card eng 2q

HYUNDAI CARD CO., LTD. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2014, AND FOR THE THREE MONTHSJUNE 30, 2014 AND 2013AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND DECEMBER 31, 2013,

THREE MONTHS AND SIX MONTHS ENDED2013,

AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ENDED

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limitedby guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/kr/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Member of Deloitte Touche Tohmatsu Limited

Independent Accountants’ Review Report English Translation of a Report Originally Issued in To the Shareholders and Board of Directors ofHyundai Card Co., Ltd.: We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd.its subsidiaries (collectively, the “Groupcondensed consolidated statements of financial position as of consolidated statements of comprehensive income, equity and condensed consolidated statements of six months ended June 30, 2014 and 2013explanatory information. Management’s responsibility for the condensed consolidated financial statements The Group’s management is responsible for the preparation and fair presentation of the accompanying condensed consolidated financial statements and fopreparation of condensed consolidated financial statements that are free from material misstatement, whether due to fraud or error. Independent accountants’ responsibility Our responsibility is to express a conclusion on the accompanying condensed consolidated financial statements based on our reviews. We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an auditdo not express an audit opinion. Review conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements of the accordance with Korean International Financial Reporting.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/kr/about for a detailed description of the legal structure of Deloitte

Independent Accountants’ Review Report

English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of

We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd.Group”). The condensed consolidated financial statements consist of the

of financial position as of June 30, 2014, respectively, consolidated statements of comprehensive income, condensed consolidated statements of

condensed consolidated statements of cash flows, all expressed in Korean won,4 and 2013, respectively, and a summary of significant accounting policies and other

Management’s responsibility for the condensed consolidated financial statements

’s management is responsible for the preparation and fair presentation of the accompanying condensed consolidated financial statements and for such internal control as management determines is necessary to enable the preparation of condensed consolidated financial statements that are free from material misstatement, whether due to

Independent accountants’ responsibility

responsibility is to express a conclusion on the accompanying condensed consolidated financial statements

We conducted our reviews in accordance with standards for review of interim financial statements in the Republic eview is limited primarily to inquiries of company personnel and analytical procedures applied to

financial data, and this provides less assurance than an audit. We have not performed an audit

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements of the Group are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034, Interim Financial

Deloitte Anjin LLC 9Fl., One IFC, 23, Yoido-dong, Youngdeungpo-gu, Seoul 150-876, Korea

Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 www.deloitteanjin.co.kr

We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd., and financial statements consist of the

respectively, and the related condensed changes in shareholders’

, all expressed in Korean won, for the three months and and a summary of significant accounting policies and other

’s management is responsible for the preparation and fair presentation of the accompanying condensed r such internal control as management determines is necessary to enable the

preparation of condensed consolidated financial statements that are free from material misstatement, whether due to

responsibility is to express a conclusion on the accompanying condensed consolidated financial statements

We conducted our reviews in accordance with standards for review of interim financial statements in the Republic eview is limited primarily to inquiries of company personnel and analytical procedures applied to

financial data, and this provides less assurance than an audit. We have not performed an audit, and accordingly, we

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying are not presented fairly, in all material respects, in

Interim Financial

Others We audited the consolidated statement of financial position as of December 31, 20consolidated statement of comprehensive income, consolidated statement of cash flowscondensed consolidated financial statements), auditing standards generally accepted in the Republic of Korea. consolidated financial statements in our independent auditors’ report dated March 12, 2014.statement of financial position as of December 31, 2013condensed consolidated financial statementsstatement of financial position as of August 7, 2014

This report is effective as of August circumstances may have occurred between the accountants’ report is read. Such events or circumstances could significantly affect the condensed consolidated financial statements and may result in modifications to the accountants’ review report.

the consolidated statement of financial position as of December 31, 2013, respectively, consolidated statement of comprehensive income, consolidated statement of changes in shareholders’ equity and

cash flows for the year ended December 31, 2013 (not presented in the accompanying financial statements), respectively, all expressed in Korean won, in accordance with

auditing standards generally accepted in the Republic of Korea. We expressed an unqualified opinion on those consolidated financial statements in our independent auditors’ report dated March 12, 2014.

nancial position as of December 31, 2013, presented as a comparative purpose condensed consolidated financial statements does not differ, in all material respects, from the statement of financial position as of December 31, 2013.

Notice to Readers

August 7, 2014, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the accountants’ review report is read. Such events or circumstances could significantly affect the condensed consolidated financial statements and may result in modifications to the accountants’ review report.

respectively, and the related changes in shareholders’ equity and (not presented in the accompanying

on, in accordance with We expressed an unqualified opinion on those

consolidated financial statements in our independent auditors’ report dated March 12, 2014. The consolidated presented as a comparative purpose in the accompanying

from the audited consolidated

review report date. Certain subsequent events or review report date and the time the accountants’ review

report is read. Such events or circumstances could significantly affect the condensed consolidated financial

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2014, AND DECEMBER 31, 2013, AND FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

The accompanying condensed consolidated financial statements, including all footnote disclosures, were

prepared by, and are the responsibility of, the management of the Group.

Chung, Tae Young

Chief Executive Officer

Hyundai Card Co., Ltd.

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSI TION

AS OF JUNE 30, 2014, AND DECEMBER 31, 2013

(Unit: Korean won)

June 30, 2014 December 31, 2013 ASSETS: CASH AND DEPOSITS (Notes 4, 22 and 27):

Cash and cash equivalents ￦ 1,144,145,363,451 ￦ 965,455,273,460 Deposits 33,028,250,000 33,031,500,000

Total cash and deposits 1,177,173,613,451 998,486,773,460

SECURITIES (Note 27): Available-for-sale (AFS) securities 1,766,969,764 1,766,969,764

Total securities 1,766,969,764 1,766,969,764 CARD ASSETS (Notes 5, 6, 25 and 27):

Card receivables, net of present value discounts and deferred origination fees 6,321,991,167,032

6,383,211,792,320

Allowance for doubtful accounts (67,167,032,038) (70,105,553,680) Cash advances 869,929,991,531 849,422,262,762

Allowance for doubtful accounts (31,302,682,752) (31,313,461,768) Card loans, net of present value discounts 2,961,794,427,180 2,701,390,003,560

Allowance for doubtful accounts (112,423,379,945) (103,438,269,110) Total card assets 9,942,822,491,008 9,729,166,774,084

PROPERTY AND EQUIPMENT (Note 7):

Land 123,968,849,098 122,011,816,788 Buildings 112,227,880,181 79,195,772,062

Accumulated depreciation (7,380,012,017) (6,313,565,576) Vehicles 172,345,628 88,948,908

Accumulated depreciation (51,209,144) (38,353,100) Fixtures and equipment 160,325,554,785 150,980,674,674

Accumulated depreciation (108,910,486,128) (97,286,451,779) Finance lease assets 3,334,009,504 3,334,009,504

Accumulated depreciation (3,334,008,504) (3,056,175,378) Construction in progress 6,434,109,827 33,125,461,350

Total property and equipment 286,787,033,230 282,042,137,453

OTHER ASSETS: Other accounts receivable 91,409,867,555 94,513,815,009

Allowance for doubtful accounts (Note 6) (643,521,826) (1,030,119,271) Accrued revenue 48,135,493,561 48,131,937,107

Allowance for doubtful accounts (Note 6) (1,224,001,157) (1,323,983,992) Advance payments 12,631,980,540 12,955,613,877

Allowance for doubtful accounts (Note 6) (651,322,306) (657,322,306) Prepaid expenses 47,416,677,289 46,967,290,940 Intangible assets (Note 8) 133,498,798,419 127,029,551,626 Derivative assets (Notes 12, 26 and 27) 441,298,736 2,750,372,571 Deferred income tax assets 145,725,215,846 143,222,807,823 Guarantee deposits 29,760,947,563 34,819,962,715 Others 2,715,439,357 2,035,111,023

Total other assets 509,216,873,577 509,415,037,122 Total Assets ￦ 11,917,766,981,030 ￦11,520,877,691,883

(Continued)

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSI TION (CONTINUED)

AS OF JUNE 30, 2014, AND DECEMBER 31, 2013

(Unit: Korean won) June 30, 2014 December 31, 2013 BORROWINGS (Notes 9 and 27):

Borrowings ￦ 240,000,000,000 ￦ 212,500,000,000 Debenture, net of discounts 7,242,970,497,020 6,978,262,324,353

Total borrowings 7,482,970,497,020 7,190,762,324,353

OTHER LIABILITIES: Accounts payable 1,042,813,427,559 1,063,762,663,494 Accrued expenses 190,046,903,854 191,925,249,569 Unearned revenue 378,461,185,104 393,154,182,657 Withholdings 122,812,344,928 134,747,372,074 Finance lease liabilities - 298,002,314 Derivative liabilities (Notes 12, 26 and 27) 66,307,046,673 48,665,166,455 Current tax liability 38,843,070,426 33,669,310,842 Net defined benefit liability (Note 10) 18,154,337,072 3,367,411,536 Guarantee deposits received 8,003,857,151 8,076,226,724 Provisions (Notes 11 and 23) 83,810,198,674 86,321,526,532

Total other liabilities 1,949,252,371,441 1,963,987,112,197

SHAREHOLDERS’ EQUITY: Capital stock 802,326,430,000 802,326,430,000 Capital surplus 57,704,443,955 57,704,443,955 Accumulated other comprehensive income (Note 21) (23,398,903,504) (5,856,733,562) Retained earnings (Notes 13 and 14) 1,648,912,142,118 1,511,954,114,940

Total shareholders’ equity 2,485,544,112,569 2,366,128,255,333 Total Liabilities and Shareholders’ Equity ￦ 11,917,766,981,030 ￦11,520,877,691,883

See accompanying notes to condensed consolidated financial statements.

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Unit: Korean won) 2014 2013

Three months ended June 30

Six months ended June 30



OPERATING REVENUE: Card income ￦ 621,438,626,586 ￦ 1,241,329,994,079 ￦ 616,783,626,697 ￦ 1,208,213,051,219 Interest income (Note 15) 6,458,684,533 11,565,651,102 5,680,294,578 10,521,560,550 Gain on valuation and disposal of securities - 30,307,300 - 54,123,600 Dividends income - 172,578,278 - 178,460,199 Reversal of provision for unused credit limits (Note 11) 350,463,106 1,004,104,382 940,010,895 433,850,851 Other operating revenue (Note 17) 31,619,155,860 48,105,017,753 41,967,458,484 88,073,454,248

Total operating revenue 659,866,930,085 1,302,207,652,894 665,371,390,654 1,307,474,500,667 OPERATING EXPENSES:

Card expenses 260,400,955,128 498,352,299,536 272,565,416,432 519,710,918,600 Interest expenses (Note 15) 77,315,962,435 153,565,525,136 77,570,269,022 156,988,322,213 General and administrative expenses (Note 18) 158,996,673,794 300,349,752,436 152,084,202,967 295,667,053,019 Securitization expenses 79,076,586 195,767,485 80,798,501 201,014,017 Bad debt expense and loss on disposal of loans (Note 6) 66,148,962,194 126,286,972,131 59,726,038,074 114,753,837,999 Other operating expenses (Note 17) 25,230,177,876 44,256,657,557 52,395,072,571 107,309,280,602

Total operating expenses 588,171,808,013 1,123,006,974,281 614,421,797,567 1,194,630,426,450 OPERATING INCOME 71,695,122,072 179,200,678,613 50,949,593,087 112,844,074,217 NON-OPERATING INCOME: Gain from sale of property and equipment and intangible

assets 12,333,000 12,333,000 2,462,612 80,795,812 Reversal of impairment loss for intangible assets (Note 8) - 6,262,020 - -

Rental revenue 420,783,993 881,936,301 716,087,444 1,361,777,309 Miscellaneous gain 64,977,638 118,298,015 50,944,234 95,768,919

Total non-operating income 498,094,631 1,018,829,336 769,494,290 1,538,342,040 NON-OPERATING EXPENSES: Donations 278,521,471 453,178,146 68,798,990 265,172,190 Loss from sale of property and equipment and intangible assets 1,588,122 19,338,263 91,731,229 593,544,244

Miscellaneous loss 4,570,950 4,570,950 - - Total non-operation expenses 284,680,543 477,087,359 160,530,219 858,716,434

NET INCOME BEFORE INCOME TAX EXPENSE 71,908,536,160 179,742,420,590 51,558,557,158 113,523,699,823 INCOME TAX EXPENSE (Note 19) 17,427,412,675 42,784,393,412 15,445,523,417 30,207,356,584 NET INCOME ￦ 54,481,123,485 ￦ 136,958,027,178 ￦ 36,113,033,741 ￦ 83,316,343,239 (Continued)

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Unit: Korean won)

2014

2013





OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (Note 21)

Items not reclassified subsequently to profit or loss ￦ (8,391,757,547) ￦ (8,980,874,682) ￦ 1,395,085,968 ￦ 353,903,847 Remeasurements of net defined benefit liability (8,391,757,547) (8,980,874,682) 1,395,085,968 353,903,847 Items reclassified subsequently to profit or loss (7,351,256,487) (8,561,295,260) 2,226,143,170 351,766,341 Cash flow hedging losses (7,351,256,487) (8,561,295,260) 2,226,143,170 351,766,341

Total other comprehensive income (loss) (15,743,014,034) (17,542,169,942) 3,621,229,138 705,670,188 TOTAL COMPREHENSIVE INCOME ￦ 38,738,109,451 ￦ 119,415,857,236 ￦ 39,734,262,879 ￦ 84,022,013,427 EARNINGS PER SHARE (Note 20)

Basic earnings per share ￦ 340 ￦ 854 ￦ 225 ￦ 519 Diluted earnings per share ￦ 340 ￦ 854 ￦ 225 ￦ 519


HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHA REHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Unit: Korean won)

Capital stock

Capital surplus

Retained earnings Total

Paid-in-capital Other capital

Accumulated other

comprehensive income

Balance at January 1, 2013 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (16,504,748,278) ￦ 1,348,744,482,014 ￦ 2,192,270,607,691 Total comprehensive income Net income - - - - 83,316,343,239 83,316,343,239 Other comprehensive income Remeasurements of net defined benefit liability - - - 353,903,847 - 353,903,847 Cash flow hedging income - - - 351,766,341 - 351,766,341 Balance at June 30, 2013 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (15,799,078,090) ￦ 1,432,060,825,253 ￦2,276,292,621,118 Balance at January 1, 2014 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (5,856,733,562) ￦ 1,511,954,114,940 ￦ 2,366,128,255,333 Total comprehensive income Net income - - - - 136,958,027,178 136,958,027,178 Other comprehensive loss Remeasurements of net defined benefit liability - - - (8,980,874,682) - (8,980,874,682) Cash flow hedging losses - - - (8,561,295,260) - (8,561,295,260) Balance at June 30, 2014 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (23,398,903,504) ￦ 1,648,912,142,118 ￦ 2,485,544,112,569


HYUNDAI CARD CO., LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Unit: Korean won) 2014 2013 CASH FLOWS FROM OPERATING ACTIVITIES:

Cash generated from operating activities (Note 22) ￦ 75,353,907,530 ￦ 808,652,495,360 Interest received 11,424,482,609 10,737,465,816 Interest paid (142,481,972,475) (144,477,387,323) Dividend received 172,578,278 178,460,199 Income tax paid (34,565,580,621) (30,731,028,724)

Net cash (used in) provided by operating activities (90,096,584,679) 644,360,005,328

CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of AFS securities 30,307,300 54,123,600 Net decrease (increase) of bank deposit 4,550,000 (2,500,000) Disposal of property and equipment 23,081,000 94,432,052 Acquisition of property and equipment (23,709,291,935) (19,870,172,670) Acquisition of intangible assets (21,282,487,961) (12,599,018,787)

Net cash used in investing activities (44,933,841,596) (32,323,135,805)

CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 2,260,000,000,000 2,765,000,000,000 Proceeds from issue of debentures 3,907,633,846,785 1,589,863,444,525 Repayment of borrowings (2,232,500,000,000) (3,027,500,000,000) Repayment of debentures (3,621,413,330,519) (1,865,626,663,810)

Net cash provided by (used in) financing activities 313,720,516,266 (538,263,219,285)

NET INCREASE IN CASH AND CASH EQUIVALENTS 178,690,089,991 73,773,650,238 CASH AND CASH EQUIVALENTS, BEGINNING OF

THE PERIOD (Note 22) 965,455,273,460

791,547,295,193 CASH AND CASH EQUIVALENTS, END OF THE

PERIOD (Note 22) ￦ 1,144,145,363,451

￦ 865,320,945,431


- 2 -

HYUNDAI CARD CO., LTD. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT S

AS OF JUNE 30, 2014, AND DECEMBER 31, 2013, AND FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

1. REPORTING ENTITY:

Hyundai Card Co., Ltd. (the “Company”), is engaged in the credit card business under the Specialized Credit Financial Business Law of Korea. On June 15, 1995, the Company acquired the credit card business of Korea Credit Circulation Co., Ltd., and on June 16, 1995, the Korean government granted permission to the Company to engage in the credit card business. As of June 30, 2014, the Company has approximately 6.83 million card members, 2.13 million registered merchants and 149 marketing centers, branches and posts. Its headquarters is located at 3, Uisadang-daero, Yeongdeungpo-gu, Seoul. As of June 30, 2014, the total common stock of the Company is ￦802,326 million. The shareholders of the Company and its ownerships as of June 30, 2014, and December 31, 2013, are as follows:

Shareholder June 30, 2014 December 31, 2013 Number of shares % of ownership Number of shares % of ownership

Hyundai Motor Co., Ltd. 59,301,937 36.96 59,301,937 36.96 Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48 GE Capital Int'l Holdings 69,000,073 43.00 69,000,073 43.00 Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54 Others 4,851,512 3.02 4,851,512 3.02

Total 160,465,286 100.00 160,465,286 100.00

(1) Details of the Company’s subsidiaries as of June 30, 2014, and December 31, 2013, are as follows:

Place of

incorporation and operation

Voting share (%)

Entities

Major operation

June 30, 2014

December 31, 2013

End of reporting period

PRIVIA 2nd SPC Asset securitization Korea 0.9 0.9 December PRIVIA 3rd SPC Asset securitization Korea 0.9 0.9 January PRIVIA 4th SPC Asset securitization Korea 0.9 - December

The entities are special-purpose entities that were established for the Company’s business activity. The Company has a power over the entities due to the fact that the Company involves in the objectives and design of the entities and exposes itself to risks and rewards of them. Also, all the decision-making processes of the entities are operated in a predetermined way autopilot by provisions and articles of incorporation. The Company is considered to have an ability to use power as it has a control over the changes of provisions and articles of incorporation. Therefore, the Company consolidates the entities. Meanwhile, in case the subsidiaries related to derivative contracts hedging risks arising from debentures issued for asset securitization default, counterparties of the derivative contracts can claim to reimburse to the Company.

- 3 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Group maintains its official accounting records in the Republic of Korean won (“won”) and prepares condensed consolidated financial statements in conformity with Korean statutory requirements and Korean International Financial Reporting Standards (“K-IFRS”), in Korean language (Hangul). Accordingly, these condensed consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean practices. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Group’s condensed consolidated financial position, operating results, changes in shareholders’ equity or cash flows, is not presented in the accompanying condensed consolidated financial statements.

(1) Basis of Preparation The Group’s interim condensed consolidated financial statements for the six months ended June 30, 2014, are prepared in accordance with K-IFRS 1034, Interim Financial Reporting. It is necessary to use the annual consolidated financial statements for the year ended December 31, 2013, for the understanding of the condensed consolidated financial statements. Unless stated otherwise, the accounting policies have been applied consistently with the annual consolidated financial statements as December 31, 2013, in order to prepare the condensed consolidated financial statements for the six months ended June 30, 2014.

1) The Group has newly adopted the following new standards that affected the Group’s accounting policies: Amendments to K-IFRS 1032, Financial Instruments: Presentation The amendments to K-IFRS 1032 clarify the requirement for the offset presentation of financial assets and financial liabilities. That is, the right to offset must not be conditional on the occurrence of future events and can be exercised anytime during the contract periods. The right to offset is executable even in the case of default or insolvency. The adoption of the amendments has no significant impact on the Group’s condensed consolidated financial statements. Amendments to K-IFRS 1110, 1112 and 1027, Investment Entities Investment entities introduced an exception to the principle in K-IFRS 1110 Consolidated financial statement that all subsidiaries shall be consolidated. The amendments define an investment entity and require a parent that is an investment entity to measure its investment in particular subsidiaries at fair value through profit or loss instead of consolidating those subsidiaries in its consolidated financial statements. Also, the new disclosure requirements for investment entities in accordance with the amendments of K-IFRS 1110 have been introduced by consequential amendments to K-IFRS 1112 Disclosure of Interests in Other Entities and K-IFRS 1027 Separate Financial Statements. The adoption of the amendments has no significant impact on the Group’s condensed consolidated financial statements. Amendments to K-IFRS 1039, Financial Instruments: Recognition and Measurement The amendments allowed the Company to use hedge accounting when, as a consequence of laws or regulations or the introduction of laws or regulations, the original counterparty to the hedging instrument is replaced by a central counterparty or an entity that is acting as counterparty in order to effect clearing by a central counterparty. The adoption of the amendments has no significant impact on the Group’s condensed consolidated financial statements.

- 4 -

Enactment of K-IFRS 2121, Levies The enactment defines that the obligating event giving rise to the recognition of a liability to pay a levy is the activity that triggers the payment of the levy in accordance with the related legislation. The enactment has no significant impact on the Group’s condensed consolidated financial statements. In addition to the new amendments and enactments listed above, K-IFRS 1036, Impairment of Assets, had been amended to add clarifications about the disclosure requirement in relation to estimated recoverable amount for non-financial assets. The adoption of these amendments has no significant impact on the Group’s condensed consolidated financial statements. 2) The Group has not applied the following new and revised K-IFRS that have been issued but are not yet

effective: Amendments to K-IFRS 1019, Employee Benefits If the amount of the contributions is independent of the numbers of years of service, the Group is permitted to recognize such contributions as a reduction in the service cost in the period in which the related service is rendered. The amendments are effective for the annual periods beginning on or after July 1, 2014. The Group anticipates that the amendment listed above may not have significant impact on the Group’s condensed consolidated financial statements.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS:

The significant accounting estimates and assumptions are continually evaluated and are based on historical experiences and various factors, including expectations of future events that are considered to be reasonable. Actual results can differ from those estimates based on such definitions. The significant judgments that management has made about the application of the Group’s accounting policies and key sources of uncertainty in estimate do not differ from those used in preparing the consolidated financial statements for the year ended December 31, 2013.

4. RESTRICTED FINANCIAL ASSETS:

Details of restricted financial assets are as follows (Unit: Korean won in millions):

Type Entity June 30, 2014 December 31, 2013 Restriction Cash and deposits KB and others ￦ 19 ￦ 19 Guarantee deposits for overdraft

Shinhan Bank and

others

33,000

33,000 Secured deposits

Mirae Asset Securities

10

13

Social enterprise fund

Other assets Korea Asset Management Corporation

6,820

9,246

Escrow account ￦ 39,849 ￦ 42,278

- 5 -

5. CARD ASSETS:

Details of card assets by customers are as follows (Unit: Korean won in millions):

June 30, 2014

Principal

Deferred origination

fees Present value

discounts

Allowance for doubtful accounts Book value

Card receivables Households

￦ 5,780,177

￦ (6,669)

￦ (5,822)

￦ (60,452)

￦ 5,707,234

Corporates 554,305 - - (6,715) 547,590 Cash advances Households 869,930 - - (31,303) 838,627 Corporates - - - - - Card loans Households 2,962,599 - (805) (112,423) 2,849,371 Corporates - - - - -

Total ￦ 10,167,011 ￦ (6,669) ￦ (6,627) ￦ (210,893) ￦ 9,942,822

December 31, 2013

Principal


fees Present value

discounts


Card receivables Households

￦ 5,870,781

￦ (7,183)

￦ (5,287)

￦ (61,803)

￦ 5,796,508

Corporates 524,912 (11) - (8,303) 516,598 Cash advances Households 849,422 - - (31,313) 818,109 Corporates - - - - - Card loans Households 2,702,253 - (863) (103,438) 2,597,952 Corporates - - - - -

Total ￦ 9,947,368 ￦ (7,194) ￦ (6,150) ￦ (204,857) ￦ 9,729,167

6. ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Changes in the allowance for doubtful accounts are as follows (Unit: Korean won in millions):

For the six months ended June 30, 2014

Principal


fees Present value

discounts


Beginning balance ￦ 70,106 ￦ 31,313 ￦ 103,438 ￦ 3,011 ￦ 207,868 Bad debt expenses (1,632) (185) (176) - (1,993) Bad debt recovered 352 455 155 - 962 Disposition and repurchase (18,414) (10,596) (21,522) - (50,532) Provision of allowance for doubtful accounts

16,755

10,316

30,528

(492)

57,107

Ending balance ￦ 67,167 ￦ 31,303 ￦ 112,423 ￦ 2,519 ￦ 213,412


Principal


fees Present value

discounts


Beginning balance ￦ 65,652 ￦ 33,786 ￦ 81,374 ￦ 2,267 ￦ 183,079 Bad debt expenses (811) (231) (328) - (1,370) Bad debt recovered 359 489 151 - 999 Disposition and repurchase (18,180) (12,045) (17,149) - (47,374) Provision of allowance for doubtful accounts

14,864

9,533

27,518

480

52,395

Ending balance ￦ 61,884 ￦ 31,532 ￦ 91,566 ￦ 2,747 ￦ 187,729

- 6 -

7. PROPERTY AND EQUIPMENT:

Changes in book value of property and equipment are as follows (Unit: Korean won in millions):

For the six months ended June 30, 2014 Beginning

balance Acquisition Reclassification Disposal Depreciation Ending

balance Land ￦ 122,012 ￦ 1,613 ￦ 344 ￦ - ￦ - ￦ 123,969 Buildings 72,882 3,716 29,316 - (1,066) 104,848 Vehicles 51 83 - - (13) 121 Fixtures and equipment 53,694 7,855 2,696 (30) (12,800) 51,415 Finance lease assets 278 - - - (278) - Construction in progress 33,125 4,290 (30,981) - - 6,434

Total ￦ 282,042 ￦ 17,557 ￦ 1,375 ￦ (30) ￦ (14,157) ￦ 286,787


Beginning balance Acquisition Reclassification Disposal Depreciation

Ending balance

Land ￦ 122,012 ￦ - ￦ - ￦ - ￦ - ￦ 122,012 Buildings 60,331 5,552 6,952 - (839) 71,996 Vehicles 163 - - (10) (46) 107 Fixtures and equipment 56,690 4,777 1,592 (597) (12,486) 49,976 Finance lease assets 1,389 - - - (555) 834 Construction in progress 23,798 9,541 (8,477) - - 24,862

Total ￦ 264,383 ￦ 19,870 ￦ 67 ￦ (607) ￦ (13,926) ￦ 269,787

- 7 -

8. INTANGIBLE ASSETS:

Changes in intangible assets are as follows (Unit: Korean won in millions):

For the six months ended June 30, 2014 Beginning

balance Acquisition Reclassification Amortization Impairment Ending

balance Development cost ￦ 35,434 ￦ 998 ￦ 870 ￦ (6,678) ￦ - ￦ 30,624 Industrial property rights 36 - - (20) - 16 Others 4,505 1,742 - (1,552) - 4,695 Construction in progress 65,899 13,456 (2,211) - - 77,144 Membership 21,156 - (142) - 6 21,020

Total ￦ 127,030 ￦ 16,196 ￦ (1,483) ￦ (8,250) ￦ 6 ￦ 133,499


Beginning balance Acquisition Reclassification Amortization Impairment

Ending balance

Development cost ￦ 34,747 ￦ 3,008 ￦ 4,111 ￦ (5,942) ￦ - ￦ 35,924 Industrial property rights 76 - - (20) - 56 Others 7,829 - - (1,712) - 6,117 Construction in progress 11,041 9,591 (4,233) - - 16,399 Membership 20,971 - - - - 20,971

Total ￦ 74,664 ￦ 12,599 ￦ (122) ￦ (7,674) ￦ - ￦ 79,467

9. BORROWINGS:

(1) Details of borrowings are as follows (Unit: Korean won in millions):

Lenders

Annual interest rate (%)

Maturity

June 30, 2014

December 31, 2013

Commercial papers Dongbu Securities and one other

2.71

2014.07.28

￦ 40,000

￦ -

Borrowings Hana bank and six others

3.59–5.55

2014.07.19–2016.04.01

200,000

212,500

￦ 240,000 ￦ 212,500

(2) Details of debentures are as follows (Unit: Korean won in millions):

Annual interest

rate (%) Maturity

June 30, 2014

December 31, 2013 Short-term debentures 2.71–2.75 2014.07.28

￦ 170,000 ￦ - Discounts on debentures (356) -

Subtotal 169,644 - Current portion of long-term debentures 3.00–6.75,

1M USD LIBOR+1.5

2014.07.07–2015.06.29

1,683,133 1,701,413 Discounts on debentures

(931)

(346) Subtotal 1,682,202 1,701,067

Long-term debentures 2.77–5.60, 1M USD

LIBOR+1.5, 1M USD

LIBOR+0.55

2015.07.08–2020.10.29

5,398,802 5,284,120 Discounts on debentures

(7,678)

(6,925) Subtotal 5,391,124 5,277,195

Total ￦ 7,242,970 ￦ 6,978,262

The debentures are unsecured corporate bonds, with their principals to be redeemed by installment or at maturity. Bond issuance costs are recorded as discounts on debentures and amortized using the effective interest rate method.

- 8 -

10. RETIREMENT BENEFIT PLAN:

(1) Defined Contribution Plan

The expenses recognized in the condensed consolidation statements of comprehensive income related to postemployment benefit plan under the defined contribution plan are as follows (Unit: Korean won in millions):

June 30, 2014 June 30, 2013

Defined contribution plan ￦ 23 ￦ 9

(2) Defined Benefit Plan

1) General

The Group operates a defined benefit plan that is linked to final payment. Plan assets mainly consist of deposits and are exposed to risk of fall in interest rate.

2) Net defined benefit obligation Changes in net defined benefit obligation are as follows (Unit: Korean won in millions):

For the six months ended June 30, 2014 Present value of the

defined benefit obligation Plan assets

National Pension Fund

Net defined benefit obligation

Beginning balance ￦ 46,404 ￦ (43,006) ￦ (30) ￦ 3,368 Current service cost 4,334 - - 4,334 Interest expense (income) 832 (782) - 50 Return on plan assets,

excluding amounts included in interest income above

- 264 - 264 Actuarial gains and losses

from changes in financial assumptions

2,264 - - 2,264 Actuarial gains and losses

from adjustment of experiences

9,293 - - 9,293 Transfer of employees between

the Group and its related companies

(4) 324 - 320 Benefits paid (3,807) 2,067 1 (1,739) Ending balance ￦ 59,316 ￦ (41,133) ￦ (29) ￦ 18,154

- 9 -

For the six months ended June 30, 2013 Present value of the

defined benefit obligation Plan assets

National Pension Fund

Net defined benefit obligation

Beginning balance ￦ 44,474 ￦ (33,745) ￦ (34) ￦ 10,695 Current service cost 4,782 - - 4,782 Interest expense (income) 707 (536) - 171 Return on plan assets,

excluding amounts included in interest income above

- 5 - 5 Actuarial gains and losses

from changes in financial assumptions

(472) - - (472) Transfer of employees between

the Group and its related companies

291 (322) - (31) Benefits paid (1,655) 1,723 3 71

Ending balance ￦ 48,127 ￦ (32,875) ￦ (31) ￦ 15,221

11. PROVISIONS:

Changes in provisions are as follows (Unit: Korean won in millions):

For the six months ended June 30, 2014 Unused commitment Point Others Total Beginning balance ￦ 47,497 ￦ 22,944 ￦ 15,880 ￦ 86,321 Increase (decrease) (1,004) 739 (2,246) (2,511)

Ending balance ￦ 46,493 ￦ 23,683 ￦ 13,634 ￦ 83,810

For the six months ended June 30, 2013 Unused commitment Point Others Total Beginning balance ￦ 46,386 ￦ 15,509 ￦ 13,792 ￦ 75,687 Increase (decrease) (434) 4,180 1,687 5,433

Ending balance ￦ 45,952 ￦ 19,689 ￦ 15,479 ￦ 81,120

Other provisions include provision for deposits in escrow account and for pending litigations amounting to 2,303 million won (see Note 23(5)) and 11,331 million won, respectively, as of June 30, 2014. Also, provision for pending litigations include the provision related to deposits in escrow account amounting to 4,467 million won.

- 10 -

12. DERIVATIVES AND HEDGE ACCOUNTING: (1) There are no derivative instruments held for trading as of June 30, 2014, and December 31, 2013.

(2) Cash flow hedge

The Group removes the volatility risk of future cash flow of a hedged item, such as borrowings, caused by changes in market interest rates or in foreign currency rates, by using derivative instruments, such as an interest rate swap or currency swap. The Group’s policies and strategies of cash flow hedge are the same as those as of December 31, 2013.

1) Fair value of cash flow hedge are as follows (Unit: Korean won in millions):

June 30, 2014

Unsettled contract amount Assets Liabilities

Accumulated other comprehensive

loss Interest rate swap ￦ 1,253,000 ￦ 441 ￦ 8,249 ￦ (5,932) Cross-currency swap 699,936 - 58,058 (3,456)

Total ￦ 1,952,936 ￦ 441 ￦ 66,307 ￦ (9,388)

December 31, 2013

Unsettled contract amount Assets Liabilities

Accumulated other comprehensive Income (loss)

Interest rate swap ￦ 1,313,000 ￦ 2,750 ￦ 2,678 ￦ 55 Cross-currency swap 703,533 - 45,987 (882)

Total ￦ 2,016,533 ￦ 2,750 ￦ 48,665 ￦ (827)

The unsettled contract amount of transaction that is the contract amount in foreign currencies for transactions between local currency and foreign currencies or the purchased amount of foreign currency for transactions between foreign currencies is translated applying the basic foreign exchange rate at the end of reporting period.

2) The maximum period for the Group exposed to the variability in future cash flows arising from derivatives designated as cash flow hedges is expected to be until March 6, 2019. Meanwhile, there is no ineffective portion recognized related to cash flow hedge for the six months ended June 30, 2014 and 2013.

- 11 -

13. PLANNED RESERVES FOR BAD LOANS:

(1) Details of planned reserves for bad loans are as follows (Unit: Korean won in millions):

June 30, 2014 December 31, 2013

Beginning balance ￦ 659,761 ￦ 611,622 Transfer to planned reserve for bad loans 17,532 48,139 Ending balance ￦ 677,293 ￦ 659,761

(2) Transfer to planned reserve for bad loans and net income after the reserve provided are as follows (Unit:

Korean won in millions, except for earnings per share): For the six months ended June 30 2014 2013 Net income ￦ 136,958 ￦ 83,316 Transfer to planned reserve for bad loans 17,532 7,358 Net income after the planned reserve provided 119,426 75,958 Earnings per share after the planned reserve provided 744 473

14. RETAINED EARNINGS:

(1) Details of retained earnings are as follows (Unit: Korean won in millions):

June 30, 2014 December 31, 2013 Legal reserve (*) ￦ 20,143 ￦ 20,143 Planned reserve for bad loans (Note 13) 659,761 611,622 Unappropriated retained earnings 969,008 880,189

Total ￦ 1,648,912 ￦ 1,511,954

(*) Korean Commercial Code requires a company to appropriate at least 10% of dividends paid as legal

reserve for each fiscal period, until the reserve equals 50% of paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.

(2) Changes in retained earnings are as follows (Unit: Korean won in millions):

For the six months ended June 30

2014 2013 Beginning balance ￦ 1,511,954 ￦ 1,348,745 Net income 136,958 83,316 Ending balance ￦ 1,648,912 ￦ 1,432,061

- 12 -

15. NET INTEREST EXPENSE:

Net interest income (expenses) is as follows (Unit: Korean won in millions):

2014 2013 Three months

ended June 30 Six months

ended June 30 Three months ended June 30


Interest income Cash and deposits ￦ 6,086 ￦ 10,618 ￦ 5,125 ￦ 9,492 Others 373 948 556 1,030

Total 6,459 11,566 5,681 10,522 Interest expenses Borrowings 3,453 6,433 5,547 10,375 Debentures 73,840 147,102 71,975 146,515 Others 23 31 48 98

Total 77,316 153,566 77,570 156,988 Net interest expenses ￦ (70,857) ￦ (142,000) ￦ (71,889) ￦ (146,466)

16. NET COMMISSION INCOME:

Net commission income (expenses) is as follows (Unit: Korean won in millions):





Commission income Card income ￦ 378,150 ￦ 758,378 ￦ 386,861 ￦ 758,071

Total 378,150 758,378 386,861 758,071 Commission expenses Service fee 128,158 256,478 147,237 289,441 Financial payment fee 2,724 5,332 3,026 5,924 Handling fee relating to credit purchase

35,528 65,585 45,885 86,469

Merchants copayment fee 13 26 15 30 Overseas payment fee 10,605 20,677 10,599 25,906 Other 12,319 25,137 12,005 24,751

Total 189,347 373,235 218,767 432,521 Net commission income ￦ 188,803 ￦ 385,143 ￦ 168,094 ￦ 325,550

- 13 -

17. OTHER OPERATING REVENUE AND OTHER OPERATING EXPENSE S:

Other operating income and other operating expenses are as follows (Unit: Korean won in millions): 2014 2013 Three months




Other operating revenue Foreign exchange gain ￦ 4,184 ￦ 7,068 ￦ 3,033 ￦ 6,016 Foreign currency translation gain 25,669 25,669 - - Gain on transaction of derivatives - 1,460 - - Gain on valuation of derivatives (6,300) - 30,644 64,059 Others 8,066 13,908 8,290 17,998

Total ￦ 31,619 ￦ 48,105 ￦ 41,967 ￦ 88,073

Other operating expenses Foreign exchange loss ￦ 421 ￦ 2,702 ￦ 802 ￦ 1,528 Foreign currency translation loss (6,300) - 30,643 64,021 Loss on transaction of derivatives 1,213 1,213 - - Loss on valuation of derivatives 25,669 25,669 - - Others 4,227 14,673 20,950 41,760

Total ￦ 25,230 ￦ 44,257 ￦ 52,395 ￦ 107,309

18. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses are as follows (Unit: Korean won in millions):

2014 2013





Salaries and wages ￦ 35,090 ￦ 63,711 ￦ 27,845 ￦ 57,248 Pension expenses 2,205 4,407 2,481 4,962 Employee benefits 5,059 11,874 6,538 14,507 Travel expenses 690 1,157 760 1,221 Communication expenses 6,076 11,965 6,054 11,158 Posts expenses 3,864 9,189 3,694 7,143 Rental expenses 6,069 12,175 6,463 12,626 Taxes dues 3,832 8,666 6,845 12,613 Repair and maintenance expenses 175 319 167 309 Insurance premiums 51 76 114 125 Entertainment expenses 195 337 140 344 Advertising expenses 15,634 21,713 12,956 18,702 Supply expenses 400 834 464 1,238 Vehicle maintenance expenses 2 7 7 10 Periodicals expenses 36 107 43 67 Publication expenses 1,943 3,815 1,599 3,249 Training expenses 784 1,926 828 1,663 Electronic data processing expenses 11,200 22,472 10,031 20,958 Expense for temporary staff 9,231 18,136 8,796 16,734 Professional expenses 35,403 66,178 34,691 69,253 Delivery commission 520 975 661 1,551 Commission expenses 6,327 12,427 6,795 12,771 Business activities expenses 760 1,448 909 1,657 Depreciation expenses 7,086 14,157 6,895 13,926 Amortization expenses 4,138 8,250 3,913 7,674 Event expenses 470 592 743 1,096 Conference expenses 46 86 227 323 Building administrative expenses 1,711 3,351 1,425 2,539

Total ￦ 158,997 ￦ 300,350 ￦ 152,084 ￦ 295,667

- 14 -

19. INCOME TAX EXPENSE:

(1) Income tax expenses are as follows (Unit: Korean won in millions):

For the six months ended June 30 2014 2013 Income tax currently payable ￦ 39,739 ￦ 45,541 Changes in deferred income tax assets (2,502) (15,132) Changes in income tax expense reflected directly in shareholders’ equity 5,547 (202) Income tax expense ￦ 42,784 ￦ 30,207

(2) Income tax expenses reflected directly in shareholders’ equity are as follows (Unit: Korean won in

millions): January 1, 2014 Increase June 30, 12014 Tax effect related to the cash flow hedging reserve gains and losses ￦ 261 ￦ 2,708 ￦ 2,969 Tax effect related to remeasurements of the net defined benefit liability 1,591 2,839 4,430

Total ￦ 1,852 ￦ 5,547 ￦ 7,399

(3) Income tax expense can be reconciled to net income as follows (Unit: Korean won in millions):

For the six months ended June 30 2014 2013 Net income before income tax ￦ 179,742 ￦ 113,524 Net income tax payable by the statutory income tax rates (*) 43,036 27,011 Tax reconciliations:

Non-deductible expenses - 144 Others (252) (621)

Subtotal (252) (477)

Any adjustments recognized in the period due to current tax of prior period - 3,673 Income tax expense for continued operation 42,784 30,207 Effective tax rates (income tax/income before income tax) 23.80% 26.61%

(*) Applicable income tax rate; 1) 11% for below 200 million won, 2) 22% for from 200 million won to 20 billion won, 3) 24.2% for above 20 billion won.

20. EARNINGS PER SHARE:

(1) Basic earnings per share are as follows (Unit: Korean won):





Net income (A) ￦ 54,481,123,485 ￦ 136,958,027,178 ￦ 36,113,033,741 ￦ 83,316,343,239 Weighted-average number of shares (B)

160,465,286 shares 160,465,286 shares 160,465,286 shares 160,465,286 shares

Net income per share (A/B) ￦ 340 ￦ 854 ￦ 225 ￦ 519

(2) Diluted earnings per share As there was no discontinued operation during the six months ended June 30, 2014 and 2013, basic earnings per share are the same as basic earnings per share from continuing operations. There are no potential common stocks as of June 30, 2014, and December 31, 2013. Therefore, the diluted earnings per share are the same as basic earnings per share for the six months ended June 30, 2014 and 2013.

- 15 -

21. ACCUMULATED OTHER COMPREHENSIVE INCOME:

Changes in accumulated other comprehensive income are as follows (Unit: Korean won in millions)


Changes Beginning

balance Reclassification of profit or loss Other

Income tax effects

Ending balance

Gain (loss) on valuation of derivatives

￦ (827) ￦ 344 ￦ (11,613) ￦ 2,708 ￦ (9,388)

Remeasurements of the net defined benefit liability

(5,030) - (11,820) 2,839 (14,011)

Total ￦ (5,857) ￦ 344 ￦ (23,433) ￦ 5,547 ￦ (23,399)


Changes Beginning

balance Reclassification of profit or loss Other

Income tax effects

Ending balance

Gain (loss) on valuation of derivatives

￦ (7,485) ￦ 153 ￦ 288 ￦ (90) ￦ (7,134)

Remeasurements of the net defined benefit liability

(9,019) - 467 (113) (8,665)

Total ￦ (16,504) ￦ 153 ￦ 755 ￦ (203) ￦ (15,799)

22. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS: (1) Cash and cash equivalents

Cash and cash equivalents in the condensed consolidated statements of cash flows are as follows (Unit: Korean won in millions):

June 30, 2014 December 31, 2013

Ordinary deposits ￦ 98,070 ￦ 176,104 Current deposits 75 151 Short-term financial instruments 11,000 14,200 Other cash and cash equivalents 1,035,000 775,000

Total ￦ 1,144,145 ￦ 965,455

- 16 -

(2) Cash generated from operations Cash generated from operations are as follows (Unit: Korean won in millions):

For the six months ended June 30 2014 2013 Net income ￦ 136,958 ￦ 83,316 Adjustments:

Income tax expense 42,784 30,207 Interest income (11,566) (10,522) Interest expense 153,566 156,988 Dividend received (173) (178) Bad debt expense and loss on disposal of receivables 126,287 114,754 Retirement benefits 4,384 4,962 Depreciation 14,157 13,926 Amortization 8,250 7,674 Loss on foreign currency translation - 64,021 Loss on valuation of derivatives 25,669 - Loss from sale of property and equipment 19 594 Sales promotional expenses 13,839 - Increase in provision for others 2,313 9,079 Reversal of impairment loss of AFS securities - (54) Other operating losses 496 649 Gain from sale of AFS securities (30) - Gain on foreign currency translation (25,669) - Gain on valuation of derivatives - (64,059) Amortization of present value discounts of card assets (14,231) (9,378) Amortization of deferred origination fees of card assets (13,019) (9,217) Gain from sale of property and equipment and intangible assets. (12) (81) Reversal of impairment loss for intangible assets (6) - Reversal of provision for others (2,184) (434) Other operating gains (30) (98)

Subtotal 324,844 308,833 Changes in operating assets and liabilities:

Decrease (increase) in card assets (327,736) 499,715 Decrease (increase) in other assets 2,544 (17,675) Net decrease in guarantee deposits 2,633 16,504 Decrease in net retirement benefit obligations (1,418) 40 Decrease in derivative liabilities (16,987) - Decrease in capital lease liabilities (298) (570) Decrease in other liabilities (45,186) (81,512)

Subtotal (386,448) 416,503 Total ￦ 75,354 ￦ 808,652

23. CONTINGENCIES AND COMMITMENTS:

Unless stated as below, contingencies and commitments are the same as those of the consolidated financial statements as of December 31, 2013.

(1) Credit line agreement

The credit line agreements are as follows (Unit: Korean won in millions):

Type Financial instruments June 30, 2014 December 31, 2013

Intraday overdraft limit Shinhan Bank and thirteen others

￦ 392,600

￦ 392,600

- 17 -

(2) Revolving Credit Facility

The Group has a revolving credit facility agreement 930,000 million won for credit line with Kookmin Bank and 12 others as of June 30, 2014.

(3) Guarantee

The Group has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd., amounting to 586 million won in connection with deferred transportation payment card and others.

(4) Pending litigations

As of June 30, 2014, the Group is involved in 46 cases (132,374 million won) as a defendant and 133 cases (12,372 million won) as a plaintiff in the pending litigations. The management of the Group does not anticipate that these pending litigations referred above will have a significant effect on the Group’s condensed consolidated financial statements.

(5) Deposit for Loss Reimbursement As of June 30, 2014, the Group has deposits of 2,303 million won and 4,517 million won of proceeds and interests, respectively, from the sale of Daewoo Engineering & Construction Co., Ltd.’s shares in an escrow account and records 2,303 million won and 4,467 million won for provision of proceeds and interests, respectively, from the litigation relating to the sale of Daewoo Engineering & Construction Co., Ltd.’s shares (see Note 11).

(6) Contract of sale of receivables

The Group entered into a contract with Hyundai Capital Services, Inc., relating to its sale of receivables on January 24, 2006. In accordance with the contract, the Group sells the receivables that are 60 days or more past due or written off to Hyundai Capital Services, Inc. Such sale occurs five times a month on designated cutoff dates at the amount calculated using a predetermined price pursuant to the contract.

(7) Alliance

The Group has separate agency agreements regarding its credit card business with SC Bank, Woori Bank, Korea Exchange Bank, Shinhan Bank, Citibank Korea, Hana Bank, Gwangju Bank, Jeonbuk Bank, Cheju Bank, Postal Office, Korea Computer Inc. and others.

(8) License Agreement and Franchise Agreement

The Group entered into member issuance and franchise agreements with Master Card International, Visa International and Diners Club International for credit card issuance, and pays each fees based on a fixed rate for each credit card issued.

(9) Reserve for Loss Reimbursement

The Group has the obligation to reimburse customers for fraudulent credit card activities; the Group records the expected losses as an accrued expense.

(10) Security on the Receivables Sold Relating to Asset-Backed Securitization

The Group continuously transfers receivables to maintain a certain level of its equity in the second series beneficiary certificates relating to the asset-backed securitization.

- 18 -

(11) Early Redemption Rule Associated with Asset-Backed Securitization

According to the agreement on the Group’s asset-backed securitization, in order to enhance the credit level of the asset-backed securities (“ABSs”), several provisions are in place as trigger clauses to be used for early redemption calls, thereby limiting the risk that the investors are exposed to resulting from a change in quality of the assets in the future. In the event the asset-backed securitization of the Group is in violation of the applicable trigger clause, the Group is obliged to make early redemption for the ABSs.

24. TRANSACTION WITH RELATED PARTIES :

(1) Status of related parties

Related parties consist of entities related to the Group, postemployment benefits, a key management personnel and a close member of that person’s family, an entity controlled or jointly controlled and an entity influenced significantly. Details of the related parties as of June 30, 2014, are as follows:

Companies

Parent Company Hyundai Motor Company Other related parties GE Capital Int’l Holdings, Green air, Kia Motors, Kia Tigers, Busan Finance

Center AMC, Samwoo, WIA-MAGNA Powertrain, Eukor Car Carriers, Innocean Wordwide, Iljin Bearing, Jongro Academy, Chunbuk Hyundai motors FC, Jongro Hakpyung, Hyundai KEFICO, Korea Credit Bureau, Hankook Economy Daily, Haevichi Country Club, Haevichi Hotel & Resort, Hyundai Construction, Hyundai construction human resource development center, Hyundai Glovis, Hyundai Dymos, Hyundai City Corporation, Hyundai Life, Hyundai Rotem, Hyundai Materials, Hyundai METIA, Hyundai Mobis, Hyundai BNG Steel, Hyundai farm land & development, Hyundai Engineering & Steel Industries, Hyundai C&I, Hyundai IHL, Hyundai energy, Hyundai engineering, Hyundai NGV, Hyundai MSEAT, Hyundai MnSoft, Hyundai Auto Ever Systems, Hyundai Wistco, Hyundai Wia, Hyundai Steel Company, Hyundai Architects & Engineers Associates, Hyundai Auto Electronics Company Ltd, Hyundai Capital, Hyundai Commercial, Hyundai Powertech, Hyundai Partecs, Hyundai Hysco, HK Savings Bank and HMC Investment Securities

- 19 -

(2) Outstanding transactions with the related parties are as follows (Unit: Korean won in millions):


Revenues Expenses Others

Card revenue Rental revenue Others Card expense

General and

administrative

expense Others

Purchase of

property and

equipment

Purchase of

intangible

assets

Disposal of

assets

Parent Company

Hyundai Motor

Company

￦ 57,927 ￦ - ￦ - ￦ - ￦ 92

￦ 33 ￦ - ￦ - ￦ -

Other related

parties

Kia Motor

Company

20,082 - - - 11

13 - - -

Hyundai Mobis 529 - - - - - - - -

Hyundai

Construction

113 - - - 6

- 2,805 - -

Hyundai Glovis 197 - - - - - - - -

Hyundai Capital 33 264 11,989 7,365 1,804 11,331 - - 203,128

Others 7,064 507 607 79 26,961 5,147 - 4,933 -

Total ￦ 85,945 ￦ 771 ￦ 12,596 ￦ 7,444 ￦ 28,874 ￦ 16,524 ￦ 2,805 ￦ 4,933 ￦ 203,128


Revenues Expenses Others

Card revenue Rental revenue Others Card expense

General and

administrative

expense Others

Purchase of

property and

equipment

Purchase of

intangible

assets

Disposal of

assets

Parent Company

Hyundai Motor

Company

￦ 74,394 ￦ - ￦ - ￦ - ￦ 111

￦ 40 ￦ - ￦ - ￦ -

Other related

parties

Kia Motor

Company

35,743 11 - 1 13

14 - - -

Hyundai Mobis 520 - - - - - - - -

Hyundai

Construction

116 - - - 8

- 4,435 - -

Hyundai Glovis 223 - - - - - - - -

Hyundai Capital 24 2 17,145 27,711 642 22,636 664 - 185,421

HMC Investment

Securities

- - - - 3

- - -

Others 6,691 235 372 70 20,621 7,056 5,190 3,287 -

Total ￦ 117,711 ￦ 248 ￦ 17,517 ￦ 27,782 ￦ 21,398 ￦ 29,746 ￦ 10,289 ￦ 3,287 ￦ 185,421

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(3) Receivables and payables (except for borrowings) from the transactions with the related parties are as

follows (Unit: Korean won in millions):

June 30, 2014

Receivable Payables Card assets Others Account payable Others Parent Company Hyundai Motor Company ￦ 50,192 ￦ 2,128 ￦ 57,407 ￦ -

Other related parties Kia Motor Company 13,653 173 17,797 - Hyundai Movis 2,187 - 485 - Hyundai Construction 1,777 - - - Hyundai Glovis 1,527 - 80 - Hyundai Wia 3,349 - - - Hyundai Steel Company 2,470 - - - Hyundai BNG Steel 466 - - - Hyundai Hysco 282 - 5,739 - Hyundai Capital 114,102 1,291 622 265 HMC Investment Securities 558 - - - Others 16,354 28,970 10,964 630

Total ￦ 206,917 ￦ 32,562 ￦ 93,094 ￦ 895

December 31, 2013

Receivable Payables Card assets Others Account payable Others Parent Company Hyundai Motor Company ￦ 55,849 ￦ 2,128 ￦ 44,986 ￦ 23

Other related parties Kia Motor Company 22,733 173 12,902 - Hyundai Movis 2,598 - 630 - Hyundai Construction 4,746 - - - Hyundai Glovis 1,391 - 1,021 - Hyundai Wia 5,634 - - - Hyundai Steel Company 2,327 - - - Hyundai BNG Steel 487 - - - Hyundai Hysco 1,295 - 5,217 - Hyundai Capital 81,951 1,424 2,813 260 HMC Investment Securities 705 - - - Others 16,271 14,936 23,634 526

Total ￦ 195,987 ￦ 18,661 ￦ 91,203 ￦ 809

(4) Granting of credit with the related parties is as follows (Unit: Korean won in millions):

Grantor Grantee Method Credit limit Period Hyundai Card Hyundai Capital Services, Inc. Call loan ￦ 300,000 2013.11.01–2014.10.31 Hyundai Capital Services, Inc. Hyundai Card Call loan 300,000 2013.11.01–2014.10.31

Call loan is granted only in case that any grantee demands credit line and there is residual fund, and the credit line currently is not being used.

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(5) Compensation for key management is as follows (Unit: Korean won in millions):

For the six months ended June 30 2014 2013

Short-term employee benefit ￦ 4,321 ￦ 3,528 Retirement benefit 958 996

Total ￦ 5,279 ￦ 4,524

(6) There were no borrowing transactions with the related parties for the six months ended June 30, 2014 and

2013.

(7) There were no lending transactions with the related parties for the six months ended June 30, 2014 and 2013.

(8) As of June 30, 2014, there are no payment guarantees and collaterals that Group has provided for the

related parties to finance, and no payment guarantees and collaterals that the Group has been provided from the related parties.

25. TRANSFERS OF FINANCIAL ASSETS:

The Group transferred its card assets to special-purpose companies (“SPCs”) for asset securitization and SPCs issued ABSs. The ABSs are collateralized by card assets as underlying assets. All of the transferred financial assets do not qualify for derecognition under K-IFRS 1039 because the Company has retained substantially all the risks and rewards of ownership of the transferred assets. Therefore, the Company continues to recognize the transferred financial assets in the separate financial statements. The details of ABSs and underlying assets are as follows (Unit: Korean won in millions):

June 31, 2014

Carrying amount Fair value

Maturity Underlying

asset Senior tranche Underlying

asset Senior tranche Net position PRIVIA 2nd SPC 2014.04.22 ￦ 1,245,445 ￦ - ￦ 1,270,655 ￦ - ￦ 1,270,655 PRIVIA 3rd SPC 2015.07.20 1,239,042 405,760 1,265,881 406,254 859,627 PRIVIA 4th SPC 2017.07.18 830,360 294,176 852,781 298,353 554,428 Discounts on bonds - (3,306) - - -

Total ￦ 3,314,847 ￦ 696,630 ￦ 3,389,317 ￦ 704,607 ￦ 2,684,710

December 31, 2013 Carrying amount Fair value

Maturity Underlying

asset Senior tranche Underlying

asset Senior tranche Net position PRIVIA 2nd SPC 2014.04.22 ￦ 1,276,283 ￦ 281,413 ￦ 1,302,516 ￦ 281,359 ￦ 1,021,157 PRIVIA 3rd SPC 2015.07.20 1,271,604 430,240 1,299,795 421,467 878,328 Discounts on bonds - (1,579) - - -

Total ￦ 2,547,887 ￦ 710,074 ￦ 2,602,311 ￦ 702,826 ￦ 1,899,485

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26. NETTING ON FINANCIAL ASSETS AND LIABILITIES:

Derivative assets and derivative liabilities recognized by the Group can be set off in accordance with the future events described in derivative master netting agreements. The effects of netting agreements are as follows (Unit: Korean won in millions):

June 30, 2014 Non-offsetting amount

Recognized financial assets and liabilities

Offsetting amount from recognized

financial assets and liabilities

Net amounts on the

consolidated statement of

financial position

Financial instruments

Cash collateral received Net amounts

Financial Assets Derivative assets ￦ 441 ￦ - ￦ 441 ￦ 265 ￦ - ￦ 176

Financial Liabilities Derivative liabilities 66,307 - 66,307 265 - 66,042

December 31, 2013

Non-offsetting amount

Recognized financial assets and liabilities

Offsetting amount from recognized

financial assets and liabilities

Net amounts on the

consolidated statement of

financial position

Financial instruments

Cash collateral received Net amounts

Financial Assets Derivative assets ￦ 2,750 ￦ - ￦ 2,750 ￦ 1,213 ￦ - ￦ 1,537

Financial Liabilities Derivative liabilities 48,665 - 48,665 1,213 - 47,452

27. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES:

(1) The fair value of financial assets and financial liabilities is as follows (Unit: Korean won in millions):

June 30, 2014 December 31, 2013 Book value Fair value Book value Fair value

Assets: Financial assets Cash and deposits ￦ 1,177,174 ￦ 1,177,174 ￦ 998,487 ￦ 998,487 Investment financial assets 1,767 1,767 1,767 1,767 Card assets 9,942,822 10,422,997 9,729,167 10,210,591 Other assets 167,880 168,013 177,862 177,974

Total ￦ 11,289,643 ￦ 11,769,951 ￦ 10,907,283 ￦ 11,388,819

Liabilities: Financial liabilities Borrowings ￦ 240,000 ￦ 240,095 ￦ 212,500 ￦ 212,624 Debentures 7,242,970 7,438,720 6,978,262 7,136,256 Other liabilities 1,422,753 1,422,749 1,439,624 1,439,608

Total ￦ 8,905,723 ￦ 9,101,564 ￦ 8,630,386 ￦ 8,788,488

The Group’s valuation techniques and relevant policies with regard to the fair value are the same as those used for previous period.

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(2) Fair value hierarchy All financial instruments at fair value are categorized into three fair value hierarchy levels. The method of categorizing fair value hierarchy levels is the same as the one used for previous period. The table below provides the Group’s financial assets and financial liabilities recorded at fair value in the condensed consolidated statements of financial position as of June 30, 2014, and December 31, 2013 (Unit: Korean won in millions):

June 30, 2014 Fair value hierarchy Book value Fair value Level 1 Level 2 Level 3

Financial Assets Derivative assets ￦ 441 ￦ 441 ￦ - ￦ 441 ￦ -

Financial Liabilities Derivative liabilities 66,307 66,307 - 66,307 -

December 31, 2013 Fair value hierarchy Book value Fair value Level 1 Level 2 Level 3 Financial Assets

Derivative assets ￦ 2,750 ￦ 2,750 ￦ - ￦ 2,750 ￦ - Financial Liabilities

Derivative liabilities 48,665 48,665 - 48,665 - The table below provides the Group’s financial assets and financial liabilities that are carried at cost since the fair values of the financial instruments are not readily determinable in the condensed consolidated statements of financial position are as follows (Unit: Korean won in millions):

June 30, 2014 December 31, 2013

Investment financial assets AFS Securities (*) ￦ 1,767 ￦ 1,767

(*) AFS securities are unlisted equity securities and recorded as carried at cost since they do not have

quoted prices in an active market and the fair values are not measured with reliability.

(3) The Group recognizes the transfers on the date of the event of change in circumstances that caused the transfers.

(4) Valuation techniques and inputs used in measuring financial assets and financial liabilities categorized within Level 2

- Derivative assets and derivative liabilities Derivative assets and derivative liabilities consist of currency swaps and interest rate swaps. Fair value of a currency swap is measured using reporting period-end’s forward exchange rate whose term is the same as residual period to maturity of the currency swap. In case that the forward exchange rate whose term is matched to the residual period to maturity is not disclosed in the market, the forward exchange rate is assumed by interpolating using announced forward exchange rates by terms. Discount rate used in measuring fair value of a currency swap is a yield curve deducted by announced interest rate in the market. Discount rate and forward interest rate used in measuring fair value of an interest rate swap is determined based on a yield curve deducted by announced rates in the market as of reporting period-end. The fair value of an interest rate swap is measured by discounting future cash flows assumed using the forward interest rate above. The inputs measuring a currency swap and an interest rate swap are deducted by observable forward exchange rates and yield curves in the market as of reporting period-end. Therefore, the Group classifies a currency swap and an interest rate swap as Level 2 in fair value hierarchy.

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(5) There are no significant changes in business environment or economic environment that affect fair values of financial assets and financial liabilities held by the Group as of June 30, 2014.

28. FINANCIAL RISK MANAGEMENT:

The Group is exposed to credit, liquidity and market risks (exchange and 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 market risks. There was no significant change in the Group's risk management division and policies after December 31, 2013.

card eng 2q

Documents

financial statementsas

accountants review report

review conclusionbased

independent auditors

readersthis report

total cash

cash equivalents

months ended2013