Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Financial Statements
(Unaudited)
June 30, 2...
Contents
Page
Independent Auditors’ Review Report 1
Condensed Consolidated Interim Statements of Financial Position 3
Cond...
(Based on a report originally issued in Korean)
The Board of Directors and Shareholders
Hyundai Capital Services, Inc.:
Re...
ABCD
2
Other Matters
The condensed consolidated interim statements of comprehensive income for the three-month and six-mon...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Financial Position
As of June...
Hyundai Capital Services, Inc.
Condensed Consolidated Interim Statements of Financial Position, Continued
As of June 30, 2...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income
For the ...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income, Continu...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income, Continu...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Changes in Equity
For the six...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Changes in Equity, Continued
...
Hyundai Capital Services, Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows
For the six-month ...
Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
June 30, ...
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Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Hyundai Capital Services, Inc. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
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Notes to the Condensed Consolidated Interim Financial Statements
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Notes to the Condensed Consolidated Interim Financial Statements
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  1. 1. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Financial Statements (Unaudited) June 30, 2013 (With Independent Auditors’ Review Report Thereon)
  2. 2. Contents Page Independent Auditors’ Review Report 1 Condensed Consolidated Interim Statements of Financial Position 3 Condensed Consolidated Interim Statements of Comprehensive Income 5 Condensed Consolidated Interim Statements of Changes in Equity 8 Condensed Consolidated Interim Statements of Cash Flows 10 Notes to the Condensed Consolidated Interim Financial Statements 11
  3. 3. (Based on a report originally issued in Korean) The Board of Directors and Shareholders Hyundai Capital Services, Inc.: Reviewed Financial Statements We have reviewed the accompanying Services, Inc. and its subsidiaries financial position as of June 30, 2013, the three-month and six-month period ended equity and cash flows for the six- significant accounting policies and other explanatory information. Management’s Responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with Korean International Financial Reporting Standards (“K Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of condensed consolidated whether due to fraud or error. Auditors’ Review Responsibility Our responsibility is to issue a report on these review. We conducted our review in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance wi consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit o Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 737 Yeoksam-dong, Gangnam-ku, Seoul 135-984, Republic of Korea Tel Fax www.kr.kpmg.com Independent Auditors’ Review Report (Based on a report originally issued in Korean) The Board of Directors and Shareholders We have reviewed the accompanying condensed consolidated interim financial statements of Hyundai Capital and its subsidiaries (the “Group”), which comprise the condensed consolidated , 2013, the condensed consolidated statements of comprehensive income period endeds June 30, 2013, the condensed consolidated statements of -month period ended June 30, 2013, and notes, comprising a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation and fair presentation of these condensed financial statements in accordance with Korean International Financial Reporting Standards (“K , and for such internal control as management determines is necessary to enable the consolidated interim financial statements that are free from material misstatement, Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our We conducted our review in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim inancial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance Interim Financial Reporting. Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101 www.kr.kpmg.com consolidated interim financial statements of Hyundai Capital consolidated statement of consolidated statements of comprehensive income for the consolidated statements of changes in and notes, comprising a summary of condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 , and for such internal control as management determines is necessary to enable the financial statements that are free from material misstatement, financial statements based on our We conducted our review in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim inancial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an th auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance
  4. 4. ABCD 2 Other Matters The condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2012 and changes in equity and cash flows for the six-month period ended June 30, 2012, presented for comparative purposes, were reviewed by Samil Accounting Corp. and their review report thereon, dated August 9, 2012, expressed that nothing had come to their attention that caused them to believe that the condensed consolidated interim financial statements as of and for the six-month period ended June 30, 2012 were not prepared, in all material respects, in accordance with K-IFRS. However, as discussed in note 2 to the condensed consolidated interim financial statements, from the annual period for the year ended December 31, 2012, the Group adopted the amendment to K-IFRS No.1001, ‘Presentation of Financial Statement.’ and K-IFRS No.1019, ‘Employee Benefits.’ The Group applied this change in accounting policies retrospectively, and accordingly restated the comparative information of the condensed consolidated interim statement of comprehensive income for the three-month and six-month periods ended June 30, 2012. The consolidated statement of financial position of the Group as of December 31, 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by Samil Accounting Corp. in accordance with auditing standards generally accepted in the Republic of Korea and their report thereon, dated March 19, 2013, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2012, presented for comparative purposes, is not different from that audited by other auditors in all material respects, except for the effects of changes in accounting policies discussed in note 2 to the condensed consolidated interim financial statements. We have not performed a review, audit or any other attestation on the accompanying condensed consolidated statement of financial position of the Group as of December 31, 2012, including changes in accounting policies described in note 2, and accordingly it is not included in the scope of our review. The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea August 12, 2013 This report is effective as of August 12, 2013, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
  5. 5. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position As of June 30, 2013 and December 31, 2012 (Unaudited) 3 (In millions of won) Notes June 30, 2013 December 31, 2012 Assets Cash and due from banks 6,21 Cash and cash equivalents W 1,095,952 1,302,161 Due from banks 14 12 1,095,966 1,302,173 Securities 3 Available-for-sale securities 6 22,106 20,283 Investments in associates 105,400 98,796 127,506 119,079 Loans receivable Loans receivable 4,5,6,7 13,046,099 12,381,225 Allowance for loan loss (334,691) (312,829) 12,711,408 12,068,396 Installment financial assets 4,5,6,7 Auto installment financing receivables 3,063,663 3,755,497 Allowance for loan loss (30,218) (33,207) Mortgage installment financing receivables 12,730 16,517 Allowance for loan loss (308) (277) 3,045,867 3,738,530 Lease receivables 4,5,6,7 Finance lease receivables 2,958,186 2,804,929 Cancelled lease receivables 622 493 2,958,808 2,805,422 Leased assets Operating leased assets 1,087,129 1,123,049 Cancelled leased assets 3,449 4,230 1,090,578 1,127,279 Property and equipment, net 8 247,083 323,478 Other assets 5 Intangible assets 9 63,652 64,163 Non-trade receivables 6 144,015 117,837 Allowance for loan loss (4,585) (3,890) Accrued revenues 6 117,911 116,330 Allowance for loan loss (14,693) (14,850) Advance payments 11 40,669 19,846 Prepaid expenses 78,954 57,438 Leasehold deposits 31,363 31,117 Derivative assets 6,13 95,226 34,915 552,512 422,906 Total assets W 21,829,728 21,907,263 See accompanying notes to the condensed consolidated interim financial statements.
  6. 6. Hyundai Capital Services, Inc. Condensed Consolidated Interim Statements of Financial Position, Continued As of June 30, 2013 and December 31, 2012 (Unaudited) 4 (In millions of won) Notes June 30, 2013 December 31, 2012 Liabilities Borrowings 6,10 Borrowings W 1,960,856 2,213,252 Bonds 15,038,711 14,802,390 16,999,567 17,015,642 Other liabilities Non-trade payables 6 307,731 340,436 Accrued expenses 6 152,778 159,742 Unearned revenue 46,110 51,832 Withholdings 6 28,585 38,343 Income Taxes Payable 73,813 70,888 Defined benefit liability 11 16,231 12,988 Leasehold deposits received 6 747,760 812,975 Deferred income tax liabilities 46,556 59,899 Provisions 12 2,010 2,017 Derivative liabilities 6,13 174,789 302,750 1,596,363 1,851,870 Total liabilities 18,595,930 18,867,512 Equity Issued capital 496,537 496,537 Capital surplus Paid-in capital in excess of par value 369,339 369,339 Other share premium 38,200 38,200 407,539 407,539 Accumulated other comprehensive income and loss 20 Unrealized gain on valuation of available- for-sale securities 2,063 1,002 Accumulated comprehensive income (loss) of equity method investees 735 (2,540) Unrealized gain (loss) on valuation of derivatives 13 (56,203) 2,125 Cumulative effect of overseas operation translations (1,801) (872) Loss on actuarial valuation (12,482) (13,147) (67,508) (13,432) Retained earnings 14 2,397,151 2,148,998 Total equity attributable to owners of the Company 3,233,719 3,039,642 Non-controlling interests 79 109 Total equity 3,233,798 3,039,751 Total liabilities and equity W 21,829,728 21,907,263 See accompanying notes to the condensed consolidated interim financial statements.
  7. 7. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income For the three and six-month periods ended June 30, 2013 and 2012 (Unaudited) 5 (In millions of won, except earnings per share information) Notes 2013 2012 Three- month period ended Six- month period ended Three- month period ended Six- month period ended Operating revenue Interest income 15 Interest on bank deposits W 7,318 15,083 11,792 24,394 Other interest income 361 724 1,388 1,431 7,679 15,807 13,180 25,825 Gain on valuation and disposal of securities 473 1,395 428 1,776 Income on loans 15,16 381,768 757,811 372,998 746,409 Income on installment financial receivables 15,16 56,653 123,301 93,416 195,241 Income on leases 15,16 225,048 453,076 225,674 446,927 Gain on disposal of loans 8,181 11,320 28,807 53,619 Gain on foreign currency transactions Gain on foreign exchanges translation 27,527 49,777 (18,937) 66,990 Gain on foreign currency transactions 318 1,044 6,598 18,812 27,845 50,821 (12,339) 85,802 Dividend income 230 2,588 - 2,831 Other operating income Gain on valuation of derivatives 140,827 314,663 (32,913) 15,961 Gain on derivatives transactions 13,754 15,891 3,456 3,456 Others 51,987 88,796 35,835 66,063 206,568 419,350 6,378 85,480 Total operating revenue W 914,445 1,835,469 728,542 1,643,910 See accompanying notes to the condensed consolidated interim financial statements.
  8. 8. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three and six-month periods ended June 30, 2013 and 2012 (Unaudited) 6 (In millions of won, except earnings per share information) Notes 2013 2012 Three- month period ended Six- month period ended Three- month period ended Six- month period ended Operating expenses Interest expenses 15 W (198,375) (402,389) (225,476) (454,930) Lease expenses 16 (123,216) (251,045) (128,779) (252,746) Provision for loss 5 (103,026) (203,956) (96,711) (179,708) Loss on foreign currency transactions Loss on foreign exchange translation (141,019) (315,059) 32,908 (15,968) Loss on foreign currency transactions (13,612) (15,541) (3,456) (3,456) (154,631) (330,600) 29,452 (19,424) General and administrative expenses 17 (161,022) (315,302) (145,921) (282,329) Other operating expenses Loss on valuation of derivatives (27,293) (49,153) 18,940 (66,989) Loss on derivatives transactions (331) (1,285) (6,612) (18,834) Others (14,829) (31,229) (22,971) (37,635) (42,453) (81,667) (10,643) (123,458) Total operating expenses (782,723) (1,584,959) (578,078) (1,312,595) Operating income 131,722 250,510 150,464 331,315 Non-operating income (expense) (1,593) 88,850 3,109 6,237 Non-operating expenses (1,051) (4,201) (819) (1,658) Profit before income taxes 129,078 335,159 152,754 335,894 Income tax expense 18 (33,775) (87,006) (36,334) (90,600) Profit for the period W 95,303 248,153 116,420 245,294 Profit for the period attributable to: Owners of the Company W 95,303 248,153 116,420 245,294 Non-controlling interests - - - - 95,303 248,153 116,420 245,294 See accompanying notes to the condensed consolidated interim financial statements.
  9. 9. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three and six-month periods ended June 30, 2013 and 2012 (Unaudited) 7 (In millions of won, except earnings per share information) Notes 2013 2012 Three- month period ended Six- month period ended Three- month period ended Six- month period ended Other comprehensive income(loss), net of income taxes 20 Items that will not be reclassified to profit or loss: Gain (loss) on actuarial valuation W 2,124 665 (1,150) (954) Items that are or may be reclassified subsequently to profit or loss: Net change in unrealized fair value of available-for-sale financial securities 818 1,060 (56) 587 Other comprehensive expense of equity method investees 2,136 3,275 (648) (670) Net change in unrealized fair value of derivatives (38,410) (58,147) 29,628 56,361 Effect of overseas operation translations (1,021) (929) (293) (443) Total other comprehensive income (loss), net of income tax (34,353) (54,076) 27,481 54,881 Total comprehensive income for the period W 60,950 194,077 143,901 300,175 Total comprehensive income attributable to: Owners of the Company W 60,950 194,077 143,901 300,175 Non-controlling interests - - - - W 60,950 194,077 143,901 300,175 Earnings per share 19 Basic and diluted earnings per share W 960 2,499 1,172 2,470 See accompanying notes to the condensed consolidated interim financial statements.
  10. 10. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity For the six-month periods ended June 30, 2013 and 2012 (Unaudited) 8 (In millions of won) Issued capital Capital surplus Accumulated other comprehensive loss Retained earnings Total Attributable to Equity holders of the Company Non- controlling interests Total equity Balances as of January 1, 2012 (Restated) W 496,537 407,539 (59,339) 1,811,642 2,656,379 109 2,656,488 Total comprehensive income Profit for the period - - - 245,294 245,294 - 245,294 Other comprehensive income Net change in unrealized fair value of available-for-sale securities - - 587 - 587 - 587 Other comprehensive income of equity method investees - - (22) - (22) - (22) Net change in unrealized fair value derivatives - - 26,733 - 26,733 - 26,733 Effect of overseas operation translations - - (670) - (670) - (670) Gain on actuarial valuation - - 196 - 196 - 196 Total comprehensive income for the period - - 54,881 245,294 300,175 - 300,175 Balances as of June 30, 2012 W 496,537 407,539 (4,458) 2,056,936 2,956,554 109 2,956,663 See accompanying notes to the condensed consolidated interim financial statements.
  11. 11. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity, Continued For the six-month periods ended June 30, 2013 and 2012 (Unaudited) 9 (In millions of won) Issued capital Capital surplus Accumulated other comprehensive loss Retained earnings Total Attributable to Equity holders of the Company Non- controlling interests Total equity Balances as of January 1, 2013 (Restated) W 496,537 407,539 (13,432) 2,148,998 3,039,642 109 3,039,751 Total comprehensive income (loss) Profit for the period - - - 248,153 248,153 - 248,153 Other comprehensive income Net change in unrealized fair value of available-for-sale securities - - 1,060 - 1,060 - 1,060 Other comprehensive income of equity method investees - - 3,275 - 3,275 - 3,275 Net change in unrealized fair value derivatives - - (58,147) - (58,147) - (58,147) Effect of overseas operation translations - - (929) - (929) - (929) Loss on actuarial valuation - - 665 - 665 - 665 Total comprehensive income(loss) for the period - - (54,076) 248,153 194,077 - 194,077 Transactions with owners Liquidation of special purpose entity - - - - - (30) (30) Balances as of June 30, 2013 W 496,537 407,539 (67,508) 2,397,151 3,233,719 79 3,233,798 See accompanying notes to the condensed consolidated interim financial statements.
  12. 12. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Cash Flows For the six-month periods ended June 30, 2013 and 2012 (Unaudited) 10 (In millions of won) Notes 2013 2012 Cash flows from operating activities Cash generated from operations 21 W 342,198 783,088 Interest received 16,662 29,334 Interest paid (368,355) (415,164) Dividends received 2,588 2,831 Income taxes paid (46,431) (79,537) Net cash provided by (used in) operating activities (53,338) 320,552 Cash flows from investing activities Liquidation of special purpose entity (30) - Dividends from associates 533 733 Acquisition of investments in associates (2,552) (10,850) Acquisition of land (1,981) (38,113) Proceeds from disposal of land 114,486 - Acquisition of building - (22,053) Proceeds from disposal of building 60,946 - Proceeds from disposal of structures 2,469 - Proceeds from disposal of vehicles 183 57 Acquisition of vehicles (256) (2,337) Proceeds from disposal of fixtures and furniture 102 - Acquisition of fixtures and furniture (4,262) (8,391) Acquisition of other tangible assets (48) (39) Proceeds from disposal of other tangible assets 75 - Increase in construction in progress (24,612) (2,317) Proceeds from disposal of intangible assets (5,287) (1,170) Decrease in leasehold deposits 3,489 3,032 Increase in leasehold deposits (3,010) (773) Net cash provided by (used in) investing activities 140,245 (82,221) Cash flows from financing activities Proceeds from borrowings 1,270,000 1,238,225 Repayments of borrowings (1,526,500) (1,325,000) Issuance of bonds 1,898,288 2,406,025 Repayments of bonds (1,934,906) (2,444,732) Net cash used in financing activities (293,118) (125,482) Effect of exchange rate fluctuations on cash and cash equivalents held 2 (8) Net increase (decrease) in cash and cash equivalents (206,209) 112,841 Cash and cash equivalents at beginning of period 1,302,161 1,455,433 Cash and cash equivalents at end of period W 1,095,952 1,568,274 See accompanying notes to the condensed consolidated interim financial statements.
  13. 13. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 11 1. Reporting Entity Hyundai Capital Services, Inc. (the “Company”) was established on December 22, 1993, to engage in installment financing, facilities leasing and new technology financing. The Company changed its trade name from Hyundai Auto Finance Co., Ltd. to Hyundai Financial Services Co. on April 21, 1995, and changed its trade name once again to Hyundai Capital Services, Inc. on December 30, 1998. In accordance with the Monopoly Regulation and Fair Trade Act, the Company is incorporated into Hyundai Motor Company Group. As of June 30, 2013, the Company’s operations are headquartered in Yeouido, Seoul. Its major shareholders are Hyundai Motor Company and GE International Holdings Corporation with 56.47% and 43.30% ownership, respectively. The condensed consolidated interim financial statements included the accounts of the Company, as the parent company, certain Autopia SPC trusts and other subsidiaries (collectively, the “Group”), while HK Mutual Savings Bank and five other entities are associates. Subsidiaries as of June 30, 2013 and December 31, 2012, are as follows. The Group has the substantial power over the subsidiaries established as special purpose entities for asset securitization even though its ownership interests over the subsidiaries do not exceed 50%. Location Ratio of ownership June 30, 2013 December 31, 2012 Special Purpose Entities Korea 0.9% Autopia Thirty-fifth SPC (trust) Autopia Thirty-fifth SPC (trust) Autopia Thirty-sixth SPC (trust) Autopia Thirty-sixth SPC (trust) - Autopia Thirty-seventh SPC (trust) - Autopia Thirty-ninth SPC (trust) - Autopia Fortieth SPC (trust) Autopia Forty-second SPC (trust) Autopia Forty-second SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-sixth SPC (trust) Autopia Forty-sixth SPC (trust) Autopia Forty-seventh SPC (trust) Autopia Forty-seventh SPC (trust) HB third SPC HB third SPC 0.5% Autopia Forty-ninth SPC (trust) Autopia Forty-ninth SPC (trust) Autopia Fiftieth SPC (trust) - Stock Company Germany 100% Hyundai Capital Europe GmbH (*) Hyundai Capital Europe GmbH (*) India Hyundai Capital India Private Limited Hyundai Capital India Private Limited Brasil Hyundai Capital Brasil LTDA - (*) It holds 100% shares of Hyundai Capital Services Limited Liability Company. 1. Reporting Entity, Continued
  14. 14. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 12 Subsidiaries that are included and excluded from the Group’s consolidated interim financial statement are as follows: Change Reason Subsidiaries Included Establishment Hyundai Capital Brasil LTDA Autopia Fiftieth SPC (trust) Excluded Liquidation Autopia Thirty-seventh SPC (trust) Autopia Thirty-ninth SPC (trust) Autopia Fortieth SPC (trust) 2. Accounting Policies 2.1 Basis of Preparation (1) Statement of compliance These condensed consolidated interim financial statements were prepared in accordance with K-IFRS (No. 1034 Interim Financial Reporting) as part of the period covered by the Group’s K-IFRS consolidated annual financial statements, and do not include all of the disclosures required for full consolidated annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements were prepared as of and for the year ended December 31, 2012. These condensed consolidated interim financial statements have been prepared in accordance with the Korean IFRS standards and interpretations issued and effective or issued and early adopted as of June 30, 2013. (2) Use of estimates and judgements The preparation of the financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as of and for the year ended December 31, 2012.
  15. 15. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 13 2. Accounting Policies, Continued 2.2 Significant Accounting Policies (1) Changes in accounting policies Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2012. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2013. (i) Amendments to K-IFRS No. 1001 Presentation of Financial Statements The amendments require presenting items in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The standards are effective for annual periods beginning on or after January 1, 2013. (ii) K-IFRS No. 1110 Consolidated Financial Statements The standard outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls. Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee. The standards are effective for annual periods beginning on or after January 1, 2013. (iii) K-IFRS No. 1112 Disclosure of Interests in Other Entites The standard brings together into a single standard for all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard requires the disclosure of information about the nature, risks and financial effects of these interests. The standards are effective for annual periods beginning on or after January 1, 2013. (iv) Amendments to K-IFRS No. 1019 Employee Benefits The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit obligation. The standard will be applied retrospectively for the Group’s annual periods beginning on or after January 1, 2013. (v) K-IFRS No. 1113 Fair Value Measurement The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements. The standard will be applied prospectively for the Group’s annual periods beginning on or after January 1, 2013.
  16. 16. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 14 2. Accounting Policies, Continued (2) Impact of change in accounting policies (i) Amendments to K-IFRS No. 1019 Employee Benefits The impact of amendments to K-IFRS No. 1019 Employee Benefits is as follows: The following table summarises the adjustments made to the Group's statements of financial position at December 31, 2012. December 31, 2012 As previously reported Amendments As restated Accumulated other comprehensive loss W (285) (13,147) (13,432) Retained earnings 2,135,851 13,147 2,148,998 The following table summarises the adjustments made to the Group’s statements of comprehensive income for the six-month period ended June 30, 2012. June 30, 2012 As previously reported Amendments As restated General and administrative expenses W 283,587 (1,258) 282,329 Income taxes 90,296 304 90,600 Other comprehensive income 55,835 (954) 54,881 (ii) Amendments to K-IFRS No. 1001 Presentation of Financial Statements The Group retrospectively applied the amendment to K-IFRS No. 1001 Presentation of Financial Statements, for which the impact is as follows: June 30, 2012 As previously reported Amendments As restated Other operating income W 67,641 (1,578) 66,063 Other operating expenses 39,293 (1,658) 37,635 Gain on disposal of property and equipment - 30 30 Miscellaneous revenues - 1,548 1,548 Loss on disposal of property and equipment - 364 364 Donation - 996 996 Miscellaneous losses - 298 298 2. Accounting Policies, Continued
  17. 17. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 15 (3) New standards and interpretations not yet adopted The following new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group for annual periods beginning after January 1, 2013, and the Group has not early adopted them. (i) K-IFRS No. 1032 Financial Instruments: Presentation The amendments address inconsistencies in current practice when applying the offsetting criteria in K-IFRS No. 1032 Financial Instrument: Presentation. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. 3. Securities Securities as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Available-for-sale securities Equity securities Marketable equity securities W 8,760 6,856 Unlisted equity securities 10,712 11,165 19,472 18,021 Debt securities Government and public bonds 2,634 2,262 22,106 20,283 Investments in associates 105,400 98,796 W 127,506 119,079
  18. 18. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 16 3. Securities, Continued 3.1 Available-for-sale securities Available-for-sale securities as of June 30, 2013 and December 31, 2012, are as follows: (1) Marketable equity securities Book value Number of shares Ownership (%) Acquisition cost 2013 2012 Marketable equity securities NICE Information Service 1,365,930 2.25 W 3,312 3,893 3,729 NICE Holdings 491,620 1.30 3,491 4,867 3,127 Unlisted equity securities Hyundai Finance Corp. (*) 1,700,000 9.29 9,888 10,564 11,065 Korean Egloan, Inc. 4,000 3.12 100 100 100 Golfclub Lich AG 14 0.59 60 48 - W 16,851 19,472 18,021 (*) The fair value for Hyundai Finance Corp. was valued as the average of valuation prices provided by two external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the discounted cash flow model. The five-year financial statements, projected based on past performance, were used in measuring the fair value assuming that the operational structure will remain as is for the next five years. Operating income and expenses were estimated based on the past performance, business plan and expected market conditions. (2) Debt securities Book value Issuer Interest rate (%) Acquisition cost 2013 2012 Government and public bonds Metropolitan Rapid Transit and others 2.5 W 2,546 2,634 2,262
  19. 19. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 17 3. Securities, Continued 3.2 Investments in associates (1) Details of investments in associates as of June 30, 2013 and December 31, 2012, are as follows: 2013 Number of shares Ownership (%) Acquisition cost Net asset value Book value HK Mutual Savings Bank (*) 4,990,438 19.99 W 45,719 38,369 50,617 HI Network, Inc.(*) 13,332 19.99 76 439 439 Korea Credit Bureau(*) 140,000 7.00 3,800 3,001 4,038 Hyundai capital Germany GmbH 600,200 30.01 1,065 1,441 1,441 Hyundai Capital UK Ltd. 7,497,500 29.99 13,401 9,831 9,831 Beijing Hyundai Auto Finance Co., Ltd. - 46.00 41,085 39,034 39,034 W 105,146 92,115 105,400 2012 Number of shares Ownership (%) Acquisition cost Net asset value Book value HK Mutual Savings Bank (*) 4,990,438 19.99 W 45,719 38,922 51,170 HI Network, Inc.(*) 13,332 19.99 76 861 861 Korea Credit Bureau(*) 140,000 7.00 3,800 2,948 3,985 Hyundai capital Germany GmbH 600,200 30.01 1,065 1,183 1,183 Hyundai Capital UK Ltd. 7,497,500 29.99 10,850 6,197 6,197 Beijing Hyundai Auto Finance Co., Ltd. - 46.00 41,085 35,400 35,400 W 102,595 85,511 98,796 (*) The Group’s shareholdings are less than 20%. However, the Group is able to significantly exert influence through its involvement in the financial and operating processes, and thus the equity method is applied.
  20. 20. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 18 3. Securities, Continued (2) Changes of investments in associates for the six-month periods ended June 30, 2013 and 2012 are as follows: 2013 Beginning balance Acquisi -tion Gain on valuation Changes in accumulated other comprehen -sive Gain(loss) Dividends Ending balance HK Mutual Savings Bank W 51,170 - (436) (117) - 50,617 HI Network, Inc. 861 - 570 - (533) 439 Korea Credit Bureau 3,985 - 53 - - 4,038 Hyundai Capital Germany GmbH 1,183 - 182 76 - 1,441 Hyundai Capital UK Ltd. 6,197 2,552 896 186 - 9,831 Beijing Hyundai Auto Finance Co., Ltd. 35,400 - 504 3,130 - 39,034 W 98,796 2,552 1,310 3,275 (533) 105,400 2012 Beginning balance Acquisi -tion Gain on valuation Changes in accumulated other comprehen -sive Loss Dividends Ending balance HK Mutual Savings Bank W 45,735 - 4,139 (414) - 49,460 HI Network, Inc. 1,003 - 100 - (733) 570 Korea Credit Bureau 3,965 - 220 (256) - 3,929 Hyundai Capital Germany GmbH 1,065 - - - - 1,065 Hyundai Capital UK Ltd. - 10,850 - - - 10,850 W 51,768 10,850 4,659 (670) (733) 65,874 (3) Goodwill related to associates as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 HK Mutual Savings Bank W 12,248 12,248 Korea Credit Bureau 1,037 1,037 W 13,285 13,285
  21. 21. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 19 3. Securities, Continued (4) Summary of financial information of investees as of June 30, 2013 and December 31, 2012, for assets and liabilities, and for the six-month periods ended June 30, 2013 and 2012, for revenue and income, follows: 2013 Assets Liabilities Operating revenue Profit (loss) for the period HK Mutual Savings Bank (*) W 2,540,276 2,348,431 218,867 (2,181) HI Network, Inc. 4,916 2,720 7,953 694 Korea Credit Bureau 52,743 9,872 20,810 1,278 Hyundai Capital Germany GmbH 5,590 791 1,230 442 Hyundai Capital UK Ltd. 965,060 932,278 22,124 2,985 Beijing Hyundai Auto Finance Co., Ltd. 331,981 247,124 8,825 (1,213) (*) Although HK Mutual Savings Bank’s fiscal year is from July 2012 to June 2013, the asset and liability amounts are as of June 30, 2013, and its operating revenue and profit for the period amounts are from January 1, 2013 to June 30, 2013. 2012 Assets Liabilities Operating revenue Profit for the period HK Mutual Savings Bank (*) W 2,655,804 2,461,195 195,441 20,694 HI Network, Inc. 7,629 3,322 8,921 1,619 Korea Credit Bureau 55,944 13,834 22,500 3,649 Hyundai Capital Germany GmbH 4,524 581 1,171 503 Hyundai Capital UK Ltd. 596,343 575,678 - - Beijing Hyundai Auto Finance Co., Ltd. 82,723 3,546 - - (*) Although HK Mutual Savings Bank’s fiscal year is from July 2011 to June 2012, the asset and liability amounts are as of December 31, 2012, and its operating revenue and profit for the period amounts are from January 1, 2012 to June 30, 2012.
  22. 22. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 20 4. Financial Receivables Financial receivables as of June 30, 2013 and December 31, 2012, are as follows: 2013 Principal Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for doubtful accounts Carrying amount Loans receivable Loan W 13,105,235 (57,921) (1,215) (334,691) 12,711,408 Installment financial assets Auto 3,077,775 (14,113) - (30,218) 3,033,444 Durable goods 1 - - - 1 Mortgage 12,709 21 - (308) 12,422 3,090,485 (14,092) - (30,526) 3,045,867 Lease receivables Finance lease receivables 2,911,293 85,215 - (38,322) 2,958,186 Cancelled lease receivables 9,228 - - (8,606) 622 2,920,521 85,215 - (46,928) 2,958,808 W 19,116,241 13,202 (1,215) (412,145) 18,716,083
  23. 23. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 21 4. Financial Receivables, Continued 2012 Principal Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for doubtful accounts Carrying amount Loans receivable Loan W 12,498,483 (115,800) (1,458) (312,829) 12,068,396 Installment financial assets Auto 3,798,433 (42,936) - (33,207) 3,722,290 Durable goods 1 - - - 1 Mortgage 16,486 30 - (277) 16,239 3,814,920 (42,906) - (33,484) 3,738,530 Lease receivables Finance lease receivables 2,838,134 (782) - (32,423) 2,804,929 Cancelled lease receivables 6,951 - - (6,458) 493 2,845,085 (782) - (38,881) 2,805,422 W 19,158,488 (159,488) (1,458) (385,194) 18,612,348
  24. 24. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 22 5. Allowance for Loan Loss Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2013 and 2012, are as follows: 2013 Loan receivables Installment financial assets Lease receivables Other assets Total Beginning balance W 312,829 33,484 38,881 18,740 403,934 Amounts written off (203,492) (20,537) (518) (3,446) (227,993) Recoveries of amounts previously written off 45,939 5,264 72 5,127 56,402 Unwinding of discount (3,962) (222) (133) - (4,317) Others 44 (8) (595) - (559) Additional (reversed) allowance 183,333 12,545 9,221 (1,143) 203,956 Ending balance W 334,691 30,526 46,928 19,278 431,423 2012 Loan receivables Installment financial assets Lease receivables Other assets Total Beginning balance W 281,184 38,130 25,563 17,284 362,161 Amounts written off (206,813) (21,432) (15) (3,607) (231,867) Recoveries of amounts previously written off 43,222 5,288 241 4,150 52,901 Unwinding of discount (3,733) (140) (96) - (3,969) Additional (reversed) allowance 165,471 9,147 5,385 (296) 179,707 Ending balance W 279,331 30,993 31,078 17,531 358,933
  25. 25. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 23 6. Financial Instruments The fair values of financial instruments as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Book value Fair value Book value Fair value Assets Financial assets Cash and due from banks W 1,095,966 1,095,966 1,302,173 1,302,173 Available-for-sale securities 22,106 22,106 20,283 20,283 Loans receivable 12,711,408 12,936,443 12,068,396 12,265,070 Installment financial assets 3,045,867 3,093,566 3,738,530 3,775,052 Lease receivables 2,958,808 2,915,682 2,805,422 2,781,545 Derivative assets 95,226 95,226 34,915 34,915 Other assets 274,011 273,825 246,545 246,707 W 20,203,392 20,432,814 20,216,264 20,425,745 Liabilities Financial liabilities Borrowings W 1,960,856 1,975,008 2,213,252 2,232,707 Bonds 15,038,711 15,335,894 14,802,390 15,418,078 Derivative liabilities 174,789 174,789 302,750 302,750 Other liabilities 1,207,231 1,211,600 1,311,636 1,320,854 W 18,381,587 18,697,291 18,630,028 19,274,389
  26. 26. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 24 6. Financial Instruments, Continued The fair value hierarchy of financial assets and liabilities carried at fair value as of June 30, 2013 and December 31, 2012, are as follows: 2013 Book value Fair value Fair value hierarchy (*) Level 1 Level2 Level 3 Financial assets Available-for-sale securities W 22,106 22,106 8,760 2,634 10,712 Derivative assets 95,226 95,226 - 95,226 - 117,332 117,332 8,760 97,860 10,712 Financial liabilities Derivative liabilities W 174,789 174,789 - 174,789 - 2012 Book value Fair value Fair value hierarchy (*) Level 1 Level2 Level 3 Financial assets Available-for-sale securities W 20,283 20,283 6,856 2,262 11,165 Derivative assets 34,915 34,915 - 34,915 - 55,198 55,198 6,856 37,177 11,165 Financial liabilities Derivative liabilities W 302,750 302,750 - 302,750 - (*) The levels of fair value hierarchy have been defined as follows: - Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and derivatives - Level 2: Inputs for the asset or liability included within valuation techniques that are observable market data. Most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap, forward, option - Level 3: Inputs for the asset or the liability that are not based on observable market data. Unlisted stocks, complicated structured bonds, complicated unlisted derivative
  27. 27. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 25 7. Derecognition of Financial Assets The Group issued senior and subordinated asset-backed securities based on loans and the associated securitized debts have recourse only to the transferred assets. Details of financial assets transferred and not derecognized as of June 30, 2013 and December 31, 2012 are as follows: 2013 2012 Book value of assets Loans receivable W 2,127,020 2,279,886 Installment financial assets 954,564 1,329,882 Lease receivables 280,273 - 3,361,857 3,609,768 Book value of related liabilities(*) (2,165,089) (2,255,036) Liabilities having right of resources on transferred Assets Fair value of assets 3,381,259 3,658,729 Fair value of related liabilities(*) (2,113,332) (2,307,077) Net position W 1,267,927 1,351,652 (*) Related liabilities aggregates senior and subordinated asset-backed securities with the related Derivative assets.
  28. 28. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 26 8. Property and Equipment Changes in property and equipment for the six-month periods ended June 30, 2013 and 2012, are as follows: 2013 Beginning balance Acquisition Replacement Disposal Depreciation Ending balance Land W 143,729 1,981 3,200 (40,016) - 108,894 Buildings 116,655 - 277 (52,866) (1,350) 62,716 Structures 3,192 - - (2,469) (27) 696 Vehicles 2,478 256 - (137) (454) 2,143 Fixture and furniture 45,054 4,262 578 (105) (10,054) 39,735 Others 2,033 48 - (76) - 2,005 Construction in progress 10,337 24,612 (4,055) - - 30,894 W 323,478 31,159 - (95,669) (11,885) 247,083 2012 Beginning balance Acquisition Replacement Disposal Depreciation Ending balance Land W 105,425 38,112 - - - 143,537 Buildings 97,939 22,053 - - (2,067) 117,925 Structures 2,558 - - - (35) 2,523 Vehicles 761 2,337 - (44) (384) 2,670 Fixture and furniture 53,770 8,391 893 (347) (10,344) 52,363 Others 1,994 39 - - (4) 2,029 Construction in progress 2,986 2,317 (922) - - 4,381 W 265,433 73,249 (29) (391) (12,834) 325,428
  29. 29. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 27 9. Intangible Assets Changes in intangible assets for the six-month periods ended June 30, 2013 and 2012, are as follows: 2013 Beginning balance Increase Replacement Amortization Ending balance Goodwill W 1,429 - - - 1,429 Development costs 28,198 5,287 - (4,843) 28,642 Rights of trademark 16 - - (7) 9 Other intangible assets 34,520 - - (948) 33,572 W 64,163 5,287 - (5,798) 63,652 2012 Beginning balance Increase Replacement Amortization Ending balance Development costs 28,635 1,170 31 (4,027) 25,809 Rights of trademark 30 - - (7) 23 Other intangible assets 36,452 - (2) (966) 35,484 W 65,117 1,170 29 (5,000) 61,316 10. Borrowings Changes in borrowings for the six-month periods ended June 30, 2013 and 2012, are as follows: 2013 2012 Beginning balance W 17,015,642 17,772,368 Borrowing 3,168,288 3,644,250 Repayment (3,461,406) (3,769,732) Others 277,043 (273,241) Ending balance W 16,999,567 17,373,645
  30. 30. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 28 11. Defined Benefit Liability The amounts of defined benefit plans recognized in the statements of financial position as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Present value of funded obligations W 64,991 63,847 Fair value of plan assets (*) (48,760) (50,859) Defined benefit liability W 16,231 12,988 (*) As of June 30, 2013, contribution to the National Pension Fund of W 43 million is included. Details of the amounts recognized in the comprehensive income statements for the six-month periods ended June 30, 2013 and 2012, are as follows : 2013 2012 Current service cost W 6,367 5,736 Interest cost 1,015 982 Expected return on plan assets (806) (580) W 6,576 6,138 12. Provisions for Unused Loan Commitments Changes in provisions for unused loan commitments for the six-month periods ended June 30, 2013 and 2012, are as follows: 2013 2012 Beginning balance W 2,017 10,445 Reversals (7) (1,190) Ending balance W 2,010 9,255
  31. 31. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 29 13. Derivative Financial Instruments and Hedge Accounting Trading derivatives as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Assets Liabilities Assets Liabilities Forward foreign exchange W 7 - 11 2 During the six-month periods ended June 30, 2013 and 2012, the Group recognized loss on trading derivatives of W 2 million and W 19 million, respectively. Derivatives designated as cash flow hedges as of June 30, 2013 and December 2012, are as follows: 2013 2012 Assets Liabilities Notional Principal amounts Assets Liabilities Notional Principal amounts Exchange forward W - 208 (43) 2,312 - (199) Interest rate swaps 2,347 5,256 (2,205) 378 7,563 (5,446) Currency swaps 92,872 169,325 (53,775) 32,214 295,185 7,770 W 95,219 174,789 (56,023) 34,904 302,748 2,125 The maximum period the Group is exposed to the variability in future cash flows arising from derivatives designated as cash flow hedges, is expected to be until September 20, 2017. There is no ineffective portion recognized related to cash flow hedge for the six-month periods ended June 30, 2013 and 2012.
  32. 32. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 30 14. Equity Details of appropriated and expected reserves for bad loans as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Appropriated reserve for bad loans W 273,907 270,220 Expected reserve for bad loans 93,631 3,687 W 367,538 273,907 Transfer to reserve for bad loans and profit for the period in consideration of effect of changes in reserve for bad loans for the six-month periods ended June 30, 2013 are as follows: 2013 Profit for the period W 248,153 Expected transfer to reserve for bad loans (*1) (93,631) Profit for the period in consideration of changes in reserve for bad loans (*2) W 154,522 Profit for the period per share in consideration of changes in reserve for bad loans(in Korean won) W 1,556 (*1) The amount transferred to reserve for bad loans for the six-month period ended June 30, 2013, is the difference between the balance of reserve for bad loans as of June 30, 2013, and the balance as of December 31, 2012. (*2) Profit for the period and earnings per share in consideration of changes in reserve for bad loans are not accordance with K-IFRS, and this amount is the sum of the expected transfer to reserve for bad loans before income tax and Profit for the period.
  33. 33. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 31 15. Net Interest Income Net interest income for the three-month and six-month periods ended June 30, 2013 and 2012, consists of: 2013 2012 Three-month period ended Six-month period ended Three-month period ended Six-month period ended Interest income: Due from Banks W 7,318 15,083 11,792 24,394 Loans receivable 368,748 733,365 361,022 722,758 Installment financial assets 55,798 121,447 91,852 192,041 Lease receivables (*1) 63,319 125,495 58,645 115,665 Other (*2) 361 724 1,387 1,431 495,544 996,114 524,698 1,056,289 Interest expense: Borrowings (21,317) (43,834) (25,732) (52,716) Bonds (168,549) (340,380) (188,760) (380,421) Other (*2) (8,510) (18,175) (10,984) (21,793) (198,376) (402,389) (225,476) (454,930) Net interest income W 297,168 593,725 299,222 601,359 (*1) Includes amortization of present value discount for lease guarantee. (*2) Amortization of present value discount using the effective interest method. 16. Net Commission Income Net commission income for the three-month and six-month periods ended June 30, 2013 and 2012, consists of: 2013 2012 Three-month period ended Six-month period ended Three-month period ended Six-month period ended Commission income Loans receivable W 13,022 24,448 11,977 23,651 Installment financial assets 855 1,854 1,564 3,200 Lease receivables 44,851 87,496 39,273 75,783 58,728 113,798 52,814 102,634 Commission expenses Lease expenses (16,686) (33,209) (4,802) (9,060) Net commission income W 42,042 80,589 48,012 93,574
  34. 34. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 32 17. General and Administrative Expenses General and administrative expenses for the three-month and six-month periods ended June 30, 2013 and 2012, are as follows: 18. Income Tax Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year ended December 31, 2013, is 26% (the estimated average tax rate for the six-month period ended June 30, 2012, is 27%). 2013 2012 Three-month period ended Six-month period ended Three-month period ended Six-month period ended Payroll W 39,929 78,123 31,344 59,313 Severance benefits 3,294 6,602 3,189 6,259 Fringe benefits 8,847 19,900 8,605 19,157 Depreciation 5,691 11,885 6,628 12,834 Advertising 12,504 23,907 13,857 24,399 Travel and transportation 1,509 2,504 1,660 2,922 Communication 3,877 7,501 3,544 7,187 Water, lighting and heating 2,637 5,850 2,897 5,414 Commission 4,919 9,596 4,864 8,919 Sales commission 20,529 37,901 15,741 29,911 Amortization 2,926 5,798 2,472 5,000 Outsourcing service charges 17,077 32,831 17,782 33,220 Rent 10,695 20,785 9,599 18,429 Other expenses 26,588 52,119 23,739 49,365 W 161,022 315,302 145,921 282,329
  35. 35. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 33 19. Earnings Per Share (1) Basic earnings per share Basic earnings per share attributable to common stock of equity holders for the three-month and six-month periods ended June 30, 2013 and 2012, is as follows: (2) Diluted earnings per share As there was no discontinued operation during the six-month periods ended June 30, 2013 and 2012, basic earnings per share is the same as basic earnings per share from continuing operations. There are no potential common stocks as of June 30, 2013 and 2012. Therefore, the diluted earnings per share is the same as basic earnings per share for the three-month and six-month periods ended June 30, 2013 and 2012. 2013 2012 Three-month period ended Six-month period ended Three-month period ended Six-month period ended Profit for the period attributable to common stock (In Korean won) (A) W 95,303,358,051 248,152,862,699 116,419,879,712 245,293,799,709 Weighted average of number of outstanding common shares (B) 99,307,435 99,307,435 99,307,435 99,307,435 Basic earnings per Share (In Korean won) (A/B) W 960 2,499 1,172 2,470
  36. 36. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 34 20. Other Comprehensive Income Other comprehensive income for the six-month periods ended June 30, 2013 and 2012, consists of: 2013 Beginning balance Changes Income tax effects Ending balance Reclassifi- cation of profit or loss Other changes Unrealized gain on valuation of available-for- sale financial assets W 1,002 (92) 1,491 (339) 2,062 Accumulated comprehensive income of equity method investees (2,540) - 3,275 - 735 Unrealized loss on valuation of derivatives 2,125 2,617 (79,329) 18,564 (56,023) Loss on exchange differences of foreign operations (872) - (929) - (1,801) Gain (loss) on actuarial valuation (13,147) - 877 (212) (12,482) W (13,432) 2,525 (74,615) 18,013 (67,509) 2012 Beginning balance Changes Income tax effects Ending balance Reclassifi- cation of profit or loss Other changes Unrealized gain on valuation of available-for- sale financial assets W (388) - 720 (133) 199 Accumulated comprehensive income of equity method investees 47 - (670) - (623) Unrealized loss on valuation of derivatives (50,157) 419 63,845 (7,903) 6,204 Loss on exchange differences of foreign operations (343) - (443) - (786) Gain (loss) on actuarial valuation (8,498) - (1,258) 304 (9,452) W (59,339) 419 62,194 (7,732) (4,458)
  37. 37. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 35 21. Supplemental Cash Flow Information Cash and cash equivalents in cash flow statements consist of cash in hand, deposits and short-term money-market instruments. Cash and cash equivalents consisting of cash and financial instruments as of June 30, 2013 and December 31, 2012, are as follows: Cash generated from operations for the six-month periods ended June 30, 2013 and 2012, is as follows: 21. Supplemental Cash Flow Information, Continued 2013 2012 Cash W 1 1 Ordinary deposits 126,206 194,944 Current deposits 4,145 3,416 Short-term financial instruments 965,600 1,103,800 W 1,095,952 1,302,161 2013 2012 Profit for the period W 248,153 245,294 Adjustments: Net interest expenses 378,683 429,105 Income tax 87,006 90,600 Gain on disposal of available-for-sale financial assets (1,395) (1,776) Income on loans (16,290) (17,864) Income on installment financial receivables (19,130) (37,664) Lease expenses 190,499 168,998 Gain on foreign exchanges translation (49,777) (66,990) Dividend income (2,588) (2,831) Gain on valuation of derivatives (314,663) (15,961) Gain on disposal of property and equipment (85,488) (30) Gain on equity method valuation (1,310) (4,659) Provision for loss 203,956 179,707 Loss on foreign exchanges translation 315,059 15,968 Severance benefits 6,602 6,138 Depreciation 11,885 12,834 Amortization of intangible assets 5,798 5,000 Loss on valuation of derivatives 49,153 66,989 Loss on disposal of property and equipment 2,896 364 Reversal of provisions (7) (1,190) Losses on Retirement of Bonds 51 - W 760,940 826,738
  38. 38. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 36 2013 2012 Changes in operating assets and liabilities (Increase) in due from banks W (3) - Decrease (increase) in available-for-sale financial assets 970 (531) (Increase) in loans receivable (810,659) (492,082) Decrease in installment financial assets 699,258 644,662 (Increase) in finance lease receivables (397,135) (400,835) Decrease in cancelled leased receivables 6,702 4,853 (Increase) in operating leased assets (125,980) (154,963) Decrease in cancelled leased assets 203,095 151,918 (Increase) in non-trade receivables (26,811) (21,930) Decrease (increase) in accrued revenues (1,581) 8,287 (Increase) in advance payments (19,439) (46,752) (Increase) in prepaid expenses (21,514) (9,509) Decrease in derivative assets 525 20 Increase (decrease) in non-trade Payables (32,705) 35,161 (Decrease) in accrued expenses (6,968) (62) (Decrease) in unearned revenue (5,722) (2,750) Increase (decrease) in withholdings (9,758) 4,533 (Decrease) in income taxes payable (32,979) - (Decrease) in leasehold deposits received (83,708) (6,727) Payment of severance benefits (4,152) (3,333) (Decrease) in plan assets 1,839 734 Transfer of severance benefits from (to) related parties (170) 362 (666,895) (288,944) W 342,198 783,088
  39. 39. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 37 22. Commitments and Contingencies (1) Credit Line Agreement Details of unused credit line agreements of the Group as of June 30, 2013 and December 31, 2012, are as follows: Type Financial institutions 2013 2012 Limit of overdraft Shinhan Bank and 2 other banks W 41,500 41,500 Limit of daily loan SC Bank and 2 other banks 15,000 45,000 Limit of CP issuance Woori Bank 150,000 - W 206,500 86,500 (2) Credit Facility Agreement The Group has revolving credit facility agreements with several financial institutions as of June 30, 2013 and December 31, 2012. Details of credit facility agreements are as follows: (*) Relative to the above credit facility agreement, Hyundai Motor Company shall pay GE Capital European Funding & Co. any amount not paid by the Group, at such time multiplied by the shareholding ratio of Hyundai Motor Company. There has been no usage of the above credit facility agreements as of June 30, 2013. 22. Commitments and Contingencies, Continued Financial institutions 2013 2012 GE Capital European Funding & Co.(*) Equivalent of USD 0.7 billion in Euros Equivalent of USD 1 billion in Euros MIZUHO CORPORATE BANK, LTD., SEOUL BRANCH W 65,000 65,000 JPMORGAN CHASE BANK, N.A., SEOUL BRANCH 110,000 110,000 CITIBANK KOREA INC. 50,000 50,000 Standard Chartered, Seoul Branch 50,000 50,000 SOCIETE GENERALE, SEOUL BRANCH 110,000 55,000 BANK OF CHINA, SEOUL BRANCH 30,000 30,000 DBS BANK LTD., SEOUL BRANCH - 100,000 Sumitomo Mitsui Banking Corporation, Seoul Branch 50,000 - BNP Paribas, Seoul Branch 100,000 - Bank of America, N.A, Seoul Branch 20,000 - Credit Agricole Corporate and Investment Bank, SEOUL BRANCH 100,000 100,000 THE ROYAL BANK OF SCOTLAND N.V., SEOUL BRANCH 110,000 110,000 ING BANK N.V., SEOUL BRANCH 100,000 - KDB Bank 60,000 60,000 Kyobo Life Insurance Co., Ltd. 50,000 50,000 Kookmin Bank 200,000 200,000 Suhyup Bank W 20,000 - CITIBANK, N.A. USD 0.2 billion USD 0.2 billion The Bank of TOKYO MITSUBISHI UFJ., Ltd. USD 0.2 billion USD 0.2 billion
  40. 40. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 38 (3) Guarantees Details of guarantees involving third parties as of June 30, 2013 and December 31, 2012, are as follows: Guarantor Details 2013 2012 Hyundai Motor Company Joint liabilities on finance lease receivables (*) W 15 15 Seoul Guarantee Insurance Co., Ltd. Guarantee for debt collection deposit, others 144,959 154,394 (*) The amounts represent the guaranteed balances as of June 30, 2013 and December 31, 2012, as defined under the joint liability agreement. The Group carries residual value guarantee insurance with LIG Insurance Co., Ltd. against loss in case unredeemed mortgage loans exceed the recoverable amount from the collateral of the loans. The receivables balance carried insurance and residual value guaranteed by the insurance as of June 30, 2013 and December 31, 2012, are as follows: (4) Pending significant litigations Details of pending significant litigations involving the Group as of June 30, 2013, are as follows: In addition, the Group has filed lawsuits against a number of debtors to collect receivables. The Group's Management does not believe that any of these matters, either individually or in the aggregate, will have a material effect on the consolidated financial position or results of the Group. Type 2013 2012 Receivables balance W 768,457 795,982 The amount of residual value guaranteed by insurance 290,819 300,656 Type Number of litigations Amount of litigations Plaintiff 24 W 1,012 Defendant 28 2,752
  41. 41. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 39 23. Related Party Transactions (1) Relationships between parents and subsidiaries The parent company is Hyundai Motor Company. Related parties include associates, joint ventures, post- employment benefit plans, members of key management personnel and entities which the Group controls directly or indirectly, has joint control or significant influence over them. (2) Transactions between related parties Significant transactions, which occurred in the normal course of business with related companies for the six- month periods ended June 30, 2013 and 2012, are as follows: 2013 2012 Purchases Disposal Purchases Disposal Parent Company W 430,932 - 443,139 - Others 267,427 210,553 270,640 28,563 W 698,359 210,553 713,779 28,563 Revenue and expenses arising from transactions with related parties for the six-month periods ended June 30, 2013 and 2012, and receivables and payables as of June 30, 2013 and December 31, 2012, are as follows: 2013 2012 Receivables Payables Receivables Payables Parent Company W 1,896 21,778 4,463 4,440 Associates - - 819 - Others 46,357 159,952 45,126 149,055 W 48,253 181,730 50,408 153,495 2013 2012 Revenues(*) Expenses(*) Revenues Expenses Parent Company W 3,234 1,372 2,194 1,560 Associates 948 1,052 - - Others 156,471 50,259 25,267 43,496 W 160,653 52,683 27,461 45,056 (*) Gains and losses from disposal of property and equipment, including real estate, to related parties for the six- month period ended June 30, 2013 are included, which are amounted to KRW 85.4 billion and KRW 2.8 billion, respectively.
  42. 42. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements June 30, 2013 (Unaudited) (In millions of won) 40 23. Related Party Transactions, Continued Details of credit granting activities with related parties as of June 30, 2013 are as follows: Credit grantor Credit borrower Type Amount Period Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Call loan W 300,000 2012.11.1~ 2013.10.31 Hyundai Capital Services, Inc. Hyundai Commercial Co., Ltd. Call loan 100,000 2012.11.1~ 2013.10.31 Hyundai Card Co., Ltd. Hyundai Capital Services, Inc. Call loan 300,000 2012.11.1~ 2013.10.31 With the counterparty’s request, credit is granted when there is surplus fund. As of June 30, 2013, no balance is recognized relating to credit granting activities. The Group has been provided with a credit facility and payment guarantees by GE Capital European Funding & Co. and Hyundai Motor Company, respectively (Note 22). (3) Key management compensation Compensation to key management for the six-month periods ended June 30, 2013 and 2012, consists of: The key management above consists of directors (including non-permanent directors), who have significant authority and responsibilities for planning, operating and controlling the Group. 24. Financial Risk Management The Group is exposed to credit risk, liquidity risk and market risk (exchange and rate risk). In order to manage these factors, the Group operates risk management policies and programs that monitor closely and respond to each of the risk factors. The Group uses derivatives to manage specific risks. There was no significant change in the Group's risk management division and policies after December 31, 2012. Type 2013 2012 Short-term employee benefits W 3,172 1,896 Severance benefits 1,540 1,186

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