FY2005 Annual Report HYUNDAI SECURITIES CO., LTD

FY2005 Annual Report HYUNDAI SECURITIES CO., LTD.

Contents

Company profile :

From the leader of Korea’s financial market to Asia’s leading investment bank

Hyundai Securities

Hyundai Securities introduced a product called“ Buy Korea,”which played a pivotal role to revive the nation’s sagging financial market after the 1997-98 Asian financial crisis, by attracting more than 30 trillion won to this fund product.

All of Hyundai Securities’efforts are geared towards establishing bigger, more specialized, globalized and diversified operations. Hyundai Securities, based on its 135 local branches and overseas offices in New York, London, HongKong, Tokyo and Shanghai, is providing a diverse range of services from money trust and asset management to corporate finance to our customers at home and overseas. Our net income during the 2005 fiscal year increased more than fourfold compared to the previous year, based on increased market share, outstanding sales ability and constant cost-cutting efforts. We will continue making efforts to increase shareholders’value by maximizing profits.

03 04 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Financial Highlights :

KRW in billions FY2005 FY2004 FY2003

Operating Results

Operating revenues 937 473 654 Operating expenses 684 406 520 Operating income 252 67 135 Non-operating income 33 18 11 Non-operating expenses 7 8 296 Pretax income 279 77 -150 Net income 283 54 -190

Financial Condition

Total assets 5,454 3,071 2,596 Total liabilities 3,948 1,871 1,451 Shareholders' equity 1,505 1,200 1,145 Return on average common shareholders' equity 20.9% 4.6% - Net Capital Ratio 598% 623% 470%

Selected Data

Number of outstanding shares 139,353,423 139,353,423 139,353,423 Book value per share 10,802 8,611 8,219 Earnings per share 2,028 387 - Total Employees 2,334 2,321 2,673 Branches(overseas) 133(5) 134(5) 133(5)

283 1,505 20.90%

1,200 1,145

54 4.60%

- 03 04 05 03 04 05 03 04 05

-190 Net income Shareholders' equity Return on Equity 05 (KRW in billions) (KRW in billions) Vision & Strategy

Vision

“Take a leap toward Global Investment Bank”

“Innovation to build up foothold of everlasting Hyundai Securities”

Strategy

Expansion Diversification Specialization

▶ Increase Equity Capital ▶ Strengthen Proprietary Trading ▶ Strengthen workforce through targeted training ▶ Mergers & Acquisitions ▶ Leverage opportunities with Wealth Management ▶ Attract, develop and retain the ▶ Strategic Alliance ▶ Revitalization of Corporate Finance best talent in the industry ▶ Improve Incentive System

You need a reliable partner for more efficient financial investment. We will provide consulting services to help you handle various emergencies in corporate business. As having a good partner helps you tackle every challenge in life much easier, Hyundai Securities, with our commitment to our investors and customers, will be the excellent investment partner to create more values for you and make your life happier.

06 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

07 08 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Message from the CEO :

Dear Fellow Shareholders and Clients :

In 2005, Korea’s benchmark Kospi, after breaking the psychological barrier of 1,000 points earlier in the year, continued breaking record highs amid the world’s booming stock markets.

I am happy to announce Hyundai Securities, buoyed by such stellar performance of local stock markets and based on our constant efforts to diversify sources of income, achieved an impressive growth in fiscal year 2005. Also, our efforts to improve the company’s financial performance also led two of Korea’s major ratings agencies to lift their credit ratings on Hyundai Securities to“ A.”

Despite such achievement, we still have a long way to cement our leading position in the industry. The company will establish business platforms to achieve a sustainable growth, in an effort to reinvent itself as a global investment bank. Our business targets for the year of 2006 are as follows:

First, we will expand our organization to become an extensive global investment bank.

Second, we will make efforts to establish more stable operations by diversifying sources of income. By developing and adopting more diverse financial products, we will reinforce our wealth management operations designed for needs of each customer and enhance our corporate performance.

Third, we will focus on nurturing more workforces with deep financial expertise, by establishing more efficient training systems and allocating more resources to improve our employees’operation capabilities.

I would like to express my gratitude for the interests of our shareholders. Our ability to deliver consistent performance is derived from the company’s management process and encouragement from our investors. It has been the efforts of people across the organization, working within the management process, that have enabled Hyundai Securities to create the opportunities we have today.

Sincerely,

Kim Ji Wan 09 President & Chief Executive Officer Major Achievements in FY2005 :

| November 2005 | Korea’s E-Business award The Seoktap industrial merit by Korea’s Commerce Ministry

The CEO Kim Ji-wan’s contribution to Hyundai Securities’e-business can be summarized by his three major principles for e- finance. Mr. Kim, based on his strategies, increased productivity of employees by 58 percent and increased the customers’total assets by 70 percent. Also, Hyundai Securities has been ranked as the top player in stocks, futures and options among local stock brokerage houses. The company, which was ranked as Korea’s best home trading system operator by Stockpia, a local securities industry research firm, also received“ Korea e-finance award,”in stock sector for two straight years beginning 2004.

| February 2006| Major ratings agency raised their ratings on Hyundai Securities

● Two major ratings agency in Korea raised their ratings on Hyundai Securities to“ A”

Two of Korea’s major credit ratings agencies, National Information & Credit Evaluation and Korea Ratings, lifted their ratings on Hyundai Securities by one notch from“ A-“ to“ A,”only a year after the two agencies lifted their ratings on Hyundai Securities from“ BBB+”to“ A-“ in February 2005. National Information & Credit Evaluation and Korea Ratings cited solid business platform, balanced competitiveness of each of the company’s securities operations, reduced uncertainties related to the Hyundai Group, as major reasons for the decision. In particular, Hyundai Securities’dramatically improved profitability exceeding those of its industry peers met positive responses from the rating agencies.

The agencies, as Hyundai Securities is securing increasingly solid platform in sales of securities, predicted the company would enjoy more benefits from the Korean government’s recent deregulations on local securities sector, which allow securities firms to operate trust management and handle more derivative products.

10 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

| April 2006 | Hyundai Securities introduced RP-based “Hyundai CMA,” which provides distinguished financial benefits

● Exempting all service fees on withdrawals from ATMs for the first time in the industry, and pre-paid fare cards. ● Offering convenient bill payment services and high interest rates based on RP, providing the same convenient financial services as local banks

● Offering distinguished total banking service, including subscription of new shares ● Intensifying market competition by taking a plunge in local CMA market

Hyundai Securities, in its effort to prepare for upcoming deregulations, introduced“ Hyundai CMA(Cash Management Account),”further intensifying the competition among Korea’s stock brokerage houses and banks in local CMA market.

Hyundai Securities’CMA not only provides basic banking services such as online bill payment and anytime deposit and withdrawal but also offers an interest rate of 4.2 percent, 42 times of the average rates of 0.1 percent for commercial banking deposits. Such high interest rate, made possible by automatic short-term investment on RP bonds, helped us to attract many customers from other banks. Also, we established the concept of“ hub-account”in which a customer’s futures investment accounts, stock investment accounts, wrap account and other financial accounts are all integrated, to help our customers to better manage and review their financial accounts. CMA card can be used as a pre-paid fare card, provides various benefits from subscription for newly issued shares and exemption of various banking service fees.

11 12 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Review of Operations :

Hyundai Securities, based on constant efforts to provide top- notch customer services, advanced financial services and enhanced sales capability, will continue business that could benefit all of our clients, shareholders and employees.

13 Retail Operations

Marketing

Hyundai Securities, in an effort to secure a leading position in the increasingly fiercer competition with local banks, is expanding its retail operations to stocks, futures and option brokerages, sales of diverse asset management services and loan offerings.

In retail operation, stock M/S in 2005 fiscal year rose 0.59 percent to 6.61 percent. However, during the same period, futures M/S declined 0.11 percent to 1.9 percent, while options M/S decreased 2.22 percent, down 0.89 percent compared to previous year.

Operating profit experienced a rapid growth in 2005, in line with booming growth of local stock markets. Operating profit was 514.6 billion won, up 64 percent from a year earlier. Subsequently pretax profit also increased to 213 billion won. Hyundai Securities is currently operating 130 branches, 3 sub-branches as of April 2006, and is also offering online services through its Internet Web site. In 2006 fiscal year, we plan to further open more new branches, particularly at new residential towns around Seoul suburb areas, while improving efficiency of business networks by relocating, closing or merging the existing branches.

Our business focus in 2005 was reinforcing wealth management operations by enhancing financial products for wealth management and installment-plan funds. In 2006, we plan to solidify our position as a leading securities firm. We will further expand sales of wealth management services, attract more wealth management clients and cement our dominance in derivative-related products markets on ELW, while maintaining our leading status in stock M/S. In order to do so, we will establish and implement measures to improve productivity of our retail operations, and create more market-oriented sales networks. Also, we will continue introducing“ fund with themes”series, our flagship success last year, and will increase our brand value and corporate trustworthiness.

Product Development

Korean government announced last year plans to knock down regulatory barriers between six sectors of the financial industry, empowering the nation’s stock brokerage industry and helping securities companies to earn the same status as local banks and insurers. The change, which will take effect in 2008, is expected to have a seismic impact in Korea’s indirect investment markets, as local securities firms would be allowed to expand their operations to more financial sectors and create more diverse range of financial products.

Product development team is at the forefront of such changes to come. The team is responsible for developing, creating, maintaining and upgrading indirect investment products to increase and manage assets of our customers. The main role of the team is developing new investment products in line with changes of financial market and diverse needs of our customers.

In fiscal year 2005, the team developed a“ Hyundai theme fund series,”a stock investment plan that is automatically switched to a bond investment plan when a pre-set profit target is fulfilled. Five fund products under the series all successfully raised targeted capital pool amounts at an early stage. Such success led the Financial Supervisory Service, Korea’s top regulator, to select the product as“ best new financial product in stock sector”in 2005. In February 2006, we also developed“ Hyundai Hero deposit RP,”a short-term financial instrument whose interest rate is linked to Korea’s benchmark call 14 rate, and it attracted capital of whopping 400 billion won in just two months and a half. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Furthermore, in April 2006, we introduced a deposit product called“ Hyundai CMA,”which helped us to establish a platform to gain a foothold in financial markets previously dominated by local banks, and a platform to provide total banking service to our customers.

Other products such as traditional stock investment plans, bond investment plans, real estate funds, derivative instrument funds, commodity investment funds have met positive reaction from customers. Such positive market reaction helped us further solidify our status in the local securities industry.

Based on such accomplishment, the product development team is preparing to develop more new financial products, following real estate property funds, equity-linked funds, and ship vessel funds we recently introduced. Also, to gird for the industry-wide changes in light of the government’s new deregulations for securities sector, we are actively reshuffling our organization and preparing more new financial products on derivative instruments.

Korea’s indirect financial investment market is expected to experience ever-fiercer competitions as regulatory barriers among financial sector are rapidly stripped down. Facing such challenges, the product development team is focusing our years of experience and business know-how to become a leader of the market.

Investment Strategy Investment strategy team, under the marketing division, reviews and analyzes a wide array of information to make suggestions on investment strategies and investment targets for retail operations.

Investment strategy team analyzes major factors that affect stock markets and capital flow of markets here and abroad in order to establish investment strategies for stock and derivative markets. It also offers valuation analysis on each industry and company, based on its issue analysis, corporate field trips and participation in corporate investor relations conferences. Based on such activities, the team discovers promising new investment targets and recommends them to our clients.

Investment strategies and investment guides are provided to our employees at branches through Hyundai Daily and real-time online messengers. We also make efforts to promote our services through various media appearances. We hold monthly sales strategy conferences for sales heads of each branch, in which we analyze movement of stock markets for the month and reviews promising investment targets and market issues. Such activities are aimed at enhancing competitiveness of our employees, and we hold various conferences for our retail customers and employees at branches.

Wealth Management

Hyundai Securities Wealth Management team provides“ Wrap Account”service, our flagship asset management service specially customized for each of our customers’needs. In Wrap Account service, we thoroughly analyze a customer’s investment preference, establishes a portfolio that reflects both market conditions and the customer’s need, and our money managers manage the customer’s assets more effectively. The wealth management team provides a wide variety of products ranging from installment-plan funds, stock investment plans and bond investment plans to mutual funds. We are establishing stable portfolio with steady, predictable returns by diversifying our investments to stocks, bonds, CP and RP. In line with the rapid growth of wealth management market in Korea, Hyundai Securities’Wrap Account service saw its capital pool to increase 130 percent last year from a year earlier, securing the leading position in the local wealth management industry. 15 The wealth management team is geared towards securing the leading position in this rapidly changing financial market in Korea and exploring new markets.

Proprietary Trading

Fixed-income

Fixed-income team of Hyundai Securities is in charge of bond investment management and bond trading operations. Major roles 1. Maintaining qualification for primary dealer 1) A duty for buying new bonds: Purchasing at least 5 percent of the issued Treasuries 2) A duty for bond circulation: Trading at least 5 percent of Treasuries in circulation 3) A duty for maintaining bond market trading: submitting bidding prices for at least 70 percent of a daily trading session of domestic Treasury market. At least 60 percent of the trading days of each quarter should meet the requirement. 4) A duty for exchange trading: Conducting at least 50 percent of Treasuries trading in floor exchange trading 5) A duty for early return of Treasuries: Early-returning at least 5 percent of total Treasuries designated for early return 6) Awarded by the Finance Minister for the exemplary compliance of PD operation in late 2005 7) A senior member of the working-level operation committee for bond trading 8) An auditor of PD committee 2. Fixed-income dealer A regulation supervised by the Financial Supervisory Service and Korea Securities Dealers Association to revitalize local bond trading market. 1) Submitting purchase & sales bidding prices for at least seven bond items, each of which is worth at least 100 million won. 2) Submitting purchase & sales bidding prices for at least three bond items, each of which is worth at least 1 billion won 3. Arrangement for housing bond sales Selected as a Kookmin Bank’s housing bond sales arranger, along with other six arrangers in March 2006 1) Providing liquidity for buyers of housing bonds 2) Providing deposit, withdraw and redemption services 4. Specialized buyer for inexpensive bonds 1) A purchaser of compulsory bonds, along with 17 other securities companies 2) Providing liquidity to government-issued compulsory bonds such as municipal development bonds or regional railway bonds

Introduction to fixed-income brokerage operation Our major operations involve brokering sellers of Treasuries, monetary stabilization bonds with potential buyers such as local banks, investment trust companies and other institutional investors. In an effort to diversify source of our brokerage fees, we are currently brokering sales of corporate bonds, bank debentures and structured bonds. Also, we are conducting arbitrage trading between Treasury bond futures and three-year Treasuries, securing another source of stable income.

Trust Division 16 On December 9 2005, the government allowed Hyundai Securities and eight other securities companies to initiate trust operations, which had been previously dominated by local banks. The change has HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

opened a new era for local securities companies to further expand their operations.

The regulatory change allowed Hyundai Securities to manage trusted assets, which served as an indirect channel for us to gain a foothold in wealth management sector. We were also able to provide more enhanced asset management service customized for each customer by providing more diverse investment strategies. Korea’s trust market amounts to 110 trillion won in total as of December 2005, showing a steady decline since the 1997-98 Asian financial crisis. But despite such slowdown, the wealth trust, including real estate trusts and money trust, steadily expanded its presence in the overall trust market, offering a glimpse into the great potentiality of local trust market. Our wealth management team launched the trust operation on January 9, 2006, and holds 83 billion won in 76 fund accounts as of March 2006. Based on such success achieved within less than three months, we will make more efforts to establish our trust operation as a stable source of profits for Hyundai Securities. Also, we will concentrate our resources on customized trust service, a vital part of our comprehensive wealth management service. We will step up efforts to adopt wealth trust service as part of out plan to become a leading company in local trust sector.

Investment Banking Corporate Finance

Corporate finance team helps local companies to find sources of direct financing in local financial sector. Our major operations involve working as a specialized agent for local companies planning to finance their corporate activities by issuing corporate bonds, special bonds, or issuing new shares. We plan to diversify our businesses to finance consulting and more systemized bond management operation. The corporate bond market tends to fluctuate upon the economic cycle, and such unpredictability significantly affects our corporate finance operations. In order to prosper in this increasingly competitive market, we are diversifying our businesses from issuing corporate bonds to offering finance consulting and other extra services. While a growing number of investors are expressing more interests in Kosdaq-listed companies’plan to increase their shares, Hyundai Securities boasts decade-long experiences in new share issuance, seasoned experts and the biggest business networks in the industry.

As Korean government is poised to dramatically ease regulatory restrictions on local securities market, investment banking team of Hyundai Securities is planning to secure more workforces with expertise and develop more specialized experts, in an effort to transform itself into a more advanced investment bank. The corporate finance team, by securing more loyal client base and enhancing sales capabilities, plans to increase its market share to 10 percent and become the nation’s third-largest securities firm.

Corporate Pension

Hyundai Securities opened a new corporate pension team to secure a leading position in local corporate pension market, which is expected to rapidly expand after 2010.

The corporate pension team provides consulting service for local corporate pension systems (assessment on pension package, issue analysis, suggestion of alternatives), administrative support management (producing related clauses, supporting labor-management relations, making regulatory filings and other operation training), pension management support (providing guidance for pension management, providing product information and pension amount setting and records/archive/notification management) and training program for companies and employees. 17 Hyundai Securities, which boasts diverse risk-management skills and long experience in handling various money management products, can produce various level of returns based on investment preferences of companies and employees. Based on such advantages, we are confident Hyundai Securities have far more competitiveness than our industry peers.

IPO

IPO team operation Hyundai Securities have seven years of experience in IPO by arranging IPOs of 65 companies, and our IPO team specializes in IPO operations, providing top IPO consulting services. IPO team helps local companies to finance their businesses by going public in local main stock market and Kosdaq market. The team discovers promising companies with great business potential and introduces the companies to the public, helping the companies to establish a stable source of financing. The team provides all range of services regarding IPO from discovering up-and-coming companies, providing consulting services for the newfound companies and introducing the firms to investors to listing the companies on the stock markets.

The team provides consulting on various financing channels for companies that went public with the help of the team, and offers other IPO-related services based on close cooperation with institutional investors and the research center in Hyundai Securities.

M&A

Major operation 1. Establishing and operating private equity funds 1) Creating private equity funds by raising money from institutional investors and other types of investors 2) Managing the fund with unlimited responsibility 2. Arranging corporate restructuring activities such as mergers and acquisitions 1) Arranging corporate restructuring activities such as acquisition, business transfer, corporate divestitures 2) Arranging corporate share sale, share swap and investment agreements with foreign investors 3. Purchase and brokerage of securities related to corporate restructuring 1) Purchase or purchase brokering of bonds of companies under court receivership 2) Financing operation related for LBO 4. Corporate analysis and finance consulting 1) Due diligence on companies targeted by mergers and acquisitions 2) Company assessment and industry analysis 3) Due diligence on assets and debts

Real Estate Finance

Real estate finance team is in charge of brokering real estate developers and potential investors, and its major operations are as follows: Major operations Real Estate Project Finance 1) PF ABS : Securitizing PF loans and bridge loans made to real estate developers and construction companies, by issuing asset-backed securities (financing construction costs by issuing

18 asset-backed securities) HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

2) Real estate fund: Creating real estate fund and making PF loans to real estate development projects Property Investment 1) REITs: private equity fund(PEF) CR- Purchasing real estate properties by REITs and offering stable dividends to investors based on rent incomes from the properties 2) Real estate commodity fund: Creating real estate property funds based on indirect investment asset management laws and investing in the properties.

Direct investment in real estate development projects Generating high returns by investing in real estate development projects in the initial stage

Business strength of Hyundai Securities’real estate finance team 1. Experts specializing in investment banking: In-depth business know-how through years of experience in the field (issued ABS worth 295 billion won in 2005, the biggest amount of ABS in a single issuance. Attracted 34.5 billion won from the public for REITs fund) 2. A diverse investor base: Secured a wide range of institutional and individual investors, which would help reduce costs for ABS issuance and help successful financing 3. The biggest business network in the industry: More access to potential investors 4. Quick decision-making process and efficient handling of deal-making process, which also effectively reflects customers’financing needs 5. Close communication with institutional investors, based on joint cooperation with corporate sales teams and the research center

Structured Finance

Major operations 1. Issuing won-and dollar-denominated ABS (asset-backed securities) and brokering ABL (asset- backed lending) 2. Issuing MBS based on home-equity loan receivables 3. Issuing SLBS based on student loans 4. Arranging private/public vessel funds 5. Arranging project financing, in which business potential is held as collateral for lending

Years of experience in business arrangement 1. Excellent negotiation ability and arrangement skills 1) Intimate relations with various organizations, including law firms, accounting firms, trustee banks and credit rating agencies, that are closely related to ABS and performance of vessel funds. 2) Quick issuance period 3) Securities issuance with minimal costs 2. In-dept knowledge on ABS issuance linked to various assets 1) Experience in ABS issuance linked to a diverse range of assets, and knowledge in ABS issuance skills 2) A wide range of records and archived information 3) Structuring ability 4) Excellent ability to handle emergency situations 3. Sales ability (placing power) based on years of experience in ABS and vessel fund issuance

19 Institutional Sales

Institutional sales division comprises four subdivisions; Corporate sales team I, Corporate sales team II, Corporate financial product team and OTC derivative product sales team.

Institutional Sales

Institutional sales team is in charge of brokering sales of stocks, futures and options for major institutional investors such as investment trust companies, banks, insurers and asset management companies. The team, divided into Institutional sales team I and Institutional sales team II, comprises of 36 staff members. The team, armed with the best workforce in the industry and effective system, aspires to secure the leading position in the industry and is making bests efforts to achieve the goal. The team played a pivotal role in block sales of major deals, most notably privatizations of KT and KT&G Corp. The team is also expected to play a crucial role in upcoming sales of the controlling stake in Hynix Semiconductor, currently held by its main creditors, as the team was selected as a major arranger of the sale. In 2003, the team developed its own program trading system for futures and options (STAS). The team also created futures/options trading systems designed for market experts in 2004, as part of its marketing effort to attract more new customers. It is also making aggressive efforts to establish automatic electronics payment service processor (FIX system) and customer database, while improving business performance monitoring.

Derivative Product Sales

Derivative product sales team was created in August 2002, and its major roles involve operations shown below: 1. Development of over-the-counter derivative products 2. Reaching over-the-counter derivative products contracts 3. Handling investment banking operations related to over-the-counter derivative products 4. Training workforce specializing in sales of over-the-counter derivative products 5. Handling transactions related to workforce outsourcing and operation outsourcing 6. Development and sales of new derivative securities linked to interest rates, exchange rates, commodities or credits 7. Architecture of the structure for new credit derivative products

The booming performance of local stock markets dramatically increased sales of equity-linked securities (ELS), which helped the derivative product sales team to expand its sales. The team was awarded for its excellent sales performance in the fourth quarter of FY2005. The team is further diversifying the range of its products amid the recent corrections in stock markets. As part of such effort, the team is steadily increasing sales of its DLS (derivative-linked securities) products. As the world’s commodity markets are expected to continue the current stellar performance, we believe the sales of derivative products based on such commodities as gold, silver and zinc would continue to be expanding as well. Our market share in ELW (equity-linked warrant) sector is steadily expanding. The team, which currently conducts basic vanilla options and cash payments only, plans to provide more creative options and payment systems. Korea’s derivative market is expected to experience a dramatic growth, boosted by the government’s new policies to knock down regulatory barriers in local securities sectors. The derivative product sales team will continue making aggressive efforts for development and sales of new products. 20 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

International Business Brokerage

Hyundai employs many of the industry’s most successful securities brokers. Our brokers provide clients with accurate market information based on our research center’s in-depth data, and visit them together with our market analysts to present them with the latest investment information. Also, as a leading brokerage firm in Korea, we have an online trading system (Mvest) designed mainly for foreign investors, and many of leading foreign institutional investors around the world trade stocks, futures and options with our advanced Mvest online trading system. Most of all, our client relationships are among our greatest competitive assets. We deepen and enrich these relationships through disciplined growth, innovation, and seamless execution.

Hyundai Securities (America), Inc. Established in New York in 1996, Hyundai Securities (America), Inc., is predominantly involved in brokering Korean stocks for US institutional investors. The New York subsidiary also provides clients with services ranging from offering research data on Korean businesses to arranging US investors’ visits to Korean businesses and IR meetings of Korean firms in the US. In particular, the research data provided by the New York subsidiary contains in-depth analyses of almost all publicly traded Korean companies including KOSDAQ-listed businesses whose coverage far exceeds that of any foreign or other Korean securities company. It is also engaged in underwriting, consulting on stock listing at the New York Stock Exchange, bonds brokering, and dealing with the assets of the Company.

Hyundai Securities (Europe) Ltd.

The London-based subsidiary provides investment services to European companies, as well as Europe based Korean companies. These services include equity and fixed income brokerage, underwriting and issuance of equity linked products. Having strong cliental relationships with European companies, Hyundai Securities (Europe) Ltd plays a vital role in introducing and advising European investors on Korea. The subsidiary continues to work closely with the parent company to bolster its issuance business and enhance presence in Europe as Korea specialists.

Hyundai Securities (Asia) Ltd.

Hyundai Securities (Asia) Ltd., made its presence in Asian financial market since 1989, is primarily involved in equity and fixed income brokerage as well as in corporate finance. Having strong clientele network, mainly focusing on Hong Kong, Singapore, and Taiwan, the Hong Kong office plays vital role of introducing and advising global investors for both listed and unlisted Korean companies. In light of the increasing overseas investment activities from Korea in the global market, the current market sentiment has driven Korean investors to widen up their investment objectives. Along with Shanghai office, Hyundai Asia provides extensive investment services to tap increasing opportunities in Greater China region.

Shanghai Rep. office

Hyundai Securities (Asia) Ltd., made its presence in Asian financial market since 1989, is primarily involved in equity and fixed income brokerage as well as in corporate finance. Having strong clientele network, mainly focusing on Hong Kong, Singapore, and Taiwan, the Hong Kong office plays vital 21 role of introducing and advising global investors for both listed and unlisted Korean companies. In light of the increasing overseas investment activities from Korea in the global market, the current market sentiment has driven Korean investors to widen up their investment objectives. Along with Shanghai office, Hyundai Asia provides extensive investment services to tap increasing opportunities in Greater China region.

Back Offices Information Technology Division

Hyundai Securities’IT division operates Host System and servers while developing and running trading systems. It develops and operates accounting information system, management information system, risk management system, CRM system, Web service, mobile service and online instruments such as ARS and CTI. The division is also in charge of the entire back-office system operation, network and security maintenance and maintenance of computers and other technical equipments. The IT division created the best online trading system in the local securities industry based on highly- efficient and low-cost system operations while establishing various policies aimed at providing better customer services. In particular, Hyundai Securities has made great efforts to improve its online services in this highly wired country, by constantly upgrading its HTS (Home Trading System) and WTS (Web Trading System), creating more easy-to-use trading systems and enhancing customer care service. As a result, Hyundai Securities was ranked by an online finance research group Stockpia.com as the best HTS provider in Korea, for two straight years beginning 2004.

Also, we increased online system capacity to accommodate up to 100,000 online users at the same time, as part of our effort to provide more stable HTS and to allow our customers to access our online trading system with less difficulty.

Based on DW (Data Warehousing) system and CRM system, which we adopted for the first time in Korea’s securities industry, Hyundai Securities recently developed EGIS (Engine of Innovation System) and CIS (Corporate Information System) in order to provide a systematic support for individual wealth management services and investment banking operations. In 2006 fiscal year, we plan to shift the focus of our core IT policies from providing quick and stable stock trading assistance to providing the development of various financial products and services, in line with the government’s recent deregulation efforts.

Research Center

Hyundai Securities’research center adopted a global standard in July 1999 and comprises of 80 staff members as of May 2006, including 40 analysts.

Analysts are categorized under one of four subdivisions, and each analyst belongs to one of several groups that analyze sectors such as IT, telecommunications/Internet, finance, utility, consumer products and industrial products.

22 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Among the fourteen other existing teams, the macro-economy team studies long-term prospect of economies here and abroad and trends of financial markets, while establishing long-term investment strategies on bond markets. The strategy team makes suggestions for long-term investments on stock markets and analyzes major market issues. Quantitative analysis team analyzes market data and sets up scientific and systematic models, while small cap team discovers shares of up-and-coming small companies and new promising industries. Information technology team provides in-depth analysis on the Internet technology sector and offers technology consulting services, and portfolio team establishes systematic wealth management systems and model portfolios to support the systems.

Member of such analysis teams creates so-called“ universe”of some 200 major companies listed on KOSPI and KOSDAQ markets, to establish a platform for consistent analysis. The regular coverage analysis report, based on corporate fundamentals, is reflected on our monthly earnings guide and provides scientific basis for investment strategies. In order to support out operations more effectively, the research center runs several support teams such as RA (Research Associate) team, translation/editing team, and publishing team. The research center now publishes various research analysis reports, written in Korean and English, about economy, investment strategies, industries and companies.

Our research analysis reports are shared by our employees through research database system (HRC Report System). The research database is not only available for Hyundai Securities employees through You First Plus, the company’s internal communication system, but also provided to our customers through HTS (Home Trading System), the company’s official Web site and EGIS. Based on such effective research system, Hyundai Securities is focusing its research capabilities on wealth management sector, which is the company’s main business focus, and supporting the company’s flagship product-HR30 (Hyundai Research model portfolio) and One2One Portfolio.

Hyundai Securities’research center also plans to provide more practical and sales-oriented research results, and offers more diverse and creative marketing schemes. In particular, the company has been holding a series of investor conferences and meetings with overseas investors, offering significant boosts to corporate sales and investment banking sales operations. Also, in order to improve sales ability of our workforce in retail sales, the company is making great efforts for employees training and education.

Compliance System Introduction

Legal & compliance practice and major operation

Compliance officer, an independent entity directly reporting to the chief executive officer, is assisted by compliance office and corporate legal office. Hyundai Securities, to ensure effective compliance operation, has a compliance manager in each department and office. The compliance officer’s major roles are as follows:

23 1. Monitoring of internal control systems and operations. Making request for improving internal inspection procedures. 2. Supervision on legal compliance of day-to-day operations in the company 3. Inspection on consumer protection 4. Compliance assistance and advisory on the board, management officers and internal departments 5. Cooperation and assistance for financial regulators and other corporate auditors 6. Legal compliance training for employees

Compliance office monitors the company’s day-to-day operations under the supervision and request of the compliance officer and helps establish internal control and monitoring system. The corporate legal office is in charge of legal disputes that may occur with the company customers.

The compliance managers, given part of the compliance officer’s duties, inspect legal compliance of each department and outside branch. A so-called“ watcher”of each regional headquarter office examines legal compliance practices in the region’s branches and reports the result to the compliance officer once a month.

The compliance monitoring committee, created to advise legal compliance internal monitoring practices, reports to the compliance officer. The committee establishes responses for major legal/compliance disputes, and creates and implements compliance policies. Also, to ensure effective development and operation of internal monitoring system, the compliance office creates a compliance alert center for employees, and implements policies to protect employees providing such compliance alerts. Also, Hyundai Securities set up an internal system to report any activities suspected of money laundering activities and illegal money transfer through trading accounts in the company. Korean government requires all financial companies to report large-sum cash transactions to the government intelligence and mandates Koreans opening new financial accounts to fill out a form containing additional private information. Customer due diligence and currency transaction report took effect beginning February 2006. Hyundai Securities are preparing detailed policies to implement such customers due diligence and currency transaction report measures (Hyundai Securities was awarded by the Finance Minister for its excellent practice in anti-money laundering policies for four straight years from 2002 to 2005).

Risk Management

Hyundai Securities’risk management team controls and manages a diverse range of risks in our management and sales operation, in order to ensure stability and profitability of the company’s business practice. In order to maintain the company’s risks and profitability at the optimal level, the team establishes extensive risk management system and procedures, while creating computerized risk management system. Hyundai Securities created risk management committee, which directly reports to the chief executive officer, and the committee reviews and approves major issues in its meeting held at least once a month. The committee also reports major risk management strategies and policies to the board members for their review. The risk management team, set up in February 2000 to assist risk management committee, conducts risk assessment, analysis and monitoring on each division in the company. Risk management team established a computerized risk control system on such financial risks as market risk, credit risk and liquidity risk. When it comes to non-financial risks such as legal risk, reputation risk or operation risk, the team is controlling the risks by consulting with related 24 internal teams. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Hyundai Securities, in order to control market risk, set volume limit, FS (factor of safety) limit, VaR limit, loss limit and stress test limit in order to monitor and manage risks on each internal team. The team also conducts MC VaR assessment on derivative products and VaR back tests at least once a year. The team is constantly monitoring credit exposure limits, individual credit limit on each credit rating group and risks on each internal departments, all part of an effort to credit risk management. Also, to ensure effective liquidity risk management, the team is monitoring maximum the liquidity gap based on maturity period and market liquidity management. The team also established computerized system for RAPM in order to distribute optimal level of resources on each internal department and to make better performance assessment based on risk level. Also, the team integrated risk management on derivative products, previously conducted independently, with the general computerized risk management system, establishing an extensively integrated risk management monitoring. The team is reporting the summary of risk management performance to senior executives on a daily basis. The company’s MIS (Management Informations System) and RMS (Risk Management System) Plus, a Web version of computerized risk management system, allows the senior staff members to check risk management activities through the system. Also, risk management committee is reporting its activities to the senior executives on a monthly basis.

Customer Center

Customer center, armed with customer representatives specializing in each sector of the services we provide and cutting-edge CTI system, handles inquiries from customers. Its major roles comprise handling inbound calls from clients, TM operation, CS operation and administrative support team. Inbound call center is responding to customers’inquiries involving banking money transfer, CMA, loans, trading, technical problems related to Hyundai Securities’official Web site and HTS system, and other general inquiries. TM operation is in charge of branch management system and telemarketing for loans. CS(Customer Satisfaction) operation is in charge of responding to customers’complaints and conducting employees’service training. The administrative support team helps supporting to make quick response to customers’complaints and inquiries, while helping employees to handle their day-to-day operations more quickly and effectively. The customer center will continue providing better and reliant customer care and analyzing productivity of our employees, in order to maximize the company’s sales. E-biz

Investment Specialist premium service

1. What is Investment Specialist? “Cyber Investment Specialist”is a service that provides expert-level investment guidance for Hyundai Securities’online customers. 20 selected investment specialists of Hyundai Securities formed a diverse range of investment clubs, offering advices to customers.

2. Services provided by Investment Specialist ‘Cyber Investment Specialist’provides services below without extra charges; 1) Investment counseling service through online chat room: We open a chat room in Hyundai Securities’YouFirst plus iMan online messenger during trading hours of 8 a.m. to 3 p.m., to offer advices on the day’s best stock picks and other counseling service. One-on-one consulting session via the online messenger is also available. Also, after the daily trading session is over on 3 p.m., we open a special chat room for other stock trading education sessions and market issue analysis. 2) SMS service: We send urgent market alerts and trading information to our customers through mobile phone messages, to help our customers to receive crucial market information on time. 3) Community service: We encourage our customers to open online communities on Hyundai Securities’Internet Web site and share their market knowledge and fraternize with each other. Our customers form off-line clubs to meet in person and share their insights and perspectives. 4) Stock college: We hold a free lecture every Friday to teach customers about HTS, futures and option trading, technical analysis and basic analysis during the two-month long training session. 5) Live broadcast on stock markets: We broadcast stock market movement, major stock market issues, market movers and technical analysis through winamp Internet broadcast on our iMan online chat room. The broadcast is available from 8:40 a.m. to 3 p.m. 6) Miscellaneous: We also promote our investment specialists by various media appearances, lectures at colleges and financial institutions. 25 26 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

With us, you can start building your own wealth management more easily and safely. We will help you to take steps to create wealth management portfolios for your happy post- retirement life. We will make the best wealth management partner for you, with our commitment to create better life for all customers and investors.

Financial Section

28 _ Management’s Discussion & Analysis 35 _ Report on the Review of the Internal Accounting Control System 36 _ Non-consolidated of Balance Sheets 38 _ Non-Consolidated Statements of Income 40 _ Non-Consolidated Statements of Appropriations of Retained Earnings 41 _ Non-Consolidated Statements of Cash Flows 43 _ Notes to Non-Consoliated Financial Statements 27 MANAGEMENT’S DISCUSSION & ANALYSIS

OPERATIONS

Brokerage

Despite adverse macroeconomic factors such as lofty crude oil prices and appreciation of the won, the KOSPI increased 393.9p year- over-year to 1,359.6p and the total trading market turnover jumped 82% year-over-year to W1.4 quadrillion, primarily reflecting: 1) expectations for economic recovery; and 2) institutions’buying position backed by a steady flow of capital into installment-plan funds. Hyundai Securities’cumulative stock brokerage soared 99% year-over-year to W207.6 trillion, and its market share rose 0.6%p to 7.4%. In particular, ELW business, initiated in December 2005, has shown industry’s top performance and market share of 18%.

(Unit : KRW in trillions) FY2005 FY2004 YoY Stocks Market turnover 1404.3 768.3 82% Hyundai 207.6 103.9 99% Market share 7.4% 6.8% 0.6%p On-line ratio 66.5% 64.9% 1.6%p

Stock brokerage commissions rate

FY2005 FY2004 FY2003

Average 0.20% 0.22% 0.22% On-line 0.13% 0.14% 0.14% Off-line 0.33% 0.36% 0.38%

Hyundai Securities’stock brokerage value consisted of individual investors for 89%, institutions for 5%, overseas investors for 4% and proprietary trading for 2%. As for stock brokerage commission income, 93% came from individuals, 3% from institutions and 4% from overseas. Stock Brokerage (Unit : KRW in trillions) FY2005 FY2004 FY2003 Portion Portion Portion Retail 185.6 89% 92.4 89% 117.1 90% Institutions 11.2 5% 5.6 5% 6.8 5% Overseas 7.8 4% 5.2 5% 4.7 4% Prop. Trading 3.0 2% 0.7 1% 1.1 1% Total 207.6 100% 103.8 100% 129.7 100%

28 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Stock Brokerage Commissions (Unit: KRW in billions) FY2005 FY2004 FY2003 Portion Portion Portion Retail 382.6 93% 204.6 91% 265.3 92% Institutions 11.8 3% 7.4 3% 10.6 4% Overseas 15.0 4% 13.0 6% 11.9 4% Total 409.4 100% 225.0 100% 287.8 100%

The cumulative brokerage commissions income jumped 77% year-over-year to W434.2 billion. Hyundai Securities has displayed its outstanding sales prowess by remaining in the industry’s top position in the pivotal brokerage business since end- 90’s.

Brokerage commissions M/S (Unit: KRW in billions) FY2005 FY2004 FY2003 Note Hyundai Brokerage commissions 434.2 245.6 311.9 8.3% 7.6% 8.4% Brokerage commissions M/S (#2 in market) (#1 in market) (#2 in market)

Source : KSS

(%, in trillions of won, %) 200 Market tumover Hyundai M/S 9.0%

160 8.0%

120 7.0%

80 6.0%

40 5.0% 2005.4 2005.5 2005.6 2005.7 2005.8 2005.9 2005.10 2005.11 2005.12 2006.1 2006.2 2006.3

Wealth Management

As of end-March 2006, the company’s wealth management indicated remarkable performance in sales of Equity-Linked-Securities (ELS), Repurchase Agreement (RP) and indirect investment products. However, total revenue decreased 28% year-over-year, primarily reflecting a large-scale BC redemption by Kookmin Bank. As a result of the company’s sustained efforts to facilitate bond business, sales of RP recorded 650% increment year-over-year to W1.1 trillion. Furthermore, sales of ELS performed substantial increment of 428% year-over-year to 860.8 billions in Korean won.

29 MANAGEMENT’S DISCUSSION & ANALYSIS

(Unit: KRW in billions) FY2005 FY2004 YoY

BCs 3,800.7 6,936.9 -45% (Wrap) (1,508.2) (676.3) 123% ELS 860.8 163.0 428% RP 1,061.6 141.6 650% Real Estate etc. 229.3 239.4 -4% Total 5,952.4 8,324.6 -28%

Wrap

Sales of entrusted wrap account soared 130% year-over-year to W1.5 trillion as of end-March 2006. Sales of equity-type products surged 8,623% year-over-year to W1 trillion while sales of bond-type products decreased 33% year-over-year to W304.7 billion, primarily reflecting record-high KOSPI and sustained capital inflow from installment-plan funds. Total balance of wrap accounts, including advisory wrap accounts, grew 123% year-over-year to W1.5 trillion.

(Unit: KRW in billions) FY2005 FY2004 YoY

Discretionary Wrap 1,498.4 652.4 130% Equity type 1,003.1 11.5 8,623% Bond type 304.7 453.9 -33% Fund type 6.3 105.6 -94% Installment-plan type 1,843 81.4 126% Advisory wrap 9.9 23.9 -59% Total 1,508.2 676.3 123%

Underwriting

Underwriting operations slipped 8% year-over-year to W2.2 trillion. However, underwriting commissions increased by more than double compared to the previous year. Corporate bond issuances (including INI Steel (now Hyundai Steel), WIA, Dongkuk Steel Mill, Hyundai Engineering & Construction, Hyundai MOBIS and Pantech) decreased 45% year-over-year to W941.3 billion. Among special- purpose bonds, ABS issuances including those for Purme Foundation (W295 billion) surged 128% year-over-year to W891.4 billion.

IPO underwriting increased substantial increment of 897% year-over-year to W99.7 billion (W18.9 billion for CDNetworks, W11 billion for WITCOM, and W14.3 billion for AVACO), as KOSDAQ’s rally boosted the primary market. Right issues are amounted to 30 W169.5 billion, including W54.4 billion for Dongbu Anam Semiconductor (now Dongbu Electronics). HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(Unit: KRW in billions) FY2005 FY2004 YoY

Total 2,201.9 2,392.6 -8% Corporate bonds 941.3 1,703.7 -45% Special debt securities 991.4 648.3 53% (ABS) (891.4) (391.6) 128% IPO 99.7 10.0 897% Right issues 169.5 30.6 454% Underwriting commissions 11.1 5.4 106%

Special debt securities include ABS, bonds issued by credit-card and capital companies.

Profit Analysis

Net profit indicated substantial increment of 424% year-over-year to W282.7 billion. Commission income climbed 74% year-over-year to W437.8 billion, primarily reflecting trading turnover growth, brisk brokerage business, better underwriting performances and increased commission from equity-linked securities sales. Interest income rose 55% year-over-year to W96.1 billion while proprietary accounts surged 82% year-over-year to W45.4 billion. SG&A expenses increased 21% year-over-year to W333 billion due to increased bonus payment for stellar performance and severance payment.

Operating profit recorded 279% year-over-year to W252.2 billion, primarily reflecting strong performances in all business segments. Non-operating profit jumped 87% year-over-year to W33.3 billion based on: 1) gains from disposal of equity stakes in Hynix (W18.4 billion); 2) gains from disposal of equity stakes in venture start-ups such as KAEL, Namotek and Arion Technology; and 3) capital gains from liquidation of investment partnership.

Non-operating expenses stayed flat year-over-year at W6.9 billion with W5.6 billion in employee welfare fund in the fourth quarter. Net profit soared 424% year-over-year to W282.7 billion.

(Unit: KRW in billions) FY2005 FY2004 YoY

Operating revenue 936.6 472.8 98% Net operating revenue 585.2 342.6 71% Commissions 437.8 251.2 74% Interests 96.1 62.0 55% Proprietary 45.4 24.9 82% Others 5.9 4.5 31%

31 MANAGEMENT’S DISCUSSION & ANALYSIS

(Unit: KRW in billions) FY2005 FY2004 YoY

Operating expenses 684.4 406.3 68% (SG&A) (333.0) (276.1) 21% Operating profit 252.2 66.5 279% Non-operating profit 33.3 17.8 87% Non-operating expenses 6.9 7.5 -8% Recurring profit 278.6 76.8 263% Pre-tax profit 278.6 76.8 263% Net profit 282.7 54.0 424%

Commissions

Commission jumped 74% year-over-year to W476 billion. More specifically, brokerage commission climbed 77% year-over-year to W434.2 billion, primarily reflecting trading turnover growth and market share gains, and BC trading commission grew 13% year-over- year to W18.4 billion. Underwriting commission also soared 106% year-over-year to W11.1 billion powered by brisk IPO underwriting and capital increases. Commission from asset management jumped 150% year-over-year to W10.5 billion on increased sales of indirect investment products and ELS.

(Unit: KRW in billions) FY2005 FY2004 YoY

Commissions income 476.0 272.8 74% (Brokerage) 4,34.2 245.6 77% (Underwriting) 11.1 5.4 106% (BCs) 18.4 16.3 13% (Wealth Management) 10.5 4.2 150% (Others) 1.8 1.3 38% Commissions expenses 38.1 21.6 76% Net commissions income 437.8 251.2 74%

�Wealth Management=Wrap fee + Sales commission on structured securities (ELS)

Interests

Net interest income surged 55% year-over-year to W96.1 billion. Interest income climbed 48% year-over-year to W133.3 billion, primarily reflecting increased interest income from loans and possessing increased number of bonds. Interest expenses rose 34% year- over-year to W37.2 billion on increased interest payment for expanded RP and customer deposits.

32 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(Unit: KRW in billions) FY2005 FY2004 YoY

Interest income 133.3 89.8 48% Interest expenses 37.2 27.8 34% Net interest income 96.1 62.0 55%

Proprietary accounts

Proprietary account grew 82% year-over-year in fiscal year to W45.4 billion.

(Unit: KRW in billions) FY2005 FY2004 YoY

Stock 37.2 -0.2 TR Bond 1.7 3.8 -55% BCs 2.2 15.6 -86% Derivatives 4.3 5.7 -25% Total 45.4 24.9 82%

SG&A Expenses

SG&A expenses increased 21% year-over-year to W333 billion, primarily reflecting increased incentives for employees. Labor costs surged 39% year-over-year to W220 billion due to higher bonus payment from brisk operations and W11.8 billion in severance payment in March 2006. Despite increased marketing expenses for new product promotions, advertising and promotional expenses declined 10% year-over-year to W16.7 billion from efficient cost control. Depreciation costs also decreased 19% year-over-year to W14.3 billion as assets subject to diminished. Despite an increase in short-term accounts receivable, bad debt expenses fell 59% year-over-year to W3.1 billion, primarily reflecting a write-off of problematic assets

(Unit: KRW in billions)

333.0 276.1 343.0

172.3

220.0 158.7 Personnel expenses 12.6 13.4 Rental expense 27.0 Computer system operations expense

10.4 33.4 Advertising expense 12.3 9.2 10.5 18.5 20.3 Depreciation 16.7 17.6 14.3 7.5 Credit loss expense 3.1 33 36.9 51.2 63.8 Others

FY2005 FY2004 FY2003 MANAGEMENT’S DISCUSSION & ANALYSIS

Hyundai Securities carried out an early retirement program for a total of 226 employees in March 2006. As most of the retirees were senior managers, Hyundai Securities was able to pare down a high fixed-cost burden and thereby secure a stable revenue base (an early retirement payout of W11.8 billion was booked as severance payment).

Financial Condition

As of the end of March 2006, Hyundai Securities held assets of W5.4 trillion, liabilities of W3.9 trillion, and shareholders’equity of W1.5 trillion. Customer deposits jumped 17% year-over-year to W1.4 trillion, primarily reflecting a bullish stock market and brisk IPO subscriptions. Short-term marketable securities recorded 173% year-over-year to W1.9 trillion powered by a rise in bond balance amid brisk operations of OTC derivatives and RP. Liabilities surged 111% year-over-year to W3.9 trillion due to larger inflow of customer deposits and brisk RP operations. Shareholders’equity picked up 25% year-over-year to W1.5 trillion on higher retained earnings and increased capital adjustments from valuation gains on available-for-sale securities.

(Unit: KRW in billions) 2006 2005 YoY Mar Mar Asset 5,453.5 3,071.3 78% Deposits 1,447.3 1,235.9 17% Trading securities 1,884.2 689.0 173% (Bond) (1,639.4) (408.3) 302% Fixed assets 587.7 664.4 -12% Liabilities 3,948.1 1,871.3 111% Customer deposits 1,435.6 1,245.3 15% Borrowings 1,057.8 140.2 654% Structured securities sold 988.2 164.2 502% Shareholders’ equity 1,505.3 1,200.0 25% Share capital 696.8 696.8 0%

*Korea Information Service and Korea Ratings upgraded credit rating for Hyundai Securities from A- to A in Feb 2006, suggesting past concerns over Hyundai Securities subsided and operational base has been solidified toward more stabilized profitability and stronger sales force. The improved credit rating should allow Hyundai Securities to reinforce its sales force as well as to lower capital-financing costs.

Capital Adequacy

The capital adequacy ratio dropped 25%p year-over-year to 598% because of brisk operations of OTC derivatives and expanded proprietary account scale.

(Unit: KRW in billions) 2006 2005 YoY Mar Mar Total Operating Capital 899.2 603.7 49% Total Risk 148.1 96.9 53% 34 Net Capital Ratio 598% 623% -25%p HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

REPORT ON THE REVIEW OF THE INTERNAL ACCOUNTING CONTROL SYSTEM

To the President of Hyundai Securities Co., Ltd.

We have reviewed the management’s report on the operations of the internal accounting control system “( IACS”) of Hyundai Securities Co., Ltd. (the“ Company”) as of March 31, 2006. In accordance with Article 2-2 of the Act on External Audit for Stock Companies (the“ External Audit Law”) of the Republic of Korea, the Company’s management is responsible for reporting on the design and operations of its IACS “( IACS report”). Our responsibility is to review the management’s IACS report and issue a report based on our review.

We conducted our review in accordance with Article 2-3 of the External Audit Law. Our review included inquiries of management and employees, inspection of related documents and checking of the operations of the Company’s IACS. We did not perform an audit of the Company’s IACS and accordingly, we do not express an audit opinion.

Based on our review, no material weakness in the design or operations of the Company’s IACS under Article 2-2 of the External Audit Law as of March 31, 2006, has come to our attention.

This report applies to the Company’s IACS in existence as of March 31, 2006. We did not review the Company’s IACS after March 31, 2006. This report has been prepared for Korean regulatory purposes pursuant to the External Audit Law, and may not be appropriate for other purposes or for other users.

As this report is based on Interim Guidelines on Auditors’Review and Report on Management’s IACS Report, issued by the Korean Audit Standards Committee on March 29, 2005, they apply only from that date until the date the Final Standards for Management’s IACS Report, and the Final Standards for Auditors’Review and Report on Management’s IACS Report become effective. A review based on the final standards may have different results and accordingly, the content of any updated report may be different.

April 14, 2006

Samil Pricewaterhouse Coopers Kukje Center Building 191 Hangangro 2 ga, Yongsanku Seoul 140-702, KOREA (Yongsan P.O. Box 266, 140-600)

Notice to Readers 35 This report is annexed in relation to the audit of the financial statements as of and for the year ended March 31, 2006, and the review of internal accounting control system pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea. NON-CONSOLIDATED BALANCE SHEETS

March 31, 2006 and 2005 (in thousands of Korean won) FY2005 FY2004

Assets Current assets Cash and deposits (Note 3) ＼ 219,926,585 ＼ 147,331,823 Deposits segregated under regulation (Note 3) 1,447,334,351 1,235,868,442 Trading securities (Note 4) 1,884,233,604 689,044,832 Structured securities(Note 5) 753,764,236 62,105,552 Options purchased (Note 5) 2,014,335 212,627 Loans, net (Note 2) 302,246,418 151,951,789 Accounts receivable, net 167,488,502 97,206,653 Accrued revenue, net 20,828,296 12,308,782 Advanced payments 9,500,568 7,104,660 Prepaid expenses 1,561,415 125,670 Prepaid income tax 3,451,634 3,035,467 Current deferred tax assets (Note 21) 43,062,768 - Financial derivative assets (Note 5) 10,318,908 554,915 Other 16,942 19,088 Total current assets 4,865,748,562 2,406,870,300

Available-for-sale securities (Note 6) 127,473,422 129,555,404 Equity-method investments (Note 7) 60,397,292 46,901,116 Long-term financial instruments (Note 3) 38,000 35,000 Long-term loans 13,716,426 36,547,820 Guarantee deposits 80,490,994 86,009,094 Troubled loans, net (Notes 2 and 8) 3,238,957 7,098,754 Collective fund for default loss (Note 3) 8,681,873 9,746,468 Property and equipment, net (Note 9) 202,992,478 203,616,590 Intangible assets (Note 10) 2,520,312 3,597,972 Non-current deferred tax assets (Note 21) 65,961,115 123,102,700 Other 22,210,317 18,238,817 Total assets 5,453,469,748 3,071,320,035

36 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

NON-CONSOLIDATED BALANCE SHEETS

March 31, 2006 and 2005 (in thousands of Korean won) FY2005 FY2004

Liabilities and Shareholders’Equity Current liabilities Short-term borrowings (Note 11) ＼ 322,147,696 ＼ 168,000,000 Structured securities sold (Note 5) 988,216,038 164,178,806 Securities sold under repurchase agreements (Note 4) 1,057,778,587 140,161,658 Deposits from customers (Note 12) 1,435,649,746 1,245,290,540 Other accounts payable 64,316,686 41,971,340 Option sold 1,005,378 386,621 Accrued expenses 14,927,103 11,671,437 Guarantee deposits received 12,382,050 14,129,174 Current maturities of subordinated debentures (Note 13) - 49,942,690 Financial derivative liabilitiess 2,380,919 - Withholdings 13,950,348 10,193,472 Others 6,227,996 4,202,769 Total current liabilities 3,918,982,547 1,850,128,507

Debentures (Note 13) 957,533 935,376 Accrued severance benefits, net (Note 14) 28,199,302 20,239,783 Other 727 832 Total liabilities 3,948,140,109 1,871,304,498

Commitments and contingencies (Note 15)

Shareholders’equity Capital stock (Note 1) Common stock 696,767,115 696,767,115 Capital surplus Additional paid-in capital 487,896,016 487,896,016 Retained earnings (Note 16) 308,369,568 25,691,081 Capital adjustments 12,296,940 (10,338,675) Total shareholders’equity 1,505,329,639 1,200,015,537 Total liabilities and shareholders’equity 5,453,469,748 3,071,320,035

The accompanying notes are an integral part of these non-consolidated financial statements. NON-CONSOLIDATED STATEMENTS OF INCOME

Years Ended March 31, 2006 and 2005 (in thousands of Korean won, except per share amounts) FY2005 FY2004

Operating revenues Commissions received ＼ 475,941,427 ＼ 272,823,152 Interest income 80,885,450 46,696,839 Gain on sales of trading securities 59,509,801 31,215,579 Gain on valuation of trading securities 27,141,437 25,721,656 Gain on structured securities transactions 62,570,621 2,857,930 Gain on structured securities sold transactions 70,583,179 450,902 Gain on valuation of deposits segregated under regulation 52,383,752 43,082,200 Gain on derivatives transactions 89,428,761 45,350,479 Others 18,142,872 4,644,214 936,587,300 472,842,951 Operating expenses Commissions expenses 38,108,343 21,636,375 Interest expense 37,209,007 27,787,943 Loss on sales of trading securities 39,295,103 25,358,202 Loss on valuation of trading securities 18,425,643 12,486,059 Loss on structured securities transations 57,911,160 130,595 Loss on structured securities sold transactions 80,050,523 6,703,498 Loss on derivatives transactions 80,355,768 36,146,063 General and administrative expenses (Notes 20, 23 and 25) 333,042,821 276,081,654 684,398,368 406,330,389 Operating income 252,188,932 66,512,562

38 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

NON-CONSOLIDATED STATEMENTS OF INCOME

Years Ended March 31, 2006 and 2005 (in thousands of Korean won, except per share amounts) FY2005 FY2004

Non-operating income Office rental income ＼ 3,341,633 ＼ 2,797,871 Gain on foreign currency transaction 40,724 21,089 Gain on disposal of available-for-sale securities 24,960,679 2,359,552 Gain on disposal of property and equipment 855,726 1,134,020 Gain on valuation of equity-method investments (Note 7) 3,729,365 - Other 373,556 11,510,434 33,301,683 17,822,966 Non-operating expenses Loss on foreign currency transaction 82,390 282,840 Loss on disposal of available-for-sale securities - 64,301 Loss on impairment of available-for-sale securities (Note 6) 33,994 849,995 Loss on valuation of equity-method investments (Note 7) 169,391 67,903 Loss on disposal of property and equipment 166,735 210,075 Donation 6,420,109 133,250 Others 65,808 5,929,581 6,938,427 7,537,945 Ordinary income 278,552,188 76,797,583

Income before income taxes 278,552,188 76,797,583 Income tax expense(benefit) (Notes 21) (4,126,299) 22,808,882 Net income 282,678,487 53,988,701

Earnings per share (Notes 22) (In Korean won) 2,095 395

The accompanying notes are an integral part of these non-consolidated financial statements. NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS

(Dates of appropriations : May 23, 2006 and May 27, 2005 for the years ended March 31, 2006 and 2005, respectively) (in thousands of Korean won) FY2005 FY2004

Retained earnings before appropriations Unappropriated retained earnings (undisposed accumulated deficit) carried over from prior years ＼ 25,691,081 ＼ (28,297,620) Net income 282,678,487 53,988,701 308,369,568 25,691,081

Appropriations (Note 19) Voluntary reserves 249,173,045 - Legal reserves 5,381,502 - Dividends 53,815,021 - 308,369,568 - Unappropriated retained earnings carried forward to the subsequent year - 25,691,081

The accompanying notes are an integral part of these non-consolidated financial statements. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended March 31, 2006 and 2005 (in thousands of Korean won) FY2005 FY2004

Cash flows from operating activities Net income ＼ 282,678,487 ＼ 53,988,701 Adjustments to reconcile net income to net cash provided by operating activities Gain on valuation of trading securities, net (8,715,794) (13,235,598) Gain(loss) on valuation of structured securities, net 18,188,610 (1,497,444) Gain(loss) on valuation of structured securities sold, net (17,122,493) 2,171,283 Gain(loss) on valuation of options, net 164,158 (161,483) Provision for severance benefits 26,470,113 14,507,291 Depreciation and amortization 16,548,756 23,833,360 Bad debt expenses 3,126,753 7,452,162 Gain on disposal of available-for-sale securities, net (24,960,679) (2,295,251) Loss on impairment of available-for-sale securities 33,994 849,995 Gain(loss) on valuation of equity-method investments, net (3,559,974) 67,903 Gain on disposal of property and equipment, net (688,991) (923,945) Gain on valuation of deposits segregated under regulation (52,383,752) (43,082,200) Others, net (3,696,920) (2,145,792) 236,082,268 39,528,982 Changes in operating assets and liabilities Deposits segregated under regulation (159,082,157) 44,388,168 Trading securities (1,263,179,723) (260,755,045) Structured securities (709,847,293) (60,608,108) Option purchased (1,791,615) (47,231) Accounts receivable (70,890,801) (50,229,375) Accrued revenue (8,689,295) (2,184,568) Advanced payments (2,395,908) (2,482,176) Prepaid expenses (1,435,745) (21,697) Prepaid income tax (416,168) 384,459 Financial derivative assets (6,449,312) (351,000) Current deferred tax assets (43,062,768) - Non-current deferred tax assets 38,867,580 22,599,743 Deposits from customers 190,360,593 198,271,220 Structured securities sold 841,159,725 162,007,523 Option sold 444,507 267,175 Other accounts payable 21,475,698 (7,026,948) Accrued expenses 3,255,763 (4,992,038) Payment of serverance benefits (18,004,345) (15,778,635) Payment of retirement trust (506,249) (805,521) Withholdings 3,756,875 (611,593) Others, net 3,511,682 440,591 41 (1,182,918,956) 22,464,944 Net cash provided by (used in)operating activities (946,836,688) 61,993,926 NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended March 31, 2006 and 2005 (in thousands of Korean won) FY2005 FY2004

Cash flows from investing activities Decrease(increase) in short-term financial instruments ＼ 19,904,319 ＼ (31,460,369) Decrease in loans 3,238,589,750 681,616,445 Increase in loans (3,389,639,628) (751,845,771) Decrease in available-for-sale securities 87,188,181 3,612,859 Increase in available-for-sale securities (2,015,100) (1,223,174) Increase in equity-method investments (12,514,440) (3,827,983) Decrease in long-term financial instruments - 8,500 Increase in long-term financial instruments (3,000) (7,000) Decrease in long-term loans 23,604,809 12,198,248 Increase in long-term loans (658,684) (855,927) Decrease in guarantee deposits 20,963,445 17,550,162 Increase in guarantee deposits (15,451,960) (10,874,859) Disposal of property and equipment 92,318 957,164 Aquisition of property and equipment (13,801,722) (8,663,372) Decrease in troubled loans 4,272,190 2,486,868 Increase in troubled loans (712,283) (2,175,212) Decrease(increase) in collective fund for default loss 1,064,595 (524,428) Increase in intangible assets (1,197,633) (202,696) Other, net (3,228,539) 1,212,558 Net cash used in investing activities (43,543,382) (92,017,987)

Cash flows from financing activities Increase in short-term borrowings 154,147,697 168,000,000 Increase in securities sold under repurchase agreements 917,616,928 96,687,138 Increase in guarantee deposits received 861,276 622,082 Decrease in guarantee deposits received (2,608,400) (3,958,741) Increase in bonds - 933,530 Decrease in subordinated bonds (50,000,000) (190,000,000) Acquisition of treasury stock (14,160,668) - Net cash provided by financing activities 1,005,856,833 72,284,009 Increase in overseas operation translation credit (547,522) (409,529) Net increase in cash and cash equivalents 14,929,241 41,850,419 Cash and cash eguivalents (Notes 24) Beginning of year 192,291,294 150,440,875 End of year 207,220,535 192,291,294

The accompanying notes are an integral part of these non-consolidated financial statements. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS March 31, 2006 and 2005

1.The Company

Hyundai Securities Co., Ltd. (the“ Company”) was incorporated on June 1, 1962 under the name of Kookil Securities Co., Ltd., and was organized pursuant to the laws of the Republic of Korea. The Company changed its name to Hyundai Securities Co., Ltd. on June 5, 1986. In 1975, the Company’s shares were listed on the Korean Stock Exchange and as of March 31, 2006, all issued and outstanding shares are publicly traded.

In accordance with its articles of incorporation, the Company is authorized to issue up to 300,000,000 shares of common stock (par value: ＼5,000). As of March 31, 2006, 139,353,423 shares of common stock were issued and outstanding.

In accordance with its articles of incorporation, the Company is authorized to issue up to ＼500 billion of convertible bonds and ＼500 billion of debentures with stock purchase options. No convertible bonds and debentures with stock purchase options have been issued as of March 31, 2006.

In accordance with its articles of incorporation, the Company may grant stock purchase options to its employees and directors up to 15% of the total issued and outstanding shares through a resolution of the shareholders. No stock purchase options have been issued as of March 31, 2006.

The Company is required to maintain a Capital Adequacy Ratio “( CAR”) of more than 100% pursuant to the Regulation on Supervision of Securities Business “( RSSB”) prescribed by the Korean Securities and Exchange Act. A CAR is a ratio of net operating capital to total risks exposed, which include market risk, counter party risk, fundamental risk, credit concentration risk and risk adjustments.

2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its non-consolidated financial statements are summarized below.

Basis of Non-Consolidated Financial Statement Presentation

The Company maintains its accounting records in Korean won and prepares statutory non-consolidated financial statements in the Korean language in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these non-consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying non- consolidated financial statements have been condensed, restructured and translated into English from the Korean language non- consolidated financial statements.

Certain information attached to the Korean language non-consolidated financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, or cash flows, is not presented in the accompanying non-consolidated financial statements.

Accounting Estimates

The preparation of the non-consolidated financial statements requires management to make estimates and assumptions that affect amounts reported therein. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.

43 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

Application of the Statements of Korea Accounting Standards

The Korea Accounting Standards Board has published a series of Statements of Korea Financial Accounting Standards “( SKAS”), which will gradually replace the existing financial accounting standards established by the Korean Financial Supervisory Commission. As SKAS No. 15 through No. 17 became applicable to the Company on April 1, 2005, the Company adopted these Standards in its non- consolidated financial statements covering periods beginning April 1, 2005.

In accordance with SKAS No. 15, Equity Method, the Company changed its policy in accounting for the earnings from equity-method investments from the net basis to gross basis. This change had no effect on the net income or shareholders' equity.

In accordance with SKAS No. 16, Deffered Income Tax, which became effective on April 1, 2005, the Company classified deferred tax assets and liabilities into current and non-current, and within each classification, amounts for deferred tax assets and liabilities are offset against each other and presented as net amount. Deferred tax effects applicable to items in the shareholders’equity are directly reflected in the shareholders’equity account.

Accordingly, capital adjustment and non-current deferred tax asset as of March 31, 2006, are decreased by ＼18,274 million, repectively. In accordance with transition provisions, non-consolidated financial statements for the year ended March 31, 2005, have not been reclassified to conform to the March 31, 2006 financial statement presentation.

Revenue Recognition

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

Cash, Cash Equivalents and Short-term Financial Instruments

Cash and cash equivalents include cash on hand and cash in banks, with original maturities of three months or less. Investments which are readily convertible into cash within four to 12 months of purchase are classified in the balance sheet as short-term financial instruments. The carrying amounts of these investments approximate fair value.

Marketable Securities and Investments

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 one of 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. Non-marketable debt securities are carried at a value using the present value of future cash flows, discounted at a reasonable interest rate determined considering the credit ratings provided by independent credit rating agencies.

Unrealized valuation gains or losses on trading securities are charged to operations and those resulting from available-for-sale securities are charged to capital adjustment, 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

44 recoverable amounts are less than the acquisition cost of securities or adjusted cost of debt securities for the amortization of discounts or premiums. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Investments in equity securities of companies, over which the Company exercises a significant control or influence (controlled investees), are recorded using the equity method of accounting. Under the equity method, the Company records changes in its proportionate ownership in the book value of the investee in current operations, as capital adjustments or as adjustments to retained earnings, depending on the nature of the underlying change in the book value of the investee. The Company discontinues the equity method of accounting for investments in equity method investees when the Company’s share of the accumulated losses of the investees equals the costs of the investments and until the subsequent cumulative changes in its proportionate net income of the investees equals its cumulative proportionate net losses not recognized during the periods when the equity method was suspended. Differences between the initial purchase price and the Company’s initial proportionate ownership in the net book value of the investee are amortized over five years using the straight-line method. There has been no unrealized profit in 2006 and 2005, arising from transactions between the Company and the equity method investees to be eliminated in equity method accounting.

Foreign currency financial statements of equity method investees are translated into Korean won using the prevailing exchange rates in effect as of the balance sheet date for assets and liabilities, historical exchange rates for equity accounts and annual average exchange rates for income and expenses. Any resulting translation gain or loss is included under the capital adjustment account, a component of shareholders’equity.

Structured Securities and Structured Securities Sold

Equity-linked securities are recorded as assets at the purchase price, and equity linked securities sold are recorded as a liability at the issuance price. Gains or losses upon redemption are recorded as a gain or loss on the redemption, and the difference with the estimated value and the book value at the balance sheet date is recorded as a gain or loss on valuation.

Derivative Instruments

Derivative financial instruments for trading or hedging purpose are valued at estimated market price with the resulting unrealized gains or losses recognized in the current operations, except for the effective portion of derivative transactions entered into for the purpose of cash-flow hedges, which is recorded as an adjustment to shareholders’equity.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based on the aggregate estimated receivable amount of the receivables.

The RSSB prescribed by the Korean Securities and Exchange Act provides guidelines for calculating the allowance for doubtful accounts. These guidelines require that the minimum level of allowances that securities firms should maintain. These guidelines require that all loans and receivables should be classified based on a number of factors including the financial position of the debtors, the repayment history, the Company’s past relationship and dealings with the debtors and the value of any security interest. In accordance with these guidelines, loans and receivables have been classified as normal, precautionary, substandard, doubtful and estimated loss.

Loans and receivables as of March 31, 2006 and 2005 by risk classification and percentages of loss applied in order to determine the allowance for doubtful accounts are as follows :

45 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

(in millions of Korean won)

Classification FY2005 FY2004 Percentages of Loss Normal ＼ 486,764 ＼ 279,207 over 0.5% Precautionary - 800 over 2% Substandard 3,306 3,192 over 20% Doubtful 5,567 18,871 over 75% Estimated loss1 37,234 43,793 100% 532,871 345,863

1 The amounts include ＼648 million (2005: ＼6,372 million) of the difference between the book value and the present value of restructured loans as of March 31, 2006.

Loans which are modified during the course of court receivership, court mediation or restructuring of customers are revalued at the present value discounted by adjusted interest rate. 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 debt expenses 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 Related Depreciation

Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets as described below.

Estimated useful lives (years) Buildings 40 Equipment 4 Others 4

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 assets, are capitalized.

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of four years.

Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the exchange rates in effect at the balance sheet date (in the case of US dollars, US$1 to ＼975.90 at March 31, 2006) and resulting transaction gains as losses are recognized in the current operation.

46 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

As of March 31, 2006, monetary assets and liabilities denominated in foreign currencies and related gains and losses on foreign currency translation for the year ended March 31, 2006 are as follows:

(in Korean won) Foreign Currency Korean won Translation Translation Accounts Amount Equivalent Gain Loss

Cash and cash equivalents US$ 4.96 ＼ 4,840 ＼ - ＼ 2

Securities Sold under Repurchase Agreements

Under the repurchase agreements, the Company recorded securities sold under repurchase agreements at the amount of securities sold, and such securities are included in current liabilities. Also the Company recorded the difference between the repurchase price and the price of the securities sold as interest expense.

Meanwhile under the resale agreements, the securities purchased under resale agreements are stated at acquisition cost and are included in current assets. The Company recorded the difference between the securities resale price and acquisition cost as interest income.

Discounts and Premium on Debentures

Discounts and premium on debentures are amortized over the redemption period of the related debenture using the effective interest method. Amortization of discount or premium on debentures is recorded as 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, based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the balance sheet date.

The severance benefits are funded through a severance insurance deposit for payment of severance benefits, and the account is deducted from accrued severance benefit liabilities. The beneficiaries of the severance insurance deposit are the Company’s employees.

In accordance with the National Pension Act, a certain portion of accrued severance benefits was contributed to the National Pension Fund and deducted from accrued severance benefits.

Treasury Stock

Treasury stock is stated at cost. Gain on disposal of treasury stock is charged to capital surplus. Loss on disposal of treasury stock is first offset against gain on disposal of treasury stock, if any, and the remainder is charged to capital adjustment, a component of shareholders’ equity.

Income Tax Expense

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 balance of deferred tax assets and liabilities during the year.

47 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

Trust Accounts

In accordance with the Trust Business Act, trust estate should be accounted separately from the Company’s own estate. Trust management fee for the management, administration and disposal of the trust are recognized as operating revenue.

Translation of Foreign Currency Financial Statements of the Overseas Branch

The overseas branch maintains its books of account in the currency of the country where the branch is located. Therefore, in translating the foreign currency financial statements of the overseas branch into Korean won, assets and liabilities are translated at the exchange rate as of the balance sheet date and income and expenses are translated at the average rates for the reporting periods.

Translation gains or losses arising from such translation of the foreign currency financial statements of the overseas branch are recorded as an overseas operation translation credit or debit which is added to or deducted from shareholders’equity.

Earnings per Share

Earnings per share are computed based on earnings available to common shareholders, using the weighted average number of common shares outstanding during the period.

3. Cash and Deposits

Cash and deposits as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won) Annual Interest Rate(%) FY2005 FY2004 FY2005 Cash and deposits Cash on hand - ＼ 3,254 ＼ 3,121 Checking accounts - 432,484 727,088 Passbook accounts in foreign currency 1.41 4,902,734 3,507,500 Money market funds (*) 10,000,000 - Passbook accounts 0.10 2,178,113 1,000,266 Time deposits 4.15-4.50 30,000,000 54,000,000 Certificate of deposit - - 6,383,848 Money market deposit accounts 3.85-4.10 110,000,000 20,000,000 Promissory notes 3.95 62,400,000 31,700,000 Other deposit - 10,000 30,010,000 219,926,585 147,331,823 Deposits segregated under regulation Subscription deposits 2.0 10,000,000 - Reserve for claims of customers’deposits (trust) (*) 1,437,257,018 1,235,854,517 Guarantee deposits for futures and options trading - 59,333 13,925 1,447,334,351 1,235,868,442 Long-term financial instruments - 38,000 35,000 Collective fund for default loss (*) 8,681,873 9,746,468 48 1,675,980,809 1,392,981,733 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(*) Annual interest rate was not determined at March 31, 2006, because depository will pay an interest based on their operating results.

As of March 31, 2006, long-term financial instruments are subject to withdrawal restriction to maintain checking accounts (Note 15).

According to the RSSB, the Company is to deposit with the Korean Securities Finance Corporation “( KSFC”) or other banks the amount of deposits from customers for the customers’claims.

Pursuant to the Korean Securities and Exchange Act, collective fund for default loss is funded for compensating loss resulting from breaching securities in stock exchange.

4. Trading Securities

Trading securities as of March 31, 2006 and 2005, consist of the following: (in thousands of Korean won)

FY2005 FY2004

Stocks ＼ 67,708,712 ＼ 20,141,402 Government and public bonds 1,503,569,422 385,882,280 Corporate bonds 135,871,381 22,472,310 Beneficiary certificates 106,978,494 145,947,772 Commercial papers 70,105,595 114,601,068 1,884,233,604 689,044,832

Debt securities as of March 31, 2006 and 2005, consist of the following: (in thousands of Korean won)

FY2005 FY2004

Par Acquisition Fair Book Book Value Cost Value Value Value

Government and ＼ 1,544,008,168 ＼ 1,520,511,313 ＼ 1,503,569,422 ＼ 1,503,569,422 ＼ 385,882,280 public bonds 136,269,687 137,035,809 135,871,381 135,871,381 22,472,310 Corporate bonds 70,072,740 70,072,740 70,105,595 70,105,595 114,601,069 Commercial papers 1,750,350,595 1,727,619,862 1,709,546,398 1,709,546,398 522,955,659

As of March 31, 2006, ＼ 1,072,654,995 thousand (2005: ＼ 142,491,717 thousand) of the above debt securities are secured against securities sold under repurchase agreements.

As of March 31, 2006, the Company holds beneficiary certificates which include ＼ 71,770 million of the bonds issued by potentially ailing companies.

The above beneficiary certificates are valued at the standard price of ＼ 89,268 million, which were announced by the investment trust management companies. Subsequently, the Company devalued beneficiary certificates of potentially ailing companies by ＼ 17,498 million. In this regard, the Company classified those beneficiary certificates as current assets in accordance with the Financial Accounting Standards of the Republic of Korea. As of March 31, 2006, the real recoverable amounts and a withdrawal point of time regarding above corporate bonds may be influenced by Korean economy situations. The accompanying non-consolidated financial statements do not reflect that uncertainty. 49 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

For the year ended March 31, 2006, the company recorded ＼ 31,554 million (2005: ＼ 20,056 million) of interest income for trading securities.

As of March 31, 2006, government and public bonds amounting to ＼ 241,157 million and stocks amounting to ＼ 51,292 million are pledged as collateral for the contractual obligations, including derivatives contracts and short-term borrowings (Notes 5,11 and 15).

5. Structured Securities, Structured Securities Sold and Derivative Instruments

Structured securities and structured securities sold as of March 31, 2006, are as follows: (in thousands of Korean won) Issue Value Cumulative Gain(loss) Price Issuing Date 2006 on Valuation Equity linked Securities ＼ 648,454,283 ＼ 648,454,283 ＼ 654,914,330 ＼ 6,460,047 Warrant Securities 122,001,118 122,001,118 98,849,906 (23,151,212) Equity linked Securities Sold 883,614,376 871,585,741 883,189,463 (11,603,722) Warrant Securities Sold 132,578,649 131,581,504 105,026,575 26,554,929

Cumulative gain(loss) on valuation as of March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2004 FY2005

Gain(loss) on Gain on Loss on Cumulative Gain(loss) valuation valuation valuation on Valuation

Equity linked Securities ＼ 1,497,444 ＼ 18,163,292 ＼ (13,200,689) ＼ 6,460,047 Warrant Securities - 21,547,373 (44,698,585) (23,151,212) Equity linked Securities Sold (2,125,120) 14,385,637 (23,864,239) (11,603,722) Warrant Securities Sold (46,166) 49,008,665 (22,407,570) 26,554,929 (673,842) 103,104,967 (104,171,083) (1,739,958)

Interests and redemption prices on maturity date of equity-linked securities are connected with fluctuation of stock index. Redemption prices on maturity date of warrants are also connected with fluctuation of stock index, but the principle are not guaranteed, only option premiums will be received. The above structured securities and structured securities sold are carried at fair value and unrealized valuation gains or losses are recognized in the current operations.

Derivatives instruments contracts outstanding as of March 31, 2006, are as follows:

(in thousands of Korean won) Outstanding Gain on Loss on Purpose of Contract amount valuation valuation transaction Stock index futures ＼ 11,283,912 ＼ - ＼ 384,888 Trading Interest futures 410,388,010 - 163,990 " OTC stock index option purchased 7,905,146 3,759,024 1,345,262 Hedging Stock index option purchased 2,004,242 461,827 451,734 Trading Stock index option Sold 831,128 30,080 204,331 "

50 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

The Company purchased OTC stock index options to hedge against fluctuations in maturity amounts of equity-linked securities sold and recorded them as financial derivative assets. Since the above option transaction does not meet the condition of hedge accounting, the Company does not apply hedge accounting. The Company provided trading and available-for-sale securities to Korea Exchange as collateral for derivative instruments transactions (Notes 4 and 6).

6. Available-for-sale securities

Available-for-sale securities as of March 31, 2006 and 2005, consist of the following: (in thousands of Korean won)

FY2005 FY2004

Stocks ＼ 125,696,167 ＼ 104,492,730 Investments in partnerships 339,400 6,793,659 Stocks in foreign currency 1,088,463 1,334,903 Corporate bonds 199,280 784,000 Beneficiary certificates 150,112 150,112 Other - 16,000,000 127,473,422 129,555,404

As of March 31, 2006, the Company provided listed available-for-sale stocks amounting to ＼ 40,292 million to Korea Exchange as collateral (Note 5).

For the year ended March 31, 2006, the Company recorded ＼ 1,148 million (2005: ＼ 1,534 million) of interest income for available- for-sale securities.

Stocks as of March 31, 2006 and 2005, consist of the following: (in thousands of Korean won, except for the number of shares owned and percentage of ownership)

FY2005 FY2004

Number of Percentage of Acquisition Market or Book Book Shares Owned Ownership Cost Net Asset Valus Value Value 1) Stocks in listed companies Hynix Semiconductor Inc. 2,182,046 0.5 ＼ 28,414,963 ＼ 63,061,129 ＼ 63,061,129 ＼ 66,532,815 Hyundai Eng. & Const. Co., Ltd. 813,149 0.7 36,795,027 40,291,533 40,291,533 14,270,765 Korea Ratings Corporation - - - - - 1,271,147 S&H Co., Ltd. - - - - - 362,004 65,209,990 103,352,662 103,352,662 82,436,731 (2) Stocks in unlisted companies Korea Securities Finance Corporation 2,152,828 3.2 10,757,876 16,574,665 10,757,876 10,757,876 Hyundai Asan Corporation 406,452 4.2 20,322,600 5,134,165 4,498,240 4,498,240 Hyundai Futures Corporation 1 396,000 8.6 2,009,700 2,008,917 1,882,774 1,882,774 Korea Securities Depository 1 56,496 0.9 496,910 3,650,790 496,910 496,910 51 Korea Exchange 624,190 3.1 2,807,105 42,705,229 2,807,105 2,807,105 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of Korean won, except for the number of shares owned and percentage of ownership)

FY2005 FY2004

Number of Percentage of Acquisition Market or Book Book Shares Owned Ownership Cost Net Asset Valus Value Value C9 Asset Management Corporation 1 140,000 9.5 700,000 589,805 700,000 - Hyundai Unicorns 1, 2 5,880 4.9 2,205,000 - - 33,994 Korea ECN Securities Coporation - - - - - 150,000 KAEL Co.,Ltd. - - - - - 420,000 NICE Pricing Services, Inc. 40,000 4.2 200,000 - - - ISS Co., Ltd. 153,600 2.4 1,000,000 - - - INNO CRAFT Co., Ltd. 420,000 11.8 900,000 - - - Dong Woo Animation Co., Ltd. 130,000 2.1 590,000 - - - Game Vil Inc. 12,574 10.5 699,960 - - - GenoTech Corp. 100,000 2.5 500,000 - - - Peptron Co., Ltd. 120,000 3.8 500,000 - - - Contela, Inc. 47,200 6.8 2,571,500 - - - Nbiz Technology Co., Ltd. 5,833 1.4 1,000,000 - - - Gigalink Co., Ltd. 315,392 5.7 1,602,092 - - - A.Stars Entertainment Co., Ltd 210,000 5.6 1,500,000 - - - Others 29,328,983 2,415,332 1,200,600 1,009,100 79,691,726 73,078,903 22,343,505 22,055,999 144,901,716 176,431,565 125,696,167 104,492,730

1 The net asset values are recorded based on the most recent available unaudited financial statements.

2 During the year ended March 31, 2006, the Company recorded ＼ 33,994 thousand of loss on impairment of available-for-sale securities, whose net asset declined significantly and are not expected to recover.

Equity investments as of March 31,2006 and 2005, consist of the following:

(in thousands of Korean won, except for the percentage of ownership)

FY2005 FY2004

Percentage of Acquisition Market or Book Book Ownership Cost Net Asset Valus Value Value

Securities Market Stabilization Fund 6.1 ＼ - ＼ - ＼ - ＼ 5,599,469 Daeduk TerasourceInvestment Partnership 5.0 500,000 437,087 84,000 84,000 H&Q AP Korea1 17.0 255,000 255,000 255,000 - MAF Muhan AGRO-BIO Venture Fund I - - - - 412,695 STIC IT Venture ET Fund - - - - 337,022 Other 400 400 400 360,473 755,400 692,487 339,400 6,793,659 52 1 The net asset values are recorded based on the most recent available unaudited financial statements. HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Stocks in foreign currency as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won, except for the number of shares owned and percentage of ownership)

FY2005 FY2004

Number of Percentage of Acquisition Market or Book Book Shares Owned Ownership Cost Net Asset Valus Value Value Nikko Mi Fund - 1.9 ＼ 140,135 ＼ 140,136 ＼ 140,136 ＼ 248,828 Japan Opportunities - 3.9 1,189,950 948,327 948,327 1,086,075 Camsight Co., Inc. 30,000 0.0 - - - - 1,330,085 1,088,463 1,088,463 1,334,903 Corporate Bonds as of March 31, 2006 and 2005, consist of the following

(in thousands of Korean won)

FY2005 FY2004

Par Acquisition Fair Book Book Value Cost Value Value Value

Unique Co., Ltd. ＼ - ＼ - ＼ - ＼ - ＼ 800,000 GS Neo Tech Co., Ltd. 200,000 200,281 200,281 200,281 - 200,000 200,281 200,281 200,281 800,000 Less : allowance for doubtful account (1,001) (16,000) 199,280 784,000

Beneficiary certificates as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won)

FY2005 FY2004

Acquisition Fair Book Book Cost Value Value Value

Money Market Fund ＼ 278,957 ＼ 150,112 ＼ 150,112 ＼ 150,112

Other available-for-sale securities as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won)

FY2005 FY2004

Par Acquisition Fair Book Book Value Cost Value Value Value Hyundai Eng. & Const. Co., Ltd. CP ＼ - ＼ - ＼ - ＼ - ＼ 16,000,000

53 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

Maturities of Corporate Bonds and Others as of March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005 FY2004

Acquisition Fair Book Book Cost Value Value Value

Within 1 year ＼ - ＼ - ＼ - ＼ 800,000 1 - 5 years 200,281 200,281 200,281 16,000,000 200,281 200,281 200,281 16,800,000

Changes in unrealized gains and losses on valuation of available-for-sale securities for the years ended March 31, 2006 and 2005 are as follows: (in thousands of Korean won)

FY2005

Beginning Increase due Decrease due Deferred tax Ending balance to valuation to disposal assets(liabilities) balance

Unrealized losses ＼ 4,000,000 ＼ - ＼ 4,000,000 ＼ - ＼ - Unrealized gains 12,138,132 55,006,728 693,934 18,274,004 48,176,922

(in thousands of Korean won)

FY2004

Beginning Increase due Decrease due Ending balance to valuation to disposal balance Unrealized losses ＼ 4,125,300 ＼ - ＼ 125,300 ＼ 4,000,000 Unrealized gains 5,508,635 6,794,497 165,000 12,138,132

7. Equity-Method Investments Equity-method investments as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won, except for the number of shares owned and percentage of ownership)

FY2005

Number of Percentage Acquisition Net Asset Book Shares Owned of Ownership Cost Value Value

Hyundai Securities America Inc. 220 100 ＼ 32,735,839 ＼ 19,929,767 ＼ 19,929,767 Hyundai Securities Asia Ltd. 10,000,000 100 8,918,826 20,002,223 20,002,223 Hyundai Securities Europe Ltd. 11,000,000 100 19,130,104 14,934,879 14,934,879 Hyundai Research Institute 400,000 20 2,000,000 998,943 998,943 Wise Asset Management Co., Ltd. 659,997 33 3,827,983 4,407,997 4,531,480 66,612,752 60,273,809 60,397,292 54 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(in thousands of Korean won, except for the number of shares owned and percentage of ownership)

FY2004

Number of Percentage Acquisition Net Asset Book Shares Owned of Ownership Cost Value Value

Hyundai Securities America Inc. 200 100 ＼ 20,221,399 ＼ 8,738,296 ＼ 8,738,296 Hyundai Securities Asia Ltd. 10,000,000 100 8,918,826 18,137,733 18,137,733 Hyundai Securities Europe Ltd. 11,000,000 100 19,130,104 15,381,561 15,381,561 Hyundai Research Institute 400,000 20 2,000,000 1,000,897 1,000,897 Wise Asset Management Co., Ltd. 659,997 33 3,827,983 3,477,984 3,642,629 54,098,312 46,736,471 46,901,116

Changes in goodwill for the years ended March 31, 2006 and 2005, are as follows: (in thousands of Korean won)

FY2005

Beginning Ending Increase Amortization balance balance

Wise Asset Management Co., Ltd. ＼ 164,645 ＼ - ＼ 41,161 ＼ 123,484

(in thousands of Korean won)

FY2004

Beginning Ending Increase Amortization balance balance

Wise Asset Management Co., Ltd. ＼ - ＼ 205,806 ＼ 41,161 ＼ 164,645

Changes in equity-method investments for the years ended March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005

Beginning Gain(loss) on Increase(decrease) Ending Acquisition balance valuation in Capital adjustment balance

Hyundai Securities America Inc. 1 ＼ 8,738,296 ＼ 12,514,440 ＼ (167,437) ＼ (1,155,532) ＼ 19,929,767 Hyundai Securities Asia Ltd. 1 18,137,733 - 2,729,015 (864,525) 20,002,223 Hyundai Securities Europe Ltd. 1 15,381,561 - 287,765 (734,447) 14,934,879 Hyundai Research Institute 2 1,000,896 - (1,953) - 998,943 Wise Asset Management Co., Ltd. 1 3,642,630 - 712,585 176,265 4,531,480 46,901,116 12,514,440 3,559,975 (2,578,239) 60,397,292

55 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of Korean won)

FY2004

Beginning Gain(loss) on Decrease in Ending Acquisition balance valuation Capital adjustment balance

Hyundai Securities America Inc. ＼ 10,251,641 ＼ - ＼ (394,447) ＼ (1,118,898) ＼ 8,738,296 Hyundai Securities Asia Ltd. 19,357,385 - 1,039,344 (2,258,996) 18,137,733 Hyundai Securities Europe Ltd. 17,944,943 - (590,796) (1,972,586) 15,381,561 Hyundai Research Institute 943,470 - 57,427 - 1,000,897 Wise Asset Management Co., Ltd. - 3,827,983 (179,431) (5,923) 3,642,629 48,497,439 3,827,983 (67,903) (5,356,403) 46,901,116

1 As the audit has not been finished by April 14, 2006, the equity-method of accounting is applied to the unaudited financial statements of subsidiaries as of and for the year ended March 31, 2006.

2 The equity-method of accounting is applied to the most recent audited financial statements of Hyundai Research Institute for the difference of balance sheet date.

8. Troubled Loans

Troubled loans as of March 31, 2006 and 2005, comprise the following:

(in thousands of Korean won)

FY2005 FY2004

Advance payments for the customers ＼ 25,235,784 ＼ 45,010,530 Dishonored bonds 7,034,950 7,073,990 32,270,734 52,084,520 Less : allowance for doubtful accounts (29,031,777) (44,985,766) 3,238,957 7,098,754

As of March 31, 2006 and 2005, troubled loans, which were restructured by reorganization plans, approved by the court or agreed by creditors, comprise the following:

(in millions of Korean won)

FY2005

Date of Discount Normal Present Maturity Difference Approval Rate (%) Value Value Advance payments for the customers Kyungnam Wool Textile Co., Ltd. 2002. 1.16 2009.12.30 11.87 ＼ 3,951 ＼ 3,303 ＼ 648

56 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(in millions of Korean won)

FY2004

Date of Discount Normal Present Maturity Difference Approval Rate (%) Value Value Advance payments for the customers Soosan Special Purposed Vehicles 1999. 8.20 2009.12.27 12.65 ＼ 7,711 ＼ 6,564 ＼ 1,147 Kyungnam Wool Textile Co., Ltd. 2002. 1.16 2009.12.30 11.87 3,951 3,033 918 Chonggu Co., Ltd. 1999. 7.13 2009.11.30 18.34 10,211 5,904 4,307 21,873 15,501 6,372

9. Property and Equipment

Property and equipment as of March 31, 2006 and 2005 comprise the following:

(in thousands of Korean won)

FY2005 FY2004

Buildings ＼ 113,409,757 ＼ 112,548,360 Equipment 157,164,060 172,406,528 Other 28,814,248 28,127,842 299,388,065 313,082,730 Less: accumulated depreciation (182,880,637) (195,951,190) 116,507,428 117,131,540 Land 86,485,050 86,485,050 202,992,478 203,616,590

Changes in property and equipment for the years ended March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005

Land Buildings Equipment Other Total

Beginning balance ＼ 86,485,050 ＼ 95,138,516 ＼ 16,939,661 ＼ 5,053,363 ＼ 203,616,590 Acquisition - 861,397 8,763,581 4,176,745 13,801,723 Depreciation - (2,822,015) (8,798,278) (2,653,170) (14,273,463) Disposal - - (28,775) (117,514) (146,289) Difference for foreign currency translation - - (3,643) (2,440) (6,083) Ending balance 86,485,050 ＼ 93,177,898 ＼ 16,872,546 ＼ 6,456,984 ＼ 202,992,478

57 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of Korean won)

FY2004

Land Buildings Equipment Other Total

Beginning balance ＼ 86,052,935 ＼ 97,174,736 ＼ 24,888,471 ＼ 5,100,178 ＼ 213,216,320 Acquisition 483,388 1,176,373 4,215,441 2,788,171 8,663,373 Depreciation - (2,807,752) (12,131,817) (2,618,965) (17,558,534) Disposal (51,273) (404,841) (27,736) (213,213) (697,063) Difference for foreign currency translation - - (4,698) (2,808) (7,506) Ending balance 86,485,050 95,138,516 16,939,661 5,053,363 203,616,590

As of March 31, 2006, depreciable assets are insured against fire and other casualty losses up to approximately ＼ 106,315,067 thousand.

As of March 31, 2006, the value of the Company’s land, as determined by the local government in Korea for property tax assessment purposes, are ＼ 100,901,365 thousand (2005: ＼ 89,393,609 thousand).

10. Intangible Assets

Changes in intangible assets for the years ended March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005

Development Software Other Total costs

Beginning balance ＼ 1,277,764 ＼ 2,309,895 ＼ 10,313 ＼ 3,597,972 Acquisition 171,127 1,026,506 - 1,197,633 Amortization (865,245) (1,401,798) (8,250) (2,275,293) Ending balance 583,646 1,934,603 2,063 2,520,312

58 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(in thousands of Korean won)

FY2004

Development Software Other Total costs

Beginning balance ＼ 5,794,249 ＼ 3,857,290 ＼ 18,563 ＼ 9,670,102 Acquisition 6,457 196,239 - 202,696 Amortization (4,522,942) (1,743,634) (8,250) (6,274,826) Ending balance 1,277,764 2,309,895 10,313 3,597,972

The amortization expense of intangible assets is included in general and administrative expenses.

11. Short -Term Borrowings

Short-term borrowings as of March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

Annual Interest Rate (%) FY2005 FY2004 FY2005

Call money 4.1 ＼ 190,000,000 ＼ 168,000,000 Short-term borrowings 2.77-3.0 132,147,696 - 322,147,696 168,000,000

The Company provided trading securities amounting to ＼ 123,895 million to Korea Securities Finance Corporation as collateral for short-term borrowings as of March 31,2006 (Note 4).

12. Deposits from customers

Deposits from customers as of March 31, 2006 and 2005, are as follows:

(in thousand of Korean won)

FY2005 FY2004

Customers’deposits for brokerage ＼ 1,292,930,768 ＼ 1,112,508,177 Customers’deposits for futures and options trading 88,239,311 84,564,905 Customers’deposits for subscriptions 8,953,700 41,536 Customers’deposits for savings 22,936,728 29,421,278 Customers’deposits for Repo 66,773 66,773 Customers’deposits for beneficiary 21,291,863 17,813,799 Other 1,230,603 874,072 1,435,649,746 1,245,290,540

59 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

13. Debentures and Subordinated Debentures

Current maturities of Subordinated Debentures as of March 31, 2006 and 2005, are as follows: (in thousands of Korean won)

Annual Interest Rates (%) Series Due date FY2005 FY2004 FY2005

24th 1 2006. 3.31 - ＼ - ＼ 50,000,000

Less: discount - (57,310) - 49,942,690

1 Public offering debentures

Debentures as of March 31, 2006 and 2005, are as follows: (in thousands of Korean won)

Annual Interest Rates (%) Series Due date FY2005 FY2004 FY2005

25th 2 2008. 3. 3 5.0 ＼ 1,000,000 ＼ 1,000,000

Less: discount (42,467) (64,624) 957,533 935,376

2 Public offering debentures

14. Accrued Severance Benefits

Changes in accrued severance benefits for the years ended March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005 FY2004

Balance at the beginning of the year ＼ 31,017,213 ＼ 47,334,482 Provision for severance benefits 26,470,113 14,507,291 Actual severance payments (20,502,121) (30,824,560) 36,985,205 31,017,213 Cumulative deposits with the National Pension Fund (177,010) (244,481) Severance insurance deposits (8,608,893) (10,532,949) Balance at the end of the year 28,199,302 20,239,783

60 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

15. Commitments and Contingencies

The Company has entered into the following agreements with several banks as of March 31, 2006.

(in millions of Korean won)

Bank Maximum Limit

Bank overdraft agreements ChoHung Bank and other banks ＼ 282,000 Working Capital borrowings Korea Securities Finance Corporation (*) Bond Dealer borrowings Korea Securities Finance Corporation 2,000,000 Margin Finance borrowings Korea Securities Finance Corporation 241,961 Short-term Note Trading at a Discount Korea Securities Finance Corporation (*)

(*) The maximum limit is up to Deposits segregated under regulation.

The Company has been named as a defendant or a plaintiff in various legal actions arising from the normal course of business. As of March 31, 2006, the aggregate amounts of claims as the plaintiff and the defendant amounted to approximately ＼ 21,630 million in 11 cases and ＼ 349,607 million in 20 cases, respectively, including cases mentioned below. The accompanying non-consolidated financial statements do not reflect any uncertainties as the ultimate result cannot presently be estimated. The Company brokered the sell-off of stocks issued by Prudential Investment & Securities Co., Ltd. “( PIS”) from Hynix Semiconductor Inc. “( HYNIX”) to Canadian Imperial Bank of Commerce(“CIBC”) on June 4, 1997. In this regard, Hyundai Heavy Industries Co., Ltd.(“HHI”) entered into an agreement that CIBC had put options on the above stocks based on the memorandum provided by the Company and HYNIX. Pursuant to the agreement, HHI bought 13,000,000 shares issued by PIS at the price of US$220 million on July 24, 2000, as CIBC exercised its put option. With regard to compensation for the above trade, HHI filed a suit against the Company and HYNIX. With regard to the above litigation, the Seoul District Court gave a decision that the Company, in solidarity with HYNIX, had to compensate ＼ 171,822 million to HHI on January 25, 2002. Therefore, the Company paid ＼ 97,256 million on April 17, 2002 and recorded as a loss. The Company and the counterpart appealed against the decision of the Seoul District Court on February 15, 2002 and this case is still pending in the court. The accompanying non-consolidated financial statements do not reflect any uncertainties as the ultimate result cannot presently be estimated. In addition, HHI insisted that the Company and HYNIX cover income tax expense and other expenses with the above trade and filed a suit against the Company and HYNIX for ＼ 48,770 million on December 30, 2004. This case is still pending in the court. The accompanying non-consolidated financial statements do not reflect any uncertainties as the ultimate result cannot presently be estimated. The Company made a contract that the Company bought the Class A Note (par value : US$50,000,000) issued by Seneca Funding I, for cash of US$7,500,000 and on credit of US$42,500,000 with Paine Webber-US on behalf of Tong Yang Investment Bank “( TYIB”) on May 13, 1999. In connection with this contract, Paine Webber-US required a collateral, and TYIB gave bond with warrant (par value : US$10,000,000) issued by Korea Data Systems Co., Ltd.(“KDS Securities”) to the Company as a collateral, and the Company gave this bond with warrant to Paine Webber-US as a collateral. On November 30, 2000, Paine Webber-US required the Company to repay borrowings and the Company required TYIB to repay borrowings. But TYIB denied borrowings, and the Company gave Paine Webber-US US$10,000,000 instead of TYIB and received KDS Securities. In this regard, the Company has filed a suit against TYIB for an uncollected amount, and TYIB has filed a suit against the Company for compensation. On February 10, 2004, Seoul High Court gave a decision that the Company made over KDS Securities and pay ＼ 10,075 million to TYIB, and the Company’s claim was rejected. On February 16, 2004, the Company made a provisional payment which amount up to ＼ 13,958 million, and as of March 4, 2004, the Company gave the converted KDS Securities to TYIB. On February 26, 2004, the Company brought a final appeal to Supreme Court and this case is still pending in the court. The Company recorded the provisional payment of ＼ 13,958 million as expenses for the year ended March 31, 2004 and provided an allowance for other accounts receivable which amount up to US$10 million (＼12,952 million). Moreover, TYIB filed an additional suit against the Company for the loss caused by provisional seizure of KDS Securities on March 17, 2003. With regard to the above litigation, the Seoul Southern District Court gave a decision that the Company had to compensate ＼ 3,633 million to TYIB on October 7, 2004. The Company and TYIB appealed to Seoul High Court and this case is still pending. With regard to the above litigation, the Company recorded the provisional payment of ＼ 3,920 million as expenses. The accompanying non-consolidated financial statements do not reflect any uncertainties as the ultimate result cannot presently be estimated. 61 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2006, lending and borrowing securities consist of Paru Co., Ltd.’s stocks amounting to ＼ 2,162 million, Korea Digital Communication corporation’s stocks amounting to ＼ 1,729 million and other’s stocks amounting to ＼ 1,318 million. In addition, the Company provided trading securities to the Korea Securities Depository as collaterals for this lending and borrowing securities (Note 4). With regard to the beneficiary certificate sold to customers, the Company has an agreement to reimburse certain portions of losses from the dissolution of Hyundai Securitization Specialty Co., Ltd. In this regard, the Company recorded other accounts payable amounting to ＼ 17,262 million as of March 31, 2006. The Company has responsibility for a defect warranty if the backed asset can’t meet the requirements of ABS.

16. Retained Earnings

Retained earnings as of March 31, 2006 and 2005, are unappropriated retained earnings.

17. Disposition of Deficit

Disposition of deficit in the last two years consist of the following:

(in thousands of Korean won)

May 28, 2004 1 May 30, 20031

Reserve for loss on securities transactions ＼ 13,718,625 ＼ 13,718,625 Voluntary reserves 39,991,979 46,025,692 Legal reserve 5,430,148 - Other surplus capital 49,594,860 - Additional paid-in capital 103,005,243 - 211,740,855 59,744,317

1 Approval date of disposition at the general shareholders’meeting

18. Capital Adjustments

Capital adjustments as of March 31, 2006 and 2005 are as follows: (in thousands of Korean won)

FY2005 FY2004

Treasury stock ＼ (30,279,533) ＼ (16,118,865) Cumulative effect of foreign currency translation 1,759,650 2,423,919 Unrealized gain on valuation of available-for-sale securities 48,176,922 12,138,132 Unrealized loss on valuation of available-for-sale securities - (4,000,000) Unrealized gain on valuation of equity-method investments 176,266 - Unrealized loss on valuation

62 of equity-method investments (7,536,365) (4,781,861) 12,296,940 (10,338,675) HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

The Company holds 4,815,870 shares of its common stock as of March 31, 2006 and intends to sell the shares in the near future

19. Dividends

Details of dividends declared for the year ended March 31, 2006 are as follows: (in Korean won) FY2005

Number of shares eligible for dividend 134,537,553 shares Dividend amount ＼ 53,815,021,200 Net income 282,678,487,235 Dividend payout ratio 19.04% Dividend ratio 8.00% Dividend yield ratio 2.99%

20. General and Administrative Expenses

General and administrative expenses for the years ended March 31, 2006 and 2005 are as follows:

(in thousands of Korean won)

FY2005 FY2004

Wages and salaries ＼ 153,993,933 ＼ 106,719,710 Severance benefits 26,470,113 14,507,291 Employee fringe benefits 39,551,278 37,449,512 EDPS expenses 10,477,376 12,264,996 Rents 9,237,712 10,418,446 Commision expenses 10,526,389 10,463,824 Entertainment expenses 3,346,809 2,194,724 Advertising expenses 16,674,674 18,483,754 Depreciation 14,273,463 17,558,534 Research expenses 740,240 1,241,094 Training 3,368,815 1,455,430 Bad debt expenses 3,126,753 7,452,162 Amortization 2,275,293 6,274,826 Taxes and dues 9,182,159 4,022,477 Business consignment commission 640,166 - others 29,157,648 25,574,874 333,042,821 276,081,654

63 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

21. Income Taxes

Income tax expense(benefit) for the years ended March 31, 2006 and 2005 are as follows: (in thousands of Korean won)

FY2005 FY2004

Current income taxes ＼ 68,889 ＼ - Deferred income taxes 14,078,817 22,808,882 Income taxes allocated directly to shareholders’ equity (18,274,005) - Income tax expense(benefit) (4,126,299) 22,808,882

The reconciliations from income before income taxes to taxable income for the years ended March 31, 2006 and 2005 are as follows:

(in thousands of Korean won)

FY2005 FY2004

Temporary Non-temporary Temporary Non-temporary Addition difference difference difference difference Accrued severance benefits ＼ 17,011,959 ＼ - ＼ 4,240,579 ＼ - Allowance for bad debts 5,887,999 - 5,977,175 - Trading securities 7,932,437 - 460,699 - Structured securities sold - - 2,125,117 - Accrued expenses 4,936,900 - 5,466,405 - OTC derivatives 203,915 - - - Structured securities 19,686,054 - - - Accrued income 5,454,700 - 4,137,660 - Employee welfare fund 5,700,000 - - - Other non-operating expenses - - 4,885,998 160,102 Deemed interest income - 915,744 - 1,047,033 Entertainment expenses - 1,768,595 - 1,270,280 Donation 194,723 525,386 130,132 3,117 Available-for-sale securities - 66,450,926 - - Others 939,760 459,976 6,795,537 76,179 67,948,447 70,120,627 34,219,302 2,556,711

64 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(in thousands of Korean won)

FY2005 FY2004

Temporary Non-temporary Temporary Non-temporary difference difference difference difference Deduction Accrued severance benefits ＼ 8,610,624 ＼ - ＼ 5,874,658 ＼ - Allowance for bad debts 5,977,175 - 6,028,239 - Impairment loss on available-for-sale securities 22,952,453 - 9,290,883 - Trading securities 21,623,431 - 13,560,771 - Discount on present value 5,704,371 - 2,931,516 - Structured securities sold 19,293,776 - - - Accrued expenses 5,466,405 - 8,417,587 - Responsible allotment as large shareholders 41,080,000 - 41,080,000 - Other non-operating income - - 5,432,614 1,113,600 OTC derivatives 2,413,762 - 203,915 - Structured securities - - 1,497,444 - Accrued income 10,938,812 - 5,454,700 - Dividend income 807,493 - - - Commisions received 1,270,590 - - - Futures 1,485,194 - - - Available-for-sale securities 66,450,926 - - - Equity method investments 3,559,974 - - - Dividend income - 1,669,372 - 562,511 Others 399,294 - 161,483 - 218,034,280 1,669,372 99,933,810 1,676,111

Changes in temporary differences and deferred tax assets (liabilities) for the years ended March 31, 2006 are as follows:

(in millions of Korean won)

Temporary differences Deferred tax assets(liabilities)

Beginning Increase Ending Beginning Increase Ending Non- Current Balance (decrease) Balance Balance (decrease) Balance current 1) Tax expense Accrued severance benefits ＼ 11,023 ＼ 8,401 ＼ 19,424 ＼ 3,031 ＼ 2,311 ＼ 5,342 ＼ - ＼ 5,342 Allowance for bad debts 5,977 (89) 5,888 1,644 (25) 1,619 15 1,604 Available-for-sale securities 95,357 (23,329) 72,028 26,223 (6,415) 19,808 - 19,808 Trading securities 38,613 (13,691) 24,922 10,619 (3,765) 6,854 6,854 - Discount on present value 5,704 (5,704) - 1,569 (1,569) - - - Structured securities sold 2,171 (19,293) (17,122) 597 (5,306) (4,709) (4,709) - Accrued expenses 5,466 (529) 4,937 1,503 (145) 1,358 - 1,358 Responsible allotment as large shareholders 160,602 (41,080) 119,522 44,165 (11,297) 32,868 11,297 21,571 65 Other extraordinary losses 97,257 - 97,257 26,746 - 26,746 - 26,746 Other non-operating expenses 28,390 - 28,390 7,807 - 7,807 - 7,807 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

(in millions of Korean won)

Temporary differences Deferred tax assets(liabilities)

Beginning Increase Ending Beginning Increase Ending Non- Current Balance (decrease) Balance Balance (decrease) Balance current Employee welfare fund - 5,700 5,700 - 1,567 1,567 1,567 - OTC derivatives (204) (2,210) (2,414) (56) (608) (664) (664) - Structured securities (1,497) 19,686 18,189 (412) 5,414 5,002 5,002 - Accrued income (5,454) (5,485) (10,939) (1,500) (1,508) (3,008) (3,008) - Equity-method investments(*) 2,542 (3,560) (1,018) - - - - - Advanced depreciation provisions(*) (16,991) 8 (16,983) - - - - - Others 3,172 (2,460) 712 873 (677) 196 197 (1) 432,128 (83,635) 348,493 122,809 (22,023) 100,786 16,551 84,235

2) Capital Adjustment Cumulative effect of foreign currency translation(*) - (1,760) (1,760) - - - - - Equity-method investments(*) - 7,361 7,361 - - - - Available-for-sale securities - (66,451) (66,451) - (18,274) (18,274) - (18,274) - (60,850) (60,850) - (18,274) (18,274) - (18,274)

3) Temporary differences 432,128 (144,485) 287,643 122,809 (40,297) 82,512 16,551 65,961 4) Tax loss carry forward 292,626 (196,218) 96,408 80,472 (53,960) 26,512 26,512 - 724,754 (340,703) 384,051 203,281 (94,257) 109,024 43,063 65,961

Total Less : Valuation allowance (80,178) 80,178 - - - 123,103 (14,079) 109,024 43,063 65,961

(*) The company did not recognize the deffered tax asset(liability) since it is not certain that temporary differences can be realized.

The Company recognized deferred tax assets for all deductible temporary differences and tax loss carry-forwards as of March 31, 2006 as it is probable that taxable profit and taxable temporary difference will be available against which deductible temporary differences and tax loss carry-forwards can be utilized.

Gross basis of deferred tax assets and liabilities as of March 31, 2006 are as follows:

(in thousands of Korean won)

Current Non-current

Deferred tax assets ＼ 51,443,412 ＼ 84,235,650 Deferred tax liabilities 8,380,644 18,274,535 43,062,768 65,961,115

66 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

22. Earnings Per Share

Basic earnings per share are computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the year. Basic ordinary income per share is the same as basic earnings per share because there are no extraordinary gains or losses.

Basic earnings per share for the years ended March 31, 2006 and 2005 are calculated as follows:

(in Korean won)

FY2005 FY2004

Net income allocated to common stock ＼ 282,678,487,235 ＼ 53,988,701,186 Weighted average number of common shares outstanding during the year 134,920,966 136,537,553 Basic earnings per share and ordinary earnings per share 2,095 395

Diluted earnings per share is not calculated since there are no diluted securities outstanding as of March 31, 2006 and 2005.

23. Transactions with Related Parties

Significant transactions which occurred in the normal course of business with related companies for the years ended March 31, 2006 and 2005, and the related account balances outstanding as of March 31, 2006 and 2005, are summarized as follows:

(in thousands of Korean won)

Expenses Payables

Hyundai Research Institute ＼ 1,021,646 ＼ - Hyundai Elevator Co., Ltd. 116,241 - Hyundai Logistics Ltd. 11,559 - Hyundai Asan Corporation 167,058 - Hyundai Merchant Marine Co., Ltd. 428,591 - Hyundai U&I Co., Ltd. 82,812 - Hyundai Securities Europe Ltd. 1,360,495 120,396 Hyundai Securities America Inc. 1,888,796 204,000 Hyundai Securities Asia Ltd. 6,492,029 605,752 2006 Total 11,569,227 930,148 2005 Total 8,696,712 630,000

67 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

24. Supplemental Cash Flow Information

Cash and cash equivalents as of March 31, 2006 and 2005, consist of the following:

(in thousands of Korean won)

FY2005 FY2004

Cash on hand ＼ 3,254 ＼ 3,121 Checking accounts 432,484 727,088 Passbook accounts in foreign currency 2,206,684 907,132 Money market funds 10,000,000 - Passbook accounts 2,178,113 1,000,265 Time deposits 20,000,000 24,000,000 Certificate of deposit - 6,383,848 Money market deposit accounts 110,000,000 20,000,000 Promissory notes 62,400,000 31,700,000 Commercial paper - 77,569,840 Other deposit - 30,000,000 207,220,535 192,291,294

Significant transactions not affecting cash flows for the years ended March 31, 2006 and 2005 are as follows:

(in thousands of Korean won)

FY2005 FY2004

Current maturities of subordinated debentures ＼ - ＼ 50,000,000 Decrease in unrealized loss on valuation of available-for-sale securities 4,000,000 125,300 Increase in unrealized gain on valuation of available-for-sale securities 36,038,790 6,629,497 Increase in unrealized loss on valuation of equity-method investment 2,754,504 4,781,861 Increase(decrease) in unrealized gain on valuation of equity-method investment 176,266 (574,541) Transfer from trading securities to available-for-sale securities - 62,517,258 Retirement of troubled loans and others 16,247,945 11,946,611

25. Supplementary Information for Computation of Value Added

The accounts and amounts, included in general and administrative expenses, needed for computation of value added for the years ended March 31, 2006 and 2005, are as follows:

(in thousands of Korean won)

FY2005 FY2004

Wages and salaries ＼ 153,993,933 ＼ 106,719,710 Severance benefits 26,470,113 14,507,291 Employee fringe benefits 39,551,278 37,449,512 68 Rents 9,237,712 10,418,446 Depreciation 14,273,463 17,558,534 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

(in thousands of Korean won)

FY2005 FY2004

Amortization ＼ 2,275,293 ＼ 6,274,826 Taxes and dues 9,182,159 4,022,477

26. Securities in Custody

As of March 31, 2006 and 2005, the securities in custody which are owned by the customers related are as follows:

(in thousands of Korean won)

FY2005 FY2004

Trustor securities in custody ＼ 44,123,808,729 ＼ 31,865,366,858 Saver securities in custody 143,470,877 150,210,339 Beneficiary securities in custody 4,026,081,190 6,781,447,401

27. Trust Accounts

Assets and liabilities of the trust accounts as of March 31, 2006 are as follows:

(in thousands of Korean won) Specific Money Retirement Total Trust Pension Trust

Marketable securities ＼ 62,556,707 ＼ 1,040,891 ＼ 63,597,598 Stocks 477,538 - 477,538 Bonds 11,025,000 - 11,025,000 Commercial papers 51,054,169 66,026 51,120,195 Beneficiary certificates - 974,865 974,865 Call loan 20,000,000 - 20,000,000 Other assets 40,798 - 40,798 Total assets 82,597,505 1,040,891 83,638,396

Other liabilities 615,561 - 615,561 Principal 81,981,944 1,040,891 83,022,835 Total liabilities and shareholders’ equity 82,597,505 1,040,891 83,638,396

Significant transactions with trust accounts for the year ended March 31, 2006, are as follows:

(in thousands of Korean won)

Trust Management Fee ＼ 14,806

28. Approval of Non-consolidated Financial Statements

The Company’s non-consolidated financial statements as of and for the year ended March 31, 2006, will be approved at the board of 69 directors’ meeting on May 4, 2006. Board of Directors

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1. Kim Ji Wan 2. Kim Joong Woong 3. Whang Kyung Tac President & CEO Inside Director Outside Director

4. Ha Seung Soo 5. Kang Yun Jae 6. Jeon Jae Joong Outside Director Executive Vice President Outside Director

7. Ryou Pyung Yeul 8. Byun Won Ho 9. Shin Woo Bum Outside Director Auditor Outside Director

70 HYUNDAI SECRITIES CO., LTD. 2005 ANNUAL REPORT

Organization Chart

Supervisory Committee Investment Banking Division

Recommendation Council for General Meeting of International Business Division Ourside Director Shareholders

Strategy & Planning Division Personnel Committee Board of Directors

CEO Trust Division

Institutional Sales Division

Retail / Wholesale Group Wealth Mangagement Division

Marketing Division

RiskManagement Committee

Back Office Division Disciplinary Committee Business Management Group

Information Technology Division

Proprietary Trading Division

Auditing Department Research Center

Compliance Division

71 Shareholders’ Information

Shareholders’ Information International Locations

Corporate headquarters HYUNDAI SECURITIES (AMERICA) Inc. #34-4, Youido-dong, Youngdeungpo-ku 1370 Avenue of the Americas, Suite 2200, Seoul, Korea, 150-735 NY, NY10019, U.S.A. Tel : 822-768-0114 Phone: 1-212-265-2333 Fax : 822-783-9746 Fax:1-212-265-2676 http://www.youfirst.co.kr HYUNDAI SECURITIES (EUROPE) Inc. Established Neptune House, Triton Court June 1, 1962 14 Finsbury Square, London, EC2A 1BR, U.K. Phone: 44-20-7786-8601(General) Stock listing 44-20-7786-8600(Dealer) Korea Stock Exchange, 003450 Fax: 44-20-7786-8620

Network HYUNDAI SECURITIES (ASIA) Inc. 133 domestics and 5 overseas Suite 3603, One Exchange Square 8 Connaught Place, Central, Hong Kong, China Number of Employees Phone: 852-2869-0559 2,334 (as of March 31, 2006) Fax: 852-2521-5215

Stock Issued HYUNDAI SECURITIES Tokyo Branch 139,353,423 (Common stock) 7th Floor, L Ningyoucho Building, 2-7-10, Nohonbashi, Ningyoucho Shareholders' equity Chuo-ku, Tokyo, 103-0013, Japan 1,505 billion Won Phone: 81-3-3661-3711 Fax: 81-3-3661-9622 Major shareholders Hyundai Merchant Marine 12.79% HYUNDAI SECURITIES Shanghai Representative Office Rm. 1405 North Stock Exchange Hyundai Merchant Marine 12.79% Mansion 528 South Pudong Rd., Foreigners 7.67% South Shanghai, China, 200120 Major Employee Stock Phone: 86-21-6881-7007~8 Shareholders 1.35% Fax: 86-21-6881-7778 (as of March, 2006) Others 73.73% Treasury Stock 3.46% Investor Relations Contacts

Strategy & Planning Department Investor Relations #34-4, Youido-dong, Youngdeungpo-ku Seoul, Korea, 150-735 Tel : 82-2-768-0152 Fax : 82-2-783-9746 email: [email protected] HYUNDAI SECURITIES Co., Ltd. #34-4, Youido-dong, Youngdungpo-ku, Seoul, Korea 150-735 Tel. : 82-2-768-0114, 82-2-783-6511 Fax. : 82-2-783-7946 http://www.youfirst.co.kr