Audit Report: Hyundai Card 3Q2011

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Independent Accountants’ Review Report English Translation of a Report Originally Issued in Korean To the Shareholders and Board of Directors of Hyundai Card Co., Ltd. and its subsidiaries: We have reviewed the accompanying consolidated financial statements of Hyundai Card Co., Ltd. and its subsidiaries (collectively the “Company”). The financial statements consist of the consolidated statements of financial position as of September 30, 2011 and December 31, 2010, and the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the three months and the nine months ended September 30, 2011 and 2010, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements The Company’s management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Independent accountants’ responsibility Our responsibility is to express a conclusion on the accompanying consolidated financial statements based on our review. We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Review conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements of the Company are not presently fairly, in all material respects, in accordance with K-IFRS 1034, Interim Financial Reporting, and the requirements of K-IFRS 1101, First-time Adoption of Korean International Financial Reporting Standards, relevant to interim financial reporting. November 29, 2011

Notice to Readers

This report is effective as of November 29, 2011, the review report date. Certain subsequent events or circumstances may have occurred between the review date and the time the review report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the review report.

HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

September 30, 2011 December 31, 2010 (Korean won in millions) ASSETS CASH AND BANK DEPOSITS (Notes 6, 32, 33 and 34):

Cash and cash equivalents ￦ 935,121 ￦ 607,048 Bank deposits 33,041 23,131

Total cash and bank deposits 968,162 630,179

INVESTMENT FINANCIAL ASSETS (Notes 7, 33 and 34): Financial assets at fair value through profit or loss (FVTPL) 70,011 190,027 Financial assets available-for-sale (AFS) 1,767 1,776

Total investment financial assets 71,778 191,803 CARD ASSETS (Notes 8, 9, 30, 33 and 34):

Card receivables, net of present value discounts, deferred origination fees and allowance for doubtful accounts 5,856,927 5,961,380

Cash advances, net of allowance for doubtful accounts 1,011,428 1,115,700 Card loans, net of present value discounts, deferred loan

origination fees and allowance for doubtful accounts 1,829,842 1,928,688 Total card assets 8,698,197 9,005,768

LOANS (Notes 8, 9, 33 and 34)

Other loans, net of allowance for doubtful accounts 433 992

PROPERTY, PLANT AND EQUIPMENT (Notes 10, 12, 15 and 30): Land 83,995 80,414 Buildings, net of accumulated depreciation 42,426 34,494 Vehicles, net of accumulated depreciation 368 293 Fixtures and equipment, net of accumulated depreciation 48,940 36,617 Capital lease assets 2,778 - Assets under construction 623 698

Total property and equipment 179,130 152,516

OTHER FINANCIAL ASSETS (Notes 9,19,30,33 and 34): Other accounts receivable, net of allowance for doubtful

accounts 50,431 15,054 Accrued revenue, net of allowance for doubtful accounts 42,117 47,611 Guarantee deposits 51,248 48,129 Derivative assets 3,507 13,748

Total other financial assets 147,303 124,542

OTHER NON-FINANCIAL ASSETS (Notes 6,9,11,26 and 30): Advanced payments, net of allowance for doubtful

accounts 23,971 76,319 Prepaid expenses 6,133 11,634 Intangible assets 70,108 70,450 Deferred income tax assets 136,619 125,064 Others 23,263 27,307

Total other non-financial assets 260,094 310,774 Total Assets ￦ 10,325,097 ￦ 10,416,574

See accompanying notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

September 30, 2011 December 31, 2010 LIABILITIES AND SHAREHOLDERS’ EQUITY (Korean won in millions) BORROWINGS : Borrowings (Notes 13, 33 and 34) ( ￦ 270,000 ￦ 1,581,766 Bonds payable, net (Notes 14, 29, 33 and 34) 6,608,662 5,594,406

Total borrowings 6,878,662 7,176,172

RETIREMENT BENEFIT(Note 16) Retirement benefit obligation 13,463 9,609

Total retirement benefit 13,463 9,609

OTHER FINANCIAL LIABILITIES (Notes 15, 19, 28, 30, 33 and 34):

Accounts payable 822,175 795,721 Withholdings 74,306 73,572 Accrued expenses 101,562 123,112 Income tax payable 41,585 86,864 Finance lease liabilities 2,814 - Derivatives liabilities 9,058 35,085 Import deposit 11,566 10,463

Total other financial liabilities 1,063,066 1,124,817

OTHER NON-FINANCIAL LIABILITIES : Unearned revenue 330,206 287,440 Provisions (Note 18 and 28) 84,074 81,426

Total other non-financial liabilities 414,280 368,866

SHAREHOLDERS’ EQUITY : Share capital (Note 20) 802,326 802,326 Share premium (Note 21) 57,704 57,704 Retained earnings (Notes 22 and 24) 1,118,522 880,210 Reserves (Note 19, 23 and 31) (22,947) (3,150) Non-controlling Interest 20 20

Total shareholders’ equity 1,955,626 1,737,110 Total Liabilities and Shareholders’ Equity ￦ 10,325,097 ￦ 10,416,574



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

2011 2010

Three months ended

September 30.

Nine months ended

September 30.

Three months ended

September 30.

Nine months ended

September 30. (Korean won in millions, except for per share amount) OPERATING REVENUE: Card income (Notes 30 and 36) ￦ 575,665 ￦ 1,729,162 ￦ 546,430 ￦ 1,540,136 Interest income (Note 35) 6,868 18,203 4,067 11,479 Gain on fair value change of financial assets at FVTPL (Note 37) 4 11 - 7

Gain on disposal of financial assets AFS (Note 37) 3,599 7,650 94,905 101,142

Reversal of impairment loss on financial assets AFS (Note 37) 67 805 - 1,753

Dividends income 297 591 223 653 Reversal of provision for unused credit limits 444 - 2,586 - Other operating revenue (Notes 30 and 38) 58,330 60,796 15,731 81,539 Total operating revenue 645,274 1,817,218 663,942 1,736,709 OPERATING EXPENSES: Card expenses (Notes 30 and 36) 230,743 678,074 220,366 621,122 Interest expenses (Note 35) 87,973 269,380 82,703 232,275 General and administrative expenses (Notes 16, 17, 25 and 30) 121,636 357,195 116,660 319,684

Securitization expenses 114 288 238 669 Bad debt expense and loss on disposal of loans 38,345 132,517 33,942 97,541

Transfer to provision for unused credit limits (Note 18) - 1,541 - 598

Loss on fair value change of financial assets at FVTPL (Note 37) - - 49 -

Impairment loss on financial assets AFS (Note 37) - 8 - -

Other operating expenses (Note 30 and 38) 58,322 62,564 15,707 75,108 Total operating expenses 537,133 1,501,567 469,665 1,346,997 OPERATING INCOME 108,141 315,651 194,277 389,712 (Continued)


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)


2011 2010

Three months ended

September 30.

Nine months ended

September 30.

Three months ended

September 30.

Nine months ended

September 30. (Korean won in millions, except for per share amount)

NON-OPERATING INCOME: Rental revenue(Note 30) ￦ 243 ￦ 873 ￦ 438 ￦ 752

NON-OPERATING EXPENSES: Donations 284 609 187 652

INCOME BEFORE INCOME TAX 108,100 315,915 194,528 389,812 INCOME TAX EXPENSE (Note 26) 26,109 77,603 34,845 92,919 PROFIT FROM THE PERIOD 81,991 238,312 159,683 296,893 OTHER COMPREHENSIVE INCOME FOR THE PERIOD (Note 31)

Gain on fair value of financial assets AFS - - (47,567) (53,801) Effective portion of changes in fair value of

cash flow hedges (12,294) (19,796) 5,800 8,773 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ￦ 69,697 ￦ 218,516 ￦ 117,916 ￦ 251,865

Net income attributable to: Owners of the Company 81,991 238,312 159,683 296,893 Non-controlling interests - - - - Total comprehensive income attributable to: Owners of the Company 69,697 218,516 117,916 251,865 Non-controlling interests - - - - Earnings per share (In won per share) (Note 27)

Basic earnings per share ￦ 511 ￦ 1,485 ￦ 995 ￦ 1,850 Diluted earnings per share ￦ 511 ￦ 1,485 ￦ 995 ￦ 1,850



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


Share capital

Capital surplus Other comprehensive income Attributable to owners of the Company

Non-controlling interests Total

Share premium

Other capital

surplus Treasury shares

Retained earnings

Net change in fair value of financial

assets AFS

Cash flow hedging

reserve (Korean won in millions)

Balance at January 1, 2010 ￦ 802,326 ￦ 45,399 ￦ 12,305 - ￦ 734,778 ￦ 53,801 ￦ (16,278) ￦ 1,632,332 ￦ 20 ￦ 1,632,352 Dividends paid - - - - (104,302) - - (104,302) - (104,302) Comprehensive income - - - - - - - - - - Net income - - - - 296,893 - - 296,893 - 296,893 Other comprehensive income - - - - - (53,801) 8,773 (45,028) - (45,028)

Balance at September 30, 2010 802,326 45,399 12,305 - 927,369 - (7,505) 1,779,895 20 1,779,915 Balance at January 1, 2011 802,326 45,399 12,305 - 880,210 - (3,150) 1,737,090 20 1,737,110 Comprehensive income - - - - - - - - - - Net income - - - - 238,312 - - 238,312 - 238,312 Other comprehensive income - - - - - - (19,796) (19,796) - (19,796)

Balance at September 30, 2011 ￦ 802,326 ￦ 45,399 ￦ 12,305 ￦ - ￦ 1,118,522 - ￦ (22,947) ￦ 1,955,606 ￦ 20 ￦ 1,955,626



CONSOLIDATED STATEMENTS OF CASH FLOWS


Nine months ended September 30, 2011 2010

(Korean won in millions) CASH FLOWS FROM OPERATING ACTIVITIES:

Profit from the period ￦ 238,312 ￦ 296,893 Income tax expense 77,602 92,919 Interest income (18,203) (11,478) Interest expense 269,380 232,275 Dividend received (591) (653) Bad debt expense and loss on disposal of receivables 132,517 97,540 Retirement benefits 7,698 5,140 Depreciation 15,162 11,445 Amortization 8,167 6,161 Loss on foreign currency translation 32,524 8,108 Loss on valuation of derivatives and trading 5,878 27,910 Increase in provision for unused commitments limit 1,541 598 Loss from sale of property, plant and equipment 5 10 Impairment loss of financial assets AFS 8 - Other operating losses 148 34 Gain on disposals of financial assets AFS (8,456) (101,142) Gain on valuation of financial assets invested (11) (7) Gain on foreign currency translation (198) (27,923) Valuation of derivatives and trading profit (37,701) (8,041) Amortization of card asset present value discounts (17,376) (5,185) Depreciation of deferred profit or loss units on card asset (17,218) (14,214) Gain from sale of property, plant and equipment (3) -

Changes in working capital: Decrease in financial assets 1 (119,060) Decrease (increase) in card assets 208,176 (1,198,069) Decrease in loans 500 - Increase in other financial assets (27,054) (20,072) Decrease (increase)in other non-financial assets 64,714 (11,054) Decrease in derivative assets 8,190 107,457 Increase in provisions 1,106 7,013 Decrease in retirement benefit obligations (3,354) (2,785) Reduction(expansion) in plan asset (489) 1,516 Decrease in derivative liabilities (17,502) (7,484) Increase in capital lease liabilities 2,814 - Increase in other financial liabilities 554 148,688 Increase in other non-financial liabilities 42,765 26,428

Cash generated from operating activities Interest received 16,353 11,345 Interest paid (254,469) (221,208) Dividend received 591 653 Income tax paid (128,884) (127,503)

Net cash provided by operating activities 603,197 (555,625)

(Continued)


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



(Korean won in millions) CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financial assets invested 120,027 - Disposal of property and equipment 44 - Disposal of intangible assets - 1,450 Net increase in bank deposit (9,910) (32,776) Net increase in gurantee deposit (2,524) (13,902) Acquisition of property and equipment (37,496) (22,058) Acquisition of intangible assets (12,152) (17,622)

Net cash provided by (used in) investing activities 57,989 (84,908)

CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings ￦ 50,000 ￦ 3,680,000 Proceeds from issue of bonds payable 2,894,973 1,974,302 Repayment of borrowings (1,361,766) (3,679,980) Repayment of bonds payable (1,916,320) (1,068,517) Payment of dividend - (104,302)

Net cash provided by (used in) financing activities (333,113) 801,503

NET INCREASE IN CASH AND CASH EQUIVALENTS 328,073 160,970 CASH AND CASH EQUIVALENTS, BEGINNING OF

THE PERIOD 607,048 487,515 CASH AND CASH EQUIVALENTS, END OF THE

PERIOD ￦ 935,121 ￦ 648,485



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 1. GENERAL:

Hyundai Card Co., LTD (the “Parent”) is engaged in the credit card business under the Specialized Credit Financial Business Law of Korea. On June 15, 1995, the Parent acquired the credit card business of Korea Credit Circulation Co., Ltd. and on June 16, 1995, the Korean government granted permission to the Parent to engage in the credit card business. As of September 30, 2011, the Parent has approximately 9.3 million card members, 1.91 million registered merchants, and 181 marketing centers, branches and posts. Its head office is located in Yoido, Seoul. As of September 30, 2011, the total common stock of the Parent is ￦802,326 million. The shareholders of the Parent and their respective ownerships as of September 30, 2011 and December 31, 2010 are as follows:

Shareholder September 30, 2011 December 31, 2010 Number of shares % of ownership Number of shares % of ownership

Hyundai Motor Co., Ltd. 50,572,187 31.52 50,572,187 31.52 Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48 Hyundai Steel Co., Ltd. 8,729,750 5.44 8,729,750 5.44 GE Capital Int'l Holdings 69,000,073 43.00 69,000,073 43.00 Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54 Others 4,851,512 3.02 4,851,512 3.02 Totals 160,465,286 100.00 160,465,286 100.00

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Parent and its subsidiaries (the “Company”) maintains its official accounting records in Republic of Korean won (“Won”) and prepares consolidated financial statements in conformity with Korean statutory requirements and Korean International Reporting Standards (“K-IFRS”), in the Korean language (Hangul). Accordingly, these consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean practices. The accompanying consolidated financial statements have been condensed, restructured and translated into English with certain expanded descriptions from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, comprehensive income, changes in stockholders’ equity or cash flows, is not presented in the accompanying consolidated financial statements.

(1) Basis of Preparation

The Company has adopted the Korean International Financial Reporting Standards (“K-IFRS”) for the annual period beginning on January 1, 2011. In accordance with K-IFRS 1101 First-time adoption of International Financial Reporting Standards, and the transition date to K-IFRS is January 1, 2010. The significant accounting policies under K-IFRS followed by the Company in the preparation of its consolidated financial statements are summarized in Note 4. The Company’s interim consolidated financial statements for the nine months ended September 30, 2011 are prepared in accordance with K-IFRS 1034 Interim Financial Reporting. The interim financial statements are prepared in accordance with the K-IFRS that are effective as of September 30, 2011. There may be newly or amended K-IFRSs and interpretations that are effective subsequent to the current period-end during 2011 or during 2012 which early-adoption is permitted during 2011. Accordingly, accounting policies that are used for the preparation of the interim consolidated financial statements may be different from the policies that are used for the preparation of the first annual consolidated financial statements

in accordance with K-IFRS as of and for the period ending December 31, 2011. Currently, enactments and amendments of the K-IFRSs are in progress, and the financial information presented in the interim financial statements may change accordingly in the future. The interim consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Major accounting policies used for the preparation of the interim consolidated financial statements are stated below. Unless stated otherwise, these accounting policies have been applied consistently to the financial statements for the current period and accompanying comparative period.

(2) Significant Accounting Policies 1) Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (and its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company When the Company loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1039 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. 2) Card assets Card assets are amounts due from customers for services performed in the ordinary course of business. Card assets are initially measured at a fair value including direct transaction cost, thereafter it is measured at amortized cost using the effective interest method except for the financial assets classified as at fair value through profit or loss(FVTPL).

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① Card Receivables

The Company records card receivables when its cardholders make purchases from domestic and foreign card merchants, and when card members of MasterCard International, Visa International and Diners Club International make purchases from domestic card merchants. Advance merchant commission payments; and commission from cardholders for installment payments and cash advances; are recognized as revenue on an accrual basis. ② Card Loans

The Company extends the card loans to its cardholders in accordance with the Specialized Credit Financial Business Law. A constant commission rate is recognized as revenue on an accrual basis.

3) Financial assets

All financial assets are recognized and derecognized on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or loss’ (FVTPL), ‘held-to-maturity’, ‘available-for-sale’ and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. ① Effective interest rate method

The effective interest rate method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognized on an effective interest rate method for debt instruments other than those financial assets classified as at FVTPL.

② Financial assets at fair value through profit or loss (FVTPL)

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: • it has been acquired principally for the purpose of selling it in the near term; or • on initial recognition it is part of a portfolio of identified financial instruments that the Company manages

together and has a recent actual pattern of short-term profit-taking; or • it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: • such designation eliminates or significantly reduces a measurement or recognition inconsistency that would

otherwise arise; or • the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed

and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

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Financial assets at FVTPL are stated at fair value, and any gains or losses arising on remeasurement are recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other revenue or expenses’ line item in the consolidated statement of comprehensive income. And transaction cost from acquisition of them recognized in loss immediately when it arises. ③ Held-to-maturity investments

Non-derivatives financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are measured at amortized cost using the effective interest rate method less any impairment, with revenue recognized on an effective interest rate method basis. ④ Available-for-sale financial assets (ABS)

Non-derivatives financial assets that are not classified as at held-to-maturity, held-for-trading, designated as at fair value through profit or loss, or loans and receivables are classified as at financial assets AFS. Financial assets AFS are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at fair value. Unquoted equity investments whose fair value cannot be measured reliably are carried at cost. Gains and losses arising from changes in fair value are recognized and accumulated in other comprehensive income, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognized in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the other comprehensive income is reclassified to profit or loss. Dividends on AFS equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that are recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income. ⑤ Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortized cost using the effective interest rate method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. ⑥ Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For listed and unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all financial assets classified as AFS, objective evidence of impairment could include: • significant financial difficulty of the issuer or counterparty; or • default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organization. • an active market for financial assets closes due to financial difficulties

For certain categories of financial asset, such as card receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase

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in the number of delayed payments in the portfolio exceeding the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. For financial assets measured at cost impairment is recognized as the difference between the carrying amount of the asset and current value of estimated future cash flows discounted by similar to the current market rate The impairment is not reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of card receivables, where the carrying amount is reduced through the use of an allowance account. When a card receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. ⑦ Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. If the Company derecognizes the entire financial asset, the difference between total received amount plus the sum of cumulative income recognized in other comprehensive income and the book value of the asset is recognized in profit or loss. If the Company does not derecognize the entire financial asset, (for example, the Company holds either an option to repurchase a certain portion of the asset or remaining shares, which does not allow the Company to hold the most of the risks and benefits from the financial asset and the Company controls assets) the Company divides the book value of financial assets into a recognized part and a unrecognized part in accordance with relative fair value of each portion. The difference between total received amount for derecognized portion of the asset plus the sum of cumulative income recognized in other comprehensive income and the book value of the asset is recognized in profit or loss. Cumulative income recognized in other comprehensive income is divided into a recognized part and a unrecognized part in accordance with relative fair value of each portion 4) Property, Plant and Equipment Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment is directly attributable to their purchase or construction, which includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is

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located. Subsequent costs are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Company and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred. The Company does not depreciate land. Depreciation expense is computed using the straight-line method based on the estimated useful lives of the assets as follows:

Estimated useful lives Building 40 years Fixtures and equipment 4 years Vehicles 4 years

Each part of property and equipment with a cost that is significant in relation to the total cost are depreciated separately. The Company reviews the depreciation method, the estimated useful lives and residual values of property, plant and equipment at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. When future economic benefits aren’t expected through the use or disposition of property, plant and equipment, the Company removes the book value of the assets from consolidated statements of financial position. Income inccurred from disposal of property, plant and equipment is the net amount of the trading and the book value and is recognized when the asset is removed. 5) Lease A lease is classified as a finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company recognizes the lesser of the current value of minimum lease payment and the fair value of lease assets as capital lease assets and capital lease liabilities. Lease expenses are allocated to two parts, interest expense and lease payment, to maintain a constant periodic rate each period’s debt balance. Financial cost except such certain qualifying assets, in accordance with the Company’s accounting policies, is recognized immediately as an expense in the period. Any adjustments to lease payment are recognized as cost during period it occurred. 6) Intangible assets ① Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. ② Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

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• the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use

or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. ③ Intangible assets acquired in a business combination Intangible assets that are acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. ④ Disposal of intangible assets

If future economic benefits are not expected through the use or disposition of the intangible assets, the Company removes the book value of the assets from the consolidated financial statements. Income incurred from the disposal of intangible assets is the net amount of the trading and book value, and is recognized when the asset is removed. 7) Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. If impairment recognized in prior periods is reversed the individual assets(or cash-generating unit), the revised carrying amount of the recoverable amount and impairment loss recognized in prior periods, unless a small amount of current carrying amounts have been recorded and determined, the reversal of impairment loss is recognized immediately in profit or loss at the time.

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8) Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. At the end of each reporting period, the remaining provision balance is reviewed and assessed to determine if the current best estimate is being recognized. If the existence of an obligation to transfer economic benefit is no longer probable, the related provision is reversed during the period. 9) Financial liabilities and equity instruments ① Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or equity in accordance with the substance of the contractual arrangement. ② Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs. Treasury shares transactions are deducted directly from equity. Income arising from purchases and sales, issuances, and incinerations of treasury shares are not recognized in profits or losses. ③ Compound instruments

The component parts of compound instruments issued by the Company are classified separately as financial liabilities and equity in accordance with the definition of the financial asset and liability. Convertible option which can be settled by exchanging financial asset such as fixed amount of cash for the fixed number of treasury shares is equity instruments. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis using the effective interest rate method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. ④ Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. ⑤ Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

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A financial liability is classified as held for trading if: • it has been acquired principally for the purpose of repurchasing it in the near term; or • on initial recognition it is part of a portfolio of identified financial instruments that the Company manages

together and has a recent actual pattern of short-term profit-taking; or • it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would

otherwise arise; or • the financial liability forms part of a group of financial assets or financial liabilities or both, which is

managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other operating revenue or expenses’ line item in the consolidated statement of comprehensive income. ⑥ Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method, with interest expense recognized on an effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. ⑦ Financial guarantee contract liabilities

Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: • the amount of the obligation under the contract, as determined in accordance with K-IFRS 1037 Provisions,

Contingent Liabilities and Contingent Assets; and • the amount initially recognized less, cumulative amortization recognized in accordance with the K-IFRS

1018 Revenue Recognition.

⑧ Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. 10) Derivative instruments The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including interest rate swaps and cross currency swaps. Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging

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instrument, in such case the timing of the recognition in profit or loss depends on the nature of the hedge relationship. A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial liability. ① Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. ② Hedge accounting The Company designates certain derivative instruments as cash flow hedges. At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in cash flows of the hedged item. ③ Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the ‘other operating revenue or expenses’ line item. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss, in the same line of the consolidated statement of comprehensive income as the recognized hedged item. Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss. 11) Share capital

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where the Parent or its subsidiary purchases the Parent’s share capital, the consideration paid is deducted from shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

12) Commission revenue

① Fees that are a part of the financial instruments’ effective interest rate Fees that are a part of the effective interest rate of a financial instrument are treated as an adjustment to the effective interest rate. Such fees include compensation for activities such as evaluating the borrower's financial condition, evaluating and recording guarantees, collateral, and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction as well as origination fees received on issuing financial liabilities measured at amortized cost. These fees are deferred and recognized as an adjustment to the effective interest rate. However, in case the financial instrument is classified as a financial asset at fair value through profit or loss, the relevant fee is recognized as revenue when the instrument is initially recognized.

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② Commission from rendering of services

Commission revenue from rendering of services is recognized as the services are provided. When it is not probable that specific loan agreement is contracted and agreed commission is not applied to K-IFRS 1039, relating those services will be recognized on a straight-line basis as the work performs. ③ Commission from significant act performed

The recognition of revenue is postponed until the significant act is executed. 13) Interest income and expense

Using the effective interest rate method, the Company recognizes interest income and expense in consolidated statements of comprehensive income. Effective interest rate method calculates the amortized cost of financial assets or liabilities and allocates interest income or expense over the relevant period. The effective interest rate discounts the expected future cash in and out through the expected life of financial instruments or, if appropriate, through shorter period, to net carrying amount of financial assets or liabilities. When calculating the effective interest rate, the Company estimates future cash flows considering all contractual financial instruments except the loss on future credit risk. Also, effective interest rate calculation include redemption costs, points (part of the effective interest rate) that are paid or earned between contracting parties, transaction costs, and other premiums and discounts. 14) Net trading profit or loss

Net trading profit or loss is comprised of held for trading assets (liabilities) related to gain and loss, and includes changes of realized (unrealized) fair value, interest, dividend, gain or loss on foreign currency translation.

15) Dividend revenue

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably). 16) Foreign currencies

The individual financial statements of the Company are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Korean Won, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise except for exchange differences on transactions entered into in order to hedge certain foreign currency risks. See Note 2 (10) above for hedging accounting policies.

17) Retirement benefit costs For defined retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period The present value of the Company’s defined benefit obligation and the fair value of plan assets as at the end of each reporting period are amortized over the expected average remaining working lives of the participating employees. Past

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service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the consolidated statements of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan. 18) Taxation Income tax consists of current tax and deferred tax. ① Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other periods. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period ② Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. ③ Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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19) Earnings per share

Basic earnings per share is calculated by dividing net profit from the period available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share is calculated using the weighted-average number of common shares outstanding adjusted to include the potentially dilutive effect of common equivalent shares outstanding. The weighted-average number of shares in current year includes convertible bond and stock option.

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company accounting policies, which are described in Note 2, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

4. TRANSITION TO K-IFRSs

Transition adjustments from previous GAAP, Korean GAAP (K-GAAP), to K-IFRSs that affected the Company’s financial position, comprehensive income and cash flows are as follows. (1) Explanation of transition to K-IFRSs Significant differences between the accounting policies chosen by the Company under K-IFRS and under K-GAAP are as follows: 1) Impairment of financial assets (allowance for doubtful accounts)

Under K-GAAP, the Company provided an allowance for doubtful accounts for card assets. The amount of allowance was the higher of allowance calculated based on the expected loss or calculated in accordance to the guidelines provided in the Regulation on Supervision of Credit-Specialized Financial Business. According to K-IFRS, card assets are assessed for impairment individually and also assessed on a collective basis by grouping assets with similar characteristics. Assets that are individually assessed for impairment and for which an impairment loss exist or continues to be recognized are not included in a collective assessment of impairment 2) Provision for unused credit limits

Under K-GAAP, the provision estimated the unused commitment based on the asset quality classifications offered to card accounts and applied a credit conversion ratio as dictated by the Supervision of Banking Business Regulation, additionally, loss provision for more than minimum required reserve rate in Regulation of Specialized Credit Financial Business was recognized. However under K-IFRS, the Company recognizes loss provision for expected future use of unused portions in accordance with K-IFRS 1037 Provision, Contingent Liabilities and Asset. 3) Expansion of the scope for accrued income adjustment

Under K-GAAP, the Company adjusted for accrued income only for card assets not past due. However, under K-IFRS, the Company adjusts for accrued income card assets that are past due and even those that are not impaired. The Company also provides an allowance for accrued income under K-IFRS.

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4) Financial instruments carried at amortized cost

Financial instruments including loan and receivable were accounted for at the nominal amount under K-GAAP. According to K-IFRS, it is measured at fair value at initial recognition and subsequent at amortized cost. 5) Deferred annual membership income

Annual membership income was recognized when it was acquired at one time under K-GAAP. However according to K-IFRS, It is deferred and recognized during the membership period. 6) Unearned revenue from points program

Under K-GAAP, the Company recognized a provision for granted points amounting to the expected expense in the future. However, according to K-IFRS, the Company defers the revenue amounting to the fair value of the points when the points related to the revenue are granted, and then recognizes the revenue when the points are used. However, the Company reserves a provision for the granted points unrelated to the revenue, for the expected expense in the future. 7) Review of useful lives of intangible assets

Under K-GAAP, intangible assets were amortized during 4~5 years of its estimated useful life. However, under K-IFRS, the Company reviews the useful life of intangible assets at the end of each reporting period and reflects appropriately changes accordingly. 8) Retirement benefit obligation (Accrued severance liability)

According to K-GAAP, at the end of a reporting period a retirement benefit obligation is calculated and recognized, based on an assumption that all employees who have worked over a year were to retire as of the reporting period end. However, according to K-IFRS, retirement benefit obligation is estimated by actuarial assessment using the projected unit credit method. 9) Tax effect The tax effects which related to the aforementioned K-IFRS transition adjustments have are also reflected. 10) Other accounts reclassified

• Reclassification of membership & deposit account Memberships which were accounted as other non-current assets in accordance with previous GAAP, are classified as intangible assets with indefinite useful live in under K-IFRS.

• Classification of financial assets and financial liabilities Accounts classified as other assets and other liabilities under previous GAAP, are classified as either financial or non-financial assets and liabilities under K-IFRS.

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(2) Reconciliation in equity due to transition to K-IFRS 1) Reconciliation of equity as of January 1, 2010, K-IFRS transition date, is as follows (Unit: Won in millions):

January 1, 2010 K-GAAP Conversion Effect K-IFRS ASSETS CASH AND BANK DEPOSITS :

Cash and cash equivalents (Note 1) ￦ 479,500 ￦ 8,015 ￦ 487,515 Bank deposits (Note 1) 51 3 54

Total cash and bank deposits 479,551 8,018 487,569

INVESTMENT FINANCIAL ASSETS : Financial assets available-for-sale (Note 1) 82,877 (300) 82,577 Financial assets held for trading 27 - 27

Total investment financial assets 82,904 (300) 82,604 CARD ASSETS :

Card receivables, net of present value discounts and allowance for doubtful accounts (Notes 1,2 and 3) 4,061,085 1,179,079 5,240,164

Cash advances, net of allowance for doubtful accounts (Notes 1 and 2) 535,785 205,031 740,816

Card loans, net of deferred loan origination fees and allowance for doubtful accounts (Notes 1,2 and 3) 814,509 219,884 1,034,393

Assets in trust, net of allowance for doubtful accounts (Note 1) 837,372 (837,372) -

Total card assets 6,248,751 766,621 7,015,372

PROPERTY AND EQUIPMENT : Land 67,819 - 67,819 Buildings, net of accumulated depreciation 32,055 - 32,055 Fixtures and equipment, net of accumulated

depreciation 34,333 - 34,333 Vehicles, net of accumulated depreciation 300 - 300 Assets under construction 912 - 912

Total property and equipment 135,419 - 135,419

OTHER ASSETS: Other accounts receivable, net of allowance for

doubtful accounts (Notes 1 and 2) 9,808 (1,327) 8,481 Accrued revenue, net of allowance for doubtful

accounts (Note 2 and 4) 41,621 (12,968) 28,653 Advanced payments, net of allowance for

doubtful accounts (Note 1) 27,189 (6,622) 20,567 Prepaid expenses (Note 1) 4,121 5,189 9,310 Guarantee deposits (Note 3) 36,017 (1,519) 34,498 Intangible assets 27,466 - 27,466 Deferred income tax assets (Note 5) 55,551 36,581 92,132 Derivative assets (Note 1) 103,225 1,117 104,342 Memberships 22,933 - 22,933 Others 16,683 - 16,683

Total other assets 344,615 20,451 365,066 Total Assets ￦ 7,291,241 ￦ 794,789 ￦ 8,086,030

(Continued)

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January 1, 2010 K-GAAP Conversion Effect K-IFRS LIABILITIES AND SHAREHOLDERS’ EQUITY BORROWINGS :

Borrowings (Note 1) ￦ 671,006 ￦ 400,000 ￦ 1,071,006 Bonds payable, net (Note 1) 3,853,140 333,871 4,187,011

Total borrowings 4,524,146 733,871 5,258,017

OTHER LIABILITIES: Accounts payable (Note 6) 628,103 1,514 629,617 Withholdings (Note 1) 67,332 (10,269) 57,063 Accrued expenses (Note 1) 175,115 1,955 177,070 Unearned revenue (Note 6) 4,664 241,537 246,201 Retirement benefit obligation (Note 7) 5,164 148 5,312 Provisions (Note 8) 387,819 (330,871) 56,948 Derivatives liabilities (Note 1) 6,363 8,034 14,397 Other liabilities (Note 3) 9,287 (235) 9,052

Total Liabilities 5,807,992 645,685 6,453,677

SHAREHOLDERS’ EQUITY: Share capital 802,326 - 802,326 Share premium 57,704 - 57,704 Retained earnings (Note 9) 576,332 158,446 734,778 Reserves (Note 1) 46,886 (9,363) 37,523 Non-controlling interest (Note 1) - 20 20

Total shareholders’ equity 1,483,249 149,103 1,632,352 Total Liabilities and Shareholders’ Equity ￦ 7,291,241 ￦ 794,789 ￦ 8,086,030 1) Effect from the changes in the scope of consolidation as a result of the adoption of K-IFRS 2) Effect of the allowance of doubtful accounts on an incurred loss model 3) Fair value effect due to the effective interest rate method 4) Effect from change in scope for accrued income adjustment 5) Temporary differences, arising from changes in capital of subsidiaries and resulting in changes of deferred tax

assets (liabilities), and offsetting of deferred tax assets and liabilities 6) Effect from change in points program accounting treatment 7) Actuarial valuations of defined benefit liabilities and valuation of long-term employee benefits 8) Changes in estimation of provision for unused credit limits 9) Adjustment of retained earnings as follows;

January 1, 2010 Adjustment in allowance for doubtful accounts ￦ 47,543 Adjustment in provision for unused credit limits 151,259

Adjustment in accrued income 532 Effective interest rate (EIR) (6,249)

Deferred annual membership income (37,571) Unearned revenue from the points program (31,479) Adjustment of retirement benefit liabilities (148) Tax reconciliation 33,840 Consolidation effect 719

Total ￦ 158,446

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2) Adjustments in equity as of December 31, 2010, the end of the final fiscal period described in annual consolidated financial statements in accordance with K-GAAP, are as follows (Unit: Won in millions):

December 31, 2010 K-GAAP Conversion Effect K-IFRS ASSETS CASH AND BANK DEPOSITS :

Cash and cash equivalents (Note 1) ￦ 719,544 ￦ 77,504 ￦ 797,048 Bank deposits (Note 1) 23,128 3 23,131

Total cash and bank deposits 742,672 77,507 820,179

INVESTMENT FINANCIAL ASSETS : Financial assets available-for-sale (Note 1) 2,143 (367) 1,776 Financial assets held for trading - - -

Total investment financial assets 2,143 (367) 1,776

CARD ASSETS : Card receivables, net of present value discounts

and allowance for doubtful accounts (Notes 1,2 and 3) 4,859,801 1,101,579 5,961,380

Cash advances, net of allowance for doubtful accounts (Notes 1 and 2) 893,897 221,803 1,115,700

Card loans, net of deferred loan origination fees and allowance for doubtful accounts (Notes 1,2 and 3) 1,638,017 290,672 1,928,689

Assets in trust, net of allowance for doubtful accounts (Note 1) 1,081,585 (1,081,585) -

Total card assets 8,473,299 532,469 9,005,768

LOANS 985 7 992 Other loans, net of allowance for doubtful

accounts (Note 2) 985 7 992

PROPERTY AND EQUIPMENT : Land 80,414 - 80,414 Buildings, net of accumulated depreciation 34,494 - 34,494 Fixtures and equipment, net of accumulated

depreciation 36,618 - 36,618 Vehicles, net of accumulated depreciation 293 - 293 Assets under construction 698 - 698

Total property and equipment 152,516 - 152,516

OTHER ASSETS: Other accounts receivable, net of allowance for

doubtful accounts (Notes 1 and 2) 15,859 (805) 15,054 Accrued revenue, net of allowance for doubtful

accounts (Note 2 and 4) 60,034 (12,397) 47,637 Advanced payments, net of allowance for

doubtful accounts (Note 1) 152,933 (76,614) 76,319 Prepaid expenses (Note 1) 7,821 3,813 11,634 Guarantee deposits (Note 3) 49,961 (1,832) 48,129 Intangible assets 47,859 1,107 48,966 Deferred income tax assets (Note 5) 147,146 (22,082) 125,064 Derivative assets (Note 1) 13,748 - 13,748 Memberships 21,484 - 21,484 Others 27,308 - 27,308

Total other assets 544,152 (108,809) 435,343 Total Assets ￦ 9,915,768 ￦ 500,806 ￦ 10,416,574

(Continued)

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December 31, 2010 K-GAAP Conversion Effect K-IFRS LIABILITIES AND SHAREHOLDERS’ EQUITY BORROWINGS :

Borrowings (Note 1) ￦ 1,391,766 ￦ 190,000 ￦ 1,581,766 Bonds payable, net (Note 1) 5,292,077 302,330 5,594,407

Total borrowings 6,683,843 492,329 7,176,172

OTHER LIABILITIES: Accounts payable (Note 6) 792,925 2,796 795,721 Withholdings (Note 1) 85,105 (11,533) 73,572 Accrued expenses (Note 1) 207,816 2,160 209,976 Unearned revenue (Note 6) 5,237 282,203 287,440 Retirement benefit obligation (Note 7) 7,250 2,357 9,608 Provisions (Note 8) 466,218 (384,792) 81,426 Derivatives liabilities (Note 1) 4,789 30,297 35,086 Other liabilities (Note 3) 10,496 (33) 10,463

Total Liabilities 8,263,679 415,785 8,679,464

SHAREHOLDERS’ EQUITY: Share capital 802,326 - 802,326 Share premium 57,704 - 57,704 Retained earnings (Note 9) 792,807 87,403 880,210 Reserves (Note 1) (749) (2,401) (3,150) Non-controlling interest (Note 1) - 20 20

Total shareholders’ equity 1,652,089 85,021 1,737,110 Total Liabilities and Shareholders’ Equity ￦ 9,915,768 ￦ 500,806 ￦ 10,416,574 1) Effect from the changes in the scope of consolidation as a result of the adoption of K-IFRS 2) Effect of the allowance of doubtful accounts on an incurred loss model 3) Fair value effect due to the effective interest rate method 4) Effect from change in scope for accrued income adjustment 5) Temporary differences, arising from changes in capital of subsidiaries and resulting in changes of deferred tax

assets (liabilities), and offsetting of deferred tax assets and liabilities 6) Effect from change in points program accounting treatment 7) Actuarial valuations of defined benefit liabilities and valuation of long-term employee benefits 8) Changes in estimation of provision for unused credit limits 9) Adjustment of retained earnings as follows;

December 31, 2010 Adjustment in allowance for doubtful accounts ￦ (25,849) Adjustment in provision for unused credit limits 17,701

Adjustment in accrued income 452 Effective interest rate (EIR) 2,222

Deferred annual membership income (10,123) Unearned revenue from the points program 6,159 Adjustment of retirement benefit liabilities 1,107 Tax reconciliation 855 Consolidation effect 94,879

Total ￦ 87,403

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3) Adjustments in consolidated comprehensive income for the year ended December 31, 2010 are as follows (Unit: Won in millions, except for per share amounts): Year ended December 31, 2010 K-GAAP Conversion Effect K-IFRS OPERATING REVENUE:

Card income (Notes 4 and 6) ￦ 2,012,965 ￦ 101,843 ￦ 2,114,808 Interest income (Note 1) 13,364 2,448 15,812 Gain on asset securitization (Note 1) 90,704 (90,704) - Gain on disposal of financial assets available-for-sale 101,145 - 101,145 Reversal of impairment loss on financial assets available-for-sale 2,616 - 2,616 Dividends income 724 - 724 Other operating revenue (Note 1) 54,223 27,118 81,341

Total operating revenue 2,275,742 40,705 2,316,447

OPERATING EXPENSES: Card expenses (Note 6) 891,441 (30,577) 860,864 Interest expenses (Note 1) 279,358 38,666 318,024 Bad debt expense and loss on disposal of loans (Notes 2 and 4) 158,861 25,849 184,710 General and administrative expenses (Notes 7 and 9) 481,588 (724) 480,864 Securitization expenses 901 901 Transfer to provision for unused credit limits (Note 8) 31,794 (17,701) 14,093 Other operating expenses 43,514 34,818 78,332

Total operating expenses 1,886,556 51,232 1,937,788

OPERATING INCOME 389,186 (10,527) 378,659

NON-OPERATING INCOME: Rental revenue 825 203 1,028 Miscellaneous gains (Note 3) 20,261 (885) 19,377 21,086 (682) 20,404

NON-OPERATING EXPENSES: Donations 1,969 - 1,969 Miscellaneous losses 19,219 - 19,219 21,188 - 21,188

INCOME BEFORE INCOME TAX 389,084 (11,209) 377,875

INCOME TAX EXPENSE (Note 5) 36,214 57,284 93,498

NET INCOME 352,870 (68,493) 284,377

OTHER COMPREHENSIVE INCOME (Note 1 and 7) : (47,635) 4,412 (43,223) Gain (loss) on fair value of financial assets available-for-sale (53,751) (50) (53,801) Effective portion of changes in fair value of cash flow hedges 6,116 7,012 13,128 Actuarial losses - (2,550) (2,550)

TOTAL COMPREHENSIVE INCOME ￦ 305,235 ￦ (64,081) ￦ 241,154

- 20 -

1) Effect from the changes in the scope of consolidation as a result of the adoption of K-IFRS 2) Effect of the allowance of doubtful accounts on an incurred loss model 3) Fair value effect by effective interest rate method 4) Effect from change in scope for accrued income adjustment 5) Temporary differences, arising from changes in capital of subsidiaries and resulting in changes of deferred

tax assets (liabilities), and offsetting of deferred tax assets and liabilities 6) Effect from change in points program accounting treatment 7) Actuarial valuations of defined benefit liabilities and valuation of long-term employee benefits 8) Changes in estimation of provision for unused credit limits 9) Change in useful life of intangible assets

4) Explanation of material adjustments to the consolidated statement of cash flows According to K-IFRS, dividends received, interest received, interest paid and income tax paid which were not presented separately under K-GAAP are now presented separately in the statement of cash flows. In addition, gains (losses) on foreign currency translation of cash and cash equivalents are presented separately in the consolidated statements of cash flows. Interest paid, interest received and dividends received were classified as operating cash flows in accordance with K-GAAP. But, in accordance with K-IFRS, interest paid are reclassified as financing cash flows, and interest received and dividends received are reclassified as investing cash flows. The effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is presented separately from cash flows from operating, investing and financing activities. Except for the aforementioned items, there are no significant differences between the consolidated statements of cash flow prepared according to K-IFRS and K-GAAP. 5) Adjustment for comparable interim period of previous fiscal year Under K-GAAP, the preparation of consolidated interim financial statements were not required and accordingly not prepared by the Company. Under K-IFRS, in such cases, the effects of transition for the comparative periods; in equity for September 30, 2010 and for comprehensive income the nine months ended September 30, 2010 is not required to be presented. Accordingly, the Company has omitted such disclosures in the accompanying financial statements.

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5. SUBSIDIARY: Details of the Company’s subsidiaries as of September 30, 2011 and December 31, 2010 are as follows.

Place of incorporation and operation

Voting share(%)

Companies Major operation September 30, 2011 December 31, 2010 PRIVIA 1st SPC Asset securitization Korea 0.9 0.9 PRIVIA 2nd SPC Asset securitization Korea 0.9 -

6. CASH AND DEPOSITS:

(1) Details of cash and cash equivalents as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Annual interest rate(%) Amount

Annual interest rate(%) Amount

Cash on hand - ￦ 4 - ￦ 4

Current deposits - 893 - 44

Pass-book deposits - 113,224 - 142,500

Other cash equivalents 3.15~3.30 280,000 2.37~2.75 20,000

Time deposits 3.70 33,000 2.88~2.90 14,500

Restricted cash & deposits 3.00~4.25 541,041 2.24~2.63 453,131

￦ 968,162 ￦ 630,179

(2) Restricted financial assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

Type Entity September 30, 2011 December 31, 2010 Restriction

Due from financial institutions

Financial instruments

Shinhan Bank and others

￦ 28

￦ 31

Guarantee deposits for overdraft

Financial

instruments KB and others 33,000 23,100 Secured deposits

Others Other dues Korea Asset Management Corporation 17,685 21,738

Escrow account

￦ 50,713 ￦ 44,869 7. INVESTMENT FINANCIAL ASSETS:

Investment financial assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Financial assets at FVTPL

MMF ￦ 70,011 ￦ 190,027 Financial assets AFS

Unlisted shares 1,767 1,775 Investments - 1

￦ 71,778 ￦ 191,803

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8. CARD ASSETS

Composition of card assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Households Business Total Households Business Total

CARD ASSETS : Card receivables(*) ￦ 5,462,351 ￦ 455,460 ￦ 5,917,811 ￦ 5,592,380 ￦ 428,316 ￦ 6,020,696 Cash advances 1,046,291 - 1,046,291 1,158,832 - 1,158,832 Card loans(*) 1,892,513 - 1,892,513 1,992,216 - 1,992,216

Sub total 8,401,155 455,460 8,856,615 8,743,428 428,316 9,171,744 LOANS Loans to corporate - 500 500 - 1,000 1,000

Total 8,401,155 455,960 8,857,115 8,743,428 429,316 9,172,744 Allowance for doubtful accounts (151,415) (7,070) (158,485) (161,546) (4,437) (165,983)

Book value ￦ 8,249,740 ￦ 448,890 ￦ 8,698,630 ￦ 8,581,882 ￦ 424,879 ￦ 9,006,761 Composition rate 94.80% 5.20% 100.00% 95.30% 4.70% 100.00%

(*) Excluding deferred origination fees and present value discounts 9. ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Changes in the allowance for doubtful accounts for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):

Nine months ended September 30, 2011 Card

receivables Cash

advances Card loans Loans Other assets Total Balance at January 1, 2011 ￦ 59,315 ￦ 43,132 ￦ 63,527 ￦ 8 ￦ 4,059 ￦ 170,041

Bad debt expenses (6,344) (6,305) (4,660) - - (17,309) Bad debt recovered 314 521 167 - - 1,002 Disposition & repurchase (16,659) (12,519) (17,482) - - (46,660)

Additional to (Reversal of) allowance doubtful accounts 24,259 10,033 21,119 59 (1,702) 53,768

Balance at September 30, 2011 ￦ 60,885 ￦ 34,862 ￦ 62,671 ￦ 67 ￦ 2,357 ￦ 160,842

Nine months ended September 30, 2010 Card

receivables Cash

advances Card loans Loans Other assets Total Balance at January 1, 2010 ￦ 42,809 ￦ 24,582 ￦ 26,060 ￦ - ￦ 1,825 ￦ 95,276

Bad debt expenses (2,958) (3,113) (1,528) - - (7,599) Bad debt recovered 277 293 160 - - 730 Disposition & repurchase (8,620) (5,052)

(6,902) - - (20,574)

Additional (Reversal of) allowance doubtful accounts 10,487 14,669 19,774 - 500 45,430

Balance at September 30, 2010 ￦ 41,995 ￦ 31,379 ￦ 37,564 ￦ - ￦ 2,325 ￦ 113,263

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10. PROPERTY AND EQUIPMENT:

(1) Property and equipment as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Acquisition

cost Accumulated depreciation

Book value

Acquisition cost

Accumulated depreciation

Book value

Land ￦ 83,995 ￦ - ￦ 83,995 ￦ 80,414 ￦ - ￦ 80,414 Buildings 45,390 (2,965) 42,425 36,663 (2,169) 34,494 Vehicles 581 (212) 369 458 (165) 293 Fixtures and equipment 112,994 (64,054) 48,940 86,975 (50,357) 36,618 Finance lease assets 3,334 (556) 2,778 - - - Assets under construction 623 - 623 697 - 697

Total ￦ 246,917 ￦ (67,787) ￦ 179,130 ￦ 205,207 ￦ (52,691) ￦ 152,516 The appraised value of the land and the buildings as of September 30, 2011 is as follow (Unit: Won in millions): Lot The appraised value

Land

Yoido 2nd land ￦ 16,129 Hannamdong site 4,702 Youngdeungpo building site 5,962 Ulsan building site 806 Suwon building site 1,440

Gwangju building site 960

Building

Yoido 2nd land 13,816 Hannamdong site 2,323 Ulsan building 1,419 Suwon building 2,629

Gwangju building 1,875

(2) The changes in book value of property and equipment for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows (Unit: Won in millions):

Nine months ended September 30, 2011

Beginning balance Acquisition Reclassification Disposal Depreciation

Ending balance

Land ￦ 80,414 ￦ 3,581 ￦ - ￦ - ￦ - ￦ 83,995 Buildings 34,494 8,727 - - (796) 42,425 Vehicles 293 233 - (46) (111) 369 Fixtures and equipment 36,617 21,470 4,552 - (13,699) 48,940 Finance lease assets - 3,334 - - (556) 2,778 Assets under

construction 698 151 (226) - - 623 Total ￦ 152,516 ￦ 37,496 ￦ 4,326 ￦ (46) ￦ (15,162) ￦ 179,130

(*) ￦4,326 million of fixtures and equipment is reclassified from construction in progress intangible assets (see

Note 11).

Year ended December 31, 2010

Beginning balance Acquisition Reclassification(*) Disposal Depreciation

Ending balance

Land ￦ 67,819 ￦ 12,595 ￦ - ￦ - ￦ - ￦ 80,414 Buildings 32,054 3,323 - - (883) 34,494 Vehicles 300 93 - - (100) 293 Fixtures and equipment 34,334 15,590 1,404 (10) (14,701) 36,617 Assets under 912 780 (994) - - 698

- 24 -


Beginning balance Acquisition Reclassification(*) Disposal Depreciation

Ending balance

construction Total ￦ 135,419 ￦ 32,381 ￦ 410 ￦ (10) ￦ (15,684) ￦ 152,516

(*) ￦410 million of fixtures and equipment is reclassified from construction in progress intangible assets (see

Note 11). 11. INTANGIBLE ASSETS:

(1) Intangible assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011

Acquisition cost Accumulated amortization Book value

Development cost ￦ 42,026 ￦ (11,553) ￦ 30,473 Industrial property rights 195 (70) 125 Others 16,824 (4,611) 12,213 Construction in progress 4,563 - 4,563 Membership 22,734 - 22,734

Total ￦ 86,342 ￦ (16,234) ￦ 70,108 December 31, 2010

Acquisition cost Accumulated amortization Book value

Development cost ￦ 27,598 ￦ (5,797) ￦ 21,801 Industrial property rights 195 (40) 155 Others 11,987 (2,230) 9,757 Construction in progress 17,253 - 17,253 Membership 21,484 - 21,484

Total ￦ 78,517 ￦ (8,067) ￦ 70,450

(2) The changes in intangible assets for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows (Unit: Won in millions):


Beginning balance Acquisition Reclassification Disposal Amortization

Ending balance

Development cost ￦ 21,801 ￦ 2,524 ￦ 11,904 ￦ - ￦ (5,756) ￦ 30,473 Industrial property rights 155 - - - (30) 125

Others 9,757 4,762 75 - (2,381) 12,213 Construction in progress 17,253 3,615 (16,305) - - 4,563

Membership 21,484 1,250 - - - 22,734 Total ￦ 70,450 ￦ 12,151 ￦ 4,326 ￦ - ￦ (8,167) ￦ 70,108

(*) ￦4,326 million of construction in progress is reclassified to fixtures and equipment (see Note 10).


Beginning balance Acquisition Reclassification(*) Disposal Amortization

Ending balance

Development cost ￦ 9,715 ￦ 8,791 ￦ 9,092 ￦ - ￦ (5,797) ￦ 21,801 Industrial property rights 195 - - - (40) 155

- 25 -


Beginning balance Acquisition Reclassification(*) Disposal Amortization

Ending balance

Others 7,577 4,329 81 - (2,230) 9,757 Construction in progress 9,980 16,856 (9,584) - - 17,253

Membership 22,933 33 - (1,482) - 21,484 Total ￦ 50,400 ￦ 30,009 ￦ (411) ￦ (1,482) ￦ (8,067) ￦ 70,450

(*) ￦411 million of construction in progress is reclassified to fixtures and equipment (see Note 10).

12. ASSETS PLEDGED AS COLLATERAL:

Land and buildings amounting to￦822 million are provided as collateral for leasehold deposit received as of September 30, 2011.

13. BORROWINGS:

Borrowings as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

Annual interest rates (%) Maturity

Borrowed from September 30, 2011 December 31, 2010

Commercial papers SK Security

and others 3.58 ~ 3.81 2011.11.18 ~ 2012.3.20 ￦ 140,000 ￦ 850,000

Borrowings Jeonbuk Bank

and others 4.69 ~ 5.55 2011.11.02 ~ 2014.7.09 130,000 620,000

Borrowings in foreign currency

- 111,766

￦ 270,000 ￦ 1,581,766

14. BONDS PAYABLE:

(1) Bonds payable issued by the Company and outstanding as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

Annual

interest rates (%) Maturity

September 30, 2011 December 31, 2010 Par value Issue price Par value Issue price

Short-term debentures 3.17 ~ 4.55

2011.10.19 ~ 2012.6.20

￦ 330,000

￦ 330,000

￦ 350,000

￦ 350,000

Current portion of debentures

3.39 ~ 8.56 Libor + 0.80

2011.10.02 ~ 2012.9.29 1,359,000 1,359,000 1,275,887 1,275,887

Long-term debentures

3.47 ~ 6.94 Libor + 0.72

2012.10.06 ~ 2018.5.12 4,929,492 4,929,492 3,972,640 3,972,640

Discounts on debentures

(9,830) (4,121) ￦ 6,618,492 ￦ 6,608,662 ￦ 5,598,527 ￦ 5,594,406

The outstanding bonds payable are non-guaranteed corporate bonds, with their principals to be redeemed at maturity. Bond issuance costs are recorded as discounts on bonds payable and amortized using the effective interest rate method.

- 26 -

(2) The redemption schedule for bonds payable is as follows (Unit: Won in millions):

Period Amount to be redeemed

as of September 31, 2011 2011.10.1 ~ 2012.9.30 ￦ 1,689,000 2012.10.1 ~ 2013.9.30 1,297,692 2013.10.1 ~ 2014.9.30 1,671,800 2014.10.1 ~ 2015.9.30 970,000

2015.10.1 ~ 990,000 ￦ 6,618,492

Period Amount to be redeemed

as of December 31, 2010 2011.1.1 ~ 2011.12.31 ￦ 1,625,887 2012.1.1 ~ 2012.12.31 1,225,556 2013.1.1 ~ 2013.12.31 827,084 2014.1.1 ~ 2014.12.31 1,050,000

2015.1.1 ~ 870,000 ￦ 5,598,527

15. FINANCE LEASE LIABILITIES:

(1) Lease contract

The Company uses electronic equipment under a finance lease for 3 years. The Company bargain purchase option at expiration date of lease contract. Lessor has legal ownership for the book value amounting to ￦3,334 million of the finance lease assets as collateral for its finance lease obligation. (2) Finance lease liabilities of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in

millions):

September 30, 2011 December 31, 2010 Minimum lease payments

Present value of minimum lease payments

Minimum lease payments

Present value of minimum lease payments

Less than 1 year ￦ 1,202 ￦ 1,169 ￦ - ￦ - 1-5 years 1,803 1,645 - - Present value discounts (191) - Present value ￦ 2,814 ￦ -

16. RETIREMENT BENEFIT PLAN:

(1) Defined benefit plan

The Company operates a defined benefit plan. Actuarial evaluation of plan assets and defined benefit obligation was performed by HMC Investment Securities Co., Ltd. as of September 30, 2011. Present value of the defined benefit obligation, current service cost and past service cost is calculated using the projected unit credit method.

(2) Details of defined benefit plan are as follows (Unit: Won in millions):

As of September 30, 2011 and December 31, 2010 the amounts recognized in the consolidation statements of financial position related to retirement benefit obligation are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010

Present value of defined benefit obligation ￦ 32,718 ￦ 27,790 Fair value of plan assets (19,218) (18,143)

- 27 -

Transferred to national pension fund (37) (39) Retirement benefit obligation ￦ 13,463 ￦ 9,608

(3) Changes in present values of defined benefit obligation for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):

Nine months ended September 30,

2011 2010 Beginning balance ￦ 27,790 ￦ 24,615 Current service cost 5,515 4,601 Interest cost 981 978 Transfer of employees between the

Company and the related companies 910 (129) Actuarial gains (losses) 1,786 -

Benefits paid (4,264) (2,655)

Ending balance ￦ 32,718 ￦ 27,410

(4) Changes in fair values of plan assets for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):

Nine months ended September 30,

2011 2010 Beginning balance ￦ 18,143 ￦ 19,259 Contributions from the employer 1,500 - Expected return on plan assets 526 683 Actuarial gains (losses) 58 (244) Transfer of employees between the

Company and the related companies 514 (263) Benefits paid (1,523) (1,323) Ending balance ￦ 19,218 ￦ 18,112

(5) Details of pension expenses are as follows (Unit: Won in millions): 2011 2010

Three months ended

September 30. Nine months ended September 30.

Three months ended September 30.

Nine months ended September 30.

Current service cost ￦ 1,951 ￦ 5,515 ￦ 1,533 ￦ 4,601 Interest cost 353 981 326 978 Expected return on plan assets (178) (526) (227) (683) Actuarial gains 442 1,728 36 244

Total ￦ 2,568 ￦ 7,698 ￦ 1,668 ￦ 5,140 Return on plan assets 198 584 122 370

(6) Details of fair values of plan assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Amount Ratio Amount Ratio Deposits ￦ 19,218 100% ￦ 18,143 100%

(7) Actuarial assumption as of September 30, 2011 and December 31, 2010 are as follows


Discount rate (%) 4.83% 4.90% Expected return on plan assets (%) 3.92% 4.20%

Expected rate of salary increase (%) 5.66% 5.43%

- 28 -

17. EMPLOYEE BENEFITS:

Details of employee benefits for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):

2011 2010

Three months ended

September 30. Nine months ended

September 30. Three months ended


September 30. Short-term employee benefits ￦ 29,905 ￦ 79,373 ￦ 32,706 ￦ 74,160 Pension expenses 2,568 7,698 1,668 5,140 ￦ 32,473 ￦ 87,071 ￦ 34,374 ￦ 79,300

18. PROVISION:

(1) Details of provision for the nine months ended September 30, 2011 and the year ended December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Provision for unused credit limits ￦ 47,614 ￦ 46,073

Provision for mileage points 19,597 14,437

Other provisions 16,863 20,916 ￦ 84,074 ￦ 81,426

(2) Provision for unused credit limits

The Company recognizes other loss provision for expected future use of unused portions of credit limits. The changes in other loss provision are as follows (Unit: Won in millions):

September 30, 2011 September 30, 2010 Beginning ￦ 46,073 ￦ 31,980

Increase 1,541 598

Ending ￦ 47,614 ￦ 32,578

(3) Provision for mileage points

The Company records provisions for projected expenses considering the past rewards history and experience. The changes in provision for mileage points are as follows (Unit: Won in millions):

September 30, 2011 September 30, 2010 Point Customer loyalty Point Customer loyalty Beginning ￦ 2,368 ￦ 12,069 ￦ 2,869 ￦ 13,080 Increase (decrease) 1,136 4,024 (367) (1,717) Ending ￦ 3,504 ￦ 16,093 ￦ 2,502 ￦ 11,363

(4) Other provisions

September 30, 2011 September 30, 2010 Beginning ￦ 20,916 ￦ 9,020 Increase(Decrease) (4,053) 9,096

Ending ￦ 16,863 ￦ 18,116 Escrow account deposits of ￦14,063 million and provision for pending litigations of ￦2,800 million are included in as the above amounts.

- 29 -

19. DERIVATIVES AND HEDGE ACCOUNTING:

(1) There are no derivative instruments held for trading as of September 30, 2011 and December 31, 2010.

(2) Cash flow hedge 1) Fair value of cash flow hedge as of September 30, 2011 and December 31, 2010 are as follows (Won in

millions):

September 30, 2011 December 31, 2010 Contract

Amount Asset Liabilities

Contract Amount Asset

Liabilities

Interest rate

swap ￦ 340,000 ￦ 643 384 ￦ 560,000 ￦ 458 ￦ 974 Cross currency

swap 648,652 2,864 8,674 511,293 13,290 34,112 Total ￦ 988,652 ￦ 3,507 ￦ 9,058 ￦ 1,071,293 ￦ 13,748 ￦ 35,086

For transactions between local currencies and foreign currencies, the unsettled amount of transaction is presented using the basic foreign exchange rate on the contract amount in foreign currencies. For transaction between foreign currencies and other foreign currencies, the unsettled amount is presented using the basic foreign exchange rate on the contract amount in foreign currencies purchased.

2) Expected cash flow for cash flow hedge

The maximum period, of which the Company is exposed to future cash flows fluctuations arising from currency swaps are as follows (Won in millions):


Less than 1month ￦ (2,827) ￦ (2,443) 1-3 months (2,418) (7,278) 3-12 months (7,326) (35,820) 1-5 years 8,169 (11,262) More than 5 years - -

￦ (4,402) ￦ (56,803) 20. SHARE CAPITAL:

(1) The Parent’s authorized shares are 600,000,000 (￦5,000 per shares), and 160,465,286 shares of common stocks (￦802,326 million) are issued as of September 30, 2011.

(2) There are no changes in shares of the Parent for the nine months ended September 30, 2011

(3) 50,572,187 shares (￦252,861 million) of common stock issued by the Parent are owned by Hyundai Motors Company as of September 30, 2011

21. SHARE PREMIUM:

Details of share premium as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):


Share premium ￦ 45,399 ￦ 45,399 Other capital surplus 12,305 12,305

￦ 57,704 ￦ 57,704

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22. RETAINED EARNINGS:

(1) Details of retained earnings as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):


Legal reserve (*) ￦ 20,143 ￦ 20,143 Retained earnings 1,098,379 860,067

￦ 1,118,522 ￦ 880,210

(*) The Korean Commercial Code requires a company to appropriate at least 10 percent of dividends paid as legal reserve for each fiscal period, until the reserve equals 50 percent of paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.

(2) Changes in retained earnings for the nine months ended September 30, 2011 and 2010 are as follows (Unit:

Won in millions):


Beginning ￦ 880,210 ￦ 734,778 Net income attributable to the owners of the Company 238,312 296,893 Total dividends - (104,302) Ending ￦ 1,118,522 ￦ 927,369

23. RESERVES:

(1) Reserves as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Cash flow hedging reserve ￦ (22,947) ￦ (3,150)

(2) Cash flow hedging reserve

Details of cash flow hedging reserve for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):


Beginning ￦ (3,150) ￦ (16,278)

Cash flow hedging reserve gains(losses) Interest rate swap 774 6,372 Cross currency swap (26,123) 5,202

Tax effect related to other comprehensive income 5,552 (2,801) Amount reclassified to current income

Cross currency swap - -

Tax effect related to reclassified amounts to current income - -

Ending ￦ (22,947) ￦ (7,505)

Cash flow hedging reserve represents the cumulative gain or loss of hedging instruments considered effective portion in hedge accounting. The cumulative deferred gains or losses of hedging instruments is reclassified to profits or losses only when the hedged item is reflected in profits or loss, or by which initial book value of non-financial hedged item is adjusted in accordance with relevant accounting policy.

24. RESERVE FOR BAD LOANS: Reserve for bad loans is calculated and disclosed according to Article 11, Terms of Specialized Credit Finance Director.

- 31 -

(1) Reserve for bad loans reflected in retained earnings as of September 30, 2011 and December 31, 2010 are as

follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Accumulated reserve for bad loans ￦ - ￦ - Expected reserve for bad loans 376,124 - Reserve for bad loans ￦ 376,124 ￦ -

(2) The transfer to reserve for bad loans and adjusted income with reserve for bad loans for the nine months

ended of September 30, 2011 and 2010 are as follows (Unit: Won in millions): 2011 2010 Three months

ended September 30.

Nine months ended

September 30.

Three months ended

September 30.

Nine months ended

September 30. Transfer to reserve for bad loans (*1,2) ￦ 122,257 ￦ 183,314 ￦ - ￦ - Adjusted income after reserve for bad loans (*1) (40,266) 54,998 159,682 296,893 EPS with reserve for bad loans (251) 343 995 1,850

(*1) Transfer amount and adjustment income are calculated as if reserve for bad loans were implemented from 2010. (*2) Transfer amount = reserve for bad loans as of September 30, 2011 – reserve for bad loans as of December 31, 2010.

25. GENERAL AND ADMINISTRATIVE EXPENSES:

Details of general and administrative expenses as of September 30, 2011 and 2010 are as follows (Unit: Won in millions):

<PAYROLL> 2011 2010 Three months

ended September 30.

Nine months ended

September 30.

Three months ended

September 30.

Nine months ended

September 30. Salaries wages ￦ 25,724 ￦ 66,104 ￦ 24,081 ￦ 57,451 Pension expenses 2,568 7,698 1,668 5,140 Employee benefits 6,280 18,652 5,574 16,709 ￦ 34,572 ￦ 92,454 ￦ 31,323 ￦ 79,300

<OTHER EXPENSES> 2011 2010 Three months

ended September 30.

Nine months ended

September 30.

Three months ended

September 30.

Nine months ended

September 30. Travel expenses ￦ 463 ￦ 1,457 ￦ 517 ￦ 1,307 Communication expenses 5,388 15,936 4,822 12,746 Post expense 2,877 8,694 2,933 8,051 Rental expenses 5,536 15,848 4,940 15,452 Taxes dues 3,563 14,841 3,916 10,546 Repair and maintenance expenses 231 594 237 496 Insurance premiums 17 222 21 160 Entertainment expenses 179 572 440 1,118 Advertising expenses 9,640 31,903 12,902 42,981 Supply expenses 397 1,423 478 1,247 Vehicle maintenance expenses 3 14 1 9 Periodicals expenses 18 63 27 76 Publication expenses 3,063 6,859 1,518 3,857 Training expenses 1,208 2,778 1,022 2,278

- 32 -

2011 2010 Electronic data processing expense 5,585 21,798 6,653 19,919 Expense for temporary staff ￦ 7,980 ￦ 24,083 ￦ 8,037 ￦ 24,871 Professional expenses 24,633 70,621 24,065 57,286 Delivery commission 468 1,681 469 1,286 Commission expense 5,426 16,449 5,196 14,521 Business activities expense 1,027 2,870 995 2,797 Depreciation expense 5,427 15,162 3,914 11,445 Amortization expense 2,977 8,167 1,603 6,161 Event expense 178 538 92 290 Conference expense 69 274 78 245 Building administrative expense 712 1,894 461 1,238 ￦ 87,065 ￦ 264,741 ￦ 85,337 ￦ 240,383 26. INCOME TAX OF CONTINUED OPERATION

(1) Income tax expense for the nine months ended September 30, 2011 and 2010 are summarized as follows (Unit: Won in millions):

Nine months ended September 30, 2011 2010 Income tax currently payable ￦ 84,227 ￦ 92,320 Changes in deferred tax assets (liabilities) by temporary differences (*) (11,555) (13,778) Changes in income tax expense reflected directly in shareholders’

equity 4,930 14,377 Income tax expense ￦ 77,602 ￦ 92,919 (*) Net deferred tax assets due to temporary differences ￦ 136,619 ￦ 105,910

Net deferred tax liabilities due to temporary differences 125,064 92,132 Changes in net deferred tax assets (liabilities) due to temporary

differences ￦ (11,555) ￦ 13,778

(2) Income tax expenses reflected directly in shareholders’ equity for the nine months are as follows (Unit: Won in millions):

January 1, 2011 September 30, 2011 Increase(Decrease) Loss on valuation of derivatives ￦ 1,110 ￦ 6,662 ￦ 5,552 Actuarial gains and losses 622 - (622) Total ￦ 1,732 ￦ 6,662 ￦ 4,930

(3) A reconciliation between income before income tax and income tax expense for the nine months ended

September 30, 2011 and 2010 are as follows (Unit: Won in millions):


Income before income tax ￦ 315,915 ￦ 389,812 Income tax payable by the statutory income tax rate of 24.2% 76,425 94,308 Tax reconciliations:

Non-taxable income - 15 Non-deductible expenses 7 109 Consolidation effect (298) 101 Others 1,468 (1,641)

Income tax of continued operation ￦ 77,602 ￦ 92,919

- 33 -

(4) Details of changes in accumulated temporary differences for the nine months ended September 30, 2011 and for the year ended December 31, 2010 are as follows (Unit: Won in millions):


Descriptions Beginning balance(*)

Decrease

Increase

Ending balance

Deferred tax asset (liab.)

Temporary differences to be deducted: Escrow deposit ￦ 18,116 ￦ - ￦ - ￦ 18,116 ￦ 3,986 Present value discount 804 804 - - - Provision for unused commitments 215,032 215,032 47,614 47,614 10,475 Prepaid expenses (swap point) 56,709 38,934 38,824 56,599 12,776 Accrued expenses 57,894 57,894 57,988 57,988 14,033 Point allowance provisions 233,069 233,069 360,794 360,794 81,974 Debt-for-equity swap 7,450 - - 7,450 1,803 Loss on impairment of financial assets

available-for-sale 16,262 67 8 16,203 3,568

Foreign currency translation losses 20,419 - 20 20,439 4,946 Retirement benefit obligation 21,278 - 3,223 24,501 5,390 Loss on fair value of currency swaps 42,597 - (5,408) 37,189 9,000 Gains or losses on fair value of currency

swaps 1,203 1,203 879 879 193

Loans to employees - - 5,443 5,443 1,197

Other loss provision(litigation) - - 2,800 2,800 616 Others 280,591 253,750 - 26,841 6,496

971,424 800,753 512,185 682,856 156,453

Temporary differences to be added: Retirement insurance premium ￦ (20,998) ￦ - ￦ 1,863 ￦ (19,135) ￦ (4,210) Allowance for doubtful accounts 12,754 12,754 (11,569) (11,569) (2,800) Accrued receivable income (291) - - (291) (70) Foreign currency translation gains (10,373) - 5,210 (5,163) (1,250) Gain on fair value of interest rate swaps (169) (169) - - - Gain on fair value of currency swaps (52,590) (6,057) - (46,533) (11,261) Gains or losses on valuation of investment

in securities (67) (67) - - -

Amortization of intangible assets - - (1,107) (1,107) (243) (71,734) 6,461 (5,603) (83,798) (19,834) Deferred income tax assets ￦ 136,619

(*) Differences between the amount disclosed in prior year’s audit report and the actual tax return amount of

￦(7,156) million is reflected in the beginning balances.


Descriptions Beginning balance

Decrease

Increase

Ending balance


Temporary differences to be deducted: Escrow deposit ￦ 12,336 ￦ - ￦ 5,748 ￦ 18,084 ￦ 3,978 Present value discount 13,136 4,492 - 8,644 2,058 Provision for unused commitments 34,657 - 24,995 59,652 13,203 Prepaid expenses(swap point) 59,396 5,084 - 54,312 12,221 Accrued expenses 84,593 - 9,849 94,442 22,855 Provision for mileage points 15,383 7,827 - 7,556 1,826 Loss on impairment of financial assets

available-for-sale (43,507) - 67,566 24,059 5,557 Foreign currency translation losses 98,575 88,523 - 10,052 2,433 Retirement insurance premium (17,082) - 34,846 17,764 3,908 Others 245,326 - 35,265 280,591 65,086

502,813 105,926 178,269 575,156 133,125

Temporary differences to be added:

- 34 -


Descriptions Beginning balance

Decrease

Increase

Ending balance


Allowance for doubtful accounts (19,633) (10,655) - (8,978) (2,173) Construction in progress (45) (45) - - - Accrued receivable income ￦ (520) ￦ - ￦ (455) ￦ (975) ￦ (236) Gain on fair value of currency swaps (98,056) (89,097) - (8,959) (2,264) Retirement benefit obligation 17,230 - (32,637) (15,407) (3,389)

(101,024) (99,797) (33,092) (34,319) (8,062) Deferred income tax assets ￦ 125,063

27. EARNINGS PER SHARE:

(1) Earnings per share for the nine months ended September 30, 2011and 2010 is as follows.

2011 2010 Three months ended




September 30. Net income ￦ 81,991,050,004 ￦ 238,312,480,149 ￦ 159,682,524,284 ￦ 296,893,491,188 Weighted average

number of shares 160,465,286 160,465,286 160,465,286 160,465,286 Net income per share ￦ 511 ￦ 1,485 ￦ 995 ￦ 1,850

(2) Diluted earnings per share

As the Company has not issued any diluted securities, diluted earnings per share is the same as basic earnings per share for the year ended September 30, 2011.

28. CONTINGENCIES AND COMMITMENTS:

(1) Credit line agreement

a. The following are credit line agreement as of September 30, 2011 and December 31, 2010 (Unit: Won in millions):

Type Financial instruments September 30, 2011 December 31, 2010 Overdraft limit SC First Bank ￦ 50,100 ￦ 50,100 Intraday overdraft limit Shinhan Bank and others 250,000 250,000 General credit limit KB 30,000 60,000

b. Credit Facility Agreement

The Company entered into a Credit Facility Agreement with GE Capital Corporation (“GECC”) on August 4, 2010. The limit of Credit Facility is Euro worth of USD200 million. The Company will pay 28bp of commitment fee for amount and the maturity is renewable every 364 days, up to 3 years. With regard to the Credit Facility Agreement, the Company, GECC, Hyundai Motor Company and Kia Motors Corp. entered into a Support Agreement and the contract date of Support Agreement is the same as that of Credit Facility Agreement. In accordance with the Support Agreement, GECC has the right of debt-for-equity swap for the unredeemed amount in case that the Company is not able to repay after a year from the first withdrawal of Credit Facility. Additionally, GECC has a put option to sell 41% of convertible stock to Hyundai Motor Company and 15% of convertible stock to Kia Motors Corp. at the time of debt-for-equity swap. Hyundai Motor Company and Kia Motors Corp. have call options to buy stocks from GECC on the same condition of put option in case that GECC does not exercise a put option. The Company is will pay 15bp of commitment fee on the amount equivalent to 41% and 15% of settled amount of Credit Facility to Hyundai Motor Company and Kia Motors Corp., respectively.

- 35 -

c. Revolving Credit Facility

The Company has a revolving credit facility agreement with many financial institutions for credit line for the period ended September 30, 2011 as follows (Unit: Won in millions): Financial instruments Credit line Term Kookmin Bank ￦ 100,000 2011-01-28 ~ 2012-01-28 Kookmin Bank 30,000 2011-05-28 ~ 2012-05-28 Nong Hyup 100,000 2011-03-29 ~ 2012-03-29 Citibank, Seoul 50,000 2010-12-24 ~ 2011-12-24 Woori Bank 200,000 2011-06-30 ~ 2012-06-30 Shinhan Bank 50,000 2011-04-28 ~ 2012-04-28 Shinhan Bank 50,000 2010-05-31 ~ 2012-05-31

(2) Alliance

The Company has separate agency agreements regarding its credit card business with SC First Bank, Shinhan Bank, Woori Bank, Korea Exchange Bank, Citibank, Hana Bank, Gwangju Bank, Jeonbuk Bank, Cheju Bank, Postal Office, Korea Computer Co., Ltd. and others.

(3) License Agreement and Franchise Agreement

The Company entered into Member Issuance and Franchise Agreements with Master Card International, Visa International and Diners Club International for credit card issuance, and pays each a fee based on a fixed rate for each credit card issued.

(4) Overseas Travel Insurance Agreement

The Company has a travel insurance agreement with Hyundai Marine & Fire Insurance Co., Ltd. to cover the risks and damages that may occur during credit cardholders’ travel. As of September 30, 2011, the maximum amount of insurance claim is ￦1.2 billion per cardholder.

(5) Directors and Officers Liability Insurance

The Company has insurance for its directors and officers covering indemnity with the limit of ￦20 billion and financial accident liability with the limit of ￦1 billion.

(6) Pending Lawsuits

As of September 30, 2011, the following are the pending lawsuits, whose outcomes cannot be ascertained as of the report date (Unit: Won in millions):

Type Plaintiff Defendant Amount Status Claim for loss compensation

Hankook Cardnet and 6 others

The Company and 16 defendants ￦ 2,742 Ongoing

Claim for loss compensation

Jeong, Seong Hwa and 70 others

The Company and 16 defendants 8,191 Ongoing


Lee, Bok Gi and 113 others

The Company and 16 defendants 153 Ongoing


Byeon, Tae Seop and 7 others



Shin, Gwang Sik and 5 others



HanKook Card System and 18 others


Unfair profits Jung, So Yeon and 26 others



Jang, Won Sik and 124 others


Claim for loss Ko, Sung Bong and 108 The Company and 16 108 Ongoing

- 36 -

Type Plaintiff Defendant Amount Status compensation others defendants


Yoon, Yong Seob and 30 others



Lee, Kyoung Hee and 3 others



Kang, Kyoung Hee and 53 others


Claim for loss compensation Shin, Dong Wook


Claim for loss compensation Yoo, Jae Won and 5 others


Claim for loss compensation Han, Ji Hae The Company 20 Ongoing

Claim for loss compensation Kim, Myung The Company 7 Ongoing

Cancellation of tax charge The Company

Yeongdeungpo District Tax Office 56 Ongoing

Cancellation of tax charge The Company

Yeongdeungpo District Tax Office 69 Ongoing

Cancellation of tax charge The Company The Parnas Hotel 1,134 Ongoing

￦ 17,779

(7) Deposit for Loss Contingency As of September 30, 2011, the Company has deposits of ￦4,967 million and ￦9,096 million to cover probable losses from the sales of Daewoo Construction’s shares and Daewoo International Corporation’ shares, respectively, in an escrow account and records the amounts as loss provision.

(8) Reserve for Loss Reimbursement

The Company has the obligation to reimburse customers for fraudulent credit card activities; the Company records the expected losses as an accrued expense.

(9) Security on the Receivables Sold Relating to Asset-Backed Securitization

The Company continuously transfers receivables to maintain a certain level of its equity in the 2nd series beneficiary certificates relating to the asset-backed securitization.

(10) Guarantee

The Company has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd. amounting to ￦5,046 million in connection with airline ticket payments and others.

(11) Early Redemption Rule Associated with Asset-Backed Securitization

According to the agreement on the Company’s Asset-Backed Securitization, in order to enhance credit level of the asset-backed securities, several provisions are in place as trigger clauses to be used for early redemption calls, thereby limiting the risk that the investors are exposed to resulting from a change in quality of the assets in the future. In the event the asset-backed securitization of the Company is in violation of the applicable trigger clause, the Company is obliged to make early redemption for the asset-backed securities.

(12) Contract of Sale of Receivables

The Company entered into a contract with Hyundai Capital Services, Inc. relating to its sale of receivables on January 24, 2006. In accordance with the contract, the Company sells the receivables that are 60 days or more past due or written-off to Hyundai Capital Services, Inc. Such sale occurs three times a month on designated cutoff dates at the amount calculated using a predetermined sales ratio pursuant to the contract.

- 37 -

29. ASSETS-BACKED BORROWINGS (ABS):

(1) Asset-backed borrowing and underlying assets

The Company transferred its card assets to a special purpose corporation (SPC) and issued ABS with them. As the Company did not meet the requirements of a financial asset transfer, in accordance with K-IFRS 1039, the Company recognized this transaction as a borrowing and not as sales of assets. As such, card assets transferred to the SPC are included as part as the Company’s other card assets.

The details of asset-backed borrowing and underlying assets as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):

.

Maturity

September 30, 2011 December 31, 2010 Senior

tranche Underlying

asset Senior

tranche Underlying

asset PRIVIA 1st SPC 2011-10-19 ￦ 54,351 ￦ 584,437 ￦ 492,720 ￦ 843,818 PRIVIA 2nd SPC 2014-04-24 447,600 980,876 - - Discounts on debentures (2,261) - (390) -

Net book value ￦ 499,690 ￦ 1,565,313 ￦ 492,330 ￦ 843,818

(2) Details of contractual maturity of the Company’s asset-backed borrowing as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):


Less than 1 year ￦ 54,351 ￦ 492,720

1-2 years - - 2-3 years 447,600 - Prior liability 501,951 492,720 Discounts on debentures (2,261) (390) Senior tranche ￦ 499,690 ￦ 492,330

30. TRANSACTION WITH RELATED PARTIES

(1) Transaction with related companies for the nine months ended September 30, 2011 and 2010 are as follows (Unit: Won in millions):

Nine months ended September 30, 2011 Nine months ended September 30, 2010

Controlling company

Company with

significant influence

Total

Controlling company

Company with


Total

Revenues Card revenue ￦ 103,634 ￦ 40,864 ￦ 144,498 ￦ 63,394 ￦ 39,763 ￦ 103,157 Rental revenue - 150 150 - 138 138 Miscellaneous revenue - 17,267 17,267 - 12,564 12,564

103,634 58,281 161,915 63,394 52,465 115,859 Expense Card expense 99 1,824 1,923 92 735 827 General and

administrative expense 358 26,515 26,873 144 24,907 25,051 Miscellaneous expense - 20,659 20,659 - 12,687 12,687

457 48,998 49,455 236 38,329 38,565 Others Payment of advanced

payment - 6,537 6,573 - 6,604 6,604 Purchase of property,

plant and equipment - 3,100 3,100 - 1,686 1,686

- 38 -

Purchase of intangible assets - 166 166 - 1,739 1,739

Total ￦ - ￦ 9,839 ￦ 9,839 ￦ - ￦ 10,029 ￦ 10,029

(2) Outstanding receivables, payables and guarantee from transactions with related parties as of September 30, 2011 and December 31, 2010 are as follows (Unit: Won in millions):


Controlling company

Company with


Total

Controlling company

Company with


Total

Receivables Card asset ￦ 59,757 ￦ 140,083 ￦ 199,840 ￦ 52,340 ￦ 153,009 ￦ 205,349 Account receivable 50 86 136 311 747 1,058 Other - 30,209 30,209 - 32 32 Allowance for bed debt (896) (2,101) (2,997) (785) (2,295) (3,080)

Total 58,911 168,277 227,188 51,866 151,493 203,359 Payables Account payable 38,776 33,287 72,063 45,967 37,717 83,684 Other - (19,218) (19,218) - - -

Total ￦ 38,776 ￦ 14,069 ￦ 52,845 ￦ 45,967 ￦ 37,717 ￦ 83,684

(3) Compensation for key executives

1) Compensation cost for key executives for the nine months ended September 30, 2011 and 2010 consist of short-term employee benefit and retirement benefit.

2) Compensation for key management for the nine months ended September 30, 2011 consists of the following (Unit: Won in millions):

Short-term employee benefit Retirement benefit Total Key management 9,563 1,622 11,185

3) Key management includes directors (including non-executive directors) and members of the audit

committee with significant authority and responsibility over the Company’s plan, direction and control. 31. OTHER COMPREHENSIVE INCOME

Comprehensive income for the nine months ended September 30, 2011consists of the following (Unit: Won in millions):


Beginning

Balance(*) Increase

(decrease) Disposal Income tax

effect Ending

balance Comprehensive income

Effective portion of changes in fair value of cash flow hedges ￦ (4,260) ￦ (26,389) ￦ 1,040 ￦ 6,662 ￦ (22,947)

(*) Amounts before income tax effect

- 39 -

32. CONSOLIDATED STATEMENTS OF CASH FLOWS

(1) The Company’s consolidated statements of financial position’s cash and cash equivalents consist of cash on hand, current deposits, and others. Details of cash and cash equivalents as of September 30, 2011 and 2010 are as follows (Unit: Won in millions):

September 30, 2011 September 30, 2010

Cash on hand ￦ 4 ￦ 4

Current deposits 893 240

Pass-book deposits 113,224 121,241

Other cash equivalents (*) 821,000 527,000

Total ￦ 935,121 ￦ 648,485 (*) Other cash equivalents consist of MMDA, CMA and Others.

(2) Non-cash investing activities and non-cash financing activities which are not reflected in the consolidated

statement of cash flow as of September 30, 2011 and 2010 are as follows (Unit: Won in millions):

September 30, 2011 September 30, 2010 Replacement of office equipment ￦ 4,552 ￦ 1,375 Replacement of short-term

borrowings to current portion 60,000 101,027 Gain(Loss) on valuation of

derivatives 25,349 (3,440) 33. FINANCIAL RISK MANAGEMENT:

(1) Introduction

1) General The Company is exposed to various financial risks such as credit risk, liquidity risk and market risk associated with financial instruments. The level of exposure to such risks, objectives of the Company and its risk management policy and procedures are outlined below.

2) Risk management framework The board of directors sets and oversees risk management framework. Responsibility for implementing and monitoring the Company risk management strategies and policies resides with Asset-Liability Management Committee (ALCO) set by the board of directors. Each committee has a permanent and non-permanent member and reports its activities to the board of directors on a regular basis. The Company’ risk management policy is to ensure that the Company identify and analyze the potential risks to financial performance, determine the degree of risk and control acceptable to the Company and monitor whether the Company confirms with the risk and its associated degree of acceptance. The risk management policy and system are regularly reviewed to reflect changes in market conditions and products and services the Company provides. The Company operates education and training program and procedures and management standards so all employees understand their roles and duties with the goal to build organizational control environment. The audit committee is responsible for monitoring whether the Company continues to comply with the risk management policies and procedures and also the current risk management system is appropriate for the risks that the Company is exposed to, with the assistance of internal auditors, which review regular and irregular risk management procedures and report the results to the audit committee.

- 40 -

(2) Credit risk

1) General

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the Company’s loan, card assets and securities. The Company considers all the elements of individual borrower’s credit risk exposure such as default and breach.

2) Risk management framework

The Company’s exposure and credit ratings of its counterparties is primarily reviewed and managed for accuracy by credit risk management department. Secondly, aggregate risks are allocated to total portfolio and controlled by counterparty limits that are reviewed and approved by the risk management department. To ensure that resolution and approval of the board of directors with respect to risk management, the Company sets and operates the risk management committee, which is a permanent organization and holds a regular meeting once a month as a rule and frequently if necessary. The risk management committee is assisted by independent risk management department (risk management team) which oversees the effectiveness of the operational credit controls and processes. - Manages aggregate risks on the acceptable level of loss through portfolio limits management. These limits of credit risk are established based on portfolio management standards and reflected into business plan. Risk management committee receives a report of whether level of credit risk and limits of the acceptable level of credit risk are in compliance with the standards. - Acceptable limits on overdue over 1 month, normal credit card payment rate and etc are considered into business plan, and credit risks are managed within the limits. - Credit limit on a new customer (the applicant) is determined based on monthly estimated income and liabilities computed using qualification standards. Final limit is granted with consideration of application ratings and external ratings agencies’ ratings. Credit limit on an existing customer is downgraded or upgraded as a result of changes in combination of factors, including behavior ratings, personal information such as employment, position, amount used, days in arrears and etc. - Target level on key factors, including expected loss, economic capital, portfolio quality index (overdue rate, 30+@3MOB), etc is set and actively monitored, of which results are reported to risk management committee. - Measurement of expected loss using long-term probability of default and recording of allowance for possible losses enables the Company to minimize the expected loss due to economy downturn. - Through implementation and management of contingency plan, the Company announces the appropriate contingency level according to the level of the deteriorating economy and quickly takes a corresponding action. This enables the Company to proactively respond to rapidly changing credit risks. Each credit management department holds right to approve credit and is required to perform credit policies and procedures and report important credit related issues to management and risk management committee. Responsibility for portfolio performance and soundness resides with each credit management department, which monitors and controls all credit risks arising from the portfolio.

- 41 -

3) Level of exposure to credit risk

The Company’s level of exposure to credit risk as of September 30, 2011 and December 31, 2010 is summarized as follows (Unit: Won in millions): September 30, 2011 December 31, 2010 Deposit ￦ 968,162 ￦ 630,179

Card asset (*1) 8,856,615 9,171,743 Loan 500 1,000 Other asset (*1,2) 149,654 128,622 Unused commitment 32,233,489 28,113,052

Total ￦ 42,208,420 ￦ 38,044,596

(*1) Card asset is stated at book value before allowance for possible losses. (*2) Other asset consists of account payable and unearned income.

4) Analysis of credit soundness of financial assets

① Credit soundness of card assets neither past due nor impaired as of September 30, 2011 and December

31, 2010 is summarized as follows (Unit: Won in millions): A. Retail


Grade(*)

Book value before

allowance for doubtful

accounts

Allowance for doubtful

accounts

Book value

Book value before


accounts


accounts

Book value

Card receivables and cash advances

1 ￦ 617,112 ￦ 326 ￦ 616,786 ￦ 690,042 ￦ 371 ￦ 689,671 2 551,423 347 551,076 588,025 408 587,617 3 649,806 540 649,266 697,028 638 696,390 4 515,243 545 514,698 534,241 634 533,607 5 520,266 797 519,469 528,814 953 527,861 6 517,283 1,250 516,033 525,120 1,448 523,672 7 480,319 2,190 478,129 489,321 2,521 486,800 8 505,505 4,147 501,358 522,392 4,861 517,531 9 543,407 7,584 535,823 553,190 8,890 544,300 10 451,604 9,408 442,196 474,873 11,666 463,207 11 332,336 9,600 322,736 364,825 12,233 352,592 12 394,240 17,615 376,625 429,980 22,539 407,441 13 140,167 7,358 132,809 136,401 8,167 128,234 14 114,588 12,059 102,529 95,141 11,419 83,722 15 27,692 3,101 24,591 14,913 1,650 13,263

6,360,991 76,867 6,284,124 6,644,306 88,398 6,555,908 Card loan 1 9,002 19 8,983 8,774 23 8,751 2 49,301 216 49,085 45,864 203 45,661 3 141,590 864 140,726 134,001 634 133,367 4 139,764 1,411 138,353 140,295 1,234 139,061 5 508,799 7,995 500,804 541,545 7,796 533,749 6 401,166 10,095 391,071 450,669 10,343 440,326 7 217,736 7,878 209,858 256,291 8,575 247,716 8 138,980 6,729 132,251 163,724 7,518 156,206 9 101,549 6,802 94,747 97,980 6,289 91,691 10 35,913 2,982 32,931 30,821 2,499 28,322 11 66,814 7,521 59,293 62,390 7,509 54,881 1,810,614 52,512 1,758,102 1,932,354 52,623 1,879,731 Total ￦ 8,171,605 ￦ 129,379 ￦ 8,042,226 ￦ 8,576,660 ￦ 141,021 ￦ 8,435,639 (*) Grades are internal credit ratings evaluated by the Company.

- 42 -

B. Corporate


Grade(*)

Book value before


accounts


accounts

Book value

Book value before


accounts


accounts

Book value

1 ￦ 234,311 ￦ 204 ￦ 234,107 ￦ 173,953 ￦ 140 ￦ 173,813 2 92,443 189 92,254 128,813 1,510 127,303 3 52,039 184 51,855 47,470 563 46,907 4 41,611 342 41,269 35,884 221 35,663 5 5,505 160 5,345 4,290 93 4,197 6 2,188 112 2,076 2,859 116 2,743 7 1,886 204 1,682 2,247 187 2,060 8 1,676 163 1,513 473 70 403

N (**) 283 - 283 1,356 9 1,347 Total ￦ 431,942 ￦ 1,558 ￦ 430,384 ￦ 397,345 ￦ 2,909 ￦ 394,436 (*) Grades are internal credit ratings evaluated by the Company. (**) N represents card assets consisting of sound government-related assets such as central and local

governments, public authorities. ② Credit soundness of credit cards past due but not impaired as of September 30, 2011 and December 31,

2010 are summarized as follows (Unit: Won in millions):

September 30, 2011

Less than

1 month 1-2 months 2-3 months More than 3 months Total

Retail ￦ 179,791 ￦ 27,674 ￦ - ￦ - ￦ 207,465 Corporate 13,777 3,346 - 3 17,126 193,568 31,020 - 3 224,591 Card assets

Card receivables 113,823 17,105 - 3 130,931 Cash advances 22,876 4,337 - - 27,213 Card loans 56,869 9,578 - - 66,447

193,568 31,020 - 3 224,591 Allowance for doubtful

accounts (7,859) (2,464) - (3) (10,326) Book value ￦ 185,709 ￦ 28,556 ￦ - ￦ - ￦ 214,265

December 31, 2010

Less than 1 month 1-2 months 2-3 months

More than 3 months Total

Retail ￦ 126,309 ￦ 21,605 ￦ - ￦ - ￦ 147,914 Corporate 29,833 646 - 3 30,482 156,142 22,251 - 3 178,396 Card assets

Card receivables 97,645 10,475 - 3 108,123 Cash advances 19,009 4,418 - - 23,427 Card loans 39,488 7,358 - - 46,846

156,142 22,251 - 3 178,396 Allowance for doubtful

accounts (5,087) (1,990) - (3) (7,080) Book value ￦ 151,055 ￦ 20,261 ￦ - ￦ - ￦ 171,316

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5) Concentrations of credit risk ① Concentration of credit risk by term structures as of September 30, 2011 and December 31, 2010 are

summarized as follows (Unit: Won in millions):

September 30, 2011

Retail

Corporate

Total Ratio


accounts

Book value

Less than 3 months ￦ 2,973,853 ￦ 454,588 ￦ 3,428,441 38.71% ￦ (42,024) ￦3,386,417 3-6 months 1,418,913 872 1,419,785 16.03% (18,654) 1,401,131 6-12 months 1,677,922 - 1,677,922 18.94% (30,111) 1,647,811 1-2 years 1,595,986 - 1,595,986 18.02% (46,904) 1,549,082 2-3 years 668,568 - 668,568 7.55% (17,407) 651,161 3-4 years 54,973 - 54,973 0.62% (1,444) 53,529 4-5 years 1,555 - 1,555 0.02% (89) 1,466 More than 5 years 9,885 - 9,885 0.11% (1,852) 8,033 Total ￦ 8,401,655 ￦ 455,460 ￦ 8,857,115 100.00% ￦ (158,485) ￦ 8,698,630

December 31, 2010

Retail

Corporate

Total Ratio


accounts

Book value

Less than 3 months ￦ 3,029,549 ￦ 374,477 ￦ 3,404,026 37.11% ￦ (38,355) ￦ 3,365,671 3-6 months 918,460 53,191 971,651 10.60% (15,437) 956,214 6-12 months 1,860,225 1,147 1,861,372 20.29% (35,552) 1,825,820 1-2 years 2,022,449 500 2,022,949 22.05% (50,597) 1,972,352 2-3 years 809,427 - 809,427 8.83% (19,220) 790,207 3-4 years 91,046 - 91,046 0.99% (1,474) 89,572 4-5 years 2,075 - 2,075 0.02% (291) 1,784 More than 5 years 10,197 - 10,197 0.11% (5,056) 5,141 Total ￦ 8,743,428 ￦ 429,315 ￦ 9,172,743 100.00% ￦ (165,982) ￦ 9,006,761

② Concentrations of credit risk by industry of corporate loans as of September 30, 2011 and December 31, 2010 are summarized as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Book value

before allowance

for doubtful accounts

Ratio

Allowance for

doubtful accounts

Book

value

Book value before

allowance for doubtful accounts

Ratio

Allowance for

doubtful accounts

Book

value Banking ￦ 121,159 26.60% ￦ (480) ￦ 120,679 ￦ 121,221 28.23% ￦ (161) ￦ 121,060 Manufacturing 149,583 32.84% (3,682) 145,901 127,973 29.81% (601) 127,372 Service 130,366 28.62% (1,103) 129,263 150,854 35.14% (1,947) 148,907 Public 525 0.12% - 525 459 0.11% - 459 Others 53,827 11.82% (1,805) 52,022 28,808 6.71% (1,723) 27,085 Total ￦ 455,460 100.00% ￦ (7,070) ￦ 448,390 ￦ 429,315 100.00% ￦ (4,432) ￦ 424,883

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6) Card assets by the allowance for doubtful accounts’ assessment methods as of September 30, 2011 and December 31, 2010 are summarized as follows (Unit: Won in millions):

September 30, 2011 Individual assessment Collective assessment Total

Book value before

allowance for

doubtful accounts

Allowancefor

doubtful accounts

Allowance rate

Book value before

allowance for

doubtful accounts

Allowance for

doubtful accounts

Allowance rate

Book value before

allowance for

doubtful accounts

Allowance for

doubtful accounts

Allowance rate

Card assets Card

receivables ￦ 1,533 ￦ - ￦ - ￦ 5,916,223 ￦ (60,884) 1.03% ￦ 5,917,756 ￦ (60,884) 1.03% Cash

advances - - - 1,046,291 (34,863) 3.33% 1,046,291 (34,863) 3.33% Card loans - - - 1,892,568 (62,671) 3.31% 1,892,568 (62,671) 3.31% Loans to

corporate - - - 500 (67) 13.40% 500 (67) 13.40% Total ￦ 1,533 ￦ - ￦ - ￦ 8,855,582 ￦(158,485) 1.79% ￦ 8,857,115 ￦ (158,485) 1.79%

December 31, 2010 Individual assessment Collective assessment Total

Book value before

allowance for

doubtful accounts


accounts Allowance rate

Book value before

allowance for

doubtful accounts

Allowance for

doubtful accounts

Allowance rate

Book value before

allowance for

doubtful accounts

Allowance for

doubtful accounts

Allowance rate

Card assets Card

receivables ￦ 1,665 - - ￦ 6,382,026 ￦ (75,319) 1.18% ￦ 6,383,691 ￦ (75,319) 1.18%

Cash advances - - - 795,241 (27,129) 3.41% 795,241 (27,129) 3.41%

Card loans - - - 1,992,811 (63,527) 3.19% 1,992,811 (63,527) 3.19% Loans to

corporate - - - 1,000 (7) 0.70% 1,000 (7) 0.70%

Total ￦ 1,665 ￦ - ￦ - ￦ 9,171,078 ￦ (165,982) 1.81% ￦ 9,172,743 ￦ (165,982) 1.81% (3) Liquidity risk

1) Liquidity risk

① General Liquidity risk is the risk that the Company is unable to meet its payment obligations arising from financial liabilities as they become due. The Company classifies and discloses contractual maturity of all financial assets, liabilities and offshore accounts in relation to liquidity risk into four categories as immediately payable, less than 1 year, 1~5 years and more than 5 years. The cash flows disclosed in the maturity analysis is undiscounted contractual amount, including principal and future interest payments, which results in disagreement with the discounted cash flows included in the consolidated statement of financial position. Calculated cash flows are allocated into four categories, which draw contractual maturity analysis of each financial asset and liability.

② Liquidity risk management process and guidance General principles and the overall framework for managing liquidity risk across the Company are defined in the Liquidity Risk Policy approved by the ALCO. All transactions that affect in and out flows of Korean/foreign currency funds across the Company are subject to liquidity risk management. Liquidity risk is centrally managed and controlled by the Financial Planning Department, which reports into the ALCO on liquidity analysis and statistics, including liquidity gap, liquidity ratio, maturity mismatch ratio and liquidity risk situation. The financial strategies to achieve the Company’s management goal including liquidity risk is set and overseen by the ALCO.

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2) Residual contractual maturity analysis of financial assets and liabilities

The Company’s financial assets and liabilities by residual contractual maturity as of September 30, 2011 and December 31, 2010 are classified as follows (Unit: Won in millions):

September 30, 2011

Immediate

payment Less than

1 year 1-5 years More than

5 years Total Financial assets Cash and due from

financial institutions ￦ 961,902 ￦ 8,233 ￦ - ￦ - ￦ 970,135 Investment financial

assets 71,778 - - - 71,778 Card assets - 8,760,397 735,226 23,337 9,518,960 Loans - 535 - - 535 Derivatives assets - 2,897 610 - 3,507 Other assets - 114,742 9,148 19,869 143,759

Total ￦ 1,033,680 ￦ 8,886,804 ￦ 744,984 ￦ 43,206 ￦ 10,708,674 Financial liabilities Borrowings ￦ - ￦ 194,934 ￦ 85,314 ￦ - ￦ 280,248 Debentures - 1,929,007 5,321,922 131,635 7,382,564 Derivatives liabilities - 5,540 3,518 - 9,058 Other liabilities 32,064 936,578 572 - 969,214

Total ￦ 32,064 ￦ 3,066,059 ￦ 5,411,326 ￦ 131,635 ￦ 8,641,084 (*) These amounts include all cash inflows such as interests without discount and derivatives are the contract amount without discount.

December 31, 2010

Immediate

payment Less than

1 year 1-5 years More than

5 years Total Financial assets Cash and due from

financial institutions ￦ 630,874 ￦ 148 ￦ - ￦ - ￦ 631,022 Investment financial

assets 191,803 - - - 191,803 Card assets - 9,008,393 771,337 20,112 9,799,842 Loans - 576 504 - 1,080 Derivatives assets - 7,564 - - 7,564 Other assets - 125,573 9,274 22,029 156,876

Total ￦ 822,677 ￦ 9,142,254 ￦ 781,115 ￦ 42,141 ￦ 10,788,187 Financial liabilities Borrowings ￦ - ￦ 1,439,519 ￦ 151,295 ￦ - ￦ 1,590,814 Debentures - 1,820,293 4,392,090 41,030 6,253,413 Derivatives liabilities - 53,105 11,262 - 64,367 Other liabilities 52,143 914,507 16 - 966,666

Total ￦ 52,143 ￦ 4,227,424 ￦ 4,554,663 ￦ 41,030 ￦ 8,875,260 (*) These amounts include all cash inflows such as interests without discount and derivatives are the contract amount without discount.

(4) Market risk

1) Market risk Market risk is the risk to the Company’s earnings arising from changes in interest rates, stock price, currency exchange rates or commodity prices. Market risk is generated through both trading and non-

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trading position. The trading market risk that the Company is mainly exposed to is the interest rate risk arising from the change in the value of debt instruments and interest rate embedded securities due to changes in market interest rate. The Company is additionally exposed to stock price and foreign exchange rate fluctuation risk arising from loans, receivables, deposits, securities or financial derivatives.

Non trading market risk also exposes the Company to interest rate risk and liquidity risk. The trading position held for the Company’s short-term funding purpose does not fall into the category that expose the Company to interest rate risk as these are not sensitive to fluctuations in interest rate due to short-term strategic management. Only risks arising from non trading market risk are managed.

2) Market risk management

Incorporated market risk management policy is set by ALCO, which approves market risk limits, use of new derivative financial instruments and day to day operations related to market risks. Furthermore, ALCO determines VaR (Value at Risk) limits on bonds, stocks, foreign currency and financial derivatives instruments, position limits and stop loss limits, and additionally sets scenario loss limits and sensitivity limits on financial derivatives instruments. Determination of interest rate and commission rate, enactment and amendment of ALM risk management policy and interest rate and commission rate guidelines and analysis of monthly ALM risk lie with the Chief Financial Committee. Interest risk limits are determined based on asset liability position and expected interest rate fluctuation considering annual operational planning, and centrally measured and monitored by the Financial Planning Team. Responsibility for management of both interest rate risk condition, such as interest rate gap, duration gap, sensitivity, etc and compliance with interest rate risk limits policy resides with the Financial Planning Team, which reports the results into the ALCO on a monthly basis.

3) Non trading market management

The majority of the Company’s non trading market risk is the interest rate risk. This non-traded interest rate risk arises from two mismatch sources: mismatches between the maturity of interest bearing assets and liabilities and between interest rate changing periods. The Company internally assesses the interest rate risk arising from Koran and Foreign currency assets and liabilities including derivatives financial instruments. And, most assets generating interest income and liabilities generating interest expense are denominated in Korean won. The objective of interest rate risk management is to reduce a decline in the value of assets due to changes in market interest rates and to secure stable and optimal net interest income. The management of interest rate risk is supported by a comprehensive analysis of interest rate gap (between assets generating interest income and liabilities generating interest expense) and measurement of interest rate VaR and EaR (Earnings-at-Risk). The Company calculates risk index using the methodologies listed above, and discloses the interest rate risk calculated using duration.

4) Interest rate VaR (Value-at-Risk)

Interest rate VaR is a statistical estimate of the maximum potential decline in the value of net assets due to the unfavorable changes in interest rate, using the VaR methodology, a key measure of market risk, into interest rate risk assessment. The interest rate VaR disclosed below is calculated using the BIS (the Bank for International Settlements) standards framework. This methodology employs using revised duration proxy by maturity provided by BIS. The assumption used to calculate the VaR is that expected range of interest rate fluctuation affected by interest rate shock is 100bp parallel movement of benchmark rate curve. Although the VaR is a generally used key measure of market risk, certain limitations to this methodology exist. The VaR measures the potential loss in value of a risky asset or portfolio based on historical market movements over a defined period for a given confidence interval. However, it is not always possible in

- 47 -

practice that the historical market movements reflect all future conditions and circumstances, which results in variance in actual loss timing and size due to the changes in assumptions used in calculation. The result of interest rate VaR calculated under normal distribution of interest rate is as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Interest rate VaR ￦ 29,147 ￦ 4,800

(5) Capital Management

The Parent (specialized credit finance company) must maintain adjusted capital adequacy ratio in accordance with Specialized Credit financial business and the sub-regulation, And the ratio for the specialized credit finance company must be more than 7 %(more than 8% for the credit card company)

This ratio is calculated dividing adjusted capital adequacy by adjusted total assets and all factors are based on non-consolidated financial statement. The Parent maintain adjusted capital adequacy over 8%. Adjusted capital adequacy ratio (unreviewed) as of September 30, 2011 and December 31, 2010 are summarized as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010(*) Adjusted Equity ￦ 1,955,338 ￦ 1,843,315 Adjusted total asset 8,776,747 9,842,155 Adjusted Equity Ratio 22.28% 18.73%

(*) Calculated under previous GAAP

34. FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

(1) Fair Value of Financial Assets and Liabilities

The fair value of financial assets and financial liabilities as of September 30, 2011 and December 31, 2010 are summarized as follows (Unit: Won in millions):

September 30, 2011 December 31, 2010 Book value Fair value Book value Fair value Assets Financial assets

Cash and due from financial institutions ￦ 968,162 ￦ 968,162 ￦ 630,179 ￦ 630,179

Investment financial assets 71,778 71,778 191,803 191,803

Card assets 8,698,196 9,038,883 9,005,768 8,946,299 Loans 433 504 992 1,017 Other assets 147,303 147,522 124,542 125,011

total ￦ 9,885,872 ￦ 10,226,849 ￦ 9,953,284 ￦ 9,894,309

Liabilities Financial liabilities Borrowings ￦ 270,000 ￦ 210,319 ￦ 1,581,766 ￦ 1,572,060

Debentures 6,608,662 6,208,650 5,594,406 5,705,078 Other liabilities 1,063,066 1,015,989 1,124,817 1,033,190

total ￦ 7,941,728 ￦ 7,434,958 ￦ 8,300,989 ￦ 8,310,328

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The Company presents a comparative

- 48 -

disclosure of fair value and book value by financial assets and financial liabilities type. The best evidence of fair value is a quoted price in an active market. The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the Company uses that technique. Although the Company believes that the valuation techniques it has used are appropriate and the fair values recorded in the consolidated statement of financial position are reasonably estimated, the application of assumptions and estimates means that any selection of different assumptions and valuation techniques would cause the reported results to differ. Furthermore, as various valuation techniques and assumptions are used in estimating fair values, it might be difficult to compare the Company’s results with fair values determined by other financial institutions.

(2) Fair Value hierarchy

All financial instruments at fair value are categorized into one of the following three fair value hierarchy levels. Level 1: Fair value measurements are those derived from quoted prices (unadjusted) for identical assets or liabilities in an active market. Examples are publicly traded stocks, derivatives and treasury bonds. Level 2: Fair value measurements are those derived from valuation techniques of which for all significant inputs are market-observable, either directly or indirectly. Examples include bonds denominated in Korean won, bonds denominated in foreign currencies and general over-the-counter derivatives transactions, such as swaps, forward contracts and options. Level 3: Fair value measurements are those derived from valuation techniques which include significant inputs which are not based on observable market data. Examples are unlisted stocks, complex structured bonds and complex over-the-counter derivatives. The best estimate of fair value is quoted prices in an active market if the financial instrument is traded in the active market (Level 1). If there is a quoted price commonly used by market participants through stock exchange, seller, broker, industrial organization, ratings agencies or supervisory authorities, that price is considered regularly occurred in actual market transactions between knowledgeable, willing parties. The table below provides the Company’s financial assets and financial liabilities recorded at fair value in the consolidated statement of financial position as of September 30, 2011 and December 31, 2010 (Unit: Won in millions):

September 30, 2011

Book value Fair value

Level 1 Level 2 Level 3(*) Financial assets Fair value financial assets

Financial assets ￦ 71,778 ￦ 71,778 ￦ 70,011 ￦ - ￦ 1,767 Derivatives assets 3,507 3,507 - 3,507 -

￦ 75,285 ￦ 75,285 ￦ 70,011 ￦ 3,507 ￦ 1,767 Financial liabilities Fair value financial

liabilities Derivatives liabilities ￦ 9,058 ￦ 9,058 ￦ - ￦ 9,058 ￦ -

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(*) Available-for-sale financial assets classified as level 3 decreased by ￦8 million due to the impairment.

December 31, 2010

Book value Fair value

Level 1 Level 2 Level 3(*) Financial assets Fair value financial assets

Financial assets ￦ 191,803 ￦ 191,803 ￦ 190,027 ￦ - ￦ 1,776 Derivatives assets 13,748 13,748 - 13,748 -

￦ 205,551 ￦ 205,551 ￦ 190,027 ￦ 13,748 ￦ 1,776 Financial liabilities

Fair value financial liabilities

Derivatives liabilities ￦ 35,086 ￦ 35,086 ￦ - ￦ 35,086 ￦ - (*) There was no change in the financial instruments classified as level 3 during the reporting period.

(3) Financial assets and financial liabilities recorded at fair value The table below provides the Company financial assets and financial liabilities recorded at fair value in the consolidated statements of financial position as of September 30, 2011 and December 31, 2010 (Unit: Won in millions):

September 30, 2011

Financial asset at FVTPL

Loans and receivables

Available-for-sale financial

assets Hedging

derivative Total

Trading financial assets

Financial assets

designated at FVTPL

Financial assets Cash and bank deposit ￦ - ￦ - ￦ 968,162 ￦ - ￦ - ￦ 968,162

Financial assets - 70,011 - 1,767 - 71,778 Card assets - - 8,698,196 - - 8,698,196 Loans - - 433 - - 433 Other assets - - 143,796 - 3,507 147,303

Total ￦ - ￦ 70,011 ￦ 9,810,587 ￦ 1,767 ￦ 3,507 ￦ 9,885,872

September 30, 2011

Financial liabilities at FVTPL

Amortized financial

liabilities Hedging

derivatives Total

Trading financial

liabilities

Financial liabilities

designated at FVTPL

Financial liabilities Borrowings ￦ - ￦ - ￦ 270,000 ￦ - ￦ 270,000 Bonds payable - - 6,608,662 - 6,608,662 Other liabilities - - 1,054,008 9,058 1,063,066

Total ￦ - ￦ - ￦ 7,932,670 ￦ 9,058 ￦ 7,941,728

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December 31, 2010

Financial asset at FVTPL

Loans and receivables

Available-for-sale financial

assets

Financial assets held to

maturity Hedging

derivatives Total

Trading financial assets

Financial assets

designated at FVTPL

Financial assets Cash and bank deposit ￦ - ￦ - ￦ 630,179 ￦ - ￦ - ￦ - ￦ 630,179 Financial assets - 190,027 - 1,776 - - 191,803 Card assets - - 9,005,768 - - - 9,005,768 Loans - - 992 - - - 992 Other assets - - 110,794 - - 13,748 124,542

Total ￦ - ￦ 190,027 ￦ 9,747,733 ￦ 1,776 ￦ - ￦13,748 ￦ 9,953,284

December 31, 2010

Financial liabilities at FVTPL

Amortized financial

liabilities Hedging

derivatives Total

Trading financial

liabilities

Financial liabilities

designated at FVTPL

Financial liabilities Borrowings ￦ - ￦ - ￦ 1,581,766 ￦ - ￦ 1,581,766 Bonds payable - - 5,594,406 - 5,594,406 Other liabilities - - 1,089,090 35,086 1,124,817

Total ￦ - ￦ - ￦ 8,265,903 ￦ 35,086 ￦ 8,300,989

35. NET INTEREST INCOME:

Net interest income for the nine months ended September 30, 2011 and 2010 is as follows (Unit: Won in millions):





Interest income Cash and due from financial institutions ￦ 6,644 ￦ 17,396 ￦ 3,449 ￦ 9,899 Others 224 807 618 1,580 Total 6,868 18,203 4,067 11,479 Interest expense Borrowings 5,967 26,675 12,290 36,400 Bonds payable 82,006 242,673 70,366 195,720 Others - 32 47 155 Total 87,973 269,380 82,703 232,275 Net interest income ￦ (81,105) ￦ (251,177) ￦ (78,638) ￦ (220,796)

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36. NET COMMISSION INCOME:

Net commission income for the nine months ended September 31, 2011 and 2010 is as follows (Unit: Won in millions):





Commission income Card assets ￦ 354,275 ￦ 1,064,382 ￦ 364,390 ￦ 1,049,338

Total 354,275 1,064,382 364,390 1,049,338 Commission expense Service fee 126,044 368,943 116,609 314,420 Payment fee 3,292 9,859 3,170 8,788 A credit sale handling fee 28,362 79,875 24,962 69,321 Merchants co-payment fee 28 88 32 99 Overseas payment fee 7,840 23,283 6,870 18,760 Other 7,149 24,204 8,180 37,885

Total 172,715 506,252 159,823 449,273 Net commission income ￦ 181,560 ￦ 558,130 ￦ 204,567 ￦ 600,065

37. NET INCOME OF FINANCIAL ASSETS:

Net income of financial assets for the nine months ended September 30, 2011 and 2010 is as follows (Unit: Won in millions):

Nine months ended September 30, 2011 Change

in fair value Gains

on disposals Impairment loss Reversal of

impairment loss Net gain Financial assets designated at fair value through profit or loss

￦ 11 ￦ - ￦ - ￦ - ￦ 11

Financial assets available-for-sale - 7,650 (8) 806 8,448


Gains on disposals Impairment loss

Reversal of impairment loss Net gain

Financial assets available-for-sale ￦ 101,142 ￦ - ￦ 1,753 ￦ 102,895 38. OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

Other operating income and other operating expenses for the nine months ended September 30, 2011 and 2010 is as follows (Unit: Won in millions):





September 30. Other operating revenue Foreign exchange gain ￦ 2,395 ￦ 6,159 ￦ 1,847 ￦ 27,129 Foreign currency translation gain

-

6,076

-

27,923

Gain on derivative transactions

5,198

5,198

-

4,559

Gain on valuation of derivatives

47,856

32,504

10,177

8,042

Joint expenses settlement revenue

2,711

10,120

3,438

12,556

Others 170 739 269 1,330

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Total ￦ 58,330 ￦ 60,796 ￦ 15,731 ￦ 81,539 2011 2010 Three months ended




September 30. Other operating expenses Foreign exchange loss ￦ 1,094 ￦ 1,918 ￦ 368 ￦ 1,994 Foreign currency translation loss

51,734

37,722

10,290

8,108

Loss on derivative transactions

1,104

5,878

-

26,090

Loss on valuation of derivatives

-

-

-

27,909

Joint expenses settlement cost

4,375

16,843

4,246

12,687

Others 14 203 803 (1,680) Total ￦ 58,321 ￦ 62,564 ￦ 15,707 ￦ 75,108 39. DIVISION INFORMATION Though the Company conducts business activities in related to credit cards, installment financing, leasing, etc., in accordance with relevant laws such as Specialized Credit Finance Business Act with performing financial business. The Company does not report separate segment information, as management considers the Company to be operating under one core business.

Economy & Finance

Audit Report: Hyundai Card 3Q2011