Hyundai Securities Annual Report 2013

H y u n d a i S e c u r i t i e s A n n u a l R e p o r t 2 0 1 3 Hyundai Securities Annual Report 2013 Hyundai Securities is creating the Korean Wave in the financial market receiving attention from around the world. INVESTOR RELATIONS CONTACTS Strategy & Planning Department 21, Yeouinaru-ro 4-gil, Yeongdeungpo-gu Seoul, Korea, 150-735 l Tel : 82-2-6114-0114 l Fax : 82-2-783-9746 email : 21105542@hyundaisec.com ㅣ website : http://www.hdable.co.kr

Korea Financial Innovation Financial Innovation Competitive power of Hyundai Securities to lead the global finance era K-Fi Possibilities to create the Korean Wave in the financial markets. Hyundai Securities will open up infinite possibilities of rising in the global financial market with unique and creative financial instruments. Hyundai Securities will jump up to be the best investment banking enterprise leading the Pan-Asia market with differentiated financial instruments and services by concentration and innovation. Through continuous innovation and aggressive investment, Hyundai Securities will do its best to improve profits for shareholders and investors of Hyundai Securities by offering a differentiated competitive edge with profitability and growth. Korea Financial Innovation Contents Prologue 02 Company profile 04 Push forward with Financial Innovation Forging New Paths to the Pan-Asia Market Message from CEO 08 Board of Directors 10 Major Achievements & Awards 12 Vision & Strategy 14 Financial Highlights 15 Organizational Structure 58 Global Network 60 Shareholders Information 61

Korea Financial Innovation Financial Innovation Competitive power of Hyundai Securities to lead the global finance era Possibilities to create the Korean Wave in the financial markets. Hyundai Securities will open up infinite possibilities of rising in the global financial market with unique and creative financial instruments. Hyundai Securities will jump up to be the best investment banking enterprise leading the Pan-Asia market with differentiated financial instruments and services by concentration and innovation. Through continuous innovation and aggressive investment, Hyundai Securities will do its best to improve profits for shareholders and investors of Hyundai Securities by offering a differentiated competitive edge with profitability and growth. Contents Prologue 02 Company profile 04 Push forward with Financial Innovation Forging New Paths to the Pan-Asia Market Message from CEO 08 Board of Directors 10 Major Achievements & Awards 12 Vision & Strategy 14 Financial Highlights 15 Organizational Structure 58 Global Network 60 Shareholders Information 61

04 Push Forward With Increasing the investment boundaries with new growth opportunities, begins with financial innovation Strengthen the core business capability for each sector Maximize financial synergies through strategic cooperation Retail _Reinforcement of WMC-focused capabilities Capital Market _ D evelopment of diverse financial instruments and achievement of stable absolute return IB _Earnings diversification by activating financing business Through creative and innovative approaches by each business sector, Hyundai Securities will reform the brokerage-oriented profit structure and will achieve qualitative growth through earnings diversification. Take the lead in financial innovation with continuous change Open up a new possibility for tomorrow. HYUNDAI SECURITIES Annual Report 2013 Push Ahead Financial With Innovation A Differentiated Strategy Hyundai Securities will continuously maintain a competitive edge through forward-thinking and a differentiated strategy Hyundai Securities has maintained its standing as the top wealth management house in the industry, with excellent financial instruments and service capabilities notwithstanding the lack of investors confidence and intensifying competition in the financial markets. Including a new supply of creative and market-initiative financial instruments, improvement of enterprise-wide capital efficiency, and execution of diverse IB businesses using derivative and structured products. Push forward with Financial Innovation 05 Through serious considerations for each business sector including brokerage, wealth management, CM and IB to be one step ahead and to be better, at formulating and executing differentiated strategies, Hyundai Securities will maximize the earnings portfolio for each business and will reinforce its market power as the representative Investment Bank of Korea. Financial innovation for strengthening competitiveness <Retail> <Capital Market> <IB> Reinforcement of intensive capability for each aspect from instruments to customers Achievement of stable absolute return and development of diverse products Earnings diversification by activating financing business - Provision of wealth management service by conversion to WMC - Systematic risk management and efficiency maximization of available capital - Stable expansion of profit sources by development of diverse deal structures - Release of Market-leading financial instruments such as K-FI Global Series -A c t i v e u t i l i z a t i o n o f i n v e s t m e n t opportunities including global investment, FX investment, foreign bonds and ETFs - Active participation in financing / syndication for M&A companies and domestic/foreign PEFs - able Check-card, the securities company s first and sole brand in the industry

04 Push forward with Financial Innovation 05 Push Ahead With A Differentiated Strategy Push Forward With Increasing the investment boundaries with new growth opportunities, begins with financial innovation Hyundai Securities will continuously maintain a competitive edge through forward-thinking and a differentiated strategy Hyundai Securities has maintained its standing as the top wealth management house in the industry, with excellent financial instruments and service capabilities notwithstanding the lack of investors confidence and intensifying competition in the financial markets. Strengthen the core business capability for each sector Maximize financial synergies through strategic cooperation Retail _Reinforcement of WMC-focused capabilities Capital Market _ D evelopment of diverse financial instruments and achievement of stable absolute return IB _Earnings diversification by activating financing business Including a new supply of creative and market-initiative financial instruments, improvement of enterprise-wide capital efficiency, and execution of diverse IB businesses using derivative and structured products. Through creative and innovative approaches by each business sector, Hyundai Securities will reform the brokerage-oriented profit structure and will achieve qualitative growth through earnings diversification. Take the lead in financial innovation with continuous change Open up a new possibility for tomorrow. HYUNDAI SECURITIES Annual Report 2013 Through serious considerations for each business sector including brokerage, wealth management, CM and IB to be one step ahead and to be better, at formulating and executing differentiated strategies, Hyundai Securities will maximize the earnings portfolio for each business and will reinforce its market power as the representative Investment Bank of Korea. Financial innovation for strengthening competitiveness <Retail> <Capital Market> <IB> Reinforcement of intensive capability for each aspect from instruments to customers Achievement of stable absolute return and development of diverse products Earnings diversification by activating financing business - Provision of wealth management service by conversion to WMC - Systematic risk management and efficiency maximization of available capital - Stable expansion of profit sources by development of diverse deal structures - Release of Market-leading financial instruments such as K-FI Global Series -A c t i v e u t i l i z a t i o n o f i n v e s t m e n t opportunities including global investment, FX investment, foreign bonds and ETFs - Active participation in financing / syndication for M&A companies and domestic/foreign PEFs - able Check-card, the securities company s first and sole brand in the industry

06 Forging New Paths To The Choice and concentration for global competence To The Pan-Asia Market 07 Forging New Paths to the Pan-Asia Market HYUNDAI SECURITIES Annual Report 2013 Breaking New Frontiers Pan-Asia To Financial Market Innovation Hyundai Securities will cross the boundaries of global finance with creative financial DNA and passion Hyundai Securities is seeking new growth opportunities through expansion of overseas businesses in order to overcome the limitations of the slow-growing, competitive domestic market. We will strive to increase the overseas earnings step by step by creating trading income in foreign sectors, including Hong Kong, such as AQG Hedge Fund business and HAI derivative trading business. Hyundai Securities has established the hedge fund and trading corporation in Singapore as a new growth engine of the global market. Combining the creative financial DNA of Korean and unique trading capabilities of Hyundai Securities, Hyundai Securities is expected to play the role of Cash Cow through expansion of earnings in the future. We will expand our business area in the global financial markets and show our financial power in the market. Hong Kong Singapore Center of the Pan-Asia financial market FY20 FY15 Active search for investment opportunities in foreign territories around Hong Kong Hyundai Securities Hyundai Securities Hong Kong has mainly engaged in the FICC Sales & Trading, DMA (Direct Market Access) sales with a low cost and high profit model, and ELW Algorithm Trading business for foreign institutional investors. Especially in ELW Trading, business revenues are expected to grow by increasing the new LP through developing inventive trading strategy and stabilizing the trading infrastructure through continuous system upgrades. HK Hyundai Securities is Establishment of AQG Capital Management, Singapore Asia Hedge Fund concentrating its energy AQG HAI based on its Pan Asian New growth engine for reinforcing our global business and creating overseas profits AQG has made stable trading income through early seeding trading as an independent on new growth engines market network. model-based hedge fund differentiated from the existing Quant Model. It is expected to 0.9% 2.8% 5.0% 10.0% - Target more than 10% of overseas profits by 2020 - increase commission revenues through accumulating a track record with stable trading performances and inviting new foreign investment funds with the support of prime brokers such as Goldman Sachs and Morgan Stanley.

06 Forging New Paths To The Choice and concentration for global competence To The Pan-Asia Market Forging New Paths to the Pan-Asia Market 07 HYUNDAI SECURITIES Annual Report 2013 Breaking New Frontiers To Financial Innovation Hyundai Securities will cross the boundaries of global finance with creative financial DNA and passion Hyundai Securities is seeking new growth opportunities through expansion of overseas businesses in order to overcome the limitations of the slow-growing, competitive domestic market. We will strive to increase the overseas earnings step by step by creating trading income in foreign sectors, including Hong Kong, such as AQG Hedge Fund business and HAI derivative trading business. Hyundai Securities has established the hedge fund and trading corporation in Singapore as a new growth engine of the global market. Combining the creative financial DNA of Korean and unique trading capabilities of Hyundai Securities, Hyundai Securities is expected to play the role of Cash Cow through expansion of earnings in the future. We will expand our business area in the global financial markets and show our financial power in the market. Hong Kong Singapore Center of the Pan-Asia financial market FY20 FY15 Active search for investment opportunities in foreign territories around Hong Kong Hyundai Securities Hyundai Securities Hong Kong has mainly engaged in the FICC Sales & Trading, DMA (Direct Market Access) sales with a low cost and high profit model, and ELW Algorithm Trading business for foreign institutional investors. Especially in ELW Trading, business revenues are expected to grow by increasing the new LP through developing inventive trading strategy and stabilizing the trading infrastructure through continuous system upgrades. HK Hyundai Securities is Establishment of AQG Capital Management, Singapore Asia Hedge Fund concentrating its energy AQG HAI based on its Pan Asian New growth engine for reinforcing our global business and creating overseas profits AQG has made stable trading income through early seeding trading as an independent on new growth engines market network. model-based hedge fund differentiated from the existing Quant Model. It is expected to 0.9% 2.8% 5.0% 10.0% - Target more than 10% of overseas profits by 2020 - increase commission revenues through accumulating a track record with stable trading performances and inviting new foreign investment funds with the support of prime brokers such as Goldman Sachs and Morgan Stanley.

Message from CEO 08 09 Message from CEO HYUNDAI SECURITIES Annual Report 2013 CEO Greeting at General Shareholders Meeting Dear shareholders: I always appreciate your steadfast interest in and support for Hyundai Securities. Last year, we had a very tough year with a branch shut-down and organization downsizing under the circumstances that the financial investment industry suffered a large decline in brokerage revenues due to a stagnant stock market and a decreasing trading value. We also faced decreasing revenues in the brokerage and trading business in a depressed stock environment, and as such recorded a deficit as of 2013. But, we tried a broad and drastic change based on financial innovation and took a great step forward for mid- and long-term radical reform. As a result of releasing differentiated derivatives including the K-FI Series to gather assets, we recorded about 20 percent growth in the clients and asset balances. We started the hedge fund and derivative trading business in Singapore and Hong Kong to prepare to become a Pan-Asia s market leader. In 2014, we will try to create profit through such changes. Now I will tell you what we are going to focus on to realize our goal. First, we will concentrate the enterprise capability on reforming the retail business. We will continue to provide differentiated products and services such as the K-FI Series and able Check-card with the product strategy division, and will increase the WM Revenues by activating cross-selling with highmargin products. Second, we will improve capital efficiency in order to maximize the enterprise revenues. We will maximize the amounts of invest within the NCR limit, and will invest in highly profitable long-term investment assets such as overseas real estate. Also, we plan to reinforce the limit management to re-allot capital efficiently according to the performance by calculating the target return rate per each business and by conducting a periodic performance evaluation. Third, we will continue to expand the global business to be the Pan-Asia market leader. We plan to continue to promote the hedge fund and derivative trading business we started in the Singapore and Hong Kong last year. We will also invigorate the China business by taking advantage of the QFII License. Dear shareholders and investors! Hyundai Securities will put clients first in any circumstances and will do its best to maintain trust with clients. I expect your continuing support. We will do our best to overcome this hard time wisely to take off again. Thank you. 2014. 4. 30 Corporate director / CEO of Hyundai Securities Yoon, Kyung Eun

10 Board of Directors Board of Directors 11 HYUNDAI SECURITIES Annual Report 2013 Create the company s true value with rational decisionmaking, creative innovation and professionalism Hyundai Securities will realize the maximization of corporate and shareholder values through rational decision-making and progressive management based on the transparent and responsible management that Hyundai Securities has been putting into practice. Inside Directors Hyun, Jeong Eun Corporate director / Chairperson of the Board Outside Directors Yoon, Kyung Eun Corporate director / CEO of Hyundai Securities Jung Ki Seung Corporate director / Inspection Commissioner of Hyundai Securities Lee, Nam Yong Corporate director / Head of Planning & Administration Unit of Hyundai Merchant Marine Kim Sang Nam Outsider director / Chairman of Labor politics committee Incorporated Association Hah Won Outsider director / The President of BAESEOK Univ.(2009.02~2012.02) Do Myung Guk Outsider director / Professor of Sogang Graduate School of MOT Yoon, Nam Geun Outsider director / Professor of the Law School of Korea University Park, William H C Outsider director / Professor of Kwangwoon University

12 13 Major Achievements & Awards HYUNDAI SECURITIES Annual Report 2013 History Awards Jun. 1962 Established Hyundai Securities (formerly Kookil Securities),Authorized as a securities business 1975 Initial Public Offering (IPO): Listed in KOSPI Mar. 1999 Released Buy Korea Fund 2000 Exceeded KRW 3 trillion of beneficiary certificates Jun. 2004 Approved Over-the-Market Derivative Products Dec. 2005 Approved combining the management of trust business Feb. 2006 Gained A credit rating from NICE and KIS Dec. 2007 Upgraded to AA- credit rating Dec. 2007 Became first Korean securities company to acquire office approval in Kazakhstan Oct. 2007 Signed MOU with Guotai Junan Securities Co., Ltd, China s biggest sales network Feb. 2007 Upgraded to A+ credit rating Oct. 2008 Developed Fund Fundamental Index, the first of its kind in the industry Jun. 2008 Opened foreign stock trading HTS Apr. 2008 Opened office in Almaty, Kazakhstan Dec. 2009 Acquired approval for the future business (OTC derivative investment & trading business and investment brokerage business) Nov. 2009 Opened real-time trading system, the first in the industry July. 2009 Started the asset management business by opening Hyundai Asset Management July. 2009 Was first in the industry for IPOs for the first half of year Mar. 2009 Launched general asset management service called Choice & Care Dec. 2010 Signed MOU with Oppenheimer & Co Aug. 2010 Approved retirement annuity product-relevant incidental services Jan. 2010 Released asset management brand QnA Dec. 2011 Reached KRW 3 trillion of equity capital Dec. 2011 Started prime brokerage service Oct. 2011 Launched Hyundai Savings Bank (Acquired Dae Young Saving Bank) Jun. 2011 Opened USA stocks HTS Feb. 2011 Acquired patent for a loan transaction system and released Stock + Rental Service Oct. 2012 Signed Agreement for support services for retirement annuity members, the first of its kind in the securities industry Oct. 2012 Opened the WMC through the branch network re-arrangement(daechi / Apgujeong / Bundang / NamUlsan) Aug. 2012 Signed Contract for hedge fund cooperation with Permal Group Jun. 2012 Held 50th anniversary of founding Hyundai Securities Apr. 2012 Upgraded to AA by KIS 2009~2006 Nov. 2009 Oct. 2009 Oct. 2009 Jun. 2009 May 2009 Feb. 2009 July 2008 Mar. 2008 Feb. 2008 Jan. 2008 Oct. 2007 July 2007 Jan. 2007 Nov. 2006 July 2006 Jun. 2006 Jan. 2006 2010 May 2010 Jan. 2010 Jan. 2010 2011 Aug. 2011 Jun. 2011 Jan. 2011 2012 Dec. 2012 Nov. 2012 May 2012 Apr. 2012 Jan.2012 2013 Nov. 2013 Sep. 2013 July 2013 July 2013 Jan. 2013 Awarded Seoul Economy Grand Prize / Seoul Economic Daily Awarded Korea Financial Innovation Grand Prize / Money Today Awarded JOY+BRAND Grand Prize / Financial News Awarded 2009 Korea Reliable Company Grand Prize / The Korea Economic Daily Awarded at 2009 Asia Capital Investment Award / The Asia Economy Daily Awarded at 2008 Korea Fund Award / Maeil Business Newspaper Awarded Best Finance / HanKyung Business Awarded at Herald Media Securities Award: Best IPO Prize, Hyundai Securities / Herald Media Awarded the Grand Prize for EDAILY FINANCE: First prize for the securities part, Hyundai Securities Hyundai CMA / EDAIL Awarded at [2008 Customer-impressing Management Award] Hyundai Securities / The Korea Economic Daily Awarded at the 7th Korea University Newspaper Award: The best company for population chose by nationwide university students / Daily UNN Awarded at 2007 Asia Securities Award: First Prize, Hyundai Securities CMA / The Asia Economy Daily Awarded at [2007 Customer-impressing Management Award] Hyundai Securities / The Korea Economic Daily Awarded at 2006 Korea Stocks Award: Grand prize Hyundai Securities / Seoul Economic Daily Awarded the first prize in HTS Service Evaluation / Stoclpia Awarded at Korea Best Brand Award: Hyundai Securities YouFirst / The Korea Economic Daily Awarded at 2005 Best Financial Products, First Prize: Hyundai Securities Theme Fund Series / Financial Supervisory Service Awarded 2010 Korea Reliable Company Grand Prize / The Korea Economic Daily Awarded Client Satisfaction Management Grand Prize / The Korea Economic Daily Awarded New Financial Product of This Year / Financial Supervisory Service Awarded 2011 Asia Capital Investment Grand Prize / The Asia Economy Daily Awarded 2011 Korea Analyst Grand Prize / Money Today Network Awarded Client Satisfaction Management Grand Prize / The Korea Economic Daily Awarded at Korea MTS Award / The Korea Economic Daily Awarded Advertisement Grand Prize / Money Today Awarded ninth Korea IB Grand Prize / Money Today Awarded at Korea Best Brand / The Korea Economic Daily Awarded Client Satisfaction Management Grand Prize / The Korea Economic Daily MK Business News App of the Year 2013 / MK Business News, MBN Awarded Korea Joongang Daily Thomson Reuters Analyst awards / Korea JoonAng Daily Awarded Korean Standard Service Quality Index / KMAC Awarded at Korea MTS Award : Evaluated by Consumer / The Korean Economic Daily Awarded Client Satisfaction Management Grand Prize / The Korea Economic Daily Oct. 2013 Apr. 2013 Apr. 2013 Acquired Investment Banking Liscense Opened Smart Consulting Service, the first in the industry Acquired QFII(Qualified Foreign Institutional Investor) Liscense 2014 Jan. 2014 Awarded Client Satisfaction Management Grand Prize / The Korea Economic Daily Feb. 2014 Launched Debit Card Service, the first in the industry

Vision & Strategy 14 15 15 HYUNDAI SECURITIES Annual Report 2013 HYUNDAI SECURITIES Annual Report 2013 Quality Growth 2014 Growth strategy of Hyundai Securities to jump to be the Pan-Asia Market Leader With financial innovation changes and challenges, Hyundai Securities is building differentiated services and competitiveness during these stagnant financial markets. Based on its new vision for 2014, Hyundai Securities will develop a new business area to create profit structure for the overseas sector as well as domestic sector that will achieve stable growth to jump to be the leader in the global financial markets. - Vision - Towards the Pan-Asian Market Leader Financial Innovation - Mission - Financial Core Strategy 1 Core Strategy 2 Core Strategy 3 Successful WM House Conversion Reorganization of sales network to focus on asset management service Reinforcement of asset quality (high-margin asset growth) Sales & Trading No.1 Strategic product expansion (K-FI Global series, etc) Reinforcement of trading capability Global New Business Expansion (10% of Overseas Revenues) Reinforcement of overseas trade/ investment (Focusing on Singapore, Hong Kong, China) Overseas Deal Sourcing (Maximization of synergy with HQ and IB) Highlights FINANCIAL HIGHLIGHT Management s Discussion & Analysis Hyundai Securities Risk Management Independent Auditors Report - Consolidated Financial Statements - Separate Financial Statements Corporate Culture One Voice, One Vision, One objectiveness Strong driving force through mutual trust and solidarity Core Values Financial Innovation Sensation (product and service innovation), Speed (timing), Synergy (inter-organizational synergy)

Management s Discussion & Analysis 16 17 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis 1. FINANCIAL HIGHLIGHTS Business results FY2013 (2013.4.1~2013.12.31) FY2012 (2012.4.1~2013.3.31) FY2011 (2011.4.1~2012.3.31) Operating revenues 1,841 2,149 1,773 Operating expenses 1,914 2,172 1,627 Operating income -74-23 146 Non-operating income 40 17 44 Non-operating expenses 29 48 9 Pre-tax income -63-53 181 Net income -43-67 137 Financial status (KRW in Billions) Total assets 18,945 19,664 15,788 Total liabilities 16,028 16,660 12,746 Total shareholder's equity 2,918 3,004 3,042 Return on equity -1.9% -2.3% 4.9% Net capital ratio 400% 444% 847% at the end of the current year. Through the strategy of Asset Gathering, the average balance of asset management amounted to KRW 57 trillion, increasing 21% from the last year. Hyundai Securities ranked second for trust balance, second for the Wrap account balance, and fifth for the ELS/DLS sales. The company will strengthen the qualitative growth of wealth management sector by expanding the highly-profitable investment product line-up The equity capital was reduced, due to underperformance in fixed income as interest rate rose and one-offs securities impairment loss in unstable financial markets. Through the pre-empitive response to the prolonged market downturn and the investment volume increases. The NCR (Net Capital Ratio) is 400%, which decreased by 44% compared to the prior year. As Hyundai Securities has tried to overcome the reduction of trading income caused by unstable financial markets and to diversify earnings, the company has increased the percentage of alternative investment for the supply of innovative products, such as K-FI Series. In addition, in order to overcome the depression of a typical IB market, the company has strived to utilize the chance of creating the new IB revenues using the certain amounts of the company s own capital, such as the M&A, letter of commitment, granting of credit and financial guarantee. The company has established and managed the risk management system, including the risk-to-profitability index measurement, performance measurement, risk limits re-allocation, and periodic performance evaluation. This was achieved through applying the concept of RAROC (Risk-Adjusted Return on Capital)-based resources distribution aiming at the effective control of the risk increase caused by using equity capital and at the enhancement of the capital efficiency. Stocks-related results Total number of shares issued 236,612,530 236,612,530 236,612,530 Common stocks 170,000,000 170,000,000 170,000,000 Preferred stocks 66,612,530 66,612,530 66,612,530 Book value per share 13,269 13,663 13,835 Earnings per share (loss) -461-677 634 Dividend per share Stock price at the end of financial year HR and branches Common stocks - 50 200 Preferred stocks 416 552 552 Common stocks 5,850 8,060 10,550 Preferred stocks 5,840 7,720 8,900 No. of employees 2,587 2,559 2,566 Branches (overseas) 115(6) 133(5) 138(6) In FY2013, the business period was reduced to 9 months(2013.4~12) due to the change of the accounting period. Due to declining brokerage income from a drop in a market turnover compared to the prior year and declining of fixed income as interest rates rose, the operating income, the pre-tax income, and the net income amounted to KRW -73.8 billion, KRW -62.6 billion, and KRW -42.9 billion, respectively. Due to the depressed brokerage market and the poor performance of trading of fixed income and derivatives, total assets decreased by 3.7% compared to the previous year. Due to the current year s deficit, ROE (Return on Equity) was -1.9%. For the purpose of improving management efficiency, we have closed a total of 18 branches and opened 5 new WMCs through the branch merger and the transition to WMCs for wealth management. The company has the total 115 branches (including 9 WMCs) 2. Status of income and loss 1 Net operating revenue Due to the reduction of the business period by change of accounting period, decreasing brokerage income by a reduction of market turnover, and decreasing trading income caused by rising interest rates, FY2013 net operating revenue was KRW 313.2 billion (9% decrease compared to the same period of the previous year). On the other hand, through the reinforcement of the wealth management sectors, the ELS/DLS sales commissions, and the Wrap and asset management fees increased. The company has strived to improve the proportion of revenues of the non-commissioned portion. Quartely Net operating Revenue FY2013 Total 3Q 2Q 1Q FY2012 FY2011 QoQ [period quarter] In the business sectors, brokerage income declined by 10.2% and trading income turned red. On the other hand, wealth management / IB / financial income increased by 20.2%, 19.9%, 24.0% respectively, compared to the same period last year. YoY [period year] (Billion Korean Won) YoY [same period] Net operating Revenue 313.2 104.0 112.9 96.3 465.4 662.3-7.8% -32.7% -8.5% Brokerage 149.6 45.1 48.5 55.9 219.6 347.0-7.0% -31.9% -10.2% Wealth management 35.2 12.3 12.1 10.8 40.3 37.6 1.3% -12.6% 20.2% IB 32.5 13.6 6.5 12.4 39.5 25.5 111.0-17.9% 19.9% Trading -27.3-9.8 5.2-22.7 48.7 130.7 - - - Finance income 134.7 48.4 44.4 41.8 146.4 126.2 9.1% -8.0% 24.0% Others -11.4-5.6-3.9-2.0-29.2-4.0 - - -

Management s Discussion & Analysis 18 19 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis Brokerage income declined by KRW 70.1 billion compared to the prior year, due to the decrease of commission income by decreasing Cumulative Net operating Revenue by business market trading value and the reduction of the business period by change of accounting period. As a result of reinforcing the wealth (Unit : %) management, the wealth management income was increased by 20% compared to the same period last year, due to increase in ELS/ DLS commissions, and Wrap and asset management fees, but then amounted to KRW 35.2 billion, decreased by 13% compared to the prior year, due to the reduction of business period. In terms of IB, revenue was improved by 20% compared to the same period last year, thanks to improved performance of real estate and DCM sectors, but was reduced to KRW 32.5 billion decreased by 18% compared to the prior year, due to the reduction of business period. The trading income amounted to KRW -27.3 billion decreased by KRW 76.1 billion compared to the prior year, due to decreasing fixed income related bonds by increasing interest rate and oneoffs from securities reduction losses. In terms of finance income, even though income from customers deposits were reduced due to the decreasing interest margin, the overall income increased by KRW 26.1 billion, compared to the same period last year, and then amounted to KRW 134.7 billion decreased by 8% compared to the prior year, thanks to increasing interest income of Hyundai Savings Bank. Financial revenue + others Trading IB WM Brokerage 10% - 29% - 3% - 4% - 54% - FY09 13% - 29% - 4% - 5% - 49% - 18% - 20% - 4% - 6% - 52% - 25% - 10% - 8% - 9% - 47% - 39% - 10% - 11% - 48% - Cumulative Net operating Revenue by business (Billion Korean Won) -9% - 3 Operating-Pre-Tax income, SG&A Due to the reduction of business period by a change of the accounting period and the decrease of brokerage and trading income, the net operating income largely decreased. However, on the other hand, the selling and general administrative expenses slightly decreased by base effect from the liquidation effect of the progressive severance payment last year. Therefore, the deficit in the operating income and pre-tax income increased. Due to continuous loss, the operating income and pre-tax income amounted to KRW -73.8 billion and KRW -62.6 billion, respectively. The SG&A expenses decreased by 21% compared to the previous year, and amounted to KRW 386.9 billion (9% increase compared to the same period last year). Operating income 347 220 150 - Brokerage - 38 40 35 - Wealth management - 26 40 - IB - 32 131 49-27 - Trading - 126 117 123 - Finance+Others - (100 million Korean Won) 3Q Sum 1Q 2Q 3Q 4Q 2 Net Operating Revenue composition trend(%) The percentage of brokerage income among the net operating revenues tends to relatively decrease by the reduction of brokerage revenue. The proportion of trading income was largely reduced temporarily, due to the one-offs from securities impairment losses of Hyundai Elevator and underperformance in fixed income as interest rates rose. On the other hand, the proportion of finance income largely increased with the interest income of the savings bank. The company has continued to reinforce the non-brokerage sector s business, including the wealth management and IB sector as a part of the continuous revenue portfolio diversification efforts, which has gradually improved the sector s business performance. 2,002 1,455-225 -126-256 -236-246 -738

Management s Discussion & Analysis 20 21 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis 3. Operating Results by Business Pre-tax income (100 million Korean Won) 1 Brokerage Due to the severe competition and the decrease of the stock trading volume as uncertainty of internal and external stock market 3Q Sum 1Q 2Q 3Q 4Q increase, brokerage income was KRW 149.6 billion, a 21% decrease compared to the prior year and by 10% compared to the same period last year. Brokerage revenue (100 million Korean Won) 3,597 1,806-533 -684-353 -29-245 -626 S&A (100 million Korean Won) 3Q Sum 1Q 2Q 3Q 4Q 3Q Sum 1Q 2Q 3Q 4Q 3,363 3,470 2,196 1,666 559 485 451 1,496 The market s daily average trading value of FY2013 was KRW 6.6 trillion a 5% decrease, compared to KRW 7.0 trillion of the prior year. The company s annual average market share was 3.80%, 0.24%p decrease compared to the prior year. The market share from commission income was slightly reduced to 6.62%. Market share (contract) (unit : KRW tril.) (Trillion Korean Won) Daily average trading value Hyundai M/S 4,910 5,167 4,879 3,548 1,219 1,365 1,286 3,869 12 10 4.20% 4.27% 8 4.11% 4.07% 6 3.98% 3.91% 4 3.71% 3.75% 3.62% 2 0 11.12 3 6 9 12.12 3 6 9 13.12

Management s Discussion & Analysis 22 23 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis Market share (commission) (Unit: %) (100 million Korean Won) 2 Client assets Hyundai Securities total asset under management (AUM) consists of brokerage assets and financial assets. Brokerage assets consist FY07 FY08 FY09 of equity valuation gains / losses for clients and their deposits for equities, futures and options. Financial assets consist of collective investment securities, Wrap accounts, derivative linked securities, cash management accounts (CMA), trust and bonds. Total client assets reached KRW 84 trillion as of the end of 2013, a 6% decrease compared to the prior year. The retail assets are similar to the prior year but the wholesale assets are KRW 42 trillion decreased by KRW 5.4 trillion. In the total AUM, the retail assets and wholesale assets were 50.5% and 49.5% respectively. Total brokerage assets decreased by 2% compared to the prior year, due to the reduction of stock carrying value. The financial assets also decreased by 8%. The retail financial assets increased by 3% compared to the prior year, and the corporate financial assets 7.47% 6.97% 7.62% 7.43% 7.36% 6.90% 6.62% decreased by 12% compared to the prior year. Due to the reduction of individual trading which comprises a high percentage of online trading, the percentage of online commitments and commissions decreased by 5%p and 3%p respectively, compared to the prior year. Client assets - Total (KRW in tril.) Financial assets Commissioned assets On Offline (Unit: %) Commitment(on) Commitment(off) Commission(on) Commission(off) FY09 35% - 34% - 38% - 43% - 53% - 50% - 50% - 53% - 29.8-32.1-33.1-37.3-43.3-35.6-57.6-32.0-53- 31.3-65% - 66% - 62% - 57% - 47% - 50% - 50% - 47% - Client assets - Retail (KRW in tril.) Due to the decrease of individual trading volume, the percentage of retail commitments and commissions decreased compared to the prior year, so that the corporation and global percentage slightly increased. Financial assets Commissioned assets Investor (Unit: %) Investor (commission) (Unit: %) FY09 Retail Corporation Overseas Retail Corporation Global 12.3-10.2-11.0-15.4-15.9-3%- 3%- 3%- 4%- 8%- 10%- 14%- 17%- 2%- 1%- 1%- 2%- 23.0-29.1-28.5-27.1-26.7-5%- 6%- 7%- 7%- 89%- 87%- 83%- 79%- 93%- 93%- 92%- 92%-

Management s Discussion & Analysis 24 25 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis Client assets - Wholesale (KRW in tril.) 3 Wealth Management WM revenues amounted to KRW 35.2 billion, increased by 20% compared to the same period last year, with the increase in Wrap Financial assets Commissioned assets fees (+14%), ELS/DLS sales fees (+64%) and the asset management fees (+48%) through reinforcement of wealth management sales and supply of high-profitable strategic products such as K-FI Series. FY09 Wealth management - Wealth management income (Unit: KRW in 100 mil.) (100 million Korean Won) 17.5-22.8-32.3-42.2-37.1-9.1-8.2-7.1-4.9-4.6-3Q Sum 1Q 2Q 3Q By financial asset type, collective investment securities and ELS/DLS increased by 18.5% and 2.2% respectively. However, Trust, CMA, RP Bond, and Wrap account decreased by 19.9%, 16.2%, 10.5% and 6.2% respectively. The balance of collective investment securities sharply increased, and ELS/DLS, which recently gets the attention as moderate risk-return investment. Especially for ELS/ DLS issuance, the company ranked fourth with the market share of 8.95% in the industry for FY2013. Through strong internal collaboration between the product development/management and sales channels, the market share continues to increase. 329 376 403 293 108 121 123 352 Financial assets composition (KRW in tril.) CMA Trust FY09 Collective investment securities Collective investment vehicle Wrap ELS/OLS Trust RP Bond ELS Wrap 3.2-3.5-16.3-2.9-13.1-41 - 56-83 - 1Q 2Q 3Q Collective investment securities 2.8-3.7-11.8-1.9-3.1-6.6-3.1-6.6-8.3-1.2-7.5-6.3-10.2-11.5-2.6-9.6-6.7-14.1-4.0-12.3-7.4-12.7-4.1-11.5-8.8-39 - 78-54 - 156-35 - 85-76 - 124-54 - 81-74 - 111-64 - 55-75 - 74-84 - 22-12 - 26-35 - 29-21 - 25-26 - 21-28 - 21-18 - 23-18 - 27 -

Management s Discussion & Analysis 26 27 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis Wrap Account Balance (Unit: KRW in 100 mil.) For the balance of collective investment securities of FY2013, the hybrid type product with the moderate risk-return, the bond Wrap Balance type(conservative investment products), the equity type(aggressive investment products), and the others increased by 61%, 29%, 20%, 28% respectively, compared to the prior year. On the other hand, MMF (Short term liquid funds) decreased by 23% compared to the prior year. 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q In the retirement pension sector, the reserve and the number of users increased by 18% and 7% respectively compared to the prior year, and the company was ranked sixth (KRW 640.7 billion) based on reserves among securities companies. Wealth management - Collective investment securites balance (Unit: KRW in tril.) 75,478 95,721 122,773 115,122 Others MMF FY08 FY09 Mixed type Trust Balance Trend (Unit: KRW in tril.) FY07 FY08 FY09 1Q 2Q 3Q Bond type Stock type 1.1-2.2-0.7-0.9-0.9-2.7-0.4-1.6-1.2-1.4-0.9-1.9-1.4-1.8-0.9-1.8-1.6-2..0-1.1-1.8-2.0-1.5-1.8-2.3-1.1-2.5-3.7-6.6-10.2-16.3-15.3-14.4-13.1- Wealth management 1.0-1.0-0.9-0.9-1.0 - Wealth management 1.2 - - CMA balance (Unit: KRW in tril.) / No. of accounts(1,000) - Retirement pension(unit: KRW in tril.) ELS / DLS Balance Trend (Unit: KRW in tril.) FY08 FY09 555 CMA balance No. of accounts 624 660 692 731 Reserves No. of accounts 137,912 147,302 107,052 2.9-1.9-1.2-2.6-4.0-4.1-2.8 3.1 3.1 3.5 2.9 40,033 22,813 1,371 1,961 3,495 5,446 6,407 FY09 FY09

Management s Discussion & Analysis 28 29 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis 4 Investment Banking IB income increased by 20%, compared to the same period last year due to improved performance of real estate and DCM, but amounted to KRW 32.5 billion with 18% decrease, compared to the same period last year, due to the reduction of the current year s business period. Owing to the increase in the bond acquisitions of DCM sector, compared to the same period last year, underwriting and brokerage of bonds increased, and IB income increased through the real estate-associated purchase commitment/increasing revenues from financial consulting, and increasing PEF management fees. Especially the FB (special bond) acquisitions amounted to KRW 1,974 billion for FY2013. Hyundai Securities ranked second in the industry. 5 Trading The trading income for FY2013 turned red compared to last year, due to the reduction of business period and under performance in fixed income as interest rates rose and one-offs from securities impairments loss, amounting to - KRW 27.3 billion loss. The company will maximize the available capital efficiency through efficient operations by operation planning per scenario and distribution of risk capital in consideration of internal and external market prospect including the interest rate prospect Trading revenues (Unit: KRW in 100 mil.) (100 million Korean Won) IB income (Unit : KRW in 100 mil.) (100 million Won) 3Q Sum 1Q 3Q Sum 1Q 2Q 3Q 2Q 3Q 2,034 1,307 487 317-227 -52-98 -273 288 255 395 271 124 65 136 325 The company s all bonds amount to KRW 10.4 trillion Corporate bond Major IB results in total and consist of special bonds(55%), corporate bonds(36%), and government bonds(9%). 8.6% Special bond Government bond HS M/S 2.36% 5.69% 9.48% The average balance of equity investment declined by 36.4% 52% to KRW 31.2 billion, compared to last year, with the increase in market volatility. The average balance 55.1% of investments decreased by 14% to KRW 6.5 trillion Approx. 29.6 Tril. Approx. 30.8 Tril. Approx. 20.8 Tril. compared to last year. Corporate Bond take-over ABS/MBS take-over Special Bond (FB) take-over

Management s Discussion & Analysis 30 31 HYUNDAI SECURITIES Annual Report 2013 Management s Discussion & Analysis Equity Management balance / Bond Management balance (Unit: KRW in 100 mil.) Financial income (Unit: KRW in 100 mil.) (100 million Korean Won) Stock(100 million Won) RP Bonds(Tril. Won) 7.2 5.8 6.9 6.9 7.6 7.1 7.0 6.5 3Q Sum 1Q 2Q 3Q 846 938 549 684 657 440 272 312 783 1,262 1,464 1,086 418 444 484 1,347 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 We have utilized the certain amounts of the company s own capital for investment in the stock-associated bonds such as Mezzanine, IPO and purchase loans /collective investment securities related real estate for the purpose of ROE increase and revenue diversification. Also, the company has strived to find the investment targets with stable income and great capital gain such as global real estates and bonds in order to supply the leading financial instruments such as K-FI Series in the market. The principle investment balance amounts to approx. KRW 504.8 billion in total and 17% of consolidated equity capital (KRW 2,917.7 billion) has been invested. Among them, the balance of investment consisting of stocks, bonds and collective investment securities amounts to KRW 403.6 billion as of the end of fiscal year, and the balance of real estate financial investment consisting of purchase loans investment is KRW 101.2 billion. Status of investment finance (Unit : 100 million Korean Won) The average balance of customers deposits (separate deposit) was similar to the same period last year, but the gain on valuation of customers deposit was KRW 7.4 billion (20% decrease) compared to the prior year, due to drop in interest on deposits. Reserve for Claims of Customers Deposit and Valuation Gains Average balance (Trillion Korean Won) Gain on valuation of customers deposits (KRW 100million) 129 133 131 116 104 93 83 76 76 74 74 Pruchased loan Collective investments securities 1.41 1Q11 1.44 2Q11 1.47 3Q11 1.46 4Q11 1.17 1Q12 1.11 2Q12 1.07 3Q12 1.06 4Q12 1.11 1Q13 1.12 2Q13 1.13 3Q14 Bonds Stocks, etc 1,269-1,266-1,012 - Interest income for margin loans increased by 2% compared to the same period last year. Due to the average loan balance (annual average) increasing by 8% but the interest rate decreased compared to same period last year. 997-1,020-214 - 910-1,113-423 - 1,063-1,662-416 - 1,047-2,868-255 - 912 - Margin loans and Interest income on Margin loans (Unit: KRW in 100 mil.) (100 million Korean Won) Credit exposure Interest income on credit exposure 6 Finance income Finance income consists of interest on margin loans, interest on loans and gains on valuation of customer deposits. Interests on bonds 221 209 180 187 189 185 181 170 185 190 194 and repurchase agreements (RPs) are classified as the trading income. In FY2013 finance income increased by 24% to KRW 134.7 billion compared to the same period last year. The gain on valuation of customers deposits decreased due to reduction of stock trading volume and an interest rate drop. However, backed by an increase in 11,588 10,870 9,363 9,906 9,917 9,516 9,389 9,144 10,042 10,330 10,803 finance income from the Savings Bank, finance income rose for the year. 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q14

Hyundai Securities Risk Management 32 33 HYUNDAI SECURITIES Annual Report 2013 Hyundai Securities Risk Management Policy Process Hyundai Securities is making efforts to achieve comprehensive risk management and optimum resource allocation by establishing a company-wide risk management structure, setting up integrated risk management processes, building the Enterprise Risk Management System (ERMS), and instilling a risk-aware culture in the organization, in order to systematically control and manage various types of risks (meaning every possibility of loss that may occur in management and business activities) that the company faces in implementing management and business activities, and to promote stability in the company s financial structure and management through efficient investment resource allocation. 1. Risk Awareness With regard to risk awareness, risks are classified into market risk, credit risk, operational risk, liquidity risk, legal risk, reputational risk, strategic risk, and systemic risk. 2. Risk Measurement The risk management department follows several methods for the measurement of each risk type, reflects the results in the risk management system, and periodically measures and analyzes risks. It documents all matters, related to the measurement models, such as the process and methods of determining variables, the source of data, basic assumptions, and the conditions for system design. The details of risk management are specified in the risk management rules for each business. Structure 1. Risk Management Committee Hyundai Securities has formed a risk management committee (hereinafter called the Committee ) as a final decision-making body on risk management to deliberate and make decisions on important matters influencing the company s financial soundness, and to establish and supervise the direction of asset management (including setting the overall limit) and risk management strategies. The Committee is held at least once every quarter, and is composed of three registered directors including the CEO, two of which have been appointed as non-executive directors. 2. Risk Management Council Hyundai Securities has formed a risk management council (hereinafter called the Council ) as a body empowered by the Committee to deliberate on operational agendas such as investment assessment and establish a detailed plan related to risk management policies. The Council is held at least once a month, and is composed of five executive officers in total, including the CRO (Chief Risk Officer). 3. Risk Management Division Hyundai Securities has formed the risk management division that implements basic principles and strategies for risk management established by the Committee and Council through proper processes and systems. The Risk Management Division is composed of 1 the executive taking charge of risk management (CRO, Chief Risk Officer), 2 the Risk Management Department (in charge of risk awareness, risk measurement, and risk control) as a department supervising operational business, 3 the Risk Review Department (in charge of investment appraisal and post-investment follow-ups), and 4 the Valuation Team (in charge of OTC product valuation). The Risk Management Division is independent of the front offices that are responsible for sales activities, and the back offices in charge of financial / settlement affairs. 3. Risk Control The Risk Management Department conducts control works through regular monitoring of whether its risk management position is maintained at the optimum level in comparison with risk level depending on changes in the market, and responds to market conditions in an effective way. In the event that the risk limit is exceeded, each business department searches for causes, develops countermeasures, then reports the countermeasures according to the procedures, or submits them to a conference group and takes follow-up actions accordingly. Risk limit management as a risk control measure is set and managed by reflecting the business strategy and risk propensity. In addition, it is flexibly but firmly carried out so that each division is ensured the maximum discretion for decision-making, and risk is maintained within the entire company s allowable limit. See the figure below : Figure 1 Risk Management Committee / Council Risk Management Division Preparing a draft plan for limit allocation Management plan Performance of the previous year Approving the draft plan for limit Business strategy Risk propensity(capital buffer) Limit Monitoring Daily / monthly / quarterly Investment volume, loss, VaR, sensitivity, etc Division (Business Department) Application for limit Risk limit application Product operation plan Feedback Performance Assessment By department/period/product RAPM (Risk - Adjusted Performance Measurement)