Fy 2016 1 q review report en

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016, AND DECEMBER 31, 2015,

AND FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

ATTACHMENT: INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

HYUNDAI CARD CO., LTD.

Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro Youngdeungpo-gu, Seoul 07326, Korea

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Independent Accountants’ Review Report

English Translation of a Report Originally Issued in Korean on May 13, 2016.

To the Shareholders and Board of Directors of

Hyundai Card Co., Ltd.:

We have reviewed the accompanying condensed consolidated financial statement of Hyundai Card Co., Ltd. and its

subsidiaries (collectively, the “Consolidated Entity”). The condensed consolidated financial statements consist of the

condensed consolidated statement of financial position as of March 31, 2016, and the related condensed

consolidated statement of comprehensive income, condensed consolidated statement of changes in shareholders’

equity and condensed consolidated statement of cash flows, all expressed in Korean won, for the three months ended

March 31, 2016 and 2015, 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 statement 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, 2015, 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, 2015 (not presented in the accompanying condensed

consolidated financial statements), 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 9, 2016. The consolidated statement of financial position as of

December 31, 2015, presented for 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, 2015.

May 13, 2016

Notice to Readers

This report is effective as of May 13, 2016, 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.


(the “Consolidated Entity”)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016, AND DECEMBER 31, 2015,

AND FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

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.


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF MARCH 31, 2016, AND DECEMBER 31, 2015

(Unit: Korean won)

March 31, 2016 December 31, 2015

ASSETS:

CASH AND DEPOSITS (Notes 4 and 28):

Cash and cash equivalents (Note 23) ￦ 556,681,251,971 ￦ 505,742,520,609

Deposits 47,424,500,000 33,024,500,000

Total cash and deposits 604,105,751,971 538,767,020,609

SECURITIES (Notes 5 and 28):

Trading securities 566,835,715,960 459,928,214,247

Available-for-sale (“AFS”) securities 1,766,969,764 1,766,969,764

Total securities 568,602,685,724 461,695,184,011

CARD ASSETS (Notes 6, 7, 25, 26 and 28):

Card receivables, net of present value of discounts and

deferred origination cost and fee 7,330,880,036,632

7,595,851,307,370

Allowance for doubtful accounts (78,102,772,770) (76,701,420,249)

Cash advances 833,743,577,548 827,002,888,065


Card loans, net of present value of discounts 3,238,957,491,441 3,239,218,653,922


Total card assets 11,143,240,094,275 11,406,586,971,982

PROPERTY, PLANT AND EQUIPMENT (Note 8):

Land 141,135,593,407 141,135,593,407

Buildings 120,401,235,857 120,401,235,857

Accumulated depreciation (12,441,996,905) (11,684,533,184)

Vehicles 2,514,088,391 2,514,088,391

Accumulated depreciation (300,411,533) (254,093,084)

Fixtures and equipment 212,640,531,620 210,311,409,618

Accumulated depreciation (132,761,641,701) (125,909,014,419)

Construction in progress 16,717,228,534 14,089,134,359

Total property, plant and equipment 347,904,627,670 350,603,820,945

OTHER ASSETS:

Other accounts receivable (Note 28) 87,921,755,094 94,824,687,899

Allowance for doubtful accounts (Notes 7 and 28) (939,013,101) (852,423,113)

Accrued revenue (Note 28) 49,034,959,695 49,401,668,393

Allowance for doubtful accounts (Notes 7 and 28) (1,401,398,308) (1,393,512,524)

Advance payments 32,963,630,634 34,200,440,607

Allowance for doubtful accounts (Note 7) (1,672,874,904) (967,357,411)

Prepaid expenses 69,187,886,865 54,889,008,962

Intangible assets (Note 9) 129,223,167,606 137,084,511,938

Derivative assets (Notes 13, 27 and 28) 27,668,447,369 39,584,012,967

Deferred income tax assets (Note 20) 146,302,218,547 150,197,163,343

Guarantee deposits (Notes 4 and 28) 34,855,553,067 32,466,788,202

Others 5,104,490,717 4,350,236,590

Total other assets 578,248,823,281 593,785,225,853

Total Assets ￦ 13,242,101,982,921 ￦13,351,438,223,400

(Continued)


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS OF MARCH 31, 2016, AND DECEMBER 31, 2015

(Unit: Korean won)


LIABILITIES:

BORROWINGS (Notes 10 and 28):

Borrowings ￦ 920,000,000,000 ￦ 590,000,000,000

Debenture, net of discounts 8,126,460,978,784 8,527,883,918,633

Total borrowings 9,046,460,978,784 9,117,883,918,633

OTHER LIABILITIES:

Accounts payable (Notes 25 and 28) 837,930,471,574 889,947,477,880

Accrued expenses (Note 28) 198,487,854,439 229,197,257,098

Unearned revenue 333,545,041,863 340,303,443,944

Withholdings (Note 28) 96,404,620,578 109,477,500,291

Derivative liabilities (Notes 13, 27 and 28) 22,379,603,211 17,743,551,531

Current tax liability 28,903,255,547 24,105,439,403

Net defined benefit liability (Note 11) 30,900,084,672 23,606,248,668

Guarantee deposits received (Note 28) 9,356,052,582 9,081,139,097

Provisions (Notes 12 and 24) 95,673,882,583 96,060,138,730

Total other liabilities 1,653,580,867,049 1,739,522,196,642

Total liabilities 10,700,041,845,833 10,857,406,115,275

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) (43,939,774,454) (38,384,103,955)

Retained earnings (Notes 14 and 15) 1,725,969,037,587 1,672,385,338,125

Total shareholders’ equity 2,542,060,137,088 2,494,032,108,125

Total Liabilities and Shareholders’ Equity ￦ 13,242,101,982,921 ￦13,351,438,223,400

(Concluded)

See accompanying notes to condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unit: Korean won)

Three months ended

March 31, 2016

Three months ended

March 31, 2015

OPERATING REVENUE:

Card income (Notes 17 and 25) ￦ 653,619,554,986 ￦ 620,828,898,162

Interest income (Note 16) 5,256,751,529 6,292,884,903

Gain on valuation and disposal of securities 1,067,908,860 219,137,267

Dividends income 136,053,244 146,989,275

Other operating revenue (Note 18) 25,278,115,691 13,912,679,751

Total operating revenue 685,358,384,310 641,400,589,358

OPERATING EXPENSES:

Card expenses (Notes 17 and 25) 302,680,342,877 256,016,861,411

Interest expenses (Note 16) 66,793,540,299 72,223,451,082

General and administrative expenses (Notes 19 and 25) 161,653,269,581 162,969,315,053

Securitization expenses 119,010,908 81,061,771

Bad debt expenses and losses on disposal of loans (Note 7) 58,615,862,081 55,439,740,720

Transfer to provision for unused credit limits (Note 12) 1,455,226,789 743,134,862

Other operating expenses (Note 18) 20,797,360,750 13,302,020,409

Total operating expenses 612,114,613,285 560,775,585,308

OPERATING INCOME 73,243,771,025 80,625,004,050

NON-OPERATING INCOME:

Gain from sale of property, plant and equipment and

intangible assets

102,585,860 19,805,430

Rental revenue (Note 25) 379,432,545 377,680,844

Miscellaneous gain 71,131,338 61,185,324

Total non-operating income 553,149,743 458,671,598

NON-OPERATING EXPENSES:

Donations 661,655,995 167,802,000

Loss from sale of property, plant and equipment and

intangible assets 66,424,523 1,208,525,531

Total non-operating expenses 728,080,518 1,376,327,531

NET INCOME BEFORE INCOME TAX EXPENSE 73,068,840,250 79,707,348,117

INCOME TAX EXPENSE (Note 20) 19,485,140,788 17,540,027,407

NET INCOME 53,583,699,462 62,167,320,710

(Continued)


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)


(Unit: Korean won)

Three months ended

March 31, 2016

Three months ended

March 31, 2015

OTHER COMPREHENSIVE LOSS,

NET OF TAX(Note 22)

Items not reclassified subsequently to profit or loss:

Remeasurements of net defined benefit liability ￦ (2,546,462,920) ￦ (3,246,298,081)

Items reclassified subsequently to profit or loss:

Cash flow hedging loss (3,009,207,579) (4,177,195,249)

Total other comprehensive loss (5,555,670,499) (7,423,493,330)

TOTAL COMPREHENSIVE INCOME ￦ 48,028,028,963 ￦ 54,743,827,380

EARNINGS PER SHARE (Note 21):

Basic earnings per share ￦ 334 ￦ 00,000,387

Diluted earnings per share ￦ 334 ￦ 00,000,000,387

(Concluded)



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY


(Unit: Korean won)

Capital surplus

Capital stock

Paid-up capital

Other

capital

Accumulated other

comprehensive

loss

Retained

earnings

Total

Balance 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 - - - - 62,167,320,710 62,167,320,710

Other comprehensive loss:

Remeasurements of net defined benefit liability

-

-

-

(3,246,298,081)

-

(3,246,298,081)

Cash flow hedging loss - - - (4,177,195,249) - (4,177,195,249)

Balance at March 31, 2015 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (47,541,677,156) ￦1,797,635,456,425 ￦2,610,124,653,224

Balance at January 1, 2016 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦ 12,305,079,416 ￦ (38,384,103,955) ￦ 1,672,385,338,125 ￦ 2,494,032,108,125

Total comprehensive income

(loss):

Net income - - - - 53,583,699,462 53,583,699,462

Other comprehensive loss:

Remeasurements of net defined benefit liability

-

-

-

(2,546,462,920)

-

(2,546,462,920)

Cash flow hedging loss - - - (3,009,207,579) - (3,009,207,579)

Balance at March 31, 2016 ￦ 802,326,430,000 ￦ 45,399,364,539 ￦12,305,079,416 ￦ (43,939,774,454) ￦ 1,725,969,037,587 ￦ 2,542,060,137,088



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


(Unit: Korean won)

Three months ended

March 31, 2016

Three months ended

March 31, 2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash generated from operating activities (Note 23) ￦ 211,528,567,582 ￦ 772,856,684,057

Interests received 5,189,247,724 6,011,892,258

Interests paid (81,138,356,077) (66,678,319,369)

Dividends received 136,053,244 146,989,275

Income taxes paid (9,414,890,480) (18,141,811,192)

Net cash provided by operating activities 126,300,621,993 694,195,435,029

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of AFS securities 16,215,800 24,624,800

Disposal of property, plant and equipment 134,635,000 180,916,679

Disposal of intangible assets 585,000,000 -

Acquisition of property, plant and equipment (8,570,685,576) (13,881,255,678)

Acquisition of intangible assets (4,752,603,864) (7,827,612,943)

Net cash used in investing activities (12,587,438,640) (21,503,327,142)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in borrowings 410,000,000,000 30,000,000,000

Proceeds from issue of debentures 5,977,225,548,009 1,918,865,303,953

Repayment of borrowings (80,000,000,000) (30,000,000,000)

Repayment of debentures (6,370,000,000,000) (2,203,560,002,931)

Net cash used in financing activities (62,774,451,991) (284,694,698,978)

NET INCREASE IN CASH AND CASH EQUIVALENTS 50,938,731,362 387,997,408,909

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF THE PERIOD (Note 23) 505,742,520,609

167,697,056,564

CASH AND CASH EQUIVALENTS AT THE

END OF THE PERIOD (Note 23) ￦ 556,681,251,971 ￦ 555,694,465,473



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016, AND DECEMBER 31, 2015, AND


1. REPORTING ENTITY:

Hyundai Card Co., Ltd. (the “Company” or the “Consolidated Entity”), 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, the

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 March 31, 2016, the Company has approximately 6.41 million card members; 2.29 million registered

merchants; and 121 marketing centers, branches and posts.

As of March 31, 2016, the total common stock of the Company is ￦802,326 million. The shareholders of the

Company and its ownerships as of March 31, 2016, and December 31, 2015, are as follows:

Shareholder


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

IGE USA Investments 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 March 31, 2016, and December 31, 2015, are as follows:

Place of

incorporation

and operation

Voting share (%)

Entities

Major operation

March 31, 2016

December 31, 2015

End of

reporting

period

PRIVIA 4th SPC Asset securitization Korea 0.5 0.5 December

PRIVIA 5th SPC Asset securitization Korea 0.5 0.5 December

Super Series 1st SPC Asset securitization Korea 0.5 0.5 December

17 Money Market

Trusts

Trust business Korea 100 100 -

The subsidiaries above are structured companies as voting rights and other powers do not play a major role in

determining the controlling interest.

Except for Money Market Trust, the subsidiaries were established for the Consolidated Entity’s business

activity. The Parent Hyundai Card Co., Ltd. has the power over the subsidiaries due to the fact that the Parent

involves in the objectives and design of the subsidiaries and is exposed to risks and rewards. Also, all the

decision-making processes of the subsidiaries are operated on autopilot by provisions and articles of

association. The Parent is considered to have the ability to use power because the Parent has control over the

changes in provisions and articles of association. Therefore, the Parent includes the special-purpose entities

under consolidation.

Meanwhile, in case default occurs by the subsidiaries related to derivative contracts hedging risks arising from

debentures issued for asset securitization, counterparties of the derivative contracts can claim for

reimbursement from the Parent.

- 2 -

2. BASIS OF CONDENSED CONSOLIDATED FINANCIAL STATEMENT PREPARATION AND

SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of condensed consolidated financial statement preparation

The Consolidated Entity’s condensed consolidated financial statements as of March 31, 2016, and December

31, 2015, and for the three months ended March 31, 2016 and 2015, 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 as of and for the year ended December 31, 2015, 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, 2015, 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 1001 – Presentation of Financial Statements

The amendments to K-IFRS 1001 clarify the concept of applying materiality in practice and restrict an entity

reducing the understandability of its financial statements by obscuring material information with immaterial

information or by aggregating material items that have different natures or functions. The adoption of the

amendment has no significant impact on the Consolidated Entity’s condensed consolidated financial statements.

Amendments to K-IFRS 1016: property, plant, and equipment

The amendments to K-IFRS 1016 prohibit entities from using a revenue-based depreciation method for items

of property, plant and equipment. The adoption of the amendment has no significant impact on the

Consolidated Entity’s condensed consolidated financial statements.

Amendments to K-IFRS 1038: Intangible Assets

The amendments to K-IFRS 1038 clarified that the use of revenue-based methods to calculate the amortization

of an asset is not appropriate, unless the consumption of the expected future economic benefits is embodied in

the asset. The adoption of the amendment has no significant impact on the Consolidated Entity’s condensed

consolidated financial statements.

Amendments to K-IFRS 1110 – Consolidated Financial Statements, K-IFRS 1112 Disclosure of interests in

other entities and K-IFRS 1028 Investment in associates

The amendments clarify that in applying the equity method of accounting to an associate or a joint venture that

is an investment entity, an investor may retain the fair value measurements that the associate or joint venture

used for its subsidiaries. The adoption of the amendment has no significant impact on the Consolidated Entity’s

condensed consolidated financial statements.

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 an interest in a

joint operation in which the activities constitute a business, as defined in K-IFRS 1103 Business

Combinations. Specifically, the amendments state that the relevant principles on accounting for business

combinations in K-IFRS 1103 and other standards should be applied. The same requirements should be

applied to the formation of a joint operation if, and only if, an existing business is contributed to the joint

operation by one of the parties that participate in the joint operation. A joint operator is also required to

disclose the relevant information required by K-IFRS 1103 and other standards for business combinations.

The adoption of the amendment has no significant impact on the Consolidated Entity’s condensed

consolidated financial statements.

- 3 -

Annual Improvements to K-IFRS 2012-2014 cycle

The annual improvements include amendments to a number of K-IFRSs. The amendments introduce specific

guidance in K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations when an entity

reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa);

such a change is considered as a continuation of the original plan of disposal, and not as a change in a plan of

sale. Other amendments to the Annual Improvements include K-IFRS 1107 Financial Instruments: Disclosures,

K-IFRS 1019 Employee Benefits and K-IFRS 1034 Interim Financial Reporting. The adoption of the

amendment 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 1109 – Financial Instruments

The amendments to K-IFRS 1109 contain the requirements for the classification and measurement of financial

assets and financial liabilities based on a business model whose objective is achieved both by collecting

contractual cash flows and selling financial assets and based on the contractual terms that give rise on specified

dates to cash flows, impairment methodology based on the expected credit losses, broadened types of

instruments that qualify as hedging instruments, the types of risk components of non-financial items that are

eligible for hedge accounting and the change in the hedge effectiveness test. The amendments are effective for

annual periods beginning on or after January 1, 2018.

Amendments to K-IFRS 1115 – Revenue from Contracts with Customers

The core principle under K-IFRS 1115 is that an entity should recognize revenue to depict the transfer of

promised goods or services to customers in an amount that reflects the consideration to which the entity expects

to be entitled in exchange for those goods or services. The amendments introduce a five-step approach to

revenue recognition and measurement: 1) Identify the contract with a customer, 2) Identify the performance

obligations in the contract, 3) Determine the transaction price, 4) Allocate the transaction price to the

performance obligations in the contract and 5) Recognize revenue when (or as) the entity satisfies a

performance obligation. This standard will supersede K-IFRS 1011 - Construction Contracts, K-IFRS 1018-

Revenue, K-IFRS 2113 - Customer Loyalty Programmes, K-IFRS 2115-Agreements for the Construction of

Real Estate, K-IFRS 2118 - Transfers of Assets from Customers and K-IFRS 2031-Revenue-Barter

Transactions Involving Advertising Services. The amendments are effective for annual periods beginning on or

after January 1, 2018.

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 that affect assets, liabilities, revenue and expenses.

Actual results may differ from those estimates.

The significant judgments that 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 as of and for the year ended December 31, 2015.

- 4 -

4. RESTRICTED FINANCIAL ASSETS:

Details of restricted financial assets as of March 31, 2016, and December 31, 2015, are as follows (Unit:

Korean won in millions):

Type Entity March 31, 2016 December 31, 2015 Restriction

Cash and deposits KB Bank and others ￦ 18 ￦ 18 Guarantee deposits for

overdraft

Shinhan Bank and others 33,000 33,000 Secured deposits

Citibank 14,400 14,400 Deposits related to

securitization

Mirae Asset Securities 7 7 Social enterprise fund

Other assets Korea Asset Management

Corporation

6,995

6,995

Escrow account

￦ 54,420 ￦ 54,420

5. SECURITIES:

Securities as of March 31, 2016, and December, 31 2015, are as follows (Unit: Korean won in millions):


Trading:

Debt securities ￦ 406,825 ￦ 399,928

Equity securities 160,011 60,000

Subtotal 566,836 459,928

Financial assets AFS:

Unlisted shares investment 1,767 1,767

Total ￦ 568,603 ￦ 461,695

6. CARD ASSETS:

Details of card assets by customers as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean

won in millions):

March 31, 2016

Principal

Deferred origination

cost and fee

Present value of

discounts

Allowance for

doubtful accounts Book value

Card receivables:

Households

￦ 6,812,039

￦ (9,660)

￦ (7,441)

￦ (72,131)

￦ 6,722,807

Corporates 535,943 - - (5,972) 529,971

Cash advances:

Households 833,743 - - (34,015) 799,728

Card loans:

Households 3,239,745 - (788) (148,223) 3,090,734

Total ￦ 11,421,470 ￦ (9,660) ￦ (8,229) ￦ (260,341) ￦ 11,143,240

December 31, 2015

Principal

Deferred origination

cost and fee

Present value of

discounts

Allowance for

doubtful accounts Book value

Card receivables:

Households

￦ 7,069,322

￦ (8,643)

￦ (7,434)

￦ (72,107)

￦ 6,981,138

Corporates 542,606 - - (4,594) 538,012

Cash advances:

Households 827,003 - - (32,868) 794,135

Card loans:

Households 3,240,008 - (789) (145,917) 3,093,302

Total ￦ 11,678,939 ￦ (8,643) ￦ (8,223) ￦ (255,486) ￦ 11,406,587

- 5 -

7. ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Changes in the allowance for doubtful accounts for the three months ended March 31, 2016 and 2015, are as

follows (Unit: Korean won in millions):

Three months ended March 31, 2016

Card receivables Card advances Card loans Other assets Total

Beginning balance ￦ 76,701 ￦ 32,868 ￦ 145,917 ￦ 3,213 ￦ 258,699

Bad debt expenses (218) (98) (151) - (467)

Bad debt recovered 133 184 78 - 395

Disposition and repurchase (5,691) (3,338) (6,056) - (15,085)

Transfer of allowance for

doubtful accounts

7,178

4,399

8,435

800

20,812

Ending balance ￦ 78,103 ￦ 34,015 ￦ 148,223 ￦ 4,013 ￦ 264,354


Card receivables Card advances Card loans Other assets Total


Bad debt expenses (408) (62) (175) - (645)

Bad debt recovered 165 217 77 - 459

Disposition and repurchase (5,806) (3,381) (6,677) - (15,864)

Transfer (reversal) of

allowance for doubtful

accounts

3,972

2,446

8,957

(385)

14,990

Ending balance ￦ 69,445 ￦ 29,298 ￦ 136,422 ￦ 2,225 ￦ 237,390

8. PROPERTY, PLANT AND EQUIPMENT:

Changes in book value of property, plant and equipment for the three months ended March 31, 2016 and 2015,

are as follows (Unit: Korean won in millions):


Beginning

balance Acquisition Reclassification Disposal

Depreciation

Ending

balance

Land ￦ 141,136 ￦ - ￦ - ￦ - ￦ - ￦ 141,136

Buildings 108,717 - - - (758) 107,959

Vehicles 2,260 - - - (46) 2,214

Fixtures and equipment 84,402 1,409 2,457 (350) (8,039) 79,879

Construction in progress 14,089 5,174 (2,546) - - 16,717

Total ￦ 350,604 ￦ 6,583 ￦ (89) ￦ (350) ￦ (8,843) ￦ 347,905


Beginning


Depreciation

Ending

balance

Land ￦ 138,257 ￦ - ￦ - ￦ - ￦ - ￦ 138,257

Buildings 104,473 - - (841) (710) 102,922

Vehicles 2,464 - - (16) (49) 2,399

Fixtures and equipment 87,856 1,835 1,829 (512) (9,279) 81,729

Construction in progress 23,380 6,464 (1,737) - - 28,107

Total ￦ 356,430 ￦ 8,299 ￦ 92 ￦ (1,369) ￦ (10,038) ￦ 353,414

- 6 -

9. INTANGIBLE ASSETS:

Changes in intangible assets for the three months ended March 31, 2016 and 2015, are as follows (Unit:



Beginning


Amortization

Ending

balance

Development cost ￦ 86,046 ￦ 994 ￦ 1,588 ￦ - ￦ (6,945) ￦ 81,683

Software 24,079 284 75 - (2,036) 22,402

Others 1,490 - - - (330) 1,160

Construction in progress 4,847 775 (1,667) - - 3,955

Membership 20,623 - - (600) - 20,023

Total ￦ 137,085 ￦ 2,053 ￦ (4) ￦ (600) ￦ (9,311) ￦ 129,223


Beginning

balance Acquisition Reclassification Amortization

Ending

balance

Development cost ￦ 98,710 ￦ 456 ￦ 238 ￦ (7,151) ￦ 92,253

Others 3,199 - - (514) 2,685

Construction in progress 11,144 5,930 (398) - 16,676

Membership 20,614 - - - 20,614

Total ￦ 133,667 ￦ 6,386 ￦ (160) ￦ (7,665) ￦ 132,228

10. BORROWINGS:

(1) Details of borrowings as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean won in

millions):

Lenders

Annual interest

rate (%)

March 31, 2016

December 31, 2015

Short-term borrowings:

Commercial paper IBK Securities and others 1.64–1.99 ￦ 290,000 ￦ 240,000

Borrowings KB and others 2.56–2.93 330,000 300,000

Subtotal 620,000 540,000

Current portion of long-

term borrowings:

Borrowings SC Bank 3.76 50,000 50,000

Long-term borrowings:

Commercial paper IBK Securities and other 1.88–1.89 250,000 -

Total ￦ 920,000 ￦ 590,000

(2) Details of debentures as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean won in

millions):

Annual

interest rates (%) Maturity March 31, 2016

December 31,

2015

Short-term debentures 1.80–2.04 2016.09.25–2016.12.02 ￦ 140,000 ￦ 210,000

Current portion of long-term

debentures

1.81–5.15

2016.04.15–2017.03.27

2,251,505 1,770,000

Long-term debentures

1.67–5.50

2017.04.03–2026.03.06

5,743,410 6,557,680

Subtotal 8,134,915 8,537,680

Discounts on debenture (8,454) (9,796)

Debenture, net ￦ 8,126,461 ￦ 8,527,884

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.

- 7 -

11. RETIREMENT BENEFIT PLAN:

(1) Defined contribution plan

The expenses recognized in the condensed consolidated statement of comprehensive income related to

postemployment benefit plan under the defined contribution plan for the three months ended March 31, 2016

and 2015, are as follows (Unit: Korean won in millions):

Three months ended March 31

2016 2015

Defined contribution plan

￦ 35 ￦ 17

(2) Net defined benefit liability

The details of net defined benefit liability as of March 31, 2016, and December 31, 2015 are as follows (Unit:



Net defined benefit liability

￦ 26,351 ￦ 19,199

Long-term employee benefit 4,549 4,407

Total ￦ 30,900 ￦ 23,606

(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 three months ended March 31, 2016 and

2015, are as follows (Unit: Korean won in millions):


Present value of

defined benefit

obligation Plan assets

National Pension

Fund

Net defined benefit

obligation

Beginning balance ￦ 81,458 ￦ (62,238) ￦ (21) ￦ 19,199

Current service cost 3,600 - - 3,600

Interest expense (income) 485 (374) - 111

Return on plan assets,

excluding amounts

included in interest

income above

- 125 - 125

Actuarial gains and losses

from changes in financial

assumptions

3,022 - - 3,022

Transfer of employees

between the affiliated

companies and its related

companies

(516) 296 5 (215)

Benefits paid (588) 1,097 - 509

Ending balance ￦ 87,461 ￦ (61,094) ￦ (16) ￦ 26,351

- 8 -


Present value of

defined benefit

obligation Plan assets

National Pension

Fund

Net defined benefit

obligation

Beginning balance ￦ 69,739 ￦ (53,378) ￦ (29) ￦ 16,332

Current service cost 3,314 - - 3,314

Interest expense (income) 461 (354) - 107

Return on plan assets,

excluding amounts

included in interest

income above

- 83 - 83


from changes in financial

assumptions

3,971 - - 3,971

Transfer of employees

between the affiliated

companies and its related

companies

(100) 137 - 37

Benefits paid (2,841) 1,156 - (1,685)

Ending balance ￦ 74,544 ￦ (52,356) ￦ (29) ￦ 22,159

(4) Long-Term Employee Benefits

Changes in present value of long-term employee benefits liability for the three months ended March 31, 2016



2016 2015

Beginning balance

￦ 4,407 ￦ 3,553

Current service cost

132 109

Interest cost

29 27


141 170

Benefits paid

(160) (141)

Ending balance

￦ 4,549 ￦ 3,718

12. PROVISIONS:

Changes in provisions for the three months ended March 31, 2016 and 2015, are as follows (Unit: Korean won

in millions):


Unused

commitment Point

Asset retirement

obligation

Others Total


Increase (decrease) 1,455 (1,659) (182) - (386)

Ending balance ￦ 54,543 ￦ 26,830 ￦ 6,154 ￦ 8,147 ￦ 95,674


Unused

commitment Point

Asset retirement

obligation

Others Total


Increase (decrease) 743 6,251 (148) 1 6,847

Ending balance ￦ 46,632 ￦ 28,995 ￦ 5,389 ￦ 9,386 ￦ 90,402

Other provisions include provision for deposits in escrow account and for pending litigations amounting to

￦2,233 million (see Note 24(4)) and ￦5,914 million, respectively, as of March 31, 2016. Also, provision for

pending litigations includes the provision related to deposits in escrow account amounting to ￦4,467 million.

- 9 -

13. DERIVATIVES AND HEDGE ACCOUNTING:

(1) There are no derivative instruments held for trading as of March 31, 2016, and December 31, 2015.

(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, 2015.

1) Fair value of cash flow hedge as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean

won in millions):

March 31, 2016

Unsettled

contract amount Assets Liabilities

Accumulated other

comprehensive

loss (*1)

Interest rate swap ￦ 1,175,000 ￦ 1 ￦ 17,979 ￦ (13,753)

Cross-currency swap 795,915 27,667 4,401 (6,398)

Total ￦ 1,970,915 ￦ 27,668 ￦ 22,380 ￦ (20,151)

December 31, 2015

Unsettled

contract amount Assets Liabilities

Accumulated other

comprehensive

loss (*1)

Interest rate swap ￦ 1,175,000 ￦ 21 ￦ 17,744 ￦ (13,469)

Cross-currency swap 808,680 39,563 - (3,673)

Total ￦ 1,983,680 ￦ 39,584 ￦ 17,744 ￦ (17,142)

(*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 amounts 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 September 23, 2020. Meanwhile, there is

no ineffective portion recognized related to cash flow hedge for the three months ended March 31, 2016

and 2015.

14. PLANNED RESERVES FOR BAD LOANS:

(1) Details of planned reserves for bad loans as of March 31, 2016, and December 31, 2015, are as follows

(Unit: Korean won in millions):


Accumulated reserve for bad loans ￦ 640,026 ￦ 666,023

Transfer (reversal) to planned reserve for bad loans 2,680 (25,997)

Reserve for bad loans ￦ 642,706 ￦ 640,026

- 10 -

(2) Reversal to planned reserve for bad loans and net income after the reserve provided for the three months

ended March 31, 2016 and 2015, are as follows (Unit: Korean won in millions, except for earnings per

share):


2016 2015

Net income ￦ 53,584 ￦ 62,167

Transfer (reversal) to planned reserve for bad loans 2,680 (36,876)

Net income after the planned reserve provided 50,904 99,043

Earnings per share after the planned reserve provided 317 617

15. RETAINED EARNINGS:

(1) Details of retained earnings as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean

won in millions):


Legal reserve (*1) ￦ 45,127 ￦ 20,143

Planned reserve for bad loans (Note 14) 640,026 666,023

Unappropriated retained earnings 1,040,816 986,219

Total ￦ 1,725,969 ￦ 1,672,385

(*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-up 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 three months ended March 31, 2016 and 2015, are as follows (Unit:



2016 2015

Beginning balance ￦ 1,672,385 ￦ 1,735,468

Net income 53,584 62,167

Ending balance ￦ 1,725,969 ￦ 1,797,635

16. NET INTEREST EXPENSE:

Net interest expense from financial instruments for the three months ended March 31, 2016 and 2015, are as



2016 2015

Interest income:

Cash and deposits ￦ 5,034 ￦ 5,739

Others 223 554

Total 5,257 6,293

Interest expenses:

Borrowings 4,190 2,026

Debentures 62,576 70,192

Others 28 5

Total 66,794 72,223

Net interest expenses ￦ (61,537) ￦ (65,930)

- 11 -

17. NET COMMISSION INCOME:

Net commission income (expenses) from financial instruments for the three months ended March 31, 2016 and



2016 2015

Commission income:

Card income ￦ 411,143 ￦ 380,588

Total 411,143 380,588

Commission expenses:

Service fee 150,315 131,698

Financial payment fee 2,160 2,307

Handling fee relating to credit purchase 36,394 37,894

Merchant’s co-payment fee 12 13

Overseas payment fee 12,038 10,517

Other 11,273 10,682

Total 212,192 193,111

Net commission income ￦ 198,951 ￦ 187,477

18. OTHER OPERATING REVENUE AND EXPENSES:

Other operating revenues and expenses for the three months ended March 31, 2016 and 2015, are as follows



2016 2015

Other operating revenue: Foreign exchange gain \ 4,133 \ 3,467

Foreign currency translation gain 12,765 -

Gain on derivatives transactions - 2,200

Gain on valuation of derivatives - 3,229

Others 8,380 5,017

Total \ 25,278 \ 13,913

Commission expense:

Foreign exchange loss \ 1,428 \ 3,473

Foreign currency translation loss - 3,229

Loss on derivatives transactions 12,765 -

Others 6,604 6,600

Total \ 20,797 \ 13,302

- 12 -

19. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses for the three months ended March 31, 2016 and 2015, are as



2016 2015

Salaries and wages ￦ 36,340 ￦ 45,441

Pension expenses 3,747 3,438

Employee benefits 7,936 7,396

Travel expenses 621 544

Communication expenses 7,671 7,880

Posts expenses 3,924 4,772

Rental expenses 6,231 6,500

Taxes dues 5,894 4,934

Repair and maintenance expenses 328 161

Insurance expenses 64 50

Entertainment expenses 104 141

Advertising expenses 10,307 5,755

Supplies 565 708

Vehicle maintenance expenses 3 3

Periodicals expenses 93 36

Publication expenses 1,824 2,003

Training expenses 902 1,419

Electronic data processing expenses 11,738 10,140

Expense for temporary staff 1,563 2,250

Professional service expenses 32,582 31,437

Delivery commission 339 420

Commission expenses 7,329 6,781

Business activity expenses 564 676

Depreciation expenses 8,843 10,038

Amortization expenses 9,311 7,665

Event expenses 678 436

Conference expenses 71 60

Building administrative expenses 2,081 1,885

Total ￦ 161,653 ￦ 162,969

20. INCOME TAX EXPENSES:

(1) Income tax expenses for the three months ended March 31, 2016 and 2015, are as follows (Unit: Korean

won in millions):


2016 2015

Income tax currently payable ￦ 14,213 ￦ 15,009

Changes in deferred income tax assets 3,895 641

Changes in income tax expense reflected directly in

shareholders’ equity

1,377

1,890

Income tax expense ￦ 19,485 ￦ 17,540

- 13 -

(2) Income tax expenses reflected directly in shareholders’ equity for the three months ended March 31, 2016


January 1, 2016 Increase March 31, 2016

Tax effect related to cash flow hedging reserve loss ￦ 5,413 ￦ 777 ￦ 6,190

Tax effect related to remeasurements of net defined

benefit liability

6,708 600 7,308

Total ￦ 12,121 ￦ 1,377 ￦ 13,498

January 1, 2015 Increase March 31, 2015

Tax effect related to cash flow hedging reserve loss ￦ 6,537 ￦ 1,082 ￦ 7,619

Tax effect related to remeasurements of net defined

benefit liability

6,166 808 6,974

Total ￦ 12,703 ￦ 1,890 ￦ 14,593

(3) A reconciliation between income before income tax and income tax expense for the three months ended

March 31, 2016 and 2015, is as follows (Unit: Korean won in millions):


2016 2015

Net income before income tax ￦ 73,069 ￦ 79,707

Net income tax payable by the statutory income tax rates (*) 17,221 18,827

Tax reconciliations:

Others 2,264 (1,287)

Subtotal 2,264 (1,287)

Income tax expense for continued operation 19,485 17,540

Effective tax rates (income tax/income before income tax) 26.67% 22.01%

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

and 3) 24.2% for above ￦20 billion.

21. EARNINGS PER SHARE:

(1) Basic earnings per share for the three months ended March 31, 2016 and 2015, are as follows (Unit: Korean

won):


2016 2015

Net income (A) ￦ 53,583,699,462 ￦ 62,167,320,710

Weighted-average

number of shares (B)

160,465,286 shares 160,465,286 shares

Net income per share (A/B) ￦ 334 ￦ 387

(2) Diluted earnings per share

As there were no discontinued operations during the three months ended March 31, 2016 and 2015, basic

earnings per share are the same as basic earnings per share from continuing operations.

- 14 -

22. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and


March 31, 2016

Changes

Beginning

balance

Reclassification

of profit or loss Other

Income tax

effects

Ending

balance

Gain (loss) on valuation

of derivatives

￦ (17,142) ￦ 7 ￦ (3,793) ￦ 777 ￦ (20,151)

Remeasurements of net

defined benefit liability

(21,242) - (3,147) 600 (23,789)

Total ￦ (38,384) ￦ 7 ￦ (6,940) ￦ 1,377 ￦ (43,940)

March 31, 2015

Changes

Beginning

balance

Reclassification

of profit or loss Other

Income tax

effects

Ending

balance

Gain (loss) on valuation

of derivatives

￦ (20,648) ￦ 117 ￦ (5,377) ￦ 1,082 ￦ (24,826)

Remeasurements of net

defined benefit liability

(19,470) - (4,054) 808 (22,716)

Total ￦ (40,118) ￦ 117 ￦ (9,431) ￦ 1,890 ￦ (47,542)

23. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS:

(1) Cash and cash equivalents

Cash and cash equivalents in the condensed consolidated statement of cash flows are as follows (Unit: Korean

won in millions):

March 31, 2016 March 31, 2015

Ordinary deposits

￦ 163,629 ￦ 145,184

Current deposits 326 27

Time deposits

- 13,500

Other cash and cash equivalents

392,726 396,983

Total ￦ 556,681 ￦ 555,694

- 15 -

(2) Cash generated from operating activities

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


2016 2015

Net income ￦ 53,584 ￦ 62,167

Adjustments:

Income tax expense 19,485 17,540

Interest income (5,257) (6,293)

Interest expense 66,794 72,223

Dividends received (136) (147)

Bad debt expenses and losses on disposal of receivables 58,616 55,440

Retirement benefits 3,747 3,421

Long-term employee benefits 302 306

Depreciation expenses 8,843 10,038

Amortization expenses 9,311 7,665

Losses on foreign currency translation - 3,229

Losses on valuation of derivatives 12,765 -

Increase in provision for unused credit limit 1,455 743

Losses from sale of property, plant and equipment 41 1,209

Losses from sale of intangible assets 25 -

Sales promotional expenses 8,852 8,402

Increase (decrease) in provision for others (1,892) 6,251

Other operating expenses 144 437

Gains on valuation of trading securities (1,020) (195)

Gains on disposal of AFS securities (16) (25)

Gains on foreign currency translation (12,765) -

Gains on valuation of derivatives - (3,229)

Amortization of present value of discounts of card assets (8,924) (9,095)

Amortization of deferred origination cost and fee of card assets (6,213) (5,984)

Gains from sale of property, plant and equipment (93) (20)

Gains from sale of intangible assets (10) -

Other operating revenues (6) (9)

Subtotal 154,048 161,907

Changes in operating assets and liabilities:

Decrease (increase) in trading securities (105,887) 233,106

Decrease in card assets 211,815 304,685

Increase in deposits (14,400) -

Decrease (increase) in other assets 7,297 (28,500)

Decrease (increase) in guarantee deposits (2,389) 796

Decrease (increase) in derivative assets 600 (343)

Decrease in net defined benefit liabilities (376) (1,648)

Decrease in long-term employee benefits - (141)

Decrease in derivative liabilities (600) (3,083)

Increase (decrease) in other liabilities (92,164) 43,911

Subtotal 3,896 548,783

Total ￦ 211,528 ￦ 772,857

The cash and cash equivalents in the condensed consolidated statement of cash flows are the same as the

cash and cash equivalents in the condensed consolidated statement of financial position.

- 16 -

24. CONTINGENCIES AND COMMITMENTS:

(1) Credit line agreement

The credit line agreements as of March 31, 2016, and December 31, 2015, are as follows (Unit: Korean won in

millions):

Type

Financial instruments March 31, 2016 December 31, 2015

Intraday overdraft limit

Shinhan Bank

and 13 others

￦ 542,600

￦ 542,600

(2) Revolving Credit Facility

As the Consolidated Entity has a revolving credit facility agreement with many financial institutions for credit

line as of March 31, 2016, the Consolidated Entity made a revolving credit facility agreement for ￦490

billion with Kookmin Bank and nine others for credit line as of March 31, 2016.

(3) Pending litigations

As of March 31, 2016, the Consolidated Entity is involved in 19 cases (￦32,534 million) as a defendant, 13

cases (￦17,999 million) as a plaintiff and the cases for debt collection against multiple debtors in the

important pending litigations. The Consolidated Entity records ￦5,914 million for other provisions regarding

the cases as a defendant. 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).

(4) Deposit for Loss Reimbursement

As of March 31, 2016, the Consolidated Entity has deposits of ￦2,233 million and ￦4,763 million of

proceeds and interests, respectively, from the sale of Daewoo Engineering & Construction Co., Ltd.’s shares in

an escrow account and records ￦2,233 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).

(5) 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.

(6) 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.

(7) Insurance for the implementation of the liability for damages

The Consolidated Entity has an insured value of ￦1 billion for the implementation of the liability for damages

in accordance with Article 43 of Credit Information Act.

(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.

- 17 -

(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

Related parties consist of entities related to the Consolidated Entity, postemployment benefits, a key

management personnel and a close member of that person’s family; an entity controlled or jointly controlled;

and an entity influenced significantly.

Details of the related parties as of March 31, 2016, are as follows:

Companies

Parent Company Hyundai Motor Company

Other related parties IGE USA Investments, 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 Country Club, Haevichi Hotels&Resorts, 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 MNSOFT, 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, Hyundai Hysco, etc.

(2) Outstanding transactions with the related parties for the three months ended March 31, 2016 and 2015, are

as follows (Unit: Korean won in millions):


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 ￦ 31,636 ￦ - ￦ - ￦ 4,043 ￦ 88 ￦ 146 ￦ - ￦ - ￦ -

Other related parties:

Hyundai Capital 234 114 5,362 3,396 649 5,774 - - 88,994

Hyundai Life 2,258 49 - - 1,108 - - - -

Kia Motor

Company

12,247

-

-

-

2

38

-

-

-

Hyundai Auto

Ever Systems

1,097

-

-

-

12,354

-

-

910

-

Hyundai

Commercial

17

189

377

17

-

619

-

-

-

Others 906 2 - 11 4,842 - 2,511 - -

Total ￦ 48,395 ￦ 354 ￦ 5,739 ￦ 7,467 ￦ 19,043 ￦ 6,577 ￦ 2,511 ￦ 910 ￦ 88,994

- 18 -


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 ￦28,203 ￦ - ￦ - ￦ - ￦ 186 ￦ 2 ￦ - ￦ - ￦ -


Hyundai Capital 17 116 4,023 7,456 656 4,316 - - 92,560

Hyundai Life 964 48 - - 1,010 - - - -

Kia Motor

Company

9,606

-

-

-

7

-

-

-

-

Hyundai Auto

Ever Systems

1,312

-

-

-

9,436

628

-

4,380

-

Hyundai

Commercial

-

202

167

-

-

552

-

-

-

Others 802 3 1 27 2,590 - 1,799 - -

Total ￦40,904 ￦ 369 ￦ 4,191 ￦ 7,483 ￦ 13,885 ￦ 5,498 ￦ 1,799 ￦ 4,380 ￦ 92,560

(3) Receivables and payables (except for borrowings) from the transactions with the related parties as of March

31, 2016, and December 31, 2015, are as follows (Unit: Korean won in millions):

March 31, 2016

Receivable Payables

Card assets Others

Accounts

payable Others

Parent company:

Hyundai Motor Company ￦ 41,610 ￦ 2,133 ￦ 31,631 ￦ -


Hyundai Capital 146,734 499 905 265

Hyundai Life 406 61,922 128 84

Kia Motor Company 20,215 - 14,281 -

Hyundai Auto Ever Systems 10,685 - 2,553 2

Hyundai Commercial 6,688 - - 424

Others 23,342 - 9,939 -

Total ￦ 249,680 ￦ 64,554 ￦ 59,437 ￦ 775

December 31, 2015

Receivable Payables

Card assets Others

Accounts

payable Others

Parent company:

Hyundai Motor Company ￦ 46,492 ￦ 2,153 ￦ 39,143 ￦ -


Hyundai Capital 111,407 423 1,038 248

Hyundai Life 1,564 59,597 139 101

Kia Motor Company 21,925 - 10,666 -

Hyundai Auto Ever Systems 5,223 - 4,017 -

Hyundai Commercial 2,472 - - 424

Others 27,521 - 11,424 -

Total ￦ 216,604 ￦ 62,173 ￦ 66,427 ￦ 773

- 19 -

(4) Compensation for key management for the three months ended March 31, 2016 and 2015, is as follows



2016 2015

Short-term employee benefit

￦ 1,770 ￦ 3,644

Retirement benefit

480 491

Other long-term employee benefit - 3

Total ￦ 2,250 ￦ 4,138

(5) There were no borrowing transactions with the related parties for the three months ended March 31, 2016

and 2015.

(6) There were no lending transactions with the related parties for the three months ended March 31, 2016 and

2015.

(7) As of March 31, 2016, 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 Consolidated Entity transferred receivables to Privia 4th SPC, Privia 5th SPC and Super Series 1st SPC

(hereafter, “SPC”) in order to securitize assets. SPC issued subordinate asset-backed securities with transferred

receivables as underlying asset, and as the Consolidated Entity is providing credit reinforcement by acquiring

such subordinate asset-backed securities, should any bad debt incur in receivables being the underlying asset,

the risk preferentially belongs to the Consolidated Entity. SPC has recourse to drawer only in regard to the

receivables transferred. Even after transfer of receivables, the Consolidated Entity owns majority of risks and

indemnity for such asset; hence, this transaction was accounted as secured loan.

Transferred financial assets that are not derecognized in their entirety and the associated liabilities as of March

31, 2016, and December 31, 2015, are as follows (Unit: Korean won in millions):

March 31, 2016

December 31,

2015

Securitized card assets

Book value of assets ￦ 2,792,107 ￦ 2,896,759

Book value of relevant liabilities 1,091,183 1,103,302

Liabilities that have recourse only to the transferred financial assets:

Fair value of assets 3,199,777 3,279,507

Fair value of relevant liabilities 1,097,961 1,110,368

Net position ￦ 2,101,816 ￦ 2,169,139

- 20 -

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 March 31, 2016, and December 31, 2015, are as follows (Unit: Korean

won in millions):

March 31, 2016

Non-offsetting amount

Recognized

financial

assets and

liabilities

Offsetting

amount from

recognized

financial assets

and liabilities

Net amounts

in the condensed

consolidated

statement of

financial

position

Financial

instruments

Cash

collateral

received Net amounts

Financial assets:

Derivative assets ￦ 27,668 ￦ - ￦ 27,668 ￦ 4,401 ￦ - ￦ 23,267

Financial liabilities:

Derivative liabilities 22,380 - 22,380 4,401 - 17,979

December 31, 2015

Non-offsetting amount

Recognized

financial

assets and

liabilities

Offsetting

amount from

recognized

financial assets

and liabilities

Net amounts

in the condensed

consolidated

statement of

financial position

Financial

instruments

Cash

collateral

received Net amounts

Financial assets:

Derivative assets ￦ 39,584 ￦ - ￦ 39,584 ￦ 21 ￦ - ￦ 39,563


Derivative liabilities 17,744 - 17,744 21 - 17,723

28. FINANCIAL ASSETS AND LIABILITIES:

(1) The fair value of financial assets and liabilities as of March 31, 2016, and December 31, 2015, are as



Book value Fair value Book value Fair value

Assets:

Financial assets:

Cash and deposits ￦ 604,106 ￦ 604,106 ￦ 538,767 ￦ 538,767

Investment financial assets 568,603 568,603 461,695 461,695

Card assets 11,143,240 12,404,114 11,406,587 12,693,621

Other financial assets 197,140 197,140 214,031 214,031

Total ￦ 12,513,089 ￦ 13,773,963 ￦ 12,621,080 ￦ 13,908,114

Liabilities:


Borrowings ￦ 920,000 ￦ 920,942 ￦ 590,000 ￦ 590,070

Debentures 8,126,461 8,313,510 8,527,884 8,702,292

Other financial liabilities 1,149,851 1,149,851 1,246,644 1,246,644

Total ￦ 10,196,312 ￦ 10,384,303 ￦ 10,364,528 ￦ 10,539,006

The Consolidated Entity’s valuation techniques and relevant policies with regard to the fair value are the same

as those used for the previous period.

- 21 -

(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 statement of financial position as of March 31, 2016, and December 31, 2015 (Unit:


March 31, 2016

Fair value hierarchy

Book value Fair value Level 1 Level 2 Level 3

Financial assets:

Trading securities ￦ 566,836 ￦ 566,836 ￦ - ￦ 566,836 ￦ -

Derivative assets 27,668 27,668 - 27,668 -


Derivative liabilities 22,380 22,380 - 22,380 -

December 31, 2015

Fair value hierarchy

Book value Fair value Level 1 Level 2 Level 3

Financial assets:

Trading securities ￦ 459,928 ￦ 459,928 ￦ - ￦ 459,928 ￦ -

Derivative assets 39,584 39,584 - 39,584 -


Derivative liabilities 17,744 17,744 - 17,744 -

The table below provides the Consolidated Entity’s financial assets and financial liabilities that are carried at

cost as the fair values of the financial instruments are not readily determinable in the condensed consolidated

statement of financial position as of March 31, 2016, and December 31, 2015 (Unit: Korean won in millions):

Description March 31, 2016 December 31, 2015

Investment financial assets:

AFS securities (*1) Unlisted equity securities ￦ 1,767 ￦ 1,767

(*1) AFS securities are recorded at cost as 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 millions of Korean won)

Current / Prior

Fair

Value

Hierarchy

Valuation Techniques

Notable

Unobservable

Inputs and

Extent

Card assets Assets ￦12,404,114 ￦12,693,621 Level 3 Discounted Cash Flow (“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 and

discount rate

per creditors

- 22 -

Description Classification

Fair Value

(In millions of Korean won)

Current / Prior

Fair

Value

Hierarchy

Valuation Techniques

Notable

Unobservable

Inputs and

Extent

Leasehold

deposits

provided

Assets 34,856 32,467 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.

N/A

Trading

securities

Assets 566,836 459,928 Level 2 DCF model is used to determine

the fair value of trading securities.

The fair value is determined by



considering the similar credit

grade with the debt security

issuer.

N/A

Borrowings Liabilities 9,234,452 9,292,362 Level 2 DCF model is used to determine

the fair value of borrowings. The

fair value is determined by



considering the Consolidated

Entity’s credit grade.

N/A

Leasehold

deposits

received

Liabilities 9,356 9,081 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.

N/A

Interest rate

swap

Assets 1 21 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

Liabilities 17,979 17,744

Currency

swaps

Assets 27,667 39,563 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.

N/A

Liabilities 4,401 -

- 23 -

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

months ended March 31, 2016, and December 31, 2015, are as follows:

March 31, 2016

Begin

ning Gains/

Losses

Other

Comprehensive

Income (loss) Purchases/

Issues Sales/

Settlements To/From Level 3

Ending

Financial instruments:

Derivatives assets ￦ -

￦ -

￦ -

￦ -

￦ -

￦ -

￦ -

December 31, 2015

Begin

ning Gains/

Losses

Other

Comprehensive

Income (loss) Purchases/

Issues Sales/

Settlements To/From Level 3

Ending

Financial instruments:

Derivatives assets ￦80

￦ -

￦ -

￦ -

￦ (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 March 31, 2016.

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, 2015.

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 of more than 8%.

Details of adjusted capital adequacy ratio as of March 31, 2016, and December 31, 2015, are as follows (Unit:



Adjusted total assets (A) ￦ 11,967,891 ￦ 12,107,908

Adjusted total capital (B) 2,126,936 2,060,972

Adjusted capital adequacy ratio (B/A) 17.77% 17.02%

Automotive

Fy 2016 1 q review report en