review reports 1 q2014 ko

Hyundai Capital Services, Inc. and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2014

(With Independent Auditors� Review Report Thereon)

Contents

Page

Independent Auditors� Review Report 1

Condensed Consolidated Interim Statements of Financial Position 3

Condensed Consolidated Interim Statements of Comprehensive Income 5

Condensed Consolidated Interim Statements of Changes in Equity 8

Condensed Consolidated Interim Statements of Cash Flows 10

Notes to the Condensed Consolidated Interim Financial Statements 11

KPMG Samjong Accounting Corp.

10th Floor, Gangnam Finance Center, 737 Yeoksam-dong,

Gangnam-ku, Seoul 135-984,

Republic of Korea

Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101

www.kr.kpmg.com

Independent Auditors� Review Report

(Based on a report originally issued in Korean)

The Board of Directors and Shareholders

Hyundai Capital Services, Inc.:

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

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

statement of financial position as of March 31, 2014, the condensed consolidated statements of

comprehensive income, changes in equity and cash flows for the three-month periods ended March

31, 2014 and 2013 and notes, comprising a summary of significant accounting policies and other

explanatory information.

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

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

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

is necessary to enable the preparation of condensed consolidated interim financial statements that are

free from material misstatement, whether due to fraud or error.

Auditors� Review Responsibility Our responsibility is to issue a report on these condensed consolidated interim financial statements

based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly & Semiannual

Financial Statements established by the Securities and Futures Commission of the Republic of Korea.

A review of interim financial information consists of making inquiries, primarily of persons responsible

for financial and accounting matters, and applying analytical and other review procedures. A review is

substantially less in scope than an audit conducted in accordance with auditing standards generally

accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we

would become aware of all significant matters that might be identified in an audit. Accordingly, we do

not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the

accompanying condensed consolidated interim financial statements referred to above are not

prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting.

Others

The consolidated statement of financial position of the Group as of December 31, 2013, and the

related consolidated statements of comprehensive income, changes in equity, and cash flows (not

included in this review report) for the year then ended, were audited in accordance with auditing

standards generally accepted in the Republic of Korea, and our report thereon, dated February 27,

2014, expressed an unqualified opinion. The accompanying consolidated statement of financial position

of the Group as of December 31, 2013, presented for comparative purposes, is not different from that

audited in all material respects.


10th Floor, Gangnam Finance Center, 737 Yeoksam-dong,

Gangnam-ku, Seoul 135-984,

Republic of Korea

Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101

www.kr.kpmg.com


Seoul, Korea

May 13, 2014

This report is effective as of May 13, 2014, the review report date. Certain subsequent events or

circumstances, which may occur between the review report date and the time of reading this report,

could have a material impact on the accompanying condensed consolidated interim financial

statements and notes thereto. Accordingly, the readers of the review report should understand that

the above report has not been updated to reflect the impact of such subsequent events or

circumstances, if any.


Condensed Consolidated Interim Statements of Financial Position

As of March 31, 2014 and December 31, 2013

(Unaudited)

3

(In millions of won)

Notes March 31,

2014 December 31,

2013

Assets

Cash and due from banks 22

Cash and cash equivalents W 1,911,613 1,502,600

Due from banks 15 15

1,911,628 1,502,615

Securities 3

Available-for-sale securities 55,022 52,783

Investments in associates 133,074 157,313

188,096 210,096

Loans receivable 4,5

Loans receivable 10,723,208 11,457,559

Allowance for loan loss (337,687) (333,359)

10,385,521 11,124,200

Installment financial assets 4,5

Auto installment financing receivables 5,453,893 4,832,949

Allowance for loan loss (48,357) (42,693)

Durable goods installment financing receivables 71 -

Mortgage installment financing receivables 9,406 9,884

Allowance for loan loss (180) (286)

5,414,833 4,799,854

Lease receivables 4,5

Finance lease receivables 2,945,228 2,989,186

Cancelled lease receivables 809 773

2,946,037 2,989,959

Leased assets, net

Operating lease assets 1,106,211 1,066,694

Cancelled lease assets 3,378 3,033

1,109,589 1,069,727

Property and equipment, net 6 232,075 233,018

Non-current assets held for sale 8 22,347 22,347

Other assets

Intangible assets 7 60,143 62,747

Non-trade receivables 114,414 119,207

Allowance for credit loss 5 (5,688) (5,457)

Accrued revenues 117,007 118,737

Allowance for credit loss 5 (15,451) (15,220)

Advance payments 64,245 57,153

Prepaid expenses 78,168 47,774

Leasehold deposits 27,839 28,343

Derivative assets 12 31,434 23,946

472,111 437,230

Total assets W 22,682,237 22,389,046

See accompanying notes to the condensed consolidated interim financial statements.

Hyundai Capital Services, Inc.

Condensed Consolidated Interim Statements of Financial Position, Continued

As of March 31, 2014 and December 31, 2013

(Unaudited)

4

(In millions of won)

Notes March 31,

2014 December 31,

2013

Liabilities

Borrowings 9

Borrowings W 1,717,270 1,811,443

Bonds 15,972,356 15,426,879

17,689,626 17,238,322

Other liabilities

Non-trade payables 240,741 307,752

Accrued expenses 168,431 161,447

Unearned revenue 41,000 41,857

Withholdings 41,124 37,486

Derivative liabilities 12 410,220 512,746

Current tax liabilities 54,840 58,528

Defined benefit liability 10 15,129 12,884

Leasehold deposits received 684,391 706,224

Deferred income tax liabilities 19 52,826 57,021

Provisions 11 1,700 1,826

Other liabilities 60 70

1,710,462 1,897,841

Total liabilities 19,400,088 19,136,163

Equity

Issued capital 496,537 496,537

Capital surplus 407,539 407,539

Accumulated other comprehensive loss 21 (12,859) (11,573)

Retained earnings 13,14 2,390,932 2,360,380

Total equity 3,282,149 3,252,883

Total liabilities and equity W 22,682,237 22,389,046



Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month periods ended March 31, 2014 and 2013

(Unaudited)

5

(In millions of won, except earnings per share information) Notes 2014 2013

Operating revenue

Interest income 15 W 11,876 8,128

Gain on valuation and disposal of securities 653 921

Income on loans 15,16 332,543 376,043

Income on installment financial receivables 15,16 79,405 66,648

Income on leases 15,16 218,648 228,029

Gain on disposals of loans 3,844 3,138

Gain on foreign currency transactions 508 22,976

Dividend income 2,206 2,357

Other operating income 17 139,266 211,341

Total operating revenue W 788,949 919,581



Condensed Consolidated Interim Statements of Comprehensive Income, Continued


(Unaudited)

6


Operating expenses

Interest expenses 15 W 194,815 204,013

Lease expenses 16 126,258 127,829

Provision for loan loss 5 118,978 100,930

Loss on foreign currency transactions 105,060 175,969

General and administrative expenses 18 153,533 154,280

Other operating expenses 17 12,823 39,214

Total operating expenses 711,467 802,235

Operating income 77,482 117,346

Non-operating income 6,122 91,884

Non-operating expenses (28,318) (3,149)

Profit before income taxes 55,286 206,081

Income tax expense 19 24,734 53,232

Profit for the period W 30,552 152,849



Condensed Consolidated Interim Statements of Comprehensive Income, Continued

For the three-month periods ended March, 2014 and 2013

(Unaudited)

7


Other comprehensive income (loss), net of income taxes

21

Items that will not be reclassified to profit or loss:

Changes in remeasurements of defined benefit

plans

W (889) (1,459)

Items that are or may be reclassified

subsequently to profit or loss:

Net change in unrealized fair value of available-

for-sale financial securities

883 242

Other comprehensive income (expense) of

equity method investees

(389) 1,139

Net change in unrealized fair value of derivatives (794) (19,737)

Effect of overseas operation translations (97) 92

Total other comprehensive income (loss), net of

income tax

(1,286) (19,723)

Total comprehensive income for the period W 29,266 133,126

Earnings per share 20

Basic and diluted earnings per share W 308 1,539


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Condensed Consolidated Interim Statements of Cash Flows


(Unaudited)

10

(In millions of won) Notes 2014 2013

Cash flows from operating activities

Cash generated from operations 22 W 267,677 276,857

Interest received 11,693 7,917

Interest paid (170,925) (201,362)

Dividends received 2,206 2,357

Income taxes paid (32,709) (33,067)

Net cash provided by operating activities 77,942 52,702

Cash flows from investing activities

Dividends from associates - 533

Acquisition of land (10) -

Proceeds from disposal of land - 114,486

Acquisition of building (405) -

Proceeds from disposal of building - 63,415

Acquisition of vehicles (189) (155)

Proceeds from disposal of vehicles 64 98

Acquisition of fixtures and furniture (1,978) (1,057)

Proceeds from disposal of fixtures and furniture 2 47

Acquisition of other tangible assets (65) (48)

Proceeds from disposal of other tangible assets 10 -

Increase in construction in progress (2,350) (4,262)

Proceeds from disposal of intangible assets (612) (162)

Decrease in leasehold deposits 1,072 -

Increase in leasehold deposits (513) (2,765)

Net cash provided by provided by (used in) investing activities (4,974) 170,130

Cash flows from financing activities

Proceeds from borrowings 330,000 460,000

Repayments of borrowings (425,000) (654,969)

Issuance of bonds 1,361,393 748,190

Repayments of bonds (930,318) (945,730)

Net cash used in financing activities 336,075 (392,509)

Effect of exchange rate fluctuations on cash and cash equivalents held (30)

14

Net increase (decrease) in cash and cash equivalents 409,013 (169,663)

Cash and cash equivalents at beginning of period 22 1,502,600 1,302,161

Cash and cash equivalents at end of period 22 W 1,911,613 1,132,498



Notes to the Condensed Consolidated Interim Financial Statements

March, 2014

(Unaudited) (In millions of won)

11

1. Reporting Entity

Hyundai Capital Services, Inc. (the �Company�) was established on December 22, 1993, to engage in

installment financing, facilities leasing and new technology financing. The Company changed its trade

name from Hyundai Auto Finance Co., Ltd. to Hyundai Financial Services Co. on April 21, 1995, and

changed its trade name once again to Hyundai Capital Services, Inc. on December 30, 1998. In

accordance with the Monopoly Regulation and Fair Trade Act, the Company is incorporated into

Hyundai Motor Company Group. As of March 31, 2014, the Company�s operations are headquartered

in 3, Uisadang-daero, Yeongdeungpo-gu, Seoul, Korea. Its major shareholders are Hyundai Motor

Company and GE International Holdings Corporation with 56.47% and 43.30% ownership,

respectively.

The condensed consolidated interim financial statements include the accounts of the Company, as the

parent company, certain Autopia SPC trusts and other subsidiaries (collectively, the �Group�), while

HK Mutual Savings Bank and five other entities are associates.

(1) The Group�s subsidiaries

Subsidiaries as of March 31, 2014 and December 31, 2013, are as follows. The Group has 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%.

Location

Ratio of

ownership

(%) March 31, 2014 December 31, 2013

Special

Purpose

Entities

Korea 0.9 Autopia Thirty-sixth SPC (trust) Autopia Thirty-sixth SPC (trust)

Autopia Forty-third SPC (trust) Autopia Forty-second SPC (trust)

Autopia Forty-fourth SPC (trust) Autopia Forty-third SPC (trust)

Autopia Forty-fifth SPC (trust) Autopia Forty-fourth SPC (trust)

Autopia Forty-sixth SPC (trust) Autopia Forty-fifth SPC (trust)

Autopia Forty-seventh SPC (trust) Autopia Forty-sixth SPC (trust)

HB third SPC Autopia Forty-seventh SPC (trust)

HB third SPC

0.5 Autopia Forty-ninth SPC (trust) Autopia Forty-ninth SPC (trust)

Autopia Fiftieth SPC (trust) Autopia Fiftieth SPC (trust)

Autopia Fifty-first SPC (trust) Autopia Fifty-first SPC (trust)

Autopia Fifty-second SPC (trust) Autopia Fifty-second SPC (trust)

0.31 HB Fourth SPC HB Fourth SPC

Limited

liability

company

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

India 100 Hyundai Capital India Private

Limited

Hyundai Capital India Private

Limited

Brazil 100 Hyundai Capital Brazil LTDA Hyundai Capital Brazil LTDA

(*) It holds 100% shares of Hyundai Capital Services Limited Liability Company.



March, 2014


12

1. Reporting Entity, Continued

(2) Changes in subsidiaries Subsidiaries that are excluded from the Group�s consolidated interim financial statements are as

follows:

Change Reason Subsidiaries

exluded Liquidation Autopia Forty-second SPC (trust)

(3) Condensed financial condition of subsidiaries as of March 31, 2014 is as follows:

Assets

Liabilities Equity

Operating

income

Profit (loss) for the year

Total comprehensive income (loss)

Hyundai Capital

Europe GmbH W 12,063 2,713 9,350 3,516 (511) (511) Hyundai Capital India

Private Limited 1,564 999 565 136 10 10 Hyundai Capital

Brazil LTDA 2,082 - 2,082 1,124 639 639

SPC(*) 2,246,966 2,245,005 1,961 35,417 (259) (259)

(*) SPC (trust)s in (1) the Group�s subsidiaries



March, 2014


13

2. Accounting Policies 2.1 Basis of Preparation (1) Statement of compliance

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

(No. 1034 Interim Financial Reporting) for the period ended March 31, 2014, and do not include all of

the disclosures required for full consolidated annual financial statements. Selected explanatory notes

are included to explain events and transactions that are significant to an understanding of the changes

in financial position and performance of the Group since the last annual consolidated financial

statements were prepared as of and for the year ended December 31, 2013.

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

the Korean IFRS standards and interpretations issued and effective or issued and early adopted as of

March 31, 2014.

(2) Use of estimates and judgements

The preparation of the financial statements in conformity with K-IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. Actual results may differ from these

estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments

made by management in applying the Group�s accounting policies and the key sources of estimation

uncertainty were the same as those that were applied to the consolidated financial statements as of

and for the year ended December 31, 2013.



March, 2014


14

2. Accounting Policies, Continued 2.2 Significant Accounting Policies (1) Changes in accounting policies

Except as described below, the accounting policies applied by the Group in these condensed

consolidated interim financial statements are the same as those applied by the Group in its

consolidated financial statements as of and for the year ended December 31, 2013. The following

changes in accounting policies are also expected to be reflected in the Group�s consolidated financial

statements as at and for the year ending December 31, 2014.

(i) Amendments to K-IFRS No. 1032 Presentation of Financial Statements

The standard requires the offsetting of financial assets to financial liabilities to be presented as a net

value on the statement of financial position, only if the assets and liabilities recognized by the Group

has legal enforceable rights to offset, and has the intent to realize the net value or realize liabilities

simultaneously to when realizing assets. The amendments are effective for annual periods beginning

on or after January 1, 2014. The adoption of the amendments had no significant impact on the

Group�s consolidated financial statements.

(ii) Amendments to K-IFRS No. 1036 Presentation of Financial Statements

The amendments address disclosure of recoverable amounts only for individual assets or cash

generating units that recognize impairment losses (or subsequent gains) on goodwill and intangible

assets with indefinite useful life. The amendments are effective for annual periods beginning on or

after January 1, 2014. The adoption of the amendments had no significant impact on the Group�s

consolidated financial statements.



March, 2014


15

3. Securities

Securities as of March 31, 2014 and December 31, 2013 are as follows:

March 31, 2014 December 31, 2013

Available-for-sale securities Equity securities

Marketable equity securities W 11,471 9,981

Unlisted equity securities 10,252 10,844

21,723 20,825

Debt securities

Corporate bonds 2,859 1,735

Government and public bonds 30,440 30,223

33,299 31,958

Investments in associates 133,074 157,313

W 188,096 210,096



March, 2014


16

3. Securities, Continued

3.1 Available-for-sale securities

Available-for-sale securities as of March 31, 2014 and December 31, 2013, are as follows:

(1) Marketable equity securities

Book value

Number of

shares Ownership

(%) Acquisition

cost March

31, 2014 December 31, 2013

Marketable equity securities

NICE Information Service 1,365,930 2.25 W 3,312 5,006 4,180

NICE Holdings 491,620 1.30 3,491 6,465 5,801

Unlisted equity securities

Hyundai Finance Corp. (*) 1,700,000 9.29 9,888 10,073 10,665

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

Golfclub Lich AG 14 0.59 60 79 79

W 16,851 21,723 20,825

(*) The fair value for Hyundai Finance Corp. was valued as the average of valuation prices provided by

two external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the discounted cash flow

model. The five-year financial statements, projected based on past performance, were used in

measuring the fair value assuming that the operational structure will remain as is for the next five

years. Operating income and expenses were estimated based on the past performance, business

plan and expected market conditions.

(2) Debt securities

Book value

Issuer Interest rate (%)

Acquisition cost

March 31, 2014

December 31, 2013

Government and public

bonds

Metropolitan

Rapid Transit

and others 2.00 W 2,708 2,859 1,735

Corporate bonds Autopia Fifty-

third SPC 3.59, 4.42 30,000 30,440 30,223

W 32,708 33,299 31,958



March, 2014


17


3.2 Investments in associates (1) Details of investments in associates as of March 31, 2014 and December 31, 2013, are as follows:

(*1) The Group�s shareholdings are less than 20%. However, the Group is able to significantly exert

influence through its involvement in the financial and operating processes, and thus the equity

method is applied.

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

applied to the financial statements as of February 28, 2014. Significant transactions occurred

between the HI Network, Inc.�s reporting date and the Group�s reporting date were appropriately

reflected.

March 31, 2014

Number of shares

Owner �ship (%) Location

Financial statement

date Industry

HK Mutual Savings

Bank (*1) 4,990,438 19.99 Korea 03/31/2014 Savings bank

HI Network, Inc.

(*1) (*2) 13,332 19.99 Korea 02/28/2014 Insurance brokerage

Korea Credit

Bureau(*1) 140,000 7.00 Korea 03/31/2014 Credit bureau

Hyundai capital

Germany GmbH 600,200 30.01

Frankfurt

(Germany) 03/31/2014 Automobile finance

brokerage Hyundai Capital UK

Ltd. 13,495,500 29.99

London

(England) 03/31/2014 Automobile finance

brokerage Beijing Hyundai Auto

Finance Co., Ltd. - 46.00

Beijing

(China) 03/31/2014 Automobile finance

brokerage



March, 2014


18


(*1) The Group�s shareholdings are less than 20%. However, the Group is able to significantly exert

influence through its involvement in the financial and operating processes, and thus the equity

method is applied.

(*2) Due to the unavailability of the financial statements as of December 31, 2013, the equity method

was applied to the financial statements as of November 30, 2013. Significant transactions

occurred between the HI Network, Inc.�s reporting date and the Group�s reporting date were

appropriately reflected.

December 31, 2013

Number of shares

Owner �ship (%) Location

Financial statement

date Industry

HK Mutual Savings

Bank (*1) 4,990,438 19.99 Korea 12/31/2013 Savings bank

HI Network, Inc.

(*1) (*2) 13,332 19.99 Korea 11/30/2013 Insurance brokerage

Korea Credit

Bureau(*1) 140,000 7.00 Korea 12/31/2013 Credit bureau

Hyundai capital

Germany GmbH 600,200 30.01

Frankfurt

(Germany) 12/31/2013

Automobile finance

brokerage Hyundai Capital UK

Ltd. 13,495,500 29.99

London

(England) 12/31/2013

Automobile finance

brokerage Beijing Hyundai Auto

Finance Co., Ltd. - 46.00

Beijing

(China) 12/31/2013

Automobile finance

brokerage



March, 2014


19


(2) Summary of financial information of investees as of March, 31 2014 and December 31, 2013 for

assets and liabilities, and for the three-month period ended March 31, 2014 and 2013, for revenue and

income, are as follows:

March 31, 2014

Total

assets

Total

liabilities Equity

Total

equity

Shares of

assets

Unrealized

gain (loss)

and

others(*2)

Book

value

HK Mutual Savings

Bank(*1) W 2,259,538 2,062,336 124,761 197,202 39,440 (15,440) 24,000

HI Network, Inc. 4,544 2,790 333 1,754 351 - 351

Korea Credit

Bureau 55,979 12,100 10,000 43,879 3,071 1,037 4,108

Hyundai Capital

Germany GmbH 7,402 1,188 3,547 6,214 1,865 - 1,865

Hyundai Capital

UK Ltd. 1,509,506 1,422,521 78,882 86,985 26,087 - 26,087

Beijing Hyundai

Auto Finance Co.,

Ltd. 1,294,583 1,127,924 176,225 166,659 76,663 - 76,663

Three-month period ended March 31, 2014

Operating

income

Interest

income

Interest

expense

Profit for the

year

Other

comprehen -

sive loss

Total

comprehen-

sive income

HK Mutual Savings

Bank (*1) W 80,379 79,393 15,835 2,770 (13) 2,757

HI Network, Inc. 1,981 12 - (366) - (366)

Korea Credit

Bureau 6,608 131 - (2,622) - (2,622)

Hyundai Capital

Germany GmbH 846 17 - 314 - 314

Hyundai Capital UK

Ltd. 20,301 18,492 3,103 9,696 - 9,696

Beijing Hyundai

Auto Finance Co.,

Ltd. 32,892 32,205 14,954 1,171 - 1,171

(*1) Although HK Mutual Savings Bank�s fiscal year ends in June, the assets and liabilities are based

on March 31, 2014, and the operating income and net income is based on the 3-month

performance from January 1, 2014 to March 31, 2014.

(*2) Impairment losses are recognized based on valuations for recoverable amounts on the

investments of HK Mutual Savings Bank. Recognized impairment losses are included.



March, 2014


20


December 31, 2013

Total assets

Total liabilities Equity

Total equity

Shares of assets

Unrealized

gain and

others Book value

HK Mutual

Savings Bank (*) W 2,494,096 2,299,652 124,761 194,444 38,889 12,248 51,137

HI Network, Inc. 5,480 3,361 333 2,119 424 - 424

Korea Credit

Bureau 63,043 16,542 10,000 46,501 3,255 1,037 4,292

Hyundai Capital

Germany GmbH 6,889 1,042 3,547 5,847 1,755 - 1,755

Hyundai Capital

UK Ltd. 1,210,970 1,135,383 78,882 75,587 22,668 - 22,668

Beijing Hyundai

Auto Finance

Co., Ltd. 873,419 705,947 176,225 167,472 77,037 - 77,037


Operating

income

Interest

income

Interest

expense

Profit

for the

year

Other

comprehen

-sive

loss

Total

comprehen

-sive

income

(loss)

Divi

-dends

HK Mutual

Savings Bank (*) W 99,293 97,589 22,558 10,330 (905) 9,425 -

HI Network, Inc. 3,133 16 - 324 - 324 (533)

Korea Credit

Bureau 8,729 97 - (995) - (995) -

Hyundai Capital

Germany GmbH 710 11 - 342 - 342 -

Hyundai Capital

UK Ltd. 10,109 7,769 1,219 954 - 954 -

Beijing Hyundai

Auto Finance

Co., Ltd. 2,164 2,136 532 85 - 85 -

(*) Although HK Mutual Savings Bank�s fiscal year ends in June, the assets and liabilities are based on

March 31, 2013, and the operating income and net income is based the 3-month performance from

January 1, 2013 to March 31, 2013.



March, 2014


21


(3) Changes of investments in associates for the three-month period ended March 31, 2014 and 2013

are as follows:

2014

Beginning

balance

Gain (loss) on

valuation

Changes in

accumulated

other comprehen

-sive gain (loss)

Impairment

loss

Ending

balance

HK Mutual Savings

Bank(*) W 51,137 554 (3) (27,688) 24,000

HI Network, Inc. 424 (73) - - 351

Korea Credit Bureau 4,292 (184) - - 4,108

Hyundai Capital

Germany GmbH 1,755 94 16 - 1,865

Hyundai Capital UK

Ltd. 22,668 2,908 511 - 26,087

Beijing Hyundai Auto

Finance Co., Ltd. 77,037 539 (913) - 76,663

W 157,313 3,838 (389) (27,688) 133,074

(*) Based on the impairment test performed on HK Mutual Savings Bank, the carrying amount before

impairment is W51,688 million, while the recoverable amount on the interest in investment is W

24,000 million as of March 31, 2014.

2013

Beginning

balance

Gain (loss) on

valuation

Changes in

accumulated

other comprehen

-sive gain (loss) Dividends

Ending

balance

HK Mutual Savings

Bank W 51,170 2,066 (181) - 53,055

HI Network, Inc. 861 570 - (533) 898

Korea Credit Bureau 3,965 (106) - - 3,879

Hyundai Capital

Germany GmbH 1,183 152 6 - 1,341

Hyundai Capital UK

Ltd. 6,197 286 (145) - 6,338

Beijing Hyundai Auto

Finance Co., Ltd. 35,400 1,101 1,459 - 37,960

W 98,796 4,069 1,139 (533) 103,471

(4) Goodwill related to associates as of March 31, 2014 and December 31, 2013 are as follows:


HK Mutual Savings Bank W - 12,248

Korea Credit Bureau 1,037 1,037

W 1,037 13,285



March, 2014


22

4. Financial Receivables

Financial receivables as of March 31, 2014 and December 31, 2013, are as follows:

March 31, 2014

Principal

Deferred

loan

origination

fees and

costs

(Direct profit

for leased

assets)

Present

value

discounts

Allowance

for loan

loss

Carrying

amount

Loans receivable

Loan W 10,713,126 11,489 (1,407) (337,687) 10,385,521

Installment financial assets

Auto 5,415,116 38,777 - (48,357) 5,405,536

Durable goods 71 - - - 71

Mortgage 9,391 15 - (180) 9,226

5,424,578 38,792 - (48,537) 5,414,833 Lease receivables

Finance lease

receivables 3,000,604 (604) - (54,772) 2,945,228

Cancelled lease

receivables 12,356 - - (11,547) 809

3,012,960 (604) - (66,319) 2,946,037

W 19,150,664 49,676 (1,407) (452,543) 18,746,390



March, 2014


23

4. Financial Receivables, Continued

December 31, 2013

Principal

Deferred

loan

origination

fees and

costs

(Direct profit

for leased

assets)

Present

value

discounts

Allowance

for loan

loss

Carrying

amount

Loans receivable

Loan W 11,462,116 (3,242) (1,314) (333,359) 11,124,201

Installment financial assets

Auto 4,804,618 28,332 - (42,694) 4,790,256

Durable goods - - - - -

Mortgage 9,868 16 - (286) 9,598

4,814,486 28,348 - (42,980) 4,799,854 Lease receivables

Finance lease

receivables 3,039,544 (746) - (49,612) 2,989,186

Cancelled lease

receivables 11,329 - - (10,556) 773

3,050,873 (746) - (60,168) 2,989,959

W 19,327,475 24,360 (1,314) (436,507) 18,914,014



March, 2014


24

5. Allowance for Loan Loss

Changes in allowance for doubtful accounts for the three-month periods ended March 31, 2014 and

2013, are as follows:

2014

Loan

receivables

Installment

financial

assets

Lease

receivables

Other

assets Total

Beginning balance W 333,359 42,980 60,168 20,677 457,184 Amounts written off (116,484) (10,162) (511) (1,607) (128,764)

Recoveries of

amounts

previously written off 23,356 2,685 5 2,459 28,505 Unwinding of discount (2,066) (81) (80) - (2,227)

Additional (reversed)

allowance 99,732 13,115 6,521 (390) 118,978 Others (210) - 216 - 6 Ending balance W 337,687 48,537 66,319 21,139 473,682

2013

Loan

receivables

Installment

financial

assets

Lease

receivables

Other

assets Total

Beginning balance W 312,829 33,484 38,881 18,740 403,934 Amounts written off (99,255) (10,810) (41) (1,738) (111,844)

Recoveries of

amounts

previously written off 22,540 2,512 55 2,407 27,514 Unwinding of discount (1,923) (113) (64) - (2,100)

Additional (reversed) allowance 91,505 4,667 4,879 (121) 100,930

Others 408 - (441) (1) (34) Ending balance W 326,104 29,740 43,269 19,287 418,400



March, 2014


25

6. Property and Equipment

Changes in property and equipment for the three-month periods ended March 31, 2014 and 2013 are

as follows:

2014

Beginning balance

Acquisi -tion

Reclassifi -cation Disposal

Deprecia

-tion

Translation difference

Ending balance

Land W 95,218 10 1,922 - - - 97,150

Buildings 89,267 405 131 - (598) - 89,205

Vehicles 2,154 189 - (54) (232) 6 2,063

Fixture and

furniture 42,068 1,978 59 (2) (5,243) 1 38,861

Others 2,005 65 - (10) - - 2,060

Construction in

progress 2,306 2,350 (1,921) - - 1 2,736

W 233,018 4,997 191 (66) (6,073) 8 232,075

2013

Beginning balance Acquisition Replacement Disposal Depreciation

Ending balance

Land W 143,729 - - (40,015) - 103,714

Buildings 119,847 - 277 (55,335) (923) 63,866

Vehicles 2,478 155 - (44) (234) 2,355

Fixture and

furniture 45,054 1,057 - (6) (5,037) 41,068

Others 2,032 48 - - - 2,080

Construction in

progress 7,598 4,261 (2,727) - - 9,132

W 320,738 5,521 (2,450) (95,400) (6,194) 222,215



March, 2014


26

7. Intangible Assets

Changes in intangible assets for the three-month periods ended March 31, 2014 and 2013 are as

follows:

2014

Beginning balance Increase

Replace- ment

Amortiza -tion

Reversal of impair-

ment loss Ending balance

Goodwill W 1,429 - - - - 1,429 Development

costs 29,017 613 - (2,625) - 27,005 Rights of

trademark 2 - - (2) - -

Membership 29,638 - (191) - 26 29,473 Other

intangible

assets 2,661 - - (425) 26 2,236

W 62,747 613 (191) (3,052) 26 60,143

2013

Beginning balance Increase Amortization Ending balance

Goodwill W 1,429 - - 1,429 Development

costs 28,198 2,889 (2,395) 28,692 Rights of

trademark 16 - (3) 13

Membership 30,008 - - 30,008 Other

intangible

assets 4,512 - (474) 4,038

W 64,163 2,889 (2,872) 64,180

8. Noncurrent Assets Held for Sale

Details of the non-current assets held for sale as of March 31, 2014 and December 31, 2013 are as

follows:


Land W 13,676 13,676

Buildings 8,671 8,671

W 22,347 22,347

The Group recognized the lesser amount between the fair value less costs to sell, and the carrying

value of the assets held for sale as the non-current assets held for sale.



March, 2014


27

9. Borrowings

(1) Borrowings as of March 31, 2014 and December 31, 2013 are as follows:

Type Lender

Annual

interest rate (%)

Maturity

March 31, 2014

December 31, 2013

Borrowings in won

Commercial paper

Shinhan Bank

and 2 others 2.95 ~ 4.15

2014.4.1 ~

2014.5.15 W 250,000 320,000 General loans

Kookmin Bank

and 11 others 2.60 ~ 5.23

2014.4.28 ~

2016.9.28 1,413,981 1,438,860 1,663,981 1,758,860 Borrowings in

foreign currency

General loans Bank of America 3.43

2015.6.12 53,289 52,583

W 1,717,270 1,811,443

(2) Bonds as of March 31, 2014 and December 31, 2013 are as follows:

Type

Annual

interest rate (%)

Maturity

March 31, 2014

December 31, 2013

Current portion of bond

Bonds 2.44 ~6.85 2014.4.7 ~ 2015.3.31 W 3,430,987 3,554,082 Less: Discount on

bonds

(3,583) (1,189) 3,427,404 3,552,893 Long-term bond

Bonds 2.44 ~7.20 2015.4.18 ~ 2021.2.10 12,579,204 11,912,543 Less: Discount on

bonds

(34,252) (38,557)

12,544,952 11,873,986

W 15,972,356 15,426,879



March, 2014


28

10. Defined Benefit Liability

(1) Defined contribution plans

The amount recognized in the statement of comprehensive income for retirement benefits based on

the defined contribution plan.

Three-month period

ended March 31, 2014 Three-month period

ended March 31, 2013

Post-employment benefit expense

defined contribution plans W 13 20

(2) Defined benefit plans

(i) Features of the defined benefit plan

The Group manages the defined benefit plan based on final wages. The plan assets are mainly

comprised of interest rate guaranteed type instruments, and therefore, are exposed to the risk of

declining interest rates.

(ii) Adjustments on the net defined benefit liability


Present value of defined benefit

obligation Plan assets National

pension fund Defined benefit

liability, net

Beginning Balance W 69,772 (56,846) (42) 12,884

Contributions - - - -

Current service costs 3,138 - - 3,138

Interest expense (income) 621 (506) - 115 Return on plan assets

(excluding net interests) - 104 - 104 Actuarial gain and losses

due to changes in

financial assumptions 1,069 - - 1,069 Transfer of severance

benefits from(to) related

parties (620) 56 - (564)

Benefits paid (2,646) 1,029 - (1,617)

W 71,334 (56,163) (42) 15,129



March, 2014


29

10. Defined Benefit Liability, Continued


Present value of defined benefit

obligation Plan assets National

pension fund Defined benefit

liability, net

Beginning Balance W 63,848 (50,816) (43) 12,989

Contributions - (3,629) - (3,629)

Current service costs 3,183 - - 3,183

Interest expense (income) 508 (403) - 105 Return on plan assets

(excluding net interests) - 23 - 23 Actuarial gain and losses

due to changes in

financial assumptions 1,902 - - 1,902 Transfer of severance

benefits from(to) related

parties (185) 114 - (71)

Benefits paid (2,628) 4,253 - 1,625

W 66,628 (50,458) (43) 16,127

11. Provisions

Changes in provisions for the three-month periods ended March 31, 2014 and 2013, are as follows:

2014 2013

Unused

loan

commit

-ments(*1) Other(*2) Total

Unused

loan

commit

-ments(*1) Other(*2) Total

Beginning balance W 1,826 - 1,826 2,017 - 2,017

Reversals (151) 25 (126) (15) - (15)

Ending balance W 1,675 25 1,700 2,002 - 2,002

(*1) The Group manages loans with limits, and therefore, recognizes provisions for unused loan

commitments.

(*2) The Group manages installment financial instruments in relation to guarantees for remaining

values of used automobiles, and therefore, recognizes provisions



March, 2014


30

12. Derivative Financial Instruments and Hedge Accounting

Trading derivatives as of March 31, 2014 and December 31, 2013, are as follows:


Assets Liabilities Assets Liabilities

Forward foreign exchange W - 2 - 2

During the three-month periods ended March 31, 2014 and 2013, the Group recognized loss onading

derivatives of W1 million and W5 million, respectively.

Derivatives designated as cash flow hedges as of March 31, 2014 and December 2013, are as follows:

March 31, 2014

Open Interest Assets

Liabilities

Notional Principal amounts

Exchange forward W 9,063 516 - (5)

Interest rate swaps 1,530,000 1,176 4,071 (2,195)

Currency swaps 7,164,245 29,742 406,147 3,184

W 8,703,308 31,434 410,218 984

December 31, 2013

Open Interest Assets

Liabilities

Notional Principal amounts

Exchange forward W 13,400 658 - (14)

Interest rate swaps 1,670,000 2,103 4,045 (1,472)

Currency swaps 6,720,795 21,185 508,698 3,263

W 8,404,195 23,946 512,743 1,777

The maximum period the Group is exposed to the variability in future cash flows arising from

derivatives designated as cash flow hedges, is expected to be until February 7, 2019.

There is no ineffective portion recognized related to cash flow hedge for the three-month periods

ended March 31, 2014 and 2013.



March, 2014


31

13. Equity

Details of appropriated and expected reserves for bad loans as of March 31, 2014 and December 31,

2013 are as follows:

March 31, 2014 December 31, 2013 Appropriated reserve for bad loans W 328,317 273,906 Expected reserve for bad loans 5,479 54,411

W 333,796 328,317

Transfer to reserve for bad loans and profit for the period in consideration of effect of changes in

reserve for bad loans for the three-month periods ended March 31, 2014 and 2013 are as follows:

2014 2013


Expected transfer to reserve for bad loans (*1) 5,479 (6,580) Profit for the period in consideration of changes in

reserve for bad loans (*2) W 25,073 159,430

Profit for the period per share in consideration of

changes in reserve for bad loans(in Korean won) W 252 1,605

(*1) The amount transferred to reserve for bad loans for the three-month period ended March 31,

2014, is the difference between the balance of reserve for bad loans as of March 31, 2014, and

the balance as of December 31, 2013.

(*2) Profit for the period and earnings per share in consideration of changes in reserve for bad loans

are not accordance with K-IFRS, and this amount is the sum of the expected transfer to reserve

for bad loans before income tax and Profit for the period.



March, 2014


32

14. Retained Earnings

Details of retained earnings as of March 31, 2014 and December 31, 2013 are as follows:


Legal reserve

Earned surplus reserve(*) W 107,635 89,630

Voluntary reserve

Appropriated reserve for

bad loans (Note 13) 328,317 273,906

Provisions for electronic

financial transactions 100 100

Reserve for Business

rationalization 74 74

328,491 274,080

Retained earnings before

appropriation 1,954,806 1,996,670

W 2,390,932 2,360,380

(*) In accordance with the Korean Commercial Law, a minimum of 10% of annual cash dividends

declared are accumulated as a legal reserve each accounting period, until the reserve equals 50%

of its issued capital stock. This reserve is not available for the payment of cash dividends, but may

only be transferred to capital stock or used to reduce accumulated deficit.



March, 2014


33

15. Net Interest Income

Net interest income for the three-month periods ended March 31, 2014 and 2013 are as follows:

2014 2013

Interest income:

Due from Banks W 10,510 7,765

Loans receivable 321,297 364,617

Installment financial assets 77,499 65,649

Lease receivables (*1) 60,453 62,176

Other (*2) 1,366 363

471,125 500,570

Interest expense:

Borrowings (17,325) (22,517)

Bonds (170,748) (171,831)

Other (*2) (6,742) (9,665)

(194,815) (204,013)

Net interest expense W 276,310 296,557

(*1) Includes amortization of present value discount for lease guarantee.

(*2) Amortization of present value discount using the effective interest method.

16. Net Commission Income

Net commission income for the three-month periods ended March 31, 2014 and 2013 are as follows:

2014 2013

Commission income

Loans receivable W 11,246 11,426

Installment financial assets 1,906 999

Lease receivables 46,460 42,645

59,612 55,070

Commission expenses

Lease expenses (6,725) (6,510)

Net Commission Income W 52,887 48,560



March, 2014


34

17. Other operating income and expenses

Other operating income and expenses for the three-month periods ended March 31, 2014 and 2013

are as follows:

2014 2013 Other operating income

Gains on valuation of derivatives W 104,096 173,836

Gains on derivatives transactions 960 2,136

Other operating income 34,210 35,369

W 139,266 211,341

Other operating expenses

Losses on valuation of derivatives W 94 21,861

Losses on derivatives transactions 72 954

Other operating expenses 12,657 16,399

W 12,823 39,214

18. General and Administrative Expenses

General and administrative expenses for the three-month periods ended March 31, 2014 and 2013,

are as follows:

2014 2013

Payroll W 33,891 38,194

Severance benefits 3,266 3,308

Fringe benefits 9,342 11,053

Depreciation 6,073 6,194

Advertising 12,595 11,403

Travel and transportation 969 995

Communication 3,893 3,624

Water, lighting and heating 3,384 3,213

Commission 15,516 13,990

Payment Commission 5,112 4,677

Sales commission 16,470 17,372

Amortization 3,052 2,872

Outsourcing service charges 17,521 15,754

Rent 11,743 10,090

Other expenses 10,706 11,541

W 153,533 154,280



March, 2014


35

19. Income Tax

(1) Income tax expense for the three-month periods ended March 31, 2014 and 2013 are as follows:

(2) Deferred income taxes recognized directly to equity as of the three-month periods ended March

31, 2014 and 2013 are as follows:

2014 2013

Current income tax expense W 28,674 50,491

Change in deferred income tax due to

temporary differences (4,195) (3,949)

Deferred income taxes recognized

directly to equity 255 6,690

Income tax expense W 24,734 53,232

2014

Beginning balance

Ending balance

Changes

Loss on valuation of available-for-sale

financial securities W (1,036)

(1,317)

(282)

Changes in remeasurements of

defined benefit plans 4,356 4,640 284

Net change in unrealized fair value of

derivatives (567) (314) 253

W 2,753 3,008 255

2013

Beginning balance

Ending balance

Changes

Loss on valuation of available-for-sale

financial securities W (320)

(397)

(77)

Changes in remeasurements of

defined benefit plans 4,197 4,663 466

Net change in unrealized fair value of

derivatives (678) 5,623 6,301

W 3,199 9,889 6,690



March, 2014


36

19. Income Tax, Continued

(3) Reconciliation between income before income taxes and income tax expense for the three-month

periods ended March 31, 2014 and 2013 are as follows:

20. Earnings Per Share

(1) Basic earnings per share

Basic earnings per share attributable to common stock of equity holders for the three-month periods

ended March 31, 2014 and 2013 are as follows:

(2) Diluted earnings per share

As there was no discontinued operation during the three-month periods ended March 31, 2014 and

2013, basic earnings per share is the same as basic earnings per share from continuing operations.

There are no potential common stocks as of March 31, 2014 and 2013. Therefore, the diluted earnings

per share is the same as basic earnings per share for the three-month periods ended March 31, 2014

and 2013.

2014 2013

Income before income taxes (A) W 55,287 206,081

Income taxes at statutory tax rates 12,917 49,410

Adjustments:

Non taxable income - (24)

Non-deductible expense for tax purposes 90 33

Changes in tax reconciliation of the

previous year 12,073 5,056

Others (346) (1,243)

Income tax expense (B) W 24,734 53,232

Effective tax rate (B/A) 44.74% 25.83%

2014 2013

Profit for the period attributable to

common stock (In Korean won) (A) W 30,552,113,596

152,849,504,648

Weighted average of number of

outstanding common shares (B)

99,307,435

99,307,435

Basic earnings per Share (In Korean

won) (A/B) W

308

1,539



March, 2014


37

21. Other Comprehensive Income

Other comprehensive income for the three-month periods ended March 31, 2014 and 2013 are as

follows:

2014

Beginning

balance

Changes

Income tax

effects

Ending

balance

Reclassifi-

cation of

profit or loss

Other

changes

Unrealized gain on

valuation of available-

for-sale financial

assets W 3,243 (99) 1,265 (282) 4,127

Share of other

comprehensive

income of associates (1,616) - (389) - (2,005)

Unrealized loss on

valuation of

derivatives 1,777 (5,244) 4,198 253 984

Loss on exchange

differences of foreign

operations (1,333) - (98) - (1,431)

Changes in

remeasurements of

defined benefit plans (13,645) - (1,173) 284 (14,534)

W (11,574) (5,343) 3,803 255 (12,859)



March, 2014


38

21. Other Comprehensive Income, Continued

2013

Beginning

balance

Changes

Income tax

effects

Ending

balance

Reclassifi-

cation of

profit or loss

Other

changes

Unrealized gain on

valuation of available-

for-sale financial

assets W 1,002 (92) 412 (77) 1,245

Share of other

comprehensive

income of associates (2,540) - 1,139 - (1,401)

Unrealized loss on

valuation of

derivatives 2,125 1,425 (27,464) 6,301 (17,613)

Loss on exchange

differences of foreign

operations (872) - 93 - (779)

Changes in

remeasurements of

defined benefit plans (13,147) - (1,926) 466 (14,607)

W (13,432) 1,333 (27,746) 6,690 (33,155)



March, 2014


39

22. Supplemental Cash Flow Information

Cash and cash equivalents in cash flow statements consist of cash in hand, deposits and short-term

money-market instruments.

Cash and cash equivalents consisting of cash and financial instruments as of March 31, 2014 and

December 31, 2013, are as follows:


Cash W - 3

Ordinary deposits 165,102 200,356

Current deposits 3,611 4,941

Short-term financial instruments 1,742,915 1,297,315

1,911,628 1,502,615

Deposits with restrictions (15) (15)

W 1,911,613 1,502,600



March, 2014


40

22. Supplemental Cash Flow Information, Continued

Cash generated from operations for the three-month periods ended March 31, 2014 and 2013 are as

follows:

2014 2013


Adjustments:

Net interest expenses 182,939 195,885

Income tax 24,734 53,232

Gain on disposal of available-for-sale financial assets (653) (921)

Loss (income) on loans 5,861 (11,808)

Loss (income) on instalment financial receivables 5,899 (11,202)

Loss (income) on leases (459) 14,163

Gain on foreign exchanges translation (390) (22,251)

Dividend income (2,206) (2,357)

Gain on valuation of derivatives (104,096) (173,836)

Gain on disposal of property and equipment (13) (85,481)

Gain related to investments in associates (4,095) (4,175)

Lease expenses 75,562 83,031

Provision for loss 118,978 100,930

Loss on foreign exchanges translation 104,160 174,039

Severance benefits 3,253 3,288

Depreciation 6,073 6,194

Amortization of intangible assets 3,052 2,872

Reversal of impairment loss on intangible assets (26) -

Loss on valuation of derivatives 94 21,861

Loss on disposal of property and equipment 3 2,837

Impairment loss of investments in associates 27,689 -

Loss related to investments in associates 257 106

Reversal of provisions (151) (15)

Increase of provisions 25 -

Losses on Retirement of Bonds - 51

W 446,490 346,443



March, 2014


41

22. Supplemental Cash Flow Information, Continued

2014 2013

Changes in operating assets and liabilities

Increase in available-for-sale financial assets W (421) (282)

Decrease (Increase) in loans receivable 633,087 (519,136)

Decrease (Increase) in installment financial assets (633,992) 564,422

(Increase) in finance lease receivables (92,262) (197,768)

Decrease in cancelled leased receivables 4,574 3,278

(Increase) in operating leased assets (115,079) (68,688)

Decrease in cancelled leased assets 125,344 102,148

Decrease (Increase) in non-trade receivables 5,893 (7,874)

Decrease (Increase) in accrued revenues 1,858 (8,304)

(Increase) in advance payments (7,093) (10,954)

(Increase) in prepaid expenses (30,394) (33,822)

Decrease (Increase) in derivative assets (7,060) 1,832

Increase (decrease) in non-trade Payables (67,012) 4,439

Increase (decrease) in accrued expenses 1,400 (7,383)

(Decrease) in unearned revenue (856) (3,219)

Increase (decrease) in withholdings 3,639 (7,666)

Increase (decrease) in current tax liabilities 346 (2,267)

(Decrease) in leasehold deposits received (29,146) (32,054)

Increase in deferred income tax liabilities - 2,948

(Decrease) in defined benefit liabilities (3,266) (2,813)

Decrease in plan assets 1,185 738

(Decrease) in other liabilities (10) (10)

(209,365) (222,435)

W 267,677 276,857



March, 2014


42

23. Commitments and Contingencies

(1) Credit line agreements

As of March 31, 2014, the Group has credit line agreements with Shinhan bank and 3 others with a

limit of W106,500 million.

(2) Credit Facility Agreement

(i) Credit Facility Agreement

As of March 31, 2014, the Group has a credit facility agreement with GE Capital European Funding &

Co. (�GE Capital�), and the limit of credit facility is Euro currency for USD 600 million. The expiration

date of the contract is January 9, 2015.

Relative to the above credit facility agreement, Hyundai Motor Company shall pay GE Capital any

amount not paid by the Group, at such time multiplied by the shareholding ratio of 56% of Hyundai

Motor Company.

(ii) Revolving Credit Facility

As of March 31, 2014, the Group has revolving credit facility agreements amounted to USD 200

million and W 1,495 billion with Kookmin Bank and 18 others for credit line.

(3) Guarantees

Details of guarantees involving third parties as of March 31, 2014 and December 31, 2013 are as

follows:

Guarantor Details

March 31, 2014

December 31, 2013

Hyundai Motor

Company

Joint liabilities on finance lease

receivables (*) W 15 15

Seoul Guarantee

Insurance Co., Ltd.

Guarantee for debt collection

deposit, others 128,648 132,589

(*) The amounts represent the guaranteed balances as of March 31, 2014 and December 31, 2013, as

defined under the joint liability agreement.

The Group carries residual value guarantee insurance with LIG Insurance Co., Ltd. against loss in case

unredeemed mortgage loans exceed the recoverable amount from the collateral of the loans. The

receivables balance carried insurance and residual value guaranteed by the insurance as of March 31,

2014 and December 31, 2013 are as follows:

Type

March 31, 2014

December 31, 2013

Receivables balance W 820,206 792,244

The amount of residual value guaranteed by insurance 288,362 284,746



March, 2014


43

23. Commitments and Contingencies, Continued

(4) Pending significant litigations

Pending significant litigations include 18 cases (total amount of W1,545 million) where the Group is

the defendant, 15 cases (total amount of W537 million) where the Group is the plaintiff, and litigations

against a number of debtors to collect receivables as of March 31, 2014.

(5) Receivables transfer agreement

The Group entered into an agreement with Hyundai Card Co., Ltd., Hyundai Commercial Co., Ltd., and

Hyundai Life Insurance Co., Ltd., regarding the transfer of receivables. According to the agreement,

the Group is a transferee of overdue receivables and amounts written off at the agreed value.



March, 2014


44

24. Related Party Transactions

(1) Relationships between parents and subsidiaries

The parent company is Hyundai Motor Company. Related parties include associates, joint ventures,

post-employment benefit plans, members of key management personnel and entities which the

Group controls directly or indirectly, has joint control or significant influence over them.

(2) Related parties with revenue arising transactions, and receivables and payables with the Group as of March 31, 2014, are as follows:

Type Company

The Parent

company

Hyundai Auto Finance Co., Ltd.

Associates Beijing Hyundai Auto Finance Co., Ltd., HI Network, Inc., Hyundai capital

Germany GmbH, HK Mutual Savings Bank

Others Hyundai Life Insurance Co., Ltd., Hyundai Card Co., Ltd., Hyundai Capital

America, Hyundai Autoever Corp., Kia Motors Corp. and 52 others.



March, 2014


45

24. Related Party Transactions, Continued

(3) Transactions between related parties

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

for the three-month periods ended March 31, 2014 and 2013 are as follows:

2014 Other Revenues Expenses Purchases Disposal

Parent Company

Hyundai Auto Finance

Co., Ltd. W 2,743 666 - 239,328

Associates Beijing Hyundai Auto

Finance Co., Ltd. 24 - - -

HI Network, Inc. 345 - - Hyundai capital Germany

GmbH 229 - - -

Korea Credit Bureau - 98 - -

HK Mutual Savings Bank 7 - -

260 443 - -

Others Hyundai Life Insurance

Co., Ltd. 79 2,073 - -

Hyundai Card Co., Ltd. 9,697 5,592 - 41,683

Hyundai Capital America 5,233 - - -

Hyundai Autoever Corp. 21 6,587 - 8,165

Kia Motors Corp. 2,835 296 - 60,700

Others 7,244 4,911 11,898 6,332

25,109 19,459 11,898 116,880

W 28,112 20,568 11,898 356,208



March, 2014


46


2013 Other Revenues Expenses Purchases Disposal

Parent Company

Hyundai Auto Finance Co.,

Ltd. W 1,451 873 - 223,572

Associates - -

HI Network, Inc. 139 407 - - Hyundai capital Germany

GmbH 106 - - -

HK Mutual Savings Bank 53 - - -

298 407 - -

Others Hyundai Life Insurance Co.,

Ltd. 109 619 177,900 -

Hyundai Card Co., Ltd. 23,242 9,365 - 38,399

Hyundai Capital America 3,605 - - -

Hyundai Autoever Corp. 10 7,198 - 3,960

Kia Motors Corp. 11 1,650 - 75,323

Others 5,367 5,104 17,006 18,223

32,344 23,936 194,906 135,905

W 34,093 25,216 194,906 359,477



March, 2014


47


(ii) Receivables and payables with related parties for the years ended March 31, 2014 and December

31, 2013 are as follows:

March 31, 2014 Receivables Payables

Parent Company W

Hyundai Auto Finance Co., Ltd. 2,147 15,145

Associates

Hyundai capital

Germany GmbH 65 -

Beijing Hyundai Auto Finance Co., Ltd. 24 -

89 -

Others

Hyundai Life Insurance Co., Ltd. 38,822 108

Hyundai Card Co., Ltd. 4,121 119,544

Hyundai Capital America 24,085 -

Hyundai Autoever Corp. 6,987 4,575

Kia Motors Corp. 626 17,189

Others 3,679 566

78,320 141,982 W 80,556 157,127

December 31, 2013 Receivables Payables

Parent Company W

Hyundai Auto Finance Co., Ltd. 1,823 24,768

Others

Hyundai Life Insurance Co., Ltd. 7,067 (14,190)

Hyundai Card Co., Ltd. 3,147 83,353

Hyundai Capital America 20,866 -

Hyundai Autoever Corp. - 87

Kia Motors Corp. 1,278 40,666

Others 4,137 614

36,495 110,530 W 38,318 135,298



March, 2014


48


(iii) Details of credit granting activities with related parties as of March 31, 2014 are as follows:

Credit grantor Credit borrower Type Amount Period

Hyundai Capital

Services, Inc.

Hyundai Card

Co., Ltd.

Call loan W 300,000

11/1/2013~10/31/2014

Hyundai Capital

Services, Inc.

Hyundai

Commercial Co.,

Ltd.

Call loan 100,000

11/1/2013~10/31/2014

Hyundai Card

Co., Ltd.

Hyundai Capital

Services, Inc.

Call loan 300,000

11/1/2013~10/31/2014

With the counterparty�s request, credit is granted when there is surplus fund. As of March 31, 2014,

no balance is recognized relating to credit granting activities.

The Group has been provided with a credit facility and payment guarantees by GE Capital European

Funding & Co. and Hyundai Motor Company, respectively (Note 23).

(4) Key management compensation

Compensation to key management for the three-month periods ended March 31, 2014 and 2013, are

as follows:

The key management above consists of directors (including non-permanent directors), who have

significant authority and responsibilities for planning, operating and controlling the Group.

Type 2014 2013

Short-term employee benefits W 3,917 1,445 Severance benefits 533 513



March, 2014


49

25. Derecognition of Financial Assets

The Group issued senior and subordinated asset-backed securities based on loans and the associated

securitized debts have recourse only to the transferred assets.

Details of financial assets transferred and not derecognized as of March 31, 2014 and December 31,

2013 are as follows:


Book value of assets

Loans receivable W 1,714,479 2,114,465

Installment financial assets 1,156,592 1,027,545

Lease receivables 347,711 297,306

3,218,782 3,439,316

Book value of related liabilities(*) (2,245,975) (2,421,325)

Liabilities having right of resources on transferred Assets Fair value of assets 3,222,871 3,441,725

Fair value of related liabilities(*) (2,255,627) (2,478,227)

Net position W 967,244 963,498

(*) Related liabilities aggregates senior and subordinated asset-backed securities with the related

Derivative assets.



March, 2014


50

26. Offsetting of Financial Assets and Liabilities

As defined in the derivative clearing agreements, master netting of derivative assets and liabilities

recognized by the Group is possible based on future events.

The impact of the right of set-off for financial assets and liabilities as of March 31, 2014 and December

31, 2013 are as follows:

March 31, 2014

Gross

amounts of

recognized

financial

assets/

liabilities

Gross amounts

of recognized

financial

assets/liabilities

set off in the

statement of

financial

position

Net amounts

of financial

assets/

liabilities

presented in

the statement

of financial

position

Related amounts not set

off in the statement of

financial position

Net

amount Financial

instruments

Cash

collateral

received

Financial assets

Derivative

financial assets

W

31,434

-

31,434

29,199

-

2,235

Financial liabilities

Derivative

financial

liabilities

410,220

-

410,220

29,199

-

381,021

December 31, 2013

Gross

amounts of

recognized

financial

assets/

liabilities

Gross amounts

of recognized

financial

assets/liabilities

set off in the

statement of

financial

position

Net amounts

of financial

assets/

liabilities

presented in

the statement

of financial

position

Related amounts not set

off in the statement of

financial position

Net

amount Financial

instruments

Cash

collateral

received

Financial assets

Derivative

financial assets

W

23,946

-

23,946

23,557

-

389


Derivative

financial

liabilities

512,745

-

512,745

23,557

-

489,188



March, 2014


51

27. Fair value management of financial Instruments

The method of measuring fair value of financial instruments is as follows:

Type Fair Value Measurement Method

Cash and due

from banks

The book value and the fair value of cash are identical. As cash, deposits, and

other cash equivalent instruments can be easily converted into cash, the book

value approximates the fair value.

Available-for-

sale securities

When available, the Group measures the fair value of a security using quoted

prices in an active market. If a market for a security is not active, the Group

establishes fair value by using a highly accredited independent valuation

agency. The independent valuation agency utilizes various valuation technique,

which include discounted cash flow model, imputed market value model, free

cash flow to equity model, dividend discount model, risk adjusted discount rate

method, and net asset valuation approach. Depending on the characteristic and

nature of the instrument, the fair value is measured by using at least one

valuation technique.

Loans

receivables/

installment

financial

assets/lease

liabilities

The fair value is determined using discounted cash flow model that incorporate

parameter inputs for expected maturity rate/prepayment rate, as appropriate.

As the discount rate used for determining the fair value incorporates the time

value of money and credit risk, the Group�s discount rate system is formed to

consider the market risk and the credit risk.

Derivative

instruments

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

using a discounted cash flow model based on a current interest rate yield curve

appropriate for market interest rate as of December 31, 2013. The fair value of

each derivative instrument measured by discounting and offsetting the probable

future cash flows of swap, which are estimated based on the forward rate and

the closing FX price. The fair value of each derivative is measured by offsetting

and discounting the expected cash flows of the swap at appropriate discount

rate which is based on forward interest rate and exchange rate that is

generated by using above method. The fair value of currency forward is

measured principally with the forward exchange rate which is quoted in the

market at the end of reporting period considering the maturity of the currency

forward. The discount rate used in measuring the fair value of currency forward

is the adverse CRS rate which is determined by using the spot exchange rate

and the forward exchange rate based on the interest rate parity theory.

Borrowings The fair value of borrowings is determined by using discounted cash flow

method. In other words, the fair value of a financial instrument is determined

by discounting the expected cash flows at an appropriate rate.

Bonds The fair value of industrial finance bonds in won, except structured industrial

finance bonds in won, is determined by using discounted cash flow method.

The fair value of structured industrial finance bonds in won and industrial

finance bonds in foreign currencies is determined by a highly accredited

independent valuation agency.

Other financial

assets and

other financial

liabilities

The fair value of other financial assets and other financial liabilities is

determined by using discounted cash flow method. However, when the cash

flow cannot be objectively measured, the book value approximates the fair

value.



March, 2014


52

27. Fair value management of financial Instruments, Continued

(1) The fair values of financial instruments as of March 31, 2014 and December 31, 2013 are as

follows:


Book value Fair value Book value Fair value

Assets

Financial assets

Cash W - - 3 3

Deposits 168,713 168,713 205,297 205,297

Short-term financial

instruments 1,742,915 1,742,915 1,297,315 1,297,315

Available-for-sale securities 55,022 55,022 52,783 52,783 Loans receivable 10,385,521 10,556,314 11,124,201 11,318,040

Installment financial assets 5,414,833 5,416,175 4,799,854 4,801,546

Lease receivables 2,946,037 2,906,145 2,989,959 2,943,184

Derivative assets 31,434 31,434 23,946 23,946

Non-trade receivables 108,726 108,726 113,750 113,750

Accrued revenues 101,556 101,556 103,517 103,517

Guaranteed deposits on

leases 27,839 27,798 28,343 28,117 W 20,982,596 21,114,798 20,738,968 20,887,498

Liabilities


Borrowings W 1,717,270 1,729,103 1,811,443 1,822,182

Bonds 15,972,356 16,396,544 15,426,879 15,780,619

Derivative liabilities 410,220 410,220 512,745 512,745

Non-trade payables(*) 220,415 220,415 290,405 290,405

Accrued expenses 168,431 168,431 161,447 161,447

Withholdings(*) 18,288 18,288 13,673 13,673

Deposits 684,391 687,541 706,224 708,597

Other liabilities 60 60 70 70 W 19,191,431 19,630,602 18,922,886 19,289,738

(*)Taxes and dues are excluded.



March, 2014


53


(2) Fair Value Hierarchy

1-1) The fair value hierarchy of financial assets and liabilities carried at fair value on the balance sheet

as of March 31, 2014 and December 31, 2013 are as follows:

March 31, 2014

Book value

Fair value

Fair value hierarchy (*2)

Level 1 Level2 Level 3(*1)

Financial assets measured at fair value

Available-for-sale financial

assets W 55,022 55,022 11,471 33,299 10,252

Derivative financial assets

Cash flow hedge financial

assets 31,434 31,434 - 31,434 -

W 86,456 86,456 11,471 64,733 10,252

Financial liabilities measured at fair value

Derivative financial

liabilities

Trading purpose

derivative financial

instruments W 2 2 - 2 -


liabilities 410,218 410,218 - 410,218 -

W 410,220 410,220 - 410,220 -



March, 2014


54


December 31, 2013

Book value

Fair value

Fair value hierarchy (*2)

Level 1 Level2 Level 3(*1)



assets W 52,783 52,783 9,981 31,958 10,844



assets 23,946 23,946 - 23,946 -

W 76,729 76,729 9,981 55,904 10,844


Derivative financial

liabilities

Trading purpose

derivative financial

instruments W 2 2 - 2 -


liabilities 512,743 512,743 - 512,743 -

W 512,745 512,745 - 512,745 -

(*1) Marketable equity securities classified as level 3 are amounted to W179 million as of March 31,

2014 and 2013, as a quoted price in an active market is unavailable and their fair value cannot be

measured reliably.

(*2) The levels of fair value hierarchy have been defined as follows:

- Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and

derivatives

- Level 2: Inputs for the asset or liability included within valuation techniques that are observable

market data. Most bonds issued in Korean won and foreign currency, general unlisted

derivatives like swap, forward, option

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

Unlisted stocks, complicated structured bonds, complicated unlisted derivative



March, 2014


55


1-2) The valuation techniques and the fair value measurement input variables of financial assets and

liabilities classified as level 2 are as follows:

Fair value

Valuation techniques Inputs

Financial assets


assets W 33,299

DCF Model

Discount rate



assets

31,434

DCF Model

Discount rate, short -term

interest rate, volatility, foreign

exchange rate, and others

64,733


Derivative financial liabilities

Available-for-sale derivative

financial liabilities

2

DCF Model





liabilities

410,218

DCF Model




W 410,220

1-3) Changes in fair value of instruments classified as level 3 for the years ended March 31, 2014 and

December 31, 2013 are as follows.

Available-for-sale securities


Beginning balance W 10,844 11,165

Increase - 60

Valuation gain(loss) (Other comprehensive

income and loss) (592) (435)

Ending balance W 10,252 10,790

Hyu

ndai C

apital S

erv

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c. and S

ubsid

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s

No

tes t

o t

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onden

sed C

on

solid

ate

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rim

Fin

ancia

l S

tate

ments

M

arc

h,

20

14

(Un

au

dit

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) (In

mill

ions o

f w

on)

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27

. F

air

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tive

in

form

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on u

no

bserv

ed

inp

uts

of

financia

l in

str

um

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ts c

lassifie

d a

s level 3 a

s o

f M

arc

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1, 2

014

are

as f

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lue

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alu

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pu

ts

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no

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uts

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ma

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no

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inp

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Imp

acts

on

fa

ir v

alu

e

Fin

an

cia

l

assets

Availa

ble

-for-

sale

fin

ancia

l

asset

W

10

,252

FC

FE

mo

del

Gro

wth

rate

,

Dis

cou

nt

rate

Incre

ase in r

ate

of

sale

-0.2

2%

~0

.72%

Fair v

alu

e is lik

ely

to incre

ase

when

the r

ate

of

sale

an

d r

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of

opera

ting in

com

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efo

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ax

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ecre

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W

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,252

Fin

ancia

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cla

ssifie

d a

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eve

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re a

vaila

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fin

an

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es i

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the

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pre

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inputs

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alu

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co

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nific

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tota

l e

qu

ity.



March, 2014


57


2-1) Fair value hierarchy of financial assets and liabilities which the fair value are disclosed as of March

31, 2014 and December 31, 2013, are as follows:

March 31, 2014

Book value Fair value

Fair value hierarchy

Level 1 Level 2 Level 3


Cash W - - - - -

Deposits 168,713 168,713 - 168,713 -


instruments 1,742,915 1,742,915 - 1,742,915 -

Loan receivables 10,385,521 10,556,314 - - 10,556,314

Installment financial

assets 5,414,833 5,416,175 - - 5,416,175

Lease receivables 2,946,037 2,906,145 - - 2,906,145

Accounts receivables 108,726 108,726 - - 108,726

Accrued revenues 101,556 101,556 - - 101,556


leases 27,839 27,798 - 27,798 -

W 20,896,140 21,028,342 - 1,939,426 19,088,916


Borrowings W 1,717,269 1,729,103 - 1,729,103 -

Bonds 15,972,356 16,396,544 - 16,396,544 -

Accounts payables 220,415 220,415 - - 220,415

Accrued expense 168,431 168,431 - - 168,431

Deposit received 18,288 18,288 - - 18,288

Deposits 684,391 687,541 - 687,541 -

60 60 - - 60

W 18,781,210 19,220,382 - 18,813,188 407,194



March, 2014


58


December 31, 2013

Book value Fair value

Fair value hierarchy

Level 1 Level 2 Level 3


Cash W 3 3 3 - -

Deposits 205,297 205,297 - 205,297 -


instruments 1,297,315 1,297,315 - 1,297,315 -

Loan receivables 11,124,201 11,318,040 - - 11,318,040


assets 4,799,854 4,801,546 - - 4,801,546

Lease receivables 2,989,959 2,943,184 - - 2,943,184

Accounts receivables 113,750 113,750 - - 113,750

Accrued revenues 103,517 103,517 - - 103,517


leases 28,343 28,117 - 28,117 -

W 20,662,239 20,810,769 3 1,530,729 19,280,037


Borrowings W 1,811,443 1,822,182 - 1,822,182 -

Bonds 15,426,879 15,780,619 - 15,780,619 -

Accounts payables 290,405 290,405 - - 290,405

Accrued expense 161,447 161,447 - - 161,447

Deposit received 13,673 13,673 - - 13,673

Deposits 706,224 708,597 - 708,597 -

70 70 - - 70

W 18,410,141 18,776,993 - 18,311,398 465,595



March, 2014


59


2-2) Since the book value is a reasonable estimate of the fair value, the valuation techniques and

inputs related to items that recognize the book value as the fair value are not disclosed.


liabilities classified as level 2 which the fair value are disclosed as of March 31, 2014 are as follows:

Fair value

Valuation

technique Inputs

Financial assets

Guaranteed deposits

on leases W 27,798

DCF model

Base rate


Borrowings 1,729,103

DCF model

Procurement interest rate,

Other spread

Bonds

16,396,544

BDT model

Discount rate, volatility, and

others

Deposits 687,541 DCF model Base rate

W 18,813,188


liabilities classified as level 3 as of March 31, 2014 are as follows:

Fair value

Valuation

technique Inputs

Financial assets

Loans and receivables W 10,556,314

DCF model


credit spread, other spread


assets

5,416,175

DCF model



Lease receivables

2,906,145

DCF model



W 18,878,634

28. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risk (exchange and rate risk). In order to

manage these factors, the Group operates risk management policies and programs that monitor

closely and respond to each of the risk factors. The Group uses derivatives to manage specific risks.

There was no significant change in the Group's risk management division and policies after December

31, 2013.

review reports 1 q2014 ko

Documents

interim financial reporting

subsidiaries condensed

review report date

installment financial

review standards

review procedures

auditors review responsibility

republic of korea tel