fy 2015 2 q audit report en

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2015, AND DECEMBER 31, 2014, AND FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

ATTACHMENT: INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Hyundai Card Co., Ltd.

Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro Youngdeungpo-gu, Seoul 150-945, Korea

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

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/kr/about for a more detailed description of DTTL and its member firms. Member of Deloitte Touche Tohmatsu Limited

Independent Accountants’ Review Report English Translation of a Report Originally Issued in Korean To the Shareholders and Board of Directors of Hyundai Card Co., Ltd.: We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd., and its subsidiaries (collectively, the “Consolidated Entity”). The condensed consolidated financial statements consist of the condensed consolidated statements of financial position as of June 30, 2015, and the related condensed consolidated statements of comprehensive income for the three months and six months ended June 30, 2015 and 2014, the related condensed consolidated statements of changes in shareholders’ equity and the related condensed consolidated statements of cash flows for the six months ended June 30, 2015 and 2014, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the condensed consolidated financial statements The Consolidated Entity’s management is responsible for the preparation and fair presentation of the accompanying condensed consolidated financial statements and for such internal control as management determines is necessary to enable the preparation of condensed consolidated financial statements that are free from material misstatement, whether due to fraud or error. Independent accountants’ responsibility Our responsibility is to express a conclusion on the accompanying condensed consolidated financial statements based on our reviews. We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit, and accordingly, we do not express an audit opinion. Review conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements of the Consolidated Entity are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards (K-IFRS) 1034, Interim Financial Reporting.

Others We audited the consolidated statement of financial position as of December 31, 2014, and the related consolidated statement of comprehensive income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year ended December 31, 2014 (not presented in the accompanying condensed consolidated financial statements), respectively, all expressed in Korean won, in accordance with auditing standards generally accepted in the Republic of Korea. We expressed an unqualified opinion on those consolidated financial statements in our independent auditors’ report dated March 3, 2015. The consolidated statement of financial position as of December 31, 2014, presented as a comparative purpose in the accompanying condensed consolidated financial statements does not differ, in all material respects, from the audited consolidated statement of financial position as of December 31, 2014. August 12, 2015

Notice to Readers This report is effective as of August 12, 2015, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the accountants’ review report is read. Such events or circumstances could significantly affect the condensed consolidated financial statements and may result in modifications to the accountants’ review report.

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES (the “Consolidated Entity”) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2015, AND DECEMBER 31, 2014, AND FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

The accompanying condensed consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the management of the Consolidated Entity.

Chung, Tae Young Chief Executive Officer Hyundai Card Co., Ltd.

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2015, AND DECEMBER 31, 2014

(Unit: Korean won) June 30, 2015 December 31, 2014 ASSETS: CASH AND DEPOSITS (Notes 4 and 28):

Cash and cash equivalents (Note 23) ￦ 407,300,237,618 ￦ 167,697,056,564 Deposits 33,028,250,000 33,028,250,000

Total cash and deposits 440,328,487,618 200,725,306,564

SECURITIES (Notes 5 and 28): Trading securities 532,368,766,240 739,004,232,776 Available-for-sale (AFS) securities 1,766,969,764 1,766,969,764

Total securities 534,135,736,004 740,771,202,540 CARD ASSETS (Notes 6, 7, 26 and 28):

Card receivables, net of present value discounts and deferred origination cost and fee 6,588,047,590,492

6,901,493,380,783

Allowance for doubtful accounts (66,705,519,656) (71,521,933,866) Cash advances 784,581,100,350 837,547,597,115

Allowance for doubtful accounts (28,484,234,871) (30,077,545,239) Card loans, net of present value discounts 3,071,629,362,687 3,046,695,716,404

Allowance for doubtful accounts (136,246,136,624) (134,240,242,776) Total card assets 10,212,822,162,378 10,549,896,972,421

PROPERTY, PLANT AND EQUIPMENT (Note 8):

Land 139,018,599,253 138,257,299,573 Buildings 112,438,229,639 113,265,523,657

Accumulated depreciation (10,197,177,198) (8,792,114,539) Vehicles 2,514,088,391 2,590,262,299

Accumulated depreciation (161,456,191) (125,949,719) Fixtures and equipment 217,837,819,055 211,900,465,338

Accumulated depreciation (139,579,122,984) (124,045,253,624) Construction in progress 35,574,405,861 23,380,082,412

Total property, plant and equipment 357,445,385,826 356,430,315,397

OTHER ASSETS: Other accounts receivable (Note 28) 151,836,762,518 116,605,521,297

Allowance for doubtful accounts (Notes 7 and 28) (464,343,731) (611,019,783) Accrued revenue (Note 28) 47,907,290,193 50,756,921,220

Allowance for doubtful accounts (Notes 7 and 28) (1,192,298,237) (1,348,989,201) Advance payments 12,087,295,448 14,223,977,849

Allowance for doubtful accounts (Note 7) (176,507,712) (650,322,306) Prepaid expenses 47,702,001,671 45,029,725,258 Intangible assets (Note 9) 126,630,770,159 133,667,230,921 Derivative assets (Notes 13, 27 and 28) 15,350,911,556 8,739,491,485 Deferred income tax assets (Note 20) 149,805,160,559 149,460,296,801 Guarantee deposits (Notes 4 and 28) 31,351,732,987 31,048,421,043 Others 3,039,635,558 2,674,605,943

Total other assets 583,878,410,969 549,595,860,527 Total Assets ￦ 12,128,610,182,795 ￦12,397,419,657,449

(Continued)

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

AS OF JUNE 30, 2015, AND DECEMBER 31, 2014

(Unit: Korean won) June 30, 2015 December 31, 2014 LIABILITIES: BORROWINGS (Notes 10, 26 and 28):

Borrowings ￦ 200,000,000,000 ￦ 200,000,000,000 Debenture, net of discounts 7,309,633,255,554 7,730,126,733,953

Total borrowings 7,509,633,255,554 7,930,126,733,953

OTHER LIABILITIES: Accounts payable (Note 28) 1,024,209,210,351 1,001,186,223,971 Accrued expenses (Note 28) 222,350,641,447 214,281,445,423 Unearned revenue 356,270,342,069 364,854,106,867 Withholdings (Note 28) 171,670,292,984 146,547,177,277 Derivative liabilities (Notes 13, 27 and 28) 21,880,910,514 30,922,252,463 Current tax liability 31,832,725,222 42,028,995,360 Net defined benefit liability (Note 11) 30,078,442,928 19,884,606,576 Guarantee deposits received (Note 28) 8,906,611,308 8,652,184,880 Provisions (Notes 12 and 24) 90,076,419,777 83,555,104,835

Total other liabilities 1,957,275,596,600 1,911,912,097,652 Total liabilities 9,466,908,852,154 9,842,038,831,605

SHAREHOLDERS’ EQUITY:

Capital stock 802,326,430,000 802,326,430,000 Capital surplus 57,704,443,955 57,704,443,955 Accumulated other comprehensive loss (Note 22) (44,624,548,642) (40,118,183,826) Retained earnings (Notes 14 and 15) 1,846,295,005,328 1,735,468,135,715

Total shareholders’ equity 2,661,701,330,641 2,555,380,825,844 Total Liabilities and Shareholders’ Equity ￦ 12,128,610,182,795 ￦12,397,419,657,449

(Concluded)

See accompanying notes.

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Unit: Korean won) 2015 2014

Three months ended June 30

Six months ended June 30



OPERATING REVENUE: Card income (Note 17) ￦ 621,298,977,061 ￦ 1,242,127,875,223 ￦ 621,438,626,586 ￦ 1,241,329,994,079 Interest income (Note 16) 4,583,049,323 10,875,934,226 6,458,684,533 11,565,651,102 Gain on valuation and disposal of securities 362,255,755 581,393,022 - 30,307,300 Dividends income - 146,989,275 - 172,578,278 Reversal of provision for unused credit limits (Note 12) - - 350,463,106 1,004,104,382 Other operating revenue (Note 18) 19,492,740,008 33,405,419,759 31,619,155,860 48,105,017,753

Total operating revenue 645,737,022,147 1,287,137,611,505 659,866,930,085 1,302,207,652,894 OPERATING EXPENSES:

Card expenses (Note 17) 273,244,263,553 529,261,124,964 260,400,955,128 498,352,299,536 Interest expenses (Note 16) 68,601,626,541 140,825,077,623 77,315,962,435 153,565,525,136 General and administrative expenses (Note 19) 169,717,352,969 332,686,668,022 158,996,673,794 300,349,752,436 Securitization expenses 99,287,436 180,349,207 79,076,586 195,767,485 Bad debt expenses and losses on disposal of loans (Note 7) 50,509,314,482 105,949,055,202 66,148,962,194 126,286,972,131 Transfer to provision for unused credit limits (Note 12) 476,442,008 1,219,576,870 - - Other operating expenses (Note 18) 18,652,342,153 31,954,362,562 25,230,177,876 44,256,657,557

Total operating expenses 581,300,629,142 1,142,076,214,450 588,171,808,013 1,123,006,974,281 OPERATING INCOME 64,436,393,005 145,061,397,055 71,695,122,072 179,200,678,613 NON-OPERATING INCOME: Gain from sale of property, plant and equipment and

intangible assets 9,012,873 28,818,303 12,333,000 12,333,000 Reversal of impairment loss for intangible assets

(Note 9) - - - 6,262,020 Rental revenue 403,305,118 780,985,962 420,783,993 881,936,301

Miscellaneous gain 70,148,064 131,333,388 64,977,638 118,298,015 Total non-operating income 482,466,055 941,137,653 498,094,631 1,018,829,336

NON-OPERATING EXPENSES: Donations 537,176,650 704,978,650 278,521,471 453,178,146 Loss from sale of property and equipment and intangible assets 51,505,049 1,260,030,580 1,588,122 19,338,263

Miscellaneous loss - - 4,570,950 4,570,950 Total non-operation expenses 588,681,699 1,965,009,230 284,680,543 477,087,359

NET INCOME BEFORE INCOME TAX EXPENSE 64,330,177,361 144,037,525,478 71,908,536,160 179,742,420,590 INCOME TAX EXPENSE (Note 20) 15,670,628,458 33,210,655,865 17,427,412,675 42,784,393,412 NET INCOME ￦ 48,659,548,903 ￦ 110,826,869,613 ￦ 54,481,123,485 ￦ 136,958,027,178 (Continued)

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

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Unit: Korean won)

2015

2014





OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (Note 22)

Items not reclassified subsequently to profit or loss ￦ 265,991,145 ￦ (2,980,306,936) ￦ (8,391,757,547) ￦ (8,980,874,682) Remeasurements of net defined benefit liability 265,991,145 (2,980,306,936) (8,391,757,547) (8,980,874,682) Items reclassified subsequently to profit or loss 2,651,137,369 (1,526,057,880) (7,351,256,487) (8,561,295,260) Cash flow hedging income (loss) 2,651,137,369 (1,526,057,880) (7,351,256,487) (8,561,295,260)

Total other comprehensive income (loss) 2,917,128,514 (4,506,364,816) (15,743,014,034) (17,542,169,942) TOTAL COMPREHENSIVE INCOME ￦ 51,576,677,417 ￦ 106,320,504,797 ￦ 38,738,109,451 ￦ 119,415,857,236 EARNINGS PER SHARE (Note 21)

Basic earnings per share ￦ 303 ￦ 691 ￦ 340 ￦ 854 Diluted earnings per share ￦ 303 ￦ 691 ￦ 340 ￦ 854

(Concluded)


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

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Unit: Korean won)

Capital stock

Capital surplus

Retained earnings Total

Paid-in capital Other capital

Accumulated other

comprehensive gain (loss)

Balance at January 1, 2014 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (5,856,733,562) ￦ 1,511,954,114,940 ￦ 2,366,128,255,333 Total comprehensive income (loss) Net income - - - - 136,958,027,178 136,958,027,178 Other comprehensive income (loss) Remeasurements of net defined benefit liability - - - (8,980,874,682) - (8,980,874,682) Cash flow hedging loss - - - (8,561,295,260) - (8,561,295,260)Balance at June 30, 2014 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (23,398,903,504) ￦ 1,648,912,142,118 ￦ 2,485,544,112,569Balance at January 1, 2015 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (40,118,183,826) ￦ 1,735,468,135,715 ￦ 2,555,380,825,844 Total comprehensive income (loss) Net income - - - - 110,826,869,613 110,826,869,613 Other comprehensive income (loss) Remeasurements of net defined benefit liability - - - (2,980,306,936) - (2,980,306,936) Cash flow hedging loss - - - (1,526,057,880) - (1,526,057,880)Balance at June 30, 2015 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (44,624,548,642) ￦ 1,846,295,005,328 ￦ 2,661,701,330,641


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

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Unit: Korean won)

Six months ended

June 30, 2015 Six months ended

June 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES:

Cash generated from operating activities (Note 23) ￦ 872,040,177,727 ￦ 75,353,907,530 Interests received 10,643,721,137 11,424,482,609 Interests paid (129,372,506,333) (142,481,972,475) Dividends received 146,989,275 172,578,278 Income taxes paid (42,756,320,587) (34,565,580,621)

Net cash provided by (used in) operating activities 710,702,061,219 (90,096,584,679)

CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of AFS securities 114,829,850 30,307,300 Net decrease of bank deposit - 4,550,000 Disposal of property, plant and equipment 45,361,000 23,081,000 Acquisition of property, plant and equipment (26,094,553,551) (23,709,291,935) Acquisition of intangible assets (10,035,220,856) (21,282,487,961)

Net cash used in investing activities (35,969,583,557) (44,933,841,596)

CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 70,000,000,000 2,260,000,000,000 Proceeds from issue of debentures 5,436,270,704,124 3,907,633,846,785 Repayment of borrowings (70,000,000,000) (2,232,500,000,000) Repayment of debentures (5,871,400,000,732) (3,621,413,330,519)

Net cash provided by (used in) financing activities (435,129,296,608) 313,720,516,266

NET INCREASE IN CASH AND CASH EQUIVALENTS 239,603,181,054 178,690,089,991 CASH AND CASH EQUIVALENTS, BEGINNING OF

THE PERIOD (Note 23) 167,697,056,564

965,455,273,460 CASH AND CASH EQUIVALENTS, END OF THE

PERIOD (Note 23) ￦ 407,300,237,618

￦ 1,144,145,363,451


HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES

NOTES

AS OF JUNE 30, 2015, AND DECEMBER 31, 2014, AND

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014 1. REPORTING ENTITY:

Hyundai Card Co., Ltd. (the “Company” or the “Controlling company”), which is a controlling company in accordance with Korean International Financial Reporting Standards (K-IFRS) 1110, Consolidated Financial Statements, is engaged in the credit card business under the Specialized Credit Financial Business Law of Korea, with its headquarters located at 3, Uisadang-daero, Yeongdeungpo-gu, Seoul. On June 15, 1995, the Company acquired the credit card business of Korea Credit Circulation Co., Ltd., and on June 16, 1995, Korean government granted permission to the Company to engage in the credit card business. The Company operates its business under the Specialized Credit Financial Business Act and other relevant applicable regulations. As of June 30, 2015, the Company has approximately 6.28 million card members, 2.26 million registered merchants and 122 marketing centers and branches. As of June 30, 2015, the total common stock of the Company is ￦802,326 million. The shareholders of the Company and its ownerships as of June 30, 2015, and December 31, 2014, are as follows:

Shareholder

June 30, 2015 December 31, 2014

Number of shares Percentage of

ownership Number of shares

Percentage of ownership

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

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

(1) Details of the Company’s subsidiaries as of June 30, 2015, and December 31, 2014, are as follows:

Place of

incorporation and operation

Voting share (%)

Entities

Major operation

June 30, 2015

December 31, 2014

End of reporting period

PRIVIA 3rd SPC Asset securitization Korea 0.9 0.9 January PRIVIA 4th SPC Asset securitization Korea 0.5 0.5 December PRIVIA 5th SPC Asset securitization Korea 0.5 0.5 December Money Market

Trust Trust business Korea 100 100 -

The above subsidiaries are structured companies as voting rights and other powers do not play a major role in determining the controlling interest. The entities are special-purpose entities that were established for the Company’s business activity. The Company has a power over the entities because the Company involves in the objectives and design of the entities and exposes itself to risks and rewards of them. Also, all decision-making processes of the entities are operated in a predetermined way in accordance with provisions and articles of incorporation. The Company is considered to have an ability to use power as it has a control over the changes of provisions and articles of incorporation. Therefore, the Company consolidates the entities. Meanwhile, in the case when derivative contracts with hedging risks arising from debentures for asset securitization issued by the subsidiaries default, counterparties of the derivative contracts can make a claim to the Company for fulfillment of agreement.

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2. BASIS OF FINANCIAL STATEMENT PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of condensed consolidated financial statement preparation

Hyundai Card Co., Ltd., and its subsidiaries’ (collectively, the “Consolidated Entity’s”) condensed consolidated financial statements for the six months ended June 30, 2015 and 2014, are prepared in accordance with Korean International Financial Reporting Standards (K-IFRS) 1034, Interim Financial Reporting. It is necessary to use the annual consolidated financial statements for the year ended December 31, 2014, for the understanding of the accompanying interim consolidated financial statements. The Consolidated Entity’s accounting policies applied for the accompanying condensed interim consolidated financial statements are the same as the policies applied for the preparation of consolidated financial statements as of and for the year ended December 31, 2014, except for the effects from the introduction of new and revised accounting standards or interpretations as described below.

1) The Consolidated Entity has newly adopted the following new standards and interpretations that affected

the Consolidated Entity’s accounting policies

Amendments to K-IFRS 1019 – Employee Benefits The amendments permit the Consolidated Entity to recognize amount of contributions as a reduction in the service cost in which the related service is rendered if the amount of the contributions is independent of the number of years of service. The adoption of the amendment has no significant impact on the Consolidated Entity’s condensed consolidated financial statements. Annual Improvements to K-IFRS 2010-2012 Cycle The amendments to K-IFRS 1002 (i) changes the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add definition for ‘performance condition’ and ‘service condition’ which were previously included within the definition of ‘vesting condition.’ The amendments to K-IFRS 1103, Business Combinations, clarify the classification and measurement of the contingent consideration in business combination. The amendments to K-IFRS 1108 clarify that a reconciliation of the total of the reportable segments’ assets should only be provided if the segment assets are regularly provided to the chief operating decision maker. The adoption of the amendment has no significant impact on the Consolidated Entity’s condensed consolidated financial statements. Annual Improvements to K-IFRS 2011-2013 Cycle The amendments to K-IFRS 1103 clarify the scope of the portfolio exception for measuring the fair values of the Consolidated Entity of financial assets and financial liabilities on a net basis includes all contracts that are within the scope the standard does not apply to the accounting for the formation of all types of joint arrangement in the financial statements of the joint arrangement itself. The amendments to K-IFRS 1113, Fair Value Measurements, and K-IFRS 1040, Investment Properties, exist and the adoption of the amendments has no significant impact on the Consolidated Entity’s condensed consolidated financial statements. 2) The Consolidated Entity has not applied the following K-IFRSs that have been issued but are not yet

effective:

Amendments to K-IFRS 1016 – Property, Plant and Equipment The amendments to K-IFRS 1016 prohibit the Consolidated Entity from using a revenue-based depreciation method for items of property, plant and equipment. The amendments are effective for the annual periods beginning on or after January 1, 2016. Amendments to K-IFRS 1038 – Intangible Assets The amendments to K-IFRS 1038 do not allow presumption that revenue is an appropriate basis for the amortization of intangible assets, which presumption can only be rebutted when the intangible asset is

- 3 -

expressed as a measure of revenue or when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated. The amendments apply prospectively for annual periods beginning on or after January 1, 2016. Amendments to K-IFRS 1111 – Accounting for Acquisitions of Interests in Joint Operations The amendments to K-IFRS 1111 provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in K-IFRS 1103, Business Combinations. A joint operator is also required to disclose the relevant information required by K-IFRS 1103 and other standards for business combinations. The amendments to K-IFRS 1111 are effective for the annual periods beginning on or after January 1, 2016.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS:

In the preparation of the Consolidated Entity’s condensed consolidated financial statements, management is required to make judgments, estimates and assumptions which affect assets, liabilities, revenue and expenses. Actual results may differ from these estimates. The significant judgments which management has made about the application of the Consolidated Entity’s accounting policies and key sources of estimation uncertainty do not differ from those used in preparing the consolidated financial statements for the year ended December 31, 2014.

4. RESTRICTED FINANCIAL ASSETS:

Details of restricted financial assets as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

Type Entity June 30, 2015 December 31, 2014 Restriction Cash and deposits KB and others ￦ 19 ￦ 19 Guarantee deposits for overdraft

Shinhan Bank and

others

33,000

33,000

Secured deposits

Mirae Asset Securities

10

10

Social enterprise fund

Other assets Korea Asset Management Corporation

6,906

6,885

Escrow account ￦ 39,935 ￦ 39,914

5. SECURITIES:

Securities as of June 30, 2015, and December, 31 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014 Trading securities Treasury bonds ￦ 69,437 ￦ 39,137 Corporate bonds 20,156 515,300

Securities 58,045 140,063 Others 384,731 44,504

Subtotal 532,369 739,004 Available-for-sale securities

Unlisted shares investment 1,767 1,767 Total ￦ 534,136 ￦ 740,771

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6. CARD ASSETS:

Details of card assets by customers as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015

Principal

Deferred origination cost and fee

Present value discounts

Allowance for doubtful accounts Book value

Card receivables Households

￦ 6,098,106

￦ (6,964)

￦ (6,097)

￦ (61,506)

￦ 6,023,539

Corporates 503,003 - - (5,200) 497,803 Cash advances Households 784,581 - - (28,484) 756,097 Card loans Households 3,072,363 - (734) (136,246) 2,935,383

Total ￦ 10,458,053 ￦ (6,964) ￦ (6,831) ￦ (231,436) ￦ 10,212,822

December 31, 2014

Principal

Deferred origination cost and fee

Present value discounts

Allowance for doubtful accounts Book value

Card receivables Households

￦ 6,301,454

￦ (6,761)

￦ (6,644)

￦ (63,711)

￦ 6,224,338

Corporates 613,445 - - (7,811) 605,634 Cash advances Households 837,548 - - (30,078) 807,470 Card loans Households 3,047,465 - (770) (134,240) 2,912,455

Total ￦ 10,799,912 ￦ (6,761) ￦ (7,414) ￦ (235,840) ￦ 10,549,897

7. ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Changes in the allowance for doubtful accounts for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

Six months ended June 30, 2015

Card receivables Cash advances Card loans Other assets Total Beginning balance ￦ 71,522 ￦ 30,078 ￦ 134,240 ￦ 2,610 ￦ 238,450 Bad debt expenses (876) (109) (287) - (1,272) Bad debt recovered 314 417 149 - 880 Disposition and repurchase (11,681) (6,863) (13,888) - (32,432) Transfer (reversal) of allowance

for doubtful accounts 7,427 4,961 16,032 (777) 27,643

Ending balance ￦ 66,706 ￦ 28,484 ￦ 136,246 ￦ 1,833 ￦ 233,269

Six months ended June 30, 2014 Card receivables Cash advances Card loans Other assets Total Beginning balance ￦ 70,106 ￦ 31,313 ￦ 103,438 ￦ 3,011 ￦ 207,868 Bad debt expenses (1,632) (185) (176) - (1,993) Bad debt recovered 352 455 155 - 962 Disposition and repurchase (18,414) (10,596) (21,522) - (50,532) Transfer (reversal) of allowance

for doubtful accounts 16,755 10,316 30,528 (492) 57,107

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

- 5 -

8. PROPERTY, PLANT AND EQUIPMENT:

Changes in book value of property, plant and equipment for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

Six months ended June 30, 2015 Beginning

balance Acquisition Reclassification Disposal Depreciation Ending

balance Land ￦ 138,257 ￦ 762 ￦ - ￦ - ￦ - ￦ 139,019 Buildings 104,473 24 - (842) (1,414) 102,241 Vehicles 2,464 - - (16) (96) 2,352 Fixtures and equipment 87,856 6,560 2,460 (419) (18,198) 78,259 Construction in progress 23,380 14,256 (2,062) - - 35,574

Total ￦ 356,430 ￦ 21,602 ￦ 398 ￦ (1,277) ￦ (19,708) ￦ 357,445


balance Acquisition Reclassification Disposal Depreciation Ending

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

Total ￦ 282,042 ￦ 17,557 ￦ 1,375 ￦ (30) ￦ (14,157) ￦ 286,787 9. INTANGIBLE ASSETS:

Changes in intangible assets for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):


balance Acquisition Reclassification Amortization Impairment

reversal Ending

balance Development cost ￦ 98,710 ￦ 3,947 ￦ 2,050 ￦ (14,245) ￦ - ￦ 90,462 Others 3,199 - - (972) - 2,227 Construction in progress 11,144 4,699 (2,515) - - 13,328 Membership 20,614 - - - - 20,614

Total ￦ 133,667 ￦ 8,646 ￦ (465) ￦ (15,217) ￦ - ￦ 126,631


balance Acquisition Reclassification Amortization Impairment

reversal Ending

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

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

- 6 -

10. BORROWINGS:

(1) Details of borrowings as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

Lenders Annual interest

rate (%)

Maturity

June 30, 2015

December 31, 2014 Short-term borrowings Borrowings Hana bank

and five others 2.56–3.96 2015.07.20 –

2016.04.20 ￦ 150,000

￦ 150,000

Current portion of long-term borrowings

Borrowings SC Bank 3.76 2016.04.01 ￦ 50,000 ￦ - Long-term borrowings Borrowings SC Bank 3.76 2016.04.01 ￦ - ￦ 50,000 ￦ 200,000 ￦ 200,000

(2) Details of debentures as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in

millions):

Annual interest

rate (%) Maturity

June 30, 2015

December 31, 2014 Short-term debentures 1.72-1.86 2015.07.02 ￦ 50,000 ￦ - Discounts on debentures (5) -

Subtotal 49,995 - Current portion of long-term debentures 2.23–5.60,

1M USD LIBOR+1.50

2015.07.08 – 2016.06.27

￦ 1,852,940 ￦ 1,922,680 Discounts on debentures

(308)

(607) Subtotal 1,852,632 1,922,073

Long-term debentures 1.79–5.50, 1M USD

LIBOR+0.55

2016.07.15 – 2020.10.29

￦ 5,414,989 ￦ 5,817,768 Discounts on debentures

(7,983)

(9,714) Subtotal 5,407,006 5,808,054

Total ￦ 7,309,633 ￦ 7,730,127

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

11. RETIREMENT BENEFIT PLAN:

(1) Defined contribution plan

The expenses recognized in the condensed consolidated statements of comprehensive income related to postemployment benefit plan under the defined contribution plan for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 June 30, 2014

Defined contribution plan ￦ 37 ￦ 23

(2) Net defined benefit liability

The details of net defined benefit liability as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014

Net defined benefit liability ￦ 26,278 ￦ 16,332

Long-term employee benefit 3,800 3,553

Total ￦ 30,078 ￦ 19,885

- 7 -

(3) Defined Benefit Plan

1) General

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

2) Net defined benefit obligation

Changes in present value of net defined benefit obligation for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

Six months ended June 30, 2015 Present value of the

defined benefit obligation Plan assets

National Pension Fund

Net defined benefit obligation

Beginning balance ￦ 69,739 ￦ (53,378) ￦ (29) ￦ 16,332 Current service cost 6,628 - - 6,628 Interest expense (income) 921 (708) (1) 212 Return on plan assets,

excluding amounts included in interest income above

- 188 - 188

Actuarial gains and losses from changes in demographic assumptions

5 - - 5

Actuarial gains and losses from changes in financial assumptions

1,214 - - 1,214

Actuarial gains and losses from adjustment of experiences

2,300 - - 2,300

Transfer of employees between the Consolidated Entity and its related companies

(73) (57) - (130)

Benefits paid (2,927) 2,452 4 (471) Ending balance ￦ 77,807 ￦ (51,503) ￦ (26) ￦ 26,278

Six months ended June 30, 2014 Present value of the

defined benefit obligation Plan assets

National Pension Fund

Net defined benefit obligation

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

excluding amounts included in interest income above

- 264 - 264

Actuarial gains and losses from changes in demographic assumptions

- - - -

Actuarial gains and losses from changes in financial assumptions

2,264 - - 2,264

Actuarial gains and losses from adjustment of experiences

9,293 - - 9,293

Transfer of employees between the Consolidated Entity and its related companies

(4) 324 - 320

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

- 8 -

(4) Long-Term Employee Benefits

Changes in present value of long-term employee benefits liability for the six months ended June 30, 2015, are as follows (Unit: Korean won in millions):


Beginning balance ￦ 3,553 Current service cost 217 Interest cost 54 Actuarial gains and losses 117 Benefits paid (141) Ending balance ￦ 3,800

12. PROVISIONS:

Changes in provisions for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions): Six months ended June 30, 2015 Unused

commitment Point Asset retirement

obligation

Others Total Beginning balance ￦ 45,889 ￦ 22,744 ￦ 5,537 ￦ 9,385 ￦ 83,555 Increase (decrease) 1,220 6,270 267 (1,236) 6,521 Ending balance ￦ 47,109 ￦ 29,014 ￦ 5,804 ￦ 8,149 ￦ 90,076

Six months ended June 30, 2014 Unused

commitment Point Others Total Beginning balance ￦ 47,497 ￦ 22,944 ￦ 15,880 ￦ 86,321 Increase (decrease) (1,004) 739 (2,246) (2,511) Ending balance ￦ 46,493 ￦ 23,683 ￦ 13,634 ￦ 83,810

Other provisions include provision for deposits in escrow account and for pending litigations amounting to ￦2,236 million and ￦5,913 million, respectively, as of June 30, 2015. Also, provision for pending litigations includes the provision related to deposits in escrow account amounting to ￦4,467 million (see Note 24).

- 9 -

13. DERIVATIVES AND HEDGE ACCOUNTING: (1) There are no derivative instruments held for trading as of June 30, 2015, and December 31, 2014.

(2) Cash flow hedge

The Company removes the volatility risk of future cash flow of a hedged item, such as borrowings, caused by changes in market interest rates or in foreign currency rates, by using derivative instruments, such as an interest rate swap or currency swap. The Company’s policies and strategies of cash flow hedge are the same as those as of December 31, 2014.

1) Fair value of cash flow hedge as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015

Unsettled contract amount Assets Liabilities

Accumulated other comprehensive loss (*1)

Interest rate swap ￦ 1,203,000 ￦ - ￦ 21,779 ￦ (16,663) Cross-currency swap 400,929 15,351 102 (5,511)

Total ￦ 1,603,929 ￦ 15,351 ￦ 21,881 ￦ (22,174)

December 31, 2014

Unsettled contract amount Assets Liabilities

Accumulated other comprehensive

loss (*1) Interest rate swap ￦ 1,213,000 ￦ 80 ￦ 20,291 ￦ (15,351) Cross-currency swap 758,448 8,659 10,631 (5,297)

Total ￦ 1,971,448 ￦ 8,739 ￦ 30,922 ￦ (20,648)

(*1) After the effect of corporate income taxes

For transactions between local and foreign currencies, the unsettled contract amount of transaction is translated by applying the basic foreign exchange rate at the end of reporting period to the contract amount in foreign currencies. For transactions between foreign currencies and other foreign currencies, the unsettled contract amount is the amount translated by applying the basic foreign exchange rate at the end of reporting period to the contract amount in foreign currencies purchased.

2) The maximum period for the Company exposed to the variability in future cash flows arising from

derivatives designated as cash flow hedges is expected to be until March 6, 2019. Meanwhile, there is no ineffective portion recognized related to cash flow hedge for the six months ended June 30, 2015 and 2014.

- 10 -

14. PLANNED RESERVES FOR BAD LOANS:

(1) Details of planned reserves for bad loans as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014 Accumulated reserve for bad loans ￦ 666,023 ￦ 659,761 Transfer(reversal) to planned reserve for bad loans (33,350) 6,262 Reserve for bad loans ￦ 632,673 ￦ 666,023

(2) Transfer (reversal) to planned reserve for bad loans and net income after the reserve provided for the six

months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions, except for earnings per share):

Six months ended June 30 2015 2014 Net income ￦ 110,827 ￦ 136,958 Transfer (reversal) to planned reserve for bad loans (33,350) 17,532 Net income after the planned reserve provided 144,177 119,426 Earnings per share after the planned reserve provided 898 744

15. RETAINED EARNINGS:

(1) Details of retained earnings as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014 Legal reserve (*1) ￦ 20,143 ￦ 20,143 Planned reserve for bad loans (Note 14) 666,023 659,761 Unappropriated retained earnings 1,160,129 1,055,564

Total ￦ 1,846,295 ￦ 1,735,468

(*1) Korean Commercial Code requires a company to appropriate at least 10% of dividends paid as legal reserve for each fiscal period, until the reserve equals 50% of paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.

(2) Changes in retained earnings for the six months ended June 30, 2015 and 2014, are as follows (Unit:

Korean won in millions):

Six months ended June 30 2015 2014 Beginning balance ￦ 1,735,468 ￦ 1,511,954 Net income 110,827 136,958 Ending balance ￦ 1,846,295 ￦ 1,648,912

- 11 -

16. NET INTEREST EXPENSE:

Net interest expense from financial instruments for the three months and six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions): 2015 2014 Three months

ended June 30 Six months

ended June 30 Three months ended June 30


Interest income Cash and deposits ￦ 4,308 ￦ 10,047 ￦ 6,086 ￦ 10,618 Others 275 829 373 948

Total 4,583 10,876 6,459 11,566 Interest expenses

Borrowings 2,057 4,083 3,453 6,433 Debentures 66,568 136,760 73,840 147,102 Others (23) (18) 23 31

Total 68,602 140,825 77,316 153,566 Net interest expenses ￦ (64,019) ￦ (129,949) ￦ (70,857) ￦ (142,000)

17. NET COMMISSION INCOME:

Net commission income (expenses) from financial instruments for the three months and six months ended June 30, 2015 and 2014, is as follows (Unit: Korean won in millions):

2015 2014 Three months




Commission income Card income ￦ 387,004 ￦ 767,592 ￦ 378,150 ￦ 758,378

Total 387,004 767,592 378,150 758,378 Commission expenses

Service fee 131,985 263,683 128,158 256,478 Financial payment fee 2,332 4,640 2,724 5,332 Handling fee relating to credit purchase

37,278 75,171 35,528 65,585

Merchants copayment fee 14 27 13 26 Overseas payment fee 10,744 21,261 10,605 20,677 Other 11,431 22,113 12,319 25,137

Total 193,784 386,895 189,347 373,235 Net commission income ￦ 193,220 ￦ 380,697 ￦ 188,803 ￦ 385,143

- 12 -

18. OTHER OPERATING REVENUE AND OTHER OPERATING EXPENSES:

Other operating revenues and expenses for the three months and six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions): 2015 2014 Three months




Other operating revenue Foreign exchange gain ￦ 3,692 ￦ 7,159 ￦ 4,184 ￦ 7,068 Foreign currency translation gain - - 25,669 25,669 Gain on transaction of derivatives (546) 1,653 - 1,460 Gain on valuation of derivatives 5,652 8,881 (6,300) - Others 10,695 15,712 8,066 13,908

Total ￦ 19,493 ￦ 33,405 ￦ 31,619 ￦ 48,105 Other operating expenses

Foreign exchange loss ￦ 757 ￦ 4,230 ￦ 421 ￦ 2,702 Foreign currency translation loss 5,652 8,881 (6,300) - Loss on transaction of derivatives - - 1,213 1,213 Loss on valuation of derivatives - - 25,669 25,669 Others 12,243 18,843 4,227 14,673

Total ￦ 18,652 ￦ 31,954 ￦ 25,230 ￦ 44,257

- 13 -

19. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses for the three months and six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):





Salaries and wages ￦ 43,348 ￦ 88,790 ￦ 35,090 ￦ 63,711 Pension expenses 5,273 8,711 2,205 4,407 Employee benefits 5,709 13,105 5,059 11,874 Travel expenses 657 1,202 690 1,157 Communication expenses 8,807 16,687 6,076 11,965 Posts expenses 4,786 9,558 3,864 9,189 Rental expenses 6,141 12,641 6,069 12,175 Taxes dues 4,079 9,013 3,832 8,666 Repair and maintenance expenses 263 424 175 319 Insurance premiums 61 111 51 76 Entertainment expenses 187 328 195 337 Advertising expenses 9,793 15,548 15,634 21,713 Supply expenses 1,017 1,725 400 834 Vehicle maintenance expenses 3 6 2 7 Periodicals expenses 87 123 36 107 Publication expenses 2,477 4,480 1,943 3,815 Training expenses 1,081 2,500 784 1,926 Electronic data processing expenses 9,884 20,024 11,200 22,472 Expense for temporary staff 1,878 4,128 9,231 18,136 Professional expenses 34,746 66,183 35,403 66,178 Delivery commission 420 840 520 975 Commission expenses 7,853 14,634 6,327 12,427 Business activities expenses 782 1,458 760 1,448 Depreciation expenses 9,670 19,708 7,086 14,157 Amortization expenses 7,552 15,217 4,138 8,250 Event expenses 1,099 1,535 470 592 Conference expenses 125 185 46 86 Building administrative expenses 1,939 3,823 1,711 3,351

Total ￦ 169,717 ￦ 332,687 ￦ 158,997 ￦ 300,350

- 14 -

20. INCOME TAX EXPENSES:

(1) Income tax expenses for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

Six months ended June 30 2015 2014 Income tax currently payable ￦ 32,562 ￦ 39,739 Changes in deferred income tax assets (347) (2,502) Changes in income tax expense reflected directly in shareholders’ equity 996 5,547 Income tax expense ￦ 33,211 ￦ 42,784

(2) Income tax expenses reflected directly in shareholders’ equity for the six months ended June 30, 2015 and

2014, are as follows (Unit: Korean won in millions): January 1, 2015 Increase June 30, 2015 Tax effect related to the cash flow hedging reserve loss ￦ 6,537 ￦ 269 ￦ 6,806 Tax effect related to remeasurements of the net defined benefit liability 6,166 727 6,893

Total ￦ 12,703 ￦ 996 ￦ 13,699

January 1, 2014 Increase June 30, 2014 Tax effect related to the cash flow hedging reserve loss ￦ 261 ￦ 2,708 ￦ 2,969 Tax effect related to remeasurements of the net defined benefit liability 1,591 2,839 4,430

Total ￦ 1,852 ￦ 5,547 ￦ 7,399

(3) A reconciliation between income before income tax and income tax expense for the six months ended June 30, 2015 and 2014, is as follows (Unit: Korean won in millions):

Six months ended June 30 2015 2014 Net income before income tax ￦ 144,038 ￦ 179,742 Net income tax payable by the statutory income tax rates (*) 34,395 43,036 Tax reconciliations:

Others (1,184) (252) Subtotal (1,184) (252)

Income tax expense for continued operation 33,211 42,784 Effective tax rates (income tax/income before income tax) 23.06% 23.80%

(*) Applicable income tax rate: 1) 11% for below ￦200 million, 2) 22% for from ￦200 million to ￦20

billion and 3) 24.2% for above ￦20 billion.

- 15 -

21. EARNINGS PER SHARE:

(1) Basic earnings per share for the three months and six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won):





Net income (A) ￦ 48,659,548,903 ￦ 110,826,869,613 ￦ 54,481,123,485 ￦ 136,958,027,178 Weighted-average

number of shares (B)

160,465,286 shares 160,465,286 shares 160,465,286 shares 160,465,286 shares Net income per share (A/B) ￦ 303 ￦ 691 ￦ 340 ￦ 854 (2) Diluted earnings per share

As there were no discontinued operations during the six months ended June 30, 2015 and 2014, basic earnings per share are the same as basic earnings per share from continuing operations.

22. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2015 and 2014, are as follows (Unit: Korean won in millions):

Six months ended June 30, 2015 Changes Beginning

balance Reclassification of profit or loss Other

Income tax effects

Ending balance

Gain (loss) on valuation of derivatives

￦ (20,648) ￦ (213) ￦ (1,582) ￦ 269 ￦ (22,174)

Remeasurements of the net defined benefit liability

(19,470) - (3,707) 727 (22,450)

Total ￦ (40,118) ￦ (213) ￦ (5,289) ￦ 996 ￦ (44,624)

Six months ended June 30, 2014 Changes Beginning

balance Reclassification of profit or loss Other

Income tax effects

Ending balance

Gain (loss) on valuation of derivatives

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

Remeasurements of the net defined benefit liability

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

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

- 16 -

23. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS:

(1) Cash and cash equivalents

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

June 30, 2015 June 30, 2014

Ordinary deposits ￦ 154,230 ￦ 98,070 Current deposits 92 75 Time deposits 13,200 11,000 Other cash and cash equivalents 239,778 1,035,000

Total ￦ 407,300 ￦ 1,144,145

(2) Cash generated from operating activities

Cash generated from operating activities is as follows (Unit: Korean won in millions):

Six months ended June 30 2015 2014 Net income ￦ 110,827 ￦ 136,958 Adjustments:

Income tax expense 33,211 42,784 Interest income (10,876) (11,566) Interest expense 140,825 153,566 Dividends received (147) (173) Bad debt expenses and losses on disposal of receivables 105,949 126,287 Retirement benefits 6,841 4,384 Depreciation expenses 19,708 14,157 Amortization expenses 15,217 8,250 Losses on foreign currency translation 8,881 - Losses on valuation of derivatives - 25,669 Increase in provision for unused credit limit 1,220 - Losses from sale of property, plant and equipment and intangible assets

1,260

19

Sales promotional expenses 16,280 13,839 Increase in provision for others 6,270 2,313 Other operating expenses 854 496 Gains on valuation of trading securities (467) - Gains on disposal of AFS securities (115) (30) Gains on foreign currency translation - (25,669) Gains on valuation of derivatives (8,881) - Amortization of present value discounts of card assets (17,656) (14,231) Amortization of deferred origination cost and fee of card assets (11,903) (13,019) Decrease in provision for unused credit limit - (1,004) Gains from sale of property, plant and equipment and intangible assets (29) (12) Reversal of impairment losses for intangible assets - (6) Decrease in provision for others (1,606) (1,180) Other operating revenues (13) (30)

Subtotal 304,823 324,844 Changes in operating assets and liabilities:

Decrease in trading securities 207,102 - Decrease (increase) in card assets 242,980 (327,736) Decrease (increase) in other financial assets (31,902) 5,875 Increase in other non-financial assets (843) (698) Decrease in net defined benefit liabilities (601) (1,418) Increase (decrease) in other financial liabilities 48,238 (47,778)

- 17 -

Decrease in other non-financial liabilities ￦ ( (8,584) ￦ ( (14,693) Subtotal 456,390 (386,448)

Total ￦ 872,040 ￦ 75,354

24. CONTINGENCIES AND COMMITMENTS:

(1) Credit line agreement

The credit line agreements as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

Type Financial instruments June 30, 2015 December 31, 2014

Intraday overdraft limit Shinhan Bank and 13 others

￦ 552,600

￦ 552,600

(2) Revolving Credit Facility

As the Consolidated Entity has a revolving credit facility agreement with many financial institutions for credit line as of June 30, 2015, the Consolidated Entity made a revolving credit facility agreement for ￦490 billion with Kookmin Bank and 8 others for credit line.

(3) Guarantee

The Consolidated Entity has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd., amounting to ￦282 million in connection with deferred transportation payment card and others. (4) Pending litigations

As of June 30, 2015, the Consolidated Entity is involved in 38 cases (￦46,375 million) as a defendant, 12 cases (￦12,411 million) as a plaintiff and multiple cases for the collection of receivables against a number of debtors in pending litigations. The Consolidated Entity has recognized ￦5,913 million as other provisions regarding defendant cases. Except the defendant cases recognized as other provisions, the management of the Consolidated Entity does not anticipate that these pending litigations referred above will have a significant effect on the Consolidated Entity’s consolidated financial statements (see Note 12). (5) Deposit for Loss Reimbursement

As of June 30, 2015, the Consolidated Entity has deposits of ￦2,236 million and ￦4,670 million of proceeds and interests, respectively, from the sale of Daewoo Engineering & Construction Co., Ltd.’s shares in an escrow account and records ￦2,236 million and ￦4,467 million for provision of proceeds and interests, respectively, from the litigation relating to the sale of Daewoo Engineering & Construction Co., Ltd.’s shares (see Note 12).

(6) Contract of Sale of Receivables

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

(7) Reserve for Loss Reimbursement

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

- 18 -

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

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

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

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

25. TRANSACTION WITH RELATED PARTIES:

(1) Status of related parties Details of the related parties as of June 30, 2015, are as follows:

Companies

Parent Company Hyundai Motor Company Other related parties GE Capital Int’l Holdings, HMC Investment Securities, Green Air, Kia Motors,

Kia Tigers, Maintrans Co., Ltd., Busan Finance Center AMC, HL Green Power, WIA-MAGNA Powertrain, Eukor Car Carriers, Innocean Worldwide, Iljin Bearing, Chunbuk Hyundai Motors FC, Korea Credit Bureau, Hankook Economy Daily, Haevichi Resort, Haevichi Country Club, Hyundai Construction, Hyundai Glovis, Hyundai Dymos, Hyundai City Corporation, Hyundai Life, Hyundai Rotem, Hyundai Materials, Hyundai Mobis, Hyundai BNG Steel, Hyundai Farm Land & Development, Hyundai Engineering & Steel Industries, Hyundai IHL, Hyundai Energy, Hyundai Engineering, Hyundai NGV, Hyundai MSEAT, Hyundai Auto Ever Systems, Hyundai-autron, Hyundai WIA, Hyundai Steel Company, HYUNDAI Architects & Engineers Assoc., Hyundai Capital, Hyundai Commercial, Hyundai KEFICO, Hyundai Powertech, Hyundai Partecs, and Hyundai Hysco, etc.

(2) Outstanding transactions with the related parties for the six months ended June 30, 2015 and 2014, are as

follows (Unit: Korean won in millions):

Six months ended June 30, 2015 Revenues Expenses Others

Card income Rental revenue Others Card expense

General and administrative

expenses Others

Purchase of property, plant and equipment

Purchase of intangible

assets Disposal of

assets Parent Company

Hyundai Motor Company

￦ 53,478 ￦ - ￦ - ￦ - ￦ 284 ￦ 2 ￦ - ￦ - ￦ -

Other related parties

Kia Motor Company

19,141 - - - 7 - - - -

Hyundai Mobis 366 - - - - - - - - Hyundai Construction

125 - - - - - 3,823 - -

Hyundai Glovis 161 - - - - - - - - Hyundai Capital 41 260 11,572 11,435 1,237 13,763 - - 181,718 Others 5,208 505 565 78 28,002 5,105 - 5,627 -

Total ￦ 78,520 ￦ 765 ￦ 12,137 ￦ 11,513 ￦ 29,530 ￦ 18,870 ￦ 3,823 ￦ 5,627 ￦ 181,718

- 19 -

Six months ended June 30, 2014 Revenues Expenses Others

Card income Rental revenue Others Card expense

General and administrative

expenses Others

Purchase of property and equipment

Purchase of intangible

assets Disposal of

assets Parent Company

Hyundai Motor Company

￦ 57,927 ￦ - ￦ - ￦ - ￦ 92 ￦ 33 ￦ - ￦ - ￦ -

Other related parties

Kia Motor Company

20,082 - - - 11 13 - - -

Hyundai Mobis 529 - - - - - - - -

Hyundai Construction

113 - - - 6 - 2,805 - -

Hyundai Glovis 197 - - - - - - - - Hyundai Capital 33 264 11,989 7,365 1,804 11,331 - - 203,128 Others 7,064 507 607 79 26,961 5,147 - 4,933 -

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

(3) Receivables and payables from the transactions with the related parties as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 Receivable Payables Card assets Others Accounts payable Others Parent Company

Hyundai Motor Company ￦ 56,091 ￦ 2,128 ￦ 49,497 ￦ - Other related parties

Kia Motor Company 18,334 - 7,827 - Hyundai Movis 2,059 - 363 - Hyundai Construction 1,392 - 383 - Hyundai Glovis 1,778 - - - Hyundai Capital 122,440 423 1,261 265 Others 29,893 45,898 16,199 526

Total ￦ 231,987 ￦ 48,449 ￦ 75,530 ￦ 791

December 31, 2014 Receivable Payables Card assets Others Accounts payable Others Parent Company

Hyundai Motor Company ￦ 68,293 ￦ 2,128 ￦ 51,529 ￦ - Other related parties

Kia Motor Company 42,731 173 9,075 - Hyundai Movis 2,864 - 468 - Hyundai Construction 1,787 - - - Hyundai Glovis 1,781 - 364 - Hyundai Capital 126,110 497 599 265 Others 39,385 46,406 17,014 630

Total ￦ 282,951 ￦ 49,204 ￦ 79,049 ￦ 895

- 20 -

(4) Compensation for key management for the six months ended June 30, 2015 and 2014, is as follows (Unit: Korean won in millions):


2015 2014 Short-term employee benefit ￦ 6,374 ￦ 4,321 Retirement benefit 982 958 Other long-term employee benefit 7 -

Total ￦ 7,363 ￦ 5,279

(5) There were no borrowing transactions with the related parties for the six months ended June 30, 2015 and

2014.

(6) There were no lending transactions with the related parties for the six months ended June 30, 2015 and 2014.

(7) As of June 30, 2015, there are no payment guarantees and collaterals that the Consolidated Entity has

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

26. TRANSFERS OF FINANCIAL ASSETS:

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

The details of ABSs and underlying assets as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 Carrying amount Fair value

Maturity Underlying

asset Senior tranche Underlying

asset Senior tranche Net position PRIVIA 3rd SPC 2015.07.20 ￦ 1,169,897 ￦ 74,940 ￦ 1,317,943 ￦ 74,957 ￦ 1,242,986 PRIVIA 4th SPC 2017.07.18 913,685 325,989 1,040,416 326,925 713,491 PRIVIA 5th SPC 2018.02.19 863,746 300,000 915,130 303,201 611,929 Discounts on bonds - (4,070) - - -

Total ￦ 2,947,328 ￦ 696,859 ￦ 3,273,489 ￦ 705,083 ￦ 2,568,406

December 31, 2014 Carrying amount Fair value

Maturity Underlying

asset Senior tranche Underlying

asset Senior tranche Net position PRIVIA 3rd SPC 2015.07.20 ￦ 1,277,386 ￦ 439,680 ￦ 1,388,805 ￦ 440,271 ￦ 948,534 PRIVIA 4th SPC 2017.07.18 829,641 318,768 924,226 319,197 605,029 PRIVIA 5th SPC 2018.02.19 858,317 300,000 877,311 300,042 577,269 Discounts on bonds - (5,334) - - -

Total ￦ 2,965,344 ￦ 1,053,114 ￦ 3,190,342 ￦ 1,059,510 ￦ 2,130,832

- 21 -

27. NETTING ON FINANCIAL ASSETS AND LIABILITIES:

Derivative assets and derivative liabilities recognized by the Consolidated Entity can be set off in accordance with the future events described in derivative master netting agreements.

The effects of netting agreements as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 Non-offsetting amount

Recognized financial assets and liabilities

Offsetting amount from recognized

financial assets and liabilities

Net amounts in the

consolidated statement of

financial position

Financial instruments

Cash collateral received Net amounts

Financial Assets Derivative assets ￦ 15,351 ￦ - ￦ 15,351 ￦ 102 ￦ - ￦ 15,249

Financial Liabilities Derivative liabilities 21,881 - 21,881 102 - 21,779

December 31, 2014 Non-offsetting amount

Recognized financial assets and liabilities

Offsetting amount from recognized

financial assets and liabilities

Net amounts in the

consolidated statement of

financial position

Financial instruments

Cash collateral received Net amounts

Financial Assets Derivative assets ￦ 8,739 ￦ - ￦ 8,739 ￦ 8,659 ￦ - ￦ 80

Financial Liabilities Derivative liabilities 30,922 - 30,922 8,659 - 22,263

28. FINANCIAL ASSETS AND LIABILITIES:

(1) The fair value of financial assets and liabilities as of June 30, 2015, and December 31, 2014, is as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014 Book value Fair value Book value Fair value Assets:

Financial assets Cash and deposits ￦ 440,328 ￦ 440,328 ￦ 200,725 ￦ 200,725 Investment financial assets 534,136 534,136 740,771 740,771 Card assets 10,212,822 10,770,004 10,549,897 11,136,398 Other financial assets 244,790 244,790 205,190 205,315

Total ￦ 11,432,076 ￦ 11,989,258 ￦ 11,696,583 ￦ 12,283,209 Liabilities:

Financial liabilities Borrowings ￦ 200,000 ￦ 200,592 ￦ 200,000 ￦ 200,366 Debentures 7,309,633 7,534,529 7,730,127 7,946,435 Other financial liabilities 1,440,878 1,440,878 1,393,751 1,393,764

Total ￦ 8,950,511 ￦ 9,175,999 ￦ 9,323,878 ￦ 9,540,565

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

- 22 -

(2) Fair value hierarchy

All financial instruments at fair value are categorized into three fair value hierarchy levels. The method of categorizing fair value hierarchy levels is the same as the one used for the previous period. The table below provides the Consolidated Entity’s financial assets and liabilities recorded at fair value in the condensed consolidated statements of financial position as of June 30, 2015, and December 31, 2014 (Unit: Korean won in millions):

June 30, 2015 Fair value hierarchy Book value Fair value Level 1 Level 2 Level 3 Financial Assets

Trading securities ￦ 532,369 ￦ 532,369 ￦ - ￦ 532,369 ￦ - Derivative assets 15,351 15,351 - 15,351 -

Financial Liabilities Derivative liabilities 21,881 21,881 - 21,881 -

December 31, 2014 Fair value hierarchy Book value Fair value Level 1 Level 2 Level 3 Financial Assets

Trading securities ￦ 739,004 ￦ 739,004 ￦ - ￦ 739,004 ￦ - Derivative assets 8,739 8,739 - 8,659 80

Financial Liabilities Derivative liabilities 30,922 30,922 - 30,922 -

The table below provides the Consolidated Entity’s financial assets and financial liabilities that are carried at cost since the fair values of the financial instruments are not readily determinable in the condensed consolidated statements of financial position as of June 30, 2015, and December 31, 2014 (Unit: Korean won in millions):

Description June 30, 2015 December 31, 2014

Investment financial assets AFS securities (*1) Unlisted equity securities ￦ 1,767 ￦ 1,767

(*1) AFS securities are recorded at cost since they do not have quoted prices in an active market and the fair

values are not reliably measured.

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

(4) The following table explains valuation techniques and input variables used in Level 2 or Level 3 fair value measurement. The valuation techniques and input variables of the financial assets and liabilities, which are measured at amortized cost, are as follows:

Description Classification

Fair Value

(In Million KRW)

Current / Prior

Fair Value

Hierarchy Valuation Techniques Notable Unobservable Inputs

and Extent

Card Assets Assets 10,770,004 11,136,398 Level 3 DCF model is used to determine the fair value of card assets. The fair value is determined by discounting the expected cash flows with the market interest rate considering the Consolidated Entity’s credit grade.

Market rate of profit, credit spread, liquidity premium, other spread, cost rate per creditors

- 23 -


Fair Value

(In Million KRW)

Current / Prior

Fair Value


and Extent

Leasehold deposits provided

Assets 32,389 31,173 Level 2 DCF model is used to determine the fair value of lease deposits provided. The fair value is determined by discounting the expected cash flows with the market interest rate considering the Consolidated Entity’s credit grade.

Market rate of profit, credit spread, liquidity premium, other spread

Trading securities

Assets 532,369 739,004 Level 2 DCF model is used to determine the fair value of trading securities. The fair value is determined by discounting the expected cash flows with the market interest rate considering the similar credit grade with the debt security issuer.

N/A

Borrowings Liabilities 7,735,121 8,146,801 Level 2 DCF model is used to determine the fair value of borrowings. The fair value is determined by discounting the expected cash flows with the market interest rate considering the Consolidated Entity’s credit grade.


Leasehold deposits received

Liabilities 8,969 8,664 Level 2 DCF model is used to determine the fair value of lease deposits received. The fair value is determined by discounting the expected cash flows with the market interest rate considering the Consolidated Entity’s credit grade.


Interest Rate Swap

Liabilities 21,779 20,291 Level 2 Discount rates and forward rates used to measure fair values of interest rate swap are determined based on the applicable constructed market-based yield curve. The fair value is determined by offsetting the discounted expected cash flows of interest rate swap with the aforementioned forward rates.

N/A

Currency Swaps

Assets 15,351 8,659 Level 2 Discount rates and forward rates used to measure fair values of currency swaps are determined based on the applicable constructed market-based yield curve. The trading base rate in the morning of the report date is used as currency swap’s exchange rate. The fair value is determined by offsetting the discounted expected cash flows of currency swap with the aforementioned forward rates and closing price.

Discounted interest rate purchased, discounted interest rate sold.

Liabilities 102 10,631

- 24 -


Fair Value

(In Million KRW)

Current / Prior

Fair Value


and Extent

Structured Swaps

Assets - 80 Level 3 Structured Swaps - Discount curve and expected interest rates used to determine the fair value of structured swap are taken from market-based swap interest rates as of the reporting date through snapping. - The volatility used in determining the fair value of structured swaps is taken from market-based Cap/Floor/Swaption volatility as of the reporting date through snapping. - Hull and White model is applied in determining the fair value of structured swaps. - The fair value is determined by discounting the expected cash flows of structured swaps with the aforementioned swap interest rates and volatility.

Volatility of the underlying assets, discounted interest rate.

(5) Changes in financial assets and liabilities classified as Level 3 that are measured at fair value for the six

months ended June 30, 2015, and the year ended December 31, 2014, are as follows (Unit: Korean won in millions):


Beg Gains/ Losses

Other Comprehensive Income (Loss)

Purchases/ Issues

Sales/ Settlements To/From Level 3 End.

Financial Instruments Derivatives Assets ￦ 80 ￦ - ￦ - ￦ - ￦ (80) ￦ - ￦ -

Year ended December 31, 2014

Beg Gains/ Losses

Other Comprehensive Income (loss)

Purchases/ Issues

Sales/ Settlements To/From Level 3 End.

Financial Instruments Derivatives Assets ￦280 ￦ - ￦ (200) ￦ - ￦ - ￦ - ￦ 80

(6) There are no significant changes in business or economic environment that affect fair values of financial

assets and liabilities held by the Consolidated Entity as of June 30, 2015.

- 25 -

29. FINANCIAL RISK MANAGEMENT:

The Consolidated Entity is exposed to credit, liquidity and market risks (exchange and rate risk). In order to manage these factors, the Consolidated Entity operates risk management policies and programs that monitor closely and respond to each of the risk factors. The Consolidated Entity uses derivatives to manage market risks. There was no significant change in the Consolidated Entity’s risk management division and policies after December 31, 2014.

30. CAPITAL MANAGEMENT:

The Company (specialized credit finance company) must maintain adjusted capital adequacy ratio in accordance with Specialized Credit Financial Business Law and subregulations, and the ratio for the credit card company must be more than 8 %. This ratio is calculated dividing adjusted capital by adjusted total assets and all factors are based on separate financial statements. The Company maintains an adjusted capital adequacy ratio over 8%.

The details of adjusted capital adequacy ratio as of June 30, 2015, and December 31, 2014, are as follows (Unit: Korean won in millions):

June 30, 2015 December 31, 2014 Adjusted total assets (A) ￦ 10,927,727 ￦ 11,272,517 Adjusted total capital (B) 2,198,412 2,047,771 Adjusted capital adequacy ratio (B/A) 20.12% 18.17%