Hyundai Capital Services Interim Financial Statements H1 2012

Hyundai Capital Services, Inc. and
Subsidiaries
Interim Consolidated Financial Statements
June 30, 2012 and 2011

Hyundai Capital Services, Inc. and Subsidiaries
Index
June 30, 2012 and 2011

Page(s)

Report on Review of Interim Financial Statements .......................................................................... 1-2

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position ......................................................................... 3-4

Interim Consolidated Statements of Comprehensive Income................................................................ 5-7

Interim Consolidated Statements of Changes in Equity ....................................................................... 8-9

Interim Consolidated Statements of Cash Flows .................................................................................... 10

Notes to the Interim Consolidated Financial Statements ................................................................... 11-32

Report on Review of Interim Financial Statements

To the Shareholders and Board of Directors of
Hyundai Capital Services, Inc.

Reviewed Financial Statements
We have reviewed the accompanying interim consolidated financial statements of Hyundai
Capital Services, Inc.(the Company) and its subsidiaries. These financial statements consist
of consolidated statements of financial position of the Company and its subsidiaries as of
June 30, 2012 and the related consolidated statements of comprehensive income for the
three-month and the six-month periods ended June 30, 2012 and 2011, and statements of
changes in equity and cash flows for the six-month periods ended June 30, 2012 and 2011,
and a summary of significant accounting policies and other explanatory notes, expressed in
Korean won.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with the International Financial Reporting Standards as
adopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial Reporting, and for
such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to
fraud or error.

Auditor's Responsibility
Our responsibility is to issue a report on these consolidated financial statements based on our
reviews.

We conducted our reviews in accordance with the quarterly and semi-annual review
standards established by the Securities and Futures Commission of the Republic of Korea. A
review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the Republic of Korea and consequently does not
enable us to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit opinion.

1

Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe the
accompanying interim consolidated financial statements do not present fairly, in all material
respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.

Emphasis of Matter
We audited the consolidated statement of financial position as of December 31, 2011, and the
related statements of comprehensive income, changes in equity and cash flows for the year
ended December 31, 2011, in accordance with auditing standards generally accepted in the
Republic of Korea and expressed an unqualified opinion on those statements dated February
24, 2012. The statement of financial position as of December 31, 2011, presented herein for
comparative purposes, is consistent, in all material respects, with the above audited statement
of financial position as of December 31, 2011.

Review standards and their application in practice vary among countries. The procedures and
practices used in the Republic of Korea to review such consolidated financial statements may
differ from those generally accepted and applied in other countries. Accordingly, this report is
for use by those who are informed about Korean review standards and their application in
practice.

Seoul, Korea
August 9, 2012

This report is effective as of August 9, 2012, 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 interim consolidated
financial statements and notes thereto. Accordingly, the readers of the review report should
understand that there is a possibility that the above review report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.

2

Interim Consolidated Statements of Financial Position
June 30, 2012 and December 31, 2011

(In millions of Korean won)
Notes 2012 2011
Assets
Cash and deposits
Cash and cash equivalents 21 1,568,274 1,455,433
Deposits 9 9
1,568,283 1,455,442
Securities 3
Available-for-sale securities 21,479 18,452
Investments in associates 65,874 51,768
87,353 70,220

Loans receivable 4,5,7 11,481,552 11,129,247
Allowances for doubtful accounts (279,331) (281,184)
11,202,221 10,848,063

Installment financial assets 4,5,7
Auto installment financing receivables 4,410,865 5,030,541
Durable goods installment financing receivables 223 1,422
Allowances for doubtful accounts (11) (141)
Mortgage installment financing receivables 19,501 25,679
Allowances for doubtful accounts (316) (1,204)
Machinery installment financing receivables 165 1,682
Allowances for doubtful accounts (2) (37)
4,399,761 5,021,194

Lease receivables 4,5
Finance lease receivables 2,517,796 2,278,383
Cancelled lease receivables 394 211
2,518,190 2,278,594

Leased assets
Operating leased assets 1,104,639 1,119,309
Cancelled leased assets 3,244 3,769
1,107,883 1,123,078

Property and equipment 8 325,428 265,433

Other assets
Intangible assets 9 61,316 65,117
Non-trade receivables 105,777 87,895
Accrued revenues 115,124 128,351
Advance payments 101,765 55,013
Prepaid expenses 38,608 26,434
Leasehold deposits 32,435 35,929
3

Interim Consolidated Statements of Financial Position
June 30, 2012 and December 31, 2011

Notes 2012 2011

Derivative assets 13 260,964 475,431
698,458 856,886
Total assets 21,907,577 21,918,910

Liabilities
Borrowings 10
Borrowings 2,162,331 2,250,000
Debentures 15,211,314 15,522,368
17,373,645 17,772,368
Other liabilities
Non-trade payables 398,723 345,089
Accrued expenses 145,257 135,083
Unearned revenue 58,345 61,095
Withholdings 28,673 24,140
Defined benefit liability 11 25,522 20,362
Leasehold deposits received 802,907 787,858
Deferred income tax liabilities 48,208 47,884
Provisions 12 9,255 10,446
Derivative liabilities 13 60,378 58,096
1,577,268 1,490,053
Total liabilities 18,950,913 19,262,421

Equity
Common stock 1 496,537 496,537
Capital surplus
Paid-in capital in excess of par value 369,339 369,339
Other capital surplus 38,200 38,200
407,539 407,539
Accumulated other comprehensive income and
20
expenses
Gain(loss) on valuation of available-for-sale
199 (388)
Securities
Accumulated comprehensive income
(623) 47
(expense) of equity method investees
Gain(loss) on valuation of derivatives 13 6,204 (50,156)
Cumulative effect of overseas operation
(786) (343)
translation
4,994 (50,840)
Retained earnings 14 2,047,485 1,803,144
Non-controlling interests 109 109
Total equity 2,956,664 2,656,489
Total liabilities and equity 21,907,577 21,918,910
The accompanying notes are an integral part of these interim consolidated financial statements.

4

Interim Consolidated Statements of Comprehensive Income
Three-Month and Six-Month Periods ended June 30, 2012 and 2011

(In millions of Korean won, except per share amounts)
Notes 2012 2011
Three Six Three Six
months months months months
Operating revenue
Interest income 15
Interest on bank deposits 11,792 24,394 9,760 18,848
Other interest income 1,388 1,431 124 254
13,180 25,825 9,884 19,102

Gain on valuation and disposal of
428 1,776 480 2,084
securities

Income on loans 15,16 372,998 746,409 392,318 773,337
Income on installment financial
15,16 93,416 195,241 109,696 224,289
receivables
Income on leases 15,16 225,674 446,927 215,548 438,066
Gain on disposal of loans 28,807 53,619 72,075 72,075
Gain on foreign transactions
Gain on foreign exchanges
32,908 66,990 98,261 244,804
translation
Gain on foreign currency
18,812 27,800 29,822
transactions 6,597
39,505 85,802 126,061 274,626

Dividend income - 2,831 13 3,251
Other operating income
Gain on valuation of derivatives 18,940 15,961 40,344 73,016
Gain on derivatives transactions 3,456 3,456 - 715
Others 36,544 67,641 56,401 81,077
58,940 87,058 96,745 154,808
Total operating revenue 832,948 1,645,488 1,022,820 1,961,638

5


Notes 2012 2011
Three Six Three Six
Operating expenses
Interest expenses 15 225,476 454,930 237,999 477,921
Lease expenses 16 128,779 252,746 123,787 255,356
Bad debts expense 5 96,712 179,707 79,709 139,425
Loss on foreign transactions
Loss on foreign exchange
18,936 15,968 40,349 73,025
translation
Loss on foreign currency
3,456 3,456 - 715
transactions
22,392 19,424 40,349 73,740

General and administrative
17 147,439 283,587 127,991 261,177
expenses

Other operating expenses
Loss on valuation of derivatives 32,913 66,989 98,273 244,821
Loss on derivatives transactions 6,612 18,834 27,810 29,837
Others 23,905 39,294 10,974 21,558
63,430 125,117 137,057 296,216
Total operating expenses 684,228 1,315,511 746,892 1,503,835

Operating income 148,720 329,977 275,928 457,803

Non-operating income
Gain on equity method valuation 3 2,516 4,659 1,894 4,749
2,516 4,659 1,894 4,749

Non-operating expenses - - - -

Income before income taxes 151,236 334,636 277,822 462,552

Income tax expense 18 35,966 90,296 68,897 108,503

Net income 115,270 244,340 208,925 354,049

Net income attributable to:
Owners of the parent 115,270 244,340 208,925 354,049
Non-controlling interests - - - -
115,270 244,340 208,925 354,049

6


Notes 2012 2011
Three Six Three Six
Other comprehensive income,
20
net of income taxes
Gain(Loss) on valuation of
available-for-sale financial (56) 587 (441) (407)
securities
Other comprehensive expense
(648) (670) (118) (15)
of equity method investees
Gain (Loss) on valuation of
29,627 56,361 (34,712) 27,609
derivatives
Effect of overseas operation
(293) (443) 8 (176)
translation
28,631 55,835 (35,263) 27,011

Total comprehensive income 143,901 300,175 173,662 381,060

Total comprehensive income
attributable to:
Owners of the parent 143,901 300,175 173,662 381,060
Non-controlling interests - - - -
143,901 300,175 173,662 381,060

Earnings per share attributable
19
to the ordinary equity holders of
the company
Basic earnings per
1,161 2,460 2,104 3,565
share
Diluted earnings per
1,161 2,460 2,104 3,565
share


7

Interim Consolidated Statements of Changes in Equity
Six-Month periods ended June 30, 2012 and 2011
Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 2011 496,537 407,539 (67,371) 1,400,013 2,236,718 129 2,236,847
Net income - - 354,049 354,049 - 354,049
Other comprehensive income
Loss on valuation of available-
- - (407) - (407) - (407)
for-sale securities
Other comprehensive income of
- - (15) - (15) - (15)
equity method investees
Gain on valuation of derivatives - - 27,609 - 27,609 - 27,609
- - (176) - (176) - (176)
translation
Total comprehensive income - - 27,011 354,049 381,060 - 381,060
Transactions with owners
Dividends - - - (104,272) (104,272) - (104,272)
Balances as of June 30, 2011 496,537 407,539 40,360 1,649,790 2,513,506 129 2,513,635

8

Interim Consolidated Statements of Changes in Equity
Six-Month periods ended June 30, 2012 and 2011
Accumulated Total
(In millions of Korean won) other attributable Non-
comprehensive
Capital Capital income and Retained to owners of controlling
stock surplus expenses earnings the parent interests Total equity
Balances as of January 1, 2012 496,537 407,539 (50,840) 1,803,144 2,656,380 109 2,656,489
Net income - - 244,340 244,340 - 244,340
Other comprehensive income
Gain on valuation of available-
- - 587 - 587 - 587
for-sale securities
Other comprehensive income of
- - (670) - (670) - (670)
equity method investees
Gain on valuation of derivatives - - 56,361 - 56,361 - 56,361
- - (443) - (443) - (443)
translation
Total comprehensive income - - 55,835 244,340 300,175 300,175
Balances as of June 30, 2012 496,537 407,539 4,995 2,047,484 2,956,555 109 2,956,664


9

Interim Consolidated Statements of Cash Flows
Six-Month Periods ended June 30, 2012 and 2011

(In millions of Korean won)
2012 2011
Cash flows from operating activities
Cash generated from operations (Note 21) 783,531 181,944
Interest received 29,334 17,936
Interest paid (415,164) (412,390)
Dividends received 2,831 3,251
Income taxes paid (79,537) (87,925)
320,995 (297,184)

Cash flows from investing activities
Decrease in deposits - 3
Dividends from associates 733 707
Acquisition of investments in associates (10,850) -
Acquisition of land (38,113) (1,853)
Acquisition of building (22,053) (5,243)
Disposal of vehicles 57 37
Acquisition of vehicles (2,337) (166)
Disposal of fixtures and furniture - 14
Acquisition of fixtures and furniture (8,391) (15,955)
Acquisition of other tangible assets (39) (496)
Increase in construction in progress (2,317) (2,604)
Disposal of intangible assets - 71
Acquisition of intangible assets (1,170) (5,910)
Decrease in leasehold deposits 3,032 1,912
Increase in leasehold deposits (773) (4,183)
(82,221) (33,666)

Cash flows from financing activities
Proceeds from borrowings 1,238,225 1,300,000
Repayments of borrowings (1,325,000) (2,016,945)
Issuance of debentures 2,406,025 3,152,196
Repayments of debentures (2,444,732) (1,842,033)
Payments of dividends - (104,273)
(125,482) 488,945

Exchange losses on cash and cash equivalents (8) (5)

Decrease in other cash and cash equivalents (443) (176)
Net increase in cash and cash equivalents 112,841 157,913

Cash and cash equivalents
Beginning of period 1,455,433 1,224,866
End of period 1,568,274 1,382,779


10

Notes to the Interim Consolidated Financial Statements
June 30, 2012 and 2011, and December 31, 2011

1. General information

Hyundai Capital Services, Inc. was established on December 22, 1993, to engage in installment
financing, facilities lease 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, 2012, 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 interim consolidated financial statements have been prepared and presented which included
the accounts of Hyundai Capital Services, Inc. (the “Company”), as the parent company
according to Korean IFRS 1027, and Autopia Thirty-fifth trust and SPC and other subsidiaries
(collectively the “Group”), while HK Mutual Savings Bank and four other entities are associates.

Subsidiaries as of June 30, 2012 and December 31, 2011, are as follows. The Company 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%.

Ratio of
Location ownership June 30, 2012 December 31, 2011
Special Korea 0.9% Autopia Thirty-fifth SPC(trust) Autopia Thirty-fifth SPC(trust)
Purpose Autopia Thirty-sixth SPC(trust) Autopia Thirty-sixth SPC(trust)
1
Entities Autopia Thirty-seventh SPC(trust) Autopia Thirty-seventh SPC(trust)
Autopia Thirty-ninth SPC(trust) Autopia Thirty-ninth SPC(trust)
Autopia Fortieth 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)
1 1
Stock Germany 100% Hyundai Capital Europe GmbH Hyundai Capital Europe GmbH
Company
1
It holds 100% shares of Hyundai Capital Services Limited Liability Company.

2. Summary of Significant Accounting Policies

2.1 Basis of Preparation

The Group’s interim consolidated financial statements for the six-month period ended June 30,
2012, have been prepared in accordance Korean IFRS 1034, ‘Interim Financial Reporting’. These
interim consolidated financial statements have been prepared in accordance with the Korean

11


IFRS standards and interpretations issued and effective or issued and early adopted as of June
30, 2012.

New standards, amendments and interpretations issued but not effective for the financial year
beginning January 1, 2012, and not early adopted by the Group are as follows:

- Amendments to Korean-IFRS 1019, Employee Benefits

According to the amendments to Korean-IFRS 1019, Employee Benefits, the corridor method is
no longer permitted. Therefore, actuarial gains and losses on the defined benefit obligation are
recognized immediately under other comprehensive income. The amendment requires to
recognize immediately all past service costs. And the amendment replaces the interest cost on
the defined benefit obligation, and the expected return on plan assets with a net interest cost
based on the net defined benefit asset or liability and the discount rate measured at the
beginning of the year. This amendment will be effective for the Group as of January 1, 2013. The
Group is assessing the impact of application of the amended Korean-IFRS 1019 on its
consolidated financial statements.

- Enactment of Korean-IFRS 1113, Fair value measurement

Korean-IFRS 1113, Fair value measurement, aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value measurement and
disclosure requirements for use across Korean-IFRS. Korean-IFRS 1101 does not extend the use
of fair value accounting but provides guidance on how it should be applied where its use is
already required or permitted by other standards within Korean-IFRS. This amendment will be
effective for the Group as of January 1, 2013, and the Group expects that it would not have a
significant impact on the Group.

- Enactment of Korean-IFRS 1001, Presentation of Financial Statements

According to the amendments to Korean-IFRS 1001, 'Presentation of Financial Statements',
items of other comprehensive income present as two groups depending on whether it will be
reclassified subsequently to profit or loss or not. An entity shall apply those amendments for
annual periods beginning on or after July 1, 2012, and earlier application is permitted. The Group
is assessing the impact of application of the amended Korean-IFRS 1001 on its consolidated
financial statements.

2.2 Accounting Policies -

The following is a summary of significant accounting policies followed by the Group in the
preparation of its interim consolidated financial statements. These policies have been consistently
applied to all the periods presented, unless otherwise stated.

Interim period income tax expense is calculated by applying estimated average annual effective
tax rate to the interim period’s pre-tax income.

12


3. Securities

Securities as of June 30, 2012 and December 31, 2011, are as follows:

(in millions of Korean won)
Type 2012 2011
Available-for-sale securities
Equity Marketable equity securities 5,600 5,687
securities Unlisted equity securities 11,208 10,526
16,808 16,213
Debt
Government and public bonds 4,671 2,239
securities
Sub-total 21,479 18,452

Investments in associates 65,874 51,768
87,353 70,220

Available-for-sale securities
Available-for-sale securities as of June 30, 2012 and December 31, 2011, are as follows:

(1) Marketable equity securities

(in millions of Korean won) Book value
Number of Ownership Acquisition
2012 2011
shares (%) cost
Marketable equity
securities
NICE Information Service 136,593 2.25 3,312 3,118 3,190
NICE Holdings 49,162 1.42 3,491 2,482 2,497
Unlisted equity securities
1
Hyundai Finance Corp. 1,700,000 9.29 9,888 11,108 10,426
Korean Egloan, Inc. 4,000 3.12 100 100 100
16,791 16,808 16,213

1
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

(in millions of Korean won) Book value
Interest Acquisition
Issuer rate (%) cost 2012 2011
Government and Metropolitan Rapid
2.50 3,322 4,671 2,239
public bonds Transit and others

13


Investments in associates
Details of investments in associates as of June 30, 2012 and December 31, 2011, are as follows:

(in millions of Korean won) 2012
Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
1
HK Mutual Savings Bank 4,990,438 20.00 45,719 37,211 49,460
1
HI Network, Inc. 13,332 19.99 76 570 570
1
Korea Credit Bureau 140,000 7.00 3,800 2,892 3,929
Hyundai Capital Germany
2 600,200 30.01 1,065 1,005 1,065
GmbH
2
Hyundai Capital UK Ltd. 1,000,000 29.99 10,850 10,734 10,850
61,510 52,421 65,874

1
The Company’s shareholdings are less than 20%. However, the Group is able to significantly influence
such as involvement in the financial and operating processes, and thus the equity method is applied.
2
The Group’s shareholdings are more than 20%. However, equity method is not applied due to insignificant
fluctuation of equities.

Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
1
HK Mutual Saving Bank 4,990,438 20.00 45,719 33,487 45,735
1
HI Network, Inc. 13,332 19.99 76 1,003 1,003
1
Korea Credit Bureau 140,000 7.00 3,800 2,928 3,965
2 600,200 30.01 1,065 1,065 1,065
GmbH
50,660 38,483 51,768

Valuations of investments in associates for the six-month periods ended June 30, 2012 and 2011,
are as follows:

Changes in
accumulated
Beginning Gain on Ending
Acquisition other Dividends
Balance valuation Balance
comprehensive
loss
HK Mutual Savings Bank 45,735 - 4,139 (414) - 49,460
HI Network, Inc. 1,003 - 300 - (733) 570
Korea Credit Bureau 3,965 - 220 (256) - 3,929
- - 1,065
GmbH 1,065 - -
Hyundai Capital UK Ltd. - 10,850 - - - 10,850
51,768 10,850 4,659 (670) (733) 65,874

14


Changes in
Beginning Gain on accumulated other Ending
Dividends
Balance valuation comprehensive Balance
loss
HK Mutual Savings Bank 42,849 4,305 47 - 47,201
HI Network, Inc. 1,055 193 - (706) 542
Korea Credit Bureau 3,514 251 - - 3,765
1,065 - - - 1,065
GmbH
48,483 4,749 47 (706) 52,573

Summary of financial information of investees as of June 30, 2012 and December 31, 2011, for
assets and liablities, and for the six-month periods ended June 30, 2012 and 2011, for revenue
and income, are as follows:

Operating
Assets Liabilities Net income
revenue
HK Mutual Savings Bank 2,584,522 2,398,465 195,441 20,694
HI Network, Inc. 5,586 2,738 8,921 1,619
Korea Credit Bureau 50,082 8,762 22,500 3,649
3,846 337 1,171 503
GmbH
Hyundai Capital UK Ltd. 35,792 - - -

Operating
Assets Liabilities Net income
revenue
1
HK Mutual Savings Bank 2,593,289 2,425,855 180,413 21,527
HI Network, Inc. 8,560 3,544 9,854 1,007
Korea Credit Bureau 51,484 9,650 18,066 3,513
3,889 341 316 58
GmbH

1
Although HK Mutual Savings Bank’s fiscal year is from July 2010 to June 2011, the asset and liability
amounts are as of December 31, 2011, and its operating revenue and net income amounts are from
January 1, 2011 to June 30, 2011.

15


4. Financial receivables

Financial receivables as of June 30, 2012 and December 31, 2011, are as follows:

2012
Deferred loan
origination fees Allowance
Present value Carrying
Principal and costs for doubtful
discounts amount
(Direct profit for accounts
leased assets)
Loans receivable
Loans 11,597,275 (114,082) (1,641) (279,331) 11,202,221
Installment financial assets
Auto 4,469,357 (58,492) - (30,664) 4,380,201
Durable goods 223 - - (11) 212
Mortgage 19,462 39 - (316) 19,185
Machinery 164 - 1 (2) 163
4,489,206 (58,453) 1 (30,993) 4,399,761
Lease receivables
Finance lease
2,544,026 (626) - (25,604) 2,517,796
receivables
Cancelled lease
5,868 - - (5,474) 394
receivables
2,549,894 (626) - (31,078) 2,518,190
18,636,375 (173,161) (1,640) (341,402) 18,120,172

2011
Deferred loan
origination fees Allowance
Present value Carrying
Principal and costs for doubtful
discounts amount
(Direct profit for accounts
leased assets)
Loans receivable
Loans 11,239,870 (108,782) (1,841) (281,184) 10,848,063
Installment financial assets
Auto 5,109,299 (78,757) - (36,748) 4,993,794
Durable goods 1,419 3 - (141) 1,281
Mortgage 25,620 60 - (1,204) 24,476
Machinery 1,674 - 6 (37) 1,643
5,138,012 (78,694) 6 (38,130) 5,021,194
Lease receivables
Finance lease
2,300,204 (703) - (21,118) 2,278,383
receivables
Cancelled lease
4,656 - - (4,445) 211
receivables
2,304,860 (703) - (25,563) 2,278,594
18,682,742 (188,179) (1,835) (344,877) 18,147,851

16


5. Allowance for Doubtful Accounts

Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2012 and
2011, are as follows:

2012
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 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
43,222 5,288 241 4,150 52,901
previously written off
Unwinding of discount (3,733) (140) (96) - (3,969)
Additional(reversed)
165,471 9,147 5,385 (296) 179,707
allowance
Ending balance 279,331 30,993 31,078 17,531 358,933

2011
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 215,703 28,643 21,031 7,649 273,026
Amounts written off (137,115) (13,816) (11) (2,415) (153,357)
Recoveries of amounts
48,063 6,726 62 4,010 58,861
previously written off
Unwinding of discount (3,091) (156) (62) - (3,309)
Additional(reversed)
132,130 8,539 1,458 (2,702) 139,425
allowance
Ending balance 255,690 29,936 22,478 6,542 314,646

17


6. Financial instruments

The fair values of financial instruments as of June 30, 2012 and December 31, 2011, are as
follows:

2012 2011
Type
Book value Fair value Book value Fair value
Assets
Financial assets
Cash and deposits 1,568,283 1,568,283 1,455,442 1,455,442
Available-for-sale
21,479 21,479 18,452 18,452
securities
Loans receivable 11,202,221 11,501,001 10,848,063 11,124,599
Installment financial
4,399,761 4,504,264 5,021,194 5,145,837
assets
Derivative assets 260,964 260,964 475,431 475,431
Other assets 235,804 235,926 234,892 234,810
17,688,512 18,091,917 18,053,474 18,454,571

Liabilities
Financial liabilities
Borrowings 2,162,330 2,174,365 2,250,000 2,257,918
Debentures 15,211,314 15,694,138 15,522,368 15,886,881
Derivative liabilities 60,378 60,378 58,096 58,096
Other liabilities 1,248,474 1,255,561 1,183,744 1,190,133
18,682,496 19,184,442 19,014,208 19,393,028

The fair value hierarchy of financial assets and liabilities carried at fair value as of June 30, 2012
and December 31, 2011, are as follows:

2012
1
Fair value hierarchy
Type Book value Fair value
level 1 level 2 level 3
Financial assets
Available-for-sale
21,479 21,479 5,600 4,671 11,208
securities
Derivative assets 260,964 260,964 - 260,964 -
282,443 282,443 5,600 265,635 11,208
Derivative liabilities 60,378 60,378 - 60,378 -

1
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

18


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

2011
1
Fair value hierarchy
Type Book value Fair value
level 1 level 2 level 3
Financial assets
Available-for-sale
18,452 18,452 5,687 2,239 10,526
securities
Derivative assets 475,431 475,431 - 475,431 -
493,883 493,883 5,687 477,670 10,526
Derivative liabilities 58,096 58,096 - 58,096 -

7. Derecognition of financial assets

The Group issued securitized debts based on loans and installment financial assets, and the
associated securitized debts have recourse only to the transferred assets.

Details of financial assets transferred and not derecognized as of June 30, 2012 and December
31, 2011, are as follows:

Type 2012 2011
Book value of assets
Loans receivable 1,859,501 2,289,879
Installment assets 1,689,912 1,775,534
3,459,413 4,065,413
1
Book value of related liabilities (2,243,131) (2,748,872)

Liabilities having right of resource on transferred assets :
Fair value of assets 3,639,148 4,167,861
1
Fair value of related liabilities (2,266,653) (2,772,816)
Net position 1,372,495 1,395,045
1
Related liabilities are amounts of securitized debts and associated derivative assets.

8. Property and equipment

Changes in property and equipment for the six-month periods ended June 30, 2012 and 2011,
are as follows:

19


2012
Beginning Ending
Type Acquisition Replacement Disposal Depreciation
balance balance
Land 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
53,770 8,391 893 (347) (10,344) 52,363
furniture
Others 1,994 39 - - (4) 2,029
Construction in
2,986 2,317 (922) - - 4,381
progress
265,433 73,249 (29) (391) (12,834) 325,428

2011
Beginning Ending
Type Acquisition Replacement Disposal Depreciation
balance balance
Land 101,844 1,853 - - - 103,697
Buildings 92,543 5,243 - - (1,541) 96,245
Structures 2,246 - - - (31) 2,215
Vehicles 838 166 - (30) (184) 790
Fixture and
35,321 15,956 19 (14) (9,083) 42,199
furniture
Others 1,200 496 259 - (4) 1,951
Construction in
8,377 2,604 (6,718) - - 4,263
progress
242,369 26,318 (6,440) (44) (10,843) 251,360

9. Intangible assets

Changes in intangible assets for the six-month periods ended June 30, 2012 and 2011, are as
follows:

2012
Beginning Ending
Type Increase Replacement Amortization
balance 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

65,117 1,170 29 (5,000) 61,316

20


2011
Beginning Ending
Type Increase Replacement Disposal Amortization
balance balance
Development costs 20,004 581 6,440 (50) (2,992) 23,983

Rights of trademark 44 - - - (7) 37
Other intangible
assets 32,564 5,328 - (21) (893) 36,978

52,612 5,909 6,440 (71) (3,892) 60,998

10. Borrowings

Changes in borrowings for the six-month periods ended June 30, 2012 and 2011, are as follows:

Types 2012 2011
Beginning balance 17,772,368 17,043,686
Borrowing 3,644,250 4,452,196
Repayment (3,769,732) (3,858,978)
Others (273,241) (249,682)
Ending balance 17,373,645 17,387,222

11. Defined benefit liability

The amounts of defined benefit plans recognized in the statements of financial position as of
June 30, 2012 and December 31, 2011, are as follows:

Type 2012 2011
Present value of funded obligations 54,641 49,709
1
Fair value of plan assets (29,119) (29,347)
Defined benefit liability 25,522 20,362

1
As of June 30, 2012, contribution to the National Pension Fund of 42 million is included (December 31,
2011 : 45 million).

Details of the amounts recognized in the comprehensive income statements for the six-month
periods ended June 30, 2012 and 2011, are as follows :

Type 2012 2011
Current service cost 5,736 4,697
Interest cost 982 885
Expected return on plan assets (572) (525)
Actuarial losses 1,250 1,056

21


7,396 6,113
12. Provisions for unused loan commitments

Changes in provisions for unused loan commitments for the six-month periods ended June 30,
2012 and 2011, are as follows:

Type 2012 2011
Beginning balance 10,445 46,624
Reversals (1,190) (33,513)
Ending balance 9,255 13,111

13. Derivative financial instruments and hedge accounting

Trading derivatives as of June 30, 2012 and December 31, 2011, are as follows:

2012 2011
Type Assets Liabilities Assets Liabilities
Forward foreign exchange 33 - 53 -

During the six-month periods ended June 30, 2012 and 2011, the Group recognized loss on
trading derivatives of 19 million and 37 million, respectively.

Derivatives designated as cash flow hedges as of June 30, 2012 and December 31, 2011, are as
follows:

2012 2011
Type Notional Notional
Assets Liabilities Principal Assets Liabilities Principal
amounts amounts
Interest rate swaps 103 1,477 (1,042) 12 1,331 (1,000)
Currency swaps 260,828 58,901 7,246 475,366 56,765 (49,157)
260,931 60,378 6,204 475,378 58,096 (50,157)

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 12, 2017.

There is no ineffective portion recognized related to cash flow hedge for the six-month periods
ended June 30, 2012 and 2011.

22


14. Equity

Details of appropriated and expected reserves for bad loans as of June 30, 2012 and December
31, 2011, are as follows:

Type 2012 2011
Appropriated reserve for bad loans 270,220 -
Expected reserve for bad loans 25,014 270,220
295,234 270,220

Transfer to reserve for bad loans and net income in consideration of effect of changes in reserve
for bad loans for the six-month periods ended June 30, 2012 and 2011, are as follows:

(in millions of Korean won, except per share amounts)
Type 2012 2011
Net income 244,340 354,049
1
Expected transfer to reserve for bad loans 25,014 (4,848)
Net income in consideration of changes in reserve for
2 219,326 358,897
bad loans
Net income per share in consideration of changes in
2 2,209 3,614
reserve for bad loans(In Korean won)

1
The amount transferred to reserve for bad loans for the six-month period ended June 30, 2011, is the
difference between the balance of reserve for bad loans as of June 30, 2011, and the balance as of
December 31, 2010.
2
Net income and earnings per share in consideration of changes in reserve for bad loans are not
accordance with K-IFRS, and these amounts are the sum of the expected transfer to reserve for bad loans
before income tax and net income.

15. Net interest income

Net interest income for the three-month and the six-month periods ended June 30, 2012 and
2011, consists of:

2012 2011
Type
Three months Six months Three months Six months
Interest income
Cash and deposits 12,385 24,394 10,350 18,848
Loans receivable 361,022 722,758 378,791 746,382
Installment financial
91,852 192,041 108,070 220,978
assets
1
Lease receivables 58,692 115,665 52,567 104,464
Other² 1,387 1,431 124 254

23


525,338 1,056,289 549,902 1,090,926
Interest expenses
Borrowings 25,732 52,716 25,941 51,680
Debentures 188,760 380,421 200,939 399,567
Other² 10,984 21,793 11,120 26,674
225,476 454,930 238,000 477,921
Net interest income 299,862 601,359 311,902 613,005

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 the six-month periods ended June 30, 2012 and
2011, consists of:

2012 2011
Type
Commission income
Loans receivable 11,976 23,651 13,527 26,955

Installment financial assets 1,564 3,200 1,625 3,311

Lease receivables 39,227 75,783 29,517 56,541
52,767 102,634 44,669 86,807
Commission expenses
Lease expenses 4,802 9,060 3,429 6,675
Net Commission Income 47,965 93,574 41,240 80,132

17. General and administrative expenses

General and administrative expenses for the three-month and the six-month periods ended June
30, 2012 and 2011, are as follows:

2012 2011
Type
Payroll 31,344 59,313 25,888 52,097
Severance benefits 4,706 7,517 3,597 6,119
Fringe benefits 8,605 19,157 7,790 16,524
Depreciation 6,629 12,834 5,604 10,843
Advertising 13,857 24,399 9,068 18,150
Travel and transportation 1,660 2,922 1,055 2,026
Communication 3,544 7,187 3,180 6,461
Water, lighting and heating 2,897 5,414 2,110 4,390

24


Commission 4,864 8,919 4,866 8,576
Sales commission 15,741 29,911 14,088 38,841
Amortization 2,472 5,000 2,035 3,892
Outsourcing service charges 17,782 33,220 16,585 32,499
Rent 9,599 18,429 9,630 17,927
Other expenses 23,739 49,365 22,495 42,832
147,439 283,587 127,991 261,177

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, 2012, is 27% (the estimated average
annual tax rate for the period ended June 30, 2011, is 23%).

19. Earnings per share

Basic earnings per share attributable to common stock for the three-month and the six-month
periods ended June 30, 2012 and 2011, is as follows:

2012 2011
Type
(1) Net income attributable
to common stock 115,269,826,053 244,340,097,651 208,924,894,050 354,048,916,718
(In Korean won)
(2) Weighted average of
number of outstanding 99,307,435 99,307,435 99,307,435 99,307,435
common shares
(3) Basic earnings per
share (In Korean won) 1,161 2,460 2,104 3,565
(1)÷(2)

b. Diluted earnings per share

As there was no discontinued operation during the three-month and the six-month periods ended
June 30, 2012 and 2011, 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, 2012 and 2011.
Therefore, the diluted earnings per share is the same as basic earnings per share for the three-
month and the six-month periods ended June 30, 2012 and 2011.

20. Other comprehensive income

Other comprehensive income for the six-month periods ended June 30, 2012 and 2011, consists
of:

25


2012
Changes
Beginning Reclassifi- Income Ending
Type cation of Other
balance tax effects balance
profit or changes
loss
Gain(loss) on valuation
of available-for-sale (388) - 720 (133) 199
financial assets
Accumulated
comprehensive
47 - (670) - (623)
income of equity
method investees
(50,157) 419 63,845 (7,903) 6,204
of derivatives
Loss on exchange
differences of foreign (343) - (443) - (786)
operations
(50,841) 419 63,452 (8,036) 4,994

2011
Changes
Beginning Reclassifi- Income tax Ending
Type cation of Other
balance effects balance
profit or changes
loss
of available-for-sale 512 (661) 140 114 105
financial assets
Accumulated
comprehensive
24 - 47 (62) 9
income of equity
method investees
(67,924) 5,919 29,833 (8,143) (40,315)
of derivatives
Gain(loss) on exchange
differences of foreign 17 - (176) - (159)
operations
(67,371) 5,258 29,844 (8,091) (40,360)

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, 2012 and
December 31, 2011, are as follows:

Type 2012 2011
Cash 1 4
Ordinary deposits 134,135 135,706

26


Current deposits 3,438 1,923
Short-term financial instruments 1,430,700 1,317,800
1,568,274 1,455,433

Cash generated from operations for the six-month periods ended June 30, 2012 and 2011, is as
follows:
Type 2012 2011
Net income 244,340 354,049
Adjustments
Net interest expenses 429,105 458,819
Income tax 90,296 108,503
Gain on disposal of available-for-sale financial
(1,776) (2,084)
assets
Income on loans (17,864) (21,784)
Income on installment financial receivables (37,664) (48,436)
Gain on leases (636) (609)
Gain on foreign exchanges translation (66,990) (244,804)
Dividend income (2,831) (3,251)
Gain on valuation of derivatives (15,961) (73,016)
Gain on disposal of property and equipment (30) (6)
Reversal of provisions (1,190) (33,513)
Gain on equity method valuation (4,659) (4,749)
Lease expenses 169,634 187,616
Bad debts expense 179,707 139,425
Loss on foreign exchanges translation 15,968 73,024
Severance benefits 7,396 6,113
Depreciation 12,834 10,843
Amortization of intangible assets 5,000 3,892
Loss on valuation of derivatives 66,989 244,820
Loss on disposal of property and equipment 364 -
Loss on bond retirement - 16
827,692 800,819
Changes in operating assets and liabilities
(Increase) in available-for-sale financial
(531) 1,543
Assets
(Increase) in loans receivable (545,005) (792,990)
Decrease in installment financial assets 644,662 162,753
(Increase) in finance lease receivables (400,835) (437,084)
Decrease in cancelled leased receivables 4,853 3,710
(Increase) in operating leased assets (154,963) (76,644)
Decrease in cancelled leased assets 151,918 111,970
Increase in allowance for doubtful accounts 52,923 58,860
(Increase) in non-trade receivables (21,487) (34)
Decrease in accrued revenues 8,287 4,306
Increase in advance payments (46,752) (590)

27


(Increase) in prepaid expenses (9,509) (7,442)
Decrease(increase) in derivative assets (12,822) 21,192
Increase in non-trade payables 35,161 7,288
(Decrease) in accrued expenses (62) (277)
(Decrease) in unearned revenue (2,750) (3,976)
Increase in withholdings 4,533 4,943
(Decrease) in leasehold deposits received (6,727) (11,068)
Payment of severance benefits (3,333) (2,923)
Decrease(increase) in plan assets 734 (1,884)
Transfer of severance benefits from related parties 866 1,405
Transfer of severance benefits to related parties (504) (1,193)
Increase in derivative liabilities 12,842 (14,789)
(288,501) (972,924)
783,531 181,944

22. Commitments and Contingencies

a. Credit Line Agreement

Details of unused credit line agreements of the Group as of June 30, 2012 and December 31,
2011, are as follows:

Type Financial institutions 2012 2011
Limit of overdraft Shinhan Bank and 2 other banks 41,500 41,500
Limit of daily loan SC Bank and 2 other banks 45,000 45,000
86,500 86,500

b. Credit Facility Agreement

The Group has revolving credit facility agreements with several financial institutions as of June
30, 2012 and December 31, 2011. Details of credit facility agreements are as follows:

Financial institutions 2012 2011
Equivalent of Equivalent of
1
GE Capital European Funding & Co USD 1 billion in USD 1 billion in
Euros Euros
Mizuho Corporate Bank, Seoul Branch 65,000 65,000
JPMorgan, Seoul Branch 110,000 80,000
Citibank, Seoul 50,000 50,000
Standard Chartered, Seoul Branch 50,000 50,000

28

Hyundai Capital Services Interim Financial Statements H1 2012

Hyundai Capital Services Interim Financial Statements H1 2012

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