capital eng 2q

Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Financial Statements (Unaudited) June 30, 2014

(With Independent Auditors’ Review Report Thereon)

Contents

Page

Independent Auditors’ Review Report 1

Condensed Consolidated Interim Statements of Financial Position 3

Condensed Consolidated Interim Statements of Comprehensive Income 5

Condensed Consolidated Interim Statements of Changes in Equity 8

Condensed Consolidated Interim Statements of Cash Flows 10

Notes to the Condensed Consolidated Interim Financial Statements 11

(Based on a report originally issued in Korean)

The Board of Directors and ShareholdersHyundai Capital Services, Inc.: Reviewed Financial Statements We have reviewed the accompanying Services, Inc. and its subsidiariesfinancial position as of June 30, 201three-month and six-month periods ended June 30, 2014 and 2013changes in equity and cash flows forfinancial statements. Management’s Responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with Korean International Financial Reporting Standards (“KInterim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of condensed consolidated whether due to fraud or error. Auditors’ Review Responsibility Our responsibility is to issue a report on these reviews. We conducted our reviews in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become awidentified in an audit. Accordingly, we do not express an audit opinion.

KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 152 Teheran-ro, Gangnam-gu, Seoul 135-984, Republic of Korea

Tel Fax www.kr.kpmg.com

Independent Auditors’ Review Report

(Based on a report originally issued in Korean)

The Board of Directors and Shareholders

We have reviewed the accompanying condensed consolidated interim financial statements of Hyundai Capitaland its subsidiaries (the “Group”), which comprise the condensed consolidated

, 2014, the condensed consolidated statements of comprehensive incomemonth periods ended June 30, 2014 and 2013, the condensed consolidated statements of

changes in equity and cash flows for the six-month periods ended June 30, 2014 and 2013

Management is responsible for the preparation and fair presentation of these condensedfinancial statements in accordance with Korean International Financial Reporting Standards (“K

, and for such internal control as management determines is necessary to enable the consolidated interim financial statements that are free from material misstatement,

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our

in accordance with the Review Standards for Quarterly & Semiannual Financial tatements established by the Securities and Futures Commission of the Republic of Korea. A review of interim

financial information consists of making inquiries, primarily of persons responsible for financial and accounting and other review procedures. A review is substantially less in scope than an audit

conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

+82 (2) 2112 0100 Fax +82 (2) 2112 0101 www.kr.kpmg.com

financial statements of Hyundai Capital consolidated statement of

consolidated statements of comprehensive income for the the condensed consolidated statements of

and 2013 and notes to the interim

condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034,

, and for such internal control as management determines is necessary to enable the financial statements that are free from material misstatement,

consolidated interim financial statements based on our

in accordance with the Review Standards for Quarterly & Semiannual Financial tatements established by the Securities and Futures Commission of the Republic of Korea. A review of interim

financial information consists of making inquiries, primarily of persons responsible for financial and accounting and other review procedures. A review is substantially less in scope than an audit

conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently are of all significant matters that might be

Conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034, Interim Financial Reporting. Others The consolidated statement of financial position of the Group as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the year then ended, which are not accompanying this report, were audited in accordance with auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 27, 2014, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2013, presented for comparative purposes, is not different from that audited by us in all material respects. The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

KPMG Samjong Accounting Corp. Seoul, Korea August 12, 2014

This report is effective as of August 12, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position As of June 30, 2014 and December 31, 2013 (Unaudited)

3

June 30, December 31, (In millions of won) Notes 2014 2013

Assets Cash and due from banks

Cash and cash equivalents 22 W 1,368,740 1,502,600 Due from banks 950 15

1,369,690 1,502,615 Securities 3

Available-for-sale securities 53,631 52,783 Investments in associates 112,205 157,313

165,836 210,096 Loans receivable 4,5

Loans receivable 10,295,587 11,457,560 Allowance for loan losses (343,133) (333,359)

9,952,454 11,124,201 Installment financial assets 4,5

Automobile installment financing receivables 5,952,664 4,832,950 Allowance for loan losses (51,416) (42,694) Durable goods installment financing receivables 1,452 — Allowance for loan losses (85) — Mortgage installment financing receivables 7,997 9,884 Allowance for loan losses (247) (286)

5,910,365 4,799,854 Lease receivables 4,5

Finance lease receivables 2,942,046 3,038,798 Allowance for loan losses (56,111) (49,612) Cancelled lease receivables 13,802 11,329 Allowance for loan losses (12,868) (10,556)

2,886,869 2,989,959 Leased assets

Operating lease assets 1,640,968 1,622,565 Accumulated depreciation (539,628) (555,872) Cancelled lease assets 5,129 5,259 Accumulated depreciation (2,226) (2,226)

1,104,243 1,069,726

Property and equipment, net 6 231,652 233,018

Assets held for sale 8 46,347 22,347

Other assets Non-trade receivables 99,227 119,207 Allowance for doubtful accounts 5 (5,670) (5,457) Accrued revenues 110,466 118,737 Allowance for doubtful accounts 5 (15,359) (15,220) Advance payments 74,849 57,153 Prepaid expenses 70,094 47,774 Intangible assets 7 60,814 62,747 Derivative assets 12,26 7,421 23,946 Leasehold deposits 28,941 28,343

430,783 437,230

Total assets W 22,098,239 22,389,046

See accompanying notes to the condensed consolidated interim financial statements.

Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position, Continued As of June 30, 2014 and December 31, 2013 (Unaudited)

4

June 30, December 31,

(In millions of won) Notes 2014 2013

Liabilities

Borrowed funds 9 Borrowings W 1,704,704 1,811,443 Bonds issued 15,234,041 15,426,879

16,938,745 17,238,322 Other liabilities

Non-trade payables 244,758 307,753 Accrued expenses 163,543 161,447 Unearned revenue 38,854 41,857 Withholdings 33,366 37,486 Derivative liabilities 12,26 615,607 512,745 Current tax liabilities 32,469 58,528 Defined benefit liability, net 10 21,605 12,884 Deposits received 652,481 706,224 Deferred income tax liabilities 19 45,006 57,022 Provisions 11 1,693 1,826 Other 60 70

1,849,442 1,897,841

Total liabilities 18,788,187 19,136,163

Equity

Issued capital 496,537 496,537 Capital surplus 407,539 407,539 Accumulated other comprehensive loss 21 (39,553) (11,574) Retained earnings 13,14 2,445,529 2,360,381

Total Equity 3,310,052 3,252,883

Total liabilities and equity W 22,098,239 22,389,046


Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income For the three-month and six-month periods ended June 30, 2014 and 2013 (Unaudited)

5

Notes

June 30, 2014 June 30, 2013

(In millions of won)

Three- month period ended

Six- month period ended



Operating revenue

Interest income 15 W 10,749 22,624 7,679 15,807

Gain on valuation and sale of securities

349

1,002

473

1,395

Income on loans 15,16 320,691 653,235 381,767 757,811

Income on installment financial assets

15,16

88,970

168,375

56,654

123,301

Income on leases 15,16 216,457 435,105 225,048 453,076

Gain(loss) on sale of loans (171) 3,673 8,182 11,320

Gain on foreign currency transactions

196,013

196,521

27,844

50,821

Dividend income 177 2,383 230 2,588

Other operating income 17 (57,520) 81,746 204,986 416,327

Total operating revenue 775,715 1,564,664 912,863 1,832,446

Operating expenses

Interest expense 15 192,449 387,264 198,376 402,389 Lease expense 16 123,867 250,126 123,216 251,045 Provision for loan losses 5 107,672 226,650 103,026 203,956 Loss(gain) on foreign currency

transactions

(91,865) 13,193 154,631 330,601 General and administrative

expenses

18 167,657 321,190 161,022 315,302 Other operating expenses 17 210,166 222,989 42,453 81,667

Total operating expenses 709,946 1,421,412 782,724 1,584,960

Operating income W 65,769 143,252 130,139 247,486 See accompanying notes to the condensed consolidated interim financial statements.

Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three-month and six-month periods ended June 30, 2014 and 2013 (Unaudited)

6

Notes

June 30, 2014 June 30, 2013






Non-operating income

Share in net income of associates under the equity method

3 W 2,733 6,828 (2,430) 1,746 Gain on sale of property and

equipment

48 61 8 85,488 Recovery of impairment loss

on intangible assets

— 26 — — Other 2,099 4,087 2,412 4,640

Total non-operating income 4,880 11,002 (10) 91,874

Non-operating expenses

Share in net loss of associates under the equity method

3 (41) 216 330 436

Impairment loss on investments in associates

3 — 27,688 — — Loss on sale of property and

equipment

55 58 58 2,896 Donation 423 513 169 272 Other 98 378 494 597

Total non-operating expenses 535 28,853 1,051 4,201 Profit before income taxes 70,114 125,400 129,078 335,159 Income tax expense 19 15,517 40,251 33,775 87,006 Profit for the period W 54,597 85,149 95,303 248,153 See accompanying notes to the condensed consolidated interim financial statements.

Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three-month and six-month periods ended June 30, 2014 and 2013 (Unaudited)

7

Notes

2014 2013

(In millions of won, except for earnings per share information)

Three-month period ended




Other comprehensive loss,

net of income taxes

21

Items that will not be reclassified

to profit or loss:

Remeasurements of

defined benefit plans

W (3,012) (3,901) 2,124 665 Items that are or may be reclassified

subsequently to profit or loss:

Net change in unrealized gains and

losses on available-for-sale securities

(353) 531 818 1,060 Share in other comprehensive

income (loss) of associates under the equity method

(4,550) (4,939) 2,136 3,275 Net change in remaining effective

portion of cash flow hedges

(18,360) (19,153) (38,410) (58,148) Net change in foreign currency

translation adjustments

(419) (517) (1,020) (929)

(26,694) (27,979) (34,352) (54,077)

Total comprehensive income for the period

W 27,903 57,170 60,951 194,076

Earnings per share 20 Basic and diluted earnings per share W 550 857 960 2,499


Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity For the six-month periods ended June 30, 2014 and 2013 (Unaudited)

8


Issued capital

Capital surplus

Additional paid-in capital

Other capital surplus

Accumulated other

comprehensive loss Retained earnings

Total equity

Balances as of January 1, 2013 W 496,537 369,339 38,200 (13,432) 2,148,998 3,039,642

Total comprehensive income (loss) Profit for the period — — — — 248,153 248,153 Other comprehensive loss: Net change in unrealized gains

and losses on available-for-sale securities — — — 1,060 — 1,060

Share in other comprehensive income of associates under the equity method — — — 3,275 — 3,275

Net change in remaining effective portion of cash flow hedges — — — (58,148) — (58,148)

Net change in foreign currency translation adjustments — — — (929) — (929)

Remeasurements of defined benefit plans — — — 665 — 665

— — — (54,077) 248,153 194,076

Balances as of June 30, 2013 W 496,537 369,339 38,200 (67,508) 2,397,151 3,233,718


Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity, Continued For the six-month periods ended June 30, 2014 and 2013 (Unaudited)

9


Issued capital

Capital surplus

Additional paid-in capital

Other capital surplus

Accumulated other

comprehensive loss Retained earnings

Total equity

Balances as of January 1, 2014 W 496,537 369,339 38,200 (11,574) 2,360,380 3,252,882 Total comprehensive income (loss)

Profit for the period — — — — 85,149 85,149 Other comprehensive loss: Net change in unrealized gains

and losses on available-for-sale securities — — — 531 — 531

Share in other comprehensive loss of associates under the equity method — — — (4,939) — (4,939)

Net change in remaining effective portion of cash flow hedges — — — (19,153) — (19,153)

Net change in foreign currency translation adjustments — — — (517) — (517)

Remeasurements of defined benefit plans — — — (3,901) — (3,901)

— — — (27,979) 85,149 57,170

Balances as of June 30, 2014 W 496,537 369,339 38,200 (39,553) 2,445,529 3,310,052


Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Cash Flows For the six-month periods ended June 30, 2014 and 2013 (Unaudited)

10

(In millions of won) Notes 2014 2013

Cash flows from operating activities Cash generated from operations 22 W 430,794 342,168

Interest received 22,192 16,662

Interest paid (361,519) (368,355) Dividends received 2,383 2,588

Income taxes paid (72,444) (46,431) Net cash provided by (used in) operating activities 21,406 (53,368) Cash flows from investing activities

Dividends received from associates — 533

Acquisition of investments in associates (5,150) (2,552) Acquisition of land (10) (1,981) Proceeds from sale of land — 114,486

Acquisition of building (405) — Proceeds from sale of building — 63,415

Acquisition of vehicles (383) (256) Proceeds from sale of vehicles 127 183

Acquisition of fixtures and furniture (9,038) (4,262) Proceeds from sale of fixtures and furniture 34 103

Acquisition of other tangible assets (75) (48) Proceeds from sale of other tangible assets 10 76

Increase in construction in progress (4,929) (24,612) Acquisition of intangible assets (6,077) (5,287) Decrease in leasehold deposits 1,537 3,488

Increase in leasehold deposits (873) (3,011) Net cash provided by provided by (used in) investing activities (25,232) 140,275 Cash flows from financing activities

Proceeds from borrowings 1,040,000 1,270,000

Repayments of borrowings (1,145,000) (1,526,500) Issuance of bonds 1,918,499 1,898,288

Repayments of bonds (1,943,504) (1,934,906)

Net cash used in financing activities (130,005) (293,118)

Effect of exchange rate fluctuations on cash and cash equivalents held (29)

2

Net decrease in cash and cash equivalents (133,860) (206,209) Cash and cash equivalents at beginning of the period 22 1,502,600 1,302,161

Cash and cash equivalents at end of the period 22 W 1,368,740 1,095,952


Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2014 (Unaudited) (In millions of won)

11

1. Reporting Entity Hyundai Capital Services, Inc. (the “Company”) was established on December 22, 1993, to engage in installment financing, facilities leasing and new technology financing. The Company changed its trade name from Hyundai Auto Finance Co., Ltd. to Hyundai Financial Services Co. on April 21, 1995, and changed its trade name once again to Hyundai Capital Services, Inc. on December 30, 1998. In accordance with the Monopoly Regulation and Fair Trade Act, the Company is incorporated into Hyundai Motor Company Group. As of June 30, 2014, the Company’s operations are headquartered in 3, Uisadang-daero, Yeongdeungpo-gu, Seoul, Korea. Its major shareholders are Hyundai Motor Company and GE International Holdings Corporation with 56.47% and 43.30% ownership, respectively. The condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries, including Autopia 36th Asset Securitization Specialty Company (“ABS SPC”) with trust for the securitization, and other subsidiaries as summarized below (collectively, the “Group”). Investments in Beijing Hyundai Auto Finance Co., Ltd. and four other associates are accounted for under the equity method. (1) The Group’s subsidiaries Subsidiaries as of June 30, 2014 and December 31, 2013, are as follows. Asset securitization vehicles are special purpose vehicles which are sponsored by the Group under its securitization program. The Group is exposed to variability of returns of the vehicles through its holding of debt securities in the vehicles and by issuing financial guarantees to the vehicles; and the Group manages key decisions that significantly affect these vehicles’ returns. As a result, the Group has concluded that its controls these vehicles even though its ownership interests over these vehicles do not exceed 50%.

Location

Ownership (%) June 30, 2014 December 31, 2013

Asset securiti-zation vehicles

Korea 0.9 Autopia 36th ABS SPC (trust) Autopia 36th ABS SPC (trust) Autopia 43rd ABS SPC (trust) Autopia 42nd ABS SPC (trust) Autopia 44th ABS SPC (trust) Autopia 43rd ABS SPC (trust) Autopia 45th ABS SPC (trust) Autopia 44th ABS SPC (trust) Autopia 46th ABS SPC (trust) Autopia 45th ABS SPC (trust) Autopia 47th ABS SPC (trust) Autopia 46th ABS SPC (trust) HB Third ABS SPC Autopia 47th ABS SPC (trust) HB Third ABS SPC 0.5 Autopia 49th ABS SPC (trust) Autopia 49th ABS SPC (trust) Autopia 50th ABS SPC (trust) Autopia 50th ABS SPC (trust) Autopia 51st ABS SPC (trust) Autopia 51st ABS SPC (trust) Autopia 52nd ABS SPC (trust) Autopia 52nd ABS SPC (trust) Autopia 54th ABS SPC (trust) 0.31 HB Fourth ABS SPC HB Fourth ABS SPC

Limited liability company

Germany 100 Hyundai Capital Europe GmbH (*) Hyundai Capital Europe GmbH (*)

India 100 Hyundai Capital India Private Limited

Hyundai Capital India Private Limited

Brazil 100 Hyundai Capital Brasil LTDA Hyundai Capital Brasil LTDA

(*) Hyundai Capital Europe GmbH holds 100% ownership interests of Hyundai Capital Services Limited

Liability Company located at Russia.


12

1. Reporting Entity, Continued

(2) Changes in subsidiaries Subsidiaries that are included in and excluded from the Group’s consolidated interim financial statements during the six-month period ended June 30, 2014 are as follows:

Change Event Subsidiaries

Included Establishment Autopia 54th ABS SPC (trust)

Excluded Liquidation Autopia 42nd ABS SPC (trust)

(3) Key financial information of subsidiaries as of June 30, 2014 is summarized as follows:

Assets

Liabilities Equity

Operating income

Profit (loss) for the year

Total comprehensive income (loss)

Hyundai Capital Europe GmbH W 11,264 2,757 8,507 8,049 (1,011) (1,566)

Hyundai Capital India Private Limited 1,611 1,045 566 562 39 35

Hyundai Capital Brasil LTDA 2,387 164 2,223 2,009 828 870

ABS SPCs 2,368,955 2,364,577 4,378 84,046 (1,612) (4,248)


13

2. Accounting Policies 2.1 Basis of Accounting (1) Statement of compliance These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, Interim Financial Reporting, for the six-month period ended June 30, 2014, and do not include all of the disclosures required for full consolidated annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as of and for the year ended December 31, 2013. These condensed consolidated interim financial statements have been prepared in accordance with the Korean IFRS standards and interpretations issued and effective or issued and early adopted as of June 30, 2014.

(2) Use of estimates and judgements The preparation of the financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as of and for the year ended December 31, 2013.


14

2. Accounting Policies, Continued 2.2 Significant Accounting Policies (1) Changes in accounting policies Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2013. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2014.

(i) Amendments to K-IFRS No. 1032, Financial Instruments: Presentation The amendments requires the offsetting of financial assets to financial liabilities to be presented as a net value on the statement of financial position, only if the assets and liabilities recognized by the Group has legal enforceable rights to offset, and has the intent to realize the net value or realize liabilities simultaneously to when realizing assets. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements. (ii) Amendments to K-IFRS No. 1036, Impairment of Assets The amendments address disclosure of recoverable amounts only for individual assets or cash generating units that recognize impairment losses (or subsequent gains) on goodwill and intangible assets with indefinite useful life. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements.

(iii) K-IFRS No. 2121, Levies The interpretation defines a levy an outflow from an entity by a government in accordance with legislation. The obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by the legislation. The liability to pay a levy is recognized progressively if the obligation event occurs over a period time; if an obligation to pay a levy is triggered when a minimum threshold is reached, the corresponding liability is recognized when that minimum activity threshold is reached. An entity shall recognize an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy. The interpretation confirms that an entity recognizes a liability for a levy when, and only when, the triggering event specified in the legislation occurs. An entity does not recognize a liability at an earlier date, even if it has no realistic opportunity to avoid the triggering event. The interpretation is effective for annual periods beginning on or after January 1, 2014. The adoption of the interpretation had no significant impact on the Group’s consolidated financial statements.


15

3. Securities Securities as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 December 31, 2013 Available-for-sale securities Equity securities

Marketable equity securities W 10,418 9,981 Unlisted equity securities 10,589 10,844

21,007 20,825 Debt securities

Government and public bonds 1,896 1,735 Corporation bonds 30,728 30,223

32,624 31,958

53,631 52,783 Investments in associates 112,205 157,313

W 165,836 210,096


16

3. Securities, Continued

3.1 Available-for-sale securities Available-for-sale securities as of June 30, 2014 and December 31, 2013, are as follows: (1) Marketable equity securities

Carrying amount

Number of

shares Ownership

(%) Acquisition

cost June 30,

2014 December 31,

2013 Marketable equity securities

NICE Information Service 1,365,930 2.25 W 3,312 4,248 4,180 NICE Holdings 491,620 1.30 3,491 6,170 5,801

Unlisted equity securities Hyundai Finance Corp. (*) 1,700,000 9.29 9,888 10,414 10,666 Korean Egloan, Inc. 4,000 3.12 100 100 100 Golfclub Lich AG 14 0.59 60 75 78

W 16,851 21,007 20,825

(*) The fair value of Hyundai Finance Corp. is estimated at the average of appraised value obtained by two external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the valuation technique based on the income approach (discounted cash flow model). In measuring the fair value under this methodology, appraisers estimate five-year financial statements based on projections considering actual operating results assuming that the operational structure will remain unchanged for the next five years. Operating income and expenses are estimated based on the past performances, future business plans and expected market conditions.

(2) Debt securities

Carrying amount

Issuer Interest rate

(%) Acquisition

cost June 30,

2014 December 31,

2013 Government and public bonds

Seoul Metropolitan Rapid Transit Corp. and others 2.00 W 1,786 1,896 1,735

Corporate bonds Autopia 53rd ABS SPC 3.59, 4.42 30,000 30,728 30,223

W 31,786 32,624 31,958


17


3.2 Investments in associates (1) Details of investments in associates as of June 30, 2014 and December 31, 2013, are as follows:

(*1) Although the Group holds less than 20% of the voting rights, it has the ability to exercise significant

influence through representation on the board of directors or equivalent governing body of the investee. Investments in these entities are accounted for using the equity method.

(*2) Due to the unavailability of the financial statements as of June 30, 2014, the equity method was applied to the financial statements as of May 31, 2014. Significant transactions occurred between the HI Network, Inc.’s reporting date and the Group’s reporting date were reflected appropriately.

June 30, 2014

Number of

shares Owner –ship (%)

Principal place of business

Financial statement

date Industry HI Network, Inc.

(*1) (*2) 13,332 19.99 Korea 5/31/2014 Insurance brokerage

Korea Credit Bureau(*1) 140,000 7.00 Korea 6/30/2014 Credit bureau Hyundai Capital

Germany GmbH 600,200 30.01 Germany 6/30/2014 Automobile finance brokerage

Hyundai Capital UK Ltd. 16,494,500 29.99 UK 6/30/2014

Automobile finance brokerage

Beijing Hyundai Auto Finance Co., Ltd. — 46.00 China 6/30/2014



18


(*1) Although the Group holds less than 20% of the voting rights, it has the ability to exercise significant

influence through representation on the board of directors or equivalent governing body of the investee. Investments in these entities are accounted for using the equity method.

(*2) Due to the unavailability of the financial statements as of December 31, 2013, the equity method was applied to the financial statements as of November 30, 2013. Significant transactions occurred between the HI Network, Inc.’s reporting date and the Group’s reporting date were reflected appropriately.

December 31, 2013

Number of

shares Owner –ship (%)

Principal place of business

Financial statement

date Industry HK Mutual Savings

Bank (*1) 4,990,438 19.99 Korea 12/31/2013 Savings bank HI Network, Inc.

(*1) (*2) 13,332 19.99 Korea 11/30/2013 Insurance brokerage

Korea Credit Bureau(*1) 140,000 7.00 Korea 12/31/2013 Credit bureau Hyundai Capital

Germany GmbH 600,200 30.01 Germany 12/31/2013 Automobile finance brokerage

Hyundai Capital UK Ltd. 13,495,500 29.99 UK 12/31/2013


Beijing Hyundai Auto Finance Co., Ltd. — 46.00 China 12/31/2013



19


(2) Summary of financial information of investees as of June 30, 2014 and December 31, 2013 for assets and liabilities, for the six-month period ended June 30, 2014 and 2013, for revenue and income, and the reconciliation of carrying amounts are as follows:

June 30, 2014

Total assets Total

liabilities Issued capital

Total equity

The Group’s share in

net assets Goodwill Carrying amount

HI Network, Inc. W 5,041 2,938 333 2,103 420 — 420 Korea Credit

Bureau 56,124 12,660 10,000 43,464 3,043 1,037 4,080 Hyundai Capital

Germany GmbH 7,608 1,254 3,547 6,354 1,907 — 1,907 Hyundai Capital

UK Ltd. 1,638,148 1,531,545 96,055 106,603 31,970 — 31,970 Beijing Hyundai Auto Finance Co., Ltd. 1,684,188 1,523,693 176,225 160,495 73,828 — 73,828

Six-month period ended June 30, 2014

Operating Revenue

Interest income

Interest expense

Net Income (loss)

Other compre-hensive

loss

Total compre-hensive income (loss)

Divi- dends

HI Network, Inc. W 6,298 30 — 75 — 75 — Korea Credit Bureau 16,860 287 — (3,332) — (3,332) —

Hyundai Capital Germany GmbH 2,073 34 — 829 (321) 508 —

Hyundai Capital UK Ltd. 43,373 39,706 7,131 14,484 (641) 13,843 —

Beijing Hyundai Auto Finance Co., Ltd. 72,313 70,676 34,917 3,655 (10,630) (6,975) —


20


December 31, 2013

Total assets Total

liabilities Issued capital

Total equity

The Group’s share in net assets Goodwill

Carrying amount

HK Mutual Savings Bank (*) W 2,494,096 2,299,652 124,761 194,444 38,889 12,248 51,137

HI Network, Inc. 5,480 3,361 333 2,119 424 — 424 Korea Credit Bureau 63,043 16,542 10,000 46,501 3,255 1,037 4,292

Hyundai Capital Germany GmbH 6,889 1,042 3,547 5,847 1,755 — 1,755

Hyundai Capital UK Ltd. 1,210,970 1,135,383 78,882 75,587 22,668 — 22,668

Beijing Hyundai Auto Finance Co., Ltd. 873,419 705,947 176,225 167,472 77,037 — 77,037

Six-month period ended June 30, 2013

Operating revenue

Interest income

Interest expense

Net income (loss)

Other compre-hensive

income (loss)

Total compre-hensive income (loss)

Divi- dends

HK Mutual Savings Bank (*) W 218,867 216,071 51,608 (2,181) (583) (2,764) —

HI Network, Inc. 7,953 33 — 694 — 694 — Korea Credit Bureau 20,810 223 — 1,278 — 1,278 (533)

Hyundai Capital Germany GmbH 1,230 19 — 442 249 691 —

Hyundai Capital UK Ltd. 22,124 18,894 2,898 2,985 620 3,605 —

Beijing Hyundai Auto Finance Co., Ltd. 8,825 2,528 1,052 (1,213) 6,805 5,592 —

(*) While HK Mutual Savings Bank’s fiscal year ends in June 30, the assets and liabilities are based on December

31, 2013, and the operating revenue and net income (loss) is based on the operating results of 6-month period from January 1, 2013 to June 30, 2013.


21


(3) Changes in investments in associates for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014

Beginning balance

Acqui- sition

Share in net income

(loss)

Share in other comprehensive

loss

Loss on impairment

Reclassi-fication to assets held

for sale Ending balance

HK Mutual Savings Bank(*) W 51,137 — 554 (3) (27,688) (24,000) —

HI Network, Inc. 424 — (4) — — — 420

Korea Credit Bureau 4,292 — (212) — — — 4,080 Hyundai Capital Germany GmbH 1,755 — 249 (97) — — 1,907

Hyundai Capital UK Ltd. 22,668 5,150 4,344 (192) — — 31,970

Beijing Hyundai Auto Finance Co., Ltd. 77,037 — 1,681 (4,890) — — 73,828

W 157,313 5,150 6,612 (5,182) (27,688) (24,000) 112,205

(*) The Group made a reclassification for all of its investments in HK Mutual Savings Bank to assets held for sale

(See Note 8).

2013

Beginning balance

Acquisi- tion

Share in net income (loss)

Share in other compre-

hensive income (loss) Dividends

Ending balance

HK Mutual Savings Bank W 51,170 — (436) (117) — 50,617

HI Network, Inc. 861 — 111 — (533) 439

Korea Credit Bureau 3,985 — 53 — — 4,038 Hyundai Capital

Germany GmbH 1,183 — 182 76 — 1,441 Hyundai Capital UK

Ltd. 6,197 2,552 896 186 — 9,831 Beijing Hyundai Auto

Finance Co., Ltd. 35,400 — 504 3,130 — 39,034 W 98,796 2,552 1,310 3,275 (533) 105,400

(4) Goodwill related to associates as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 December 31, 2013

HK Mutual Savings Bank W — 12,248 Korea Credit Bureau 1,037 1,037

W 1,037 13,285 4. Financial Receivables

Financial receivables as of June 30, 2014 and December 31, 2013, are as follows:


22

June 30, 2014

Unpaid principal balance

Deferred loan fees, net of

costs (Initial direct

fees on finance leases)

Present value

discounts

Allowance for loan losses

Carrying amount

Loans receivable

Loans W 10,273,385 23,576 (1,374) (343,133) 9,952,454

Installment financial assets Automobile 5,908,088 44,576 — (51,416) 5,901,248 Durable goods 1,452 — — (85) 1,367 Mortgage 7,985 12 — (247) 7,750

5,917,525 44,588 — (51,748) 5,910,365 Lease receivables

Finance lease receivables 2,942,576 (530) — (56,111) 2,885,935

Cancelled lease receivables 13,802 — — (12,868) 934

2,956,378 (530) — (68,979) 2,886,869

W 19,147,288 67,634 (1,374) (463,860) 18,749,688


23

4. Financial Receivables, Continued

December 31, 2013

Unpaid principal balance

Deferred loan fees, net of

costs (Initial direct

fees on finance leases)

Present value

discounts

Allowance for loan losses

Carrying amount

Loans receivable

Loan W 11,462,116 (3,242) (1,314) (333,359) 11,124,201

Installment financial assets Automobile 4,804,618 28,332 — (42,694) 4,790,256 Mortgage 9,868 16 — (286) 9,598

4,814,486 28,348 — (42,980) 4,799,854 Lease receivables

Finance lease receivables 3,039,544 (746) — (49,612) 2,989,186

Cancelled lease receivables 11,329 — — (10,556) 773

3,050,873 (746) — (60,168) 2,989,959

W 19,327,475 24,360 (1,314) (436,507) 18,914,014


24

5. Allowance for Loan Losses

Changes in allowance for loan losses including allowance for doubtful accounts for other assets for the six-month periods ended June 30, 2014 and 2013, are as follows:

2014

Loan receivables

Installment financial

assets Lease

receivables Other assets Total

Beginning balance W 333,359 42,980 60,168 20,677 457,184 Charge-offs (231,301) (22,106) (559) (3,256) (257,222) Recoveries 51,650 6,034 28 5,252 62,964 Unwinding of discounts (4,117) (169) (158) — (4,444) Provision for (release of)

allowance 193,746 25,017 9,531 (1,644) 226,650 Others (204) (8) (31) — (243) Ending balance W 343,133 51,748 68,979 21,029 484,889

2013

Loan receivables

Installment financial

assets Lease

receivables Other assets Total

Beginning balance W 312,829 33,484 38,881 18,740 403,934 Charge-offs (203,492) (20,537) (518) (3,446) (227,993) Recoveries 45,939 5,264 72 5,127 56,402 Unwinding of discounts (3,962) (222) (133) — (4,317) Provision for (release of)

allowance 183,333 12,545 9,221 (1,143) 203,956 Others 44 (8) (595) — (559) Ending balance W 334,691 30,526 46,928 19,278 431,423


25

6. Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2014 and 2013 are as follows: 2014

Beginning balance

Acquisi-tion Transfer Disposal

Depre- ciation

Translation differences

Ending balance

Land W 95,218 11 1,921 — — — 97,150

Buildings 89,267 405 132 — (1,198) — 88,606

Vehicles 2,154 287 — (101) (466) 2 1,876 Fixture and

furniture 42,068 5,019 489 (58) (10,523) (15) 36,980

Others 2,005 75 — (10) — — 2,070 Construction in

progress 2,306 5,019 (2,351) — — (4) 4,970

W 233,018 10,816 191 (169) (12,187) (17) 231,652 2013

Beginning balance Acquisition Transfer Disposal Depreciation

Ending balance

Land W 143,729 1,981 3,200 (40,016) — 108,894

Buildings 119,847 — 277 (55,335) (1,377) 63,412

Vehicles 2,478 256 — (137) (454) 2,143 Fixture and

furniture 45,054 4,262 578 (105) (10,054) 39,735

Others 2,033 48 — (76) — 2,005 Construction in

progress 10,337 24,612 (4,055) — — 30,894

W 323,478 31,159 — (95,669) (11,885) 247,083


26

7. Intangible Assets

Changes in intangible assets for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014

Beginning balance Increase Transfer Amortization

Recovery of impairment

loss Ending balance

Goodwill W 1,429 — — — — 1,429 Development costs 29,017 2,487 — (5,314) — 26,190

Trademark 2 — — (2) — —

Membership 29,638 — (191) — 26 29,473

Others 2,661 1,969 — (908) — 3,722 W 62,747 4,456 (191) (6,224) 26 60,814

2013 Beginning balance Increase Amortization Ending balance

Goodwill W 1,429 — — 1,429 Development costs 28,198 5,287 (4,843) 28,642

Trademark 16 — (7) 9

Membership 30,008 — — 30,008

Others 4,512 — (948) 3,564 W 64,163 5,287 (5,798) 63,652


27

8. Assets Held for Sale

Details of the non-current assets held for sale as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 December 31, 2013

Investments in associates (*1) W 24,000 —

Land (*2) 13,676 13,676

Buildings (*2) 8,671 8,671

W 46,347 22,347 (*1) The board of directors approved the plan to sell all of the Group’s interest in HK Mutual Savings Bank.

Accordingly, the Group made a reclassification of the investment as held for sale. Management expects that the sale of its share will be completed no later than the second half of 2014.

(*2) Real estate properties that the Group owns, which are expected to be sold no later than the second half of 2014.

The Group measures assets held for sale at the lower of its carrying amount and fair value less costs to sell.


28

9. Borrowed Funds

(1) Borrowings as of June 30, 2014 and December 31, 2013 are as follows:

Type Lender

Annual interest rate (%)

Maturity June 30,

2014 December 31,

2013

Borrowings in won Commercial paper

Shinhan Bank and 2 others 2.95 ~ 3.61

2014.7.24 ~ 2014.8.14 W 200,000 320,000

General loans

Kookmin Bank and 13 others 2.60 ~ 5.23

2014.7.1 ~ 2016.9.28 1,454,105 1,438,860

1,654,105 1,758,860 Borrowings in foreign

currency

General loans Bank of America 3.43 2015.6.12 50,599 52,583

W 1,704,704 1,811,443

(2) Bonds issued as of June 30, 2014 and December 31, 2013 are as follows:

Type

Annual Interest rate (%)

Maturity June 30,

2014 December 31,

2013

Current portion of long-term bonds Bonds 2.44 ~7.20

2014.7.16 ~ 2015.6.29 W 3,745,899 3,554,082

Less: Discount on bonds

(7,109) (1,189) 3,738,790 3,552,893 Long-term bonds

Bonds 2.44 ~6.53 2015.7.8 ~

2021.4.15 11,522,144 11,912,543

Less: Discount on bonds

(26,893) (38,557)

11,495,251 11,873,986

W 15,234,041 15,426,879


29

10. Post-employment Benefit Plans (1) Defined contribution plans

The amount recognized in the statement of comprehensive income for retirement benefits based on the defined contribution plan for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013

Post-employment benefits recognized as an expense for defined contribution plans W 29 26

(2) Defined benefit plans (i) Characteristics of the defined benefit plan

The Group operates the defined benefit plan based on final wages. The plan assets are mainly comprised of interest rate guaranteed type instruments, and therefore, are exposed to the risk of declining interest rates.

(ii) Changes in defined benefit liability, net

Six-month period ended June 30, 2014 Present value of

defined benefit obligation Plan assets

National pension fund

Defined benefit liability, net

Beginning balance W 69,772 (56,846) (42) 12,884

Contributions paid — — — —

Current service costs 6,275 — — 6,275

Interest cost (income) 1,242 (1,010) — 232

Return on plan assets (excluding interest income) — 324 — 324

Actuarial loss arising from experience adjustment 1,901 — — 1,901

Actuarial loss arising from financial assumptions 2,921 — — 2,921

Transfers between related parties (668) 104 — (564)

Benefits paid (5,084) 2,716 — (2,368) W 76,359 (54,712) (42) 21,605


30

10. Post-employment Benefit Plans, Continued

(2) Defined benefit plans, Continued

Six-month period ended, 2013 Present value of

defined benefit obligation Plan assets

National pension fund

Defined benefit liability, net

Beginning Balance W 63,847 (50,816) (43) 12,988

Contributions paid — (3,629) — (3,629)

Current service costs 6,367 — — 6,367

Interest cost (income) 1,015 (806) — 209

Return on plan assets (excluding interest income) — — — —

Actuarial gain arising from experience adjustment (110) (2) — (112)

Actuarial gain arising from financial assumptions (765) — — (765)

Transfers between related parties (1,237) 1,067 — (170)

Benefits paid (4,126) 5,469 — 1,343

W 64,991 (48,717) (43) 16,231


31

11. Provisions

Provisions account for the allowance for unfunded lending commitments including unused loan commitments and residual value guarantees. A similar approach to the allowance for loan losses is used for calculating a reserve for the estimated credit losses related to unfunded lending commitments. Changes in provisions for the six-month periods ended June 30, 2014 and 2013, are as follows:

2014 2013

Unused loan

commitments (*1) Other (*2) Total

Unused loan

commitments (*1) Other Total

Beginning balance W 1,826 — 1,826 2,017 — 2,017 Provision for

(reversal of)

allowance (309) 176 (133) (7) — (7) Ending balance W 1,517 176 1,693 2,010 — 2,010

(*1) The Group facilitates credits with limits, under which the Group provides commitments to extend credits.

Provision is made for estimated losses arising from unused loan commitments. (*2) The Group facilitates certain installment financial receivable products which the Group guarantees residual

value of used automobiles for consumers. Provision is made for estimated losses arising from these residual value guarantees.

12. Derivative Financial Instruments and Hedge Accounting Trading derivatives as of June 30, 2014 and December 31, 2013, are as follows:

June 30, 2014 Notional amount Assets Liabilities

Foreign currency forwards W 55 — 5

December 31, 2013 Notional amount Assets Liabilities

Foreign currency forwards W 57 — 2 During the six-month periods ended June 30, 2014 and 2013, the Group recognized loss on trading derivatives of W3 million and W2 million, respectively.


32

12. Derivative Financial Instruments and Hedge Accounting, Continued In the normal course of business, the Group enters into derivative contracts to manage its exposures to changes in future cash flows arising from volatilities in interest rate and foreign currency exchange rates with its borrowings and bonds issued. The Group uses interest rate swaps and currency swaps principally to manage exposures to fluctuations in future cash flows due to interest rate risk and foreign exchange risk. The Group also utilizes currency forward contracts to manage exposures to fluctuation in future cash flows with its lease contracts denominated in foreign currencies. There was no change in overall strategy of the Group for cash flow hedges. Derivatives that are designated and qualifying as cash flow hedges as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014

Notional amount Assets

Liabilities

Accumulated other

comprehensive

Income (loss)

Interest rate swaps W 1,510,000 241 7,567 (5,553)

Currency swaps 6,249,342 6,325 608,035 (11,859)

Foreign currency forwards 7,076 855 — 36 W 7,766,418 7,421 615,602 (17,376)

December 31, 2013

Notional amount Assets

Liabilities

Accumulated other

comprehensive

Income (loss)

Interest rate swaps W 1,670,000 2,103 4,045 (1,472)

Currency swaps 6,207,240 21,185 508,698 3,263

Foreign currency forwards 11,305 658 — (14) W 7,888,275 23,946 512,743 1,777

Notional amounts represent won equivalent amounts of foreign currencies for won-to-foreign currency transactions and receiving foreign currencies for foreign currency-to-foreign currency transactions that are translated with the BOK rate as of the reporting date. The Group is expected to be exposed to the variability in future cash flows arising from derivatives designated as cash flow hedges, until February 7, 2019. There was no ineffective portion recognized related to cash flow hedge for the six-month periods ended June 30, 2014 and 2013.


33

13. Equity In accordance with Regulation on Supervision of Specialized Credit Finance Business mandated by the Financial Services Commission, the Group appropriates regulatory reserves for loan losses which equal to the difference between allowance for loan losses estimated under K-IFRS and allowance estimated based on loans and receivables of regulatory risk grades of loans and receivables and minimum required reserve ratio in accordance with the Regulation.

Details of regulatory reserve for loans losses as of June 30, 2014 and December 31, 2013 are as follows:

June 30,

2014

December 31, 2013

Appropriated reserve for loan losses W 328,317 273,906 Expected provision for regulatory reserve for loan losses 14,521 54,411

W 342,838 328,317

Provision for regulatory reserve for loan losses and profit for the period and earnings per share adjusted with provision for regulatory reserve for loan losses for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013 Profit for the period W 85,149 248,153 Provision for regulatory reserve for loan losses (*1) (14,521) (93,631) Profit for the period adjusted with provision for regulatory reserve for loan losses (*2) W 70,628 154,522

Basic and diluted earnings per share adjusted with provision for regulatory reserve for loan losses (in won) W 711 1,556

(*1) Provision for regulatory reserve for loan losses represents additional reserves expected to be made for the

six-month periods ended June 30, 2014 and 2013. (*2) Profit for the period adjusted with provision for regulatory reserve for losses are not prepared in accordance

with K-IFRS, but the amount reflects the expected provision for regulatory reserve for loan losses on a pretax basis on profit for the period.


34

14. Retained Earnings

Details of retained earnings as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 December 31, 2013

Legal reserve

Earned surplus reserve (*) W 107,635 89,630

Voluntary reserve Regulatory reserve for loan losses (Note 13) 328,317 273,906

Provisions for electronic financial transactions 100 100

Reserve for business rationalization 74 74

328,491 274,080 Retained earnings before

appropriation 2,009,403 1,996,671

W 2,445,529 2,360,381

(*) In accordance with the Korean Commercial Law, a minimum of 10% of annual cash dividends declared are

accumulated as a legal reserve each accounting period, until the reserve equals 50% of its issued capital stock. This reserve is not available for the payment of cash dividends, but may only be transferred to capital stock or used to reduce accumulated deficit.


35

15. Net Interest Income

Net interest income for the three-month and six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013

Three-month Period ended

Six-month

period ended Three-month period ended

Six-month

period ended

Interest income Cash and due from banks W 10,196 20,706 7,318 15,083

Loans receivable 309,143 630,440 368,748 733,365 Installment financial assets 86,786 164,285 55,798 121,447

Lease receivables (*1) 59,873 120,326 63,319 125,495 Other (*2) 553 1,919 361 724

466,551 937,676 495,544 996,114

Interest expense Borrowings (16,122) (33,447) (21,317) (43,834) Bonds issued (169,433) (340,181) (168,549) (340,380) Other (*2) (6,894) (13,636) (8,510) (18,175)

(192,449) (387,264) (198,376) (402,389)

Net interest income W 274,102 550,412 297,168 593,725 (*1) Includes amortization of present value discounts for deposits received for leases. (*2) Includes amortization of present value discount using the effective interest method.

16. Net Commission Income

Net commission income for the three-month and six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013


Six-month


Six-month

period ended

Commission income

Loans receivable W 11,549 22,795 13,022 24,448 Installment financial assets 2,184 4,090 855 1,854 Lease receivables 40,843 87,303 44,851 87,496

54,576 114,188 58,728 113,798

Commission expenses Lease expenses (5,834) (12,559) (16,686) (33,209)

Net commission income W 48,742 101,629 42,042 80,589

17. Other operating income and expenses


36

Other operating income and expenses for the three-month and six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013


Six-month


Six-month

period ended

Other operating income Gain on valuation of derivatives W (92,567) 11,529 140,827 314,663

Gain on derivatives transactions 102 1,062 13,755 15,891

Other 34,945 69,155 50,404 85,773

W (57,520) 81,746 204,986 416,327

Other operating expenses Loss on valuation of derivatives W 190,856 190,950 27,292 49,153

Loss on derivatives transactions 5,168 5,240 331 1,285

Other 14,142 26,799 14,830 31,229

W 210,166 222,989 42,453 81,667


37

18. General and Administrative Expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2014 and 2013, are as follows:

19. Income Taxes

2014 2013




Six- month

period ended Salaries W 45,617 79,508 39,929 78,123 Severance benefits 3,270 6,536 3,294 6,602 Employee benefits 6,559 15,901 8,847 19,900 Depreciation 6,114 12,187 5,691 11,885 Advertising 12,259 24,854 12,504 23,907 Travel and transportation 1,504 2,473 1,509 2,504 Communication 4,067 7,960 3,877 7,501 Utilities 2,874 6,258 2,637 5,850 Commissions and charges 5,437 10,549 4,919 9,596 Sales promotion 16,356 32,826 20,529 37,901 Amortization 3,172 6,224 2,926 5,798 Outsourcing service charges 17,727 35,248 17,077 32,831 Rents 10,292 22,035 10,695 20,785 Other 32,409 58,631 26,588 52,119

W 167,657 321,190 161,022 315,302


38

(1) Income tax expense for the six-month periods ended June 30, 2014 and 2013 are as follows:

(2) Deferred income taxes recognized directly to equity for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014 2013

Current income tax expense W 44,832 82,335 Change in deferred income tax due to temporary differences (12,015) (13,342)

Deferred income taxes recognized directly to equity 7,434 18,013

Income tax expense W 40,251 87,006

2014

Beginning balance

Ending balance

Changes

Loss on valuation of available-for-sale securities W (1,036) (1,205) (169)

Share of other comprehensive income of associates — 243 243

Net change in remaining effective portion of cash flow hedges (567) 5,548 6,115

Remeasurements of defined benefit plans 4,356 5,601 1,245

W 2,753 10,187 7,434

2013

Beginning balance

Ending balance

Changes

Loss on valuation of available-for-sale securities W (320) (659) (339)

Net change in remaining effective portion of cash flow hedges (678) 17,886 18,564

Remeasurements of defined benefit plans 4,197 3,985 (212)

W 3,199 21,212 18,013


39

19. Income Taxes, Continued (3) Reconciliation between profit before income taxes and income tax expense for the six-month periods ended

June 30, 2014 and 2013 are as follows:

2014 2013

Profit before income taxes (A) W 125,401 335,159

Income taxes at statutory tax rates 29,885 80,647

Adjustments:

Non-taxable income (7) (45)

Non-deductible expense for tax purposes 157 13 Recognition of previously unrecognized tax

losses and changes to estimates for prior years 10,216 6,391

Income tax expense (B) W 40,251 87,006

Effective tax rate (B/A) 32.10% 25.96%


40

20. Earnings Per Share

(1) Basic earnings per share Basic earnings per share attributable to common stock of equity holders for the three-month and six-month periods ended June 30, 2014 and 2013 are as follows:

(2) Diluted earnings per share As there was no discontinued operation during the three-month and six-month periods ended June 30, 2014 and 2013, basic earnings per share is the same as basic earnings per share from continuing operations. There are no potential common stocks as of June 30, 2014 and 2013. Therefore, the diluted earnings per share is the same as basic earnings per share for the three-month and six-month periods ended June 30, 2014 and 2013.

2014 2013


Six-month period ended


Six-month period ended

Profit for the period attributable to common stocks (in won) (A) W 54,597,148,109 85,149,261,705

95,303,358,051

248,152,862,699

Weighted average of number of outstanding common stocks (B)

99,307,435 99,307,435 99,307,435 99,307,435 Basic earnings per

Share (in won) (A/B)

W 550 857

960

2,499


41

21. Other Comprehensive Income

Other comprehensive income for the six-month periods ended June 30, 2014 and 2013 are as follows:

2014

Beginning balance

Changes

Income tax effects

Ending balance

Reclassifi-

cation to profit or loss

Other changes

Net change in unrealized gain on valuation of available-for-sale securities W 3,243 (100) 800 (169) 3,774

Share in other comprehensive income of associates (*) (1,616) — (5,182) 243 (6,555)

Net change in remaining effective portion of cash flow hedges 1,777 (306) (24,962) 6,115 (17,376)

Net change in foreign currency translation adjustments (1,333) — (517) — (1,850)

Remeasurements of defined benefit plans (13,645) — (5,146) 1,245 (17,546)

W (11,574) (406) (35,007) 7,434 (39,553)

(*) Includes accumulated other comprehensive loss in the amount of W40 million, net of income taxes (W13

million) as of June 30, 2014, related to the investments in HK Mutual Savings Bank which has been reclassified to assets held for sale.


42

21. Other Comprehensive Income, Continued

2013

Beginning balance

Changes

Income tax effects

Ending balance

Reclassifi-

cation to profit or loss

Other changes

Net change in unrealized gain on valuation of available-for-sale securities W 1,002 (92) 1,491 (339) 2,062

Share in other comprehensive income of associates (2,540) — 3,275 — 735

Net change in remaining effective portion of cash flow hedges 2,125 2,617 (79,329) 18,564 (56,023)

Net change in foreign currency translation adjustments (872) — (929) — (1,801)

Remeasurements of defined benefit plans (13,147) — 877 (212) (12,482)

W (13,432) 2,525 (74,615) 18,013 (67,509)


43

22. Supplemental Cash Flow Information

Cash and cash equivalents as of June 30, 2014 and December 31, 2013, are as follows:

Other cash equivalents include short-term, highly liquid investments in money markets.

Cash generated from operations for the six-month periods ended June 30, 2014 and 2013 are as follows:

22. Supplemental Cash Flow Information, Continued

June 30, 2014 December 31, 2013

Cash W 1 3

Ordinary deposits 149,924 200,356

Checking deposits 3,315 4,941

Other cash equivalents 1,215,500 1,297,300

W 1,368,740 1,502,600

2014 2013 Profit for the period W 85,149 248,153 Adjustments:

Gain on sale of available-for-sale securities (1,002) (1,395) Income on loans 14,004 (16,290) Income on instalment financial assets 13,909 (19,130) Income on leases 27,888 28,598 Gain on foreign currency translation (191,293) (49,777) Dividend income (2,383) (2,588) Gain on valuation of derivatives (11,529) (314,663) Release of allowance for unfunded lending commitments (309) (7) Net interest expenses 364,640 378,683 Lease expenses 150,065 161,901 Provision for loan losses 226,650 203,956 Loss on foreign currency translation 11,707 315,059 Loss on valuation of derivatives 190,950 49,153 Losses on redemption of bonds issued — 51 Provision for unfunded lending commitments 176 — Severances 6,507 6,576 Depreciation 12,187 11,885 Amortization 6,224 5,798 Share in net income of associates under the equity method (6,828) (1,746) Gain on sale of property and equipment (61) (85,488) Recovery of impairment loss on intangible assets (26) — Share in net loss of associates under the equity method 216 436 Impairment loss on investments in associates 27,688 — Loss on sale of property and equipment 58 2,896 Income tax expense 40,251 87,006

W 879,689 760,914


44

23. Commitments and Contingencies

2014 2013 Changes in operating assets and liabilities

Increase in due from banks W (936) (3) Decrease in available-for-sale securities 851 970 Decrease (Increase) in loans receivable 963,998 (810,659) Decrease (Increase) in installment financial assets (1,149,437) 699,258 Increase in finance lease receivables (197,292) (397,135) Decrease in cancelled lease receivables 9,311 6,702 Increase in operating lease assets (184,711) (125,980) Decrease in cancelled lease assets 253,379 203,095 Decrease (Increase) in non-trade receivables 22,213 (26,811) Decrease (Increase) in accrued revenues 7,439 (1,581) Increase in advance payments (17,696) (19,439) Increase in prepaid expenses (22,320) (21,514) Decrease (Increase) in derivatives, net (85,304) 525 Decrease in non-trade payables (57,348) (32,679) Increase (decrease) in accrued expenses 320 (6,994) Decrease in unearned revenue (3,002) (5,722) Decrease in withholdings (4,120) (9,758) Increase (decrease) in current tax liabilities 1,552 (32,979) Decrease in defined benefit liabilities (5,752) (5,364) Decrease in plan assets 2,820 2,907 Decrease in deposits received (67,999) (83,708) Decrease in other liabilities (10) (30)

(534,044) (666,899) W 430,794 342,168


45

(1) Line of credit commitments As of June 30, 2014, the Group has line-of-credit commitments from Shinhan Bank and 3 other financial institutions with aggregated limits in the amount of W106,500 million.

(2) Credit Facility Agreement (i) Credit Facility Agreement As of June 30, 2014, the Group has a credit facility agreement with GE Capital European Funding & Co. (“GE Capital”); and the limit of this credit facility is euro equivalent amounts to USD 600 million. The expiration date of the agreement is January 9, 2015. Regarding the credit facility agreement above, Hyundai Motor Company guarantees GE Capital for any amounts not paid by the Group, equal to its ownership interests of 56% in the Group.

(ii) Revolving Credit Facility

As of June 30, 2014, the Group has revolving credit facility agreements amounted to USD 200 million and W 1,495 billion with Kookmin Bank and 17 other financial institutions for credit line.

(3) Guarantees

Details of guarantees provided to the Group as of June 30, 2014 and December 31, 2013 are as follows:

Guarantor Details June 30,

2014 December 31, 2013 Hyundai Motor Company

Joint liabilities on finance lease receivables (*) W 1,568 1,568

Seoul Guarantee Insurance Co., Ltd.

Guarantee for debt collection deposit, others 122,349 132,589

(*) The amounts represent the guaranteed unpaid principals as of June 30, 2014 and December 31, 2013, as

defined under the joint liability agreement.

The Group has residual value guarantee insurance policy with LIG Insurance Co., Ltd. and other carriers which covers losses resulting from defaults in mortgage loans that unpaid amounts exceed the recoverable amounts from the collateral of the loans. Loans insured by the policy and residual value guaranteed by the insurance policy as of June 30, 2014 and December 31, 2013 are as follows:

Type

June 30, 2014

December 31, 2013

Loans insured W 857,119 792,244

Residual value guaranteed by the insurance policy 294,165 284,746


46

23. Commitments and Contingencies, Continued (4) Significant pending litigations

Pending significant litigations include 17 cases (total amount of W3,592 million) where the Group is the defendant, 13 cases (total amount of W492 million) where the Group is the plaintiff, and litigations against a number of debtors to collect receivables as of June 30, 2014.

(5) Receivables transfer agreement The Group entered into an agreement with Hyundai Card Co., Ltd., Hyundai Commercial Co., Ltd., and Hyundai Life Insurance Co., Ltd., regarding the transfer of receivables. According to the agreement, the Group is a transferee of overdue receivables and amounts written off at the agreed value.


47

24. Related Party Transactions

(1) Relationships between parents and subsidiaries

The parent company is Hyundai Motor Company. Related parties include associates, joint ventures, post-employment benefit plans, members of key management personnel and entities which the Group controls directly or indirectly, has joint control or significant influence over them.

(2) Related parties Related parties that have transactions, and receivables and payables with the Group as of June 30, 2014, are as follows:

Type Company

The Parent company

Hyundai Motor Company

Associates HI Network, Inc., Korea Credit Bureau, Hyundai Capital Germany GmbH, Hyundai Capital UK Ltd., Beijing Hyundai Auto Finance Co., Ltd., HK Mutual Savings Bank

Others Hyundai Life Insurance Co., Ltd., Hyundai Card Co., Ltd., Hyundai Autoever Corp., Kia Motors Corp., Hyundai Capital America, and 75 others.


48

24. Related Party Transactions, Continued (3) Transactions with related parties

(i) Significant transactions, which occurred in the normal course of business with related companies for the six-

month periods ended June 30, 2014 and 2013 are as follows:

2014 Other Revenues Expenses Sales Purchases

Parent Company

Hyundai Motor Company W 6,568 759 — 441,177

Associates

HI Network, Inc. — 661 — —

Korea Credit Bureau 4 98 — — Hyundai Capital Germany GmbH 229 — — —

Beijing Hyundai Auto Finance Co., Ltd. 24 — — —

HK Mutual Savings Bank 35 — 24 — 292 759 24 —

Others Hyundai Life Insurance Co., Ltd. 134 4,309 — 261

Hyundai Card Co., Ltd. 20,405 12,296 — 82,598

Hyundai Autoever Corp. 38 17,049 — 13,268

Kia Motors Corp. 7,064 547 — 110,867

Hyundai Capital America 7,818 — — —

Others 11,985 10,540 24,255 26,328

47,444 44,741 24,255 233,322 W 54,304 46,259 25,279 674,499


49

24. Related Party Transactions, Continued

(3) Transactions with related parties, Continued

2013 Other Revenues Expenses Sales Purchases

Parent Company

Hyundai Motor Company W 3,234 1,372 — 430,932

Associates

HI Network, Inc. 267 1,052 — — Hyundai Capital Germany GmbH 211 —

— —

Beijing Hyundai Auto Finance Co., Ltd. 410 —

— —

HK Mutual Savings Bank 60 — — — 948 1,052 — —

Others Hyundai Life Insurance Co., Ltd. 85,580 5,783 177,900 —

Hyundai Card Co., Ltd. 51,653 17,171 — 74,917

Hyundai Autoever Corp. 26 14,507 — 8,904

Kia Motors Corp. 11 2,524 — 146,544

Hyundai Capital America 8,487 — — —

Others 7,477 10,059 32,653 37,062

153,234 50,044 210,553 267,427 W 157,416 52,468 210,553 698,359


50


(ii) Receivables and payables with related parties for the years ended June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 Receivables Payables

Parent Company W

Hyundai Motor Company 3,333 30,658

Associates

Korea Credit Bureau 4 —

Others

Hyundai Life Insurance Co., Ltd. 41,964 134

Hyundai Card Co., Ltd. 2,007 115,393

Hyundai Autoever Corp. 250 5,097

Kia Motors Corp. 21,703 14,227

Hyundai Capital America 10,290 —

Others 23,646 570

99,860 135,421 W 103,197 166,079

December 31, 2013 Receivables Payables

Parent Company W

Hyundai Motor Company 1,823 24,768

Others

Hyundai Life Insurance Co., Ltd. 21,257 —

Hyundai Card Co., Ltd. 3,147 83,353

Hyundai Autoever Corp. — 87

Kia Motors Corp. 1,278 40,666

Hyundai Capital America 20,866 —

Others 4,137 614

50,685 124,720 W 52,508 149,488


51


(iii) Details of line-of-credits provided to and received from related parties as of June 30, 2014 are as follows:

Creditor Debtor Type Amount Period Hyundai Capital Services, Inc.

Hyundai Card Co., Ltd.

Call loan W 300,000

11/1/2013~10/31/2014

Hyundai Capital Services, Inc.

Hyundai Commercial Co., Ltd.

Call loan 100,000

11/1/2013~10/31/2014 Hyundai Card Co., Ltd.

Hyundai Capital Services, Inc.

Call loan 300,000

11/1/2013~10/31/2014

With the counterparty’s request, a credit is granted when there are available funds in accordance with the agreement. As of June 30, 2014, there was no outstanding balances under the line of credit. The Group has been provided with a credit facility and payment guarantees by GE Capital European Funding & Co. and Hyundai Motor Company, respectively (Note 23).

(4) Key management compensation

Compensation to key management for the six-month periods ended June 30, 2014 and 2013, are as follows:

The key management above consists of directors (including non-permanent directors), who have significant authority and responsibilities for planning, operating and controlling the Group.

Type 2014 2013 Short-term employee benefits W 2,647 3,172 Severance benefits 1,066 1,540


52

25. Transfers of Financial Assets

The Group issued senior and subordinated asset-backed securities collateralized by loans receivable, instalment financial assets, and lease receivables; and the investors in the securitized notes have recourse only to the cash flows from the transferred financial assets. Details of financial assets transferred that are not derecognized as of June 30, 2014 and December 31, 2013 are as follows:

June 30,

2014 December 31,

2013 Carrying amount of assets

Loans receivable W 1,603,544 2,030,886 Installment financial assets 1,494,612 1,010,051 Lease receivables 290,126 292,453

3,388,282 3,333,390 Carrying amount of associated liabilities (*) (2,274,109) (2,361,821) For those liabilities that have recourse only to the transferred financial assets

Fair value of assets 3,423,090 3,441,725 Fair value of associated liabilities (*) (2,291,989) (2,427,098) Net position W 1,131,101 1,014,627

(*) Does not include derivatives. The Group uses currency swaps principally to manage exposures to

fluctuations in future cash flows due to interest rate risk and foreign exchange risk of foreign currency denominated asset-backed securities issued.


53

26. Offsetting Financial Assets and Liabilities Derivative assets and liabilities are subject to an enforceable master netting arrangement or similar agreement including derivative clearing agreements based on future events as defined in the arrangement.

Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014

Gross amounts of recognized financial assets/

liabilities

Gross amounts of recognized

financial assets/liabilities

offset in the statement of

financial position

Net amounts of financial assets/ liabilities in the

statement of financial position

Related amounts not offset in the statement of financial

position

Net

amount Financial

instruments

Cash collateral received

Financial assets Derivative assets

W 7,421 — 7,421 7,421 — — Financial liabilities Derivative

liabilities 615,607 — 615,607 7,421 — 608,186

December 31, 2013

Gross amounts of recognized financial assets/

liabilities

Gross amounts of recognized financial

assets/liabilities set off in the statement of

financial position

Net amounts of financial

assets/ liabilities

presented in the statement of financial

position

Related amounts not set off in the statement of financial

position

Net

amount Financial

instruments

Cash collateral received

Financial assets Derivative assets

W

23,946

—

23,946

23,557

—

389

Financial liabilities

Derivative liabilities

512,745 — 512,745 23,557 — 489,188


54

27. Fair Value Management of Financial Instruments

Valuation models of measuring fair value of financial instruments are as follows:

Type Valuation model Cash and due

from banks The carrying amount and the fair value of cash are identical. As cash, deposits, and other

cash equivalent instruments can be easily converted into cash, the carrying amount approximates the fair value.

Available-for-sale securities

When available, the Group measures the fair value of a security using quoted prices in an active market. If a market for a security is not active, the Group establishes fair value by using a highly accredited independent valuation agency. The independent valuation agency utilizes various valuation technique, which include discounted cash flow model, imputed market value model, free cash flow to equity model, dividend discount model, risk adjusted discount rate method, and net asset valuation approach. Depending on the characteristic and nature of the instrument, the fair value is measured by using at least one valuation technique.

Loans receivables/ installment financial assets/lease receivables

The fair value is determined using discounted cash flow model that incorporate parameter inputs for expected maturity rate/prepayment rate, as appropriate. As the discount rate used for determining the fair value incorporates the time value of money and credit risk, the Group’s discount rate system is formed to consider the market risk and the credit risk.

Derivative instruments

The fair value of interest rate swaps and currency swaps are determined by using a discounted cash flow model based on a current interest rate yield curve appropriate for market interest rate as of June 30, 2014. The fair value of each derivative instrument measured by discounting and offsetting the probable future cash flows of swap, which are estimated based on the forward rate and the closing foreign exchange price. The fair value of each derivative is measured by offsetting and discounting the expected cash flows of the swap at appropriate discount rate which is based on forward interest rate and exchange rate that is generated by using above method. The fair value of currency forward is measured principally with the forward exchange rate which is quoted in the market at the end of reporting period considering the maturity of the currency forward. The discount rate used in measuring the fair value of currency forward is the adverse CRS rate which is determined by using the spot exchange rate and the forward exchange rate based on the interest rate parity theory.

Borrowings The fair value of borrowings is determined by using discounted cash flow method. In other words, the fair value of a financial instrument is determined by discounting the expected cash flows at an appropriate rate.

Bonds The fair value of industrial finance bonds in won, except structured industrial finance bonds in won, is determined by using discounted cash flow method. The fair value of structured industrial finance bonds in won and industrial finance bonds in foreign currencies is determined by a highly accredited independent valuation agency.

Other financial assets and liabilities

The fair value of other financial assets and other financial liabilities is determined by using discounted cash flow method. However, when the cash flow cannot be objectively measured, the book value approximates the fair value.


55

27. Fair value management of financial Instruments, Continued (1) Fair value of financial instruments The fair values of financial instruments, together with carrying amounts shown in the statements of financial position, as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014 December 31, 2013

Carrying amount Fair value

Carrying amount Fair value

Assets Financial assets Cash and due from banks W 1,369,690 1,369,690 1,502,615 1,502,615 Available-for-sale securities 53,631 53,631 52,783 52,783 Loans receivable 9,952,454 10,088,762 11,124,201 11,318,040 Installment financial assets 5,910,365 5,919,715 4,799,854 4,801,546 Lease receivables 2,886,869 2,858,170 2,989,959 2,943,184 Derivative assets 7,421 7,421 23,946 23,946 Non-trade receivables 93,557 93,557 113,750 113,750 Accrued revenues 95,107 95,107 103,517 103,517 Leasehold deposits 28,941 29,006 28,343 28,117 W 20,398,035 20,515,059 20,738,968 20,887,498

Liabilities Financial liabilities Borrowings W 1,704,704 1,718,056 1,811,443 1,822,182 Bonds issued 15,234,041 15,665,172 15,426,879 15,780,619 Derivative liabilities 615,607 615,607 512,745 512,745 Non-trade payables (*) 221,721 221,721 290,405 290,405 Accrued expenses 163,543 163,543 161,447 161,447 Withholdings (*) 17,009 17,009 13,673 13,673 Deposits received 652,481 657,135 706,224 708,597 Other liabilities 60 60 70 70 W 18,609,166 19,058,303 18,922,886 19,289,738

(*) Excludes liabilities for taxes and dues


56

27. Fair value management of financial Instruments, Continued

(2) Fair Value Hierarchy

1-1) The fair value hierarchy of financial assets and liabilities measured at fair value in the statement of financial position as of June 30, 2014 and December 31, 2013 are as follows:

June 30, 2014

Carrying amount

Fair value

Fair value hierarchy (*2)

Level 1 Level 2 Level 3 (*1) Financial assets

measured at fair value

Available-for-sale securities W 53,631 53,631 10,418 32,624 10,589

Derivative assets Designated as hedging instruments for cash flow hedges 7,421 7,421 — 7,421 —

W 61,052 61,052 10,418 40,045 10,589 Financial liabilities



Trading W 5 5 — 5 — Designated as hedging instruments for cash flow hedges 615,602 615,602 — 615,602 —

W 615,607 615,607 — 615,607 —


57

27. Fair value management of financial Instruments, Continued (2) Fair Value Hierarchy, Continued December 31, 2013

Carrying amount

Fair value

Fair value hierarchy (*2)

Level 1 Level 2 Level 3 (*1) Financial assets


Available-for-sale securities W 52,783 52,783 9,981 31,958 10,844

Derivative assets Designated as hedging instruments for cash flow hedges 23,946 23,946 — 23,946 —

W 76,729 76,729 9,981 55,904 10,844 Financial liabilities



Trading W 2 2 — 2 — Designated as hedging instruments for cash flow hedges 512,743 512,743 — 512,743 —

W 512,745 512,745 — 512,745 — (*1) Equity securities for which quoted prices in active markets are not available and fair value of those

instruments cannot be measured reliably are measured at cost and classified as level 3 instruments. These instruments are amounted to W175 million and W178 million as of June 30, 2014 and 2013, respectively.

(*2) The levels of fair value hierarchy have been defined as follows: - Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and derivatives - Level 2: Inputs for the asset or liability included within valuation techniques that are observable market

data. Most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap, forward, option

- Level 3: Inputs for the asset or the liability that are not based on observable market data. Unlisted stocks, complicated structured bonds, complicated unlisted derivative


58

27. Fair value management of financial Instruments, Continued (2) Fair Value Hierarchy, Continued 1-2) The valuation techniques and the fair value measurement input variables of financial assets and liabilities

classified as level 2 are as follows:

Carrying amount

Valuation techniques Inputs

Financial assets Available-for-sale securities W 32,624 DCF Model Discount rate Derivative assets

Designated as hedging instruments for cash flow hedges

7,421

DCF Model

Discount rate, short -term interest rate, volatility, foreign exchange rate, and others

40,045 Financial liabilities Derivative liabilities

Trading

5

DCF Model


Designated as hedging instruments for cash flow hedges

615,602

DCF Model


W 615,607

1-3) Changes in fair value of instruments classified as level 3 for the years ended June 30, 2014 and December

31, 2013 are as follows.

Available-for-sale securities

June 30, 2014 December 31, 2013

Beginning balance W 10,844 11,165

Increase — 78 Losses recognized as other comprehensive income

and loss (255) (399)

Ending balance W 10,589 10,844


59


(2) Fair Value Hierarchy, Continued

1-4) Valuation techniques and quantitative information unobserved inputs of financial instruments classified as level 3 as of June 30, 2014 are as follows:

Fair value

Valuation technique Inputs

Unobservable inputs

Estimated range of unobservable inputs Impacts on fair value

Financial assets Available-for-

sale securities W 10,589

FCFE model

Growth rate, Discount rate

Sales growth rate 0.38% ~ 2.00% Fair value is likely to increase as the sales growth rate and pre-tax operating income ratio rise, while cost of equity capital declines

Pre-tax operating income ratio

16.53% ~ 17.98%

Cost of equity capital 6.83% Financial assets classified as level 3 are available-for-sale securities as of June 30, 2014. Changes in other comprehensive income due to changes in inputs to valuation are not considered to have material impacts comparing to the amount of total equity of the Group.


60



2-1) Fair value hierarchy of financial assets and liabilities which the fair value are disclosed as of June 30, 2014 and December 31, 2013, are as follows:

June 30, 2014

Carrying

amount Fair value

Fair value hierarchy

Level 1 Level 2 Level 3 Financial assets measured at fair value

Cash and due from banks W 1,369,690 1,369,690 1 1,369,689 —

Loan receivables 9,952,454 10,088,762 — — 10,088,762

Installment financial assets 5,910,365 5,919,715 — — 5,919,715

Lease receivables 2,886,869 2,858,170 — — 2,858,170

Accounts receivables 93,557 93,557 — — 93,557

Accrued revenues 95,107 95,107 — — 95,107

Leasehold deposits 28,941 29,006 — 29,006 —

W 20,336,983 20,454,007 1 1,398,695 19,055,311 Financial liabilities measured at fair value

Borrowings W 1,704,704 1,718,056 — 1,718,056 —

Bonds issued 15,234,041 15,665,172 — 15,665,172 —

Accounts payables (*) 221,721 221,721 — — 221,721

Accrued expense 163,543 163,543 — — 163,543

Withholdings (*) 17,009 17,009 — — 17,009

Deposits received 652,481 657,135 — 657,135 —

Other liabilities 60 60 — — 60

W 17,993,559 18,442,696 — 18,040,363 402,333

(*) Excludes liabilities for taxes and dues


61



December 31, 2013

Carrying

amount Fair value

Fair value hierarchy

Level 1 Level 2 Level 3 Financial assets measured at fair value

Cash and due from banks W 1,502,615 1,502,615 3 1,502,612 —

Loan receivables 11,124,201 11,318,040 — — 11,318,040

Installment financial assets 4,799,854 4,801,546 — — 4,801,546

Lease receivables 2,989,959 2,943,184 — — 2,943,184

Accounts receivables 113,750 113,750 — — 113,750

Accrued revenues 103,517 103,517 — — 103,517

Leasehold deposits 28,343 28,117 — 28,117 —

W 20,662,239 20,810,769 3 1,530,729 19,280,037 Financial liabilities measured at fair value Borrowings W 1,811,443 1,822,182 — 1,822,182 —

Bonds issued 15,426,879 15,780,619 — 15,780,619 —

Accounts payables 290,405 290,405 — — 290,405

Accrued expense 161,447 161,447 — — 161,447

Deposit received 13,673 13,673 — — 13,673

Deposits received 706,224 708,597 — 708,597 —

Other liabilities 70 70 — — 70

W 18,410,141 18,776,993 — 18,311,398 465,595


62



2-2) Since the carrying amount is a reasonable estimate of the fair value, the valuation techniques and inputs related to items that recognize the book value as the fair value are not disclosed.

2-3) The valuation techniques and inputs of the fair value measurement for financial assets and liabilities

classified as level 2 for which the fair value are disclosed as of June 30, 2014 are as follows:

Fair value

Valuation

technique Inputs

Financial assets

Leasehold deposits W 29,006 DCF model Base interest rate

Financial liabilities Borrowings 1,718,056

DCF model

Market benchmark interest rate,

other spreads Bonds issued

15,665,172

BDT model

Market benchmark discount rate,

volatility, and other inputs

Deposits received 657,135 DCF model Base interest rate

W 18,040,363

2-4) The valuation techniques and the fair value measurement input variables of financial assets and liabilities classified as level 3 as of June 30, 2014 are as follows:

Fair value

Valuation

technique Inputs Financial assets Loans and receivables W 10,088,762

DCF model

Market benchmark interest rate,

credit spread, other spreads Installment financial assets

5,919,715

DCF model

Market benchmark interest rate, credit spread, other spreads

Lease receivables

2,858,170

DCF model

Market benchmark interest rate, credit spread, other spreads

W 18,866,647 28. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risk (exchange and interest rate risk). In order to manage these factors, the Group operates risk management policies and programs that monitor closely and respond to each of the risk factors. The Group uses derivatives to manage specific risks. There was no significant change in the Group's risk management operations and policies after December 31, 2013.

capital eng 2q

Documents

financial statementswe

review report date

review standards

review procedures

consolidated interimkifrs

installment financial

auditing standards

material respects