H Y U N D A I M O T O R C O M P A N Y A N N U A L R E P O R T 2 0 1 4 HYUNDAI MOTOR COMPANY ANNUAL REPORT 2014 Hyundai Motor Company www.hyundai.com Copyright © 2015 Hyundai Motor Company. All Rights Reserved. www.facebook.com/AboutHyundai www.youtube.com/AboutHyundai www.twitter.com/About_Hyundai Today, automobiles are no longer just a means of transportation. Automobiles, as a living space, mean different things to different customers. As people’s perception of automobiles changed, so did the perception of Hyundai Motor as a brand. People expect more from Hyundai Motor. Therefore, the challenge now is to deliver greater value to our customers. Under the new slogan ‘New thinking. New Possibilities.’, Hyundai Motor is living up to the new challenge by creating new value for customers and society. LIFETIME PARTNER IN AUTOMOBILES AND BEYOND HYUNDAI MOTOR COMPANY ANNUAL REPORT 2014 C O N T E N T S PROLOGUE FINANCIAL HIGHLIGHTS & 04 - 09 BUSINESS HIGHLIGHTS MESSAGE FROM THE CEO 10 - 13 NEW THINKING. BRAND BASIC TECH DESIGN PHILOSOPHY BLUE DRIVE | CONCEPT CAR WRC | N BRAND HUMAN POWER NEW POSSIBILITIES. WAY OF HYUNDAI MOTOR MILESTONES OF HYUNDAI MOTOR GLOBAL PERFORMANCE OF HYUNDAI MOTOR ARENA OF HYUNDAI MOTOR INNOVATION OF HYUNDAI MOTOR VALUES OF HYUNDAI MOTOR 16 - 21 22 - 27 28 - 31 32 - 37 38 - 43 44 - 45 48 - 49 50 - 53 54 - 57 58 - 61 62 - 63 64 - 67 COMMITMENT OF HYUNDAI MOTOR 68 - 73 CORPORATE GOVERNANCE AND 74 - 75 BOARD OF DIRECTORS FINANCIAL STATEMENTS 76-165 HYUNDAI MOTOR PRODUCT LINEUP 166-169 MODERN PREMIUM FOR YOUR BRILLIANT MOMENTS SALES REVENUE Unit : KRW Million GLOBAL RETAIL SALES Unit : Thousand 89,256,319 9 1 3 , 6 5 2 , 9 8 6 3 6 , 7 0 3 , 7 8 1 2 7 , 9 6 4 , 4 8 5 9 8 , 7 9 7 , 7 7 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 1 7 2 , 5 8 9 , 6 6 0 1 0 2 4,835 5 3 8 , 4 1 2 6 , 4 2 9 3 , 4 9 9 0 , 4 1 0 7 , 3 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 HYUNDAI MOTOR COMPANY Annual Report 2014 FINANCIAL HIGHLIGHTS SALES REVENUE Unit : KRW Million 89,256,319 87,307,636 84,469,721 77,797,895 66,985,271 2.2% 2010 2011 2012 2013 2014 OPERATING INCOME Unit : KRW Million 8,440,601 8,315,497 8,028,829 5,918,492 10.3 10.0 7,549,986 9.5 8.5 8.8 2010 2011 2012 2013 2014 i F n a n c a i l i H g h l i g h t s 0 6 / 0 7 CONSOLIDATED STATEMENTS OF INCOME Unit : KRW Million FOR THE YEAR Sales Revenue1 Operating Income Net Income2 Basic EPS(KRW)3 2010 2011 2012 2013 2014 66,985,271 77,797,895 84,469,721 87,307,636 5,918,492 8,028,829 8,440,601 8,315,497 Margin(%) 8.8% 10.3% 10.0% 9.5% 89,256,319 7,549,986 8.5% 6,001,182 8,104,863 9,061,132 8,993,497 7,649,468 Margin(%) 9.0% 20,516 10.4% 28,200 10.7% 31,532 10.3% 31,441 8.6% 27,037 1 Business results of BHMC is accounted in equity income accounting 2 Net income includes non-controlling interest 3 Basic earnings per common share attributable to the owners of the Parent Company CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Unit : KRW Million AT YEAR END Assets Liabilities Shareholder’s Equity Liab. to Eqt. Ratio(%) 2010 2011 2012 2013 2014 94,714,131 109,479,975 121,537,814 133,421,479 147,225,117 61,826,158 69,152,273 73,620,239 76,838,690 32,887,973 40,327,702 47,917,575 56,582,789 188.0% 171.5% 153.6% 135.8% 84,604,552 62,620,565 135.1% CREDIT RATING BBB-/Baa3 BBB/Baa2 BBB+/Baa1 2008 2009 2010 2011 2012 2013 2014 Domestic Overseas KIS NICE Korea Rating S&P Moody’s 2008 2009 AA AA AA BBB- Baa3 AA AA AA BBB- Baa3 2010 AA+ AA+ AA+ BBB Baa2 2011 AA+ AA+ AA+ BBB Baa2 2012 AAA AAA AAA BBB+ Baa1 2013 AAA AAA AAA BBB+ Baa1 2014 AAA AAA AAA BBB+ Baa1 Operating Income Margin(%) *Jan. 2015, S&P upgraded the credit rating for HMC to A- HYUNDAI MOTOR COMPANY Annual Report 2014 BUSINESS HIGHLIGHTS i B u s n e s s H g h i GLOBAL RETAIL SALES Unit : Thousand SALES BY REGION Unit : Thousand SALES BY SEGMENT Unit : Thousand l i g h t s 0 8 / 0 9 3,701 658 3,043 2010 4,099 682 4,392 667 4,621 641 4,835 684 4.6% 3,417 2011 3,724 2012 3,980 2013 4,151 2014 Korea Overseas GLOBAL MARKET SHARE *Source : IHS Global Demand Jan. 2015 5.7% 5.7% 5.7% 5.4% 5.1% 2010 2011 2012 2013 2014 1 5 4 Total 2 4,835 3 4 Total 4,962 1 3 2 1. Korea 2. N. America 3. Europe 4. Asia 5. Others 684 864 642 1,700 946 14.1% 17.9% 13.3% 35.2% 19.6% 1. Small PC 2. Mid-Large PC 3. RV 4. CV 2,909 853 908 292 58.6% 17.2% 18.3% 5.9% SALES BY PLANT Unit : Thousand 1,879(37.9%) 1,120(22.6%) 396(8.0%) 613(12.4%) 308(6.2%) 237(4.8%) 203(4.1%) 179(3.6%) 27(0.6%) Korea US China India Czech Russia Turkey Brazil China(CV) PRODUCTION BY PLANT Unit : Thousand 1,876(37.9%) 1,120(22.6%) 399(8.0%) 611(12.3%) 307(6.2%) 237(4.8%) 203(4.1%) 179(3.6%) 23(0.5%) Korea US China India Czech Russia Turkey Brazil China(CV) Total 4,962 Total 4,956 HYUNDAI MOTOR COMPANY Annual Report 2014 Message from the CEO STRENGTHENING COMPETITIVENESS WITH INNOVATION AND BOLD INVESTMENTS Despite volatile market conditions, Hyundai Motor has taken a great step towards the future in 2014. Sales have risen yet again achieving the highest ever annual sales of 4.96 million units. In addition, Hyundai Motor has strengthened its market presence in terms of important indicators such as quality, product competitiveness and brand value. For example, Hyundai Motor ranked first in JD Power’s Initial Quality Study (IQS) in the US and second in the Vehicle Dependability Study (VDS) in China. Our flagship sedan, Genesis, as well as the new Sonata and new i10 also received great reviews, demonstrating Hyundai Motor’s strong product competitiveness. Avante (Elantra) became the first Hyundai Motor’s model to reach the 10 million sales mark and sales volumes of nine models exceeded 100,000 units in countries including South Korea, US and China in 2014, demonstrating the popularity of the Hyundai Motor brand worldwide. Hyundai Motor reaffirmed its competitiveness in next-generation technology was recognized the Tucson (ix35) Fuel Cell powertrain was listed as one of Ward’s ‘10 Best Engines’. Hyundai Motor’s brand value has increased significantly yet again moving up to 40th from 43rd in 2013 according to the global brand consulting firm, Interbrand. In 2015, Hyundai Motor aims to hit the sales mark of 5.05 million units and further strengthen its leading position in the global market. We are planning to make bold R&D investments to further improve quality, deliver greater customer satisfaction and strengthen future competitiveness. Stronger emphasis will be placed on quality verification at the product design stage and efforts to improve quality will be coordinated with the labor union, in order to set a new benchmark in automobile quality. We will also make leapfrog improvements in our customer experience at the point of sales and service. Hyundai Motor will become a beloved brand by delivering complete satisfaction. “We will strengthen our future competitiveness by making bold investments to develop innovative technologies, strengthen our product development capacity, enhance the quality of our customer service and increase our brand value as a leader in the global automobile industry.” M e s s a g e f r o m t h e C E O 1 0 / 1 1 In 2015, we plan to focus on R&D investment to further strengthen our competitiveness and develop new technologies for our future. More specifically, we will invest in the development of innovative fuel efficiency improvement technologies as well as green and smart technologies. Hyundai Motor will lead the innovation to become an automobile company that exceeds customer expectations in all respects. Faced with ever increasing uncertainty, we will establish an organic collaboration structure between production plants and the sales network, in order to improve the overall efficiency of our global production and sales operations, ultimately improving our capacity to achieve sustained growth. Lastly, we will strive to become a responsible global corporate citizen by increasing the scope and scale of our social contribution activities worldwide. More effort will be made to ensure shared growth with suppliers and ultimately contribute to making a better world for all our stakeholders. I ask for your continued support and interest in the future. Thank you. Chairman and CEO Chung Mong-koo HYUNDAI MOTOR COMPANY Annual Report 2014 Message from the CEO WE WILL STRIVE TO BECOME A GLOBAL LEADER IN THE AUTOMOBILE INDUSTRY. Dear shareholders, Thank you for taking your time to attend the Hyundai Motor’s 47th annual shareholders’ meeting. The year 2014 was full of challenges for the automobile industry, with the lowest market growth rate since 2010 and the global economy settling into a new normal of slow growth. The global economy slumped largely due to the slow growth of emerging economies. Backed by a favorable exchange rate, Japanese automakers presented a particularly difficult challenge to their competitors, including Hyundai Motor. Nevertheless, we achieved an annual sales growth of 4%, producing and selling 4.96 million units and surpassing our annual business target. We also strengthened our reputation as a leading automaker with significant achievements in quality management, R&D and brand image. Hyundai Motor was placed first in JD Power’s Initial Quality Study in the US and second in JD Power’s Vehicle Dependability Study in China. Our flagship sedan model, Genesis received great reviews, as did the new Sonata and i10. Hyundai Motor reaffirmed competitiveness in next-generation technology with the Tucson (ix35) FCEV’s powertrain being listed as one of Ward’s 10 Best Engines. Moreover, Hyundai’s brand value has increased significantly yet again, moving up to 40th place in Interbrand's Best Global Brands, making 2014 yet another year of strong growth in brand value. All these achievements were made possible thanks to the strong support of our shareholders. We are determined to make 2015 another year full of great achievements. In 2015, we will overcome any challenges by working together even more effectively and in turn strengthening our internal capacity. We are aiming to manufacture and sell 5.05 million units and thereby surpassing the five million annual sales mark for the first time in Hyundai Motor’s history. Hyundai Motor’s key strategies for achieving this target are as follows. M e s s a g e f r o m t h e C E O 1 2 / 1 3 First, we will continue to maintain our competitive edge in quality management. All members of Hyundai Motor will work together to further improve product quality and productivity at the same time, in order to avoid any large recalls such as the one recently experienced by another major automaker. Utmost efforts will be made by all departments at Hyundai Motor to optimize the quality of all new models released in 2015. Second, in order to achieve our ambitious sales target, we will also make greater investments to achieve leapfrog improvements in our customers’ experience at the point of sales and services. Hyundai Motor’s ultimate goal is to achieve sustainable business growth whilst being a much beloved brand. Third, we will continue to invest in R&D to enhance Hyundai Motor’s future competitiveness. We will invest in the development of innovative fuel efficiency improvement technologies as well as in green and smart technologies, leading on innovation and exceeding customer expectations. Lastly, I would like to once again emphasize that every single member of Hyundai Motor will give their best to innovate and achieve our ambitious sales target of 5.05 million units. Dear shareholders, I ask for your continued support this year, as you have given us to date. We, at Hyundai, will strive to create greater value for customers and make Hyundai Motor a global leader in the automobile industry. I wish you and your family great fortune and good health. President and CEO Kim Choong-ho NEW THINKING. NEW THINKING, NEW VALUES THE WORLD OF MODERN PREMIUM Even today’s most advanced products can quickly become outdated. Hyundai Motor is striving to create cars today which will still be the best tomorrow. This is Hyundai Motor’s unique way of creating new experiences and new values. Brilliant Brand B R A N D 1 6 / 1 7 REALIZING ‘MODERN PREMIUM’ VALUES WITH AUTOMOBILES THAT DELIVER MORE Premium was once defined by a products quality. But it is now defined in terms of how a certain combination of great products and services can fulfill specific customer’s needs and even improve a customer’s life. Although it is a lofty goal, Hyundai Motor is aiming to become a brand that goes beyond even this new definition of premium. Creating something that goes beyond performance, design, service and price to deliver unprecedented levels of satisfaction is the goal of Hyundai Motor’s ‘Modern Premium’. It is also about providing an automobile experience full of art, culture and two-way communication. A NEW VALUE PROPOSITION FOR AUTOMOBILES Automobiles are no longer just a means of transport; they provide a living space and a companion for everyday life. Likewise, Hyundai Motor is committed to being much more than just an automaker. Under the slogan of ‘Modern Premium’, we want to deliver a new experience, with unprecedented levels of satisfaction. We will develop new models that complement customers’ lifestyles and foster a new automobile life and culture which will enrich the lives of our customers. Ultimately, we want to become a brand which helps our customers fulfill their dreams under the slogan of ‘Modern Premium’. ENGAGING CUSTOMERS BEYOND AUTOMOBILES Hyundai Motor’s customer service is continuously evolving just as the technology and quality of our products are. Innovation is key to our desire to become not just a car seller but a company that engages with its customers and understands their needs. In 2013, we began our service innovation with the launch of ‘blueme service’ which is a diagnostics service which is designed specifically for female drivers. We have also modified some of our shops with popular non-automobile themes such as coffee, flowers and cartoon characters to suit local customer preferences. In 2015, we plan to launch ‘Auto Square’ a new multi-shop customer experience in collaboration with premium audio manufacturer, Harman Kardon, and Coffee Bean, one of the most popular coffee shop chains. Our customers have been very receptive to our engagement efforts. This is a part of our wider ‘Modern Premium’ branding effort. HYUNDAI MOTOR COMPANY Annual Report 2014 Brilliant Space PRESENTING A PLACE FOR A ‘MODERN PREMIUM’ EXPERIENCE Hyundai Motorstudio Seoul B R A N D 1 8 / 1 9 A DEALERSHIP FOCUSED ON CUSTOMERS AND NOT THE CARS CREATING A NEW TYPE OF SPACE WITH AUTOMOBILES A BRAND NEW EXPERIENCE : HYUNDAI MOTORSTUDIO Just as automobiles have evolved Creating a new type of ‘Modern Hyundai Motorstudio is Hyundai into a living space from a means Premium’ space is an important Motor’s first brand space designed of transport, our dealerships are part of Hyundai Motor’s strategy to to demonstrate its ‘Modern Premium’ turning into a new type of space, establish its ‘Modern Premium’ brand. values. Created to be a space for creating a new paradigm. This will involve the transformation customers, great effort was made to They must evolve from a sales space of existing spaces which were ensure everything about the studio to a cultural space where customers designed for displaying and selling from the exterior design, the items can enjoy something more than automobiles into spaces which can on display, the management and the just an opportunity to get a good deal. provide a fresh experience full of infrastructure were all designed with Understanding the need for this art and culture, and engage with the customer in mind. major shift, Hyundai Motor is customers in a new way. As a result, visitors can have a creating new spaces such as We recently opened a flagship complete brand experience with the Hyundai Motorstudio and dealership in Sao Paulo designed engagement opportunities, art transforming our dealerships. using our new ideas and are exhibitions, entertainment features. The new dealerships and Hyundai actively upgrading our facilities and In short, it provides a new type Motorstudio are designed to be introducing new services throughout of rich cultural experience never spaces where the focus is on the our over 6,000 dealerships before available at traditional customer who is visiting, and not on worldwide. We also opened Hyundai automobile dealerships or exhibition the automobiles. Motorstudio, which is our flagship centers. Hyundai Motor opened demonstration of ‘Modern Premium’ its first Hyundai Motorstudio in and the first automobile brand Seoul and recently opened another experience center in Korea. one in Moscow, making the brand experience available to more people. Hyundai Motorstudio Moscow Hyundai Motorstudio is a new brand space created to provide experiences which will help visitors understand ‘Modern Premium’ values. HYUNDAI MOTOR COMPANY Annual Report 2014 Brilliant Art REDEFINING THE RELATIONSHIP BETWEEN A BRAND AND ART B R A N D 2 0 / 2 1 © Tate Photography © Andrew Dunkley, Tate Photography SUPPORTING ART AND BEING INSPIRED It takes a lot of inspiration to develop all the technologies involved in designing and creating a new automobile model. Hyundai Motor is also thinking of ways in which the brand can be inspired by art. We have actively been working to enhance the artistic quality of our products and brand. At the same time, we are supporting the artists who create work that inspires us. We are aiming to grow and contribute to the creation of a robust art community. We firmly believe that supporting activities that allow more people to appreciate art is a part of ‘Modern Premium’. CREATING A GREAT EXPERIENCE AND LASTING MEMORIES Hyundai Motor is working with a number of art museums in a variety of ways. For example, Hyundai Motor has entered into a ten-year partnership for the ‘Hyundai Motor Series’ exhibition with National Gallery of Modern Art in Seoul. It also signed a long-term partnership agreement, the longest lasting ever, with Tate Modern not just as a funding provider but as an active participant in the creation of exhibitions that deliver great value to society. ‘The Brilliant Art Project’ is yet another Hyundai Motor initiative designed to introduce creative works to the greater public. There are a number of other collaborative art projects also being implemented. At Hyundai Motor, we want our products and activities to ultimately lead to a great customer experience. Likewise, all our art projects from the ‘brilliant memories’ campaign to ‘brilliant 30’ were designed to help us realize our brand vision of ‘Modern Premium’. We firmly believe that our continued involvement in art projects and collaboration initiatives will help Hyundai Motor realize its vision of ‘Modern Premium’ with added value. HYUNDAI MOTOR COMPANY Annual Report 2014 Basic Tech 01 DEMONSTRATING HYUNDAI MOTOR’S STRENGTH IN POWERTRAIN TECHNOLOGY After winning multiple ‘Ward’s 10 Best Engines’ awards for its engines, Hyundai Motor has now demonstrated its strength in alternative powertrain technology with its fuel cell making it into the ‘2015 10 Best Engines Winners’ by US Ward’s Auto. It was the first time a fuel cell had made it onto the list. Thanks to its leading engine design and manufacturing capacity, Hyundai Motor has made it onto the ‘Ward’s 10 Best Engines’ list five times with Tau engine on the list for three consecutive years (2008- 2010) and Gamma engine in 2011. EVOLUTION : MAKING THE BEST ENGINE IN THE WORLD B A S C I T E C H 2 2 / 2 3 A DREAM ENGINE FOR PREMIUM PERFORMANCE The engine is the heart of a car and having a great engine is essential for making a great car. It has been just over two decades since Hyundai Motor introduced its first in-house developed engine, and already it is a leading engine maker. Until recently, the industry had focused on the creation of powerful engines. However, Hyundai Motor reassessed this fundamental goal, shifting away from the old goals of achieving ‘more power’ and ‘faster acceleration’. Built for multiple goals from good performance to environmental benefits. Hyundai Motor’s R&D effort has been focusing its R&D effort on creating engines which can achieve high efficiency during everyday use. The shift in development goals is due to the slower average operation speed due to traffic congestion and slower speed limits imposed due to safety concerns. Growing customer demand for high fuel efficiency cars is yet another reason. Since good performance characteristics are still important, Hyundai Motor is trying to strike the perfect balance between power and efficiency with special consideration to the environmental. We are committed to working towards better performance, higher efficiency and cleaner emissions. POWERTRAIN TECHNOLOGY DEVELOPMENT HISTORY 1991 Alpha engine and transmission : Hyundai Motor’s first in-house powertrain 1995 Beta engine and transmission 1.6L, 1.8L, 2.0L medium engine 1997 Epsilon engine and transmission 1998 High performance/high tech V6 Delta engine 1999 GDi V8 Omega engine 2004 Theta engine with top environmental performance 2005 Lambda engine 2006 Gamma and S engine 2007 Diesel F, G and H engine 2008 Tau engine : ‘Ward’s 10 best engines’ 2009 R-engine & 6-speed transmission First Korean engine to achieve EURO-5 emission compliancy 2010 Nu engine 2011 Tau GDi engine & rear wheel 8-speed automatic transmission First Korean automatic transmission for rear wheel powertrain Gamma GDi engine : ‘Ward’s 10 best engines’ 2014 Fuel Cell Powertrain, ‘Ward’s 10 best engines’ 7-speed DCT (Dual Clutch Transmission) Maximum power output of 1.6 Gamma GDi Engine (One of ‘2011 Ward’s 10 Best Engines’) HYUNDAI MOTOR COMPANY Annual Report 2014 Basic Tech 02 STRONGER AND LIGHTER : EVOLUTION FOR HYUNDAI MOTOR’S CAR BODIES FOR BETTER SAFETY AND STYLE B A S C I T E C H 2 4 / 2 5 51.2 : 48.8 IDEAL FRONT AND REAR WEIGHT DISTRIBUTION IN CAR BODY Hyundai Motor has achieved 51.2 : 48.8 front-to-rear weight distribution, an ideal yet extremely difficult to achieve ratio, ensuring exceptional drivability. The wheelbase was extended with reduced overhang at both the front and rear. However, the length of the front hood was increased to achieve a more dynamic profile. High speed operation stability was also improved with improved aerodynamics. (Genesis G330 with panoramic sunroof) CREATING A STRONGER YET LIGHTER CAR BODY The vehicle body is the skeleton of an automobile, which not only houses and supports the vehicle components but also protect the passengers. Body design is also essential to achieving an aesthetically pleasing exterior design. Engineers at Hyundai Motor are doing they utmost to ensure maximum safety for all of the occupants, applying their ingenuity and the latest technologies in every way possible. 51.5% USE OF ADVANCED HIGH STRENGTH STEEL High structural rigidity is key to improved durability and collision safety. Hyundai Motor is increasing the use of Advanced High Strength Steel (AHSS) with tensile strength above 60kg which is lighter than regular steel but more than twice as strong. In addition, the use of parts made using an advanced hot-stamping method has increased and dual sectional structure was applied as well, in order to achieve better ride quality and smoother handling, ultimately creating a premium drivability. (Genesis) MAKING A SAFER CAR WITH THE BEST TECHNOLOGY AVAILABLE Safety technology is the most important of all automobile technologies. Hyundai Motor is developing various safety enhancement systems in order to provide the best possible protection for people inside and outside of Hyundai Motor cars, in all possible situations. Vehicle Dynamic Control (VDC), Advanced Traction Cornering Control (ATCC), Vehicle Stability Management (VSM), and Autonomous Emergency Braking (AEB) are examples of Hyundai Motor’s latest safety systems. Hyundai Motor is also conducting collision performance tests to further improve its safety performance rating. HYUNDAI MOTOR COMPANY Annual Report 2014 Basic Tech 03 PRECISION CONTROL OF BRAKING POWER HTRAC is a next-generation 4-wheel drive system which variably controls the braking power of the left and right wheels in both the front and rear wheels, achieving exceptional stability on ice and other difficult road conditions. Smart Tech HYUNDAI MOTOR IS MAKING THE SMART CAR A REALITY BY INFUSING ITS CARS WITH ADVANCED TECHNOLOGIES VSM (Vehicle Stability Management System) The VSM prevents asymmetrical braking by applying braking force to the wheels individually, ensuring stable maneuvering. ADVENT OF SMART CARS The age of smart cars is approaching fast as automobiles are increasingly making full use of electronic technology developments. There are already cars out there which can drive themselves, automatically adjust speed and maneuver into the hard shoulder in emergency situations. Hyundai Motor has already highlighted the importance of smart car technology, particularly with regard to Hyundai Motor’s growth and leadership in market. Hyundai Motor has already developed and introduced various smart technologies such as ‘Blue Link’ and the Advanced Smart Cruise Control (ASCC) system. Hyundai Motor is currently focusing its efforts on the development of the autonomous car, which will be the ultimate smart car. B A S C I T E C H 2 6 / 2 7 ASCC (Advanced Smart Cruise Control) A combination of sensors measure the distance from the car in front and automatically adjust speed to maintain a safe distance without having to apply the brakes manually. LKAS (Lane Keeping Assist System) LKAS is an upgraded version of the Lane Departure Warning System (LDWS) which sends a warning signal and vibration through the steering wheel when the car leaves the lane without signaling. The forward-looking camera at the front of the vehicle detects the driving lane and automatically steers the vehicle to stay in the middle of lane. BSD (Blind Spot Detection System) The BSD consists of radars on the left and right sides of the rear bumper which detects obstacles and incoming vehicles. The system sends warning signals to the driver to help prevent accidents. ASPAS (Advanced Smart Parking Assist System) The ultrasonic sensor at the rear of the vehicle detects the parking space and the system controls the steering system, helping drivers park with confidence. The second generation parking assist system supports both parallel and reverse parking maneuvers. 9 Airbags There are a combination of nine airbags, consisting of a driver’s knee airbag, curtain airbags, frontside airbags and rear side airbags working together to protect drivers and passengers. (Genesis) ㆍ Internet access ㆍ App store ㆍ Smartphone remote start and door lock control ㆍ Traffic information and navigation ㆍ Automatic Collision Notification (ACN) / Remote diagnostics ㆍ Image processing-based safety system ㆍ Eco-driving coaching ㆍ Gesture-based audio control HYUNDAI MOTOR COMPANY Annual Report 2014 Design Philosophy A DESIGN INSPIRED BY NATURE, ART AND PEOPLE ‘FLUIDIC SCULPTURE’ : EVOLUTION IN AESTHETICS OF AUTOMOBILE DESIGN Great designs can considerably increase the value of advanced technologies by making them shine. ‘Fluidic Sculpture’ is Hyundai Motor’s design philosophy which aspires to create advanced designs. ‘Fluidic Sculpture’ takes its inspiration from nature and through a unique process turns this inspiration into a great design. The end result embodies nature’s vibrant energy and dynamism. Breaking down the barriers between art and automobile design, ‘Fluidic Sculpture’ has given a unique design identity to Hyundai Motor. Hyundai Motor introduced ‘Fluidic Sculpture’ to the world in 2009, with the launch of Sonata which received overwhelmingly positive reviews for its unique and stunning look. Hyundai Motor subsequently announced ‘Fluidic Sculpture 2.0’ and has been applying it to its new models since 2013. Thanks to great design, the owners of Hyundai Motor models can enjoy great satisfaction and a sense of pride, whilst inspiring others to become a part of Hyundai Motor’s exciting design revolution. Hyundai Motor Design Process I D E S G N P H L O S O P H Y I 2 8 / 2 9 HYUNDAI MOTOR COMPANY Annual Report 2014 I D E S G N P H L O S O P H Y I 3 0 / 3 1 HMI REALIZING ‘MODERN PREMIUM’ WITH GREAT DESIGN AND ATTRACTIVE TECHNOLOGY Hyundai Motor’s design philosophy goes beyond aesthetics by eliminating the unnecessary and incorporating all of the necessary elements into a great design. Although Hyundai Motor is known for its striking exterior designs, every aspect of the design is carefully thought through, especially the interior design, to ensure great ergonomics which leads to exceptional comfort for drivers and passengers alike. Clustering and placing buttons in the most convenient locations, fine-tuning the design to a tenth of an inch and using materials that convey a sense of refinement when touched are all parts of Hyundai Motor’s design practice based on Human Machine Interface (HMI) principles. Following the HMI principles, Hyundai Motor is creating interior designs that are simple, intuitive and ergonomic which leads to higher levels of emotional satisfaction. Imagine CREATING DESIGNS EMBODYING THE DNA OF ‘MODERN PREMIUM’ Hyundai Motor’s designers working in Korea, the US, Germany, China, Japan and India, each bring their own unique perspective, a key source of inspiration and competitiveness. Needless to say, designer’s imagination is the earth from which innovative new designs blossoms. Aiming to stimulate the creativity of its designers, Hyundai Motor recently launched ‘My Baby’ projects for both Korea-based and overseas based designers. The main design team at Namyang Technology Research Center is also collaborating with overseas design studios in Europe, the US and Japan, in order to strengthen their competitiveness. Hyundai Motor will continue to support various projects to create innovative new designs which are engaging and satisfying for our customers. HYUNDAI MOTOR COMPANY Annual Report 2014 Blue Drive CREATING CARS THAT PROTECT THE PLANET IS THE GOAL BEHIND BLUE DRIVE B L U E D R V E I 3 2 / 3 3 GREEN CARS ARE PREMIUM CARS CREATING A GREENER WORLD WITH ‘BLUE DRIVE’ Blue Drive is the name of Hyundai Motor’s low carbon green technology strategy designed to reduce CO2 emissions. The strategy focuses on improving fuel It does not matter how fast, aesthetically pleasing, durable or smart a car is, if it is not built with the environment in mind. Simply put, cars do not have a place in society if they are not green. Sustainable cars are the future and the paradigm requires car makers to place the environment at the forefront of their thinking. Today, going green is not a choice but an imperative and Hyundai Motor is efficiency and driving the expansion of the working to set a new benchmark with the firm belief that green cars are premium. green vehicle market. Hyundai Motor’s ‘Blue Drive’ strategy will guide us to develop green automobiles beating today’s standards and becoming the cars of our green future. ‘Blue Drive’ is the name for Hyundai Motor’s low carbon green technology strategy, designed to reduce CO2 emissions. It is also a brand name for vehicles equipped with fuel-saving technologies. Hyundai Motor chose ‘Blue Drive’ as its strategy as a statement to its commitment to protect the environment and contribute to the sustainability of all forms of life on Earth including humanity. ‘Blue Drive’ encompasses Hyundai Motor’s will to protect the Earth by preserving blue skies, clean water and a green environment. Hyundai Motor will continue its efforts towards the betterment of the environment and greening of the world. HYUNDAI MOTOR COMPANY Annual Report 2014 BLUE DRIVE : REALIZING THE DREAM OF ZERO CO2 EMISSIONS WORKING TOWARD GREENER CARS LEADING FCEV : THE ULTIMATE GREEN VEHICLE Cars that do not require any fossil fuel to operate and emit zero CO2 are the ultimate goal of Hyundai Motor’s ‘Blue Drive’ strategy. More specifically, the ‘Blue Drive’ strategy aims to improve the functionality of automobiles such as performance, safety and convenience while reducing pollution and fuel consumption. Hyundai Motor has introduced a number of green technologies and developed green cars with the guidance of the ‘Blue Drive’ strategy. As of 2015, Hyundai Motor’s green models include a Hybrid Electric Vehicle (HEV), a Plug-in Hybrid Electric Vehicle (PHEV) which can be charged using grid electricity, a zero emissions battery Electric Vehicle (EV) and a Fuel Cell Electric Vehicle (FCEV) which is regarded as the ultimate green car. Fuel Cell Electric Vehicles, which run on electricity generated from a chemical reaction between hydrogen and oxygen, are regarded by many as the ultimate green vehicle. Hyundai Motor successfully began mass production of the Tucson (ix35) Fuel Cell in 2013, establishing it as the ‘First Mover’ in the FCEV market. In 2014, Ward’s Auto listed the fuel cell of the Tucson (ix35) Fuel Cell as one of ‘2015 Ward’s 10 Best Engines’, making Hyundai Motor the first FCEV to be included in the list and putting it under the spotlight. Hyundai Motor will continue to play a positive role in expanding the FCEV market to provide the ultimate green vehicle experience to a greater number of people. FCEV 100kW class fuel cell stack B L U E D R V E I 3 4 / 3 5 HYUNDAI MOTOR’S FCEV DEVELOPMENT STATUS AND IMPACT ZERO CO2 EMISSIONS WORLD’S FIRST MASS PRODUCTION BYPRODUCT : PURE H2O 0 Plug-in Hybrid Electric Vehicle SONATA MAKING HISTORY WITH GREEN VEHICLES Hyundai Motor has been making an active contribution within the green vehicle market for some time, often leading innovation in both Korea and the world. For example, Hyundai Motor announced its first hybrid electric concept in 1995 and is currently selling a number of different HEVs. Likewise, Hyundai Motor has developed SONATA PLUG-IN HYBRID ELECTRIC VEHICLE : THE FIRST PHEV DEVELOPED IN KOREA PHEVs are similar to HEVs but have a larger battery and can be charged using mains electricity. PHEVs can operate as EVs using its first EV, Sonata EV in 1991 and launched Korea’s first highway-capable BlueOn electricity stored in the battery for limited EV in 2010. In January 2015, Hyundai Motor unveiled the Sonata Plug-in Hybrid Electric Vehicle, the first Korean PHEV, at the Detroit Motor Show, demonstrating its prowess in green automobile technologies. The PHEV market has been growing quickly along with EVs and Hyundai Motor is expecting PHEV models to serve as a significant source of Hyundai Motor’s future business growth. distances and operate as HEVs when the battery charge level becomes low. HYUNDAI MOTOR COMPANY Annual Report 2014 Blue Drive History 2009.7. ~ 2013.11. st phase 1 Launch of Blue Drive brand and first line of green models 2013.12. ~ 2015 nd phase 2 Expansion of HEV model lineup and mass production of world’s first FCEV rd phase 2016 ~ 3 Evolution to next-generation green models GREEN CAR PROJECTS The Hyundai Motor Group plans to establish a full lineup of green models ranging from compact cars to SUVs by 2020. The green automobile market is expected to expand from 2 million units in 2014 to 6.4 million units by 2020. Hyundai Motor is investing in green car technologies in order to become a leader in this emerging market. ’09 Avante (Elantra) HEV ’10 BlueOn EV ’11 Sonata HEV ’13 Grandeur (Azera) HEV ’13 Tucson (ix35) Fuel Cell ’15 Sonata PHEV ’16 ~ Next-generation green cars BLUE DRIVE DEVELOPMENT HISTORY 1991 Sonata EV 1995 FGV (Future Green Vehicle)-1, the first hybrid concept car 2000 Santa Fe EV / 1st generation Santa Fe FCEV 2001 Santa Fe EV demonstration project in partnership with Hawaiian government 2004 Click HEV / HEV Demonstration program (2004~2008) 2nd generation Tucson FCEV / North America FCEV demonstration program led by the US Department of Energy (2004~2009) 2005 Hyundai Environmental Technology R&D Center, Automobile Recycling Center Verna HEV / European ELV collection network 2006 Established Hyundai Motor Global Standard on four Heavy Metals 2009 Low carbon green technology strategy ‘Blue Drive’ Avante (Elantra) LPi HEV / FCEV demonstration project in Korea (2009~2011) 2010 BlueOn EV BlueOn demonstration program in partnership with Ministry of Environment 3rd generation Tucson (ix35) Fuel Cell 2011 Sonata Hybrid 2012 The Yeosu Expo support - 9 BlueOn EVs / 15 Tucson (ix35) Fuel Cells 5 fuel cell electric buses / CNG hybrid electric bus ‘Blue City’ Tucson (ix35) Fuel Cell to complete the cross-Europe demonstration drive 2013 Began production of Tucson (ix35) Fuel Cell, the 1st mass production FCEV Grandeur (Azera) hybrid launched 2014 Launched 2nd generation Sonata Hybrid Hyundai Fuel Cell Electric Engine of Tucson (ix35) Fuel Cell as ‘Ward’s 10 Best Engines’ 2015 Unveiled Sonata Plug-in Hybrid CONCEPT CARS : A GLIMPSE INTO THE FUTURE THE CARS OF THE FUTURE ARE CLOSER THAN YOU THINK When discussing tomorrow’s automobiles, Hyundai Motor always starts with two key words, ‘smart’ and ‘environmentally friendly’. We then think about ways we can infuse the Hyundai Motor spirit of ‘Modern Premium’ into these new key words and develop concept cars. Built with Hyundai Motor’s latest technology, our concept cars are introduced at motor shows all around the world. Hyundai Motor has introduced a number of concept cars including the HCD series developed at the California Design and Technical Center, the HND series developed at the Namyang Technology Research Center and the HED-1 developed by Hyundai Motor Europe Technical Center. The most recently announced concept car by Hyundai Motor was the HCD-15 Santa Cruz, a crossover concept pickup which brings the best of a SUV and a pickup truck together in one package. After lengthy preparations, Santa Cruz is Hyundai Motor’s bold entrance into the pickup truck market. 2015 HCD-15 : Santa Cruz (US) 2014 HED-9 : Intrado (Europe) 2013 HND-9 : Venace (Namyang) HCD-14 : Genesis (US) 2012 HND-7 : Hexa Space (Namyang) HED-8 : i-oniq (Europe) HCD-12 : Curb (US) HND-6 : Blue Square (Namyang) 2011 2010 HED-7 : i-flow (Europe) HYUNDAI MOTOR COMPANY Annual Report 2014 WRC Hyundai Motorsport WRC TOWARDS THE CHAMPION OF THE FUTURE CREATING NEW POSSIBILITIES FOR HYUNDAI MOTOR WITH WRC W R C 3 8 / 3 9 WRC : TESTING TECHNOLOGIES TO THE EXTREME The World Rally Championship (WRC) is regarded as one of the two most important automobile racing events in the world. It also serves as a place where automakers can show off their technological prowess. WRC event consists of races, each over 1,500km long held 13 times a year. The courses include some of the most extreme, over icy roads and rough tracks in high altitude regions. It takes great technological capacity and strong performance to win the race. In 2014, Hyundai Motor re-entered the WRC with rally cars built on its i20 platform and has since been placed 3rd or higher in the four races up to the WRC Sweden rally in 2015. Strong performance at the WRC demonstrated Hyundai Motor’s technological capacity and enhanced its brand reputation. With Hyundai Mobis, Hyundai Steel and Hyundai Wia as new sponsors, Hyundai Motor plans to continue its participation in the WRC with the goal of not just winning the championship but of becoming the best brand known in the automotive industry. HYUNDAI MOTOR COMPANY Annual Report 2014 SHARING THE EXCITEMENT OF WRC WITH CUSTOMERS REACHING OUT TO CUSTOMERS THROUGH WRC Results : Hyundai World Rally Team Hyundai Motor has launched a number of marketing campaigns and outreach activities for its customers and WRC fans. For example, Hyundai Motor established ㆍ 2015 Rally Sweden (2nd) Manufacturer’s standing : 1st a hospitality facility at the rally sites. It is a combination of a rally car maintenance Driver’s standing : 2nd center and a rest area for rally fans, Hyundai Motor dealers, reporters and invited customers. We have also launched a new official Hyundai Motor WRC website which ㆍ 2014 Rally Deutschland (9th) Manufacturer’s standing : 1st updates fans in five languages. Other recently released WRC related activities include Driver’s standing : 1st the launch of over 20 pieces of merchandise, a display of replica WRC cars, Q&A with WRC racers and rally car experience sessions, offering new experiences to rally fans. In January 2015, Hyundai Motor launched a WRC virtual reality experience app, which provides a virtual experience of co-driving the Hyundai i20 WRC car, using a smart phone. The app is expected to enhance the high performance image of Hyundai Motor models. Starting with the Monte-Carlo Rally 2015, Hyundai Motor has launched new marketing initiatives to reach out to its fans. ㆍ 2014 Rally Poland (7th) Driver’s standing : 3rd ㆍ 2014 Rally Mexico (3rd) Driver’s standing : 3rd ㆍ 2014 Rally Sweden (2nd) Completed race In addition to the launching of new merchandise and various on-line promotional ㆍ 2014 Rally Monte-Carlo (1st) events, the initiatives include ‘Commons Booth’ which offers a co-driving Race at WRC experience and hosts a display of replica WRC cars. EXPERIENCE THE EXCITEMENT AND VIRTUAL REALITY OF WRC WITH ‘HYUNDAI VR+’ Hyundai VR+ is a free application that presents you with a virtual experience of co-driving the hyundai i20 WRC car. It offers the option to enjoy a 360 degree panoramic view as co-driver to Dani Sordo. Hyundai VR+ is available at the Apple Appstore and Google Play and is supported on smart phones including iPhone 5 or higher and Android 4.1 or higher. HYUNDAI VR+ Sample Video W R C 4 0 / 4 1 HYUNDAI MOTOR COMPANY Annual Report 2014 High Performance THE GLOBAL AUTOMOTIVE MARKET IS JUST AS COMPETITIVE AS WRC, THEREFORE HYUNDAI MOTOR IS ENSURING ITS COMPETITIVENESS WITH THE ‘N’ PERFORMANCE SUB-BRAND. THE ‘N’ BRAND ; CREATED WITH HIGH PERFORMANCE TECHNOLOGY OF WRC CARS Hyundai Motor is planning to shortly launch high performance ‘N’ brand models built using the technologies and experiences gained through its participation in WRC. The ‘N’ stands for Hyundai Motor’s Namyang Technology Research Center and signifies Namyang Technology Research Center’s commitment to motor sports and the development of high performance models. In 2014, Hyundai World Rally Team was placed 1st at the Rally Deutschland. The i20 WRC car was decorated with the ‘N’ initial, beginning the first chapter of the ‘N’ brand’s story. N Brand N B R A N D 4 2 / 4 3 BUILDING COMPETITIVE TECHNOLOGY WITH THE ‘N’ BRAND The WRC is an event which provides opportunities to both demonstrate and advance automobile technologies, and this is exactly why Hyundai Motor has been actively participating in the WRC. Hyundai Motor firmly believes in the importance of developing high performance models to enhance Hyundai Motor’s brand value and is committed to making the necessary investments to foster its new ‘N’ performance sub-brand. The ‘N’ brand will create new possibilities for Hyundai Motor and add new value to Hyundai Motor’s ‘N’ brand. *i20 WRC CAR First unveiled at the Paris Motor Show in 2012, the i20 has since evolved into a true rally car for the Hyundai World Rally Team. The Hyundai i20 WRC car is designed especially for the intense competition of a rally with a 300hp 1,600cc engine, a racing 6-speed sequential transmission, 4-wheel drivetrain, racing suspension and much more. In 2015, three members of the Hyundai Motor Group, Hyundai Mobis, Hyundai Steel and Hyundai Wia, became sponsors of the Hyundai World Rally Team, raising expectations even higher. The logos of the sponsor companies were added to the i20 WRC rally cars with the main sponsor Hyundai Mobis’ logo on the front hood. Hyundai Steel’s logo was placed on the bottom of the A pillar and the Hyundai Wia logo was placed on the rear. HYUNDAI MOTOR COMPANY Annual Report 2014 Human Power THE PEOPLE BEHIND HYUNDAI MOTOR AND THE ‘MODERN PREMIUM’ BRAND Challengers unafraid of failure, Creators who realize new values, Pioneers who venture into the future, Communicators that reach into the lives of people, Professionals who compete with the world. These are people comprising Hyundai Motor in different parts of the world. And they are the people who are creating a ‘Modern Premium’ future of Hyundai Motor. H U M A N P O W E R 4 4 / 4 5 Extreme weather testing on Mount Evans, US. NEW POSSIBILITIES. WE HAVE BEEN WALKING ON PATHS THAT WE HAVE CREATED OURSELVES Hyundai Motor has pioneered uncharted paths that others did not dare to explore. Hyundai Motor has walked new paths creating new possibilities along the way. Hyundai Motor is on a journey for new possibilities everywhere in the world for the future. We invite our customers to join our journey into a brighter future. HYUNDAI MOTOR COMPANY Annual Report 2014 Way of Hyundai Motor With its founding sprite and values as the driving force, Hyundai Motor Group has achieved sustained growth since its incorporation. We have selected five core values, created vision and defined management philosophy, creating a management philosophy structure which clarifies our goals and serves as a driving force. Moreover, these values are helping us write brand new chapters in Hyundai Motor’s history. REALIZING MANKIND’S DREAM PHILOSOPHY LIFETIME PARTNER IN AUTOMOBILES AND BEYOND VISION W A Y O F H Y U N D A I M O T O R 4 8 / 4 9 PHILOSOPHY VISION 5 CORE VALUES Hyundai Motor recognizes the importance and impact that automobiles have on society and mankind. It strives to play a role that extends beyond being simply a car manufacturer to become a customer’s lifelong companion. It will build connections with customers by fulfilling its vision to become a ‘lifetime partner in automobiles and beyond’ and participate in working ‘together for a better future’ as a member of the Hyundai Motor Group. The five core values are the cultural DNA embedded in Hyundai Motor and its employees, which serves as the guidelines towards a better future. By upholding the five core values, Hyundai Motor plans to foster an outstanding corporate culture which will match Hyundai Motor’s growing reputation. The management philosophy of a company is the basis for its business management. The essence of our management philosophy is ‘realizing mankind’s dream to create a new future, using imaginative ideas and striving for new frontiers’. Hyundai Motor will continue to conduct various business activities in line with our management philosophy, in order to become an internationally respected company, making a positive contribution to humanity. Core concepts of management philosophy ㆍSense of unlimited responsibility ㆍRealization of possibilities ㆍRespect of mankind CULTURAL DNA FOR FUTURE SUCCESS 5 CORE VALUES CUSTOMER CHALLENGE COLLABORATION RESPECT FOR PEOPLE GLOBALITY We promote a customer- We refuse to be We create synergy We believe the future of We respect the diversity driven corporate complacent, embracing through a sense of our organization lies in the of cultures and customs, culture by providing every opportunity for ‘togetherness’ that hearts and capabilities of we aspire to be the world’s the best quality and greater challenge, and is fostered by mutual individual members, and best at what we do, impeccable service with with our passion and communication and will help them develop and strive to become a all values centered on our ingenious thinking we cooperation within the their potential by creating respected global corporate customers. are confident that we will company and with our a corporate culture that citizen. achieve our goals. business partners. respects and nurtures talent. HYUNDAI MOTOR COMPANY Annual Report 2014 Milestones of Hyundai Motor Hyundai Motor has created a global success story as leading Korean automaker. I M L E S T O N E S O F H Y U N D A I M O T O R 5 0 / 5 1 1967 ~ 1990 1991 ~ 1999 1967 ㆍ Incorporation of Hyundai Motor 1968 ㆍ Completion of Ulsan assembly plant ㆍ Mass production of Cortina begins 1976 ㆍ Launch of Hyundai Pony, the first Korean passenger car ㆍ First export of Hyundai Pony to Ecuador 1983 ㆍ Incorporation of the Canadian subsidiary HMC 1985 ㆍ Launch of Pony Excel ㆍ Incorporation of the US subsidiary HMA ㆍ Launch of 1st generation Sonata 1986 ㆍ Exports of Excel to the US begin ㆍ Launch of Grandeur (Azera), Hyundai Motor’s large-sized luxury car 1987 ㆍ Excel is the best selling imported compact car in the US for 3 consecutive years 1988 ㆍ Launch of Sonata, Hyundai Motor’s mid-sized luxury sedan 1989 ㆍ Overseas exports of Excel surpass 1 million units 1990 ㆍ Launch of Elantra and Scoupe 1991 ㆍ Developed Alpha engine, the first engine created in Korea ㆍ Launch of Galloper ㆍ Developed Sonata EV 1992 ㆍ Unveiling of HCD-I, Korea’s first concept car ㆍ Cumulative production surpasses 5 million units 1993 ㆍ Launch of Sonata II 1994 ㆍLaunch of Accent ㆍ Annual production surpasses 1 million units 1995 ㆍ Launch of Avante (Elantra) ㆍ Completion of Jeonju commercial vehicle manufacturing plant ㆍ Hyundai Motor Europe Technical Center (HMETC) opens 1996 ㆍ Inauguration of the Namyang Technology Research Center ㆍ Cumulative production surpasses 10 million units 1997 ㆍ Independently developed Epsilon engine ㆍ Established the Turkey plant / Asan plant 1998 ㆍ Independently developed world-class, high performance V6 Delta engine ㆍ Launch of Grandeur (Azera) and Sonata ㆍ Established India plant ㆍ Acquisition of Kia Motors 1999 ㆍ Launch of Equss (Centennial : Hyundai Motor’s ultra large-sized sedan), Verna, and Trajet XG ㆍ Developed Korea’s first automotive fuel cell battery HYUNDAI MOTOR COMPANY Annual Report 2014 2009 ~ 2011 2009 ㆍ Genesis named ‘North American Car of the Year’ ㆍ Main sponsor of the US Super Bowl ㆍCumulative exports to Africa surpass 1 million units ㆍ No. 69 in Global Brand Value ㆍ Established the Czech plant ㆍ Established Hyundai Motor India Engineering Pvt. Ltd. ㆍ Developed next-generation high performance Theta GDi ㆍ Sales of Santa Fe surpass 2 million units ㆍ Tau engine named ‘10 Best Engines Winners’ by Ward’s Auto for 2 consecutive years 2010 ㆍ Cumulative sales of Sonata surpass 5 million units ㆍ Official sponsor of the 2010 FIFA World Cup South Africa ㆍCumulative sales by HMI surpass 3 million units ㆍ Established the Russia plant ㆍ Launch of the eco-friendly electric car BlueOn ㆍUnveiling of the independently- developed Nu·Tau GDi engines and RWD 8-speed automatic transmission ㆍ Tau engine named ‘10 Best Engines Winners’ by Ward’s Auto ㆍ Annual sales in the US surpass 500,000 units ㆍ Tucson (ix35) Fuel Cell developed 2011 ㆍ Blue Link introduced at the 2011 CES in the US ㆍ Unveiling of the new brand direction and slogan ‘NEW THINKING. NEW POSSIBILITIES.’ ㆍ Launch of the 5th generation Grandeur (Azera) and Veloster ㆍ Launch of Sonata Hybrid ㆍ Launch of Genesis Prada limited edition ㆍ No. 61 in Global Brand Value ㆍ Launch of i40 wagon ㆍ Cumulative exports to Central and South America surpass 2 million units ㆍ Gamma engine named ‘10 Best Engines Winners’ by Ward’s Auto 2000 ~ 2004 2005 ~ 2008 2000 ㆍ Launch of Santa Fe and Avante (Elantra) ㆍ Developed Korea’s first passenger diesel engine and large commercial engine ㆍ Debut of the four mid and large-sized bus models 2001 ㆍ Production of Beta engine surpasses 1 million units ㆍ Unveiling of Korea’s first Fuel Cell Electric Vehicle Santa Fe ㆍ Established Hyundai European Design Center 2002 ㆍ Cumulative production at Asan plant surpasses 1 million units ㆍOfficial sponsor of the 2002 FIFA World Cup Korea /Japan ㆍ Production of Sonata begins in China 2003 ㆍ Established the California Design & Technical Center ㆍ Production of Avante (Elantra) surpasses 2 million units ㆍ Proclaimed Global Environmental Management ㆍ Established the Europe Technical Center ㆍ Established the Namyang Design Center ㆍ Annual exports surpass 1 million units 2004 ㆍ Launch of Hyudai Motor’s first compact SUV, Tucson (ix35) ㆍ Production of Delta engine surpasses 1 million units ㆍ Sonata placed first in JD Power’s IQS ㆍ Cumulative exports surpass 10 million units ㆍ Developed Theta engine and Lambda engine ㆍ Official sponsor of UEFA Euro 2004 2005 ㆍ Established the US proving ground ㆍ Exports to Africa and the Middle East surpass 1 million units ㆍ Established the Alabama plant ㆍ Developed clean Mu V6 engine ㆍ Debut in Interbrand’s 100 Best Global Brands ㆍ Established Environmental Technology Research Center ㆍ Established Hyundai America Technical Center ㆍ Established Eco-Friendly Vehicle Recycling Center 2006 ㆍ Developed Gamma engine ㆍ No. 1 Non-Premium Nameplate in JD Power’s IQS ㆍ Launch of new Avante (Elantra) ㆍ Exports to South America surpass 1 million units ㆍ Developed V6 diesel S engine ㆍ Established new Hyundai Motor Europe building 2007 ㆍ Launch European strategic model i30 ㆍ Cumulative sales in the US surpass 5 million units ㆍ Unveiling of the 3rd generation fuel cell concept car i-Blue ㆍ Developed F, G, H diesel engines for commercial vehicle ㆍ Launch of the next-generation compact car i10 by HMI 2008 ㆍ Launch of Genesis ㆍ Established the 2nd plant in India ㆍ Beijing Hyundai hits 1 million vehicles production milestone ㆍ Established 2nd plant in Beijing ㆍ Sales of Avante (Elantra) surpass 5 million units ㆍ Launch of European strategic model i20 ㆍ Developed next-generation clean diesel R-engine ㆍ Launched Blue Drive brand for green models ㆍTau engine named ‘10 Best Engines Winners’ by Ward’s Auto ㆍ Developed front-wheel 6-speed automatic transmission 2012 ~ 2013 2014 2015 ㆍ Unveiling of Sonata Plug-in Hybrid ㆍ Established Hyundai Motorstudio Moscow ㆍ Participation of i20 in the WRC, achieving 2nd place in the Rally Sweden ㆍ Launch of Sonata Turbo ㆍ Launch of All-new Tucson I M L E S T O N E S O F H Y U N D A I M O T O R 5 2 / 5 3 2012 ㆍ Avante (Elantra) awarded 2014 ㆍ All-new Genesis wins the 2014 ‘North American Car of the Year’ iF Design Award ㆍ All-new Genesis and i10 win the Red Dot Design Award ㆍ Unveiling of HED-9 Intrado at the Geneva International Motor Show ㆍ Launch of the All-new Sonata ㆍ All-new Genesis wins the highest safety score in NHTSA history ㆍ Established Hyundai Motorstudio Seoul ㆍOfficial sponsor of the 2014 FIFA World Cup Brazil ㆍ Cumulative production by HAOS surpasses 1 million units ㆍ Participation of i20 in the WRC, achieving 1st place in Rally Deutschland ㆍ Unveiling of new i20 for Europe ㆍ Official sponsor of Incheon Asian Games ㆍ Selected as one of the top 40 Global Brands ㆍ Cumulative global sales of Avante (Elantra) surpass 10 million units ㆍ Genesis ranked highest in the Residual Value Awards in the US ㆍ i20 awarded ‘Indian Car of the Year’ ㆍ Launch of new Sonata Hybrid ㆍ Tucson (ix35) Fuel Cell engine named ‘10 Best Engines Winners’ by Ward’s Auto ㆍ Launch of New Santa Fe, i40 Saloon, and Veloster Turbo ㆍNo. 53 in Global Brand Value ㆍ Established the Brazil plant ㆍ Tucson (ix35) Fuel Cell supplied to Europe ㆍUnveiling of the i-oniq electric concept car ㆍ Grandeur (Azera), Avante (Elantra), Santa Fe awarded ‘the ALG Residual Value Award’ ㆍ Grandeur (Azera), Santa Fe, Veloster win a Good Design™ Award ㆍOfficial sponsor of UEFA Euro 2012 2013 ㆍWorld’s 1st mass production of Tucson (ix35) Fuel Cell ㆍ Launch of Maxcruz ㆍ Cumulative sales in the US surpass 8 million units ㆍLaunch of Hyundai Motorsport ㆍ Unveiling of new i10 ㆍ Selected as one of top 50 Global Brands ㆍ Cumulative sales of Sonata in Korea surpass 3 million units ㆍ Unveiling of electronically controlled AWD HTRAC ㆍ Cumulative production by HMI surpass 5 million units ㆍ Launch of All-new Genesis ㆍ World Rally Championship (WRC) Team launched ㆍ Beijing Hyundai annual sales in China surpass 1 million units HYUNDAI MOTOR COMPANY Annual Report 2014 G L O B A L P E R F O R M A N C E O F H Y U N D A I M O T O R 5 4 / 5 5 B R A N D V A L U E 10.4billion USD G R O W T H 1st H I G H V O L U M E C A RS S A L E S 9models 4.9% GLOBAL 2014 Global Brand Value Hyundai Motor’s brand value reached the global Top 40 at PERFORMANCE Rate of increase in Global Brand Value over the past 10 years OF Number of models which sold more than 100,000 units in a single country HYUNDAI MOTOR 2014 Global Sales Record In 2014, Hyundai Motor strengthened its market leadership 10.4 billion USD according to Interbrand’s ‘2014 Best 100 Hyundai Motor’s brand value has steadily increased over Thanks to growing customer loyalty and brand image with sales of 4,963,535 units worldwide, which was a 4.9% Global Brands’. the past 10 years since it made it into the Best 100 Global Brands in 2005. The overall increase rate is 200%, which is the highest within the companies included in the Best 100 Global Brands. worldwide, nine Hyundai models have sold more than increase from the previous year. 100,000 units in a single country’s market worldwide. HYUNDAI MOTOR COMPANY Annual Report 2014 Strengthened brand reputation proves greater value Providing a unique customer experience at the point Hyundai Motor is striving to deliver more value than just of customer contact a high product quality. Hyundai Motor has established Hyundai Motor has been optimizing the global sales its vision of becoming a ‘lifetime partner that goes network and implementing measures to improve beyond automobiles’ and is now concentrating its effort customer satisfaction, which has led to some great on creating automobiles which have value more than results including achieving the best customer just as a means of transport. satisfaction in China and Brazil. Tailored customer Hyundai Motor’s effort has paid off handsomely. service protocols were developed to provide a unique Hyundai Motor’s brand value reached the Global Top 40 customer experience. at 10.4 billion USD according to Interbrand’s ‘Best 100 Dealership are also going through major facelifts Global Brands’. Hyundai Motor has made it onto the list following the ‘Global Dealer Design Standard’. for 10 consecutive years, steadily increasing its brand Hyundai Motor has also opened flagship dealerships in major value. Hyundai Motor’s brand value has increased by 20% cities around the world and other places where visitors can annually since its new ‘Modern Premium’ brand identity experience Hyundai Motor’s ‘Modern Premium’ brand. was announced. Excellence in quality leads to record sales of 4.96 million units In 2014, Hyundai Motor recorded annual sales of 4,963,535 units exceeding its annual sales target. In addition, Hyundai Motor strengthened its market presence as a leading automaker in terms of important indicators such as quality, product competitiveness and brand value. For example, Investments were made to improve customer service skills amongst customer facing staff. Efforts will continue to find ways to improve our customer’s experience, to ensure that we achieve the highest customer satisfaction and sustained growth. Ever expanding global sales network Hyundai Motor has established manufacturing plants in key markets and invested heavily in R&D, production and Hyundai Motor was placed first in JD Power’s IQS in the sales divisions to develop highly tailored products for US and second in a VDS in China. Our flagship sedan each market. model, Genesis, as well as the new Sonata and new i10 We also greatly expanded our sales networks with 6,200 also received great reviews. In 2015, Hyundai Motor is dealers in over 200 countries in order to deliver our aiming to hit the sales mark of 5.05 million units and competitive products. strengthen its foundation for sustainable growth. We are planning to make bold R&D investments to Hyundai Motor will continue to develop highly refined products and supply them through our highly efficient maintain our industry leading product quality. In light sales networks in order to make our cars accessible to of large-scale recalls from some of our competitors, local customers everywhere. Hyundai Motor will place an even stronger emphasis We will also continue to invest to improve the customer on quality verification at the product design stage and experience at point of sales and customer service and efforts for quality improvement will be coordinated paving the way for higher volume sales. By making with the labor union, in order to set a new benchmark in these efforts, we will work towards our ultimate goal to automobile quality. achieve sustained growth as a cherished brand. 2014 Global Sales 496 unit : 10,000 units 2014 Production per country : South Korea 1,876 unit : 1,000 units 2014 Global sales : top 5 models unit : 1,000 units 2,893 G L O B A L P E R F O R M A N C E O F H Y U N D A I M O T O R 5 6 / 5 7 2011 2012 2013 2014 2015 406 441 473 496 505 (target) Brazil Turkey Russia Czech US India China South Korea 179 203 237 307 399 611 1,143 1,876 Santa Fe 243 Sonata 472 Tucson (ix35) 540 Accent 710 Avante (Elantra) 928 Hyundai Motor has expanded its business into the US and China, the two largest automobile markets in the world, as well as Europe, home of some of the strongest automakers in the world. It has succeeded in providing a unique customer experience, achieving the highest brand value and customer satisfaction. Hyundai Motor will not only continue to strengthen its production base in major markets worldwide but will invest in R&D, production and sales in order to develop highly tailored products to further increase sales and brand value. HYUNDAI MOTOR COMPANY Annual Report 2014 Arena of Hyundai Motor Hyundai Motor has a comprehensive worldwide business network which consists of manufacturing plants, R&D centers and design centers. Hyundai Motor is realizing its vision of ‘Modern Premium’ and fulfilling needs of its customers using its global network. Ulsan Plant Asan Plant · The world’s single largest · State- of -the-art self automobile plant · Five independent sufficient factory · Manufactures passenger manufacturing plants, engine vehicles for export : Sonata, and transmission plant Grandeur (Azera), etc. · Export shipment dock, test · Operates environment-friendly drive and crash test sites solar farm on rooftops Jeonju Plant · A base for manufacturing global commercial vehicles · The world’s biggest production center for commercial vehicles Hyundai Motor Technical China ASIA & PACIFIC Hyundai Motor Group China (HMGC) Global Support Center (China) Sichuan Hyundai Motor Company (CHMC) Hyundai Africa & Middle East Regional Headquarters for commercial vehicles Hyundai Assan Otomotive Sanayi ve Tic. A.S. (HAOS) Beijing Hyundai Motor Company (BHMC) Hyundai Motor Japan Technical Center Hyundai Motor Japan (HMJ) AST & AFRIC A E E L D MID Hyundai Africa & Middle East Regional Headquarters Hyundai Motor India Limited (HMI) Hyundai Motor India Technical Center (HMIE) India A C I R E M A H T U O S & L A R T N E C · A C I R E M A Hyundai Auto Canada (HAC) Asia-Pacific Regional Commercial Headquarters Hyundai America Technical Center Inc. (HATCI) Asia-Pacific Regional Headquarters Hyundai Motor Manufacturing Alabama (HMMA) Hyundai Motor Company Australia (HMCA) Hyundai Central & South America Regional Headquarters Hyundai Central & South America Regional Headquarters for commercial vehicles WORLDWIDE NETWORK Hyundai Motor Mexico (HMM) Hyundai De Mexico (HYMEX) Hyundai Translead (HT) Hyundai US Technical Research Center (California Proving Ground) Hyundai Motor America (HMA) Hyundai US Design Center H T R O N Hyundai Motor Manufacturing Russia LLC (HMMR) Hyundai Motor CIS (HMCIS) Hyundai Motor Netherlands B.V. (HMNL) Hyundai Motor España, S.L. (HMES) Hyundai Motor Poland (HMP) Hyundai Motor Europe GmbH (HME) Hyundai Motor Europe Technical Center GmbH (HMETC) / Design Center ASIA China Korea A R E N A O F H Y U N D A I M O T O R 5 8 / 5 9 Hyundai Motor Manufacturing Brazil (HMB) Hyundai Motor France SAS (HMF) Hyundai Motor Manufacturing Czech s.r.o. (HMMC) Hyundai Motor Czech s.r.o. (HMCZ) Hyundai Motor United Kingdom, Ltd. (HMUK) Hyundai Motor Deutshland GmbH (HMD) Hyundai Motor Company Italy (HMCI) Hyundai Motorsport GmbH (HMSG) Hyundai Eastern Europe Regional Headquarters Hyundai Eastern Europe Regional Headquarters for commercial vehicles E U R O P E India Plants · A manufacturing base for India Technical Center · Located in Hyderabad China Plants · Annual manufacturing emerging markets such as · Designs Indian market capacity of 1,050,000 vehicles India focused strategic vehicles and in 3 factories · Operates flexible engine plants supports back-end operations · Plans to build 4th and · Manufactures strategic vehicles such as EON, i10, i20, etc. 5th factories with a total manufacturing capacity of 300,000 vehicles · Ranked the first in sales of small sized cars in China with Verna model (Accent model in Namyang Technology Environmental Technology Research Center · World class capacity, Center · Pioneers development of comprehensive technology environmentally friendly R&D center vehicles such as hydrogen · Employs 11,000 researchers fuel-cell vehicles · Consists various centers for · Vehicle recycling and clean design and engineering, power manufacturing technology training, performance and test developments driving, aero-acoustic wind tunnel, and environmental Korea) in 2014 R&D ASIA HYUNDAI MOTOR COMPANY Annual Report 2014 America Technical Center · State-of-the-art R&D center California Proving Ground · Located in the Mojave Desert, Alabama Plant · Located in Alabama Brazil Plant · Located in Sao Paulo located in Ann Arbor, Michigan Los Angeles · A standard model for Hyundai · Manufactures local market · Operates Hyundai California · The longest track is 60km, Motor’s overseas plants focused strategic vehicle, HB20 Design & Technical Center, total area of 17,680,000㎡ · Topped the Harbor Report’s · Ranked 1st in 2014 Brazil and driving tracks North American automaker Vehicle Ownership Satisfaction productivity survey for 6 Study (VOSS) consecutive years for the press factory, and 5 consecutive years for engine and assembley factory Europe Technical Center · Located near Frankfurt, Czech Plant · Manufactures Europe market Turkey Plant · First Hyundai Motor’s Russia Plant · Manufactures strategic model Germany focused strategic vehicles overseas plant Solaris (Accent) focused on · Develops quality automobiles such as i-series · Manufactured a total of more the local market and engines that meet · Awarded for 2 consecutive than 1 million vehicles in 2014 · Received Russian Government environment regulations years 2014 ‘Excellence Award’ Quality Award in 2014 in Czech National Award for Quality A R E N A O F H Y U N D A I M O T O R 6 0 / 6 1 Russia EUROPE Germany Czech Turkey AMERICA BRAZIL AMERICABRAZILEUROPE HYUNDAI MOTOR COMPANY Annual Report 2014 Innovation of Hyundai Motor PAVING THE PATH TO HYUNDAI MOTOR’S GLOBAL LEADERSHIP WITH THE DEVELOPMENT OF NEW TECHNOLOGIES R&D capacity is a core factor in determining the brand value of a company. The development of new tech- nologies is also a driving force behind a stronger future for a company. Hyundai Motor has established a global R&D network and is currently developing new technologies capable of having a major impact on the automotive market. The automotive industry is changing rapidly and Hyundai Motor is investing more resources than ever so that we can lead the change. Leading the market by strengthening R&D capacity The Namyang Technology Research Center is by far As the automotive industry moves towards green and smart cars, the ability to develop ‘green’ and ‘smart’ cars has become a key indicator of a company’s R&D capacity. Determined to become a market leader, Hyundai Motor has created a long- term R&D investment plan and begun to make large scale investments in key areas. The expansion of R&D facilities and the recruitment of new R&D staff is under way in order to secure the necessary capacity and infrastructure for the development of game changing new technologies. Domestic R&D network : Birth place of new technologies the largest R&D center, and consists of a planning center, a design center, a powertrain center, wind tunnel facilities, collision testing facilities, and a comprehensive proving ground. Over 11,000 researchers are working at the center, developing and testing new models. The Namyang Technology Research Center serves as the center of Hyundai Motor’s global R&D network, linking overseas R&D centers with Hyundai Motor’s Korea-based capacity. The Mabuk Environmental Technology Center is largely responsible for the development of the hydrogen fuel cell car and other leading green technologies. The Korea Central Research Institute is responsible for developing new technologies including environmental, alternative energy, Hyundai Motor’s domestic R&D network consists of intelligent safety features, convenience features three major R&D centers, which are the Namyang and new materials. Technology Research Center, the Mabuk Environmental R&D centers 8 regions Total area of Hyundai Motor’s proving ground ㆍNamyang Technology Research Center comprehensive proving ground 21,480,000m2 ㆍUlsan plant comprehensive proving ground ㆍCalifornia proving ground ㆍChina Technical Research Center proving ground 1,650,000m2 660,000m2 17,680,000m2 1,490,000m2 understanding regional markets and technological about the lifestyle of customers in their respective trends and using their understanding to support the markets and developing refreshing designs that deliver development of localized models. Working on the high levels of satisfaction to the target customers. frontline, overseas R&D centers play a pivotal role in supporting Hyundai Motor to become a leading World class proving grounds I I N N O V A T O N O F H Y U N D A I M O T O R 6 2 / 6 3 Technology Center and the Korea Central Research Engaging the global market with a global R&D automaker. Institute. Their work ranges from the development of network new models to new technologies for future. Hyundai Motor has established R&D centers in key regions of the world in order to better understand the different environments and customer preferences, which vary significantly. Hyundai Motor’s overseas research network consists of Beijing Hyundai Technical Center in Yantai, Shandong province, Hyundai America Technical Center in Ann Arbor, Michigan state, Hyundai Motor Europe Technical Center in Frankfurt, Germany, Hyundai Motor Japan R&D Center in Yokohama, Japan and Indian Technical Research Center in Hyderabad. Each overseas research center directly communicates with the Namyang Technology Research Center in Korea. Overseas R&D centers are responsible for Design centers : Leading the global trend Hyundai Motor has built proving grounds in both Korea and overseas where the handling, ride quality, high speed driving and durability of new models can Improving the quality of design is an essential be tested. Hyundai Motor has two proving grounds requirement in becoming a global leader in the in Korea ; one at the Namyang Technology Research premium brand market. The Namyang Design Center Center which is one of the most comprehensive proving is Hyundai Motor’s main design center and it has been grounds in the world and another at the Ulsan plant continuously increasing its capacity so that it can which was the first proving ground built in Korea. become a world-leading automobile design center. It is Hyundai Motor’s US proving ground in California is the the birthplace of ‘Fluidic Sculpture’, Hyundai Motor’s third largest proving ground established by a non- highly acclaimed design philosophy. domestic brand. It is carefully designed to emulate the The Namyang Design Center is also the center of various driving conditions found in the US, playing an Hyundai Motor’s global research network which integral role in Hyundai Motor’s localization effort. collaborates with Hyundai Motor’s overseas design centers in Europe, the US, India, China and Japan. Overseas design centers are responsible for learning Hyundai Motor Global R&D Center HYUNDAI MOTOR COMPANY Annual Report 2014 Values of Hyundai Motor Quality Striving for perfection Hyundai Motor has been upholding its management principle to never compromise on quality, whilst strengthening transparency and business ethics to further improve quality. For example, Hyundai Motor has established cutting-edge infrastructure for testing not just real parts but parts that only exist on blueprint, identifying potential problems even before they have materialized. These advanced tools are helping to deliver exceptionally well built cars which deliver greater satisfaction to customers. One automobile : with over 30,000 parts. Hyundai Motor introduced a five-star rating system for quality assessment of suppliers in order to motivate them to produce the highest quality parts. Many tests are conducted throughout the assembly process in order to achieve the best possible product quality. Hyundai Motor’s commitment to quality knows no bounds. THE SECRET BEHIND HYUNDAI MOTOR’S QUALITY MANAGEMENT IS RELENTLESS EFFORT TO ACHIEVE THE BEST QUALITY 1 2014 2013 2012 1st (94 pts.) 5th (106 pts.) 9th (107 pts.) High product quality is essential to winning customer’s trust and ensuring the longevity of a brand. A brand can withstand the competition when it leads the competition in terms of quality. This is why Hyundai Motor is continually emphasizing quality management under the slogan ‘The Hyundai way is the quality way’. Hyundai Motor’s quality management aims for excellence throughout the complete lifecycle of its products with an emphasis on customer engagement, in order to become the most beloved brand in the world. V A L U E S O F H Y U N D A I M O T O R 6 4 / 6 5 Proactive quality management and creative effort ‘Proactive’ and ‘Creative’ are two keywords which define the essence of Hyundai Motor’s quality management practices. Rather than just following the same strategy as other global automakers, we analyze changing trends and proactively implement creative solutions which coincide with Hyundai Motor’s management practices. All global companies invest in quality management. However, not all succeed in achieving their goals. Often, companies suffer when they blindly follow the successful strategy of others, sometimes driving them to a serious decline in business. Recognizing this, Hyundai is determined to walk its own path under the slogan of ‘the Hyundai Motor way is the quality way’. Hyundai Motor is determined to continue innovating new ways to further improve quality, until and after Hyundai Motor becomes the brand of choice. Best quality verified Hyundai Motor is reaping the fruits of quality management with concrete achievements. Hyundai Motor was placed first in 2004 JD Power’s Initial Quality Study in the US within the non-luxury brand category. Hyundai Motor was also placed first in 2006 and 2009 as well, and second in the Vehicle Dependability Study in China. Our flagship sedan model, Genesis, as well as the new Sonata and new i10 also received great reviews. The Czech Society for Quality (CSQ) awarded Hyundai Motor’s assembly plants in Nosovice, in the Moravian-Silesian Region, the highest mark of ‘Excellence’. Hyundai Motor Global Production Sites Non-luxury brand (JD Power)2014 Initial Quality Study Ranking HYUNDAI MOTOR COMPANY Annual Report 2014 Customer Global Marketing FROM FIFA WORLD CUP TO GLOBAL MOTOR SHOW : HYUNDAI MOTOR IS AT THE EPICENTER OF VENUES GREAT CUSTOMER SERVICE : THE FOUNDATION OF HYUNDAI MOTOR’S COMPETITIVENESS Customers are at the heart of all business activities and management decisions that are made at Hyundai Motor. Hyundai Motor simply cannot exist without its customers and their satisfaction determine our brand value. This is why Hyundai Motor is striving to provide the best possible customer service under the slogan of ‘the best customer service is given even before the customer knows they need it’. Highest customer satisfaction in Brazil Ranked first in 2014 Vehicle Ownership Satisfaction Survey (VOSS) Highest customer satisfaction in China Beijing Hyundai Highest score in 2014 Sales Satisfaction Index (SSI) Highest customer satisfaction in South Korea Korea Service Quality Index (KSQI) Best call center service for 11 consecutive years Ranked first in all industries Creating a customer-centered smart service and implemented high-tech, remote diagnostic technology As part of our ongoing efforts to create customer-friendly services and to increase the credibility and efficiency of our maintenance services, Hyundai Motor began to automate its service centers across the world in 2014. From the moment a customer makes a reservation for the workshop to arrival, processing, and post management of the vehicle, all steps of the procedure is managed electronically to facilitate communication and provide a customer-oriented service. to resolve difficult repair problems in real-time so that it can guarantee complete vehicle maintenance services to customers worldwide. Bringing customer service closer to people Hyundai Motor provides world-class services through its global service network to customers across the world. Hyundai Motor is dedicated to improving customer service, for example by launching the automotive industry’s Hyundai Motor has developed a new customer service system, first ‘Before Service’ (free vehicle inspections before based on advanced IT technologies, which makes more services available anywhere, anytime. For example, Hyundai Motor released a new mobile platform-based diagnostics system in 2014, which allows a vehicle’s condition to be assessed in a much less time than previously required. Because the new system is PC-based, diagnostics can also take place away from service stations, further enhancing breakdowns) to more than four million people worldwide, and expanding the ‘Home-to-Home Service’ to facilitate maintenance by offering convenient vehicle pick-up and delivery services for customers. Hyundai Motor has maintained the highest level of customer satisfaction in Korea for 11 consecutive years. It pays attention to services that enhance customer satisfaction, such as standardizing customer convenience. Hyundai Motor launched its remote Hyundai Customer Care Center’s (HCCC) innovative processes diagnostic service to provide high quality services to responding quickly to customer’s requests and providing worldwide. The remote diagnostic service reinforced the free car washes to customers that visit showrooms and management of its Global Service Support Center (GSSC) service centers. Sponsoring international football events Hyundai Motor began its association with FIFA and UEFA in 1999 and has supported all FIFA competitions including the 2002, 2006 and 2010 World Cups in Korea-Japan, Germany and South Africa respectively. Hyundai Motor also supported Euro 2000, 2004, 2008, 2012 and 2013 FIFA Confederations Cup. In 2014, Hyundai Motor was the only Official Partner of the 2014 FIFA World Cup Brazil™. Last year, Hyundai Motor has turned the 2014 FIFA World Cup into one of the most ‘social’ tournaments ever. A series of marketing activities including World Cup test drives and the Hyundai Motor Fan Park have been staged in major European cities. Furthermore, official transportation vehicles and emergency repair service was will be provided throughout the tournament. Reaching out to customers through sports sponsorship Hyundai Motor’s sports sponsorship has in recent years expanded into golf and cricket. For example, as part of an effort to diversify the sponsorship, Hyundai Motor has been the title sponsor of the PGA opening tournament since 2011, the Hyundai Motor Tournament of Champions. High-end and green cars were displayed at tournament sites as a part of the marketing effort. Hyundai Motor’s International Cricket Council (ICC) sponsorship began in 2011 when it first participated as the Official Car Partner of the ICC Cricket World Cup 2011. Hyundai Motor supported a number of major events including the T20 in 2012 and 2014, the Champions’ trophy in 2013 and the ICC Cricket World Cup 2015. Cricket is a popular sport, enjoyed by more than 2 billion people worldwide. Hyundai Motor has been sponsoring major cricket events through activities such as the provision of official transportation and the Hyundai Fan Park event. Motor Shows : introducing new models to customers Hyundai Motor is actively participating in both international motor shows in US, Europe and China as well as smaller ones held in emerging markets. In 2014, Hyundai Motor made a major splash with the debut of the second generation Genesis. The HED-9 Intrado next-generation FCEV concept and SUV ix25 concept received strong media attention at the 2014 Geneva Motor Show and Beijing Motor Show, respectively. In 2015, Hyundai Motor unveiled the Sonata Plug-in Hybrid, the first Korean PHEV and crossover truck concept, HCD-15 Santa Cruz. The All-new Tucson (ix35) was unveiled at the 2015 Geneva Motor Show. Hyundai Motor will continue to present new technologies and vehicle models at motor shows to provide customers with an opportunity to experience the company’s technological excellence and to increase brand value. V A L U E S O F H Y U N D A I M O T O R 6 6 / 6 7 HYUNDAI MOTOR COMPANY Annual Report 2014 12.23 million kW generation system. Hyundai Motor produced 12.23 million kW of clean electricity using its rooftop solar Commitment of Hyundai Motor HYUNDAI MOTOR IS COMMITTED TO FULFILLING ITS ENVIRONMENTAL RESPONSIBILITIES TO ENABLE A SUSTAINABLE FUTURE FOR MANKIND I C O M M T M E N T O F H Y U N D A I M O T O R 6 8 / 6 9 Green technologies for the future Thanks to the installation of high-efficiency facilities Producing clean electricity using solar panels 5,600t The Asan plant's 10MW rooftop solar electricity generation system can reduce up to 5,600 tons of CO2 emissions per year. Environmental problems have emerged as a major issue in determining the future of humanity, Hyundai Motor is dedicated to minimizing the environmental impact of vehicles throughout their lifecycle, from development to recycling. Hyundai Motor is also The development of greener vehicles can reduce greenhouse gas emissions and Hyundai Motor is developing propriety environmental technologies with the ultimate goal of zero emissions. Under the name of ‘Blue Drive’, Hyundai Motor developed green technologies which enabled the launch of vehicles with vastly improved fuel efficiency, innovative alternative fuel vehicles and clean emission vehicles. Reducing emissions at manufacturing plants Hyundai Motor is managing greenhouse gas emissions from all operation sites including manufacturing plants, R&D centers and office buildings. Efforts have been concentrated on the emissions from three production plants in Korea which account for 85% of Hyundai Motor’s overall emissions from domestic operations. At the Ulsan plant, a differential- pressure power generation facility was installed for on-site electricity generation. Significant investments committed to the development of green energy and is dedicated to were made to enable the installation of high- making a contribution to the sustainable future of humanity. efficiency equipment including low emission boilers. and improved productivity, the Asan plant reduced their greenhouse gas emissions by 8% per unit-produced compared to the previous year. The Jeonju plant reduced emissions per unit-produced by 9.1% by investing in high efficiency equipment, improving production processes and energy efficiency improvements. In 2014, a 500kW solar generation plant was installed at the Namyang Technology Research Center and the staff improved energy efficiency of testing equipment. The Asan plant has a large-scale, solar power plant on its roof which generates significant amount of clean electricity. The 10MW generator produces enough electricity to power 3,800 households and reduce CO₂ emission by 5,600 tons per year, which is equivalent to planting 1.12 million pine trees. Electricity generated from the solar generator is supplied to Asan city and near-by regions. Working with the Emission Trading Scheme Protecting the environment by recycling resources Hyundai Motor has established an internal management Hyundai Motor is promoting resource recycling in all areas of its operation to strengthen its environmental management. Hyundai Motor established the first Automobile Recycling Center in Korea to develop technologies and processes to minimize the negative environmental impact from recycling automobiles at the end of their life cycle. Hyundai Motor decided to support automobile recycling in Mongolia using its experience and technological capacity and signed an MOU with the Mongolia Ministry of Road & Transportation to establish the Ulaanbaatar ELV Recycling Park (UERP). system in response to the implementation of the Emission Trading Scheme (ETS), a market-based system designed to deliver greenhouse gas reductions in a growing number of regions. The Czech Republic plant has already been operating under the European ETS and Beijing Hyundai Motor is preparing for the implementation of the ETS in Beijing, China. The Korean Emission Trading scheme was launched in 2015 and efforts are ongoing to ensure that the necessary plants have adequate work processes, work manual and human resources, organizational capacity and financial resources to cope with the new policy. CO2SOLARPOWER HYUNDAI MOTOR COMPANY Annual Report 2014 MOVING THE WORLD TOGETHER FOR PEOPLE AND ENVIRONMENT Corporate Social Responsibility Hyundai Motor has chosen to work on CSR activities which focus on traffic safety, transport service improvement and environmental protection. As a leading automobile manufacturer, it is focusing especially on activities which promote traffic safety in Korea. As a global corporate citizen, we are focusing on educational support in developing countries for our overseas CSR activities. 1,050 sessions 90 million ㎡ 1.25 million kids 300 million views Robocar Poli traffic safety animation to hit 300 million view marks Robocar Poli, a children’s animation developed in collaboration between Hyundai Motor and Roi Visual, to promote traffic safety to children, hit 300 million views in 2014. Traffic Safety Class on the Go In 2014, Hyundai Motor held traffic safety education sessions, as a part of its ‘Safe Move’ CSR activity. Hyundai Motor gave free traffic safety lessons to over 30,000 children, at 1,050 kindergartens and daycare centers in South Korea. Kids Hyundai campaign No. of participants The Kids Hyundai campaign aims to promote traffic safety among young children. The campaign activities include the distribution of angel wing-shaped ‘boarding/unloading’ stickers for kindergarten buses, a children’s safety experience center exhibition, a traffic safety quiz competition and a drawing competition. Over 1.25 million children have participated in the campaign activities so far. Hyundai Green Zone : Turning desert into grassland The ‘Hyundai Green Zone’ is Hyundai Motor’s environmental restoration project in China. During the first phase of the project, volunteers successfully converted 50 million square meters of newly formed desert in Chakanor, Neimenggu into grassland. This transformation has helped to reduce yellow sand from the region, which affects the entire Northeast Asian region, including Korea. Hyundai Motor launched a five year project to convert 40 million ㎡ of desert in the Zhenglan Qi region into grassland by 2018. Social contribution symbol and slogan As a slogan that summarizes the Hyundai Motor’s entire social contribution philosophy, ‘Moving the World Together’ expresses the Hyundai Motor’s desire to make changes for the better, by working together with its neighbors. ‘Moving’ represents the desire for continuous change and development, ‘World’ represents the hopes and dreams of the world, and ‘Together’ represents the harmonious partnership with society. I C O M M T M E N T O F H Y U N D A I M O T O R 7 0 / 7 1 HYUNDAI MOTOR COMPANY Annual Report 2014 1 2 3 4 5 6 7 1 Hyundai Motor 3 Happy Move 4 Hope on wheels 6 Children’s Traffic Robocar Poli Traffic Park for Kids 2 H-Volunteer Designer Safety Quiz Contest 5 Hyundai-KOICA Dream Center 7 Hyundai Green Zone Safe Move to establish culture of traffic safety prevention association. Hyundai Motor is also contributing to Hyundai Motor produced an educational animation on traffic safety for children around the world called ‘Traffic safety stories with Poli’, which is currently being aired and receiving high ratings on TV in Korea, China, Russia, Israel and Taiwan. In addition, Hyundai Motor is offering opportunities for children to learn about traffic safety through various programs such as other environmental protection programs such as the restoration and preservation of the Taewha River, which is the habitation of the tailed silk butterfly. Happy Move making changes in the world through volunteering the ‘Traffic Safety Class on Go’, ‘Children’s Traffic Safety Quiz Happy Move encompasses various social service programs of Contest’ and ‘Children Safety First Exprience Fair’. Hyundai Motor including visits to welfare houses, one-company- The ‘Traffic Safety Class on Go’ visited 1,050 kindergartens and one-village rural care, and volunteer activities during festivals 30,000 children in Korea offering traffic safety classes and also and the end-of-the year season. ‘H-Volunteer Designer’ program renovated Korea’s first children’s traffic park in Nowon-gu into was created so that employees of Hyundai Motor can participate ‘Robocar Poli Traffic Park for Kids’. Hyundai Motor provides in the volunteer activity of their choice with the support of the safety and environment related educational materials through company. As a result, more than 130 volunteer programs were run its homepage for kids ‘Kids Hyundai’ at ‘kids.hyundai.com’ and in 2014, including Korean language and culture classes for foreign blogs. Hyundai Motor also organizes the ‘Children Safety First workers in Korea, vase-making classes with local children’s Experience Fair’ and ‘Children’s Traffic Safety Quiz Contest’ centers, and photo-taking services for the elderly in rural areas. in cooperation with the Ministry of Public Safety and Security ‘H-Family Volunteer’ is a one day family volunteer service, helping (MPSS) and Citizens’ Coalition for Safety (CCS) in order to the less privileged in local communities. In 2014, traditional Korean educate children about safety from early on. These events are food and handicraft classes for children with a foreign parent part of a bigger task to change the attitude towards safety in and a world famous building miniature theme-park tour for the Korea and thereby improving safety on and off the roads. less privileged elderly were held as part of the volunteer program. ‘Looking for Three-leaf Clovers’ is another program run by ‘H-Family Workcamp’ is a volunteer service program involving Hyundai Motor that offers one-to-one mentoring by college college students of various nationalities and families of Hyundai students to children who have suffered a loss as a result of a Motor, where they work on enhancing the environment of local traffic accident, as a means of support and encouragement to communities by renovating the facilities of local children’s centers, help them pursue their dreams. planting trees and crops, and enhancing the living environment of the less privileged. Another program, ‘Happy Move Global Youth Easy Move for the convenience of people with special needs Corps’ which started in 2008 is actively engaged in community Since 2005, Hyundai Motor has continued to support social service vehicles through its social enterprise campaign called ‘Moving the World Together’. This campaign has enabled those living in rural or other difficult-to-reach areas to be able to travel to their destination much more easily. The ‘Moving the World Together’ project offers substantial aid to many services in China, India and Cambodia, and is continuing to expand its work having dispatched more than 7,000 volunteers to 20 countries over the last seven years. Dream Center to foster technology talent in developing countries social enterprises. Hyundai Motor is putting in a lot of effort Hyundai Motor is involved in building and supporting ‘Hyundai- in order to expand its social enterprise projects and to train KOICA Dream Center’ as part of a government-private sector professionals in the area. So far it has been successful in project to reduce inequalities in learning opportunities and supporting 305 social services centers with a total of 4 billion to create sustainable jobs in developing countries. The first I C O M M T M E N T O F H Y U N D A I M O T O R 7 2 / 7 3 KRW, and is planning on further expanding its help and support in the social services area. Green Move to restore nature Hyundai Motor started its second ‘Hyundai Green Zone’ project in China to help reverse desertification. The first project, which started in 2008, has earned a respectable reputation as a foreign company in China after its success in transforming 50 million ㎡ of the inner Mongolia’s Kunshantag Desert into a green land. As a result of this project, Hyundai Motor has been selected as ‘The Most Responsible Company in China’ for four consecutive years since 2011. The second project will be in the northern part of China, in the Zhenglan Qi district, covering 40 million ㎡ of land, and will run for five years starting in 2018. To reduce the number of roadkills and Dream Center was opened in Ghana, Africa in 2013 as a 3-year technical training center for auto mechanics, and the second Dream Center was opened in Indonesia in 2014. The third Dream Center is currently under construction in Phnom Penh, Cambodia and will be completed in early 2015. Hyundai-KOICA Dream Center was recognized as a Creating Shared Value (CSV) Model that creates value for both society and the company through Hyundai Motor’s core technology, and was awarded the first ‘Porter Prized for Excellence in CSV’ last year. thereby the number of resultant traffic accidents, Hyundai Motor supported the establishment of Korea’s first roadkill Grand Starex Easy Move Edition CORPORATE GOVERNANCE AND BOARD OF DIRECTORS HMC HAS BOARD OF DIRECTORS AND THREE SUBCOMMITTEES INCLUDING AUDIT COMMITTEE, EXTERNAL DIRECTOR CANDIDATE RECOMMENDATION COMMITTEE AND Meetings 1st General Date Agenda Jan. 23, 2014 Approval of 46th Financial Statement and 7 other items Extraordinary Feb. 20, 2014 Approval of agenda of the 46th General Meeting of Shareholders Extraordinary Mar. 14, 2014 Appointment of CEO and 5 other items Extraordinary Mar. 31, 2014 Approval of transaction with directors 2nd General 3rd General Apr. 24, 2014 Approval of transaction with company owned by major shareholders and 1 other item Jul. 24, 2014 Approval of transaction with company owned by major shareholders and 2 other items Extraordinary Sep. 17, 2014 Approval of participation of a bidding for land Extraordinary Sep. 26, 2014 Approval of purchase of land 4th General Oct. 23, 2014 Approval of transaction with company owned by major shareholders and 3 other items CORPORATE GOVERNANCE & COMMUNICATION COMMITTEE UNDER THE BOARD OF DIRECTORS. Extraordinary Nov. 11, 2014 Approval of acqusition of treasury stocks * Detailed information can be found at HMC’s homepage (http://pr.hyundai.com) or the FSS ’s electronic disclosure system (http://dart.fss.or.kr). Resolution Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Key Activities of the BOD in 2014 THE BOARD OF DIRECTORS THE AUDIT COMMITTEE AND THE EXTERNAL DIRECTOR CANDIDATE RECOMMENDATION COMMITTEE The BOD makes decisions on matters stipulated by law and the Articles of Incorporation, as well as issues delegated to it through share- The Audit Committee consists of four external directors. Its duties include auditing the company’s management and accounting, re- holders’ meetings. The BOD sets guidelines for the company’s management and makes important decisions related to the execution of questing business reports from executives, and monitoring the company’s financial status. The Audit Committee can raise discussions projects. The BOD supervises the work of executives and management. The BOD consists of four internal and five external directors. on matters related to general shareholders̓ meetings, directors and the BOD, and auditing issues. Internal systems to enable mem- The BOD convenes regular board meetings as well as extraordinary meetings whenever necessary. bers’ access to management information necessary for proper auditing are in place. BOARD OF DIRECTORS Key Activities of the Audit Committee in 2014 The External Director Candidate Recommendation Committee consists of two internal directors and three external directors. All exter- nal directors are appointed after being recommended by the Recommendation Committee. Compensation for directors was capped at KRW 15 billion at the 2014 General Shareholders̓ Meeting. Total compensation for internal and external directors from January 1 to December 31, 2014 amounted to KRW 10 billion. Average compensation for internal directors was KRW 2.4 billion and KRW 95 million for external directors. AUDIT COMMITTEE EXTERNAL DIRECTOR CANDIDATE RECOMMENDATION COMMITTEE CORPORATE GOVERNANCE & COMMUNICATION COMMITTEE Name Title/Affiliation Internal Chung Mong-koo Chairman & CEO Chung Eui-sun Vice Chairman Kim Choong-ho President & CEO Yoon Gap-han President & CEO Oh Se-bin Lawyer, Dong In Law Group Nam Sung-il Professor of Economics, Sogang University External Yi You-jae Professor of Business Administration, Seoul National University Lee Dong-kyu Advisor of Kim and Chang Law Group Lee Byung-kook Chairman of e-Chon Tax Accounting Corp. BOD Members (as of end April 2015) Joint Positions Held External Director Candidate Recommendation Committee Audit Committee Corporate Governance & Communication Committee o - o - o o o - - - - - - o o - o o - - - - o - o o o Meetings 1st General Date Agenda Jan. 23, 2014 Approval of 46th Financial Statement and 2 other items Extraordinary Feb. 20, 2014 Approval of agenda of the 46th General Meeting of Shareholders 2nd General 3rd General 4th General Apr. 24, 2014 Jul. 24, 2014 Oct. 23, 2014 - - - Resolution Approved Approved - - - * Detailed information can be found at the FSS’s electronic disclosure system (http://dart.fss.or.kr). THE CORPORATE GOVERNANCE & COMMUNICATION COMMITTEE HMC changed the name of the committee from ETHICS COMMITTEE to CORPORATE GOVERNANCE & COMMUNICATION COMMIT- TEE and reorganized the committee to promote shareholders’ rights in April, 2015. The Ethics Committee was established in 2007 to improve transparency of internal transactions and to ensure ethical management of the company. Ethical management and internal transaction restriction were further reinforced in 2012 when the Committee was reorganized as a subcommittee of the BOD. The Cor- porate Governance & Comminication Committee consists of four external directors. Key Activities of the Ethics Committee in 2014 Meetings 1st General Date Agenda Jan. 23, 2014 Approval of key social contribution plans for 2014 and 3 other items Extraordinary Mar. 14, 2014 Appointment of Chairman of the Ethics Committee and 1 other item 2nd General 3rd General 4th General Apr. 24, 2014 Approval of transaction with company owned by major shareholders and 1 other item Jul. 24, 2014 Approval of transaction with company owned by major shareholders and 1 other item Oct. 23, 2014 Approval of transaction with company owned by major shareholders and 2 other items Resolution Approved Approved Approved Approved Approved C O R P O R A T E G O V E R N A N C E A N D B O A R D O F D R E C T O R S I 7 4 / 7 5 * Detailed information on the directors can be found at HMC’s homepage (Korean: http://pr.hyundai.com; English: http://worldwide.hyundai.com/worldwide_index.html) or the * Detailed information can be found at the FSS’s electronic disclosure system (http://dart.fss.or.kr). Financial Supervisory Service (FSS )’s electronic disclosure system (http://dart.fss.or.kr). HYUNDAI MOTOR COMPANY Annual Report 2014 FINANCIAL STATEMENTS HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES INDEPENDENT AUDITORS’ REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 77 78 80 81 82 84 86 INDEPENDENT AUDITORS’ REPORT English Translation of Independent Auditors’ Report Originally Issued in Korean on March 3, 2015 To the Shareholders and the Board of Directors of Hyundai Motor Company: We have audited the accompanying consolidated financial statements of Hyundai Motor Company (the “Company”) and its subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2014 and December 31, 2013, respectively, and the consolidated statements of income, comprehensive income, statements of changes in equity and statements of cash flows, all ex- pressed in Korean won, for the years then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an audit opinion on these financial statements based on our audit. We conducted our audit in accordance with Korean Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the en- tity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the cir- cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries as of December 31, 2014 and December 31, 2013, respectively, and its financial performance and its cash flows for the 7 6 / 7 7 years then ended in accordance with K-IFRS. Others We have audited the consolidated financial statements of the Company and its subsidiaries as of December 31, 2013 in accordance with the former KSAs, known as auditing standards generally accepted in Korea, which we relied on the report of other auditor on the financial statements of certain consolidated subsidiaries whose financial statements reflect 42.3% of consolidated total assets as of December 31, 2013 and 49.0% of consolidated total sales for the year then ended, respectively. March 3, 2015 Notice to Readers This report is effective as of March 3, 2015, the auditor’s report date. Certain subsequent events or circumstances may have occurred between the auditor’s report date and the time the auditor’s report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditor’s report. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 AND 2013 AS OF DECEMBER 31, 2014 AND 2013 (CONTINUED) In millions of Korean Won In millions of Korean Won ASSETS Current assets: Cash and cash equivalents Short-term financial instruments Trade notes and accounts receivable Other receivables Other financial assets Inventories Current tax assets Financial services receivables Non-current assets classified as held for sale Other assets Total current assets Non-current assets: Long-term financial instruments Long-term trade notes and accounts receivable Other receivables Other financial assets Property, plant and equipment Investment property Intangible assets Investments in joint ventures and associates Deferred tax assets Financial services receivables Operating lease assets Other assets Total non-current assets Total assets (Continued) NOTES December 31, 2014 December 31, 2013 19 19 3,19 4,19 5,19 6 13,19 8 7,19 19 3,19 4,19 5,19 9 10 11 12 32 13,19 14 7,19 ￦ 7,096,513 4,002,506 3,750,092 3,722,109 14,884,434 7,417,239 32,869 22,498,584 47,643 1,573,695 65,025,684 99,044 51,534 1,039,157 2,520,119 22,542,259 322,207 3,821,656 16,157,334 649,850 21,496,004 13,265,616 234,653 82,199,433 ￦ 6,872,430 14,875,288 3,485,345 3,118,386 507,821 7,073,116 54,845 21,178,591 22,347 1,667,936 58,856,105 35,495 43,309 1,127,839 2,731,884 21,462,587 263,984 3,129,090 14,694,995 521,399 19,835,016 10,564,876 154,900 74,565,374 ￦ 147,225,117 ￦ 133,421,479 LIABILITIES AND EQUITY Current liabilities: Trade notes and accounts payable Other payables Short-term borrowings Current portion of long-term debt and debentures Income tax payable Provisions Other financial liabilities Other liabilities Total current liabilities Non-current liabilities: Long-term other payables Debentures Long-term debt Net defined benefit liabilities Provisions Other financial liabilities Deferred tax liabilities Other liabilities Total non-current liabilities Total liabilities Equity: Capital stock Capital surplus Other capital items Accumulated other comprehensive income Retained earnings Equity attributable to the owners of the Company Non-controlling interests Total equity Total liabilities and equity (Concluded) See accompanying notes to consolidated financial statements. NOTES December 31, 2014 December 31, 2013 19 19 15,19 15,19 16 17,19 18,19 19 15,19 15,19 33 16 17,19 32 18,19 20 21 22 23 24 ￦ 7,041,529 ￦ 6,722,740 4,686,473 6,845,920 9,679,498 656,201 1,844,780 223,303 4,201,969 4,687,490 5,292,798 8,685,254 605,280 1,782,937 144,069 3,999,114 35,179,673 31,919,682 2,339 30,302,085 7,430,429 594,058 4,882,090 210,528 4,051,203 1,952,147 15,964 29,322,780 4,666,030 389,306 5,122,982 440,113 3,352,352 1,609,481 49,424,879 44,919,008 84,604,552 76,838,690 7 8 / 7 9 1,488,993 4,134,550 (1,273,752) (1,344,826) 54,649,863 57,654,828 4,965,737 62,620,565 1,488,993 4,130,668 (1,128,779) (834,036) 48,274,239 51,931,085 4,651,704 56,582,789 ￦ 147,225,117 ￦ 133,421,479 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 In millions of Korean Won, except per share amounts 2014 2013 ￦ 89,256,319 ￦ 87,307,636 Profit for the year Sales Cost of sales Gross profit Selling and administrative expenses Operating income Gain on investments in joint ventures and associates, net Finance income Finance expenses Other income Other expenses Income before income tax Income tax expense Profit for the year Profit attributable to: Owners of the Company Non-controlling interests NOTES 25,38 30 26,30 27 28 28 29 29,30 32 Earnings per share attributable to the owners of the Company: 31 Basic earnings per common share Diluted earnings per common share See accompanying notes to consolidated financial statements. 70,126,276 19,130,043 11,580,057 7,549,986 2,388,658 881,883 601,019 1,039,865 1,308,099 9,951,274 2,301,806 7,649,468 7,346,807 302,661 ￦ 27,037 ￦ 27,037 67,859,491 19,448,145 11,132,648 8,315,497 3,057,109 805,261 552,709 1,138,001 1,066,453 11,696,706 2,703,209 8,993,497 8,541,834 451,663 ￦ 31,441 ￦ 31,441 Other comprehensive income (expenses): Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Changes in retained earnings of equity-accounted investees, net Items that may be reclassified subsequently to profit or loss: Gain (loss) on available-for-sale (“AFS”) financial assets, net Gain (loss) on valuation of cash flow hedge derivatives, net Changes in share of earnings of equity-accounted investees, net Loss on foreign operations translation, net In millions of Korean Won 2014 2013 ￦ 7,649,468 ￦ 8,993,497 (379,062) (82,187) (461,249) (225,611) (62,752) 80,382 (379,757) (587,738) 249,790 13,206 262,996 59,155 6,263 (60,746) (383,309) (378,637) Total other comprehensive expenses (1,048,987) (115,641) Total comprehensive income ￦ 6,600,481 ￦ 8,877,856 Comprehensive income attributable to: Owners of the Company Non-controlling interests Total comprehensive income See accompanying notes to consolidated financial statements. 6,405,423 195,058 8,441,925 435,931 ￦ 6,600,481 ￦ 8,877,856 8 0 / 8 1 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (CONTINUED) In millions of Korean Won In millions of Korean Won Capital stock Capital surplus Other capital items Accumulated other comprehensive income Retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity ￦1,488,993 4,158,988 (1,128,779) (473,373) 39,993,230 44,039,059 3,878,516 47,917,575 Capital stock Capital surplus Other capital items Accumulated other comprehensive income Retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity ￦1,488,993 4,130,668 (1,128,779) (834,036) 48,274,239 51,931,085 4,651,704 56,582,789 Balance at January 1, 2013 Comprehensive income : Profit for the year Gain on AFS financial assets, net Gain on valuation of cash flow hedge derivatives, net Changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Loss on foreign operations translation, net Total comprehensive income Transactions with owners, recorded directly in equity : Payment of cash dividends Increase in subsidiaries’ stock Purchases of subsidiaries’ stock Others Total transactions with owners, recorded directly in equity Balance at December 31, 2013 (Continued) - - - - - - - - - - - - - - - - - - - - 25,279 (53,599) - (28,320) - - - - - - - - - - - - - 8,541,834 8,541,834 451,663 8,993,497 58,197 2,319 - - 58,197 958 59,155 2,319 3,944 6,263 (61,148) 13,206 (47,942) 402 (47,540) - 247,548 247,548 2,242 249,790 (360,031) - (360,031) (23,278) (383,309) (360,663) 8,802,588 8,441,925 435,931 8,877,856 - - - - - (520,832) (520,832) (111,697) (632,529) - - 25,279 571,225 596,504 (53,599) (121,676) (175,275) (747) (747) (595) (1,342) (521,579) (549,899) 337,257 (212,642) ￦1,488,993 4,130,668 (1,128,779) (834,036) 48,274,239 51,931,085 4,651,704 56,582,789 - - - - - - - - - - - - - - - - - - - - - - (952) - 4,834 - - - - - - - - - - - - - (144,973) - 3,882 (144,973) - 7,346,807 7,346,807 302,661 7,649,468 (227,394) (31,570) - - (227,394) 1,783 (225,611) (31,570) (31,182) (62,752) 80,124 (82,103) (1,979) 174 (1,805) - (348,491) (348,491) (30,571) (379,062) (331,950) - (331,950) (47,807) (379,757) (510,790) 6,916,213 6,405,423 195,058 6,600,481 8 2 / 8 3 - - - - - - - (534,409) (534,409) (52,519) (586,928) - - - - (952) 148,659 147,707 - 5,649 5,649 4,834 16,909 21,743 (144,973) - (144,973) (6,180) (6,180) 277 (5,903) (540,589) (681,680) 118,975 (562,705) Balance at January 1, 2014 Comprehensive income : Profit for the year Gain (loss) on AFS financial assets, net Loss on valuation of cash flow hedge derivatives, net Changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Loss on foreign operations translation, net Total comprehensive income Payment of cash dividends Increase in subsidiaries’ stock Purchases of subsidiaries’ stock Disposals of subsidiaries’ stock Purchases of treasury stock Others Total transactions with owners, recorded directly in equity Balance at December 31, 2014 (Concluded) Transactions with owners, recorded directly in equity : ￦ 1,488,993 4,134,550 (1,273,752) (1,344,826) 54,649,863 57,654,828 4,965,737 62,620,565 See accompanying notes to consolidated financial statements HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (CONTINUED) Cash flows from operating activities: Cash generated from operations: (NOTES : 34) Profit for the year Adjustments Changes in operating assets and liabilities Interest received Interest paid Dividend received Income tax paid Net cash provided by operating activities Cash flows from investing activities: Proceeds from withdrawal of short-term financial instruments, net Proceeds from disposals of other financial assets Receipts from other receivables Proceeds from disposals of property, plant and equipment Proceeds from disposals of intangible assets Proceeds from disposals of investments in subsidiaries Proceeds from disposals of investments in joint ventures and associates Acquisitions of other financial assets Increases in other receivables Purchases of long-term financial instruments Acquisitions of property, plant and equipment Acquisitions of intangible assets Acquisitions of investments in joint ventures and associates Other cash receipts from investing activities, net In millions of Korean Won 2014 2013 ￦ 7,649,468 8,369,656 (12,421,149) 3,597,975 704,872 (1,393,607) 1,030,074 (1,818,469) 2,120,845 10,877,563 200,167 48,493 47,045 8,130 453,215 23,811 (12,990,529) (50,971) (32,143) (3,353,809) (1,372,086) (130,417) 76,521 ￦ 8,993,497 7,332,779 (13,217,233) 3,109,043 703,243 (1,444,092) 787,804 (1,947,532) 1,208,466 224,284 71,693 76,395 306,471 26,673 - 1,504 (107,515) (96,776) (2,854,853) (3,171,093) (991,064) (131,088) 24,637 Net cash used in investing activities ￦ (6,195,010) ￦ (6,620,732) (Continued) Cash flows from financing activities: Proceeds from (repayment of) short-term borrowings, net Proceeds from long-term debt and debentures Paid-in capital increase of subsidiaries Purchases of subsidiaries’ stock Disposals of subsidiaries’ stock In millions of Korean Won 2014 2013 ￦ 1,412,120 19,001,138 147,707 5,649 23,678 ￦ (864,251) 23,632,277 476,493 (175,275) - Repayment of long-term debt and debentures (15,120,767) (16,669,654) Purchases of treasury stock Dividends paid Other cash payments from financing activities, net Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year (Concluded) See accompanying notes to consolidated financial statements. (144,973) (586,928) (30,647) 4,706,977 (408,729) 224,083 6,872,430 - (632,529) (51,611) 5,715,450 (190,092) 113,092 6,759,338 ￦ 7,096,513 ￦ 6,872,430 8 4 / 8 5 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 1. GENERAL: Hyundai Motor Company (the “Company” or “Parent Company”) was incorporated in 1967, under the laws of the Republic of Korea. The Company and its subsidiaries (the “Group”) manufactures and distributes motor vehicles and parts, operates vehicle financing and credit card processing, and manufactures trains. The shares of the Company have been listed on the Korea Exchange since 1974, and the Global Depositary Receipts issued by the Company have been listed on the London Stock Exchange and Luxembourg Stock Exchange. As of December 31, 2014, the major shareholders of the Company are Hyundai MOBIS (20.78%) and Chung Mong-koo (5.17%). (1) The Company’s consolidated subsidiaries as of December 31, 2014, are as follows: Subsidiaries Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. (*) Nature of the business Financing ˝ Hyundai Rotem Company (Hyundai Rotem) (*) Manufacturing Hyundai KEFICO Corporation (Hyundai KEFICO) Green Air Co., Ltd. Hyundai Auto Electronics Company Ltd. Hyundai Partecs Co., Ltd. Hyundai NGV Tech Co., Ltd. Maintrans Company Jeonbuk Hyundai Motors FC Co., Ltd. Hyundai Motor America (HMA) Hyundai Capital America (HCA) ˝ ˝ R&D Manufacturing Engineering Services Football Club Sales Financing Hyundai Motor Manufacturing Alabama, LLC (HMMA) Manufacturing Hyundai Translead, Inc. (HT) Stamped Metal American Research Technology, Inc. (SMARTI) ˝ Holding company Stamped Metal American Research Technology LLC Manufacturing Hyundai America Technical Center, Inc. (HATCI) Rotem USA Corporation Hyundai Auto Canada Corp. (HAC) Hyundai Auto Canada Captive Insurance Inc. (HACCI) Hyundai Capital Canada Inc. (HCCA) Hyundai Capital Lease Inc. R&D Manufacturing Sales Canada Insurance Financing ˝ ˝ ˝ ˝ Hyundai Motor India Limited (HMI) Manufacturing India Hyundai Motor India Engineering Private Limited (HMIE) Hyundai Capital India Private Limited (HCI) R&D Financing ˝ ˝ Location Korea ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ USA ˝ ˝ ˝ ˝ ˝ ˝ ˝ Ownership percentage Indirect ownership 56.47% 36.96% 43.36% 100.00% 51.00% Hyundai Rotem 51.00% 60.00% 56.00% 53.66% 80.00% Hyundai Rotem 80.00% 100.00% 100.00% 80.00% 100.00% 100.00% 72.45% 100.00% 100.00% HMA 80.00% HMA 100.00% HMA 72.45% SMARTI 100.00% 100.00% Hyundai Rotem 100.00% 100.00% 100.00% 60.00% 100.00% 100.00% 100.00% 100.00% HMA 100.00% HAC 100.00% HCCA 100.00% HMI 100.00% Hyundai Capital Services 100.00% Subsidiaries Hyundai Motor Japan Co., Ltd. (HMJ) Hyundai Motor Japan R&D Center Inc. (HMJ R&D) Beijing Jingxian Motor Safeguard Service Co., Ltd. (BJMSS) Beijing Jingxianronghua Motor Sale Co., Ltd. Beijing Xinhuaxiaqiyuetong Motor Chain Co., Ltd. Hyundai Millennium (Beijing) Real Estate Development Co., Ltd. Rotem Equipments (Beijing) Co., Ltd. Nature of the business Sales R&D Sales ˝ ˝ Real estate development Sales KEFICO Automotive Systems (Beijing) Co., Ltd. Manufacturing Location Japan Japan China ˝ ˝ ˝ ˝ ˝ Ownership percentage Indirect ownership 100.00% 100.00% 100.00% 100.00% 100.00% 99.00% BJMSS 100.00% ˝ CMEs 99.00% 100.00% Hyundai Rotem 100.00% 100.00% Hyundai KEFICO 100.00% KEFICO VIETNAM COMPANY LIMITED ˝ Vietnam Hyundai Motor Company Australia Pty Limited (HMCA) Sales Australia Hyundai Motor Manufacturing Czech, s.r.o. (HMMC) Manufacturing Hyundai Motor Czech s.r.o (HMCZ) Sales Czech ˝ Hyundai Motor Europe GmbH (HME) Marketing and sales Germany Hyundai Motor Deutschland GmbH (HMD) Hyundai Motor Europe Technical Center GmbH (HMETC) Hyundai Motor Sport GmbH (HMSG) Hyundai Capital Europe GmbH Sales R&D Marketing Financing ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Hyundai Motor Manufacturing Rus LLC (HMMR) Manufacturing Russia 70.00% ˝ HME 100.00% Hyundai Capital Services 100.00% Hyundai Motor Commonwealth of Independent States B.V (HMCIS B.V) Hyundai Motor Netherlands B.V. (HMNL) Hyundai Motor Commonwealth of Independent States (HMCIS) Sales ˝ ˝ Russia 100.00% 100.00% Holding company Netherlands 100.00% HMMR 1.40% Hyundai Capital Services Limited Liability Company Financing ˝ 100.00% Hyundai Assan Otomotiv Sanayi Ve Ticaret A.S. (HAOSVT) Manufacturing Turkey 83.91% Hyundai EURotem Demiryolu Araclarive Ticaret A.S. Hyundai Motor UK Limited (HMUK) Hyundai Motor Company Italy S.r.l (HMCI) Hyundai Motor Espana. S.L.U. (HMES) Hyundai Motor France SAS (HMF) Hyundai Motor Poland Sp. Zo.O (HMP) Hyundai Motor DE Mexico S DE RL DE CV (HMM) Hyundai de Mexico, SA DE C.V., (HYMEX) Hyundai Rio Vista, Inc. Hyundai Motor Brasil Montadora de Automoveis LTDA (HMB) Hyundai Capital Brasil Servicos De Assistencia Financeira Ltda ˝ Sales ˝ ˝ ˝ ˝ ˝ Manufacturing Real estate development ˝ UK Italy Spain France Poland Mexico ˝ 50.50% Hyundai Rotem 50.50% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.99% HT 0.01% HT 99.99% USA 100.00% HT 100.00% Manufacturing Brazil 100.00% Financing ˝ 100.00% Hyundai Capital Services 100.00% 8 6 / 8 7 HMCIS B.V 100.00% Hyundai Capital Europe 100.00% HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS China Millennium Corporations (CMEs) Holding company Cayman Islands 59.60% Name of subsidiaries Assets Liabilities Sales Investment Korea 100.00% Hyundai Capital Services, Inc. (*) ￦ 22,538,708 ￦ 19,101,141 ￦ 3,011,804 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 Subsidiaries Nature of the business Location Ownership percentage Hyundai Rotem Brasil Engineering Services LTD Sales Brazil 100.00% Indirect ownership Hyundai Rotem 100.00% KyoboAXA Private Tomorrow Securities Investment Trust No.12 Shinyoung Private Securities Investment Trust WB-1 UBS Hana Dynamic Balance Private Investment Trust 1 Shinhan BNPP Private Corporate Security Investment Trust No.34 Miraeasset Triumph Private Equity Security Investment Trust No.15 Autopia Forty-Third ~ Forty-Seventh Asset Securitization Specialty Company (*) Autopia Forty-Ninth ~ Fifty-Second Asset Securitization Specialty Company (*) Autopia Fifty-Fourth ~ Fifty-five Asset Securitization Specialty Company (*) HB the Third Securitization Specialty Company (*) HB the Fourth Securitization Specialty Company (*) Privia the Third Securitization Specialty Co., Ltd. (*) Privia the Fourth ~ Fifth Securitization Specialty Co., Ltd. (*) Hyundai CHA Funding Corporation Hyundai Lease Titling Trust Hyundai HK Funding, LLC Hyundai HK Funding Two, LLC Hyundai HK Funding Three, LLC Hyundai ABS Funding Corporation HK Real Properties, LLC Hyundai Auto Lease Offering, LLC Hyundai HK Lease, LLC Hyundai Protection Plan, Inc. Hyundai Protection Plan Florida, Inc. Hyundai Capital Insurance Services, LLC Hyundai Capital Insurance Company Power Protect Extended Services, Inc. Power Protect Extended Services Florida, Inc. ˝ ˝ ˝ ˝ Financing ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Insurance ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ USA ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% 100.00% 0.90% 0.50% 0.50% 0.90% 0.31% 0.90% 0.50% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Hyundai Capital Services 0.90% Hyundai Capital Services 0.50% ˝ Hyundai Capital Services 0.90% Hyundai Capital Services 0.31% Hyundai Card 0.90% Hyundai Card 0.50% HCA 100.00% ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ (*) The Group is considered to have substantial control over the entities by virtue of an agreement with other investors or relationship with structured entities. (2) Condensed financial position and results of operations of the Company’s major consolidated subsidiaries as of and for the year ended December 31, 2014, are as follows: Hyundai Card Co., Ltd. (*) Hyundai Rotem Company (*) Hyundai KEFICO Corporation (*) HCA (*) HMA HMMA HMMC HMI (*) HME (*) HAC (*) HMMR HMCA HMCIS 12,397,420 4,400,828 1,054,525 9,842,039 2,662,157 557,785 30,361,736 27,835,212 6,516,465 3,306,417 3,241,318 2,115,173 1,298,995 998,306 884,601 696,189 641,565 3,795,729 1,394,335 1,646,741 1,029,825 1,292,923 538,314 550,768 498,732 396,810 2,617,995 3,191,088 1,741,520 5,342,308 16,812,738 7,436,941 5,397,857 4,636,707 6,734,387 2,939,635 2,384,202 1,972,615 3,353,943 In millions of Korean Won Profit (loss) for the year ￦ 237,705 223,514 (15,109) 81,572 266,867 378,405 362,485 440,955 200,999 (38,666) 67,576 22,464 61,715 49,902 (*) Based on the subsidiary’s consolidated financial statements. Condensed financial position and results of operations of the Company’s major consolidated subsidiaries as of and for the year ended December 31, 2013, were as follows: In millions of Korean Won 8 8 / 8 9 Name of subsidiaries Assets Liabilities Sales Hyundai Capital Services, Inc. (*) ￦ 22,389,046 ￦ 19,136,092 ￦ 3,222,235 Hyundai Card Co., Ltd. (*) Hyundai Rotem Company (*) Hyundai KEFICO Corporation (*) HCA (*) HMA HMMA HMMC HMI (*) HME (*) HAC (*) HMMR HMCA HMCIS (*) Based on the subsidiary’s consolidated financial statements. 11,520,878 4,274,897 894,606 9,154,730 2,485,374 481,021 24,787,736 22,762,022 6,382,182 3,031,145 3,050,239 1,904,660 1,130,991 908,415 1,285,326 687,001 923,966 3,756,767 1,294,805 1,480,611 968,802 1,084,122 497,106 606,948 541,674 583,367 2,527,479 3,299,370 1,666,971 4,403,250 16,592,560 7,385,302 5,450,412 4,736,902 5,531,337 3,145,661 2,750,925 2,272,191 3,742,285 Profit (loss) for the year ￦ 391,427 163,210 126,076 98,432 285,406 490,250 479,606 374,303 220,593 4,164 73,997 209,710 40,010 96,107 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) The financial statements of all subsidiaries, which are used in the preparation of the consolidated financial statements, Details of non-wholly owned subsidiaries of the Company that had material non-controlling interests as of December 31, are prepared for the same reporting periods as the Company’s. 2013, were as follows: (4) Summarized cash flows of non-wholly owned subsidiaries that have material non-controlling interests to the Group as of December 31, 2014, are as follows: Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company In millions of Korean Won Ownership percentage of non-controlling interests 43.53% 63.04% 56.64% In millions of Korean Won Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents ￦ (976,758) ￦ (1,351,845) ￦ (188,798) (64,890) 147,298 (44) (141,427) 695,513 - (57,753) 245,511 119 Net decrease in cash and cash equivalents ￦ (894,393) ￦ (797,758) ￦ (921) Non-controlling interests ￦ 1,415,812 ￦ 1,491,715 ￦ 1,088,548 Profit attributable to non-controlling interests Dividends paid to non-controlling interests 170,307 78,365 105,461 - 62,686 155 (6) Financial support provided to consolidated structured entities As of December 31, 2014, Hyundai Card Co., Ltd. and Hyundai Capital Services, Inc., subsidiaries of the Company, have agreements which provide counterparties with rights to claim themselves in the event of default on the derivatives relating to asset-backed secu- rities issued by consolidated structured entities, Autopia Forty-Fifth, Forty-Sixth, Forty-Ninth and Fifty-Second Asset Securitization Summarized cash flows of non-wholly owned subsidiaries that had material non-controlling interests to the Group as of Decem- Specialty Company, Privia the third and the Fourth Securitization Specialty Co., Ltd. ber 31, 2013, were as follows: In millions of Korean Won (7) The nature and the risks associated with interests in unconsolidated structured entities Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company 1) Nature of interests in an unconsolidated structured entity, which belongs to the Group as of December 31, 2014, is as follows: Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents ￦ (140,669) 69,086 272,041 (20) ￦ 103,169 (105,453) 176,192 - ￦ (408,594) (24,474) 440,503 (4,183) Description Purpose Nature of business Method of funding Total assets In millions of Korean Won Asset securitization SPC Fund raising through asset-securitization Fund collection Corporaten Bond and others Net increase in cash and cash equivalents ￦ 200,438 ￦ 173,908 ￦ 3,252 Investment fund Investment in beneficiary certificate Fund management and operation Sales of beneficiary certificates (5) Details of non-wholly owned subsidiaries of the Company that have material non-controlling interests as of December 31, Investment trust 2014, are as follows: In millions of Korean Won Development trust, Unspecified monetary trust, Principal unsecured trust, Operation of trust investment Trust management and operation, Payment of trust fee, Distribution of trust benefit Sales of trust investment product 34,442 Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company Nature of interests in an unconsolidated structured entity, which belongs to the Group as of December 31, 2013, was as follows: Ownership percentage of non-controlling interests Non-controlling interests Profit attributable to non-controlling interests Dividends paid to non-controlling interests 43.53% ￦ 1,496,716 104,053 - 63.04% ￦ 1,611,007 140,912 - 56.64% ￦ 1,056,862 (11,870) 6,984 Description Purpose Nature of business Method of funding Total assets Asset securitization SPC Fund raising through asset-securitization Fund collection Corporate Bond and others ￦ 396,497 In millions of Korean Won ￦ 305,457 13,207,887 9 0 / 9 1 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 2) Risks associated with interests in an unconsolidated structured entity, which belongs to Group as of (9) Changes in consolidated subsidiaries December 31, 2014, are as follows: In millions of Korean Won Subsidiaries newly included in and excluded from consolidation for the year ended December 31, 2014, are as follows: Financial support provided to the structured entity Description Book value in the structured entity (*) Method Purpose Asset securitization SPC ￦ 31,209 Mezzanine debt Credit facility Investment fund Investment trust 210,023 Beneficiary certificates Invest agreement 26,491 Investment trust ˝ Maximum amount of exposure to loss of the structured entity ￦ 31,209 210,023 26,491 (*) Interest in structured entities is recognized as AFS financial assets and others according to K-IFRS 1039. Risks associated with interests in an unconsolidated structured entity, which belongs to Group as of December 31, 2013, were as follows: Description Book value in the structured entity (*) Method Purpose Financial support provided to the structured entity In millions of Korean Won Maximum amount of exposure to loss of the structured entity Asset securitization SPC ￦ 30,223 Mezzanine debt Credit facility ￦ 30,223 (*) Interest in structured entities was recognized as AFS financial assets and others according to K-IFRS 1039. Changes Included ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Name of subsidiaries Hyundai Capital Canada Inc. (HCCA) Hyundai Capital Lease Inc. Hyundai Motor Netherlands B.V. (HMNL) Hyundai Rotem Brasil Engineering Services LTD KyoboAXA Private Tomorrow Securities Investment Trust No.12 Shinyoung Private Securities Investment Trust WB-1 UBS Hana Dynamic Balance Private Investment Trust 1 Shinhan BNPP Private Corporate Security Investment Trust No.34 Miraeasset Triumph Private Equity Security Investment Trust No.15 Autopia Fifty-Fourth Asset Securitization Specialty Company Autopia Fifty-Fifth Asset Securitization Specialty Company Privia the Fourth Securitization Specialty Co., Ltd. Privia the Fifth Securitization Specialty Co., Ltd. Hyundai HK Funding Three, LLC Power Protect Extended Services, Inc. Power Protect Extended Services Florida, Inc. (8) Significant restrictions of the subsidiaries Excluded Hyundai Motor Norway AS (HMN) 1) As of December 31, 2014, Hyundai Card Co., Ltd. and Hyundai Capital Services, Inc., subsidiaries of the Company have signifi- cant restrictions that require them to obtain consent from directors appointed by non-controlling shareholders in the event of merger, investment in stocks, transfer of the whole or a significant part of assets, borrowing, guarantee or disposal of assets beyond a certain amount, acquirement of treasury stock, payment of dividend and so on. 2) As of December 31, 2014, Hyundai Rotem Company, subsidiary of the Company, is required to obtain consent from directors appointed by non-controlling shareholders in the event of significant change in the capital structure of the entity, excluding transactions according to the business plan or the regulation of the Board of Directors, such as issue, disposal, repurchase or retirement of stocks or options, increase or decrease of capital, and so on. ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Hyundai Motor Hungary (HMH) IBK Panorama Private Equity Security Investment Trust No.50 Woori Frontier Private Equity Security Investment Trust No.5 KTB Safe Private Equity Security Investment Trust No.78 Macquarie Lion Private Equity Security Investment Trust Security No.45 Shinhan BNPP Private Corporate Security Investment Trust No.27 Miraeasset Triumph Private Equity Security Investment Trust No.13 Autopia Thirty-Sixth Asset Securitization Specialty Company Autopia Fourty-Second Asset Securitization Specialty Company Privia the Second Securitization Specialty Co., Ltd. (*) HMN has been merged with HMUK, a subsidiary of the Company, during the year ended December 31, 2014. Description Establishment ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 9 2 / 9 3 Merger (*) Liquidation ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (10) Decrease in the Group's ownership interests in one of its subsidiary and the consequent effects on the equity attributable to - K-IFRS interpretation 2121 (Enactment): ‘Levies’ combinations. The amendments to K-IFRS 1111 are effective the owners of the Company for the year ended December 31, 2014, is as follows: The enactment to K-IFRS 2121 clarifies that the obligating for the annual periods beginning on or after January 1, 2016. In millions of Korean Won event giving rise to the recognition of a liability to pay a levy Description Ownership percentage before transaction Ownership percentage after transaction Increase in paid-in capital and proceeds on disposal Changes in non-controlling interests Changes in capital surplus HCA (*1) 85.00% 80.00% ￦ 132,263 133,215 (952) HAOSVT (*2) 89.29% 83.91% ￦ 23,678 16,909 4,834 (*1) The ownership percentage of the Group decreased as a result of not participating in the paid-in capital increase that occurred during the year ended December 31, 2014. (*2) The ownership percentage of the Group decreased as the Group disposed its shares partially during the year ended December 31, 2014. is the activity that triggers the payment of the levy in accor- - Annual Improvements to K-IFRS 2010-2012 Cycle dance with the related legislation. The amendments to K-IFRS 1002 (i) change the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add definition The above mentioned changes in accounting policies did not for ‘performance condition’ and ‘service condition’ which were have any significant effect on the Group’s consolidated financial previously included within the definition of ‘vesting condition’. statements. The amendments to K-IFRS 1103 clarify the classification and measurement of the contingent consideration in business com- bination. The amendments to K-IFRS 1108 clarify that a recon- 2) New and revised standards that have been issued but are ciliation of the total of the reportable segments’ assets should not yet effective as of the authorization date for issue of only be provided if the segment assets are regularly provided to financial statements, and that have not been applied earlier the chief operating decision maker. The amendments are effec- by the Group are as follows: tive for the annual periods beginning on or after July 1, 2014. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: the consolidated financial statements for the year ended De- - K-IFRS 1019 (Amendment): ‘Employee Benefits’ - Annual Improvements to K-IFRS 2011-2013 Cycle cember 31, 2013, except for the adoption effect of the new ac- The amendments to K-IFRS 1019 permit to recognize amount The amendments to K-IFRS 1103 clarify the scope of the counting standards and interpretations described below. of contributions as a reduction in the service cost in which portfolio exception for measuring the fair values of the group The Company maintains its official accounting records in Korean Won and prepares its consolidated financial statements in con- the related service is rendered if the amount of the contribu- of financial assets and financial liabilities on a net basis in- tions are independent of the number of years of service. The cludes all contracts that are within the scope the standard formity with Korean International Financial Reporting Standards 1) New and revised standards that have been applied from the amendments are effective for the annual periods beginning on does not apply to the accounting for the formation of all types (“K-IFRS”), in Korean language (Hangul). Accordingly, these con- year beginning on January 1, 2014, are as follows: or after July 1, 2014. solidated financial statements are intended for use by those who of joint arrangement in the financial statements of the joint arrangement itself. The amendments to K-IFRS 1113 ‘Fair Val- are informed about K-IFRS and Korean practices. The accompa- - K-IFRS 1032 (Amendment): ‘Financial Instruments: Presentation’ - K-IFRS 1016 (Amendment): ‘Property, Plant and Equipment’ ue Measurement’ and K-IFRS 1040 ‘Investment Property’ exist nying consolidated financial statements have been condensed, The amendments to K-IFRS 1032 clarify the requirement to The amendments to K-IFRS 1016 prohibit from using a reve- and these amendments are effective to the annual periods restructured and translated into English with certain expanded de- offset financial assets and financial liabilities within the pre- nue-based depreciation method for items of property, plant beginning on or after July 1, 2014. scriptions from Korean language consolidated financial statements. sentation of the statements of financial position: the right to and equipments. The amendments are effective for the annual 9 4 / 9 5 Certain information included in Korean language consolidated offset must not be conditional upon the occurrence of future periods beginning on or after January 1, 2016. The Group does not anticipate that the above mentioned enact- financial statements, but not required for a fair presentation of events and can be exercised anytime during the contract pe- ments and amendments will have any significant effect on the the Group’s consolidated statements of financial position, income, riods. The right to offset is executable even in the case of de- - K-IFRS 1038 (Amendment): ‘Intangible Assets’ Group’s consolidated financial statements. comprehensive income, changes in equity or cash flows, is not fault or insolvency. presented in the accompanying consolidated financial statements. The amendments to K-IFRS 1038 rebut presumption that rev- enue is not an appropriate basis for the amortization of intan- - K-IFRS 1036 (Amendment): ‘Impairment of Assets’ gible assets, which the presumption can only be rebutted when (2) Basis of measurement The amendments to K-IFRS 1036 require disclosure of the re- the intangible asset expressed as a measure of revenue or (1) Basis of consolidated financial statements preparation coverable amounts of cash generating units or individual assets when it can be demonstrated that revenue and consumption of The consolidated financial statements have been prepared on only when there has been impairment or reversal of impairment. the economic benefits of the intangible asset are highly cor- the historical cost basis except as otherwise stated in the ac- The Group has prepared the consolidated financial statements in related. The amendments to K-IFRS 1038 apply prospectively counting policies below. Historical cost is usually measured at accordance with K-IFRS. - K-IFRS 1039 (Amendment): ‘Financial Instruments: Recognition for annual periods beginning on or after January 1, 2016. the fair value of the consideration given to acquire the assets. The consolidated financial statements as of and for the year and Measurement’ ended on December 31, 2014, to be submitted at the ordinary The amendments to K-IFRS 1039 permit the use of hedge ac- - K-IFRS 1111 (Amendment): ‘Joint Arrangements’ shareholders’ meeting were authorized for issuance at the counting when, as a consequence of the introduction of laws The amendments to K-IFRS 1111 provide guidance on how to (3) Basis of consolidation board of directors’ meeting on February 12, 2015. or regulations, the original counterparty to the hedging instru- account for the acquisition of joint operation that constitues a The significant accounting policies used for the preparation of ment is replaced by a central counterparty or an entity which is business as defined in K-IFRS 1103 ‘Business Combintations’. A The consolidated financial statements incorporate the financial the consolidated financial statements are summarized below. acting as counterparty in order to effect clearing by a central joint operator is also required to disclose the relevant informa- statements of the Company and entities (including structured These accounting policies are consistent with those applied to counterparty. tion required by K-IFRS 1103 and other standards for business entities) controlled by the Company (or its subsidiaries). Control HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 is achieved when the Company: Changes in the Group’s ownership interests in subsidiaries, with- profit or loss. Prior to the acquisition date, the amount resulting 5) Construction contracts ■ has power over the investee; The carrying amounts of the Group’s interests and the non-con- that have previously been recognized in other comprehensive reliably, the contract revenue and contract costs associated with ■ is exposed, or has rights, to variable returns from its involve- trolling interests are adjusted to reflect the changes in their income are reclassified to profit or loss where such treatment the construction contract are recognized as revenue and ex- ment with the investee; and relative interests in the subsidiaries. Any difference between the would be appropriate if that interest were directly disposed of. penses, respectively by reference to the stage of completion of out a loss of control, are accounted for as equity transactions. from changes in the value of its equity interest in the acquiree Where the outcome of a construction contract can be estimated ■ has the ability to use its power to affect its returns. amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized The Company reassesses whether or not it controls an investee directly in equity and attributed to owners of the Group. (5) Revenue recognition if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group loses control of a subsidiary, the profit or loss 1) Sale of goods the contract activity at the end of reporting period. The percentage of completion of a contract activity is reliably measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total con- tract costs, by surveys of work performed or by completion of a on disposal is calculated as the difference between (i) the ag- The Group recognizes revenue from sale of goods when all of physical proportion of the contract work. Variations in contract When the Company has less than a majority of the voting rights gregate of the fair value of the consideration received and the the following conditions are satisfied: work, claim and incentive payments are included to the extent of an investee, it has power over the investee when the voting fair value of any retained interest and (ii) the previous carrying that the amount can be measured reliably and its receipt is con- rights are sufficient to give it the practical ability to direct the amount of the assets (including goodwill), liabilities of the sub- ■ the Group has transferred to the buyer the significant risks sidered probable. Where the outcome of a construction contract relevant activities of the investee unilaterally. The Company sidiary and any non-controlling interests. When assets of the and rewards of ownership of the goods; the amount of reve- cannot be estimated reliably, contract revenue is recognized to considers all relevant facts and circumstances in assessing subsidiary are carried at revalued amounts or fair values and nue can be measured reliably; the extent of contract costs incurred that it is probable will be whether or not the Company’s voting rights in an investee are the related cumulative gain or loss has been recognized in other ■ it is probable that the economic benefits associated with the recoverable. Contract costs are recognized as expenses in the sufficient to give it power, including: comprehensive income and accumulated in equity, the amounts transaction will flow to the Group period in which they are incurred. When it is probable that total previously recognized in other comprehensive income and accu- contract costs will exceed total contract revenue, the expected ■ the size of the Company’s holding of voting rights relative to mulated in equity are accounted for as if the Group had directly The Group grants award credits which the customers can redeem loss is recognized as an expense immediately. the size and dispersion of holdings of the other vote holders; disposed of the relevant assets (i.e. reclassified to profit or loss for awards such as free or discounted goods or services. The ■ potential voting rights held by the Company, other vote hold- or transferred directly to retained earnings as specified by appli- fair value of the award credits is estimated by considering the ers or other parties; cable K-IFRSs). The fair value of any investment retained in the fair value of the goods granted, the expected rate and period of (6) Foreign currency translation ■ rights arising from other contractual arrangements; and former subsidiary at the date when control is lost is regarded as collection. The fair value of the consideration received or receiv- ■ any additional facts and circumstances that indicate that the the fair value on initial recognition for subsequent accounting able from the customer is allocated to award credits and sales The individual financial statements of each entity in the Group Company has, or does not have, the current ability to direct the under K-IFRS 1039 ‘Financial Instruments: Recognition and Mea- transaction. The consideration allocated to the award credits is are measured and presented in the currency of the primary relevant activities at the time that decisions need to be made, surement’ or, when applicable, the cost on initial recognition of deferred and recognized as revenue when the award credits are economic environment in which the entity operates (its func- 9 6 / 9 7 including voting patterns at previous shareholders’ meetings. an investment in an associate or a jointly controlled entity. redeemed and the Group’s obligations have been fulfilled. tional currency). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of (4) Business combination 2) Rendering of services In preparing the financial statements of the individual entities, transactions occurring in currencies other than their func- tional currency (foreign currencies) are recorded using the comprehensive income from the effective date of acquisition The Group recognizes revenue from rendering of services based exchange rate on the dates of the transactions. At the end of and up to the effective date of disposal, as appropriate. When Acquisitions of businesses are accounted for using the acquisi- on the percentage of completion when the amount of revenue each reporting period, monetary items denominated in foreign necessary, adjustments are made to the financial statements of tion method. The consideration transferred in a business combi- can be measured reliably and it is probable that the economic currencies are translated using the exchange rate at the report- subsidiaries to bring their accounting policies into line with those nation is measured at fair value, which is calculated as the sum benefits associated with the transaction will flow to the Group. ing period. Non-monetary items that are measured in terms of used by the Company. All intra-group transactions, balances, of the acquisition-date fair values of the assets transferred by income and expenses are eliminated in full on consolidation. the Group, liabilities incurred by the Group to the former owners Non-controlling interests are presented in the consolidated of the acquiree and the equity interests issued by the Group in 3) Royalties historical cost in a foreign currency are translated using the ex- change rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are trans- statement of financial position within equity, separately from exchange for control of the acquiree. The consideration includes The Group recognizes revenue from royalties on an accrual ba- lated using the exchange rates at the date when the fair value the equity of the owners of the Company. The carrying amount any asset or liability resulting from a contingent consideration sis in accordance with the substance of the relevant agreement. was determined. Exchange differences resulting from settlement of non-controlling interests consists of the amount of those arrangement and is measured at fair value. Acquisition-related non-controlling interests at the initial recognition and the chang- costs are recognized in profit or loss as incurred. When a busi- of assets or liabilities and translation of monetary items denom- inated in foreign currencies are recognized in profit or loss in es in shares of the non-controlling interests in equity since the ness combination is achieved in stages, the Group’s previously 4) Dividend and interest income the period in which they arise except for some exceptions. date of the acquisition. Total comprehensive income is attributed held equity interest in the acquiree is remeasured at its fair val- Revenues arising from dividends are recognized when the right to the owners of the Company and to the non-controlling inter- ue at the acquisition date (i.e. the date when the Group obtains to receive payment is established. Interest income is recognized For the purpose of presenting the consolidated financial state- ests even if the non-controlling interest has a deficit balance. control) and the resulting gain or loss, if any, is recognized in using the effective interest method as time passes. ments, assets and liabilities in the Group’s foreign operations HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 are translated into Won, using the exchange rates at the end of with fixed or determinable payments and fixed maturity that the computed at initial recognition. The carrying amount of the asset (9) Derecognition of financial assets reporting period. Income and expense items are translated at the Group has the positive intent and ability to hold to maturity. HTM is reduced either directly or through use of an allowance account average exchange rate for the period, unless the exchange rate financial assets are presented at amortized cost using the effec- and the amount of the loss is recognized in profit or loss. The Group derecognizes a financial asset when the contractual during the period has significantly fluctuated, in which case the tive interest rate less accumulated impairment loss, and interest rights to the cash flows from the asset expire, or when it trans- exchange rates at the dates of the transactions are used. The income is recognized using the effective interest rate method. Certain financial assets such as trade receivables and financial fers the financial asset and substantially all the risks and re- exchange differences arising, if any, are recognized in equity as other comprehensive income. On the disposal of a foreign oper- services receivables that are assessed not to be impaired indi- wards of ownership of the asset to another entity. If the Group vidually are, in addition, assessed for impairment on a collective neither retains substantially all the risks and rewards of own- ation, the cumulative amount of the exchange differences relat- 3) Loans and receivables basis. The objective evidence of impairment for a portfolio of ership nor transfers and continues to control the transferred ing to that foreign operation is reclassified from equity to profit Loans and receivables are non-derivative financial assets with receivables could include the Group’s past experience of col- asset, the Group recognizes its retained interest in the asset and or loss when the gain or loss on disposal is recognized. Any fixed or determinable payments that are not quoted in an active lecting payments, an increase in the number of delayed pay- associated liability for amounts it may have to pay. If the Group goodwill arising on the acquisition of a foreign operation and market, and measured at amortized cost. Interest income is rec- ments in the portfolio past the average credit period, as well as retains substantially all the risks and rewards of ownership of any fair value adjustments to the carrying amounts of assets ognized using the effective interest rate method except for short- observable changes in national or local economic conditions that a transferred financial asset, the Group continues to recognize and liabilities arising on the acquisition of that foreign operation term receivables for which the discount effect is not material. correlate with default on receivables. the financial asset and also recognizes a collateralized borrow- are treated as assets and liabilities of the foreign operation and translated at the exchange rate at the end of reporting period. 4) AFS financial assets If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an ing for the proceeds received. Foreign exchange gains or losses are classified in finance in- AFS financial assets are those non-derivative financial assets event occurring after the impairment was recognized, the previ- (10) Inventory come (expenses) or other income (expenses) by the nature of that are designated as AFS or are not classified as loans and ously recognized impairment loss is reversed and recognized in the transaction or event. receivables, HTM financial assets nor financial assets at FVT- profit or loss. The reversal shall not result in a carrying amount Inventory is measured at the lower of cost or net realizable PL. AFS financial assets are measured at fair value. However, of the financial asset that exceeds what the amortized cost value. Inventory cost including the fixed and variable manufac- investments in equity instruments that do not have a quoted would have been had the impairment not been recognized at the turing overhead cost, is calculated, using the moving average (7) Financial assets market price in an active market and whose fair value cannot be date the impairment is reversed. method except for the cost for inventory in transit which is de- reliably measured are measured at cost. termined by the identified cost method. The Group classifies financial assets into the following specified categories: financial assets at fair value through profit or loss A gain or loss on changes in fair value of AFS financial assets 2) Financial assets carried at cost (“FVTPL”), held-to-maturity (“HTM”) financial assets, loans and is recognized in other comprehensive income, except for im- The amount of the impairment loss on financial assets that are (11) Investments in associates and joint ventures receivables and available-for-sale (“AFS”) financial assets. The pairment loss, interest calculated using the effective interest carried at cost because their fair value cannot be reliably mea- 9 8 / 9 9 classification depends on the nature and purpose of the finan- method and foreign exchange gains and losses on monetary sured is measured as the difference between the carrying amount An associate is an entity over which the Group has significant cial assets and is determined at the time of initial recognition. assets. Accumulated other comprehensive income is reclassified of the financial asset and the present value of estimated future influence. Significant influence is the power to participate in the to profit or loss from equity at the time of impairment recogni- cash flows discounted at the current market rate of return for a financial and operating policy decisions of the investee but is tion or elimination of related financial assets. Dividends on an similar financial asset. Such impairment losses are not reversed. not control or joint control over those policies. 1) Financial assets at FVTPL AFS equity instrument are recognized in profit or loss when the FVTPL includes financial assets classified as held for trading and Group’s right to receive payment is established. financial assets designated at FVTPL upon initial recognition. A financial asset is classified as FVTPL, if it has been acquired 3) AFS financial assets A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net as- If there is objective evidence of impairment on AFS financial sets of the joint arrangement. Joint control is the contractually principally for the purpose of selling or repurchasing in near (8) Impairment of financial assets assets, the cumulative loss that has been recognized in other agreed sharing of control of an arrangement, which exists only term. All derivative assets, except for derivatives that are desig- comprehensive income less any impairment loss previously rec- when decisions about the relevant activities require unanimous nated and effective hedging instruments, are classified as held 1) Financial assets carried at amortized cost ognized in profit or loss is reclassified from equity to profit or consent of the parties sharing control. for trading financial assets which are measured at fair value The Group assesses at the end of each reporting period whether loss. Impairment losses recognized in profit or loss for invest- through profit or loss. Financial assets at FVTPL are measured there is any objective evidence that a financial asset or group of ments in equity instruments classified as AFS are not reversed The investment in an associate or a joint venture is initially rec- at fair value, with any gains or losses arising on remeasurement financial assets is impaired. If any such evidence exists, the Group through profit or loss. Meanwhile, if, in a subsequent period, the ognized at cost and accounted for using the equity method. Un- recognized in profit or loss. determines the amount of any impairment loss. The amount of fair value of a debt instrument classified as AFS increases and der the equity method, an investment in an associate or a joint 2) HTM financial assets flows, excluding future credit losses that have not been incurred, impairment loss is reversed through profit or loss. the Group’s share of the profit or loss and other comprehensive HTM financial assets are non-derivative financial instruments discounted at the financial asset’s original effective interest rate income of the associate or the joint venture. When the Group’s the loss is measured as the difference between the asset’s car- the increase can be objectively related to an event occurring venture is initially recognized in the consolidated statement of rying amount and the present value of estimated future cash after the impairment loss was recognized in profit or loss, the financial position at cost and adjusted thereafter to recognize HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 share of losses of an associate or a joint venture exceeds the interest if that gain or loss would be reclassified to profit or loss Goodwill is measured as the excess of the aggregate of the Group’s interest in that associate or joint venture (which in- on the disposal of the related assets or liabilities. In addition, the Representative useful lives (years) consideration transferred, the amount of any non-controlling cludes any long-term interests that, in substance, form part of Group applies K-IFRS 1105 to a portion of investment in an as- the Group’s net investment in the associate or the joint ven- sociate or a joint venture that meets the criteria to be classified ture), the Group discontinues recognizing its share of further as held for sale. losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made The Group continues to use the equity method when an invest- payments on behalf of the associate or the joint venture. ment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an Any excess of the cost of acquisition over the Group’s share of associate. There is no remeasurement to fair value upon such Buildings and structures Machinery and equipment Vehicles Dies, molds and tools Office equipment Other 2 - 50 2 - 25 3 - 20 2 - 15 2 - 20 2 - 30 interest in the acquiree, and the acquisition-date fair value of the Group’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable as- sets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeds the aggregate of the consideration transferred, the the net fair value of the identifiable assets, liabilities and con- changes in ownership interests. The Group reviews the depreciation method, the estimated use- amount of any non-controlling interest in the acquiree, and the tingent liabilities of an associate or a joint venture recognized ful lives and residual values of property, plant and equipment at acquisition-date fair value of the Group’s previously held equity at the date of acquisition is recognized as goodwill, which is in- Unrealized gains from transactions between the Group and its the end of each annual reporting period. If expectations differ interest in the acquiree, the excess is recognized immediately in cluded within the carrying amount of the investment. The entire associates or joint ventures are eliminated up to the shares in from previous estimates, the changes are accounted for as a profit or loss as a bargain purchase gain. carrying amount of the investment including goodwill is tested associate (joint venture) stocks. Unrealized losses are also elim- change in accounting estimate. for impairment and presented at the amount less accumulated inated unless evidence of impairment in assets transferred is impairment losses. Any excess of the Group’s share of the net produced. If the accounting policy of associates or joint ventures fair value of the identifiable assets, liabilities and contingent differs from the Group, financial statements are adjusted accord- (13) Investment property liabilities over the cost of acquisition, after reassessment, is ingly before applying equity method of accounting. If the Group’s Goodwill is not amortized but tested for impairment at least an- nually. For purposes of impairment tests, goodwill is allocated to those cash generating units (“CGU”) of the Group expected to have synergy effect from the business combination. CGU recognized immediately in profit or loss. ownership interest in an associate or a joint venture is reduced, Investment property is property held to earn rentals or for cap- that goodwill has been allocated is tested for impairment every but the significant influence is continued, the Group reclassifies ital appreciation or both. An investment property is measured year or when an event occurs that indicates impairment. If re- Upon disposal of an associate or a joint venture that results in to profit or loss only a proportionate amount of the gain or loss initially at its cost and transaction costs are included in the coverable amount of a CGU is less than its carrying amount, the the Group losing significant influence over that associate or joint previously recognized in other comprehensive income. initial measurement. After initial recognition, the book value of impairment will first decrease the goodwill allocated to that CGU venture, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial rec- investment property is presented at the cost less accumulated and the remaining impairment will be allocated among other depreciation and accumulated impairment losses. assets relative to its carrying value. Impairment recognized for ognition as a financial asset in accordance with K-IFRS 1039. The (12) Property, plant and equipment Subsequent costs are recognized as the carrying amount of the goodwill may not be reversed. When disposing a subsidiary, re- difference between the previous carrying amount of the asso- asset when, and only when it is probable that future economic lated goodwill will be included in gain or loss from disposal. ciate or joint venture attributable to the retained interest and its Property, plant and equipment is to be recognized if, and only if benefits associated with the asset will flow to the Group, and fair value is included in the determination of the gain or loss on it is probable that future economic benefits associated with the the cost of the asset can be measured reliably, or recognized 1 0 0 / 1 0 1 disposal of the associate or joint venture. In addition, the Group asset will flow to the Group, and the cost of the asset can be as a separate asset if appropriate. The carrying amount of what 2) Development costs accounts for all amounts previously recognized in other com- measured reliably. After the initial recognition, property, plant was replaced is derecognized. The expenditure on research is recognized as an expense when prehensive income in relation to that associate or joint venture and equipment is stated at cost less accumulated depreciation it is incurred. The expenditure on development is recognized on the same basis we would be required if that associate or joint and accumulated impairment losses. The cost includes any cost Land is not depreciated, and other investment properties are as an intangible asset if, and only if, all of the following can be venture had directly disposed of the related assets or liabilities. directly attributable to bringing the asset to the location and depreciated using the straight-line method over the period from demonstrated: Therefore, if a gain or loss previously recognized in other com- condition necessary for it to be capable of operating in the 20 to 50 years. The Group reviews the depreciation method, the prehensive income by that associate or joint venture would be manner intended by management and the initial estimate of the estimated useful lives and residual values at the end of each ■ the technical feasibility of completing the intangible asset so reclassified to profit or loss on the disposal of the related assets costs of dismantling and removing the item and restoring the annual reporting period. If expectations differ from previous es- that it will be available for use or sale; or liabilities, the Group reclassifies the gain or loss from equity site on which it is located. In addition, in case the recognition timates, the changes are accounted for as a change in account- ■ the intention to complete the intangible asset and use or sell it; to profit or loss (as reclassification adjustment) when it loses criteria are met, the subsequent costs will be added to the car- ing estimate. ■ the ability to use or sell the intangible asset; significant influence over that associate or joint venture. rying amount of the asset or recognized as a separate asset, and the carrying amount of what was replaced is derecognized. When the Group reduces its ownership interest in an associate (14) Intangible assets or a joint venture but the Group continues to use the equity Depreciation is computed using the straight-line method based ■ how the intangible asset will generate probable future eco- nomic benefits; ■ the availability of adequate technical, financial and other re- sources to complete the development and to use or sell the method, the Group reclassifies to profit or loss the proportion on the estimated useful lives of the assets. The representative 1) Goodwill intangible asset; and of the gain or loss that had previously been recognized in other useful lives are as follows: Goodwill arising from a business combination is recognized as ■ the ability to measure reliably the expenditure attributable to comprehensive income relating to that reduction in ownership an asset at the time of obtaining control (the acquisition-date). the intangible asset during its development. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 The cost of an internally generated intangible asset is the sum If the cash inflow of individual asset occurs separately from incurred in negotiating and arranging an operating lease are statements of financial position represents the present value of of the expenditure incurred from the date when the intangible other assets or group of assets, the recoverable amount is added to the carrying amount of the leased asset and recognized the defined benefit obligation, less the fair value of plan assets. asset first meets the recognition criteria above and the carry- measured for that individual asset; otherwise, it is measured for as expense on a straight-line basis over the lease term. Defined benefit obligations are calculated by an actuary using ing amount of intangible assets is presented as the acquisition each CGU to which the asset belongs. Except for goodwill, all cost less accumulated amortization and accumulated impairment non-financial assets that have incurred impairment are tested the Projected Unit Credit Method. losses. for reversal of impairment at the end of each reporting period. 2) The Group as lessee The present value of the defined benefit obligations is measured Intangible assets with indefinite useful lives or intangible assets assets and liabilities of the Group at their fair value at the in- rate of high-quality corporate bonds with similar maturity as the Assets held under finance leases are initially recognized as by discounting estimated future cash outflows by the interest 3) Intangible assets acquired separately not yet available for use are not amortized but tested for im- ception of the lease or, if lower, at the present value of the expected post-employment benefit payment date. In countries Intangible assets that are acquired separately are carried at pairment at least annually. minimum lease payments. Minimum lease payments are appor- where there is no deep market in such bonds, the market yields at cost less accumulated amortization and accumulated impair- ment losses. Amortization is recognized using the straight-line tioned between the finance expenses and the reduction of the the end of the reporting period on government bonds are used. outstanding liability. The finance expenses are allocated to each method based on the estimated useful lives. The Group reviews (16) Non-current assets classified as held for sale period during the lease term so as to produce a constant pe- The remeasurements of the net defined benefit liabilities (as- the estimated useful life and amortization method at the end of riodic rate of interest on the remaining balance of the liability. sets) comprising actuarial gain or loss from changes in actuarial each annual reporting period. If expectations differ from pre- The Group classifies a non-current asset (or disposal group) as Contingent rents are recognized as expenses in the periods in assumptions or differences between actuarial assumptions and vious estimates, the changes are accounted for as a change in held for sale if its carrying amount will be recovered principally which they are incurred. accounting estimate. through a sale transaction rather than through continuing use. actual results, the effect of the changes to the asset ceiling and return on plan assets, excluding amounts included in net interest For this to be the case, the asset (or disposal group) must be Operating lease payments are recognized as expense on a on the net defined benefit liabilities (assets) are recognized in Amortization is computed using the straight line method based available for immediate sale in its present condition subject only straight-line basis over the lease term, except where another other comprehensive income of the consolidated statements on the estimated useful lives of the assets. The representative to terms that are usual and customary for sales of such assets systematic basis is more representative of the time pattern in of comprehensive income, which is immediately recognized as useful lives are as follows: (or disposal groups) and its sale must be highly probable. The which economic benefits from the leased asset are consumed. retained earnings. Those recognized in retained earnings will management must be committed to a plan to sell the asset (or Contingent rents for operating lease are recognized as expenses not be reclassified in profit or loss. Past service costs are rec- disposal group), and the sale should be expected to qualify for in the periods in which they are incurred. ognized in profit and loss when the plan amendment occurs and Representative useful lives (years) recognition as a completed sale within one year from the date Development costs Industrial property rights Software Other 3 - 6 4 - 13 2 - 10 2 - 40 of classification. Non-current assets (or disposal group) classified as held for (18) Borrowing costs net interest is calculated by applying the discount rate deter- mined at the beginning of the annual reporting period to the net defined benefit liabilities (assets). Defined benefit costs are composed of service cost (including current service cost, past 1 0 2 / 1 0 3 sale are measured at the lower of their carrying amount and Borrowing costs directly attributable to the acquisition, con- service cost, as well as gains and losses on settlements), net in- fair value less costs to sell. struction or production of qualifying assets are capitalized to terest expense (income), and remeasurements. Club membership included in other intangible assets is deemed to have an indefinite useful life as there is no foreseeable limit (17) Lease on the period over which the membership is expected to gener- the cost of those assets, until they are ready for their intended use or sale. A qualifying asset is an asset that necessarily takes The retirement benefit obligation recognized in the consolidat- a substantial period of time to get ready for its intended use or ed statement of financial position represents the actual deficit sale. Investment income earned on the temporary investment or surplus in the Group’s defined benefit plans. Any surplus ate economic benefit for the Group, therefore the Group does Leases are classified as finance leases when the terms of the of specific borrowings pending their expenditure on qualifying resulting from this calculation is limited to the present value of not amortize it. lease transfer substantially all the risks and rewards of ownership assets is deducted from the borrowing costs eligible for capital- any economic benefits available in the form of refunds from the to the lessee. All other leases are classified as operating leases. ization. All other borrowing costs are recognized in profit or loss plans or reductions in future contributions to the plans. in the period in which they are incurred. (15) Impairment of tangible and intangible assets The Group assesses at the end of each reporting period wheth- Amounts due from lessees under finance leases are recognized (19) Retirement benefit plans 1) The Group as lessor (20) Provisions er there is any indication that an asset may be impaired. If any as receivables at the amount of the Group’s net investment in A provision is recognized when the Group has a present obliga- such indication exists, the Group estimates the recoverable the leases. Finance lease interest income is allocated to ac- Contributions to defined contribution retirement benefit plans tion (legal or constructive) as a result of a past event, it is prob- amount of the asset to determine the extent of the impairment counting periods so as to reflect an effective interest rate on are recognized as an expense when employees have rendered able that an outflow of resources embodying economic benefits loss. Recoverable amount is the higher of fair value less costs to the Group’s net investment outstanding in respect of the leases. service entitling them to the contributions. will be required to settle the obligation, and a reliable estimate sell and value in use. Rental income from operating leases is recognized on a straight- can be made of the amount of the obligation. The amount rec- line basis over the term of the relevant lease. Initial direct costs The retirement benefit obligation recognized in the consolidated ognized as a provision is the best estimate of the consideration HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 required to settle the present obligation at the end of the re- assets shall be generally recognized for all deductible temporary 3) Current and deferred tax for the year mined in accordance with K-IFRS 1037 ‘Provisions, Contingent porting period, taking into account the risks and uncertainties differences to the extent that it is probable that taxable profits Current and deferred tax are recognized in profit or loss, except Liabilities and Contingent Assets’; and surrounding the obligation. A provision is measured using the will be available against which those deductible temporary dif- when they relate to items that are recognized in other compre- ■ the amount initially recognized less, cumulative amortization present value of the cash flows estimated to settle the present ferences can be utilized. Such deferred tax assets and liabilities hensive income or directly in equity, or items arising from initial recognized in accordance with the K-IFRS 1018 ‘Revenue’ obligation. The increase in provision due to passage of time is shall not be recognized if the temporary difference arises from accounting treatments of a business combination. The tax effect recognized as interest expense. goodwill or from the initial recognition (other than in a business arising from a business combination is included in the account- The Group generally provides a warranty to the ultimate con- affects neither the taxable profit nor the accounting profit. sumer for each product sold and accrues warranty expense at the time of sale based on actual claims history. Also, the Group Deferred tax liabilities are recognized for taxable temporary (22) Treasury stock accrues probable expenses, which may occur due to product lia- differences associated with investments in subsidiaries and as- Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as FVTPL. FVTPL is stated at fair value and the gains and losses arising on remeasurement and the interest expenses paid in financial lia- bility suit, voluntary recall campaign and other obligations at the sociates, and interests in joint ventures, except when the Group When the Group repurchases its equity instruments (treasury bilities are recognized in profit and loss. combination) of other assets and liabilities in a transaction that ing for the business combination. 3) Financial liabilities at FVTPL end of the reporting period. In addition, the Group recognizes is able to control the timing of the reversal of the temporary stock), the incremental costs and net of tax effect are deduct- provisions for the probable losses of unused loan commitment, difference and it is probable that the temporary difference will ed from equity and recognized as other capital item deducted construction contracts, pre-contract sale or service contract not reverse in the foreseeable future. Deferred tax assets aris- from the total equity in the consolidated statements of financial 4) Other financial liabilities due to legal or constructive obligations. ing from deductible temporary differences associated with such position. In addition, profits or losses from purchase, sale or re- Other financial liabilities are initially measured at fair value, net investments and interests are only recognized to the extent that tirement of treasury stocks are directly recognized in equity and of transaction costs. Other financial liabilities are subsequently When some or all of the economic benefits required to settle taxable profit will be available against which the temporary dif- not in current profit or loss. measured at amortized cost using the effective interest method, a provision are expected to be recovered from a third party, a ference can be utilized and they are expected to be reversed in with interest expense recognized on an effective-yield basis. receivable is recognized as an asset if it is virtually certain that the foreseeable future. reimbursement will be received and the amount of the receivable (23) Financial liabilities and equity instruments can be measured reliably. The carrying amount of deferred tax assets is reviewed at the 5) Derecognition of financial liabilities end of each reporting period and reduced to the extent that it is Debt instruments and equity instruments issued by the Group are The Group derecognizes financial liabilities only when the no longer probable that sufficient taxable profits will be avail- recognized as financial liabilities or equity depending on the con- Group’s obligations are discharged, cancelled or they expire. (21) Taxation able to allow all or part of the asset to be recovered. tract and the definitions of financial liability and equity instrument. Income tax expense is composed of current and deferred tax. Deferred tax assets and liabilities are measured at the tax rates (24) Derivative financial instruments that are expected to be applied in the period in which the liabil- 1) Equity instruments ity is settled or the asset is realized, based on tax rates and tax An equity instrument is any contract that evidences a residual Derivatives are initially recognized at fair value at the date the 1) Current tax laws that have been enacted or substantively enacted by the interest in the assets of an entity after deducting all of its liabil- derivative contracts are entered into and are subsequently The current tax is computed based on the taxable profit for the end of the reporting period. The measurement of deferred tax ities. Equity instruments issued by the Group are recognized at remeasured to their fair value at the end of each reporting pe- current year. The taxable profit differs from the income before assets and liabilities reflects the tax consequences that would issuance amount net of direct issuance costs. riod. The resulting gain or loss is recognized in profit or loss im- income tax as reported in the consolidated statements of income follow from the manner in which the Group expects to recover because it excludes items of income or expense that are taxable or settle the carrying amount of its assets and liabilities at the mediately unless the derivative is designated and effective as a hedging instrument, in such case the timing of the recognition in or deductible in other years and it further excludes items that end of the reporting period. 2) Financial guarantee liabilities profit or loss depends on the nature of the hedge relationship. are never taxable or deductible. The Group’s liability for current A financial guarantee contract is a contract that requires the The Group designates certain derivatives as hedging instruments tax expense is calculated using tax rates that have been enacted Deferred tax assets and liabilities are offset when there is a issuer to make specified payments to reimburse the holder for a to hedge the risk of changes in fair value of a recognized as- or substantively enacted by the end of the reporting period. legally enforceable right to offset current tax assets against loss it incurs because a specified debtor fails to make payment set or liability or an unrecognized firm commitment (fair value 2) Deferred tax different taxable entities which intend either to settle current ied by the same taxation authority. Also, they are offset when debt instrument. ble forecast transaction and the risk of changes in foreign cur- rency exchange rates of firm commitment (cash flow hedges). current tax liabilities and when they relate to income tax lev- when due in accordance with the original or modified terms of a hedges) and the risk of changes in cash flow of a highly proba- Deferred tax is recognized on temporary differences between tax liabilities and assets on a net basis, or to realize the assets Financial guarantee contract liabilities are initially measured at the carrying amounts of assets and liabilities in the consolidated and settle the liabilities simultaneously, in each future period in their fair values and, if not designated as at FVTPL, are subse- financial statements and the corresponding tax bases used in the which significant amounts of deferred tax liabilities or assets quently measured at the higher of: 1) Fair value hedges computation of taxable profit. Deferred tax liabilities are general- are expected to be settled or recovered. The Group recognizes the changes in the fair value of derivatives ly recognized for all taxable temporary differences. Deferred tax ■ the amount of the obligation under the contract, as deter- that are designated and qualified as fair value hedges are rec- 1 0 4 / 1 0 5 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 ognized in profit or loss immediately, together with any changes are within the scope of K-IFRS 1017 ‘Leases’, and measure- based on the best estimate of amounts necessary to settle the recognized at the end of the reporting period and the differ- in the fair value of the hedged asset or liability that are attribut- ments that have some similarities to fair value but are not fair present and future warranty obligation. ence may affect income tax charged or credited, or deferred tax able to the hedged risk. Hedge accounting is discontinued when value, such as net realisable value in K-IFRS 1002 ‘Inventories’ the Group revokes the hedging relationship, when the hedging or value in use in K-IFRS 1036 ‘Impairment of Assets’. assets and liabilities in the period in which the final income tax determined. instrument expires or is sold, terminated, or exercised, or when 3) Defined benefit plans it is no longer qualified for hedge accounting. The fair value ad- In addition, for financial reporting purposes, fair value mea- The Group operates defined retirement benefit plans. Defined justment to the carrying amount of the hedged item arising from surements are categorized into Level 1, 2 or 3 based on the benefit obligations are determined at the end of each report- 5) Fair value of financial instruments the hedged risk is amortized to profit or loss from that date. degree to which the inputs to the fair value measurements are ing period using an actuarial valuation method that requires The Group uses valuation techniques that include inputs that 2) Cash flow hedges The effective portion of changes in the fair value of derivatives of post-employment benefit plan which serves for the long term judgements on the choice of various valuation methods and as- period causes significant uncertainties when the post-employ- sumptions based on the condition of the principal market at the that are designated and qualified as cash flow hedges is recog- (26) Significant accounting judgements and key sources of ment benefit obligation is estimated. end of the reporting period. observable and the significance of the inputs to the fair value management assumptions on discount rates, rates of expected are not based on observable market data to estimate the fair measurement in its entirety, which are described in Note 19. future salary increases and mortality rates. The characteristic value of certain type of financial instruments. The Group makes nized in other comprehensive income. The gain or loss relating to estimation uncertainties the ineffective portion is recognized immediately in profit or loss. Amounts previously recognized in other comprehensive income In the application of the Group’s accounting policies, manage- 4) Taxation 6) Measurement and useful lives of property, plant, equipment and accumulated in equity are reclassified to profit or loss in the ment is required to make judgments, estimates and assump- The Group recognizes current tax and deferred tax based on or intangible assets periods when the hedged item affects profit or loss. If the forecast tions about the carrying amounts of assets and liabilities that the best estimates of income tax effect to be charged in the If the Group acquires property, plant, equipment or intangible transaction results in the recognition of a non-financial asset or cannot be identified from other sources. The estimation and future as the result of operating activities until the end of the assets from business combination, it is required to estimate the liability, the related gain and loss recognized in other comprehen- assumptions are based on historical experience and other fac- reporting period. However, actual final income tax to be charged fair value of the assets at the acquisition date and determine the sive income and accumulated in equity is transferred from equity tors that are considered to be relevant. Actual results may be in the future may differ from the relevant assets and liabilities useful lives of such assets for depreciation and amortization. to the initial cost of related non-financial asset or liability. different from those estimations. The estimates and underlying assumptions are continually evaluated. Revisions to accounting Cash flow hedge accounting is discontinued when the Group estimates are recognized in the period in which the estimate is revokes the hedging relationship, when the hedging instrument revised if the revision affects only that period or in the period expires or is sold, terminated or exercised, or it no longer quali- of the revision and future periods if the revision affects both fies for the criteria of hedging. Any gain or loss accumulated in current and future periods. equity at that time remains in equity and is recognized as profit or loss when the forecast transaction occurs. When the forecast The main accounting estimates and assumptions related to the transaction is no longer expected to occur, the gain or loss ac- significant risks that may make significant changes to the car- cumulated in equity is recognized immediately in profit or loss. rying amounts of assets and liabilities after the reporting period (25) Fair value are as follows: 1) Goodwill Fair value is the price that would be received to sell an asset Determining whether goodwill is impaired requires an estimation or paid to transfer a liability in an orderly transaction between of the value in use of the cash-generating units to which good- market participants at the measurement date, regardless of will has been allocated. The value in use calculation requires the whether that price is directly observable or estimated using an- management to estimate the future cash flows expected to arise other valuation technique. In estimating the fair value of an as- from the cash-generating unit and a suitable discount rate in set or a liability, the Group takes into account the characteristics order to calculate present value. of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or 2) Warranty provision disclosure purposes in these consolidated financial statements is The Group recognizes provisions for the warranties of its prod- determined on such a basis, except for leasing transactions that ucts as described in Note 2.(20). The amounts are recognized 1 0 6 / 1 0 7 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 3. TRADE NOTES AND ACCOUNTS RECEIVABLE: 4. OTHER RECEIVABLES: (1) Trade notes and accounts receivable as of December 31, 2014 and 2013, consist of the following: Other receivables as of December 31, 2014 and 2013, consist of the following: December 31, 2014 December 31, 2013 In millions of Korean Won December 31, 2014 December 31, 2013 In millions of Korean Won Description Current Non-current Current Non-current Description Current Non-current Current Non-current Trade notes and accounts receivable ￦ 3,808,798 ￦ 57,100 ￦ 3,531,279 ￦ 47,969 Accounts receivable-others ￦ 2,083,571 ￦ 719,888 ￦ 1,672,402 ￦ 827,510 Allowance for doubtful accounts Present value discount accounts (2) Aging analysis of trade notes and accounts receivables (58,706) - (45,934) - Due from customers for contract work 1,617,221 - 1,393,555 - (5,566) - (4,660) Lease and rental deposits ￦ 3,750,092 ￦ 51,534 ￦ 3,485,345 ￦ 43,309 Deposits Others Allowance for doubtful accounts Present value discount accounts 28,119 2,820 93 (9,715) - 298,401 23,998 119 - (3,249) 42,784 13,699 2,549 (6,603) - 274,832 23,154 7,283 - - (4,940) As of December 31, 2014 and 2013, total trade notes and accounts receivable that are past due, but not impaired, amount to ￦311,979 million and ￦310,984 million, respectively; of which ￦282,969 million and ￦264,159 million, respectively, are past due less than 90 days, but not impaired. As of December 31, 2014 and 2013, the impaired trade notes and accounts receivable amount to ￦58,706 mil- 5. OTHER FINANCIAL ASSETS: lion and ￦45,934 million, respectively. (3) Transferred trade notes and accounts receivable that are not derecognized (1) Other financial assets as of December 31, 2014 and 2013, consist of the following: December 31, 2014 December 31, 2013 In millions of Korean Won As of December 31, 2014 and 2013, total trade notes and accounts receivable which the Group transferred to financial institutions but Description Current Non-current Current Non-current did not qualify for derecognition, amount to ￦1,100,610 million and ￦997,519 million, respectively. The Group recognize the carrying amount of the trade notes and accounts receivable continuously due to the fact that the risks and rewards were not transferred sub- stantially, and cash and cash equivalents received as consideration for the transfer are recognized as short-term borrowings. (4) The changes in allowance for doubtful accounts for the years ended December 31, 2014 and 2013, are as follows: Financial assets at fair value through profit or loss (“FVTPL”) ￦ 14,853,071 ￦ 4,652 ￦ 447,300 Derivative assets that are effective hedging instruments AFS financial assets Loans 13,373 1,950 16,040 25,629 2,264,116 225,722 7,558 21,363 31,600 1 0 8 / 1 0 9 ￦ 1,592 19,138 2,494,033 217,121 ￦ 14,884,434 ￦ 2,520,119 ￦ 507,821 ￦ 2,731,884 ￦ 3,722,109 ￦ 1,039,157 ￦ 3,118,386 ￦ 1,127,839 Description Beginning of the year Impairment loss Write-off Effect of foreign exchange differences End of the year 2014 ￦ 45,934 16,548 (2,757) (1,019) ￦ 58,706 In millions of Korean Won 2013 ￦ 29,543 14,959 (539) 1,971 ￦ 45,934 (2) AFS financial assets that are measured at fair value as of December 31, 2014 and 2013, consist of the following: December 31, 2014 December 31, 2013 In millions of Korean Won Description Debt instruments Equity instruments Acquisition cost Valuation difference Book value ￦ 154,945 1,460,735 ￦ 4,402 645,984 ￦ 159,347 2,106,719 ￦ 1,615,680 ￦ 650,386 ￦ 2,266,066 Book value ￦ 124,240 2,391,156 ￦ 2,515,396 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) Equity instruments classified into AFS financial assets as of December 31, 2014 and 2013, consist of the following: 6. INVENTORIES: In millions of Korean Won December 31, 2014 December 31, 2013 Inventories as of December 31, 2014 and 2013, consist of the following: Name of the company Hyundai Steel Co., Ltd. Hyundai Glovis Co., Ltd. Korea Aerospace Industries, Co., Ltd. Hyundai Heavy Industries Co., Ltd. Hyundai Oil Refinery Co., Ltd. Hyundai Green Food Co., Ltd. Hyundai Development Company Hyundai Finance Corporation KT Corporation NICE Holdings Co., Ltd. Doosan Capital Co., Ltd. Hyundai Merchant Marine Co., Ltd. NICE Information Service Co., Ltd. Ubivelox Co., Ltd. Hyundai Asan Corporation Nesscap, Inc. Others Ownership percentage Acquisition cost Valuation difference Book value 7.87% 4.88% 10.00% 2.88% 4.35% 2.36% 0.60% 9.29% 0.09% 1.30% 7.14% 0.38% 2.25% 5.15% 1.88% 4.47% ￦ 791,681 ￦ (209,158) ￦ 582,523 210,688 151,086 56,924 53,734 15,005 9,025 9,888 8,655 3,491 10,000 9,161 3,312 1,710 22,500 1,997 101,878 323,031 236,865 194,926 84,555 28,726 8,390 477 (1,152) 4,006 (2,744) (2,231) 3,149 2,360 (20,383) (798) (4,035) 533,719 387,951 251,850 138,289 43,731 17,415 10,365 7,503 7,497 7,256 6,930 6,461 4,070 2,117 1,199 97,843 Book value ￦ 791,681 422,947 282,678 562,830 145,523 38,769 10,440 10,666 7,575 5,801 10,348 7,900 4,180 4,585 2,117 1,104 82,012 ￦ 1,460,735 ￦ 645,984 ￦ 2,106,719 ￦ 2,391,156 As of December 31, 2014, the valuation difference between the book value and the acquisition cost of AFS equity instruments in- cludes the cumulative impairment loss of ￦24,968 million. Description Finished goods Merchandise Semi-finished goods Work in progress Raw materials Supplies Materials in transit Others Total (*) In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 4,178,587 ￦ 3,771,488 108,428 428,282 360,888 1,232,731 236,715 437,564 434,044 105,385 434,834 410,024 1,138,616 204,657 540,666 467,446 ￦ 7,417,239 ￦ 7,073,116 (*) As of December 31, 2014 and 2013, valuation allowance in amount of ￦69,434 million and ￦81,145 million, respectively, is included. 7. OTHER ASSETS: Other assets as of December 31, 2014 and 2013, consist of the following: Description Accrued income Advanced payments Prepaid expenses Prepaid value added tax and others December 31, 2014 December 31, 2013 In millions of Korean Won Current Non-current Current Non-current ￦ 424,478 ￦ 10,003 ￦ 362,854 ￦ 498 568,905 295,665 284,647 - 201,836 22,814 700,542 291,282 313,258 - 90,589 63,813 ￦ 1,573,695 ￦ 234,653 ￦ 1,667,936 ￦ 154,900 1 1 0 / 1 1 1 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 8. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE: (2) The changes in property, plant and equipment (“PP&E”) for the year ended December 31, 2014, are as follows: Non-current assets classified as held for sale as of December 31, 2014 and 2013, consist of the following: Description Land Buildings Vehicles In millions of Korean Won December 31, 2014 December 31, 2013 ￦ - - 47,643 ￦ 47,643 ￦ 13,676 8,671 - ￦ 22,347 The Group recognized a gain (other income) on disposals of ￦17,153 million and a loss (other expenses) on disposals of ￦244 million as land and buildings, which were classified as non-current assets held for sale as of December 31, 2013, were disposed of during the year ended December 31, 2014. The Group has been committed to a plan to sell vehicles that were classified as held for sale as of December 31, 2014 and an active programme to complete the plan has been initiated. The assets will be disposed within 12 months. No impairment loss on the non-cur- rent assets classified as held for sale is recognized for the year ended December 31, 2014. 9. PROPERTY, PLANT AND EQUIPMENT: (1) Property, plant and equipment as of December 31, 2014 and 2013, consist of the following: December 31, 2014 In millions of Korean Won December 31, 2013 Description Land Buildings Structures Acquisition cost Accumulated depreciation(*) Book value Acquisition cost Accumulated depreciation(*) Book value ￦ 5,801,178 ￦ - ￦ 5,801,178 ￦ 5,770,486 ￦ - ￦ 5,770,486 7,443,871 1,066,962 (2,206,379) 5,237,492 (469,523) 597,439 6,686,495 1,037,122 (1,991,035) 4,695,460 (448,432) 588,690 Machinery and equipment 13,019,812 (6,813,475) 6,206,337 12,243,086 (6,221,320) 6,021,766 Vehicles Dies, molds and tools Office equipment Others 283,659 6,689,376 1,484,990 57,986 (123,080) 160,579 (4,977,928) 1,711,448 (1,058,838) (28,790) 426,152 29,196 283,518 5,997,667 1,329,759 50,024 (133,686) 149,832 (4,568,511) 1,429,156 (967,490) (19,388) 362,269 30,636 Construction in progress 2,372,438 - 2,372,438 2,414,292 - 2,414,292 ￦ 38,220,272 ￦ (15,678,013) ￦ 22,542,259 ￦ 35,812,449 ￦ (14,349,862) ￦ 21,462,587 (*) Accumulated impairment is included. Description Land Buildings Structures 4,695,460 588,690 Machinery and equipment 6,021,766 Vehicles 149,832 Dies, molds and tools 1,429,156 Office equipment Others 362,269 30,636 Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Others (*) End of the year ￦ 5,770,486 ￦ 16,234 ￦ 18,404 ￦ (150) ￦ - ￦ (3,796) ￦ 5,801,178 In millions of Korean Won 11,752 13,825 12,398 38,323 12,565 54,447 5,996 889,295 91,233 1,113,839 91,388 865,295 161,101 1,038 (517) (219,615) (138,883) 5,237,492 (3,665) (31,876) (26,172) (4,879) (1,234) (187) (820) (54,307) (38,337) 597,439 (796,113) (113,677) 6,206,337 (36,229) (56,563) 160,579 (559,748) (158,224) (8,436) (30,941) 1,711,448 7,793 149 426,152 29,196 - 13,421 2,372,438 Construction in progress 2,414,292 3,177,138 (3,231,593) ￦ 21,462,587 ￦ 3,342,678 ￦ - ￦ (69,500) ￦ (1,832,672) ￦ (360,834) ￦ 22,542,259 (*) Others include the effect of foreign exchange differences and transfers from or to other accounts. The changes in PP&E for the year ended December 31, 2013, were as follows: In millions of Korean Won Description Land Buildings Structures 4,587,496 544,473 Machinery and equipment 5,833,154 Vehicles 181,964 Dies, molds and tools 1,485,672 Office equipment Others 371,028 34,293 Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Others (*) End of the year ￦ 5,799,466 ￦ 3,590 ￦ 39,145 ￦ (53,866) ￦ - ￦ (17,849) ￦ 5,770,486 47,711 13,554 21,627 24,995 8,476 64,387 3,120 400,638 (54,997) (207,201) (78,187) 4,695,460 88,904 1,146,144 20,096 488,754 76,365 1,623 (4,866) (75,089) (11,866) (5,510) (5,319) (569) (52,226) (1,149) 588,690 (789,330) (114,740) 6,021,766 (37,775) (27,582) 149,832 (519,678) (144,820) (7,797) (28,558) 1,429,156 628 (34) 362,269 30,636 1 1 2 / 1 1 3 Construction in progress 1,902,312 2,892,321 (2,261,669) (24,026) - (94,646) 2,414,292 ￦ 20,739,858 ￦ 3,079,781 ￦ - ￦ (236,108) ￦ (1,758,827) ￦ (362,117) ￦ 21,462,587 (*) Others include the effect of foreign exchange differences and transfers from or to other accounts. (3) The Group has entered into a real estate purchase contract with the Korea Electric Power Corporation for the year ended December 31, 2014 and the amount of the contractual commitment for acquisition of the real estate is ￦5,802,500 million. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 10. INVESTMENT PROPERTY: (3) The fair value of investment property as of December 31, 2014 and 2013, consist of the following: (1) Investment property as of December 31, 2014 and 2013, consist of the following: December 31, 2014 In millions of Korean Won December 31, 2013 Description Land Buildings Structures Acquisition cost ￦ 63,406 398,626 18,630 Accumulated depreciation Book value Acquisition cost Accumulated depreciation Book value ￦ - ￦ 63,406 ￦ 62,467 ￦ - ￦ 62,467 (153,193) (5,262) 245,433 13,368 320,904 18,630 (133,163) (4,854) 187,741 13,776 ￦ 480,662 ￦ (158,455) ￦ 322,207 ￦ 402,001 ￦ (138,017) ￦ 263,984 Description Land Buildings Structures In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 64,783 436,271 15,514 ￦ 516,568 ￦ 62,467 351,992 15,496 ￦ 429,955 On January 1, 2010, the K-IFRS transition date, the Group remeasured the fair value of its investment property through an indepen- dent third party. As of December 31, 2014, no fair value remeasurement of investment property was performed, as the change in fair value is considered not to be material. The fair value of the investment property is classified as Level 3, based on the inputs used in the valuation techniques. The fair value (2) The changes in investment property for the year ended December 31, 2014, are as follows: has been determined based on the cost approach and the market approach. The cost approach measured fair value as current re- In millions of Korean Won placement cost considering supplementary installation, depreciation period, structure and design. Description Beginning of the year Transfers Disposals Depreciation Land Buildings Structures ￦ 62,467 ￦ 3,617 ￦ (2,836) 187,741 13,776 67,373 - - - ￦ - (10,722) (408) Effect of foreign exchange differences ￦ 158 1,041 - End of the year ￦ 63,406 245,433 13,368 ￦ 263,984 ￦ 70,990 ￦ (2,836) ￦ (11,130) ￦ 1,199 ￦ 322,207 Description Rental income Operating and maintenance expenses The changes in investment property for the year ended December 31, 2013, were as follows: In millions of Korean Won 11. INTANGIBLE ASSETS: (4) Income and expenses related to investment property for the years ended December 31, 2014 and 2013, are as follows: In millions of Korean Won 2014 ￦ 42,499 19,433 2013 ￦ 35,495 13,632 1 1 4 / 1 1 5 Description Beginning of the year Transfers Disposals Depreciation Land Buildings Structures ￦ 62,874 ￦ 175 ￦ (582) 206,023 (9,666) 13,935 248 - - ￦ - (9,751) (407) Effect of foreign exchange differences ￦ - 1,135 - End of the year ￦ 62,467 187,741 13,776 ￦ 282,832 ￦ (9,243) ￦ (582) ￦ (10,158) ￦ 1,135 ￦ 263,984 (1) Intangible assets as of December 31, 2014 and 2013, consist of the following: December 31, 2014 In millions of Korean Won December 31, 2013 Description Goodwill Acquisition cost Accumulated amortization(*) Book value Acquisition cost Accumulated amortization(*) Book value ￦ 288,882 ￦ (2,404) ￦ 286,478 ￦ 301,798 ￦ (2,446) ￦ 299,352 Development costs 6,070,412 (3,515,429) 2,554,983 5,426,534 (3,480,977) 1,945,557 Industrial property rights Software Others Construction in progress 169,976 684,882 488,116 278,381 (80,014) (369,901) (174,231) (17,014) 89,962 314,981 313,885 261,367 123,244 536,674 440,613 274,490 (78,877) (263,253) (148,710) - 44,367 273,421 291,903 274,490 ￦ 7,980,649 ￦ (4,158,993) ￦ 3,821,656 ￦ 7,103,353 ￦ (3,974,263) ￦ 3,129,090 (*) Accumulated impairment is included. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (2) The changes in intangible assets for the year ended December 31, 2014, are as follows: (3) Research and development expenditures for the years ended December 31, 2014 and 2013, are as follows: Description Beginning of the year Internal developments and separate acquisitions Transfers within intangible assets Disposals Amortization Impairment loss Others (*) End of the year Goodwill ￦ 299,352 ￦ - ￦ - ￦ - ￦ - ￦ (1,429) ￦ (11,445) ￦ 286,478 Description Development costs (*) Research and development (manufacturing cost and administrative expenses) In millions of Korean Won 2014 ￦ 1,117,115 1,011,789 ￦ 2,128,904 In millions of Korean Won 2013 ￦ 781,694 1,067,350 ￦ 1,849,044 Development costs Industrial property rights Software Others Construction in progress 1,945,557 1,117,115 33,377 (4,386) (564,905) (9,391) 37,616 2,554,983 (*) Amortization of development costs is not included. 44,367 40,605 16,141 - (9,571) 273,421 291,903 14,811 6,977 45,800 27,749 (124) (103,560) (3,305) (28,059) (358) - - (1,580) 89,962 84,633 18,978 314,981 313,885 (4) Impairment test of goodwill The allocation of goodwill amongst the Group’s cash-generating units as of December 31, 2014 and 2013, is as follows: 274,490 173,962 (123,067) - - (17,418) (46,600) 261,367 ￦ 3,129,090 ￦ 1,353,470 ￦ - ￦ (7,815) ￦ (706,095) ￦ (28,596) ￦ 81,602 ￦ 3,821,656 (*) Others include the effect of foreign exchange differences and transfer from or to other accounts. The changes in intangible assets for the year ended December 31, 2013, were as follows: In millions of Korean Won Description Beginning of the year Internal developments and separate acquisitions Transfers within intangible assets Disposals Amortization Impairment loss Others (*) End of the year Goodwill ￦ 301,011 ￦ - ￦ - ￦ - ￦ - ￦ - ￦ (1,659) ￦ 299,352 Description Vehicle Finance Others In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 186,026 ￦ 197,471 482 99,970 1,911 99,970 ￦ 286,478 ￦ 299,352 The recoverable amounts of the Group’s CGUs are measured at their value-in-use calculated based on cash flow projections of fi- nancial budgets for the next five years approved by management and the pre-tax discount rate applied to the cash flow projections is 14.0%. Cash flow projections beyond the next five-year period are extrapolated by using the estimated growth rate which does not exceed the long-term average growth rate of the region and industry to which the CGU belongs. An impairment loss has been recognized for the Finance CGU in the amount of ￦1,429 million for the year ended December 31, 2014. No impairment loss had been 1 1 6 / 1 1 7 Development costs Industrial property rights Software Others Construction in progress 1,854,606 781,694 5,060 (15,198) (658,684) (27,250) 5,329 1,945,557 recognized for the year ended December 31, 2013. 32,441 5,553 12,696 - (7,220) 230,673 315,867 34,650 1,518 30,826 12,522 (319) (2,282) (84,814) (31,635) - - (911) 897 44,367 62,405 (3,176) 273,421 291,903 148,620 196,495 (61,104) - - - (9,521) 274,490 ￦ 2,883,218 ￦ 1,019,910 ￦ - ￦ (17,799) ￦ (782,353) ￦ (28,161) ￦ 54,275 ￦ 3,129,090 (*) Others include the effect of foreign exchange differences and transfer from or to other accounts. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 12. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: (1) Investments in joint ventures and associates as of December 31, 2014, consist of the following: Investments in joint ventures and associates as of December 31, 2013, consisted of the following: In millions of Korean Won In millions of Korean Won Name of the company Beijing-Hyundai Motor Company (BHMC) (*1) Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Nature of the business Manufacturing Financing Hyundai WIA Automotive Engine (Shandong) Company (WAE) Manufacturing Hyundai Motor Group China, Ltd. (HMGC) (*1) Sichuan Hyundai Motor Company (CHMC) (*1) Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. Investment Manufacturing Manufacturing Construction Manufacturing Manufacturing Manufacturing Manufacturing HMC Investment Securities Co., Ltd. Securities brokerage Hyundai Commercial Inc. Eukor Car Carriers Inc. (*2) Others Financing Transportation Location Ownership Percentage China China China China China Korea Korea Korea Korea Korea Korea Korea Korea Korea 50.00% 53.00% 22.00% 50.00% 50.00% 33.88% 20.95% 25.35% 37.58% 29.37% 47.27% 27.49% 50.00% 12.00% Book value ￦ 2,179,636 193,624 164,090 158,287 155,573 7,482,972 3,130,886 707,713 380,815 302,058 289,369 225,332 196,471 170,132 420,376 ￦ 16,157,334 Name of the company Beijing-Hyundai Motor Company (BHMC) (*1) Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Nature of the business Manufacturing Financing Hyundai WIA Automotive Engine (Shandong) Company (WAE) Manufacturing Hyundai Motor Group China, Ltd. (HMGC) (*1) Sichuan Hyundai Motor Company (CHMC) (*1) Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. Investment Manufacturing Manufacturing Construction Manufacturing Manufacturing Manufacturing Manufacturing HMC Investment Securities Co., Ltd. Securities brokerage Hyundai Commercial Inc. Eukor Car Carriers Inc. (*2) Others(*3) Financing Transportation Location Ownership Percentage China China China China China Korea Korea Korea Korea Korea Korea Korea Korea Korea 50.00% 53.00% 22.00% 50.00% 50.00% 33.88% 20.95% 26.79% 37.58% 29.37% 47.27% 26.27% 50.00% 12.00% Book value ￦ 2,026,337 88,760 129,783 153,823 132,014 6,748,127 3,050,804 600,284 335,227 236,732 270,535 217,218 125,806 148,866 430,679 ￦ 14,694,995 (*1) Each of the joint arrangements in which the Group retains joint control is structured through a separate entity and there are no contractual terms according to which the (*1) Each of the joint arrangements in which the Group retained joint control was structured through a separate entity and there were no contractual terms according to which parties retain rights to the assets and obligations for the liabilities relating to the joint arrangement or other relevant facts and circumstances. As a result, the Group considers the parties retained rights to the assets and obligations for the liabilities relating to the joint arrangement or other relevant facts and circumstances. As a result, the Group that the parties that retain joint control in the arrangement have rights to the net assets and classifies the joint arrangements as joint ventures. Also, there are restrictions considered that the parties that retained joint control in the arrangement had rights to the net assets and classified the joint arrangements as joint ventures. Also, there are which require consent from the director who is designated by the other investors, for certain transactions such as payment of dividend. restrictions which require consent from the director who is designated by the other investors, for certain transactions such as payment of dividends. (*2) As the Group is considered to be able to exercise significant influence by representation on the board of directors of the investee and other reasons, although the total (*2) As the Group was considered to be able to exercise significant influence by representation on the board of directors of the investee and other reasons, although the total ownership percentage is less than 20%, the investment is accounted for using the equity method. ownership percentage was less than 20%, the investment was accounted for using the equity method. (*3) As of December 31, 2014, the entity is categorized as a joint venture although the Group’s total ownership percentage is a majority share of 53%, because the Group does not (*3) As of December 31, 2013, the entity was categorized as a joint venture although the Group’s total ownership percentage was a majority share of 53%, because the Group did have control over the entity by virtue of an agreement with the other investors. not have control over the entity by virtue of an agreement with the other investors. 1 1 8 / 1 1 9 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (2) The changes in investments in joint ventures and associates for the year ended December 31, 2014, are as follows: The changes in investments in joint ventures and associates for the year ended December 31, 2013, were as follows: In millions of Korean Won In millions of Korean Won Name of the company Beginning of the year Acquisitions / (disposals) Share of profits for the year Dividends Others (*) End of the year Name of the company Beginning of the year Acquisitions / (disposals) Share of profits for the year Dividends Others (*) End of the year BHMC BHAF WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd. Hyundai Commercial Inc. Eukor Car Carriers Inc. Others ￦ 2,026,337 88,760 129,783 153,823 132,014 6,748,127 3,050,804 600,284 335,227 236,732 270,535 217,218 125,806 148,866 430,679 ￦ - 94,340 - - 25,557 - - - - - - 3,636 - - (10,482) ￦ 963,152 ￦ (815,497) ￦ 5,644 ￦ 2,179,636 9,443 31,205 28,462 (4,858) 984,600 - - (25,590) - 1,081 3,102 1,592 2,860 (96,123) (153,632) 50,750 (11,664) 40,996 109,398 (3,447) 45,459 49,328 21,156 4,381 11,745 23,307 75,451 - (2,010) - - (5,650) (7,920) (27,172) (48,100) 1,478 129 18,008 (2,322) 97 64,570 5,879 193,624 164,090 158,287 155,573 7,482,972 3,130,886 707,713 380,815 302,058 289,369 225,332 196,471 170,132 420,376 BHMC WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd. Hyundai Commercial Inc. Eukor Car Carriers Inc. Others ￦ 1,657,185 107,253 103,450 77,346 5,638,238 3,023,813 484,518 299,075 615,271 233,660 217,187 121,597 127,881 411,257 - - 17,432 56,592 - - - - (483,681) - - - - 55,559 ￦ 966,555 ￦ (622,500) ￦ 25,097 ￦ 2,026,337 28,524 31,948 (665) 1,249,062 62,243 110,947 34,434 102,489 44,005 2,517 11,932 31,336 73,320 (7,070) - - (89,257) (11,664) (3,447) - (5,889) - (1,156) - (8,044) (22,659) 1,076 993 (1,259) (49,916) (23,588) 8,266 1,718 8,542 (7,130) (1,330) (7,723) (2,307) 1,962 129,783 153,823 132,014 6,748,127 3,050,804 600,284 335,227 236,732 270,535 217,218 125,806 148,866 519,439 ￦ 13,117,731 ￦ (354,098) ￦ 2,748,647 ￦ (771,686) ￦ (45,599) ￦ 14,694,995 (*) Others consist of changes in accumulated other comprehensive income, changes in ownership percentage, impairment loss on investments in associates and others. ￦ 14,694,995 ￦ 113,051 ￦ 2,402,979 ￦ (995,073) ￦ (58,618) ￦ 16,157,334 (*) Others consist of changes in accumulated other comprehensive income, changes in ownership percentage and others. 1 2 0 / 1 2 1 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) Condensed financial information of the Group’s major joint ventures and associates as of and for the year ended December Condensed financial information of the Group’s major joint ventures and associates as of and for the year ended December 31, 31, 2014, is as follows: Name of the company BHMC BHAF (*) WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd. (*) Hyundai Commercial Inc. (*) Eukor Car Carriers Inc. Current assets ￦ 8,017,912 2,313,511 810,860 408,159 474,710 16,655,401 13,642,088 3,452,727 815,573 1,736,275 1,078,838 5,592,617 4,778,907 503,455 In millions of Korean Won Non-current assets ￦ 2,822,478 Current liabilities ￦ 6,104,511 Non-current liabilities ￦ 330,032 - 1,948,183 - 882,572 302,466 575,607 396,641 244,695 239,165 24,388,801 11,974,338 4,797,605 2,484,590 1,305,272 805,183 780,341 - - 2,541,803 8,256,605 1,830,980 752,801 1,032,851 662,110 4,918,694 4,284,158 316,999 554,056 127,834 500,007 6,585,999 3,216,775 1,257,464 340,814 576,592 589,631 - - 1,312,677 Name of the company Sales In millions of Korean Won Profit for the year from continuing operations Profit for the year from discontinued operations Other comprehensive Income (expense) Total comprehensive income ￦ 19,755,886 ￦ 1,925,153 ￦ - ￦ - ￦ 1,925,153 BHMC BHAF (*) WAE HMGC CHMC 181,756 1,778,572 1,543,128 362,750 17,817 138,819 59,947 (9,716) Kia Motors Corporation 47,097,049 2,993,593 Hyundai Engineering & Construction Co., Ltd. 17,386,959 Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd. (*) Hyundai Commercial Inc. (*) 7,595,606 3,253,110 4,214,317 2,550,730 515,456 350,831 586,697 439,189 103,744 164,826 31,068 6,610 24,711 Eukor Car Carriers Inc 2,487,114 196,984 - - - - - - - - - - - - - - - - - (416,539) (23,108) 6,214 104 (47,635) (6,687) 317 19,521 60,726 17,817 138,819 59,947 (9,716) 2,577,054 563,589 445,403 103,848 117,191 24,381 6,927 44,232 257,710 2013, was as follows: Name of the company BHMC WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd (*1,2) Hyundai Commercial Inc. (*2) Eukor Car Carriers Inc. Current assets ￦ 6,724,971 663,359 386,643 285,878 13,472,386 11,108,964 2,769,033 841,587 1,470,314 867,798 4,552,120 4,154,667 563,589 Non-current assets ￦ 2,579,744 774,846 90,778 408,432 Current liabilities ￦ 5,109,071 303,861 151,274 351,942 22,709,654 10,806,238 3,624,248 2,091,422 1,240,856 787,872 775,516 - - 1,984,373 6,905,974 1,535,457 785,041 1,111,124 578,069 3,885,124 3,800,298 341,512 In millions of Korean Won Non-current liabilities ￦ 95,244 544,423 - 78,341 5,121,007 2,624,163 1,013,737 374,060 444,852 482,460 - - 1,194,435 Name of the company Sales In millions of Korean Won Profit for the year from continuing operations Profit for the year from discontinued operations Other comprehensive Income (expense) Total comprehensive income 1 2 2 / 1 2 3 ￦ 19,432,536 ￦ 1,937,099 ￦ - ￦ - ￦ 1,937,099 BHMC WAE HMGC CHMC 1,599,574 1,830,188 435,110 125,285 66,577 1,273 Kia Motors Corporation 47,597,897 3,817,059 Hyundai Engineering & Construction Co., Ltd. 13,938,287 Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd (*1,2) Hyundai Commercial Inc. (*2) 7,091,994 3,273,053 4,046,137 2,185,540 750,633 346,231 569,644 425,007 97,851 53,597 84,835 2,096 36,617 Eukor Car Carriers Inc. 2,598,281 255,829 - - - - - - - 1,555,167 - - - - - - - (147,086) (102,351) 17,000 4,318 (2,849) 3,036 (5,062) (15,387) (14,770) 125,285 66,577 1,273 3,669,973 467,293 442,007 102,169 1,605,915 87,871 (2,966) 21,230 241,059 (*1) Although the closing date of the fiscal year of HMC Investment Securities Co., Ltd. is March, 31, the financial statements, used for applying the equity method, are prepared for the same reporting periods as the Company’s. (*2) Operating finance business of which total assets (liabilities) are included in current assets (liabilities) as they do not distinguish current and non-current portion in their separate (*) Operating finance business of which total assets (liabilities) are included in current assets (liabilities) as they do not distinguish current and non-current portion in their financial statements. separate financial statements. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (4) Condensed additional financial information of the Group’s major joint ventures as of and for the year ended (6) Reconciliation of the Group’s share of net assets of the Group’s major joint ventures and associates to their carrying December 31, 2014, is as follows: amounts as of December 31, 2014, is as follows: In millions of Korean Won In millions of Korean Won Name of the company BHMC BHAF (*) HMGC CHMC Cash and cash equivalents ￦ 867,555 279,486 44,836 196,076 Current financial liabilities Non-current financial liabilities Depreciation and amortization Interest income Interest expenses Income tax expense ￦ - ￦ 247,534 ￦ 290,920 ￦ 29,076 ￦ 54,141 ￦ 641,753 1,948,183 49,153 44,285 - 127,834 500,007 1,278 4,369 4,049 177,122 1,146 2,492 84,809 6,912 7,210 5,973 16,832 - (*) Operating finance business of which total assets (liabilities) are included in current financial liabilities as BHAF does not distinguish current and non-current portion in separate financial statements. Condensed additional financial information of the Group’s major joint ventures as of and for the year ended December 31, 2013, Name of the company BHMC BHAF WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd (*) Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. Hyundai Commercial Inc. Eukor Car Carriers Inc. Group’s share of net assets ￦ 2,202,923 Goodwill ￦ - Unrealized loss and others Carrying amounts ￦ (23,287) ￦ 2,179,636 193,624 164,090 169,048 155,573 7,328,393 1,993,529 710,123 386,574 275,529 290,812 185,280 196,471 169,870 - - - - 197,089 1,137,357 - - 27,172 - 40,052 - - - - (10,761) - (42,510) - (2,410) (5,759) (643) (1,443) - - 262 193,624 164,090 158,287 155,573 7,482,972 3,130,886 707,713 380,815 302,058 289,369 225,332 196,471 170,132 was as follows: Name of the company BHMC HMGC CHMC Cash and cash equivalents ￦ 573,257 136,091 73,834 In millions of Korean Won HMC Investment Securities Co., Ltd. Current financial liabilities Non-current financial liabilities Depreciation and amortization Interest income Interest expenses Income tax expense ￦ - - - 88,192 78,341 ￦ - ￦ 282,461 ￦ 15,426 ￦ 42,012 ￦ 645,700 assets. (*) The difference between the carrying amount and the fair value of the investee’s identifiable assets and liabilities as of the acquisition date, is included in the amount of net 5,191 6,488 4,069 2,505 4,276 746 19,167 1,135 Reconciliation of the Group’s share of net assets of the Group’s major joint ventures and associates to their carrying amounts as of December 31, 2013, was as follows: In millions of Korean Won 1 2 4 / 1 2 5 (5) The aggregate amounts of the Group’s share of the joint ventures’ and associates’, that are not individually material, profit and comprehensive income for the years ended December 31, 2014 and 2013, are as follows: In millions of Korean Won Name of the company Description Profit for the year Other comprehensive income Total comprehensive income December 31, 2014 December 31, 2013 ￦ 75,451 890 ￦ 76,341 ￦ 73,320 1,498 ￦ 74,818 BHMC WAE HMGC CHMC Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd (*) Hyundai WIA Corporation Hyundai Powertech Co., Ltd. Hyundai HYSCO Co., Ltd. Hyundai Dymos Inc. HMC Investment Securities Co., Ltd. Hyundai Commercial Inc. Eukor Car Carriers Inc. Group’s share of net assets Goodwill Unrealized loss and others Carrying amounts ￦ 2,050,200 ￦ - ￦ (23,863) ￦ 2,026,337 129,783 163,074 132,014 6,605,359 1,913,447 604,486 345,223 210,104 272,312 177,166 125,806 148,604 - - - 197,089 1,137,357 - - 27,172 - 40,052 - - - (9,251) - (54,321) - (4,202) (9,996) (544) (1,777) - - 262 129,783 153,823 132,014 6,748,127 3,050,804 600,284 335,227 236,732 270,535 217,218 125,806 148,866 (*) The difference between the carrying amount and the fair value of the investee’s identifiable assets and liabilities as of the acquisition date, is included in the amount of net assets. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (7) The market price of listed equity securities as of December 31, 2014, is as follows: (4) The changes in allowance for doubtful accounts of financial services receivables for the years ended December 31, 2014 and In millions of Korean Won, except price per share 2013, are as follows: Name of the company Kia Motors Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai HYSCO Co., Ltd. HMC Investment Securities Co., Ltd. Price per share Total number of shares ￦ 52,300 ￦ 137,318,251 42,100 176,000 72,700 10,150 23,327,400 6,893,596 6,698,537 8,065,595 Market value ￦ 7,181,745 982,084 1,213,273 486,984 81,866 13. FINANCIAL SERVICES RECEIVABLES: Description Beginning of the year Impairment loss Write-off Effect of foreign exchange differences Disposals and others End of the year In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 823,408 629,261 (527,556) 6,706 (86,253) ￦ 845,566 ￦ 749,166 669,339 (474,001) (2,761) (118,335) ￦ 823,408 (1) Financial services receivables as of December 31, 2014 and 2013, consist of the following: (5) Gross investments in financial leases and their present value of minimum lease receipts as of December 31, 2014 and 2013, In millions of Korean Won are as follows: Description Loans Card receivables Financial lease receivables Others Allowance for doubtful accounts Loan origination fee Present value discount accounts December 31, 2014 December 31, 2013 ￦ 31,464,943 ￦ 29,078,336 10,601,341 2,730,188 16,755 44,813,227 (845,566) 35,682 (8,755) 9,806,136 3,038,540 11,348 41,934,360 (823,408) (89,881) (7,464) ￦ 43,994,588 ￦ 41,013,607 December 31, 2014 In millions of Korean Won December 31, 2013 Description Not later than one year Gross investments in financial leases Present value of minimum lease receipts Gross investments in financial leases Present value of minimum lease receipts ￦ 1,284,279 ￦ 1,117,016 ￦ 1,453,668 ￦ 1,257,942 Later than one year and not later than five years 1,743,890 1,609,391 1,944,394 1,776,643 Later than five years 229 227 172 171 ￦ 3,028,398 ￦ 2,726,634 ￦ 3,398,234 ￦ 3,034,756 1 2 6 / 1 2 7 (6) Unearned interest income of financial leases as of December 31, 2014 and 2013, is as follows: (2) Aging analysis of financial services receivables As of December 31, 2014 and 2013, total financial services receivables that are past due but not impaired are ￦1,751,712 million and Gross investments in financial lease Description ￦1,288,443 million, respectively; all of them are past due less than 90 days. As of December 31, 2014 and 2013, the impaired financial services receivables amount to ￦513,128 million and ￦530,638 million, respectively. Net lease investments: Present value of minimum lease receipts Present value of unguaranteed residual value In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 3,028,398 ￦ 3,398,234 2,726,634 3,554 2,730,188 3,034,756 3,784 3,038,540 Unearned interest income ￦ 298,210 ￦ 359,694 (3) Transferred financial services receivables that are not derecognized As of December 31, 2014 and 2013, the Group issued asset backed securities, which have recourse to the underlying assets, based on loans, card receivables and others. As of December 31, 2014, the carrying amounts and fair values of the transferred financial assets that are not derecognized are ￦15,046,062 million and ￦15,220,978 million, respectively, the carrying amounts and fair values of the associated liabilities are ￦10,962,648 million and ￦10,927,013 million, respectively, and the net position is ￦4,293,965 million. As of December 31, 2013, the carrying amounts and fair values of the transferred financial assets that were not derecognized were ￦14,802,187 million and ￦14,709,639 million, respectively, the carrying amounts and fair values of the associated liabilities were ￦10,934,023 million and ￦11,101,945 million, respectively, and the net position was ￦3,607,694 million. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 14. OPERATING LEASE ASSETS: (2) Long-term debt as of December 31, 2014 and 2013, consists of the following: (1) Operating lease assets as of December 31, 2014 and 2013, consist of the following: Description Acquisition cost Accumulated depreciation Accumulated impairment loss In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 15,136,720 ￦ 12,030,614 (1,804,291) (66,813) (1,388,421) (77,317) ￦ 13,265,616 ￦ 10,564,876 (2) Future minimum lease receipts related to operating lease assets as of December 31, 2014 and 2013, are as follows: Description Not later than one year Later than one year and not later than five years Later than five years In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 2,474,411 2,674,220 - ￦ 2,018,610 2,270,798 1 ￦ 5,148,631 ￦ 4,289,409 Description General loans Facility loan Lender Shinhan Bank and others Korea Development Bank and others Commercial paper Hana Daetoo Security Asset-backed securities JP Morgan and others Others Woori Bank and others Annual interest rate (%) December 31, 2014 0.37~9.54 1.00~5.85 3.13~3.17 0.46~0.71 0.10~2.00 Less: present value discounts Less: current maturities In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 3,283,340 ￦ 3,127,981 383,072 524,530 73,000 5,607,169 239,260 9,585,841 125,375 2,030,037 233,000 3,535,460 238,899 7,659,870 134,025 2,859,815 ￦ 7,430,429 ￦ 4,666,030 (3) Debentures as of December 31, 2014 and 2013, consist of the following: In millions of Korean Won Description Latest maturity date Annual interest rate (%) December 31, 2014 December 31, 2014 December 31, 2013 Guaranteed public debentures June 8, 2017 3.75~4.50 ￦ 1,648,312 ￦ 1,583,399 15. BORROWINGS AND DEBENTURES: (1) Short-term borrowings as of December 31, 2014 and 2013, consist of the following: In millions of Korean Won Non-guaranteed private debentures February 6, 2019 Asset-backed securities December 15, 2020 Guaranteed private debentures April 25, 2015 Non-guaranteed public debentures April 29, 2021 5.68 2.08~7.20 1.45~3.63 0.18~6.52 Description Overdrafts Lender Citi Bank and others General loans Kookmin Bank and others Loans on trade receivables collateral Korea Exchange Bank and others Annual interest rate (%) December 31, 2014 0.40~3.63 0.34~9.54 LIBOR+0.23~0.40 Banker’s Usance Kookmin Bank and others LIBOR+0.31~0.40 Short-term debentures Commercial paper Shinhan Bank and others Asset-backed securities HSBC 2.27 0.27~2.64 December 31, 2014 December 31, 2013 ￦ 189,121 3,274,955 1,100,610 433,510 19,997 1,827,727 - ￦ 211,603 2,468,175 997,519 439,579 - 747,375 428,547 ￦ 6,845,920 ￦ 5,292,798 Less: discount on debentures Less: current maturities 82,440 21,247,129 4,079,019 10,976,262 38,033,162 81,616 7,649,461 1 2 8 / 1 2 9 79,148 20,298,628 2,383,997 10,891,176 35,236,348 88,129 5,825,439 ￦ 30,302,085 ￦ 29,322,780 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 16. PROVISIONS: 17. OTHER FINANCIAL LIABILITIES: (1) Provisions as of December 31, 2014 and 2013, consist of the following: Other financial liabilities as of December 31, 2014 and 2013, consist of the following: Description Warranty Other long-term employee benefits Others In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 5,613,785 ￦ 5,871,332 Description 674,397 438,688 624,836 409,751 Financial liabilities at FVTPL Derivative liabilities that are effective hedging instruments ￦ 6,726,870 ￦ 6,905,919 Financial lease liabilities December 31, 2014 December 31, 2013 In millions of Korean Won Current Non-current Current Non-current ￦ 10,139 204,438 8,726 ￦ 192 209,591 745 ￦ 2 134,974 9,093 ￦ 3,061 426,434 10,618 ￦ 223,303 ￦ 210,528 ￦ 144,069 ￦ 440,113 (2) The changes in provisions for the year ended December 31, 2014, are as follows: In millions of Korean Won 18. OTHER LIABILITIES: Description Beginning of the year Charged Utilized Amortization of present value discounts Changes in expected reimbursements by third parties Effect of foreign exchange differences Warranty ￦ 5,871,332 866,416 (1,136,032) 138,039 (86,270) (39,700) Other long-term employee benefits ￦ 624,836 103,242 (53,599) - - (82) Others ￦ 409,751 189,247 (155,660) 3,555 - (8,205) End of the year ￦ 5,613,785 ￦ 674,397 ￦ 438,688 The changes in provisions for the year ended December 31, 2013, were as follows: Description Beginning of the year Charged Utilized Amortization of present value discounts Changes in expected reimbursements by third parties Effect of foreign exchange differences Warranty ￦ 5,908,719 773,917 (975,612) 142,133 44,819 (22,644) Other long-term employee benefits ￦ 609,589 64,075 (48,834) - - 6 End of the year ￦ 5,871,332 ￦ 624,836 In millions of Korean Won Others ￦ 490,450 100,207 (181,975) 13,268 - (12,199) ￦ 409,751 Other liabilities as of December 31, 2014 and 2013, consist of the following: Description Advances received Withholdings Accrued expenses Unearned income Due to customers for contract work Others December 31, 2014 December 31, 2013 In millions of Korean Won Current Non-current Current Non-current ￦ 412,851 ￦ 87,526 ￦ 250,886 ￦ 48,426 994,554 1,954,263 402,145 290,827 147,329 460,593 1,105,380 491,180 - 1,663,951 640,578 - 763,450 442,495 445,292 91,110 - 458,707 - 611,168 1 3 0 / 1 3 1 ￦ 4,201,969 ￦ 1,952,147 ￦ 3,999,114 ￦ 1,609,481 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 19. FINANCIAL INSTRUMENTS: (2) Categories of financial liabilities as of December 31, 2014, consist of the following: (1) Categories of financial assets as of December 31, 2014, consist of the following: In millions of Korean Won Description Financial assets at FVTPL Loans and receivables AFS financial assets Derivatives designated as hedging instruments Book value Fair value Cash and cash equivalents ￦ - ￦ 7,096,513 ￦ - ￦ - ￦ 7,096,513 ￦ 7,096,513 Short-term and long-term financial instruments Trade notes and accounts receivable Other receivables - - - Other financial assets 14,857,723 Other assets Financial services receivables - - 4,101,550 3,801,626 3,143,926 241,762 434,481 43,994,588 - - - - - - 4,101,550 4,101,550 3,801,626 3,801,626 3,143,926 3,143,926 2,266,066 39,002 17,404,553 17,404,553 - - - - 434,481 434,481 43,994,588 44,292,330 ￦ 14,857,723 ￦ 62,814,446 ￦ 2,266,066 ￦ 39,002 ￦ 79,977,237 ￦ 80,274,979 Categories of financial assets as of December 31, 2013, consisted of the following: In millions of Korean Won Description Financial assets at FVTPL Loans and receivables AFS financial assets Derivatives designated as hedging instruments Book value Fair value Cash and cash equivalents ￦ - ￦ 6,872,430 ￦ - ￦ - ￦ 6,872,430 ￦ 6,872,430 Short-term and long-term financial instruments Trade notes and accounts receivable Other receivables - - - Other financial assets 448,892 Other assets Financial services receivables - - 14,910,783 3,528,654 2,845,387 248,721 363,352 41,013,607 - - - - - - 14,910,783 14,910,783 3,528,654 3,528,654 2,845,387 2,845,387 2,515,396 26,696 3,239,705 3,239,705 - - - - 363,352 363,352 41,013,607 41,566,247 ￦ 448,892 ￦ 69,782,934 ￦ 2,515,396 ￦ 26,696 ￦ 72,773,918 ￦ 73,326,558 In millions of Korean Won Description Trade notes and accounts payable Other payables Borrowings and debentures Other financial liabilities Other liabilities Financial liabilities at FVTPL Financial liabilities carried at amortized cost Derivatives designated as hedging instruments Book value Fair value ￦ - - - 10,331 - ￦ 7,041,529 ￦ - ￦ 7,041,529 ￦ 7,041,529 4,688,812 54,257,932 9,471 1,954,335 - - 4,688,812 4,688,812 54,257,932 55,033,485 414,029 433,831 433,831 - 1,954,335 1,954,335 ￦ 10,331 ￦ 67,952,079 ￦ 414,029 ￦ 68,376,439 ￦ 69,151,992 Categories of financial liabilities as of December 31, 2013, consisted of the following: In millions of Korean Won Financial liabilities at FVTPL Financial liabilities carried at amortized cost Derivatives designated as hedging instruments Book value Fair value ￦ - - - 3,063 - ￦ 6,722,740 ￦ - ￦ 6,722,740 ￦ 6,722,740 4,703,454 47,966,862 19,711 1,664,019 - - 4,703,454 4,703,454 47,966,862 48,636,232 561,408 584,182 584,182 - 1,664,019 1,664,019 ￦ 3,063 ￦ 61,076,786 ￦ 561,408 ￦ 61,641,257 ￦ 62,310,627 1 3 2 / 1 3 3 Description Trade notes and accounts payable Other payables Borrowings and debentures Other financial liabilities Other liabilities (3) Fair value estimation Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Level 1 to Level 3, based on the degree to which the fair value is observable, as described below: ■ Level 1 : Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. ■ Level 2 : Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). ■ Level 3 : Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 Fair value measurements of financial instruments by fair-value hierarchy levels as of December 31, 2014, are as follows: The changes in financial instruments classified as Level 3 for the year ended December 31, 2014, are as follows: In millions of Korean Won In millions of Korean Won Description Financial assets : Level 1 Level 2 Level 3 Total Description Beginning of the year Purchases Disposals Valuation Transfers End of the year AFS financial assets ￦ 229,342 ￦ 12,547 ￦ (183) ￦ (9,428) ￦ 15,205 ￦ 247,483 Financial assets at FVTPL ￦ 106,293 ￦ 14,751,430 ￦ - ￦ 14,857,723 Derivatives designated as hedging instruments AFS financial assets Financial liabilities : Financial liabilities at FVTPL Derivatives designated as hedging instruments - 1,877,566 39,002 141,017 - 39,002 247,483 2,266,066 ￦ 1,983,859 ￦ 14,931,449 ￦ 247,483 ￦ 17,162,791 ￦ - - ￦ - ￦ 10,331 414,029 ￦ 424,360 ￦ - - ￦ - ￦ 10,331 414,029 ￦ 424,360 The changes in financial instruments classified as Level 3 for the year ended December 31, 2013, were as follows: In millions of Korean Won Description Beginning of the year Purchases Disposals Valuation Transfers End of the year AFS financial assets ￦ 264,103 ￦ 2,829 ￦ (42,064) ￦ 4,474 ￦ - ￦ 229,342 Fair value measurements of financial instruments by fair-value hierarchy levels as of December 31, 2013, were as follows: In millions of Korean Won (4) Interest income, dividend income and interest expenses by categories of financial instruments for the years ended December 31, 2014 and 2013, consist of the following: In millions of Korean Won 2014 Description Financial assets : Financial assets at FVTPL Derivatives designated as hedging instruments AFS financial assets Financial liabilities : Financial liabilities at FVTPL Derivatives designated as hedging instruments Level 1 Level 2 Level 3 Total ￦ 38,927 ￦ 409,965 - 2,187,434 26,696 98,620 ￦ - - ￦ 448,892 26,696 229,342 2,515,396 ￦ 2,226,361 ￦ 535,281 ￦ 229,342 ￦ 2,990,984 ￦ - - ￦ - ￦ 3,063 561,408 ￦ 564,471 ￦ - - ￦ - ￦ 3,063 561,408 ￦ 564,471 2013 Interest expenses ￦ - - - 1 3 4 / 1 3 5 Description Non-financial services : Interest income Dividend income Interest expenses Interest income Dividend income Loans and receivables ￦ 235,429 ￦ - ￦ 573,439 415,673 1,321 ￦ - - 29,860 ￦ - - 11,096 - - - 961 - - - 198,501 - 229,750 ￦ 652,423 ￦ 29,860 ￦ 198,501 ￦ 574,400 ￦ 11,096 ￦ 229,750 Financial assets at FVTPL AFS financial assets Financial liabilities carried at amortized cost Financial services : Loans and receivables ￦ 2,467,008 ￦ - ￦ - ￦ 2,640,111 ￦ - Financial assets at FVTPL AFS financial assets Financial liabilities carried at amortized cost 28,807 1,197 - - - - - - 1,340,995 6,141 - - - - - ￦ - - - 1,351,481 ￦ 2,497,012 ￦ - ￦ 1,340,995 ￦ 2,646,252 ￦ - ￦ 1,351,481 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (5) Financial assets and liabilities subject to offsetting, financial instruments subject to an enforceable master netting Financial assets and liabilities subject to offsetting, financial instruments subject to an enforceable master netting arrangement arrangement or similar agreement as of December 31, 2014, consist of the following: or similar agreement as of December 31, 2013, consisted of the following: In millions of Korean Won In millions of Korean Won Gross amounts of recognized financial assets and liabilities Gross amounts of recognized financial assets and liabilities set off in the consolidated statement of financial position Net amounts of financial assets and liabilities presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position - financial instruments Related amounts not set off in the statement of financial position -collateral received (pledged) Net amounts ￦ 3,917,901 ￦ 116,275 ￦ 3,801,626 ￦ - ￦ - ￦ 3,801,626 Description Financial assets: Trade notes and accounts receivable Other receivables 3,421,842 277,916 3,143,926 Financial assets at FVTPL (*) Derivative assets that are effective hedging instruments 66,947 39,002 - - 66,947 39,002 28,980 - - - 3,143,926 66,947 10,022 - - - - - Gross amounts of recognized financial assetsand liabilities Gross amounts of recognized financial assets and liabilities set off in the consolidated statement of financial position Net amounts of financial assets and liabilities presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position - financial instruments Related amounts not set off in the statement of financial position -collateral received (pledged) Net amounts ￦ 3,590,967 ￦ 62,313 ￦ 3,528,654 ￦ - ￦ - ￦ 3,528,654 314,618 2,845,387 34,637 26,696 24,438 - - - 2,845,387 34,637 2,258 Description Financial assets: Trade notes and accounts receivable Other receivables Financial assets at FVTPL (*) Derivative assets that are effective hedging instruments 3,160,005 34,637 26,696 4,830,361 3,063 561,408 - - - - - - - - - ￦ 7,445,692 ￦ 394,191 ￦ 7,051,501 ￦ 28,980 ￦ - ￦ 7,022,521 ￦ 6,812,305 ￦ 376,931 ￦ 6,435,374 ￦ 24,438 ￦ - ￦ 6,410,936 Financial liabilities: Trade notes and accounts payable 7,319,804 278,275 7,041,529 Other payables 4,804,728 115,916 4,688,812 Financial liabilities at FVTPL (*) Derivative liabilities that are effective hedging instruments 10,331 414,029 - - 10,331 414,029 28,980 - - - - 7,041,529 4,688,812 10,331 385,049 Financial liabilities: Trade notes and accounts payable Other payables Financial liabilities at FVTPL (*) Derivative liabilities that are effective hedging instruments 6,972,764 250,024 6,722,740 126,907 4,703,454 3,063 561,408 24,438 - - - - 6,722,740 4,703,454 3,063 536,970 1 3 6 / 1 3 7 ￦ 12,548,892 ￦ 394,191 ￦ 12,154,701 ￦ 28,980 ￦ - ￦ 12,125,721 ￦ 12,367,596 ￦ 376,931 ￦ 11,990,665 ￦ 24,438 ￦ - ￦ 11,966,227 (*) There are no derivative assets and liabilities that can be offset as of December 31, 2014. Therefore, derivative assets and liabilities do not meet the criteria for offsetting in (*) There were no derivative assets and liabilities that can be offset as of December 31, 2013. Therefore, derivative assets and liabilities did not meet the criteria for offsetting K-IFRS 1032, but the Group has a right of offsetting them in the event of default, insolvency or bankruptcy of the counterparty. in K-IFRS 1032, but the Group had a right of offsetting them in the event of default, insolvency or bankruptcy of the counterparty. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (6) The commission income (financial services revenue) arising from financial assets or liabilities other than financial assets or (9) The quantitative information about significant unobservable inputs used in the fair value measurements categorized within liabilities at FVTPL for the years ended December 31, 2014 and 2013, are ￦1,646,656 million and ￦1,646,100 million, Level 3 of the fair-value hierarchy and the description of relationships of significant unobservable inputs to the fair value respectively. In addition, the fee expenses (cost of sales from financial services) occurring from financial assets or liabilities are as follows: other than financial assets or liabilities at FVTPL for the years ended December 31, 2014 and 2013, are ￦787,994 million and ￦897,756 million, respectively. (7) The Group recognizes transfers between levels of the fair-value hierarchy at the date of the event or change in circumstances that caused the transfer. There are no significant transfers between Level 1 and Level 2 for the year ended December 31, 2014. Description Unlisted equity securities Fair value at December 31, 2014 Valuation Techniques Unobservable inputs Range Sales growth rate 0.5% ~ 8.2% ￦ 247,483 Discounted cash flow Pre-tax operating income ratio 2.1% ~ 21.8% Discount rate 7.9% ~ 14.0% In millions of Korean Won Description of relationship If the sales growth rate and the pre-tax operating income ratio rise or the discount rate declines, the fair value increases. (8) Descriptions of the valuation techniques and the inputs used in the fair value measurements categorized within Level 2 and Level 3 of the fair-value hierarchy are as follows: The Group believes that the changes of unobservable inputs to reflect reasonably possible alternative assumptions would not have significant effects on the fair value measurements. - Currency forwards and options Fair value of currency forwards and options is measured based on forward exchange rate quoted in the current market at the end of the reporting period, which has the same remaining period of derivatives to be measured. If the forward exchange rate, which 20. CAPITAL STOCK: has the same remaining period of currency forward and option, is not quoted in the current market, fair value is measured using estimates of similar period of forward exchange rate by applying interpolation method with quoted forward exchange rates. The Company’s number of shares authorized is 600,000,000 shares. Common stock and preferred stock as of December 31, 2014 and As the inputs used to measure fair value of currency forwards and options are supported by observable market data, such as for- ward exchange rates, the Group classified the estimates of fair value measurements of the currency forwards and options as Level 2 of the fair-value hierarchy. - Debt instruments including corporate bonds Fair value of debt instruments including corporate bonds is measured applying discounted cash flow method. The rate used to dis- count cash flows is determined based on swap rate and credit spreads of debt instruments, which have the similar credit rating and period quoted in the current market with those of debt instruments including corporate bonds that should be measured. The Group classifies fair value measurements of debt instruments including corporate bonds as Level 2 of the fair-value hierarchy since the rate, which has significant effects on fair value of debt instruments including corporate bonds, is based on observable market data. 2013, consist of the following: (1) Common stock Description Issued Par value Capital stock In millions of Korean Won, except par value December 31, 2014 December 31, 2013 220,276,479 shares 220,276,479 shares ￦ 5,000 ￦ 1,157,982 ￦ 5,000 ￦ 1,157,982 1 3 8 / 1 3 9 - Unlisted equity securities The Company completed stock retirement of 10,000,000 common shares and 1,320,000 common shares as of March 5, 2001 and May 4, Fair value of unlisted equity securities is measured using discounted cash flow projection, and certain assumptions not based on 2004, respectively. Due to these stock retirements, the total face value of outstanding stock differs from the capital stock amount. observable market prices or rate, such as sales growth rate, pre-tax operating income ratio and discount rate based on business plan and circumstance of industry are used to estimate the future cash flow. The weighted-average cost of capital used to discount the future cash flows, is calculated by applying the Capital Asset Pricing Model, using the data of similar listed companies. The Group determines that the effect of estimation and assumptions referred above affecting fair value of unlisted equity securities is significant and classifies fair value measurements of unlisted securities as Level 3 of the fair-value hierarchy. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (2) Preferred stock Description 1st preferred stock 2nd preferred stock 3rd preferred stock Total Par value Issued Korean Won Dividend rate ￦ 5,000 25,109,982 shares ￦ 125,550 Dividend rate of common stock + 1% ˝ ˝ 37,613,865 shares 2,478,299 shares 193,069 12,392 Dividend rate of common stock + 2% Dividend rate of common stock + 1% 65,202,146 shares ￦ 331,011 As of March 5, 2001, the Company retired 1,000,000 second preferred shares. Due to this stock retirement, the total face value of outstanding stock differs from the capital stock amount. The preferred shares are non-cumulative, participating and non-voting. In millions of Korean Won 23. ACCUMULATED OTHER COMPREHENSIVE INCOME: Accumulated other comprehensive income as of December 31, 2014 and 2013, consists of the following: Description Gain on valuation of AFS financial assets Loss on valuation of AFS financial assets Gain on valuation of cash flow hedge derivatives Loss on valuation of cash flow hedge derivatives Gain on share of the other comprehensive income of equity-accounted investees Loss on share of the other comprehensive income of equity-accounted investees Loss on foreign operations translation, net 21. CAPITAL SURPLUS: Capital surplus as of December 31, 2014 and 2013, consists of the following: Description Stock paid-in capital in excess of par value Others 22. OTHER CAPITAL ITEMS: In millions of Korean Won December 31, 2014 December 31, 2013 24. RETAINED EARNINGS AND DIVIDENDS: ￦ 3,321,334 813,216 ￦ 4,134,550 ￦ 3,321,334 809,334 ￦ 4,130,668 (1) Retained earnings as of December 31, 2014 and 2013, consist of the following: Description Legal reserve (*) Discretionary reserve Unappropriated Other capital items consist of treasury stocks purchased for the stabilization of stock price. Number of treasury stocks as of Decem- ber 31, 2014 and 2013, are as follows: Description Common stock 1st preferred stock 2nd preferred stock 3rd preferred stock December 31, 2014 December 31, 2013 accumulated deficit, if any. Number of shares (*) The Commercial Code of the Republic of Korea requires the Company to appropriate as a legal reserve, a minimum of 10% of annual cash dividends declared, until such reserve equals 50% of its capital stock issued. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock or used to reduce 11,632,277 1,993,081 1,053,727 5,660 11,006,710 1,950,960 1,000,000 - Appraisal gains, amounting to ￦1,852,871 million, derived from asset revaluation by the Asset Revaluation Law of Korea are included in retained earnings. It may be only transferred to capital stock or used to reduce accumulated deficit, if any. In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 670,781 (163,791) 15 (30,378) 148,672 ￦ 737,234 (2,850) 2,589 (1,382) 59,833 (395,272) (386,557) (1,574,853) ￦ (1,344,826) (1,242,903) ￦ (834,036) In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 528,648 35,826,647 18,294,568 ￦ 475,707 31,021,647 16,776,885 1 4 0 / 1 4 1 ￦ 54,649,863 ￦ 48,274,239 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (2) The computation of the proposed dividends for the year ended December 31, 2014, is as follows: 26. SELLING AND ADMINISTRATIVE EXPENSES: Description Number of shares issued Treasury stocks Shares, net of treasury stocks Par value per share Dividend rate Dividends declared Dividends per share Market price per share Dividend yield ratio Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock In millions of Korean Won, except per share amounts 220,276,479 (11,632,277) 208,644,202 ￦ 5,000 60% 625,933 ￦ 3,000 169,000 1.8% 25,109,982 (1,993,081) 23,116,901 ￦ 5,000 61% 70,507 ￦ 3,050 126,500 2.4% 37,613,865 (1,053,727) 36,560,138 ￦ 5,000 62% 113,336 ￦ 3,100 134,000 2.3% 2,478,299 (5,660) 2,472,639 ￦ 5,000 61% 7,542 ￦ 3,050 117,000 2.6% The computation of the dividends for the year ended December 31, 2013, was as follows: In millions of Korean Won, except per share amounts Description Number of shares issued Treasury stocks Shares, net of treasury stocks Par value per share Dividend rate Dividends declared Dividends per share Market price per share Dividend yield ratio 25. SALES: Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock 220,276,479 (11,006,710) 209,269,769 ￦ 5,000 39% 408,076 ￦ 1,950 236,500 0.8% 25,109,982 (1,950,960) 23,159,022 ￦ 5,000 40% 46,318 ￦ 2,000 125,000 1.6% 37,613,865 (1,000,000) 36,613,865 ￦ 5,000 41% 75,058 ￦ 2,050 130,500 1.6% 2,478,299 - 2,478,299 ￦ 5,000 40% 4,957 ￦ 2,000 114,500 1.7% Selling and administrative expenses for the years ended December 31, 2014 and 2013, consist of the following: Description Selling expenses: Export expenses Overseas market expenses Advertisements and sales promotion Sales commissions Expenses for warranties Transportation expenses Administrative expenses: Payroll Post-employment benefits Welfare expenses Service charges Research Others In millions of Korean Won 2014 2013 ￦ 964,524 371,490 2,053,000 615,214 1,095,916 296,027 5,396,171 2,453,025 148,160 368,228 1,169,274 792,715 1,252,484 6,183,886 ￦ 951,362 269,422 2,087,172 602,845 964,684 324,158 5,199,643 2,313,956 168,825 363,299 1,154,974 722,732 1,209,219 5,933,005 ￦ 11,580,057 ￦ 11,132,648 1 4 2 / 1 4 3 27. GAIN ON INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: Gain on investments in joint ventures and associates for the years ended December 31, 2014 and 2013, consist of the following: In millions of Korean Won Sales for the years ended December 31, 2014 and 2013, consist of the following: Description 2014 2013 In millions of Korean Won Gain on share of earnings of equity-accounted investees, net ￦ 2,402,979 ￦ 2,748,647 Description Sales of goods Rendering of services Royalties Financial services revenue Others 2014 2013 ￦ 79,111,075 ￦ 77,371,830 1,207,996 209,129 8,455,068 273,051 1,285,463 230,642 8,205,197 214,504 ￦ 89,256,319 ￦ 87,307,636 Gain on disposals of investments in associates, net Impairment loss on investments in associates 13,367 (27,688) 308,462 - ￦ 2,388,658 ￦ 3,057,109 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 28. FINANCE INCOME AND EXPENSES: 29. OTHER INCOME AND EXPENSES: (1) Finance income for the years ended December 31, 2014 and 2013, consist of the following: (1) Other income for the years ended December 31, 2014 and 2013, consists of the following: Description Interest income Gain on foreign exchange transactions Gain on foreign currency translation Dividend income Income on financial guarantee Gain on disposals of AFS financial assets Gain on valuation of derivatives Others In millions of Korean Won 2014 ￦ 652,423 2013 ￦ 581,388 37,077 63,050 29,860 1,864 540 97,009 60 78,825 83,042 11,096 3,727 8,601 33,045 5,537 ￦ 881,883 ￦ 805,261 Description Gain on foreign exchange transactions Gain on foreign currency translation Gain on disposals of PP&E Gain on disposals of intangible assets Commission income Rental income Gain on disposals of non-current assets classified as held for sale Others 2014 ￦ 311,870 136,490 15,267 2,136 58,843 78,187 17,153 419,919 ￦ 1,039,865 In millions of Korean Won 2013 ￦ 307,055 195,810 103,104 16,649 46,135 70,931 4,530 393,787 ￦ 1,138,001 (2) Finance expenses for the years ended December 31, 2014 and 2013, consist of the following: (2) Other expenses for the years ended December 31, 2014 and 2013, consist of the following: In millions of Korean Won In millions of Korean Won Description Interest expenses Loss on foreign exchange transactions Loss on foreign currency translation Loss on disposals of trade notes and accounts receivable Loss on valuation of derivatives Others 2014 ￦ 300,247 38,394 247,842 3,634 10,517 385 2013 ￦ 341,192 75,934 95,407 11,041 22,260 6,875 ￦ 601,019 ￦ 552,709 Description Loss on foreign exchange transactions Loss on foreign currency translation Loss on disposals of PP&E Impairment loss on intangible assets Loss on disposals of non-current assets classified as held for sale Donations Others 2014 ￦ 442,493 194,477 37,722 28,721 244 71,067 533,375 2013 ￦ 377,865 236,842 32,741 28,161 1,179 75,124 314,541 1 4 4 / 1 4 5 ￦ 1,308,099 ￦ 1,066,453 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 30. EXPENSES BY NATURE: 32. INCOME TAX EXPENSE: Expenses by nature for the years ended December 31, 2014 and 2013, consist of the following: (1) Income tax expense for the years ended December 31, 2014 and 2013, consist of the following: In millions of Korean Won In millions of Korean Won Description Changes in inventories Raw materials and merchandise used Employee benefits Depreciation Amortization Others Total (*) 2014 ￦ (351,411) 49,677,376 8,537,685 1,843,802 706,095 22,600,885 2013 ￦ (389,147) 47,353,933 8,308,494 1,768,985 782,353 22,233,974 Description Income tax currently payable Adjustments recognized in the current year in relation to the prior years Changes in deferred taxes due to: Temporary differences Tax credits and deficits Items directly charged to equity ￦ 83,014,432 ￦ 80,058,592 Effect of foreign exchange differences 2014 ￦ 1,643,888 (52,349) 818,276 (247,876) 231,519 (91,652) 2013 ￦ 1,620,676 207,646 1,138,556 (180,586) (113,430) 30,347 (*) Sum of cost of sales, selling and administrative expenses and other expenses in the consolidated statements of income. Income tax expense ￦ 2,301,806 ￦ 2,703,209 31. EARNINGS PER COMMON SHARE AND PREFERRED STOCK: the years ended December 31, 2014 and 2013, are as follows: (2) The reconciliation from income before income tax to income tax expense pursuant to Corporate Income Tax Law of Korea for Basic earnings per common share and preferred stock are computed by dividing profit available to common shares and preferred stock by the weighted-average number of common shares and preferred stock outstanding during the year. The Group did not compute dilut- ed earnings per common share for the years ended December 31, 2014 and 2013, since there were no dilutive items during the years. Basic earnings per common share and preferred stock for the years ended December 31, 2014 and 2013, are computed as follows: In millions of Korean Won, except per share amounts December 31, 2014 Description Common stock 1st preferred stock 2nd preferred stock 3rd preferred stock Description Common stock 1st preferred stock 2nd preferred stock 3rd preferred stock Profit available to share Weighted-average number of shares outstanding (*) Basic earnings per share ￦ 5,656,688 628,018 994,937 67,164 209,221,204 23,155,054 36,608,682 2,477,823 ￦ 27,037 27,122 27,178 27,106 December 31, 2013 Profit available to share Weighted-average number of shares outstanding (*) Basic earnings per share ￦ 6,579,651 729,301 1,154,838 78,044 209,269,769 ￦ 31,441 23,159,022 36,613,865 2,478,299 31,491 31,541 31,491 (*) Weighted-average number of shares outstanding includes the effects of treasury stock transactions. Description Income before income tax Income tax expense calculated at current applicable tax rates of 27.2% in 2014 and 27.0% in 2013 Adjustments: Non-taxable income Disallowed expenses Tax credits Others Income tax expense Effective tax rate In millions of Korean Won 2014 2013 ￦ 9,951,274 ￦ 11,696,706 2,708,321 3,163,781 (111,489) 139,304 (713,191) 278,861 (406,515) 1 4 6 / 1 4 7 (109,720) 101,057 (685,584) 233,675 (460,572) ￦ 2,301,806 ￦ 2,703,209 23.1% 23.1% HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) The changes in deferred tax assets (liabilities) for the year ended December 31, 2014, are as follows: (4) The components of items charged to equity for the years ended December 31, 2014 and 2013, are as follows: In millions of Korean Won In millions of Korean Won Description Provisions AFS financial assets Subsidiaries, associates and joint ventures Reserve for research and manpower development Derivatives PP&E Accrued income Gain on foreign currency translation Others Beginning of the year Changes End of the year Description 2014 2013 ￦ 1,737,352 ￦ 107,182 ￦ 1,844,534 Deferred tax charged or credited to: (247,363) (1,172,789) (290,481) (52,121) (60,212) (156,805) 57,172 74,216 (3,962,231) (788,151) (7,509) 992 178,374 (3,815,776) 4,489 (3,539) (52,628) (818,276) (307,575) (1,329,594) (233,309) 22,095 (4,750,382) (3,020) (2,547) 125,746 (4,634,052) Loss (gain) on valuation of AFS financial assets, net Loss (gain) on valuation of cash flow hedge derivatives, net Remeasurements of defined benefit plans Changes in retained earnings of equity-accounted investees ￦ 72,227 19,982 128,118 11,192 ￦ (17,411) (2,216) (91,818) (1,985) ￦ 231,519 ￦ (113,430) (5) The temporary differences not recognized as deferred tax liabilities related to subsidiaries, associates and joint ventures are ￦7,000,120 million and ￦6,248,359 million as of December 31, 2014 and 2013, respectively. Accumulated deficit and tax credit carryforward 984,823 247,876 1,232,699 ￦ (2,830,953) ￦ (570,400) ￦ (3,401,353) 33. RETIREMENT BENEFIT PLAN: (1) Expenses recognized in relation to defined contribution plans for the years ended December 31, 2014 and 2013, are as fol- The changes in deferred tax assets (liabilities) for the year ended December 31, 2013, were as follows: Description Provisions AFS financial assets Subsidiaries, associates and joint ventures Reserve for research and manpower development Derivatives PP&E Accrued income Gain on foreign currency translation Others Beginning of the year ￦ 1,672,540 (229,971) (854,175) (240,177) (56,428) (3,232,024) (32,434) 615 294,834 (2,677,220) In millions of Korean Won End of the year ￦ 1,737,352 (247,363) (1,172,789) (290,481) (52,121) (3,962,231) (7,509) 992 178,374 (3,815,776) Changes ￦ 64,812 (17,392) (318,614) (50,304) 4,307 (730,207) 24,925 377 (116,460) (1,138,556) Accumulated deficit and tax credit carryforward 804,237 180,586 984,823 ￦ (1,872,983) ￦ (957,970) ￦ (2,830,953) lows: Description Paid in cash Recognized liability In millions of Korean Won 2014 ￦ 6,426 508 ￦ 6,934 2013 ￦ 6,315 416 ￦ 6,731 1 4 8 / 1 4 9 (2) The significant actuarial assumptions used by the Group as of December 31, 2014 and 2013, are as follows: Description Discount rate Rate of expected future salary increase December 31, 2014 December 31, 2013 3.62% 5.01% 4.45% 4.97% HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) The amounts recognized in the consolidated statements of financial position related to defined benefit plans as of December Changes in net defined benefit assets and liabilities for the year ended December 31, 2013, were as follows: 31, 2014 and 2013, consist of the following: Description Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities Net defined benefit assets In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 4,065,742 (3,471,803) ￦ 593,939 594,058 (119) ￦ 3,131,966 (2,749,943) ￦ 382,023 389,306 (7,283) (4) Changes in net defined benefit assets and liabilities for the year ended December 31, 2014, are as follows: Description Beginning of the year Current service cost Interest expenses (income) Remeasurements: Return on plan assets Actuarial gains arising from changes in demographic assumptions Actuarial gains arising from changes in financial assumptions Actuarial gains arising from experience adjustments Contributions Benefits paid Transfers in (out) Effect of foreign exchange differences and others In millions of Korean Won Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ 3,131,966 ￦ (2,749,943) ￦ 382,023 452,968 136,845 - (119,797) 3,721,779 (2,869,740) - 25,672 389,867 62,158 477,697 28,274 - - - 28,274 - (724,424) (153,751) 514 19,503 101,627 106 (7,646) 452,968 17,048 852,039 28,274 25,672 389,867 62,158 505,971 (724,424) (52,124) 620 11,857 End of the year ￦ 4,065,742 ￦ (3,471,803) ￦ 593,939 Description Beginning of the year Current service cost Past service cost Interest expenses (income) Remeasurements: Return on plan assets Actuarial gains arising from changes in demographic assumptions Actuarial gains arising from changes in financial assumptions Actuarial gains arising from experience adjustments Contributions Benefits paid Transfers in (out) Effect of foreign exchange differences and others In millions of Korean Won Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ 2,975,771 ￦ (2,154,022) ￦ 821,749 473,463 21,337 115,713 - - (82,893) 473,463 21,337 32,820 3,586,284 (2,236,915) 1,349,369 - (7,684) (85,942) (230,175) (22,660) (338,777) - - - (7,684) - (590,241) (120,090) 1,105 3,444 80,259 1,080 3,558 (7,684) (85,942) (230,175) (22,660) (346,461) (590,241) (39,831) 2,185 7,002 End of the year ￦ 3,131,966 ￦ (2,749,943) ￦ 382,023 (5) The sensitivity analyses below have been determined based on reasonably possible changes of the significant assumptions as of December 31, 2014 and 2013, while holding all other assumptions constant. 1 5 0 / 1 5 1 In millions of Korean Won Effect on the net defined benefit liabilities December 31, 2014 December 31, 2013 Description Discount rate Rate of expected future salary increase Increase by 1% Decrease by 1% Increase by 1% Decrease by 1% (431,595) 501,421 524,793 (423,593) (326,031) 313,430 385,624 (275,984) (6) The fair value of the plan assets as of December 31, 2014 and 2013, consists of the following: Description Insurance instruments Debt instruments Others In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 3,230,405 ￦ 2,415,575 102,734 138,664 66,149 268,219 ￦ 3,471,803 ￦ 2,749,943 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 34. CASH GENERATED FROM OPERATIONS: Cash generated from operations for the years ended December 31, 2014 and 2013, is as follows: In millions of Korean Won 35. RISK MANAGEMENT: (1) Capital risk management Description Profit for the year Adjustments: Post-employment benefits Depreciation Amortization of intangible assets Provision for warranties Income tax expense Loss on foreign currency translation, net Loss (gain) on disposals of PP&E, net Interest income, net Gain on share of earnings of equity-accounted investees, net Gain on disposals of investments in associates, net Cost of sales from financial services, net Others Changes in operating assets and liabilities: Decrease (increase) in trade notes and accounts receivable Increase in other receivables Increase in other financial assets Increase in inventories Decrease (increase) in other assets Increase in trade notes and accounts payable Decrease in other payables Increase (decrease) in other liabilities Decrease in other financial liabilities Changes in net defined benefit liabilities Payment of severance benefits Decrease in provisions Changes in financial services receivables Increase in operating lease assets Others 2014 2013 of capital. Debt to equity ratio calculated as total liabilities divided by total equity is used as an index to manage the Group’s capital. ￦ 7,649,468 ￦ 8,993,497 The overall capital risk management policy is consistent with that of the prior period. Debt to equity ratios as of December 31, 2014 The Group manages its capital to maintain an optimal capital structure for maximizing profit of its shareholder and reducing the cost 470,016 1,843,802 706,095 866,416 2,301,806 242,779 22,455 (352,176) (2,402,979) (13,367) 4,338,252 346,557 8,369,656 (614,041) (213,459) (1,680,932) (804,120) (12,947) 824,354 (167,667) 227,641 (23,610) (723,804) (52,124) (1,345,291) (3,639,876) (4,267,094) 71,821 527,620 1,768,985 782,353 773,917 2,703,209 53,397 (70,363) (240,196) (2,748,647) (308,462) 3,849,325 241,641 7,332,779 195,459 (376,285) (364,928) (828,298) 131,150 150,460 (455,914) (981,317) (15,784) (588,056) (39,831) (1,206,421) (4,034,164) (4,737,714) (65,590) and 2013, are as follows: Description Total liabilities Total equity Debt-to-equity ratio (2) Financial risk management In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 84,604,552 ￦ 76,838,690 62,620,565 135.1% 56,582,789 135.8% The Group is exposed to various financial risks such as market risk (foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk related to its financial instruments. The purpose of risk management of the Group is to identify potential risks related to financial performance and reduce, eliminate and evade those risks to an acceptable level of risks to the Group. Overall, the Group’s financial risk management policy is consistent with the prior period policy. 1) Market risk The Group is mainly exposed to financial risks arising from changes in foreign exchange rates and interest rates. Accordingly, the Group uses financial derivative contracts to hedge and to manage its interest rate risk and foreign currency risk. 1 5 2 / 1 5 3 a) Foreign exchange risk management The Group is exposed to various foreign exchange risks by making transactions in foreign currencies. The Group is mainly exposed to foreign exchange risk in USD, EUR and JPY. The Group manages foreign exchange risk by matching the inflow and the outflow of foreign currencies according to each currency and maturity, and by adjusting the foreign currency settlement date based on its exchange rate forecast. The Group uses foreign exchange derivatives; such as currency forward, currency swap, and currency option; as hedging instruments. However, speculative foreign exchange trade on derivative financial instruments is prohibited. Cash generated from operations ￦ 3,597,975 ￦ 3,109,043 (12,421,149) (13,217,233) HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 The Group’s sensitivity to a 5% change in exchange rate of the functional currency against each foreign currency on income before c) Equity price risk income tax as of December 31, 2014, would be as follows: The Group is exposed to market price fluctuation risk arising from equity instruments. As of December 31, 2014, the amounts of held for In millions of Korean Won trading equity instruments and AFS equity instruments measured at fair value are ￦106,293 million and ￦2,106,719 million, respectively. Foreign Currency USD EUR JPY Foreign Exchange Rate Sensitivity Increase by 5% Decrease by 5% 2) Credit risk ￦ 3,724 (11,391) (5,800) ￦ (3,724) 11,391 5,800 The Group is exposed to credit risk when a counterparty defaults on its contractual obligation resulting in a financial loss for the Group. The Group operates a policy to transact with counterparties who only meet a certain level of credit rating which was evaluated based on the counterparty’s financial conditions, default history, and other factors. The credit risk in the liquid funds and derivative financial instruments is limited as the Group transacts only with financial institutions with high credit-ratings assigned by interna- tional credit-rating agencies. Except for the guarantee of indebtedness discussed in Note 37, the book value of financial assets in the The sensitivity analysis includes the Group’s monetary assets, liabilities and derivative assets, liabilities but excludes items of income consolidated financial statements represents the maximum amounts of exposure to credit risk. statements such as changes of sales and cost of sales due to exchange rate fluctuation. b) Interest rate risk management 3) Liquidity risk The Group has borrowings with fixed or variable interest rates. Also, the Group is exposed to interest rate risk arising from financial The Group manages liquidity risk based on maturity profile of its funding. The Group analyses and reviews actual cash outflow and its instruments with variable interest rates. To manage the interest rate risk, the Group maintains an appropriate balance between bor- budget to match the maturity of its financial liabilities to that of its financial assets. rowings with fixed and variable interest rates for short-term borrowings and has a policy to borrow funds with fixed interest rates to avoid the future cash flow fluctuation risk for long-term debt if possible. The Group manages its interest rate risk through regular Due to the inherent nature of the industry, the Group requires continuous R&D investment and is sensitive to economic fluctuations. assessments of the change in markets conditions and the adjustments in nature of its interest rates. The Group minimizes its credit risk in cash equivalents by investing in risk-free assets. In addition, the Group has agreements in place The Group’s sensitivity to a 1% change in interest rates on income before income tax as of December 31, 2014, would be as follows: Accounts Cash and cash equivalents Financial assets at FVTPL Short-term financial instruments Borrowings and debentures In millions of Korean Won Interest Rate Sensitivity Increase by 1% Decrease by 1% ￦ 22,623 (7,474) 3,166 (93,809) ￦ (22,623) 7,731 (3,166) 93,809 The Company’s subsidiaries, Hyundai Card Co., Ltd. and Hyundai Capital Services, Inc., that are operating financial business, are man- aging interest rate risk by utilizing value at risk (VaR). VaR is defined as a threshold value which is a statistical estimate of the max- imum potential loss based on normal distribution. As of December 31, 2014 and 2013, the amounts of interest rate risk measured at with financial institutions with respect to trade financing and overdraft to mitigate any significant unexpected market deterioration. The Group, also, continues to strengthen its credit rates to secure a stable financing capability. The Group’s maturity analysis of its non-derivative liabilities according to their remaining contract period before expiration as of De- cember 31, 2014, is as follows: In millions of Korean Won Remaining contract period 1 5 4 / 1 5 5 Description Non interest-bearing liabilities Interest-bearing liabilities Financial guarantee Not later than one year ￦ 13,682,337 17,718,878 1,023,692 Later than one year and not later than five years Later than five years ￦ 1,848 38,564,699 182,373 ￦ 490 933,850 39,713 Total ￦ 13,684,675 57,217,427 1,245,778 VaR are ￦119,847 million and ￦137,835 million, respectively. The maturity analysis is based on the non-discounted cash flows and the earliest maturity date at which payments, i.e. both principal and interest, should be made. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) Derivative instrument 36. RELATED-PARTY TRANSACTIONS: The Group enters into derivative instrument contracts such as forwards, options and swaps to hedge its exposure to changes in for- The transactions and balances of receivables and payables within the Group are wholly eliminated in the preparation of consolidated eign exchange rate. financial statements of the Group. As of December 31, 2014 and 2013, the Group deferred a net loss of ￦30,363 million and a net income of ￦1,207 million, respectively, in accumulated other comprehensive loss, on its effective cash flow hedging instruments. The longest period in which the forecasted transactions are expected to occur is within 51 months as of December 31, 2014. For the years ended December 31, 2014 and 2013, the Group recognized a net income of ￦178,547 million and a net loss of ￦230,974 million in profit or loss (before tax), respectively, which resulted from the ineffective portion of its cash flow hedging instruments and changes in the valuation of its other non-hedging derivative instruments. (1) For the year ended December 31, 2014, significant transactions arising from operations between the Group and related parties or affiliates by the Monopoly Regulation And Fair Trade Act of the Republic of Korea (“the Act”) are as follows: Sales/proceeds Purchases/expenses In millions of Korean Won Description Entity with significant influence over the Company Joint ventures and associates Other related parties Affiliates by the Act Hyundai MOBIS Co., Ltd. ￦ 855,186 ￦ 9,962 ￦ 4,834,975 ￦ 39,486 Sales Others Purchases Others Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Parts Europe N.V. Mobis Brasil Fabricacao De Auto Pecas Ltda Mobis Module CIS, LLC Others Kia Motors Corporation Kia Motors Manufacturing Georgia, Inc. Kia Motors Russia LLC Kia Motors Slovakia s.r.o. BHMC HMGC Hyundai WIA Corporation Hyundai HYSCO Co., Ltd. Others 21,484 48 18,040 25,720 4,628 2,561 - 20,272 941,875 637,885 885,546 120,347 956,691 368,616 200,301 12,528 456,964 3,073 780,543 16,792 438 17,402 5,561 1,889 - 448 731 476,662 1,609 156 19,896 44,452 146 520 1,804 35,133 6,258 69,118 1,321,444 1,177,753 746,382 529,788 244,800 307,535 216,528 445,031 154,410 2,419,402 - 576,617 404 2,389 856,907 13,912 23,419 578 650 1,616 - - 28 17,424 224,568 943 4,714 655 - 6,193 14,985 15 1 5 6 / 1 5 7 2,870,138 1,803,768 408,969 454,203 4,756,881 1,380,518 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 For the year ended December 31, 2013, significant transactions arising from operations between the Group and related parties or (2) As of December 31, 2014, significant balances related to the transactions between the Group and related parties or affiliates by the Act were as follows: affiliates by the Act are as follows: Sales/proceeds Purchases/expenses In millions of Korean Won Hyundai MOBIS Co., Ltd. ￦ 784,889 ￦ 9,171 ￦ 4,677,717 ￦ 39,636 Sales Others Purchases Others Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Parts Europe N.V. Mobis Brasil Fabricacao De Auto Pecas Ltda Mobis Module CIS, LLC Others Kia Motors Corporation Kia Motors Manufacturing Georgia, Inc. Kia Motors Russia LLC Kia Motors Slovakia s.r.o. BHMC HMGC Hyundai WIA Corporation Hyundai HYSCO Co., Ltd. Others 8,312 37 18,863 27,328 2,914 8 - 35,372 1,035,544 681,292 1,050,815 121,271 1,035,584 478,507 177,136 67,664 442,986 8,598 809,390 4,353 567 17,529 219,153 3,456 - 557 178,286 371,290 1,274 - 20,605 19,851 - 6,386 1,930 13,211 304 79,639 1,248,960 1,196,235 738,002 518,339 213,395 293,390 245,352 256,656 292,539 2,426,147 - 612,391 750 10,888 924,715 235,109 - 386 138 1,058 9,010 - 304 9,250 318,541 440 3,201 1,077 - 6,341 8,115 377 2,694,149 1,359,617 779,660 456,128 4,151,199 2,315,890 Description Entity with significant influence over the Company Joint ventures and associates Other related parties Affiliates by the Act In millions of Korean Won Receivables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Payables Other payables and others Hyundai MOBIS Co., Ltd. ￦ 168,950 ￦ 29,282 ￦ 833,602 ￦ 173,338 Hyundai Life Insurance Co., Ltd. 1,950 115,470 Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Parts Europe N.V. Mobis Module CIS, LLC Others Kia Motors Corporation Kia Motors Manufacturing Georgia, Inc. Kia Motors Russia LLC Kia Motors Slovakia s.r.o. Kia Motors America, Inc. BHMC HMGC Hyundai WIA Corporation Hyundai HYSCO Co., Ltd. Others 48 41 402 1,920 349 - 6,993 242,152 41,110 67,015 6,827 - 196,521 30,573 71,864 5,799 212,461 1,218 153,052 1,762 283 11,457 220,276 513 31 325 246,721 13,442 23 3,057 105,747 27,554 304 13,978 2,109 31,943 6,468 6,101 67 102,683 93,474 95,819 45,899 32,315 17,969 68,526 32,124 239,148 1 44,177 91 1,056 - 163,315 8,617 397,362 14,610 674,701 175 - - - 139 - 19 2,726 90,703 516 328 9,490 20 16 1,718 47,409 4,587 487,761 149,694 188,167 1 5 8 / 1 5 9 Description Entity with significant influence over the Company Joint ventures and associates Other related parties Affiliates by the Act HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 As of December 31, 2013, significant balances related to the transactions between the Group and related parties or affiliates by (3) Significant fund transactions and equity contribution transactions for the year ended December 31, 2014, between the Group the Act were as follows: and related parties are as follows: In millions of Korean Won In thousands of U.S. Dollars, In millions of Korean Won Description Entity with significant influence over the Company Joint ventures and associates Other related parties Affiliates by the Act Receivables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Payables Other payables and others Description Lending Collection Borrowing Repayment Joint ventures and associates $ - $ - $ - $ 362 ￦ 130,417 Loans Borrowings Equity contribution Hyundai MOBIS Co., Ltd. ￦ 145,178 ￦ 29,937 ￦ 816,009 ￦ 167,061 Hyundai Life Insurance Co., Ltd. Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Parts Europe N.V. Mobis Module CIS, LLC Others Kia Motors Corporation Kia Motors Manufacturing Georgia, Inc. Kia Motors Russia LLC Kia Motors Slovakia s.r.o. Kia Motors America, Inc. BHMC HMGC Hyundai WIA Corporation Hyundai HYSCO Co., Ltd. Others 1,078 - 45 543 2,280 682 - 12,861 229,225 39,286 107,096 7,181 - 172,422 16,300 37,711 1,269 119,489 699 148,752 38,369 1,290 546 10,496 211,572 1,192 51 3,699 284,253 13,531 - 7,121 49,828 9,743 2,245 28,591 2,354 40,330 4,362 22,116 102 78,629 98,762 96,200 36,595 22,824 25,484 44,554 51,676 145,327 - 42,431 72 386 - 131,423 15,460 379,266 158,542 488,217 1,398 - - - - - 1 149 115,888 99 339 19,673 382 214 1,676 43,575 4,025 349,067 139,193 430,285 Significant fund transactions and equity contribution transactions for the year ended December 31, 2013, between the Group and related parties were as follows : Description Lending Collection Borrowing Repayment Entity with significant influence over the Company $ 200,000 Joint ventures and associates - $ - 253 $ - - $ - 50,265 ￦ - 131,088 In thousands of U.S. Dollars, In millions of Korean Won Loans Borrowings Equity contribution (4) Compensation of registered and unregistered directors, who are considered to be the key management personnel for the years ended December 31, 2014 and 2013, are as follows: Description Short-term employee salaries Post-employment benefits Other long-term benefits In millions of Korean Won 2014 ￦ 178,844 33,179 623 1 6 0 / 1 6 1 2013 ￦ 158,875 30,329 413 ￦ 212,646 ￦ 189,617 37. COMMITMENTS AND CONTINGENCIES: (1) As of December 31, 2014, the debt guarantees provided by the Group, excluding the ones provided to the Company’s subsidiaries, are as follows: Description To associates To others In millions of Korean Won Overseas (*) ￦ 97,248 1,033,860 ￦ 1,131,108 Domestic ￦ - 139,290 ￦ 139,290 (*) The guarantee amounts in foreign currency are translated into Korean Won using the Base Rate announced by Seoul Money Brokerage Services, Ltd. as of December 31, 2014. HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (2) As of December 31, 2014, the Group is involved in domestic and foreign lawsuits as a defendant. In addition, the Group is 38. SEGMENT INFORMATION: involved in lawsuits for product liabilities and others. The Group obtains insurance for potential losses which may result from product liabilities and other lawsuits. Meanwhile, as of December 31, 2014, the Group is currently involved in lawsuits for (1) The Group has a vehicle segment, a finance segment and other segments. The vehicle segment is engaged in the manufacturing ordinary wage, which involves disputes over whether certain elements of remuneration are included in the earnings used for and sale of motor vehicles. The finance segment operates vehicle financing, credit card processing and other financing the purposes of calculating overtime, allowances for unused annual paid leave and retirement benefits, and unable to activities. Other segments include the R&D, train manufacturing and other activities, which cannot be classified in the vehicle estimate the outcome or the potential consolidated financial impact. segment or in the finance segment. (3) As of December 31, 2014, a substantial portion of the Group’s PP&E is pledged as collateral for various loans up to (2) Sales and operating income by operating segments for the years ended December 31, 2014 and 2013, are as follows: ￦890,640 million. In addition, the Group pledged certain bank deposits, checks, promissory notes and investment securities, including 213,466 shares of Kia Motors Corporation, as collateral to financial institutions and others. Certain receivables held by the Company’s foreign subsidiaries, such as financial services receivables are pledged as collateral for their borrowings. In millions of Korean Won For the year ended December 31, 2014 Vehicle Finance Others Consolidation adjustments Total (4) Hyundai Capital Services, Inc., a subsidiary of the Company, has Revolving Credit Facility Agreements with the following Total sales ￦ 105,798,039 ￦ 10,997,532 ￦ 7,241,540 ￦ (34,780,792) ￦ 89,256,319 financial institutions. 1) Credit Facility Agreement Hyundai Capital Services, Inc. entered into a Credit Facility Agreement with GE Capital European Funding & CO (the “GE Capital”) on February 15, 2013. The credit line of the agreement is Euro worth of USD 600 million as of December 31, 2014 and the agreement had been renewed on January 9, 2015 with the same credit line. The entity will be able to extend the agreement until January 5, 2018 an- nually. Otherwise, it will be automatically terminated. 2) Revolving Credit Facility Hyundai Capital Services, Inc. has a Revolving Credit Facility Agreement which credit line is USD 200 million, EUR 10 million and ￦1,645,000 million with Kookmin Bank and 19 other financial institutions, as of December 31, 2014. (5) Hyundai Card Co., Ltd, a subsidiary of the Company, has a Revolving Credit Facility Agreement which credit line is ￦490,000 million with Kookmin Bank and 9 other financial institutions, as of December 31, 2014. Inter-company sales (33,489,970) (227,146) (1,063,676) 34,780,792 Net sales Operating income 72,308,069 10,770,386 5,806,836 1,061,001 6,177,864 191,621 - 490,528 - 89,256,319 7,549,986 In millions of Korean Won For the year ended December 31, 2013 Total sales Inter-company sales Net sales Operating income Vehicle Finance Others Consolidation adjustments Total ￦ 103,198,545 ￦ 10,146,973 ￦ 7,077,614 ￦ (33,115,496) ￦ 87,307,636 (31,663,499) 71,535,046 6,412,596 (254,543) 9,892,430 1,120,128 (1,197,454) 33,115,496 5,880,160 388,421 - 394,352 - 87,307,636 8,315,497 1 6 2 / 1 6 3 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (3) Assets and liabilities by operating segments for the years ended December 31, 2014 and 2013, are as follows: (5) Non-current assets by region where the Group’s entities are located in as of December 31, 2014 and 2013, are as follows: In millions of Korean Won For the year ended December 31, 2014 Vehicle Finance Others Consolidation adjustments Total Total assets Total liabilities Borrowings and debentures ￦ 85,791,905 ￦ 65,894,361 ￦ 7,035,554 ￦ (11,496,703) ￦ 147,225,117 30,424,220 4,393,547 56,783,188 49,644,731 4,162,456 2,142,616 (6,765,312) (1,922,962) 84,604,552 54,257,932 Description Korea North America Asia Europe Others In millions of Korean Won For the year ended December 31, 2013 Consolidation adjustments Total (*) Vehicle Finance Others Consolidation adjustments Total (*) Sum of PP&E, intangible assets and investment property. In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 21,109,314 ￦ 19,428,529 2,174,461 1,129,741 1,952,153 399,453 1,882,933 1,057,874 2,080,979 456,797 26,765,122 24,907,112 (79,000) (51,451) ￦ 26,686,122 ￦ 24,855,661 Total assets Total liabilities Borrowings and debentures ￦ 80,927,475 ￦ 59,157,882 ￦ 6,496,797 ￦ (13,160,675) ￦ 133,421,479 29,481,884 4,425,746 51,055,240 44,561,579 3,724,238 1,738,408 (7,422,672) (2,758,871) 76,838,690 47,966,862 (6) There is no single external customer who represents 10% or more of the Group’s revenue for the years ended December 31, 2014 and 2013. (4) Sales by region where the Group’s entities are located in for the years ended December 31, 2014 and 2013, are as follows: 39. CONSTRUCTION CONTRACTS: In millions of Korean Won For the year ended December 31, 2014 Cost, income and loss and claimed construction from construction in progress as of December 31, 2014, and 2013 are as follows: Korea North America Asia Europe Others Consolidation adjustments Total Total sales ￦ 54,344,055 ￦ 33,998,857 ￦ 6,732,058 ￦ 26,488,776 ￦ 2,473,365 ￦ (34,780,792) ￦ 89,256,319 Inter-company sales (14,443,717) (7,185,075) (562,985) (12,584,985) (4,030) 34,780,792 - Description Accumulated accrual cost Accumulated income Net sales 39,900,338 26,813,782 6,169,073 13,903,791 2,469,335 - 89,256,319 Accumulated construction in process In millions of Korean Won For the year ended December 31, 2013 Progress billing Due from customers Due to customers Korea North America Asia Europe Others Consolidation adjustments Total Total sales ￦ 53,151,843 ￦ 32,764,610 ￦ 7,156,618 ￦ 24,965,678 ￦ 2,384,383 ￦ (33,115,496) ￦ 87,307,636 Inter-company sales (14,386,591) (7,117,997) (720,235) (10,890,673) - 33,115,496 - Net sales 38,765,252 25,646,613 6,436,383 14,075,005 2,384,383 - 87,307,636 In millions of Korean Won December 31, 2014 December 31, 2013 ￦ 7,427,961 ￦ 6,201,961 1 6 4 / 1 6 5 1,071,348 8,499,309 (7,172,915) 1,617,221 (290,827) 739,304 6,941,265 (5,993,002) 1,393,555 (445,292) HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS HYUNDAI MOTOR COMPANY Annual Report 2014 Hyundai Motor Product Lineup EQUUS (CENTENNIAL) ㆍ 2014 Motorist Choice Award, AutoPacific and IntelliChoice, US for 3 consecutive years ㆍ 2014 Ward’s 10 Best Interiors, Ward’s Auto, US ㆍ 2013 Total Value Awards, Strategic Vision, US GENESIS ㆍ 2015 Consumer Guide Automotive Best Buy Awards SONATA ㆍ 2015 Best Economic Performance Award, The Automotive Science Group ㆍ 2014 Top Safety Pick+, Insurance Institute for Highway Safety (IIHS), US VELOSTER ㆍ 2014 Top Safety Earning (Five-Star Rating), NHTSA, US i30 ㆍ 2013 The Australia’s Best Cars National Awards for in ㆍ 2014 Top Rated Family Sedan, Edmunds.com, US Small Car Category 2013 ㆍ 2014 The Winner Of the Midsize Sedan Challenge, CARS.COM, USA TODAY, MotorWeek, U.S. ix35 (TUCSON) ㆍ 2014 AutoPacific Vehicle Satisfaction Awards in Compact Crossover SUV Category ㆍ 2014 Car of the Year in Russia, Compact SUV Category ix35 (TUCSON) FUEL CELL ㆍ 2014 10 Best Engines, Ward’s Auto, US ㆍ 2014 JD Power IQS Highest Rank in the Midsize Premium Cars Category ㆍ 2014 GOOD DESIGN Awards, the Chicago Athenaeum, US ㆍ 2014 Top Safety Pick+: All Rated Good or Higher, IIHS, US ㆍ 2014 2015 Residual Value Award (Premium Full Size), ALG (Automotive Lease Guide), US ㆍ 2014 5-Star Safety Rating, ELANTRA (AVANTE) ㆍ 2014 JD Power IQS Highest Rank in Compact Cars Category ㆍ 2013 Top Picks 2013 - Best Small Passenger Car, Australasian New Car Assessment Program, Australia Consumer Reports, US ㆍ 2014 2014 GOOD DESIGN Awards, The Chicago Athenaeum, US ㆍ 2014 Transportation Design/Special Vehicle, iF (International Forum) Product Design Award, Germany ㆍ 2014 Red Dot Design Awards, Red Dot Design Zentrum Nordhein Westfalen, Germany SANTA FE ㆍ 2014 Top Picks 2014 - Midsized SUV, Consumer Reports, US ㆍ 2014 Australia’s Best Cars - Best SUV $45K ~ $65K, Australia’s Best Cars Magazine, Australia ELANTRA (AVANTE) SONATA GENESIS EQUUS (CENTENNIAL) BEST SELLING CARS ix35 (TUCSON) Fuel Cell H Y U N D A I M O T O R P R O D U C T L N E U P I 1 6 6 / 1 6 7 i30 VELOSTER ix35 (TUCSON) SANTA FE HYUNDAI MOTOR COMPANY Annual Report 2014 Hyundai Motor Product Lineup Passenger Cars SUV MPV / Bus Truck EQUUS (CENTENNIAL) i40 VELOSTER TURBO GRAND SANTA FE H-1 (GRAND STAREX) GENESIS i40 SEDAN ACCENT 4DR SANTA FE H350 i30 ACCENT 5DR TUCSON UNIVERSE i30 3DR / 5DR / WAGON ELANTRA (AVANTE) ELANTRA (AVANTE) COUPE VELOSTER HB20 i20 ACTIVE / 5DR i10 EON ix25 ix20 UNICITY H-100 NEW SUPER AERO CITY HEAVY DUTY TRUCK AEROTOWN MEDIUM DUTY TRUCK COUNTY H-100 XCIENT DUMP XCIENT CARGO XCIENT TRACTOR XCIENT MIXER H Y U N D A I M O T O R P R O D U C T L N E U P I 1 6 8 / 1 6 9 GENESIS COUPE AZERA (GRANDEUR) AZERA (GRANDEUR) HYBRID SONATA SONATA HYBRID * Engines and features may vary by country. Please check with your local dealer. HYUNDAI MOTOR COMPANY Annual Report 2014 MODERN PREMIUM FOR YOUR BRILLIANT MOMENTS / 1 7 1 HYUNDAI MOTOR COMPANY Annual Report 2014FINANCIAL STATEMENTS