecting their

assets through rigorous risk management. Our objective is to provide reliable financial services based on

expertise, integrity and consideration for the customer.

“Financial Health” Service

To reach our objective, Daishin Securities has built an innovative retail business model. At the coreof this model

is the “financial health” service. This is not a one-time service limited to recommendation of certain stocks or

products. Rather, it offers a total solution starting with identifying customers’ needs and providing thorough

follow-up care for comprehensive management of a customer’s assets.

We revamped various systems over a two-year period to prepare the “financial health” service and created a

service manual. The Logic & Portfolio Center was set up to provide sales personnel with various scenarios and

portfolios depending on market conditions. This, in turn, enables sales personnel to offer consulting tailored to

the needs of individual customers. Moreover, a wide range of courses have been introduced to train sales staff as

financial doctors, sharpen their skills, and instill in them the principles and mindset to best serve the customer.

In February 2010, a ceremony was held in which sales personnel pledged their oath as financial doctors. The

financial health service serves as the cornerstone of our goal of developing into a globally trusted company

promoting harmony with customers.

“Believe” Service

Daishin Securities launched the “Believe” service in October 2009. Rooted in the customer-oriented philosophy,

this service was designed to prepare for the scheme allowing investors to transfer funds between fund

distributors and to support the “financial health” service. “Believe” service is available to new fund subscribers

and customers who transfer funds from other securities firms. It provides distinctive benefits including CMA

with interest rates of up to 9% per annum and loans secured by funds with interest rates as low as 1% per annum.

Additionally, the “fund investment health” service provides customers with reviews of funds they currently hold

along with financial advice. Instead of just receiving transaction reports, customers are given an assessment of

investment products they hold as well as recommendations and follow-up service.

“Believe” service has gained much popularity. Daishin Securities captured 10% of market share based on inflow

from fund transfers since the fund transfer scheme noted above went into effect. That is the second largest

market share in the industry. Despite massive fund redemptions in Korea, Daishin Securities’ fund assets have

actually increased.

Customer Satisfation

Daishin Securities revised its customer satisfaction strategy for successful execution of the “financial health”

service.

To enhance customer service quality, we conduct a monthly customer satisfaction survey. Through the survey,

we gauge satisfaction levels and hear the views of about 700 customers. The survey results are communicated to

domestic branches on a half-yearly basis to encourage voluntary efforts to improve service quality.

To deliver unique customer satisfaction (CS) service and promote a customer-oriented culture, diverse CS

activities will be carried out during the current fiscal year. We are conducting CS activities to boost employee

unity and morale as well as activities to raise the CS mindset among customers, employees and the company.

We also foster CS consultants to enhance the CS training scheme and customer satisfaction.

VOC (Voice of Customer) personnel have been designated at all 116 branches in Korea and the head office

departments to enable responsible and swift response to customers’ requests. Regulations stipulate that all VOC

requests be handled within 24 hours after they are submitted. We also operate other channels including the

company website, telephone, postcard and email to address issues related to customers’ complaints without

delay.

In recognition of high levels of customer satisfaction, Daishin Securities was ranked first in the GCSI (Global

Customer Satisfaction Competency Index) by Japan Management Association Consultants (JMAC) for four

years in a row.

18

B. Rebuilding Business Model Based On Core Competency

Based on our solid financial strength and effective risk management system, we will pursue our unique growth

strategy of “growth amid stability“ by strengthening areas in which we have a competitive edge and increasing

investment in areas with high growth potential.

Reinforcing New Growth Drivers

Daishin Securities is rebuilding its business model. The goal is to sophisticate and differentiate our retail service

and strengthen the headquarters’ sales edge.

For the past two years, our focus has been on providing differentiated retail service via the “financial health”

service and online service. We plan to further concentrate our resources on successful implementation of the

“financial health” service. To reinforce the headquarters’ sales capability, we expanded the wholesale,

retirement pension, investment banking and capital market organizations. We will continue to make investments

to develop these businesses as our new growth drivers.

Based on our solid financial strength and effective risk management system, we will pursue our unique growth

strategy of “growth amid stability” by strengthening areas in which we have a competitive edge and increasing

investment in areas with high growth potential.

For the past few years, Daishin has been proceeding with a major shift in the profit structure. Our plan is to

gradually reduce the proportion of revenue from brokerage while slowly increasing the proportion of wealth

management, investment banking, retirement pension and proprietary trading.

Expantion of Headquarters Business

At Daishin, our mid-to-long term investment banking strategy is growth based on differentiation. On the back of

our core strength in traditional investment banking activities, we will further hone our competitive edge in such

high value-added operations as private equity funds (PEF), corporate restructuring and M&A, special purpose

acquisition companies (SPAC) and structured finance.

Since the introduction of the Financial Investment Services and Capital Markets Act, Daishin Securities has

adopted an aggressive approach to expand the scope of its securities business. This has led to Daishin’s

obtaining licenses to engage in the payment settlement and futures operations.

Our PEF business started with the launch of Daishin Pegasus PEF in 2008. Our other achievements in this area

include the creation of a KRW 200 billion national pension PEF (Daishin-Heungkuk No.1 PEF) and acquisition

of Korea Asset In Trust by MSB PEF.

The retirement pension business requires a long-term approach. This means we have to look beyond top-line

growth in the near time and focus on maximizing profitability to satisfy customers and receive their trust. Long

tradition, insightful management knowhow and ability to design optimal products will help us generate greater

profits as long as we take a prudent and constructive approach to our business. Daishin had the highest return

among all retirement pension providers last year in the defined benefit category, demonstrating our exceptional

skills in product design and management. This year, we will further improve performance of the defined

contribution plan which has been the traditional core strength of securities companies. To this end, we intend to

rely on the research center’s asset allocation ability and management strategy.

Our research center is rated the best in the industry, garnering top honors in analyst polls conducted by Korea’s

major economic publications for the past two years. Harnessing our superior research capability, we are working

to increase institutional clients’ returns via IR activities, non-deal roadshows and company visits.

Extending Our Global Business

Daishin Securities has been pursuing overseas business for the past several years. Our focus is on building a

tangible sales base rather than top-line growth.

Our mid-to-long term goal is to transform into Asia’s representative regional investment bank. We are seeking

business opportunities in regions of Asia with high growth potential and our sales efforts are being concentrated

in areas where we can excel.

To minimize risks and generate stable returns, we are forging alliances with leading regional partners well

versed in the local financial landscape when entering a new market. Recently, we have been building our

financial network by teaming up with China Merchants Securities and Shenzhen Capital Group in China as well

as other local financial firms in Asian countries with promising growth prospects such as Taiwan, Vietnam,

Cambodia and Laos.

19

In entering China, emerging as the world’s largest financial market, we have partnered with China Merchants

Securities to seek diverse business opportunities. Our Hong Kong subsidiary is taking the lead as we pursue

expansion in Asia.

We have extended our brokerage service to enable trading of stocks listed in Japan, Hong Kong and China. We

will continue to expand the service to US stocks, foreign derivative products and FX margin trading.

C. Sustainable Management System And Fulfilling CSR

Inclusion in Korea Dividend Stock Price Index (KODI) in 2003

Inclusion in Korea Corporate Governance Stock Price Index (KOGI) in 2004

Inclusion in Dow Jones Sustainability Korea Index (DJSI Korea) in 2009

Daishin Securities is continuing to grow into a sustainable company by fulfilling its corporate social

responsibility.

Corporate Governance

At Daishin Securities, we are securing stakeholder trust through transparent and faithful business operations and

building a BOD-centered management system of accountability under the supervision of independent outside

directors.

According to 2008 corporate governance evaluation results revealed by Korea Corporate Governance Service,

Daishin was ranked 11th among 685 listed companies and received the rating of “Very Good”.

Daishin Securities received high scores exceeding stock market and securities industry averages across all

categories including protection of shareholder interests, board of directors, disclosure, auditing body, and

distribution of the proceeds of operation.

We were incorporated into Dow Jones Sustainability Korea Index in October 2009. DJSI is the world’s most

recognized index tracking the financial performance of the leading sustainability-driven companies worldwide.

It conducts in-depth assessment on companies’ economic, environmental and social aspects with a focus on the

long-term development of corporate value.

The current composition of DJSI (Dow Jones Sustainability Korea Index) which tracks Korea’s 200 largest

companies includes 41 companies in 24 industries. Among the 16 listed securities firms, only Daishin Securities

and two others are included in the index. Daishin’s inclusion in the index signifies a major step forward in

becoming a sustainability driven company.

Enhancing Shareholder Value

In FY2009, Daishin Securities maintained one of the industry’s highest dividend yields to enhance shareholder

value. Our efforts to develop more sophisticated business models and diversify earnings for the past several

years have greatly enhanced company profits and payout ratio.

Accordingly, we became the first major securities firm in Korea to pay out cash dividends for twelve years in a

row.

Daishin Securities distributed the same level of per share cash dividends in FY2009 as the previous year. We

paid out KRW 1,000 for common stock, KRW 1,050 for Class 1 preferred stock, and KRW 1,000 for Class 2

preferred stock. We had the industry’s highest dividend yields with 5.9% for common stock, 9.8% for Class 1

preferred stock, and 10.6% for Class 2 preferred stock. Total dividends amounted to KRW 79 billion and the

payout ratio was 86.5%.

At Daishin, we have always put our clients’ needs first and strived to maximize shareholder value.

We will continue to work towards creating greater value for our shareholders through sustained growth.

Stringent Risk Management

Daishin Securities’ risk management aims to concentrate and professionalize systems and organizations under

the mission of supporting sustainable management and financial stability based on enterprise risk management

(ERM).

Although we demonstrated exceptional risk management capability as we emerged from the subprime loan

crisis virtually unscathed, we tightened monitoring of derivatives-related risks to take timely action in a rapidly

changing financial market. We have also introduced a system to deal with the possibility of increased

operational risks due to financial uncertainties.

20

In terms of the organization, we separated the inspection function from the Risk Management Department to

create the Credit Analysis Department to boost expertise and work efficiency. Subsequently in 2010, the

Settlement Service Department was incorporated into the Risk Management Group to further strengthen the

system of checks and balances of the front office function which is becoming more diverse and specialized.

In 2009, Korea’s leading credit rating agencies (Korea Ratings, NICE Investors Service) gave Daishin high

marks for asset quality and liquidity, market position and profit generation ability from brokerage, and capital

buffer. Accordingly, they raised our credit rating from A+ to AA-, which attests to confidence in Daishin’s

financial stability and risk management capability.

Social Responsibility – Admire Companionship

Since its inception, Daishin Securities has firmly believed in giving back to society. Our CSR (corporate social

responsibility) initiatives focus on reaching out to our local communities and neighbors in need through

donations and sponsorships.

The Daishin Songchon Cultural Foundation, established in 1990, is at the forefront of spearheading our

philanthropic endeavors. The foundation is involved in such programs as annual scholarships to discover and

nurture local talent and support for healthcare, arts and culture, and academia. We expect 2010 to be the year in

which we integrate our CSR initiatives into more effective and efficient system in order to build a sustainable

management system by fulfilling our corporate social obligations.

To this end, we plan to promote the volunteer corps and carry out a wide range of community involvement

programs.

We will also encourage employees to voluntarily engage in philanthropic efforts and instill the spirit of

corporate citizenship across the company as we strive to build a foundation for a sustainable company.

8. Major Shareholder Structure

(as of March 31st, 2010, Common shares basis)

Stakeholder Number of shares Percentage(%) Relation with

Daishin Remark

Hong-Seok Yang and 5

relatives 3,512,964 shares 6.92%

Major

Shareholder

Daishin ESOP 3,719,636 shares 7.33% ESOP

Treasury stock 4,888,808 shares 9.63% Treasury stock

9. Board of Directors and Audit Committee Member

Sort Name Position Duty Remark

Full-time Auh-Ryung Lee Chairwoman

Full-time Chung-Nam Roh President & CEO

Full-time Ki-Hoon Kim Audit committee

member

Auditing Dept, Legal Support

Dept.

Part-time Young-Ill Koh Outside Director Audit Committee chairman

Part-time Ki-Bae Lee Outside Director

Part-time Sung-Ho Kim Outside Director

Part-time In-Tae Hwang Outside Director Audit Committee member

21

II. Financial Report

1. Balance Sheet

Daishin Securities Co., Ltd. Non-Consolidated Balance Sheets March 31, 2010 and 2009

(in thousands of Korean won)

2010 2009

Assets

Cash and cash equivalents (Note 3) ￦ 525,636,306 ￦ 409,021,538

Deposits segregated under regulation

(Note 3) 1,053,730,288 972,109,855

Trading securities (Note 4) 3,777,114,437 2,697,372,812

Available-for-sale securities (Note 6) 193,926,550 138,440,063

Equity-method investments (Note 7) 48,122,534 60,713,594

Derivatives-combined securities (Note 5) 323,438,263 433,176,449

Derivative assets 443,969,688 366,332,382

Loans receivable, net (Note 8) 837,278,686 630,169,682

Property and equipment, net (Note 9) 521,748,425 547,306,131

Intangible assets, net (Note 10) 50,306,489 30,314,940

Accounts receivable, net (Note 8) 54,654,973 34,313,048

Accrued revenue, net (Note 8) 41,078,070 40,931,852

Advanced payments 17,576,942 11,966,612

Guarantee deposits 63,671,446 63,555,539

Collective fund for default loss (Note 3) 6,229,887 5,403,190

Others 44,688,724 46,261,577

Total assets ￦ 8,003,171,708 ￦ 6,487,389,264

22


2010 2009

Liabilities and Shareholders' Equity

Liabilities

Deposits from customers (Note 12) ￦1,092,887,769 ￦1,134,342,861

Borrowings (Note 13) 777,876,183 409,583,235

Securities sold under repurchase

agreements (Note 4) 2,715,353,102 1,740,559,485

Securities sold 34,394,428 2,579,222

Derivatives-combined securities

sold (Note 5) 1,314,770,477 1,165,433,853

Derivative liabilities 45,812,760 160,310,563

Debentures, net (Note 14) 59,780,240 59,679,998

Accrued severance benefits, net (Note 15) 1,467,700 1,759,474

Income tax payable 59,870,235 -

Other accounts payable 103,869,209 29,443,514

Accrued expenses 20,423,725 15,898,095

Guarantee deposits received 56,571,735 65,937,175

Deferred income tax liabilities (Note 20) 35,576,132 40,093,889

Withholdings 5,135,025 2,633,876

Others 1,613,499 1,515,071

Total liabilities 6,325,402,219 4,829,770,311

Commitments and contingencies (Note 11)

Shareholders' equity

Capital stock (Note 17)

Common stock 254,867,000 254,867,000

Preferred stock 180,000,000 180,000,000

Capital surplus 713,145,971 715,771,296

Capital adjustments (Note 19) (141,203,280) (139,041,646)

Accumulated other comprehensive

income (Note 19) 74,737,527 61,081,074

Retained earnings (Note 18) 596,222,271 584,941,229

Total shareholders' equity 1,677,769,489 1,657,618,953

Total liabilities and

shareholders' equity ￦ 8,003,171,708 ￦ 6,487,389,264

The accompanying notes are an integral part of these non-consolidated financial statements.

23

2. Statement of Income Daishin Securities Co., Ltd.

Non-Consolidated Statements of Income

For the years ended March 31, 2010 and 2009

(in thousands of Korean won except per share amounts)

2010 2009

Operating revenues

Commissions received (Note 21) ￦ 361,643,566 ￦ 293,114,678

Gain on sale of trading securities 106,405,009 104,083,162

Gain on valuation of trading securities 35,713,517 33,372,056

Gain on sale of available-for-sale securities 1,403,156

2,308,481

Recovery on impairment loss on available-for-sale securities 49,773

-

Gain on valuation of securities sold 436,222 -

Gain on derivatives-combined securities Transactions 212,463,187

38,755,058

Gain on derivatives-combined securities sold transactions 1,519,515,420

1,676,233,143

Gain on derivative transactions 763,148,244 410,669,648

Interest income 230,503,021 209,107,414

Reversal of allowance for doubtful accounts 4,457,195

4,166,517

Dividend income 5,068,088 4,322,427

Gain on valuation of deposits segregated under regulation 27,868,047

39,746,681

Others 5,033,563 7,790,979

3,273,708,008 2,823,670,244

Operating expenses

Commissions expense 21,939,676 19,685,357

Loss on sale of trading securities 91,942,871 138,521,575

Loss on valuation of trading securities 6,675,763 4,420,568

Loss on sale of available-for-sale Securities 766,050 802,286

Loss on impairment of available-for-sale securities (Note 6) 1,044,882 6,029,315

Loss on valuation of securities sold 1,543,677 263,882

Loss on derivatives-combined securities transactions 5,493,740 225,828,176

Loss on derivatives-combined securities sold transactions 871,868,037 200,001,803

Loss on derivatives transactions 1,634,661,714 1,681,569,405

Interest expense 110,235,309 130,728,212

General and administrative expenses (Note 22) 347,432,851 296,013,906

Bad debts expense - 19,270,143

Others 7,274,773 406,482

3,100,879,343 2,723,541,110

Operating income 172,828,665 100,129,134

2009 2008

24

(in thousands of Korean won, except per share amounts)

2010 2009


Gain on disposal of property and

equipment ￦ 3,389,229 ￦ 7,330

Office rental income 12,494,467 13,479,206

Gain on valuation of equity-method

investments (Note 7) 1,094,309 298,097

Others 3,079,134 13,277,757

20,057,139 27,062,390


Loss on disposal of property and

equipment 2,428,847 253,963

Loss on valuation of equity-method

investments (Note 7) 39,787,899 793,021

Donation 1,234,624 1,221,943

Others 393,586 9,009

43,844,956 2,277,936

Net income before income taxes 149,040,848 124,913,588

Income tax expense (Note 20) 57,685,317 21,662,244

Net income ￦ 91,355,531 ￦ 103,251,344

Basic earnings per share (in Korean won)

(Note 23) ￦ 1,190 ￦ 1,317

Diluted earnings per share (in Korean won)

(Note 23) ￦ 1,190 ￦ 1,317


25

3. Statement of Appropriations of Retained Earnings

Daishin Securities Co., Ltd. Non-Consolidated Statements of Appropriations of Retained Earnings For the years ended March 31, 2010 and 2009 (Dates of appropriations: May 28, 2010 and May 29, 2009 For the years ended March 31, 2010 and 2009, respectively)

(in thousands of Korean won) 2010 2009

Retained earnings before appropriations

Unappropriated retained earnings

carried over from prior year ￦ 28,993,286 ￦ 23,703,252

Net income 91,355,531 103,251,344

120,348,817 126,954,596

Transfer from reserve for loss on futures

transactions - 120,628

Appropriations (Note 18)

Legal reserves 7,901,448 8,007,449

Dividends 79,014,483 80,074,489

Voluntary reserves 10,000,000 10,000,000

96,915,931 98,081,938

Unappropriated retained earnings

carried forward to the subsequent year ￦ 23,432,886 ￦ 28,993,286

.

The accompanying notes are an integral part of these non-consolidated financial statements

26

4. Statement of Changes in Shareholder’s Equity Daishin Securities Co., Ltd. Non-Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009


27

5. Statement of Cash Flows


Non-Consolidated Statements of Cash Flows

For the years ended March 31, 2010 and 2009 (in thousands of Korean won) 2010 2009

Cash flows from operating activities

Net income ￦ 91,355,531 ￦ 103,251,344

Adjustments to reconcile net income to net cash

provided by (used in) operating activities

Loss (Gain) on disposal of trading securities,

net (14,462,138) 34,438,413

Gain on valuation of trading securities, net (29,037,754) (28,951,488)

Gain on sales of available-for-sale securities,

net (637,106) (1,627,229)

Loss (Gain) on derivatives-combined securities

transactions, net (206,969,446) 187,073,118

Gain on derivatives-combined securities sold

transactions, net (647,647,383) (1,476,231,340)

Loss on derivatives transactions, net 871,513,470 1,270,899,757

Loss on valuation of securities sold, net 1,107,455 263,882

Bad debts expense - 19,270,143

Depreciation 27,109,571 23,395,755

Amortization 9,022,903 -

Loss (Gain) on disposal of property and

equipment, net (960,382) 246,633

Loss on impairment of available-for-sale

securities 1,044,882 6,029,315

Provision for severance benefits 932,207 1,578,846

Loss on valuation of equity-method

investments, net 38,693,589 494,924

Reversal of allowance for doubtful accounts (4,517,844) (4,166,517)

Gain on valuation of deposits segregated

under regulation (27,868,047) (39,746,681)

Others, net 12,072,499 7,733,317

120,752,007 103,952,192

28


2010 2009

Changes in operating assets and liabilities

Deposits segregated under regulation ￦ (53,793,368) ￦ (283,476,325)

Trading securities (1,036,242,005) (726,795,259)

Derivatives-combined securities 316,707,633 131,773,660

Loans receivable (206,408,364) 215,059,768

Accounts receivable (20,279,722) (24,727,539)

Accrued revenue (148,222) (10,177,190)

Advanced payments (5,610,330) (4,371,987)

Collective fund for default loss (826,697) 1,162,720

Derivative assets and liabilities (1,063,648,579) (986,815,110)

Deposits from customers (41,473,708) 322,951,998

Securities sold 30,707,752 (10,692,527)

Derivatives-combined securities sold 796,984,008 1,258,913,721

Income tax payable 60,610,712 (45,479,882)


Accrued expenses 4,525,630 (4,034,973)

Withholdings 2,501,149 (6,623,770)

Deferred income tax (8,369,576) 13,575,909

Decrease in severance insurance

plan deposits - 2,811,582

Payment of retirement trust - 55,093

Payment of severance benefits (1,469,907) (318,787)

Securities sold under repurchase agreements 501,912,568 516,838,827

Others, net 4,272,253 (12,363,412)

(662,203,943) 361,552,575

Net cash provided by (used in) operating activities (541,451,936) 465,504,767

Cash flows from investing activities

Decrease in time deposits, net - 1,000,000

Decrease (Increase) in guarantee deposits, net (115,908) 1,731,910

Disposal of property and equipment 8,647,211 14,270

Acquisition of property and equipment (12,278,176) (32,112,969)

Acquisition of intangible assets (9,394,103) (17,962,035)

Disposal of available-for-sale securities 5,739,209 38,054,397

Acquisition of available-for-sale securities (42,033,323) (72,320,670)

Decrease in equity-method investments - 9,440,900

Increase in equity-method investments (28,397,426) (3,491,723)

Others (2,331,985) (8,021,261)

Net cash used in investing activities (80,164,501) (83,667,181)

29


2010 2009

Cash flows from financing activities

Increase (Decrease) in borrowings, net ￦ 368,292,948 ￦ (203,914,947)

Acquisition of treasury stock (13,480,247) (77,503,777)

Decrease in guarantee deposits received, net (9,365,440) (5,102,877)

Issuance of debentures - 59,678,900

Retirement of debentures - (10,000)

Payments of dividends (80,097,105) (106,147,158)

Increase in securities sold under

repurchase agreements 472,881,049 -

Net cash provided by (used in)

financing activities 738,231,205 (332,999,859)

Net increase in cash and cash

equivalents 116,614,768 48,837,727

Cash and cash equivalents (Note 27)

Beginning of year 409,021,538 360,183,811

End of year ￦ 525,636,306 ￦ 409,021,538


30

III. Audit Report

1. Audit Report by the Audit Committee

The Audit Committee has reviewed and audited the accounting principles and operations for 49th

fiscal year (1st April 2009 ~ 31

st March 2010), and it has made the audit report as follows.

(1) Audit method summary

The Audit Committee has reviewed the accounting books and related documents, as well as the

financial statements and other detailed documents for the accounting audit, and the committee has

made comparison check, on-the-spot inspection, witness, reference check and other appropriate

auditing measures if it was found necessary.

In regards to the operations audit, the Audit Committee has received management report from the

Directors and it has reviewed the related documents and details in an appropriate manner when the

committee found it necessary for attending the Board of Directors meeting or other important

meetings,

(2) Details on the balance sheet & income statement

The balance sheet and income statement fairly represents the Company’s assets and profit/loss

conditions appropriately in accordance to the Korean regulations and the Company’s statute.

(3) Details on the statement of appropriations of retained earnings

The Company’s statement of appropriations of retained earnings has been prepared appropriately

in accordance to the Korean regulations and the Company’s statute.

(4) Details on the business report

The Company’s business report accurately represents the Company’s condition.

13th May 2010

Daishin Securities Co.,Ltd.

Chairman of Audit Committee Young-Ill Koh

31

2. Report of Independent Auditors (Non-consolidated Financial Statements)

To the Board of Directors and Shareholders of


We have audited the accompanying non-consolidated statements of financial position of Daishin Securities Co.,

Ltd. (the “Company”) as of March 31, 2010 and 2009, and the related non-consolidated statements of income,

appropriations of retained earnings, changes in shareholders’ equity and cash flows for the years then ended,

expressed in Korean won. These financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects,

the financial position of Daishin Securities Co., Ltd. as of March 31, 2010 and 2009, and the results of its

operations, the changes in its retained earnings, the changes in its shareholders’ equity and its cash flows for the

years then ended in conformity with accounting principles generally accepted in the Republic of Korea.

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

accompanying non-consolidated financial statements are not intended to present the financial position, results of

operations, changes in shareholders’ equity and cash flows in conformity with accounting principles and

practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the

procedures and practices used in the Republic of Korea to audit such financial statements may differ from those

generally accepted and applied in other countries. Accordingly, this report and the accompanying non-

consolidated financial statements are for use by those who are informed about Korean accounting principles or

auditing standards and their application in practice.

Seoul, Korea

May 17, 2010

This report is effective as of May 17, 2010, the audit report date. Certain subsequent events or circumstances,

which may occur between the audit report date and the time of reading this report, could have a material impact

on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the

audit report should understand that there is a possibility that the above audit report may have to be revised to

reflect the impact of such subsequent events or circumstances, if any.

32

3. Report on Internal Accounting Control System

A. Report of independent accounts review of internal accounting control system

To the President of


We have reviewed the accompanying management’s report on the operations of the Internal Accounting Control

System (“IACS”) of Daishin Securities Co., Ltd. (the “Company”) as of March 31, 2010. The Company’s

management is responsible for designing and operating IACS and for its assessment of the effectiveness of

IACS. Our responsibility is to review the management’s report on the operations of the IACS and issue a report

based on our review. The management’s report on the operations of the IACS of the Company states that “based

on its assessment of the operations of the IACS as of March 31, 2010, the Company’s IACS has been designed

and is operating effectively as of March 31, 2010 in all material respects, in accordance with the IACS standards

established by the Internal Accounting Control System Operations Committee (IACSOC) of the Korea Listed

Companies Association.”

Our review was conducted in accordance with the IACS review standards established by the Korean Institute of

Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the

review of management’s report on the operations of the IACS to obtain a lower level of assurance than an audit.

A review is to obtain an understanding of a company’s IACS and consists principally of inquiries of

management and, when deemed necessary, a limited inspection of underlying documents, which is substantially

less in scope than an audit.

A company’s IACS is a system to monitor and operate those policies and procedures designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with accounting principles generally accepted in the Republic of Korea.

Because of its inherent limitations, IACS may not prevent or detect a material misstatement of the financial

statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

Based on our review, nothing has come to our attention that causes us to believe that management’s report on

the operations of the IACS, referred to above, is not presented fairly, in all material respects, in accordance with

the IACS standards established by IACSOC.

Our review is based on the Company’s IACS as of March 31, 2010, and we did not review management’s

assessment of its IACS subsequent to March 31, 2010. This report has been prepared pursuant to the Acts on

External Audit for Stock Companies in Korea and may not be appropriate for other purposes or for other users.

May 17, 2010

V. Consolidated Financial Statements

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Financial Statements March 31, 2010 and 2009

34

Daishin Securities Co., Ltd. and Subsidiaries Index March 31, 2010 and 2009

Pages

Report of Independent Auditors .................................................................... 1 - 2

Consolidated Financial Statements

Statements of Financial Position ........................................................................ 3 - 4

Statements of Income ....................................................................................... 5 - 6

Statements of Changes in Shareholders’ Equity .............................................. 7 - 8

Statements of Cash Flows ................................................................................ 9 - 11

Notes to the Consolidated Financial Statements .............................................. 12 - 58

Samil PricewaterhouseCoopers is the Korean member firm of PricewaterhouseCoopers. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity

1

Report of Independent Auditors

To the Board of Directors and Shareholders of


We have audited the accompanying consolidated statements of financial position of

Daishin Securities Co., Ltd. and its subsidiaries (collectively referred to as the

“Company”) as of March 31, 2010 and 2009, and the related consolidated statements

of income, changes in shareholders’ equity and cash flows for the years then ended,

expressed in Korean won. These financial statements are the responsibility of the

Company's management. Our responsibility is to express an opinion on these financial

statements based on our audits. We did not audit the financial statements of Daishin

Investment Trust Management Co., Ltd. and Daishin Securities Asia Ltd., whose

financial statements reflect combined total assets representing 0.72% and 0.81%,

respectively, of the consolidated total assets as of March 31, 2010 and 2009,

respectively, and combined total revenues representing 0.24% and 0.25%, respectively,

of the consolidated total revenues for the years then ended, respectively. Those

statements were audited by other auditors whose reports thereon have been furnished

us, and our opinion expressed herein, insofar as it relates to the amounts included for

Daishin Investment Trust Management Co., Ltd. and Daishin Securities Asia Ltd., is

based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in

the Republic of Korea. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free of

material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We

believe that our audits and the reports of the other auditors provide a reasonable basis

for our opinion.

2

In our opinion, based on our audits and the reports of the other auditors, the

consolidated financial statements as of and for the year ended March 31, 2010 and

2009, referred to above present fairly, in all material respects, the financial position of

Daishin Securities Co., Ltd. and its subsidiaries as of March 31, 2010 and 2009, and

the results of their operations, the changes in its shareholders’ equity and their cash

flows for the years then ended in conformity with accounting principles generally

accepted in the Republic of Korea.

Accounting principles and auditing standards and their application in practice vary

among countries. The accompanying consolidated financial statements are not

intended to present the financial position, results of operations, changes in

shareholders’ equity and cash flows in conformity with accounting principles and

practices generally accepted in countries and jurisdictions other than the Republic of

Korea. In addition, the procedures and practices used in the Republic of Korea to audit

such financial statements may differ from those generally accepted and applied in other

countries. Accordingly, this report and the accompanying consolidated financial

statements are for use by those who are informed about Korean accounting principles

or auditing standards and their application in practice.

Seoul, Korea

June 22, 2010

This report is effective as of June 22, 2010, the audit report date. Certain subsequent

events or circumstances, which may occur between the audit report date and the time of

reading this report, could have a material impact on the accompanying consolidated

financial statements and notes thereto. Accordingly, the readers of the audit report

should understand that there is a possibility that the above audit report may have to be

revised to reflect the impact of such subsequent events or circumstances, if any.

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Financial Position March 31, 2010 and 2009

3


Assets

Cash and cash equivalents (Note 3) ￦ 536,378,601 ￦ 433,495,752

Deposits segregated under regulation (Note 3) 1,090,333,288 972,112,855

Trading securities (Note 4) 3,777,114,437 2,697,372,812

Available-for-sale securities (Note 6) 193,926,550 138,440,063

Equity-method investments (Note 7) 22,042,296 8,343,250

Derivative-combined securities (Note 5) 323,438,263 433,176,449

Derivative assets 443,969,688 366,332,382

Loans receivable, net (Note 8) 837,494,537 630,319,927

Property and equipment, net (Note 9) 521,950,512 547,541,264

Intangible assets, net (Note 10) 50,306,489 30,465,021

Accounts receivable, net (Note 8) 54,778,042 34,313,048

Accrued revenue, net (Note 8) 42,380,253 42,117,858

Advanced payments 19,036,692 11,967,424

Guarantee deposits 64,108,489 64,022,028

Collective fund for default loss (Note 3) 6,229,887 5,403,190

Deferred income tax assets (Note 20) 2,437,265 2,008

Others 46,545,565 49,203,839

Total assets ￦8,032,470,854 ￦6,464,629,170

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Financial Position March 31, 2010 and 2009

4


Liabilities and Shareholders' Equity

Liabilities

Deposits from customers (Note 12) ￦ 1,092,887,769 ￦1,134,342,809

Borrowings (Note 13) 777,876,183 409,583,235

Securities sold under repurchase agreements (Note 4) 2,715,275,985 1,719,443,051

Securities sold 34,394,428 2,579,222

Derivative-combined securities sold (Note 5) 1,314,770,477 1,165,433,853

Derivative liabilities 45,812,760 160,310,563

Debentures, net (Note 14) 59,780,240 59,679,998

Accrued severance benefits, net (Note 15) 1,526,680 1,824,318

Income tax payable 59,870,235 97,801


Accrued expenses 20,434,798 15,993,581

Guarantee deposits received 55,625,779 63,988,019

Deferred income tax liabilities (Note 20) 35,576,132 40,093,889

Withholdings 5,167,789 2,653,823

Others 19,292,138 1,542,541

Total liabilities 6,342,160,602 4,807,010,217

Commitments and contingencies (Note 11)

Shareholders' equity

Capital stock (Note 17)

Common stock 254,867,000 254,867,000

Preferred stock 180,000,000 180,000,000

Capital surplus 713,145,971 715,771,296

Capital adjustments (Note 19) (141,203,280) (139,041,646)

Accumulated other comprehensive income (Note 19) 74,737,527 61,081,074

Retained earnings (Note 18) 596,222,271 584,941,229

Minority interests 12,540,763 -

Total shareholders' equity 1,690,310,252 1,657,618,953

Total liabilities and shareholders' equity ￦ 8,032,470,854 ￦ 6,464,629,170

The accompanying notes are an integral part of these consolidated financial statements.

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Income


5


2010 2009

Operating revenues

Commissions received (Note 21) ￦ 366,864,892 ￦ 297,493,590

Gain on sales of trading securities 106,405,009 104,131,639

Gain on valuation of trading securities 35,713,517 33,372,056

Gain on sale of available-for-sale securities 1,403,156 2,308,481

Recovery on impairment loss on

available-for-sale securities 49,773 -

Gain on valuation of securities sold 436,222 -

Gain on derivative-combined securities transactions 212,463,187 38,755,058

Gain on derivative-combined securities

sold transactions 1,519,515,420 1,676,233,143

Gain on derivatives transactions 763,148,244 410,669,648

Interest income 231,179,223 211,675,093

Reversal of allowance for doubtful accounts 4,457,195 4,166,517

Dividend income 5,068,088 4,322,427

Gain on valuation of deposits

segregated under regulation 27,868,047 39,746,681

Others 5,033,735 7,794,879

3,279,605,708 2,830,669,212

Operating expenses

Commissions expenses 21,371,894 19,812,902

Loss on sale of trading securities 92,100,686 138,523,886

Loss on valuation of trading securities 6,675,763 4,420,568

Loss on sale of available-for-sale securities 766,050 804,869

Loss on impairment of available-for-sale securities (Note 6) 1,044,882 6,029,315

Loss on valuation of securities sold 1,543,677 263,882

Loss on derivative-combined securities transactions 5,493,740 225,828,176

Loss on derivative-combined

securities sold transactions 871,868,037 200,001,803

Loss on derivatives transactions 1,634,661,714 1,681,569,405

Interest expense 109,162,946 130,696,558

General and administrative expenses (Note 22) 355,457,744 303,017,236

Bad debts expense 174,784 19,270,143

Others 7,276,335 408,629

3,107,598,252 2,730,647,372

Operating income 172,007,456 100,021,840

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Income


6


2010 2009


Gain on disposal of property and equipment ￦ 3,389,229 ￦ 7,330

Office rental income 12,361,570 13,346,309

Gain on valuation of equity-method

Investments (Note 7) 3,765,394 -

Others 3,279,093 13,278,491

22,795,286 26,632,130


Loss on disposal of property and equipment 2,428,847 253,963

Loss on equity method valuation 164 98,473

Loss on sale of equity-method investments (Note 7) 2,071 -

Donation 1,234,624 1,221,943

Compensation loss 41,723,815 -

Others 422,815 9,009

45,812,336 1,583,388

Net income before income taxes 148,990,406 125,070,582

Income tax expense (Note 20) 55,250,060 21,819,237

Net income ￦ 93,740,346 ￦ 103,251,345

Parent interest in net income ￦ 91,355,531 ￦ 103,251,345

Minority interest in net income 2,384,815 -

Basic earnings per share (in Korean won) (Note 23) ￦ 1,190 ￦ 1,317

Diluted earnings per share (in Korean won) (Note 23) ￦ 1,190 ￦ 1,317


Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009

7


Capital stock Capital surplus

Capital

adjustments

Accumulated

other

comprehensive

Income

Retained

earnings

Minority

interest Total

Balance as of

April 1, 2009 ￦ 434,867,000 ￦ 715,771,296 ￦ (139,041,646) ￦ 61,081,074 ￦ 584,941,229 ￦ - ￦ 1,657,618,953

Cash dividends - - - - (80,074,489) - (80,074,489)

Retain earnings

after appropriations - - - - 504,866,740 - 1,577,544,464

Net income - - - - 91,355,531 2,384,815 93,740,346

Loss on sale of

treasury stock - (2,625,325) (2,089,445) - - - (4,714,770)

Gain on valuation of

available-for-sale

securities

- - - 15,390,165 - - 15,390,165

Paid in capital increase

of Subsidiaries - - (72,189) - - - (72,189)

Gain and loss on

translation of foreign

operations

-

-

-

(1,820,655)

-

-

(1,820,655)

Changes in equity-

method investments - - - 86,943 - 340,505 427,448

Change in consolidated

entity - - - - - 9,815,443 9,815,443

Balance as of

March 31, 2010 ￦ 434,867,000 ￦ 713,145,971 ￦ (141,203,280) ￦ 74,737,527 ￦ 596,222,271 ￦ 12,540,763 ￦ 1,690,310,252

Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009

8


Capital stock Capital surplus

Capital

adjustments

Accumulated

other

comprehensive

Income

Retained

earnings Total

Balance as of

April 1, 2008 ￦ 434,867,000 ￦ 717,846,169 ￦ (78,044,740) ￦ 62,538,914 ￦ 593,081,721

￦ 1,730,289,064

Other appropriation - - 5,229,977 - (5,229,977) -

Cash dividends - - - - (106,161,860) (106,161,860)

Retain earnings

after appropriations - - - - 481,689,884

1,624,127,204

Net income - - - - 103,251,345 103,251,345

Changes in

treasury stock - (2,074,873) (66,226,883) - -

(68,301,756)

Gain and loss on

valuation of available-

for-sale securities

- - - (4,052,870) -

(4,052,870)

Gain and loss on

translation of foreign

operations

- - - 2,595,030 -

2,595,030

Balance as of

March 31, 2009 ￦ 434,867,000 ￦ 715,771,296 ￦ (139,041,646) ￦ 61,081,074 ￦ 584,941,229

￦ 1,657,618,953


Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Cash Flows


9


Cash flows from operating activities

Net income ￦ 93,740,346 ￦ 103,251,345

Adjustments to reconcile net income

to net cash provided by (used in) operating activities

Loss(Gain) on disposal of trading securities, net (14,304,322) 34,392,247

Gain on valuation of trading securities, net (29,037,754) (28,951,488)

Gain on disposal of available-for-sale securities, net (637,106) (1,624,645)

Loss(Gain) on derivatives-combined securities

transactions, net (206,969,446) 187,073,118

Gain on derivatives-combined securities sold

transactions, net (647,647,383) (1,476,231,340)

Loss on derivatives transactions, net 871,513,470 1,270,899,757

Loss on valuation of securities sold, net 1,107,455 263,882

Bad debts expense 174,784 19,270,143

Depreciation 27,204,299 23,500,357

Amortization 9,172,985 60,695

Loss(Gain) on disposal of property and equipment, net (960,382) 246,633

Loss on impairment of available-for-sale

securities, net 1,044,882 6,029,315

Provision for severance benefits 1,354,090 1,672,857

Loss(Gain) on valuation of

equity-method investments, net (3,765,229) 98,473

Reversal of allowance for doubtful accounts (4,517,956) (4,166,517)

Gain on valuation of deposits segregated under

regulation (27,868,047) (39,746,681)

Compensation loss 17,707,439 -

Others, net 11,693,436 7,433,315

99,005,561 103,471,466



10


Changes in operating assets and liabilities

Deposits segregated under regulation ￦ (90,393,368) ￦ (283,476,325)

Trading securities (1,036,399,820) (726,735,444)

Derivatives-combined securities 316,707,633 131,773,660

Loans receivables (206,473,970) 216,111,312

Accounts receivable (20,408,696) (24,727,539)

Accrued revenue (314,927) (10,334,110)

Advanced payments (7,069,541) (4,163,967)

Collective fund for default loss (826,697) 1,162,720

Derivative assets and liabilities (1,063,648,579) (986,815,109)

Deposits from customers (41,473,655) 322,955,786

Securities sold 30,707,752 (10,692,527)

Derivatives-combined securities sold 796,984,008 1,258,913,721

Income tax payable 60,512,910 (45,407,065)


Accrued expenses 4,500,933 (3,994,113)

Withholdings 2,486,298 (6,623,770)

Deferred income tax (10,804,834) 13,539,556

Decrease in severance insurance plan deposit - 3,264,241

Payment of retirement trust - 55,093

Payment of serverance benefits (1,750,816) (908,414)

Securities sold under repurchase agreements 522,951,885 496,636,842

Others, net 4,125,415 (12,484,290)

(682,743,239) 342,307,259

Net cash provided by (used in) operating activities (583,737,678) 445,778,725



11


Cash flows from investing activities

Decrease in time deposits, net ￦ - ￦ 1,000,000

Decrease(Increase) in guarantee deposits, net 858,692 1,554,714

Disposal of property and equipment 8,647,211 14,812

Acquisition of property and equipment (12,357,478) (32,261,298)

Increase in intangible assets (9,394,103) (18,012,148)

Acquisition of available-for-sale securities (42,033,323) (72,320,670)

Disposal of available-for-sale securities 5,739,209 38,151,814

Increase in equity-method investments (260,000) (3,491,723)

Others, net (874,324) (8,021,261)

Net cash used in investing activities (49,674,116) (93,385,760)

Cash flows from financing activities

Increase(Decrease) in borrowings, net 368,292,948 (203,914,948)

Issuance of debentures - 59,678,900

Retirement of debentures - (10,000)

Decrease in guarantee deposits received, net (9,365,440) (5,102,877)

Issuance of new shares 317,385 -

Payment of dividends (80,097,105) (106,147,158)

Acquisition of treasury shares (13,480,247) (77,503,777)

Increase in securities sold under repurchase agreements 472,881,049

Others, net - (2,588,100)

Net cash provided by(used in) financing activities 738,548,590 (335,587,960)

Effect of exchange rate changes on cash and

cash equivalents (2,287,028) 5,746,047

Effect of consolidated entity's scope changes

on cash and cash equivalents 33,081 -

Net increase in cash and cash equivalents 102,882,849 22,551,052

Cash and cash equivalents (Note 26)

Beginning of year 433,495,752 410,944,700

End of year ￦ 536,378,601 ￦ 433,495,752


Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009

12

1. The Company

Daishin Securities Co., Ltd. (the Controlling Company) was incorporated as Samrak

Securities Co., Ltd. on July 27, 1962, under the Commercial Code of the Republic of

Korea, to engage in the securities business operations, including brokerage

transactions, trading and underwriting of securities and other related business

activities. The Company changed its corporate name to Daishin Securities Co., Ltd.

on April 22, 1975, and has been listed on the Korea Exchange since October 1,

1975. The Company has issued global depositary receipts (“GDR”), representing 10

million shares of preferred stock at the London Stock Exchange’s Professional

Securities Market since November 2, 2007. The head office of the Company is in

Seoul, and the Company has 115 domestic branches and two representative

overseas offices.

Consolidated Subsidiaries

The consolidated financial statements include the accounts of Daishin Securities Co.,

Ltd. and its controlled subsidiaries (collectively referred to as “the Company”).

Consolidated subsidiaries include majority-owned entities and entities in which

Daishin Securities Co., Ltd. owns more than 30% of the total outstanding voting

stock and is the largest shareholder.

The following table sets forth certain information with regard to consolidated

subsidiaries as of March 31, 2010:

Subsidiary Capital

Percentage of

Ownership (%) Location

Daishin Investment

Trust Management Co., Ltd. ₩ 27,597 million 100 Korea

Daishin Securities Asia Ltd. ₩ 10,892 million 100 Hong Kong

Daishin-Pegasus I PEF ₩ 16,964 million 26.08 Korea

Daishin-Pegasus I PEF whose financial statements were adjusted to reconcile its

accounting policies with those of the Controlling Company’s.


13

Subsidiaries excluded from the consolidated financial statements as of March 31, 2010,

are as follows:

Subsidiary Capital

Percentage of

Ownership (%) Location

Daishin Economic Research

Institute ₩ 4,995 million 99.00 Korea

Daishin Champs Elysees Hwit ₩ 82 million 100 Korea

Daishin Factoring Co., Ltd. ₩ - 33.25 Korea

In accordance with consolidation accounting standards generally accepted in the

Republic of Korea, the financial statements of the above subsidiaries are excluded

from the consolidated financial statements either because their total assets at the end

of the prior fiscal year end were less than ￦10,000 million, or were in the process of

being liquidated.

Equity method investees of the Company as of March 31, 2010, are as follows:

Number of

Shares Owned

Percentage of

Ownership

Daishin-MSB I PEF - 0.90

Daishin Securities Growth Alpha SPAC 10,000 1.04

The Jeonbuk Bank Ltd. 2,600,000 4.87

Daishin-Pegasus I PEF is included in the consolidated financial statements because

of the increase of its net assets as of March 31, 2010.

2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of

the accompanying consolidated financial statements are summarized below.

Basis of Financial Statement Presentation

The Company maintains its accounting records in Korean won and prepares

statutory consolidated financial statements in the Korean language in conformity with

accounting principles generally accepted in the Republic of Korea. Certain

accounting principles applied by the Company that conform with financial accounting

standards and accounting principles in the Republic of Korea may not conform with

generally accepted accounting principles in other countries. Accordingly, these


14

consolidated financial statements are intended for use by those who are informed

about Korean accounting principles and practices. The accompanying consolidated

financial statements have been condensed, restructured and translated into English

from the Korean language consolidated financial statements.

Certain information attached to the Korean language financial statements, but not

required for a fair presentation of the Company's financial position, results of

operations or cash flows, is not presented in the accompanying consolidated

financial statements.

Accounting Estimates

The preparation of financial statements requires management to make estimates

and assumptions that affect amounts reported therein. Although these estimates are

based on management's best knowledge of current events and actions that the

Company may undertake in the future, actual results may differ from those estimates.

Application of the Statements of Korean Financial Accounting Standards

The Company’s non-consolidated financial statements were prepared in conformity

with accounting principles generally accepted in Korea.

In accordance with the Enforcement Decree on Financial Investment Services, the

Company has changed the method of account classification and certain amounts in

the financial statements as of and for the year ended March 31, 2009, have been

reclassified to conform to the March 31, 2010 financial statement presentation.

These reclassifications had no effect on previously reported net income or

shareholders' equity.

Principles of Consolidation

The Company records differences between the investment account and

corresponding capital account of subsidiaries as goodwill or negative goodwill, and

such differences are amortized over five years using the straight-line method.

However, differences which occur from additional investments acquired in

consolidated subsidiaries are reported in a separate component of shareholders'

equity, and are not included in the determination of the results of operations. In

accordance with accounting principles generally accepted in the Republic of Korea,

minority interests in consolidated subsidiaries are presented as a component of

shareholders' equity in the consolidated statements of financial position.

All significant intercompany transactions and balances have been eliminated during

consolidation.

Unrealized profits, arising from sales by the Controlling Company to consolidated

subsidiaries, or equity-method investees, are fully eliminated and charged to the


15

equity of the Controlling Company. Unrealized profits, arising from sales by the

consolidated subsidiaries, or equity-method investees, are fully eliminated, and

charged to the equity of the controlling Company and minority interest, based on the

percentage of ownership.

Daishin Securities Co., Ltd. and its consolidated subsidiaries follow the same fiscal

year end.

Revenue Recognition

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

date.

Marketable Securities

The Company accounts for equity and debt securities under the provision of SKAS

No. 8, Investments in Securities. This statement requires investments in equity and

debt securities to be classified into three categories: trading, available-for-sale and

held-to-maturity.

Securities are initially carried at cost, including incidental expenses, with cost being

determined using the moving average method. Debt securities, which the Company

has the intent and ability to hold to maturity, are generally carried at cost, adjusted

for the amortization of discounts or premiums. Premiums and discounts on debt

securities are amortized over the term of the debt using the effective interest method.

Trading and available-for-sale securities are carried at fair value, except for non-

marketable securities, classified as available-for-sale securities, which are carried at

cost.

Unrealized valuation gains or losses on trading securities are charged to operations

and those resulting from available-for-sale securities are charged to accumulated

other comprehensive income and expense, the accumulated amount of which shall

be charged to operations when the related securities are sold, or when an

impairment loss on the securities is recognized. Impairment losses are recognized in

the statement of income when the recoverable amounts are less than the acquisition

cost of securities or adjusted cost of debt securities for the amortization of discounts

or premiums.

If the realizable value subsequently recovers, in case of a security stated at fair

value, the increase in value is recorded in current operations, up to the amount of

the previously recognized impairment loss, while for the security stated at amortized

cost or acquisition cost, the increase in value is recorded in current operations, so

that its recovered value does not exceed what its amortized cost would have been

as of the recovery date if there had been no impairment loss.


16

Privately placed funds among collective investment securities are accounted for as if

the assets included were actually owned by the Company. When these funds are not

managed by a guideline set by the Company and are substantially different from the

assets actually owned by the Company, the funds are accounted for as non-specific

investment funds managed by third parties.

Equity-Method Investments

In the consolidated financial statements of the Company, investments in business

entities in which the Company has control or the ability to exercise significant

influence over the operating and financial policies are accounted for using the equity

method of accounting. Under the equity method, the original investment is recorded

at cost and adjusted by the Company's share in the net book value of the investee

with a corresponding charge to current operations, a separate component of

shareholders ́equity, or retained earnings, depending on the nature of the

underlying change in the net book value. All significant unrealized profits resulting

from intercompany transactions of property and equipment have been eliminated.

After computing the difference between the cost of the investment and the share of

investee's net value of the identifiable assets and liabilities at the date of acquisition,

any residual cost over (under) fair value of the net identifiable assets and liabilities is

assigned to the unidentifiable asset, goodwill (or the unidentifiable liabilities,

negative goodwill), which are recorded as part of investments and are amortized

over five years using the straight-line method. However, differences which occur

from additional investments or investment of associates made after the Company

has control in its subsidiaries are recognized as capital surplus or capital

adjustments.

Assets and liabilities of the Company’s foreign investees are translated at current

exchange rates, while income and expense are translated at average rates for the

period. Adjustments resulting from the translation process are reported in a separate

component of shareholders’ equity, and are not included in the determination of the

results of operations.

Derivatives-combined securities and Derivatives-combined securities sold

Equity-linked securities are recorded as assets at the purchase price, and equity -

linked securities sold are recorded as a liability at the issuance price. Gains or

losses upon redemption are recorded as a gain or loss on the redemption, and the

difference with the estimated value and the book value at the end of the reporting

period is recorded as a gain or loss on valuation.


17

Derivative Instruments

Derivative instruments for trading or hedging purpose are recorded as assets and

liabilities at a fair value. And unrealized gain and loss resulting from changes in the

market or fair value of such instruments are reported as current operations except

for the effective portion of derivative transactions entered into for the purpose of

cash-flow hedges, recorded as accumulated other comprehensive income under

shareholders’ equity.

Allowance for Doubtful Accounts

The Regulation on Financial Investment Business prescribed by the Financial

Investment Business and Capital Market Act provides guidelines for calculating the

allowance for doubtful accounts. These guidelines require the minimum level of

allowances that securities firms should maintain. These guidelines require that all

loans and receivables should be classified based on a number of factors including

the financial position of the debtors, the repayment history, the Company’s past

relationship and dealings with the debtors and the value of any security interest. In

accordance with these guidelines, loans and receivables have been classified as

normal, precautionary, substandard, doubtful and estimated loss.

Loans which are modified during the court receivership, court mediation or

restructuring of customers are revalued at the present value discounted by the

effective interest rate at the inception of the debt. The difference between the book

value and the readjusted value is offset against the provision for possible loan

losses, and the remaining difference is recognized as bad debts expense in the year

incurred. The difference between the book value (nominal value) and the present

value is amortized using the effective interest rate method and is recorded as

interest income.

Property and Equipment, and Intangible assets

Property and equipment are stated at cost, except for certain assets subject to

upward revaluation in accordance with the Asset Revaluation Law of Korea. The

revaluation presents production facilities and other buildings at their depreciated

replacement cost, and land at the prevailing market price, as of the effective date of

revaluation.

Depreciation is computed using the straight-line method based on the estimated

useful lives of the assets as follows:

Assets Estimated useful lives

(years)

Buildings 40

Vehicles 4~5

Furniture and equipment 4~5


18

Intangible assets are stated at cost, net of amortization calculated using the straight-

line method based on the estimated useful lives of the assets.

Maintenance and Repairs

Routine maintenance and repairs are charged to expense as incurred. Expenditures

which enhance the value or extend the useful life of the related asset are capitalized.

Securities Sold under Repurchase Agreements

Under the repurchase agreements, the Company records securities sold under

repurchase agreements at the amount of securities sold. Also the Company records

the difference between the repurchase price and the price of the securities sold as

interest expense.

Meanwhile under the resale agreements, the securities purchased under resale

agreements are stated at acquisition cost. The Company records the difference

between the securities resale price and acquisition cost as interest income.

Securities Sold

If securities are borrowed from Korea Securities Finance Corporation, the Company

presents the borrowed securities in the statement of financial position. In addition, if

the related securities are sold, the Company recognizes securities sold as liability in

the statement of financial position.

Discounts and Premiums on Debentures

The difference between the face value and the proceeds on issuance of the

debenture is treated as either a discount or premium on the debenture, which is

amortized over the term of the debenture using the effective interest rate method.

The discount or premium is reported as a direct deduction from or addition to the

face value of the debenture in the statement of financial position. Amortization of the

discount or premium is treated as part of interest expense.

Accrued Severance Benefits

Employees and directors with at least one year of service are entitled to receive a

lump-sum payment upon termination of their employment with the Company based

on their length of service and rate of pay at the time of termination. Accrued

severance benefits represent the amount which would be payable assuming all

eligible employees and directors were to terminate their employment as of the end

of the reporting period.

For defined contribution pension plan, the Company recognizes as expense the

severance benefits provided for the period.

The Company has a defined benefit pension plan, and accrues severance benefits

for current employees and pension payables for retired employees.


19

Pension plan assets are presented as a deduction from the total accrued severance

benefits and pension payables. The excess of pension plan assets over pension

plan liabilities is recorded as investment assets.

Foreign Currency Translation

Assets and liabilities denominated in foreign currencies are translated into Korean

won at the rate of exchange in effect as of the end of the reporting period. Gains and

losses resulting from the translation are reflected as either income or expense for

the period.

Translation of Foreign Operations

Accounts of foreign subsidiaries are maintained in the currencies of the countries in

which they operate. In translating the foreign currency financial statements of these

subsidiaries into Korean won, income and expenses are translated at the average

rate for the year, while assets and liabilities are translated at the rate prevailing on

the end of the reporting period. Resulting translation gains or losses are recorded as

a cumulative translation adjustment presented as part of shareholders’ equity.

Treasury Stock

Treasury stock is stated at cost. Gain on disposal of treasury stock is charged to

capital surplus. Loss on disposal of treasury stock is first offset against gain on

disposal of treasury stock, if any, and the remainder is charged to capital adjustment,

a component of shareholders’ equity.

Deferred Income Tax Assets and Liabilities

The Company recognizes deferred income taxes for anticipated future tax

consequences resulting from temporary differences between amounts reported for

financial reporting and income tax purposes. Deferred tax assets and liabilities are

computed on such temporary differences, including available net operating loss

carry forwards and tax credits, by applying enacted statutory tax rates applicable to

the years when such differences are expected to reverse. Deferred tax assets are

recognized when it is more likely that such deferred tax assets will be realized. The

total income tax provision includes the current tax expense under applicable tax

regulations and the change in the balances of deferred tax assets and liabilities

during the year.

Trust Account

The Company accounts for the trust assets separately from other assets. In terms of

operating, managing and disposing of the trust assets among the trust accounts, the

Company records as operating revenues the fees it earns from trust accounts.


20

Provisions and Contingent Liabilities

When there is a probability that an outflow of economic benefits will occur due to a

present obligation resulting from a past event, and whose amount is reasonably

estimable, a corresponding amount of provision is recognized in the consolidated

financial statements. However, when such outflow is dependent upon a future event,

is not certain to occur, or cannot be reliably estimated, a disclosure regarding the

contingent liability is made in the notes to the consolidated financial statements.

Earnings Per Share

Earnings per share are computed based on earnings available to common

shareholders, using the weighted average number of common shares outstanding

during the year.

3. Restricted Deposits and Others

Restricted deposits and others as of March 31, 2010 and 2009, consist of the

following:


Cash and cash equivalents ￦ 22,900,000 ￦ -

Deposits segregated under regulations

Reserve for claims of customers' deposits ￦ 15,210,000 ￦ 2,410,000

Reserve for claims of customers' deposits (trust) 1,023,728,943 933,637,400

Securities borrowed - 73,955

Deposits for exchange-traded derivatives 1,251,845 -

Restricted due from financial institutions 42,500 41,500

Long-term due from financial institutions 2,000,000 25,980,000

￦1,042,233,288 ￦ 962,142,855

Guarantee deposits (surety guarantee) ￦ 1,000 ￦ 1,000

Collective fund for default loss ￦ 6,229,887 ￦ 5,403,190

According to the Regulation on Financial Investment Business (“RFIB”), the

Company is required to deposit with the Korea Securities Finance Corporation

(“KSFC”) or other banks the amount of deposits from customers for the customers’

claims.

Pursuant to the Financial Investment Business and Capital Market Act, the collective

fund for default loss is reserved to compensate losses resulting from breaching

securities in the Korea Exchange.

As of March 31, 2010, ₩22,900 million of cash and cash equivalents is pledged as

collaterals for derivative transactions with SC First Bank and others.


21

As of March 31, 2010, cash and bank deposits related to maintain checking

accounts are subject to withdrawal restrictions.

As of March 31, 2010, long-term due from financial institutions is pledged as

collateral for the Korea Financial Telecommunications & Clearings Institute’s

services.

4. Trading Securities

Trading securities as of March 31, 2010 and 2009, consist of the following:


Stocks ￦ 75,186,253 ￦ 58,699,808

State and Local government bonds 859,726,545 707,818,374

Special bonds 2,129,549,357 1,791,842,686

Corporate bonds 551,680,366 106,966,879

Collective investment securities 33,529,733 32,045,065

Foreign currency certificates 127,442,183 -

￦3,777,114,437 ￦2,697,372,812

Debt securities as of March 31, 2010 and 2009, consist of the following:

2010 2009

(in millions of Par Acquisition Fair Book Book

Korean won) Value Cost Value Value Value

State and Local

government bonds ￦ 845,596,082 ￦ 851,538,079 ￦ 859,726,545 ￦ 859,726,545 ￦ 707,818,374

Special bonds 2,116,524,693 2,117,660,928 2,129,549,357 2,129,549,357 1,791,842,686

Corporate bonds 541,196,774 545,627,442 551,680,366 551,680,366 106,966,879

￦3,503,317,549 ￦3,514,826,449 ￦3,540,956,268 ￦3,540,956,268 ￦2,606,627,939

As of March 31, 2010, ₩2,754,890 million (March 31, 2009: ₩1,845,479 million) of

the above state and local government bonds, special bonds and corporate bonds is

pledged as collaterals against securities sold under repurchase agreements.


22

Collective investment securities among trading securities as of March 31, 2010 and

2009, consist of the following:

2010

Unsold Collective Other Collective

(in thousands of Korean won) Investment Securities Investment Securities Total

Book value

before valuation

￦ 30

￦ 32,879,324

￦ 32,879,354

Gain(Loss) on valuation - 650,379 650,379

Book value

after valuation

￦ 30 ￦ 33,529,703 ￦ 33,529,733

2009

Unsold Collective Other Collective

(in thousands of Korean won) Investment Securities Investment Securities Total

Book value

before valuation

￦ 7,226,065

￦ 24,157,368

￦ 31,383,433

Gain(Loss) on valuation 214,250 447,382 661,632

Book value

after valuation

￦ 7,440,315 ￦ 24,604,750 ￦ 32,045,065

Interest income from trading securities for the year ended March 31, 2010, was

₩148,840 million (March 31, 2009: \123,287 million).

The Company has provided state and local government bonds, and others with a

total face value of ￦244,600 million as collaterals for reserve for futures transactions

with Korea Exchange and others, and for debt and credit transactions with Korea

Securities Depository and others with a total face value of ￦45,000 million. It also

provided securities with a total face value of ￦134,600 million to Korea Securities

Finance Corporation and others as a margin to customers from KSFC, securities with

a total face value of ￦525 million to a court as performance guarantee in the trust

business, and securities with a total face value of ₩316,100 million to Societe

Generale and others for its derivative transactions.


23

5. Derivatives-combined Securities, Derivatives-combined Securities Sold

and Derivative Instruments

Derivatives-combined securities and Derivatives-combined securities sold as of

March 31, 2010 and 2009, are as follows:

2010 2009

Fair Gain on Loss on Fair

(in thousands of Korean won) Value Valuation Valuation Value

Derivatives-combined

securities

Equity-linked securities ￦ 323,153,951 ￦ 74,283,287 ￦ 791,769 ￦ 431,928,767

Others 284,312 - 358,659 1,247,682

￦ 323,438,263 ￦ 74,283,287 ￦ 1,150,428 ￦ 433,176,449

Derivatives-combined

securities sold

Equity-linked securities sold ￦ 705,566,675 ￦ 1,552,426 ￦ 101,574,213 ￦ 806,110,145

Equity-linked warrants sold 417,795,998 615,202,957 33,023,088 357,581,930

Others 191,407,804 8,292,368 4,274,776 1,741,778

￦1,314,770,477 ￦ 625,047,751 ￦ 138,872,077 ￦ 1,165,433,853

Interest and redemption price on maturity date of equity-linked securities are

affected by the fluctuation of the stock index. The redemption price on maturity date

of warrants is also affected by the fluctuation of stock index. The principal of warrant

is not guaranteed, however, and only option premiums will be received. The above

derivatives combined securities and derivatives combined securities sold are carried

at fair value and unrealized valuation gains or losses are recognized in the current

operations.


24

Credit-linked securities among derivatives-combined securities sold as of March 31,

2010, consist of the following :

(in thousands of Korean won) Face amount Date of issue Date of maturity

Standard

company

DLS20 sold

￦ 50,000,000

July 3,

2009

September 20,

2011

Hyndai Heavy

Industries Co.,Ltd

DLS21 sold

25,000,000

July 23,

2009

September 20,

2011

Hyndai Heavy

Industries Co.,Ltd

DLS22 sold

2,800,000

July 29,

2009

September 20,

2011

Hyndai Heavy

Industries Co.,Ltd

DLS23 sold

10,000,000

September 2,

2009

May 19,

2012 LG Display Co., Ltd.

DLS24 sold

1,000,000

September 9,

2009

March 21,

2011

Daewoo Shipbuilding &

Marine Engineering

Co., Ltd.

DLS25 sold

111,000

September 17,

2009

September 24,

2010

Samsung Heavy

Industries Co.,Ltd

DLS26 sold

2,300,000

September 11,

2009

May 19,

2012 LG Display Co., Ltd.

DLS27 sold

10,000,000

September 15,

2009

December 20,

2010


Marine Engineering

Co., Ltd.

DLS28 sold

300,000

September 18,

2009

March 21,

2011


Marine Engineering

Co., Ltd.

DLS29 sold

2,900,000

September 25,

2009

September 20,

2010

Samsung Heavy

Industries Co.,Ltd

DLS30 sold

588,810

September 30,

2009

March 21,

2011


Marine Engineering

Co., Ltd.

DLS31 sold

2,000,000

October 8,

2009

September 20,

2010

Samsung Heavy

Industries Co.,Ltd

DLS32 sold

7,040,000

October 9,

2009

September 20,

2010

Samsung Heavy

Industries Co.,Ltd

DLS33 sold

3,650,000

October 28,

2009

March 22,

2011


Marine Engineering

Co., Ltd.

DLS35 sold

1,190,000

November 4,

2009

March 22,

2011


Marine Engineering


25

Co., Ltd.

DLS36 sold

1,050,000

November 20,

2009

March 22,

2011


Marine Engineering

Co., Ltd.

DLS38 sold

1,000,000

December 29,

2009

March 22,

2011


Marine Engineering

Co., Ltd.

DLS39 sold

5,330,000

January 15,

2010

March 22,

2011


Marine Engineering

Co., Ltd.

DLS40 sold

300,000

January 20,

2010

March 22,

2011


Marine Engineering

Co., Ltd.

DLS41 sold

2,420,000

February 24,

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO

LG Electronics Inc.

DLS43 sold

1,000,000

March 8,

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO

LG Electronics Inc.

DLS44 sold

2,000

March 17,

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO

LG Electronics Inc.

DLS45 sold

3,520,000

March 12

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO

LG Electronics Inc.

DLS47 sold

1,700,000

March 16,

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO

LG Electronics Inc.

DLS48 sold

10,000,000

March 19,

2010

March 22,

2013

Hyundai Motor Co

GS-Caltex

POSCO


26

Derivative instrument contracts outstanding as of March 31, 2010 and 2009, are as

follows:

2010 2009


Outstanding

Contract

Amount

Gain on

Valuation

Loss on

Valuation

Outstanding

Contract

Amount

Purpose of

Transaction

Interest rate swaps ￦1,002,900,000 ￦ 632,751 ￦12,500,704 ￦ - Hedging

Interest rate futures sold 520,150,050 962,980 162,930 391,619,418 Hedging

Currency swaps 330,647,620 6,058,627 2,957,350 65,688,000 Hedging

Currency futures 11,776,438 3,709 30,005 - Hedging

Currency forwards sold 3,323,895 20,022 - 198,704 Hedging

Stock index futures

purchased (domestic) 39,873,769 202,269 21,445 19,371,850 Trading

Stock index futures

sold (domestic) 11,190,019 100,649 265,682 24,671,575 Trading

Long position on stock

index options purchased

(domestic) - - - 611,145 Trading

Long position on stock

index options sold

(domestic) 216,800 94,800 - - Trading

Stock and stock index

options purchased 1 8,791,987,938 37,682,990 614,977,031 3,178,806,680 Hedging

Stock and stock index

options sold 2 121,237,907 1,059,643 1,479,831 81,584,989 Hedging

Credit swap(CDS) 239,535,600 4,285,187 140,864 - Hedging

Other options purchased 1 75,126,361 4,139,306 457,019 - Hedging

Other options sold 2 126,307,362 7,891,896 181,818 441,634,591 Hedging

￦11,274,273,759 ￦ 63,134,829 ￦633,174,679 ￦4,204,186,952

1 The Company purchased these instruments to hedge against fluctuations in

maturity amounts of equity-linked securities sold and recorded them as derivative

instrument assets. Since the above option transaction does not meet the

condition of hedge accounting, the Company does not apply hedge accounting.

2 The Company sold these instruments to hedge against fluctuations in maturity

amounts of derivative instrument assets and recorded them as derivative

instrument liabilities. Since the above option transaction does not meet the

condition of hedge accounting, the Company does not apply hedge accounting.

The Company provided time deposits and trading securities to Korea Exchange

as collateral for derivative instrument transactions (Note 11).


27

6. Available-for-sale Securities

Available-for-sale securities as of March 31, 2010 and 2009, consist of the following:


Stocks ￦ 135,940,076 ￦ 108,321,385

Investments in partnerships 2,001,200 2,001,200

Collective investment securities 30,348,878 26,806,454

Foreign currency certificates 18,911,949 839,763

Others 6,724,447 471,261

￦ 193,926,550 ￦ 138,440,063

Stocks among available-for-sale securities as of March 31, 2010 and 2009, consist

of the following:

(in thousands of Korean won, except for the number of shares owned and percentage of ownership)

2010 2009

Number

of

Shares

Owned

Percentage

of

Ownership

Acquisition

Cost

Market or

Net Asset

Value

Book

Value

Book

Value

Stocks in listed companies

Namsun Aluminum Co. - - ￦ - ￦ - ￦ - ￦ 15

Daishin Information &

Communication Co., Ltd. 1,713,700 4.46 6,433,185 993,946 993,946 762,596

Kumho Industrial

Co.,Ltd. 3,405,731 0.67 12,400,267 12,400,267 12,400,267 -

18,833,452 13,394,213 13,394,213 762,611


28


2010 2009

Number

of

Shares

Owned

Percentage

of

Ownership

Acquisition

Cost

Market or

Net Asset

Value

Book

Value

Book

Value

Stocks in unlisted companies

Songchon Construction

Co., Ltd. 77,603 - ￦ 4,834,712 ￦ - ￦ - ￦ -

Micro Science Tech

Co., Ltd. 221,157 11.06 675,000 294,207 247,382 247,382

Ecomaister Co. 100,000 1.47 1,250,000 293,603 258,957 258,957

IGLOO Security, Inc. 300,000 5.00 3,000,000 754,475 301,577 301,577

K.S.F.C. 2,944,130 4.33 14,780,423 28,634,608 28,634,608 22,610,918

Korea Securities

Depository 122,556 1.95 1,026,605 11,707,775 11,707,775 10,260,143

KIDB Co., Ltd. 76,000 6.06 380,000 531,020 380,000 380,000

Korea Securities

Computer Corp. 58,117 1.09 290,585 2,973,847 2,973,847 1,810,345

Korea Exchange 644,885 3.22 3,209,846 76,578,804 76,578,804 68,273,330

K.M.B. Co. 10,000 0.50 50,000 278,770 278,770 229,980

Others 4,373,184 1,023,532 1,184,143 3,186,142

33,870,355 123,070,641 122,545,863 107,558,774

￦ 52,703,807 ￦136,464,854 ￦135,940,076 ￦108,321,385

The shares in Kumho Industrial Co.,Ltd. were acquired upon the conversion of the

receivables from Kumho Industrial Co.,Ltd. of ￦16,571 million into equity on March

31, 2010. The Company performed a valuation on these stocks, by using rational

valuation model and proper estimation based on the professional judgment from an

independent valuation institution. As of March 31, 2010, these stocks are subject to

disposal restrictions.

The fair values of the available-for-sale non-marketable equity securities, such as

Korea Exchange and five others, were reliably measured by an independent appraisal

institute using reasonable judgment. The fair values ware determined based on

several valuation models such as discounted cash flow (DCF), and market approach

model depending on the equity securities.


29

Collective investment securities among available-for-sale securities as of March 31,

2010 and 2009, consist of the following:

2010 2009


Acquisition Fair Book Book

Cost Value Value Value

Stock-type ￦ 21,342,028 ￦14,066,016 ￦14,066,016 ￦ 9,876,952

Bond-type 8,500,000 9,083,440 9,083,440 8,577,520

Real estate-type 8,199,500 7,199,422 7,199,422 8,351,982

￦ 38,041,528 ￦30,348,878 ￦30,348,878 ￦ 26,806,454

Foreign currency certificates among available-for-sale securities as of March 31,

2010 and 2009, consist of the following:

2010 2009

(in thousands of

Korean won )

Acquisition Book Book

Cost Value Value

Bonds ￦ 19,092,265 ￦ 18,513,768 ￦ -

Others 701,196 398,181 839,763

￦ 19,793,461 ￦ 18,911,949 ￦ 839,763

Maturities of available-for-sale debt securities as of March 31, 2010 and 2009, are as

follows:


Maturity

Acquisition Fair Book Book

Cost Value Value Value

1 ~ 5 years ￦ 19,092,265 ￦ 18,513,768 ￦ 18,513,768 ￦ -

The Company recognized ￦1,021 million (￦16,791 million prior to the current year)

as losses on impairment of available-for-sale securities and recognized ￦24 million

(￦745 million prior to the current year) as losses on impairment of other available-

for-sale securities.


30

Changes in unrealized gains and losses on valuation of available-for-sale securities for

the years ended March 31, 2010 and 2009, are as follows:

2010

Beginning

Balance

Valuation

amount

Realized

amount

Deferred Tax

Assets

(Liabilities)

Ending

Balance (in thousands of Korean won)

Unrealized gains

Stocks ￦65,385,260 ￦ 17,220,437 ￦ - ￦ (3,788,496) ￦78,817,201

Collective investment securities (7,983,357) 3,595,313 - (790,969) (5,179,013)

Foreign currency certificates 394,893 (578,496) (506,273) 238,649 (451,227)

￦57,796,796 ￦ 20,237,254 ￦ (506,273) ￦ (4,340,816) ￦73,186,961

2009

Beginning

Balance

Valuation

amount

Realized

amount

Deferred Tax

Assets

(Liabilities)

Ending

Balance (in thousands of Korean won)

Unrealized gains

Stocks ￦64,615,441 ￦ (6,837,856) ￦ 1,540,367 ￦ 6,067,308 ￦65,385,260

Collective investment securities (2,878,005) (5,749,112) (516,300) 1,160,060 (7,983,357)

Foreign currency certificates 112,230 506,273 (154,800) (68,810) 394,893

￦61,849,666 ￦(12,080,695) ￦ 869,267 ￦ 7,158,558 ￦57,796,796


31

7. Equity-Method Investments

Equity-method investments as of March 31, 2010 and 2009, consist of the following:


2010

Investee

Number of

Shares

Owned

Percentage of

Ownership

Acquisition

Cost

Net Asset

Value

Book

Value

Daishin Factoring Co., Ltd. 1 3,990,000 33.25 \20,804,920 \ - \ -

Daishin Economic

Research Institute 2 495,000 99.00 4,950,000 4,945,128 4,950,000

Daishin-MSB I PEF 3 - 0.90 250,000 249,836 249,836

Daishin Securities

Growth Alpha SPAC3 10,000 1.04 10,000 17,956 10,000

The Jeonbuk Bank Ltd.3 2,600,000 4.87 13,000,000 21,576,311 16,832,460

\39,014,920 \26,789,231 \22,042,296


2009

Investee

Number of

Shares

Owned

Percentage of

Ownership

Acquisition

Cost

Net Asset

Value

Book

Value

Daishin Factoring Co., Ltd. 1 3,990,000 33.25 ₩20,804,920 ₩ - ₩ -

Daishin Economic

Research Institute 2 495,000 99.00 4,950,000 4,991,725 4,950,000

Daishin-Pegasus I PEF 3 - 26.08 3,491,723 3,393,250 3,393,250

₩29,246,643 ₩ 8,384,975 ₩ 8,343,250

1 The Company discontinued applying the equity method to account for this

investment as the Company’s share in the accumulated losses exceeded the cost

of the investment. The Company recognized impairment loss of ₩20,805 million

for this investee prior to the year ended March 31, 2010. This investee is now

non-operational.

2 This investment was excluded from the application of equity-method of

accounting due to its immateriality to the financial statements. This investment is

measured at its original cost due to the absence of an active market price to

determine its fair value.


32

3 Despite ownerships of the Company of less than 20%, the equity method was

applied to Daishin-MSB I PEF and Daishin Securities Growth Alpha SPAC as the

Company can exert influence in the investee through its seat in these investees’

respective board of directors.

Changes in goodwill and negative goodwill for the year ended March 31, 2010,

is as follows:

2010

(in thousands of Beginning Increase Amortization Other Ending

Korean won) balance (decrease) (reversal) Increase balance

The Jeonbuk Bank

Ltd. ￦ - ￦ - ￦ (1,185,963)

￦ 5,929,814

￦ 4,743,851

Changes in equity-method investments for years ended March 31, 2010 and 2009,

are as follows:

2010

(in thousands

of Korean won)

Beginning

Acquisition

Gain(loss)

on

Valuation

Increase

(Decrease) Ending

Balance in Others Balance

Investee

Daishin

Economic

Research

Institute \ 4,950,000

\ -

\ -

\ - \ 4,950,000

Daishin-MSB I

PEF - 250,000 (164) - 249,836

Daishin

Securities

Growth Alpha

SPAC - 10,000 - - 10,000

The Jeonbuk

Bank Ltd. - - 3,765,394 13,067,066 16,832,460

\ 4,950,000 \ 260,000 \ 3,765,230 \13,067,066 \ 22,042,296


33

2009

(in thousands

of Korean

won)

Beginning

Acquisition

Gain(loss)

on

Valuation

Increase

(Decrease) Ending

Balance in Others Balance

Investee

Daishin

Economic

Research

Institute \ 4,950,000

\ -

\ -

\ - \ 4,950,000

Daishin-

Pegasus I PEF - 3,491,723 (98,473) - 3,393,250

\ 4,950,000 \ 3,491,723

\ (98,473)

\ - \ 8,343,250

Changes in unrealized holding gains on the equity-method investments for the year

ended March 31, 2010, are as follows:

2010

(in thousands of Beginning Increase Realization Deferred Ending

Korean won) balance (decrease) (disposal) income tax balance

The Jeonbuk Bank Ltd \ - \ 111,466 \ - \ (24,523) \ 86,943

The marketable equity-method investment as of March 31, 2010, follows:

Investee

Fair value


Book value


The Jeonbuk Bank Ltd. \ 18,278,000 \ 16,832,460


34

Financial information of investees as of and for the years ended March 31, 2010 and

2009, follows:

(in thousands of Korean won) 2010

Investee Assets Liabilities Sales

Net

Income(Loss)


Institute ￦ 6,848,592 ￦ 1,853,513 ￦ 3,092,234 ￦ 39,934

Daishin-MSB I PEF 27,634,036 2,210 20,291 (18,174)

Daishin Securities Growth

Alpha SPAC 4,091,394 2,364,825 - (21,781)

The Jeonbuk Bank Ltd. 7,230,911,293 6,787,865,893 503,028,716 52,916,764


Investee Assets Liabilities Sales

Net

Income(Loss)


Institute ￦ 6,352,700 ￦ 1,310,553 ￦ 2,603,905 ￦ (362,065)

Daishin-Pegasus I PEF 13,033,081 20,655 54 (377,574)

8. Loans Receivables and Allowance for Doubtful Accounts

Loans receivables as of March 31, 2010 and 2009, consist of the following:


Call loans ￦ 270,000 ￦ -

Broker's loans 637,717,166 434,814,887

Bonds purchased under

repurchased agreements 143,170,000 74,800,000

Loans 7,630,920 6,631,182

Dishonored loans 41,728,633 42,788,804

Private placement bonds 46,329,426 118,850,176

Others 73,116,977 73,756,357

949,963,122 751,641,406

Less: Allowance for losses (112,468,585) (121,321,479)

￦ 837,494,537 ￦ 630,319,927


35

Loans receivable and other accounts as of March 31, 2010 and 2009, by risk

classification applied in order to determine the allowance for doubtful accounts, are

as follows:


Description Normal Precautionary Substandard Doubtful Estimated Loss Total

Loan Receivables

Broker's loans ￦ 637,710,709 ￦ 6,457 ￦ - ￦ - ￦ - ￦ 637,717,166

Loans 6,797,999 - - - 832,921 7,630,920

Loans receivable

purchased 1,222,279 - - - - 1,222,279

Replaced payment - - 6,583,195 - 41,830,204 48,413,399

Dishonored loans 1 - - 2,724,018 4,000,000 35,004,615 41,728,633

Troubled loans - - - - 23,481,300 23,481,300

Private placement

bonds2 16,087,311 28,242,115 - - 2,000,000 46,329,426

Other Assets

Accounts receivable 3 8,247,142 - - 1,849,061 4,518,681 14,614,884

Accrued revenue 42,540,334 - - 200,000 1,896,980 44,637,314

Others - - 20,292 - - 20,292

￦ 712,605,774 ￦ 28,248,572 ￦ 9,327,505 ￦ 6,049,061 ￦ 109,564,701 ￦ 865,795,613


Description Normal Precautionary Substandard Doubtful Estimated Loss Total

Loan Receivables

Broker's loans ￦434,757,562 ￦ 57,123 ￦ 202 ￦ - ￦ - ￦ 434,814,887

Loans 5,798,270 - - - 832,913 6,631,183

Loans receivable

purchased 1,834,368 - - - - 1,834,368

Replaced payment - - 5,917,386 - 42,431,566 48,348,952

Dishonored loans 1 - - 2,090,910 5,342,743 35,355,151 42,788,804

Troubled loans 91,333 - - - 23,481,704 23,573,037

Private placement

bonds 2 105,019,857 - - 11,830,319 2,000,000 118,850,176

Other Assets

Accounts receivable 3 8,004,660 - - 1,849,061 5,398,016 15,251,737

Accrued revenue 41,985,692 - - 1,092,438 1,590,219 44,668,349

Others - - 22,547 - - 22,547

￦597,491,742 ￦ 57,123 ￦ 8,031,045 ￦20,114,561 ￦111,089,569 ￦ 736,784,040


36

1 Includes present value discounts of ￦96 million and ￦303 million as of March 31,

2010 and 2009, respectively. 2 Includes present value discounts of ￦510 million as of March 31, 2010. 3 The balance does not include accounts receivable of ￦46,041 million (March 31,

2009: ￦25,886 million) for which allowances were not provided as of March 31,

2010.

.

The ratios of allowance for doubtful accounts as of March 31, 2010, 2009 and 2008,

are as follows:

(in millions of Korean won) 2010 2009 2008

Amount of receivables ￦ 865,795 ￦ 736,784 ￦ 931,820

Allowance for doubtful accounts 120,769 130,770 115,990

Ratio(%) 13.95 17.75 12.45


37

The book values and the present values of restructured loans as of March 31, 2010 and March 31, 2009, are as follows:


2010

Account Company Type Date of

Restructuring

Final Repayment

Date Discount Rate (%)

Nominal Value

Present Value Difference

Corporate bonds

Namsun Aluminium Co., Ltd.

Work-out April 3, 2006 Dec. 31, 2012 10.5 ￦ 1,556,350

￦1,492,542 ￦ 63,808

Corporate bonds

Pantech Co., Ltd. Conversion to Equity Aug. 10, 2007 Dec. 31, 2011 5.70-6.90 1,167,668 1,135,508 32,160

Corporate bonds

Kumho Industrial Co.,Ltd.

Work-out March 30, 2010 Dec. 31, 2014 11.24 2,387,498 1,877,683 509,815

￦ 5,111,516 ￦4,505,733 ￦ 605,783


2009

Account Company Type Date of

Restructuring

Final Repayment

Date Discount Rate (%)

Nominal Value

Present Value Difference

Corporate bonds

Namsun Aluminium Co., Ltd.

Work-out April 3, 2006 Dec. 31, 2010 10.5 ￦ 1,556,350 ￦1,350,717 ￦ 205,633

Corporate bonds

Pantech Co., Ltd. Conversion to Equity Aug. 10, 2007 Dec. 31, 2011 6.9 1,672,731 1,593,661 79,070

Corporate bonds

Pantech & Curitel Communications, Inc.

Conversion to Equity

Aug.10, 2007 Dec. 31, 2011 5.70-6.45 515,302 497,249 18,053 ￦ 3,744,383 ￦3,441,627 ￦ 302,756


38

As of March 31, 2010, uncollectible loans whose legal expiration dates have not

fallen due or claims to guarantor were still effective, amounted to ￦108,959 million.

9. Property and Equipment, and Real Estate Investment

Property and equipment as of March 31, 2010 and 2009, consist of:


Buildings ￦ 278,414,360 ￦ 282,370,054

Vehicles 912,343 927,956

Furniture and equipment 204,541,218 192,598,700

483,867,921 475,896,710

Less: Accumulated depreciation (224,401,399) (205,607,358)

259,466,522 270,289,352

Land 260,906,810 264,574,945

Construction-in progress 1,577,180 12,676,967

￦ 521,950,512 ￦ 547,541,264


39

Changes in property and equipment for the years ended March 31, 2010 and 2009,

consist of the following:

2010

(In thousands of

Land Buildings Vehicles

Furniture

Total

Korean won) and Construction-

Equipment In-Progress

Beginning

￦264,574,945 ￦216,972,369 ￦ 305,222 ￦53,011,762 ￦ 12,676,966 ￦547,541,264 balance

Acquisition/

- - 303,533 5,326,777 6,727,168 12,357,478 Capitalized

Replacement - - - 17,826,954 (17,826,954) -

Disposal (3,668,135) (2,848,902) (36,194) (4,173,081) - (10,726,312)

Depreciation - (7,033,858) (148,780) (20,021,662) - (27,204,300)

Translation

adjustment - - - (17,618) - (17,618)

Ending balance ￦260,906,810 ￦207,089,609 ￦ 423,781 ￦51,953,132 ￦ 1,577,180 ￦521,950,512

2009

(In thousands of

Land Buildings Vehicles

Furniture

Total

Korean won) and Construction-

Equipment In-Progress

Beginning

￦264,574,945 ￦224,031,620 ￦ 397,959 ￦49,875,457 ￦ 146,840 ￦539,026,821 balance

Acquisition/

- - 58,788 6,866,936 25,335,574 32,261,298 Capitalized

Replacement - - - 12,805,448 (12,805,448) -

Disposal - - (6,579) (254,866) - (261,445)

Depreciation - (7,059,251) (144,946) (16,296,159) - (23,500,356)

Translation

adjustment - - - 14,946 - 14,946

Ending balance ￦264,574,945 ￦216,972,369 ￦ 305,222 ￦53,011,762 ￦ 12,676,966 ￦547,541,264

As of March 31, 2010, the government-appraised value of land is ￦238,928 million

(2009: ￦248,040 million).

As of March 31, 2010, depreciable assets are insured against fire and other

casualty losses for up to approximately ￦198,941 million.

As of March 31, 2010, the real estate investment mainly represents land with the

government-appraised value of ￦5,783 million (2009: ￦6,013 million).


40

10. Intangible Assets

Changes in intangible assets for the years ended March 31, 2010 and 2009, are as

follows:

2010

(in thousands of

Korean won )

Development

costs

Others

Total

Beginning balance ￦ 30,314,940 ￦ 150,081 ￦ 30,465,021

Acquisition 7,593,587 21,420,865 29,014,452

Amortization (6,880,817) (2,292,167) (9,172,984)

Ending balance ￦ 31,027,710 ￦ 19,278,779 ￦ 50,306,489

The acquisition amount under others represents participation fee for the retail

payment system.

2009

(in thousands of

Korean won )

Development

costs

Others

Total

Beginning balance ￦ 12,352,905 ￦ 160,664 ￦ 12,513,569

Acquisition 17,962,035 50,113 18,012,148

Amortization - (60,696) (60,696)

Ending balance ￦ 30,314,940 ￦ 150,081 ￦ 30,465,021

The Company recognizes amortization as a general and administrative expense.


41

11. Commitments and Contingencies

(A) As of March 31, 2010, legal actions involving the Company include eight cases

as the defendant with total claims amounting to ￦1,000 million, and six cases

as the plaintiff with total claims amounting to ￦1,065 million, including a

cautionary obligation action. Considering these legal cases and various other

claims and proceedings pending as of March 31, 2010, the Company's

management believes that, although the outcome of these matters is uncertain,

the conclusion of these matters will not have a material adverse effect on the

operations or financial position of the Company.

A fund manager, employed by Daishin Investment Trust Management Co., Ltd.,

a subsidiary of the Company, withdrew ₩16.4 billion from certain funds,

transferred a portion into other funds and misappropriated the rest. Daishin

Investment Trust Management Co., Ltd.’s management estimated ￦39.1 billion

to compensate for the damages and made a provision for damages for ￦17.7

billion, excluding the reimbursed funds, as of March 31, 2010.

The litigation amount the Company may have to pay could depend on the

settlement of the funds, the suits by investors and the outcome of the discussion

with the investors. As of March 31, 2010, in relation to current provision amount,

there are seven cases pending, involving ￦14.84 billion in damages.

As of March 31, 2010, there is a pending litigation involving a subsidiary,

Daishin Investment Trust Management Co. Ltd., which filed a case against My

Asset Investment Management on June 18, 2009, for encouraging illegal activity.

The amount of damages claimed is ￦9,208.7 million plus interest. As of report

date, the effect of the outcome of litigation on the Company’s consolidated

financial statements cannot be reasonably determined.


42

(B) As of March 31, 2010, the contractual obligations and maximum amounts with

financial institutions as of March 31, 2009, are as follows :

(in thousands of Korean won) Financial Institutions Maximum Limit

Bank overdraft agreements Shinhan Bank and

other banks

￦258,000,000

Short-term borrowing agreements Kookmin Bank ￦100,000,000

Margin finance borrowings Korea Securities Finance

Corporation

￦400,000,000

Margin finance borrowings Korea Securities Finance

Corporation

Limited to amounts

deposited

Working capital borrowings

Korea Securities Finance

Corporation

￦200,000,000

Working capital borrowings Korea Securities Finance

Corporation

Limited to amounts

deposited

Discounted notes Korea Securities Finance

Corporation

￦200,000,000

Discounted notes (subscription) Korea Securities Finance

Corporation

Limited to amounts

subscribed

(C) The Company has provided government and public bonds, and others with a

total face value of \244,600 million as collaterals for reserve for futures

transactions with Korea Exchange and others, and for debt and credit

transactions with Korea Securities Depository and others with a total face value

of \45,000 million. It also provided securities with a total face value of

\134,600 million to Korea Securities Finance Corporation and others as a

margin to customers from KSFC, securities with a total face value of \525

million to a court as performance guarantee in the trust business, and

securities with a total face value of ₩316,100 million to Societe Generale and

others for its derivative transactions.

The Company has provided ₩22,900 million of the time deposits as collateral

for derivative transactions with SC First Bank and others.

(D) As of March 31, 2010, the Company entered into contracts for management

services. Also the Company offered a sales guarantee, amounting to ₩45,200

million, for corporate bonds issued by Bigtrust Salacia Ltd. but not sold on the

date of issue.


43

12. Deposits from Customers

Deposits from customers as of March 31, 2010 and 2009, are as follows:


Customers’ deposits for brokerage ￦ 825,737,510 ￦ 912,948,663

Customers’ deposits for futures and options

trading 241,863,205 208,052,023

Customers’ deposits for savings 7,536,831 9,107,744

Customers’ deposits for Repo 2,625,978 1,807,051

Customers’ deposits for beneficiary 15,095,997 2,413,290

Others 28,248 14,038

￦1,092,887,769 ￦ 1,134,342,809

13. Borrowings

Borrowings as of March 31, 2010 and 2009, consist of the following:


Annual Interest

Rates (%)

2010 2010 2009

Call money 2.10 ~ 2.19 ￦ 485,000,000 ￦ 280,000,000

Korea Securities Finance

Corporation

4.55 ~ 6.75 292,876,183

129,583,235

￦ 777,876,183 ￦ 409,583,235

14. Debentures

Debentures as of March 31, 2010 and 2009, consist of the following:

(in thousands of

Korean won) Date of issue

Date of

maturity

Annual

Interest

Rates(%) 2010 2009

9-1st Non -

guaranteed

debenture (public) March 27,2009 March 27,2012 6.50 ￦60,000,000 ￦60,000,000

Less : Discount (219,760) (320,002)

￦59,780,240 ￦59,679,998

Debentures are to be redeemed at maturity.


44

15. Accrued Severance Benefits

Changes in accrued severance benefits for the year ended March 31, 2010, are as

follows:

(in thousands of

Korean won)

Beginning

Balance Increase

Decrease

Ending

Balance

Provision for

severance benefits ￦ 5,647,077 ￦ 1,354,091 ￦ 1,750,816

￦ 5,250,352

Pension plan assets (3,822,759) (869,658) (968,745) (3,723,672)

￦ 1,824,318 ￦ 484,433 ￦ 782,071 ￦ 1,526,680

As of March 31, 2010, 70.9% of the accrued severance benefits of the Company

are funded under defined benefit plans with two financial companies.

Pension plan assets as of March 31, 2010, consist of cash and bank deposits,

securities and others.

16. Monetary assets and liabilities denominated in foreign currencies

Monetary assets and liabilities denominated in foreign currencies as of March 31,

2010 and 2009, and the related gains and losses on foreign exchange translation

for the year ended March 31, 2010, are as follows:

(in thousands of Korean won and foreign currencies)

Foreign Companies Domestic Companies

2010 2009 2010 2009

Account

Foreign

Currency

Foreign

Currency

Amount

Korean Won

Equivalent

Korean Won

Equivalent

Foreign

Currency

Amount

Korean Won

Equivalent

Korean Won

Equivalent

Cash and

cash equivalents

JPY - ￦ - ￦ - 22,107 ￦ 269,191 ￦ 201,331

HKD - - - 2,121 308,957 -

USD 9,436,218 10,670,476 12,654,222 108 121,937 -

Deposits

segregated

under regulation

USD - - - 834 943,061

JPY - - - 1,580 19,236 -

Bonds in

foreign currency

USD

-

-

-

10,346

11,699,813

-

Accounts receivable USD 60,980 68,956 - - - -

Accrued revenue USD 2,976 3,365 51,291 - - -

Guarantee deposits USD 118,619 134,134 163,581 - - -

Deposits from

Customers

JPY - - - 5,022 61,155 4,736

HKD - - - 68 9,944 -

USD - - - 20 22,348 -

Accrued expenses USD 44,044 49,805 68,931 - - -

￦10,926,736 ￦12,938,025 ￦ 13,455,642 ￦ 206,067


45

The monetary assets and liabilities of an overseas subsidiary after eliminating

intercompany transactions are translated at the foreign exchange rate in effect as of

the end of the reporting period.

Foreign currency translation gains and losses for the year ended March 31, 2010,

amounted to ₩2 million and ₩321 million, respectively.

17. Shareholders’ Equity

The Controlling Company is authorized to issue 600 million shares of capital stock.

As of March 31, 2010, 50,773,400 shares of common stock, excluding retired

stocks, and 36,000,000 shares of preferred stock have been issued. The capital

stock amounts to ₩434,867 million, including preferred stock of ₩180,000 million.

On September 16, 2002, the Company retired 200,000 treasury shares. Due to the

retirement of its treasury stock, the book value per share of issued shares is

₩5,020 as of March 31, 2010.

As of March 31, 2010, the Company holds 4,888,808 common shares and

4,000,000 preferred shares as treasury stock recorded as a capital adjustment.

18. Retained Earnings and Dividends

Retained earnings as of March 31, 2010 and 2009, consist of:


Appropriated

Legal reserve ￦ 105,873,454 ￦ 97,866,005

Reserve for loss on futures transactions - 120,628

Voluntary reserves 370,000,000 360,000,000

Unappropriated 120,348,817 126,954,596

￦ 596,222,271 ￦ 584,941,229

The Commercial Code of the Republic of Korea requires the Company to

appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash

dividends paid, until such reserve equals 50% of its issued capital stock. The

reserve is not available for the payment of cash dividends, but may be transferred

to capital stock, or used to reduce accumulated deficit, if any, with the ratification of

the Company’s majority shareholders.


46

Details of year-end dividends are as follows:

(in thousands of Korean won, 2010 2009

except for number of shares)

Number of shares eligible

for dividends

Common stock 45,884,487 45,384,494

Preferred stock 22,599,998 23,799,999

2nd Preferred stock 9,399,998 9,699,996

Dividend amount Common stock ￦ 45,884,487 ￦45,384,494

Preferred stock 23,729,998 24,989,999

2nd Preferred stock 9,399,998 9,699,996

Dividend rate Common stock 20% 20%

Preferred stock 21% 21%

2nd Preferred stock 20% 20%

Dividend payout ratio 86.49% 77.55%

Dividend yield rate Common stock 6.35% 5.88%

Preferred stock 11.01% 14.83%

2nd Preferred stock 11.72% 15.34%

19. Capital Adjustments and Accumulated Other Comprehensive Income

Capital adjustments and accumulated other comprehensive income as of March 31,

2010 and 2009, are as follows:


Capital Adjustments

Treasury stock ￦ (141,131,091) ￦ (139,041,646)

Others (72,189) -

￦ (141,203,280) ￦ (139,041,646)

Accumulated Other

Comprehensive Income

Unrealized gain and loss on

valuation of available-for-sale

securities ￦ 73,186,961 ￦ 57,796,796

Gain and loss on translation of

foreign operations 1,463,623 3,284,278

Unrealized gain on valuation of

equity –method investments 86,943 -

￦ 74,737,527 ￦ 61,081,074


47

20. Income Tax

Income tax expense for the years ended March 31, 2010 and 2009, consists of:


Current income tax ￦ 65,314,418 ￦ 7,492,661

Changes in deferred income tax (6,953,013) 7,045,893

Income taxes allocated directly to shareholders’ equity (3,111,345) 7,280,683

Income tax expense ￦ 55,250,060 ￦ 21,819,237

Deferred income taxes allocated directly to the shareholders’ equity are as follows:


Gain and loss on disposal of

the treasury securities ￦ 740,476 ￦ 787,021

Gain and loss on valuation of

available-for-sale securities (4,340,816) 7,158,558

Gain and loss on translation of

foreign operations 513,518 (664,896)

Capital adjustments (others) (24,523) -

￦ (3,111,345) ￦ 7,280,683

The following table reconciles the expected amounts of income tax expense based

on statutory rates to the actual amount of taxes recorded by the Company for the

years ended March 31, 2010 and 2009:


Income before taxes ￦ 148,990,406 ￦ 125,070,582

Income tax based on statutory tax rate ￦ 40,945,962 ￦ 34,368,010

Non-temporary differences (571,077) (246,606)

Additional income taxes for prior years

(Income tax refund) 12,293,493 (4,695,065)

Effect of changes in the statutory tax rate - (3,117,576)

Tax credit for the current year - (5,403,400)

Others 2,581,682 913,874

Income tax expense ￦ 55,250,060 ￦ 21,819,237

Effective tax rate 37.1% 17.4%


48

Changes in temporary differences and deferred tax assets (liabilities) for the year ended March 31, 2010, are as follows:

Temporary Differences Deferred Tax Assets (Liabilities)


Beginning Balance

Increase (Decrease)

Ending Balance

Beginning Balance

Increase (Decrease)

Ending Balance

Deferred tax liabilities arising from temporary differences

Accrued income ￦ (16,182,864) ￦ 16,182,864 ￦ - ￦ (3,916,253) ￦ 3,916,253 ￦ -

Gain and loss on valuation of derivatives-combined securities

- (7,725,708) (7,725,708) - (1,869,621) (1,869,621)

Gain and loss on valuation of derivatives-combined securities sold

(733,936,395) 162,341,295 (571,595,100) (177,612,608) 39,286,594 (138,326,014)

Gain and loss on valuation of trading securities (25,375,352) (4,574,635) (29,949,987) (6,140,835) (1,107,062) (7,247,897)

Assets revaluation reserves (69,230,864) - (69,230,864) (16,753,869) - (16,753,869)

(844,725,475) 166,223,816 (678,501,659) (204,423,565) 40,226,164 (164,197,401) Deferred tax assets arising from temporary differences

Loss on impairment of securities 17,495,102 (745,146) 16,749,956 4,233,815 (180,326) 4,053,489 Equity-method investments 14,880,030 45,907,350 60,787,380 3,253,381 9,473,380 12,726,761 Gain and loss on valuation of securities sold 263,882 1,510,400 1,774,282 63,859 365,517 429,376

Allowance for doubtful accounts 28,235 87,645 115,880 6,833 19,385 26,218 Gain and loss on valuation of derivatives-combined securities 225,333,136 (225,333,136) - 54,530,619 (54,530,619) -

Gain and loss on valuation of derivatives 485,460,171 93,714,823 579,174,994 117,481,361 22,678,988 140,160,349

Others 25,735 42,349,575 42,375,310 6,028 2,490,508 2,496,536

743,486,291 (42,508,489) 700,977,802 179,575,896 (19,683,167) 159,892,729


49

Deferred tax charged directly to shareholders' equity

Available-for-sale securities (74,098,456) (19,730,982) (93,829,438) (16,301,660) (4,340,816) (20,642,476) Valuation of equity-method investments 7,213,762 (39,277) 7,174,485 1,983,784 (8,641) 1,975,143

Gain and loss on translation of foreign operations (4,210,612) 2,334,173 (1,876,439) (926,335) 513,518 (412,817)

(71,095,306) (17,436,086) (88,531,392) (15,244,211) (3,835,939) (19,080,150)

₩ (172,334,490) ₩106,279,241 ₩ (66,055,249) (40,091,880) 16,707,058 (23,384,822)

Portion not certain to be realized - (9,754,045) (9,754,045)

￦ (40,091,880) ￦ 6,953,013 ￦ (33,138,867)


50

Realization of the future tax benefits related to the deferred tax assets is dependent on

many factors, including the Company’s ability to generate taxable income within the

period during which the temporary differences reverse, the outlook of the Korean

economic environment, and the overall future industry outlook. Management periodically

considers these factors in reaching its conclusion and recognized the deferred income

tax asset since all the future (deductible) tax benefits are determined to be realizable as

of March 31, 2010, except for the deferred income tax effects from cumulative temporary

differences of ￦40,313 million, which were related to the valuation of equity-method

investments.

Deferred tax assets and liabilities are computed based the on the difference between the

financial statement carrying amounts and tax bases of assets and liabilities by applying

enacted tax rates in effect in the years in which the differences are expected to reverse.

The enacted income tax rates are 24.2% for the year ended March 31, 2010 and 2011,

and 22% for the year ended March 31, 2012 and thereafter.

As of March 31, 2010, income tax payable and tax refund receivable are ￦65,607

million and ￦5,737 million, respectively.

21. Commissions received

Commissions received for the years ended March 31, 2010 and 2009, are as follows:


Brokerage commissions ￦ 331,473,983 ￦ 272,870,832

Underwriting commissions 9,108,912 3,694,850

Brokerage commissions on collective

investment securities

8,199,198

7,986,865

Commissions on mergers & acquisitions 3,328,832 1,104,455

Sales commissions on derivatives

combined securities

7,455,460

5,888,979

Operating fees 3,370,139 -

Trust fees and commissions received

from trust account

1,180,080

4,277,346

Others 2,748,288 1,670,263

￦ 366,864,892 ￦ 297,493,590


51

22. General and Administrative Expenses

General and administrative expenses for the years ended March 31, 2010 and 2009, are

as follows:


Wages and salaries ￦ 93,804,500 ￦ 91,529,112

Severance benefits 9,979,470 10,132,184

Employee fringe benefits 99,081,228 83,081,044

Computer system operation

expenses

23,271,239 22,691,545

Rental expense 7,790,523 7,434,407

Commission expense 23,444,879 20,822,877

Entertainment expense 3,613,589 3,302,623

Advertising expense 21,633,744 5,607,331

Depreciation 27,204,299 23,500,357

Amortization 9,172,985 60,695

Research and study expense - 6,799

Training expense 882,137 1,426,744

Taxes and dues 14,088,125 9,573,947

Business consignment commission 1,142,975 936,792

Sales promotion expenses 18,400 -

Others 20,329,651 22,910,779

￦ 355,457,744 ￦ 303,017,236


52

23. Earnings per Share

Earnings per share is computed by dividing net income by the weighted-average number

of common shares outstanding during the year.

Basic earnings per share for the years ended March 31, 2010 and 2009, is calculated as

follows:

(in thousands of Korean won, except for

per share amounts) 2010 2009

Parent interest in net income as reported

on the statements of income ￦ 91,355,531 ￦ 103,251,345

Adjustments

Dividends for preferred stock (38,200,492) (44,532,492)

Difference between the repurchase

amount and carrying amount of the

preferred shares 871,032 1,590,526

Net income available for common stock 54,026,071 60,309,379

Weighted-average number of common

shares outstanding 45,383,222 45,791,649

Basic earnings per share(in Korean won) ￦ 1,190 ￦ 1,317

Diluted earnings per share is identical to the basic earnings per share since there are no

diluted securities outstanding as of March 31, 2010 and 2009.


53

24. Consolidated Comprehensive Income

Consolidated comprehensive income for the years ended March 31, 2010 and 2009,

consists of:


Consolidated net income ￦ 91,355,531 ￦ 103,251,345

Other comprehensive income

Gain on valuation of available-for-sale

securities, net of related income taxes of

￦4,340,816 thousand

(2009: ￦(7,158,558) thousand) 15,390,165 (4,052,870)

Changes in equity-method investments, net

of related income taxes of ￦24,523

thousand (2009: Nil) 86,943 -

Gain and loss on translation of foreign

operations, net of related income taxes

￦(513,518) thousand (2009: ￦664,896

thousand) (1,820,655) 2,595,030

Consolidated comprehensive income ￦ 105,011,984 ￦ 101,793,505

Parent interest in comprehensive income ￦ 104,671,479 ￦ 101,793,505

Minority interest in comprehensive income ￦ 340,505 ￦ -


54

25. Related Party Transactions

Significant transactions with consolidated subsidiary, which have been eliminated during

consolidation, for the years ended March 31, 2010 and 2009, and the related receivables

and payables as of March 31, 2010 and 2009, are as follows:

(in thousands of Korean won) Revenues Expense

2010 2009 2010 2009

Subsidiary

Daishin Investment Trust Management Co., Ltd. ￦ 175,433 ￦ 432,897 ￦1,072,363 ￦ 32,573

Daishin Securities Asia Ltd. 1,795,379 - 1,013,133 -

Daishin-Pegasus I PEF 198,000 118,258 - -

￦ 2,168,812 ￦ 551,155 ￦2,085,496 ￦ 32,573

(in thousands of Korean won) Receivables Payables

2010 2009 2010 2009

Subsidiary

Daishin Investment Trust Management Co., Ltd. ￦ - ￦ - ￦ 1,051,873 ￦23,065,842

Daishin Securities Asia Ltd. - - 68,420 -

￦ - ￦ - ￦ 1,120,293 ￦23,065,842

With the exception of the above, as of March 31, 2010, the Company has ￦572 million

of fee receivables under trust assets, which were accounted separately from the assets

of Daishin Investment Trust Management Co., Ltd. For the year ended March 31, 2010,

the commission income amounted to ￦2,652 million.


55

Significant transactions with related parties for the years ended March 31, 2010 and 2009,

and the related receivables and payables as of March 31, 2010 and 2009, are as follows :

(in thousands of

Korean won) Revenues Expense

2010 2009 2010 2009

Subsidiary

Daishin Economic

Research Institute ￦ 66,450 ￦ 66,450 ￦ 3,398,560 ￦ 2,862,565

Daishin Champs Elysees Hwit 558,000 558,000 - -

Equity-method Investees

Daishin-MSB I PEF 3 30,608 - - -


Alpha SPAC3 1,949 - - -

Others


Communication Co., Ltd. 10,899 10,899 3,043,417 3,887,436

Daishin Songchon Culture

Foundation - - 1,000,000 1,000,000

￦ 667,906 ￦ 635,349 ￦ 7,441,977 ￦ 7,750,001

(in thousands of

Korean won) Receivables Payables

2010 2009 2010 2009

Subsidiary

Daishin Factoring Co., Ltd. ￦33,481,704 ￦33,481,704 ￦ - ￦ -

Daishin Economic

Research Institute - - 1,375,660 1,184,905

Daishin Champs Elysees Hwit - - 800,000 800,000

Equity-method Investees


Alpha SPAC3 2,000,000 - - -

Others


Communication Co., Ltd. - - 231,560 2,343

￦35,481,704 ￦33,481,704 ￦ 2,407,220 ￦ 1,987,248

Number of shares owned, percentage of ownership, acquisition cost, market value or net

book value of the non-marketable investments to related parties are disclosed in Note 6,

Available-for-sale Securities, and Note 7, Equity-Method Investments.

With regard to the above receivables, the Company provided allowances for doubtful


56

accounts amounting to ₩33,482 million.

Key Management Compensation

For the year ended March 31, 2010, the Company recognized short-term benefits of

￦3,485 million and severance benefits of ￦235 million as key management

compensation. Key management consists of registered executive officers who have the

authority and responsibility in the planning, directing and controlling of the Company’s

operations.

26. Supplemental Cash Flow Information

Significant transactions not affecting cash flows for the years ended March 31, 2010 and

2009, are as follows:


Unrealized gain and loss on valuation of

available-for-sale securities ￦ 15,390,165 ￦ 4,052,870

Gain and loss on translation of foreign

operations 1,733,712 2,595,030

Reclassification of construction-in-

progress to other accounts 17,826,954 12,805,448

Acquisition of intangible assets 19,620,348 -

Tax effects applicable to gain

on sale of treasury stock 740,476 787,021

Write-off of accounts receivable 816,190 116,342

Write-off of accrued income 362,424 13,707

In accordance with the new Interpretations & Opinions of the Financial Supervisory

Service, the Company reclassified cash flows from available-for-sale securities

transactions as cash flows from investing activities, instead of cash flows from operating

activities, while cash flows from collective fund for default loss was reclassified from cash

flows from investing activities to cash flows from operating activities. The Company’s

statement of cash flows for the year ended March 31, 2009, has been restated to reflect

above changes.


57

27. Supplementary Information for Computation of Value Added

The accounts and amounts, included in general and administrative expenses and

development costs, needed for computation of value added for the years ended March

31, 2010 and 2009, are as follows:

General and administrative

expenses Development Costs

Total

(in thousands of

Korean won) 2010 2009 2010 2009 2010 2009

Wages and salaries ￦93,804,500 ￦91,529,112 ￦ 428,710 ￦1,022,009 ￦94,233,210 ￦92,551,121

Severance benefits 9,979,470 10,132,184 - 136,579 9,979,470 10,268,763

Employee fringe benefits 99,081,228 83,081,044 - - 99,081,228 83,081,044

Rental expenses 7,790,523 7,434,407 - 93,642 7,790,523 7,528,049

Depreciation 27,204,299 23,500,357 - - 27,204,299 23,500,357

Taxes and dues 14,088,125 9,573,947 - 8 14,088,125 9,573,955

28. Securities in Custody and Borrowing Securities

As of March 31, 2010 and 2009, the securities in custody which are owned by the

customers are as follows:

(in millions of Korean won) 2010 2009

Trustor securities in custody ￦ 14,780,728 ￦ 12,795,081

Saver securities in custody 34,341 43,545

Beneficiary securities in custody 3,388,862 2,496,553

Others - 5,162

￦ 18,203,931 ￦ 15,340,341

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


Borrowing securities ￦ 37,086,360 ￦ 256,900

The Company has provided government and public bonds and others as collaterals for

the borrowing securities to Korea Securities Depository and others.

29. Preparation for the adoption of K-IFRS


58

(1) Preparation and implementation of IFRS adoption

The Company is required to prepare its financial statements in accordance with the

Korean International Financial Reporting Standards (K-IFRS) starting 2011, based on the

roadmap on the adoption of International Financial Reporting Standard announced in

March 2007. In this regard, the Company has appointed an advisory organization for the

preliminary analysis and impact assessments over the Company’s current accounting

policies and financial reporting processes.

At the end of September 2009, during the second phase, the Company updated the

accounting infrastructure and the related process for the system implementation. At the

end of March 2010, the Company completed the system implementation after three

months of testing. The Company expects to prepare its financial statements under the K-

IFRS after April 2010. The significant developments in the adoption of K-IFRS are

reported to the Company management.

(2) Significant differences in accounting policies

If the Company prepares financial statements in accordance with K-IFRS, certain areas

such as consolidation scope, hybrid instruments, bad debts allowance, revenue

recognition, employee benefits, and fair value of financial instruments will be significantly

different from the financial statements in accordance with the current Korean GAAP. The

reconciliation of the effects is subject to change following any subsequent GAAP

difference analysis.

Daishin Securities Co., Ltd. Annual Report for the year ... · PDF fileStock Market Division of the Korea Exchange ... CEO’s Interview ... Daishin Securities will continue to uphold

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