Audit Report: Hyundai Commercial 1Q12 (English)

Hyundai Commercial, Inc. andSubsidiaries

Interim Consolidated Financial Statements

March 31, 2012

Hyundai Commercial, Inc. and SubsidiariesIndexMarch 31, 2012

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

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position .........................................................................3-5

Interim Consolidated Statements of Comprehensive Income................................................................6-7

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

1

Report on Review of Interim Financial Statements

To the Shareholders and Board of Directors of

Hyundai Commercial, Inc.

Reviewed Financial Statements

We have reviewed the accompanying interim consolidated financial statements of Hyundai

Commercial, Inc. (the Company) and its subsidiaries. These financial statements consist of

consolidated statement of financial position of the Company and its subsidiaries as of March

31, 2012, and the related consolidated statements of comprehensive income, changes in

equity and cash flows for the three-month periods ended March 31, 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 interim

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 interim 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 interim 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.

2

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.

Others

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 March 14,

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 interim 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

May 23, 2012

This report is effective as of May 23, 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.

Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionMarch 31, 2012 and December 31, 2011

3

(In Korean won)March 31,

2012December 31,

2011

Assets

Cash and deposits

Cash and cash equivalents (Note 20) \ 314,495,886,665 \ 276,009,118,714

Deposits 9,000,000 9,000,000

314,504,886,665 276,018,118,714

Securities (Note 3)

Available-for-sale securities 25,249,021,460 26,848,232,720

Equity method investment 262,577,811,893 147,539,965,125

287,826,833,353 174,388,197,845

Loans receivable (Notes 4, 5, 6 and 7)

Factoring 205,850,000 575,109,250

Allowance for doubtful accounts (2,851,640) (3,163,206)

Loans 2,507,457,406,246 2,408,864,450,819

Allowance for doubtful accounts (18,450,441,678) (18,165,997,032)

2,489,209,962,928 2,391,270,399,831

Installment financial assets (Notes 4, 5, 6 and 7)

Auto installment financing receivables 379,370,074,249 402,435,731,643

Allowance for doubtful accounts (2,411,441,310) (2,700,210,858)

Durable goods installment financing receivables 55,443,932,968 68,855,356,831


432,020,391,366 468,115,734,026

Lease receivables (Note 8) 91,046,771,590 84,053,398,124

Property and equipment (Note 9)

Vehicles 113,102,040 114,731,133

Fixtures and furniture 2,212,202,385 2,382,936,140

Others 410,999,664 410,999,664

2,736,304,089 2,908,666,937


4


2012December 31,

2011

Other assets

Intangible assets (Note 10) ￦ 2,854,014,129 ￦ 3,072,304,012

Non-trade receivables 26,232,243,316 29,912,441,707


Accrued revenues 15,671,378,095 18,075,550,289


Advance payments 430,437,762 635,365,367

Prepaid expenses 3,000,797,719 3,383,242,667

Leasehold deposits 10,739,617,155 9,963,176,364

Derivative assets (Note 16) 1,380,604,087 1,369,008,885

Others 3,885,995,860 3,885,995,860

63,913,582,900 69,966,696,832

Total assets ￦3,681,258,732,891 ￦3,466,721,212,309

Liabilities and Equity

Borrowings

Borrowings (Note 11) ￦ 730,475,846,697 ￦ 725,523,723,026

Debentures (Note 12) 2,141,877,642,380 1,937,737,884,950

Securitized debts (Note 13) 359,435,856,941 359,361,741,945

3,231,789,346,018 3,022,623,349,921

Other liabilities

Non-trade payables 8,382,323,422 7,907,799,257

Accrued expenses 22,932,992,519 26,857,795,596

Unearned revenue 4,331,133,491 4,869,902,233

Advances 237,543,296 231,248,416

Withholdings 6,506,859,101 3,073,415,790

Accrued income taxes 17,386,439,595 14,047,411,098

Defined benefit liability (Note 14) 2,029,044,421 2,232,465,895

Leasehold deposits received 19,778,332,355 16,493,405,207

Deferred income tax liabilities 17,538,855,085 16,336,206,889

Derivative liabilities (Note 16) 2,659,351,141 2,691,394,681

101,782,874,426 94,741,045,062

Total liabilities 3,333,572,220,444 3,117,364,394,983


5


2012December 31,

2011

Equity

Common stock (Notes 1 and 17) 100,000,000,000 100,000,000,000

Preferred stock 25,000,000,000 25,000,000,000

125,000,000,000 125,000,000,000

Capital surplus(Note 17)

Paid-in capital in excess of par value 74,608,059,537 74,608,059,537

Accumulated other comprehensive income andexpenses (Note 19)

Loss on valuation of derivatives (370,498,677) (1,082,947,513)

Gain on valuation of available-for-salesecurities

4,680,225,305 6,047,837,848

Accumulated comprehensive income of equitymethod investee

6,759,493,025 (1,702,584,378)

11,069,219,653 3,262,305,957

Retained earnings (Note 17) 136,989,413,257 146,466,631,832

Non-controlling interests 19,820,000 19,820,000

Total equity 347,686,512,447 349,356,817,326

Total liabilities and equity ￦3,681,258,732,891 ￦3,466,721,212,309

The accompanying notes are an integral part of these interim consolidated financial statements.

Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month Periods ended March 31, 2012 and 2011

6


2012March 31,

2011

Operating revenue

Interest income ￦ 2,771,651,435 ￦ 1,107,200,116

Income on loans 65,135,535,375 53,859,750,805

Income on installment financial receivables 12,063,627,224 16,074,074,823

Income on leases 1,677,877,761 1,243,380,418

Gain on disposal of loans 763,113,842 463,061,126

Gain on foreign exchange translations 852,500,000 3,011,500,000

Dividend income 250,000,000 300,000,000

Other operating income 206,267,242 338,313,775

Total operating revenue 83,720,572,879 76,397,281,063

Operating expenses

Interest expenses 39,515,390,596 33,981,587,383

Bad debts expense (Note 5) 4,808,806,861 5,142,117,843

Loss on disposal of loans 615,486,495 137,878,224

Loss on foreign currency transactions - 1,616

General and administrative expenses (Note 18) 14,285,714,760 13,786,786,878

Other operating expenses

Loss on valuation of derivatives 903,755,000 3,011,500,000

Others 673,845,682 425,457,887

1,577,600,682 3,436,957,887

Total operating expenses 60,802,999,394 56,485,329,831

Operating income 22,917,573,485 19,911,951,232

Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month Periods ended March 31, 2012 and 2011

7

(In Korean won)

March 31,2012

March 31,2011

Non-operating income

Gain on equity method valuation(Note 3)

￦ 10,849,056,508 ￦ 4,102,292,172

Non-operating expenses

Other non-operating expenses 8,582,824,000 -

Income before income taxes 25,183,805,993 24,014,243,404

Income tax expense (Note 15) 4,676,477,761 6,609,095,951

Net income ￦ 20,507,328,232 ￦ 17,405,147,453

Net income attributable to:

Owners of the parent 20,507,328,232 17,405,147,453

Non-controlling interests - -

20,507,328,232 17,405,147,453

Other comprehensive income,net of income taxes (Note 19)

Gain on valuation of derivatives 712,448,836 872,054,497

Gain(Loss) on valuation of available-for-sale financial securities

(1,367,612,543) 5,067,118,496

Other comprehensive income of equitymethod investee

8,462,077,403 (18,802,707)

7,806,913,696 5,920,370,286

Total comprehensive income ￦ 28,314,241,928 ￦ 23,325,517,739

Total comprehensive income attributable to:

Owners of the parent 28,314,241,928 23,325,517,739

Non-controlling interests - -

28,314,241,928 23,325,517,739


Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Changes in EquityThree-Month Periods ended March 31, 2012 and 2011

8

(In Korean won)

Capital stockCapitalsurplus

Accumulatedother

comprehensiveincome andexpenses

Retainedearnings

Totalattributable toowners of the

parent

Non-controllinginterests Total equity

Balances as of January 1, 2011 \100,000,000,000 \ - \ (862,281,456) \ 81,470,127,594 \ 180,607,846,138 \ 9,910,000 \180,617,756,138

Total comprehensive income

Net income - - - 17,405,147,453 17,405,147,453 - 17,405,147,453

Other comprehensive income

Gain on valuation of derivatives - - 872,054,497 - 872,054,497 - 872,054,497Gain on valuation of available-for-

sale securities- - 5,067,118,496 - 5,067,118,496 - 5,067,118,496

Other comprehensive income ofequity method investee

- - (18,802,707) - (18,802,707) - (18,802,707)

Total comprehensive income - - 5,920,370,286 17,405,147,453 23,325,517,739 - 23,325,517,739

Transactions with ownersEstablishment of special purpose

entity- - - - - 9,910,000 9,910,000

Dividends - - - (10,000,000,000) (10,000,000,000) - (10,000,000,000)

Total transactions with owners - - - (10,000,000,000) (10,000,000,000) 9,910,000 (9,990,090,000)

Balances as of March 31, 2011 \100,000,000,000 \ - \ 5,058,088,830 \ 88,875,275,047 \ 193,933,363,877 \ 9,910,000 \193,953,183,877

Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Changes in EquityThree-Month Periods ended March 31, 2012 and 2011

9

(In Korean won)

Capital stock Capital surplus

Accumulatedother

comprehensiveincome andexpenses

Retainedearnings

Total attributableto owners of the

parent

Non-controllinginterests Total equity

Balances as of January 1, 2012 \125,000,000,000 \ 74,608,059,537 \ 3,262,305,957 \ 146,466,631,832 \349,336,997,326 \ 19,820,000 \180,617,756,138

Total comprehensive income

Net income - - - 20,507,328,232 20,507,328,232 - 20,507,328,232

Other comprehensive income

Gain on valuation of derivatives - - 712,448,836 - 712,448,836 - 712,448,836Loss on valuation of available-for-

sale securities- - (1,367,612,543) - (1,367,612,543) - (1,367,612,543)

Other comprehensive income ofequity method investee

- - 8,462,077,403 - 8,462,077,403 - 8,462,077,403

Total comprehensive income - - 7,806,913,696 20,507,328,232 28,314,241,928 - 28,314,241,928

Transactions with owners

Dividends - - - (30,000,000,000) (30,000,000,000) - (30,000,000,000)Changes in retained earnings of

equity method investee- - - 15,453,193 15,453,193 - 15,453,193

Total transactions with owners - - - (29,984,546,807) (29,984,546,807) - (29,984,546,807)

Balances as of March 31, 2012 \125,000,000,000 \ 74,608,059,537 \11,069,219,653 \136,989,413,257 \347,666,692,447 \ 19,820,000 \347,686,512,447


Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Cash FlowsThree-Month Periods ended March 31, 2012 and 2011

10

(In Korean won)

March 31, 2012 March 31, 2011

Cash flows from operating activities

Cash generated from operations (Note 20) \ (10,167,972,302) \ (145,532,068,736)

Interest received 2,508,291,569 1,035,936,694Interest paid (37,272,790,705) (32,053,228,259)Dividends received 250,000,000 300,000,000Income taxes paid - (4,642,871,180)

Net cash used in operations (44,682,471,438) (180,892,231,481)

Cash flows from investing activitiesAcquisition of equity method investment (95,644,380,000) -Disposal of vehicles 63,107,858 -Acquisition of vehicles (76,172,300) (79,715,188)Acquisition of fixtures and furniture (57,306,040) (60,417,632)Acquisition of intangible assets (57,690,600) (43,725,000)Increase in leasehold deposits (685,649,000) (189,000,000)

Net cash used in investing activities (96,458,090,082) (372,857,820)

Cash flows from financing activitiesProceeds from borrowings 285,790,000,000 305,726,462,099Repayments of borrowings (280,837,876,329) (312,138,441,529)Issuance of debentures 289,675,205,800 169,535,450,000Repayments of debentures (85,000,000,000) (82,000,000,000)Issuance of securitized debts - 199,456,325,601Cash inflows of transactions with subsidiaries - 9,910,000Payments of dividends (30,000,000,000) (10,000,000,000)

Net cash provided by financing activities 179,627,329,471 270,589,706,171

Net increase in cash and cash equivalents 38,486,767,951 89,324,616,870

Cash and cash equivalentsBeginning of period 276,009,118,714 99,938,403,013

End of period \ 314,495,886,665 \ 189,263,019,883


Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsMarch 31, 2012 and 2011, and December 31, 2011

11

1. General Information

Hyundai Commercial, Inc. (the Company) was established on March 27, 2007, by taking over all

the assets, liabilities, rights and obligations related with the loans of the industrial product division

of Hyundai Capital Services, Inc. and its installment financing and lease financing division. It is

engaged in installment financing, and leasing of facilities. The Company’s operations are

headquartered in Yeouido, Seoul. Its shareholders are as follows:

Shareholders Ownership

Hyundai Motor Company 50.00%

Myung-yi Chung 33.33%

Tae-young Chung 16.67%

Total 100.00%

2. Summary of Significant Accounting Policies

The consolidated financial statements have been prepared and presented which included the

accounts of Hyundai Commercial, Inc., as the parent company according to the Korean IFRS

1027, and Commercial Auto First trust and SPC and another subsidiary(collectively the “Group”),

while Hyundai Card Co., Ltd. and Green cross life insurance are accounted for under the equity

method.

Subsidiaries as of March 31, 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%.

March 31, 2012 December 31, 2011

Special

Purpose

Entities

Commercial Auto First Trust and SPC Commercial Auto First Trust and SPC

Commercial Auto Second Trust and SPC Commercial Auto Second Trust and SPC

The Group’s interim consolidated financial statements for the three-month period ended March 31,

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 IFRS

standards and interpretations issued and effective or issued and early adopted as of March 31,

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-IFRS1019, Employee Benefits

According to the amendments to Korean-IFRS1019, Employee Benefits, the corridor method is no

longer permitted. Therefore, actuarial gains and losses on the defined benefit obligation are


12

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-IFRS1019 on its consolidated financial

statements.

- Enactment of Korean-IFRS1113, Fair value measurement

Korean-IFRS1113, 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-IFRS1101 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 material impact

on the Group.

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.

3. Securities

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

(in thousands of Korean won)

Type March 31, 2012 December 31, 2011

Available-for-sale securities

Equity securities

Marketable equitysecurities \ 16,250,000 \ 18,200,000

Unlisted equitysecurities

3,199,476 3,083,604

Sub-total 19,449,476 21,283,604

Debt securities 5,799,545 5,564,629

Sub-total 25,249,021 26,848,233

Equity method investment 262,577,812 147,539,965

\ 287,826,833 \ 174,388,198


13

Available-for-sale securities

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


Book value

Number ofshares

Ownership(%)

Acquisitioncost

March 31,2012

December31, 2011

Marketable equity securities

JNK Heaters Co.,Ltd.

1,000,000 12.5 \10,126,881 \16,250,000 \18,200,000

Unlisted equity securities

Leehan Corp.1 136,000 12.3 3,199,762 3,198,856 3,082,984

Isung Eng,. Corp. 62 620 620 620Debt securities

Leehan Corp.2 - - 5,469,801 5,799,545 5,564,629

1,136,062 \18,797,064 \25,249,021 \26,848,233

1The fair value of the securities for Leehan Corp. was valued as the valuation price provided by an external

appraiser, Korea Asset Pricing. The external appraisers valuated the fair value as the average of valuation

prices using the discounted cash flow model and the imputed market value model.2

Those debt securities are the convertible bond issued by Leehan Corp. during the year, and the fair value

of the convertible bond for Leehan Corp. was valued as the valuation price provided by an external

appraiser, Korea Asset Pricing. The differences between the fair value of convertible bond and the book

value of normal bond by effective interest rate recognized in the gain or loss on valuation of debt securities

and the fluctuation of conversion right and advanced redemption right recognized in the gain or loss on

embedded derivatives.

Equity method investments

Equity method investments as of March 31, 2012 and December 31, 2011, are as follows:


March 31, 2012Number of

sharesOwnership

(%)Acquisition

costNet asset

valueBook value

Hyundai Card Co.,

Ltd.1 8,889,622 5.54 \ 113,820,162 \ 115,044,378 \ 151,971,127

Green Cross Life

Insurance2 7,357,260 37.43 95,644,380 62,152,804 110,606,685

Total \ 209,464,542 \ 177,197,182 \ 262,577,812


December 31, 2011Number of

sharesOwnership

(%)Acquisition

costNet asset

valueBook value

Hyundai Card Co.,Ltd.

1 8,889,622 5.54 \ 113,820,162 \ 110,613,215 \ 147,539,965

1The Company’s shareholdings in Hyundai Card Co., Ltd. are less than 20%. However, the Company is

able to participate in the management and significantly influence the financial and operating processes.

Thus, the equity method is applied.


14

2The Group acquired the equity securities of Green Cross Life Insurance during the current period.

Valuations of equity method investment for the three-month periods ended March 31, 2012 and

2011, are as follows:

(in thousands of Korean won)March 31, 2012

BeginningBalance

AcquisitionGain on

valuation

Changes inaccumulated

othercomprehensive

income(*)

Changes inretainedearnings

EndingBalance

HyundaiCard Co.,Ltd.

\147,539,965 \ - \ 4,154,800 \ 276,362 \ - \151,971,127

Green CrossLifeInsuranceCo,. Ltd.

\ - \ 95,644,380 \ 6,694,257 \ 8,252,595 \ 15,453 \110,606,685

Total \147,539,965 \ 95,644,380 \ 10,849,057 \ 8,528,957 \ 15,453 \262,577,812

(*) Changes in accumulated other comprehensive income is the amount before income taxes.


March 31, 2011

Beginning Balance Gain on valuation

Changes inaccumulated other

comprehensiveincome(*)

Ending Balance

HyundaiCard Co.,Ltd.

\133,160,973 \4,102,292 \ (24,106) \ 137,239,159

The difference between the acquired amounts of equity method investment and its corresponding

net asset value as of March 31, 2012 and December 31, 2011, follows:



Hyundai Card Co., Ltd. \ 36,926,750 \ 36,926,750

Green Cross Life Insurance Co,. Ltd. 48,453,881 -

Total \ 85,380,631 \ 36,926,750

The assets and liabilities as of March 31, 2012 and December 31, 2011, and revenue and income for

the three-month periods ended March 31, 2012 and 2011, follow :


15


March 31, 2012

Year endAssets Liabilities

Operatingrevenue

Net income

Hyundai CardCo., Ltd.

December 31 \10,872,759,798 \ 8,796,080,584 \ 615,422,079 \ 74,997,698

Green CrossLifeIinsuranceCo,. Ltd.

March 31 \ 3,437,590,803 \ 3,271,552,038 \ 347,600,863 \ 9,420,826

Green Cross Life Insurance Co,. Ltd.’s fiscal year is from April 1, 2011 to March 31, 2012, the asset and

liability amounts are as of March 31, 2012, and its operating revenue and net income amounts are from

January 1, 2012 to March 31, 2012. The regarded acquisition date is February 29, 2012, and the investee

recognized its net income \ 17,883,442 thousand after regarded acquisition date.


December 31, 2011

Year endAssets Liabilities

Operatingrevenue

Net income

Hyundai CardCo., Ltd.

December 31 \10,851,933,716 \8,855,250,685 \ 2,407,597,301 \ 238,647,582

4. Financial Receivables

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


March 31, 2012

Principal

Deferred loanorigination fees and

costs(Initial direct costsfor lease assets)

Presentvalue

discounts

Allowancefor doubtful

accountsBook value

Loan receivables

Factoringreceivables

\ 205,850 \ - \ - \ (2,852) \ 202,998

Loans 2,483,927,021 23,685,648 (155,262) (18,450,442) 2,489,006,965

2,484,132,871 23,685,648 (155,262) (18,453,294) 2,489,209,963

Installment financial assets

Auto 379,432,881 (62,807) - (2,411,441) 376,958,633

Durable goods 55,904,285 (460,352) - (382,175) 55,061,758

435,337,166 (523,159) - (2,793,616) 432,020,391

Lease receivables

Finance leasereceivables

91,734,334 (16,096) - (671,466) 91,046,772

\ 3,011,204,371 \ 23,146,393 \ (155,262) \ (21,918,376) \ 3,012,277,126


16


December 31, 2011

Principal

Deferred loanorigination fees and

costs(Initial direct costsfor lease assets)

Presentvalue

discounts

Allowancefor doubtful

accountsBook value

Loan receivables

Factoring \ 575,109 \ - \ - \ (3,163) \ 571,946

Loans 2,390,384,894 18,629,791 (150,234) (18,165,997) 2,390,698,454

2,390,960,003 18,629,791 (150,234) (18,169,160) 2,391,270,400

Installment financial assets

Auto 402,751,465 (315,733) - (2,700,211) 399,735,521

Durable goods 69,532,615 (677,259) - (475,143) 68,380,213

472,284,080 (992,992) - (3,175,354) 468,115,734

Lease receivables

Finance leasereceivables

84,693,337 (19,542) - (620,397) 84,053,398

\ 2,947,937,420 \ 17,617,257 \ (150,234) \ (21,964,911) \ 2,943,439,532

5. Allowance for Doubtful Accounts

Changes in allowance for doubtful accounts for the nine-month periods ended March 31, 2012 and



March 31, 2012

TypeLoan

receivablesInstallment

financial assetsLease

receivablesOther assets Total

Beginning balance \ 18,169,160 \ 3,175,354 \ 620,397 \ 330,388 \ 22,295,299

Amounts written off (1,613,880) (61,379) - - (1,675,259)

Recoveries of amountspreviously written off

(2,993,634) (179,420) - - (3,173,054)

Unwinding of discount (49,660) (6,252) - - (55,912)

Additional(reversed)allowance

4,941,308 (134,687) 51,069 (48,883) 4,808,807

Ending balance \ 18,453,294 \ 2,793,616 \ 671,466 \ 281,505 \ 22,199,881


March 31, 2011

TypeLoan

receivablesInstallment

financial assetsLease

receivablesOther assets Total

Beginning balance \ 12,795,689 \ 3,609,027 \ 214,613 \ 372,974 \ 16,992,303

Amounts written off (520,382) (108,512) - - (628,894)

Recoveries of amountspreviously written off

(1,646,955) (269,466) (6,811) - (1,923,232)

Unwinding of discount (25,690) (3,048) (108) - (28,846)

Additional allowance 4,038,536 924,960 145,923 32,699 5,142,118

Ending balance \ 14,641,198 \ 4,152,961 \ 353,617 \ 405,673 \ 19,553,449


17

6. Financial Instruments

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


Type


Bookvalue

Fairvalue

Bookvalue

Fairvalue

Financial assets

Cash and deposits \ 314,504,887 \ 314,504,887 \ 276,018,119 \ 276,018,119

Available-for-salesecurities

25,249,021 25,249,021 26,848,233 26,848,233

Loans receivable 2,489,209,963 2,501,074,948 2,391,270,400 2,398,975,565

Installment financialassets

432,020,391 433,307,489 468,115,734 473,294,235

Derivative assets 1,380,604 1,380,604 1,369,009 1,369,009

Non-trade

receivables26,057,929 26,057,929 29,694,392 29,694,392

Accrued revenues 15,564,187 15,564,187 17,963,211 17,963,211

Leasehold deposits 10,739,617 10,677,518 9,963,176 9,861,028

\ 3,314,726,599 \ 3,327,816,583 \ 3,221,242,274 \ 3,234,023,792

Financial liabilities

Borrowings \ 730,475,847 \ 736,188,566 \ 725,523,723 \ 730,010,502

Debentures 2,141,877,642 2,191,177,733 1,937,737,885 1,983,599,328

Securitized debts 359,435,857 367,047,260 359,361,742 367,266,231

Derivative liabilities 2,659,351 2,659,351 2,691,395 2,691,395

Non-trade payables 8,382,323 8,382,323 7,907,799 7,907,799

Accrued expenses 22,932,993 22,932,993 26,857,796 26,857,796

Withholdings1

4,300,068 4,300,068 2,731,628 2,731,628

Leasehold depositsreceived

19,778,332 20,036,119 16,493,405 16,677,090

\ 3,289,842,413 \ 3,352,724,413 \ 3,079,305,373 \ 3,137,741,769

1Excluding taxes.

The fair value hierarchy of financial assets and liabilities carried at fair value as of March 31, 2012

and December 31, 2011, are as follows:


March, 31 2012

TypeBookvalue

Fairvalue

Fair value hierarchy1

level 1 level 2 level 3

Financial assets at fair

value


\ 25,249,021 \ 25,249,021 \ 16,250,000 \ - \ 8,999,021


18

Derivative assets 1,380,604 1,380,604 - 1,380,604 -

\ 26,629,625 \ 26,629,625 \ 16,250,000 \ 1,380,604 \ 8,999,021

Financial liabilities at

fair value

Derivative liabilities \ 2,659,351 \ 2,659,351 \ - \ 2,659,351 \ -

1The levels of fair value hierarchy have been defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and derivatives

Level 2: Inputs for the asset or liability included within valuation techniques that are observable market

data. Most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap,

forward, option

Level 3: Inputs for the asset or the liability that are not based on observable market data. Unlisted stocks,

complicated structured bonds, complicated unlisted derivatives and others.


December 31, 2011

TypeBookvalue

Fairvalue

Fair value hierarchy(*)

level 1 level 2 level 3

Financial assets at fair

value


\ 26,848,233 \ 26,848,233 \ 18,200,000 \ - \ 8,648,233

Derivative assets 1,369,009 1,369,009 - 1,369,009 -

\ 28,217,242 \ 28,217,242 \ 18,200,000 \ 1,369,009 \ 8,648,233

Financial liabilities at

fair value

Derivative liabilities \ 2,691,395 \ 2,691,395 \ - \ 2,691,395 \ -

The changes in financial instruments of level 3 for the three-month periods ended March 31, 2012

and the year ended December 31, 2011, are as follows:


TypeAvailable-for-sale securities


Beginning balance \ 8,648,233 \ 17,657,945

Acquisition - 8,670,183

Gains on interest 205,027 72,492

Gains on valuation(Other comprehensive income)

145,761 (1,579,387)

Disposal - (4,655,000)

Reclassification1

- (11,518,000)

Ending balance \ 8,999,021 \ 8,648,233

1The fair value hierarchy of the available-for-sale securities has been reclassified from level 3 to level 1 as

JNK Heaters Co., Ltd. was listed during the prior period.


19

The book value of financial instruments by categories as of March 31, 2012 and December 31,



March 31, 2012

Type

Financialassets at fairvalue throughprofit or loss

Loans andreceivables

Available-for-sale financial

assets

Hedgingderivative

instrumentsTotal

Financial assets

Cash and deposits \ - \ 314,504,887 \ - \ - \ 314,504,887

Available-for- salesecurities

- - 25,249,021 - 25,249,021

Loans receivable - 2,489,209,963 - - 2,489,209,963

Installmentfinancial assets

- 432,020,391 - - 432,020,391

Derivative assets 450,538 - - 930,066 1,380,604

Non-tradereceivables

- 26,057,929 - - 26,057,929

Accrued revenues - 15,564,187 - - 15,564,187

Leaseholddeposits

- 10,739,617 - - 10,739,617

\ 450,538 \ 3,288,096,974 \ 25,249,021 \ 930,066 \ 3,314,726,599


December 31, 2011

Type

Financialassets at fairvalue throughprofit or loss

Loans andreceivables

Available-for-sale financial

assets

Hedgingderivative

instrumentsTotal

Financial assets

Cash and deposits \ - \ 276,018,119 \ - \ - \ 276,018,119

Available-for- salesecurities

- - 26,848,233 - 26,848,233

Loans receivable - 2,391,270,400 - - 2,391,270,400

Installmentfinancial assets

- 468,115,734 - - 468,115,734

Derivative assets 501,793 - - 867,216 1,369,009

Non-tradereceivables

- 29,694,392 - - 29,694,392

Accrued revenues - 17,963,211 - - 17,963,211

Leaseholddeposits

- 9,963,176 - - 9,963,176

\ 501,793 \ 3,193,025,032 \ 26,848,233 \ 867,216 \ 3,221,242,274



TypeFinancial

liabilities atamortized cost

Hedgingderivative

instrumentsTotal

Financialliabilities at

amortized cost

Hedgingderivative

instrumentsTotal

Financial liabilities

Borrowings \ 730,475,847 \ - \ 730,475,847 \ 725,523,723 \ - \ 725,523,723


20

Debentures 2,141,877,642 - 2,141,877,642 1,937,737,885 - 1,937,737,885

Securitized debts 359,435,857 359,435,857 359,361,742 - 359,361,742

Derivativeliabilities

- 2,659,351 2,659,351 - 2,691,395 2,691,395

Non-tradepayables

8,382,323 - 8,382,323 7,907,799 - 7,907,799

Accrued expenses 22,932,993 - 22,932,993 26,857,796 - 26,857,796

Withholdings 4,300,068 - 4,300,068 2,731,628 - 2,731,628

Leaseholddepositsreceived

19,778,332 - 19,778,332 16,493,405 - 16,493,405

\3,287,183,062 \ 2,659,351 \3,289,842,413 \ 3,076,613,978 \ 2,691,395 \ 3,079,305,373

7. Derecognition of financial assets

The Group issued senior and subordinated asset-backed securities based on loans and installment

financial assets, and subsidiaries, such as Commercial Auto First trust and SPC, issued securitized

debts based on senior beneficiary certificates. Meanwhile, the Group is involved in ongoing

securitized financial instruments through credit reinforcement such as acquisitions of subordinated

beneficiary certificates.

Details of transferred financial assets not derecognized as of March 31, 2012 and December 31,




Book value of assets

Loan receivable \ 559,377,227 \ 466,479,102

Installment financial assets 78,580,393 97,302,634

Sub total 637,957,620 563,781,736

Book value of related liabilities 359,435,857 359,361,742

Liabilities having right of resource on transferred assets :

Fair value of assets \ 640,858,040 \ 566,361,232

Fair value of related liabilities 366,483,117 367,266,231

Net position \ 274,374,923 \ 199,095,001

8. Finance Lease Receivables

Details of total lease investments and present value of minimum lease receipts as of March 31,

2012 and December 31, 2011, are as follows:

(in thousands of Korean won)Type March 31, 2012 December 31, 2011


21

Total leaseinvestments

Present value ofminimum lease

receipts

Total leaseinvestments

Present value ofminimum lease

receipts

Less than 1 year \ 38,661,720 \ 33,528,707 \ 38,319,151 \ 33,136,156

1 to 5 years 62,242,818 58,189,530 55,204,893 51,537,639

\ 100,904,538 \ 91,718,237 \ 93,524,044 \ 84,673,795

Details of unearned interest income as of March 31, 2012 and December 31, 2011, are as follows:



Total lease investments \ 100,904,538 \ 93,524,044

Net lease investments

Minimum lease receipts

(present value)91,718,237 84,673,795

Unguaranteed residual value

(present value)- -

91,718,237 84,673,795

Unearned interest income \ 9,186,301 \ 8,850,249

9. Property and Equipment

Property and equipment as of March 31, 2012 and December 31, 2011, consist of:


TypeMarch 31, 2012 December 31, 2011

Acquisitioncost

Accumulateddepreciation

Book valueAcquisition

costAccumulateddepreciation

Book value

Vehicles \ 235,097 \ (121,995) \ 113,102 \ 238,639 \ (123,908) \ 114,731

Fixture andfurniture

7,122,896 (4,910,694) 2,212,202 7,065,590 (4,682,654) 2,382,936

Others 411,000 - 411,000 411,000 - 411,000

\ 7,768,993 \ (5,032,689) \ 2,736,304 \ 7,715,229 \ (4,806,562) \ 2,908,667

Changes in property and equipment for the three-month periods ended March 31, 2012 and 2011,

are as follows:


March 31, 2012

Type Beginning balance Acquisition Disposal Depreciation Ending balance

Vehicles \ 114,731 \ 76,172 \ (61,447) \ (16,354) \ 113,102


2,382,936 57,306 - (228,040) 2,212,202

Others 411,000 - - - 411,000

\ 2,908,667 \ 133,478 \ (61,447) \ (244,394) \ 2,736,304


22


December 31, 2011

Type Beginning balance Acquisition Disposal Depreciation Ending balance

Vehicles \ 119,066 \ 79,715 \ - \ (15,372) \ 183,409


1,986,277 60,418 - (345,126) 1,701,569

Others 411,000 - - - 411,000

\ 2,516,343 \ 140,133 \ - \ (360,498) \ 2,295,978

10. Intangible Assets

Intangible assets as of March 31, 2012 and December 31, 2011, consist of:


TypeMarch 31, 2012 December 31, 2011

Acquisitioncost


Bookvalue

Acquisitioncost


Bookvalue

Software \ 5,663,954 \ (4,497,313) \ 1,166,641 \ 5,637,719 \ (4,331,112) \ 1,306,607

Other intangibleassets

2,210,587 (523,214) 1,687,373 2,179,131 (413,434) 1,765,697

\ 7,874,541 \ (5,020,527) \ 2,854,014 \ 7,816,850 \ (4,744,546) \ 3,072,304

Changes in intangible assets for the three-month periods ended March 31, 2012 and 2011, are as

follows:


March 31, 2012

Type Beginning balance Increase1

Amortization Ending balance

Software \ 1,306,607 \ 26,235 \ (166,201) \ 1,166,641

Other intangible assets 1,765,697 31,456 (109,780) 1,687,373

\ 3,072,304 \ 57,691 \ (275,981) \ 2,854,014

1Inclusive of transfer from advance payments.


March 31, 2011

Type Beginning balance Increase1

Amortization Ending balance

Software \ 1,632,196 \ 43,725 \ (310,920) \ 1,365,001

Other intangible assets 849,207 899,800 (60,784) 1,688,223

\ 2,481,403 \ 943,525 \ (371,704) \ 3,053,224


23

11. Borrowings

Borrowings as of March 31, 2012 and December 31, 2011, consist of:


Types LenderAnnual

interest rate (%)March 31, 2012 December 31, 2011

Borrowings in won

Commercial paperSK Securities

and 3 others3.65 ~ 4.27 \ 130,000,000 \ 140,000,000

General loansWoori Bank and

9 others3.71 ~ 6.19 600,475,847 585,523,723

\ 730,475,847 \ 725,523,723

12. Debentures

Debentures issued by the Group and outstanding as of March 31, 2012 and December 31, 2011,

are as follows:


TypeAnnualinterest

rates (%)


Par value Issue price Par value Issue price

Current portion of debenture

Debenture 3.78 ~ 6.70 \ 700,000,000 \ 700,000,000 \ 635,000,000 \ 635,000,000

Less: Discount ondebentures

(261,394) (253,677)

700,000,000 699,738,606 635,000,000 634,746,323

Non-current portion of debenture

Debenture 3.93 ~ 8.00 1,443,861,000 1,443,861,000 1,304,713,500 1,304,713,500

Less: Discount ondebentures

(1,721,964) (1,721,938)

1,443,861,000 1,442,139,036 1,304,713,500 1,302,991,562

\ 2,143,861,000 \ 2,141,877,642 \ 1,939,713,500 \ 1,937,737,885

13. Securitized debts

The amounts of securitized debts which are secured by loans and installment financial assets in

accordance with Asset Backed Securitization Act, as of March 31, 2012 and December 31, 2011,

are as follows:


TypeAnnualinterest

rates (%)


Par value Issue price Par value Issue price

Current portion of securitized debts

Debenture 4.12 ~ 4.26 \ 50,000,000 \ 50,000,000 \ 50,000,000 \ 50,000,000

Less: Discount onsecuritized debts

(40,399) (62,214)


24

49,959,601 49,937,786

Non-current portion of securitized debts

Debenture 4.76 ~ 5.43 310,000,000 310,000,000 310,000,000 310,000,000

Less: Discount onsecuritized debts

(523,744) (576,044)

309,476,256 309,423,956

\ 360,000,000 \ 359,435,857 \ 360,000,000 \ 359,361,742

14. Defined Benefit Liability

Details of the amounts recognized in the income statements for the three-month periods ended

March 31, 2012 and 2011:


Type March 31, 2012 March 31, 2011

Current service cost \ 489,409 \ 403,489

Interest cost 75,736 62,598

Expected return on plan assets (50,448) (37,882)

Past service cost (21,263) -

\ 493,434 \ 428,205

The amounts of defined benefit plans recognized in the statements of financial position as of

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



Present value of funded obligations \ 7,447,382 \ 7,596,812

Fair value of plan assets (5,418,338) (5,364,346)

Defined benefit liability \ 2,029,044 \ 2,232,466

15. Income Tax

The Group recognized income tax based on estimation of weighted average annual tax rate annual

fiscal year. Expected weighted average annual tax rate for March 31, 2012, is 18.5% (March 31,

2011 : 27.5%).

16. Derivative Financial Instruments and Hedge Accounting

The Group has the convertible bond issued by Leehan Corp., and recognized the difference

between the acquisition cost of convertible bond and the fair value of normal bond as derivative

assets. The amount recognized as derivative assets as of March 31, 2012, is \ 450,538 thousand

(December 31, 2011 : \ 501,793 thousand), while the net losses from derivative asset for the

three-month period ended March 31, 2012, is \ 51,255 thousand. (March 31, 2011 : Nil)


25

Derivatives designated as cash flow hedges as of March 31, 2012 and December 31, 2011, are as

follows:


Type


Assets Liabilities

Accumulatedother

comprehensive income

andexpenses

Assets Liabilities

Accumulatedother

comprehensive income

andexpenses

Interest rate swaps \ 282,643 \ - \ 214,243 \ - \ 241,837 \ (899,733)

Currency swaps 647,423 2,659,351 (584,742) 867,216 2,449,558 (183,215)

\ 930,066 \ 2,659,351 \ (370,499) \ 867,216 \ 2,691,395 \ (1,082,948)

The amount recognized as other comprehensive income, representing the effective portion related

to cash flow hedge, is \ 712,449 thousand as of March 31, 2012, and the reclassified amount from

other comprehensive income to profit or loss is \ 186,921 thousand. There is no ineffective portion

recognized related to cash flow hedge for the three-months periods ended March 31, 2012 and

2011.

17. Equity

The Company is authorized to issue 80,000,000 shares (par value of per share : \ 5,000). As of

March 31, 2012 and December 31, 2011, the number of common stock and preferred stock, and

paid in capital are as follows :

(in thousands of Korean won, except number of shares)

Type March 31,

2012

December 31,

2011

Commonstock

Number of shares 20,000,000 20,000,000

Capital stock 100,000,000 100,000,000

Additional paid-in capital -

100,000,000 100,000,000

Preferred

stock

Number of shares 5,000,000 5,000,000

Capital stock 25,000,000 25,000,000

Additional paid in capital 74,608,060 74,608,060

99,608,060 99,608,060

Total \ 199,608,060 \ 199,608,060

The convertible preferred stocks have been issued at \ 20,000 per share(par value \ 5,000 per

share) are non-cumulative, non-participating, nominative, non-permanent preferred stock without

voting right, and will be converted into common stock after seven years from issue date.

Legal reserve and discretionary reserve as of March 31, 2012 and December 31, 2011, are as

follows:


26

(in millions of Korean won)

Type

March 31,

2012

December 31,

2011

Legal reserve Revenue reserve \ 4,000,000 \ 1,000,000

Discretionaryreserve

Reserve for electronic financialtransactions

100,000 100,000

Reserve for bad loans 3,357,192 -

Unappropriated retained earnings

(Expected reserve for bad loans

March 31, 2012: \ 9,918,236 thousand,

December 31, 2011: \ 3,357,192 thousand)

129,532,221 145,366,632

\ 136,989,413 \ 146,466,632

If allowances for doubtful accounts do not meet the minimum amount calculated in accordance

with allowance reserve standards of Regulation on Supervision under Article 11 of the Specialized

Credit Financial Business Law Article 11, the Group appropriates a reserve for bad loans in an

amount more than the difference between the allowance and the requirement. The reserve for bad

loans is attributed to discretionary reserve for retained earnings. If the existing reserve for bad

loans exceeds the reserve for bad loans to be reserved, the excess amounts are to be reversed.

And if undisposed deficit exists, the reserve for bad loans is reserved after undisposed deficit is

disposed of.

Appropriated and expected reserves for bad loans as of March 31, 2012 and December 31,




Appropriated reserve for bad loans \ 3,357,192 \ -

Expected reserve for bad loans 9,918,236 3,357,192

\ 13,275,428 \ 3,357,192

Transfer to reserve for bad loans and net income in consideration of effect of changes in

reserve for bad loan for the three-month periods ended March 31, 2012 and 2011, are as

follows:



Net income \ 20,507,328 \ 17,405,147

Transfer to reserve for bad loans1

(9,918,236) (386,438)

Net income in consideration of changes in reserve forbad loans

2 10,589,092 17,018,709

Net income per share in consideration of changes inreserve for bad loans (In won)

3 529 851


27

1Transfer to reserve for bad loans are subtracted from balance of reserve for bad loans in 2011

to balance in 2010.2

Net income in consideration of changes in reserve for bad loans is not accordance with K-IFRS,

and the amount is the sum of the transfer to reserve for bad loans before income tax and net

income.3

Net income per share in consideration of changes is calculated by subtracting the transfer to reserve for

bad loans from the net income for common stock.

The \ 30 billion of dividends for fiscal year ended December 31, 2011, were paid in March 2012

(2011 : \ 10 billion).


Type December 31, 2011 December 31, 2010

Common stock \ 24,000,000 \ 10,000,000

Preferred stock 6,000,000 -

Total \ 30,000,000 \ 10,000,000

18. General and Administrative Expenses

General and administrative expenses for the three-month periods ended March 31, 2012 and



March 31, 2012 March 31, 2011

Payroll \ 3,627,700 \ 4,420,861

Severance benefits 493,395 440,880

Fringe benefits 1,415,100 1,208,312

Outsourcing service charges 987,431 753,024

Sales promotions 3,285,944 3,280,980

Commission 1,205,021 776,937

Outsourcing service commission 501,123 422,413

Depreciation 244,394 360,498

Amortization 275,980 371,704

Taxes and dues 494,678 330,542

Electronic expenses 392,101 225,485

Rent 255,933 220,846

Maintenance expenses on building 269,775 212,515

Travel and transportation 188,824 142,948

Education 132,070 158,690

Communication 142,061 125,161

Other expenses 374,185 334,991

\ 14,285,715 \ 13,786,787


28

19. Other Comprehensive Income

Other comprehensive income for the three-month periods ended March 31, 2012 and 2011,

consist of:

(in thousands of Korean won)March 31, 2012

TypeBeginning

balance

ChangesIncome

tax effectsEndingbalance

Reclassifi-cation of

profit or loss

Otherchanges

Loss on valuation ofderivatives \ (1,082,948) \ 186,921 \ 752,985 \ (227,457) \ (370,499)

Gain on valuation ofavailable-for-salefinancial assets

6,047,838 - (1,804,238) 436,625 4,680,225

Accumulatedcomprehensiveexpense of equitymethod investee

(1,702,584) - 8,528,957 (66,880) 6,759,493

\ 3,262,306 \ 186,921 \ 7,477,704 \ 142,288 \ 11,069,219


March 31, 2011

TypeBeginning

balance

Changes

Incometax effects

Endingbalance

Reclassifi-cation ofprofit or

loss

Otherchanges

Loss on valuation ofderivatives \ (1,662,559) \ 501,024 \678,857 \ (307,827) \ (790,505)

Gain on valuation ofavailable-for-salefinancial assets

2,180,057-

6,415,186 (1,348,068) 7,247,175

Accumulatedcomprehensiveexpense of equitymethod investee

(1,379,779)-

(24,105) 5,303 (1,398,581)

\ (862,281) \ 501,024 \7,069,938 \ (1,650,592) \ 5,058,089

20. Supplemental Cash Flow Information

Cash and cash equivalents in cash flow statements as of March 31, 2012 and December 31, 2011,

consist of follows:



Cash \ 2,000 \ 2,000

Ordinary deposits 8,947,682 6,005,235

Short-term financial instruments 305,546,205 270,001,884


29

\ 314,495,887 \ 276,009,119

Cash generated from operations for the three-month periods ended March 31, 2012 and 2011, are

as follows:


March 31, 2012 March 31, 2011

Net income \ 20,507,328 \ 17,405,147

Adjustments

Net interest expenses 36,743,739 32,874,387

Dividends (250,000) (300,000)

Income tax 4,676,478 6,609,096

Gain on loans receivable 12,148,934 8,184,588

Gain on installment financing 1,070,003 (990,016)

Gain on leased assets (5,981) (7,541)

Gain on foreign currency translation (852,500) (3,011,500)

Gain on equity method valuation (10,849,057) (4,102,292)

Gain on disposal of property and equipment (1,660) -

Bad debts expense 4,808,807 5,142,118


Depreciation 244,394 360,498

Amortization of intangible assets 275,981 371,704

Loss on valuation of derivatives 903,755 3,011,500

49,406,327 48,570,747

Changes in operating assets and liabilities

(Increase) in loans receivable (98,004,667) (209,450,834)

Decrease in installment financing receivables 36,598,032 13,844,229

(Increase) in finance lease receivables (7,040,997) (9,356,084)

(Increase) in deferred loan origination fees andcosts

(18,810,993) (11,132,062)

Increase(decrease) in present value discounts (468,150) 35,586

Increase(decrease) in allowance for bad debts 332,367 (1,952,078)

Decrease in non-trade receivables 3,680,198 242,458

Decrease(increase) in accrued revenues 2,371,714 (1,489,753)

Decrease(increase) in advance payments 204,928 (641,177)

Decrease in prepaid expenses 382,445 2,916,989

Increase in non-trade payables 474,524 5,976,566

(Decrease) in accrued expenses (5,543,701) (3,901,377)

(Decrease) in unearned revenue (538,769) (171,522)

Increase in advance receipts 6,295 124,518

Increase in withholdings 3,433,443 372,267

Payment of severance benefits (23,775) (118,002)

Decrease(increase) in plan assets 2,920 (56,789)

Transfer of severance benefits from related parties 90,489 208,597

Transfer of severance benefits to related parties (766,489) -


30

Increase in leasehold deposits received 3,538,559 3,040,505

(80,081,627) (211,507,963)

\ (10,167,972) \ (145,532,069)

Significant investing and financing activities not affecting cash flows for the three-month period

ended March 31, 2012 and the year ended December 31, 2011, are as follows:



Transferred from advance payments to otherintangible assets

\ - \ 899,800

Transferred to legal reserve 3,000,000 1,000,000Transferred to reserve for bad loans 3,357,192 -

21. Commitments and Contingencies

Details of credit line agreements of the Group as of March 31, 2012, and December 31, 2011, are

as follows:


Type Financial institutions March 31, 2012 December 31, 2011

Limit of overdraftWoori Bank and 6 other

banksKRW 205 billion KRW 175 billion

Limit of L/C Shinhan Bank USD 8 million USD 8 million

Details of pending significant litigations involving the Group as of March 31, 2012, are as follows:


Type Number of litigations Amount of litigations

Plaintiff 18 \ 891,055

Defendant 1 99,751

As of report date, the outcome of these cases cannot be reasonably determined and no

adjustments are reflected on the consolidated financial statements of the Group as of March 31,

2012.

The Group enters into a financial support agreement with Shinhan Bank for the acquisition of mold

equipment for Hyundai and Kia Motor Company’s component partner companies. The Group

guarantees the loans of the component partner companies. The amount of payment guarantees as of

March 31, 2012, is \ 9,185,056 thousand (December 31, 2011: \ 12,542,306 thousand).

Details of guarantees involving third parties as of March 31, 2012, and December 31, 2011, are asfollows:


Guarantor Details March 31, 2012 December 31, 2011


31

Hyundai WiaGuarantees on machinery installment

financing receivables\ 51,167,500 \ 63,422,227

Hyundai Motor

Company

Guarantees on finance leasereceivables 7,557,767 8,877,631

22. Related Party Transactions

The parent company is Hyundai Motor Company. Related parties include associates, joint

ventures, post-employment benefit plans, members of key management personnel and entities

which the Group controls directly or indirectly, has joint control or significant influence over them.

Significant transactions, which occurred in the normal course of business with related companies

for the three-month periods ended March 31, 2012 and 2011, are as follows:

(in thousands of Korean won) March 31, 2012 March 31, 2011Purchases Sale Purchases Sale

Parent Company

Hyundai Motor Company \ 85,742 \ - \ 26,300 \ -

Others

Hyundai Wia Corp. 11,033,130 - 13,056,575 -Hyundai Capital Services

Inc. - 12,271,016 - 6,347,493

Hyundai Autoever Corp. 41,950 - 65,523 -

11,075,080 12,271,016 13,122,098 6,347,493

\ 11,160,822 \ 12,271,016 \ 13,148,398 \ 6,347,493

Revenues and expenses arising from transactions with related parties for the three-month periods

ended March 31, 2012 and 2011, and receivables and payables as of March 31, 2012 and December

31, 2011, are as follows:

(in thousands of Korean won) March 31, 2012 December 31, 2011Receivables Payables Receivables Payables

Parent Company

Hyundai Motor Company \ 176,942 \ 187,549 \ 209,920 \ 173,830

Others

Kia Motors Corp. 2,057 - 2,966 -

Hyundai Capital ServicesInc.

2,835,319 53,521 2,435,947 34,453

Autoever Systems Corp. - - - -

HMC Investment Securities - - - -

Hyundai Card Co., Ltd. 3,768,271 2,391,759 3,504,434 2,870,760

Innocean Worldwide Corp. - - - -

Samwoo Co., Ltd. 31,277,819 118,675 31,345,746 118,675

Haevichi Hotel and Resort - - - -

Haevichi Country Club - - - -

Mseat Inc. 15,000,000 - 15,000,000 -


32

Wia Magna Powertrain - - - -

Employees 1,353,401 - 1,281,205 -

54,236,867 2,563,955 53,570,298 3,023,888

\ 54,413,809 \ 2,751,504 \ 53,780,218 \ 3,197,718


March 31, 2012 March 31, 2011Revenues Expenses Revenues Expenses

Parent Company

Hyundai Motor Company 568,476 5,037 812,407 4,498

Others

Kia Motors Corp. 7,580 - 6,948 -Hyundai Capital Services

Inc.1,317,458 1,290,051 617,720 165,059

Autoever Systems Corp. - 477,443 - 380,461

HMC Investment Securities - 5,000 21,931 338,200

Hyundai Card Co., Ltd. 404,256 535,361 111,296 120,943

Innocean Worldwide Corp. - 9,900 - 25,300Samwoo 618,396 - 50,040 -Haevichi Hotel and Resort - 330 - -Haevichi Country Club - 550 - -Mseat Inc. 255,962 - 64,868 -Wia Magna Powertrain - - 31,196 -Employees 6,986 40 8,333 55

2,610,638 2,318,675 912,332 1,030,0183,179,114 2,323,712 1,724,739 1,034,516

The Group has been provided with guarantees by the related parties.

Compensation for key management for the three-month periods ended March 31, 2012 and 2011,

consists of:



Short-term employee benefits \ 783,971 \ 460,482


The key management above consists of directors (including non permanent directors), who have

significant authority and responsibilities for planning, operating and controlling the Group.

23. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risk. In order to manage these factors,

the Group operates risk management policies and programs that monitor closely and respond to

each of the risk factors. The Group uses derivatives to manage specific risks.

There is no important change after 2011 in risk management team and other risk management

policy of the Group.

Investor Relations

Audit Report: Hyundai Commercial 1Q12 (English)