Audit Report: Hyundai Capital 1Q2011

Hyundai Capital Services, Inc. and Subsidiaries

Interim Consolidated Financial Statements

March 31, 2011 and 2010

Hyundai Capital Services, Inc. and Subsidiaries Index March 31, 2011

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

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position .......................................................................... 3-5

Interim Consolidated Statements of Comprehensive Income ................................................................ 6-8

Interim Consolidated Statements of Changes in Shareholders’ Equity .............................................. 9-10

Interim Consolidated Statements of Cash Flows .................................................................................... 11

Notes to the Interim Consolidated Financial Statements .................................................................. 12-66

1

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. and subsidiaries. These financial statements consist of consolidated

statements of financial position of the Company and subsidiaries as of March 31, 2011 and

December 31, 2010, and the related consolidated statements of comprehensive income,

changes in equity and cash flows for the three-month periods ended March 31, 2011 and

2010, 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 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.

2

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

Without qualifying our opinion, as mentioned in Note 2, we draw attention to the fact that

these consolidated financial statements are prepared in accordance with Korean IFRS and the

interpretations which are effective as of this report date. Therefore, there may be changes in

the Korean IFRS and related interpretations adopted in the preparation of these consolidated

financial statements when Company prepares its first full Korean IFRS financial statements.

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

May 29, 2011

This report is effective as of May 29, 2011, 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 consolidated interim

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.

Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Financial Position March 31, 2011 and December 31, 2010

3

(In millions of Korean won)

2011 2010

Assets

Cash and deposits

Cash and cash equivalents (Note 25) ￦ 1,293,915 ￦ 1,224,866

Deposits (Note 4) 22 25

1,293,937 1,224,891

Securities (Note 5)

Available-for-sale securities 21,679 20,577

Equity method investments 50,734 48,483

72,413 69,060

Loans receivable (Notes 6 and 7) 10,901,990 10,434,141

Allowances for doubtful accounts (242,475) (215,703)

10,659,515 10,218,438

Installment financial assets (Notes 6 and 7)

Auto installment financing receivables 5,036,661 5,023,945


Durable goods installment financing receivables 4,505 6,801

Allowances for doubtful accounts (188) (633)

Mortgage installment financing receivables 35,890 40,025


Machinery installment financing receivables 8,765 14,653


5,059,051 5,056,782

Lease receivables (Notes 6 and 7)

Finance lease receivables (Note 9) 1,950,937 1,796,750


Cancelled lease receivables 2,986 2,719


1,931,620 1,778,438

Leased assets (Note 10)

Operating leased assets 1,210,334 1,282,845

Cancelled leased assets 3,788 3,192

1,214,122 1,286,037


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2011 2010

Property and equipment (Note 11) 247,587 242,369

Other assets

Intangible assets (Note 12) 56,147 52,612

Non-trade receivables 42,343 40,833


Accrued revenues 115,813 115,278


Advance payments 94,760 99,842


Prepaid expenses 33,885 18,186

Leasehold deposits 32,608 31,954

Derivative assets (Note 18) 484,708 521,530

854,122 872,587

Total assets ￦ 21,332,367 ￦ 20,748,602

Liabilities and Shareholders’ Equity

Borrowings

Borrowings (Note 13) ￦ 2,385,360 ￦ 2,646,945

Debentures (Note 14) 14,998,955 14,396,741

17,384,315 17,043,686

Other liabilities

Non-trade payables 383,880 362,539

Accrued expenses 122,977 110,225

Unearned revenue 64,592 69,338

Withholdings 29,679 21,939

Defined benefit liability (Note 15) 10,395 11,687

Leasehold deposits received 751,192 746,532

Deferred income tax liabilities (Note 16) 76,454 2,617

Provisions (Note 17) 47,611 46,624

Derivative liabilities (Note 18) 121,299 96,568

1,608,079 1,468,069

Total liabilities 18,992,394 18,511,755

Commitments and contingencies (Note 26)


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2011 2010

Shareholders' equity

Common stock (Notes 1 and 19) 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 expenses (Note 24)

Gain on valuation of available-for-sale securities

547

512

Accumulated comprehensive income of equity method investees

126

24

Loss on valuation of derivatives (5,603) (67,924)

Cumulative effect of overseas operation translation

(167)

17

(5,097) (67,371)

Retained earnings (Note 19) 1,440,865 1,400,013

Non-controlling interests 129 129

Total shareholders' equity 2,339,973 2,236,847

Total liabilities and shareholders' equity ￦ 21,332,367 ￦ 20,748,602

The accompanying notes are an integral part of these interim consolidated financial statements.

Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Comprehensive Income Three-Month Periods ended March 31, 2011 and 2010

6

(In millions of Korean won, except per share amounts)

2011 2010

Operating revenue

Interest income

Interest on bank deposits ￦ 9,088 ￦ 6,354

Other interest income 130 339

9,218 6,693

Gain on valuation and disposal of securities

Gain on disposal of available-for-sale securities 1,604 778

Reversal of impairment loss on available-for-sale securities

-

1,078

1,604 1,856

Income on loans 381,019 320,084

Income on installment financial receivables 114,594 129,571

Income on leased assets 222,517 214,261

Gain on foreign transactions

Gain on foreign exchanges translation 146,543 240,355

Gain on foreign currency transactions 2,021 7,294

148,564 247,649

Dividend income 3,238 3,512

Other operating income

Gain on valuation of derivatives 32,672 7,263

Gain on derivatives transactions 715 12,517

Others 24,676 15,415

58,063 35,195

Total operating revenue 938,817 958,821

Operating expenses

Interest expenses 239,921 220,036

Lease expenses 131,570 149,551

Bad debts expense (Note 7) 59,716 6,849

Loss on foreign transactions

Loss on foreign exchanges translation 32,676 3,329

Loss on foreign currency transactions 715 11,758

33,391 15,087

General and administrative expenses (Note 22) 133,186 102,793


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2011 2010

Other operating expenses

Loss on valuation of derivatives ￦ 146,548 ￦ 243,001

Loss on derivatives transactions 2,028 9,140

Others 10,474 15,419

159,050 267,560

Total operating expenses 756,834 761,876

Operating income 181,983 196,945

Non-operating income

Gain on equity method valuation (Note 5) 2,885 4,524

2,885 4,524

Non-operating expenses

Loss on equity method valuation (Note 5) 30 243

Donations 109 44

139 287

Income before income taxes 184,729 201,182

Income tax expense (Note 16) 39,605 46,376

Net income ￦ 145,124 ￦ 154,806

Net income attributable to:

Owners of the parent 145,124 154,806

Non-controlling interests - -

145,124 154,806

Other comprehensive income, net of income taxes (Note 24)

Gain on valuation of available-for-sale financial securities

35 292

Other comprehensive income of equity method investees

102 15

Gain (Loss) on valuation of derivatives 62,321 (3,410)

Effect of overseas operation translation (184) -

62,274 (3,103)

Total comprehensive income ￦ 207,398 ￦ 151,703


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2011 2010

Total comprehensive income attributable to:

Owners of the parent ￦ 207,398 ￦ 151,703

Non-controlling interests - -

￦ 207,398 ￦ 151,703

Earnings per share attributable to the ordinary equity holders of the company (Note 23)

Basic earnings per share ￦ 1,461 ￦ 1,559


Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Changes in Shareholders’ Equity Three-Month Periods ended March 31, 2011 and 2010

9

(In millions of Korean won) Capital

stock Capital surplus

Accumulated other

comprehensive income and expenses

Retained earnings

Total attributable to owners of the parent

Non-controlling interests

Total equity

Balances as of January 1, 2010 ￦ 496,537 ￦ 407,539 ￦ (5,470) ￦ 1,318,186 ￦ 2,216,792 ￦ 129 ￦ 2,216,921

Total comprehensive income Net income - - - 154,806 154,806 - 154,806 Other comprehensive income


- - 292 - 292 - 292


- - 15 - 15 - 15

Loss on valuation of derivatives - - (3,410) - (3,410) - (3,410) Total other comprehensive

income - - (3,103) - (3,103) - (3,103)

Total comprehensive income - - (3,103) 154,806 151,703 - 151,703

Transactions with owners Liquidation of special purpose

entity - - - - - (10) (10)

Transfer from dividends payable - - - 2 2 - 2 Dividends - - - (203,580) (203,580) - (203,580)Others - - - (6) (6) - (6)

Total transactions with owners - - - (203,584) (203,584) (10) (203,594)

Balances as of March 31, 2010 ￦ 496,537 ￦ 407,539 ￦ (8,573) ￦ 1,269,408 ￦ 2,164,911 ￦ 119 ￦ 2,165,030

Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Changes in Shareholders’ Equity Three-Month Periods ended March 31, 2011 and 2010

10

(In millions of Korean won) Capital

stock Capital surplus

Accumulated other

comprehensive income and expenses

Retained earnings

Total attributable to owners of the parent

Non-controlling interests

Total equity

Balances as of January 1, 2011 ￦ 496,537 ￦ 407,539 ￦ (67,371) ￦ 1,400,013 ￦ 2,236,718 ￦ 129 ￦ 2,236,847

Total comprehensive income Net income - - - 145,124 145,124 - 145,124Other comprehensive income


- - 35 - 35 - 35


- - 102 - 102 - 102

Gain on valuation of derivatives - - 62,321 - 62,321 - 62,321 Effect of overseas operation

translation - - (184) - (184) - (184)

Total other comprehensive income

- - 62,274 - 62,274 - 62,274

Total comprehensive income - - 62,274 - 207,398 - 207,398

Transactions with owners Dividends - - - (104,272) (104,272) - (104,272)

Balances as of March 31, 2011 ￦ 496,537 ￦ 407,539 ￦ (5,097) ￦ 1,440,865 ￦ 2,339,844 ￦ 129 ￦ 2,339,973


Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Cash Flows Three-Month Periods ended March 31, 2011 and 2010

11


2011 2010

Cash flows from operating activities

Cash generated from operations (Note 25) ￦ (81,391) ￦ 490,812

Interest received 9,088 6,471

Interest paid (230,624) (206,567)

Dividends received 3,238 3,512

Income taxes paid (36,590) (21,735)

(336,279) 272,493

Cash flows from investing activities

Decrease in deposits 3 1,913

Decrease in leasehold deposits 107 401

Dividends from equity method investments 707 -

Acquisition of land (1,853) -

Acquisition of building (4,785) -

Acquisition of vehicles (78) -

Acquisition of fixtures and furniture (5,820) (620)

Acquisition of other tangible assets (231) -

Increase in construction in progress (941) (1,856)

Acquisition of intangible assets (2,142) (128)

Increase in leasehold deposits (629) -

Liquidation of special purpose entity - (10)

(15,662) (300)

Cash flows from financing activities

Proceeds from borrowings 750,000 985,000

Repayments of borrowings (1,010,000) (1,028,538)

Issuance of debentures 1,499,996 1,262,425

Repayments of debentures (773,671) (1,483,241)

Payments of dividends (45,151) -

421,174 (264,354)

Exchange losses on cash and cash equivalents (184) -

Net increase in cash and cash equivalents

69,049

7,839

Cash and cash equivalents (Note 25)

Beginning of period 1,224,866 990,835

End of period ￦ 1,293,915 ￦ 998,674


Hyundai Capital Services, Inc. and Subsidiaries Notes to the Interim Consolidated Financial Statements March 31, 2011 and 2010, and December 31, 2010

12

1. General information

Hyundai Capital Services, Inc. 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 March 31, 2011, 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.

2. Summary of Significant Accounting Policies

The 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-third trust and SPC and other subsidiaries(collectively the

“Group”), while HK Mutual Saving Bank and three other entities are accounted for using the equity

method.

Subsidiaries as of March 31, 2011 and December 31, 2010, 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%.

2011 2010

Special

Purpose

Entities

Autopia Thirty-third trust and SPC Autopia Thirty-third trust and SPC

Autopia Thirty-fourth trust and SPC Autopia Thirty-fourth trust and SPC

Autopia Thirty-fifth trust and SPC Autopia Thirty-fifth trust and SPC

Autopia Thirty-sixth trust and SPC Autopia Thirty-sixth trust and SPC

Autopia Thirty-seventh trust and SPC Autopia Thirty-seventh trust and SPC

Autopia Thirty-eighth trust and SPC Autopia Thirty-eighth trust and SPC

Autopia Thirty-ninth trust and SPC Autopia Thirty-ninth trust and SPC

Autopia Fortieth trust and SPC Autopia Fortieth trust and SPC

Autopia Forty-first trust and SPC Autopia Forty-first trust and SPC

Autopia Forty-second trust and SPC Autopia Forty-second trust and SPC

Autopia Forty-third trust and SPC Autopia Forty-third trust and SPC

Autopia Forty-fourth trust and SPC Autopia Forty-fourth trust and SPC

Autopia Forty-fifth trust and SPC Autopia Forty-fifth trust and SPC

Stock

Company Hyundai Capital Europe GmbH Hyundai Capital Europe GmbH

The Group financial statements are prepared in the Korean language (Hangul) in conformity with

International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”).

The Group’s Korean IFRS transition date is January 1, 2010, and the adoption date is January 1,

2011.


13

The interim consolidated financial statements are stated at historical cost unless otherwise stated

in the notes.

The reconciliations and descriptions of the effect of the transition from the consolidated financial

statements of the Group prepared in accordance with accounting principles generally accepted in

the Republic of Korea (“K-GAAP”) before the adoption date to Korean IFRS on the Group’s equity

as of January 1, 2010, March 31, 2010, and December 31, 2010, its comprehensive income and

cash flows for the three-month period ended March 31, 2010 and year ended December 31, 2010,

are provided in Note 3.

The interim consolidated financial statements for the three-month periods ended March 31, 2011

and 2010, have been prepared in accordance with Korean IFRS 1034. Because these interim

consolidated financial statements are a part of financial statements prepared by Korean IFRS as of

December 31, 2011, these are subject to Korean IFRS 1101, ‘First-time Adoption of Korean IFRS’.

These interim consolidated financial statements have been prepared in accordance with the

Korean IFRS standards and interpretations issued and effective at the reporting date. The Korean

IFRS standards and interpretations that will be applicable at December 31, 2011, including those

that will be applicable on an optional basis, are not known with certainty at the time of preparing

these interim consolidated financial statements.

The following is a summary of significant accounting policies followed by the Group in the

preparation of its consolidated financial statements. These policies have been consistently applied

to all the periods presented, unless otherwise stated.

2.1 Consolidation

a. Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power

to govern the financial and operating policies generally accompanying a shareholding of more than

one half of the voting rights. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group controls another

entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

They are deconsolidated from the date that control ceases.

The Group uses the acquisition method to account for business combinations. The consideration

transferred is measured as the fair values of the assets transferred, equity interests issued and

liabilities incurred or assumed at the acquisition date. Acquisition-related costs are expensed as

incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair values at the acquisition date. On an acquisition-by-

acquisition basis, the Group recognizes any non-controlling interest in the acquiree at the non-

controlling interest’s proportionate share of the acquiree’s net assets.


14

The excess of the consideration transferred and the amount of any non-controlling interest in the

acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the

fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this

is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain

purchase, the difference is recognized directly in the statement of comprehensive income.

Inter-company transactions, balances and unrealized gains on transactions between Group

companies are eliminated.

b. Special purpose entities

The Group established several SPEs for the purpose of asset-backed securitization, but owns none

of the shares directly or indirectly. The Group consolidates the SPEs when the risks, rewards and

substance of the relationship indicated that the Group consolidates the SPEs. SPEs controlled by

the Group are created with conditions that impose strict limits on the decision-making power over

the operations therefore the Group obtains all benefits from the SPEs’ operation and net assets,

and that the Group may be exposed to risks incident to the activities of the SPEs or the Group

retains the majority of the residual or ownership risks related to the SPEs’ assets.

c. Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of

the Group. For purchases from non-controlling interests, the difference between any consideration

paid and the relevant share acquired of the carrying value of net assets of the subsidiary is

recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in

equity.

d. Associates and joint ventures

Associates are all entities over which the Group has significant influence but not control, generally

accompanying a shareholding of between 20% and 50% of the voting rights. Investments in

associates are accounted for using the equity method of accounting and are initially recognized at

cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any

accumulated impairment loss.

The group’s share of its associates’ post-acquisition profits or losses is recognized in the income

statement, and its share of post-acquisition movements in other comprehensive income is

recognized in other comprehensive income. The cumulative post-acquisition movements are

adjusted against the carrying amount of the investment. When the group’s share of losses in an

associate equals or exceeds its interest in the associate, including any other unsecured

receivables, the group does not recognize further losses, unless it has incurred obligations or made

payments on behalf of the associate.


15

Unrealised gains on transactions between the Group and its associates are eliminated to the extent

of the Group’s interest in the associates. Unrealised losses are also eliminated unless the

transaction provides evidence of an impairment of the asset transferred. Accounting policies of

associates have been changed where necessary to ensure consistency with the policies adopted by

the Group.

2.2 Foreign currency translation

a. Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the

currency of the primary economic environment in which the entity operates (the “functional

currency”). The consolidated financial statements are presented in Korean won, which is the

Group’s functional currency.

b. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions or valuation where items are remeasured. Foreign

exchange gains and losses resulting from the settlement of such transactions and from the

translation at year-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognized in the income statement, except when deferred in other comprehensive

income as qualifying cash flow hedges.

2.3 Critical accounting estimates and assumptions

Estimates and judgments are continually evaluated and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances. The resulting accounting estimates will, by definition, seldom equal the related

actual results. The estimates and assumptions that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year are

addressed below.

a. Allowance for doubtful accounts

The Group presents the allowance for doubtful accounts calculated based on the best estimates

that are necessary to reflect the impairment incurred at each reporting date. Allowance for doubtful

accounts is recognized as individual and collective units to consider financial circumstances of

customers, net realizable value, credit quality, size of portfolio, concentrativeness, economic factors

and etc. According to the change of these factors, the allowance for doubtful accounts will be

changed in a future period.


16

b. Fair value of financial instruments

Fair value of financial assets and liabilities is based on quoted market prices, exchange-broker

prices of financial instruments traded in an active market. If there is no quoted price for a financial

instrument, the Group establishes fair value by using valuation techniques and advanced self-

valuation techniques.

Valuation techniques include Discount Cash Flow method using variables observable in market,

comparison method with similar instruments that have observable market transactions, and option

pricing model. For more complicated financial instruments, the Group uses advanced self-valuation

techniques. Parts of or all the variables used in this valuation technique may not be observable in

market, or may be derived from quoted prices and market ratio, or may be measured based on

specific assumption.

At initial recognition if the difference between the fair value of valuation technique and transaction

price occurs, then the transaction price as the best estimate of fair value is recognized as fair value.

This fair value difference presents in profit immediately on any available observable market data

according to individual factors and changes of environment.

2.4 Revenue recognition

The Group recognizes capital lent to customers as loan receivables, when installment payments or

deferred payments on services and goods are made. While installment financial capital paid by the

Group to manufacturers or sellers on behalf of customers is recognized as installment financial

assets. Financial lease receivables classified as financial leases are recognized as lease

receivables.

The expected future cash flows from loan receivables, installment financial assets and lease

receivables (“Financial receivables”) described above are amortized under the effective interest

method over the period of the financial receivables being used by customers.

2.5 Statements of Cash flows

The Group prepares statements of cash flows using indirect method.

2.6 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term

highly liquid investments with original maturities of three months or less and bank overdrafts.


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2.7 Financial assets

a. Classification

The Group classifies its financial assets as financial assets at fair value through profit or loss, loans

and receivables and available-for-sale financial assets. Management determines the classification

of its financial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial

asset is classified in this category if acquired principally for the purpose of selling in the short term.

Derivatives are also categorized as held for trading unless they are designated as hedges.

Meanwhile, the Group has no financial asset at fair value through profit or loss other than financial

assets held for trading.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that

are not quoted in an active market.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or

not classified in any of the other categories.

b. Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date (the date on

which the Group commits to purchase or sell the asset). Investments are initially recognized at fair

value plus transaction costs for all financial assets not carried at fair value through profit or loss.

Financial assets carried at fair value through profit or loss are initially recognized at fair value, and

transaction costs are expensed in the income statement. Available-for-sale financial assets and

financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and

receivables, and held-to-maturity investments are subsequently carried at amortized cost using the

effective interest method.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in

income statement as profit and loss.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value

adjustments recognized in equity are transferred to in the income statement as gain or loss on

disposal of securities. Interest on available-for-sale securities calculated using the effective interest

method is recognized in the income statement as part of interest income. Dividends on available-for

sale equity instruments are recognized in the income statement as dividend income when the

Group’s right to receive payments is established.


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c. Derecognition of financial assets

A financial asset is derecognized only if the contractual rights on cash flow of the financial asset

terminate or all the risks and rewards of ownership of the financial asset are substantially

transferred.

The Group can transfer an asset in statement of financial position but retains parts of or all the risks

and rewards of ownership of the transferred asset substantially. To the extent that a transfer of a

financial asset retains rights and obligations, the Group accounts both asset and liability at the

same time. After the Group transfers a financial asset and still retains control, it shall continue to

recognize the asset to the extent of its continuing involvement in the asset.

d. Impairment of financial assets

(1) Assets carried at amortized cost

The Group assesses at the end of each reporting period whether there is objective evidence that a

financial asset is impaired. Impairment losses are incurred only if there is objective evidence of

impairment and that loss event has an impact on the estimated future cash flows of the financial

asset. The amount of the loss is measured as the difference between the asset’s carrying amount

and the present value of estimated future cash flows discounted at the financial asset’s original

effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognized, the reversal of the

previously recognized impairment loss is recognized in the income statement.

(2) Available-for-sale financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a

financial asset or a group of financial assets is impaired. For equity securities classified as

available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is

also evidence that the assets are impaired. If any such evidence exists for available-for-sale

financial assets, the difference between carrying amount and current fair value is recognized in

profit or loss. Impairment losses recognized in profit or loss for an investment in an equity

instrument classified as available for sale are not be reversed through profit or loss. If, in a

subsequent period, the fair value of a debt instrument classified as available-for-sale increases and

the increase can be objectively related to an event occurring after the impairment loss was

recognized in profit or loss, the impairment loss is reversed.

2.8 Deferral of Loan Origination Fee and Loan Origination Cost

Loan origination fee, which is a processing fee in relation to the loan origination process such as

upfront fee, is deferred and deducted from the loan account, adjusted over the life of the loan based

on the effective interest rate method. Loan origination cost, which relates to activities performed by


19

the lender such as soliciting potential borrowers, is deferred and added to the loan account,

adjusted over the life of the loan based on the effective interest rate method when the future

economic benefit in connection with the cost incurred can be identified on a per loan basis.

2.9 Allowance for Financial Receivables

a. Calculation of allowance for doubtful accounts

The Group recognizes the impairment of financial receivables as an allowance for doubtful

accounts. It is based on the impairment estimates made through impairment assessment of

financial receivables carried at amortized cost. Allowance for doubtful accounts consists of

impairments related to individually material financial receivables and allowances of collective

assessment for impairment incurred in homogeneous assets.

Individually material financial receivables undertake the individual assessment of the difference

between the assets’ carrying amount and the present value of estimated future cash flows.

Unimpaired assets in the result of individual assessment and individually immaterial assets

undertake the collective assessment classified by asset groups that have analogous risk attributes.

The Group uses statistical model in the collective assessment based on the expected probability of

default, periodic collect amounts, loss-given default based on the past losses, loss emergency

period, and management’s decision about the current economy and credit circumstances. The

material factors used at statistical model for the collective assessment are evaluated to compare

with actual data regularly.

The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss.

b. Write-off policy

The Group writes off the doubtful receivables when the assets are deemed unrecoverable. This

decision considers the information about significant changes of financial position such that a

borrower or an obligor is in default, or the amount recoverable from security is not enough. Write-off

decision of standard small loan is generally made based on the delinquent status of loan.

2.10 Leases

a. Classification

The Group classifies leases based on the extent to which risks and rewards incidental to ownership

of a leased asset lie with the lessor or the lessee.

The lease arrangement classified as a financial lease is ①the lease transfers ownership of the

asset to the lessee by the end of the lease term, ②the lessee has the option to purchase the asset

at a price that is expected to be sufficiently lower than the fair value at the date the option becomes

exercisable for it to be reasonably certain, at the inception of the lease, that the option will be

exercised, ③the lease term is for the major part of the economic life of the asset even if title is not


20

transferred, ④at the inception of the lease the present value of the minimum lease payments

amounts to at least substantially all of the fair value of the leased asset, and ⑤the leased assets

are of such a specialized nature that only the lessee can use them without major modifications.

Minimum lease payments include that part of the residual value that is guaranteed by the lessee,

by a party related to the lessee or by a third party unrelated to the Group that is financially capable

of discharging the obligations under the guarantee.

b. Finance leases

Where the Group has substantially all the risks and rewards of ownership, leases of property, plant

and equipment are classified as finance lease. An amount equal to the net investment in the lease

is presented as a receivable. Expenses that are incurred with regard to the lease contract made but

not executed at the date of the statement of financial position are accounted for as prepaid leased

assets and are reclassified as finance lease receivables at the inception of the lease. Lease

receivables include amounts such as commissions, legal fees and internal costs that are

incremental and directly attributable to negotiating and arranging a lease. Each lease payment is

allocated between principal and finance income. Financial income is recognized on an uncollected

part of net investment using the effective interest method.

c. Operating leases

The property on operating leases is stated at acquisition cost, net of accumulated depreciation.

Expenditures that are incurred for the lease contract made but not executed at the date of the

statement of financial position are accounted for as prepaid leased assets and are reclassified as

operating leased assets at the inception of the lease term. Rentals from operating lease other than

any guaranteed residual value are reported as revenues on a straight-line basis over the lease

term. Initial direct costs incurred during the period of preparing the lease contract are recognized as

operating leased assets and are amortized over the lease term in proportion to the recognition of

income on leased assets.

2.11 Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation and

accumulated impairment losses. Historical cost includes expenditure that is directly attributable to

the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or

recognized as a separate asset, as appropriate, only when it is probable that future economic

benefits associated with the item will flow to the Group and the cost of the item can be measured

reliably.


21

Depreciation method and estimated useful lives used by the Group are as follows:

Depreciation Method Useful life

Buildings Straight-line 40 years

Structures Straight-line 40 years

Fixtures and furniture Straight-line 4 years

Vehicles Straight-line 4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at

the end of each reporting period. An asset’s carrying amount is written down immediately to its

recoverable amount if the asset’s carrying amount is greater than its estimated recoverable

amount. Gains and losses on disposals are determined by comparing the proceeds with the

carrying amount and are recognised within Other operating income(expenses) in the income

statement.

2.12 Intangible assets

Intangible assets are stated at cost, which includes acquisition cost and directly related costs

required to prepare the asset for its intended use. Intangible assets are stated net of accumulated

amortization calculated based on using the following amortization method and estimated useful

lives:

Amortization Method Useful life

Development costs Straight-line 5 years

Rights of trademark Straight-line 5 years

Other intangible assets Straight-line 5 years

2.13 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for

impairment. Assets that are subject to amortization are reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount may not be recoverable. An

impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its

recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell

and value in use. For the purposes of assessing impairment, assets are grouped at the lowest

levels for which there are separately identifiable cash flows (cash-generating units). Non-financial

assets that are subject to amortization suffered impairment are reviewed for possible reversal of the

impairment at each reporting date.

2.14 Pension obligations

The Group operates a defined benefit plan. The liability recognized in the statement of financial

position in respect of defined benefit pension plans is the present value of the defined benefit

obligation at the end of the reporting period less the fair value of plan assets, together with

adjustments for unrecognized past-service costs. The defined benefit obligation is calculated


22

annually by independent actuaries using the projected unit credit method. The present value of the

defined benefit obligation is determined by discounting the estimated future cash outflows using

interest rates of high-quality corporate bonds that are denominated in the currency in which the

benefits will be paid, and that have terms to maturity approximating to the terms of the related

pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions are recognised in profits or losses in the period in which they arise.

2.15 Provisions and Contingent Liabilities

When there is a probability that an outflow of economic benefits will occur due to a present

obligation resulting from a present legal or as a result of past events, and whose amount is

reasonably estimable, a corresponding amount of provision is recognized in the financial

statements. Where there are a number of similar obligations, the likelihood that an outflow will be

required in settlement is determined by considering the class of obligations as a whole. A provision

is recognized even if the likelihood of an outflow with respect to any one item included in the same

class of obligations may be small.

Provisions are the best estimate of the expenditure required to settle the present obligation that

consider the risks and uncertainties inevitably surround many events and circumstances at the

reporting date. Where the effect of the time value of money is material, the amount of a provision is

the present value of the expenditures expected to be required to settle the obligation.

A possible obligation that arises from past events and whose existence will be confirmed only by

the occurrence or non-occurrence of uncertain future events, or a present obligation that arises

from past events but is not certain to occur, or cannot be reliably estimated, a disclosure regarding

the contingent liability is made in the notes to the financial statements.

2.16 Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and

are subsequently re-measured at their fair value. The method of recognizing the resulting gain or

loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature

of the item being hedged. The Group designates certain derivatives as either:

(a) Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value

hedge);

(b) Hedges of a particular risk associated with a recognized asset or liability or a highly probable

forecast transaction (cash flow hedge);

The Group documents at the inception of the transaction the relationship between hedging

instruments and hedged items, as well as its risk management objectives and strategy for

undertaking various hedging transactions. The Group also documents its assessment, both at


23

hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging

transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

a. Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are

recorded in the income statement, together with any changes in the fair value of the hedged asset

or liability that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying

amount of a hedged item for which the effective interest method is used is amortized to profit or

loss over the period to maturity.

b. Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as

cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the

ineffective portion is recognized immediately in profits or losses.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for

hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and

is recognized when the forecast transaction is ultimately recognized in the income statement. When

a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported

in equity is immediately transferred to profits or losses.

2.17 Current and deferred income tax

Interim period income tax expense is calculated by applying to an interim period’s pre-tax income

the tax rate that would be applicable to expected total annual earnings.

Deferred income tax is recognized, using the liability method, on temporary differences arising

between the tax bases of assets and liabilities and their carrying amounts in the consolidated

financial statements. However, deferred tax assets and liabilities are not accounted for if they arise

from the initial recognition of an asset or liability in a transaction other than a business combination

that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred

income tax is determined using tax rates and laws that have been enacted or substantially enacted

by the date of the statement of financial position and are expected to apply when the related

deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable

profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries

and associates, except for deferred income tax liability where the timing of the reversal of the


24

temporary difference is controlled by the Group and it is probable that the temporary difference will

not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to

offset current tax assets against current tax liabilities and when the deferred income taxes assets

and liabilities relate to income taxes levied by the same taxation authority on either the same

taxable entity or different taxable entities which intend either to settle current tax liabilities and

assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future

period in which significant amounts of deferred tax liabilities or assets are expected to be settled or

recovered.

2.18 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the

Group by the weighted average number of ordinary shares in issue during the period excluding

ordinary shares purchased by the Group and held as treasury shares.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary

shares outstanding to assume conversion of all dilutive potential ordinary shares. Only dilutive

potential ordinary shares are dilutive, they are added to the number of ordinary shares outstanding

in the calculation of diluted earnings per share.

2.19 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the

chief operating decision-maker. The chief operating decision-maker, is responsible for allocating

resources and assessing performance of the operating segments.

3. Transition to Korean IFRS

The interim consolidated financial statements as of March 31, 2011, are prepared according to

Korean IFRS at the adoption date of January 1, 2011. The statements of financial position as of

December 31, 2010 and as of March 31, 2010, which were prepared previously under K-GAAP are

restated in accordance with Korean IFRS 1101, “First-time adoption of Korean IFRS”, for the

comparative purposes at the transition date of January 1, 2010.

a. Exemptions of Korean IFRS 1101 elected by the Group

The Group has elected to apply the following optional exemptions from full retrospective

application.

(1) Business combination

The Group has not retrospectively applied Korean IFRS 1103 (Business combination) to the

business combinations that took place prior to the transition date.


25

(2) Deemed cost of property and equipment

The Group has elected to use carrying amount of property and equipment under K-GAAP as

deemed cost at the date of transition to Korean IFRS.

b. Explanation on the reconciliation of K-GAAP and Korean IFRS

Major reconciliations of the transition between K-GAAP and Korean IFRS are as follows:

(1) Impairment of financial assets (allowance for financial assets)

Under K-GAAP, allowances for financial receivables are calculated based on the long-term

average expected loss. In case the allowance calculated based on the expected loss is smaller

than the allowance calculated in accordance to the guidelines provided in the Act on the

Specialized Credit Financial Business, the Group recognizes an allowance in accordance to the

guidelines provided in the Act on the Specialized Credit Financial Business. Under Korean IFRS,

impairment losses are recognized where there is evidence that impairment occurred. Allowance for

financial receivables is measured individually for assets that are individually significant and on a

collective basis for portfolios with similar risk characteristics.

(2) Provision for unused loan commitment

Under K-GAAP, provision for unused loan commitment is not recognised. Under Korean IFRS, the

expected losses of unused loan commitment are recognized as provision for unused credit lines.

(3) Accrued revenue for overdue receivables

Under K-GAAP, accrued revenue for receivables which are overdue is not recognized. Under

Korean IFRS, accrued revenue for receivables which are overdue but not impaired is recognized

and the incurred losses of the accrued revenue are recognized as allowance.

(4) Measurement of financial assets carried at amortized cost

Under K-GAAP, non-marketable loan and receivables are measured at nominal value if the

difference between nominal value and discounted value is not substantial. Under K-IFRS, loan and

receivables are initially measured at fair value and subsequently carried at amortized cost using

the effective interest method.

(5) Recognition of unused compensated absences

According to K-GAAP, unused compensated absences given to employees are recognized as

liabilities at the end of the reporting period only when the right to be paid has been established.

Under K-IFRS, the Group recognizes liabilities when an employee has provided service in

exchange for compensated absences.


26

(6) Depreciation method for property and equipment

Under K-GAAP, depreciation method for certain property and equipment was declining-balance

method. Under K-IFRS, the Group uses the straight-line method to reflect properly the matching of

the future economic benefits.

(7) Retirement benefit obligations

Under K-GAAP, the Group recognizes the amount which would be payable assuming all eligible

employees and directors were to terminate their employment as of the statement of financial

position date as accrued severance benefits represent. Under K-IFRS, the Group recognizes the

estimated amount using the projected unit credit method which is on an actuarial basis as the

defined benefit obligation.

(8) Reclassification of memberships as intangible assets

Under K-GAAP, memberships are classified as investments. Under K-IFRS, the Group reclassifies

memberships held for operating purposes as an intangible asset with an infinite useful life.

(9) Consolidation

Under K-GAAP, Autopia Thirty-third SPC, trust and other subsidiaries were previously excluded

from consolidation in accordance with Article 1.3, Clause 1 of Enforcement Decree of the Act on

External Audit of Stock Companies. Under K-IFRS, they are consolidated (Note 2).

(10) Income tax effects

The Group recognized changes in deferred tax representing the impact of deferred taxes on the

adjustments for the transition to Korean IFRS.

c. Effects on the consolidated financial position and comprehensive income


27

(1) Reconciliation of financial position as of January 1, 2010

(in millions of Korean won)

Assets Liabilities Shareholders’

equity

K-GAAP ￦ 15,854,426 ￦ 13,698,696 ￦ 2,155,730

Conversion effects to Korean IFRS

Allowance for doubtful accounts 220,443 - 220,443

Provision for unused loan commitments - 26,416 (26,416)

Accrued revenues 21,259 - 21,259

Measurement of amortized cost (6,395) - (6,395)

Recognition of unused compensated absences

- 2,267 (2,267)

Depreciation 11,748 - 11,748

Retirement benefit obligations - 91 (91)

Others (3,945) 3,335 (7,280)

Scope of consolidation 2,903,721 2,998,859 (95,138)

Deferred income taxes - 54,672 (54,672)

Total effect of transition 3,146,831 3,085,640 61,191

Korean IFRS ￦ 19,001,257 ￦ 16,784,336 ￦ 2,216,921

(2) Reconciliation of financial position and results of operations as of and for the three-month period

ended March 31, 2010


Assets Liabilities Total equity Total

comprehensive income

Net Income

K-GAAP ￦16,004,974 ￦13,892,302 ￦ 2,112,672 ￦ 160,520 ￦ 169,022


Allowance for doubtful accounts

221,648 - 221,648 1,205 1,205

Provision for unused loan commitments

- 29,664 (29,664) (3,248) (3,248)

Accrued revenues 19,165 - 19,165 (2,094) (2,094)

Measurement of amortized cost

(3,703) - (3,703) 2,692 2,692


- 3,071 (3,071) (804) (804)

Depreciation 1,005 - 1,005 (10,742) (10,742)

Retirement benefit obligations

698 - 698 708 708

Others 5,268 5,207 61 6,872 1,464

Scope of consolidation 2,494,892 2,591,935 (97,043) (2,786) (2,777)

Deferred income taxes - 56,738 (56,738) (620) (620)

Total effect of transition 2,738,973 2,686,615 52,358 (8,817) (14,216)

Korean IFRS ￦18,743,947 ￦16,578,917 ￦ 2,165,030 ￦ 151,703 ￦ 154,806


28

(3) Reconciliation of financial position and results of operations as of and for the year ended

December 31, 2010


Assets Liabilities Total equity Total

comprehensive income

Net Income

K-GAAP ￦17,931,200 ￦15,727,686 ￦ 2,203,514 ￦ 454,942 ￦ 511,545



208,187 - 208,187 (12,256) (12,256)

Provision for unused loan commitments

- 46,624 (46,624) (20,208) (20,208)

Accrued revenues 22,471 - 22,471 1,212 1,212

Measurement of amortized cost

2,443 - 2,443 8,838 8,838


- 2,524 (2,524) (257) (257)

Depreciation 1,113 - 1,113 (10,636) (10,636)

Retirement benefit obligations

- 3,823 (3,823) (2,299) (2,299)

Others 39,865 39,926 (61) 8,645 8,645

Scope of consolidation 2,543,323 2,604,768 (61,445) (15,673) (10,375)

Deferred income taxes - 86,404 (86,404) 14,776 14,776

Total effect of transition 2,817,402 2,784,069 33,333 (27,858) (22,560)

Korean IFRS ￦20,748,602 ￦18,511,755 ￦ 2,236,847 ￦ 427,084 ￦ 488,985

d. Adjustments of cash flows in 2010

According to Korean IFRS, cash flows of the related income (expenses) and assets (liabilities) are

adjusted to separately disclose the cash flows from interest received, interest paid and cash

payments of income taxes that were not presented separately under K-GAAP. And the effects of

the change in exchange rate on cash and cash equivalents held or due in a foreign currency are

presented separately from cash flows from operating, investing and financing activities.

There are no such significant differences between cash flows under Korean IFRS and K-GAAP.

e. Adjustments of operating income and expenses

The Group reclassified certain non-operating income and expenses under K-GAAP to other

operating income and expenses according to Korean IFRS.


29

Adjustments for the three-month periods ended March 31, 2011 and 2010, are as follows:


Type 2011 2010

Other operating income ￦ 6,928 ￦ 7,355

Other operating expenses ￦ 2,574 ￦ 6,424

4. Restricted Financial Instruments

Restricted financial instruments as of March 31, 2011 and December 31, 2010, are as follows:

(in millions of Korean won) Amount

Type Entities 2011 2010 Restriction

Deposits Kookmin Bank and 5 others

￦ 22 ￦ 25

Maintaining deposits for

opening account

5. Securities

Securities as of March 31, 2011 and December 31, 2010, are as follows:


Type 2011 2010

Available-for-sale securities

Equity securities

Marketable equity securities

￦ 7,040 ￦ 7,318

Unlisted equity securities

10,084 9,887

17,124 17,205

Debt securities

Government and public bonds

4,555 3,372

Sub-total 21,679 20,577

Equity method investments 50,734 48,483

￦ 72,413 ￦ 69,060


Available-for-sale securities as of March 31, 2011 and December 31, 2010, are as follows:


30

(1) Marketable equity securities


Book value

Number of

shares Ownership

(%) Acquisition

cost 2011 2010

Marketable equity securities

NICE Information Service

136,593 2.25 ￦ 3,312 ￦ 4,016 ￦ 4,221

NICE Holdings 49,162 1.42 3,491 3,024 3,097 Unlisted equity

securities

Hyundai Finance

Corp. 1

1,700,000 9.29 9,888 10,084 9,887

￦ 16,691 ￦ 17,124 ￦ 17,205

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.

(2) Debt securities


Book value

Issuer Interest rate (%)

Acquisition cost 2011 2010

Government and public bonds

Metropolitan Rapid Transit and others

2.50 ￦ 4,295 ￦ 4,555 ￦ 3,372

Equity method investments

Equity method investments as of March 31, 2011 and December 31, 2010, are as follows:


2011

Number of

shares

Ownership (%)

Acquisition

cost

Net asset value

Book value

HK Mutual Saving

Bank 1

4,990,438 20.00 ￦ 45,719 ￦ 33,429 ￦ 45,677

HI Network, Inc. 1 13,332 19.99 76 1,215 508

Korea Credit Bureau 1 140,000 7.00 3,800 2,447 3,484

Hyundai Capital Germany GmbH

600,200 30.01 1,065 954 1,065

￦ 50,660 ￦ 38,045 ￦ 50,734


31


2010

Number of shares

Ownership

(%)

Acquisition cost

Net asset value

Book value

HK Mutual Saving

Bank 1

4,990,438 20.00 ￦ 45,719 ￦ 30,601 ￦ 42,849

HI Network, Inc. 1 13,332 19.99 76 1,055 1,055

Korea Credit Bureau 1 140,000 7.00 3,800 2,477 3,514


600,200 30.01 1,065 908 1,065

￦ 50,660 ￦ 35,041 ￦ 48,483

1

The Company’s shareholdings in HK Mutual Saving Bank, HI Network, Inc. and Korea Credit

Bureau are less than 20%. However, the Company is able to significantly influence such as

involvement in the financial and operating processes, and thus the equity method is applied.

Valuations of equity method investments for the three-month periods ended March 31, 2011 and

2010, are as follows:


2011

Beginning Balance

Acquisition Gain (loss) on valuation

Changes in accumulated

other comprehensive

loss

Dividends Ending Balance

HK Mutual Saving Bank

￦ 42,849 ￦ - ￦ 2,725 ￦ 103 ￦ - ￦ 45,677

HI Network, Inc. 1,055 - 160 - (707) 508

Korea Credit Bureau

3,514 - (30) - - 3,484


1,065 - - - - 1,065

￦ 48,483 ￦ - ￦ 2,855 ￦ 103 ￦ (707) ￦ 50,734

2010

Beginning Balance

Acquisition Gain (loss) on valuation

Changes in accumulated

other comprehensive

loss

Dividends Ending Balance


￦ 35,799 ￦ - ￦ 3,063 ￦ 19 ￦ - ￦ 38,881

HI Network, Inc. - 76 1,461 - (1,227) 310

Korea Credit Bureau

3,191 - (243) - - 2,948


1,065 - - - - 1,065

￦ 40,055 ￦ 76 ￦ 4,281 ￦ 19 ￦ (1,227) ￦ 43,204


32

The difference between the acquired amounts of equity method investments and their

corresponding net asset value as of March 31, 2011 and December 31, 2010, follows:


2011 2010

HK Mutual Saving Bank ￦ 12,248 ￦ 12,248

Korea Credit Bureau 1,037 1,037

￦ 13,285 ￦ 13,285

Summary of financial information of investees as of March 31, 2011 and December 31, 2010,

follows:


2011

Fiscal year end Assets Liabilities

Operating revenue

Net income

(loss)


1

June 30 ￦ 2,487,736 ￦ 2,320,593 ￦ 88,477 ￦ 13,626

HI Network, Inc. December 31 8,641 2,567 5,075 798

Korea Credit Bureau December 31 42,029 7,066 6,876 (423)


December 31 3,286 108 132 12

1 Although HK Mutual Savings Bank’s fiscal year is from July 2010 to June 2011, the asset and

liability amounts are as of March 31, 2011, and its operating revenue and net income amounts

are from January 1, 2011 to March 31, 2011.

2010

Fiscal year end Assets Liabilities

Operating revenue

Net income

(loss)


1

June 30 ￦ 2,439,109 ￦ 2,286,106 ￦ 73,134 ￦ 15,313

HI Network, Inc. December 31 8,734 3,458 4,634 1,008

Korea Credit Bureau December 31 45,301 9,914 3,714 (3,751)


December 31 3,145 117 - -

1

Although HK Mutual Savings Bank’s fiscal year is from July 2009 to June 2010, the asset and

liability amounts are as of December 31, 2010, and its operating revenue and net income

amounts are from January 1, 2010 to March 31, 2010.

6. Financial receivables

Financial receivables as of March 31, 2011 and December 31, 2010, are as follows:


33


2011

Principal Deferred loan origination

fees and costs

Present value discounts


Carrying amount

Loan receivables

Loans \ 11,011,257 \ (108,343) \ (924) \ (242,475) \ 10,659,515

Installment financial assets

Auto 5,129,216 (92,554) (1) (26,234) 5,010,427

Durable goods 4,483 22 - (188) 4,317

Mortgage 35,797 93 - (270) 35,620

Machinery 8,731 - 33 (77) 8,687

5,178,227 (92,439) 32 (26,769) 5,059,051

Lease receivables

Finance lease receivables

1,951,539 (602) - (19,952) 1,930,985

Cancelled lease receivables

2,986 - - (2,351) 635

1,954,525 (602) - (22,303) 1,931,620

\ 18,144,009 \ (201,384) \ (892) \ (291,547) \ 17,650,186

2010

Principal Deferred loan origination

fees and costs



Carrying amount

Loan receivables

Loans \ 10,545,431 \ (110,263) \ (1,027) \ (215,703) \ 10,218,438


Auto 5,123,218 (99,271) (2) (27,489) 4,996,456

Durable goods 6,762 39 - (633) 6,168

Mortgage 39,915 111 - (404) 39,622

Machinery 14,595 - 58 (117) 14,536

5,184,490 (99,121) 56 (28,643) 5,056,782

Lease receivables

Finance lease receivables

1,797,372 (622) - (19,273) 1,777,477

Cancelled lease receivables

2,719 - - (1,758) 961

1,800,091 (622) - (21,031) 1,778,438

\ 17,530,012 \ (210,006) \ (971) \ (265,377) \ 17,053,658

7. Allowance for Doubtful Accounts

Changes in allowance for doubtful accounts for the three-month periods ended March 31, 2011

and 2010, are as follows:



34

2011

Type Loan

receivables


Lease

receivables Other assets Total

Beginning balance \ 215,703 \ 28,643 \ 21,031 \ 7,648 \ 273,025

Amounts written off (56,556) (6,554) (9) (1,150) (64,269)

Recoveries of amounts previously written off

25,260 3,499 51 1,993 30,803

Discount unwind (1,458) (89) (39) - (1,586)

Additional(reversed) allowance

59,526 1,270 1,269 (2,349) 59,716

Ending balance \ 242,475 \ 26,769 \ 22,303 \ 6,142 \ 297,689

2010

Type Loan

receivables


Lease

receivables Other assets Total

Beginning balance \ 175,934 \ 32,517 \ 12,529 \ 6,997 \ 227,977

Amounts written off (45,199) (8,320) 177 (845) (54,187)

Recoveries of amounts previously written off

24,982 3,565 145 2,238 30,930

Discount unwind (1,282) (111) (12) - (1,405)

Additional(reversed) allowance

8,194 517 732 (2,594) 6,849

Ending balance \ 162,629 \ 28,168 \ 13,571 \ 5,796 \ 210,164

8. Financial instruments

a. Fair value of financial instruments

The fair values of financial instruments as of March 31, 2011 and December 31, 2010, are as follows:


Type

2011 2010

Carrying amount

Fair value Carrying amount

Fair value

Assets

Financial assets

Cash and deposits \ 1,293,937 \ 1,293,937 \ 1,224,891 \ 1,224,891


21,679 21,679 20,577 20,577

Loan receivables 10,659,515 10,913,247 10,218,438 10,571,397


5,059,051 5,193,460 5,056,782 5,218,322

Lease receivables 1,931,620 1,903,450 1,778,438 1,765,179

Derivative assets 484,708 484,708 521,530 521,530

Other assets 252,572 252,683 246,972 247,084

\ 19,703,082 \ 20,063,164 \ 19,067,628 \ 19,568,980


35

Liabilities

Financial liabilities

Borrowings \ 2,385,360 \ 2,332,945 \ 2,646,945 \ 2,652,759

Debentures 14,998,955 15,367,032 14,396,741 14,795,749

Derivative liabilities 121,299 121,299 96,568 96,568

Other liabilities 1,192,913 1,201,193 1,107,961 1,124,866

\ 18,698,527 \ 19,022,469 \ 18,248,215 \ 18,669,942

b. Fair value hierarchy

The fair value hierarchy of financial assets and liabilities carried at fair value as of March 31, 2011

and December 31, 2010, are as follows:


2011

Type Carrying

amount

Fair value

Fair value hierarchy1

level 1 level 2 level 3

Financial assets

Financial assets at fair value


\ 21,679 \ 21,679 \ 7,039 \ 4,555 \ 10,085

Derivative assets 484,708 484,708 - 484,708 -

506,387 506,387 7,039 489,263 10,085


Derivative liabilities \ 121,299 \ 121,299 \ - \ 121,299 \ -

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

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 derivatives.


36

2010

Type Carrying

amount

Fair value

Fair value hierarchy(*)

level 1 level 2 level 3

Financial assets

Financial assets at fair value


\ 20,577 \ 20,577 \ 7,318 \ 3,372 \ 9,887

Derivative assets 521,530 521,530 - 521,530 -

542,107 542,107 7,318 524,902 9,887


Derivative liabilities \ 96,568 \ 96,568 \ - \ 96,568 \ -

c. Financial instruments by categories

The carrying amount of financial instruments by categories as of March 31, 2010 and December

31, 2010, are as follows:


2011

Type



Available-for-sale financial

assets

Hedging derivative instruments

Total

Financial assets

Cash and deposits \ - \ 1,293,937 \ - \ - \ 1,293,937

Available-for- sale securities

- - 21,679 - 21,679

Loan receivables - 10,659,515 - - 10,659,515


- 5,059,051 - - 5,059,051

Lease receivables - 1,931,620 - - 1,931,620

Derivative assets 57 - - 484,651 484,708

Other assets - 252,572 - - 252,572

\ 57 \ 19,196,695 \ 21,679 \ 484,651 \ 19,703,082


37

2010

Type



Available-for-sale financial

assets


Total

Financial assets

Cash and deposits \ - \ 1,224,891 \ - \ - \ 1,224,891


- - 20,577 - 20,577

Loan receivables - 10,218,438 - - 10,218,438


- 5,056,782 - - 5,056,782

Lease receivables - 1,778,438 - - 1,778,438

Derivative assets 72 - - 521,458 521,530

Other assets - 246,972 - - 246,972

\ 72 \ 18,525,521 \ 20,577 \ 521,458 \ 19,067,628


2011 2010

Type

Financial liabilities at amortized

cost


Total

Financial liabilities at amortized

cost


Total


Borrowings \ 2,385,360 \ - \ 2,385,360 \ 2,646,945 \ - \ 2,646,945

Debentures 14,998,955 - 14,998,955 14,396,741 - 14,396,741

Derivative liabilities

- 121,299 121,299 - 96,568 96,568

Other liabilities 1,192,913 - 1,192,913 1,107,961 - 1,107,961

\ 18,577,228 \ 121,299 \ 18,698,527 \ 18,151,647 \ 96,568 \ 18,248,215

9. Finance lease receivables

a. Total lease investments and present value of minimum lease receipts

Details of total lease investments and present value of minimum lease receipts as of March 31,

2011 and December 31, 2010, are as follows:


Type

2011 2010

Total lease investments

Present value of minimum lease

receipts


Present value of minimum lease

receipts

Less than 1 year \ 830,521 \ 502,228 \ 765,722 \ 457,513

1 to 5 years 1,382,634 535,610 1,272,610 504,344

\ 2,213,155 \ 1,037,838 \ 2,038,332 \ 961,857


38

b. Unearned interest income

Details of unearned interest income as of March 31, 2011 and December 31, 2010, are as follows:


2011 2010


Net lease investments

Unearned interest income


Net lease investments

Unearned interest income

Minimum lease

receipts (present value)

Unguaranteed residual value

(present value)

Total

Minimum lease

receipts (present value)

Unguaranteed residual value

(present value)

Total

\ 2,213,155 \ 1,037,838 \ 913,099 \1,950,937 \ 262,218 \ 2,038,332 \ 961,857 \ 834,893 \1,796,750 \ 241,582

c. The amounts of doubtful finance lease receivables and related allowance as of March 31, 2011



Type 2011 2010

Finance lease receivables \ 1,023 \ 3,889

Allowance (1,023) (3,889)

10. Leased assets

All operating leased assets consist of vehicles as of March 31, 2011 and December 31, 2010, and

the details are as follows:


2011

2010

Acquisition cost

Accumulated depreciation

Carrying amount

Acquisition cost

Accumulated depreciation

Carrying amount

Operating leased assets

￦1,874,090

￦ (663,756)

￦ 1,210,334

￦1,991,961

￦ (709,116)

￦ 1,282,845

Cancelled leased assets

3,830

(42)

3,788

3,234

(42)

3,192

￦1,877,920

￦ (663,798)

￦ 1,214,122

￦1,995,195

￦ (709,158)

￦ 1,286,037

Future minimum lease receipts under operating lease as of March 31, 2011 and December 31,



Type 2011 2010

Less than 1 year \ 409,712 \ 423,307

1 to 5 years 391,155 414,181

\ 800,867 \ 837,488


39

11. Property and equipment

a. Details of property and equipment

Property and equipment as of March 31, 2011 and December 31, 2010, consist of:


Type

2011 2010

Acquisition

cost Accumulated depreciation

Carrying amount

Acquisition


Carrying

amount

Land \ 103,697 \ - \ 103,697 \ 101,844 \ - \ 101,844

Buildings 117,090 (20,519) 96,571 112,305 (19,762) 92,543

Structures 2,466 (235) 2,231 2,466 (220) 2,246

Vehicles 1,686 (859) 827 1,608 (770) 838

Fixture and furniture

122,799 (86,021) 36,778 116,971 (81,650) 35,321

Others 1,429 - 1,429 1,200 - 1,200

Construction in progress

6,054 - 6,054 8,377 - 8,377

\ 355,221 \ (107,634) \ 247,587 \ 344,771 \ (102,402) \ 242,369

The value of land based on the published prices announced by the Korean government as of

March 31, 2011, is \ 92,931 million (2010: \ 91,633 million).


40

b. Changes in property and equipment

Changes in property and equipment for the three-month periods ended March 31, 2011 and 2010,

are as follows:

2011

Type Beginning balance

Acquisition

Replacement Depreciation Ending balance

Land \ 101,844 \ 1,853 \ - \ - \ 103,697

Buildings 92,543 4,785 - (757) 96,571

Structures 2,246 - - (15) 2,231

Vehicles 838 78 - (89) 827


35,321 5,820 13 (4,376) 36,778

Others 1,200 231 - (2) 1,429


8,377 941 (3,264) - 6,054

\ 242,369 \ 13,708 \ (3,251) \ (5,239) \ 247,587

2010

Type Beginning balance

Acquisition

Replacement Depreciation Ending balance

Land \ 98,778 \ - \ - \ - \ 98,778

Buildings 92,374 - - (688) 91,686

Structures 2,134 - - (15) 2,119

Vehicles 960 - - (85) 875


32,281 622 - (4,010) 28,893

Others 1,086 - - - 1,086


11,070 1,855 (1,350) - 11,575

\ 238,683 \ 2,477 \ (1,350) \ (4,798) \ 235,012

As of March 31, 2011, the Company carries comprehensive asset insurance for its buildings for up

to ￦211,916 million (2010: ￦209,783 million). Comprehensive movable property insurance for

fixture and furniture covers up to ￦20,194 million (2010: ￦18,812 million). Other leased office

buildings and vehicles are covered with liability and general insurance.

12. Intangible assets

a. Details of Intangible assets

Intangible assets as of March 31, 2011 and December 31, 2010, consist of:


41


Type

2011 2010

Acquisition


Book value

Acquisition


Book value

Development costs \ 59,592 \ (37,579) \ 22,013 \ 56,142 \ (36,138) \ 20,004

Rights of trademark 69 (29) 40 69 (25) 44

Other intangible assets

49,487 (15,393) 34,094 47,545 (14,981) 32,564

\ 109,148 \ (53,001) \ 56,147 \ 103,756 \ (51,144) \ 52,612

b. Changes in intangible assets

Changes in intangible assets for the three-month periods ended March 31, 2011 and 2010, are as

follows:


2011

Type Beginning balance Increase1 Amortization Ending balance

Development costs \ 20,004 \ 3,450 \ (1,441) \ 22,013

Rights of trademark 44 - (4) 40

Other intangible assets 32,564 1,942 (412) 34,094

\ 52,612 \ 5,392 \ (1,857) \ 56,147

1 Inclusive of transfer from construction in progress

2010

Type Beginning balance Increase1 Amortization Ending balance

Development costs \ 7,691 \ 1,350 \ (1,342) \ 7,699

Rights of trademark 57 - (3) 54

Other intangible assets 31,186 127 (492) 30,821

\ 38,934 \ 1,477 \ (1,837) \ 38,574


42

13. Borrowings

Borrowings as of March 31, 2011 and December 31, 2010, consist of:


Types Lender Annual

interest rate (%) 2011 2010

Borrowings in won

Commercial paper SK Securities

and 6 others

2.93 ~ 4.15 ￦ 1,010,000 ￦ 1,420,000

General loans Kookmin Bank

and 11 others

4.19 ~ 6.12 1,320,000 1,170,000

2,330,000 2,590,000

Borrowings in foreign currency

General loans UBS 2.35 55,360 56,945

￦ 2,385,360 ￦ 2,646,945

Above borrowings include securitized borrowings(2011: Nil; 2010: ￦ 10,000 million) issued based

on loan receivables and installment financial assets.

14. Debentures

Debentures issued by the Group and outstanding as of March 31, 2011 and December 31, 2010,

are as follows:


Type Annual

interest rates (%)

2011 2010

Par value Issue price Par value Issue price

Short-term debenture

Debenture 1.76 ~ 5.07 ￦ 553,387 ￦ 553,387 ￦ 659,397 ￦ 659,397

Less: Discount on debentures

(146) (253)

553,241 659,144

Current portion of debenture

Debenture 0.33 ~ 8.77 4,230,870 4,230,870 3,384,553 3,384,553


(5,452) (6,163)

4,225,418 3,378,390

Long-term debenture

Debenture 0.33 ~ 8.83 10,248,952 10,248,952 10,381,923 10,381,923


(28,656) (22,716)

10,220,296 10,359,207

￦ 15,033,209 ￦ 14,998,955 ￦ 14,425,873 ￦ 14,396,741


43

As of March 31, 2011, above debentures include securitized borrowings of ￦ 2,658,607 million,

(2010: ￦ 2,936,654 million) issued based on loan receivables and installment financial assets.

15. Defined benefit liability

a. The amounts of defined benefit plans recognized in the statements of financial position as of

March 31, 2011 and 2010, December 31, 2010, are as follows:


Type 2011 2010

Present value of funded obligations ￦ 40,707 ￦ 38,732

Fair value of plan assets (30,312) (27,045)

Defined benefit liability ￦ 10,395 ￦ 11,687

b. Changes in present value of defined benefit obligations


Type 2011 2010

Beginning balance ￦ 38,732 ￦ 37,337

Current service cost 2,349 2,065

Interest cost 442 502

Benefits paid (816) (2,064)

Ending balance ￦ 40,707 ￦ 37,840

c. Changes in the fair value of plan assets


Type 2011 2010


Expected return on plan assets 263 331

Actuarial (losses)/gains 36 (104)

Contributions by plan participants 3,499 -

Benefits paid (531) (903)


d. Details of the amounts recognized in the income statement


Type 2011 2010

Current service cost ￦ 2,349 ￦ 2,065

Interest cost 442 502

Expected return on plan assets (263) (331)

￦ 2,528 ￦ 2,236


44

e. Actual return on plan assets


Type 2011 2010

Actual return on plan assets ￦ 299 ￦ 227

f. Details of plan assets


Type 2011 2010

Amount Ratio(%) Amount Ratio(%)

Cash ￦ 7 0.02 ￦ 96 0.36

Deposits 11,825 39.01 12,053 44.56

Interest rate guaranteed asset for 1-year

18,480 60.97 14,896 55.08

￦ 30,312 100.00 ￦ 27,045 100.00

g. Actuarial assumptions

Actuarial assumptions required to recognize defined benefit liability as of March 31, 2011 and

December 31, 2010, are as follows:

Type 2011 2010

Discount rate 4.90% 4.90%

Expected return on plan assets 4.20% 4.20%

Future salary increases 5.39% 5.39%

Assumptions regarding future mortality experience are set based on actuarial advice published by

Korea Insurance Development Institute.

16. Income tax

a. Income tax expense for the three-month periods ended March 31, 2011 and 2010, consist of


Type 2011 2010

Current tax1 ￦ (16,344) ￦ 36,474

Changes in deferred tax assets(liabilities) 73,837 10,145

Deferred tax credited directly to equity (17,888) (243)

Income tax ￦ 39,605 ￦ 46,376 1 Income tax for the three-month period ended March 31, 2011, includes changes in tax

reconciliation of the previous year.


45

b. Deferred tax credited directly to equity


Type 2011 2010

Gain on valuation of available-for-sale financial securities

￦ 2 ￦ (79)

Accumulated comprehensive income of equity method investees

- (4)

Loss on valuation of derivatives (17,890) (160)

￦ (17,888) ￦ (243)

c. Reconciliation between income before income tax and income tax expense


Type 2011 2010

Profit before tax ￦ 184,729 ￦ 201,182

Current tax (24.2%) ￦ 44,678 ￦ 48,681

Adjustments:

Income not subject to tax (7) (5)

Expenses not deductible for tax purposes

83 44

Others (SPC consolidation, others) (5,149) (2,344)

Income tax ￦ 39,605 ￦ 46,376

Effective tax rate

(Income tax over net income before tax)

21.4% 23.1%

d. Changes in temporary differences and deferred assets (liabilities)


2011

Type Temporary differences Deferred assets (liabilities)

Opening Changes Ending Opening Ending

Allowance ￦ (35,003) ￦ (173,184) ￦ (208,187) ￦ (8,471) ￦ (50,381)

Derivatives instruments

(264,263) 36,348 (227,915) (59,619) (50,770)

Deferred fee (192,524) 51,317 (141,207) (45,647) (31,066)

Direct cost for leased assets

(84,109) (2,312) (86,421) (19,057) (19,013)

Foreign exchanges translation

227,514 (74,256) 153,258 55,058 34,356

Accrued expenses 132,116 (102,145) 29,971 31,770 7,253

Deferred revenue 43,532 (43,532) - 10,658 -


(66,457) 66,337 (120) (16,081) (26)

Others 63,997 (14,142) 49,855 15,272 11,711

Consolidation effect 125,064 (49,234) 75,830 33,500 21,482

￦ (50,133) ￦ (304,803) ￦ (354,936) ￦ (2,617) ￦ (76,454)


46

2010

Type Temporary differences Deferred assets (liabilities)

Opening Changes Ending Opening Ending

Allowance ￦ (79,850) ￦ 15,409 ￦ (64,441) ￦ (19,324) ￦ (15,594)

Derivatives instruments

(988,057) 452,206 (535,851) (230,538) (124,188)

Deferred fee (105,075) (1,372) (106,447) (25,071) (25,382)

Direct cost for leased assets

(65,368) (5,595) (70,963) (14,932) (16,208)

Foreign exchanges

translation 863,000 (452,103) 410,897 200,985 91,576

Accrued expenses 79,135 (64,006) 15,129 19,151 3,381

Deferred revenue 52,001 309 52,310 12,362 12,338

Present value

discounts (65,053) (3,621) (68,674) (15,495) (16,258)

Others 13,468 19,418 32,886 2,368 7,105

Consolidation effect 124,541 10,983 135,524 30,760 33,351

￦ (171,258) ￦ (28,372) ￦ (199,630) ￦ (39,734) ￦ (49,879)

e. Realization of the deferred tax assets and basic judgment

Realization of the future tax benefits related to the deferred tax assets is dependent on many

factors, including the Group’s ability to generate taxable income within the period during which the

temporary differences reverse, the outlook of the Korean economic environment, and the overall

future industry outlook. Management periodically considers these factors in reaching its conclusion

and recognized the deferred income tax asset based on future realization.

As of March 31, 2011, the Group recognizes deferred income tax assets excluding certain

temporary differences which may not be realized. The amount above may change if the estimation

of future taxable income changes.

17. Provisions for unused loan commitments

Changes in provisions for unused loan commitments for the three-month periods ended March 31,

2011 and 2010, are as follows:


Type 2011 2010


Additional 987 3,248



47

18. Derivative financial instruments and hedge accounting

a. Trading derivatives

Trading derivatives as of March 31, 2011 and December 31, 2010, are as follows:


Type

2011 2010

Notional principal amounts

1 Assets Liabilities


1

Assets Liabilities

Forward foreign exchange

\ 523 \ 57 \ - \ 578 \ 72 \ -

1 Notional principal amounts are the amounts of foreign currency contracts for the Korean won

against foreign currency transaction, and the amount of foreign currency purchase contracts for

the foreign currency against the foreign currency transaction translated in the exchange rate as

of March 31, 2010 and December 31, 2010.

During the three-month period ended March 31, 2011, the Group recognized loss on trading

derivatives of \ 8 million.

b. Derivatives designated as cash flow hedges

Derivatives designated as cash flow hedges as of March 31, 2011 and December 31, 2010, are as

follows:


Type

2011 2010


Assets Liabilities Notional principal amounts

Assets Liabilities

Interest rate swaps \ 150,000 \ 228 \ 812 \ 280,000 \ 9 \ 2,073

Currency swaps 7,060,785 484,423 120,487 6,616,568 521,449 94,495

\ 7,210,785 \ 484,651 \ 121,299 \ 6,896,568 \ 521,458 \ 96,568

19. Shareholders’ equity

a. Capital stock

The Company is authorized to issue 500,000,000 shares. As of March 31, 2011, the Company has

99,307,435 shares issued and outstanding with a par value of \ 5,000 per share.


48

b. Legal reserve

The Korean Commercial Law requires the Company 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 stock. This 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.

c. Discretionary reserve

The Company appropriates a reserve in accordance with Electronic Financial Transactions Act and

a reserve for business rationalization in accordance with Restriction of Special Taxation Act.

d. Legal reserve and discretionary reserve

Legal reserve and discretionary reserve as of March 31, 2011 and December 31, 2010 are as

follows:


Type 2011 2010

Regal reserve Revenue reserve \ 79,699 \ 48,914

Discretionary reserve

Reserve for electronic

financial transactions 100 100

Reserve for business

rationalization 74 74

\ 174 \ 174

e. Reserve for bad loans

If allowances for doubtful accounts do not meet the minimum amount calculated in accordance

with allowance reserve standards of Regulation on Supervision under the Specialized Credit

Financial Business Law, the Group appropriates a reserve for bad loans in an amount more than

the difference between the allowance and the requirement.

(1) Reserve for bad loans for the three-month period ended March 31, 2011 and year ended



Type 2011 2010

Appropriated reserve for bad loans \ - \ -

Expected reserve for bad loans 220,506 208,187

\ 220,506 \ 208,187


49

(2) Transfer to reserve for bad loans and net income in consideration of effect of changes in

reserve for bad loan for the three-month period ended March 31, 2011, are as follows:


Type Amount

Transfer to reserve for bad loans \ 12,319 Net Income in consideration of

changes in reserve for bad loan \ 132,805

Net Income per share in consideration of changes in reserve for bad loan (In won)

\ 1,337

20. Net interest income

Net interest income for the three-month periods ended March 31, 2011 and 2010, follows:


Type 2011 2010

Interest income

Cash and deposits ￦ 9,088 ￦ 6,354

Loans receivable 367,591 310,000

Installment financial assets 112,908 127,706

Lease receivables 36,474 28,888

Other 130 339

526,191 473,287

Interest expenses

Borrowings 25,739 29,712

Debentures 198,628 180,098

Other 15,554 10,226

239,921 220,036

￦ 286,270 ￦ 253,251


50

21. Net commission income

Net commission income for the three-month periods ended March 31, 2011 and 2010, follows:


Type 2011 2010

Commission income

Loans receivable ￦ 13,428 ￦ 10,083

Installment financial assets 1,686 1,865

Lease receivables 27,024 17,220

42,138 29,168

Commission expenses


Other 3,968 4,163

17,642 12,912

￦ 24,496 ￦ 16,256

22. General and administrative expenses

General and administrative expenses for the three-month periods ended March 31, 2011 and



Type 2011 2010

Payroll \ 26,209 \ 20,096

Severance benefits 2,522 2,287

Fringe benefits 8,734 7,864

Depreciation 5,239 4,798

Advertising 9,082 8,738

Travel and transportation 971 698

Communication 3,281 2,918

Water, lighting and heating 2,280 2,461

Commission 3,710 3,186

Sales commission 24,753 14,222

Amortization 1,857 1,837

Outsourcing service charges 15,914 15,091

Rent 8,297 7,462

Other expenses 20,337 11,135

\ 133,186 \ 102,793


51

23. Earnings per share

a. Basic earnings per share

Basic earnings per share attributable to common stock for the three-month periods ended March

31, 2011 and 2010, follows:

Type 2011 2010

(1) Net income attributable to common stock (In won)

\ 145,124,022,668 \ 154,806,425,393

(2) Weighted average of number of outstanding common shares

99,307,435 99,307,435

(3) Basic earnings per share (In won) (1)÷(2) \ 1,461 \ 1,559

b. Diluted earnings per share

As there was no discontinued operation during the three-month periods ended March 31, 2011 and

2010, basic earnings per share is the same as basic earnings per share from continuing

operations. There are no potential common stocks as of March 31, 2011 and 2010. Therefore, the

diluted earnings per share is the same as basic earnings per share for three-month periods ended

March 31, 2011 and 2010.

24. Other comprehensive income

Other comprehensive income for the three-month periods ended March 31, 2011 and 2010,

consist of:


2011

Type

Beginning balance

Changes

Income tax

effects

Ending balance

Reclassifi-cation of profit or loss

Other

changes

Loss on valuation of available-for-sale financial assets

￦ 512

￦ - ￦ 33

￦ 2

￦ 547

Accumulated comprehensive expense of equity method investees

24

- 102

-

126

Loss on valuation of derivatives

(67,924) 2,548 77,663 (17,890) (5,603)

Loss on exchange differences of foreign operations

17

- (184)

-

(167)

￦ (67,371) ￦ 2,548 ￦ 77,614 ￦ (17,888) ￦ (5,097)


52


2010

Type

Beginning balance

Changes

Income tax

effects

Ending balance

Reclassifi-cation of profit or loss

Other

changes

Gain(Loss) on valuation of available-for-sale financial assets

￦ (1,835) ￦ - ￦ 371 ￦ (79) ￦ (1,543)

Accumulated comprehensive expense of equity method investees

(69) - 19 (4) (54)

Loss on valuation of derivatives

(3,566) (3,307) 57 (160) (6,976)

￦ (5,470) ￦ (3,307) ￦ 447 ￦ (243) ￦ (8,573)

25. Cash flow statement

a. Cash and cash equivalents

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 March 31, 2011 and

December 31, 2010, follows:


Type 2011 2010

Cash ￦ 4 ￦ 4

Ordinary deposits 159,027 182,321

Current deposits 1,884 3,241

Short-term financial instruments 1,133,000 1,039,300

￦ 1,293,915 ￦ 1,224,866


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b. Cash generated from operations

Cash generated from operations for the three-month period ended March 31, 2011 and 2010, are

as follows:


Type 2011 2010

Net income ￦ 145,124 ￦ 154,806

Adjustments

Net interest expenses 230,703 213,343

Dividends (3,238) (3,512)

Income tax 39,605 46,376

Gain on disposal of available-for-sale financial assets

(367)

(419)

Gain on loan receivables (10,927) (16,032)

Gain on installment financing (25,454) (25,328)

Gain on leased assets (329) (196)

Gain on foreign exchange translations (146,540) (240,355)

Gain on valuation of derivatives (32,671) (7,263)

Gain on equity method valuation (2,885) (4,524)

Gain on disposal of property and equipment - (18)


Bad debts expense 59,716 6,849

Loss on foreign exchange translations 32,672 3,322

Severance benefits 2,528 2,236

Depreciation 5,239 4,798

Amortization of intangible assets 1,857 1,837

Loss on valuation of derivatives 146,548 243,001

Loss on equity method valuation 30 243

Additional provision 987 3,248

394,911 358,212

Changes in operating assets and liabilities

(Increase) in available-for-sale financial assets (701) (1,807)

(Increase) in loan receivables (522,383) (270,155)

Decrease(increase) in installment financing receivables

(291)

184,667

(Increase) in finance lease receivables (208,149) (192,367)

Decrease in canceled leased receivables 1,845 1,057

(Increase) in operating leased assets (24,928) (107,243)

Decrease in canceled leased assets 51,266 35,895

Decrease in deferred loan origination fees and costs 26,337 36,121

Increase in present value discounts 84 210

Increase in allowance for bad debts 30,804 30,930

Decrease(increase) in non-trade receivables (1,510) 5,612

(Increase) in accrued revenues (534) (1,075)

Decrease(increase) in advance payments 3,930 (5,695)


54

Increase in prepaid expenses (15,699) (16,541)

Decrease in derivative assets 21,729 259,083

Increase(decrease) in non-trade payables 15,153 (4,029)

Increase(decrease) in accrued expenses 12,752 (7,557)

Increase(decrease) in unearned revenue (4,745) 3,154

Increase in withholdings 7,741 6,242

Increase(decrease) in leasehold deposits received (154) 21,211

Payment of severance benefit (803) (1,898)

Decrease(increase) in plan assets (3,005) 984

Transfer of severance benefits from related parties 366 392

Transfer of severance benefits to related parties (380) (558)

Increase(decrease) in derivative liabilities (10,151) 1,161

(621,426) (22,206)

￦ (81,391) ￦ 490,812

c. Investing and financing activities not affecting cash flows -

Significant investing and financing activities not affecting cash flows for the three-month periods

ended March 31, 2011 and 2010, are as follows:


Type 2011 2010

Transferred from construction in progress to development costs

￦ 3,251 ￦ 1,350

Transferred from construction in progress to fixture and furniture

13

-

Transferred from available-for-sale financial securities to equity method investments

-

76

Transferred to legal reserve ￦ 30,785 ￦ 20,358


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26. Commitments and Contingencies

a. Credit Line Agreement

Details of credit line agreements of the Group as of March 31, 2011, are as follows:


Type Financial institutions Amount

Limit of overdraft Shinhan Bank and 3 other banks ￦ 51,500

Limit of daily loan SC Jeil Bank and 3 other banks 45,000

Limit of purchasing commercial paper

Woori Bank and 2 other banks 300,000

Limit of credit line (SPC) Korea Development Bank 30,400

￦ 426,900

b. Credit Facility Agreement

The Group has revolving credit facility agreements with several financial institutions as of March

31, 2011. Details of credit facility agreements are as follows:


Financial institutions Limit amount

GE Capital Corporation1 Euro currency for a USD 1 billion

Mizuho Corporate Bank, Seoul Branch ￦ 65,000

JPMorgan, Seoul Branch 80,000

Citibank, Seoul2 50,000

Standard Chartered, Seoul Branch 50,000

Societe Generale, Seoul Branch 55,000

1 GE Capital Corporation (the “GECC”) and Hyundai Motor Company entered into a support

agreement which includes the provision of debt-to-equity swap for the unredeemed amount and

the put/call option of the converted stocks. 2 Comprehensive limit including overdraft of ￦ 10 billion.

There has been no usage of the above credit facility agreements as of March 31, 2011.


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c. Pending significant litigations

Detail of pending significant litigations involving the Group as of March 31, 2011, are as follows:

(in millions of Korean won) Number of litigations Amount of litigations

Plaintiff 3 ￦ 1,164

Defendant 3 24

In addition, the Group has filed lawsuits against a number of debtors to collect receivables. As of

report date, the outcome of these cases cannot be reasonably determined and no adjustments are

reflected on the financial statements of the Group as of March 31, 2011.

d. Guarantees

Details of guarantees involving third parties as of March 31, 2011, are as follows:


Guarantor Details Amount1

Hyundai Motor Company Joint liabilities on finance lease receivables1 ￦ 2,154

Hyundai Wia Joint liabilities on machinery installment

financing receivables1

8,732

Seoul Guarantee Insurance Co., Ltd.

Guarantee for debt collection deposit, others 200,999

1 The amounts represent the guaranteed balances as of March 31, 2011, as defined under the

joint liability agreement.

The Group carries residual value guarantee insurance with Hyundai Marine & Fire Insurance Co., Ltd.

against loss in case unredeemed mortgage loans exceed recoverable amount from the collateral of the

loans. The receivables balance carried insurance and residual value guaranteed by insurance as of

March 31, 2011, are as follows:


Receivables balance The amount of residual value guaranteed

by insurance

￦ 1,009,440 ￦ 325,139

27. Related Party Transactions

a. 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.


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b. Transaction between related parties

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

for the three-month periods ended March 31, 2011 and 2010, are as follows:

(in millions of Korean won) 2011 2010

Purchases Disposal Purchases Disposal

Parent Company

Hyundai Motor Company ￦ 234,476 ￦ - ￦ 247,862 ￦ -

Others

Kia Motors Corp. 63,001 - 73,886 -

Autoever Systems Corp. 301 - 1,019 -

Glovis Co., Ltd. - 17,540 - 17,030

Hyundai Card Co., Ltd. 26,192 - 22,075 -

Hyundai Commercial 4,633 - 4,198 -

94,157 17,540 101,178 17,030

￦ 328,633 ￦ 17,540 ￦ 349,040 ￦ 17,030

Revenue, expenses arising from transactions with related parties for the three-month periods

ended March 31, 2011 and 2010, and receivables and payables as of March 31, 2011 and


(in millions of Korean won) 2011

Revenue Expenses Receivables Payables

Parent Company

Hyundai Motor Company ￦ 5,204 ￦ 864 ￦ 5,044 ￦ 64,669

Others Kia Motors Corp. - 133 365 7,594 Autoever Systems Corp. 8 4,642 - - Glovis Co., Ltd. - 608 3,819 - Hyundai Card Co., Ltd. 6,230 2,412 - 175,065 Hyundai Commercial 227 109 - 2,300 Amco Co., Ltd. 2 1,585 250 10 Hyundai Hysco 49 - - - Hyundai Steel 540 - - - Innocean Worldwide Inc. 69 1,331 - - Other related parties 266 97 - -

7,391 10,917 4,434 184,969

￦ 12,595 ￦ 11,781 ￦ 9,478 ￦ 249,668


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2010

Revenue Expenses Receivables Payables

Parent Company

Hyundai Motor Company ￦ 8,556 ￦ 1,296 ￦ 5,188 ￦ 9,662

Others Kia Motors Corp. 2,275 57 422 10,643 Autoever Systems Corp. 7 3,683 - - Glovis Co., Ltd. - 2,642 2,689 - Hyundai Card Co., Ltd. 6,271 6,094 1,681 106,061 Hyundai Commercial 161 378 24 2,346 Amco Co., Ltd. 3 1,278 250 10 Hyundai Hysco 37 - - - Hyundai Steel - - - - Innocean Worldwide Inc. - - - - Other related parties 716 1,297 - -

9,470 15,429 5,066 119,060

￦ 18,026 ￦ 16,725 ￦ 10,254 ￦ 128,722

The Group has been provided with a credit facility by GECC (Note 26).

c. Rewards to key managements

Rewards to key managements to key managements for the three-month periods ended March 31,

2011, and 2010, are as follows:

Type 2011 2010

Short-term employee benefits ￦ 885 ￦ 428

Severance benefits 280 248

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 uses derivatives to manage specific

risks.


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28.1 Credit risk

a. Exposure to credit risk

Exposures to credit risk as of March 31, 2011 and December 31, 2010, are as follows:


Type 2011 2010

Cash and deposits ￦ 1,293,932 ￦ 1,224,887

Available-for-sale securities 4,555 3,372

Loans receivable 10,659,515 10,218,438

Installment financial assets 5,059,051 5,056,782

Lease receivables 1,931,620 1,778,438

Other assets 224,811 219,383

Derivative assets 484,708 521,530

Unused loan commitments 1,129,519 1,071,419

￦ 20,787,711 ￦ 20,094,249

b. Credit quality of financial assets –

Credit quality of financial assets exposed to credit risk as of March 31, 2010 and December 31,

2010, follows:


Type 2011 2010

Normal Past due Impaired Normal Past due Impaired

Cash and deposits \ 1,293,932 \ - \ - \ 1,224,887 \ - \ -


4,555 - - 3,372 - -

Financial receivables

Loans receivable 10,037,662 542,441 79,412 9,638,971 499,519 79,948


4,882,250 173,235 3,566 4,881,495 168,567 6,720

Lease receivables

1,864,184 62,400 5,036 1,724,271 51,037 3,130

16,784,096 778,076 88,014 16,244,737 719,123 89,798

Other assets 224,811 - - 219,383 - -

Derivative assets 484,708 - - 521,530 - -

Unused loan commitments

1,129,519 - - 1,071,419 - -

\ 19,921,621 \ 778,076 \ 88,014 \19,285,328 \ 719,123 \ 89,798


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(1) Financial receivables neither past due nor impaired

Credit quality of financial receivables which are neither past due nor impaired as of March 31, 2011



2011 2010

Type

Gross amount Allowance Carrying amount

Gross amount Allowance Carrying amount

Loans receivable \ 10,180,824 \ (143,162) \ 10,037,662 \ 9,771,150 \ (132,179) \ 9,638,971


4,899,878 (17,628) 4,882,250 4,900,962 (19,467) 4,881,495

Lease receivables 1,877,395 (13,211) 1,864,184 1,735,837 (11,566) 1,724,271

\ 16,958,097 \ (174,001) \ 16,784,096 \16,407,949 \ (163,212) \ 16,244,737

(2) Financial receivables past due but not impaired

Financial receivables past due but not impaired as of March 31, 2011 and December 31, 2010, are

as follows:


2011

Types Less than 1 month

Between

1 ~ 2 months

Between 2~3 months

Total

Loan receivables \ 446,012 \ 81,677 \ 44,487 \ 572,176

Installment financial assets 157,231 14,745 4,680 176,656

Lease receivables 56,522 5,809 1,596 63,927

659,765 102,231 50,763 812,759

Allowance (14,759) (7,201) (12,723) (34,683)

Carrying amount \ 645,006 \ 95,030 \ 38,040 \ 778,076

2010

Types Less than 1 month

Between

1 ~ 2 months

Between 2~3 months

Total

Loan receivables \ 426,165 \ 62,167 \ 35,782 \ 524,114

Installment financial assets 158,040 10,620 3,179 171,839

Lease receivables 47,422 2,978 1,877 52,277

631,627 75,765 40,838 748,230

Allowance (14,104) (5,427) (9,576) (29,107)

Carrying amount \ 617,523 \ 70,338 \ 31,262 \ 719,123


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c. Assets pledges as collateral

The assets pledged as collateral for financial receivables as of March 31, 2011 and December 31,



2011

Type

Impaired Unimpaired

Total Delinquent Non-delinquent

Total financial receivables

\ 88,014 \ 778,076 \ 16,784,096 \ 17,650,186

Collateralized assets

Collateralized vehicles

29,923 364,102 4,676,922 5,070,947

Collateralized real estate

492 2,629 131,845 134,966

\ 30,415 \ 366,731 \ 4,808,767 \ 5,205,913

2010

Type

Impaired Unimpaired

Total Delinquent Non-delinquent

Total financial receivables

\ 89,798 \ 719,123 \ 16,244,737 \ 17,053,658

Collateralized assets

Collateralized vehicles

25,585 335,539 4,577,950 4,939,074

Collateralized real estate

328 2,739 127,709 130,776

\ 25,913 \ 338,278 \ 4,705,659 \ 5,069,850


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d. Credit risk concentration

Credit risk concentration of financial receivables by debtors as of March 31, 2011 and December

31, 2010, follows:


Type

2011 2010

Including allowance

Ratio Allowance Carrying amount

Including allowance

Ratio Allowance Carrying amount

Individual \ 15,362,416 85.6% \ (262,098) \15,100,318 \ 14,902,141 86.0% \ (236,824) \ 14,665,317

Corporate

Finance 40,786 0.2% (275) 40,511 38,098 0.2% (296) 37,802

Manufac-turing

775,274 4.3% (9,822) 765,452 737,970 4.3% (10,444) 727,526

Service 775,141 4.3% (7,642) 767,499 721,722 4.2% (6,854) 714,868

Public 6,851 0.1% (24) 6,827 6,270 0.1% (54) 6,216

Others 981,265 5.5% (11,686) 969,579 912,833 5.2% (10,904) 901,929

2,579,317 14.4% (29,449) 2,549,868 2,416,893 14.0% (28,552) 2,388,341

\ 17,941,733 100.0% \ (291,547) \17,650,186 \ 17,319,034 100.0% \ (265,376) \ 17,053,658

28.2 Liquidity risk

Cash flows of financial liabilities based on remaining contractual maturities as of March 31, 2011



2011

Type Immediate payment

Up to 1 year 1 to 5 years Over 5 years Total1

Borrowings \ - \ 1,858,836 \ 605,849 \ - \ 2,464,685

Debentures - 5,417,105 9,913,647 1,437,295 16,768,047

Other liabilities 5,368 508,390 619,433 - 1,133,191

Derivative liabilities2

Cash inflow - (545,529) (2,153,598) (791,994) (3,491,121)

Cash outflow - 602,936 2,312,067 810,031 3,725,034

\ 5,368 \ 7,841,738 \ 11,297,398 \ 1,455,332 \ 20,599,836

1 The above amounts including the principal and future interest payments are contractual

undiscounted cash flows and are not equal to the amounts of statement of financial position based

on the discounted cash flows. 2

Gross settlement derivatives and contractual undiscounted cash flows


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2010

Type Immediate payment

Up to 1 year 1 to 5 years Over 5 years Total1

Borrowings \ - \ 2,154,878 \ 557,869 \ - \ 2,712,747

Debentures - 4,687,022 10,882,286 408,872 15,978,180

Other liabilities 4,545 513,232 548,020 - 1,065,797

Derivative liabilities2

Cash inflow - (415,810) (1,568,597) - (1,984,407)

Cash outflow - 448,349 1,647,039 - 2,095,388

\ 4,545 \ 7,387,671 \ 12,066,617 \ 408,872 \ 19,867,705

28.3 Market risk

a. Interest rate risk

The Group manages the interest rate risk through Value at Risk(VaR), Earning at Risk(EaR)

measurement and Interest Rate Gap Analysis that analyze the maturity between the interest

revenue-generating assets and the liabilities raised interest expense.

VaR is calculated using the standard framework of the Bank for International Settlements(BIS). The

VaR model uses the proxy of modified duration per expiration interval proposed by the BIS and

expected interest rate volatility of expiration interval by reason of interest rate fluctuation of 100bp.

The interest rate risk using VaR as of March 31, 2011 and December 31, 2010, follows:

VaR is a commonly used market risk measurement techniques but has some limitations. VaR

estimates the expected loss under the specific reliability based on the historical changes in the

market data. However, the past changes in market cannot reflect all conditions and environments

that may occur in the future. Therefore, in the process of calculating, the timing and size of the

actual loss may vary according to changes in assumptions.

b. Foreign exchange risk

The Group holds borrowings and debentures that are denominated in foreign currencies and is

exposed to foreign exchange risk arising from various currency exposures. The Group undertakes

hedging strategies with hedge accounting being applied to manage these foreign exchange risks.


Type 2011 2010

Interest rate VaR \ 107,028 \ 78,614


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Foreign exchange position exposures of the Group as of March 31, 2011 and December 31, 2010,

are as follows:

The Group’s exposure to foreign exchange risk is hedged by derivatives. Therefore, foreign

exchange risk of the Group is not significant.

28.4 Capital risk management

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

uses adjusted capital adequacy ratio under the regulation on Supervision of Specialized Credit

Financial Business Law as a capital management indicator. This ratio is calculated as adjusted total

asset divided by adjusted equity.

Adjusted capital adequacy ratio of the Group as of March 31, 2010 and December 31, 2010, are as

follows:

The above adjusted capital adequacy ratio is calculated according to Supervision of Specialized

Credit Financial Business Law.

29. Segment Information

Management has determined the operating segments based on the management’s reports in

conformity with nature of goods and services. Operating segments are segregated into auto

financing service and other service.


Currency 2011 2010

USD \ 4,358,821 \ 3,802,170

EUR 1,024,124 991,452

MYR 492,353 497,145

JPY 466,162 514,125

CHF 421,838 426,304

Others 69,369 150,709

\ 6,832,667 \ 6,381,905


Type 2011 2010

Adjusted total asset (1) \ 19,795,933 \ 17,289,887

Adjusted equity (2) 2,361,691 2,374,967

Adjusted capital adequacy ratio(2)÷(1) 11.93% 13.74%


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Segments’ assets and profits or losses are measured by management accounting policies of the

Group. Non-operating and nonrecurring incomes/expenses are not classified into segments, but

only financial receivables are allocated into operating segments.

Segments information for the three-month periods ended March 31, 2011 and 2010, are as follows:

2011

Type

Auto

Others

Total

Adjustments Financial statements

Unallocated, others

1

GAAP

adjustments

Operating income

Interest income

￦ 371,138 ￦ 152,727 ￦ 523,865

Non-interest income

243,866 24,643 268,509

615,004 177,370 792,374 ￦ 202,304 ￦ (55,861) ￦ 938,817

Operating expenses

Interest expenses

(165,850) (37,014) (202,864)

Non-interest expenses

(322,617) (84,266) (406,883)

(488,467) (121,280) (609,747) (207,599) (60,513) (756,833)

Segment operating profits(pre-tax)

126,537 56,090 182,627 (5,295) 4,652 181,984

Segment

assets


2

￦14,577,492 ￦ 3,496,565 ￦18,074,057 ￦ 69,992 ￦ (931) ￦18,143,118

1 Unallocated and reclassification

• Income and expense unallocated – Mostly nonrecurring income/expenses related to interest

income on bank deposits, securities and general administrative expenses

• Assets unallocated – Initial direct cost for finance lease receivables and cancelled lease

receivables

2

Loan principal and present value discounts

Operating segments Description

Auto financing service segment

Assets, liabilities, incomes and expenses from auto

installment financing and auto leasing

Other service segment

Assets, liabilities, incomes and expenses from personal loan

and mortgage installment financing other than auto related

products.


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2010

Type

Auto

Others

Total

Adjustments Financial statements

Unallocated, others

1

GAAP

adjustments

Operating income

Interest income

￦ 345,341 ￦ 123,962 ￦ 469,303

Non-interest income

215,261 21,764 237,025

560,602 145,726 706,328 ￦ 153,293 ￦ 99,200 ￦ 958,821

Operating expenses

Interest expenses

(178,617) (41,941) (220,558)

Non-interest expenses

(249,188) (50,570) (299,758)

(427,805) (92,511) (520,316) (125,794) (115,766) (761,876)

Segment operating profits(pre-tax)

132,797 53,215 186,012 27,499 (16,566) 196,945

Segment assets


2

￦ 12,155,850 ￦ 3,117,760 ￦15,273,610 ￦ 49,910 ￦ (933) ￦15,322,587

Audit Report: Hyundai Capital 1Q2011

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Transcript of Audit Report: Hyundai Capital 1Q2011