카드 검토 영문

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카드 검토 영문

  1. 1. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF JUNE 30, 2012AND FOR THE THREE MONTHS AND SIX MONTHS ENDEDJUNE 30, 2012 AND JUNE 30, 2011AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
  2. 2. Independent Accountants’ Review ReportEnglish Translation of a Report Originally Issued in KoreanTo the Shareholders and Board of Directors ofHyundai Card Co., Ltd.:We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and itssubsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidated statementof financial position as of June 30, 2012 and the related condensed consolidated statements of comprehensiveincome for the three months and the six months ended June 30, 2012 and June 30, 2011, the related condensedstatements of changes in shareholders’ equity and cash flows for the six months ended June 30, 2012 and June 30,2011, and a summary of significant accounting policies and other explanatory information.Management’s responsibility for the condensed consolidated financial statementsThe Company’s management is responsible for the preparation and fair presentation of the accompanying condensedconsolidated financial statements and for such internal control as management determines is necessary to enable thepreparation of condensed consolidated financial statements that are free from material misstatement, whether due tofraud or error.Independent accountants’ responsibilityOur responsibility is to express a conclusion on the accompanying condensed consolidated financial statementsbased on our review.We conducted our reviews in accordance with standards for review of interim financial statements in the Republicof Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied tofinancial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, wedo not express an audit opinion.Review conclusionBased on our reviews, nothing has come to our attention that causes us to believe that the accompanyingcondensed consolidated financial statements of the Company are not presented fairly, in all material respects, inaccordance with Korean International Financial Standards 1034, Interim Financial Reporting.
  3. 3. OthersWe have also audited the consolidated statements of financial position as of December 31, 2011, and the relatedconsolidated statements of comprehensive income, changes in shareholders’ equity and cash flows (not presented inthe accompanying condensed consolidated financial statements), all expressed in Korean Won, for the year endedDecember 31, 2011, in accordance with auditing standards generally accepted in the Republic of Korea. On thoseconsolidated financial statements we expressed an unqualified opinion in our independent auditors’ report dated asof February 27, 2012. In addition, the consolidated statement of financial position as of December 31, 2011,presented as comparative purposes in the accompanying condensed consolidated financial statements, does notdiffer, in all material respects, with the audited consolidated statement of financial position as of December 31, 2011.August 10, 2012 Notice to ReadersThis report is effective as of August 10, 2012, the review report date. Certain subsequent events or circumstancesmay have occurred between the accountants’ review report date and the time the accountants’ review report isread. Such events or circumstances could significantly affect the accompanying condensed consolidated financialstatements and may result in modifications to the accountants’ review report.
  4. 4. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES(the “Company”)CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF JUNE 30, 2012AND FOR THE THREE MONTHS AND SIX MONTHS ENDEDJUNE 30, 2012 AND JUNE 30, 2011 The accompanying condensed financial statements including all footnote disclosures were prepared by and are the responsibility of the Company. Chung, Tae Young CEO
  5. 5. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2012 AND DECEMBER 31, 2011 (Unit: Korean Won) June 30, 2012 December 31, 2011ASSETSCASH AND BANK DEPOSITS (Notes 5, 28 and 29): Cash and cash equivalents ₩ 847,062,479,578 ₩ 830,022,903,023 Bank deposits 33,031,500,000 33,031,500,000 Total cash and bank deposits 880,093,979,578 863,054,403,023INVESTMENT FINANCIAL ASSETS (Note 29): Financial assets available-for-sale (AFS) 1,766,969,764 1,766,969,764 Total investment financial assets 1,766,969,764 1,766,969,764CARD ASSETS (Notes 6, 7, 26, 28 and 29): Card receivables, net of present value discounts, deferred origination fees and allowance for doubtful accounts 6,395,406,823,016 6,432,351,415,041 Cash advances, net of allowance for doubtful accounts 924,382,461,958 978,117,626,263 Card loans, net of present value discounts, deferred loan origination fees and allowance for doubtful accounts 2,179,886,055,534 1,963,797,640,687 Total card assets 9,499,675,340,508 9,374,266,681,991LOANS (Notes 6, 7, 28 and 29) Other loans, net of allowance for doubtful accounts 469,647,440 469,647,440PROPERTY AND EQUIPMENT (Notes 8, 10, 13 and 26): Land 118,160,330,711 83,994,796,609 Buildings, net of accumulated depreciation 63,944,678,888 42,186,583,765 Vehicles, net of accumulated depreciation 273,858,264 270,015,754 Fixtures and equipment, net of accumulated depreciation 59,315,618,675 57,974,548,577 Finance lease assets 1,944,838,878 2,500,507,128 Construction in progress 11,181,081,396 471,628,080 Total property and equipment 254,820,406,812 187,398,079,913OTHER FINANCIAL ASSETS (Notes 7, 17, 26, 28 and 29): Other accounts receivable, net of allowance for doubtful accounts 52,545,194,828 44,939,903,548 Accrued revenue, net of allowance for doubtful accounts 40,435,815,327 43,753,371,236 Guarantee deposits 43,943,885,169 52,758,804,118 Derivative assets 15,584,834,280 2,555,101,143 Total other financial assets 152,509,729,604 144,007,180,045OTHER NON-FINANCIAL ASSETS (Notes 5, 7, 9, 23 and 26): Advanced payments, net of allowance for doubtful accounts 21,128,473,870 25,223,575,660 Prepaid expenses 49,744,634,808 48,548,656,736 Intangible assets 67,808,659,935 72,976,002,526 Deferred income tax assets 134,124,660,527 112,403,093,896 Others 21,833,180,090 21,819,424,816 Total other non-financial assets 294,639,609,230 280,970,753,634 Total Assets ₩11,083,975,682,936 ₩10,851,933,715,810(Continued)
  6. 6. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2012 AND DECEMBER 31, 2011 (CONTINUED) (Unit: Korean Won) June 30, 2012 December 31, 2011LIABILITIES AND SHAREHOLDERS’EQUITYBORROWINGS : Borrowings (Notes 11, 28 and 29) ( ₩ 490,000,000,000 ₩ 590,000,000,000 Bonds payable, net of discounts on debentures (Notes 12, 25, 28 and 29) 6,708,887,420,387 6,481,760,496,118 Total borrowings 7,198,887,420,387 7,071,760,496,118RETIREMENT BENEFIT (Note 14) Retirement benefit obligation 21,953,792,202 17,774,550,158 Total retirement benefit 21,953,792,202 17,774,550,158OTHER FINANCIAL LIABILITIES (Notes 13, 17, 26, 28 and 29): Accounts payable 1,047,457,966,158 1,066,705,610,154 Withholdings 88,451,567,048 64,312,342,703 Accrued expenses 107,572,352,566 140,922,092,976 Finance lease liabilities 2,007,366,509 2,548,330,830 Derivative liabilities 1,762,166,340 5,326,133,113 Guarantee deposits 12,868,293,354 11,684,414,000 Total other financial liabilities 1,260,119,711,975 1,291,498,923,776OTHER NON-FINANCIAL LIABILITIES : Withholdings 6,617,218,797 5,649,822,585 Unearned revenue 374,195,483,654 347,865,031,849 Provisions (Notes 16 and 24) 80,834,848,187 80,233,007,232 Current tax liability 35,401,015,241 40,468,853,188 Total other non-financial liabilities 497,048,565,879 474,216,714,854SHAREHOLDERS’ EQUITY : Share capital (Note 18) 802,326,430,000 802,326,430,000 Capital surplus (Note 18) 57,704,443,955 57,704,443,955 Retained earnings (Notes 19 and 21) 1,254,110,117,202 1,148,396,655,980 Reserves (Notes 17, 20 and 27) (8,204,528,664) (11,764,319,031) Non-controlling interest 29,730,000 19,820,000 Total shareholders’ equity 2,105,966,192,493 1,996,683,030,904 Total Liabilities and Shareholders’ Equity ₩ 11,083,975,682,936 ₩ 10,851,933,715,810 See accompanying notes to condensed consolidated financial statements.
  7. 7. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 (Unit: Korean Won) 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30.OPERATING REVENUE:Card income (Notes 26 and 31) ₩ 596,020,112,472 ₩ 1,182,844,074,854 ₩ 575,072,716,824 ₩ 1,153,496,509,377Interest income (Note 30) 4,750,680,827 10,046,723,333 6,457,772,982 11,341,792,252Gain on disposal of financial assets AFS (Note 32) - - 4,051,343,198 4,051,343,198Reversal of impairment loss on financial assets AFS (Note 32) - 67,000,000 671,860,595 738,860,595Dividends income - 232,822,339 - 294,418,979Reversal of provision for unused credit limits - - 635,005,051 -Other operating revenue (Notes 26 and 33) 18,784,846,068 41,787,097,955 18,211,082,986 45,066,866,975Total operating revenue 619,555,639,367 1,234,977,718,481 605,099,781,636 1,214,989,791,376OPERATING EXPENSES:Card expenses (Notes 26 and 31) 278,513,544,223 529,561,625,310 219,796,482,657 447,330,811,457Interest expenses (Note 30) 86,578,547,921 173,241,397,774 91,045,743,585 181,406,990,924General and administrative expenses (Notes 14, 15, 22 and 26) 149,027,360,807 280,938,867,339 121,865,384,340 235,558,495,893Securitization expenses 66,607,876 175,866,798 66,839,007 173,611,640Bad debt expense and loss on disposal of loans 55,872,178,959 98,186,842,299 41,344,482,284 94,171,915,310Transfer to provision for unused credit limits (Note 16) (225,277,347) 1,501,400,815 - 1,985,815,922Impairment loss on financial assets AFS (Note 32) - - - 8,324,157Other operating expenses (Note 26 and 33) 7,853,626,212 30,650,525,796 18,269,397,129 46,539,079,124Total operating expenses 577,686,588,651 1,114,256,526,131 492,388,329,002 1,007,175,044,427OPERATING INCOME 41,869,050,716 120,721,192,350 112,711,452,634 207,814,746,949(Continued)
  8. 8. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 (CONTINUED) (Unit: Korean Won) 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30.INCOME BEFORE INCOME TAX 41,869,050,716 120,721,192,350 112,711,452,634 207,814,746,949INCOME TAX EXPENSE (Note 23) 11,153,287,590 15,007,731,128 30,439,907,479 51,493,316,804NET INCOME FOR THE PERIOD 30,715,763,126 105,713,461,222 82,271,545,155 156,321,430,145OTHER COMPREHENSIVE INCOME FOR THE PERIOD (Note 27) Effective portion of changes in fair value of cash flow hedges, net of tax 2,701,223,576 3,559,790,367 (7,067,120,365) (7,502,254,888)TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ₩33,416,986,702 ₩109,273,251,589 ₩75,204,424,790 ₩148,819,175,257Net income attributable to: Owners of the Company 30,715,763,126 105,713,461,222 82,271,545,155 156,321,430,145 Non-controlling interests - - - -Total comprehensive income attributable to: Owners of the Company 33,416,986,702 109,273,251,589 75,204,424,790 148,819,175,257 Non-controlling interests - - - - See accompanying notes to condensed consolidated financial statements.
  9. 9. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 Capital Surplus Reserve Cash flow Attributable to Non- Share Share Other Retained hedging owners of the controlling capital premium capital earnings reserve Company Interests TotalBalance at January 1, 2011 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 909,749,073,997 ₩ (3,150,335,270) ₩ 1,766,629,612,682 ₩ 19,820,000 ₩ 1,766,649,432,682Comprehensive income Net income - - - 156,321,430,145 - 156,321,430,145 - 156,321,430,145 Other compre- hensive income - - - - (7,502,254,888) (7,502,254,888) - (7,502,254,888)Non-controlling interests - - - - - - 9,910,000 9,910,000Balance at June 30, 2011 802,326,430,000 45,399,364,539 12,305,079,416 1,066,070,504,142 (10,652,590,158) 1,915,448,787,939 29,730,000 1,915,478,517,939Balance at January 1, 2012 802,326,430,000 45,399,364,539 12,305,079,416 1,148,396,655,980 (11,764,319,031) 1,996,663,210,904 19,820,000 1,996,683,030,904Comprehensive income - - - - - - - - Net income - - - 105,713,461,222 - 105,713,461,222 - 105,713,461,222 Other compre- hensive income - - - - 3,559,790,367 3,559,790,367 - 3,559,790,367Non-controlling interests - - - - - - 9,910,000 9,910,000Balance at June 30, 2012 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 1,254,110,117,202 ₩ (8,204,528,664) ₩ 2,105,936,462,493 ₩29,730,000 ₩ 2,105,966,192,493 See accompanying notes to condensed consolidated financial statements.
  10. 10. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011 Six months ended June 30, 2012 2011 (Unit: Korean Won)CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the period ₩ 105,713,461,222 ₩ 156,321,430,145 Income tax expense 15,007,731,128 51,493,316,804 Interest income (10,046,723,333) (11,334,712,100) Interest expense 173,241,397,774 181,406,990,924 Dividend received (232,822,339) (294,418,979) Bad debt expense and loss on disposal of receivables 98,186,842,299 94,171,915,310 Retirement benefits 5,280,211,663 5,129,583,010 Depreciation 13,278,266,528 9,735,198,564 Amortization 6,920,354,234 5,189,364,698 Loss on foreign currency translation 11,773,479,686 6,360,259,345 Loss on valuation and transaction of derivatives 799,000,000 26,373,400,000 Increase in provision for unused credit limit 1,501,400,815 1,985,815,922 Card expense 1,238,937,503 2,454,295,003 Loss from disposal of property and equipment 81,595,456 4,518,026 Impairment loss of financial assets AFS - 8,324,157 Other operating expenses 140,502,637 147,847,937 Reversal of impairment loss for investment financial assets (67,000,000) (738,860,595) Gain on disposal of financial assets AFS - (4,051,343,198) Gain on foreign currency translation (13,249,097) (26,448,009,330) Gain on valuation and transaction of derivatives (11,767,500,000) (6,247,080,000) Amortization of present value discounts on card asset (23,080,028,495) (11,690,490,134) Amortization of deferred origination fees (10,117,027,449) (11,932,318,762) Gain on disposal of property and equipment (3,095,000) (2,635,856) Other operating revenue (2,279,000,000) (2,287,618,501)Changes in working capital: Decrease (increase) in card assets (191,380,340,206) 352,132,337,068 Decrease in other loan - 500,000,000 Increase in other financial assets (5,799,746,264) (19,484,681,046) Decrease (increase) in other non-financial assets (2,402,187,070) 59,126,562,312 Increase in derivative assets (12,629,999,999) - Decrease in provisions - (4,053,421,155) Decrease in retirement benefit obligations (1,755,860,759) (2,144,306,709) Decrease (increase) in plan asset 658,753,726 (815,502,679) Increase in derivative liabilities 11,724,000,000 390,682,348 Increase (decrease) in finance lease liabilities (540,964,321) 3,075,493,444 Decrease in other financial liabilities (31,253,267,031) (101,126,357,372) Increase in other non-financial liabilities 26,330,451,805 26,490,059,852Cash generated from operating activities Interest received 11,501,389,530 5,040,499,652 Interest paid (165,480,031,763) (173,773,419,864) Dividend received 232,822,339 294,418,979 Income tax paid (42,956,545,250) (81,385,313,705)Net cash provided by (used in) operating activities (28,194,790,031) 530,021,823,515(Continued)
  11. 11. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 (CONTINUED) Six months ended June 30, 2012 2011 (Unit: Korean Won)CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of investment financial assets 67,000,000 110,019,643,960 Disposal of property and equipment 3,100,000 44,071,303 Disposal of intangible assets 1,250,000,000 - Net decrease (increase) in guarantee deposit 9,860,120,861 (2,883,723,721) Net increase in bank deposit - (9,910,000,000) Acquisition of property and equipment (75,042,053,649) (22,596,400,452) Acquisition of intangible assets (3,806,501,973) (9,714,521,804)Net cash provided by (used in) investing activities (67,668,334,761) 64,959,069,286CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 4,190,000,000,000 - Proceeds from issue of bonds payable 1,836,689,791,347 1,920,026,752,737 Increase in non-controlling interest 9,910,000 9,910,000 Repayment of borrowings (4,290,000,000,000) (1,218,013,480,000) Repayment of bonds payable (1,623,797,000,000) (1,073,473,274,800)Net cash provided by (used in) financing activities 112,902,701,347 (371,450,092,063)NET INCREASE IN CASH AND CASH EQUIVALENTS 17,039,576,555 223,530,800,738CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 830,022,903,023 607,047,772,134CASH AND CASH EQUIVALENTS, END OF THE PERIOD ₩ 847,062,479,578 ₩ 830,578,572,872 See accompanying notes to condensed consolidated financial statements.
  12. 12. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 20111. GENERAL: Hyundai Card Co., LTD (the “Parent”) is engaged in the credit card business under the Specialized Credit Financial Business Law of Korea. On June 15, 1995, the Parent acquired the credit card business of Korea Credit Circulation Co., Ltd. and on June 16, 1995, the Korean government granted permission to the Parent to engage in the credit card business. As of June 30, 2012, the Parent has approximately 9.30 million card members, 2.01 million registered merchants, and 180 marketing centers, branches and posts. Its head office is located in Yeoido, Seoul. As of June 30, 2012, the total common stock of the Parent is ₩802,326 million. The shareholders of the Parent and their respective ownerships as of June 30, 2012 and December 31, 2011 are as follows: June 30, 2012 December 31, 2011 Shareholder Number of shares % of ownership Number of shares % of ownership Hyundai Motor Co., Ltd. 50,572,187 31.52 50,572,187 31.52 Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48 Hyundai Steel Co., Ltd. 8,729,750 5.44 8,729,750 5.44 GE Capital Intl Holdings 69,000,073 43.00 69,000,073 43.00 Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54 Others 4,851,512 3.02 4,851,512 3.02 Totals 160,465,286 100.00 160,465,286 100.002. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company maintains its official accounting records in Republic of Korean won (“Won”) and prepares consolidated financial statements in conformity with Korean statutory requirements and Korean International Reporting Standards (“K-IFRS”), in the Korean language (Hangul). Accordingly, these condensed consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean practices. The accompanying condensed consolidated financial statements have been translated into English with certain expanded descriptions from the Korean language condensed consolidated financial statements, if applicable. (1) Basis of Preparation The Company’s interim consolidated financial statements for the six months ended June 30, 2012 are prepared in accordance with K-IFRS 1034, Interim Financial Reporting. The Company’s accounting policies applied for the accompanying interim consolidated financial statements are the same as the policies applied for the preparation of consolidated financial statements for the year ended December 31, 2011, except for the effects from the introduction of new and revised accounting standards or interpretations as described below.
  13. 13. - 2 -1) Accounting standards and interpretations that were newly applied during the six months ended June 30, 2012, and changes in the Company’s accounting policies are as follows:K-IFRS 1107, Financial Instruments: Disclosures – Transfers of Financial AssetsThe amendments to K-IFRS 1107 increase the disclosure requirements for transactions involving transfers offinancial assets. These amendments are intended to provide greater transparency around risk exposures when afinancial asset is transferred but the transferor retains some level of continuing involvement in the asset. Theamendments also require disclosures where transfers of financial assets are not evenly distributed throughoutthe period. K-IFRS 1107 requires additional disclosures regarding the continuous involvement of the Companyrelated to transferred assets. With regards to the financial assets that are transferred to special purpose company(the “SPC”) from the Parent but not removed, the Company additionally disclosed the fair value of transferredassets. (Note 25)Amendments to K-IFRS 1012, Deferred Tax – Recovery of Underlying AssetsThe amendments to K-IFRS 1012 provide an exception to the general principles in K-IFRS 1012 that themeasurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that wouldfollow from the manner in which the entity expect to recover the carrying amount of an asset. Investmentproperty measured using the revaluation model under K-IFRS 1040 Investment Property or a non-depreciableasset measured using the revaluation model in K-IFRS 1016 Property, Plant, and Equipment, are presumed tobe recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted incertain circumstances. These amendments do not have a significant effect on the Company’s consolidatedfinancial statements and disclosures.Amendments to K-IFRIC Interpretation 2114, Prepayments of a Minimum Funding RequirementsThe amendments to K-IFRIC Interpretation 2114 requires the surplus from to prepayments of a minimumfunding requirements be recognized as an asset while it was not before adopting the interpretation. Theseamendments do not have a significant effect on the Company’s consolidated financial statements anddisclosures.2) Currently, enactments and amendments of the K-IFRSs are in progress, and the financial information presented in the consolidated financial statements may change accordingly in the future. The Company has not applied the following new and revised K-IFRSs that have been issued but are not yet effective:K-IFRS 1019 (as revised in 2011), Employee BenefitsThe amendments to K-IFRS 1019 change the accounting for defined benefit plans and termination benefits.The most significant change relates to the accounting for changes in defined benefit obligations and plan assets.The amendments require the recognition of changes in defined benefit obligations and in fair value of planassets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of K-IFRS 1019 and accelerate the recognition of past service costs. The amendments to K-IFRS 1019 are effectivefor annual periods beginning on or after January 1, 2013 and require retrospective application with certainexceptions.K-IFRS 1113, Fair Value MeasurementK-IFRS 1113 establishes a single source of guidance for fair value measurements and disclosures about fairvalue measurements. The standard defines fair value, establishes a framework for measuring fair value, andrequires disclosures about fair value measurements. K-IFRS 1113 is effective for annual periods beginning onor after January 1, 2013, with earlier application permitted.The Company does not anticipate that these amendments referred above will have a significant effect on theCompany’s consolidated financial statements and disclosures.
  14. 14. - 3 - 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The application of the Company’s accounting policies and the judgments by management on sources of estimation uncertainty are the same as those of the consolidated financial statements as of December 31, 2011. 4. SUBSIDIARIES: (1) As of June 30, 2012, subsidiaries of the Company are PRIVIA 1st SPC, PRIVIA 2nd SPC and PRIVIA 3rd SPC. And PRIVIA 1st SPC and PRIVIA 2nd SPC were already subsidiaries of the Company as of December 31, 2011. The percentages of ownership and voting rights are both 0.9%, which have not changed for the six months ended June 30, 2012. (2) Changes in the Company’s subsidiaries for the six months ended June, 30 2012 are as follows. Company Asset PRIVIA 3rd SPC Newly established due to ABS issuance 5. RESTRICTED CASH AND DEPOSITS: Restricted financial assets as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Type Entity June 30, 2012 December 31, 2011 Restriction Due from financial Financial KB and others Guarantee deposits institutions instruments ₩ 18 ₩ 18 for overdraft Financial Shinhan Bank Secured deposits instruments and others 33,000 33,000 Financial Mirae Asset Social enterprise instruments Securities 13 13 fund Others Other dues Korea Asset Management Escrow account Corporation 18,610 18,610 ₩ 51,641 ₩ 51,641 6. CARD ASSETS AND LOANS Card assets and loans by customer as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Households Corporates Total Households Corporates TotalCARD ASSETS : Card receivables (*) ₩ 5,918,132 ₩ 542,254 ₩6,460,386 ₩ 6,039,571 ₩ 461,552 ₩ 6,501,123 Cash advances 959,142 - 959,142 1,016,028 - 1,016,028 Card loans (*) 2,258,543 - 2,258,543 2,030,869 - 2,030,869 Sub total 9,135,817 542,254 9,678,071 9,086,468 461,552 9,548,020LOANS Loans to corporate - 500 500 - 500 500 Total 9,135,817 542,754 9,678,571 9,086,468 462,052 9,548,520Allowance for doubtful accounts (172,133) (6,293) (178,426) (165,480) (8,304) (173,784)Book value ₩ 8,963,684 ₩ 536,461 ₩ 9,500,145 ₩ 8,920,988 ₩ 453,748 ₩9,374,736Composition rate 94.35% 5.65% 100.00% 95.16% 4.84% 100.00% (*) Adjusted for deferred origination fees and present value discounts
  15. 15. - 4 -7. ALLOWANCE FOR DOUBTFUL ACCOUNTS: Changes in the allowance for doubtful accounts for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 Card Cash receivables advances Card loans Loans Other assets TotalBalance at January 1, 2012 ₩ 68,773 ₩ 37,910 ₩ 67,071 ₩ 30 ₩ 2,306 ₩ 176,090Bad debt expenses (1,033) (249) (108) - - (1,390)Bad debt recovered 349 559 184 - - 1,092Disposition & repurchase (10,757) (7,250) (8,045) - - (26,052)Provision of allowance for doubtful accounts 7,647 3,790 19,555 - 64 31,056Balance at June 30, 2012 ₩ 64,979 ₩ 34,760 ₩ 78,657 ₩ 30 ₩ 2,370 ₩ 180,796 Six months ended June 30, 2011 Card Cash receivables advances Card loans Loans Other assets TotalBalance at January 1, 2011 ₩ 59,315 ₩ 43,132 ₩ 63,527 ₩ 8 ₩ 4,059 ₩ 170,041Bad debt expenses (3,383) (3,386) (2,397) - - (9,166)Bad debt recovered 177 275 93 - - 545Disposition & repurchase (12,235) (9,509) (12,897) - - (34,641)Provision of (Reversal of) allowance for doubtful accounts 20,313 14,445 18,341 44 (1,142) 52,001Balance at June 30, 2011 ₩ 64,187 ₩ 44,957 ₩ 66,667 ₩ 52 ₩ 2,917 ₩ 178,7808. PROPERTY AND EQUIPMENT: Changes in the book value of property and equipment for the six months ended June 30, 2012 and 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 Beginning Ending balance Acquisition Reclassification(*) Disposal Depreciation balance Land ₩ 83,995 ₩ 34,165 ₩ - ₩ - ₩ - ₩ 118,160 Buildings 42,187 22,169 347 - (758) 63,945 Vehicles 270 76 - - (72) 274 Fixtures and equipment 57,974 13,179 137 (82) (11,892) 59,316 Finance lease assets 2,500 - - - (556) 1,944 Construction in progress 472 5,453 5,256 - - 11,181 Total ₩ 187,398 ₩ 75,042 ₩ 5,740 ₩ (82) ₩ (13,278) ₩ 254,820 (*) ₩5,740 million of construction in progress is reclassified from advanced payments.
  16. 16. - 5 - Six months ended June 30, 2011 Beginning Ending balance Acquisition Reclassification(*) Disposal Depreciation balance Land ₩ 80,414 ₩ 1,853 ₩ - ₩ - ₩ - ₩ 82,267 Buildings 34,494 5,427 - - (511) 39,410 Vehicles 293 233 - (46) (75) 405 Fixtures and equipment 36,617 11,598 4,552 - (8,871) 43,896 Finance lease assets - 3,334 - - (278) 3,056 Construction in progress 698 151 (226) - - 623 Total ₩ 152,516 ₩ 22,596 ₩ 4,326 ₩ (46) ₩ (9,735) ₩ 169,657 (*) ₩4,326 million of fixtures and equipment is reclassified from construction in progress intangible assets (see Note 9).9. INTANGIBLE ASSETS: Changes in intangible assets for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 Beginning Ending balance Acquisition Reclassification(*) Disposal Amortization balance Development cost ₩ 36,656 ₩ 1,444 ₩ 482 ₩ - ₩ (5,123) ₩ 33,459 Industrial property rights 116 - - - (20) 96 Others 11,369 - - - (1,777) 9,592 Construction in progress 2,101 2,363 (1,286) - - 3,178 Membership 22,734 - - (1,250) - 21,484 Total ₩ 72,976 ₩ 3,807 ₩ (804) ₩ (1,250) ₩ (6,920) ₩ 67,809 (*) ₩804 million of construction in progress is reclassified to advanced payments. Six months ended June 30, 2011 Beginning Ending balance Acquisition Reclassification(*) Disposal Amortization balance Development cost ₩ 21,801 ₩ 2,162 ₩ 9,667 ₩ - ₩ (3,666) ₩ 29,964 Industrial property rights 155 - - - (20) 135 Others 9,757 3,894 75 - (1,503) 12,223 Construction in progress 17,253 2,407 (14,068) - - 5,592 Membership 21,484 1,250 - - - 22,734 Total ₩ 70,450 ₩ 9,713 ₩ (4,326) ₩ - ₩ (5,189) ₩ 70,648 (*) ₩4,326 million of construction in progress is reclassified to fixtures and equipment (see Note 8).10. ASSETS PLEDGED AS COLLATERALS: Land and buildings amounting to ₩1,676 million are provided as collaterals for leasehold deposits received as of June 30, 2012.
  17. 17. - 6 -11. BORROWINGS: Borrowings as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Annual interest Borrowed from rates (%) Maturity June 30, 2012 December 31, 2011Commercial IBK Securities 2012.7.9 papers and others 3.48 ~ 3.61 ~ 2012.9.13 ₩ 320,000 ₩ 490,000Borrowings Hana Bank 2012.11.2 and others 4.69 ~ 5.55 ~ 2014.7.19 170,000 100,000 ₩ 490,000 ₩ 590,00012. BONDS PAYABLE: Details of bonds payable as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Annual June 30, 2012 December 31, 2011 interest rates (%) Maturity Par value Issue price Par value Issue price Short-term 2012.12.08 ~ 3.40 ~ 4.95 debentures 2013.6.14 ₩ 90,000 ₩ 90,000 ₩ 130,000 ₩ 130,000 Current portion of 2012.7.05 ~ long-term 3.47 ~ 6.15 2013.6.30 debentures 1,390,000 1,390,000 1,333,797 1,333,797 Long-term 3.36 ~ 6.94 debentures 1M USD Libor 2013.7.12 ~ + 0.724, 2019.3.19 1M USD Libor + 1.5 5,240,047 5,240,047 5,027,320 5,027,320 Discounts on debentures (11,160) (9,357) Bonds payable, net ₩6,708,887 ₩ 6,481,760 The above bonds payable are non-guaranteed corporate bonds, with their principals to be redeemed at maturity. Bond issuance costs are recorded as discounts on bonds payable and amortized using the effective interest rate method.13. FINANCE LEASE LIABILITIES: (1) Lease contract The Company uses electronic equipment under a finance lease for 3 years. The Company may exercise a bargain purchase option at expiration date of the lease contract. The lessor has the legal ownership of the finance lease assets as collateral for the finance lease obligation; the collateral amounts to ₩1,944 million and ₩2,500 million as of June 30, 2012 and December 31, 2011, respectively. (2) Finance lease liabilities of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Minimum lease Present value of Minimum lease Present value of payments minimum lease payments payments minimum lease payments Less than 1 year ₩ 1,202 ₩ 1,124 ₩ 1,202 ₩ 1,096 1-5 years 902 883 1,503 1,452 Present value discounts (97) (157) Present value ₩ 2,007 ₩ 2,548
  18. 18. - 7 -14. RETIREMENT BENEFIT PLAN: (1) Defined contribution plan The expense recognized in the consolidated statements of comprehensive income related to post-employment benefit plan under the defined contribution plan for the six month period ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Defined contribution plan ₩ 4 ₩ - (2) Defined benefit plan 1) As of June 30, 2012 and December 31, 2011, the amounts recognized in the consolidated statements of financial position related to retirement benefit obligation are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Present value of defined benefit obligation ₩ 40,936 ₩ 37,007 Fair value of plan assets (18,945) (19,195) Transferred to national pension fund (37) (37) Retirement benefit obligation ₩ 21,954 ₩ 17,775 2) Changes in the present value of the defined benefit obligation for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning balance ₩ 37,007 ₩ 27,790 Current service cost 4,386 3,564 Interest cost 732 628 Transfer of employees between the Company and the related companies (531) (78) Actuarial losses 567 1,324 Benefits paid (1,225) (2,066) Ending balance ₩ 40,936 ₩ 31,162 3) Changes in the fair value of the plan assets for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning balance ₩ 19,195 ₩ 18,143 Contributions from the employer - 1,500 Expected return on plan assets 368 348 Actuarial gains 41 38 Transfer of employees between the Company and its related companies (176) 307 Benefits paid (483) (992) Ending balance ₩ 18,945 ₩ 19,344
  19. 19. - 8 - 4) Details of pension expenses are as follows (Unit: Won in millions): 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30.Current service cost ₩ 2,193 ₩ 4,386 ₩ 1,782 ₩ 3,564Interest cost 366 732 314 628Expected return on plan assets (184) (368) (174) (348)Actuarial losses 687 526 1,302 1,286 Total ₩ 3,062 ₩ 5,276 ₩ 3,224 ₩ 5,130Return on plan assets 211 409 196 386 5) Actuarial assumption For the computation of defined benefit obligation, actuarial assumption of discount rate is 4.00% and 4.23% as of June 20, 2012 and December 31, 2011, respectively. Actuarial assumption of expected return on plan assets is 4.69% and 4.08% as of June 20, 2012 and December 31, 2011, respectively, and that of expected rate of salary increase is constantly 5.60% as of June 20, 2012 and December 31, 2011.15. EMPLOYEE BENEFITS: Details of employee benefits for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30. Short-term employee benefits ₩ 27,810 ₩ 52,773 ₩ 24,112 ₩ 49,468 Pension expenses 3,064 5,280 3,224 5,130 ₩ 30,874 ₩ 58,053 ₩ 27,336 ₩ 54,59816. PROVISION: (1) Provision for unused credit limits The Company recognizes loss provision for expected future use of unused portions of credit limits. Changes in loss provision for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning ₩ 47,167 ₩ 46,073 Increase 1,501 1,986 Ending ₩ 48,668 ₩ 48,059 (2) Provision for mileage points Changes in provision for mileage points for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Point Customer loyalty Point Customer loyalty Beginning ₩ 3,685 ₩ 7,555 ₩ 2,368 ₩ 12,069 Increase (decrease) (468) 1,707 786 1,668 Ending ₩ 3,217 ₩ 9,262 ₩ 3,154 ₩ 13,737
  20. 20. - 9 - (3) Other provisions Changes in other provisions for the six months ended June 30, 2012 and 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning ₩ 21,826 ₩ 20,916 Decrease (2,138) (4,053) Ending ₩ 19,688 ₩ 16,863 The above amounts as of June 30, 2012 include provision for deposits in escrow account of ₩14,058 million, provision for pending litigations of ₩5,630 million.17. DERIVATIVES AND HEDGE ACCOUNTING: (1) There are no derivative instruments held for trading as of June 30, 2012 and December 31, 2011. (2) Cash flow hedge The Company removes the volatility risk of future cash flow of a hedged item, such as borrowing or bond, caused by changes in market interest rates or in foreign currency rates, by using derivatives instruments such as an interest swap or currency swap. The Company’s policies and strategies of cash flow hedge are the same as those as of December 31, 2011. 1) Fair value of cash flow hedge as of June 30, 2012 and December 31, 2011 are as follows (Won in millions): June 30, 2012 December 31, 2011 Contract Contract Amount Asset Liabilities Amount Asset LiabilitiesInterest rate swap ₩ 496,000 ₩ 689 803 ₩ 280,000 ₩ 643 ₩ 931Cross currency swap 940,503 14,896 959 582,573 1,912 4,395 Total ₩ 1,436,503 ₩ 15,585 ₩ 1,762 ₩ 862,573 ₩ 2,555 ₩ 5,326 For transactions between local currencies and foreign currencies, the unsettled amount of transaction is presented using the basic foreign exchange rate on the contract amount in foreign currencies. For transaction between foreign currencies and other foreign currencies, the unsettled amount is presented using the basic foreign exchange rate on the contract amount in foreign currencies purchased. 2) Expected cash flows for cash flow hedge The maximum periods, during which the Company will be exposed to future cash flows fluctuations arising from currency swaps are as follows (Won in millions): June 30, 2012 December 31, 2011 Less than 1month ₩ (1,822) ₩ (1,228) 1-3 months (2,896) (398) 3-12 months (14,293) (10,805) 1-5 years 7,332 367 ₩ (11,679) ₩ (12,064)
  21. 21. - 10 -18. SHARE CAPITAL: There was no change in share capital and capital surplus for the six months ended June 30, 2012.19. RETAINED EARNINGS: (1) Details of retained earnings as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Legal reserve (*) ₩ 20,143 ₩ 20,143 Reserve for bad loans 454,337 439,031 Retained earnings 779,630 689,223 ₩ 1,254,110 ₩ 1,148,397 (*) The Korean Commercial Code requires a company to appropriate at least 10 percent of dividends paid as legal reserve for each fiscal period, until the reserve equals 50 percent of paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital. (2) Changes in retained earnings for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning ₩ 1,148,397 ₩ 909,749 Net income attributable to the owners of the Company 105,713 156,321 Ending ₩ 1,254,110 ₩ 1,066,07020. RESERVES: Details of cash flow hedging reserve for the six months ended June 30, 2012 and 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Beginning ₩ (11,764) ₩ (3,150) Cash flow hedging reserve gains (losses) Interest rate swap 174 1,010 Cross currency swap 4,544 (10,593) Tax effect (1,159) 2,080 Amount reclassified to current income - - Tax effect related to reclassified amounts to current income - - Ending ₩ (8,205) ₩ (10,653) Cash flow hedging reserve represents the cumulative gain or loss of hedging instruments related to the effective portion of the Company’s hedge accounting. The cumulative deferred gains or losses of hedging instruments is reclassified to income or loss only when the hedged item is reflected in current operations, or by which initial book value of non-financial hedged item is adjusted in accordance with relevant accounting policy.
  22. 22. - 11 -21. RESERVE FOR BAD LOANS: Reserve for bad loans is calculated and disclosed according to Article 11, Supervisory Regulation on Company Specialized Credit Finance. (1) Reserve for bad loans reflected in retained earnings as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Accumulated reserve for bad loans ₩ 439,031 ₩ 192,810 Expected reserve for bad loans 15,306 246,221 Reserve for bad loans ₩ 454,337 ₩ 439,031 (2) The provision of reserve for bad loans and adjusted income after reserve for bad loans for the three months and six months ended of June 30, 2012 and June 30,2011 are as follows (Unit: Won in millions): 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30.Transfer to reserve for bad loans ₩ (3,842) ₩ 15,306 ₩ 32,875 ₩ 61,057Adjusted income after reserve for bad loans 34,558 90,407 49,397 95,26422. GENERAL AND ADMINISTRATIVE EXPENSES: Details of general and administrative expenses for the three months and six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): <PAYROLL> 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30. Salaries wages ₩ 22,380 ₩ 41,794 ₩ 19,681 ₩ 40,380 Pension expenses 3,064 5,280 3,224 5,130 Employee benefits 7,021 14,567 5,784 12,372 ₩ 32,465 ₩ 61,641 ₩ 28,689 ₩ 57,882 <OTHER EXPENSES> 2012 2011 Three months Six months Three months Six months ended June 30. ended June 30. ended June 30. ended June 30. Travel expenses ₩ 777 ₩ 1,279 ₩ 572 ₩ 994 Communication expenses 5,575 10,989 4,958 10,548 Post expense 3,351 6,471 2,760 5,817 Rental expenses 6,846 13,586 5,274 10,313 Taxes dues 3,925 7,702 6,410 11,278 Repair and maintenance expenses 145 296 182 363 Insurance premiums 184 188 199 206 Entertainment expenses 258 442 137 393 Advertising expenses 10,220 20,019 11,829 22,262 Supply expenses 627 1,156 640 1,026 Vehicle maintenance expenses 3 11 1 10 Periodicals expenses 261 288 17 44 Publication expenses 1,684 3,515 2,487 3,797 Training expenses 1,428 2,271 837 1,570 Electronic data processing expense 8,026 16,371 9,216 16,213 Expense for temporary staff 9,456 18,206 7,777 16,102 Professional expenses 43,573 77,086 24,300 45,988 Delivery expense 1,117 2,097 572 1,213
  23. 23. - 12 - 2012 2011 Commission expense 6,067 11,939 5,104 11,023 Business activities expense 1,126 2,041 1,065 1,843 Depreciation expense 6,768 13,278 5,162 9,735 Amortization expense 3,480 6,920 2,786 5,189 Event expense 1,126 1,793 203 360 Conference expense 101 197 103 206 Building administrative expense 439 1,157 585 1,183 ₩ 116,563 ₩ 219,298 ₩ 93,176 ₩ 177,67623. INCOME TAX FROM CONTINUING OPERATIONS (1) Income tax expense for the six months ended June 30, 2012 and June 30, 2011 are summarized as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Income tax currently payable ₩ 37,889 ₩ 53,662 Changes in deferred tax assets by temporary differences (*) (21,722) (3,627) Total 16,167 50,035 Changes in income tax expense reflected directly in shareholders’ equity (1,159) 1,458 Income tax expense ₩ 15,008 ₩ 51,493 (*) Ending net deferred tax assets due to temporary differences ₩ 134,125 ₩ 128,690 Beginning net deferred tax assets due to temporary differences 112,403 125,063 Changes in net deferred tax assets due to temporary differences ₩ (21,722) ₩ (3,627) (2) Income tax expenses reflected directly in shareholders’ equity for the six months ended June 30, 2012 are as follows (Unit: Won in millions): January 1, 2012 June 30, 2012 Decrease Loss on valuation of derivatives ₩ 3,732 ₩ 2,573 ₩ (1,159) (3) A reconciliation between income before income tax and income tax expense for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 2011 Income before income tax ₩ 120,721 ₩ 207,815 Income tax payable by the statutory income tax rate (23.8% and 24.2% for the six months ended June 30, 2012 and June 30, 2011, respectively) 28,753 50,265 Tax reconciliations: Non-taxable income (46) - Non-deductible expenses 105 6 The amount of deductible temporary differences for which no deferred tax asset is recognized (11,384) - True-up adjustment (3,463) (6,941) Others 1,043 8,163 Sub-total (13,745) 1,228 Income tax of continued operation ₩ 15,008 ₩ 51,493
  24. 24. - 13 -24. CONTINGENCIES AND COMMITMENTS: Contingencies and commitments are the same as those of the separate financial statements as of December 31, 2011 except for the followings. (1) Credit line agreement a. Credit Facility Agreement The Company entered into a Credit Facility Agreement with GE Capital Corporation (“GECC”) on August 1, 2012. The Credit Facility limit is Euro equivalent of USD200 million. The maturity of the Credit Facility is January 9, 2015 and is renewable on January 2013 and 2014. With regard to the Credit Facility Agreement, the Company, GECC, Hyundai Motor Company and Kia Motors Corp. entered into a Support Agreement and the contract date of Support Agreement is the same as the one of the Credit Facility Agreement. Details of Credit Facility Agreement at the end of reporting period are the same as those as of December 31, 2011. b. Revolving Credit Facility The Company had Revolving Credit Facility Agreements with many financial institutions during the six months ended June 30, 2012 and the details of credit lines are as follows (Unit: Won in millions): Financial instruments Credit line Term Kookmin Bank ₩ 100,000 2012-01-30 ~ 2013-01-28 Kookmin Bank 30,000 2012-05-28 ~ 2013-05-28 Kookmin Bank 30,000 2011-10-24 ~ 2012-10-22 Nong Hyup Bank 100,000 2012-03-29 ~ 2013-03-29 Citibank, Seoul 50,000 2011-12-24 ~ 2012-12-23 Woori Bank 200,000 2012-06-29 ~ 2013-06-28 Shinhan Bank 50,000 2012-04-16 ~ 2013-04-15 Shinhan Bank 50,000 2012-05-31 ~ 2013-05-31 (2) Pending Lawsuits As of June 30, 2012, the pending lawsuits, whose outcomes cannot be ascertained as of the report date, are the followings (Unit: Won in millions): Type Plaintiff Defendant Amount Status Claim for loss Hankook Cardnet and 6 The Company and 16 compensation others defendants ₩ 2,742 Ongoing Claim for loss Jeong, Seong Hwa and 70 The Company and 16 compensation others defendants 2,343 Ongoing Claim for loss Lee, Bok Gi The Company and 16 compensation and 113 others defendants 153 Ongoing Claim for loss Ko, Sung Bong and 108 The Company and 16 compensation others defendants 109 Ongoing Claim for loss Shin, Gwang Sik and 5 The Company and 16 compensation others defendants 1,801 Ongoing Claim for loss HanKook Card System and The Company and 16 compensation 18 others defendants 1,700 Ongoing Claim for loss Jang, Won Sik and 124 The Company and 11 compensation others defendants 700 Ongoing Claim for loss Kang, Kyoung Hee and 53 The Company and 16 compensation others defendants 108 Ongoing Claim for loss Shin, Dong Wook The Company and 16 compensation defendants 2 Ongoing Claim for loss Yoon, Yong Seob and 30 The Company and 16 compensation others defendants 1,242 Ongoing Claim for loss Lee, Kyoung Hee and 3 The Company and 16 compensation others defendants 80 Ongoing
  25. 25. - 14 - Type Plaintiff Defendant Amount Status Claim for loss Yoo, Jae Won and 5 others The Company and 16 compensation defendants 100 Ongoing Claim for loss SPECOM Co. Ltd. The Company and 16 compensation defendants 846 Ongoing Claim for loss Lim, Byeong Gwi and 30 The Company and 16 compensation others defendants 2,481 Ongoing Claim for loss ZIO TECHNET and 32 The Company and 16 compensation others defendants 903 Ongoing Claim for loss The Company and 16 compensation Jung, Hyun Oh and others defendants 85 Ongoing Cancellation of tax The Company Yeongdeungpo District charge Tax Office 56 Ongoing Cancellation of tax The Company Yeongdeungpo District charge Tax Office 69 Ongoing Unfair profits refund Jung, So Yeon and 26 The Company and 5 others defendants 21 Ongoing Claim for loss KUMHO Industrial and 5 KAMCO, the Company compensation others and 5 defendants 104,674 Ongoing Litigation on invalidity of dismissal Kim, Se Eun The Company 93 Ongoing Unfair profits refund Lee, Yeon Jae The Company and 3 defendants 23 Ongoing ₩ 120,331 (3) Guarantee The Company has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd. amounting to ₩4,210 million in connection with airline ticket payments and others. (4) Contract of Sale of Receivables The Company entered into a contract with Hyundai Capital Services, Inc. relating to its sale of receivables on January 24, 2006. In accordance with the contract, the Company sells the receivables that are 60 days or more past due or written-off to Hyundai Capital Services, Inc. Such sale occurs five times a month on designated cutoff dates at the amount calculated using a predetermined price pursuant to the contract.25. ASSETS-BACKED SECURITIES (ABS): (1) Asset-backed securities and the underlying assets The Company transferred its card assets to SPCs and issued asset-backed securities with them. The details of asset-backed securities and underlying assets as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): . June 30, 2012 December 31, 2011 Senior Underlying Senior Underlying Maturity tranche asset (*) tranche asset (*) PRIVIA 2nd SPC 2014-04-24 ₩ 461,520 ₩ 955,311 ₩ 461,320 ₩ 1,020,544 PRIVIA 3rd SPC 2015-07-20 461,520 888,619 - - Discounts on debentures (4,585) - (2,023) - Net book value ₩ 918,455 ₩1,843,930 ₩ 459,297 ₩ 1,020,544 (*) The fair value of underlying assets as of June 30, 2012 and December 31, 2011 are ₩1,874,444 million and ₩1,037,224 million, respectively.
  26. 26. - 15 - (2) Details of contractual maturity of the Company’s asset-backed securities as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Less than 1 year ₩ - ₩ - 1-2 years 461,520 - 2-3 years - 461,320 More than 3 years 461,520 - Senior tranche 923,040 461,320 Discounts on debentures (4,585) (2,023) Senior tranche ₩ 918,455 ₩ 459,29726. TRANSACTION WITH RELATED PARTIES: (1) Status of related parties Related parties can be an entity which can have significant influence over the Company, or over the Company’s post-employment benefits, a key management personnel and a close member of that person’s family, an entity which belongs to the same group as the Company, or an entity controlled or jointly controlled. Details of related parties as of June 30, 2012 are as follows: Companies Controlling company Hyundai motor company Related parties Green air, Glovis, Kia motor company, Kia Tigers, Daesung electric, Rotem, MnSoft, Metia, BNG Steel, Samwoo, Aia, IHL Industry, NGV, MSEAT, WISTCO, WIA, WIA Magna Powertrain, Eukor Car Carriers, Innocean, Iljin, Jongro Academy, Jongro Eclass, Carnes, Kefico, Partecs, Hankook Economy News, Korea Space and Aircraft, Haevichi Country Club, Hyundai Dymos, Hyundai Movis, Hyundai Steel, Hyundai Capital, Hyundai Powertech, Hyundai Hysco, HMC Investment bank, Auto Ever Systems, Haevichi Resort, Hyundai AMCO, Chunbuk Hyundai motors FC, Hyundai Commercial, Seoul Metro Line9, HL Green Power, Corentec, Hyundai E&C, Hyundai Hyundai construction, Hyundai engineering, Hyundai city construction, Busan-Jungkwan energy, Hyundai energy, Songdo Landmark City, Hyundai farm land & development, Hatayrnc, Hyundai C&I, Hyundai Architects & Engineers Assoc, Hyundai matirials, Busan Finance Center AMC, Hyundai resource development institute, Hyundai Life.
  27. 27. - 16 - (2) Transaction with related companies for the six months ended June 30, 2012 and June 30, 2011 are as follows (Unit: Won in millions): Six months ended June 30, 2012 Six months ended June 30, 2011 Company Company with with Controlling significant Controlling significant company influence Total company influence TotalRevenues Card revenue ₩ 53,105 ₩ 27,777 ₩ 80,882 ₩ 79,783 ₩ 27,752 ₩ 107,535 Rental revenue - 125 125 - 99 99 Miscellaneous revenue - 23,128 23,128 - 13,310 13,310 53,105 51,030 104,135 79,783 41,161 120,944Expense Card expense 15 111 126 69 349 418 General and administrative expense 213 14,073 14,286 228 19,213 19,441 Miscellaneous expense - 26,430 26,430 - 14,762 14,762 228 40,614 40,842 297 34,324 34,621Others Payment of advance payment - - - - 4,910 4,910 Purchase of property and equipment 76 8,368 8,444 - 237 237 Purchase of intangible assets - 1,148 1,148 - 124 124Total ₩ 76 ₩ 9,516 ₩ 9,592 ₩ - ₩ 5,271 ₩ 5,271 (3) Outstanding receivables, payables and guarantee from transactions with related parties as of June 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Company Company with with Controlling significant Controlling significant company influence Total company influence TotalReceivables Card asset ₩ 61,301 ₩ 167,161 ₩ 228,462 ₩ 60,555 ₩ 165,755 ₩ 226,310 Accounts receivable - - - 59 68 127 Other 151 21,598 21,749 - 30,241 30,241 Allowance for doubtful accounts (674) (1,839) (2,513) (908) (2,464) (3,372) Total 60,778 186,920 247,698 59,706 193,600 253,306Payables Accounts payable 48,490 40,385 88,875 35,013 54,520 89,533 Other - - - 3,955 - 3,955 Total ₩ 48,490 ₩ 40,385 ₩ 88,875 ₩ 38,968 ₩ 54,520 ₩ 93,488 (4) Compensation for key executives 1) Compensation cost for key executives for the six months ended June 30, 2012 and June 30, 2011 consist of short-term employee benefit and retirement benefit. 2) Compensation for key management for the six months ended June 30, 2012 is as follows (Unit: Won in millions): Short-term employee benefit Retirement benefit Total Key management 6,658 839 7,497 3) Key management includes directors (including non-executive directors) and members of the audit committee with significant authority and responsibility over the Company’s plan, direction and control.
  28. 28. - 17 -27. OTHER COMPREHENSIVE INCOME Comprehensive income for the six months ended June 30, 2012 consists of the following (Unit: Won in millions): Six months ended June 30, 2012 Beginning Income tax Ending Balance Increase Disposal effect balance Comprehensive income Effective portion of changes in fair value of cash flow hedges ₩ (11,764) ₩ 4,920 ₩ 202 ₩ (1,159) ₩ (8,205)28. FINANCIAL RISK MANAGEMENT: (1) Introduction 1) General The Company is exposed to various financial risks such as credit risk, liquidity risk and market risk associated with financial instruments. The level of exposure to such risks, objectives of the Company and its risk management policy and procedures are outlined below. The Company’s risk management objectives, policy and procedures are the same as those for 2011. (2) Credit risk 1) Level of exposure to credit risk The Company’s level of exposure to credit risk as of June 30, 2012 and December 31, 2011 is summarized as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Deposit ₩ 880,094 ₩ 863,054 Card asset (*1) 9,678,071 9,548,020 Loan 500 500 Other assets (*1,2) 154,874 146,308 Unused commitment 32,052,804 31,564,297 Total ₩ 42,766,343 ₩ 42,122,179 (*1) Card asset is stated at book value before allowance for doubtful accounts. (*2) Other assets consist of accounts payable and unearned income.
  29. 29. - 18 - 2) Analysis of credit soundness of financial assets ① Credit soundness of card assets neither past due nor impaired as of June 30, 2012 and December 31, 2011 is summarized as follows (Unit: Won in millions): June 30, 2012 December 31, 2011 Book value Book value before Allowance before Allowance allowance for allowance for for doubtful doubtful Book for doubtful doubtful Book accounts accounts value accounts accounts valueRetail Card receivables and cash advances ₩ 6,726,916 ₩ 82,030 ₩6,644,886 ₩6,929,335 ₩88,295 ₩6,841,040 Card loans 2,158,156 57,736 2,100,420 1,951,993 54,686 1,897,307Corporate Card receivables 510,086 2,441 513,645 438,878 1,936 436,942 Total ₩ 9,401,158 ₩ 142,207 ₩ 9,258,951 ₩ 9,320,206 ₩ 144,917 ₩9,175,289 ② Credit soundness of card assets past due but not impaired as of June 30, 2012 and December 31, 2011 are summarized as follows (Unit: Won in millions): June 30, 2012 Less than More than 1 month 1-2 months 2-3 months 3 months Total Retail ₩ 180,534 ₩ 28,891 ₩ - ₩ - ₩ 209,425 Corporate 13,187 6,886 - - 20,073 193,721 35,777 - - 229,498 Card assets Card receivables 108,134 18,870 - - 127,004 Cash advances 27,901 6,299 - - 34,200 Card loans 57,686 10,608 - - 68,294 193,721 35,777 - - 229,498 Allowance for doubtful accounts (7,635) (3,020) - - (10,655) Book value ₩ 186,086 ₩ 32,757 ₩ - ₩ - ₩ 218,843 December 31, 2011 Less than More than 1 month 1-2 months 2-3 months 3 months Total Retail ₩ 150,825 ₩ 26,687 ₩ - ₩ - ₩ 177,512 Corporate 12,131 4,637 - 3 16,771 162,956 31,324 - 3 194,283 Card assets Card receivables 99,144 18,194 - 3 117,341 Cash advances 17,265 4,349 - - 21,614 Card loans 46,547 8,781 - - 55,328 162,956 31,324 - 3 194,283 Allowance for doubtful accounts (7,317) (2,943) - (3) (10,263) Book value ₩ 155,639 ₩ 28,381 ₩ - ₩ - ₩ 184,020

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