Hcs 검토영문

Hyundai Capital Services, Inc. and
Subsidiaries
Interim Consolidated Financial Statements
September 30, 2012 and 2011

Hyundai Capital Services, Inc. and Subsidiaries
Index
September 30, 2012 and 2011

Page(s)

Report on Review of Interim Financial Statements ..........................................................................1-2

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position .........................................................................3-4

Interim Consolidated Statements of Comprehensive Income................................................................5-7

Interim Consolidated Statements of Changes in Equity ....................................................................... 8-9

Interim Consolidated Statements of Cash Flows ....................................................................................10

Notes to the Interim Consolidated Financial Statements...................................................................11-32

Report on Review of Interim Financial Statements

To the Shareholders and Board of Directors of
Hyundai Capital Services, Inc.

Reviewed Financial Statements
We have reviewed the accompanying interim consolidated financial statements of Hyundai
Capital Services, Inc.(the Company) and its subsidiaries. These financial statements consist
of consolidated statement of financial position of the Company and its subsidiaries as of
September 30, 2012, and the related consolidated statements of comprehensive income for
the three-month and the nine-month periods ended September 30, 2012 and 2011, and
statements of changes in equity and cash flows for the nine-month periods ended September
30, 2012 and 2011, and a summary of significant accounting policies and other explanatory
notes, expressed in Korean won.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with the International Financial Reporting Standards as
adopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial Reporting, and for
such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to
fraud or error.

Auditor's Responsibility
Our responsibility is to issue a report on these interim consolidated financial statements based
on our reviews.

We conducted our reviews in accordance with the quarterly and semi-annual review
standards 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.

1

Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe the
accompanying interim consolidated financial statements do not present fairly, in all material
respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.

Emphasis of Matter
We audited the consolidated statement of financial position as of December 31, 2011, and the
related statements of comprehensive income, changes in equity and cash flows for the year
ended December 31, 2011, in accordance with auditing standards generally accepted in the
Republic of Korea and expressed an unqualified opinion on those statements dated February
24, 2012. The statement of financial position as of December 31, 2011, presented herein for
comparative purposes, is consistent, in all material respects, with the above audited statement
of financial position as of December 31, 2011.

Review standards and their application in practice vary among countries. The procedures and
practices used in the Republic of Korea to review such consolidated financial statements may
differ from those generally accepted and applied in other countries. Accordingly, this report is
for use by those who are informed about Korean review standards and their application in
practice.

Seoul, Korea
November 8, 2012

This report is effective as of November 8, 2012, 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 interim consolidated
financial statements and notes thereto. Accordingly, the readers of the review report should
understand that there is a possibility that the above review report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.

2

Interim Consolidated Statements of Financial Position
September 30, 2012 and December 31, 2011

(In millions of Korean won)
Notes 2012 2011
Assets
Cash and deposits
Cash and cash equivalents 21 1,305,820 1,455,433
Deposits 12 9
1,305,832 1,455,442
Securities 3
Available-for-sale securities 20,183 18,452
Investments in associates 101,549 51,768
121,732 70,220

Loans receivable 4,5,7 11,748,679 11,129,247
Allowances for doubtful accounts (299,947) (281,184)
11,448,732 10,848,063

Installment financial assets 4,5,7
Auto installment financing receivables 4,066,614 5,030,541
Durable goods installment financing receivables 37 1,422
Allowances for doubtful accounts (3) (141)
Mortgage installment financing receivables 18,115 25,679
Allowances for doubtful accounts (363) (1,204)
Machinery installment financing receivables 12 1,682
Allowances for doubtful accounts (12) (37)
4,053,681 5,021,194

Lease receivables 4,5
Finance lease receivables 2,793,713 2,278,383
Cancelled lease receivables 331 211
2,794,044 2,278,594

Leased assets
Operating leased assets 1,121,752 1,119,309
Cancelled leased assets 2,510 3,769
1,124,262 1,123,078

Property and equipment 8 324,273 265,433

Other assets
Intangible assets 9 64,263 65,117
Non-trade receivables 101,660 87,895
Accrued revenues 120,640 128,351
Advance payments 62,664 55,013
Prepaid expenses 30,534 26,434
Leasehold deposits 31,665 35,929
3

Interim Consolidated Statements of Financial Position
September 30, 2012 and December 31, 2011

Notes 2012 2011

Derivative assets 13 96,230 475,431
488,937 856,886
Total assets 21,661,493 21,918,910

Liabilities
Borrowings 10
Borrowings 2,195,562 2,250,000
Debentures 14,834,798 15,522,368
17,030,360 17,772,368
Other liabilities
Non-trade payables 335,850 345,089
Accrued expenses 160,521 135,083
Unearned revenue 56,350 61,095
Withholdings 37,653 24,140
Defined benefit liability 11 26,056 20,362
Leasehold deposits received 823,033 787,858
Deferred income tax liabilities 42,989 47,884
Provisions 12 2,224 10,446
Derivative liabilities 13 98,462 58,096
1,583,138 1,490,053
Total liabilities 18,613,498 19,262,421

Equity
Common stock 1 496,537 496,537
Capital surplus
Paid-in capital in excess of par value 369,339 369,339
Other capital surplus 38,200 38,200
407,539 407,539
Accumulated other comprehensive income and
20
expenses
Gain(loss) on valuation of available-for-sale
195 (388)
Securities
Accumulated comprehensive income
(629) 47
(expense) of equity method investees
Gain(loss) on valuation of derivatives 13 (13,592) (50,156)
Cumulative effect of overseas operation
(740) (343)
translation
(14,766) (50,840)
Retained earnings 14 2,158,576 1,803,144
Non-controlling interests 109 109
Total equity 3,047,995 2,656,489
Total liabilities and equity 21,661,493 21,918,910
The accompanying notes are an integral part of these interim consolidated financial statements.

4

Interim Consolidated Statements of Comprehensive Income
Three-Month and Nine-Month Periods ended September 30, 2012 and 2011

(In millions of Korean won, except per share amounts)
Notes 2012 2011
Three Nine Three Nine
months months months months
Operating revenue
Interest income 15
Interest on bank deposits 12,048 36,442 10,636 29,485
Other interest income 363 1,793 83 337
12,411 38,235 10,719 29,822

Gain on valuation and disposal of
1,276 3,053 1,755 3,839
securities

Income on loans 15,16 382,306 1,128,716 390,759 1,164,096
Income on installment financial
15,16 86,297 281,538 106,833 331,122
receivables
Income on leases 15,16 234,010 680,937 216,141 654,207
Gain on disposal of loans - 53,615 - 72,041
Gain on foreign currency
transactions
Gain on foreign exchanges
92,628 146,761 - 6
translation
Gain on foreign currency
21,348 40,160 13,534 43,355
transactions
113,976 186,921 13,534 43,361

Dividend income 2,057 4,888 2,728 5,979
Other operating income
Gain on valuation of derivatives - 2,933 546,168 374,363
Gain on derivatives transactions 263 3,718 468 1,183
Others 43,333 110,975 26,669 107,781
43,596 117,626 573,305 483,327
Total operating revenue 875,929 2,495,529 1,315,774 2,787,794

5


Notes 2012 2011
Operating expenses
Interest expenses 15 226,705 681,635 239,087 717,008
Lease expenses 16 130,888 383,635 123,790 379,146
Bad debts expense 5 81,580 261,288 89,932 229,357
Loss on foreign currency
transactions
Loss on foreign exchange
861 3,112 546,136 374,363
translation
Loss on foreign currency
- 4,316 468 1,183
transactions
861 7,428 546,604 375,546

General and administrative
17 158,398 441,985 145,223 406,400
expenses

Other operating expenses
Loss on valuation of derivatives 92,677 146,638 - -
Loss on derivatives transactions 20,884 39,718 13,541 43,379
Others 13,270 52,558 11,295 32,853
126,831 238,914 24,836 76,232
Total operating expenses 752,263 2,014,885 1,169,472 2,183,689

Operating income 150,666 480,644 146,302 604,105

Non-operating income
Gain on equity method valuation 3 568 5,227 - 4,174

Non-operating expenses
Loss on equity method valuation 3 5,971 5,971 575 -

Income before income taxes 145,263 479,900 145,727 608,279

Income tax expense 18 34,172 124,468 37,691 146,194

Net income 111,092 355,432 108,036 462,085

Net income attributable to:
Owners of the parent 111,092 355,432 108,036 462,085
Non-controlling interests - - - -
111,092 355,432 108,036 462,085

6


Notes 2012 2011
Other comprehensive income,
20
net of income taxes
Gain(Loss) on valuation of
available-for-sale financial (4) 583 (123) (529)
securities
Other comprehensive expense
3 (7) (677) 41 26
of equity method investees
Gain (Loss) on valuation of
(19,796) 36,564 (62,040) (34,431)
derivatives
Effect of overseas operation
46 (396) 646 469
translation
(19,761) 36,074 (61,476) (34,465)

Total comprehensive income 91,331 391,506 46,560 427,620

Total comprehensive income
attributable to:
Owners of the parent 91,331 391,506 46,560 427,620
Non-controlling interests - - - -
91,331 391,506 46,560 427,620

Earnings per share attributable
19
to the ordinary equity holders of
the company
Basic earnings per
1,119 3,579 1,088 4,653
share
Diluted earnings per
1,119 3,579 1,088 4,653
share


7

Interim Consolidated Statements of Changes in Equity
Nine-Month periods ended September 30, 2012 and 2011
Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 2011 496,537 407,539 (67,372) 1,400,014 2,236,718 129 2,236,847
Net income - - - 462,085 462,085 - 462,085
Other comprehensive income
Loss on valuation of available-
- - (529) - (529) - (529)
for-sale securities
Other comprehensive income of
- - 26 - 26 - 26
equity method investees

Gain on valuation of derivatives - - (34,431) - (34,431) - (34,431)

- - 470 - 470 - 470
translation
Total comprehensive income - - (34,464) 462,085 427,621 - 427,621
Transactions with owners - -
Dividends - - - (104,273) (104,273) (104,273)
Liquidation of special purpose entity - - - - - (20) (20)
Balances as of September 30,
496,537 407,539 (101,836) 1,757,826 2,560,066 109 2,560,175
2011

8

Interim Consolidated Statements of Changes in Equity
Nine-Month periods ended September 30, 2012 and 2011
Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 2012 496,537 407,539 (50,840) 1,803,144 2,656,380 109 2,656,489
Net income - - - 355,432 355,432 - 355,432
Other comprehensive income
Gain on valuation of available-
- - 583 - 583 - 583
for-sale securities
Other comprehensive income of
- - (677) - (677) - (677)
equity method investees
Gain on valuation of derivatives - - 36,564 - 36,564 - 36,564
- - (396) - (396) - (396)
translation
Total comprehensive income - - 36,074 355,432 391,506 - 391,506
Balances as of September 30,
2012 496,537 407,539 (14,766) 2,158,576 3,047,886 109 3,047,995


9

Interim Consolidated Statements of Cash Flows
Nine-Month Periods ended September 30, 2012 and 2011

(In millions of Korean won)
2012 2011
Cash flows from operating activities
Cash generated from operations (Note 21) 1,336,243 376,726
Interest received 40,211 27,144
Interest paid (626,100) (652,629)
Dividends received 4,888 5,979
Income taxes paid (148,170) (76,788)
Net cash generated 607,071 (319,568)

Cash flows from investing activities
Acquisition of investments in associates (51,935) -
Decrease from business combination (161,666) -
Liquidation of special purpose entity - (20)
Decrease in deposits - 3
Dividends from associates 733 707
Acquisition of land (38,305) (3,581)
Acquisition of building (22,053) (8,546)
Acquisition of structures (640) (379)
Disposal of vehicles 125 37
Acquisition of vehicles (2,704) (206)
Disposal of fixtures and furniture 165 32
Acquisition of fixtures and furniture (12,952) (26,406)
Acquisition of other tangible assets (42) (803)
Increase in construction in progress (1,759) (3,408)
Disposal of intangible assets - 71
Acquisition of intangible assets (5,230) (6,030)
Decrease in leasehold deposits 5,027 3,249
Increase in leasehold deposits (1,027) (7,201)
Net cash generated (292,263) (52,481)

Cash flows from financing activities
Proceeds from borrowings 1,898,222 2,240,000
Repayments of borrowings (2,118,654) (2,806,945)
Issuance of debentures 3,751,742 4,390,133
Repayments of debentures (3,995,327) (3,178,991)
Payments of dividends - (104,273)
Net cash generated (464,017) 539,924
Exchange losses on cash and cash equivalents (7) (6)

Increase (Decrease) in other cash and cash equivalents (397) 470
Net increase in cash and cash equivalents (149,613) 168,339

Cash and cash equivalents
Beginning of period 1,455,433 1,224,865
End of period 1,305,820 1,393,204


10

Notes to the Interim Consolidated Financial Statements
September 30, 2012 and 2011, and December 31, 2011

1. General information

Hyundai Capital Services, Inc. the company was established on December 22, 1993, to engage
in installment financing, facilities lease 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 September 30, 2012, the Company’s
operations are headquartered in Yeouido, Seoul. Its major shareholders are Hyundai Motor
Company and GE International Holdings Corporation with 56.47% and 43.30% ownership,
respectively.

The interim consolidated financial statements have been prepared and presented which included
the accounts of Hyundai Capital Services, Inc. (the “Company”), as the parent company
according to Korean IFRS 1027, and Autopia Thirty-fifth trust and SPC and other subsidiaries
(collectively the “Group”), while HK Mutual Savings Bank and five other entities are associates.

Subsidiaries as of September 30, 2012 and December 31, 2011, are as follows. The Company
has the substantial power over the subsidiaries established as special purpose entities for asset
securitization even though its ownership interests over the subsidiaries do not exceed 50%.

Ratio of
Location ownership September 30, 2012 December 31, 2011
Special Korea 0.9% Autopia Thirty-fifth SPC(trust) Autopia Thirty-fifth SPC(trust)
Purpose Autopia Thirty-sixth SPC(trust) Autopia Thirty-sixth SPC(trust)
1
Entities Autopia Thirty-seventh SPC(trust) Autopia Thirty-seventh SPC(trust)
Autopia Thirty-ninth SPC(trust) Autopia Thirty-ninth SPC(trust)
Autopia Fortieth SPC(trust) Autopia Fortieth SPC(trust)
Autopia Forty-second SPC(trust) Autopia Forty-second SPC(trust)
Autopia Forty-third SPC(trust) Autopia Forty-third SPC(trust)
Autopia Forty-fourth SPC(trust) Autopia Forty-fourth SPC(trust)
Autopia Forty-fifth SPC(trust) Autopia Forty-fifth SPC(trust)
Autopia Forty-sixth SPC(trust) Autopia Forty-sixth SPC(trust)
Autopia Forty-seventh SPC(trust) Autopia Forty-seventh SPC(trust)
1 1
Stock Germany 100% Hyundai Capital Europe GmbH Hyundai Capital Europe GmbH
Company
1
It holds 100% shares of Hyundai Capital Services Limited Liability Company.

2. Summary of Significant Accounting Policies

2.1 Basis of Preparation

The Group’s interim consolidated financial statements for the nine-month period ended
September 30, 2012, have been prepared in accordance Korean IFRS 1034, ‘Interim Financial
Reporting’. These interim consolidated financial statements have been prepared in accordance

11


with the Korean IFRS standards and interpretations issued and effective or issued and early
adopted as of September 30, 2012.

New standards, amendments and interpretations issued but not effective for the financial year
beginning January 1, 2012, and not early adopted by the Group are as follows:

- Amendments to Korean-IFRS 1019, Employee Benefits

According to the amendments to Korean-IFRS 1019, Employee Benefits, the corridor method is
no longer permitted. Therefore, actuarial gains and losses on the defined benefit obligation are
recognized immediately under other comprehensive income. The amendment requires to
recognize immediately all past service costs. And the amendment replaces the interest cost on
the defined benefit obligation, and the expected return on plan assets with a net interest cost
based on the net defined benefit asset or liability and the discount rate measured at the
beginning of the year. This amendment will be effective for the Group as of January 1, 2013. The
Group is assessing the impact of application of the amended Korean-IFRS 1019 on its
consolidated financial statements.

- Enactment of Korean-IFRS 1113, Fair value measurement

Korean-IFRS 1113, Fair value measurement, aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value measurement and
disclosure requirements for use across Korean-IFRS. Korean-IFRS 1101 does not extend the use
of fair value accounting but provides guidance on how it should be applied where its use is
already required or permitted by other standards within Korean-IFRS. This amendment will be
effective for the Group as of January 1, 2013, and the Group expects that it would not have a
significant impact on the Group.

- Amendment of Korean IFRS 1001, Presentation of financial statements

Korean-IFRS 1001, Presentation of financial statements, was amended to present the operating
income or loss as an amount of sales net of cost of sales, and selling and administrative
expenses in the statement of comprehensive income. It also describes that an entity can present
operating income or loss to include other profits or losses as reflected in entity-specific measure
of its operating performance (under the name ‘adjusted operating income or loss’ or another if
appropriate) in the notes. The effective date of the amendment is December 31, 2012, and the
amendment is required to be applied for annual periods ending on or after the effective date, with
early adoption permitted. The Group expects that the application of this amendment would not
have material impact on its profit or loss for the period but has an impact on its operating income
or loss account. In addition, Korean-IFRS 1001, Presentation of financial statements, was
amended to require the other comprehensive income items to be presented into two groups on
the basis of whether they are potentially reclassificable to profit or loss subsequently. An entity
shall apply those amendments for annual periods beginning on or after July 1, 2012. Earlier
application is permitted. The Group expects the application of the above amended Korean IFRS
requirement would not have a material impact on its consolidated financial statements.

12


2.2 Accounting Policies

The following is a summary of significant accounting policies followed by the Group in the
preparation of its interim consolidated financial statements. These policies have been consistently
applied to all the periods presented, unless otherwise stated.

Interim period income tax expense is calculated by applying estimated average annual effective
tax rate to the interim period’s pre-tax income.

3. Securities

Securities as of September 30, 2012 and December 31, 2011, are as follows:

(in millions of Korean won)
Type 2012 2011
Available-for-sale securities
Equity Marketable equity securities 5,824 5,687
securities Unlisted equity securities 11,050 10,526
16,874 16,213
Debt
Government and public bonds 3,309 2,239
securities
Sub-total 20,183 18,452

Investments in associates 101,549 51,768
121,732 70,220

Available-for-sale securities
Available-for-sale securities as of September 30, 2012 and December 31, 2011, are as follows:

(1) Marketable equity securities

(in millions of Korean won) Book value
Number of Ownership Acquisition
2012 2011
shares (%) cost
Marketable equity
securities
NICE Information Service 682,965 2.25 3,312 3,145 3,190
NICE Holdings 49,162 1.42 3,491 2,679 2,497
Unlisted equity securities
1
Hyundai Finance Corp. 1,700,000 9.29 9,888 10,950 10,426
Korean Egloan, Inc. 4,000 3.12 100 100 100
16,791 16,874 16,213

1
The fair value for Hyundai Finance Corp. was valued as the average of valuation prices provided by two
external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the discounted cash flow model. The
five-year financial statements, projected based on past performance, were used in measuring the fair value
assuming that the operational structure will remain as is for the next five years. Operating income and
expenses were estimated based on the past performance, business plan and expected market conditions.

13


(2) Debt securities

(in millions of Korean won) Book value
Interest Acquisition
Issuer rate (%) cost 2012 2011
Government and Metropolitan Rapid
2.50 3,322 3,309 2,239
public bonds Transit and others

Investments in associates
Details of investments in associates as of September 30, 2012 and December 31, 2011, are as
follows:

(in millions of Korean won) 2012
Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
1
HK Mutual Savings Bank 4,990,438 20.00 45,719 37,418 49,666
1
HI Network, Inc. 13,332 19.99 76 739 739
1
Korea Credit Bureau 140,000 7.00 3,800 3,050 4,087
Hyundai Capital Germany
600,200 30.01 1,065 1,245 1,092
GmbH
Hyundai Capital UK Ltd. 1,000,000 29.99 10,850 6,714 6,715
Beijing Hyundai Auto
- 46.00 41,085 38,971 39,249
Finance Co., Ltd
102,595 88,137 101,548

1
The Company’s shareholdings are less than 20%. However, the Group is able to significantly influence
such as involvement in the financial and operating processes, and thus the equity method is applied.

Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
1
HK Mutual Saving Bank 4,990,438 20.00 45,719 33,487 45,735
1
HI Network, Inc. 13,332 19.99 76 1,003 1,003
1
Korea Credit Bureau 140,000 7.00 3,800 2,928 3,965
600,200 30.01 1,065 1,065 1,065
GmbH
50,660 38,483 51,768

Valuations of investments in associates for the nine-month periods ended September 30, 2012
and 2011, are as follows:

Changes in
accumulated
Beginning Gain on Ending
Acquisition other Dividends
Balance valuation Balance
comprehensive
loss
HK Mutual Savings Bank 45,735 - 4,352 (421) - 49,666
HI Network, Inc. 1,003 - 469 - (733) 739
Korea Credit Bureau 3,965 - 378 (256) - 4,087

14


1,065 - 27 - - 1,092
GmbH
Hyundai Capital UK Ltd. - 10,850 (4,135) - - 6,715
Beijing Hyundai Auto
- - 39,249
Finance Co., Ltd - 41,085 (1,836)
51,768 51,935 (745) (677) (733) 101,548

Changes in
accumulated
Beginning Gain on Ending
other Dividends
Balance valuation Balance
comprehensive
income
HK Mutual Savings Bank 42,849 3,341 26 - 46,216
HI Network, Inc. 1,055 418 - (707) 766
Korea Credit Bureau 3,514 415 - - 3,929
1,065 - - - 1,065
GmbH
48,483 4,174 26 (707) 51,976

Summary of financial information of investees as of September 30, 2012 and December 31,
2011, for assets and liabilities, and for the nine-month periods ended September 30, 2012 and
2011, for revenue and income, are as follows:

Operating
Assets Liabilities Net income
revenue
1
HK Mutual Savings Bank 2,558,809 2,371,718 319,118 21,760
HI Network, Inc. 6,842 3,144 14,088 2,469
Korea Credit Bureau 53,371 9,799 33,652 5,901
4,173 23 764 91
GmbH
Hyundai Capital UK Ltd. 519,473 497,093 4,528 (13,789)
Beijing Hyundai Auto Finance
89,982 5,263 1,780 (4,080)
Co., Ltd

1
Although HK Mutual Savings Bank’s fiscal year is from July 2011 to June 2012, its operating revenue and
net income amounts are from January 1, 2012 to September 30, 2012.

Operating
Assets Liabilities Net income
revenue
1
HK Mutual Savings Bank 2,593,289 2,425,855 275,790 16,706
HI Network, Inc. 8,560 3,544 15,774 2,132
Korea Credit Bureau 51,484 9,650 28,847 5,856
3,889 341 473 103
GmbH

1
Although HK Mutual Savings Bank’s fiscal year is from July 2010 to June 2011, the asset and liability
amounts are as of December 31, 2011, and its operating revenue and net income amounts are from
January 1, 2011 to September 30, 2011. .

15


4. Financial receivables

Financial receivables as of September 30, 2012 and December 31, 2011, are as follows:

2012
Deferred loan
origination fees Allowance
Present value Carrying
Principal and costs for doubtful
discounts amount
(Direct profit for accounts
leased assets)
Loans receivable
Loans 11,860,462 (110,241) (1,542) (299,947) 11,448,732
Installment financial assets
Auto 4,117,243 (50,629) - (30,719) 4,035,895
Durable goods 37 - - (3) 34
Mortgage 18,080 35 - (363) 17,752
Machinery 12 - - (12) -
4,135,372 (50,594) - (31,097) 4,053,681
Lease receivables
Finance lease
2,825,132 (614) - (30,805) 2,793,713
receivables
Cancelled lease
6,347 - - (6,016) 331
receivables
2,831,479 (614) - (36,821) 2,794,044
18,827,313 (161,449) (1,542) (367,865) 18,296,457

2011
Deferred loan
origination fees Allowance
Present value Carrying
Principal and costs for doubtful
discounts amount
(Direct profit for accounts
leased assets)
Loans receivable
Loans 11,239,870 (108,782) (1,841) (281,184) 10,848,063
Installment financial assets
Auto 5,109,299 (78,757) - (36,748) 4,993,794
Durable goods 1,419 3 - (141) 1,281
Mortgage 25,620 60 - (1,204) 24,476
Machinery 1,674 - 6 (37) 1,643
5,138,012 (78,694) 6 (38,130) 5,021,194
Lease receivables
Finance lease
2,300,204 (703) - (21,118) 2,278,383
receivables
Cancelled lease
4,656 - - (4,445) 211
receivables
2,304,860 (703) - (25,563) 2,278,594
18,682,742 (188,179) (1,835) (344,877) 18,147,851

16


5. Allowance for Doubtful Accounts

Changes in allowance for doubtful accounts for the nine-month periods ended September 30,
2012 and 2011, are as follows:

2012
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 281,184 38,129 25,563 17,284 362,160
Amounts written off (288,046) (29,985) (64) (5,313) (323,408)
Recoveries of amounts
66,060 7,817 327 6,545 80,749
previously written off
Unwinding of discount (5,537) (232) (154) - (5,923)
Additional(reversed)
239,452 15,389 6,244 203 261,288
allowance
Others 6,834 (21) 4,905 - 11,718
Ending balance 299,947 31,097 36,821 18,719 386,584

2011
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 215,703 28,643 21,031 7,649 273,026
Amounts written off (226,069) (21,476) (860) (4,074) (252,479)
Recoveries of amounts
68,790 9,198 182 6,002 84,172
previously written off
Unwinding of discount (4,763) (240) (102) - (5,105)
Additional(reversed)
215,009 15,162 1,942 (2,756) 229,357
allowance
Ending balance 268,670 31,287 22,193 6,821 328,971

17


6. Financial instruments

The fair values of financial instruments as of September 30, 2012 and December 31, 2011, are as
follows:

2012 2011
Type
Book value Fair value Book value Fair value
Assets
Financial assets
Cash and deposits 1,305,832 1,305,832 1,455,442 1,455,442
Available-for-sale
20,183 20,183 18,452 18,452
securities
Loans receivable 11,448,732 11,758,056 10,848,063 11,124,599
Installment financial
4,053,681 4,160,101 5,021,194 5,145,837
assets
Derivative assets 96,230 96,230 475,351 475,351
Other assets 235,246 235,465 234,892 234,810
17,159,904 17,575,867 18,053,474 18,454,571

Liabilities
Financial liabilities
Borrowings 2,195,562 2,214,737 2,250,000 2,257,918
Debentures 14,834,798 15,327,496 15,522,368 15,886,881
Derivative liabilities 98,462 98,462 58,096 58,096
Other liabilities 1,266,636 1,278,634 1,183,744 1,190,133
18,395,458 18,919,329 19,014,208 19,393,028

The fair value hierarchy of financial assets and liabilities carried at fair value as of September 30,
2012 and December 31, 2011, are as follows:

2012
1
Fair value hierarchy
Type Book value Fair value
level 1 level 2 level 3
Financial assets
Available-for-sale
20,183 20,183 5,824 3,409 10,950
securities
Derivative assets 96,230 96,230 - 96,230 -
116,413 116,413 5,824 99,639 10,950
Derivative liabilities 98,462 98,462 - 98,462 -

1
The levels of fair value hierarchy have been defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and derivatives

18


Level 2: Inputs for the asset or liability included within valuation techniques that are observable market
data. Most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap,
forward, option
Level 3: Inputs for the asset or the liability that are not based on observable market data. Unlisted stocks,
complicated structured bonds, complicated unlisted derivative

2011
1
Fair value hierarchy
Type Book value Fair value
level 1 level 2 level 3
Financial assets
Available-for-sale
18,452 18,452 5,687 2,239 10,526
securities
Derivative assets 475,431 475,431 - 475,431 -
493,883 493,883 5,687 477,670 10,526
Derivative liabilities 58,096 58,096 - 58,096 -

7. Transfer of financial assets

The Group issued senior and subordinated asset-backed securities based on loans and the
associated securitized debts have recourse only to the transferred assets.

Details of financial assets transferred and not derecognized as of September 30, 2012 and
December 31, 2011, are as follows:

Type 2012 2011
Book value of assets
Loans receivable 1,690,686 2,289,879
Installment assets 1,565,064 1,775,534
3,255,750 4,065,413
1
Book value of related liabilities (1,923,275) (2,617,033)

Liabilities having right of resource on transferred assets :
Fair value of assets 3,342,516 4,167,861
1
Fair value of related liabilities (1,899,921) (2,640,977)
Net position 1,442,595 1,526,884

1
Related liabilities are amounts of securitized debts and associated derivative assets.

19


8. Property and equipment

Changes in property and equipment for the nine-month periods ended September 30, 2012 and
2011, are as follows:

2012
Beginning Ending
Type Acquisition Replacement Disposal Depreciation
balance balance
Land 105,425 38,305 - - - 143,729
Buildings 97,939 22,053 - - (2,438) 117,554
Structures 2,558 641 - - (57) 3,142
Vehicles 761 2,704 - (120) (620) 2,725
Fixture and
53,770 12,952 12 (625) (15,722) 50,387
furniture
Others 1,994 42 - - (6) 2,030
Construction in
2,986 1,759 (40) - - 4,705
progress
265,433 78,456 (28) (745) (18,843) 324,272

2011
Beginning Ending
Type Acquisition Replacement Disposal Depreciation
balance balance
Land 101,844 3,580 - - - 105,424
Buildings 92,543 8,546 - - (2,348) 98,741
Structures 2,246 379 - - (48) 2,577
Vehicles 838 206 - (30) (279) 735
Fixture and
35,321 26,406 19 (32) (14,052) 47,662
furniture
Others 1,200 803 - - (5) 1,998
Construction in
8,377 3,408 (7,090) - - 4,695
progress
242,369 43,328 (7,071) (62) (16,732) 261,832

9. Intangible assets

Changes in intangible assets for the nine-month periods ended September 30, 2012 and 2011,
are as follows:

2012
Beginning Ending
Type Increase Replacement Amortization
balance balance
Goodwill - 1,429 - - 1,429
Development costs 28,635 5,163 98 (6,082) 27,814
Rights of trademark 30 - - (10) 20
Other intangible assets 36,452 67 (70) (1,449) 35,000

65,117 6,659 28 (7,541) 64,263

20


2011
Beginning Ending
Type Increase Replacement Disposal Amortization
balance balance
Development costs 20,004 313 7,071 (50) (4,638) 22,700

Rights of trademark 44 - - - (11) 33
Other intangible
assets 32,564 5,718 - (21) (1,382) 36,879

52,612 6,031 7,071 (71) (6,031) 59,612

10. Borrowings

Changes in borrowings for the nine-month periods ended September 30, 2012 and 2011, are as
follows:

Types 2012 2011
Beginning balance 17,772,368 17,043,686
Borrowing 5,649,965 6,630,133
Increased by business combination 168,654 -
Repayment (6,113,981) (5,985,936)
Others (446,646) 319,967
Ending balance 17,030,360 18,007,850

11. Defined benefit liability

The amounts of defined benefit plans recognized in the statements of financial position as of
September 30, 2012 and December 31, 2011, are as follows:

Type 2012 2011
Present value of funded obligations 59,493 49,709
1
Fair value of plan assets (33,437) (29,347)
Defined benefit liability 26,056 20,362

1.
As of September 30, 2012, contribution to the National Pension Fund of 45 million is included
(December 31, 2011 : 45 million).

Details of the amounts recognized in the comprehensive income statements for the nine-month
periods ended September 30, 2012 and 2011, are as follows :

Type 2012 2011
Current service cost 8,741 7,249
Interest cost 1,491 1,372
Expected return on plan assets (896) (800)

21


Actuarial losses 3,609 1,708
12,945 9,529

12. Provisions for unused loan commitments

Changes in provisions for unused loan commitments for the nine-month periods ended September
30, 2012 and 2011, are as follows:

Type 2012 2011
Beginning balance 10,445 46,624
Reversals (8,221) (36,196)
Ending balance 2,224 10,428

13. Derivative financial instruments and hedge accounting

Trading derivatives as of September 30, 2012 and December 31, 2011, are as follows:

2012 2011
Type Assets Liabilities Assets Liabilities
Forward foreign exchange 17 - 53 -

During the nine-month periods ended September 30, 2012 and 2011, the Group recognized gain
or loss on trading derivatives of (-)35 million and 13 million, respectively.

Derivatives designated as cash flow hedges as of September 30, 2012 and December 31, 2011,
are as follows:

2012 2011
Type Notional Notional
Assets Liabilities Principal Assets Liabilities Principal
amounts amounts
Currency forwards 622 - (344) - - -
Interest rate swaps 169 9,060 (6,740) 12 1,331 (1,000)
Currency swaps 95,422 89,402 (6,509) 475,366 56,765 (49,157)
96,213 98,462 (13,593) 475,378 58,096 (50,157)

The maximum period the Group is exposed to the variability in future cash flows arising from
derivatives designated as cash flow hedges, is expected to be until September 20, 2017.

There is no ineffective portion recognized related to cash flow hedge for the nine-month periods
ended September 30, 2012 and 2011.

22


14. Equity

Details of appropriated and expected reserves for bad loans as of September 30, 2012 and
December 31, 2011, are as follows:

Type 2012 2011
Appropriated reserve for bad loans 270,220 -
Expected reverse for bad loans (991) 270,220
269,229 270,220

Transfer to reserve for bad loans and net income in consideration of effect of changes in reserve
for bad loans for the nine-month periods ended September 30, 2012 and 2011, are as follows:

(in millions of Korean won, except per share amounts)
Type 2012 2011
Net income 355,432 462,085
1
Expected transfer to reverse for bad loans 991 (63,685)
Net income in consideration of changes in reserve for
2 356,423 398,400
bad loans
Net income per share in consideration of changes in
2 3,589 4,012
reserve for bad loans(In Korean won)

1
The amount transferred to reserve for bad loans for the nine-month period ended September 30, 2011, is
the difference between the balance of reserve for bad loans as of September 30, 2011, and the balance
as of December 31, 2010.
2
Net income and earnings per share in consideration of changes in reserve for bad loans are not
accordance with K-IFRS, and these amounts are the sum of the expected transfer to reserve for bad loans
before income tax and net income.

15. Net interest income

Net interest income for the three-month and the nine-month periods ended September 30, 2012
and 2011, consists of:

2012 2011
Type
Three months Nine months Three months Nine months
Interest income
Cash and deposits 12,048 36,442 10,636 29,484
Loans receivable 370,674 1,093,432 378,669 1,125,051
Installment financial
84,944 276,985 105,335 326,313
assets
1
Lease receivables 65,389 181,054 55,459 159,923
Other² 362 1,793 83 337
533,417 1,589,706 550,182 1,641,108

23


Interest expenses
Borrowings 26,115 78,831 24,911 76,591
Debentures 189,738 570,159 203,054 602,621
Other² 10,852 32,645 11,122 37,796
226,705 681,635 239,087 717,008
Net interest income 306,712 908,071 311,095 924,100

1
Includes amortization of present value discount for lease guarantee.
² Amortization of present value discount using the effective interest method.

16. Net commission income

Net commission income for the three-month and the nine-month periods ended September 30,
2012 and 2011, consists of:

2012 2011
Type
Commission income
Loans receivable 11,633 35,284 12,089 39,044

Installment financial assets 1,353 4,553 1,498 4,809

Lease receivables 41,126 116,909 31,892 88,455
54,112 156,746 45,479 132,308
Commission expenses
Lease expenses 8,938 17,998 4,558 11,233
Net Commission Income 45,174 138,748 40,921 121,075

17. General and administrative expenses

General and administrative expenses for the three-month and the nine-month periods ended
September 30, 2012 and 2011, are as follows:

2012 2011
Type
Payroll 42,447 101,760 36,291 88,388
Severance benefits 5,285 12,802 3,387 9,506
Fringe benefits 8,718 27,875 8,440 24,964
Depreciation 6,009 18,843 5,889 16,732
Advertising 9,029 33,428 11,675 29,825
Travel and transportation 1,230 4,152 1,019 3,045
Communication 3,505 10,692 3,308 9,769
Water, lighting and heating 3,015 8,429 2,378 6,768
Commission 5,053 13,972 4,268 12,844
Sales commission 17,101 47,012 14,168 53,009

24


Amortization 2,541 7,541 2,139 6,031
Outsourcing service charges 17,406 50,626 17,496 49,995
Rent 9,993 28,422 8,368 26,295
Other expenses 27,066 76,431 26,397 69,229
158,398 441,985 145,223 406,400

18. Income Tax

Income tax expense is recognized based on management’s best estimate of the weighted
average annual income tax rate expected for the full financial year. The estimated average
annual tax rate used for the year ending December 31, 2012, is 26% (the estimated tax rate for
the period ended September 30, 2011, is 24%).

19. Earnings per share

a. Basic earnings per share

Basic earnings per share attributable to common stock for the three-month and the nine-month
periods ended September 30, 2012 and 2011, are as follows:

2012 2011
Type
(1) Net income attributable
to common stock 111,091,946,750 355,432,044,401 108,036,036,963 462,084,953,681
(In Korean won)
(2) Weighted average of
number of outstanding 99,307,435 99,307,435 99,307,435 99,307,435
common shares
(3) Basic earnings per
share (In Korean won) 1,119 3,579 1,088 4,653
(1)÷(2)

b. Diluted earnings per share

As there was no discontinued operation during the three-month and the nine-month periods
ended September 30, 2012 and 2011, basic earnings per share is the same as basic earnings
per share from continuing operations. There are no potential common stocks as of September
30, 2012 and 2011. Therefore, the diluted earnings per share is the same as basic earnings per
share for the three-month and the nine-month periods ended September 30, 2012 and 2011.

25


20. Other comprehensive income

Other comprehensive income for the nine-month periods ended September 30, 2012 and 2011,
consists of:

2012
Changes
Beginning Reclassifi- Income tax Ending
Type cation of Other
balance effects balance
profit or changes
loss
Gain(loss) on valuation
of available-for-sale (388) - 714 (131) 195
financial assets
Accumulated
comprehensive
47 - (676) - (629)
income of equity
method investees
(50,157) (2,705) 50,942 (11,673) (13,593)
of derivatives
Loss on exchange
differences of foreign (343) - (397) - (740)
operations
(50,841) (2,705) 50,583 (11,804) (14,767)

2011
Changes
Beginning Reclassifi- Income tax Ending
Type cation of Other
balance effects balance
profit or changes
loss
of available-for-sale 512 (660) (18) 149 (17)
financial assets
Accumulated
comprehensive
24 - 26 - 50
income of equity
method investees
(67,924) 12,905 (56,179) 8,842 (102,356)
of derivatives
Gain on exchange
differences of foreign 17 - 470 - 487
operations
(67,371) 12,245 (55,701) 8,991 (101,836)

21. Supplemental cash flow information

Cash and cash equivalents in cash flow statements consist of cash in hand, deposits and short-
term money-market instruments.

Cash and cash equivalents consisting of cash and financial instruments as of September 30,
2012 and December 31, 2011, are as follows:

26


Type 2012 2011
Cash 1 4
Ordinary deposits 136,042 135,706
Current deposits 5,078 1,923
Short-term financial instruments 1,164,700 1,317,800
1,305,821 1,455,433

Cash generated from operations for the nine-month periods ended September 30, 2012 and 2011,
is as follows:
2012 2011
Net income 355,432 462,085
Adjustments
Net interest expenses 643,399 687,187
Income tax 124,468 146,194
Gain on disposal of available-for-sale financial
(3,053) (3,839)
assets
Income on loans (26,071) (31,715)
Income on installment financial receivables (53,027) (70,935)
Income on leases (946) (986)
Gain on foreign exchanges translation (146,761) (6)
Dividend income (4,888) (5,979)
Gain on valuation of derivatives (2,933) (374,363)
Gain on disposal of property and equipment (30) (7)
Reversal of provisions (8,221) (36,196)
Gain on equity method valuation (5,227) (4,174)
Lease expenses 256,477 273,683
Bad debts expense 261,288 229,357
Loss on foreign exchanges translation 3,112 374,363
Severance benefits 12,945 9,529
Depreciation 18,843 16,732
Amortization of intangible assets 7,541 6,031
Loss on valuation of derivatives 146,638 -
Loss on equity method valuation 5,971 -
Loss on disposal of property and equipment 485 -
Loss on others 53 16
1,230,063 1,214,892
Changes in operating assets and liabilities
Decrease in available-for-sale financial
2,036 4,294
Assets
(Increase) in loans receivable (765,456) (1,001,167)
Decrease in installment financial assets 997,356 226,516
(Increase) in finance lease receivables (534,069) (599,723)
Decrease in cancelled leased receivables 7,734 4,011
(Increase) in operating leased assets (242,924) (130,949)

27

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