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

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.

1

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

Emphasis of Matter
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.

2

Interim Consolidated Statements of Financial Position
March 31, 2011 and December 31, 2010

(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)

4


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
547 512
securities
Accumulated comprehensive income of equity
126 24
method investees
Loss on valuation of derivatives (5,603) (67,924)
Cumulative effect of overseas operation
(167) 17
translation
(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.
5

Interim Consolidated Statements of Comprehensive Income
Three-Month Periods ended March 31, 2011 and 2010

(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
- 1,078
securities
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

6


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
35 292
securities
Other comprehensive income of equity method 15
102
investees
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

7



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


8

Interim Consolidated Statements of Changes in Shareholders’ Equity

Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 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
Gain on valuation of available-
- - 292 - 292 - 292
for-sale securities
Other comprehensive income of
- - 15 - 15 - 15
equity method investees
Loss on valuation of derivatives - - (3,410) - (3,410) - (3,410)
Total other comprehensive
- - (3,103) - (3,103) - (3,103)
income
Total comprehensive income - - (3,103) 154,806 151,703 - 151,703
Transactions with owners
Liquidation of special purpose
- - - - - (10) (10)
entity
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

9

Interim Consolidated Statements of Changes in Shareholders’ Equity

Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 2011 ￦ 496,537 ￦ 407,539 ￦ (67,371) ￦ 1,400,013 ￦ 2,236,718 ￦ 129 ￦ 2,236,847
Total comprehensive income
Net income - - - 145,124 145,124 - 145,124
Other comprehensive income
Gain on valuation of available-
- - 35 - 35 - 35
for-sale securities
Other comprehensive income of
- - 102 - 102 - 102
equity method investees
Gain on valuation of derivatives - - 62,321 - 62,321 - 62,321
Effect of overseas operation
- - (184) - (184) - (184)
translation
Total other comprehensive
- - 62,274 - 62,274 - 62,274
income
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


10

Interim Consolidated Statements of Cash Flows

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


11

Notes to the Interim Consolidated Financial Statements
March 31, 2011 and 2010, and December 31, 2010

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 Autopia Thirty-third trust and SPC Autopia Thirty-third trust and SPC
Purpose Autopia Thirty-fourth trust and SPC Autopia Thirty-fourth trust and SPC
Entities 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
Hyundai Capital Europe GmbH Hyundai Capital Europe GmbH
Company

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.

12


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.

13


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.

14


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.

15


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.

17


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

18


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

19


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.

20


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

21


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

22


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

23


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.

24


(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.

25


(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

26


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

(in millions of Korean won)
Shareholders’
Assets Liabilities
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
- 2,267 (2,267)
absences
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

Total
Assets Liabilities Total equity comprehensive Net Income
income
K-GAAP ￦16,004,974 ￦13,892,302 ￦ 2,112,672 ￦ 160,520 ￦ 169,022
Allowance for doubtful
221,648 - 221,648 1,205 1,205
accounts
Provision for unused loan
- 29,664 (29,664) (3,248) (3,248)
commitments
Accrued revenues 19,165 - 19,165 (2,094) (2,094)
Measurement of
(3,703) - (3,703) 2,692 2,692
amortized cost
Recognition of unused
- 3,071 (3,071) (804) (804)
compensated absences
Depreciation 1,005 - 1,005 (10,742) (10,742)
Retirement benefit
698 - 698 708 708
obligations
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

27


(3) Reconciliation of financial position and results of operations as of and for the year ended
December 31, 2010

Total
Assets Liabilities Total equity comprehensive Net Income
income
K-GAAP ￦17,931,200 ￦15,727,686 ￦ 2,203,514 ￦ 454,942 ￦ 511,545
Allowance for doubtful
208,187 - 208,187 (12,256) (12,256)
accounts
Provision for unused loan
- 46,624 (46,624) (20,208) (20,208)
commitments
Accrued revenues 22,471 - 22,471 1,212 1,212
Measurement of
2,443 - 2,443 8,838 8,838
amortized cost
Recognition of unused
- 2,524 (2,524) (257) (257)
compensated absences
Depreciation 1,113 - 1,113 (10,636) (10,636)
Retirement benefit
- 3,823 (3,823) (2,299) (2,299)
obligations
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.

28


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

Kookmin Bank Maintaining deposits for
Deposits
and 5 others ￦ 22 ￦ 25 opening account

5. Securities

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

Type 2011 2010
Available-for-sale securities
Marketable equity
securities ￦ 7,040 ￦ 7,318
Equity securities
Unlisted equity
securities
10,084 9,887
17,124 17,205
Government and
Debt securities
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
Available-for-sale securities as of March 31, 2011 and December 31, 2010, are as follows:

29


(1) Marketable equity securities

Book value
Number of Ownership Acquisition
2011 2010
shares (%) cost
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
1 1,700,000 9.29 9,888 10,084 9,887
Corp.
￦ 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
Interest Acquisition
Issuer rate (%) cost 2011 2010
Government and Metropolitan Rapid
public bonds 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 Ownership Acquisition Net asset
Book value
shares (%) cost value
HK Mutual Saving
Bank
1 4,990,438 20.00 ￦ 45,719 ￦ 33,429 ￦ 45,677
1
HI Network, Inc. 13,332 19.99 76 1,215 508
1
Korea Credit Bureau 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

30


2010
Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
HK Mutual Saving
Bank
1 4,990,438 20.00 ￦ 45,719 ￦ 30,601 ￦ 42,849
1
HI Network, Inc. 13,332 19.99 76 1,055 1,055
1
Korea Credit Bureau 140,000 7.00 3,800 2,477 3,514
Hyundai Capital
Germany GmbH
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
Changes in
accumulated
Beginning Gain (loss) Ending
Acquisition other Dividends
Balance on valuation comprehensive Balance
loss
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
Hyundai Capital
Germany GmbH
1,065 - - - - 1,065

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

2010
Changes in
accumulated
Beginning Gain (loss) Ending
Acquisition other Dividends
Balance on valuation comprehensive Balance
loss
HK Mutual Saving
Bank ￦ 35,799 ￦ - ￦ 3,063 ￦ 19 ￦ - ￦ 38,881
HI Network, Inc. - 76 1,461 - (1,227) 310
Korea Credit
Bureau
3,191 - (243) - - 2,948
Hyundai Capital
Germany GmbH
1,065 - - - - 1,065

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

31


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
Operating Net income
Fiscal year end Assets Liabilities
revenue (loss)
HK Mutual Saving
1 June 30 ￦ 2,487,736 ￦ 2,320,593 ￦ 88,477 ￦ 13,626
Bank
HI Network, Inc. December 31 8,641 2,567 5,075 798
Korea Credit Bureau December 31 42,029 7,066 6,876 (423)
Hyundai Capital
December 31 3,286 108 132 12
Germany GmbH

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

2010
Operating Net income
Fiscal year end Assets Liabilities
revenue (loss)
HK Mutual Saving
1 June 30 ￦ 2,439,109 ￦ 2,286,106 ￦ 73,134 ￦ 15,313
Bank
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)
Hyundai Capital
December 31 3,145 117 - -
Germany GmbH

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:

32


2011
Deferred loan Allowance
Present value Carrying
Principal origination for doubtful
discounts amount
fees and costs accounts
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
1,951,539 (602) - (19,952) 1,930,985
receivables
Cancelled lease
2,986 - - (2,351) 635
receivables
1,954,525 (602) - (22,303) 1,931,620
18,144,009 (201,384) (892) (291,547) 17,650,186

2010
Deferred loan Allowance
Present value Carrying
Principal origination for doubtful
discounts amount
fees and costs accounts
Loan receivables
Loans 10,545,431 (110,263) (1,027) (215,703) 10,218,438
Installment financial assets
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
1,797,372 (622) - (19,273) 1,777,477
receivables
Cancelled lease
2,719 - - (1,758) 961
receivables
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:


33

Audit Report: Hyundai Capital 1Q2011

Audit Report: Hyundai Capital 1Q2011

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