커머셜 영문감사보고서

Hyundai Commercial, Inc. and Subsidiaries Consolidated Financial Statements December 31, 2014 and 2013 (With Independent Auditors’ Audit Report Thereon)

Contents

Page

Independent Auditors’ Report 1

Consolidated Statements of Financial Position 3

Consolidated Statements of Comprehensive Income 5

Consolidated Statements of Changes in Equity 7

Consolidated Statements of Cash Flows 8

Notes to the Consolidated Financial Statements 9

KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 152, Teheran-ro, Gangnam-gu Seoul, 135-984, Korea

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Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders Hyundai Commercial, Inc.: We have audited the accompanying consolidated financial statements of Hyundai Commercial, Inc. and its subsidiaries (the “Group”), which comprise the consolidated statements of financial position as of December 31, 2014 and 2013 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respect, the consolidated financial position of the Group as at December 31, 2014 and 2013 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards. Other Matter The accompanying consolidated statement of financial position of the Group as of December 31, 2013, and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, were audited by us in accordance with the previous Korean auditing standards. KPMG Samjong Accounting Corp. Seoul, Korea March 13, 2015 This report is effective as of March 13, 2015, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Financial Position As of December 31, 2014 and 2013

3

(In Korean won)

Notes December 31,

2014 December 31,

2013

Assets Cash and due from banks 12 Cash and cash equivalents 30 W 232,793,098,679 280,489,429,324 Due from banks 6 9,000,000 9,000,000 232,802,098,679 280,498,429,324 Securities Trading securities 7,12 29,063,677,042 - Available-for-sale securities 8,12,13 46,867,767,400 52,913,346,681 Investments in associates 9 295,630,649,552 258,117,765,424 371,562,093,994 311,031,112,105 Loans receivables 10,11,12 Factoring 2,156,213,021 4,145,309,432 Allowance for doubtful accounts (2,516,085) (28,760,007) Loans 3,525,862,060,385 3,003,414,808,167 Allowance for doubtful accounts (22,435,822,911) (21,626,634,497) 3,505,579,934,410 2,985,904,723,095 Installment financial assets 10,11,12 Auto installment financial receivables 285,343,219,344 281,894,747,216 Allowance for doubtful accounts (1,468,052,213) (1,827,954,594) Durable goods installment financing receivables 13,487,744,235 20,071,412,811 Allowance for doubtful accounts (3,881,563) (135,964,512) 297,359,029,803 300,002,240,921 Lease receivables 10,11,12 Financial lease receivables 14 307,183,216,287 213,536,302,589 Allowance for doubtful accounts (3,233,417,504) (1,815,586,653) 303,949,798,783 211,720,715,936 Property and equipment 15 Vehicles 19,044,075 38,087,150 Fixtures and furniture 5,227,946,145 3,259,138,554 Others 370,999,664 410,999,664 5,617,989,884 3,708,225,368 Other assets Intangible assets 16 11,983,837,035 4,474,389,846 Account receivables 12 3,565,683,526 18,117,506,853 Allowance for doubtful accounts 11 (12,214,781) (42,153,646) Accrued revenues 12 20,948,755,918 18,277,365,728 Allowance for doubtful accounts 11 (121,887,215) (121,450,184)

Advanced payments 16,723,036,367 11,320,091,953 Prepaid expenses 6,539,358,614 3,624,203,501 Leasehold deposits 12 2,409,425,689 2,126,867,765 Derivatives assets 12,21 - 162,823,025 Other investment assets - 3,914,564,740

62,035,995,153 61,854,209,581 Total assets W 4,778,906,940,706 4,154,719,656,330

See accompanying notes to the consolidated financial statements.

Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Financial Position, Continued As of December 31, 2014 and 2013

4

(In Korean won)

Notes December 31,

2014 December 31,

2013

Liabilities Borrowings and debt securities issued Borrowings 12,17 W 432,828,418,961 596,955,176,683 Debentures 12,18 3,592,437,798,383 2,803,450,657,012 Securitized debts 12,19 89,982,509,453 259,852,347,235 4,115,248,726,797 3,660,258,180,930 Other liabilities Account payables 12 20,409,056,771 14,442,798,233 Accrued expenses 12 32,305,066,665 24,018,798,330 Unearned revenue 5,348,288,440 5,883,874,618 Advances 160,049,366 561,139,875 Withholdings 12 9,171,921,658 4,638,033,401 Net defined benefit liabilities 20 4,388,337,963 2,511,838,894 Leasehold deposits received 12 57,948,012,269 53,848,412,018 Provisions 1,504,378,384 - Current income tax liabilities 7,674,842,295 9,140,342,918 Deferred income tax liabilities 27 25,078,547,564 23,056,840,364 Derivatives liabilities 12,21 3,493,828,647 1,937,593,381 Financial guarantee liabilities 1,406,867,122 -

Non-controlling interest liabilities 19,820,000 19,820,000 168,909,017,144 140,059,492,032 Total liabilities 4,284,157,743,941 3,800,317,672,962

Equity Capital stock 1,22 Common stock 100,000,000,000 100,000,000,000 Preferred stock 25,000,000,000 25,000,000,000

125,000,000,000 125,000,000,000 Capital surplus 22 Paid-in capital in excess of par value 74,608,059,537 74,608,059,537 Hybrid security 22 119,644,480,000 - Capital adjustments

Other capital adjustments (2,397,101,756) - Accumulated other comprehensive income (loss) 29 Unrealized loss on valuation of derivatives 21 (2,630,032,786) (950,104,066) Unrealized gain (loss) on valuation of available-for-

sale securities

734,946,364 (1,908,746,117) Accumulated comprehensive income (loss) of equity

method investee

10,905,883,336 (9,334,142,540) Remeasurement of defined benefit plans (3,936,978,968) (2,254,434,232)

5,073,817,946 (14,447,426,955) Retained earnings 23 Legal reserve 8,830,000,000 7,100,000,000 Voluntary reserve 16,151,091,015 15,389,637,505 Unappropriated retained earnings 147,838,850,023 146,751,713,281

(Estimated provision of regulatory reserve for credit losses W5,033,207,723 and W761,453,510, respectively)

172,819,941,038 169,241,350,786

Total equity 494,749,196,765 354,401,983,368 Total liabilities and equity W 4,778,906,940,706 4,154,719,656,330


Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income For the years ended December 31, 2014 and 2013

5

(In Korean won) Notes 2014 2013 Operating revenue

Interest income 24 W 9,875,705,713 9,434,233,198 Income on loans 24,25 288,623,054,487 281,391,820,093 Income on installment financial receivables

24,25 23,849,029,020 29,016,725,243

Income on leases 24,25 18,063,862,667 11,466,743,779 Gain on valuation of trading securities 7 25,446,540 - Gain on disposal of loans 2,628,857,257 3,988,547,540 Gain on foreign transactions 24,173,868 316,000,000 Dividend income 100,000,000 200,000,000 Gain on disposal of available-for-sale securities 849,181,503 3,267,027,980 Other operating revenue 6,791,882,187 7,149,934,537

350,831,193,242 346,231,032,370

Operating expenses Interest expense 24 152,688,056,216 157,791,181,350 Lease expenses 242,468,518 - Bad debt expense 11 31,947,097,202 25,054,917,751 Loss on disposal of loans 4,571,267,448 7,510,206,205 Loss on valuation of trading securities 7 437,301 - Loss on foreign transactions - 1,316 General and administrative expenses 26 81,725,221,148 71,486,179,960 Loss on valuation of derivatives 24,000,000 83,414,242 Loss on derivative transactions 152,712 - Other operating expenses 15,134,656,913 8,435,402,416 286,333,357,458 270,361,303,240

Operating income 64,497,835,784 75,869,729,130 Non-operating income

Gain on equity method valuation 9 12,382,461,066 9,041,656,171 Gain on disposal of property and equipment 2,385,472 42,750,144 Miscellaneous income 1,165,732,176 641,755,608

13,550,578,714 9,726,161,923 Non-operating expenses

Loss on equity method valuation 9 34,799,344,400 25,292,131,269 Loss on disposal of property and equipment 1,745,306 - Impairment loss on other investment assets 503,604,200 - Donation 2,000,000 1,952,381 Miscellaneous losses 728,738,174 546,058,448

36,035,432,080 25,840,142,098 Profit before income taxes

42,012,982,418 59,755,748,955

Income tax expenses

27 17,301,625,045 23,138,278,177

Profit for the period

23 W 24,711,357,373 36,617,470,778

(Profit adjusted by regulatory reserve for credit losses amounted to W19,678,149,650 and W35,856,017,268 for the years ended December 31, 2014 and 2013, respectively)


Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income, Continued For the years ended December 31, 2014 and 2013

6

(In Korean won) Notes 2014 2013

Other comprehensive income (loss), net of income taxes 29

Items that are or may be reclassified to profit or loss subsequently

W 21,203,789,637 (14,802,629,099)

Items that will not be reclassified to profit or loss subsequently

(1,682,544,736) (584,283,616)

19,521,244,901 (15,386,912,715)

Total comprehensive income for the period

W 44,232,602,274 21,230,558,063

Earnings per share 28

Basic earnings per share W 809 1,531 Diluted earnings per share 835 1,465


Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Changes in Equity For the years ended December 31, 2014 and 2013

7

(In Korean won)

Capital stock

Capital surplus Hybrid security

Capital adjustments

Accumulated other

comprehensive income (loss)

Retained earnings

Total attributable to owners of

the Controlling Company

Balance as of January 1, 2013 W 125,000,000,000 74,608,059,537 - - 939,485,760 137,592,534,587 338,140,079,884 Total comprehensive income (loss) Profit for the period - - - - - 36,617,470,778 36,617,470,778 Other comprehensive income (loss)

Net unrealized gain on valuation of derivatives - - - - 964,717,915 - 964,717,915

Net unrealized loss on valuation of available-for-sale securities - - - - (2,621,906,414) - (2,621,906,414)

Other comprehensive income of equity method investees - - - - (13,145,440,600) 1,031,345,421 (12,114,095,179)

Remeasurement of defined benefit plans - - - - (584,283,616) - (584,283,616)

- - - - (15,386,912,715) 37,648,816,199 22,261,903,484 Transactions with owners Annual dividends paid - - - - - (6,000,000,000) (6,000,000,000)

Balance as of December 31, 2013 W 125,000,000,000 74,608,059,537 - - (14,447,426,955) 169,241,350,786 354,401,983,368

Balance as of January 1, 2014 W 125,000,000,000 74,608,059,537 - - (14,447,426,955) 169,241,350,786 354,401,983,368 Total comprehensive income (loss) Profit for the period - - - - - 24,711,357,373 24,711,357,373 Other comprehensive income (loss) Net unrealized loss on valuation of derivatives - - - - (1,679,928,720) - (1,679,928,720)

Net unrealized gain on valuation of available-for-sale securities - - - - 2,643,692,481 - 2,643,692,481

Other comprehensive income of equity method investees - - - - 20,240,025,876 - 20,240,025,876

Remeasurement of defined benefit plans - - - - (1,682,544,736) - (1,682,544,736) - - - - 19,521,244,901 24,711,357,373 44,232,602,274

Transactions with owners Annual dividends paid - - - - - (17,300,000,000) (17,300,000,000) Issuance of hybrid security - - 119,644,480,000 - - - 119,644,480,000 Interest paid to hybrid security holders - - - - - (3,832,767,121) (3,832,767,121) Other transactions - - - (2,397,101,756) - - (2,397,101,756)

Balance as of December 31, 2014 W 125,000,000,000 74,608,059,537 119,644,480,000 (2,397,101,756) 5,073,817,946 172,819,941,038 494,749,196,765


Hyundai Commercial, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the years ended December 31, 2014 and 2013

8

(In Korean won) Notes 2014 2013 Cash flows from operating activities Cash generated from (used in) operations 30 W (396,423,330,520) 16,926,012,674

Interest received 10,278,137,577 7,852,640,077

Interest paid (145,979,896,118) (153,042,772,791)

Dividend received 100,000,000 200,000,000

Income taxes paid (16,517,530,400) (20,254,938,110)

Net cash used in operating activities (548,542,619,461) (148,319,058,150)

Cash flows from investing activities Proceeds from disposal of available-for-sale securities 21,756,263,190 8,759,859,472

Acquisition of available-for-sale securities (16,384,501,882) (44,267,937,586)

Acquisition of investments in associates (40,149,070,000) (940,000,000)

Proceeds from disposal of vehicles - 33,890,000

Proceeds from disposal of fixtures and furniture 2,973,100 11,675,000

Acquisition of fixtures and furniture (3,161,370,683) (1,815,170,606)

Acquisition of other investment assets - (28,568,880)

Disposal of other property and equipment 40,000,000 -

Acquisition of intangible assets (6,320,581,602) (376,058,800)

Increase in advanced payments (5,402,944,414) (11,522,462,304)

Decrease in leasehold deposits 31,366,720 9,303,000,928

Increase in leasehold deposits (281,917,103) (289,147,437)

Net cash used in investing activities (49,869,782,674) (41,130,920,213)

Cash flows from financing activities Proceeds from borrowings 1,072,744,977,700 673,059,902,143 Repayments of borrowings (1,236,871,735,422) (799,773,487,454)

Issuance of debentures 2,322,141,754,502 1,250,875,138,454

Repayments of debentures (1,533,906,000,000) (876,336,940,878)

Issuance of securitized debts - 170,000,000,000

Repayments of securitized debts (169,869,837,782) (220,000,000,000) Liquidation of derivatives - (4,711,000,000) Payments of dividends (17,300,000,000) (6,000,000,000) Issuance of hybrid security 119,644,480,000 - Interest paid to hybrid security holders (3,470,465,752) - Liquidation of preferred shares (2,397,101,756) -

Net cash provided by financing activities 550,716,071,490 187,113,612,265

Net cash decrease in cash and cash equivalents

(47,696,330,645) (2,336,366,098)

Cash and cash equivalents at beginning of period 30 280,489,429,324 282,825,795,422

Cash and cash equivalents at end of period 30 W 232,793,098,679 280,489,429,324


Hyundai Commercial, Inc. and Subsidiaries Notes to the Consolidated Financial Statements For the years ended December 31, 2014 and 2013 (In thousands of won)

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1. Reporting Entity Hyundai Commercial, Inc. (the “Controlling Company) and its subsidiaries (collectively, the “Group”) included in consolidation are summarized as below.

(a) Controlling Company Hyundai Commercial, Inc. was established on March 27, 2007, by taking over all the assets, liabilities, rights, and obligations related with the loans of the industrial product division of Hyundai Capital Services, Inc. and its installment financing and lease financing division. It is engaged in installment financing and leasing of facilities. The Group’s operations are headquartered at 3, Gukhoe-daero 66-gil, Yeongdeungpo-gu, Seoul, Korea. The common shareholders of the Group as of December 31, 2014 are as follows:

Number of shares Percentage of ownership (%)

Hyundai Motor Company 10,000,000 50.00 Myung-yi Chung 6,667,000 33.33 Tae-young Chung 3,333,000 16.67 20,000,000 100.00

(b) The Group’s subsidiaries Subsidiaries as of December 31, 2014 and 2013 were as follows. The Group has substantial power over the subsidiaries established as special purpose entities for asset securitization even though its ownership interest over the subsidiaries do not exceed 50%.

December 31, 2014 December 31, 2013

Special Purpose Entities Commercial Auto First

SPC (Trust) Commercial Auto First

SPC (Trust)

Commercial Auto Second

SPC (Trust) Commercial Auto Second

SPC (Trust)


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1. Reporting Entity, Continued (c) Condensed financial information of subsidiaries

Assets Liabilities Equity Operating revenue

Loss for the year

December 31, 2014 Commercial Auto First SPC (trust) W 50,117,158 50,096,903 20,255 5,465,260 (73,271)

Commercial Auto Second SPC (trust) 40,081,826 40,064,499 17,327 4,116,981 (56,871)

December 31, 2013 Commercial Auto First SPC (trust) W 150,305,348 150,211,822 93,526 9,796,267 (131,774)

Commercial Auto Second SPC (trust) 110,203,346 110,129,148 74,198 5,437,737 (83,405)


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2. Basis of Preparation (a) Statement of compliance The consolidated financial statements have been prepared in accordance with the Korean International Financial Reporting Standards (“K-IFRS”) as prescribed in the Act on External Audits of Corporations in the Republic of Korea. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statement of financial position: - Financial instruments at fair value through profit or loss are measured at fair value - Available-for-sale financial instruments measured at fair value - Derivative financial instruments measured at fair value - The liability (asset) for defined benefit obligations is recognized as the present value of the defined

benefit obligation less the fair value of the plan assets.

(c) Use of estimates and judgments The preparation of the consolidated 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. Estimates and underlying assumptions are evaluated on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future years affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes: - Note 4(i) – Allowance for financial receivables - Note 4(o) – Net defined benefit liabilities Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: - Note 11 – Allowance for Doubtful Accounts - Note 20 – Net Defined Benefit Liabilities - Note 31 – Commitments and Contingencies

(d) Measurement of fair values The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy.


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2. Basis of Preparation, Continued

(d) Measurement of fair values, Continued

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows. - Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. - Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). - Level 3: inputs for the asset or liability that are not based on observable market data (unobservable

inputs). If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in Note 12.


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3. Changes in accounting policies

(a) New standards and interpretations adopted

i) Amendments to K-IFRS No. 1032, Financial Instruments: Presentation The Group has adopted amendments to K-IFRS 1032, Offsetting Financial Assets and Financial Liabilities, since January 1, 2014. The amendments require that financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when an entity currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

According to the amendments, the right to set off should not be contingent on a future event, and legally enforceable in the normal course of business, in the event of default, and in the event of insolvency or bankruptcy of the entity and all of the counterparties.

The entity intends to settle on a net basis, if the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and payables in a single settlement process or cycle.

In accordance with the transitional requirements of K-IFRS 1032, the Group applied the amendments retrospectively. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements.

ii) Amendments to K-IFRS No. 1036, Impairment of Assets The Group has adopted amendments to K-IFRS 1036, Impairment of Assets. The amendments clarified that the Group should disclose the recoverable amounts of the asset or cash-generating unit, only when an impairment loss has been recognized or reversed for the asset or cash-generating unit during the period.

The Group retrospectively applied the amendments in accordance with the transitional requirements of K-IFRS 1036. The adoption of the amendments had no impact or no significant impact on the Group’s consolidated financial statements.

iii) K-IFRS No. 2121, Levies The Group has adopted K-IFRS No.2121, Levies, since January 1, 2014. The interpretation confirms that an entity recognizes a liability for a levy when the triggering event specified in the legislation occurs. An entity does not recognize a liability at an earlier date, even if it has no realistic opportunity to avoid the triggering event. If a levy is only payable once a specified amount has been reached, then no liability is recognized until this ‘minimum threshold’ is reached. The same recognition principles apply in the interim financial statements as in the annual financial statements, even if this results in uneven charges over the course of the year. The adoption of the interpretation had no significant impact on the Group’s consolidated financial statements.


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4. Significant Accounting Policies Significant accounting policies applied consolidated financial statements preparing according to K-IFRS are following, and consolidated financial statements as of current and prior that is for period presented for comparative was prepared by the same accounting policies. Some amount of statement of comprehensive income for prior period presented for comparative are changed some item’s presentation and classified to reflect the changes related other comprehensive income items presentation method standard. (a) Consolidation

i) Subsidiaries The Group controls subsidiaries when it is exposed, or has rights, to variable returns from its involvement with the subsidiaries and has the ability to affect those returns through its power over the subsidiaries. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. If a subsidiary of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.

ii) Intra-group transactions Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.

iii) Non-controlling interests Non-controlling interests in a subsidiary are accounted for separately from the parent’s ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero.

iv) Changes in ownership interests in a subsidiary Changes in ownership interests in a subsidiary that do not result in a loss of control, such as the subsequent purchase or sale by a parent of a subsidiary’s equity instruments, are accounted for as equity transactions in capital adjustments. Adjustments to non-controlling interests are based on a proportionate amount of net asset of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit or loss. The difference between the consideration and the adjustments made to non-controlling interest is recognized directly in equity attributable to the owners of the Group.


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4. Significant Accounting Policies, Continued

(b) Associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not have control or joint control over these policies. Significant influence is generally presumed to exist when the Group holds 20% or more, but less than 50%, of the voting rights. Under the equity method, an investment in an associate is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If an associate uses accounting policies different from those of the Group for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in applying the equity method. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has to make payments on behalf of the investee for further losses. (c) Cash and cash equivalents Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. (d) Non-derivative financial assets Non-derivative financial assets are classified into the following measurement categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets, all of which are initially recognized on the date at which the Group becomes a party to the contractual provisions of the instrument. A financial asset is measured initially at its fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition. i) Financial assets at fair value through profit or loss Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or is designated at fair value through profit or loss. Financial assets at fair value through profit or loss are measured at fair value upon initial recognition and changes therein are recognized in profit or loss. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred.

ii) Held-to-maturity investments If the non-derivative assets have a fixed maturity with fixed or determinable payments, and the Group has the positive intent and ability to hold them until maturity, then such financial assets are classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest rate method.


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(d) Non-derivative financial assets, Continued

iii) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method.

iv) Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives those are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.

v) Derecognition of financial assets The Group de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. If the Group retains substantially all the risks and rewards of ownership of the transferred financial assets, the Group continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.

vi) Offsetting between financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Group currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.


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(e) Derivative financial instruments Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. 1) Hedge accounting The Group holds various derivative financial instruments, such as currency swaps and interest rate swaps, etc., to hedge its foreign currency and interest rate risk exposures. On initial designation of the hedge, the Group formally documents the relationship between the hedging instruments and hedged items, including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

i) Fair value hedge Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the consolidated statement of comprehensive income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

ii) Cash flow hedge When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

2) Embedded derivative instruments Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria has been met: (a) the economic characteristics and risks of the host contract and the embedded derivatives are not clearly and closely related to a separate instrument with the same terms as the embedded derivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

3) Other derivative instruments Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.


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(f) Impairment of financial assets A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.

Objective evidence that a financial asset is impaired includes, but is not limited to, the following events:

i) Assets carried at amortized cost An impairment loss in respect of assets carried at amortized cost measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate and is recognized in profit or loss. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

ii) Available-for-sale financial assets When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

(g) Revenue recognition The Group recognizes capital lent to customers as loans receivables. Installment financial capital paid by the Group to manufacturers or sellers on behalf of customers is recognized as installment financial assets. Financial lease receivables classified as financial leases are recognized as lease receivables. The expected future cash flows from loans receivables, installment financial assets and lease receivables (“financial receivables”) described above are amortized under the effective interest method over the period of the financial receivables being used by customers.

(h) Deferral of loan origination fee and loan origination cost Loan origination fee, which is processing fee in relation to the loan origination process such as upfront fee, is deferred and deducted from the loan account, adjusted over the life of the loan based on the effective interest rate method. Loan origination cost, which relates to activities performed by the lender such as soliciting potential borrowers, is deferred and added to the loan account, adjusted over the life of the loan based on the effective interest rate method when the future economic benefit in connection with the cost incurred can be identified on a per loan basis.


19


(i) Allowance for financial receivables

i) Calculation of allowance for doubtful accounts The Group recognizes the impairment of receivables as an allowance for doubtful accounts. It is based on the impairment estimates made through impairment assessment of receivables carried at amortized cost. Allowance for doubtful account consists of impairments related to individually material financial receivables and collective assessment for impairment incurred in homogeneous assets. Individually material receivables undertake the individual assessment of the difference between the assets’ carrying amount and the present value of estimated future cash flows. Unimpaired assets from individual assessments and individually immaterial assets undertake the collective assessment classified by asset groups that have analogous risk attributes. The Group uses statistical model in the collective assessment based on the expected probability of default, periodic collect amounts, loss-given default based on the past losses, loss emergence period, and management’s decision about the current economy and credit circumstance. The material factors used in statistical model for the collective assessment are evaluated to compare with actual data regularly. The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss.

ii) Write-off policy The Group writes off the doubtful receivables when the assets are deemed unrecoverable. This decision considers the information about significant changes of financial position such that a borrower or an obligor is in default, or the amount recoverable from security is not enough. Write-off decision of standard small loan is generally made based on the delinquent status of loan.


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(j) Leases

i) Classification The Group classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the lessee assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. The lease arrangement classified as a finance lease is where: ① the lease transfers ownership of the asset to the lessee by the end of the lease term, the lessee has the option to purchase the asset at ②a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised,

the lease term is for the major part of the economic life of the asset e③ ven if the title is not transferred, at the inception of the lease the present value of the minimum lease payments amounts ④to at least substantially all of the fair value of the leased asset, or the leased assets are of such a ⑤specialized nature that only the lessee can use them without major modifications. Minimum lease payments include that part of the residual value that is guaranteed by the lessee, by a party related to the lessee or by a third party unrelated to the Group that is financially capable of discharging the obligation under the guarantee.

ii) Finance leases Where the Group has substantially all the risks and rewards of ownership, lease of property, and equipment are classified as finance lease. An amount equal to the net investment in the lease is presented as a receivable. Expenses that are incurred with regard to the lease contract made but not executed at the date of the statement of financial position are accounted for as prepaid leased assets and are classified as finance lease receivables at the inception of the lease. Lease receivables include amounts such as commissions, legal fees, and internal costs that are incremental and directly attributable to negotiation and arranging a lease. Each lease payment is allocated between principal and finance income. Financial income on an uncollected part of net investment shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.


21


(k) Property and equipment Property and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The cost of replacing a part of an item of property or equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced cost is derecognized. The cost of the day to day servicing of property and equipment are recognized in profit or loss as incurred. Property and equipment are depreciated on a straight-line basis over the estimated useful lives, which most closely reflect the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative years are as follows:

Description Depreciation method Useful lives

Vehicles Straight-line 4 years Fixtures and furniture Straight-line 4 years

Works of art classified under other tangible assets are not amortized due to their indefinite useful life in nature. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the carry amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and recognized within other operating income (expenses) in the consolidated statement of comprehensive income.


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(l) Intangible assets Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses. Amortization of intangible assets is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero.

Descriptions Amortization method Useful lives

Development Straight-line 5 years Software Straight-line 4 years

Other intangible assets Straight-line 5 years

However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized. i) Research and development Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

ii) Subsequent expenditures Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred. (m) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets that are subject to amortization suffered impairment are viewed for possible reversal of the impairment at each reporting date.


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(n) Non-derivative financial liabilities The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.

i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

ii) Other financial liabilities Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method. The Group derecognizes a financial liability from the consolidated statement of financial position when it is extinguished (i.e., when the obligation specified in the contract is discharged, cancelled or expires).

(o) Net defined benefit liabilities The Group operates a defined benefit plan. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of reporting period less the fair value of plan assets, together with adjustments for unrecognized past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income or loss in the period in which they arise.


24


(p) Provisions and contingent liabilities When there is a probability that an outflow of economic benefits will occur due to a present obligation resulting from a present legal or as a result of past events, and whose amount is reasonably estimable, a corresponding amount of provision is recognized in the consolidated financial statements. Provisions are the best estimate of the expenditure required to settle the present obligation that consider the risks and uncertainties inevitably surround many events and circumstances at the reporting date. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events, or a present obligation that arises from past events but is not certain to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made in the notes to the consolidated financial statements.

(q) Foreign currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the Group’s functional currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges.

(r) Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects. Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Group’s option, and any dividends are discretionary. Dividends thereon are recognized as distributions within equity upon approval by the Group’s shareholders.


25


(s) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

i) Current income tax Current income tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

ii) Deferred income tax Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.


26


(t) Earnings per share The Group presents its basic and diluted earnings per ordinary share in consolidated comprehensive statement of income. Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by adjusting net profit attributable to ordinary shareholders of the Group for basic earnings considered potential ordinary shares with dilution effect and weighted average number of ordinary shares outstanding.

(u) Dividend distribution Dividend distribution to the Group’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Group’s shareholders.

(v) Approval of financial statements The Group’s consolidated financial statements were approved by the board of directors on February 26, 2015 and will be reported at the annual meeting of shareholders on March 27, 2015.


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5. Segment Reporting The Group is engaged in limited financial business (Loans, Installment Finance, and Lease, etc.) under the Specialized Credit Financial Business Law in Korea. Therefore, segment reporting is not disclosed as the Group’s own business is comprised of single operating segment.

6. Restricted Financial Instruments

Restricted financial instruments as of December 31, 2014 and 2013 are as follows:

Type Depository 2014 2013 Restriction

Due from banks Kookmin Bank and 2 others W 9,000 9,000

Guarantee deposit for account opening

7. Trading Securities

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

(*) For liquidity management, the Group holds short-term investments in excess of immediate funding needs. These excess funds are invested in short-term, highly liquid financial instruments, which provide liquidity for the Group’s short-term funding needs and flexibility in the use of other funding sources.

Debt securities as of December 31, 2014 and 2013 are as follows: Carrying value

Acquisition cost 2014 2013 Commercial papers W 29,038,668 29,063,677 -

Gain and loss from trading securities recognized in profit or loss as of December 31, 2014 and 2013 are as follows:

Book value

2014 2013

Gain on valuation of trading securities W 25,446 - Loss on valuation of trading securities 437 -

2014 2013

Trading securities (*)

Debt securities W 29,063,677 -


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8. Available-for-sale Securities

Balances as of available-for-sale securities as of December 31, 2014 and 2013 are as follows:

2014 2013 Equity securities Marketable equity securities W 4,655,000 7,200,000

Unlisted equity securities 2,893,203 2,700,821

Equity investments 1 1

Beneficiary certificates 26,879,856 27,416,294

34,428,060 37,317,116

Debt securities 12,439,707 15,596,231 W 46,867,767 52,913,347


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8. Available-for-sale Securities, Continued Details of available-for-sale securities as of December 31, 2014 and 2013 are as follows:

Book value

Number of shares

Owner- ship (%)

Acquisition cost 2014 2013

Marketable equity securities

JNK Heaters Co., Ltd. 1,000,000 12.50 W 10,126,881 4,655,000 7,200,000

Unlisted equity securities

Anyang KDC Project Corp. (*1) 389,999 15.00 2,580,576 2,832,087 2,689,862

Anyang KDC Asset Management Corp. (*1) 1,499 15.00 9,919 11,243 10,339

Isung Eng, Corp. 24 - 620 620 620 Tong Yang Leisure Co., Ltd. (*1) 6,200 0.18 190,395 49,253 -

2,781,510 2,893,203 2,700,821

Equity investments HB Fourth ABS, Ltd. 13 0.19 1 1 1

Beneficiary certificates

Hanjoo New Credit Private Special Asset Investment Trust (*2) - - 618,376 621,184 4,134,256

Yuniae Daebu Investment Trust (*2) - - 4,947,777 5,021,568 7,764,524

Nice Investment Second Trust (*2) - - 6,334,000 6,408,806 8,705,756

Daesong Finance Daebu (*2) - - - - 6,811,758

YNK Partners Daebu - - 5,022,659 5,092,928 - Hyundai Ship Investment Fund No.3 (*3) - - 9,680,000 9,735,370 -

26,602,812 26,879,856 27,416,294

Debt securities Leehan Corp. - - - - 3,512,054 Commercial Auto Third SPC (*1) - - 4,000,000 4,128,163 4,007,450

Commercial Auto Fourth SPC (*1) - - 8,000,000 8,311,544 8,076,727

12,000,000 12,439,707 15,596,231

W 51,511,204 46,867,767 52,913,347


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8. Available-for-sale Securities, Continued

(*1) The fair value of the securities was estimated based on the prices provided by an external appraiser, Korea Investors Service Pricing Inc.

(*2) The fair value of beneficiary certificates which is related to NPL investment was estimated based

on the prices provided by an external appraiser, Korea Investors Service Pricing Inc. The fair value of the securities was determined by discounting the expected cash flows based on principal and interest arising from trusted asset at an appropriate rate.

(*3) The fair value of the securities was estimated based on the prices provided by an external

appraiser, KIS Pricing Inc. The fair value is measured by deducting other assets and liabilities within the investment trust from the amount estimated by discounting expected future cash flows of beneficiary certificates.


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9. Investments in Associates (1) Details of investments in associates as of December 31, 2014 and 2013 are as follows:

Loca-tion

Number of shares

Owner- ship (%)

Acquisition cost Book value

December 31, 2014 Hyundai Card Co., Ltd. (*) Korea

8,889,622 5.54 W 113,820,162 178,492,382

Hyundai Life Insurance Co., Ltd. Korea

15,509,040 39.65 180,002,130 117,138,268

W 293,822,292 295,630,650

December 31, 2013 Hyundai Card Co., Ltd. (*) Korea

8,889,622 5.54 W 113,820,162 168,007,972

Hyundai Life Insurance Co., Ltd. Korea

10,785,620 39.44 139,853,060 90,109,793

W 253,673,222 258,117,765 (*) 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 classified as investments in associates.


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9. Investments in Associates, Continued

(2) Details of valuation of equity method investment and other changes for the years then ended December 31, 2014 and 2013 are as follows:

Beginning

balance Acquisition Share of

profit (loss)

Changes in accumulated

other comprehen-sive income (loss) (*1)

Changes in

retained earnings

Ending balance

December 31, 2014 Hyundai Card Co., Ltd. W 168,007,972 - 12,382,461 (1,898,051) - 178,492,382

Hyundai Life Insurance Co., Ltd.(*2) 90,109,793 40,149,070 (34,799,344) 21,678,749 - 117,138,268

W 258,117,765 40,149,070 (22,416,883) 19,780,698 - 295,630,650

December 31, 2013

Hyundai Card Co., Ltd. W 158,386,190 - 9,041,656 80,467 499,659 168,007,972

Hyundai Life Insurance Co., Ltd.(*2) 127,015,755 940,000 (25,292,131) (13,206,434) 652,603 90,109,793

W 285,401,945 940,000 (16,250,475) (13,125,967) 1,152,262 258,117,765

(*1) Tax effects are not deducted. (*2) The Group recognized expense associated with the investment in Hyundai Life Insurance Co., Ltd.

which amounted to W8,582,824 thousand as other operating expense.

(3) Summary of financial information of associates as of and for the years ended December 31, 2014 and 2013 are as follows:

Summary of financial information of associates (*1) Reporting date Total assets Total liabilities Net assets

December 31, 2014

Hyundai Card Co., Ltd. December 31 W 12,402,910,868 9,847,530,042 2,555,380,826

Hyundai Life Insurance Co., Ltd. December 31 4,902,840,052 4,668,160,432 234,679,620

December 31, 2013

Hyundai Card Co., Ltd. December 31 W 11,520,877,692 9,154,729,617 2,366,148,075

Hyundai Life Insurance Co., Ltd. December 31 (*2) 4,107,538,481 3,941,914,013 165,624,468


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9. Investments in Associates, Continued

Reporting date

Summary of financial information of associates (*1)

Operating revenue

Profit (loss) for the year

Total comprehen-sive income

(loss) Dividends received

December 31, 2014 Hyundai Card Co., Ltd. December 31 W 2,617,995,017 223,514,021 189,252,571 - Hyundai Life Insurance

Co., Ltd. December 31 1,061,859,537 (85,392,841) (30,601,310) -

December 31, 2013

Hyundai Card Co., Ltd. December 31 W 2,527,479,161 163,209,633 173,857,648 -

Hyundai Life Insurance Co., Ltd.

December 31 (*2) 981,376,579 (39,543,472) (73,229,042)

-

(*1) Summarized financial statements of Hyundai Life Insurance Co., Ltd. were adjusted to reflect fair

value adjustments made at the time of acquisition. (*2) The fiscal year-end date of Hyundai Life Insurance Co., Ltd. has been changed from March 31 to

December 31 according to Enforcement Decree of the Insurance Business Act, Article 61.

(4) Reconciliations of the summarized financial information presented to the carrying amount of its

interest in associate as of December 31, 2014 and 2013 are as follows:

Net assets Ownership

(%) Shares of

assets Goodwill

Unamortized fair value

adjustments (*) Book value

December 31, 2014

Hyundai Card Co., Ltd. W 2,555,380,826 5.54 141,565,632 36,926,750 - 178,492,382

Hyundai Life Insurance Co., Ltd. 234,679,620 39.65 93,058,209 19,739,063 4,340,996 117,138,268

W 2,790,060,446 234,623,841 56,665,813 4,340,996 295,630,650

December 31, 2013

Hyundai Card Co., Ltd. W

2,366,148,075 5.54

131,081,222 36,926,750 -

168,007,972

Hyundai Life Insurance Co., Ltd.

165,624,468 39.44

65,322,218 17,265,061

7,522,514

90,109,793

W 2,531,772,543 196,403,440 54,191,811 7,522,514 258,117,765

(*) Fair value adjustments are related to value of business acquired, sales channel and IT systems

made at the time of acquisition.


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10. Financial Receivables

Details of financial receivables as of December 31, 2014 and 2013 are as follows:

Principal

Deferred loan origination

fees and costs

Present value discount

Allowance for doubtful accounts Book value

December 31, 2014

Loans receivables

Factoring receivables W 2,156,213 - - (2,516) 2,153,697

Loans 3,483,482,341 42,746,404 (366,685) (22,435,823) 3,503,426,237

3,485,638,554 42,746,404 (366,685) (22,438,339) 3,505,579,934 Installment financial assets

Auto 281,405,117 3,938,103 - (1,468,052) 283,875,168

Durable goods 13,839,097 (351,353) - (3,882) 13,483,862

295,244,214 3,586,750 - (1,471,934) 297,359,030

Lease receivables Financial lease

receivables 306,642,700 540,517 - (3,233,418) 303,949,799

W 4,087,525,468 46,873,671 (366,685) (27,143,691) 4,106,888,763

December 31, 2013

Loans receivables

Factoring receivables W 4,145,309 - - (28,760) 4,116,549

Loans 2,962,002,487 41,732,726 (320,405) (21,626,634) 2,981,788,174

2,966,147,796 41,732,726 (320,405) (21,655,394) 2,985,904,723 Installment financial assets

Auto 278,334,703 3,560,044 - (1,827,954) 280,066,793

Durable goods 20,315,358 (243,945) - (135,965) 19,935,448

298,650,061 3,316,099 - (1,963,919) 300,002,241

Lease receivables Financial lease

receivables 213,344,202 192,101

- (1,815,587) 211,720,716

W 3,478,142,059 45,240,926 (320,405) (25,434,900) 3,497,627,680


35

11. Allowance for Doubtful Accounts Changes in allowance for doubtful accounts for the years ended December 31, 2014 and 2013 are as follows:

Loans

receivables

Installment financial assets

Lease receivables Other assets Total

December 31, 2014 Beginning balance W 21,655,394 1,963,919 1,815,587 163,604 25,598,504

Amounts written off (9,722,696) (1,073,302) (1,969,996) - (12,765,994) Recoveries of amounts previously written off 1,069,282 252,861 187 - 1,322,330

Disposal of receivables (17,579,858) (1,017,426) - - (18,597,284)

Unwinding of discount (215,080) (11,780) - - (226,860) Additional (reversed) allowance 27,231,297 1,357,662 3,387,640 (29,502) 31,947,097

Ending balance W 22,438,339 1,471,934 3,233,418 134,102 27,277,793

December 31, 2013

Beginning balance W 19,259,170 2,527,318 1,026,911 227,475 23,040,874

Amounts written off (6,452,388) (280,185) (128,917) - (6,861,490) Recoveries of amounts previously written off 1,278,189 59,806 23,660 - 1,361,655

Disposal of receivables (15,011,571) (1,698,041) (955) - (16,710,567)

Unwinding of discount (262,070) (24,816) - - (286,886) Additional (reversed) allowance 22,844,064 1,379,837 894,888 (63,871) 25,054,918

Ending balance W 21,655,394 1,963,919 1,815,587 163,604 25,598,504


36

12. Fair Value of Financial Instruments

Fair value is the amount at which the asset could be exchanged or the liabilities could be settled in a transaction between knowledgeable and willing independent parties. The best estimated fair value is the published price quotation in an active market. The Group believes that valuation technique applied to the financial instruments is adequate and fair value of financial instruments is reasonable, but if the Group uses another valuation technique or assumptions, such fair value might be changed. Also, as fair value measurement of financial instruments uses variable valuation techniques and assumptions, comparing fair value with those recognized by other financial institutions might be difficult.

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.

Trading securities In case that the market of a financial instrument is active, fair value is established at the closing quoted price as of the last day for the reporting period. The fair value of investments in money market funds is determined by the sum of acquisition cost and accrued interest.

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 techniques, 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 receivables

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. 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 the above method.

Borrowings / Dentures / Securitized debts

The fair value 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.

Other financial assets and other financial liabilities

The fair value is determined by using the discounted cash flow method. However, when the cash flow cannot be objectively measured, the book value approximates the fair value.


37

12. Fair Value of Financial Instruments, Continued

(1) Fair values of financial instruments as of December 31, 2014 and 2013 are as follows:

December 31, 2014 December 31, 2013 Book value Fair value Book value Fair value

Financial assets Cash and due from banks W 232,802,099 232,802,099 280,498,429 280,498,429

Trading securities 29,063,677 29,063,677 - -

Available-for-sale securities 46,867,767 46,867,767 52,913,347 52,913,347

Loans receivables 3,505,579,934 3,508,954,446 2,985,904,723 2,968,560,192

Installment financial assets 297,359,030 296,679,081 300,002,241 298,739,837

Lease receivables 303,949,799 304,045,372 211,720,716 211,044,247

Derivative assets - - 162,823 162,823

Account receivables 3,553,469 3,553,469 18,075,353 18,075,353

Accrued revenues 20,826,869 20,826,869 18,155,916 18,155,916

Leasehold deposits 2,409,426 2,326,800 2,126,868 2,086,563

W 4,442,412,070 4,445,119,580 3,869,560,416 3,850,236,707

Financial liabilities

Borrowings W 432,828,419 433,598,405 596,955,177 598,777,407

Debentures 3,592,437,798 3,637,422,103 2,803,450,657 2,850,826,093

Securitized debts 89,982,509 90,975,852 259,852,347 265,161,361

Derivative liabilities 3,493,829 3,493,829 1,937,593 1,937,593

Account payables 20,409,057 20,409,057 14,442,798 14,442,798

Accrued expenses 32,305,067 32,305,067 24,018,798 24,018,798

Withholdings (*) 8,545,657 8,545,657 4,170,622 4,170,622

Leasehold deposits 57,948,012 59,530,573 53,848,412 54,366,279

W 4,237,950,348 4,286,280,543 3,758,676,404 3,813,700,951

(*) Excluding taxes and dues


38

12. Fair Value of Financial Instruments, Continued (2) Fair Value Hierarchy The levels of fair value hierarchy have been defined as follows: - Level 1: Quoted prices in active markets for identical assets or liabilities. For example, listed

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

market data. For example, most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap, forward, option.

- Level 3: Inputs for the asset or liability that is not based on observable market data. For example, unlisted stocks, complicated structured bonds, complicated unlisted derivatives and others.

A. Financial assets and liabilities carried at fair value in the consolidated statements of financial position

1) The fair value hierarchy of financial instruments as of December 31, 2014 and 2013 are as follows:

Fair value hierarchy Book value Fair value Level 1 Level 2 Level 3

December 31, 2014 Financial assets Available-for-sale

securities W 29,063,677 29,063,677 - 29,063,677 - Derivative assets 46,867,767 46,867,767 4,655,000 - 42,212,767 W 75,931,444 75,931,444 4,655,000 29,063,677 42,212,767

Financial liabilities Derivative liabilities W 3,493,829 3,493,829 - 3,493,829 - December 31, 2013 Financial assets Available-for-sale

securities W 52,913,347 52,913,347 7,200,000 - 45,713,347 Derivative assets 162,823 162,823 - 162,823 - W 53,076,170 53,076,170 7,200,000 162,823 45,713,347

Financial liabilities Derivative liabilities W 1,937,593 1,937,593 - 1,937,593 -


39


2) The valuation techniques and the fair value measurement input variables of financial assets and liabilities classified as level 2 as of December 31, 2014 and 2013 are as follows:

Fair value

December 31,

2014 December 31,

2013 Valuation

techniques Inputs Financial assets

Trading securities W 29,063,677 - DCF Model Discount rate, short -term interest rate, volatility, and others

Derivative assets - 162,823 DCF Model Discount rate, short -term interest rate, volatility, and others

Financial liabilities Derivative financial liabilities

3,493,829 1,937,593 DCF Model Discount rate, volatility, foreign exchange rate, stock price, and others

Valuation techniques and quantitative information unobserved inputs of financial instruments classified as level 3 as of December 31, 2014 and 2013 are as follows:

December 31, 2014

Fair value Valuation

techniques Inputs Unobservable

inputs

Estimated range of

unobservable inputs (%)

Financial assets


W 42,212,767 DCF Model Discount rate Recovery rate 94.74 ~ 100.00

Spot rate 3.44 ~ 6.34

Issue rate, Residual maturity, Credit rating

-

Discount curve 3.61 ~ 9.76


40


December 31, 2013

Fair value Valuation

techniques Inputs Unobservable

inputs

Estimated range of

unobservable inputs (%)

Financial assets


W 45,713,347 DCF Model Discount rate Recovery rate 94.74 ~ 100.00

Spot rate 3.86 ~ 7.74

Issue rate, Residual maturity, Credit rating

-

Discount curve 4.03 ~ 10.77

Financial assets classified as level 3 are available-for-sale financial assets as of December 31, 2014. Changes in other comprehensive income due to changes in inputs to valuation are considered to have insignificant impacts considering the amount of total equity.

3) The changes in financial instruments of level 3 for the years ended December 31, 2014 and 2013 are

as follows:

Available-for-sale securities 2014 2013

Beginning balance W 45,713,347 16,334,327 Acquisition 16,570,396 44,267,937 Interest income 386,359 2,000,762 Gain (loss) on valuation (other comprehensive

income or loss) 560,840 (11,396,848) Disposal (21,018,175) (5,492,831) Ending balance W 42,212,767 45,713,347


41

12. Fair Value of Financial Instruments, Continued B. Financial instruments not measured at fair value but disclosed 1) The fair value hierarchy of financial instruments not measured at fair value but disclosed as of

December 31, 2014 and 2013 are as follows:

December 31, 2014

Book value Fair value Fair value hierarchy

Level 1 Level 2 Level 3 Financial assets

Cash and due from banks (*) W 232,802,099 232,802,099 - 232,802,099 -

Loans receivables 3,505,579,934 3,508,954,446 - - 3,508,954,446 Installment financial assets 297,359,030 296,679,081 - - 296,679,081

Lease receivables 303,949,799 304,045,372 - - 304,045,372 Account receivables 3,553,469 3,553,469 - - 3,553,469

Accrued revenues 20,826,869 20,826,869 - - 20,826,869

Leasehold deposits 2,409,426 2,326,800 - 2,326,800 - W 4,366,480,626 4,369,188,136 - 235,128,899 4,134,059,237


Borrowings W 432,828,419 433,598,405 - 433,598,405 -

Debentures 3,592,437,798 3,637,422,103 - 3,637,422,103 -

Securitized debts 89,982,509 90,975,852 - - 90,975,852

Account payables 20,409,057 20,409,057 - - 20,409,057

Accrued expenses 32,305,067 32,305,067 - - 32,305,067

Withholdings 8,545,657 8,545,657 - - 8,545,657

Leasehold deposits 57,948,012 59,530,573 - 59,530,573 - W 4,234,456,519 4,282,786,714 - 4,130,551,081 152,235,633

(*) In the items classified as level 2, the book value is disclosed as fair value since the book value is a

reasonable estimate of the fair value.


42


December 31, 2013

Book value Fair value Fair value hierarchy

Level 1 Level 2 Level 3 Financial assets

Cash and due from banks (*) W

280,498,429

280,498,429 -

280,498,429 -

Loans receivables 2,985,904,723 2,968,560,192 - - 2,968,560,192 Installment financial assets 300,002,241 298,739,837 - - 298,739,837

Lease receivables 211,720,716 211,044,247 - - 211,044,247

Account receivables

18,075,353

18,075,353 - -

18,075,353

Accrued revenues 18,155,916 18,155,916 - - 18,155,916

Leasehold deposits 2,126,868 2,086,563 - 2,086,563 -

W

3,816,484,246

3,797,160,537 -

282,584,992

3,514,575,545 Financial liabilities

Borrowings W 596,955,177 598,777,407 - 598,777,407 -

Debentures 2,803,450,657 2,850,826,093 - 2,850,826,093 -

Securitized debts 259,852,347 265,161,361 - - 265,161,361

Account payables 14,442,798 14,442,798 - - 14,442,798

Accrued expenses 24,018,798 24,018,798 - - 24,018,798 Withholdings 4,170,622 4,170,622 - - 4,170,622

Leasehold deposits 53,848,412 54,366,279 - 54,366,279 - W 3,756,738,811 3,811,763,358 - 3,503,969,779 307,793,579

(*) In the items classified as level 2, book value is disclosed as fair value since the book value is a reasonable estimate of the fair value.


43


2) Valuation techniques and inputs used to measure fair value

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. The valuation techniques and the fair value measurement input variables of financial instruments classified as level 2 or level 3 which the fair value are disclosed as of December 31, 2014 and 2013 are as follows: Fair value

December 31,

2014 December 31,

2013 Valuation technique Inputs

Financial assets Loans receivables W 3,508,954,446 2,968,560,192 DCF model

Procurement interest rate, credit spread, other spread

Installment financial assets 296,679,081 298,739,837 DCF model


Financial lease receivables 304,045,372 211,044,247 DCF model


Leasehold deposits 2,326,800 2,086,563 DCF model Base interest rate

W 4,112,005,699 3,480,430,839 Financial liabilities

Borrowings W 433,598,405 598,777,407 DCF model


Debentures

3,637,422,103 2,850,826,093 DCF model


Securitized debts

90,975,852 265,161,361 DCF model


Leasehold deposits

59,530,573 54,366,279 DCF model

Base interest rate

W 4,221,526,933 3,769,131,140


44

12. Fair Value of Financial Instruments, Continued The book values of financial instruments by categories as of December 31, 2014 and 2013 were as follows:

Financial assets at fair

value through

profit or loss

Available-for-sale financial assets

Loans and receivables

Hedging derivative

instruments Total

December 31, 2014

Financial assets

Cash and due from banks W - - 232,802,099 - 232,802,099

Trading securities 29,063,677 - - - 29,063,677

Available-for-sale securities - 46,867,767 - - 46,867,767

Loans receivable - - 3,505,579,934 - 3,505,579,934

Installment financial assets - - 297,359,030 - 297,359,030

Financial lease receivables - - 303,949,799 - 303,949,799

Account receivables - - 3,553,469 - 3,553,469

Accrued revenues - - 20,826,869 - 20,826,869

Leasehold deposits - - 2,409,426 - 2,409,426 W 29,063,677 46,867,767 4,366,480,626 - 4,442,412,070

December 31, 2013

Financial assets

Cash and due from banks W - - 280,498,429 - 280,498,429

Available-for-sale securities - 52,913,347 - - 52,913,347

Loans receivable - - 2,985,904,723 - 2,985,904,723

Installment financial assets - - 300,002,241 - 300,002,241

Financial lease receivables - - 211,720,716 - 211,720,716

Derivative assets 153 - - 162,670 162,823

Account receivables - - 18,075,353 - 18,075,353

Accrued revenues - - 18,155,916 - 18,155,916

Leasehold deposits - - 2,126,868 - 2,126,868 W 153 52,913,347 3,816,484,246 162,670 3,869,560,416


45


Financial liabilities at

amortized cost

Hedging derivative

instruments Total

December 31, 2014 Financial liabilities

Borrowings W 432,828,419 - 432,828,419

Debentures 3,592,437,798 - 3,592,437,798

Securitized debts 89,982,509 - 89,982,509

Derivative liabilities - 3,493,829 3,493,829

Account payables 20,409,057 - 20,409,057

Accrued expenses 32,305,067 - 32,305,067

Withholdings (*) 8,545,657 - 8,545,657

Leasehold deposits received 57,948,012 - 57,948,012 W 4,234,456,519 3,493,829 4,237,950,348

December 31, 2013


Borrowings W 596,955,177 - 596,955,177

Debentures 2,803,450,657 - 2,803,450,657

Securitized debts 259,852,347 - 259,852,347

Derivative liabilities - 1,937,593 1,937,593

Account payables 14,442,798 - 14,442,798

Accrued expenses 24,018,798 - 24,018,798

Withholdings (*) 4,170,622 - 4,170,622

Leasehold deposits received 53,848,412 - 53,848,412 W 3,756,738,811 1,937,593 3,758,676,404

(*) Excluding taxes and dues


46

13. Transfer of Financial Assets

(a) Financial assets that are not entirely derecognized

The Group issued senior and subordinated securitized debts based on loans and instalment receivables which were securitized. The securitized debts have recourse only to the transferred assets.

Details of financial assets transferred but not entirely derecognized as of December 31, 2014 and 2013 are as follows: December 31, 2014 December 31, 2013

Book value of assets:

Loans receivables W 837,293,807 605,061,704

Installment financial assets 1,428,220 8,609,642

838,722,027 613,671,346 Book value of related liabilities W 89,982,509 259,852,347

Liabilities having right of resource on transferred assets:

Fair value of assets W 839,524,750 610,120,433

Fair value of related liabilities (90,975,852) (265,161,361) Net position W 748,548,898 344,959,072

(b) Financial assets that are entirely derecognized The Group derecognized loans receivables from the consolidated financial statements by transferring them for W101,598,233 thousand to Commercial Auto Third SPC (Trustee Bank: Citibank Korea, Inc.) on December 18, 2012. Gains related to the transaction amounted to W2,450,829 thousand. Also the Group derecognized loans receivables from the consolidated financial statements by transferring them for W202,700,000 thousand to Commercial Auto Fourth SPC (Trustee Bank: Woori Bank) on November 15, 2013. Gains related to the transaction amounted to W2,674,381 thousand.


47

13. Transfer of Financial Assets, Continued

(b) Financial assets that are entirely derecognized, Continued

The Group has continuing involvement in the transferred assets after taking over debt securities issued by Commercial Auto Third SPC and Commercial Auto Fourth SPC. Details of continuing involvement were as follows: Maximum

exposure to loss

Type of continuing involvement


December 31, 2014

Commercial Auto Third SPC Acquisition on debt securities

W 4,128,163 4,128,163

Commercial Auto Fourth SPC 8,311,544 8,311,544 W 12,439,707 12,439,707

Maximum

exposure to loss

Type of continuing involvement


December 31, 2013

Commercial Auto Third SPC Acquisition on debt securities

W 4,007,450 4,007,450

Commercial Auto Fourth SPC 8,076,727 8,076,727 W 12,084,177 12,084,177


48

14. Financial Lease Receivables

Details of total lease investments and present value of minimum lease payment as of December 31, 2014 and 2013 are as follows:


Total lease investments

Present value of minimum

lease payment

Total lease investments

Present value of minimum

lease payment

Less than 1 year W 114,331,819 98,361,154 88,198,065 78,351,361

1 to 5 years 228,163,719 208,822,062 144,063,735 135,184,942

W 342,495,538 307,183,216 232,261,800 213,536,303 Details of unearned interest income as of December 31, 2014 and 2013 are as follows:


Total lease investments W 342,495,538 232,261,800 Net lease investments Minimum lease payment (present value) W 307,183,216 213,536,303 Unguaranteed residual value (present value) - -

W 307,183,216 213,536,303

Unearned interest income W 35,312,322 18,725,497

15. Property and Equipment Details of property and equipment as of December 31, 2014 and 2013 are as follows:

Acquisition cost Accumulated depreciation Book value

December 31, 2014

Vehicles W 113,472 (94,428) 19,044 Fixtures and furniture 13,163,555 (7,935,609) 5,227,946 Others 371,000 - 371,000 W 13,648,027 (8,030,037) 5,617,990

December 31, 2013 Vehicles W 113,472 (75,385) 38,087 Fixtures and furniture 9,574,766 (6,315,628) 3,259,138 Others 411,000 - 411,000 W 10,099,238 (6,391,013) 3,708,225


49

15. Property and Equipment, Continued Changes in property and equipment for the years ended December 31, 2014 and 2013 are as follows:

Beginning balance Acquisition Disposal

Deprecia-tion

Ending balance

December 31, 2014 Vehicles W 38,087 - - (19,043) 19,044 Fixtures and furniture 3,259,138 3,736,064 (2,333) (1,764,923) 5,227,946

Others 411,000 - (40,000) - 371,000 W 3,708,225 3,736,064 (42,333) (1,783,966) 5,617,990

December 31, 2013 Vehicles W 69,799 - (2,534) (29,178) 38,087 Fixtures and furniture 2,701,927 1,815,171 (281) (1,257,679) 3,259,138

Others 411,000 - - - 411,000 W 3,182,726 1,815,171 (2,815) (1,286,857) 3,708,225

As of December 31, 2014, the Group maintained comprehensive property insurance with Hyundai Marine and Fire Insurance for its fixtures and furniture, and other tangible assets for up to W4,631,921 thousand (W2,746,052 thousand as of December 31, 2013), vehicle insurance for its vehicles, and group accident insurance, travel insurance and business damage insurance for its employees. Also, the Group maintained comprehensive property insurance with Hyundai Marine and Fire Insurance for its machine tool installment financial assets and lease assets for up to W41,212,098 thousand (W104,410,832 thousand as of December 31, 2013).


50

16. Intangible Assets Details of intangible assets as of December 31, 2014 and 2013 are as follows:

Acquisition cost Accumulated amortization Book value

December 31, 2014

Development costs W 7,502,523 (2,850,184) 4,652,339 Software 8,144,817 (6,229,114) 1,915,703 Membership 4,720,565 - 4,720,565 Others 812,901 (117,671) 695,230

W 21,180,806 (9,196,969) 11,983,837

December 31, 2013 Development costs W 4,818,913 (1,573,439) 3,245,474 Software 6,794,896 (5,565,983) 1,228,913 Others 25,851 (25,848) 3

W 11,639,660 (7,165,270) 4,474,390 Changes in intangible assets for the years ended December 31, 2014 and 2013 are as follows:

(*1) Includes transfer from advance payments (*2) Due to changes in the Group’s accounting policy, there were reclassification from other

investment assets to membership. From this amount, W190,395 thousand was converted into available-for-sale securities.

Beginning balance

Acquisition (*) Amortization Ending balance

December 31, 2013 Development costs W 1,978,048 1,971,120 (703,694) 3,245,474 Software 1,474,742 376,059 (621,888) 1,228,913 Others 220 - (217) 3

W 3,453,010 2,347,179 (1,325,799) 4,474,390

(*) Includes transfer from advance payments

Beginning balance

Acquisition(*1)

Transfer (*2) Amortization

Impairment loss

Ending balance

December 31, 2014

Development costs W 3,245,474 2,683,611 - (1,276,746) - 4,652,339 Software 1,228,913 1,349,921 - (663,131) - 1,915,703 Memberships - 1,500,000 3,724,169 - (503,604) 4,720,565 Others 3 787,050 - (91,823) - 695,230 W 4,474,390 6,320,582 3,724,169 (2,031,700) (503,604) 11,983,837


51

17. Borrowings Details of borrowings as of December 31, 2014 and 2013 are as follows:

Lender Annual interest

rate (%) December 31,

2014 December 31,

2013 Borrowings in won Commercial paper Dongbu Securities

and 3 others 2.20 ~ 2.85 W 120,000,000 90,000,000 General loan Woori Bank and 5

others 2.47 ~ 4.54 312,828,419 506,955,177 W 432,828,419 596,955,177

18. Debentures Details of debentures issued by the Group as of December 31, 2014 and 2013 are as follows:

Annual interest

rate (%) Par value Book value

December 31, 2014

Current portion of debenture Debentures 2.14 ~ 5.4 W 979,000,000 979,000,000 Discount on debentures - (383,842) 979,000,000 978,616,158 Non-current portion of debenture Debentures 2.30 ~ 6.48 2,615,946,000 2,615,946,000 Discount on debentures - (2,124,360) 2,615,946,000 2,613,821,640

W 3,594,946,000 3,592,437,798

December 31, 2013 Current portion of debenture Debentures 2.74 ~ 8.00 W 712,388,000 712,388,000 Discount on debentures - (314,325) 712,388,000 712,073,675 Non-current portion of debenture Debentures 2.82 ~ 6.48 2,093,000,000 2,093,000,000 Discount on debentures - (1,623,018) 2,093,000,000 2,091,376,982 W 2,805,388,000 2,803,450,657


52

19. Securitized Debts The amounts of securitized debts, which are secured by loans and installment financial assets in accordance with Asset Backed Securitization Act as of December 31, 2014 and 2013 are as follows:

Annual interest

rate (%) Par value Book value

December 31, 2014

Current portion of securitized debts Securitized debts 4.97 ~ 5.43 W 90,000,000 90,000,000 Discount on securitized debts - (17,491) 90,000,000 89,982,509 Non-current portion of securitized debts

Securitized debts 4.97 ~ 5.43 - - Discount on securitized debts - - - -

W 90,000,000 89,982,509

December 31, 2013 Current portion of securitized debts Securitized debts 4.76 ~ 5.27 W 170,000,000 170,000,000 Discount on securitized debts - (68,602) 170,000,000 169,931,398 Non-current portion of securitized debts

Securitized debts 4.97 ~ 5.43 90,000,000 90,000,000 Discount on securitized debts - (79,051) 90,000,000 89,920,949 W 260,000,000 259,852,347


53

20. Net Defined Benefit Liabilities

Details of net defined benefit liabilities as of December 31, 2014 and 2013 are as follows: December 31, 2014 December 31, 2013

Present value of defined benefit obligations W 19,069,034 14,127,941 Fair value of plan assets (14,680,696) (11,616,102) Net defined benefit liabilities W 4,388,338 2,511,839

Changes in present value of net defined benefit liabilities for the years ended December 31, 2014 and 2013 are as follows: Present value of

defined benefit obligations

Fair value of plan assets

Defined benefit liabilities

December 31, 2014

Beginning balance W 14,127,941 (11,616,102) 2,511,839 Current service cost 2,856,493 - 2,856,493 Interest cost 503,052 (396,034) 107,018 Remeasurement

Experience adjustments (231,573) - (231,573) Changes in demographic assumption 1,055,191 - 1,055,191 Changes in economic assumption 1,292,022 - 1,292,022 Remeasurement of plan assets

- 104,076 104,076 Transfer of severance benefits from

related parties 864,425 (679,958) 184,467 Transfer of severance benefits to related

parties (918,551) 707,356 (211,195) Contributions by plan participants - (3,280,000) (3,280,000) Benefits paid

(479,966) 479,966 - Ending balance W 19,069,034 (14,680,696) 4,388,338


54

20. Net Defined Benefit Liabilities, Continued Present value of

defined benefit obligations

Fair value of plan assets

Defined benefit liabilities

December 31, 2013

Beginning balance W 10,602,378 (8,546,162) 2,056,216 Current service cost 2,524,839 - 2,524,839 Interest cost 368,928 (287,437) 81,491 Remeasurement

Experience adjustments 1,186,219 - 1,186,219 Changes in demographic assumption 50,258 - 50,258 Changes in economic assumption (473,997) - (473,997) Remeasurement of plan assets - 8,342 8,342

Transfer of severance benefits from related parties 1,238,158 (1,022,394) 215,764

Transfer of severance benefits to related parties (836,505) 299,212 (537,293)

Contributions by plan participants - (2,600,000) (2,600,000)

Benefits paid (532,337) 532,337 -

Ending balance W 14,127,941 (11,616,102) 2,511,839

Gains and losses related to defined benefit plans for the years ended December 31, 2013 and 2013 are as follows: 2014 2013

Current service cost W 2,856,493 2,524,839 Interest cost 503,052 368,928 Expected return on plan assets (396,034) (287,437) W 2,963,511 2,606,330


55

20. Net Defined Benefit Liabilities, Continued

Details of plan assets as of December 31, 2014 and 2013 are as follows:

December 31, 2014 2013 December 31, 2013 Amount Ratio (%) Amount Ratio (%)

Cash and cash equivalents W 5,089 0.04 18 - Deposits (*) 2,683,989 18.28 7,903,833 68.04 Interest rate guaranteed asset

for 1-year 11,991,618 81.68 3,712,251 31.96

W 14,680,696 100.00 11,616,102 100.00

(*) National Pension Fund of W5,889 thousand as of December 31, 2014 and 2013, respectively, are included.

Actuarial assumptions required to recognize defined benefit liability are as follows:

2014 2013

Discount rate (%) 2.91 3.84 Future salary increases (%) 6.26 5.64 Assumptions regarding future mortality experience are set based on actuarial advice published by the Korea Insurance Development Institute.

Sensitivity analysis of the present value of defined benefit obligation as of December 31, 2014 is as follows:

The present value of defined benefit obligation Book value 1% point increase 1% point decrease

Discount rate W 19,069,034 17,411,926 21,025,425 Future salary increases 19,069,034 21,009,873 17,394,278

The expected weighted-average years to maturity of the defined benefit pension plan as of December 31, 2014 are 8.41 years.


56

21. Derivative Financial Instruments and Hedge Accounting There were no amounts recognized as derivative assets as of December 31, 2014 and the Group recognized derivative assets of W153 thousand as of December 31, 2013. Net loss on the derivative assets was W153 thousand for the year ended December 31, 2014 and net income on the derivative assets was W232,586 thousand for the year ended December 31, 2013. Cash flow hedge is used by the Group to reduce the exposure from changes in interest rate and exchange rate of the cash flows of foreign currency debentures. Interest rate swaps and currency swaps are used. Derivatives designated as cash flow hedges as of December 31, 2014 and 2013 are as follows:

Assets Liabilities

Accumulated other

comprehensive income (loss)

December 31, 2014

Interest rate swaps W - 3,335,696 (2,528,457) Currency swaps - 158,133 (101,576)

W - 3,493,829 (2,630,033)

December 31, 2013 Interest rate swaps W 162,670 1,302,153 (1,549,239) Currency swaps - 635,441 599,135

W 162,670 1,937,594 (950,104) For the year ended December 31, 2014, the amount recognized as other comprehensive income, representing the effective portion related to cash flow hedge, is W2,732,539 thousand and the amount reclassified from other comprehensive income to profit or loss is W523,633 thousand (before tax). There is no amount recognized as profit or loss related to cash flow hedge, representing the ineffective portion, for the year ended December 31, 2014.


57

22. Equity The Controlling Company is authorized to issue 80,000,000 shares (par value at W5,000 won). Details of capital stock as of December 31, 2014 are as follows:

Common stock Preferred stock (*) Total

Number of issued shares outstanding 20,000,000 5,000,000 25,000,000

Capital stock W 100,000,000 25,000,000 125,000,000 Paid-in-capital in excess of par value - 74,608,060 74,608,060

(*) The convertible preferred stocks are non-cumulative, non-participating, nominative, non-permanent

preferred stocks without voting right. The stocks will be converted to common stock after 10 years from issue date.

Details of hybrid security as of December 31, 2014 and 2013 were as follows:

AmountDate of issue

Date of maturity

December 31, 2014

December 31, 2013

Interest rate (%)

The 171st bond type hybrid security

June 13, 2014

June 13, 2044 119,644,480 - 5.80

The hybrid security above is early-payable after 5 years from the date of issue, and the maturity can be extended with the same terms and conditions on the date of maturity. In addition, in case the Controlling Company decides not to pay dividend on common and preferred stock, it will not pay contractual interest to the hybrid security holders.


58

23. Retained Earnings Details of retained earnings as of December 31, 2014 and 2013 are as follows: December 31, 2014 December 31, 2013

Legal reserve

Revenue reserve (*1) W 8,830,000 7,100,000 Voluntary reserve Reserve for loan losses (*2) 16,051,091 15,289,638 Reserve for electronic financial transactions (*3) 100,000 100,000 16,151,091 15,389,638

Unappropriated retained earnings 147,838,850 146,751,713 (Expected regulatory reserve for credit losses

December 31, 2014: W5,033,208 thousand December 31, 2013: W761,453 thousand)

W 172,819,941 169,241,351

(*1) The Korean Commercial Law requires the Controlling Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its issued capital stock. This reserve is not available for the payment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit, if any.

(*2) If allowances for doubtful accounts do not meet the minimum amount calculated in accordance

with allowance reserve standards of Regulation on Supervision under Article 11 of the Specialized Credit Financial Business Law, the Group appropriates a regulatory reserve for loan losses in an amount more than the difference between the allowance and the requirement.

(*3) The Group appropriates a reserve in accordance with Electronic Financial Transactions Act.


59

23. Retained Earnings, Continued Appropriated and expected regulatory reserve for credit losses as of December 31, 2014 and 2013 are as follows: December 31, 2014 December 31, 2013

Appropriated regulatory reserve for credit losses W 16,051,091 15,289,638

Expected regulatory reserve for credit losses 5,033,208 761,453

W 21,084,299 16,051,091 Profit adjusted for estimated regulatory reserve for credit losses for the years ended December 31, 2014 and 2013 are as follows: 2014 2013

Profit for the period W 24,711,357 36,617,471 Estimated provision of regulatory reserve for credit losses (*1) 5,033,208 761,453

Profit adjusted by regulatory reserve for credit losses (*2) W 19,678,149 35,856,018

Earnings per share adjusted by estimated regulatory reserve for credit losses (in won) (*3) 557 1,493

(*1) Expected provision for regulatory reserve for loan losses for the year ended December 31, 2014, is

the difference between the balance of regulatory reserve for loan losses as of December 31, 2014, and the balance as of December 31, 2013.

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

loan losses is not in accordance with K-IFRS, and is the amount after reflecting the expected provision for regulatory reserve for loan losses before income tax for profit for the period.

(*3) Adjusted earnings per share is calculated based on amount deducting estimated provision of

regulatory reserve for credit losses from net profit for the period attributable to ordinary shareholders of the Group.


60

23. Retained Earnings, Continued

Statements of appropriation of retained earnings based on separate financial statements for the years ended December 31, 2014 and 2013 are as follows: (in Korean won)

2014 2013 I. Unappropriated retained earnings

Unappropriated retained earnings W 130,295,182,041 95,030,608,881 Interest paid to hybrid security holders (3,832,767,121) - Net income 50,124,796,286 55,056,026,670

176,587,211,206 150,086,635,551 II. Appropriation of retained earnings

Legal reserve 1,240,000,000 1,730,000,000 Estimated provision of regulatory reserve

for credit losses 5,033,207,723 761,453,510 Dividends 12,400,000,000 17,300,000,000

18,673,207,723 19,791,453,510 III. Unappropriated retained earnings

to be carried over to subsequent year W 157,914,003,483 130,295,182,041

The annual dividends for the year ended December 31, 2014 are to be proposed at the annual meeting of shareholders on March 27, 2015. These dividends payable are not recorded on the consolidated financial statements of the Group as of December 31, 2014. Details of dividends for the years ended December 31, 2014 and 2013 are as follows:

Type 2014 2013 Annual dividends

Common stock

Number of shares eligible for dividends 20,000,000 20,000,000

Par value for share (in won) 5,000 5,000 Dividends rate (%) 7.70 11.30 Dividends W 7,700,000 11,300,000 Preferred

stock Number of shares eligible for dividends 5,000,000

5,000,000

Par value for share (in won) 5,000 5,000 Dividends rate (%) 18.80 24.00 Dividends 4,700,000 6,000,000 Total dividends (A) W 12,400,000 17,300,000 Profit for the period (B) W 24,711,357 36,617,471

Dividend payout ratio (A/B) 50.18 47.25


61

24. Net Interest Income

Net interest income for the years ended December 31, 2014 and 2013 are as follows:

2014 2013

Interest income: Cash and due from banks W 6,808,170 7,092,838 Loans receivables 270,655,835 264,222,726 Installment financial assets 23,041,378 27,829,738 Lease receivables 17,557,926 11,181,405 Available-for-sale securities 3,035,528 2,000,762 Other (*) 32,008 340,633

321,130,845 312,668,102 Interest expense: Borrowings 17,903,334 29,393,298 Debentures 122,567,687 111,074,842 Securitized debts 9,643,984 15,367,663 Other (*) 2,573,051 1,955,378

152,688,056 157,791,181 Net interest income W 168,442,789 154,876,921

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

25. Net Commission Income

Net commission income for the years ended December 31, 2014 and 2013 are as follows:

2014 2013

Net commission income Loans receivable W 17,967,219 17,169,094 Installment financial assets 807,651 1,186,987 Lease receivables 505,937 285,339

W 19,280,807 18,641,420


62

26. General and Administrative Expenses Details of general and administrative expenses for the years ended December 31, 2014 and 2013 are as follows: 2014 2013

Wages and salaries W 34,804,239 26,526,982 Retirement benefits 2,963,511 2,606,330 Employee welfare 5,936,199 6,368,174 Outsourcing service charges 3,885,265 4,453,877 Sales commission 6,608,039 8,661,777 Commission 3,591,216 3,585,234 Outsourcing service commission 4,178,119 3,985,962 Depreciation 1,783,966 1,286,857 Amortization 2,031,700 1,325,799 Taxes and dues 2,204,690 2,094,363 Electronic data processing expenses 4,944,374 2,856,455 Rent 3,675,723 3,288,446 Administrative expenses for building 140,713 87,690 Travel expenses 879,130 832,751 Training expenses 868,871 538,681 Communication 784,098 662,984 Others 2,445,368 2,323,818 W 81,725,221 71,486,180


63

27. Income Tax Expenses

(1) Income tax expense for the years ended December 31, 2014 and 2013 are as follows:

(2) Deferred income tax recognized directly to equity for the years ended December 31, 2014 and 2013 are as follows:

2014 2013

Unrealized loss (gain) on valuation of derivatives W 528,977 (307,997)

Unrealized loss (gain) on valuation of available-for-sale securities (844,028) 837,073

Comprehensive income (loss) of equity method investee 459,328 (19,473)

Changes in retained earnings of equity method investee - (120,917)

Remeasurement of defined benefit plans 537,171 186,539 W 681,448 575,225

(3) Reconciliation between income before income taxes and income tax expense for the years ended December 31, 2014 and 2013 are as follows:

2014 2013

Profit before income taxes (A) W 42,012,982 59,755,749 Income taxes at statutory tax rates 9,705,142 13,998,891 Adjustments: Non-deductible expense for tax purposes 131,941 112,052 Tax credit (29,762) (42,602) Deferred income taxes unrecognized 7,493,912 6,181,557 Supplementary payment of income taxes - 2,970,911 Others 392 (82,531) Income tax expense (B) W 17,301,625 23,138,278

Effective tax rate (B/A)(%) 41.18 38.72

2014 2013

Income tax for the year W 14,598,470 16,587,398 Change in deferred income tax due to

temporary differences 2,021,707 3,004,744 Deferred income tax recognized directly to

equity 681,448 575,225 Supplementary payment of income taxes - 2,970,911 Income tax expense W 17,301,625 23,138,278


64

27. Income Tax Expenses, Continued

(4) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2014 and 2013, are as follows:

2014

Temporary differences Deferred tax assets

(liabilities) Beginning balance(*) Changes

Ending balance

Beginning balance

Ending balance

Deferred loan origination fees and costs W (48,451,883) (1,058,836) (49,510,719) (11,725,356) (11,981,594)

Investments in associates 5,232,780 2,636,186 7,868,966 (13,113,450) (15,650,677)

Derivatives 1,506,755 1,963,074 3,469,829 364,635 839,699 Accrued expenses 1,392,424 2,019,296 3,411,720 336,967 825,636 Available-for-sale

securities 1,636,103 4,177,016 5,813,119 395,937 1,406,775 Others 2,828,212 (4,970,303) (2,142,091) 684,427 (518,386) W (35,855,609) 4,766,433 (31,089,176) (23,056,840) (25,078,547)

2013

Temporary differences Deferred tax assets

(liabilities) Beginning balance(*) Changes

Ending balance

Beginning balance

Ending balance

Deferred loan origination fees and costs W (46,197,317) (2,254,566) (48,451,883) (11,179,751) (11,725,356)

Investments in associates (24,085,900) 29,318,680 5,232,780 (10,784,979) (13,113,450)

Derivatives 3,012,056 (1,505,301) 1,506,755 728,917 364,635 Accrued expenses 4,155,522 (2,763,098) 1,392,424 1,005,636 336,967 Available-for-sale

securities (1,885,175) 3,521,278 1,636,103 (456,212) 395,937 Others 2,743,459 84,753 2,828,212 634,293 684,427 W (62,257,355) 26,401,746 (35,855,609) (20,052,096) (23,056,840)

(*) Adjustments due to temporary differences as of January 1, 2014 and 2013 which have been revised

based on additional tax adjustment.


65

27. Income Tax Expenses, Continued

(5) Valuation of deferred Tax Assets Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Group’s ability to generate taxable income within the period during which the temporary differences reverse, the outlook of the Korean economic environment, and the overall future industry outlook. Management periodically considers these factors in reaching its conclusion and recognizes deferred income tax assets based on the possibility of future realization. The Group did not recognize deferred income tax assets of W72,541,186 thousand and W61,557,960 thousand as of December 31, 2014 and 2013, respectively, related to temporary differences in investments in associates because it is not probable that the temporary differences will be realized.

28. Basic Earnings per Share

(1) Basic earnings per share attributable to common stock of equity holders for the years ended December 31, 2014 and 2013 are as follows:

(In won) 2014 2013

Profit attributable to owners of the Controlling Company W 24,711,357,373 36,617,470,778 (-) Dividends on preferred stock (4,700,000,000) (6,000,000,000) (-) Interest paid to hybrid security holders (3,832,767,121) -

Profit attributable to common stock (A) W 16,178,590,252 30,617,470,778

Weighted average number of common stock outstanding (B) 20,000,000 20,000,000 Earnings per share (A/B) W 809 1,531

(2) Diluted net earnings per share

As there was no discontinued operation during the years ended December 31, 2014 and 2013, basic earnings per share are the same as basic earnings per share from continuing operations. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has one category of dilutive potential ordinary share: convertible preferred stock.

Diluted earnings per share for the years ended December 31, 2014 and 2013 are as follows: (In won) 2014 2013

Profit attributable to owners of the Controlling Company W 16,178,590,252 30,617,470,778 Dividend on convertible preferred stock 4,700,000,000 6,000,000,000

Profit used to determine diluted earnings per share (A) W 20,878,590,252 36,617,470,778

Weighted average number of common stock outstanding (B) 20,000,000 20,000,000 Assumed conversion of convertible preferred stock 5,000,000 5,000,000 Weighted average number of common stock for diluted

earnings per share 25,000,000 25,000,000

Diluted earnings per share (A/B) W 835 1,465


66

29. Accumulated Other Comprehensive Income (Loss) Details of accumulated other comprehensive income (loss) for the years ended December 31, 2014 and 2013 are as follows:

Changes

Beginning

balance

Reclassifica-tion of profit

or loss Other

changes Income

tax effects Ending balance

December 31, 2014 Items that are or may be reclassified subsequently to profit or loss: Unrealized loss on valuation

of derivatives W (950,104) 523,633 (2,732,539) 528,977 (2,630,033) Unrealized gain (loss) on

valuation of available-for-sale securities (1,908,746) 2,926,881 560,840 (844,028) 734,947

Accumulated comprehensive income (loss) of equity method investees (9,334,143) - 19,780,698 459,328 10,905,883

(12,192,993) 3,450,514 17,608,999 144,277 9,010,797 Items that will not be reclassified to profit or loss: Remeasurement of defined

benefit plans (2,254,434) - (2,219,716) 537,171 (3,936,979) W (14,447,427) 3,450,514 15,389,283 681,448 5,073,818

Changes

Beginning

balance

Reclassifica-tion of profit

or loss Other

changes Income

tax effects Ending balance

December 31, 2013 Items that are or may be reclassified subsequently to profit or loss: Unrealized loss on valuation

of derivatives W (1,914,822) 316,000 956,715 (307,997) (950,104) Unrealized gain (loss) on

valuation of available-for-sale securities 713,160 - (3,458,979) 837,073

(1,908,746)

Accumulated comprehensive income (loss) of equity method investees 3,811,298 - (13,125,968) (19,473)

(9,334,143)

2,609,636 316,000 (15,628,232) 509,603 (12,192,993)

Items that will not be reclassified to profit or loss: Remeasurement of defined

benefit plans (1,670,151) - (770,822) 186,539 (2,254,434) W 939,485 316,000 (16,399,054) 696,142 (14,447,427)


67

30. Supplemental Cash Flow Information

(1) Cash and cash equivalents in the statement of cash flows consist of cash on hand, deposits, and short-term money market instruments. Details of cash and cash equivalents as of December 31, 2014 and 2013 are as follows:


Ordinary deposits W 14,919,766 15,239,429 Short-term financial instruments 217,873,333 265,250,000 W 232,793,099 280,489,429 (2) Cash generated from operations for the years ended December 31, 2014 and 2013 are as follows: 2014 2013

Profit for the period W 24,711,357 36,617,471 Adjustments:

Net interest expense 142,812,352 148,356,948 Dividend received (100,000) (200,000) Income tax expenses 17,301,625 23,138,278 Income on loans (2,092,169) 15,479,882 Income on installment financial receivables (2,041,451) 809,412 Income on leases (1,666,229) 641,624 Gain on foreign transactions (24,000) (316,000) Gain on disposal of property and equipment (2,385) (42,750) Gain on disposal of available-for-sale securities (849,181) (3,267,028) Gains on equity method valuation (12,382,461) (9,041,656) Bad debt expense 31,947,097 25,054,918 Retirement benefits 2,963,511 2,606,330 Depreciation 1,783,966 1,286,857 Amortization 2,031,700 1,325,799 Loss on disposal of property and equipment 1,745 - Loss on valuation of derivatives 24,000 83,414 Loss on equity method valuation 34,799,344 25,292,131 Gain on valuation of trading securities (25,447) - Loss on valuation of trading securities 437 - Impairment loss on other investment assets 503,604 - Provision for allowance 28,103 - Other long-term employee benefit 901,583 - Other operating expense 5,613,022 -

221,528,766 231,208,159


68

30. Supplemental Cash Flow Information, Continued

2014 2013 Changes in operating assets and liabilities:

Increase in loans receivables W (544,814,339) (242,766,709) Decrease in installment financing receivables 3,327,000 54,627,067 Increase in finance lease receivables (93,950,493) (81,927,674) Decrease in account receivables 14,551,823 8,351,716 Increase in accrued revenues (3,517,737) (912,531) Increase in advanced payments - (610,894) Increase in trading securities (29,038,668) - Decrease in derivative assets 153 - Decrease (increase) in prepaid expenses (3,448,146) 75,674 Decrease (increase) in account payables 5,966,259 (756,827) Decrease (increase) in accrued expenses 5,036,795 (5,644,347) Decrease in unearned revenues (3,157,815) (2,213,247) Decrease (increase) in advances (401,091) 315,848 Increase in deposits 4,533,888 1,167,853 Increase in financial guarantee liabilities 1,406,867 - Decrease in net defined benefit liabilities (3,306,728) (2,921,529) Increase in leasehold deposits received 4,148,778 22,315,983

(642,663,454) (250,899,617) Cash generated from (used in) operations W (396,423,331) 16,926,013

(3) Significant transactions not involving cash flows for the years ended December 31, 2014 and 2013 are as follows:

2014 2013

Transferred from advance payments to development costs W - 1,971,120


69

31. Commitments and Contingencies (1) Details of unused credit line agreements as of December 31, 2014 and 2013 are as follows:

Financial

institution Limit Unused limit

December 31, 2014 Limit of overdraft

Woori Bank and 11 others W 405 billion 405 billion

Limit of letter of credit Woori Bank and

one other

USD 7,000,000 USD 7,000,000 Limit of credit facility Hyundai Capital W 100 billion 100 billion

December 31, 2013 Limit of overdraft

Woori Bank and 11 others W 405 billion 405 billion

Limit of letter of credit Korea Exchange Bank

USD 2,000,000 USD 2,000,000

Limit of credit facility Hyundai Capital W 100 billion 100 billion As of December 31, 2014, the Group has a credit facility agreement for unsold property with Daewoo Engineering & Construction Co., Ltd. and others which amounted to W119 billion. (2) Details of guarantees involving third parties as of December 31, 2014 and 2013 are as follows:

Guarantor Details December 31,

2014 December 31,

2013

Hyundai Wia Guarantees on machinery installment financing receivables W 13,792,075 20,051,379

Hyundai Motor Company Guarantees on finance lease receivables 1,963,933 2,037,940

Seoul Guarantee Insurance Company

Deposit guarantee 13,629,390 13,517,216

(3) Details of pending significant litigations as of December 31, 2014 are as follows:

Number of litigations Amount of litigations As a plaintiff 60 W 4,903,817

As a defendant 7 963,196 The results of litigation cannot be predicted, no provisions were recorded on the consolidated financial statements of the Group as of December 31, 2014.

(4) For the year ended December 31, 2014, the Supreme Court’s decision included a proposed criteria

for ordinary wages, which may obligate the Group to pay additional wages if involved in litigations. Although the effects on the financial statements are difficult to estimate, the Group’s management determines that the possibility of the outflow of economically beneficial resources to be low.


70

32. Related Party Transactions (1) The ultimate parent company of the Group is Hyundai Motor Company. Related parties include

associates, joint venture, post-employment employment benefit plans, member of key management personnel and entities which the Group controls directly or indirectly or has significant influence over them.

(2) Significant transactions, which occurred in the normal course of business with related parties, for

the years ended December 31, 2014 and 2013 are as follows: 2014 2013

Purchase of assets

Disposal of assets

Purchase of assets Disposal of assets

Parent company

Hyundai Motor Company W 352,142 - - -

Related parties

Hyundai Wia 54,892,060 - 76,288,104 -

Hyundai Capital Services, Inc. - 68,879,286 - 59,719,820

Hyundai Autoever Corp. 15,609,177 - 8,256,278 -

Hyundai Life Insurance Co., Ltd. 13,761 40,000 - -

70,514,998 68,919,286 84,544,382 59,719,820 W 70,867,140 68,919,286 84,544,382 59,719,820

(3) Receivables and payables associated with related parties as of December 31, 2014 and 2013 are

as follows: December 31, 2014 December 31, 2013

Receivables Payables Receivables Payables

Parent company

Hyundai Motor Company W 30,545 40,557 41,317 7,621

Associates

Hyundai Card Co., Ltd. 727,686 9,416,927 498,496 9,776,918

Hyundai Life Insurance Co., Ltd. 335,898 - 224,289 -

1,063,584 9,416,927 722,785 9,776,918

Related parties

Kia Motors Corporation 97 - - 985

Hyundai Capital Services, Inc. 832,614 57,646 494,775 108,018

Hyundai Autoever Corp. - 575,080 - 852,893

Samwoo Co., Ltd. - - 308,885 118,675

Haevichi Hotels & Resorts Co., Ltd. - 1,255 - -

Hyundai Engineering Co., Ltd. - 14,321 - -

Employees 4,359,193 - 3,265,857 -

5,191,904 648,302 4,069,517 1,080,571

W 6,286,033 10,105,786 4,833,619 10,865,110


71

32. Related Party Transactions, Continued (4) Revenue and expense associated with related parties for the years ended December 31, 2014 and

2013 are as follows: 2014 2013

Revenue Expense Revenue Expense

Parent company

Hyundai Motor Company W 417,120 304 752,108 304

Associates

Hyundai Card Co., Ltd. 1,722,236 1,580,906 1,395,566 1,279,343

Hyundai Life Insurance Co., Ltd. 1,898,454 311,199 467,692 238,494

3,620,690 1,892,105 1,863,258 1,517,837

Others

Kia Motors Corporation - 9,538 - 6,793

Hyundai Capital Services, Inc. 5,309,069 6,842,587 5,992,461 9,730,281

Hyundai Autoever Corp. - 5,200,835 - 4,347,942

HMC Investment Securities Co., Ltd. - - - 12,200

Innocean Worldwide, Inc. - 28,250 - 28,600

Hyundai Amco Co., Ltd. - 41,508 - 121,503

Samwoo Co., Ltd. - - 36,471 -

Haevichi Country Club, Ltd. - 550 - 7,470

Haevichi Hotels & Resorts Co., Ltd. - 10,295 - 3,371

Hyundai Engineering Co., Ltd. - 131,994 - -

Korea Credit Bureau - 98,052 - -

Hyundai Engineering & Construction Co., Ltd. - 15,258 - -

Employees 82,184 - 54,027 140

5,391,253 12,378,867 6,082,959 14,258,300 W 9,429,063 14,271,276 8,698,325 15,776,441

The Controlling Company has been provided with guarantee by related parties and payment guarantees (see note 31). (5) Compensation for key management for the years ended December 31, 2014 and 2013 are as

follows: 2014 2013

Short-term employment benefits W 2,452,024 2,538,449 Retirement benefits 968,876 958,918 The key management above consists of directors (including non-permanent directors), who have significant authority and responsibilities for planning, operating, and controlling of the Group.


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33. Arrangements with Consolidated Structured Entities The Group is providing contractual arrangements that could require the Controlling Company to maintain certain mortgage ratios associated with securitized debts to consolidated structured entities.

34. Interest in Unconsolidated Structured Entities

(1) Nature, purpose, activity of unconsolidated structured entities which the Controlling Company had interest in as of December 31, 2014, and how these structured entities are financed were summarized as follows:

Nature Purpose Activity Financing method ABS SPC Funding for ABS and

securitization (1) Implementation of ABS plan (2) Taking over securitized asset and

collecting of underlying assets (3) Issuing and repayment of AB

(1) Issuing ABS base on underlying assets

Project Financing

PF loans for SOC and development real estate

(1) Construction of infrastructure and real estate

(1) Loan commitment based on credit line, credit facility and investment agreement

Investment

Funds Investment for

beneficiary certificates

(1) Management and operation of fund assets

(2) Payments of fund fee or allocation of income

(1) Selling beneficiary certificates

(2) Investment of general partners or limited partners

(2) Size of the unconsolidated structured entities, carrying value and maximum exposure to loss related to the Controlling Company’s interests in unconsolidated structured entities as of December 31, 2014 were as follows:

ABS SPC PF Investment

Fund Total

Size of the unconsolidated

structured entities W 306,015,705 3,458,739,396 61,012,836 3,825,767,937 Carrying value

Available-for-sale securities 12,439,707 - 17,144,486 29,584,193 Loans receivable 22,632,900 173,357,760 - 195,990,660

35,072,607 173,357,760 17,144,486 225,574,853 The maximum exposure to loss

Available-for-sale securities 12,439,707 - 17,144,486 29,584,193 Loans receivable 22,632,900 173,357,760 - 195,990,660

- 63,000,000 - 63,000,000 W 35,072,607 236,357,760 17,144,486 288,574,853


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35. Financial Risk Management

The Group is exposed to credit risk, liquidity risk, and market risk (exchange and interest rate risk). In order to manage these risk factors, the Group operates risk management policies and programs which closely monitor these risk factors. The Group uses derivatives to manage specific risks. (1) Credit risk A. Maximum exposure to credit risk

The maximum exposures to credit risk related to financial instruments except equity securities not considering the value of the collateral as of December 31, 2014 and 2013 are as follows:


Cash and deposits W 232,802,099 280,498,429 Loans receivable 3,505,579,934 2,985,904,723 Installment financial assets 297,359,030 300,002,241 Lease receivables 303,949,799 211,720,716 Non-trade receivables 3,553,469 18,075,353 Accrued revenue 20,826,869 18,155,916 Leasehold deposits 2,409,426 2,126,868 Derivative assets - 162,823 W 4,366,480,626 3,816,647,069


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35. Financial Risk Management, Continued

B. Credit quality of financial assets

1) Credit quality classification Credit quality of maximum exposure to credit risk as of December 31, 2014 and 2013 are as follows:

December 31, 2014

Normal Past due Impaired

Cash and deposits W 232,802,099 - - Financial receivables

Loans receivable 3,427,894,462 73,361,291 4,324,181 Installment financial

assets 290,191,712 6,892,780 274,538 Lease receivables 290,241,550 13,708,249 -

4,008,327,724 93,962,320 4,598,719 Non-trade receivables Accrued revenue 3,553,469 - - Leasehold deposits 19,848,411 978,458 - Derivative assets 2,409,426 - - Payment guarantee

agreement - - - W 4,266,941,129 94,940,778 4,598,719

December 31, 2013

Normal Past due Impaired

Cash and deposits W 280,498,429 - - Financial receivables

Loans receivable 2,890,754,461 91,638,019 3,512,243 Installment financial

assets 289,699,746 10,149,460 153,035 Lease receivables 204,270,862 7,449,854 -

3,384,725,069 109,237,333 3,665,278 Non-trade receivables 18,075,353 - - Accrued revenue 16,923,964 1,231,952 - Leasehold deposits 2,126,868 - - Derivative assets 162,823 - - Payment guarantee

agreement - - - W 3,702,512,506 110,469,285 3,665,278


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2) Financial receivables neither past due nor impaired Credit quality according to internal credit rating of financial receivables which are neither past due nor impaired as of December 31, 2014 and 2013 are as follows:

December 31, 2014

Gross amount Allowance Book value

First-rate W 2,759,913,707 (5,091,144) 2,754,822,563 Second-rate 513,665,734 (1,773,854) 511,891,880 Third-rate 296,583,342 (2,509,096) 294,074,246 Fourth-rate 74,370,595 (1,160,689) 73,209,906 Fifth-rate 67,060,258 (2,634,534) 64,425,724 Sixth-rate 31,015,556 (2,801,767) 28,213,789 No rating 282,838,328 (1,148,712) 281,689,616 W 4,025,447,520 (17,119,796) 4,008,327,724

December 31, 2013


First-rate W 2,227,344,653 (4,767,901) 2,222,576,752 Second-rate 463,694,181 (1,573,024) 462,121,157 Third-rate 263,089,487 (2,374,026) 260,715,461 Fourth-rate 69,764,340 (1,125,970) 68,638,370 Fifth-rate 63,625,721 (2,045,908) 61,579,813 Sixth-rate 34,870,510 (2,860,072) 32,010,438 No rating 278,305,590 (1,222,512) 277,083,078 W 3,400,694,482 (15,969,413) 3,384,725,069

The Group classifies financial receivables into six internal credit rating based on the rating criteria and the characteristic of receivables. The internal credit rating is assessed based on the expected probability of default in the previous month. Meanwhile, some financial receivables are not given a credit rating for reason of a lack of research data such as information on new loan accounts of the current month or requiring additional management.


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3) Financial receivables past due but not impaired

Financial receivables past due but not impaired as of December 31, 2014 and 2013 are as follows:

December 31, 2014

Less than 1 month

Between 1 ~ 2

months

Between 2~3

months

Over 3 months

(*) Total

Loans receivables W 65,276,227 10,911,135 - 3,100 76,190,462 Installment financial

assets 5,568,194 1,180,074 - 291,650 7,039,918

Lease receivables 7,854,028 1,984,807 1,785,786 3,193,328 14,817,949

78,698,449 14,076,016 1,785,786 3,488,078 98,048,329

Allowance (2,151,152) (927,646) (14,893) (992,318) (4,086,009) Book value W 76,547,297 13,148,370 1,770,893 2,495,760 93,962,320

December 31, 2013

Less than 1 month

Between 1 ~ 2

months

Between 2~3

months

Over 3 months

(*) Total

Loans receivables W 84,294,366 10,059,129 - - 94,353,495 Installment financial

assets 7,829,169 1,516,211 70,801 985,767 10,401,948

Lease receivables 4,788,547 212,203 351,681 2,140,388 7,492,819

96,912,082 11,787,543 422,482 3,126,155 112,248,262

Allowance (2,299,383) (699,006) (3,411) (9,129) (3,010,929) Book value W 94,612,699 11,088,537 419,071 3,117,026 109,237,333

(*) The Group does not classify the receivables provided with guarantees from the related parties in the

receivables which are past due for over three months as impaired financial receivables (See note 31).


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4) Impaired financial receivables as of as of December 31, 2014 and 2013 are as follows

December 31, 2014


Loans receivable W 9,877,633 (5,553,452) 4,324,181 Installment financial assets 658,971 (384,433) 274,538 Lease receivables - - -

W 10,536,604 (5,937,885) 4,598,719

December 31, 2013


Loans receivable W 8,945,517 (5,433,274) 3,512,243 Installment financial assets 833,156 (680,121) 153,035 Lease receivables 118,845 (118,845) -

W 9,897,518 (6,232,240) 3,665,278

5) Credit quality of other assets

Credit quality according to external credit rating of other assets, excluding financial receivables, which are neither past due nor impaired as of December 31, 2014 and 2013 are as follows:

Cash and deposits (*) December 31, 2014 December 31, 2013

AAA W 216,840,766 155,498,429 AA+ 15,760,947 65,000,000 AA - 10,000,000 AA- 200,386 30,000,000 A+ - 20,000,000

W 232,802,099 280,498,429

(*) The average external credit rating of three domestic credit rating agencies is used.

Derivative assets (*) December 31, 2014 December 31, 2013

AAA W - 162,670 No rating - 153

W - 162,823

(*) Derivative assets are classified based on the average external credit rating of three domestic credit rating agencies and S&P credit rating.


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C. Details of assets pledged The assets pledged as collateral for financial receivables as of December 31, 2014 and 2013 are as follows:

December 31, 2014

Impaired Unimpaired

Total Delinquent Non-delinquent

Total financial receivables W 4,598,719 93,962,320 4,008,327,724 4,106,888,763 Collateralized assets

Collateralized vehicles 9,261,840 68,368,538 2,441,656,537 2,519,286,915 Collateralized real estate - - 48,938,673 48,938,673 W 9,261,840 68,368,538 2,490,595,210 2,568,225,588

December 31, 2013

Impaired Unimpaired

Total Delinquent Non-delinquent

Total financial receivables W 3,665,278 109,237,333 3,384,725,069 3,497,627,680 Collateralized assets

Collateralized vehicles 8,400,946 85,623,689 2,081,117,665 2,175,142,300 Collateralized real estate - - 110,883,451 110,883,451 W 8,400,946 85,623,689 2,192,001,116 2,286,025,751


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35. Financial Risk Management, Continued D. Credit risk concentration Credit risk concentration of financial receivables by debtors as of December 31, 2014 and 2013 are as follows:

December 31, 2014 Financial

receivables Ratio(%) Allowance Book value

Finance W 570,488 0.01 (104,075) 466,413 Manufacturing 114,614,322 2.77 (858,923) 113,755,399 Service 3,910,743,247 94.60 (25,695,552) 3,885,047,695 Others 108,104,396 2.62 (485,140) 107,619,256 W 4,134,032,453 100.00 (27,143,690) 4,106,888,763

December 31, 2013 Financial

receivables Ratio(%) Allowance Book value

Finance W 857,687 0.02 (105,596) 752,091 Manufacturing 108,817,634 3.09 (542,662) 108,274,972 Service 3,273,818,285 92.93 (23,198,100) 3,250,620,185 Others 139,568,974 3.96 (1,588,542) 137,980,432 W 3,523,062,580 100.00 (25,434,900) 3,497,627,680


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35. Financial Risk Management, Continued (2) Liquidity risk

Cash flows of financial liabilities based on remaining contractual maturities as of December 31, 2014 and 2013 are as follows: December 31, 2014

Immediate payment

Up to 3 months

3 months to 1 year 1 to 5 years Over 5 years Total (*1)

Borrowings W - 154,286,093 277,255,155 5,736,209 - 437,277,457

Debentures - 158,269,791 924,298,173 2,792,275,781 30,264,750 3,905,108,495

Securitized debts - 41,042,578 50,533,674 - - 91,576,252

Other liabilities 6,350,031 49,960,127 9,631,403 50,354,499 10,871 116,306,931 Financial guarantee

liabilities - - - 1,406,867 - 1,406,867 Derivative liabilities (*2) Cash inflow - (1,667,573) (4,186,333) (37,158,220) - (43,012,126)

Cash outflow - 2,299,266 6,188,646 38,074,209 - 46,562,121 W 6,350,031 404,190,282 1,263,720,718 2,850,689,345 30,275,621 4,555,225,997

December 31, 2013

Immediate payment

Up to 3 months

3 months to 1 year 1 to 5 years Over 5 years Total (*1)

Borrowings W - 294,900,277 259,886,138 71,133,555 - 625,919,970

Debentures - 104,502,355 700,629,848 2,087,722,686 136,729,250 3,029,584,139

Securitized debts - 23,202,597 156,615,534 91,576,252 - 271,394,383

Other liabilities 1,814,442 24,826,942 9,232,203 46,737,129 64,000 82,674,716 Derivative liabilities (*2) Cash inflow - (2,449,545) (28,713,572) (11,666,077) - (42,829,194)

Cash outflow - 2,813,693 30,418,823 11,511,134 - 44,743,650 W 1,814,442 447,796,319 1,128,068,974 2,297,014,679 136,793,250 4,011,487,664

(*1) The above amounts including the principal and future interest payments are contractual

undiscounted cash flows and are not equal to the amounts in the statement of financial position based on the discounted cash flows.

(*2) The above amounts are gross settlement derivatives and contractual undiscounted cash flows. In accordance with the contract on securitized assets, there is a trigger clause on various requirements for credit support. The Group has to comply with certain conditions of securitized debts. If these conditions are not met, the Group should redeem the securitized debts before maturity.


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35. Financial Risk Management, Continued (3) Market risk A. Interest rate risk

The Group manages the interest rate risk through Value at Risk (VaR), Earning at Risk (EaR) measurement and Interest Rate Gap Analysis that analyze the maturity between the interest revenue-generating assets and the interest-bearing liabilities. VaR is calculated using the standard framework of the Bank for International Settlements (BIS). The VaR model uses the proxy of modified duration per expiration interval proposed by the BIS and expected interest rate volatility of expiration interval by reason of interest rate fluctuation of 100bp. The interest rate risk using VaR as of December 31, 2014 and 2013 are as follows:


Interest rate VaR W 6,040,640 4,631,277 VaR is a commonly used market risk measurement techniques but has some limitations. VaR estimates the expected loss under the specific reliability based on the historical changes in the market data. However, the past changes in market cannot reflect all conditions and environments that may occur in the future. Therefore, in the process of calculating, the timing and size of the actual loss may vary according to changes in assumptions. B. Foreign exchange risk The Group holds financial instruments and borrowings that are denominated in foreign currencies and is exposed to foreign exchange risk arising from various currency exposures. The Group undertakes hedging strategies with hedge accounting being applied to manage these foreign exchange risks. Foreign exchange position exposures of the Group as of December 31, 2014 and 2013 are as follows:


USD W 32,946,000 21,106,000 The Group’s exposure to foreign exchange risk is hedged by derivatives. Therefore, foreign exchange risk of the Group is not significant. C. Price Risk Marketable equity securities which are classified into available-for-sale securities are exposed to price risk. The effects of 10% price variation for comprehensive income and equity as of December 31, 2014 and 2013 are as follows:


Comprehensive income W 363,090 561,600 Equity 363,090 561,600


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35. Financial Risk Management, Continued (4) Capital risk management

The objective of the Group’s capital management is to maintain sound capital structure. The Group uses the adjusted capital adequacy ratio under the Supervision of Specialized Credit Financial Business Law as a capital management indicator. This ratio is calculated as adjusted total assets divided by adjusted equity. Adjusted capital adequacy ratios of the Group as of December 31, 2014 and 2013 are as follows:


Adjusted total assets (A) W 4,535,332,107 3,869,789,947

Adjusted equity (B) 526,366,211 426,781,262

Adjusted capital adequacy ratio (B/A)(%)(*) 11.61 11.03 (*) The above adjusted capital adequacy ratio is calculated according to Supervision of Specialized

Credit Financial Business Law.

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