20152 q캐피탈검토보고서영문

HYUNDAI CAPITAL SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2015

(With Independent Auditors’ Review Report Thereon)


Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2015

Table of 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 7

Condensed Consolidated Interim Statements of Cash Flows 8

Notes to Condensed Consolidated Interim Financial Statements 9

152, Teheran-ro, Gangnam-gu, Seoul 135-984(Yeoksam-dong, Gangnam Finance Center 10th Floor)Republic of Korea

Independent Auditors’ Review Report

(Based on a report originally issued in Korean)

The Board of Directors and Shareholders

Hyundai Capital Services, Inc.:

We have reviewed the accompanying condensed consolidated interim financial statements of Hyundai

Capital Services, Inc. and its subsidiaries (the Group), which comprise the condensed consolidated

statement of financial position as of June 30, 2015, the condensed consolidated statements of

comprehensive income for the three-month and six-month periods ended June 30, 2015 and 2014, the

condensed consolidated statements of changes in equity and cash flows for the six-month periods ended

June 30, 2015 and 2014 and notes, comprising a summary of significant accounting policies and other

explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these condensed consolidated

interim financial statements in accordance with Korean International Financial Reporting Standards (K-

IFRS) No.1034, Interim Financial Reporting, and for such internal control as management determines

is necessary to enable the preparation of financial statements that are free from material misstatement,

whether due to fraud or error.

Auditors’ Responsibility

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

based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and 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 aware of all significant matters that might be identified in an audit. Accordingly, we do

not express an audit opinion.

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.

Other matters

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.

Accordingly, this report and the accompanying condensed consolidated interim financial statements are

for use by those knowledgeable about Korean review standards and their application in practice.

The statement of financial position of the Group as of December 31, 2014, 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 by us in accordance with Korean Standards on Auditing

and our report thereon, dated March 2, 2015, expressed an unqualified opinion. The accompanying

condensed consolidated statement of financial position of the Group as of December 31, 2014,

presented for comparative purposes, is consistent, in all material respects, with the audited consolidated

financial statements from which it has been derived.

Seoul, Republic of Korea

August 12, 2015

This report is effective as of August 12, 2015, 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 review report has not been updated to reflect the impact of such subsequent events or

circumstances, if any.

cc

사각형

Administrator

새 스탬프


Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2015 and December 31, 2014

(In millions of Korean won)

June 30,

2015 December 31,

Notes (Unaudited) 2014

Assets

Cash and due from other financial institutions

Cash and cash equivalents 22 W 725,744 608,207

Due from banks 2,847 36,133

Short-term financial investments 4 493,176 950,396

1,221,767 1,594,736

Securities 5

Available-for-sale securities 72,731 63,446

Investments in associates 227,776 209,118

300,507 272,564

Loans receivable 6, 7

Loans receivable 9,128,031 9,903,532

Allowance for loan losses (318,715) (319,323)

8,809,316 9,584,209

Installment financial assets 6, 7

Automobile installment financing receivables 7,657,217 6,548,952


Durable goods installment financing receivables 875 1,164

Allowance for loan losses (112) (78)

Mortgage installment financing receivables 4,188 5,945

Allowance for loan losses (86) (68)

7,601,142 6,502,794

Lease receivables 6, 7

Finance lease receivables 2,704,342 2,736,708


Cancelled lease receivables 19,878 16,755


2,655,238 2,685,208

Leased assets

Operating lease assets 1,874,387 1,727,082

Accumulated depreciation (566,694) (540,364)

Accumulated impairment losses (394) (598)

Cancelled lease assets 7,662 7,435

Accumulated impairment losses (4,058) (3,801)

1,310,903 1,189,754

Property and equipment, net 8 250,791 248,322

Other assets

Non-trade receivables 151,764 121,223

Allowance for doubtful accounts 7 (7,572) (6,438)

Accrued revenues 105,602 111,004

Allowance for doubtful accounts 7 (12,551) (13,660)

Advance payments 124,844 104,219

Prepaid expenses 70,577 45,157

Intangible assets 9 54,647 57,262

Derivative assets 13, 26 84,787 20,321

Leasehold deposits 22,882 22,033

594,980 461,121

Total assets W 22,744,644 22,538,708

See accompanying notes to the condensed consolidated interim financial statements

3


Condensed Consolidated Interim Statements of Financial Position (Continued)

As of June 30, 2015 and December 31, 2014


June 30,

2015 December 31,

Notes (Unaudited) 2014

Liabilities

Borrowed funds 10

Borrowings W 1,508,132 1,562,261

Bonds issued 16,192,770 15,899,469

17,700,902 17,461,730

Other liabilities

Non-trade payables 284,992 276,706

Accrued expenses 172,346 177,592

Unearned revenue 35,203 38,751

Withholdings 47,672 36,465

Derivative liabilities 13, 26 181,077 383,107

Current tax liabilities 62,407 51,487

Employee benefit liabilities 11 37,127 25,006

Deposits received 577,197 609,078

Deferred income tax liabilities 19 28,118 33,722

Provisions 12 7,714 7,448

Other 50 50

1,433,903 1,639,412

Total liabilities 19,134,805 19,101,142

Equity

Issued capital 496,537 496,537

Capital surplus 407,539 407,539

Accumulated other comprehensive loss 21 (63,881) (64,595)

Retained earnings 14 2,769,644 2,598,085

Total equity 3,609,839 3,437,566

Total liabilities and equity W 22,744,644 22,538,708


4


Condensed Consolidated Interim Statements of Comprehensive Income (Unaudited)

For the three-month and six-month periods ended June 30, 2015 and 2014


Three-month periods Six-month periods

ended June 30, ended June 30,

Notes 2015 2014 2015 2014

Operating revenue

Interest income 15 W 5,531 10,749 13,902 22,624

Gain on valuation and sale of securities 349 349 842 1,002

Income on loans 15, 16 277,213 320,691 566,003 653,235

Income on installment financial assets 15, 16 107,066 88,970 206,740 168,375

Income on leases 15, 16 215,042 216,457 426,679 435,105

Gain on sale of loans 37,378 (171) 40,483 3,673

Gain on foreign currency transactions 3,001 196,013 41,612 196,521

Dividend income 295 177 2,243 2,383

Other operating income 17 165,872 (57,520) 243,227 81,746

Total operating revenue 811,747 775,715 1,541,731 1,564,664

Operating expenses

Interest expense 15 163,927 192,449 336,195 387,264

Lease expense 16 128,069 123,867 250,260 250,126

Provision for loan losses 7 72,345 107,672 149,212 226,650

Loss on foreign currency transactions 127,746 (91,865) 171,973 13,193

General and administrative expenses 18 183,965 167,657 360,059 321,190

Other operating expenses 17 16,006 210,166 66,560 222,989

Total operating expenses 692,058 709,946 1,334,259 1,421,412

Operating income 119,689 65,769 207,472 143,252

Non-operating income

Share in net income of associates

under the equity method 5 10,097 2,733 19,087 6,828

Gain on sale of property and equipment 18 48 1,250 61

Reversal of impairment loss

on intangible assets — — — 26

Other 1,043 2,099 2,415 4,087

Total non-operating income 11,158 4,880 22,752 11,002

Non-operating expenses

Share in net loss of associates

under the equity method 5 (167) (41) 18 216

Impairment loss on investments

in associates 5 — — — 27,689

Loss on sale of property and equipment 89 55 366 58

Donation 117 423 129 513

Other 173 98 402 378

Total non-operating expenses 212 535 915 28,854

Profit before income taxes 130,635 70,114 229,309 125,400

Income tax expense 19 33,660 15,517 57,750 40,251

Profit for the period W 96,975 54,597 171,559 85,149


5


Condensed Consolidated Interim Statements of Comprehensive Income (Unaudited) (Continued)

For the three-month and six-month periods ended June 30, 2015 and 2014


Three-month periods Six-month periods


Notes 2015 2014 2015 2014

Other comprehensive income (loss), 21

net of income taxes

Items that will never be reclassified

to profit or loss:

Remeasurements of defined

benefit plans W 1,380 (3,012) (2,614) (3,901)

Items that are or may be reclassified

subsequently to profit or loss:

Net change in unrealized gains and

losses on available-for-sale

securities 3,559 (353) 6,585 531

Share in other comprehensive income

(loss) of associates under the

equity method 54 (4,550) (311) (4,938)

Net change in effective portion of

cash flow hedges (8,287) (18,360) (2,148) (19,154)

Net change in foreign currency

translation adjustments 541 (419) (798) (517)

Total other comprehensive

income (loss), net of

income taxes (2,753) (26,694) 714 (27,979)

Total comprehensive income for the period W 94,222 27,903 172,273 57,170

Earnings per share

Basic and diluted earnings per share 20 W 977 550 1,728 857

(in won)


6


Condensed Consolidated Interim Statements of Changes in Equity (Unaudited)

For the six-month periods ended June 30, 2015 and 2014


Accumul-

Capital surplus ated other

Additional Other compre-

Issued paid-in capital hensive Retained Total

Capital capital surplus income earnings equity

Balances as of January 1, 2014 W 496,537 369,339 38,200 (11,573) 2,360,380 3,252,883

Total comprehensive income

Profit for the period — — — — 85,149 85,149

Other comprehensive

income (loss):

Net change in unrealized gains

and losses on available-for-

sale securities — — — 531 — 531

Share in other comprehensive

income of associates under

the equity method — — — (4,938) — (4,938)

Net change in effective portion

of cash flow hedges — — — (19,154) — (19,154)


translation adjustments — — — (517) — (517)


benefit plans — — — (3,901) — (3,901)

Total comprehensive

income — — — (27,979) 85,149 57,170

Balances as of June 30, 2014 W 496,537 369,339 38,200 (39,552) 2,445,529 3,310,053

Balances as of January 1, 2015 W 496,537 369,339 38,200 (64,595) 2,598,085 3,437,566

Total comprehensive income

Profit for the period — — — — 171,559 171,559

Other comprehensive

income (loss):

Net change in unrealized gains

and losses on available-for-

sale securities — — — 6,585 — 6,585


income of associates under

the equity method — — — (311) — (311)


of cash flow hedges — — — (2,148) — (2,148)


translation adjustments — — — (798) — (798)


benefit plans — — — (2,614) — (2,614)

Total comprehensive

income — — — 714 171,559 172,273

Balances as of June 30, 2015 W 496,537 369,339 38,200 (63,881) 2,769,644 3,609,839


7


Condensed Consolidated Interim Statements of Cash Flows (Unaudited)

For the six-month periods ended June 30, 2015 and 2014


Notes 2015 2014

Cash flows from operating activities

Cash generated from operations 22 W 217,765 430,794

Interest received 14,679 22,192

Interest paid (152,297) (361,519)

Dividends received 2,243 2,383

Income taxes paid (53,124) (72,444)

Net cash provided by operating activities 29,266 21,406

Cash flows from investing activities

Acquisition of investments in associates — (5,150)

Acquisition of property and equipment (17,786) (14,840)

Proceeds from sale of property and equipment 920 171

Acquisition of intangible assets (4,146) (6,077)

Proceeds from sale of intangible assets 413 —

Increase in leasehold deposits (340) (873)

Decrease in leasehold deposits 512 1,537

Net cash used in investing activities (20,427) (25,232)

Cash flows from financing activities

Proceeds from borrowings 870,521 1,040,000

Repayments of borrowings (924,960) (1,145,000)

Proceeds from issue of bonds 4,056,236 1,918,499

Repayments of bonds (3,893,090) (1,943,504)

Net cash provided by (used in) financing activities 108,707 (130,005)

Effect of exchange rate fluctuations on

cash and cash equivalents held (9) (29)

Net increase (decrease) in cash and cash equivalents 117,537 (133,860)

Cash and cash equivalents at beginning of the period 22 608,207 1,502,600

Cash and cash equivalents at end of the period 22 W 725,744 1,368,740


8


Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2015

9 (Continued)

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, 2015, the Company’s operations are headquartered at

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 consolidated financial statements include the accounts of the Company and its subsidiaries,

including Autopia 43rd 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, 2015 and December 31, 2014 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%.

(*1) Including trusts for asset securitization

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

Limited Liability Company located at Russia.

Ownership June 30, December 31,

Location (%) 2015 2014

Asset Korea 0.9 Autopia 43rd

ABS SPC (*1) Autopia 43rd

ABS SPC (*1)

securitization Autopia 44th

ABS SPC (*1) Autopia 44th ABS SPC (*1)

vehicles Autopia 45th


Autopia 46th


Autopia 47th


HB Third ABS SPC HB Third ABS SPC

0.5 Autopia 49th


Autopia 50th


Autopia 51st ABS SPC (*1) Autopia 51

st ABS SPC (*1)

Autopia 52nd

ABS SPC (*1) Autopia 52nd

ABS SPC (*1)

Autopia 54th


Autopia 55th


Autopia 56th

ABS SPC (*1)

0.31 HB Fourth ABS SPC HB Fourth ABS SPC

Limited Germany 100 Hyundai Capital Europe GmbH (*2) Hyundai Capital Europe GmbH (*2)

liability India 100 Hyundai Capital India Private Ltd. Hyundai Capital India Private Ltd.

companies Brazil 100 Hyundai Capital Brasil LTDA Hyundai Capital Brasil LTDA

Trusts Korea 100 Special money trust (16 trusts) Special money trust (29 trusts)



(Unaudited)

June 30, 2015

10 (Continued)

(2) Changes in subsidiaries

During the six-month period ended June 30, 2015, Autopia 56th ABS SPC, including a trust for

asset securitization, was newly included in the Group’s consolidated financial statements except for

changes in the number of special money trust accounts in which the Group invests.

(3) Key financial information of subsidiaries

Key financial information of subsidiaries as of and for the period ended June 30, 2015 is

summarized as follows:

2. Basis of Preparation

(1) Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with

Korean International Financial Reporting Standards (K-IFRS), as prescribed in the Act on External

Audits of Corporations in the Republic of Korea.

These condensed consolidated interim financial statements were prepared in accordance with K-

IFRS No. 1034, Interim Financial Reporting, as part of the period covered by the Group’s K-IFRS

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 at and for the year ended December 31,

2014. These condensed consolidated interim financial statements do not include all of the disclosures

required for full annual financial statements.

(2) Use of estimates and judgments

The preparation of the condensed consolidated interim 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimates are revised and in any future periods

affected.

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 applied to the consolidated financial statements as of and for

the year ended December 31, 2014.

(in millions of Korean won) Total

compre-

Operating Profit (loss) hensive

Assets Liabilities Equity revenue for the period income (loss)

Hyundai Capital Europe GmbH W 15,323 5,699 9,624 7,781 (1,263) (1,648)

Hyundai Capital India Private Ltd. 1,207 563 644 682 35 46

Hyundai Capital Brasil LTDA 4,305 118 4,187 2,990 1,706 1,282

Autopia ABS SPCs 2,359,500 2,361,657 (2,157) 51,906 (958) (1,173)

HB ABS SPCs 4,747 3,738 1,009 1,141 562 562

Special money trusts 416,319 — 416,319 26 26 26



(Unaudited)

June 30, 2015

11 (Continued)

(3) Measurement of fair value

The Group regularly reviews significant unobservable inputs and valuation adjustments. If third

party information, such as broker quotes or pricing services, is used to measure fair values, then the

Group assesses the evidence obtained from the third parties to support the conclusion that such

valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy.

When measuring the fair value of an asset or a liability, the Group uses market observable data as

far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the

inputs used in the valuation techniques as follows.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the

asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data

(unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different

levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the

same level of the fair value hierarchy as the lowest level input that is significant to the entire

measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting

period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in Note 27.

3. Significant 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, 2014. 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, 2015.

Amendments to K-IFRS No. 1019, Employee Benefits, entitled Defined Benefits Plans: Employee

Contributions

The narrow scope amendments apply to contributions from employees or third parties to defined

benefit plans. The objective of the amendments is to simplify the accounting for contributions that are

independent of the number of years of employee service, for example, employee contributions that are

calculated according to a fixed percentage of salary. When contributions are eligible for the practical

expedient, a company is permitted, but not required, to recognize them as a reduction of the service cost

in the period in which the related service is rendered.

The amendments apply retrospectively for annual periods beginning on or after July 1, 2014.

Earlier application is permitted. The adoption of the amendments had no significant impact on the

Group’s consolidated financial statements.



(Unaudited)

June 30, 2015

12 (Continued)

4. Short-term Financial Investments

Short-term financial investments as of June 30, 2015 and December 31, 2014 are as follows:

For liquidity management, the Group holds short-term investments in excess of immediate funding

needs. These excess funds are invested in short-term, highly liquid and investment grade money market

instruments, which provide liquidity for the Group’s short-term funding needs and flexibility in the use

of other funding sources.

(1) Debt securities

Details of debt securities in short-term financial investments as of June 30, 2015 and December 31,

2014 are as follows:

(2) Beneficiary certificates

Details of beneficiary certificates in short-term financial investments as of June 30, 2015 and

December 31, 2014 are as follows:

(in millions of Korean won) June 30, December 31,

2015 2014

Debt securities W 405,103 899,880

Beneficiary certificates 88,073 50,516

W 493,176 950,396

(in millions of Korean won) June 30, 2015

Interest Acquisition Carrying

Details rate (%) cost amount

Commercial paper and Korea development bank

repurchase agreements and 58 others 1.45 ~ 2.30 W 404,529 405,103

(in millions of Korean won) December 31, 2014

Interest Acquisition Carrying

Details rate (%) cost amount

Commercial paper and Korea development bank

repurchase agreements and 170 others 2.40 ~ 2.65 W 899,543 899,880


Acquisition Carrying

Details cost amount

Money market funds Hana UBS Class One MMF K-5 W 60,000 60,026

KDB Government Bond Corporate MMF 1 20,000 20,004

Dongbu Together Corporate MMF 3 C 8,000 8,043

W 88,000 88,073


Acquisition Carrying

Details cost amount

Money market trusts Shinhan Bank W 10,000 10,500

Money market funds Hana UBS Class One MMF K-5 40,000 40,016

W 50,000 50,516



(Unaudited)

June 30, 2015

13 (Continued)

5. Securities

Securities as of June 30, 2015 and December 31, 2014 are as follows:


2015 2014

Available-for-sale securities

Equity securities

Marketable equity securities W 23,194 13,958

Unlisted equity securities 9,909 10,537

33,103 24,495

Debt securities

Government and public bonds 2,625 1,807

Corporate bonds 31,265 31,209

33,890 33,016

Beneficiary certificates 5,738 5,935

72,731 63,446

Investments in associates 227,776 209,118

W 300,507 272,564



(Unaudited)

June 30, 2015

14 (Continued)

5.1. Available-for-sale Securities

Available-for-sale securities as of June 30, 2015 and December 31, 2014 are as follows:

(1) Equity securities

(*1) The fair value of Hyundai Finance Corp. is estimated at the average of appraisal value quoted

by two independent valuation service providers, using the valuation technique based on the income

approach (discounted cash flow model). In measuring the fair value under this methodology, these

service providers 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. The Group has reviewed the underlying assumptions and concurs with

the methodology employed.

(2) Debt securities

The fair value of Seoul Metropolitan Rapid Transit Corp. and other Korean municipal bonds is

quoted from broker and dealer companies and Autopia 53rd ABS SPC is quoted from an independent

valuation service provider.

(3) Beneficiary certificates

The fair value of the beneficiary certificate is quoted from an independent valuation service

provider, using the valuation technique based on the income approach (discounted cash flow model).

(in millions of Korean won) Carrying amount

Number Ownership Acquisition June 30, December 31,

of shares (%) cost 2015 2014

Marketable equity securities

NICE Information Service Co., Ltd. 1,365,930 2.25 W 3,312 13,386 6,461

NICE Holdings Co., Ltd. 491,620 1.30 3,491 9,808 7,497

Unlisted equity securities

Hyundai Finance Corporation (*1) 1,700,000 9.29 9,888 9,741 10,365

Korean Egloan, Inc. 4,000 3.12 100 100 100

Golfclub Lich AG 14 0.59 60 68 72

W 16,851 33,103 24,495


Interest rate Acquisition June 30, December 31,

Issuer (%) cost 2015 2014

Government and Seoul Metropolitan

public bonds Rapid Transit Corp.

and other Korean

municipal bonds 1.50, 2.00 W 2,517 2,625 1,807

Corporate bonds Autopia 53rd

ABS SPC 3.59, 4.42 30,000 31,265 31,209

W 32,517 33,890 33,016


Acquisition June 30, December 31,

cost 2015 2014

Hyundai Ship Special Asset Investment Trust III W 5,707 5,738 5,935



(Unaudited)

June 30, 2015

15 (Continued)

5.2. Investments in Associates

(1) Details of investments in associates

Details of investments in associates as of June 30, 2015 and December 31, 2014 are as follows:

(*1) While 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. Therefore, investments in these entities are accounted for using the equity method.

(*2) Due to the unavailability of the financial statements as of June 30, 2015, the equity method

was applied using the investee’s financial statements as of May 31, 2015. There were no significant

transactions between May 31 and June 30, 2015.

(*1) While 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. Therefore, investments in these entities are accounted for using the equity method.

(*2) Due to the unavailability of the financial statements as of December 31, 2014, the equity

method was applied using the investee’s financial statements as of November 30, 2014. There were no

significant transactions between November 30 and December 31, 2014.

June 30, 2015

Principal Date of

Number of Ownership place of financial

shares (%) business statements Industry

Hi Network, Inc. (*1)(*2) 13,332 19.99 Korea 5/31/2015 Insurance brokerage

Korea Credit Bureau (*1) 140,000 7.00 Korea 6/30/2015 Credit information service

Hyundai Capital Germany GmbH 600,200 30.01 Germany 6/30/2015 Automobile finance brokerage

Hyundai Capital UK Ltd. 16,494,500 29.99 U.K. 6/30/2015 Automobile finance

Beijing Hyundai Auto Finance Co., Ltd. — 46.00 China 6/30/2015 Automobile finance

December 31, 2014

Principal Date of

Number of Ownership place of financial

shares (%) business statements Industry

Hi Network, Inc. (*1)(*2) 13,332 19.99 Korea 11/30/2014 Insurance brokerage

Korea Credit Bureau (*1) 140,000 7.00 Korea 12/31/2014 Credit information service

Hyundai Capital Germany GmbH 600,200 30.01 Germany 12/31/2014 Automobile finance brokerage

Hyundai Capital UK Ltd. 16,494,500 29.99 U.K. 12/31/2014 Automobile finance

Beijing Hyundai Auto Finance Co., Ltd. — 46.00 China 12/31/2014 Automobile finance



(Unaudited)

June 30, 2015

16 (Continued)

(2) Summary of financial information of investees

Summary of financial information of investees as of June 30, 2015 and December 31, 2014, for

assets and liabilities, for the six-month periods ended June 30, 2015 and 2014, for revenue and income,

and the reconciliation of investee’s net assets to the carrying amount of the investments in the Group’s

financial statements are as follows:


The

Group’s

Total Total Issued Total share in Carrying

assets liabilities capital equity net assets Goodwill amount

Hi Network, Inc. W 4,707 1,810 333 2,897 579 — 579

Korea Credit Bureau 53,761 7,110 10,000 46,651 3,266 1,037 4,303

Hyundai Capital Germany GmbH 8,112 2,188 3,547 5,924 1,778 — 1,778

Hyundai Capital UK Ltd. 2,117,655 1,994,282 96,055 123,373 37,000 — 37,000

Beijing Hyundai Auto Finance Co., Ltd. 2,821,744 2,421,492 354,325 400,252 184,116 — 184,116

(in millions of Korean won) Six-month period ended June 30, 2015

Other Total

compre- compre-

Net hensive hensive

Operating Interest Interest income income income

revenue income expense (loss) (loss) (loss)

Hi Network, Inc. W 5,579 23 — 204 — 204

Korea Credit Bureau 19,060 185 — (260) — (260)

Hyundai Capital Germany GmbH 2,193 32 — 1,026 (265) 761

Hyundai Capital UK Ltd. 58,125 54,673 11,672 13,117 (5,308) 7,809

Beijing Hyundai Auto Finance Co., Ltd. 153,451 148,516 56,992 32,183 2,741 34,924


The

Group’s

Total Total Issued Total share in Carrying

assets liabilities capital equity net assets Goodwill amount

Hi Network, Inc. W 5,306 2,613 333 2,693 539 — 539

Korea Credit Bureau 54,717 7,806 10,000 46,911 3,284 1,037 4,321

Hyundai Capital Germany GmbH 7,033 1,871 3,547 5,162 1,550 — 1,550

Hyundai Capital UK Ltd. 1,879,927 1,764,363 96,055 115,564 34,657 — 34,657

Beijing Hyundai Auto Finance Co., Ltd. 2,313,511 1,948,183 354,325 365,328 168,051 — 168,051


Total

Other compre-

Net comprehensive

Operating Interest Interest income hensive income

revenue income expense (loss) loss (loss)

Hi Network, Inc. 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)



(Unaudited)

June 30, 2015

17 (Continued)

(3) Roll-forward of investments in associates

The following tables present a roll-forward of the carrying amounts of investments in associates

for the six-month periods ended June 30, 2015 and 2014:

(*1) At December 31, 2013, the carrying amount of the Group’s investments in HK Savings Bank

was W51,137 million including goodwill of W12,248 million. In March, 2014, the Group recognized

impairment loss of W27,689 million on this investment which made a new cost basis of W24,000

million equaling to net recoverable amount based on the impairment analysis. In May, 2014, the board

of directors approved the plan to sell all of the Group’s interest in HK Savings Bank, and the investment

was sold in October, 2014.

(4) Goodwill related to associates

Goodwill that forms part of the carrying amount of an investment in Korea Credit Bureau was

amounted to W1,037 million as of June 30, 2015 and December 31, 2014.


Share in

other

Share in compre-

Beginning net income hensive Ending

balance (loss) income (loss) balance

Hi Network, Inc. W 539 40 — 579

Korea Credit Bureau 4,321 (18) — 4,303

Hyundai Capital Germany GmbH 1,550 308 (80) 1,778

Hyundai Capital UK Ltd. 34,657 3,935 (1,592) 37,000

Beijing Hyundai Auto Finance Co., Ltd. 168,051 14,804 1,261 184,116

W 209,118 19,069 (411) 227,776


Share in

other Reclassifi-

Share in compre- Loss on cation to

Beginning net income hensive impair- assets held Ending

balance Addition (loss) income (loss) ment for sale balance

HK Savings Bank (*1) W 51,137 — 554 (2) (27,689) (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 (5,181) (27,689) (24,000) 112,205



(Unaudited)

June 30, 2015

18 (Continued)

6. Financial Receivables

Financial receivables as of June 30, 2015 and December 31, 2014 are as follows:


Deferred

loan costs,

net of fees

(Initial

Unpaid direct fees,

outstanding net of costs Present Allowance

principal on finance value for loan Carrying

balance leases) discounts losses amount

Loans receivable

Loans W 9,087,064 42,930 (1,963) (318,715) 8,809,316

Installment financial assets

Automobile 7,607,864 49,353 — (60,940) 7,596,277

Durable goods 875 — — (112) 763

Mortgage 4,183 5 — (86) 4,102

7,612,922 49,358 — (61,138) 7,601,142

Lease receivables

Finance lease receivables 2,704,710 (368) — (50,271) 2,654,071

Cancelled lease receivables 19,878 — — (18,711) 1,167

2,724,588 (368) — (68,982) 2,655,238

W 19,424,574 91,920 (1,963) (448,835) 19,065,696


Deferred

loan costs,

net of fees

(Initial

Unpaid direct fees,

outstanding net of costs Present Allowance

principal on finance value for loan Carrying

balance leases) discounts losses amount

Loans receivable

Loans W 9,869,534 35,340 (1,342) (319,323) 9,584,209

Installment financial assets

Automobile 6,503,014 45,938 — (53,121) 6,495,831

Durable goods 1,164 — — (78) 1,086

Mortgage 5,938 7 — (68) 5,877

6,510,116 45,945 — (53,267) 6,502,794

Lease receivables

Finance lease receivables 2,737,140 (432) — (52,494) 2,684,214

Cancelled lease receivables 16,755 — — (15,761) 994

2,753,895 (432) — (68,255) 2,685,208

W 19,133,545 80,853 (1,342) (440,845) 18,772,211



(Unaudited)

June 30, 2015

19 (Continued)

7. Allowances for Loan Losses

The following tables present a roll-forward of in allowance for loan losses including allowance for

doubtful accounts for other assets for the six-month periods ended June 30, 2015 and 2014:


Installment

Loans financial Lease Other

receivable assets receivables assets Total

Beginning balance W 319,323 53,267 68,255 20,098 460,943

Charge-offs (180,690) (21,844) (399) (2,415) (205,348)

Recoveries 54,506 7,446 12 6,523 68,487

Unwinding of discounts (3,265) (155) (120) — (3,540)

Provision for (release of) allowance 129,552 22,424 1,319 (4,083) 149,212

Others (711) — (85) — (796)

Ending balance W 318,715 61,138 68,982 20,123 468,958


Installment

Loans financial Lease Other

receivable assets receivables 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



(Unaudited)

June 30, 2015

20 (Continued)

8. Property and Equipment

The following tables present a roll-forward of the carrying amounts of property and equipment for

the six-month periods ended June 30, 2015 and 2014:


Beginning Translation Ending

balance Addition Transfer Disposal Depreciation differences balance

Land W 97,883 — — — — — 97,883

Buildings 87,589 6 815 — (1,204) — 87,206

Vehicles 5,062 286 — (82) (566) (13) 4,687

Fixture and

furniture 42,538 9,610 1,984 (287) (11,696) (20) 42,129

Others 2,101 — — — — — 2,101

Construction

in progress 13,149 6,480 (2,799) — — (45) 16,785

W 248,322 16,382 — (369) (13,466) (78) 250,791



balance Addition Transfer Disposal Depreciation differences 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



(Unaudited)

June 30, 2015

21 (Continued)

9. Intangible Assets

The following tables present a roll-forward of the carrying amounts of intangible assets for the six-

month periods ended June 30, 2015 and 2014:

(*1) The Group obtained control of GE Capital Korea Co., Ltd. (GECK) by acquiring 100% of its

shares in July 2012 and then merged with GECK in August 2012. As a result of the business

combination, the Group recognized goodwill in the amount of W1,429 million, measured as the excess

of the consideration transferred over amounts of the identifiable assets acquired and the liabilities

assumed. The Group tested goodwill for impairment as of December 31, 2014 and recognized

impairment loss equal to the carrying amount of goodwill as the recoverable amount of the CGU was

determined to be less than its carrying amount.



balance Addtion Disposal Amortization differences balance

Development costs W 24,896 3,845 (37) (5,717) — 22,987

Memberships 29,545 49 — — 5 29,599

Other intangible assets 2,821 — — (758) (2) 2,061

W 57,262 3,894 (37) (6,475) 3 54,647


Beginning Reversal of Ending

balance Addition Transfer Amortization impairment balance

Goodwill (*1) W 1,429 — — — — 1,429

Development costs 29,017 2,487 — (5,314) — 26,190

Trademark 2 — — (2) — —

Memberships 29,638 — (191) — 26 29,473

Other intangible assets 2,661 1,969 — (908) — 3,722

W 62,747 4,456 (191) (6,224) 26 60,814



(Unaudited)

June 30, 2015

22 (Continued)

10. Borrowed Funds

(1) Borrowings

Borrowings as of June 30, 2015 and December 31, 2014 are as follows:

(2) Bonds issued

Bonds issued as of June 30, 2015 and December 31, 2014 are as follows:

(in millions of Korean won) Annual Carrying amount

interest June 30, December 31,

Lender rate (%) Maturity 2015 2014

Short-term borrowings:

Commercial paper Shinhan Bank 1.70 ~ July 24, 2015 through

and 5 others 2.30 June 13, 2016 W 220,000 180,000

General loans Kookmin Bank 2.45 ~ July 30, 2015 through

and 6 others 3.60 June 30, 2016 770,000 840,000

Borrowings in

foreign currency Citibank 0.84 July 23, 2015 2,521 —

992,521 1,020,000

Current portion of long-term

borrowings:

General loans Shinhan Bank 2.60 ~ August 3, 2015 through

and 3 others 3.82 April 4, 2016 253,611 264,000

Borrowings in

foreign currency — 54,903

253,611 318,903

Long-term borrowings:

General loans Shinhan Bank 2.55 ~ September 9, 2016 through

and 5 others 4.03 November 15, 2018 262,000 223,358

W 1,508,132 1,562,261

(in millions of Korean won) Annual Carrying amount

interest June 30, December 31,

rate (%) Maturity 2015 2014

Short-term notes:

Asset-backed short-term bonds 1.78 July 20, 2015 W 40,000 20,000

Less: discount on bonds (39) (2)

39,961 19,998

Current portion of long-term bonds:

Bonds 2.77 ~ 5.70 July 8, 2015 through 3,654,608 4,231,328

Less: discount on bonds June 22, 2016 (2,455) (4,615)

3,652,153 4,226,713

Long-term bonds:

Bonds 1.60 ~ 6.53 July 25, 2016 through 12,522,131 11,675,441

Less: discount on bonds April 21, 2023 (21,475) (22,683)

12,500,656 11,652,758

W 16,192,770 15,899,469



(Unaudited)

June 30, 2015

23 (Continued)

11. Employee benefit liabilities

(1) Defined contribution plans

The Group recognized W61 million and W29 million in the statement of comprehensive income

for retirement benefits based on the defined contribution plan for the six-month periods ended June 30,

2015 and 2014, respectively.

(2) Defined benefit plans

(a) Characteristics of the defined benefit plan

The Group operates defined benefit plan. Under the plan, eligible employees are paid severance

benefits based on average salaries of three months prior to the termination and service periods. The plan

assets are mainly comprised of interest rate guaranteed type instruments, and therefore, are exposed to

the risk of declining interest rates.

(b) Roll-forward of present value of defined benefit obligations

The following tables present a roll-forward of the present value of defined benefit obligations for

the six-month periods ended June 30, 2015 and 2014:

(c) Roll-forward of fair value of plan assets

The following tables present a roll-forward of the fair value of defined benefit obligations for the

six-month periods ended June 30, 2015 and 2014:

(in millions of Korean won) Six-month period ended June 30,

2015 2014

Beginning balance W 91,189 69,772

Current service costs 8,243 6,275

Interest cost 1,202 1,241

Actuarial losses:

Experience adjustments 1,699 1,901

Changes in economic assumptions 1,510 2,921

Changes in demographic assumptions 6 —

Transfer of severance benefits from (to) related parties, net (18) (668)

Benefits paid (3,907) (5,083)

Ending balance W 99,924 76,359


2015 2014


Expected return on plan assets 944 1,010

Actuarial losses - Changes in economic assumptions (235) (324)

Transfer of severance benefits from (to) related parties, net (342) (104)

Benefits paid (3,536) (2,716)




(Unaudited)

June 30, 2015

24 (Continued)

(3) Other long-term employee benefit plans

The Group grants long service payments to employees and directors with certain periods of services.

The Group recognized current service cost of W615 million in the statement of comprehensive income

and paid W398 million for the six-month period ended June 30, 2015. The Group recognizes other long-

term employee benefit liability of W5,804 million and W5,587 million as of June 30, 2015 and

December 31, 2014, respectively.



(Unaudited)

June 30, 2015

25 (Continued)

12. Provisions

Provisions include the allowance for unused loan commitments, residual value guarantees and asset

retirement obligations and others. A similar approach to the allowance for loan losses is used for

calculating a reserve for the estimated credit losses related to unused loan commitments.

The following tables present a roll-forward of the provisions for the six-month periods ended

June 30, 2015 and 2014:

(*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 incurred

losses arising from these residual value guarantees.

(*3) The Group recognizes provisions for asset retirement obligations (AROs) which represent the

estimated costs to restore the existing leased properties which are discounted to the present value using

the appropriate discount rate at the end of the reporting period. Disbursements of such costs are expected

to occur at the end of the lease contract. Such costs are reasonably estimated using the average lease

term and the average restoration expenses. The average lease term is calculated based on the past three-

year historical data of the expired leases. The average restoration expense is calculated based on the

actual costs incurred for the past two years using the four-year average inflation rate. The present value

of AROs is capitalized to the acquisition cost of leasehold improvements in fixture and furniture and

are depreciated over the useful life of the assets.


Unused Residual Asset

loan value retirement

commit- guaran- obliga-

ments (*1) tees (*2) tions (*3) Other Total

Beginning balance W 1,431 809 5,208 — 7,448

Provision for (release of) allowance 26 324 (877) 201 (326)

Provisions made for AROs and

capitalized to related assets — — 565 — 565

Unwinding of interests — — 27 — 27

Ending balance W 1,457 1,133 4,923 201 7,714


Unused Residual

loan value

commit- guaran-

ments (*1) tees (*2) Total

Beginning balance W 1,826 — 1,826

Provision for (release of) allowance (309) 176 (133)

Ending balance W 1,517 176 1,693



(Unaudited)

June 30, 2015

26 (Continued)

13. Derivative Financial Instruments and Hedge Accounting

(1) Trading derivatives

The Group had no trading derivatives as of June 30, 2015 and trading derivatives as of


During the six-month periods ended June 30, 2015 and 2014, the Group recognized gain (loss) on

trading derivatives of W194 thousand and (W2,370) thousand, respectively.

(2) Derivatives designated and qualifying as hedging instruments

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 primarily uses interest rate swaps and currency

swaps 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 related to 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 hedging instruments for cash flow hedges as of

June 30, 2015 and December 31, 2014 are as follows:

Notional principal amount represents Korean 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 benchmark foreign currency exchange rate disclosed

by the Bank of Korea as of the reporting date.

(in thousands of Korean won) December 31, 2014

Notional principal

amount Assets Liabilities

Foreign currency forwards W 15,114 — 194


Accumulated

Notional other

principal comprehensive

amount Assets Liabilities income (loss)

Interest rate swaps W 1,190,000 — 16,312 (12,364)

Currency swaps 5,196,808 84,696 164,765 (30,959)

Foreign currency forwards 3,850 91 — 22

W 6,390,658 84,787 181,077 (43,301)


Accumulated

Notional other

principal comprehensive

amount Assets Liabilities income (loss)

Interest rate swaps W 1,330,000 — 16,571 (12,561)

Currency swaps 6,066,047 20,083 366,536 (28,613)

Foreign currency forwards 5,716 238 — 21

W 7,401,763 20,321 383,107 (41,153)



(Unaudited)

June 30, 2015

27 (Continued)

Changes in effective portion of cash flow hedges for the six-month periods ended June 30, 2015

and 2014 are as follows:

The Group is expected to be exposed to the variability in future cash flows arising from hedged

items designated as cash flow hedges, until September 29, 2020. There was no cash flow hedges

discontinued during the six-month periods ended June 30, 2015 and 2014.

There was no ineffective portion recognized in profit or loss related to cash flow hedge for the six-

month periods ended June 30, 2015 and 2014.


Changes

in fair value

recognized

in other Reclassified

Beginning comprehensive to Ending

balance income profit or loss balance

Effective portion of cash flow hedges W (54,292) 128,093 (130,927) (57,126)

Income tax effects 13,139 13,825

Effective portion of cash flow hedges,

net of income taxes W (41,153) (43,301)


Changes

in fair value

recognized

in other Reclassified

Beginning comprehensive to Ending

balance income profit or loss balance

Effective portion of cash flow hedges W 2,344 (208,866) 183,597 (22,925)

Income tax effects (567) 5,548

Effective portion of cash flow hedges,

net of income taxes W 1,777 (17,377)



(Unaudited)

June 30, 2015

28 (Continued)

14. Equity

(1) Regulatory reserve for loan losses

In accordance with the Article 11 of 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 regulatory risk grades of loans and receivables and minimum required

reserve ratio to each grade.

Details of regulatory reserve for loan losses as of June 30, 2015 and December 31, 2014 are as

follows:

Regulatory reserve for loan losses as of June 30, 2015 and December 31, 2014 represents the

amount which reflects the expected provision for (release of) regulatory reserve for loan losses to

appropriated reserve for loan losses at the beginning of the period.

Provision for (release of) regulatory reserve for loan losses and profit for the period and earnings

per share adjusted with provision for (release of) regulatory reserve for loan losses for the six-month

periods ended June 30, 2015 and 2014 are as follows:

(*1) Provision for (release of) regulatory reserve for loan losses represents additional reserves

expected to be made (released) for the six-month periods ended June 30, 2015 and 2014.

(*2) Profit for the period adjusted with provision for (release of) regulatory reserve for losses is not

prepared in accordance with K-IFRS, but the amount reflects the expected provision for (release of)

regulatory reserve for loan losses on a pre-tax basis on profit for the period.


2015 2014

Appropriated reserve for loan losses W 335,372 328,317

Expected provision for (release of)

regulatory reserve for loan losses (34,151) 7,055

W 301,221 335,372


2015 2014

Profit for the period W 171,559 85,149

Less: provision for (release of)

regulatory reserve for loan losses (*1) (34,151) 14,521

Profit for the period adjusted with provision for

(release of) regulatory reserve for loan losses (*2) W 205,710 70,628

Basic and diluted earnings per share

adjusted with provision for (release of)

regulatory reserve for loan losses (in won) W 2,071 711



(Unaudited)

June 30, 2015

29 (Continued)

(2) Retained earnings

Details of retained earnings as of June 30, 2015 and December 31, 2014 are as follows:

(*1) Korean Commercial Act requires the Group to appropriate, as a legal reserve, an amount equal

to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its issued

capital. The reserve is not available for the payment of cash dividends, but may be transferred to capital

stock or used to reduce accumulated deficit, if any.


2015 2014

Legal reserves:

Earned surplus reserve (*1) W 107,634 107,634

Discretionary reserves:

Regulatory reserve for loan losses 335,372 328,317

Reserve for electronic financial transactions 100 100

Reserve for business rationalization 74 74

335,546 328,491

Retained earnings before appropriation 2,326,464 2,161,960

W 2,769,644 2,598,085



(Unaudited)

June 30, 2015

30 (Continued)

15. Net Interest Income

Net interest income for the three-month and six-month periods ended June 30, 2015 and 2014 are

as follows:

(*1) Including amortization of unearned revenue for security deposits received for leases under the

effective interest method.

(*2) Including amortization of present value discounts under the effective interest method for the

security deposits paid for leased offices, amortization of present value discounts for customer deposits

received for leases and unwinding of provisions.

16. Net Fee Income

Net fee income for the three-month and six-month periods ended June 30, 2015 and 2014 are as

follows:

(in millions of Korean won) Three-month periods Six-month periods


2015 2014 2015 2014

Interest income:

Cash and due from

other financial institutions W 4,995 10,196 12,277 20,706

Available-for-sale securities 303 302 601 596

Loans receivable 265,491 309,143 542,827 630,440

Installment financial assets 103,696 86,786 200,399 164,285

Lease receivables (*1) 51,197 59,873 102,823 120,326

Other (*2) 233 251 1,024 1,323

425,915 466,551 859,951 937,676

Interest expense:

Borrowings 11,052 16,122 22,946 33,447

Bonds issued 148,473 169,433 303,287 340,181

Other (*2) 4,402 6,894 9,962 13,636

163,927 192,449 336,195 387,264

Net interest income W 261,988 274,102 523,756 550,412



2015 2014 2015 2014

Fee income:

Loans receivable W 11,722 11,549 23,176 22,795

Installment financial assets 3,369 2,184 6,340 4,090

Lease receivables 39,034 40,843 78,602 87,303

54,125 54,576 108,118 114,188

Fee expenses:

Lease expenses 5,377 5,834 10,211 12,559

Net fee income W 48,748 48,742 97,907 101,629



(Unaudited)

June 30, 2015

31 (Continued)

17. Other Operating Income and Expenses

Other operating income and expenses for the three-month and six-month periods ended June 30,

2015 and 2014 are as follows:

18. General and Administrative Expenses

General and administrative expenses for the three-month and six-month periods ended June 30,

2015 and 2014 are as follows:



2015 2014 2015 2014

Other operating income:

Gain on valuation of derivatives W 99,227 (92,567) 142,135 11,529

Gain on derivatives transactions 28,496 102 29,829 1,062

Gain on short-term financial

investments 716 — 850 —

Gain on purchased loan 13,273 14,638 26,542 29,223

Shared services income 9,829 5,553 14,352 11,689

Other fee and commission 14,169 11,799 27,173 22,277

Other 162 2,955 2,346 5,966

W 165,872 (57,520) 243,227 81,746

Other operating expenses:

Loss on valuation of derivatives W (22,209) 190,856 15,402 190,950

Loss on derivatives transactions 24,749 5,168 25,635 5,240

Shared services expense 8,684 7,232 13,566 13,209

Other 4,782 6,910 11,957 13,590

W 16,006 210,166 66,560 222,989



2015 2014 2015 2014

Salaries W 59,304 45,617 118,398 79,508

Severance benefits 6,155 3,270 10,432 6,536

Employee benefits 7,609 6,559 17,694 15,901

Advertising 17,751 12,259 32,426 24,854

Sales promotion 18,536 16,356 36,559 32,826

Rents 11,610 10,292 23,550 22,035

Utilities 2,518 2,874 5,080 6,258

Communication 3,855 4,067 7,605 7,960

Travel and transportation 1,560 1,504 2,675 2,473

Professional and other service fees 16,872 20,706 32,548 36,133

Outsourcing service charges 9,410 17,727 17,048 35,248

Commissions and charges 5,806 5,437 11,681 10,549

Depreciation 7,014 6,114 13,466 12,187

Amortization 3,165 3,172 6,475 6,224

Other 12,800 11,703 24,422 22,498

W 183,965 167,657 360,059 321,190



(Unaudited)

June 30, 2015

32 (Continued)

19. Income Taxes

(1) Income tax expense

Income tax expense for the six-month periods ended June 30, 2015 and 2014 are as follows:

(2) Deferred income taxes recognized directly to equity

Deferred income taxes recognized directly to equity for the six-month periods ended June 30, 2015

and 2014 are as follows:

(in millions of Korean won) Six-month periods

ended June 30,

2015 2014

Current income tax expense W 63,834 44,832

Change in deferred income tax due to temporary differences (5,604) (12,015)

Deferred income taxes recognized directly to equity (480) 7,434

Income tax expense W 57,750 40,251

Six-month period ended June 30,

2015 2014

Beginning Ending Beginning Ending

balance balance Changes balance balance Changes

Unrealized gains and losses on

available-for-sale securities W (2,168) (4,270) (2,102) (1,036) (1,205) (169)


income of associates

under the equity method 326 426 100 — 243 243

Effective portion

of cash flow hedges 13,139 13,825 686 (567) 5,548 6,115

Remeasurements of

defined benefit plans 8,186 9,022 836 4,356 5,601 1,245

W 19,483 19,003 (480) 2,753 10,187 7,434



(Unaudited)

June 30, 2015

33 (Continued)

(3) Effective tax rate reconciliation

Income tax expense attributable to net income was W57,750 million and W40,251 million for the

six-month periods ended June 30, 2015 and 2014, respectively, and differed from the amounts computed

by applying the statutory tax rate to profit before income taxes as a result of the following:

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, 2015 and 2014 are as follows:

(2) Diluted earnings per share

There are no potential common stocks as of June 30, 2015 and 2014. Therefore, the diluted earnings

per share is equal to basic earnings per share for the three-month and six-month periods ended June 30,

2015 and 2014.


2015 2014

Profit before income taxes (A) W 229,309 125,400

Income taxes at statutory tax rates 55,031 29,885

Adjustments:

Non-taxable income (2) (7)

Non-deductible expense 140 157

Changes in estimates for tax provisions of the prior year (139) (3,319)

Tax audit settlements — 13,283

Others including tax credits and foreign subsidiaries 2,720 252

Income tax expense (B) W 57,750 40,251

Effective tax rate (B/A) 25.18% 32.10%

Three-month periods ended June 30, Six-month period ended June 30,

2015 2014 2015 2014

Profit for the period attributable

to common stock (in won) (A) W 96,975,422,693 54,597,148,109 W 171,559,083,307 85,149,261,705

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 977 550 W 1,728 857



(Unaudited)

June 30, 2015

34 (Continued)

21. Other Comprehensive Income

Other comprehensive income for the six-month periods ended June 30, 2015 and 2014 are as

follows:

(*1) Including accumulated other comprehensive loss in the amount of W40 million, net of income

taxes of W13 million, as of June 30, 2014, related to the investments in HK Savings Bank which were

reclassified to assets held for sale.


Changes

Reclassifi-

Beginning cation to Other Income tax Ending

balance profit or loss changes effects balance

Net change in unrealized

gains and losses on

available-for-sale securities W 6,792 (87) 8,774 (2,102) 13,377


loss of associates

under the equity method (1,021) — (411) 100 (1,332)


of cash flow hedges (41,153) (130,927) 128,093 686 (43,301)


translation adjustments (3,573) — (798) — (4,371)

Remeasurements of

defined benefit plans (25,640) — (3,450) 836 (28,254)

W (64,595) (131,014) 132,208 (480) (63,881)


Changes

Reclassifi-

Beginning cation to Other Income tax Ending

balance profit or loss changes effects balance

Net change in unrealized

gains and losses on

available-for-sale securities W 3,243 (100) 800 (169) 3,774


loss of associates

under the equity method (*1) (1,615) — (5,181) 243 (6,553)


of cash flow hedges 1,777 183,597 (208,866) 6,115 (17,377)


translation adjustments (1,333) — (517) — (1,850)

Remeasurements of

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

W (11,573) 183,497 (218,910) 7,434 (39,552)



(Unaudited)

June 30, 2015

35 (Continued)

22. Supplemental Cash Flow Information

(1) Cash and cash equivalents

Details of cash and cash equivalents as of June 30, 2015 and December 31, 2014 are as follows:

Other cash equivalents include demand deposits, certificate of deposits, time deposits, commercial

paper, repurchase agreements and other debt instruments with maturities of three months or less from

the acquisition date that are readily convertible to known amounts of cash which are subject to an

insignificant risk of changes in their fair value, and are used by the Group in the management of its

short-term commitments.

(2) Cash generated from operations

Cash generated from operations for the six-month periods ended June 30, 2015 and 2014 are as

follows:


2015 2014

Cash on hold W 2 1

Ordinary deposits 173,698 197,732

Checking deposits 4,336 5,621

Other cash equivalents 547,708 404,853

W 725,744 608,207


2015 2014

Profit for the period W 171,559 85,149

Adjustments:

Gain on sale of available-for-sale securities (842) (1,002)

Income on loans (amortization net deferred loan costs and

accretion of present value discounts) 25,712 14,004

Income on installment financial assets (amortization of

net deferred loan costs) 21,939 13,909

Income on leases (amortization of net deferred loan costs) 22,996 27,888

Gain on foreign currency translation (16,005) (191,293)

Dividend income (2,243) (2,383)

Gain on valuation of derivatives (142,135) (11,529)

Gain on valuation of short-term financial investments (850) —

Net interest expenses (accretion of present value discounts) 322,293 364,639

Lease expenses (depreciation and impairment loss on

leased assets) 156,652 150,065

Provision for loan losses 149,212 226,650

Loss on foreign currency translation 142,211 11,707

Severance benefits 8,501 6,507

Long-term employee benefits 615 —

Depreciation 13,466 12,187

Amortization 6,475 6,224

Loss on valuation of derivatives 15,402 190,950

Provisions (release of provisions) 551 (133)



(Unaudited)

June 30, 2015

36 (Continued)


2015 2014

Share in net income of associates under the equity method W (19,087) (6,828)

Gain on sale of property and equipment (1,250) (61)

Reversal of impairment loss on intangible assets — (26)

Share in net loss of associates under the equity method 18 216

Impairment loss on investments in associates — 27,689

Loss on sale of property and equipment 365 58

Income tax expense 57,750 40,251

761,746 879,689

Changes in operating assets and liabilities:

Decrease (increase) in due from banks 33,286 (936)

Increase in short-term financial investments 458,070 —

Decrease in available-for-sale securities 240 851

Decrease in loans receivable 619,629 963,998

Increase in installment financial assets (1,142,711) (1,149,437)

Increase in finance lease receivables (220,760) (197,292)

Decrease in cancelled lease receivables 7,682 9,311

Increase in operating lease assets (277,575) (184,711)

Decrease in cancelled lease assets 218,675 253,379

Decrease (increase) in non-trade receivables (25,909) 22,213

Decrease in accrued revenues 3,604 7,439

Increase in advance payments (20,625) (17,696)

Decrease in prepaid expenses (25,211) (22,320)

Increase in derivatives, net (142,596) (85,304)

Increase (decrease) in non-trade payables 10,465 (57,348)

Increase (decrease) in accrued expenses (176,331) 320

Decrease in unearned revenue (3,548) (3,002)

Increase (decrease) in withholdings 11,207 (4,120)

Increase in current tax liabilities — 1,551

Decrease in deposits received (42,687) (67,999)

Decrease in defined benefit liabilities (3,907) (5,083)

Decrease in plan assets 3,536 2,716

Transfer of severance benefits from (to) related parties, net 324 (564)

Decrease in long-term employee benefits (398) —

Decrease in other liabilities — (10)

(715,540) (534,044)

W 217,765 430,794



(Unaudited)

June 30, 2015

37 (Continued)

23. Commitments and Contingencies

(1) Line of credit commitments

As of June 30, 2015, the Group has line-of-credit commitments from Shinhan Bank and two other

financial institutions with aggregated limits in the amount of W54,500 million.

(2) Credit Facility Agreement

(a) Credit Facility Agreement with GE Capital

The Group entered into a credit facility agreement with GE Capital European Funding & Co. (GE

Capital) on February 15, 2013 and the limit of this credit facility is euro equivalent amounts to USD

600 million. The agreement was renewed on January 9, 2015 with the same limit above. The agreement

is renewable in every one year and ultimately expires on January 5, 2018.

In relation to the credit facility agreement above, Hyundai Motor Company guarantees GE Capital

for any amounts not paid by the Group, for amount up to its ownership interests of 56% in the Group.

(b) Revolving Credit Facility

As of June 30, 2015, the Group has revolving credit facility agreements amounted to USD 200

million, EUR 10 million and W1,995,000 million with Kookmin Bank and 20 other financial

institutions for credit lines.

(3) Guarantees

Details of guarantees provided to the Group as of June 30, 2015 and December 31, 2014 are as

follows:

(*1) The amounts represent the guaranteed unpaid principals as of June 30, 2015 and December 31,

2014 as defined under the joint liability agreement.

The Group has residual value guarantee insurance policy with KB Insurance Co., Ltd. and other

insurance carriers which covers losses resulting from defaults in mortgage loans where 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, 2015 and December 31, 2014 are as

follows:


Guarantor Details 2015 2014

Hyundai Motor Company Joint liabilities on finance lease

receivables (*1) W 1,568 1,568

Seoul Guarantee Guarantee for debt collection

Insurance Co., Ltd. deposit and others 90,272 102,696


2015 2014

Loans insured W 702,431 799,687

Residual value guaranteed by the insurance policy 233,990 271,032



(Unaudited)

June 30, 2015

38 (Continued)

(4) Pending litigations

Pending litigations include 14 cases with aggregated amount of W1,270 million where the Group

is the defendant, 27 cases with aggregated amount of W1,366 million where the Group is the plaintiff,

and litigations against a number of debtors to collect receivables as of June 30, 2015. The Group

recognizes provisions of W201 million related to one legal suit.

Management has reviewed legal claims against the Group with outside legal counsels and has taken

into consideration the views of such counsel as to the outcome of the claims. In management’s opinion,

the final disposition of all such claims will not have a material adverse effect on the Group’s financial

position or results of its operations.

(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., to purchase certain delinquent receivables on a regular basis at

amount agreed with the transferors.

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

See Note 23, regarding the credit facility agreement with GE Capital, which has significant

influence on the Group. The other related parties that have transactions, and receivables and payables

with the Group as of June 30, 2015 is as follows:

Type Company

The Parent Hyundai Motor Company

Associates Hi Network, Inc., Korea Credit Bureau, Hyundai Capital Germany GmbH,

Hyundai Capital UK Ltd. and Beijing Hyundai Auto Finance Co., Ltd.

Others Hyundai Life Insurance Co., Ltd., Hyundai Card Co., Ltd., Hyundai Autoever Corp.,

Hyundai Glovis Co., Ltd., Kia Motors Corp., Hyundai Capital America, and 30 others



(Unaudited)

June 30, 2015

39 (Continued)

(3) Transactions with related parties

Significant transactions, which occurred in the normal course of business with related companies

for the six-month periods ended June 30, 2015 and 2014 are as follows:


Operating Operating Non-operating Other

revenue expenses income Sales Purchases

The Parent

Hyundai Motor Company W 21,323 1,145 — — 442,871

Associates

Hi Network, Inc. 245 112 — — —

Korea Credit Bureau 1 108 — — —

Hyundai Capital Germany GmbH 245 — — — —

491 220 — — —

Other related parties

Hyundai Life Insurance Co., Ltd. 190 5,469 — — 2,003

Hyundai Card Co., Ltd. 26,515 11,810 64 — 70,365

Hyundai Autoever Corp. 57 20,946 — — 20,366

Hyundai Glovis Co., Ltd. 145 648 — 13,579 —

Kia Motors Corp. 15,105 1,985 — — 124,068

Hyundai Capital America 6,303 — — — —

Others 12,229 10,352 — — 39,966

60,544 51,210 64 13,579 256,768

W 82,358 52,575 64 13,579 699,639


Operating Operating Non-operating Other

revenue expenses income Sales Purchases

The Parent

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 Savings Bank 35 — — 24 —

292 759 — 24 —


Hyundai Life Insurance Co., Ltd. 69 4,309 65 — 261

Hyundai Card Co., Ltd. 18,108 12,296 2,297 — 82,598

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

Kia Motors Corp. 7,064 547 — — 110,867

Hyundai Capital America 7,818 — — — —

Others 11,112 10,540 873 24,255 26,328

44,209 44,741 3,235 24,255 233,322

W 51,069 46,259 3,235 24,279 674,499



(Unaudited)

June 30, 2015

40 (Continued)

Receivables and payables with related parties as of June 30, 2015 and December 31, 2014 are as

follows:

(*1) Other assets include plan assets of W57,901 million and W59,307 million as of June 30, 2015

and December 31, 2014, respectively, related to the Group’s defined benefit plan.

(4) Key management compensation

Compensation to key management for the six-month periods ended June 30, 2015 and 2014 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.

(in millions of Korean won)

Lease Other Other

receivables assets liabilities

The Parent

Hyundai Motor Company W 473 8,695 29,529

Associates

Hyundai Capital Germany GmbH — — 13


Hyundai Life Insurance Co., Ltd. (*1) 410 65,724 402

Hyundai Card Co., Ltd. 1,001 1,526 122,864

Hyundai Glovis Co., Ltd. 462 2,495 —

Kia Motors Corp. — 3,308 19,317

Hyundai Capital America — 36,779 —

Others 11,660 25,730 458

13,533 135,562 143,041

W 14,006 144,257 172,583

(in millions of Korean won)

Lease Other Other

receivables assets liabilities

The Parent

Hyundai Motor Company W 1,477 2,924 12,471

Other related partiies

Hyundai Life Insurance Co., Ltd. (*1) 400 66,829 50

Hyundai Card Co., Ltd. 2,004 865 126,606

Hyundai Autoever Corp. — — 98

Hyundai Glovis Co., Ltd. 436 1,744 —

Kia Motors Corp. — 410 7,642

Hyundai Capital America — 22,800 —

Others 11,321 804 925

14,161 93,452 135,321

W 15,638 96,376 147,792

June 30, 2015

December 31, 2014


2015 2014

Short-term employee benefits W 7,336 2,647

Severance benefits 893 1,066

Other Long-term employee benefits 7 —



(Unaudited)

June 30, 2015

41 (Continued)

25. Transfer of Financial Assets

The Group issued senior and subordinated asset-backed securities collateralized by loans

receivable, installment 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, 2015 and


(*1) Excluding derivatives for hedges. The Group enters into currency swaps contracts 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.


2015 2014

Carrying amount of assets:

Loans receivable W 800,345 1,135,248

Installment financial assets 2,222,639 1,801,193

Lease receivables 288,309 320,341

3,311,293 3,256,782

Carrying amount of associated liabilities (*1): (2,359,271) (2,301,178)

For those liabilities that have recourse

only to the transferred financial assets:

Fair value of assets 3,339,021 3,273,905

Fair value of associated liabilities (*1) (2,381,388) (2,318,511)

Net position W 957,633 955,394



(Unaudited)

June 30, 2015

42 (Continued)

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, 2015 and December 31, 2014 are as follows:


Gross

amounts of Net

recognized amounts of

financial financial

Gross assets assets

amounts of /liabilities /liabilities Related amounts not offset

recognized offset in the in the in the statement of

financial statement of statement of financial position

assets financial financial Financial Cash collateral Net

/liabilities position position instruments received amounts

Financial assets:

Derivative assets W 84,787 — 84,787 84,787 — —

Financial liabilities:

Derivative liabilities 181,077 — 181,077 84,787 — 96,290


Gross

amounts of Net

recognized amounts of

financial financial

Gross assets assets

amounts of /liabilities /liabilities Related amounts not offset

recognized offset in the in the in the statement of

financial statement of statement of financial position

assets financial financial Financial Cash collateral Net

/liabilities position position instruments received amounts

Financial assets:

Derivative assets W 20,321 — 20,321 20,321 — —


Derivative liabilities 383,107 — 383,107 20,321 — 362,786



(Unaudited)

June 30, 2015

43 (Continued)

27. Fair Value Measurements of Financial Instruments

(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, 2015 and December 31, 2014 are as follows:

(*1) Excluding liabilities for taxes and dues

The following methods and assumptions were used to estimate the fair value of each class of

financial instruments:

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, at face value or cost plus

accrued interest, approximates the fair value because of short maturity of these instruments.

Short-term financial investments

In case that the market of a financial instrument is active, fair value is established at the close

quoted price as of the last day for the reporting period. The fair value of investments in money market

funds is determined by the sum of acquisition cost and accrued interest.

(in millions of Korean won) June 30, 2015 December 31, 2014

Carrying Fair Carrying Fair

amount value amount value

Financial assets:

Cash and due from

other financial institutions W 1,221,767 1,221,767 1,594,736 1,594,736

Available-for-sale securities 72,731 72,731 63,446 63,446

Loans receivable 8,809,316 8,643,370 9,584,209 9,439,544

Installment financial assets 7,601,142 7,640,895 6,502,794 6,528,367

Lease receivables 2,655,238 2,654,541 2,685,208 2,676,961

Derivative assets 84,787 84,787 20,321 20,321

Non-trade receivables 144,192 144,192 114,785 114,785

Accrued revenues 93,051 93,051 97,344 97,344

Leasehold deposits 22,882 21,938 22,033 20,896

W 20,705,106 20,577,272 20,684,876 20,556,400


Borrowings W 1,508,132 1,515,490 1,562,261 1,571,584

Bonds issued 16,192,770 16,637,260 15,899,469 16,346,713

Derivative liabilities 181,077 181,077 383,107 383,107

Non-trade payables (*1) 267,222 267,222 255,369 255,369

Accrued expenses 172,346 172,346 177,592 177,592

Withholdings (*1) 28,096 28,096 19,314 19,314

Deposits received 577,197 557,278 609,078 584,187

Other liabilities 50 50 50 50

W 18,926,890 19,358,819 18,906,240 19,337,916



(Unaudited)

June 30, 2015

44 (Continued)


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 the discounted cash flow model, the imputed market value model, the free

cash flow to equity (FCFE) model, the dividend discount model, the risk adjusted discount rate method,

and the 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 receivable, installment financial assets, and lease receivables

The fair value is determined by using the 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 financial instruments

The fair value of interest rate swaps and currency swaps are determined by using the discounted

cash flow model based on a current interest rate yield curve appropriate for market interest rate as of

the reporting date. 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 derived from 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 the discounted cash flow method; the fair value

of a financial instrument is determined by discounting the expected future cash flows at an appropriate

discount rate.

Bonds issued

The fair value of bonds is determined by using discounted cash flow method. The fair value of

bonds denominated in won and bonds denominated in foreign currencies are quoted from a reliable

independent valuation service provider.

Other financial assets and liabilities

The fair value of other financial assets and other financial liabilities is determined by using

discounted cash flow method. For certain other financial assets and liabilities, carrying amount

approximates fair value due to their short term nature and generally negligible credit risk. These

instruments include nontrade receivables, accrued interest receivable, nontrade payables, and others.



(Unaudited)

June 30, 2015

45 (Continued)

(2) Fair value hierarchy

(a) Financial assets and liabilities measured at fair value

The fair value hierarchy of financial assets and liabilities measured at fair value in the statement of

financial position as of June 30, 2015 and December 31, 2014 are as follows:

(*1) Equity securities for which quoted prices in active markets are not available and fair value of

those instruments cannot be estimated reliably are measured at cost and classified as Level 3 instruments.

These instruments are amounted to W168 million and W172 million as of June 30, 2015 and

December 31, 2014, respectively.


Carrying Fair Fair value hierarchy

amount value Level 1 Level 2 Level 3 (*1)

Financial assets measured at fair value:

Short-term financial investments W 493,176 493,176 — 493,176 —

Available-for-sale securities 72,731 72,731 23,194 33,890 15,647

Derivative assets

Designated as hedging instruments

for cash flow hedges 84,787 84,787 — 84,787 —

W 650,694 650,694 23,194 611,853 15,647

Financial liabilities measured at fair value:

Derivative liabilities


for cash flow hedges W 181,077 181,077 — 181,077 —



amount value Level 1 Level 2 Level 3 (*1)

Financial assets measured at fair value:

Short-term financial investments W 950,396 950,396 — 950,396 —

Available-for-sale securities 63,446 63,446 13,958 33,016 16,472

Derivative assets



W 1,034,163 1,034,163 13,958 1,003,733 16,472

Financial liabilities measured at fair value:


Trading W — — — — —



W 383,107 383,107 — 383,107 —



(Unaudited)

June 30, 2015

46 (Continued)

The valuation techniques and inputs for measuring the fair value of financial assets and liabilities

classified as Level 2 as of June 30, 2015 and December 31, 2014 are as follows:

The following tables present a roll-forward of the fair value of Level 3 instruments for the six-

month periods ended June 30, 2015 and 2014.

The valuation techniques and quantitative information of significant unobserved inputs for

financial instruments classified as Level 3 as of June 30, 2015 and December 31, 2014 are as follows:

(in millions of Korean won) Fair value

June 30, December 31, Valuation

2015 2014 technique Inputs

Financial assets measured

at fair value:

Short-term financial

investments W 493,176 950,396 DCF Model Discount rate, short-term interest rate, volatility and others

Available-for-sale securities 33,890 33,016 DCF Model Discount rate

Derivative assets

Designated as hedging

instruments

for cash flow hedges 84,787 20,321 DCF Model Discount rate, short-term interest rate, volatility, foreign exchange rate and others

W 611,853 1,003,733

Financial liabilities measured

at fair value:


Designated as hedging

instruments

for cash flow hedges W 181,077 383,107 DCF Model Discount rate, short-term interest rate, volatility, foreign exchange rate and others

(in millions of Korean won) Available-for-sale securities


2015 2014


Losses recognized as other comprehensive loss (626) (255)

Redemption of principal (199) —



Estimated

range of

Valuation Unobservable unobservable

Fair value technique Inputs inputs inputs Impacts on fair value

Financial assets

measured at fair value:


Equity securities W 9,741 FCFE Growth rate and Sales growth rate 0.04% ~ Fair value is likely to increase

model discount rate 2.94% as the sales growth rate and pre-tax

Pre-tax operating 17.77% ~ operating income ratio rise,

income ratio 19.59% while cost of equity capital declines.

Cost of capital

on equity 10.73%

Beneficiary certificates 5,738 Net asset Credit rating and Credit rating BBB Fair value is likely to increase

model discount rate Discount rate 6.85% as the discount rate declines

W 15,479 while credit rating of loan receivables rises.



(Unaudited)

June 30, 2015

47 (Continued)

Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable

changes in the fair value of financial instruments which are affected by the unobservable inputs, using

a statistical technique. When the fair value is affected by more than two input parameters, the amounts

represent the most favorable or most unfavorable. For fair value measurements classified as Level 3,

the sensitivity analysis on change of unobservable inputs as of June 30, 2015 and December 31, 2014

is as follows:

(*1) For equity securities that changes in fair value are calculated by increasing and decreasing

growth rate (-1%~1%) and discount rate (-1~1%). For beneficiary certificates, the changes in fair value

are calculated by increasing and decreasing discount rate (-1%~1%).

(*2) For equity securities that changes in fair value are calculated by increasing and decreasing

growth rate (0.5%~1.5%) and discount rate (-1~1%). For beneficiary certificates, the changes in fair

value are calculated by increasing and decreasing discount rate (-1%~1%).


Estimated

range of

Valuation Unobservable unobservable

Fair value technique Inputs inputs inputs Impacts on fair value

Financial assets

measured at fair value:


Equity securities W 10,365 FCFE Growth rate and Sales growth rate 0.54% ~ Fair value is likely to increase

model discount rate 1.77% as the sales growth rate and pre-tax

Pre-tax operating 19.60% ~ operating income ratio rise,

income ratio 21.82% while cost of equity capital declines.

Cost of capital

on equity 7.88%

Beneficiary certificates 5,935 Net asset Credit rating and Credit rating BBB Fair value is likely to increase

model discount rate Discount rate 7.18% as the discount rate declines

W 16,300 while credit rating of loan receivables rises.

(in millions of Korean won) Other comprehensive income (loss)

June 30, 2015 December 31, 2014

Favorable Unfavorable Favorable Unfavorable

change (*1) change (*1) change (*2) change (*2)

Available-for-sale securities W 1,149 (822) 9,246 (3,558)



(Unaudited)

June 30, 2015

48 (Continued)

(b) Financial assets and liabilities measured at amortized cost

The fair value hierarchy of financial assets and liabilities measured at amortized cost as of June 30,

2015 and December 31, 2014 are as follows:

(*1) Excluding liabilities for taxes and dues



amount value Level 1 Level 2 Level 3

Financial assets measured at

amortized cost:

Cash and cash equivalents W 725,744 725,744 2 725,742 —

Due from banks 2,847 2,847 — 2,847 —

Loan receivables 8,809,316 8,643,370 — — 8,643,370

Installment financial assets 7,601,142 7,640,895 — — 7,640,895

Lease receivables 2,655,238 2,654,541 — — 2,654,541

Non-trade receivables 144,192 144,192 — — 144,192

Accrued revenues 93,051 93,051 — — 93,051

Leasehold deposits 22,882 21,938 — 21,938 —

W 20,054,412 19,926,578 2 750,527 19,176,049

Financial liabilities measured at

amortized cost:

Borrowings W 1,508,132 1,515,490 — 1,515,490 —

Bonds issued 16,192,770 16,637,260 — 16,637,260 —

Non-trade payables (*1) 267,222 267,222 — — 267,222

Accrued expenses 172,346 172,346 — — 172,346

Withholdings (*1) 28,096 28,096 — — 28,096

Deposits received 577,197 557,278 — 557,278 —

Other 50 50 — — 50

W 18,745,813 19,177,742 — 18,710,028 467,714



amount value Level 1 Level 2 Level 3


amortized cost:

Cash and cash equivalents W 608,207 608,207 1 608,206 —

Due from banks 36,133 36,133 — 36,133 —

Loan receivables 9,584,209 9,439,544 — — 9,439,544

Installment financial assets 6,502,794 6,528,367 — — 6,528,367

Lease receivables 2,685,208 2,676,961 — — 2,676,961

Non-trade receivables 114,785 114,785 — — 114,785

Accrued revenues 97,344 97,344 — — 97,344

Leasehold deposits 22,033 20,896 — 20,896 —

W 19,650,713 19,522,237 1 665,235 18,857,001

Financial liabilities measured at

amortized cost:

Borrowings W 1,562,261 1,571,584 — 1,571,584 —

Bonds issued 15,899,469 16,346,713 — 16,346,713 —

Non-trade payables (*1) 255,369 255,369 — — 255,369

Accrued expenses 177,592 177,592 — — 177,592

Withholdings (*1) 19,314 19,314 — — 19,314

Deposits received 609,078 584,187 — 584,187 —

Other 50 50 — — 50

W 18,523,133 18,954,809 — 18,502,484 452,325



(Unaudited)

June 30, 2015

49 (Continued)

The valuation techniques and inputs related to cash and cash equivalents, non-trade receivables,

accrued revenues, non-trade payables, accrued expenses, withholdings and other liabilities are not

disclosed as the Group estimates the fair value of these items equal to the carrying amount as the

carrying amount is a reasonable approximation of the fair value because of short maturity of these

instruments.

The valuation techniques and inputs for the fair value measurements for financial assets and

liabilities classified as Level 2 for which the fair value are disclosed as of June 30, 2015 and


The valuation techniques and inputs for the fair value measurements of financial assets and

liabilities classified as Level 3 for which the fair value are disclosed as of June 30, 2015 and


28. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risk (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 primarily utilizes derivatives to manage

specific risks.

There was no material change in the Group's risk management operations and policies after

December 31, 2014.





amortized cost:

Due from banks W 2,847 36,133 DCF model Market benchmark interest rate

Leasehold deposits 21,938 20,896 DCF model Market benchmark interest rate

W 24,785 57,029


amortized cost:

Borrowings W 1,515,490 1,571,584 DCF model Market benchmark interest rate, other spreads

Bonds issued 16,637,260 16,346,713 BDT model Market benchmark discount rate, volatility and other inputs

Deposits received 557,278 584,187 DCF model Market benchmark interest rate

W 18,710,028 18,502,484





amortized cost:

Loans and receivables W 8,643,370 9,439,544 DCF model Market benchmark interest rate, credit spread and other spreads

Installment financial assets 7,640,895 6,528,367 DCF model Market benchmark interest rate, credit spread and other spreads

Lease receivables 2,654,541 2,676,961 DCF model Market benchmark interest rate, credit spread and other spreads

W 18,938,806 18,644,872



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June 30, 2015

50

29. Capital Management

The objective of the Group’s capital management is to maintain sound capital structure. The Group

uses the adjusted capital adequacy ratio under the Article 8 of Regulation on Supervision of Specialized

Credit Finance Business (the Regulation) mandated by the Financial Services Commission as a capital

management indicator. The ratio is calculated as adjusted total assets divided by adjusted equity based

on the Company’s financial position in the separate financial statements.

Adjusted capital adequacy ratios of the Company as of June 30, 2015 and December 31, 2014 are

as follows:

(*1) Adjusted capital adequacy ratio is calculated in accordance with Regulations on Supervision

of Specialized Credit Finance Business and Detailed Regulations on Supervision of Specialized Credit

Finance Business. The Company should maintain the adjusted capital adequacy ratio 7% or above in

accordance with the Regulation.


2015 2014

Adjusted total assets (A) W 21,954,834 21,792,521

Adjusted equity (B) 3,551,863 3,345,862

Adjusted capital adequacy ratio (B/A) (*1) 16.18% 15.35%

20152 q캐피탈검토보고서영문

Automotive

Transcript of 20152 q캐피탈검토보고서영문