Tanding ALL: Triding Orth

KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO.
, LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD
KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT &
KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD
Contents
SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY
PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT
CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA
INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA
INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES
CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS,
KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD
KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT
HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD
KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA
INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA
VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT
K OREA I NVESTMENT H OLDINGS C O ., L TD . | A NNUAL R EPORT FY2005

HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PRELUDE OUR PRIDE OUR POWER OUR VISION
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD (ABOUT US) (REVIEW OF OPERATIONS) (FINANCIAL SECTION)
Financial
VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT
HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT
HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT Highlights 12 Milestones 24 Korea Investment
& Securities 40 Management’s
Discussion & Analysis
Shareholder
K OREA I NVESTMENT H OLDINGS C O ., L TD . Information 14 Integration
Synergies 33 Korea Investment
Trust Management 52 Financial
Section
27-1, Y EOUIDO - DONG , Y EONGDEUNGPO - GU , S EOUL , K OREA 150-747
STANDING TALL, STRIDING FORTH
Tel: 82-2-3276-6400 l Fax: 82-2-3276-6402 l
E-mail: truefriend@truefriend.com l http://www.koreaholdings.com
K OREA I NVESTMENT H OLDINGS C O ., L TD . | A NNUAL R EPORT FY2005 02 Chairman’s
Message 16 Management
Plans 34 Korea Value
Asset Management 86 Organization
Chart
KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA
INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA
INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA 04 Interview with
the CEO 18 Vision &
Strategies 35 Korea Investment
Partners 87 Network
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD 08 Board
of Directors 20 Subsidiaries 36 Cornerstone
Equity Partners
37 Korea Investment
Mutual Savings Bank
FY2005 ANNUAL REPORT
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD
Contents
PRELUDE OUR PRIDE OUR POWER OUR VISION

(ABOUT US) (REVIEW OF OPERATIONS) (FINANCIAL SECTION)
Financial
Highlights 12 Milestones 24 Korea Investment
Shareholder
Information 14 Integration
Section
02 Chairman’s
Chart
04 Interview with
the CEO 18 Vision &
Partners 87 Network
08 Board
Equity Partners
37 Korea Investment
Mutual Savings Bank
Corporate Profile
1
Korea Investment Holdings

Korea Investment Holdings Co., Ltd. was established as
Dongwon Financial Holdings Co., Ltd. in January 2003 and renamed Korea
Investment Holdings Co., Ltd. (KIH) in May 2005. KIH specializes in securities
and investment, and its subsidiaries are involved in investment, asset management
and trust management. This focus sets KIH apart from the other major Korean
financial groups, for which banking services are the mainstay business.
In March 2005, the company took over Korea Investment & Securities
(KITC), a securities firm with excellent asset management capabilities. The
strategic acquisition has enhanced KIH’s investment segment, strengthened the
revenue structure, and focused resources to achieve the economy of scale. At the
same time, synergies have been created among the brokerage, corporate finance,
and asset management business. KIH also established Korea Value Asset
Management, specializing in long-term and value investment, in February
2006, and Cornerstone Equity Partners, a manager of private equity funds
(PEFs), in March 2006.
Supported by its subsidiaries, KIH continues to develop diverse financial

products to meet clients’ increasingly sophisticated financial needs and offer
differentiated financial services that enhance customer satisfaction. KIH seeks to
increase the volume of and the returns on customer assets.
Financial Highlights Shareholder Information INTERNATIONAL DIRECTORY
87

NON-CONSOLIDATED FINANCIAL STATEMENTS (AS OF OR FOR THE YEAR ENDED MARCH 31, 2006) OWNERSHIP OF SUBSIDIARIES
(US dollars in millions and KRW in billions) FY05(US$) FY05 FY04 Investor Investee Shares Percentage (%)
OPERATING RESULTS Korea Investment Holdings Company Korea Investment & Securities 28,000,000 100
Operating Revenues 612.1 594.7 85.5
" Korea Investment Partners 50,700,000 100
Operating Expenses 28.6 27.8 5.3
Administrative Expenses 13.6 13.2 4.2 " Cornerstone Equity Partners 100,000 100
Operating Income 583.5 566.9 80.2 " Korea Investment Mutual Savings Bank 11,448,899 98.13
Non-Operating Income 3.4 3.3 5.2 HEAD OFFICE
Korea Investment & Securities Korea Investment Trust Management 13,129,198 99.46
Non-Operating Expenses 5.7 5.5 1.3
KOREA INVESTMENT HOLDINGS CO., LTD
Net Income 581.1 564.6 84.1 " Korea Value Asset Management 2,000,000 100
FINANCIAL POSITION " Korea Investment & Securities Asia, Ltd. 4,999,999 99.99 27-1, Yeouido-dong, Yeongdeungpo-gu,
Total Assets 2,295.5 2,230.3 1,383.2 Seoul, Korea 150-747
" Korea Investment & Securities Europe, Ltd. 2,000,000 100 (02)3276-6400
Total Liabilities 574.6 558.3 200.7 (02)3276-6402
Total Stockholders' Equity 1,720.9 1,672.0 1,182.6 " Korea Investment & Securities America, Inc. 100 100 truefriend@truefriend.com
CONSOLIDATED FINANCIAL STATEMENTS STOCK INFORMATION OVERSEAS NETWORK
FY05(US$) FY05 FY04 FY05 FY04 FY03(2004.1.1~2004.3.31) KOREA INVESTMENT & SECURITIES EUROPE LIMITED (KIS EUROPE)
2nd Floor, Cheyne House, Crown Court 62-63 Cheapside, London EC2V 6JP
OPERATING RESULTS Common shares 52,876,205 52,876,205 52,876,205 Tel : 44-207-236-4800 / Fax : 44-207-236-4811
Operating Revenues 1,316.2 1,278.8 526.1 Preferred shares #1 5,858,251 5,858,251 5,858,251
Operating Expenses 1,083.9 1,053.1 421.9 Preferred shares #2 2,849,787 2,849,787 2,849,787
KOREA INVESTMENT & SECURITIES AMERICA, INC. (KIS AMERICA)
Administrative Expenses 426.8 414.7 188.4 Total outstanding shares 61,584,243 61,584,243 61,584,243 Two Executive Drive Suite 640, Fort Lee, NJ 07024
Operating Income 232.3 225.7 104.2 Total Market Cap. (In billions of KRW) 2,028 796 343 Tel : 1-201-592-0631 / Fax : 1-201-592-1409
Non-Operating Income 251.1 244.0 64.2 Share Price (High) (In KRW) 43,000 16,000 7,200
Non-Operating Expenses 53.7 52.2 43.2 Share Price (Low) (In KRW) 13,500 5,660 5,160
KOREA INVESTMENT & SECURITIES ASIA LIMITED (KIS ASIA)
Net Income 489.7 475.8 99.5 Foreign Ownership (%) 45.65% 29.94% 11.72% Suite 2110, Jardine House, 1 Connaught Place, Central, Hong Kong
FINANCIAL POSITION PER (H/L)(x) 4.27 / 1.34 10.48 / 3.71 18.27 / 13.10 Tel : 852-2530-8900 / Fax : 852-2521-3467
Total Assets 5,620.3 5,460.7 4,801.2 EPS (In KRW) 10,081 1,526 394
Total Liabilities 3,898.6 3,787.9 3,652.4 TOKYO REPRESENTATIVE OFFICE
Total Stockholders' Equity 1,721.6 1,672.7 1,148.8 STOCK PRICE & FOREIGN OWNERSHIP TREND OF KIH 10F Yotsuya Orchid Building, 23-3, Daikyo-cho, Shinju-ku, Tokyo 160-0015, Japan
Tel : 813-5363-5376 / Fax : 813-3358-8401
Korean won figures are translated, solely for the convenience of readers into U.S.dollars at KRW971.60/US$, the prevailing rates as of March 31, 2006
Stock price Foreign ownership
(%)
OPERATING REVENUES (In billions of KRW) NET INCOME (In billions of KRW) ROE (%) 50,000 60
700 700 70 40,000 50
600 594.7 600 60 40

564.6
30,000
500 500 50
30
400 400 40 39.6 20,000
20
300 300 30
10,000
200 10
200 20
100 85.5 100 84.1 10 0 0

7.6
.01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .31
0 0 0 .04 .05 .06 .07 .08 .09 .10 .11 .12 .01 .02 .03 .03
05 05 05 05 05 05 05 05 05 06 06 06 06
FY04 FY05 FY04 FY05 FY04 FY05
87

Tel : 813-5363-5376 / Fax : 813-3358-8401
(%)
700 700 70 40,000 50
600 594.7 600 60 40

564.6
30,000
500 500 50
30
400 400 40 39.6 20,000
20
300 300 30
10,000
200 10
200 20
100 85.5 100 84.1 10 0 0

7.6
.01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .31
0 0 0 .04 .05 .06 .07 .08 .09 .10 .11 .12 .01 .02 .03 .03
05 05 05 05 05 05 05 05 05 06 06 06 06
Chairman’s Message
To Our Clients and Shareholders
We had a banner year in 2005, acquiring Korea Investment & Securities (KITC) and merging its
operations with our existing subsidiaries. As a result, our FY05 net income reached KRW564.6
billion. The performance was applauded by investors inside and outside Korea, boosting our share
price 154% during the fiscal year.
Major Achievements
The Korean financial market has undergone many changes over the past several years. In 2005,
the ongoing effort to upgrade the domestic market to advanced status began to show tangible
results. Progress in this respect has been accelerated by the Korean companies that have already
become major global players.
Many of Korea’s corporations were reevaluated under new standards in 2005, and retail financial
clients migrated from bank account-centered investments to more specialized financial products.
Moreover, many new financial products made their domestic market debut during the year. In step
with the new paradigms, the Korean government gave advance notice of the Capital Market
Consolidation Act, which will go into effect in 2008. The measure is part of an effort to construct a
financial hub in Northeast Asia and cultivate world-class financial institutions in Korea.
Amid this backdrop, we strengthened our investment banking and asset management operations
to compete more effectively and to play a leading role in Korea’s rapidly changing financial
market. As part of our strategy, we acquired Korea Investment & Securities (KITC) and Korea
Investment Trust Management (KITM) in 2005. In May, our name was also changed from
Dongwon Investment Holdings to Korea Investment Holdings, marking a new beginning for us.
We are maximizing our synergy by merging securities operations (KITC and Dongwon Securities)
and investment trust operations (KITM and Dongwon Investment Trust Management).
The newly merged Korea Investment & Securities (KIS) brings together the brokerage
competencies of Dongwon Securities and the asset management expertise of KITC to generate a
positive synergy. A large financial institution has been born that can direct qualitative and
quantitative change in the Korean financial market. For FY05, the new KIS achieved an industry
high net income of KRW792.3 billion and operating income of KRW233.6 billion, while ROE
was a remarkable 56.3%.
In March 2006, KIH launched a new subsidiary called Cornerstone Equity Partners to specialize
in private equity funds. This move will help to diversify revenue sources further and allow for a
still more vigorous role in domestic finance. In addition, Korea Value Asset Management Co. was
established to focus proven asset management capabilities on the high-end segment. In the first
two months of operation, assets under management reached KRW252 billion.
3

“ We strengthened our investment banking and asset management operations to compete more effectively
and to play a leading role in Korea’s rapidly changing financial market. As part of our strategy,
we acquired Korea Investment & Securities (KITC) and Korea Investment Trust Management (KITM) in 2005. ”
A More Exciting Year to Come
I expect even greater changes in the coming year than we saw in FY05. More individual investors
will directly and indirectly participate in the market and Korean corporations will continue their
growth, driving long-term growth for the Korean securities market. The Capital Market
Consolidation Act will go into effect, and securities firms will introduce a wide range of financial
products to satisfy clients’ investment goals and diverse financing needs.
Meanwhile, financial institutions from all over the world have been pursuing mega-mergers
during the past few years. The traditional barriers separating financial segments have also
continued to come down, intensifying competition.
In the coming year, all of us at KIH and our subsidiaries will continue to transform and progress,
building on past successes in a dynamic market environment. KIS’s professional resources will be
leveraged to provide an integrated management system for client investment assets. We will
compete effectively with banks, which offer only simple, formalized products and services, and
provide maximum investment returns for our clients.
In addition, we will continue to bolster our involvement in the wholesale and investment banking
segments, diversifying and stabilizing our revenue structure. Most importantly, expansion in our
principal investment areas will lay the groundwork for us to grow as a world-class investment
financial institution.
In step with industry trends, our asset managers will use their proven rates of return and
individual renown to solidify market positions. Our Savings bank will also serve as a strategic
sales channel for us.
As a holding company, we continue to support the ongoing performance of our subsidiaries and
strive to maximize the synergy among them. In this way, we will continue to pursue our long-term
vision of emerging as one of Asia’s premier financial institutions.
Other Korean industries have achieved major results on the global stage. I am firmly convinced
that the domestic financial industry can do so as well. I remain devoted to helping to make this
happen and I thank all of you who have provided your unwavering support. Let’s continue to
work together for the future benefit of us all.
Seung-Woo Chang, Chairman

Korea Investment Holdings Co., Ltd.
Interview with the CEO
“ Korea Investment Holdings recorded KRW565 billion in net income, the best figure since
its launch four years ago and the highest figure ever for a non-bank holding company in Korea. ”
Q1: Please briefly explain KIH’s performance for FY05.
A1: “Last year Korea Investment Holdings had an unprecedented performance.

Importantly, Korea Investment & Securities, our main subsidiary, achieved
KRW729.3 billion in net income, the highest figure for Korean securities firms. Our
other subsidiaries were also among the leading performers in the industry. As a result,
KIH recorded KRW565 billion in net income, the best figure since its launch four
years ago and the highest figure ever for a non-bank holding company in Korea. All
of this was made possible because top management and the employees worked
together for the same goals.”
Q2: What do you see as your most important result last year?
A2: “Our most important achievement was also one of the biggest news stories for the
domestic financial industry last year. We acquired Korea Investment & Securities
(KITC) and merged it with Dongwon Securities. I believe the move was very timely,
for it takes the company beyond the typical brokerage house role to true leadership in
the asset management market. The company is now in a position to manage all client
assets comprehensively.
Interview with the CEO The significance of the new company was evident within just two months after the
merger was complete. Without the move, we would have had trouble in taking
advantage of the tremendous surge in the Korean stock market last year. Many had
predicted problems for such a merger, but we quickly secured leading positions in
each business segment. I am very proud of this. I believe we passed our first test, and
we can now build on this success to take the next step toward achieving our mid- to
long-term vision.”
5

“ Iproud
have always believed that my role is to create the environment in which highly talented people are
to work passionately and creatively. I am striving to make Korea Investment Holdings a place where
Korea's-and Asia's-best want to work.”
Q3: Then, what is your mid- to long-term vision?
A3: “I want to see Korea achieve the kind of success in the financial industry that it did in
other industries previously. Almost all Korean industries are now world class and
many Korean companies are major global players. By contrast, the domestic financial
industry has yet to reach the point where it can effectively and efficiently support and
cultivate such companies.
The finance industry is the lifeblood of a nation. I have no doubt that Korea must
have a world-class financial market and financial institutions to emerge as a truly
advanced nation. Of course, the Korean financial market began to open rapidly in
the wake of the financial crisis of the late 1990s. We dreamed of reaching an
advanced level and now we are in the process of realizing that dream. My mid- to
long-term vision is to grow KIH into one of the leading financial investment
institutions in Asia and compete head to head with the world’s best.
Q4: What are the fundamental conditions for growing into a global financial
institution and what is the CEO’s role in satisfying these conditions?
A4: “People are the key. A company’s fate, particularly in the financial industry, rests on
the caliber of its human resources. I have always believed that my role is to create the
environment in which highly talented people are proud to work passionately and
creatively. American and European financial institutions have been able to attract the
world’s best talent because that is where such people gather. I am striving to make
KIH a place where Korea’s-and Asia’s-best want to work. I will continue these
efforts in the future.”
“ markets
We must go beyond simply playing the broker if we are to have a competitive edge in today’s financial
and offer clients more sophisticated and comprehensive investment vehicles.
”
Q5: What are your main corporate strategies for FY06 in view of achieving the
long-term corporate vision?
A5: “We aim to strengthen our competencies as an institution that specializes in investment.
The needs of both retail and corporate clients are more diverse than ever. I believe
capabilities as an investment institution are critical for satisfying those needs most
effectively. That is to say we must go beyond simply playing the broker if we are to have
a competitive edge in today’s financial markets and offer clients more sophisticated and
comprehensive investment vehicles.
As an example of such efforts, in February 2006 we spun off our equity proprietary
trading division, a unit recognized in the marketplace as having superior investment
capabilities, to become Korea Value Asset Management to serve our clients with high-
end investment products. Within just two months, this new subsidiary had secured
KRW252 billion in assets under management, an amazing performance.
Then in March we assembled the industry’s best private equity fund managers to
establish Cornerstone Equity Partners. At the same time, the securities company has
been intent on bolstering its human and system capabilities for managing bonds and
financial products. Efforts are also being made to generate positive synergy among
the retail, investment banking and portfolio investment segments.
Bolstering these sectors will bring us the revenue structure of an advanced financial
institution, laying the groundwork for generating stable and sustainable returns.
Indeed, I have been working to strengthen our investment capabilities steadily over
the past several years. In FY05, in-house investment resulted in about KRW470 billion
in returns for Korea Investment & Securities.”
7

“ We are committed to growing Korea Investment Holdings into Korea’s first global financial institution; we shall
not rest until that lofty goal has been reached. I invite you all to take an active interest in what we are doing.
”
Q6: Would you like to say something to current or potential shareholders and to
the general public ?
A6: ”FY05 was a truly memorable year for the Korean financial market as a whole. The
market did not just increase in size but achieved great qualitative growth as well. We
saw the potential for the Korean financial market to grow. In fact, Korean society is
aging and interest rates have persisted, and individual investors have begun to exhibit
the same patterns that are found in the most advanced markets. I expect this will
continue for the foreseeable future.
In addition, the Korean corporations that have emerged as major global players need to be
reassessed. Soon, the term “Korea discount” will be forgotten. The government’s financial
policies come into play here. For example, the corporate pension policies are being
adopted, and the Capital Market Consolidation Act will be enacted. Such policies for
supporting and liberalizing the financial market will help to spark new paradigms in Korea.
To stay ahead of competition within such a dynamic market, our company monitors the
rapid changes inside and outside Korea and has been responding substantially.
Competition is now fiercer than ever and we have been working hard to secure an intrinsic
competitive advantage. In fact, the acquisition of Korea’s largest asset management
company and the inceptions of two new specialized investment subsidiaries are good
examples of how our company strives to sharpen its competitiveness within the market.
These were giant steps forward and they have been hugely successful already. Our efforts
and tangible results have been widely recognized in the industry, and investors responded
by increasing our company’s market capitalization by 154% during the year.
However, our company is not complacently satisfied with where we stand. We are
committed to growing Korea Investment Holdings into the nation’s first global
financial institution, and we shall not rest until that lofty goal has been reached. I
invite you all to take an active interest in what we are doing. Let me also thank
everyone who has supported us last year and in the time before that.”
Nam-Goo Kim, President & CEO

Korea Investment Holdings Co., Ltd.
Board of Directors & Management
STANDING DIRECTORS
SEUNG-WOO CHANG
Chairman of the Board
Former Minister of Planning and Budget,
Republic of Korea
MANAGEMENT
HOLDING SANG-KYO HAN CHAN-HYOUNG CHUNG YONG-WOO LEE

COMPANY Senior Managing Director, Senior Managing Director, Managing Director,
Head of Corporate Management Division Head of Management Support Division Strategy Planning Office
SUBSIDIARIES SUNG-IHL HONG BUM-SEOK KIM YONG-JAE LEE

President & CEO President & CEO President & CEO
Korea Investment & Securities Korea Investment Trust Management Korea Value Asset Management
NON-STANDING DIRECTORS
YOUNG-HYE LEE
Non-Standing Director
CEO of Design House
JAE-SU LIM
Non-Standing Director (Auditor)
Former President of Chohung Bank
9

NAM-GOO KIM
President & CEO
Vice Chairman of
Korea Investment & Securities
JU-WON KIM
Vice President
Co-CEO of Korea Investment Partners
WOO-TAEK AUO CHRIS LEE SANG-HOON OH

Managing Director, Managing Director, Managing Director,
Head of Risk Management Office Strategy Planning Office & IR Management Support Office
JONG-SEUNG LEE SEOK-HEON KIM CHUN-SIK LEE

President & CEO President & CEO President & CEO
Korea Investment Partners Cornerstone Equity Partners Korea Investment Mutual Savings Bank
JEONG-TAE KIM
Non-Standing Director (Auditor)
KWANG-SEON CHUNG
Former President of Kookmin Bank Non-Standing Director (Auditor)
Professor of Chungang University
DS
KITC
Korea Investment & Securities (KIS)
H
DF Korea Investment
Korea Investment Trust Management (KITM)
Holdings
KITM
DITM
2005
Synergy Effects
In March of 2005, KIH acquired KITC, a securities house with strong wealth management sales resources, and its subsidiary KITM,
Korea’s largest asset management company. Shortly after the acquisition, KIH merged KITC and KITM with its respective subsidiaries,
Dongwon Securities and DITM. As a result, KIH has begun to offer greater diversity in its product lines and services
due to the boost in synergies and the improved efficiencies in its management structure.
These efforts are all in keeping with KIH’s plans for securing its leadership in financial and securities markets.
11

CHAPTER 1
SUCCESSFUL, A ND M OVING F ORWARD
Korea Investment Holdings had a successful year of

organic and inorganic growth in 2005.
We have diversified
and strengthened our lines of business through the maximizing of synergies.
Milestones
COMPREHENSIVE F INANCIAL S ERVICE P ROVIDER

Korea Investment Holdings, a holding company a growing proportion of the aging population,
dedicated to the financial business, is the only Korean retail investors are migrating away from
financial holding company in Korea specializing banking deposits into more sophisticated
in securities. investment vehicles. Against the backdrop,
Korea Investment Holdings is striving to meet
The Korean financial market is undergoing the sophisticated and diverse needs of clients.
dynamic changes. With low interest rates and
KIH’S HISTORY
MAR. 7, 2006 ESTABLISHED CORNERSTONE EQUITY PARTNERS
FEB. 14, 2006 ESTABLISHED KOREA VALUE ASSET MANAGEMENT
JUL. 1, 2005 MERGED KOREA INVESTMENT TRUST MANAGEMENT WITH

DONGWON INVESTMENT TRUST MANAGEMENT
JUN. 1, 2005 MERGED KITC WITH DONGWON SECURITIES AND RENAMED AS

KOREA INVESTMENT & SECURITIES (KIS)
MAY 20, 2005 HELD 3RD REGULAR GENERAL SHAREHOLDERS’ MEETING AND RENAMED
COMPANY AS KOREA INVESTMENT HOLDINGS CO., LTD.
MAR. 31, 2005 ACQUIRED KITC, KITM AND KIM ASIA AS SUBSIDIARIES
MAR. 23, 2005 JOINED IN A STRATEGIC ALLIANCE WITH INDUSTRIAL BANK OF KOREA
MAR. 14, 2005 RECEIVED FSC APPROVAL FOR MERGER BETWEEN DONGWON MUTUAL
SAVINGS BANK AND DONGWON CAPITAL
DEC. 13, 2004 SEPARATED FROM DONGWON GROUP
JAN. 5, 2004 ACQUIRED STAKE IN DONGWON MUTUAL SAVINGS BANK

(98.13%, RENAMED AS KOREA INVESTMENT MUTUAL SAVINGS BANK IN JUNE, 2005)
NOV. 28, 2003 ACQUIRED STAKE IN DONGWON VENTURE CAPITAL

(71.01%, RENAMED AS KOREA INVESTMENT PARTNERS IN AUGUST, 2005)
JUL. 21, 2003 DONGWON FINANCIAL HOLDINGS LISTED ON KSE
MAY 30, 2003 LAUNCHED A FINANCIAL HOLDING COMPANY
JAN. 11, 2003 ESTABLISHED DONGWON FINANCE CO., LTD.
JAN. 1, 2003 SEPARATED FROM DONGWON INDUSTRY CO., LTD.

13

KOREA I NVESTMENT H OLDINGS AND ITS S UBSIDIARIES
KIH has four subsidiaries under its umbrella, including Korea & Securities Europe Ltd., Korea Investment & Securities America
Investment & Securities, Korea Investment Mutual Savings Bank, Inc., and Korea Investment & Securities Asia Ltd.
Korea Investment Partners and Cornerstone Equity Partners. KIS
has five subsidiaries including Korea Investment Trust The following diagram provides a complete overview of how KIH
Management, Korea Value Asset Management, Korea Investment and its subsidiaries developed to date and how they are linked.
Holding Company
100% HOLDING
Dec. Jun.
May 1982 Apr. 1996 Jul. 2003
1968 2005 Jan.
Hanshin HS acquired by HS renamed as DS acquired by DS & KITC integrated into 2003
Securities (HS) Dongwon Dongwon DFH Korea Investment &
established Industries Securities (DS) Dongwon
Securities (KIS) Financial
Securities Holdings (DFH)
Aug.
1974 Jun. 2000 Mar. 2005 founded
Korea Investment Trust KITC transformed KITC acquired by DFH 99.46%

Company (KITC) established into a securities firm HOLDING May 2003
DFH approved
100% HOLDING by FSC
Feb. Jul.
1998 2005
Jul. 2003
Dongwon Investment Trust DITM & KITM integrated into Korea DFH listed on
Asset Management (DITM) established Jun. Investment Trust Management (KITM) Feb. KSE
SPIN-OFF 2000 2006
Management
Korea Investment Trust Management Korea Value Asset Management
(KITM) established (KVAM) established
May
2005
Nov. Aug. 100% HOLDING DFH renamed as
Nov. 2003 Korea Investment
1986 2005
100% HOLDING Holdings (KIH)
Investment Dongwon Venture Capital DVC acquired by DVC renamed as Korea
Partners (DVC) established DFH (71.01%) Investment Partners (KIP) Mar
2006
Cornerstone Equity Partners
established
98.13% HOLDING
Dec. Jun.
1982 Sep. 1996 Oct. 2000 Jan. 2004 Jan. 2005 2005
Korea Mutual Savings Bank KMSB acquired DMSB DMSB DMSB DMSB renamed
(KMSB) established by Dongwon merged with acquired by merged with as Korea
Savings Securities (DS) Anheung DFH DC Investment
Bank Savings Bank Mutual Savings
Bank (KIMSB)
May
1995
Dongwon Capital (DC) established
1960 1970 1980 1990 2000 2003 2005 2006

Integration Synergies
ENHANCED CAPABILITIES & D IVERSIFIED S ERVICES

In March of 2005, Korea Investment Holdings meanwhile, has brought opportunities for KIS
Co., Ltd. acquired KITC, a securities house channels to serve its clients with much more
with strong wealth management sales resources, diversified and tailored investment products.
and its subsidiary KITM, Korea’s largest asset
management company. Shortly after the KIS now boasts KRW1.6 trillion in equity
acquisition, KIH merged KITC and KITM capital and a domestic network spanning 115
with its respective subsidiaries, Dongwon branches and three foreign subsidiaries. KIH is
Securities and DITM. The merger of KITC has building a new profit model for Korean
enhanced KIH’s overall investment business, securities firms, significantly reducing the
diversified the revenue structure, and enhanced dependency on revenue from volatile brokerage
resource efficiency. The KITM acquisition, commissions.
HIGH EXPECTATIONS OF THE MARKET

ON KIH’S GROWTH POTENTIAL AFTER THE INTEGRATION
INCREASED THE
MARKET CAPITALIZATION
OF KOREA INVESTMENT HOLDINGS
BY A STUNNING 154%.
AFTER THE INTEGRATION,

KIH RECORDED KRW565 BILLION IN NET INCOME,
A REMARKABLE ACHIEVEMENT
in only four years since inception.
THE INTEGRATION
HELPED THE COMPANY LAY THE GROUNDWORK
FOR EMERGING
AS A LEADING INVESTMENT
INSTITUTION.
15

“Korea Investment Holdings is
MOVING FORWARD
to build a new business model
for Korean securities houses.
Through organic and inorganic
growth, KIH and its subsidiaries are
working together to become a
LEADING FINANCIAL
INSTITUTION IN ASIA.”
NAM-GOO KIM
President & CEO
Management Plans
SANG-KYO HAN CHAN-HYOUNG CHUNG

Senior Managing Director Senior Managing Director
Head of Corporate Management Division Head of Management Support Division
17

“We have announced the
VISION 20-20, with the goal of
building a company with
KRW20 TRILLION in market
capitalization and 20% ROE
by 2020. Concrete steps must be
taken to achieve these lofty
targets, and 2006 will be
a very critical year for us.”
We aim to become a multinational hub for

investment and one of Asia’s top 10 financial
institutions by 2020. To this end, we have
announced the “Vision 20-20”, with the goal of
building a company with KRW20 trillion in
market capitalization and 20% ROE by 2020.
Concrete steps must be taken to achieve these
lofty targets, and 2006 will be a very critical year
for us. In the coming year, KIH will lay the
groundwork for maximizing synergies among
group subsidiaries to reinforce the asset
management and investment banking businesses.
* We will reinforce our capabilities in IB and

proprietary investment.
* We will improve our AM portfolio and further

diversify AM product lines.
* We will aim to serve our clients with comprehensive

investment services that cater to the diverse needs of
our retail and wholesale clients.
* We will leverage our expertise and resources to

repeat our domestic success overseas.
JU-WON KIM
Vice President
Vision & Strategies
OUR VISION IS TO BECOME

A LEADING FINANCIAL INSTITUTION IN A SIA BY 2020.
“Vision 20-20” Business Tools for Growth

- EMERGING AS A LEADING ASIAN INVESTMENT - INNOVATIVE AND DIVERSE PRODUCTS & SERVICES
INSTITUTION BY REALIZING 20% ROE AND FROM CREDIT DERIVATIVES TO FIXED INCOME
KRW20 TRILLION IN MARKET CAPITALIZATION BY 2020 PRODUCTS AND MORE
Business Models for Growth - CUSTOMIZED AND RELIABLE CUSTOMER

- INVESTMENT BANKING (IB) RELATIONSHIPS AND PRODUCT DISTRIBUTION
AND ASSET MANAGEMENT (AM) FROM CORPORATE RELATIONSHIP MANAGERS TO
PRIVATE CLIENT SERVICES
We plan to pursue new business opportunities while strengthening the IB and AM segments, and to this
end, we devised the following short-term action plans:
Expanding the Investment Banking Business
We are taking steps to grow into a true IB market - We will pursue higher profits from niche bond
leader. We have reorganized the company, hired markets, which are relatively untapped in
experienced employees in IB, and securitized our comparison with the booming securities markets.
assets to create a capital pool large enough to
support the IB business. We will take the following - Capitalizing on our success in equity-linked
further steps to achieve our goals: securities, we will reinforce our capabilities in
corporate analysis and investment to lay the
First, we will maintain our competitive edge in the groundwork for expanding into the bond market
equity underwriting and trading business while while maintaining the lead in the domestic
expanding the scope of our IB business into bonds derivatives market.
and derivatives.
19

Second, we will strengthen our principal investment achieved by securities firms. We believe the
business to play a more influential and active role in comprehensive client asset management model is
Korean financial markets. the key for Korean securities firms to compete
against banks, which are moving into business areas
Third, we will continue to pursue business that have traditionally been occupied by securities
opportunities overseas while leveraging our firms.
competitive edge in real estate project financing to
strengthen our position in the IB business. Shifting the Brokerage Business Focus to Wholesale
Strengthening the Asset Management Business Although we pursue a next-generation business

model based on AM and IB, we seek to remain
The acquisition of KITC was the first step in our competitive in the brokerage market as well. The
strategy to enhance KIH’s AM business. The main primary brokerage focus for this year will be on
target in the AM business this year is to realize the enhancing our international wholesale brokerage
synergies among KIH subsidiaries to transform the operation. KIS is already the market leader in the
nature of how Korean securities firms operate their domestic wholesale market.
retail business. With competitive products from
KIS, KITM, KVAM, and KIMSB, KIH’s sales With our strong research capabilities and growing
channels can meet various investment goals and overseas sales capacities, we strive to acquire
expectations of our retail clients and eventually global leadership in the international wholesale
initiate true wealth management. market. Success in the international wholesale
market will be the first step for KIH to gain
The success of such business models will prove that presence in the global market, especially in Asia.
a more stable and profitable business can be
OUR GROWTH STRATEGIES

Subsidiaries
KOREA INVESTMENT & NET INCOME NET INCOME

SECURITIES (KIS)
KRW
729.3 (292% GROWTH)
billion
800
(In billions of KRW)
729
600
- The backbone of the holding company and a leading

Korean securities firm with a diversified profit 400
structure, a wide range of derivatives and services, and

extensive capabilities in investment banking 200
186
- Established through integration of the KITC and
Dongwon Securities in June 2005 FY04 FY05
SUNG-IHL HONG President & CEO
KOREA INVESTMENT TRUST ROE ROE

MANAGEMENT (KITM)
8.6 %
(5.8%p GROWTH) 10
8 8.6%
(%)
- A leading asset management company with strong 6

capabilities in managing equity-type funds with the
top-tier AUM volume in the industry 4
- KITM holds KRW19.4 trillion in AUM as of the end

2 2.8%
of March 2006, with an 8.7% share of the market.
FY04 FY05
BUM-SEOK KIM President & CEO
KOREA VALUE ASSET ASSETS UNDER MANAGEMENT

MANAGEMENT (KVAM)
KRW
252.3 billion
(AS OF MAY, 2006)
- An asset management company specializing in long-term value investment in equity-type funds

- Established in Feb. 2006 with the spinning off of KIS’s equity proprietary trading division, KVAM is a
high-end asset management company dedicated to providing long-term value investment products.
YONG-JAE LEE President & CEO

21

ROE ROE
KOREA INVESTMENT PARTNERS
(KIP)
7.2 %
(6.1%p IMPROVEMENT) 8
6
7.2%
(%)
- Specialists in comprehensive venture investment

services 4
- Established in November 1986, KIP provides 2

investment and financing services to small- and
medium-size venture start-ups. 1.1%
FY04 FY05
JONG-SEUNG LEE President & CEO
FUNDS UNDER MANAGEMENT

CORNERSTONE EQUITY
PARTNERS (CEP)
KRW
100+ billion
(PENDING FORMAL CLOSING OF
INITIAL COMMITMENTS)
- A private equity firm focusing on management buyouts and other equity investments providing
significant control
- Established in March 2006, CEP makes equity investments on behalf of itself and its investors which
include pension funds and corporate clients. CEP seeks to acquire controlling ownership stakes or
strategic minority positions in collaboration with highly capable management teams to create
significant long-term value of the invested businesses and deliver superior returns to its investors.
SEOK-HEON KIM President & CEO
ROA ROA
KOREA INVESTMENT MUTUAL
SAVINGS BANK (KIMSB)
2.4 %
(2.0%p IMPROVEMENT) 4
(%)
3
- A banking arm of KIH that serves unique and
significant geographical territories with deposits, 2 2.4%
installment savings, and various loan services through
7 branches in key satellite cities of Seoul
1
0.4%
FY04 FY05 3Q
CHUN-SIK LEE President & CEO

Korea Value Asset Korea Investment

KOREA
Management Trust Management
INVESTMENT
HOLDINGS
Cornerstone Equity Partners Korea Investment Partners
Korea Investment
Mutual Savings Bank
Fundamentals & Management

Korea Investment Holdings and subsidiaries believe we can achieve our vision to become a leading financial institution
in Asia by delivering the best client value proposition in the market. Thus, we strive to provide competitive products
and services that are tailored to meet various needs and goals of our clients at all times.
23

CHAPTER 2
THE TO SUCCEED
POWER
We have the power to attain our goals.

This power comes from the close cooperation between
our subsidiaries, which support KIH as it positions itself
as a comprehensive financial service provider
offering high-end investment and asset management services.
“FOR FY05, KIS ACHIEVED AN INDUSTRY HIGH
NET INCOME OF KRW 792.3 BILLION
AND OPERATING INCOME
OF KRW233.6 BILLION, WHILE ROE WAS A REMARKABLE 56.3%.”
KOREA INVESTMENT & SECURITIES CO., LTD. (KIS) IS A LEADING LARGE-SCALE SECURITIES
HOUSE AND A MAIN AFFILIATE OF KIH, KOREA’S FIRST AND ONLY FINANCIAL HOLDINGS
GROUP FOCUSED ON THE SECURITIES AND INVESTMENT BUSINESS.
At the end of March 2005, Korea Investment Holdings the first investment trust company in Korea, and played an
(previously Dongwon Financial Holdings) acquired Korea important role in the history of the investment trust industry,
Investment & Securities Co., Ltd. (KITC) from the Korea garnering a reputation as a ‘respectable asset manager.’
Deposit Insurance Company (KDIC) for KRW546.2 billion. Dongwon Securities was established in 1968 and became a
After a capital injection by the KDIC, an overhaul of the member of the Dongwon Group in 1982, a company with
company’s finances, and a complete revamping of the corporate outstanding services and high standards in brokerage, corporate
governance structure, KITC was transformed and ready for a financing and equity trading.
new start. In June 2005, KITC and Dongwon Securities were
merged, taking the name Korea Investment & Securities Co. With the merger, the new KIS was able to stabilize quickly and
Ltd. (KIS), so as to create a stable and diversified revenue take advantage of economies of scale, which enabled the new
structure and positive synergies going forward. As for the two entity to rapidly gain the momentum for enhanced
players involved in the merger, KITC was founded in 1974 as performances. Together with an increase in brokerage
commissions from bullish stock markets and record growth of
the KOSPI, excellent performances in principal investments and
Net Revenue strong gains on the sales of property and investment securities,
(Profit Structure Diversified and Stabilized After Integration) (In billions Korean won) KIS was able to post a stunning KRW729.3 billion in revenue,
a record in the industry.
The merger has allowed KIS to develop a well-balanced revenue

structure consisting of asset management, brokerage, corporate
financing and equity trading, unlike most domestic securities
companies, which remain unbalanced due to the dispropor-
tionately large size of their brokerage segments. KIS’s balanced
revenue streams have enabled the company to become firmly
established as a market leader with KRW50 trillion in AUM,
KRW1,575.3 billion in equity capital, 2,261 employees, 115
branches across the country, and three overseas branches.
KIS, in utilizing a new business model for the merged company

BEFORE INTEGRATION AFTER INTEGRATION promises diversified yet stable sources of revenue, making KIS
(FY04) (FY05)
truly representative of the securities and asset management
1. IB=Underwriting + Project Financing + Equity-linked securities
2. Trading gain includes equity trading gain only industry in Korea.
3. Includes April and May results of ex-Dongwon
Note: For a comparison reason, financial gains such as interest income, derivative trading
gain/loss, and bond trading gain/loss not included.
25

“BY THE END OF FY05, KIS HAD HANDLED 7% OF
ALL KOREAN RETAIL BROKERAGE TRANSACTIONS,
AND WAS MANAGING 7% OF ALL RETAIL FUNDS AND 10%

of all the assets entrusted to securities
AND ASSET MANAGEMENT FIRMS BY KOREAN CLIENTS.”
RETAIL BUSINESS for introducing Korean retail clients to Korean equity

markets, forcing traditional securities firms to evolve in terms
KOREAN FINANCIAL MARKETS AT A GLANCE of services and profit models.
FY05 has been one of the most dynamic years in the history
of Korea’s financial markets. Going forward, these markets RETAIL BUSINESS OF KIS
will never be the same. The KOSPI index has risen 38.5%, Created through a successful merger of Dongwon Securities, a
breaking its historical record, and is expected to continue its leading brokerage firm, and Korea Investment & Securities
strong growth in FY06. (KITC), the biggest asset management firm in Korea, the new
KIS is one of the largest as well as one of the few financial
At the same time, retail funds have revolutionized the ways in institutions in Korea with a leadership position in the full
which Korean households invest and manage their wealth. spectrum of retail investment markets. By the end of FY05,
Affected by low market interest rates, an unstable real estate KIS had handled 7% of all Korean retail brokerage
market, a growing elderly population, and booming equity transactions, and was managing 7% of all retail funds and
markets, the size of managed equity funds increased 148% 10% of all the assets entrusted to securities and asset
during the first three quarters of FY05. As a result, by the end management firms by Korean clients. With its leadership in
of FY05, the proportion of Korea’s total financial assets in bank both brokerage and asset management, KIS was able to
deposits decreased to 39% compared to 48% in FY01. During achieve a diversified client portfolio. At the end of FY05,
the same period, assets entrusted to securities firms and asset among its KRW50 trillion in client assets, KIS had 60% in
management companies increased to 44% from 35%, equities and 40% in low-risk assets such as bond-type funds,
surpassing the percentage in bank deposits for the first time. MMFs, and RPs. Such a balanced client asset portfolio is very
unique in the market as most securities firms have unbalanced
These topographical changes in Korean financial markets client asset portfolios and are thus unable to adequately serve
posed both opportunities and threats to Korean securities the varied risk appetites and investment goals of retail clients.
firms. In the short-term, securities firms enjoyed high profits
in FY05 mainly due to increased transaction volumes in One of the major internal achievements of KIS in FY05 was
equity markets. In the long run, however, the increasing the successful integration of its sales force, channels, brands,
market share of banks and discount brokerage houses in fund and IT systems including customer relationship management
sales and the retail brokerage market, respectively, posed a (CRM). The organic integration of business resources will
grave long-term threat to traditional securities firms. Banks enable KIS to actively cross-sell various products to the retail
and discount brokerage houses have become major channels clients of the former Dongwon and KITC. The cross-selling
strategy will be executed in such a fashion as to optimize the changes and more drastic changes are expected in the next few
client asset portfolio according to the varied investment goals years as Korean financial markets mature. KIS is ready to lead
and risk appetites of retail clients. the new dynamics of the market by offering its clients the best
value propositions in the market. The successful integration of
Offering industry leading research and market-proven asset KIS operations was just the beginning in its long journey to
management products, along with highly experienced reshape how Korean households invest their wealth.
financial advisors, KIS is one of very few financial institutions
in Korea with the capacity to provide model portfolios
capable of meeting the needs and expectations of clients. The WHOLESALE
ability to manage total household assets will effectively
differentiate KIS from commercial banks or other securities The wholesale business is gaining more importance in the
firms with limited expertise that sell off-the-shelf products. market. In FY05, with a growing trend of indirect investment
and revaluation of Korean stocks, the trading volumes of
In addition, KIS is in the process of strategically aligning its institutional and foreign investors grew substantially by
retail channels. In April of 2005, KIH signed a strategic 59.4% and 43.9%, respectively.
alliance with the Industrial Bank of Korea (IBK). For KIS’s
retail business, the alliance with IBK provides entry-level KIS, for its part, recorded a stellar performance in the
channels in addition to KIS’s own 115-branch network, which wholesale market. In fact, FY05 was the year in which KIS
traditional banking clients can utilize to enter the securities became a major wholesale brokerage house through taking the
and asset management markets. On the other side of the leading position in the domestic wholesale market. KIS
spectrum, KIS has two PB channels and an on-line VIP commanded a 6.2% market share in FY05, while handling
brand, iNoble Services, to serve affluent clients. With high- transactions worth KRW20.6 trillion. This achievement can
end channels, KIS aims to compete against traditional bank be ascribed to the company’s strong sales force, its well-
PB channels to win new clients from among the rapidly established customer satisfaction (CS) services, and most of all,
increasing number of high-net-worth-individuals (HNWI) in to Korea’s leading research team. KIS’s research team has one
Korea. Both off-line and on-line services strive to provide total of the widest and most in-depth coverage of Korean markets
investment management advisory services and solutions to with the industry’s top analysts. KIS analysts have a thorough
meet the needs and high expectations of demanding clients. understanding of and strong networks in the industries they
cover, enabling them to deliver invaluable interpretations of
The Korean retail finance market is undergoing dynamic the market and valuations of the companies in real-time.
27

“IN FY05, OUR INTERNATIONAL BUSINESS DIVISION
OVERSAW transactions worth KRW 8.3 trillion

FROM FOREIGN INSTITUTIONAL INVESTORS, ONE OF THE TOP
THREE IN TRANSACTION VOLUMES AMONG DOMESTIC INSTITUTIONS.”
However, the main focus of our wholesale business in FY06 gain an international reputation and thus, more business
will be on expanding the international side of our business. In opportunities in other business areas. Through an
FY05, our international business division oversaw international reputation backed by a thorough understanding
transactions worth KRW8.3 trillion from foreign institutional of local conditions and sales capabilities, KIS strives to
investors, one of the top three in transaction volumes among become the major channel connecting Korea’s financial
domestic institutions. KIS’s short-term goal is to become the markets with the rest of the world.
leading domestic institution in the market and to eventually
compete against global players in the long-term. We believe
that by combining our proven local research capabilities with IB & PRINCIPAL INVESTMENT
a strong overseas sales force, we can differentiate ourselves in
this highly competitive market. The Korean government has found that the brokerage-based
business models of most domestic securities companies are
As it was in FY05, a variety of activities and events will be highly vulnerable to market fluctuations. These models are
held to facilitate the needs of our institutional and corporate also structurally unbalanced, being weak in corporate
clients in FY06. In collaborations with many renowned financing, investment and asset management, and this has
research centers, monthly conferences and more than 10 non- hampered the development of the capital markets in Korea. In
deal roadshows are to be held in both Korea and in major response, in 2006 the government proposed the introduction
cities around the globe through our overseas subsidiaries. of the Capital Market Consolidation Act to enable the organic
Currently, KIS operates three overseas subsidiaries in New and inorganic growth of capital markets through
York, London and Hong Kong. In addition, at our diversification in the financial industry and the expansion of
headquarters in Seoul, experienced sales traders are ready to capital markets. The intention of the proposed bill is to allow
satisfy an ever-diversifying range of client needs. We also the selling of a greater range of financial investment products
maintain strategic business partnerships with Korea’s leading and to allow firms to develop multiple lines of business
custodian banks in order to provide high quality settlement through regulatory reforms such as the introduction of new
services at our settlement desks. settlement services. With these efforts to open up the industry,
domestic financial companies will be able to quickly expand in
KIS believes that the wholesale business, especially the size and develop competencies in corporate funding and
international side, is an area of tremendous potential for local investment. Such measures will enable domestic firms to
securities firms. At the same time, wholesale is a strategically compete more effectively against multinationals such as
important business area that we must command in order to Goldman Sachs, Merrill Lynch, and Morgan Stanley.
“KIS ISSUED KRW1.9 TRILLION OF ELS IN FY05

and also claimed leadership in ELW,
ACCOUNTING FOR MORE THAN 20% OF THE ELW MARKET, WHICH WAS
FIRST INTRODUCED IN KOREA IN DECEMBER OF 2005.”
Keeping in step with the paradigm changes in the industry, Division secured the number one position among primary
Korea Investment & Securities introduced, in FY03, a new dealers of government bonds for five consecutive quarters and
business model, the ‘IB-AM (Investment Banking-Asset topped the list of underwriters for financial bonds and special
Management) Model.’ Since then, KIS’s investment banking bonds in both 2005 and 2006. The company has recently
business has laid a firm foundation for delivering solid made efforts to diversify into the structured product market
performances and achievements in IPO, corporate financing, with newly developed oil project funds.
asset management and investment.
3 The Financial Advisory Service Division makes direct
Leveraging its industry-leading experts and abundant investments in large-scale M&As, working closely with the
experience, KIS offers comprehensive financial services Principal Investment Division, or arranges suitable investors
covering the full spectrum of corporate financing from the for such deals. The division’s main projects included the sale
fostering of SMEs to the issuance of stocks, bonds, off-shore of Korean government holdings in the Industrial Bank of
securities and asset-backed securities (ABS). Korea and the sale of equities of Shinhan Financial Group
and Woori Financial Holdings for KDIC. KIS will continue
1 KIS’s IPO Division managed a number of high profile to expand its business from state-run enterprises to private
deals in the past years. The firm became the first Korean firms with a number of potential merger and acquisition deals
company to successfully complete an IPO, in this case, an on the horizon.
IPO for the listing of Mirae Corporation on the Nasdaq
stock exchange and it also succeeded in completing the 4 The Real Estate Finance Center provides one-stop financial
industry’s first dual listing, with the adding of LG.Philips services covering all aspects of the real estate business,
LCD to the KOSPI and the NYSE, concurrently. Other encompassing consulting on development, lending, bridge
underwriting activities included the issuance of depository loans, project financing and post administration services (real
receipts (DRs) for POSCO, KT and KT&G, and a capital estate trust). The center has maintained the largest market
increase by public offering for Kookmin Bank. KIS is truly a share of over 30% in project financing for two years in a row.
leader in Korea’s primary market and this was validated when Notably, with the placing of its sales organizations, asset
the Korea Securities Exchange named KIS an outstanding management business and a mutual savings bank all under
lead manager for four consecutive years from 2001 to 2004. one roof, the center was able to take full advantage of the
resulting synergies. Furthermore, KIS aims to advance into
2 KIS offers one-stop services by combining expertise in the SOC sector, in which it can utilize its expertise as a
underwriting and bond issuance/brokerage. Its Fixed Income securities house to provide financial intermediary and
29

advisory services while securing long-term profits from the trading division, which was spun off in February 2006 to
management of infrastructure funds. create Korea Value Asset Management.
5 Keeping abreast of steadily growing demand for futures-, This year again, KIS will make both direct and indirect
options-, and SWAP-based over-the-counter (OTC) investments in diverse high-performing assets, while taking
derivatives, KIS plays a major role in the OTC derivatives reasonable risks in doing so. This will be a part of our efforts
market with the active development and distribution of a to make the most of excess cash for greater investment
number of products. KIS, with its talented pool of experts in efficiency. By doing so, our aspiration to become a leader in
the development of OTC derivatives, issued KRW1.4 trillion investment will be put into action.
of equity-linked securities (ELS) in FY04 and KRW1.9 trillion
of ELS in FY05. The firm also claims leadership in equity- With the hiring of more than 60 experts with extensive
linked warrants (ELW), accounting for more than 20% of investment banking experience, the largest pool of such talent
the market issuance. ELW was first introduced in Korea in in the industry, KIS has reorganized the Investment Division
December of 2005. for executing principal investments and a New Business
Office for identifying opportunities in overseas markets. In
This year, KIS will continue its strong growth in corporate addition, our rigorous risk management discipline will
financing activities including IPOs, capital increase by public continue to be exercised at the group level for risks associated
offering, bond underwriting and brokerage and project with principal investment.
financing, and will take a leadership position in ELS, ELW
and other OTC derivatives. Going forward, KIS will conduct its indirect investment
activities through Korea Value Asset Management and
KIS has delivered impressive results in principal investment Cornerstone Equity Partners. For direct investment, the
and asset management. In FY05, it sold 7.3 million shares of company will make strategic investments in firms
Hana Financial Holdings, which it had held for three years, maintaining close relationships with its IB and Wholesale
in keeping with its long-term investment strategies. The Divisions and will seek investment opportunities in Vietnam,
transaction generated KRW232.6 billion in proceeds or a China and other emerging markets. This strategy will help us
389% rate of return. KIS has made equity investments at an identify new markets and create new sources of revenue. In
average of KRW100 billion every year, reaping returns of addition, we will design and develop investment products
44% in FY05, 72% in FY04 and 42% in FY03. This solid based on principal investment for our clients, creating mutual
track record is attributable to our strong equity proprietary benefits for both the company and its clients.
RISK MANAGEMENT GROUP-WIDE RISK MANAGEMENT

STRUCTURE
Based on the general principle that risk and expected returns Although KIS has the greatest exposure both in terms of
are inevitably related to each other, management believes that scope and magnitude in terms of absolute exposure to risk
effective risk management is essential for continued stable the holding company retains the function to oversee and
growth going forward. manage risk on a group-wide basis. At the holding company
level, the risk management unit’s key roles and responsibilities
In keeping with this principle, we vigorously monitor, are to oversee the risk exposure of each subsidiary, monitor
evaluate and manage risks associated with market, credit, business activities, and set the guidance related to risk
liquidity and operations. exposure for subsidiaries. The holding company has the
capabilities to check and monitor activities performed by all
We have established a comprehensive risk management subsidiaries on a near real-time basis.
platform that effectively monitors and controls our risk exposures,
but also segregates the oversight functions in order to All of the subsidiaries have a central risk management unit that
ensure necessary checks and balances are in place. monitors and evaluates risk exposure while also having the role
of constantly communicating with all profit centers. At most
Our platform enables management to of the profit centers within a subsidiary, a senior staff member
adroitly address risk related issues as the has been appointed as the risk management officer and he/she
platform links the financial, operational, has the responsibility to monitor and communicate with the
compliance and legal reporting systems subsidiary’s central risk management unit.
on a near real-time basis. More
importantly, we have put in place RISK MANAGEMENT STRUCTURE (KIS)
risk management processes and The top risk management decision-making body at KIS is the
policies to enable our staff to Board of Directors (BoD), which is made up of four standing
effectively employ our risk executive directors and four non-standing directors.
management platform. Supporting the BoD on risk management issues are the Risk
Management Committee, Investment Decision Committee
and Compliance Officer, which together take on the role of
overseeing and resolving important issues. As the support
31

A CHARACTERISTIC OF THE FINANCIAL SECTOR IS THAT RISK AND
EXPECTED RETURNS ARE INEVITABLY RELATED TO EACH OTHER .
CONSEQUENTLY, EFFECTIVE RISK MANAGEMENT IS ESSENTIAL

FOR CONTINUED STABLE GROWTH GOING FORWARD.
function for the risk related committees, the company has a policies and procedures adhere to the business principles of the
risk management division, compliance division and legal company. The compliance division, which reports directly to
support staff. the CEO, provides full support to the Compliance Officer.
Risk Management Committee - The Risk Management Audit Committee - The Audit Committee is not a direct
Committee has the responsibility of monitoring and risk management related body and is in fact independent of
managing the various risks associated with business the management and business functions. All activities carried
operations in order to facilitate a strong financial position and out by committees including the risk management related
continued profitable growth. Risk limits for business committees are audited by the Audit Committee.
segments, trading positions and overall risk management
policies are evaluated and instituted by the Risk Management
Committee. An active monitoring network comprised of At most of the profit centers within a subsidiary, a
non-trading staff from a diverse range of business lines senior staff member has been appointed as the risk
together with working level committees composed of general management officer and he/she has the
manager level staff are under the control of the Risk responsibility to monitor and
Management Committee. communicate with the
subsidiary’s central risk
Investment Decision Committee - This new body was management unit.
formed recently to reinforce KIS’s risk management
capabilities in the area of principal investment as the
company is endeavoring to expand its principal investment
position. The Investment Decision Committee is responsible
for all decision-making on principal investment activities
greater than KRW5 billion.
Compliance Officer - The Compliance Officer’s role is to

oversee and manage operational risk, legal risk, and
compliance. The Compliance Officer can be seen as the
company’s sentinel, which ensures that business practices,
FOR THE COMPANY AS A WHOLE,

THE total risk exposure HAS BEEN SET AT A LEVEL
WHERE THE NET CAPITAL RATIO WOULD BE
GREATER THAN 350 %.
Risk Management Division - The risk management For the company as a whole, the total risk exposure has been
division is the primary support body for the Risk set at a level where the net capital ratio would be greater than
Management Committee and performs duties related to 350%. In accordance with applicable regulations, the
monitoring & analysis of risk and communication of risk company has to maintain a net capital ratio of over 300% to
policies to frontline divisions. On the trading side, the risk be in the OTC derivatives business, and to maintain a more
management division has a system interface independent of conservative position, the company has set 350% as the
the asset management division, which enables the regular minimum net capital ratio. Risk limits for individual
cross-checking of transaction details. divisions, products and managers are allocated within the set
total risk exposure and to ensure risk is being properly
RISK MANAGEMENT POLICIES managed, constant monitoring is carried out.
The management introduced a RAROC (Risk Adjusted
Return on Capital) based management system that quantifies VaR is employed to manage KIS’s trading position and the
the risk for each product to enable the appropriate allocation company’s VaR criteria are based on a one-day horizon and a
of costs involved with risk to the frontline divisions. As risk 99% confidence level. Volatility is monitored and managed
applied costs have to be considered when carrying out utilizing the EWMA model on a one-day horizon. The
investment decisions, overall risk exposure of the company is current risk management system enables the company to
involuntarily adjusted to an optimum level. measure VaR by division, fund, management, asset type and
timeframe.
Risk Management Structure

Risk management related reporting is performed on a regular
and on-demand basis with regular reports being provided to
Risk Management the management and the Risk Management Committee on a
Committee
BOD Management
daily, monthly, and quarterly basis. Within the regular
reports, information is included on risk limits and asset
Investment Decision
Committee management status, as are detailed analyses of market, credit
and liquidity risk.
Compliance Officer
Audit Committee
Korea Investment Trust Management
33

AS OF THE END OF MARCH 2006,
KITM HAD AUM OF KRW19.4 TRILLION,
accounting for A MARKET SHARE OF 8.7%.”
KOREA INVESTMENT TRUST MANAGEMENT CO., LTD. (KITM) IS

KOREA’S LEADING ASSET MANAGEMENT COMPANY, ORIGINATED
FROM KOREA’ S FIRST INVESTMENT TRUST COMPANY.
Korea Investment Trust Management Co., Ltd. (KITM) is The outlook for Korea’s asset management market is bullish
an asset management company, established in June 2000 due to the paradigm shifts in the financial markets. These
through a spin-off from Korea Investment Trust, Korea’s first shifts are due to the continuing low-interest rate
investment trust company. environment, increasing migration of investors into riskier
assets as the population ages, and new interest in retirement
In March 2005, KITM was acquired by KIH as a subsidiary savings plans (RSPs). However, tempering the positive
of KIS, and in July 2005, it was merged with Dongwon outlook is the fact that there are too many players in the
Investment Trust Management Co., Ltd. As of the end of market. A crowded market means cut-throat competition,
March 2006, KITM had assets under management (AUM) and the end result will be a driving out from the market of
of KRW19.4 trillion, accounting for a market share of 8.7%. those asset management companies unable to compete.
With sizable AUM and more than 30 years of asset KITM will sharpen its competitive edge by enhancing its
management experience, KITM has been a living witness to investment return, improving the structure of AUM, and
the growth of Korea’s asset management industry. It was expanding its distribution channels. In the mid- to long-term, it
the first company in Korea to develop a fund for foreign will expand its business to overseas markets and grow throughout
investors, an offshore investment fund, a real estate fund, and Asia as an acknowledged leader in asset management.
an onshore fund of funds. Last year, KITM became Korea’s
first asset management company to hold a nationwide
seminar on the retirement pension system. As such, KITM Financial Markets and KITM's Fund by Type
(In trillions Korean won)
has greatly contributed to the qualitative growth of Korea’s
asset management industry.
Equities
In order to realize its management philosophy of ‘better Fixed Income

performances and better services based on specialty and passion,’
MMF
KITM will continue to practice research-based value investment,
remaining unswayed by short-term market conditions or passing Others
enthusiasm, and achieve better performances based on reasonable

investment decision-making. The company will also enhance the
FINANCIAL MARKET KITM
level of customer satisfaction by providing a wide range of
specialized products and services.
Korea Value Asset Management
“OVER THE PAST 3 YEARS THE TEAM MANAGED EQUITIES

WORTH KRW303.7 BILLION
FROM WHICH IT GENERATED KRW156 BILLION IN RETURNS,
WITH 51% in annual average returns.”
KOREA VALUE ASSET MANAGEMENT CO., LTD. (KVAM) IS AN ASSET

MANAGEMENT COMPANY SPECIALIZING IN LONG - TERM VALUE INVESTMENT IN
EQUITY- TYPE FUNDS .
KVAM was incorporated in February 2006 and launched its attention in Korean financial markets. The team’s underlying
business in April 2006 upon obtaining an asset management asset management philosophy subscribed to disciplined ‘value
business license from the Financial Supervisory Commission. investment’ and ‘long-term investment,’ and the team took a
‘low risk and middle return’ approach to risk management.
KVAM is an asset management company specializing in
long-term value investment in equity-type funds and fund of KVAM’s management philosophy, similar to that of the Equity
funds. KVAM originated in the equity proprietary trading Management Team when it managed equity products for KIS,
division of Korea Investment & Securities Co., Ltd (KIS), is that of making ‘value investments’ in the intrinsic value of a
which was responsible for managing KIS’s assets before being company, of making ‘long-term investments’unswayed by
spun off to form KVAM. market volatility, and of holding a stock until the intrinsic
value is reflected in the price. Value investment is not a price-
The former KIS equity proprietary trading division managed momentum investment, which is greatly affected by changes in
more than KRW100 billion in equities during its tenure at the KOSPI, rather, value investors pick undervalued stocks in
KIS. Over the past three years the team managed equities the market and hold them until the price reaches a target range.
worth KRW303.7 billion from which it generated KVAM managers frequently visit the companies they are
KRW156 billion in returns, recording remarkably high investing in to monitor and keep up-to-date on current
annual average returns of 51% to become the focus of conditions on a continual basis.
With a market reputation as the one and only long-term

Assets Under Management AUM Breakdown
value asset management company in Korea, the company’s
(In billions Korean won) (As of May 2006) first fund products, the Korea 10-year Value Fund, was very
400 well accepted by investors as a high-end fund product. To
maintain its prestige and unique market position, the
300
252.3 products from KVAM were not sold through third party
200 AUM channels that sell off-the-shelf fund products. Such a value
135.5
proposition has been appreciated by many investors,
100 especially during the recent bouts of high volatility in the
market. In fact, KVAM has attracted KRW252.3 billion in
0
Apr. 2006 May 2006
equity-type bond-mixed type AUM as of the end of May 2006 since launching its business
on April 18, 2006, and the company expects to record high
growth going forward.
Korea Investment Partners
35

“KIP OPERATES 6 VENTURE CAPITAL FUNDS
WITH KRW 145 BILLION

in combined assets. In FY05, its newly formed venture capital funds held
ASSETS OF KRW40 BILLION AND A MARKET SHARE OF 7.0%.”
KOREA INVESTMENT PARTNERS CO., LTD. (KIP) IS A VENTURE-CAPITAL COMPANY

THAT INVESTS IN SMALL START- UPS AND MANAGES VENTURE CAPITAL FUNDS .
KIP is a venture-capital company, incorporated in November capital sector. Recently, in less than four years since its launch of
1986, to contribute to the national economy through the Korea Venture Capital Funds VII & VIII in FY02, KIP paid
investment in small start-up businesses and the management of out hefty returns to investors. These were larger than the
a venture capital funds. At the time of its foundation, KIP was principle amount and this remarkable event became the talk of
named Hanshin Technology Development Finance and later the town. In considering the remaining investment asset value,
renamed Dongwon Venture Capital, which was later changed the basic ROI is expected to reach 252%, which will make KIP a
to Korea Investment Partners in FY05. legend in the venture fund industry.
As of FY05, KIP held a total of KRW79 billion in investment Building on its experience in organizing and successfully
assets and the company mainly invests in such sectors as managing ten VCFs and five CRFs, KIP is gearing up to enter
telecommunications, media, and semiconductors. It has the PEF market in the future. The company also plans to launch
formed ten venture capital funds (VCFs) in total, four of which funds of more than KRW50 billion every year to expand the size
were dissolved. In addition, KIP organized five corporate of its assets under management and to establish a virtuous cycle
restructuring funds (CRFs) and liquidated all of them at an of funds. Based on its distinguished and stable investment
early stage. Currently, the company operates six VCFs with system, as evaluated by investors and related institutions, and the
KRW145 billion in combined assets. In FY05, its newly maximizing of synergies through Korea Investment Holdings,
formed VCFs held KRW40 billion to take up a market share KIP is strongly committed to becoming a top performer in asset
of 7.0%, cementing its position as a leading company in the management in the alternative investment market.
industry. Major investors of the funds managed by KIP include
the National Pension Service, Small Business Corporation,
Investment Amount & Portfolio (In millions Korean won)
Ministry of Information and Communication, Korea Local
Administration Official’s Mutual Fund, and Mitsubishi
Corporation of Japan.
KIP was awarded an “A” rating, the highest grade, in an

evaluation of venture capital companies by the Small and
Medium Business Administration (SMBA), which is in charge of
the registration and management of venture capital companies.
KIP also won official commendation from the Ministry of
Health and Welfare in FY05 when it was recognized as an
excellent manager of national pension funds in the venture
Cornerstone Equity Partners
“CEP IS IN THE PROCESS OF FINALIZING AN INITIAL CLOSING OF
KRW 100 BILLION ON ITS MAIDEN FUND...

and is aiming to become a leading private equity investor
IN THE KOREAN MARKET.”
CORNERSTONE EQUITY PARTNERS (CEP) IS A PRIVATE EQUITY FIRM THAT

WAS ESTABLISHED IN M ARCH 2006.
CEP’s objective is to achieve superior returns for its private entered the market in FY05. The increased competition has
equity funds (PEFs) by acquiring significant equity stakes in been accompanied by steadily increasing acquisition prices,
businesses that have high-quality management teams, strong however, M&A activity will likely remain robust (see chart on
track records, and substantial value enhancement potential. recent M&A volumes) providing attractive opportunities for
CEP’s investment approach is to work closely with the the newly established domestic PEFs.
invested companies in implementing optimal corporate
strategies, efficient capital structures, improved corporate As of the end of FY05, total commitments by private
governance, and other value-creation initiatives. equity investors to 15 registered domestic PEFs were
KRW2,895 billion, of which only KRW339 billion had
The M&A and PEF investment landscape has been been invested. The investment activity by these funds to
undergoing significant changes in recent years. The disposals date has been slower than expected but a considerable
of financially-distressed enterprises through public auctions ramp-up in the deployment of their unused capital is
were the major sources of domestic M&A transactions, anticipated going forward. More time will be needed to
however, the number of such potential targets has been begin to gauge the performances of the domestic PEFs,
rapidly decreasing. In terms of key participants, foreign however, the overall prospects are bright and this nascent
financial investors dominated the early M&A scene until the segment is well positioned to continue to develop and grow
recent resurgence of various domestic strategic investors. its presence in the domestic M&A market.
Furthermore, the Korean government has taken initiatives to
provide a level playing field to local funds and domestic PEFs CEP is in the process of finalizing an initial closing of
KRW100 billion on its maiden fund, and is ultimately
targeting up to KRW300 billion. CEP will seek significant
Announced Mergers and Acquisitions-Korea equity stakes in privately-held and publicly-listed companies
focusing on mid-market sized businesses, and strategic minority
10,000 100 positions in large-cap opportunities. It is aiming for above-
Value US$m
market returns with an annual IRR target that is competitive to
8,000 Number of deals 80 those achieved by the top quartile performing PEF funds.
6,000 60 CEP has six investment professionals dedicated to sourcing,

analyzing, executing and managing investments. Together
4,000 40 they have extensive experience in PEFs, consulting, securities
and investment banking. CEP’s investment decisions are also
2,000 20 overseen by an Investment Committee, Risk Management
Committee and an Advisory Board. Backed by a solid and
0 0 committed team, the support of the KIH network, and a
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2003 2004 2005 strong investor base, CEP is aiming to become a leading
private equity investor in the Korean market.
Source : Thomson Financial
Korea Investment Mutual Savings Bank
37

“ As of the end of March 2006, KIMSB had total assets of
KRW 745.5 BILLION,

EQUITY CAPITAL OF KRW71.1 BILLION
AND A BIS RATIO OF 18.1%.”
KOREA I NVESTMENT M UTUAL S AVINGS B ANK (KIMSB) WAS ESTABLISHED

TO CATER TO THE NEEDS OF RETAIL CONSUMERS AND SME S .
KIMSB offers simple, but effective financial products and subsidiaries. Currently, a company-wide customer
convenient services while seeking to attract savings for deposit. relationship management system is being developed, which
will enhance the cross-selling and up-selling abilities between
The bank offers such products and services as deposits KIH subsidiaries. More synergies are expected to be realized
including regular savings, fixed deposits, time deposits, etc.; as the government recently announced policy changes, which
loans including discounts on bills, regular loans, secured allow mutual savings banks to sell non-depository financial
loans, mortgage loans, etc.; financial clearing; and a merchant products. In addition, new co-product developments and
banking business for financial institutions. joint sales efforts between KIMSB and other KIH subsidiaries
are planned for FY06.
KIMSB was founded in December 1982, under the name of
Korea Mutual Savings and Finance Co., Ltd., and acquired With a competitive edge over other commercial banks in
by Dongwon Securities (currently KIS) in December of terms of financing for consumers and SMEs, and in
1996. In January of 2004, Dongwon Financial Holdings residential mortgage loans, KIMSB seeks to expand its e-
(currently KIH) integrated the bank as a subsidiary with the business through its extended branch networks. KIMSB is
acquisition of 99.86% of the bank’s equity from Dongwon committed to becoming a better savings bank, one that truly
Securities. On June 23, 2005, the name was changed to the satisfies the needs of its clients by offering a wide range of
current Korea Investment Mutual Savings Bank Co., Ltd. high-quality products and services through its own networks,
as well as through those of its affiliates.
KIMSB has grown over the years and now has a
commanding presence in the industry. As of the end of BIS Ratio ROE
March, 2006, KIMSB’s total assets were KRW745.5 billion (%) (%)
and the bank’s equity capital was KRW71.1 billion. In
addition, as of March 2006, the BIS ratio was a strong 18.1%
21.2%
compared to the average of 7.8% for other savings banks, and 20 18.2% 18.1%
40
the non-performing loan (NPL) ratio was 6.78%, bettering
26.0%
the average of 11.9%. Plus, the bank has performed in the
10 20 20.0%
black for five consecutive years since FY01. These financial
strengths attest to KIMSB’s growing financial stability and
5.0%
presence in the financial markets. 0 0
FY03 FY04 FY05 FY03 FY04 FY05 3Q
In addition, KIMSB plays a role as a strategic channel (03.7~04.6) (04.7~05.6) 3Q(05.7~06.3)
introducing HNW deposit customers to KIH’s other

FY 17~20
FY 14~16
Asia's Leading Financial Group
FY 11~13
Significant International Niche Player
FY 08~10
Asia's Top Five IB-AM Financial Brand
Korea's Leading Financial Group
FY 05~07
Most Profitable Investment & Securities Group
Products & Services

As a comprehensive financial service provider, we will continue to develop diversified high-quality products and services to
solidfy our leadership position in the financial markets. By combining our stock investment services and fund products, we aim
to serve our clients better with portfolio management individually tailored to a variety of risk tolerances and investment goals.
In particular, we will make vigorous efforts to penetrate the High-Net-Worth Individuals market, estimated to be worth
US$150~200 billion. We strive to become the premier wealth management service provider in Korea.
39

CHAPTER 3
ACTING ON OUR
DREAMS
We have a grand vision of becoming Asia’s leading investment institution.

We know where we are heading and how to get there.
We believe our passion and professionalism will bring this ambition to fruition.
Management’s Discussions & Analysis
IN THE MANAGEMENT’S DISCUSSION AND ANALYSIS SECTION, WE HIGHLIGHT MAINLY KEY INFORMATION THAT PROVIDES UNDERSTANDING AND
INSIGHT TO OUR AUDIENCE FOR THIS ANNUAL REPORT OF KOREA INVESTMENT HOLDINGS’ CURRENT OPERATIONAL STATUS AND FUTURE
OBJECTIVES. HENCE, THE MD&A SECTION MAY CONTAIN FORWARD-LOOKING STATEMENTS, WHICH REFLECT PLANS FOR FUTURE OPERATIONS,
PRODUCTS OR SERVICES , AND FORECASTS OF ITS REVENUES , EARNINGS OR OTHER MEASURES OF ECONOMIC PERFORMANCE OF KOREA
INVESTMENT HOLDINGS’ MANAGEMENT. THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED. KOREA INVESTMENT HOLDINGS DOES NOT UNDERTAKE TO UPDATE
FORWARD-LOOKING STATEMENTS TO REFLECT CIRCUMSTANCES OR EVENTS THAT OCCUR AFTER THE DATE THE FORWARD-LOOKING STATEMENTS
ARE MADE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
Introduction
Korea Investment Holdings (“Company”) and subsidiaries (collectively, “Group”) is at the vanguard of players in Korean financial markets
being the only player in the securities/asset management industry to operate under a financial holding company structure. Under the Group
umbrella, our main business subsidiaries are Korea Investment & Securities (KIS), Korea Investment Trust Management (KITM), Korea
Investment Partners (KIP) and Korea Investment Mutual Savings Bank (KIMSB). Through our four key subsidiaries, we provide brokerage,
investment product distribution, investment banking, asset management and banking services to a diversified customer base.
As of June 2005, we had undergone a major transformation by means of a merger between Dongwon Securities and legacy Korea Investment
& Securities(KITC), which was acquired from the Korea Deposit Insurance Corp. (the Korean government’s restructuring arm) in March of
the same year. The merger of the two companies has enabled the Group to effectively assimilate Dongwon Securities’ strength in securities-
related businesses together with Korea Investment & Securities’ strong suit in asset management. Through the new Korea Investment &
Securities, we expect sizable revenue synergies to be realized. In the short-term, synergies will mostly be in the form of cross-selling as the
integrated platform will facilitate improved interaction with customers from both former Dongwon Securities and KITC. Cross-selling is
merely the tip of the iceberg as the new KIS not only has more to offer its clients both in terms of products/services, but has also improved its
knowledge of individual investment goals and risk appetites of customers. In fact, KIS is one of the few financial institutions in Korea with the
capacity to provide investment portfolio management needs on an individual basis. KIS will possess the capabilities to provide clients with
tailor-made products, differentiating itself from its competitors in the securities industry and from commercial banks.
To further strengthen the Group’s revenue, two new subsidiaries were established in 2006. The Korea Value Asset Management (KVAM) was
spun-off from Korea Investment & Securities as an entity that will focus on value investing for a long-term investment horizon, and
Cornerstone Equity Partners (CEP) was also newly set up to diversify the Group’s operational foundation.
Business Environment
Economic Conditions
Contrary to positive expectations at the end of 2004, the Korean economy again performed on a sub-par level in 2005. GDP growth was
limited to 4% YoY, which was substantially lower than the potential GDP growth level of 4.6%. On the export front, the appreciation of the
Korean won had adversely affected export performance with export volume growth dropping from 19.6% YoY for 2004 to 8.5% YoY in
2005. On the other hand, private consumption showed an about turn with YoY growth posting 3.2% for 2005 compared to negative levels in
the previous couple of years. In fact, it was the first time in three years that private consumption (accounting for 64% of growth) had
contributed more to economic growth than exports. Coming into the latter half of 2005, the economy seemed to show signs of fatigue from
the strong won, rising oil & raw material prices and an upward trend in interest rates. Overall, the economic situation did not seem conducive
for the local securities market, but irrespective of such downbeat economic implications, the KOSPI surged during 2005.
Equity Market
FY2005 was an auspicious year for the securities industry as the local bourse seemed to show no letting down especially during the second half
of FY2005. We saw the KOSPI reach a 10-year historical high in January at 1,421.79p and by end of March, the KOSPI had risen by 41%
YoY to 1,359.60p. Unlike the previous bull runs during the late 1980’s and late 1990’s, where market exuberance was mainly driven by
positive economic performance, the recent run has been goaded by copious market liquidity. Continued net buying by foreign investors
41

coupled with solid money inflows into local equity-type funds has boosted liquidity to another level. Domestically, there has been an
underlying change in the equity market as the general populace has once again returned to the stock market through indirect investment
products such as monthly equity installment plans. While demand has swelled to new proportions, supply has not been abundant as new
listings and IPOs still have not recovered to past levels.
New Capital Market Consolidation Scheme

In November of 2005, the Korean government announced its intention to introduce the so-called “Capital Market Consolidation Act.” The
main objective of the government is to allow domestic securities firms to strengthen their operations in order to compete with foreign players,
especially in the field of M&As and other value-added business currently dominated by the foreign contingent. Basically, this new law breaks
down the barriers of entry between the various financial businesses and hence going forward, local investment banks will be able to carry out
securities, futures & options and asset management operations on an integrated platform. The government is currently making necessary
preparations and ironing out the details of this Act and the new regulations are expected to become effective from 2008. We believe that this
new Act will be particularly beneficial to the Group as we are currently ahead of the class, having already built an integrated business platform
through our financial holding company structure.
Results of Operations
Consolidated Results of Operations
As the acquisition of Korea Investment & Securities (KITC) was completed as of March 31, 2005, in conformance to local accounting
regulations, the Group’s consolidated income statement for FY04 does not reflect the income statement of KITC. The KITC assets, liabilities
and shareholders’ equity were fully reflected on the Group’s consolidated balance sheet for FY04.
Overview
In FY05, we achieved a significant increase in profitability with ROA improving to 8.7% for the year compared to 2.1% from the previous
year, reflecting the one-off gains realized during the year and the overall enhancement of operations. With the complete inclusion of KIS
earnings together with strong revenue growth, our net income increased by 378% to KRW476 billion for the year, while fully diluted
earnings per share surged to KRW8,110. Generally, favorable equity market conditions and changing financial needs of the populace were
positive to revenue growth.
Consolidated Income Statement Highlights

Change (YoY)
(KRW in millions) FY05 FY04
Amount %
Net operating revenue 640,400 292,619 347,782 119%
SG&A expenses 414,656 188,422 226,234 120%
Operating income 225,744 104,197 121,547 117%
Net non-operating income 191,794 21,031 170,763 812%
Ordinary income 417,538 125,229 292,309 233%
Extraordinary item 3,726 - 3,726 NA
Net income before income tax expense 421,264 125,229 296,035 236%
Net income before minority interests 476,285 99,717 376,568 378%
Net income after adjusting for minority interests 475,755 99,469 376,286 378%
ROA 8.7% 2.1%

ROE 33.7% 9.2%
Cost-to-income ratio 64.7% 64.4%
Basic EPS (Won) 8,486 1,634
Fully diluted EPS (Won) 8,110 1,632
Net Revenues
Net operating revenue totaled KRW640 billion in FY05, corresponding to an increase of 119% from the previous year, primarily due to the
full reflection of KIS in FY05 financials and also to strong growth of net commissions. For FY05, net commissions grew by 218% to
KRW438 billion reflecting significantly higher net revenues in equity related businesses. In general, the equities business operated in a
favorable environment characterized by low interest rates, changing risk-reward appetites of retail investors, and increased inflows of funds by
institutional investors into equities (e.g. National Pension Fund). The institutional and retail brokerage business showed strong net revenue
growth as brokerage commissions for FY05 totaled KRW291 billion, an increase of 73% from FY04, backed by a surge in equities transaction
volume, which totaled KRW2,802 billion in FY05. The asset management operations also contributed to net revenue growth as continued
strong inflows of customer funds into equity-type funds was discernible during the year. As of year-end 2005, total client assets reached
KRW50 trillion and with 60% of client assets in equities, profitability also improved as equity-type products had higher commissions
compared to MMFs or bond-type products.
Net Operating Revenue

Change (YoY)
Amount %
Net commissions 437,823 137,809 300,013 218%
Net interest income 94,647 69,918 24,730 35%
Dividend income 13,792 14,383 (-)590 -4%
Net gain on disposal of trading securities 78,670 62,652 16,018 26%
Net gain on valuation of trading securities (-)18,806 3,327 (-)22,133 NA
Net gain on structured securities transactions 99,778 15,451 84,328 546%
Net gain on valuation of structured securities (-)9,489 (-)8,442 (-)1,047 12%
Net gain on equity method valuation 8,110 5,456 2,654 49%
Net gain on valuation of securities sold (-)202 103 (-)305 NA
Net gain on disposal of hybrid securities sold (-)111,736 (-)25,329 (-)86,407 341%
Net gain on valuation of hybrid securities sold 9,867 5,165 4,702 91%
Net gain on disposal of derivative assets 10,996 (-)3,273 14,269 NA
Net gain on valuation of derivative assets (-)1,713 4,085 (-)5,798 NA
Other operating revenues (net) 28,662 11,313 17,349 153%
Operating Expenses (SG&A expenses)

Operating expenses totaled KRW415 billion in FY05, 120% above FY04’s level, as a result of the full reflection of KIS. Operational efficiency
remained unchanged as the Group’s cost-to-income ratio rose by 0.3%p to 64.7% as of FY05, which was around the industry-average. Our
operating expenses are mainly comprised of labor related expenses, accounting for 39% of total SG&A expenses, and hence SG&A expenses are
heavily influenced by the number of staff, wages, and discretionary compensation. Depreciation/amortization expenses accounting for 11% of
total SG&A expenses is also a key item and this increased in FY05 mainly due to the reflection of goodwill amortization. Advertising expenses
rose by 219% in FY05 mainly due to a pro-active marketing campaign promoting the newly established KIS following the merger of Dongwon
Securities and KITC.
Operating Expenses (SG&A expenses)

Change (YoY)
Amount %
Labor expenses 160,772 78,507 82,265 105%
IT related expenses 23,427 12,650 10,776 85%
Depreciation/amortization expenses 47,095 13,863 33,232 240%
Taxes & public dues 18,513 7,203 11,310 157%
Advertising expenses 26,632 8,353 18,280 219%
Other SG&A expenses 138,216 67,844 70,372 104%
SG&A expenses 414,656 188,422 226,234 120%
43

Non-Operating Income
Net non-operating income totaled KRW192 billion in FY05 corresponding to an increase of 812% from the previous year, mainly due to a
significant increase of gain on disposal of tangible assets and available-for-sale securities to KRW209 billion in FY05. On the non-operating
expense side, impairment loss on available-for-sale securities increased in FY05 in an effort to improve asset quality.
Non-Operating Income
Change (YoY)
Amount %
Non-operating income 244,028 64,191 179,837 280%
Rental income 13,617 10,205 3,412 33%
Gain on disposal of available-for-sale securities 97,837 30,806 67,031 218%
Gain on disposal of tangible assets 111,605 3,403 108,201 3,179%
Reversal of negative goodwill 17,223 12,156 5,067 42%
Other non-operating income 3,747 7,621 (-)3,875 -51%
Non-operating expenses 52,234 43,160 9,074 21%
Impairment loss on available-for-sale sec. 38,109 5,452 32,656 599%
Loss on disposal of available-for-sale sec. 671 29,718 (-)29,047 -98%
Loss on disposal of tangible assets 5,532 145 5,387 NA
Other non-operating expenses 7,922 7,845 78 1%
Net non-operating income 191,794 21,031 170,763 812%
Financial Position
The Group’s total assets grew by 14% to KRW5,461 billion in FY05, mainly due to an increase of investment securities and loans. Investment
securities increased by KRW332 billion to KRW2,510 billion in FY05 as the Group increased its trading securities volume mainly through
equities, which grew by 331% YoY to KRW391 billion. Loans also showed strong growth, increasing by 35% to KRW830 billion in FY05,
reflecting the active origination of loans at the mutual savings operations as well as increased securities related lending. Fixed assets on the other
hand decreased by 28% to KRW377 billion in FY05 as building and land were disposed of during the year.
Total liabilities grew to KRW3,788 billion, translating to a mere 4% increase YoY. Customer withholdings fell by 10% to KRW1,725 billion
while borrowings fell by 72% to KRW159 billion as required funding was procured through the issuance of debenture. In FY05, the net
issuance of debentures was KRW329 billion, increasing the balance to KRW499 billion as of year-end. The Group’s consolidated debt-to-
equity was reduced to 39.3% in FY05 from 64.6% owing to the substantial improvement of the Group’s capital base.
Total shareholders’ equity increased 46% to KRW1,673 billion in FY05. The strengthening of the Group’s capital base is attributed primarily
to the enhancement of profitability as retained earnings grew by 311% to KRW591 billion in FY05. Capital adjustments were unchanged at
KRW165 billion while the capital surplus increased by 18% to KRW607 billion.
Balance Sheets
Change (YoY)
Amount %
Total assets 5,460,672 4,801,178 659,495 14%
Investment securities 2,509,688 2,177,977 331,711 15%
Loans 830,375 613,014 217,361 35%
Fixed assets 377,522 523,439 (-)145,917 -28%
Goodwill 93,205 116,226 (-)23,021 -20%
Total liabilities 3,787,941 3,652,389 135,552 4%
Withholdings 1,724,535 1,908,693 (-)184,158 -10%
Borrowings 158,554 571,740 (-)413,187 -72%
Debentures 499,234 169,953 329,281 194%
Total shareholders' equity 1,672,732 1,148,789 523,943 46%
Capital stock 307,921 307,921 0%
Consolidated capital surplus 607,329 514,890 92,440 18%
Consolidated retained earnings 590,798 143,848 446,950 311%
Consolidated capital adjustments 164,954 164,939 16 0%
Review of Unconsolidated Financial Statements

With the completion of the acquisition of KITC as of March 31, 2005, in conformance with local accounting regulations, the Group’s non-
consolidated income statement for FY04 does not reflect the income statement of KITC when deriving the Group’s gain on equity method
valuation. The Company’s unconsolidated financial statements differ from the Group’s consolidated financial statements, as operating income
from the holding company on an unconsolidated basis is derived mainly from gains on equity method valuation from its various subsidiaries.
Earnings Analysis
Unconsolidated Income Statement Highlights

Change (YoY)
Amount %
Operating revenues 594,661 85,507 509,155 595%
Gain on equity method valuation 582,118 84,235 497,883 591%
Interest income 12,543 1,222 11,321 926%
Other operating revenues 0 50 (-)50 -100%
Operating expenses 27,774 5,267 22,507 427%
Loss on equity method valuation 117 0 117 0%
Interest expense 14,473 1,053 13,419 1274%
Administrative expenses 13,184 4,214 8,971 213%
Net non-operating income (-)2,282 3,897 (-)6,179 NA
Ordinary income 564,605 84,137 480,468 571%
Net income 564,605 84,137 480,468 571%
45

For FY05, net income of KRW564 billion came in 571% higher compared to FY04’s net income of KRW84 billion. The substantial boost in
earnings was mainly attributed to a sizable increase in operating revenues reflecting the inclusion of KITC in relation to gains on equity
method valuation. Due to this, gains on equity method valuation came in 591% higher at KRW582 billion compared to KRW84 billion in
FY04.
Equity Method Gains by Subsidiary

Change (YoY)
Amount %
Dongwon Securities 75,501 (-)75,501 NA
Korea Investment & Securities* 565,308 565,308 NA
Korea Investment Partners 2,097 3,064 (-)967 -32%
Korea Investment Mutual Savings Bank 14,714 6,032 8,682 144%
Cornerstone Equity Partners (-)117 (-)117 NA
Dongwon Capital** (-)363 363 NA
Total 582,002 84,234 497,768 591%
* KIS for FY05 includes the Dongwon Securities portion following the merger in June 2005.
** Dongwon Capital was merged with Korea Investment Mutual Savings Bank in January 2005.
Operating expenses increased by 427% on a YoY basis to KRW28 billion for FY05, but this level was lower compared to revenue growth. An
increase in operating expenses is primarily attributed to the rise in interest expense from KRW1 billion in FY04 to KRW14 billion in FY05,
which accounted for 52% of total operating expenses in FY05. Administrative expenses also climbed to KRW13 billion in FY05 from only
KRW4 billion in FY04.
Net non-operating income recorded a deficit in FY05, coming in at a loss of KRW2,282 million compared to a gain of KRW3,897 million in
FY04. The net loss on disposition of tangible assets of KRW3,550 million was the main factor bringing down net non-operating income in FY05.
Financial Position
Unconsolidated Balance Sheet Highlights

Change (YoY)
Amount %
Assets 2,230,292 1,383,248 847,043 61%
Securities using equity method 1,767,313 1,167,746 599,567 51%
Liabilities 558,267 200,661 357,606 178%
Total shareholders' equity 1,672,025 1,182,587 489,438 41%
Capital stock 307,921 307,921 - NA
Retained earnings 693,574 157,802 535,772 340%
Total assets grew by 61% YoY to KRW2,230 billion in FY05 primarily due to the increase in securities using the equity method. Significantly
improved performances by the Company’s subsidiaries boosted their net worth, hence leading to a 51% increase in securities using the equity
method to KRW1,767 billion in FY05. The other element contributing to asset growth was the increase of loans to KRW268 billion in FY05
from none in FY04.
Total liabilities as of year-end FY05 were KRW558 billion, reflecting a net KRW300 billion issuance of debentures in order to fund the
Company’s operations. Shareholders’ equity grew to KRW1,672 billion, corresponding to an increase of 41% YoY, reflecting the sizable
growth in retained earnings to KRW694 billion in FY05 from KRW158 billion in FY04.
Operating Results by Subsidiary
Financial Highlights
FY05 FY04 Change (YoY)
(KRW in billions)
KIS KITC Dongwon Combined Amount %
Income Statement
Net commissions 402 164 134 298 104 35%
Net interest income 63 (-)41 47 6 57 950%
Net gain on dealing of trading sec 77 6 63 69 8 12%
Net gain on structured sec 90 0 7 7 83 NA
Net gain on structured sec. sold (-)99 0 (-)20 (-)20 (-)79 395%
Others (net) 14 (-)57 21 (-)36 50 NA
SG&A expenses 313 155 150 305 8 3%
Operating income 234 (-)83 104 21 213 NA
Net non-operating gains 433 269 (-)4 265 168 63%
Ordinary income 667 186 99 285 382 134%
Net income 729 186 74 260 469 180%
Balance Sheet
Total assets 4,382 1,644 2,215 3,859 523 14%
Total liabilities 2,807 1,212 1,633 2,845 (-)38 -1%
Shareholders' equity 1,575 432 582 1,014 561 55%
ROA 16.6% 11.3% 3.4% 6.7%

ROE 56.3% - 9.5%
EPS 28,789 188 948
BPS 56,261 35,982 36,387
* Change has been calculated based on KIS combined for FY04

* FY05 performances do not include those of Dongwon in April and May.
The Group’s flagship subsidiary, Korea Investment & Securities (KIS), was created through the merger of former Korea Investment &
Securities (KITC) and Dongwon Securities. The marriage of these two firms has formed a securities business powerhouse as each of the legacy
entities had strengths that complement each other. KITC was one of the largest asset managers during its heyday while Dongwon Securities
was widely recognized as a leading player in the realm of brokerage and investment banking. Going forward, the Group should be able to
capitalize on its operational scope and size to become a top comprehensive investment banking and asset management service provider.
As the merger of Dongwon Securities and Korea Investment & Securities (KITC) was completed in June 2005, the FY04 financial statements
only include the figures for the pre-merger Korea Investment Securities. For the sake of better understanding, our comparative analysis was
made on a combined Dongwon Securities and KITC basis for FY04.
Business Performance
A bull market run in 2005, especially in the latter half of the year, brought on increased transaction volumes, boosting brokerage fees
significantly for the year. Despite pro-active penetration by discount brokers, KIS was able to maintain a relatively steady market share during
year with retail brokering M/S being at around the 5% level and ending at 5.0% as of year-end. On the institutional investor front, KIS has
maintained a 1% M/S in the highly fragmented market being largest domestic wholesale brokerage firm.
47

Brokerage Revenue & Market Share
(KRW in billions) 4Q FY05 3Q FY05 2Q FY05 1Q FY05

Market share 4.9% 5.2% 5.0% 5.1%
Retail Quarterly revenue 67.6 75.3 53.7 34.6
Market share 1.2% 1.1% 1.2% 1.1%
Institutional Quarterly revenue 11.9 11.0 10.4 6.9
The asset management (AM) fund distribution business maintained its leadership position as AUM remained steady at the mid KRW18
trillion level in FY05. The quality of the revenue stream has improved as sales of equity-type funds continue on an upward trend. With the
diversification of investor needs and the aging of Korean society together with the launch of the corporate pension market, indirect investment
should remain on its current course. KIS will maintain its strong position in the AM distribution business through its ability to provide
complex and comprehensive AM products.
KIS’s forte is in investment banking, and the company continued to maintain its dominant position in project financing with a 33% market
share for FY05. To add to this, KIS holds a leading market position in the relatively new ELS and ELW markets with a market share a 12%
and 21%, respectively. However, performance was somewhat disappointing on the IPO business as KIS missed out on a few large IPO deals.
Nonetheless, KIS is expected to regain its top position in the IPO market, as there are many deals currently in the pipeline. Equity proprietary
trading remained steady with annual return of 44.2% realized in FY05 with an average trading balance of KRW106 billion. Value investing
has been our focus and above KOSPI level returns attest to our successful implementation of our investment philosophy.
Backed by a diverse portfolio of strong performing businesses and disposition related one-off items, KIS showed a discernible improvement of
profitability in FY05. ROA improved to 16.6% in FY05 from 6.7% in the previous year, backed by the boost in earnings and ROE also rose
to 56.3% in FY05. In terms of net income, KIS posted KRW729 billion for FY05, which was 180% higher than the previous year’s earnings
performance. Operating income improved substantially recording KRW234 billion in FY05 compared to KRW21 billion in FY04. A sizable
increase in net commissions during FY05 was the main driver of earnings, reflecting a solid performance on the brokerage side as brokerage
commissions increased by 73% to KRW291 billion. For the non-operating side, there were one-off gains of KRW338 billion including gain
on the disposition of Hana Financial Group shares (7.3 million shares sold) of KRW233 billion and also KRW110 billion of gains through
the sale of KIS's real estate holdings.
Korea Investment Trust Management
Change (YoY)
Amount %
Management fees 23,654 17,546 6,108 35%
Net commission income 1,290 141 1,149 815%
Net interest income 2,592 3,224 (-)632 -20%
Others 41 27 14 52%
SG&A expenses 17,980 17,028 952 6%
Net non-operating income 62 (-)455 517 NA
Ordinary income 9,659 3,455 6,204 180%
Net income 6,904 2,403 4,501 187%
0
Total assets 78,713 79,207 (-)494 -1%
Current assets 72,585 72,981 (-)396 -1%
Fixed assets 6,128 6,226 (-)98 -2%
Total liabilities 5,158 2,436 2,722 112%
Shareholders' equity 73,555 76,771 (-)3,216 -4%
ROA 8.8% 3.0%

ROE 8.6% 2.8%
EPS (Won) 530 182
BPS (Won) 5,572 6,398
* Based on aggregate of former KITM and Dongwon Investment Trust Management
Korea Investment Trust Management (KITM) is the amalgamation of the former KITM and Dongwon Investment Trust Management. The
merger of the two asset management units under the Group umbrella was completed in July 2005 and KITM is currently the second largest
asset manager in Korea with assets under management (AUM) of KRW19.4 trillion as of year-end FY05.
Assets Under Management
(KRW in billions) Equity Equity hybrid Bond hybrid Bond MMF Others Total
FY04 1,520 2,329 3,518 6,552 8,392 771 23,083
FY05 2,512 1,950 4,297 4,231 5,300 1,061 19,350
* Includes both KITM and Dongwon Investment Trust Management
Owing to the rapid expansion of sales of monthly equity installment funds and the continued inflow of money into the stock market, KITM
showed a KRW1 trillion increase in equity-type funds. Demand for equity-type products should continue on an upward path owing to low
growth prospects, low interest rates and demographical elements such as Korea’s aging population. However, overall AUM fell to KRW19.4
trillion as bond funds continued to show net outflows as the market seemed to shift towards vehicles of higher risk. The balance of money
market funds (MMF) also decreased to KRW5.3 trillion in FY05 from KRW8.4 trillion, mainly due to contracted liquidity following the
implementation of the next-day redemption scheme, and the redistribution of MMF positions by existing investor clients due to internal
invesment concentration risk restrictions.
Despite the overall decrease of AUM, profitability improved at KITM as elucidated by the improvement of ROA to 8.8% in FY05 from 3.0%
in FY04. In terms of absolute earnings, net income rose by 187% YoY in FY05 to KRW6,904 million, primarily due to an increase in
management fees to KRW23.7 billion in FY05 from KRW17.5 billion in FY04. The sharp boost in management fees reflected KITM’s focus
on selling equity-type products with their relatively higher fee income compared to bond-type and MMFs. Aside from management fees on the
operating side, net commission income also increased by 815% to KRW1,290 million in FY05 while net interest income fell by 19% in FY05.
Change (YoY)
Amount %
Operating revenue 19,057 6,441 12,616 196%
Operating expenses 13,469 7,011 6,458 92%
Operating income 5,588 (-)570 6,158 NA
Net non-operating income 210 869 (-)658 -76%
Ordinary income 5,799 298 5,500 1843%
Net income 4,158 621 3,536 569%
Total assets 87,724 63,801 23,923 37%

Venture investment assets 59,069 52,267 6,802 13%
Shareholders' equity 63,711 52,096 11,615 22%
ROA 4.7% 1.0%

ROE 7.2% 1.1%
EPS (Won) 84 13
BPS (Won) 1,257 1,028
* KIP’s fiscal year ends as of December

49

Korea Investment Partners (KIP) is the Group’s subsidiary that provides support to SMEs and start-up companies through direct investment,
credit lending and consulting. Consequently, KIP’s profitability and financial health is heavily dependent on the macro-economic situation,
government policies toward SMEs and local stock markets, the KOSDAQ, in particular. Please note that as KIP’s fiscal year ends at
December, the analysis is based on its fiscal year-end performance and not as of the end of March 2006.
Venture Investment Market Trend
(KRW in billions) 2005 2004 2003

Total market 2,141 2,563 2,737
Investments outstanding KIP 79 83 77
KIP M/S 3.7% 3.2% 2.8%
Total market 665 564 612
New investments KIP 31 24 21
KIP M/S 4.7% 4.2% 3.4%
Total market 3,515 3,496 3,427
Venture capital fund investments outstanding KIP 145 108 108
KIP M/S 4.1% 3.1% 3.2%
Total market 574 527 455
New venture capital fund investments KIP 40 0 30
KIP M/S 7.0% 0.0% 6.6%
Since total investments outstanding peaked at KRW3.0 trillion in 2001, the venture capital market has continued to shrink and as of 2005,
investments outstanding fell to KRW2.1 trillion. On the other hand, venture capital fund investments remained stable at the mid KRW3 trillion
level for the past three years with new venture capital fund investments being relatively steady during the same period. In the case of KIP, the
company has been active in the venture sector with market share for both investments outstanding rising to 3.7% in FY05 while for venture capital
fund investments, market share increased to 4.1%.
Among the 102 venture capital firms currently in operation, KIP is in a strong position to sustain healthy growth. The venture capital market
is expected to expand in the future and the proliferation of private equity funds (PEF) should drive growth. KIP’s brand power together with
connections with key players in the venture market (e.g. Small Business Corporations) and collaborative capabilities with other Group
subsidiaries should enable KIP to prosper.
On the operating side, owing to the improving business environment driven by a robust KOSDAQ market, results were strong in FY05. Net income
increased by 569% in FY05 to KRW4.2 billion, mainly due to the turnaround in operating income, which came in at KRW5.6 billion. Key revenue
drivers were the realization of KRW4.7 billion through the recovery of investments from Kael and Seoul SET. Furthermore, equity method gains
from the disposition of assets such as Able C&C and SNU Precision in relation to investment venture capital fund also contributed positively to
earnings. These positive elements were however offset by a 98% increase in operating expenses due to impairment losses of KRW7 billion.
Korea Investment Mutual Savings Bank
FY05 3Q Change (YTD)

(KRW in millions) FY04
Jul. 05~Mar. 06 Amount %
Income Statement
SG&A expenses 7,659 8,386 (-)727 -9%
Net non-operating income 727 (-)154 881 NA
Ordinary income 15,606 2,468 13,138 532%
Extraordinary income 3,726 - 3,726 NA
Net income 16,346 2,468 13,878 562%
FY05 3Q Change (YTD)

(KRW in millions) FY04
Jul. 05~Mar. 06 Amount %
Balance Sheet
Total assets 745,481 629,810 115,671 18%
Loan receivables 508,927 408,204 100,723 25%
Deposits 585,165 490,628 94,537 19%
Shareholders' equity 71,112 54,739 16,373 30%
* KIMSB’s fiscal year ends as of June and hence a comparison was made for FY2004
Korea Investment Mutual Savings Bank (KIMSB) is the Group’s banking services provider, which was established in 1982 as a bank initially
serving the Jeonnam area. In 2001, KIMSB acquired Anheung Mutual Trust Bank, based in the Kyungki province, and now KIMSB has
operations in two regions with the Kyungki region being the main focus market. In January 2005, Dongwon Capital merged with KIMSB in
order to reconfigure the Group and to further strengthen KIMSB. The bank’s operational focus is to pursue customers through strong
relationships with local communities, and to provide loans through a rapid decision-making process.
Please note that as KIMSB’s fiscal year ends in June, the analysis in regards to the income statement is based on a comparison of FY04 on a
full year basis and FY05 for a period from July 2005 to March 2006, which corresponds to three fiscal quarters. In respect of the balance
sheet, the comparison was made on a YTD basis (from July 2005 to March 2006).
Key Performance Indices

Change (YTD)
% FY05 3Q FY04
%p
ROA 2.4 0.4 2.0
Profitability
ROE 26.0 5.0 21.0
NIM 1.66 0.81 0.85
BIS CAR 18.1 18.2 (-)0.1
Stability
Tier 1 CAR* 11.4 11.5 (-)0.1
NPL ratio (substandard & below loans / total loans) 6.8 10.8 (-)4.0
Asset quality
NPL coverage ratio 52.3 55.7 (-)3.4
* Tier 1 CAR was calculated as of Dec, 2005

51

Key Performance Indices
Change (YTD)
(In billions of KRW) FY05 3Q FY04
Amount
Deposits 585.2 490.6 94.5
Loans 529.1 430.2 98.9
Deposits & Loans
Secured loans 89.0% 83.3% 5.7%
Owing to an overall benign credit cycle together with robust loan growth in the Kyungki area, KIMSB was able to realize loan growth of 23%
from June 2005 to March 2006. Growth in loans was mainly concentrated in real estate collateralized loans, auction payment loans and loans
secured with golf memberships. To fund the loans originated, KIMSB procured KRW95 billion of deposits during the three quarters.
The robust loan growth boosted net operating revenue by 154% to KRW22.5 billion, which was double that of FY04. This reflected the
substantial increase in net interest income during the first three quarters of FY05 with net interest income coming in at KRW22.5 billion
while during the same period in FY04, net interest income was KRW19.5 billion. Owing to this, ROA rose to 2.4% compared to 0.4% in
FY04 while ROE surged to 26.0% from 5.0% during the previous year.
Asset quality continues to show improvement with the NPL ratio falling to 6.8%. BIS CAR, at 18.1% as of March 2006, is extremely high
and this should enable KIMSB to sustain growth and to adequately retain a strong capital structure.
INDEPENDENT AUDITORS’ REPORT
ENGLISH TRANSLATION OF A REPORT ORIGINALLY ISSUED IN KOREAN
14Fl., Hanwha Securities Bldg.,

23-5 Yoido-dong,
Youngdeungpo-gu , Seoul
150-717, Korea
Tel:+82 2 6676 1000, 1114
Fax: +82 2 6674 2114
www.deloitteanjin.co.kr
To the Shareholders and Board of Directors of

Korea Investment Holdings Co., Ltd.:
We have audited the accompanying non-consolidated balance sheets of Korea Investment Holdings Co., Ltd. (the “Company”, formerly
Dongwon Financial Holding Co., Ltd.) as of March 31, 2006 and 2005, and the related non-consolidated statements of income,
appropriations of retained earnings and cash flows for the years then ended, all expressed in Korean won. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of March 31, 2006 and 2005, and the results of its operations, changes in its retained earnings and its cash flows for the years then ended,
in conformity with accounting prineiples generally accepted in the Republic of Korea (See Note 2).
Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial
statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles
and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the
Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting
procedures and auditing standards and their application in practice.
April 25, 2006
Notice to Readers
This report is effective as of April 25, 2006, the auditors’ report date. Certain subsequent events or circumstances may have occurred
between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the
accompanying financial statements and may result in modifications to the auditors’ report.
NON-CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2006 AND 2005
53

KOREA INVESTMENT HOLDINGS CO., LTD.
Korean won (In thousands)
2006 2005
ASSETS
Cash and bank deposits (Notes 3 and 14) ￦ 1,734,612 ￦ 160,594,048
Available-for-sale securities (Note 4) 190,731,456 17,724,615
Securities using the equity method (Note 5) 1,767,312,774 1,167,746,112
Loans, net of allowance for doubtful accounts of ￦5,460,000 thousand in 2006
(Notes 6 and 14) 267,540,000 -
Property and equipment, net of accumulated depreciation of ￦35,349
thousand in 2006 and ￦3,342,600 thousand in 2005 (Note 7) 85,281 36,061,735
Accounts receivable-other, net of allowance for doubtful accounts of
￦538 thousand in 2006 (Note 14) 26,355 96,476
Guarantee deposits (Note 14) 1,805,937 934,824
Accrued income, net of allowance for doubtful accounts of
￦15,663 thousand in 2006 (Note 14) 767,477 -
Intangibles (Note 8) 46,171 64,666
Other assets 241,660 25,825
Total assets ￦ 2,230,291,723 ￦ 1,383,248,301
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Borrowings (Notes 9 and 15) ￦ 55,000,000 ￦ 10,243,000
Debentures, net of discounts of ￦986,135 thousand in 2006 and
￦367,227 thousand in 2005 (Note 10) 499,013,865 169,632,773
Accounts payable-other (Note 14) 447,360 1,408,078
Value added tax withheld 1,825,706 -
Dividends payable 149,132 67,387
Rental deposits received (Note 14) - 18,535,324
Accrued severance indemnities, net of individual severance insurance deposits of
￦697,318 thousand in 2006 and ￦299,349 thousand in 2005 and
National Pension fund of ￦6,529 thousand in 2006 and ￦6,686 thousand in 2005 245,664 361,034
Other liabilities 1,585,012 413,284
Total liabilities ￦ 558,266,739 ￦ 200,660,880
SHAREHOLDERS’ EQUITY:
Common stock (Note 11) 264,381,025 264,381,025
Preferred stock (Note 11) 43,540,190 43,540,190
Capital surplus (Note 11) 491,707,273 474,195,903
Retained earnings (Note 11)
(Net income of ￦564,605,265 thousand in 2006 and ￦84,136,919
thousand in 2005) 693,573,819 157,801,992
Capital adjustments (Notes 4 and 11) 178,822,677 242,668,311
Total shareholders’ equity 1,672,024,984 1,182,587,421
Total liabilities and shareholders’ equity ￦ 2,230,291,723 ￦ 1,383,248,301
See accompanying notes to non-consolidated financial statements.

NON-CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2006 AND 2005

Korean won (In thousands, except per share amounts)
2006 2005
REVENUE :
Gain on equity method valuation (Note 5) ￦ 582,118,110 ￦ 84,234,776
Interest income (Note 14) 12,543,194 1,221,947
Other operating revenue - 50,000
594,661,304 85,506,723
OPERATING EXPENSES :
Loss on equity method valuation (Note 5) 116,875 -
Interest expense 14,472,514 1,053,267
Administrative expenses (Notes 7, 8, 14 and 20) 13,184,454 4,213,585
27,773,843 5,266,852
OPERATING INCOME 566,887,461 80,239,871
OTHER INCOME :
Rental income (Note 14) 2,099,228 2,645,319
Gain on foreign currency transactions - 1,131,000
Gain on foreign currency translation - 1,293,000
Gain on disposal of available-for-sale securities 71,730 100,401
Gain on disposal of property and eguipment 1,076,939 -
Other non-operating income 10,425 31,794
3,258,322 5,201,514
OTHER EXPENSES :
Loss on foreign currency transactions 118,000 67,000
Rental administrative expenses 794,297 966,466
Loss on disposal of available-for-sale securities 1,641 -
Loss on disposal of property and eguipment (Note 14) 4,626,579 -
Other non-operating expenses 1 271,000
5,540,518 1,304,466
ORDINARY INCOME 564,605,265 84,136,919
EXTRAORDINARY ITEM - -
INCOME BEFORE INCOME TAX 564,605,265 84,136,919
INCOME TAX EXPENSE (Note 13) - -
NET INCOME ￦ 564,605,265 ￦ 84,136,919
ORDINARY INCOME PER COMMON SHARE (Note 2) ￦ 10,081 ￦ 1,526
NET INCOME PER COMMON SHARE (Note 2) ￦ 10,081 ￦ 1,526
ORDINARY INCOME PER COMMON SHARE ASSUMING DILUTION
(Note 2) ￦ 9,624 ￦ 1,472
NET INCOME PER COMMON SHARE ASSUMING DILUTION (Note 2) ￦ 9,624 ￦ 1,472

NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS
55

2006 2005
RETAINED EARNINGS BEFORE APPROPRIATIONS:
Unappropriated retained earnings carried over from prior year ￦ 110,817,643 ￦ 63,927,854
Net income 564,605,265 84,136,919
675,422,908 148,064,773
APPROPRIATIONS:
Legal reserve (Note 11) 56,460,527 8,413,692
Dividends (Note 12)
Cash dividends 58,472,562 28,833,438
Dividends per common share - ￦1,000 (20%) in 2006 and
￦500 (10%) in 2005
Dividends per preferred share #1 - ￦1,061.5 (21.23%) in 2006 and
￦561.5 (11.23%) in 2005
Dividends per preferred share #2 - ￦1,000 (20%) in 2006 and
￦500 (10%) in 2005
114,933,089 37,247,130
UNAPPROPRIATED RETAINED EARNINGS TO BE

CARRIED FORWARD TO SUBSEQUENT YEAR ￦ 560,489,819 ￦ 110,817,643

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ￦ 564,605,265 ￦ 84,136,919
Adjustments to reconcile net income to net cash used in
operating activities:
Loss on equity method valuation 116,875 -
Interest expenses (amortization of discounts on debentures) 318,651 18,975
Provision for severance indemnities 477,718 160,911
Depreciation 384,157 491,108
Amortization 18,495 8,243
Bad debt expenses 5,476,201 -
Loss on disposal of available-for-sale securities 1,641 -
Loss on disposal of property and eguipment 4,626,579 -
Gain on equity method valuation (582,118,110) (84,234,776)
Other operating revenues - (50,000)
Gain on foreign currency translation - (1,293,000)
Gain on disposal of available-for-sale securities (71,730) (100,401)
Gain on disposal of property and eguipment (1,076,939) -
(571,846,462) (84,998,940)
Changes in assets and liabilities resulting from operations:
Decrease in accounts receivable-other 69,584 895,778
Decrease (increase) in accrued income (783,140) 42,466
Increase in advance payments (44,653) (291)
Increase in prepaid expenses (166,978) (22,756)
Decrease in tax refund receivable 41 22,470
Increase in prepaid value added tax (4,245) -
Decrease in accounts payable-other (960,718) (11,518,880)
Increase in accrued expenses 1,059,837 210,838
Increase in withholdings 111,894 20,942
Increase in dividends payable 81,744 -
Increase in value added tax withheld 1,825,706 -
Payment of severance indemnities (197,222) (153,192)
Succession of accrued severance indemnities 1,945 169,620
Increase in individual severance insurance deposits (397,969) (108,482)
Decrease in National pension fund 157 -
Decrease in forward contract - (174,824)
Increase (decrease) in rental deposits received (492,894) 2,451,656
103,089 (8,164,655)
(7,138,108) (9,026,676)
(continued)
57

2006 2005
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash inflows from investing activities:
Decrease in bank deposits ￦ - ￦ 10,000,000
Proceeds from disposal of available-for-sale securities 17,743,873 15,100,401
Capital reduction by payment in cash of securities using equity method - 550,003,215
Collection of loans 48,000,000 22,000,000
Decrease in guarantee deposits 924,024 -
Proceeds from disposal of property and equipment 14,050,070 -
80,717,967 597,103,616
Cash outflows from investing activities:

Acquisition of available-for-sale securities 191,337,236 22,660,320
Acquisition of securities using equity method 2,228,159 555,937,961
Extension of loans 321,000,000 12,000,000
Acquisition of property and eguipment 49,842 28,104
Increase in guarantee deposits 1,795,137 401,746
Acquisition of intangibles - 70,304
516,410,374 591,098,435
(435,692,407) 6,005,181
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash inflows from financing activities:
Proceeds from borrowings 148,000,000 -
Issuance of debentures 329,062,440 169,624,960
477,062,440 169,624,960
Cash outflows from financing activities:

Repayment of borrowings 103,243,000 23,072,000
Repayment of debentures - 21,800,000
Acquisition of treasury stock 61,014,923 -
Payment of dividends 28,833,438 23,159,217
193,091,361 68,031,217
283,971,079 101,593,743
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (158,859,436) 98,572,248
CASH AND CASH EQUIVALENTS, AT THE BEGINNING

OF THE YEAR (NOTE 17) 160,591,048 62,018,800
CASH AND CASH EQUIVALENTS, AT THE END

OF THE YEAR (NOTE 17) ￦ 1,731,612 ￦ 160,591,048

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
(1) Korea Investment Holdings Co., Ltd.

Korea investment Holdings Co., Ltd. (the “Company”), was established under the Financial Holding Company Law on January 11, 2003,
through spin-off from Dongwon Industries Co., Ltd. for the purpose of providing integrated management services to affiliated companies.
On May 31, 2003, the Financial Supervisory Service approved the establishment of the Company as a financial holding company and the
Company’s name was changed to Dongwon Finance Holding Co., Ltd. from Dongwon Finance Co., Ltd. And on July 21, 2003, it was listed
on Korea Stock Exchange (KSE). The Company acquired Korea Investment & Securities Co., Ltd. on March 31, 2005 and changed its name
to Korea Investment Holdings Co., Ltd. on May 20, 2005.
The Company changed the end date of the fiscal year from December 31 to March 31 pursuant to the resolution at the shareholders’ meeting
on June 27, 2003. In addition, the Company and its subsidiaries were separated from Dongwon Group on December 13, 2004 in accordance
with the Regulation on Monopoly and Fair Trade Act.
The summary of subsidiaries as of March 31, 2006 and 2005 is as follows.
2006 2005
Ownership Ownership
Investor Investee Shares Percentage Shares Percentage
Korea Investment
Dongwon Securities Co., Ltd.(*) - - 16,000,000 100.00
Holdings Co., Ltd.
" Korea Investment & Securities Co., Ltd. 28,000,000 100.00 12,000,000 100.00
" Korea Investment Partners Co., Ltd.(**) 50,700,000 100.00 36,001,000 71.01
" Cornerstone Equity Partners Co., Ltd. 100,000 100.00 - -
Korea Investment Mutual Saving Bank
" 11,448,899 98.13 11,448,899 98.13
Co., Ltd.(**)
Korea Investment & Korea Investment Trust Management
13,129,198 99.46 8,929,198 99.21
Securities Co., Ltd. Co., Ltd.
Dongwon Investment Trust Management
" - - 3,000,000 100.00
Co., Ltd. (***)
" Korea Value Assets Management Co., Ltd. 2,000,000 100.00 - -
" Korea Investment & Securities Asia, Ltd. 4,999,999 99.99 4,999,999 99.99
" Korea Investment & Securities Europe, Ltd. 2,000,000 100.00 2,000,000 100.00
" Korea Investment & Securities America, Ltd. 100 100.00 100 100.00
(*) Dongwon Securities Co., Ltd. was merged to Korea Investment & Securities on June 1, 2005; therefore, Dongwon Securities’s subsidiaries became subsidiaries of Korea Investment & Securities
Co., Ltd. as of March 31, 2006.
(**) On June 23, 2005, Dongwon Mutual saving & Finance Co., Ltd. changed its name to Korea Investment Mutual Saving Bank Co., Ltd. and August 5, 2005, Dongwon Venture Capital
Changed its name to Korea Investment Partners Co., Ltd. Through the stock exchanging, Korea Investment Holdings Co., Ltd owns 100% of shares (See Note 21).
(***) Dongwon Investment Trust Management Co., Ltd. was merged into Korea Investment Trust Management Co., Ltd. on July 1, 2005.
(2) Subsidiaries
A. Dongwon Securities Co., Ltd.

Dongwon Securities Co., Ltd. was incorporated in December 1968 to engage in securities trading, underwriting and brokerage services. The
company’s name was changed to Dongwon Securities Co., Ltd. from Hanshin Securities Co., Ltd. on April 1, 1996. It reduced capital stock
by payments of cash amounting to ￦550,003 million; as a result, its capital stock amounts to ￦80,000 million. On June 1, 2005, the
company was merged into Korea Investment & Securities Co., Ltd.
B. Korea Investment & Securities Co., Ltd.

Korea Investment & Securities Co., Ltd. was established in 1974, under the name of Korea Investment Trust Co., Ltd. with capital of ￦500
59

million. After several capital increase, reduction and acquisition of Dongwon Securities Co., Ltd. as of June 1, 2005, the shareholders’ equity
of the Company is ￦140,000 million as of March 31, 2006. The Company has 115 branch offices in Korea and 3 overseas subsidiaries as of
March 31, 2006. Since the entire shares of the company acquired by KDIC were sold to Korea Investment Financial Holdings Co. on March
1, 2005, the major shareholder of the company was changed to Korea Investment Financial Holdings Co., which owns 100 percent of
common stock of the company.
C. Korea Investment Partners Co., Ltd.(formerly, Dongwon Venture Capital Co., Ltd.)
Korea Investment Partners Co., Ltd. was incorporated on November 25, 1986 to engage in investing and financing to small business
entrepreneurs with high technology, managing venture capital fund and brokerages services. On December 3, 1986, it registered its venture
capital business in the Ministry of Industries and Resources of Korea. Its shares were listed on the KOSDAQ on December 1, 1999. The
company changed its name to Korea Investment Partners Co., Ltd. from Dongwon Venture Capital Co., Ltd. on August 5, 2005 and
voluntarily unlisted its 50,700,000 shares of common stock on December 24, 2005. Its capital stock is ￦25,350 million as of March 31, 2006.
D. Korea Investment Mutual Saving Bank Co., Ltd.(Formerly, Dongwon Mutual Savings & Finance Co., Ltd.)
Korea Investment Mutual Saving Bank Co., Ltd. was incorporated under the Mutual Credit & Saving Law on December 14, 1982 with a
paid-in capital of ￦1,000 million and was renamed to Dongwon Mutual Savings & Finance Co., Ltd. from Korea Mutual Credit & Savings
Co., Ltd. on March 28, 2001. It merged with Dongwon Capital on January 1, 2005. In accordance with Article 14 of the Corporate
Restructuring Promotion Law, Ahnheung Mutual Credit & Savings Co., Ltd. was merged with Dongwon Mutual Savings & Finance Co.,
Ltd. on October 31, 2000. On June 23, 2005, it changed its name to Korea Investment Mutual Saving Bank Co., Ltd. As of March 31,
2006, its capital stock amounts to ￦58,335 million.
E. Cornerstone Equity Partners Co., Ltd.

Cornerstone Equity Partners Co., Ltd. was incorporated on March 7, 2006 to engage in managing Private Equity fund and advisory services.
As of March 31, 2006, its paid-in capital amounts to ￦1,000 million, and Korea Investment Holdings Co., Ltd. owns 100% of the shares of
the company.
(3) 2nd-tier subsidiaries
A. Korea Investment Trust Management Co., Ltd.

Korea Investment Trust Management Co., Ltd. was incorporated on June 26, 2000 to engage in securities trading, underwriting and
brokerage services, and it obtained operations from Korea Investment & Securities Co, Ltd. on June 29, 2000. On July 1, 2005 it merged
with Dongwon Investment Trust Management Co., Ltd. Its capital stock amounts to ￦66,000 million as of March 31, 2006.
B. Dongwon Investment Trust Management Co., Ltd.

On February 16, 1988, Dongwon Investment Trust Management Co., Ltd. was established and obtained a license to engage in investment
and trust securities businesses, and advisory services under the Investment and Trust Securities Law. On July 29, 2002, it was renamed to
Dongwon Investment Trust Management Co., Ltd. from Dongwon BNP Investment Trust Management Co., Ltd. Its capital stock amounts
to ￦15,000 million as of March 31, 2005, and it merged with Korea Investment Trust Management Co., Ltd. on July 1, 2005.
C. Korea Investment & Securities Asia, Ltd.

Korea Investment & Securities Asia, Ltd. was incorporated on July 11, 1997 in the Hong Kong to engage in advisory services, securities
trading and brokerage services, and it obtained operations from Korea Investment & Securities Co, Ltd. on June 29, 2000. Its capital stock is
HK$38,650,000 million as of March 31, 2006, and it was renamed to Korea Investment & Securities Asia, Ltd. from Korea Investment &
Management Asia Ltd.
D. Korea Investment & Securities Europe, Ltd.

Korea Investment & Securities Europe, Ltd. was incorporated on November 14, 1994 in the United Kingdom to engage in securities trading,
underwriting and brokerage services. It started its operation in 1995 upon the approval of business activity in the country. As of March 31,
2006, its capital stock is $2,000 thousand. The company changed its name from Dongwon Securities Europe Ltd. to Korea Investment &
Securities Europe, Ltd. in 2006.
E. Korea Investment & Securities America, Ltd.

Korea Investment & Securities America, Ltd. was incorporated on September 25, 1990 in the United States to engage in securities trading,
underwriting and brokerage services. As of March 31, 2006, its capital stock is $3,000 thousand. The company changed its name from
Dongwon Securities America, Inc. to Korea Investment & Securities America, Ltd.
F. Korea Value Assets Management Co., Ltd.

Korea Value Assets Management Co., Ltd. was incorporated on February 13, 2006, to engage in management and selling of indirect
investment securities and advisory service. On April 14, 2006, it obtained license from the Financial Supervisory Commission. Its capital
stock amounts to ￦10,000 million as of March 31, 2006 and Korea Investment & Securities Co., Ltd. owns 100% of the shares of the
company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statement Presentation

The Company maintains its official accounting records in Korean won and prepares statutory financial statements in the Korean language
(Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by
the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with
generally accepted accounting principles in other countries. Accordingly, these financial statements are intended for use by those who are
informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and
translated into English (with certain expanded descriptions) from the Korean language financial statements. Some supplementary information
included in the Korean language financial statements, but not required for a fair presentation of the Company's financial position, results of
operations or cash flows, is not presented in the accompanying financial statements.
The 2006 financial statements prepared for the regular shareholders’ meeting will be finally approved on April 27, 2006 by the board of
directors.
The Korean Accounting Standards Board (“KASB”) has published a series of Statements of Korea Accounting Standards (“SKAS”), which
replace the existing financial accounting standards, established by the Korean Financial and Supervisory Board. The Company prepared its
financial statements as of March 31, 2006 in accordance with the SKAS No. 1~17 (except No. 11 - Discontinuing Operations and No. 14 -
Exceptions to Accounting for Small and Medium-sized Entities) and No. 101- financial holding company. Also, SKAS No. 18~20, which are
effective from January 1, 2006, will be adopted in next accounting period.
Major changes compared with the standards applied in preparing the financial statements of the Company as of March 31, 2006 are as follows:
a. SKAS No. 15 “Investments in Associates”

According to SKAS No. 15 “Investments in Associates”, the Company’s portion of profits and losses resulting from inter-company (not
subsidiary company) transactions that are recognized in assets, such as inventories and fixed assets, are eliminated and charged to equity
securities accounted for using the equity method. Also, unrealized profits and losses resulting from sales of assets from the Company to
investee are eliminated according to the ratio of ownership. The adoption of this SKAS had no effect on the net assets and net income as of
and for the year ended March 31, 2006.
61

b. SKAS No. 16 “Income Tax”es
According to SKAS No. 16 “Income Taxes”, deferred taxes related with gain on valuation of available-for-sale securities accounted for as
capital adjustments are disclosed net of taxes. The adoption of this SKAS had no effect on the net assets and net income as of and for the year
ended March 31, 2006.
Cash and Bank Deposits

Highly liquid bank deposits and securities, with original maturities of three months or less and with no significant risk of loss in value by
interest rate fluctuations, are considered as cash equivalents.
Investments in Securities Other Than Those Accounted for Using the Equity Method
At acquisition, the Company classifies securities into one of the three categories; trading, held-to-maturity or available-for-sale. Trading
securities are those that were acquired principally to generate profits from short-term fluctuations in prices. Held-to-maturity securities are
those with fixed or determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity.
Available-for-sale securities are those not classified as either held-to-maturity or trading securities. Trading securities are classified as current
assets, whereas available-for-sale and held-to-maturity securities are classified as non-current assets, except for those whose maturity dates or
whose likelihood of being disposed of are within one year from balance sheet date, which are classified as current assets.
Securities are recognized initially at cost, which includes the market price of the consideration given to acquire them and incidental expenses.
If the market price of the consideration is not reliably determinable, the market prices of the securities purchased are used as the basis for
measurement. If neither the market prices of the consideration given nor those of the acquired securities are available, the acquisition cost is
measured at the best estimates of its fair value.
After initial recognition, held-to-maturity securities are stated at amortized cost. The difference between their acquisition costs and face values
of held-to-maturity securities is amortized over the remaining term of the securities by applying the effective interest method and added to of
subtracted from the acquisition costs and interest income of the remaining period. Trading securities are valued at fair value, with unrealized
gains or losses included in current operations. Available-for-sale securities are also valued at fair value, with unrealized gains or losses included
in capital adjustments, until the securities are sold or if the securities are determined to be impaired and the lump-sum cumulative amount of
capital adjustments are included in current operations. However, available-for-sale securities that are not traded in an active market and
whose fair values cannot be reliably estimated are accounted for at their acquisition costs. For those securities that are traded in an active
market, fair values refer to those quoted market prices, which are measured as the closing price at the balance sheet date. The fair value of
non-marketable securities are measured at the discounted future cash flows by using the discount rate that appropriately reflects the credit
rating of issuing entity assessed by a publicly reliable independent credit rating agency. If application of such measurement method is not
feasible, estimates of the fair values may be made using a reasonable valuation model or quoted market prices of similar debt securities issued
by entities conducting similar business in similar industries.
Securities are evaluated at each balance sheet date to determine whether there is any objective evidence of impairment loss. When any such
evidence exists, unless there is a clear counter-evidence that recognition of impairment is unnecessary, the Company estimates the recoverable
amount of the impaired security and recognizes any impairment loss in current operations. The amount of impairment loss of the held-to-
maturity security or non-marketable equity security is measured as the difference between the recoverable amount and the carrying amount. The
recoverable amount of held-to maturity security is the present value of expected future cash flows discounted at the securities' original effective
interest rate. For available-for-sale debt or equity security, the amount of impairment loss to be recognized in the current period is determined by
subtracting the amount of impairment loss of debt or equity security already recognized in prior period from the amount of amortized cost in
excess of the recoverable amount for debt security or the amount of the acquisition cost in excess of the fair value for equity security.
If the realizable value subsequently recovers, in case of a security stated at fair value, the increase in value is recorded in current operations, up
to the amount of the previously recognized impairment loss, while for the security stated at amortized cost or acquisition cost, the increase in
value is recorded in current operation, so that its recovered value does not exceed what its amortized cost would be as of the recovery date if
there had been no impairment loss.
Investment Securities Accounted for Using the Equity Method

Equity securities held for investment in companies in which the Company is able to exercise significant influence over the operating and
financial policies of the investees are accounted for using the equity method. If the cost of the acquisition exceeded the acquirer’s interest in
the fair value of the identifiable assets and liabilities at the date of acquisition, the difference is amortized over the period during which future
economic benefits are expected to flow to the Company. However, if the cost of the acquisition is less than the acquirer’s interest in the fair
value of the identifiable assets and liabilities, (1) the difference that relates to expectations of future losses and expenses that are identified in
the acquirer’s plan for the acquisition is recognized as income in the income statement when the future losses and expenses are recognized, (2)
the difference not exceeding the fair values of acquired identifiable non-monetary assets is recognized as income on a systematic basis over the
remaining weighted average useful life of the identifiable acquired depreciable or amortizable assets, and (3) the difference in excess of the fair
values of acquired identifiable non-monetary assets is immediately recognized as income.
The Company’s share in the net income or net loss of investees is reflected in current operations. Changes in the retained earnings, capital
surplus or other capital accounts of investees are accounted for as an adjustment to retained earnings or to capital adjustments.
The Company’s portion of profits and losses resulting from inter-company (not subsidiary company) transactions that are recognized in assets,
such as inventories and fixed assets, are eliminated and charged to equity securities accounted for using the equity method. Unrealized profit
arising from sales by the Company to equity method investees is proportionately eliminated. Also, unrealized profit arising from sales by the
equity method investees to the Company is proportionately eliminated. However, unrealized profit arising from sales by the Company to
subsidiary is fully eliminated.
For overseas affiliates whose financial statements are prepared in foreign currencies, assets and liabilities are translated at the exchange rate at the
balance sheet date, shareholders’ equity is translated at the historical exchange rate and the items in the statement of income are translated at the
weighted average exchange rate for the reporting period. Net translation adjustments are recorded as a component of shareholders’ equity.
Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts on outstanding loans at the end of the period based on the financial position of
the borrower and the repayment ability of the borrower in accordance with the Regulation on Supervision of Financial Holdings Business.
Based on these standards, all loans are classified as normal, precautionary, substandard, doubtful, or loss. An allowance for possible loan losses
is then calculated, as of the balance sheet date, on the loan balances using the prescribed percentages of no less than 0.5 percent, 2 percent, 20
percent, 50 percent and 100 percent, respectively. The allowance for possible loan losses is shown as a deduction from the respective
outstanding loans.
Property & Equipment and Related Depreciation

Property and equipment are stated at cost, except for assets revalued upward in accordance with the Asset Revaluation Law of Korea, net of
accumulated depreciation. Routine maintenance and repairs are expensed as incurred. Expenditures that result in the increase of future
economic benefits such as the enhancement of the value or extension of the useful lives of the facilities involved are treated as additions to
property and equipment.
Depreciation is computed using the straight-line method over the estimated useful lives (building 40 years, other tangible assets 4 years) of the
related assets.
Intangibles
Intangible assets are stated at cost, net of amortization computed using the straight-line method over the estimated economic useful lives of
related assets.
Discount on Debentures
The difference between the face amount of a debenture and its issued amount is classified as a discount on debentures. A discount on
debentures is amortized on an effective interest basis over the redemption period of the debentures.
Accrued Severance Indemnities

Employees and directors with more than one year of service are entitled to receive severance indemnities, based on length of service and rate of
pay, upon termination of their employment. The severance indemnities that would be payable assuming all eligible employees were to resign
63

amount to ￦949,511 thousand and ￦667,070 thousand as of March 31, 2006 and 2005, respectively. The Company has made deposits to
the National Pension Fund in accordance with National Pension Funds Act. The use of the deposit is restricted to the payment of severance
indemnities. Accordingly, accrued severance indemnities in the accompanying balance sheet are presented net of this deposit. And actual
payment of severance indemnities amounted to ￦197,222 thousand and ￦153,192 thousand as of March 31, 2006 and 2005 respectively.
Accounting for Foreign Currency Transactions and Translation

The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded in Korean won based on the prevailing
rates of exchange on the transaction date. Monetary accounts with balances denominated in foreign currencies are recorded and reported in
the accompanying financial statements at the exchange rates prevailing at the balance sheet date.
Derivative Instruments
Derivative instruments are presented as assets or liabilities valued principally at fair value of the rights or obligations associated with the
derivative contracts. The unrealized gain or loss from derivative transactions is recognized in current operations.
However, for derivative instruments for the purpose of hedging the exposure to the variability of cash flows of a forecasted transaction, the
effective portion of the derivative’s gain or loss is deferred as a capital adjustment, a component of shareholders’ equity. The ineffective
portion of the gain or loss is charged or credited to current operations.
Income Tax Expense

The Company recognizes income tax expense determined by adding or deducting changes in deferred income tax assets (liabilities) to or from
total income tax and surtaxes to be paid for the current period. The deferred income tax assets or liabilities will be charged or credited to
income tax expense in the period each temporary difference reverses in the future. The Company recognizes deferred tax liabilities basically for
all taxable temporary differences, but recognizes deferred tax assets for all deductible temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible temporary difference can be utilized. Also, the Company recognizes deferred tax
assets for all deductible temporary differences arising from investments in subsidiaries and associates to the extent that it is probable that the
temporary difference will be reversed in the foreseeable future and taxable profit will be available against which the temporary difference can
be utilized. In addition, current tax and deferred tax is charged or credited directly to equity if the tax relates to items that are credited or
charged directly to equity in the same or different period. The deferred income tax assets (liabilities) are classified as current or non-current
based on the classification for financial reporting.
Earnings per Common Share and Earnings per Common Share Assuming Dilution
Primary earnings per common share is computed by dividing net income, after deduction for expected dividends for preferred shares, by the
weighted average number of common shares outstanding during the year. The number of shares used in computing earnings per common
share is 50,032,123 shares in 2006 and 52,090,609 shares in 2006 and 2005, respectively. Earnings per dilutive share are computed by
dividing net income, after deduction of expected dividends for preferred shares and addition for the effects of expenses related to diluted
securities by the weighted average number of common shares outstanding during the year plus the dilutive potential common shares
(2,647,531 shares and 2,847,531 shares in 2006 and 2005, respectively).
3. CASH AND BANK DEPOSITS:

Cash and bank deposits as of March 31, 2006 and 2005 consist of the following (Korean won in thousands):
Description Banks 2006 2005

Cash on hand ￦ - ￦ 108
Bank deposits:
Demand deposits Korea Exchange Bank 1,011,410 166,032
Korea investment
Money Market Fund 720,202 160,424,908
& Securities
Guarantee deposits for checking accounts Shinhan Bank 3,000 3,000
￦ 1,734,612 ￦ 160,594,048
Guarantee deposits for checking accounts are restricted to withdrawal.

4. AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities as of March 31, 2006 consist of the following (Korean won in thousands):
Description Acquisition cost Book value Gain (loss) on valuation

Stocks ￦ 191,337,236 ￦ 190,731,456 ￦ (605,780)
Available-for-sale securities as of March 31, 2005 consist of the following (Korean won in thousands):
Description Acquisition cost Book value Gain (loss) on valuation

Government and public bonds ￦ 13,465 ￦ 13,465 ￦ -
Company bonds 17,660,320 17,711,150 50,830
￦ 17,673,785 ￦ 17,724,615 ￦ 50,830
5. SECURITIES USING EQUITY METHOD:
(1) Securities using equity method as of March 31, 2006 and 2005 consist of the following (Korean won in thousands):
<March 31, 2006>

No. of Ownership Acquisition Net
Company invested shares percentage cost asset value Book value
28,000,000 100.00% ￦ 796,563,876 ￦ 1,575,319,132 ￦ 1,632,543,683
Co., Ltd. (*)
50,700,000 100.00% 67,988,558 62,196,057 63,657,103
Co., Ltd.(***)
Korea Investment Mutual Saving
11,448,899 98.13% 49,653,557 69,782,999 70,228,863
Bank Co., Ltd.(**)
Cornerstone Equity Partners Co., Ltd. 100,000 100.00% 1,000,000 883,125 883,125
￦ 915,205,991 ￦ 1,708,181,313 ￦ 1,767,312,774
<March 31, 2005>

No. of Ownership Acquisition Net
Company invested shares percentage cost asset value Book value
Dongwon Securities Co., Ltd.(*) 16,000,000 100.00% ￦ 248,276,582 ￦ 582,191,669 ￦ 521,511,214
12,000,000 100.00% 548,007,569 438,355,150 548,007,569
Co., Ltd. (*)
Dongwon Venture Capital Co., Ltd. 36,001,000 71.01% 36,732,085 42,889,316 42,713,356
Korea Investment Mutual
11,449,988 98.13% 49,653,557 54,893,157 55,513,973
Saving Bank Co., Ltd.(**)
￦ 882,669,793 ￦ 1,118,329,292 ￦ 1,167,746,112
(*) Dongwon Securities Co., Ltd.’s securities using equity method are included in Korea Investment & Securities Co., Ltd.’s due to the merger on June 1, 2005 (See Note 21).
(**) Korea Investment Mutual Saving Bank merged with Dongwon Capital Co., Ltd, (See Note 21).
(***) Korea Investment Holdings Co., Ltd. owns 100% of Korea Investment Partners Co., Ltd.’s stock by acquiring additional 14,699,000 shares through stock exchange (See Note 21).
(2) Under the equity method, the changes of the differences between the initial purchase price and the Company’s initial proportionate
ownership of the net book value of the investee as of March 31, 2006 and 2005 are as follows (Korean won in thousands):
65

<March 31, 2006>
Beginning Increase Reserve Ending
Company balance (Decrease) (amortization) Balance
Korea Investment & Securities Co., Ltd. ￦ 116,225,999 ￦ (60,400,730) ￦ (2,615,871) ￦ 53,209,398
Dongwon Securities Co., Ltd. (60,680,455) 60,680,455 - -
Korea Investment Partners Co., Ltd. (175,960) - 175,960 -
Korea Investment Mutual Saving Bank Co., Ltd. 620,816 - (174,952) 445,864
￦ 55,990,400 ￦ 279,725 ￦ (2,614,863) ￦ 53,655,262
<March 31, 2005>

Beginning Increase Reserve Ending
Company balance (Decrease) (amortization) Balance
Korea Investment & Securities Co., Ltd. ￦ - ￦ 116,225,999 ￦ - ￦116,225,999
Dongwon Securities Co., Ltd. (74,491,263) - 13,810,808 (60,680,455)
Dongwon Venture Capital Co., Ltd. (410,574) - 234,614 (175,960)
Korea Investment Mutual Saving Bank Co., Ltd. (15,924) 772,548 (135,808) 620,816
￦ (74,917,761) ￦ 116,998,547 ￦ 13,909,614 ￦ 55,990,400
The difference between the acquisition cost and the Company’s portion of Korea Investment & Securities Co., Ltd. (Formerly, Dongwon
Securities Co., Ltd.) net equity was charged to non-monetary assets in proportion to the fair value and reversed at the time of non-monetary
assets are expensed. In addition, the difference between the acquisition cost and the Company’s portion of other investees’ net equity is
amortized using the straight-line method over five years from the year the acquired.
(3) The details of valuation of securities using the equity method as of March 31, 2006 and 2005 are as follows (Korean won in thousands):
<March 31, 2006>

Gain (loss) on Other
Investee Beginning Acquisition equity method Increase Transfer Ending
balance valuation (decrease) (*) balance
Dongwon Securities
￦ 521,511,214 ￦ - ￦ - ￦ - ￦(521,511,214) ￦ -
Co., Ltd.
Korea Investment &
548,007,569 279,725 565,307,783 (2,562,608) 521,511,214 1,632,543,683
Securities Co., Ltd.
Korea Investment
42,713,356 31,256,473 2,096,718 (12,409,444) - 63,657,103
Partners Co., Ltd.
Korea Investment Mutual
55,513,973 - 14,713,609 1,281 - 70,228,863
Saving Bank Co., Ltd.
Cornerstone Equity
- 1,000,000 (116,875) - - 883,125
Partners Co., Ltd.
￦ 1,167,746,112 ￦ 32,536,198 ￦ 582,001,235 ￦ (14,970,771) ￦ - ￦ 1,767,312,774
<March 31, 2005>

Gain (loss) on Other
Investee Beginning Acquisition equity method Increase Ending
balance valuation (decrease) (*) balance
Dongwon Securities
￦ 909,346,184 ￦ 588,845 ￦ 75,500,852 ￦(463,924,667) ￦ 521,511,214
Co., Ltd.
- 548,007,569 - - 548,007,569
Co., Ltd.
Dongwon Venture Capital Co., Ltd. 39,815,070 - 3,064,096 (165,810) 42,713,356
Korea Investment Mutual Saving
41,760,058 7,971,549 6,032,457 (250,091) 55,513,973
Bank Co., Ltd.
Dongwon Capital Co., Ltd. 593,997 370,000 (362,629) (601,368) -
￦ 991,515,309 ￦ 556,937,963 ￦ 84,234,776 ￦ (464,941,936) ￦ 1,167,746,112
(*) Others mainly consist of decrease by dividend payment, changes in capital adjustments and retained earnings.
(4) Financial statements of investees used in the equity method valuation as of March 31, 2006 and 2005 are as follows:
Balance sheet date

Investee Description
2006 2005
Dongwon Securities Co., Ltd. May 31, 2005(*) March 31, 2005 Audited financial statements
Korea Investment & Securities Co., Ltd. March 31, 2006 March 31, 2005 Audited financial statements
Korea Investment Partners Co., Ltd. March 31, 2006 March 31, 2005 Reviewed financial statements
Korea Investment Mutual Saving Bank
March 31, 2006 March 31, 2005 Reviewed financial statements
Co., Ltd.
Provisional settlement of financial
Cornerstone Equity Partners Co., Ltd. March 31, 2006 -
statements
(*) As Dongwon Securities Co., Ltd. was merged into Korea Investment & Securities Co., Ltd. on June 1, 2005, we use the audited financial statements as of May 31, 2005 were used.
(5) Significant unrealized profits (losses) that occurred in transactions with investees for the years ended March 31, 2006 and 2005 are as
follows:
Affiliated company Account 2006 2005

Korea Investment & Securities Co., Ltd. Allowance for doubtful accounts ￦ 4,015,154 ￦ -
" Available-for-sale securities(*) (157,108,036) -
Korea Investment Partners Co., Ltd. Bad debt expenses 1,461,046 -
" Other operating revenue - 25,000
Total ￦ (151,631,836) ￦ 25,000
(*) Unrealized profit caused by disposal of available-for-sale securities was deducted from gain on equity method valuation, and the deducted amount was reflected as an increase in the capital
variation of equity method.
6. LOANS:
Loans as of March 31, 2006 and 2005 consist of the following (Korean won in thousands):
Annual 2006 2005

Counterpart Loan date Maturity date interest rate (%)
Korea Investment &
2005.5. 10 2015.5.10 5.50% ￦ 50,000,000 ￦ -
Securities Co., Ltd.
" 2005.4. 1 2015.4. 1 5.50% 150,000,000 -
Korea Investment
2005.8. 11 2006.2.28 4.95% 18,000,000 -
Partners Co., Ltd.(*)
" 2006.3. 24 2007.3.23 4.95% 55,000,000 -
￦ 273,000,000 ￦ -
(*) The maturity date of loans to Korea Investment Partners Co., Ltd. was extended from November 30, 2005 to April 30, 2006.
7. PROPERTY AND EQUIPMENT:

The changes in property and equipment for the years ended March 31, 2006 and 2005 are as follows (Korean won in thousands)
<March 31, 2006>

Beginning
Description of year Acquisition Disposal Depreciation End of year
Land ￦ 12,760,560 ￦ - ￦ 12,760,560 ￦ - ￦ -
Buildings 23,242,044 - 22,880,876 361,168 -
Vehicles 1,017 - - 1,017 -
Equipment 58,114 49,842 703 21,972 85,281
￦ 36,061,735 ￦ 49,842 ￦ 35,642,139 ￦ 384,157 ￦ 85,281
67

<March 31, 2005>
Beginning
Description of year Acquisition Disposal Depreciation End of year
Land ￦ 12,760,560 ￦ - ￦ - ￦ - ￦ 12,760,560
Buildings 23,720,108 - - 478,064 23,242,044
Vehicles 5,084 - - 4,067 1,017
Equipment 38,987 28,104 - 8,977 58,114
￦ 36,524,739 ￦ 28,104 ￦ - ￦ 491,108 ￦ 36,061,735
8. INTANGIBLES:
The changes in intangibles for the years ended March 31, 2006 and 2005 are as follows (Korean won in thousands):
<March 31, 2006>

Beginning
Description of year Acquisition Depreciation End of year
Software ￦ 1,685 ￦ - ￦ 919 ￦ 766
Other intangible asset 62,981 - 17,576 45,405
￦ 64,666 ￦ - ￦ 18,495 ￦ 46,171
<March 31, 2005>

Beginning
Description of year Acquisition Depreciation End of year
Software ￦ 2,604 ￦ - ￦ 919 ￦ 1,685
Other intangible asset - 70,305 7,324 62,981
￦ 2,604 ￦ 70,305 ￦ 8,243 ￦ 64,666
9. BORROWINGS:
(1) Local currency borrowings and foreign currency borrowings as of March 31, 2006 and 2005 consist of the following (Korean won in thousands):
2006 2005
Annual
Bank interest rate (%) Local currency Local currency
Foreign currency equivalent Foreign currency equivalent
Woori Bank(*) 4.27 US$ - ￦ 55,000,000 US$ - ￦ -
Shinhan Bank Libor+2.0 - - 10,000,000 10,243,000
US$ - ￦ 55,000,000 US$ 10,000,000 ￦ 10,243,000
(*) The maturity date of borrowings will be on April 27, 2006.
10. DEBENTURES:
Debentures as of March 31, 2006 and 2005 consist of the following (Korean won in thousands):
Annual
Description Issuing date Maturity date interest rate 2006 2005
The 2 unsecured public debenture
nd
2005.3.15 2007.3.15 4.54% ￦ 100,000,000 ￦ 100,000,000
The 3rd unsecured private debenture 2005.3.16 2008.3.16 4.75% 70,000,000 70,000,000
The 4th unsecured public debenture 2005.5.10 2008.5.10 4.38% 100,000,000 -
The 5th unsecured private debenture 2005.5.17 2008.5.17 4.39% 30,000,000 -
The 6th unsecured public debenture 2006.3.20 2009.3.20 5.34% 100,000,000 -
The 7th unsecured private debenture 2006.3.20 2009.3.20 5.38% 100,000,000 -
Less : Discount on debentures (986,135) (367,227)
￦ 499,013,865 ￦ 169,632,773
11. SHAREHOLDERS’ EQUITY:
(1) Capital stock as of March 31, 2006 and 2005 consists of the following:
Description Shares / Korean won

Authorized shares 200,000,000
Par value ￦ 5,000
Outstanding common shares 52,876,205
Preferred shares #1 5,858,251
Preferred shares #2 2,849,787
(2) The types and dividend ratio of preferred shares as of March 31, 2006 and 2005 are as follows:
Description Types Dividend ratio (%) Remark

Preferred share #1 Participating and non-cumulative Common share ratio + 1.23 -
Non Participating and Conversion into common share
Preferred share #2 3.69(*)
Non-cumulative on May 26, 2010
(*) If the dividend ratio of common stock exceeded the dividend ratio of preferred share #2, the Company pays a dividend at the same ratio on the excess.
(3) The Changes in capital and paid-in capital in excess of par value are as follows (Korean won in thousands):
Paid-in capital in
Date Description Outstanding shares Capital(*) excess of par
value
2003.1. 1 Spin-off 2,436,000 ￦ 12,180,000 ￦ 86,271,564
2003.3.22 Capital increase with consideration(**) 6,564,000 32,820,000 (746,422)
2003.4. 4 Capital increase without consideration 9,000,000 45,000,000 (45,000,000)
2003.7. 8 Stock swap 43,584,243 217,921,215 423,229,075
61,584,243 ￦ 307,921,215 ￦ 463,754,217
(*) Including common stock and preferred stock

(**) Deduction of stock issuance cost from paid-in capital in excess of par value
(4) Assets revaluation reserve:

Assets revaluation reserve as of March 31, 2006 and 2005 was related to the transferred lands and buildings during the spin-off from
Dongwon Industries Co., Ltd. and restricted to use only for offsetting accumulated deficit or transfer to capital stock.
(5) Other capital surplus:

The Company exchange shares owned by Korea Investment Partners Co., Ltd.’s shareholders with treasury stock to own a 100 percent on
December 23, 2005. As a result, the Company accounted for the difference between book value and fair value of the treasury stock granted as
gain on sale of treasury stock (other capital surplus). The details of gain on sale of treasury stock are computed as follows (Korean won in
thousands):
The number of treasury stock granted Book value Fair value Gain on sale of treasury stock
781,135 shares ￦ 12,796,669 ￦ 30,308,038 ￦ 17,511,369
(6) Legal reserve:

The Financial Holding Company Code #53, requires the Company to appropriate, as a legal reserve, a minimum of 10 percent of annual net
income declared, until such reserve equals 100 percent of its capital stock issued. These reserves are not available for the payment of cash
dividends, but can be transferred to capital stock or may be used to reduce any accumulated deficit, pursuant to the resolution at the
shareholders’ meeting.
69

(7) Treasury stock:
Treasury stock consists of common shares purchased, mainly from shareholders of Dongwon Securities Co., Ltd. who executed stock pre-
emptive rights and odd-lots during the stock swap transaction. Treasury stock as of March 31, 2006 and 2005 consist of the following
(Korean won in thousands):
2006 2005
Description Shares Amount Shares Amount
Common stock 3,004,461 ￦ 49,219,524 785,596 ￦ 5,516,896
Preferred stock #1 202,824 1,910,911 2,824 10,591
Preferred stock #2 202,256 2,624,149 2,256 8,844
3,409,541 ￦ 53,754,584 790,676 ￦ 5,536,331
12. DIVIDENDS:
(1) Dividends and dividend yield ratio for the years ended March 31, 2006 and 2005 are computed as follows:
<March 31, 2006>

Korean won
(In thousands except dividend per share and closing price at year end)
Description Common Share Preferred Share #1 Preferred Share #2
Outstanding shares(*) 49,821,795 shares 5,655,427 shares 2,647,531 shares
Dividend per share ￦ 1,000 ￦ 1,062 ￦ 1,000
Cash dividends ￦ 49,821,795 ￦ 6,003,236 ￦ 2,647,531
Closing price at year end ￦ 32,490 ￦ 19,040 ￦ 26,740
Dividend yield rate 3.08% 5.58% 3.74%
(*) It excludes treasury stock and stocks held by Korea Investment Partners Co., Ltd, which are exempted from dividend.
<March 31, 2005>

Korean won
(In thousands except dividend per share and closing price at year end)
Description Common Share Preferred Share #1 Preferred Share #2
Outstanding shares(*) 48,390,238 shares 5,776,106 shares 2,790,071 shares
Dividend per share ￦ 500 ￦ 561.5 ￦ 500
Cash dividends ￦ 24,195,119 ￦ 3,243,284 ￦ 1,395,035
Closing price at year end ￦ 13,700 ￦ 7,760 ￦ 9,140
Dividend yield rate 3.65% 7.24% 5.47%
(*) It excludes treasury stock and stocks held by Dongwon Securities Co., Ltd.
(2) Dividends to net income ratio for the year ended March 31, 2006 and 2005 are computed as follows (Korean won in thousands):
Description 2006 2005

Cash dividends ￦ 58,472,562 ￦ 28,833,438
Net income 564,605,265 84,136,919
Dividends to net income ratio 10.36% 34.27%
13. INCOME TAX EXPENSE AND DEFERRED INCOME TAXES:
(1) The differences between income before income tax in financial accounting and taxable income pursuant to Corporate Income Tax Law of
Korea for the years ended March 31, 2006 and 2005 are as follows (Korean won in thousands):

Income before income tax ￦ 564,605,265 ￦ 84,136,919
Permanent differences 2,327,913 (68,765,714)
Temporary differences (564,668,844) (15,389,948)
Accumulated deficit (2,264,334) -
Taxable income (loss) ￦ - ￦ (18,743)
(2) The table below shows the accumulated temporary differences and total amount of deferred income tax assets (liabilities) as of
March 31, 2006 (Korean won in thousands):
Beginning Increase Ending

Description balance (decrease) balance Current Non-current
Gain (loss) on valuation
￦ 19,464,136 ￦ - ￦ 19,464,136 ￦ - ￦ 19,464,136
of available-for-sale securities
Accrued severance indemnities 360,774 202,403 563,178 - 563,178
Available-for-sale securities (50,830) 656,610 605,780 - 605,780
Tax loss carryforward 2,373,610 (2,264,334) 109,277 - 109,277
Sub-total 22,147,690 (1,405,321) 20,742,371 - 20,742,371
Unrecognized amount 22,147,690 (1,405,321) 20,742,371 - 20,742,371
Recognized amount - - - - -
Statutory tax rate(*) 27.5% 27.5% 27.5% 27.5% 27.5%
Deferred income tax assets(A) ￦ - ￦ - ￦ - ￦ - ￦ -
Beginning Increase Ending

Description balance (decrease) balance Current Non-current
Securities using the equity method ￦ (720,113,730) ￦ (567,030,465) ￦ (1,287,144,195) ￦ - ￦ (1,287,144,195)
Advanced depreciation provisions (1,766,437) 1,766,437 - - -
Individual severance insurance
(299,349) (263,829) (563,178) - (563,178)
deposits
Sub-total (722,179,516) (565,527,857) (1,287,707,373) - (1,287,707,373)
Unrecognized amount (722,179,516) (565,527,857) (1,287,707,373) - (1,287,707,373)
Recognized amount - - - - -
Statutory tax rate(*) 27.5% 27.5% 27.5% 27.5% 27.5%
Deferred income tax liabilities(B) - - - - -
Deferred income tax assets
￦ - ￦ - ￦ - ￦ - ￦ -
(liabilities), net(A+B)
(*) The Company applied expected marginal tax rate on measuring deferred income tax assets (liabilities). In addition, accumulative temporary differences related to gain on equity method
valuation are applied excluding proceeds on dividend received based on article 18-2 of the Corporate Income Tax Law.
The Company did not recognize deferred income tax assets and liabilities related to gain on equity method valuation and dividend income
received from the subsidiaries since the probability of their realization in the near future is uncertain.
71

(3) As of March 31, 2006, amount of tax loss carryforward on tax accounting and the term of deduction is as follows (Korean won in thousands):
Accrued period Amount Maturity

2003.12.31 ￦ 90,534 2008.3.31
2005. 3.31 18,743 2010.3.31
￦ 109,277
14. RELATED PARTY TRANSACTIONS:

Significant transactions with related parties for the year ended March 31, 2006 and 2005, and outstanding balances with related parties as of
March 31, 2006 and 2005 are summarized below (Korean won in thousands).
Related Party Description 2006 2005

Korea Investment & Securities Co., Ltd.(*) Bank deposits ￦ 720,203 ￦ 160,424,907
" Loans 200,000,000 -
" Allowance for doubtful account (loans) (4,000,000) -
" Accounts receivable-other 26,893 34,929
Allowance for doubtful account
" (538) -
(accounts receivable-other)
" Accrued income 730,822 -
" (14,616) -
(accrued income)
" Guarantee deposits 227,707 621,054
Korea Investment Trust Management Co., Ltd. Purchase of guarantee deposits 660,000 -
Korea Investment Partners Co., Ltd. Loans 73,000,000 -
" Allowance for doubtful account (Loans) (1,460,000) -
" Accrued income 52,318 -
Korea Investment Partners Co., Ltd. ￦ (1,046) ￦ -
(accrued income)
Korea Value Asset Management Co., Ltd. Disposal of property and eguipment 400 -
Total assets ￦ 269,942,143 ￦ 161,080,890
Korea Investment & Securities Co., Ltd. Accounts payable-other ￦ 45,914 ￦ 4,696
Korea Investment Mutual Saving Bank Co., Ltd. (*) Rental deposits received - 633,186
Total liabilities ￦ 45,914 ￦ 637,882
Korea Investment & Securities Co., Ltd.(*) Interest income ￦ 508,867 ￦ 754,013
" Interest income 11,397,123 -
Korea Investment Trust Management Co., Ltd Interest income 9,493 -
Korea Investment Partners Co., Ltd. Interest income 588,192 55,479
Korea Investment Mutual Saving Bank(*) Interest income 1,750 449,968
" Rental income 28,055 161,462
Total revenue ￦ 12,533,480 ￦ 1,420,922
Korea Investment & Securities Co., Ltd.(*) Commissions ￦ 105 ￦ -
" Building maintenance 99,089 95,935
" Bad debt expenses 4,015,154 -
" Rent 418,846 127,965
Korea Investment Partners Co., Ltd. Bad debt expenses 1,461,046 -
Korea Value Asset Management Co., Ltd. Loss on disposal of property and eguipment 304 -
Total expense ￦ 5,994,544 ￦ 223,900
(*) As Dongwon Capital Co., Ltd. was merged into Korea Investment Mutual Saving Bank Co., Ltd. in the prior year, and Dongwon Securities Co., Ltd. is merged into Korea Investment &
Securities Co., Ltd. this year, transactions of Dongwon Capital Co., Ltd. and Dongwon Securities Co., Ltd. were included in transactions of Korea Investment Mutual Saving Bank Co., Ltd.
and Korea Investment & Securities Co., Ltd., respectively.
15. FOREIGN CURRENCY DENOMINATED LIABILITIES:

Foreign currency denominated liabilities as of March 31, 2006 and 2005 are as follows (Korean won in thousands):
2006 2005
Description Foreign currencies Local currency Foreign currencies Local currency
Liabilities:
Borrowings USD - ￦ - USD 10,000,000 ￦ 10,243,000
16. COMMITMENTS AND CONTINGENCIES:
(1) As of March 31, 2006, the Company maintains commercial paper loan (line of credit: ￦100,000,000 thousand) with Woori Bank.
(2) Legal proceedings

The Company is involved in lawsuits as a defendant claiming damages of ￦526,416 thousand as of March 31, 2006. The management
believes that the ultimate outcome of these litigations will not have a significant impact on the financial position of the Company.
17. CASH FLOW STATEMENTS:
(1) Cash in the statements of cash flows consists of cash and cash equivalents and the reconciliations between cash and cash equivalents and
cash and bank deposits on the balance sheets as of March 31, 2006 and 2005 are as follows (Korean won in thousands):

Cash and bank deposits ￦ 1,734,612 ￦ 160,594,048
Deductions:
Deposits with maturity of three months or more (3,000) (3,000)
Cash and cash equivalents ￦ 1,731,612 ￦ 160,591,048
(2) Significant transactions not involving cash flows for the years ended March 31, 2006 and 2005 are as follows (Korean won in thousands):

Offset between building and rental deposits received ￦ 18,042,430 ￦ -
Changes in valuation of available-for-sale securities 656,610 17,830
Increase in capital variation of equity method 2,561,327 85,061,281
Increase in negative capital variation of equity method 12,409,444 -
Decrease in treasury stock by exchanging stock 12,796,669 -
Increase in other capital surplus by exchanging stock 17,511,369 -
18. MAJOR INDICATORS FOR THE FINAL INTERIM:

The major indicators of management performance for the final interim period, which are not audited, are as follows:
Korean won
(In thousands, except per share amounts)
Operating income ￦ 268,668,557 ￦ 30,645,001
Net income 259,600,829 29,707,311
Ordinary income per share 4,621 535
Net income per share 4,621 514
73

19. FINANCIAL INFORMATION OF SUBSIDIARIES:
(1) The condensed balance sheets of subsidiaries as of March 31, 2006 are as follows (Korean won in thousands):
Total stockholders’
Company Total assets Total liabilities equities
Korea Investment & Securities Co., Ltd. ￦ 4,382,141,623 ￦ 2,806,822,491 ￦ 1,575,319,132
Korea Investment Partners Co., Ltd. 141,236,786 79,040,730 62,196,056
Korea Investment Mutual Saving Bank Co., Ltd. 745,480,629 674,368,492 71,112,137
Cornerstone Equity Partners Co., Ltd. 915,644 32,519 883,125
(2) The condensed statements of operations of subsidiaries for the year ended March 31, 2006 are as follows (Korean won in thousands):
Operating Net
Company Operating revenue income (loss)(*) income (loss)
Dongwon Securities Co., Ltd. ￦ 83,951,505 ￦ (5,416,149) ￦ (8,315,929)
Korea Investment & Securities Co., Ltd. 1,090,524,473 233,600,910 729,332,466
Korea Investment Partners Co., Ltd. 15,316,598 (874,348) 670,699
Korea Investment Mutual Saving Bank Co., Ltd. 59,155,170 14,399,211 15,172,140
Cornerstone Equity Partners Co., Ltd. - (109,065) (116,875)
(*) The period of the above operating results is from April 1, 2005 to March 31, 2006, but that of Dongwon Securities Co., Ltd. is from April 1, 2005 to May 31, 2005.
(3) Major assets and liabilities of the Company and its subsidiaries as of March 31, 2006 are summarized as follows (Korean won in thousands):
1) Major liabilities
Company Withholdings Borrowings Debentures Total

Korea Investment Holdings Co., Ltd. ￦ - ￦ 55,000,000 ￦ 499,013,865 ￦ 554,013,865
Korea Investment & Securities Co., Ltd. 854,934,303 228,300,090 220,000 1,083,454,393
Korea Investment Partners Co., Ltd. - 77,704,673 - 77,704,673
Korea Investment Mutual Saving Bank Co., Ltd. 585,164,762 70,549,157 - 655,713,919
Cornerstone Equity Partners Co., Ltd. - - - -
￦ 1,440,099,065 ￦ 431,553,920 ￦ 499,233,865 ￦ 2,370,886,850
2) Major assets
Cash and bank Securities Loans Total

Company deposits
Korea Investment Holdings Co., Ltd. ￦ 1,734,612 ￦ 1,958,044,230 ￦ 267,540,000 ￦ 2,227,318,842
Korea Investment & Securities Co., Ltd. 370,817,298 2,124,824,933 321,729,419 2,817,371,650
Korea Investment Partners Co., Ltd. 27,502,092 104,567,937 - 132,070,029
Korea Investment Mutual Saving Bank Co., Ltd. 23,446,054 183,850,199 508,928,671 716,224,924
Cornerstone Equity Partners Co., Ltd. 578,460 - - 578,460
￦ 424,078,516 ￦ 4,371,287,299 ￦ 1,098,198,090 ￦ 5,893,563,905
(4) Allowances for doubtful accounts as of March 31, 2006 are summarized as follows (Korean won in thousands):
Loans subject to allowance % of allowance

Company for doubtful accounts Allowance to loans
Korea Investment Financial Holdings Co., Ltd. ￦ 273,810,032 ￦ 5,476,201 2.0%
Korea Investment & Securities Co., Ltd. 368,576,795 22,667,227 6.1%
Korea Investment Partners Co., Ltd. 113,388 - 0.0%
Korea Investment Mutual Saving Bank Co., Ltd. 530,093,660 18,947,477 3.6%
Cornerstone Equity Partners Co., Ltd. - - 0.0%
￦ 1,172,593,875 ￦ 47,090,905 4.0%
(5) Contributions of subsidiaries for the years ended March 31, 2006 and 2005 are as follows (Korean won in thousands):
2006 2005
Description Amount Percentage Amount Percentage
Dongwon Securities Co., Ltd. ￦ - 0.00% ￦ 75,500,852 89.63%
Korea Investment and Securities Co., Ltd. 565,307,783 97.13% - -
Korea Investment Partners Co., Ltd. 2,096,718 0.36% 3,064,096 3.64%
Korea Investment Mutual Saving Bank Co., Ltd. 14,713,609 2.53% 6,032,457 7.16%
Dongwon Capital Co., Ltd. - 0.00% (362,629) (0.43%)
Cornerstone Equity Partners Co., Ltd. (116,875) (0.02%) - 0.00%
Gain on equity method valuation 582,001,235 100.00% 84,234,776 100.00%
Other income 15,801,515 6,473,460
Other expenses (33,197,485) (6,571,317)
Net income ￦ 564,605,265 ￦ 84,136,919
(*) Korea Investment & Securities Co., Ltd.’s income includes ￦5,828,392 thousand of 2nd-tier subsidiary contribution in 2006 and Dongwon Securities Co., Ltd.’s income includes ￦(10,115,832)
thousand of 2nd-tier subsidiary contribution in 2005.
20. ADMINISTRATIVE EXPENSES:

Administrative expenses for the year ended March 31, 2006 and March 31, 2005 consist of the following (Korean won in thousands):
2006 2005
Salaries ￦ 3,711,211 ￦ 1,286,686
Provision for severance indemnities 477,718 160,911
Employee benefits 301,071 104,542
Commissions 686,203 1,030,790
Depreciation 384,157 491,108
Amortization 18,495 8,243
Taxes and dues 365,184 255,204
Advertising 21,063 27,218
Repairs 147,389 106,646
Building maintenance 99,089 147,187
Bad debt 5,476,201 -
Others 1,496,673 595,050
￦ 13,184,454 ￦ 4,213,585
75

21. IMPORTANT ALTERATION OF CORPORATE GOVERNANCE:
(1) Korea Investment Mutual Saving Bank Co., Ltd.’s merger with Dongwon Capital Co., Ltd.
Korea Investment Mutual Saving Bank Co., Ltd., subsidiary of Korea Investment Holdings Co., Ltd., merged with Dongwon Capital Co.,
Ltd. on January 1, 2005. The details of merger contract are as follows:
1) Participants : Surviving company after merger - Korea Investment Mutual Savings Bank Co., Ltd.
Dissolved company - Dongwon Capital Co., Ltd.
2) Merger ratio : 0.803636 of Korea Investment Mutual Savings Bank Co., Ltd.’s share per Dongwon Capital Co., Ltd.’s share.
3) The date of Merger : The merger contract were made on October 27, 2004 and approved format the special shareholders’ meeting on
November 29, 2004. The merger was allowed by the Financial Supervisory Commission on January 1, 2005.
(2) Additional acquisition of Korea Investment Mutual Saving Bank Co., Ltd. shares
The Company has additionally acquired shares of Korea Investment Mutual Saving Bank Co., Ltd. for ￦8,560,394 thousand according to
the contract of stock transfer on March 24, 2005. Accordingly, the Company holds 11,448,899 shares (98.13%) of Korea Investment
Mutual Saving Bank Co., Ltd. as of March 31, 2006.
(3) Acquisition of Korea Investment & Securities Co., Ltd.’s shares

The Company was selected as preferred negotiation partner on July 14, 2004 for the acquisition of Korea Investment & Securities Co., Ltd.,
which has been managed by Korea Deposit Insurance Company (KDIC). In addition, the Public Fund Oversight Committee approved the
preliminary contract on October 29, 2004. The Company and KDIC agreed with the contract of stock transfer on February 22, 2005. The
contents of the contract are as follows (Korean won in thousands):
Acquisition date Acquisition shares Contract price Incidental expense Acquisition cost Ownership (%)
2005.3.31 12,000,000 546,200,000 2,807,294 548,287,294 100.0
In accordance with the directive on the reduction of capital stock by the Financial Supervisory Commission pursuant to Articles 10 and 12 of
the Law of Structure Improvement of Financial Industry and the decision of injecting public funds by KDIC through participation in paid-in
capital increase, Korea Investment & Securities Co., Ltd. executed reduction of capital stock without compensation amounting to
￦4,965,336 million, which resulted in a gain on capital reduction of ￦4,965,261 million. In addition, KDIC injected paid-in capital
amounting to ￦914,942 million (￦60,000 million as common stock, ￦845,471 million as capital in excess of par value and ￦9,471
million as others) on March 30, 2005. In addition, gain on capital reduction was transferred to accumulated deficit based on the decision at
the general meeting of shareholders on June 29, 2005.
(4) Korea Investment & Securities Co., Ltd.’s merger with Dongwon Securities Co., Ltd.
Korea Investment & Securities Co., Ltd, subsidiary of Korea Investment Holdings Co., Ltd., merged with Dongwon Securities on June 1,
2005. The contents of merger contract are as follows:
1) Date of merger : June 1, 2005.

2) Form of merger : Korea Investment & Securities Co., Ltd. is surviving company and Dongwon Securities Co., Ltd. is dissolved.
3) Merger ratio : 1 Share of Korea Investment & Securities Co. Ltd. for every Share of Dongwon Securities Co., Ltd.
(5) Korea Investment Trust Management Co., Ltd.’s merger with Dongwon Investment Trust Management Co., Ltd.
Korea Investment Trust Management Co., Ltd. merged with Dongwon Investment Trust Management Co., Ltd. on July 1, 2005. The
contents of merger contract are as follows:
1) Date of merger : July 1, 2005.

2) Form of merger : Korea Investment Trust Management Co., Ltd. is surviving company, and Dongwon Investment Trust Management Co., Ltd.
was dissolved.
3) Merger ratio : 1 Share of Korea Investment & Securities Co. Ltd. for every 1.4 of Dongwon Securities Co., Ltd.s share.
(6) The full enlistment of Korea Investment Partners Co., Ltd.

The stock exchange contract was made on November 1, 2005 and Korea Investment Holdings Co., Ltd. granted 0.055474 share of treasury
stock, instead of every 1 common stock of Korea Investment Partners Co., Ltd. to own 100% of its share. As a result, Korea Investment
Partners Co., Ltd. became unlisted on December 24, 2005. The details are as follows (Korean won in thousands):
Cost of stock exchange

Treasury stocks
Shares of Korea Ownership Cash Granted Amount Total
Description Investment Partners Percentage(%) stocks
Beginning 36,001,000 71.01
Acquisition
Cash(*) 600,000 1.18 ￦ 909,909 - ￦ - ￦ 909,909
Stock exchange 14,099,000 27.81 38,526 781,135 30,308,038 30,346,564
Sub total 14,699,000 28.99 ￦ 948,435 781,135 ￦ 30,308,038 ￦ 31,256,473
Ending 50,700,000 100.00
(*) On November 2, 2005, Korea Investment Holdings Co., Ltd. acquired treasury stock of Korea Investment Partners Co., Ltd. by cash.
INTERNAL ACCOUNTING CONTROL SYSTEM REVIEW REPORT
ENGLISH TRANSLATION OF A REPORT ORIGINALLY ISSUED IN KOREAN
77

14Fl., Hanwha Securities Bldg.,
23-5 Yoido-dong,
Youngdeungpo-gu , Seoul
150-717, Korea
Tel:+82 2 6676 1000, 1114
Fax: +82 2 6674 2114
www.deloitteanjin.co.kr
To the Chief Executive Officer of

Korea Investment Holdings Co., Ltd.:
We have reviewed the report of management’s assessment of internal accounting control system (“IACS”) of Korea Investment Holdings 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 assessing the design and operations of its
IACS. Our responsibility is to review management’s assessment 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.
As this report is based on Interim Guidelines on Auditors’ Review and Report on Management’s Assessment of IACS, issued by the Korean
Audit Standards Committee on March 29, 2005, it applies only from that date until the date the Final Standard for Management’s
Assessment of IACS and Final Standard for Auditors’ Review and Report on Management Assessment of IACS becomes effective. A review
performed based on the final standards may have different results and accordingly, the content of our report may be different.
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 subsequent to 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.
April 25, 2006
Notice to Readers
This report is annexed in relation to the audit of the financial statements as of 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.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2006 AND 2005

2006 2005
ASSETS
Cash and bank deposits ￦ 1,270,139,199 ￦ 1,143,997,952
Trading securities 1,320,258,117 1,024,533,924
Structured securities 783,421,522 704,597,592
Available-for-sale securities 289,837,872 322,777,782
Held-to-maturity securities 78,493,230 87,619,840
Investment securities using the equity method 37,677,525 38,447,648
Loans, net of allowances for doubtful accounts of
￦40,993,766 thousand in 2006 and ￦45,066,117
thousand in 2005 830,374,829 613,014,122
Property and equipment, net of accumulated
depreciation of ￦188,682,298 thousand in 2006 and
￦200,235,626 thousand in 2005 315,089,043 451,834,556
Intangibles 62,433,081 71,604,765
Accounts receivable-other, net of allowances for doubtful
accounts of ￦3,385,663 thousand in 2006 and
￦8,062,128 thousand in 2005 167,505,749 89,143,186
Accrued income, net of allowances for doubtful
accounts of ￦1,140,735 thousand in 2006 and
￦1,827,487 thousand in 2005 31,114,961 34,274,229
Advance payments, net of doubtful accounts of
￦625 thousand in 2006 and ￦11,448 thousand in 2005 11,706,164 6,531,955
Derivative assets 16,333,090 12,084,020
Long-term deposits 9,238,502 273,192
Long-term loans, net of allowance for doubtful
accounts ￦64,389 thousands in 2006 and ￦64,434
thousand in 2005 11,915,470 12,828,855
Guarantee deposits 114,422,799 109,871,215
Collective fund for default loss 7,556,490 8,325,522
Deferred income tax assets 61,236,071 9,564,747
Other assets 41,918,719 59,852,405
￦ 5,460,672,433 ￦ 4,801,177,507
(continued)
79

2006 2005
LIABILITIES:
Withholdings ￦ 1,724,534,868 ￦ 1,908,692,745
Borrowings, net of present value discount of ￦7,750,843 thousand in
2006 and ￦ 11,612,414 thousand in 2005 158,553,830 571,740,405
Debentures, net of discounts of ￦986,135 thousand in
2006 and ￦367,227 thousand in 2005 499,233,865 169,952,773
Accounts payable-other 59,340,458 18,386,041
Accrued expenses 17,527,556 25,608,313
Hybrid securities sold 1,056,865,791 865,420,920
Option sold 24,600 314,800
Securities sold 187,882,306 2,149,339
Income tax payable 3,135,062 834,600
Taxes withheld 19,569,509 18,609,020
Rental deposits received 13,139,519 43,507,778
Accrued severance indemnities, net of individual severance insurance
deposits of ￦23,359,555 thousand in 2006 and ￦22,195,360 thousand in
2005, and National Pension Fund of ￦243,563 thousand in 2006 and
￦289,477 thousand in 2005 22,015,899 17,635,375
Other liabilities 26,117,277 9,536,760
3,787,940,540 3,652,388,869
SHAREHOLDERS’ EQUITY:
Common stock 307,921,215 307,921,215
Consolidated capital surplus 607,329,471 514,889,532
Consolidated retained earnings 590,797,635 143,847,999
(Net income of ￦475,755,345 thousand in 2006 and ￦99,469,320 in 2005)
Consolidated capital adjustments 164,954,219 164,938,643
Minority interests 1,729,353 17,191,249
1,672,731,893 1,148,788,638
￦ 5,460,672,433 ￦ 4,801,177,507
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 2006 AND 2005

Korean won (in thousands, except per share amounts)
2006 2005
REVENUES:
Commission income ￦ 479,104,932 ￦ 166,068,934
Interest income 183,353,012 117,205,374
Dividends income 13,792,446 14,382,793
Gain on disposal of trading securities 180,715,553 111,647,793
Gain on valuation of trading securities 1,968,168 5,068,865
Gain on structured securities transactions 102,624,039 20,254,419
Gain on valuation of structured securities 22,138,954 12,244,304
Gain on equity method valuation 8,337,514 5,455,915
Gain on disposal of hybrid securities sold 22,137,629 5,156,399
Gain on valuation of hybrid securities sold 41,447,734 22,594,741
Gain on disposal of derivative assets 190,990,531 28,332,203
Gain on valuation of derivative assets 1,145,777 4,463,312
Fee on trust accounts 20,855,950 5,470,398
Other operating revenue 10,233,016 7,727,554
1,278,845,255 526,073,004
OPERATING EXPENSES:
Commission expenses 41,282,368 28,259,795
Interest expenses 88,705,626 47,287,525
Loss on disposal of trading securities 102,045,461 48,995,429
Loss on valuation of trading securities 20,773,779 1,741,406
Loss on structured securities transactions 2,845,793 4,803,750
Loss on valuation of structured securities 31,628,059 20,686,485
Loss on disposal of derivative assets 179,994,389 31,605,258
Loss on valuation of derivative assets 2,858,339 378,367
Loss on disposal of hybrid securities sold 133,873,684 30,485,207
Loss on valuation of hybrid securities sold 31,580,580 17,429,282
Selling and administrative expenses 414,656,054 188,421,660
Other operating expenses 2,629,444 1,781,735
1,053,100,864 421,875,899
OPERATING INCOME 225,744,391 104,197,105
NON-OPERATING INCOME:
Rental income 13,617,043 10,204,811
Gain on disposal of available-for-sale securities 97,837,446 30,806,007
Gain on disposal of held-to-maturity securities 318,847 -
Gain on disposal of tangible assets 111,604,514 3,403,450
Reversal of negative goodwill 17,222,544 12,155,855
Gain on forward contract transactions - 27,824
Gain on disposal of investment 206,713 1,302,853
Gain on foreign currency transactions 143,792 1,721,794
Gain on foreign currency translation 183,745 1,858,905
Gain on prior period adjustment - 377,160
Others 2,893,473 2,332,821
244,028,117 64,191,480
(continued)
81

Korean won (in thousands, except per share amounts)
2006 2005
NON-OPERATING EXPENSES
Impairment loss on available-for-sale securities ￦ 38,108,674 ￦ 5,452,370
Loss on disposal of available-for-sale securities 670,777 29,717,802
Loss on disposal of tangible assets 5,532,163 145,306
Loss on disposal of investment 17,732 8,833
Loss on disposal of other assets - 2,208
Loss on foreign currency translation 1,332 6,791
Other bad debt expenses - 680,817
Donations 515,362 338,883
Rental administrative expense 794,297 966,465
Additional payment of income taxes in prior period 117,647 733,793
Loss on forward contract transactions - 271,000
Others 6,231,621 4,252,000
52,234,085 43,160,059
ORDINARY INCOME 417,538,423 125,228,526
EXTRAORDINARY ITEM 3,725,514 -
NET INCOME BEFORE INCOME TAX EXPENSES 421,263,937 125,228,526
INCOME TAX EXPENSES(BENEFITS) -55,021,004 25,511,921
NET INCOME BEFORE MINORITY INTERESTS 476,284,941 99,716,605
NET INCOME OF MINORITY INTERESTS 529,596 247,285
NET INCOME ￦ 475,755,345 ￦ 99,469,320
ORDINARY INCOME PER COMMON SHARE ￦ 8,429 ￦ 1,634
NET INCOME PER COMMON SHARE ￦ 8,486 ￦ 1,634
DILUTION ORDINARY INCOME PER COMMON SHARE ￦ 8,056 ￦ 1,632
DILUTION NET INCOME PER COMMON SHARE ￦ 8,110 ￦ 1,632

NON-CONSOLIDATED BALANCE SHEETS
MARCH 31, 2006 AND 2005
KOREA INVESTMENT & SECURITIES CO.,LTD.

2006 2005
ASSETS
CURRENT ASSETS
Cash and bank deposits ￦ 370,817,298 ￦ 137,215,428
Deposits 833,627,044 260,360,201
Trading securities 1,160,304,907 679,857,682
Structured securities 783,421,522 -
Options purchased 308,000 40
Loans, less allowance for doubtful accounts of ￦777,348
thousand in 2006 and ￦24,626 thousand in 2005 320,952,071 84,925,178
Receivables, less allowance for doubtful accounts of ￦2,686,408
thousand in 2006 and ￦1,625,554 thousand in 2005 163,632,822 21,055,162
Accrued income, less allowance for doubtful accounts of
￦1,133,143 thousand in 2006 and ￦70,749 thousand in 2005 26,135,659 14,063,824
Prepaid income tax 4,489,398 27,161,689
Derivative instrument assets 16,025,090 -
Current portion of deferred income tax assets 30,383,347 -
Other current assets, less allowance for doubtful accounts of
￦1,558,034 thousand in 2006 and ￦16,582 thousand in 2005 10,699,399 2,657,498
3,720,796,557 1,227,296,702
NON-CURRENT ASSETS
Available-for-sale securities 78,971,123 1,393,031
Investment securities using the equity method 102,127,381 59,334,427
Long-term deposits 65,292 222,692
Long-term loans, less allowance for doubtful accounts of
￦60,418 thousand in 2006 and ￦59,782 thousand in 2005 11,030,082 11,896,698
Guarantee deposits 107,028,681 79,837,891
Property and equipment, net of accumulated depreciation of
￦182,403,667 thousand in 2006 and ￦77,918,186 thousand in 2005 302,380,033 252,282,521
Intangibles 3,989,371 6,295,835
Deferred income tax assets 26,972,671 -
Other non-current assets, less present value discount and
allowance for doubtful accounts of ￦18,955,566 thousand
in 2006 and ￦119,575 thousand in 2005 28,780,432 4,953,603
661,345,066 416,216,698
TOTAL ASSETS ￦ 4,382,141,623 ￦ 1,643,513,400
(continued)
83

2006 2005
CURRENT LIABILITIES
Call money ￦ - ￦ 128,200,000
Short-term borrowings 28,300,000 155,236,431
Bonds sold under reverse resale agreements 344,229,060 633,604,081
Customers’ deposits 854,934,303 253,340,483
Securities sold 187,882,306 -
Structured securities sold 1,056,865,791 -
Options sold 24,600 -
Accounts payable 57,379,423 1,091,314
Accrued expenses 4,730,433 13,842,226
Withholding income taxes 18,283,440 10,061,585
Guarantee deposits received 2,557,000 -
Deposits for rent 14,406,291 7,672,938
Other current liabilities 11,930,821 495,888
2,581,523,468 1,203,544,946
LONG-TERM LIABILITIES
Debentures 220,000 -
Accrued severance indemnities, net of National Pension Fund for severance
and retirement benefits of ￦237,034 thousand in 2006 and ￦1,933 thousand
in 2005, and individual severance insurance deposits of ￦21,529,775 in 2006
and ￦8,393,292 thousand in 2005 20,479,088 8,186,884
Subordinated borrowings 200,000,000 -
Other non-current liabilities 4,599,935 -
225,299,023 8,186,884
TOTAL LIABILITIES 2,806,822,491 1,211,731,830
SHAREHOLDERS’ EQUITY
Capital stock 140,000,000 60,000,000
Capital surplus 691,113,722 5,810,731,722
Retained earnings (accumulated deficit) (Net income of ￦729,332,466 thousand
in 2006 and ￦185,922,493 thousand in 2005) 729,332,466 (5,438,974,031)
Capital adjustments 14,872,944 23,879
TOTAL SHAREHOLDERS’ EQUITY 1,575,319,132 431,781,570
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ￦ 4,382,141,623 ￦ 1,643,513,400

NON-CONSOLIDATED STATEMENTS OF INCOME

2006 2005
OPERATING REVENUES
Commissions received ￦ 438,437,193 ￦ 170,315,115
Interest and dividend income 130,546,738 69,886,974
Distribution income 1,770,936 650,709
Gain on sales of trading securities 173,075,749 19,915,696
Gain on valuation of trading securities 837,503 997,114
Gain on structured securities transactions 110,813,208 -
Gain on valuation of securities sold 221,111 -
Gain on structured securities sold transactions 49,261,291 -
Gain on valuation of reserve for claims of customers’ deposits 3,578,888 7,946,357
Gain on derivatives transactions 181,981,712 37,697,640
Others 144 1,139,301
1,090,524,473 308,548,906
OPERATING EXPENSES
Commission expense 36,649,495 5,945,387
Interest expense 53,608,721 111,019,515
Loss on trust accounts - 77,092,654
Loss on sales of trading securities 96,609,990 13,934,264
Loss on valuation of trading securities 15,867,782 864,948
Loss on structured securities transactions 21,019,577 -
Loss on valuation of securities sold 126,626 -
Loss on structured securities sold transactions 148,276,120 -
Loss on derivatives transactions 171,832,607 27,491,032
Selling and administrative expenses 312,803,119 155,151,197
Others 129,526 -
856,923,563 391,498,997
OPERATING INCOME (LOSS) 233,600,910 (82,950,091)
NON-OPERATING INCOME:
Gain on disposal of property and equipment 110,480,449 18,535
Rental income 12,187,519 7,045,583
Gain on disposal of available-for-sale securities 337,623,374 89,926,575
Gain on equity method valuation 6,705,154 2,205,013
Gain on disposal of investment assets - 102,432
Gain on foreign currency transactions 128,370 103
Gain on foreign currency translation 2,179 -
Others 2,644,546 240,156,786
￦ 469,771,591 ￦ 339,455,027
(continued)
85

2006 2005
NON-OPERATING EXPENSES
Loss on disposal of property and equipment ￦ 798,917 ￦ 3,496,239
Loss on disposal of available-for-sale securities 534,174 8,764,637
Impairment loss on available-for-sale securities 30,824,241 37,859,735
Loss on foreign currency translation 464 -
Donation 510,498 342,730
Others 3,643,438 20,108,729
36,887,516 70,582,443
ORDINARY INCOME 666,484,985 185,922,493
EXTRAORDINARY ITEM - -
NET INCOME BEFORE INCOME TAX 666,484,985 185,922,493
INCOME TAX BENEFITS (62,847,481) -
NET INCOME ￦ 729,332,466 ￦ 185,922,493
ORDINARY INCOME PER COMMON SHARE ￦ 28,789 ￦ 188
NET INCOME PER COMMON SHARE ￦ 28,789 ￦ 188

ORGANIZATION CHART
GENERAL SHAREHOLDERS’ MEETING
MANAGEMENT COMMITTEE
OPERATIONS COMMITTEE
BOARD OF DIRECTORS
OUTSIDE DIRECTOR RECOMMENDATION COMMITTEE
RISK MANAGEMENT COMMITTEE
AUDIT COMMITTEE
CEO
VICE PRESIDENT MANAGEMENT SUPPORT DIVISION

MANAGEMENT SUPPORT OFFICE
RISK MANAGEMENT OFFICE
AUDIT OFFICE
CORPORATE MANAGEMENT DIVISION

CORPORATE MANAGEMENT OFFICE
STRATEGY PLANNING OFFICE

87

Tel : 813-5363-5376 / Fax : 813-3358-8401
(%)
700 700 70 40,000 50
600 594.7 600 60 40

564.6
30,000
500 500 50
30
400 400 40 39.6 20,000
20
300 300 30
10,000
200 10
200 20
100 85.5 100 84.1 10 0 0

7.6
.01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .01 .31
0 0 0 .04 .05 .06 .07 .08 .09 .10 .11 .12 .01 .02 .03 .03
05 05 05 05 05 05 05 05 05 06 06 06 06
Contents
SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY
PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT
CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA
INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA
INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES
CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS,
KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD
KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT
K OREA I NVESTMENT H OLDINGS C O ., L TD . | A NNUAL R EPORT FY2005

HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT PRELUDE OUR PRIDE OUR POWER OUR VISION
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD (ABOUT US) (REVIEW OF OPERATIONS) (FINANCIAL SECTION)
Financial
HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA VALUE ASSET MANAGEMENT CO., LTD KOREA INVESTMENT Highlights 12 Milestones 24 Korea Investment
Shareholder
K OREA I NVESTMENT H OLDINGS C O ., L TD . Information 14 Integration
Section
27-1, Y EOUIDO - DONG , Y EONGDEUNGPO - GU , S EOUL , K OREA 150-747
STANDING TALL, STRIDING FORTH
Tel: 82-2-3276-6400 l Fax: 82-2-3276-6402 l
E-mail: truefriend@truefriend.com l http://www.koreaholdings.com
K OREA I NVESTMENT H OLDINGS C O ., L TD . | A NNUAL R EPORT FY2005 02 Chairman’s
Chart
INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA
INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD KOREA INVESTMENT TRUST MANAGEMENT CO., LTD KOREA 04 Interview with
the CEO 18 Vision &
Partners 87 Network
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO., LTD 08 Board
Equity Partners
37 Korea Investment
Mutual Savings Bank
PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD PARTNERS CO., LTD CORNERSTONE EQUITY PARTNERS, KOREA INVESTMENT MUTUAL SAVINGS BANK KOREA INVESTMENT HOLDINGS CO., LTD

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KOREA INVESTMENT HOLDINGS CO., LTD KOREA INVESTMENT & SECURITIES CO.

K OREA I NVESTMENT H OLDINGS C O ., L TD . | A NNUAL R EPORT FY2005

PRELUDE OUR PRIDE OUR POWER OUR VISION

Korea Investment Holdings

Supported by its subsidiaries, KIH continues to develop diverse financial

Korea Investment Holdings

CONSOLIDATED FINANCIAL STATEMENTS STOCK INFORMATION OVERSEAS NETWORK

700 700 70 40,000 50

600 594.7 600 60 40

100 85.5 100 84.1 10 0 0

Korea Investment Holdings

CONSOLIDATED FINANCIAL STATEMENTS STOCK INFORMATION OVERSEAS NETWORK

700 700 70 40,000 50

600 594.7 600 60 40

100 85.5 100 84.1 10 0 0

To Our Clients and Shareholders

Korea Investment Holdings

A More Exciting Year to Come

Seung-Woo Chang, Chairman

Q1: Please briefly explain KIH’s performance for FY05.

A1: “Last year Korea Investment Holdings had an unprecedented performance.

Korea Investment Holdings

Q3: Then, what is your mid- to long-term vision?

Korea Investment Holdings

Nam-Goo Kim, President & CEO

HOLDING SANG-KYO HAN CHAN-HYOUNG CHUNG YONG-WOO LEE

SUBSIDIARIES SUNG-IHL HONG BUM-SEOK KIM YONG-JAE LEE

Korea Investment Holdings

WOO-TAEK AUO CHRIS LEE SANG-HOON OH

JONG-SEUNG LEE SEOK-HEON KIM CHUN-SIK LEE

Korea Investment Holdings

SUCCESSFUL, A ND M OVING F ORWARD

Korea Investment Holdings had a successful year of

COMPREHENSIVE F INANCIAL S ERVICE P ROVIDER

FEB. 14, 2006 ESTABLISHED KOREA VALUE ASSET MANAGEMENT

JUL. 1, 2005 MERGED KOREA INVESTMENT TRUST MANAGEMENT WITH

JUN. 1, 2005 MERGED KITC WITH DONGWON SECURITIES AND RENAMED AS

DEC. 13, 2004 SEPARATED FROM DONGWON GROUP

JAN. 5, 2004 ACQUIRED STAKE IN DONGWON MUTUAL SAVINGS BANK

NOV. 28, 2003 ACQUIRED STAKE IN DONGWON VENTURE CAPITAL

JUL. 21, 2003 DONGWON FINANCIAL HOLDINGS LISTED ON KSE

MAY 30, 2003 LAUNCHED A FINANCIAL HOLDING COMPANY

JAN. 11, 2003 ESTABLISHED DONGWON FINANCE CO., LTD.

JAN. 1, 2003 SEPARATED FROM DONGWON INDUSTRY CO., LTD.

Korea Investment Holdings

Korea Investment Trust KITC transformed KITC acquired by DFH 99.46%

1960 1970 1980 1990 2000 2003 2005 2006

ENHANCED CAPABILITIES & D IVERSIFIED S ERVICES

HIGH EXPECTATIONS OF THE MARKET

AFTER THE INTEGRATION,

Korea Investment Holdings

SANG-KYO HAN CHAN-HYOUNG CHUNG

Korea Investment Holdings

We aim to become a multinational hub for

* We will reinforce our capabilities in IB and

* We will improve our AM portfolio and further

* We will aim to serve our clients with comprehensive

* We will leverage our expertise and resources to

OUR VISION IS TO BECOME

“Vision 20-20” Business Tools for Growth

Business Models for Growth - CUSTOMIZED AND RELIABLE CUSTOMER

Expanding the Investment Banking Business

Korea Investment Holdings