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Hana Financial Group Inc.Consolidated financial statements for the years endedDecember 31, 2013 and 2012with independent auditors’ report

Hana Financial Group Inc. December 31, 2013 and 2012 Contents

Page Independent auditors’ report 1-2 Consolidated statements of financial position 3 Consolidated statements of comprehensive income 4 Consolidated statements of changes in equity 5 Consolidated statements of cash flows 6-7 Notes to the consolidated financial statements 8-201

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- 1 -

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- 2 -

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Hana Financial Group Inc.Consolidated statements of financial position

(Korean won in millions)

NotesAssetsCash and due from banks 6, 7, 9, 11, 57 ₩ 19,343,218 ₩ 18,890,870 ₩ 11,213,497 Financial assets held-for-trading 5, 6, 7, 9, 12, 16, 17, 19 15,766,359 14,888,324 10,772,601 Financial assets designated at fair value

through profit and loss 5, 6, 7, 9, 13 240,597 65,212 60,500 Available-for-sale financial assets 5, 6, 7, 9, 14, 16, 17 29,529,156 25,471,566 16,245,832 Held-to-maturity investments 6, 7, 9, 15, 16, 17 4,736,987 7,219,480 2,289,567 Loans receivable 6, 7, 9, 18 203,597,827 196,435,133 129,249,113 Derivative assets used for hedging purposes 5, 6, 7, 9, 19 96,068 167,520 110,446 Investments in associates and joint ventures 20 948,686 881,947 881,586 Property and equipment 10, 21 2,688,451 2,700,331 1,494,899 Investment property 10, 22 515,431 502,823 332,774 Intangible assets 10, 24 1,457,186 1,645,210 340,095 Deferred income tax assets 53 45,595 18,772 11,319 Current tax assets 7,316 49,109 468 Non-current assets held for sale 25 660 1,439 - Other assets 6, 7, 9, 26 16,215,102 15,977,352 5,860,912

Total assets ₩ 295,188,639 ₩ 284,915,088 ₩ 178,863,609

LiabilitiesFinancial liabilities held-for-trading 5, 6, 7, 9, 19, 27 ₩ 4,373,515 ₩ 3,961,739 ₩ 2,419,359 Financial liabilities designated at fair value

through profit and loss 5, 6, 7, 9, 28 4,904,171 4,355,636 2,966,907 Deposits 6, 7, 9, 29 187,225,676 178,262,815 105,199,275 Borrowings 6, 7, 9, 30 21,833,638 22,361,914 15,441,945 Debentures 6, 7, 9, 31 30,419,564 32,432,503 28,481,270 Derivative liabilities used for hedging purposes 5, 6, 7, 9, 19 140,081 14,151 2,647 Post-employment benefit obligation 32 162,053 109,429 40,737 Provisions 33 448,972 438,055 152,257 Deferred income tax liabilities 53 304,447 300,543 91,724 Current tax liabilities 31,004 50,588 222,372 Other liabilities 6, 7, 9, 34 24,455,893 22,285,278 9,027,040

Total liabilities ₩ 274,299,014 ₩ 264,572,651 ₩ 164,045,533

EquityIssued capital 35 ₩ 1,449,470 ₩ 1,215,249 ₩ 1,215,249 Hybrid equity securities 35 299,121 299,121 299,121 Capital surplus 35 10,380,574 6,814,903 6,669,072 Capital adjustments 36 (170,261) (80,949) (70,712)Accumulated other comprehensive income 14, 37 (9,740) 306,583 277,944 Retained earnings 38 7,982,838 7,169,418 5,687,644

Equity attributable to equity holders of the parent 19,932,002 15,724,325 14,078,318

Non-controlling shareholders' equity 957,623 4,618,112 739,758

Total equity ₩ 20,889,625 ₩ 20,342,437 ₩ 14,818,076

Total liabilities and equity ₩ 295,188,639 ₩ 284,915,088 ₩ 178,863,609

The accompanying notes are integral part of the consolidated financial statements.

As of December 31, 2013, December 31, 2012 and January 1, 2012

December 31, 2013 December 31, 2012 January 1, 2012

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Hana Financial Group Inc.Consolidated statements of comprehensive incomeFor the years ended December 31, 2013 and 2012(Korean won in millions, except per share amounts)

NotesNet interest income: 41

Interest income ₩ 10,534,899 ₩ 11,433,226Interest expense (6,049,858) (6,834,560)

4,485,041 4,598,666

Net fee and commission income: 42Fee and commission income 2,478,039 2,378,739Fee and commission expense (885,223) (826,566)

1,592,816 1,552,173

Net trading income 43 233,557 389,478Net loss on financial assets and liabilities

designated at fair value through profit and loss 44 (63,625) (369,784)Net gain (loss) on derivative financial instruments

used for hedging purposes 45 (37,243) 11,025Net gain on available-for-sale financial assets and

other financial assets not measures at fair value 46 285,477 217,380Gain on foreign currency translation and transactions 247,322 505,088Total operating income 6,743,345 6,904,026

Impairment loss on financial assets 47 (1,271,655) (1,626,984)Net operating income 5,471,690 5,277,042

General and administrative expenses 48 (3,846,309) (3,769,778)Other operating income 49 564,597 1,250,440Other operating expenses 50 (1,024,968) (740,353)Operating income 1,165,010 2,017,351

Non-operating expense:Share of earnings from investments in associates and joint ventures 9, 20 85,213 66,791Other non-operating income 51 138,610 112,799Other non-operating expenses 52 (118,560) (204,730)

105,263 (25,140)

Net income before income tax 1,270,273 1,992,211

Income tax expense 53 (277,305) (263,031)

Net income 992,968 1,729,180

Attributable to: Equity holders of the parent 933,877 1,621,531 Non-controlling interests 59,091 107,649

Other comprehensive income: Items that could be recycled to profit or loss at a future point in time: Gain (loss) on valuation of available-for-sale financial assets (88,703) 171,001 Exchange differences on transaction of foreign operations (105,322) (132,708) Changes in unrealized gain on valuation of equity method investments (36,568) (9,961) Net gain (loss) on cash flow hedges 957 (2,214)

Items that will never be recycled: Remeasurement of the net defined benefit liability(asset) (57,685) (33,894)

Total comprehensive income ₩ 705,647 ₩ 1,721,404

Attributable to: Equity holders of the parent 617,554 1,650,170 Non-controlling interests 88,093 71,234

Earnings per share 55Basic earnings per share ₩ 3,399 ₩ 6,648 Diluted earnings per share 3,388 6,631


2013 2012

- 4 -4

Hana Financial Group Inc.Consolidated statements of changes in equityFor the years ended December 31, 2013 and 2012(Korean won in millions)

Notes₩ 1,215,249 ₩ 299,121 ₩ 6,669,072 ₩ (70,712) ₩ 291,429 ₩ 5,677,021 ₩ 14,081,180 ₩ 739,758 ₩ 14,820,938

Changes in accounting policy 3 - - - - (22,002) 42,987 20,985 - 20,985Effects of retrospective restatement 60 - - - - 8,517 (32,364) (23,847) - (23,847)Restated balance 1,215,249 299,121 6,669,072 (70,712) 277,944 5,687,644 14,078,318 739,758 14,818,076

- - - - - (72,309) (72,309) - (72,309)Interim dividends - - - - - (48,206) (48,206) - (48,206)Acquisition of equity interests in subsidiaries - - - - - - - 4,336,245 4,336,245

- - 115,413 - - - 115,413 (261,183) (145,770)- - 10,678 (10,701) - - (23) - (23)- - 19,740 464 - - 20,204 (233,520) (213,316)

54 - - - - - (19,082) (19,082) (33,990) (53,072)- - - - - (160) (160) (432) (592)

1,215,249 299,121 6,814,903 (80,949) 277,944 5,547,887 14,074,155 4,546,878 18,621,033- - - - - 1,621,531 1,621,531 107,649 1,729,180- - - - 166,429 - 166,429 4,572 171,001- - - - (95,485) - (95,485) (37,223) (132,708)

- - - - (9,908) - (9,908) (53) (9,961)- - - - (1,129) - (1,129) (1,085) (2,214)- - - - (31,268) - (31,268) (2,626) (33,894)- - - - 28,639 1,621,531 1,650,170 71,234 1,721,404

₩ 1,215,249 ₩ 299,121 ₩ 6,814,903 ₩ (80,949) ₩ 306,583 ₩ 7,169,418 ₩ 15,724,325 ₩ 4,618,112 ₩ 20,342,437

Notes₩ 1,215,249 ₩ 299,121 ₩ 6,814,903 ₩ (80,949) ₩ 306,583 ₩ 7,169,418 ₩ 15,724,325 ₩ 4,618,112 ₩ 20,342,437

- - - - - (60,257) (60,257) (12,898) (73,155)Interim dividends - - - - - (43,288) (43,288) - (43,288)

- - (9,920) - - - (9,920) (10,749) (20,669)- - - - - - - 179,737 179,737

54 - - - - - (19,082) (19,082) (20,063) (39,145)35 234,221 - 3,575,804 (94,740) - - 3,715,285 (3,883,561) (168,276)36 - - (213) 5,022 - - 4,809 - 4,809

- - - 410 - - 410 (1,029) (619)- - - (4) - 2,170 2,166 (19) 2,147

1,449,470 299,121 10,380,574 (170,261) 306,583 7,048,961 19,314,448 869,530 20,183,978- - - - - 933,877 933,877 59,091 992,968- - - - (106,932) - (106,932) 18,229 (88,703)- - - - (115,916) - (115,916) 10,594 (105,322)

- - - - (36,206) - (36,206) (362) (36,568)- - - - 488 - 488 469 957- - - - (57,757) - (57,757) 72 (57,685)- - - - (316,323) 933,877 617,554 88,093 705,647

₩ 1,449,470 ₩ 299,121 ₩ 10,380,574 ₩ (170,261) ₩ (9,740) ₩ 7,982,838 ₩ 19,932,002 ₩ 957,623 ₩ 20,889,625


As of December 31, 2012

Acquisition and disposal of treasury stock

Remeasurement of the net defined benefit liability

Issuance of hybrid equity securitiesDividends on hybrid equity securities

Remeasurement of the net defined benefit liability

method investmentsNet gain on cash flow hedges

Total comprehensive income

Others

Total comprehensive income

As of December 31, 2013

Net income for the periodLoss on valuation of available-for-sale financial assetsExchange differences on transaction of foreign operationsChanges in unrealized gain on valuation of equity

Non-controllingshareholders'

equity

Dividends

Exercise of appraisal rights of shareholders

Issuance of share capital (share swap)

Hybrid equitysecurities

Capitalsurplus

Capitaladjustments

Accumulatedother

comprehensiveincome

Equityattributable to

equity holders ofthe parentIssued capital Total

Retainedearnings

As of January 1, 2013

Acquisition of additional equity interests in subsidiaries

Net income for the periodGain on valuation of available-for-sale financial assetsExchange differences on transaction of foreign operationsChanges in unrealized gain on valuation of equity method

TotalAs of January 1, 2012 (reported amounts)

Acquisition of additional equity interests in subsidiaries

Issued capitalHybrid equity

securitiesCapitalsurplus

Equityattributable to

equity holders ofthe parent

Capitaladjustments

Retainedearnings

investmentsNet loss on cash flow hedges

Non-controllingshareholders'

equity

Others

Accumulatedother

comprehensiveincome

Exercise and expiration of share-based payment transactionsRedemption of hybrid equity securitiesDividends on hybrid equity securities

Dividends

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Hana Financial Group Inc.Consolidated statements of cash flowsFor the years ended December 31, 2013 and 2012(Korean won in millions)

Notes

Operating activities

Net income before income tax ₩ 1,270,273 ₩ 1,992,211

Adjustments to reconcile net income before income tax tonet cash flows:Net interest expense (income) 30,391 (41,526)Net loss (gain) on valuation of trading securities 12,320 (348,969)Net loss (gain) on valuation of financial assets and liabilities designated at fair value through profit and loss (75,918) 259,863 Net gain on disposal of available-for-sale financial assets (196,220) (182,541)Net loss (gain) on fair value of hedged items 36,893 (10,949)Net gain on disposal of held-to-maturity investments (345) (9)Impairment loss on available-for-sale financial assets 162,304 180,440 Loss on foreign exchange translation 240,329 192,535 Provision of allowance for possible loan losses 1,109,351 1,446,546 Depreciation and amortization 499,542 455,595 Share based payment expense 8,649 (1,871)Provision of post-employment benefit obligations 142,855 194,319 Net gain on valuation of investments in associates and joint ventures (85,213) (66,791)Other loss relating to property, equipment and intangible assets, net 10,715 15,881 Gain on a bargain purchase (73,602) (1,068,381)Others 16,676 135,365

1,838,727 1,159,507

Changes in operating assets and liabilities:Due from banks 1,892,744 (4,095,179)Financial assets held-for-trading (793,517) (2,190,933)Financial assets designated at fair value through profit and loss (9,260,874) 1,844,767 Loans receivable (206,074) (7,669)Derivative assets used for hedging purposes (124,703) 25,715 Investment in associates and joint ventures 25,569 (723)Other assets 2,559,810 4,189,673 Financial liabilities held-for-trading 424,759 703,075 Financial liabilities designated at fair value through profit and loss 655,142 1,131,822 Deposits 9,144,457 4,472,271 Derivative liabilities used for hedging purposes 125,930 10,589 Payment of post-employment benefit obligations (170,772) (210,911)Provisions (76,694) (59,892)Other liabilities (317,109) (2,247,377)

3,878,668 3,565,228

Payment of income tax (183,533) (1,085,493)Net cash flows provided by operating activities 6,804,135 5,631,453

(Continued)The accompanying notes are integral part of the consolidated financial statements.

2013 2012

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Hana Financial Group Inc.Consolidated statements of cash flowsFor the years ended December 31, 2013 and 2012(Korean won in millions)

NotesInvesting activities

Net cash flow used in purchasing subsidiary 272,176 1,533,684 Purchase of available-for-sale financial assets (18,831,627) (12,692,837)Proceeds from disposal of available-for-sale financial assets 15,816,717 9,562,551 Purchase of held-to-maturity financial assets (3,620,350) (362,533)Proceeds from redemption of held-to-maturity financial assets 6,211,081 1,200,545 Purchase of investments in associates (149,998) (46,600)Proceeds from disposal of investments in associates 88,802 34,347 Acquisition of property and equipment (190,593) (231,138)Proceeds from disposal of property and equipment 18,277 60,282 Purchase of investment property (4,941) (37)Proceeds from disposal of investment property - 3,415 Purchase of intangible assets (68,212) (85,080)Proceeds from disposal of intangible assets 5,986 2,865 Increase in guarantee deposit, net (1,509,046) (909,560)

Net cash flows used in investing activities (1,961,728) (1,930,096)

Financing activitiesIncrease (decrease) in borrowings, net 6,993 (1,272,893)Issuance of debentures 8,868,767 13,466,796 Redemption of debentures (10,570,302) (14,754,869)

The exercise of share options - (18)Dividends paid (103,545) (120,515)Dividends of hybrid equity securities (19,082) (19,082)Acquisition of treasury stock (49,216) - Disposal of treasury stock 43,122 - Transaction costs of issuance of shares (1,215) - Decrease in non-controlling shareholders' equity , net (571,047) (393,541)

Net cash flows used in investing activities (2,395,525) (3,094,122)

Effect of exchange rate changes on cash and cash equivalents (101,790) (180,471)

Net Increase in cash and cash equivalents 2,345,092 426,764 Cash and cash equivalents at the beginning of the period 7,669,500 7,242,736 Cash and cash equivalents at the end of the period 57 ₩ 10,014,592 ₩ 7,669,500


2013 2012

-7-

Hana Financial Group Inc. Notes to the consolidated financial statements December 31, 2013 and 2012

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1. Company information The accompanying consolidated financial statements include Hana Financial Group Inc. (“HFG”), its controlled subsidiaries (collectively, the “Company”), and investment in joint ventures. General information describing HFG, the Company and joint ventures is provided below. 1.1 HFG

HFG was incorporated on December 1, 2005 under the Financial Holding Company Act, by issuing 204,256,243 common shares with the aggregate par value of ￦1,021,281 million to the shareholders of Hana Bank, Hana Daetoo Securities Co., Ltd. (formerly, Daehan Investment and Securities Co. Ltd., “H&DS”), Hana INS Co., Ltd. (“Hana INS”), and Hana Institute of Finance (“HIF”) in exchange for those entities’ shares owned by their shareholders. HFG was established to primarily engage in management of its subsidiaries, which operate in the financial services industry in the Republic of Korea.

Date of acquisition Subsidiaries Notes October 13, 2006 Hana IB Securities Co., Ltd.(“Hana IB”) Acquired by H&DS in 2008 April 27, 2007 Hana Capital Co., Ltd.(“Hana Capital”) Acquired through the stock swap

transaction with Hana Bank August 10, 2007 Hana Life Insurance Co., Ltd.

(“Hana Life Insurance”) Acquired through the stock swap transaction with Hana Bank

October 31, 2009 Hana SK Card Co., Ltd. (“Hana SK Card”)

Established through the spin-off of Hana Bank’s credit card business

March 10, 2010 Hana Asset Trust Co., Ltd. (“Hana Asset Trust”)

Acquired through the purchase of common shares

February 8, 2012 Hana Savings Bank Co., Ltd. (“Hana Savings Bank”)

Established through the purchase and assumption agreement

February 9, 2012 Korea Exchange Bank (“KEB”) Acquired through the purchase of common shares

August 30, 2013 Hana Bancorp, Inc. Acquired through the purchase of common shares


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1. Company information (cont’d) 1.2 Scope of consolidation

Country Major

business Number of

shares Ownership

(%) Reporting

date Subsidiaries of HFG: Hana Bank Korea Banking 219,799,157 100.0 December 31KEB Korea Banking 644,906,826 100.0 December 31H&DS Korea Financial

investments 35,060,263 100.0 December 31Hana SK Card Korea Credit card

business 60,000,000 51.0 December 31Hana Capital Korea Installment

credit financing 7,261,199 50.1 December 31

Hana Asset Trust Korea Real estate trust 10,000,000 100.0 December 31

Hana INS Korea System development

service 1,600,000 100.0 December 31HIF Korea Specialized

service 640,000 100.0 December 31Hana Savings Bank Korea Mutual

savings banking 15,000,000 100.0 December 31

Hana Life Insurance Korea Life insurance 22,040,200 100.0 December 31Hana Bancorp, Inc. U.S Financial

holdings company 6,764,474 71.4 December 31

Hana Short-term Bond Wrap (*)

Korea Investment trust company - - December 31

MMW Series A (*) Korea Investment trust company - - December 31

Special money intrust (*) Korea Specified money intrust - - December 31

Subsidiaries of Hana Bank: Hana Bank (China) Co., Ltd.(*)

China Banking - 100.0 December 31

PT Bank Hana Indonesia Banking 75,100 75.1 December 31LS Leading Solution 128 Private Equity Investment Vehicles [Bond] (*)

Korea Private

investment trust company - 100.0 December 31

Samsung Partner 22 Private Equity Investment Vehicle [Bond](*)

Korea Private



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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d)

Country

Major business

Number of shares

Ownership (%)

Reporting date

UBS Hana Power Private Investment Trust 18 [Bond] (*)

Korea Private investment

trust company - 100.0 December 31UBS Hana Power Private Investment Trust 19 [Bond] (*)


trust company - 100.0 December 31Hanhwa PEF Invest Trust 29 [Bond] (*)


trust company - 100.0 December 31Hyundai Trust PEF Invest 6 [Bond] (*)


trust company - 100.0 December 31Hyundai Trust PEF Invest 14 [Bond] (*)


trust company - 100.0 December 31Korea Investment Basic 54 Private Equity Investment Vehicles [Bond](*)

Korea Private


Hana CSP Co., Ltd (*) Korea SPC - - December 31Hana Cymbidium Co., Ltd (*)

Korea SPC - - December 31

Hana Aphrodite Co., Ltd (*) Korea SPC - - December 31Sevenstar Co., Ltd (*) Korea SPC - - December 31Marine Solution Co., Ltd. (*) Korea SPC - - December 31Chungangstar Co., Ltd. (*) Korea SPC - - December 31Trust Accounts (*) Korea Trust

accounts - - December 31Subsidiaries of KEB: KEB Capital Inc. Korea Investment

and management

service for NPL assets

backed securities 14,976,192 99.30 December 31

KEB Futures Co., Ltd. Korea Futures brokerage

service 3,000,000 100.00 December 31KEB Fund Services Co., Ltd.

Korea Transfer agent 510,000 100.00 December 31

KEB(Australia) Holdings Ltd.

Australia Financial business - 100.00 December 31

Korea Exchange Bank of Canada

Canada Financial business 334,000 100.00 December 31

Korea Exchange Bank (Deutschland) A.G.

Germany Financial business 20,000 100.00 December 31


- 11 -


CountryMajor

business Number of

shares Ownership

(%) Reporting

date PT. Bank KEB Indonesia Indonesia Financial

business 1,485 99.00 December 31Banco KEB do Brasil S. A. Brazil Financial

business 69,726,415 100.00 December 31KEB NY Financial Corp. U.S. Financial

business 100 100.00 December 31KEB LA Financial Corp. U.S. Financial

business 200 100.00 December 31KEB USA Int’l Corp. U.S. Financial

business 100 100.00 December 31KEB Asia Finance Limited Hong Kong Financial

business 50,000,000 100.00 December 31KEB Bank (China) Co., Ltd.(*)

China Financial business - 100.00 December 31

Athene 1st Co., Ltd. (*) Korea Special Purpose Company - - December 31

Athene 2nd Co., Ltd. (*) Korea Special Purpose Company - - December 31

Trust accounts (*) Korea Trust accounts - - December 31

Subsidiaries of KEB (Australia) Holdings Ltd.:

KEB Australia Ltd. Australia Financial business 54,999,996 100.00 December 31

Subsidiaries of H&DS: Hana the First Private Equity Fund(*)

Korea Private equity fund - 48.90 December 31

Hana Asia Limited Hong Kong Advisory services for securities 2,000,000 100.00 December 31

Hana Power Limited Liability Company (*)

Korea Private equity fund - 0.90 December 31

Hana Daol Land Chip Heungdeok Real Estate Private Fund 35(*)

Korea Investment

trust - 100.00 December 31KoFC Hana-Dongbu Frontier Champ 2010 No. 6 Private Equity Fund(*)

Korea

Private equity fund - 29.20 December 31

Hana Global Investment Consulting Co., Ltd.(*)

China Investment consulting - 100.00 December 31

Subsidiaries of Hana the First Private Equity Fund:

Radian 1 SPC Co., Ltd. Korea SPC 60,000,020 100.00 December 31Warden 1 SPC Ltd. Korea SPC 1,001,340,000 100.00 December 31


- 12 -


Country Major

business Number of

shares Ownership

(%) Reporting

date Subsidiaries of Hana SK Card:

Saenggakdaero T 10th Securitization Specialty Co., Ltd. (*)

Korea Asset

securitization - - December 31Saenggakdaero T 11th Securitization Specialty Co., Ltd. (*)

Korea Asset


Korea Asset


Korea Asset

securitization - - December 31Subsidiaries of Hana Asset Trust:

Hana Asset Management Co., Ltd.

Korea Asset management 2,000,000 100.00 December 31

Subsidiaries of Hana Bancorp, Inc.:

BNB Hana Bank, N.A U.S Banking 500,000 100.00 December 31BNB Funding Corp. (*) U.S SPC - - December 31BNB Statutory trust I U.S SPC 155,000 100.00 December 31

(*) These investees maintain no shares as they were incorporated as either a private equity investment vehicle, special purpose entity or a trust.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) The financial information of subsidiaries as of December 31, 2013 and 2012 is as follows (Korean won in millions):

December 31, 2013

Assets Liabilities Equity Revenue Net income

(loss)

Other comprehensive income(loss)

Comprehensive income (loss)

Hana Bank (*1) ₩ 162,894,654 ₩ 151,449,384 ₩ 11,445,270 ₩ 12,640,198 ₩ 708,740 ₩ (196,533) ₩ 512,207 KEB (*1) 106,633,816 97,050,850 9,582,966 9,486,414 444,123 (23,696) 420,427 H&DS (*1) 13,325,966 11,721,902 1,604,064 2,047,990 62,046 (4,736) 57,310 Hana SK Card (*1) 4,897,814 4,209,106 688,708 880,728 3,522 1,151 4,673 Hana Capital 3,271,267 3,010,200 261,067 275,113 44,426 (207) 44,219 Hana Asset Trust (*1) 101,513 10,455 91,058 34,006 9,805 68 9,873

Hana INS 26,819 17,435 9,384 91,155 1,088 (23) 1,065 HIF 4,557 1,047 3,510 9,794 24 7 31 Hana Savings Bank 876,248 728,917 147,331 69,277 5,766 (278) 5,488 Hana Life Insurance (*2) 2,989,949 2,822,009 167,940 320,023 18,136 (44,162) (26,026)

Hana Bancorp, Inc.(*1) (*2) 334,166 281,981 52,185 4,479 (2,609) (2,975) (5,584)


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December 31, 2012

Assets Liabilities Equity Revenue Net income

(loss)

Other comprehensive income (loss)

Comprehensive income (loss)

Hana Bank (*1)(*3) ₩ 155,851,532 ₩ 144,787,623 ₩ 11,063,909 ₩ 14,317,103 ₩ 676,684 ₩ 58,795 ₩ 735,479 KEB (*1)(*2)(*3) 104,656,207 95,597,347 9,058,860 8,804,201 579,853 (216,231) 363,622 H&DS (*1)(*3) 12,422,225 10,875,180 1,547,045 2,526,416 22,686 9,455 32,141 Hana SK Card (*1) 8,184,000 7,499,804 684,196 1,021,064 (29,504) (2,740) (32,244) Hana Capital 2,791,677 2,574,750 216,927 265,168 28,371 (5,610) 22,761 Hana Asset Trust (*1) 94,375 13,038 81,337 35,947 10,995 159 11,154

Hana INS 27,539 19,214 8,325 99,320 (1,293) - (1,293) HIF 4,241 760 3,481 9,082 22 - 22 Hana Savings Bank 1,326,885 1,185,031 141,854 56,441 (41,797) 337 (41,460) (*1) Consolidated financial information of the intermediate parents (*2) Income incurred up to the date of the business combination was excluded. (*3) These subsidiaries restated the financial statements for the prior periods for changes in accounting policies and correction of errors noted in Note 60.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) Changes in scope of consolidation for the year ended December 31, 2013 are as follows:

Name of subsidiaries Reason Included in scope of consolidation: Hana Life Insurance Co., Ltd. Included due to the additional purchase Hana Bancorp, Inc. Included due to the new investments BNB Hana Bank, N.A Included due to the new investments BNB Funding Corp. Included due to the new investments BNB Statutory trust I Included due to the new investments

Radian 1 SPC Co., Ltd. Included due to the new investmentsWarden 1 SPC Ltd. Included due to the new investmentsSamsung Partner 22 Private Equity Investment Vehicle [Bond] Included due to the new investments

UBS Hana Power Private Investment Trust 18 [Bond] Included due to the new investmentsUBS Hana Power Private Investment Trust 19 [Bond] Included due to the new investments

LS Leading Solution 128 Private Equity Private Equity [Bond] Included due to the new investments

Hyundai Trust PEF Invest 14 [Bond] Included due to the new investmentsKorea Investment Basic 54 Private Equity Investment Vehicles [Bond] Included due to the new investments

Chungangstar Co.,Ltd. Included due to acquisition of control Athene 1st Co., Ltd. Included due to the new investments

Athene 2nd Co., Ltd. Included due to the new investments FC Tailored Trust D 13-339 Included due to the new investments FC Tailored Trust D 13-633 Included due to the new investments FC Tailored Trust D 13-893 Included due to the new investments FC Tailored Trust D 13-1044 Included due to the new investments FC Tailored Trust D 13-1091 Included due to the new investments

Excluded from scope of consolidation:

Saenggakdaero T 5th Securitization Specialty Co., Ltd. Excluded due to the liquidation




Saenggakdaero T 9th Securitization Specialty Co., Ltd. Excluded due to the liquidation Samsung Partner 21 Private Equity Investment Vehicle [Bond] Excluded due to the disposal

UBS Hana Power Private Investment Trust 13 [Bond] Excluded due to the disposal UBS Hana Power Private Investment Trust 14 [Bond] Excluded due to the disposal


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Name of subsidiaries Reason LS Leading Solution 109 Private Equity Private Equity [Bond] Excluded due to the disposal

Hyundai Trust PEF Invest 11 [Bond] Excluded due to the disposal Korea Investment Basic 47 Private Equity Investment Vehicles [Bond] Excluded due to the disposal

Hana Short-term Bond Wrap Excluded due to the disposal FC Taliored Trust D 13-78 Excluded due to the disposal FC Taliored Trust D 13-59 Excluded due to the disposal MMT 5-32(RP) Excluded due to the disposal FC Taliored Trust D 13-200 Excluded due to the disposal FC Taliored Trust D 13-339 Excluded due to the disposal FC Taliored Trust D 13-633 Excluded due to the disposal BYH Co., Ltd. Excluded due to loss of control Hana Funding Limited Excluded due to the liquidation

Hana 2nd Securitization Specialty Co., Ltd. Excluded due to the liquidation 1.2.1 Hana Bank Hana Bank was incorporated in November 1959 under the name of Seoul Bank. Seoul Bank acquired Korea Trust Bank in August 1976. On September 27, 2002, Seoul Bank entered into a business combination contract with the former Hana Bank as approved by Seoul Bank’s shareholders. On December 1, 2002, upon completion of the merger, with Seoul Bank as the surviving entity, Seoul Bank changed its name to Hana Bank. Hana Bank is engaged in commercial and consumer banking, investment trusts, foreign currency exchanges and other related operations as permitted under the Banking Act, the Capital Market and Financial Investment Business Act and other relevant laws and regulations in the Republic of Korea. Hana Bank is also engaged in the bancassurance business since September 26, 2003, upon the revision of the Insurance Act. Hana Bank has 219,799,157 common shares (￦1,147,404 million of aggregate par value) outstanding and has 626 domestic branches and 4 overseas branches as of December 31, 2013.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.2 Korea Exchange Bank (“KEB”) KEB was established on January 30, 1967, as a government-invested bank to engage in foreign exchange and trade finance business under the Korea Exchange Bank Act proclaimed on July 28, 1966. On December 30, 1989, the Korea Exchange Bank Act was repealed and KEB was converted into a corporation under the Commercial Code of the Republic of Korea. On April 4, 1994, KEB was listed on the Korean Stock Exchange. The merger between KEB and Korea Exchange Bank Credit Service Co., Ltd. was finalized on February 28, 2004. KEB primarily provides commercial banking services, trust banking services, foreign exchange, merchant banking business through the merger with Korea International Merchant Bank, a domestic subsidiary of the Bank, and other related operations as permitted under the Banking Act, the Capital Market and the Financial Investment Business Act and other relevant laws and regulations in the Republic of Korea. As of Febrary 9, 2012, the Company purchased 57.27% interest in KEB, which gives it control of KEB. On March 15, 2013, the Company’s Board of Directors approved a share swap contract to acquire a 100 percent stake of KEB. Pursuant ot the contract, KEB was incorporated into the Company’s wholly owned subsidiary as of April 5, 2013. As of December 31, 2013, KEB has 644,906,826 common shares (￦3,224,534 million of aggregate par value) outstanding and operates through 354 branches (including 29 depositary offices) and 3 subsidiaries in the Republic of Korea and 23 branches (including 2 depositary offices and 6 offices) and 10 subsidiaries overseas. 1.2.3 H&DS H&DS was incorporated on January 18, 1977 pursuant to the Security Investment Trust Act of the Republic of Korea for the purpose of providing a wide range of security investment trust services for its customers. H&DS combined with Hana IB (formerly, Hana Securities Co., Ltd.) as a business combination under common control (wholly-owned by HFG) on December 1, 2008. H&DS has 35,060,263 common shares (￦175,301 million of aggregated par value) outstanding and 90 branch offices (including 6 business offices) in Korea as of December 31, 2013. 1.2.4 Hana SK Card Hana SK Card was incorporated on October 31, 2009 resulting from the spin-off of Hana Bank’s credit card business to engage in credit sales, cash advance, card loan and other ancillary business pursuant to the Credit-Specialized Financial Business Act of the Republic of Korea. The Company acquired 100% ownership of Hana Card Co., Ltd. (“Hana Card”) through acquiring the entire equity interest of Hana Card. The Company subsequently entered into a joint-venture agreement with SK Telecom Co., Ltd. (“SK Telecom”) on December 11, 2009 to acquire 49% ownership of Hana Card and consequently, Hana Card changed its name to Hana SK Card as a result of the joint-venture. Hana SK Card has 117,647,058 common shares (￦588,235 million of aggregate par value) outstanding and 12 branch offices in Korea as of December 31, 2013.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.5 Hana Capital Hana Capital (formerly, Kolon Capital Co., Ltd.) was incorporated on February 13, 1987 pursuant to the laws of the Republic of Korea and changed its name to Hana Capital on April 8, 2005. Hana Capital obtained a license to engage in the installment financing business on January 9, 1996 in accordance with the Credit Card Business Act of the Republic of Korea and was registered as an installment financing company in accordance with the Credit-Specialized Financial Business Act of the Republic of Korea on February 16, 1999 to engage in leasing, installment financing and corporate and consumer loan business. The Company acquired a 50.13% ownership of Hana Capital through a stock swap transaction with Hana Bank on April 27, 2007. Hana Capital has 14,484,157 common shares (￦72,421 million of aggregate par value) outstanding as of December 31, 2013. 1.2.6 Hana Asset Trust (formerly, Hana Daol Trust Co., Ltd.) Hana Asset Trust was incorporated on June 15, 1999 for the purpose of conducting research and analysis of regional and local developments. On February 27, 2004, Hana Asset Trust changed its primary business to a real estate investment trust company, pursuant to the Trust Business Act. The Company acquired 58% ownership of Hana Daol Trust (formerly, Daol Trust Co., Ltd.) and incorporated Hana Daol Trust as its subsidiary as of March 10, 2010. The Company additionally acquired 7% ownership of Hana Daol Trust as of December 30, 2011, and purchased residual interest in Hana Daol Trust for the year ended December 31, 2013 and incorporated Hana Asset Trust (formerly, Hana Daol Trust) as its wholly owned subsidiary as of December 31, 2013. Hana Asset Trust has 10,000,000 common shares (￦10,000 million of aggregate par value) outstanding as of December 31, 2013. 1.2.7 Hana INS Hana INS was incorporated on August 30, 1990 pursuant to the laws of the Republic of Korea for the purpose of developing and maintaining software used in the financial service industry. Hana INS has 1,600,000 common shares (￦8,000 million of aggregate par value) outstanding as of December 31, 2013. 1.2.8 HIF HIF (formerly, Korea Investment & Economy Research Inc.) was incorporated on July 3, 1990 pursuant to the laws of the Republic of Korea for the purpose of engaging in research and analysis of domestic and global economies, various industry sectors, including the financial industry, and sales of such research findings. HIF has 640,000 common shares (￦3,200 million of aggregate par value) outstanding as of December 31, 2013.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.9 Hana Savings Bank Hana Savings Bank was incorporated on February 8, 2012 pursuant to the Depositor Protection Act of the Republic of Korea for the purpose of engaging in the credit business as permitted by Financial Services Commission and the Company made a purchase and assumption agreement with Korea Deposit Insurance Corporation. In accordance to the agreement, Hana Savings Bank commenced its business after purchasing assets and assuming liabilities from Ace Savings Bank and Jeil-Ⅱ Savings Bank on February 17, 2012. On September 5, 2012, Hana Savings Bank purchased assets and assumed liabilities from Korea Mutual Savings Bank in accordance to the purchase and assumption agreement with Korea Deposit Insurance Corporation after the approval of the Board of Directors held on August 21, 2012. Hana Savings Bank has 15,000,000 common shares (￦75,000 million of aggregated par value) outstanding and 12 branch offices (including 4 depositary offices) in Korea as of December 31, 2013. 1.2.10 Hana Life Insurance (formerly, Hana HSBC Insurance Co., Ltd.) Hana Life Insurance was incorporated on November 25, 1991 pursuant to the laws of the Republic of Korea to engage in the life insurance business. The Company acquired 100% ownership of Hana Life Insurance Co., Ltd. through a stock swap transaction with Hana Bank on August 10, 2007 and the Company subsequently sold its 50% ownership minus 1 share of Hana Life Insurance on January 28, 2008 to the HSBC Group, and changed its name to Hana HSBC Insurance. On April 26, 2013, the Company’s Board of Directors approved a share purchase contract to acquire a 50 percent minus 1 share of Hana HSBC Insurance, and changed its name to Hana Life Insurance on May 10, 2013. Hana Life Insurance has 22,040,200 common shares (￦110,201 million of aggregate par value) outstanding as of December 31, 2013 1.2.11 Hana Bancorp, Inc. Hana Bancorp, Inc.(formerly, BNB Financial Service Corporation) was incorporated on April 8, 1988 to engage in the bank business. The Company acquired 52.29% ownership of BNB Financial Service Corporation and incorporated Hana Bancorp, Inc. as its subsidiaries as of October 31, 2013. The Company additionally acquired 19.08% of ownership of Hana Bancorp, Inc. and consequently has 71.37% ownership as of December 31, 2013.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.12 Private Equity Investment Vehicles In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated 3 special money intrusts, MMW Series A and Hana Short-term Bond Wrap because the Company is exposed, or has rights, to variable returns from its involvement with the private equity investment vehicles and has the ability to affect those returns through its power over the private equity investment vehicles. 1.2.13 Subsidiaries of Hana Bank 1.2.13.1 Hana Bank (China) Co., Ltd. (“Hana Bank China”) Hana Bank China was incorporated to engage in commercial banking, foreign currency exchanges and other related operations in China on December 14, 2007. Issued capital of Hana Bank China amounts to CNY 2 billion as of December 31, 2013, and its head office is located in Beijing with 19 branches including a branch in Qingdao, formerly, the Qingdao International Bank. 1.2.13.2 PT Bank Hana PT Bank Hana was established in April 1971 to engage in both retail and wholesale banking operations under the laws of Indonesia. On December 14, 2007, Hana Bank acquired 60.97% ownership of PT Bank Hana under a share purchase and sale agreement. As of December 31, 2013, Hana Bank owns 75.1% ownership of PT Bank Hana as a result of a subsequent increase in issued capital of IDR1,000 billion. PT Bank Hana’s head office is located in Jakarta with 35 branches. 1.2.13.3 Private Equity Investment Vehicles In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated 8 private equity investment vehicles because the Company is exposed, or has rights, to variable returns from its involvement with the private equity investment vehicles and has the ability to affect those returns through its power over the private equity investment vehicles. 1.2.13.4 Special Purpose Entities In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated 5 special purpose companies because the Company is exposed, or has rights, to variable returns from its involvement with the SPEs and has the ability to affect those returns through its power over the SPEs.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.13.5 Trust Accounts In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated trust accounts with a guarantee of principal repayment or with a guarantee of principal and interest repayment because the Company is exposed, or has rights, to variable returns from its involvement with the trust accounts and has the ability to affect those returns through its power over the trust accounts. 1.2.14 Subsidiaries of KEB 1.2.14.1 KEB Capital Inc. KEB Capital Inc. (“KEBC”) was established on September 11, 1989, to engage in equipment rental and other relevant businesses under the Specialized Credit Financial Business Act (formerly, Equipment Rental Business Act) and was listed on the Korea Securities Dealers Automated Quotation (“KOSDAQ”) on January 15, 1995. KEBC has changed its name to KEB Capital Inc. on October 18, 2012. KEBC has ￦75,400 million of aggregated par value as of December 31, 2013. KEB is restricted to control a company which runs the specialized credit financial business in accordance with the Finacial Holding Companies Act Article 19 as on and after January 31, 2014. On October 17, 2013, KEBC’s Board of Directors approved to change business field to investment in asset backed securities and asset management business in Asset-Backed Securitization Act. 1.2.14.2 KEB Futures Co., Ltd. KEB Futures Co., Ltd. (“KEBF”) was incorporated on September 24, 1997 as an integrated futures broker of KEB. In 1998, KEBF was granted a futures trading license for overseas markets and domestic operations from the Ministry of Economy and Finance. KEBF changed its name to KEB Futures Co., Ltd. on March 19, 1999. KEBF has ￦15,000 million of aggregated par value as of December 31, 2013 and is wholly owned by KEB. 1.2.14.3 KEB Fund Services Co., Ltd. KEB Fund Services Co., Ltd.(“KEB Fund Services”) was established on April 1, 2003 to provide trust services for securities companies and general services including accounting and trust services for banks, pension funds and other companies under the Capital Market and Financial Investment Business Act (formerly, Indirect Investment Asset Management Business Act). KEB Fund Services has ￦2,550 million of aggregated par value as of December 31, 2013 and is wholly owned by KEB. 1.2.14.4 Korea Exchange Bank of Canada Korea Exchange Bank of Canada (“KEBOC”) was established in Toronto, Canada on October 6, 1981 to provide financial services to Korean companies and residents in Toronto and the surrounding area. KEBOC has CAD33,400 thousand of aggregated par value as of December 31, 2013 after several capital increase and is wholly owned by KEB.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.14.5 KEB (Australia) Holdings Ltd. KEB (Australia) Holdings Ltd. is a paper company with the purose to establish KEB Australia Ltd. and is wholly owned by KEB. KEB Australia Ltd. (“KEBA”) was established in Sydney, Australia on July 6, 1986 to provide financial services to Korean companies and residents in Sydney and the surrounding area. KEBA has AUD55,000 thousand of aggregated par value as of December 31, 2013 after several capital increases and is wholly owned by KEB (Australia) Holding Ltd. 1.2.14.6 Korea Exchange Bank (Deutschland) A.G. Korea Exchange Bank (Deutschland) A.G. (“KEBDAG”) was established in Frankfurt, Germany on December 29, 1992 to provide financial services to Korean companies and residents in Frankfurt and the surrounding area. KEBDAG has EUR15,339 thousand of aggregated par value as of December 31, 2013 and is wholly owned by KEB. 1.2.14.7 PT. Bank KEB Indonesia PT. Bank KEB Indonesia (“KEBI”) was established in Jakarta, Indonesia on November 5, 1990 to provide financial services to Korean companies and residents in Jakarta and the surrounding area and changed its name from PT. KOREA Exchange Bank Danamon to PT. Bank KEB Indonesia in 2006. As of December 31, 2013, KEBI has IDR150,000 million of aggregated par value and KEB has a 99% stake in KEBI. 1.2.14.8 Banco KEB do Brasil S. A. Banco KEB do Brasil S. A. (“KEBB”) was incorporated on May 21, 1999 to provide finance services for foreign clients, advisory services, finance arrangement and security investment trust services regarding overseas investment for domestic companies. As of December 31, 2013, KEBB has BRL69,726 thousand of aggregated par value and is wholly owned by KEB. 1.2.14.9 KEB NY Financial Corp. KEB NY Financial Corp.(“NYFinCo”) was established in New York, USA on April 8, 2004 to provide financial services to Korean companies and residents in New York and the surrounding area. As of December 31, 2013, NYFinCo has US$1 of aggregated par value and is wholly owned by KEB. 1.2.14.10 KEB LA Financial Corp. KEB LA Financial Corp.(“LAFinCo”) was established in Los Angeles, USA on July 2, 2009 to provide financial services to Korean companies and residents in Los Angeles and the surrounding area. As of December 31, 2013, LAFinCo has US$2 of aggregated par value and is wholly owned by KEB. 1.2.14.11 KEB USA Int’l Corp. KEB USA Int’l Corp. (“USAI”) was incorporated on May 3, 2004 to engage in the foreign exchange business. As of December 31, 2013, USAI has US$1 of aggregated par value and is wholly owned by KEB.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.14.12 KEB Asia Finance Limited KEB Asia Finance Limited (“KAF”) was established on July 2, 2009 to provide finance services for foreign clients, advisory services, finance arrangement and security investment trust services regarding overseas investment for domestic companies. As of December 31, 2013, KAF has US$50,000 thousand of aggregated par value and is wholly owned by KEB. 1.2.14.13 KEB Bank (China) Co., Ltd. KEB Bank (China) Co., Ltd. (“KEB China”) was incorporated on May 17, 2010 to enter China’s market, a major market in Asia, and to provide financial services for Korean or Chinese companies and individuals. KEB China has CNY2,200 million of aggregated par value as of December 31, 2013 and is wholly owned by KEB. 1.2.14.14 Special Purpose Entities In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated two special purpose entities because the Company is exposed, or has rights, to variable returns from its involvement with the SPEs and has the ability to affect those returns through its power over the SPEs. 1.2.14.15 Trust accounts In accordance with the KIFRS 1110 Consolidated Financial Statements, the Company consolidated 11 trust accounts with guarantee of the repayment of principal or with guarantee of the repayment of principal and interest because the Company is exposed, or has rights, to variable returns from its involvement with the trust accounts and has the ability to affect those returns through its power over the trust accounts. 1.2.15 Subsidiaries of H&DS 1.2.15.1 Hana the First Private Equity Fund Hana the First Private Equity Fund (“Hana the First PEF”) was established on December 22, 2009 as a joint-stock company under the Capital Market Financial Investment Business Act for the purpose of distributing to the partners of Hana the First PEF the profits generated from participating in control, improving financial, business and governance structures of invested companies. Hana the First PEF is owned by Hana Bank (29.97% ownership) as a limited partner and H&DS (18.93% ownership) as a general and management partner. 1.2.15.2 Hana Asia Limited Hana Asia Limited was incorporated on July 3, 2008 under the Securities and Futures Ordinance to engage in investment trusts.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.15.3 Hana Power Limited Liability Company Hana Power Limited Liability Company was incorporated on December 27, 2010 under the Commercial Act to acquire and manage common shares issued by Commerce & Industry Energy Co., Ltd. and the related rights. Issued capital of Hana Power Limited Liability Company amounts to ₩10,000 thousand as of the reporting date. H&DS controls Hana Power Limited Liability Company because H&DS is exposed, or has rights, to variable returns from its involvement with Hana Power Limited Liability Company and has the ability to affect those returns through its power over Hana Power Limited Liability Company based on the facts that the Company obtains benefits from the loans and equity investments and provides credit enhancements. 1.2.15.4 Hana Daol Land Chip Heungdeok Real Estate Private Fund 35 Hana Daol Land Chip Heungdeok Real Estate Private Fund 35 was incorporated on September 19, 2011 in accordance with the Financial Investment Services and Capital Markets Act and wholly owned by H&DS. 1.2.15.5 KoFC Hana-Dongbu Frontier Champ 2010 No. 6 Private Equity Fund KoFC Hana-Dongbu Frontier Champ 2010 No. 6 Private Equity Fund was incorporated on November 22, 2010 under the Financial Investment Services and Capital Market Act to engage in investment trust services. The Company controls this entity because the Company is exposed, or has rights, to variable returns from its involvement with this entity and has the ability to affect those returns through its power over this entity in accordance with KIFRS 1110 Consoldated Financial Statements. 1.2.15.6 Hana Global Investment Consulting Co., Ltd. Hana Global Investment Consulting Co., Ltd. was incorporated in Beijing on October 14, 2011 and engages in advisory services on issuing bonds, listing China companies on the Korean stock market, cross-border M&A transactions and others. 1.2.16 Subsidiaries of Hana SK Card 1.2.16.1 Special Purpose Entities In accordance with the KIFRS 1110 Consoldated Financial Statements, the Company consolidated 4 special purpose entities including Saenggakdaero T 10th Securitization Specialty Co., Ltd., Saenggakdaero T 11th Securitization Specialty Co., Ltd., Saenggakdaero T 12th Securitization Specialty Co., Ltd. and Saenggakdaero T 17th Securitization Specialty Co., Ltd assuming that Hana SK Card is exposed, or has rights, to variable returns from its involvement with the special purpose entities and has the ability to affect those returns through its power over the entities.


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1. Company information (cont’d) 1.2 Scope of consolidation (cont’d) 1.2.17 Subsidiaries of Hana Asset trust 1.2.17.1 Hana Asset Management Co., Ltd. (formerly, Hana Daol Fund Management Co., Ltd) Hana Asset Management Co., Ltd. (“Hana Asset Management”) was incorporated on April 14, 2006 for the purpose of providing asset management and investment advisory services, pursuant to the Capital Market Financial Investment Business Act. Hana Asset Management changes its name from Hana Daol Fund Management to Hana Asset Management on December 12, 2013. Hana Asset Management has 2,000,000 common shares (￦10,000 million of aggregate par value) outstanding, which are wholly owned by Hana Asset Trust as of December 31, 2013. 2. Principles of consolidation Subsidiaries are fully consolidated from the date on which control is transferred to the Company. Subsidiaries are no longer consolidated from the date on which the Company loses control over them. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities. The Company consolidates special purpose entities (SPEs) if the substance of its relationship with them indicates that it has control over them. The Company considers the existence and influence of exercisable or transferrable voting rights when evaluating its subsidiaries. The investment accounts of the Company and the corresponding equity accounts of the subsidiaries are eliminated in consolidation. The consolidated financial statements reflect only the share of the consolidated subsidiaries post-application of purchase accounting method. The difference between the cost of investment and the Company’s share of fair value of identifiable net assets and liabilities of the subsidiaries at the date of purchase accounting method application is presented as goodwill or negative goodwill. A review of impairment is performed at the end of each reporting date. If the Company acquires the additional equity in a subsidiary after the acquisition date, the additional investment accounts of the Company and the corresponding equity accounts of the subsidiary are eliminated based on the initial acquisition date. The differences between the investment accounts and the corresponding equity accounts are recognized as the consolidated capital surplus or capital adjustments. All significant intercompany transactions and account balances among consolidated companies are eliminated on consolidation. Unrealized gains or losses included in loans and borrowings arising from transactions between consolidated companies are eliminated on consolidation. The related accounts receivable and payable are also eliminated on consolidation.


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2. Principles of consolidation (cont’d) Under the equity method of accounting, the Company’s initial investment in an investee is recorded at acquisition cost. Subsequently, the carrying amount of the investment is adjusted to reflect the Company’s share of income or loss of the investee in the statement of comprehensive income and share of changes in equity that have been recognized directly in the equity of the investee in the related equity account of the Company on the statement of financial position. The Company consolidates the financial statements using the Company’s financial statements reporting period which is coterminous with the reporting period of the consolidated subsidiaries. A special reserve provided for possible future losses on certain trust accounts under the arrangement of guaranteed fixed rate of return and repayment of the principal is included under retained earnings in the consolidated financial statements. Non-controlling interests are presented as a separate component of equity in the consolidated statement of financial position. Losses in excess of non-controlling interests are treated as a reduction to equity. If there is a subsequent recovery from the losses in excess of the non-controlling interests, a reversal of the previous charge to equity is made up to the extent of the original amount charged to equity. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. Each identifiable asset and liability is measured at fair value at the acquisition date except for the following below:

- Lease contracts are required to be classified based on the contractual terms and other factors as at the contract date.

- Contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognized.

- Deferred tax assets or liabilities are recognized and measured in accordance with KIFRS 1012 Income Taxes.

- Employee benefit arrangements are recognized and measured in accordance with KIFRS 1019 Employee Benefits.

- Indemnification assets are recognized and measured on the same basis as the indemnified items.

- Reacquired rights are measured in accordance with special provisions. - Liabilities or equity instruments related to share-based payment transactions are measured

in accordance with KIFRS 1102 Share-based Payment. - Assets held for sale are measured at net fair value in accordance with KIFRS 1105

Non-current Assets Held for Sale. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer. However, any portion of the acquirer's share-based payment awards exchanged for awards held by the acquiree's employees that is included in consideration transferred in the business combination shall be measured in accordance with the method described above rather than at fair value.


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2. Principles of consolidation (cont’d) Acquisition-related costs are costs the acquirer incurs to achieve a business combination. Those costs include finder's fees; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. Acquisition-related costs, other than those associated with the issue of debt or equity securities, are expensed in the periods in which the costs are incurred and the services are received. The costs to issue debt or equity securities are recognized in accordance with KIFRS 1032 Financial Instruments: Presentation and KIFRS 1039 Financial Instruments: Recognition and Measurement. The Company recognizes goodwill as of the acquisition date measured as the excess of the aggregate of (i) the consideration transferred measured in accordance with this IFRS, which generally requires acquisition-date fair value, (ii) the amount of any non-controlling interest in the acquiree measured in accordance with this IFRS; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquire, over (iv) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this IFRS. Occasionally, the Company makes a bargain purchase, which is a business combination in which the amount in (iv) exceeds the aggregate of (i), (ii) and (iii). If that excess remains after reassessing whether the Company has correctly identified all of the assets acquired and all of the liabilities assumed and shall recognize any additional assets or liabilities that are identified in that review, the Company recognizes the resulting gain in profit or loss on the acquisition date. Additional acquisition of non-controlling interests is recognized as the transaction of shareholders and no relating goodwill is recognizied. 3. Summary of significant accounting policies 3.1 Basis of preparation The consolidated financial statements of the Company have been prepared in accordance with Korea International Financial Reporting Standards (K-IFRS) enacted by the Corporate External Audit Law. The accompanying consolidated financial statements have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language financial statements. In the event of any differences in interpreting the financial statements or the independent auditors’ report thereon, the Korean version, which is used for regulatory reporting purposes, shall prevail. The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Company presents an additional statement of financial position at the beginning of the earliest period presented when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification of items in financial statements. An additional statement of financial position as at January 1, 2012 is presented in these consolidated financial statements due to retrospective application of certain accounting policies and retrospective restatements, refer Note 3 and 60.


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3. Summary of significant accounting policies (cont’d) 3.2 Foreign exchange 3.2.1 Functional currency When preparing for the financial statements, the Company measures and recognizes all transactions according to the functional currency. The term, functional currency, is defined as the currency used to conduct operating activities in the primary economic environment and trades between entities using its own functional currency and other currencies which are converted to the functional currency to be measured and recognized. 3.2.2 Translation of foreign currency transactions and balances at the end of the reporting period Transactions in foreign currencies are initially recorded at the functional currency rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange at the reporting date. Non–monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non–monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. 3.2.3 Translation of the Company’s foreign affiliates As at the reporting date, the assets and liabilities of subsidiaries and overseas branches are translated into the Company’s presentation currency, Korean Won (KRW), at the rate of exchange as at the reporting date, and their statement of comprehensive income are translated at the weighted-average exchange rates for the year. Exchange differences arising on translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity related to that particular foreign operation is recognized as other operating expenses or other operating income in the Company’s consolidated statements of comprehensive income. 3.3 Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise of cash at banks and on hand and short-term deposits with an original maturity of three months or less. The purpose of cash and cash equivalents are to make short-term investments and to meet short-term cash demands. Cash and cash equivalents are highly liquidable and can be easily convertible and subject to changes in value.


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3. Summary of significant accounting policies (cont’d) 3.4. Initial recognition and measurement of financial assets Financial assets within the scope of KIFRS 1039 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset. The Company’s financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments, and derivative financial instruments. 3.4.1 Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by KIFRS 1039. Derivatives, including separated embedded derivatives are also classified as held-for-trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognized in finance income or finance cost in the statement of comprehensive income. The Company may only designate financial assets as financial assets at fair value through profit or loss upon initial recognition when the following criteria is met.

- The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis.

- The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

- The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwise would be required by the contract.


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3. Summary of significant accounting policies (cont’d) 3.4. Initial recognition and measurement of financial assets (cont’d) 3.4.2 Available-for-sale financial investments Available-for-sale financial investments include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or the investment is determined to be impaired, at which time the cumulative loss is recognized in the statement of comprehensive income in finance costs and removed from the available-for-sale reserve. The Company evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and the management’s intention significantly changes in the foreseeable future, the Company may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and has the intent and ability to hold these assets for the foreseeable future or maturity.Reclassification to held-to-maturity is permitted only when the entity has the ability and intention to hold the financial asset accordingly. For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the effective interest rate(“EIR”) method. Any difference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired then the amount recorded in equity is reclassified to the statement of comprehensive income. 3.4.3 Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to maturity when the Company has the positive intention and ability to hold it to maturity. After initial measurement held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognized in the statement of comprehensive income in finance costs.


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3. Summary of significant accounting policies (cont’d) 3.4. Initial recognition and measurement of financial assets (cont’d) 3.4.4 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the EIR, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognized in the statement of comprehensive income in finance costs. 3.5 Derivative financial instruments and hedge accounting The Company uses derivative financial instruments such as forward currency contracts, interest rate swaps and forward commodity contracts to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives are taken directly to the statement of comprehensive income, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income. For the purpose of hedge accounting, hedges are classified as:

- Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (except for foreign currency risk)

- Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges which meet the strict criteria for hedge accounting are accounted for as follows:


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3. Summary of significant accounting policies (cont’d) 3.5 Derivative financial instruments and hedge accounting (cont’d) 3.5.1 Fair value hedges The change in the fair value of an interest rate hedging derivative is recognized in the statement of comprehensive income in finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognized in the statement of comprehensive income in finance costs. For fair value hedges relating to items carried at amortized cost, the adjustment to carrying value is amortized through the statement of comprehensive income over the remaining term until maturity. Effective interest rate amortization may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the statement of comprehensive income. 3.5.2 Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognized directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of comprehensive income in finance costs. Amounts recognized as other comprehensive income are transferred to the statement of comprehensive income when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognized as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognized in equity are transferred to the statement of comprehensive income. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss. 3.5.3 Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are accounted for as separate derivatives. When their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss (“FVTPL”). In case where fair value is determined using data which is not observable, the difference between the transaction price and model value is deferred and amortized over the life of the associated instrument using the straight-line method.


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3. Summary of significant accounting policies (cont’d) 3.5 Derivative financial instruments and hedge accounting (cont’d) 3.5.4 ‘Day 1’ profit or loss When the transaction price is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets, the Company immediately recognizes the differences between the transaction price and fair value (a ‘Day 1’ profit or loss) in ‘Net trading income’. 3.5.5 Liquidity adjustment and credit valuation adjustment When measuring derivatives at fair value, the liquidity adjustment and credit valuation adjustment are calculated to reflect the effectiveness of the adjustments for counterparties. 3.6 Investments in associates and joint ventures Investments in entities over which the Company has control or significant influence are accounted for using the equity method. Under the equity method of accounting, the Company’s initial investment in an investee is recorded at acquisition cost. Subsequently, the carrying amount of the investment is adjusted to reflect the Company’s share of income or loss of the investee in the statement of comprehensive income and share of changes in equity that have been recognized directly in the equity of the investee in the related equity account of the Company on the statement of financial position. If the Company’s share of losses of the investee equals or exceeds its interest in the investee, it suspends recognizing its share of further losses. However, if the Company has other long-term interests in the investee, it continues recognizing its share of further losses to the extent of the carrying amount of such long-term interests. The Company resumes the application of the equity method if the Company’s share of income or change in equity of an investee exceeds the Company’s share of losses accumulated during the period of suspension of the equity method of accounting. At the date of acquisition, the excess of the cost of the investment over the Company’s share of the net fair value of the investee’s identifiable assets and liabilities is accounted for as goodwill or negative goodwill. The amortization expense is included as part of valuation gain or loss on the equity method investments in the statement of comprehensive income. The difference related to goodwill is recorded as the carrying amount. Goodwill is reviewed for impairment when signs of damage arise and is not amortized over its useful life. Further, the Company’s share of any difference between the net fair value of the investee’s identifiable assets and liabilities, and the net book value of such assets and liabilities is amortized based on the investee’s accounting treatments on the related assets and liabilities and charged or credited to the valuation gain or loss on the equity method investments in the statement of comprehensive income The Company’s share in the investee’s unrealized profits and losses resulting from transactions between the Company and its investee are eliminated to the extent of the interest in the investee.


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3. Summary of significant accounting policies (cont’d) 3.7 Impairment of financial assets 3.7.1 Available-for-sale financial assets For available-for-sale financial assets, the Company assesses at each reporting date whether there is objective evidence that an asset is impaired. When there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the statement of comprehensive income – is removed from equity and recognized in the statement of comprehensive income. In the case of equity investments classified as available-for-sale, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Also, when objective evidence exists for the impairment of available-for-sale equity securities which are measured using the cost method, the Company calculates the difference between the item’s carrying amount and the present value of the estimated future cash flows using the current market rate of return. Impairment losses on equity investments are not reversed through the statement of comprehensive income; increases in the fair value after impairment are recognized directly in equity. 3.7.2 Held-to-maturity investments When objective evidence exists for the impairment of a particular held-to-maturity financial asset, the Company calculates the difference between the item’s carrying amount and the present value of the estimated future cash flows using the EIR. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment is reversed and reduced by adjusting the allowance account. If the carrying amount does not reflect the impairment at the initial recognition after the reversal, the amount cannot exceed the amortized cost at the date of the reversal recognition. 3.7.3 Loans and receivables The Company first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the impairment loss is recognized in the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the amount of impairment loss.


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3. Summary of significant accounting policies (cont’d) 3.7 Impairment of financial assets (cont’d) The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Company’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past–due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. 3.8 Reclassification of financial assets The Company may reclassify, in certain circumstances, non–derivative financial assets out of the ‘Held–for–trading’ category and into the ‘Available–for–sale’, ‘Loans and receivables’, or ‘Held–to–maturity’ categories. From this date it was also permitted to reclassify, in certain circumstances, financial instruments out of the ‘Available–for–sale’ category and into the ‘Loans and receivables’ category. Reclassifications are recorded at fair value at the date of reclassification, which becomes the new amortized cost. For a financial asset reclassified out of the ‘Available–for–sale’ category, any previous gain or loss on that asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired then the amount recorded in equity is recycled to the statement of comprehensive income. The Company may reclassify a non–derivative trading asset out of the ‘Held–for–trading’ category and into the ‘Loans and receivables’ category if it meets the definition of loans and receivables and the Company has the intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset is reclassified, and if the Company subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as an adjustment to the EIR from the date of the change in estimate.


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3. Summary of significant accounting policies (cont’d) 3.9 Derecognition of financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:

- The rights to receive cash flows from the asset have expired. - The Company has transferred its rights to receive cash flows from the asset or has

assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘Pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. 3.10 Recognition and measurement of financial liabilities All financial liabilities are recognized initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. 3.10.1 Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by KIFRS 1039. Separated embedded derivatives are also classified as held-for-trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held-for-trading are recognized in the statement of comprehensive income.


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3. Summary of significant accounting policies (cont’d) 3.10 Recognition and measurement of financial liabilities (cont’d) 3.10.2 Deposits, borrowings, and debentures After initial recognition, interest bearing deposits, borrowings and debentures are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the statement of comprehensive income when the liabilities are derecognized as well as through the EIR method amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortization is included in finance cost in the statement of comprehensive income. 3.11 Derecognition of financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of comprehensive income. 3.12 Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. 3.13 Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provision is used only for expenditures for which the provision was originally recognized. If the effect of the time value of money is material, provisions are stated at present value. Confirmed acceptances and guarantees, unconfirmed acceptances and guarantees and bills endorsed are not recognized on the statement of financial position, but are disclosed as off-statement of financial position items in the notes to the financial statements. The Company provides a provision for such off-statement of financial position items, applying a Credit Conversion Factor (“CCF”) and provision rates, and records the provision as a reserve for possible losses on acceptances and guarantees. The Company provides an allowance for possible losses on a certain portion of unused credit line and cash advance commitments on credit cards. The Company records the provision for such unused balances as an allowance for possible losses on unused commitments and cash advance commitments which are calculated by applying a CCF and the minimum required provision percentage provided by the Regulation on the Supervision of Banking Business.


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3. Summary of significant accounting policies (cont’d) 3.14 Financial guarantees In the ordinary course of business, the Company gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognized in the financial statements at fair value, being the premium received. Subsequent to initial recognition, the Company’s liability under each guarantee is measured at the higher of the amount initially recognized less, when appropriate, cumulative amortization recognized in the statement of comprehensive income, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees and the premium received are recognized in the statement of comprehensive income. 3.15 Bonds purchased under resale agreements and bonds sold under repurchase agreements Bonds purchased under resale agreements and bonds sold under repurchase agreements are included in loans receivable and borrowings, respectively, in the accompanying statement of financial position. 3.16 Property and equipment Property and equipment (including equipment under operating leases where the Company is the lessor) is stated at cost excluding the costs of day–to–day servicing, less accumulated depreciation and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and are treated as changes in accounting estimates. Depreciation is calculated using the straight–line method or declining balance method to write down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows:

Property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized as other operating income in the statement of comprehensive income when the asset is derecognized. Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.

Depreciation method Years Buildings Straight-line method 5 to 50 Vehicles, furniture and fixtures,

leasehold improvements

Declining balance method 3 to 20


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3. Summary of significant accounting policies (cont’d) 3.17 Investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the statement of comprehensive income in the period in which they occur. Depreciation is calculated using the straight–line method to write down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows:

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the statement of comprehensive income in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Company accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. 3.18 Lease The Company classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. Otherwise, a lease is classified as an operating lease. 3.18.1 Finance lease The Company recognizes finance leases as lease payment receivables in the statements of financial position at the amounts of the net investment in the lease contract. Any initial direct costs of the lease contract including commissions, legal fees and internal costs that are incremental and directly attributable to negotiating and arranging a lease contract are added to the amount of lease payment receivables. The Company accounts for the lease payment and the finance income separately and the finance income is calculated by using the EIR method on the lessor's net investment in the lease contract.

Depreciation method Years Buildings Straight-line method 40 to 50


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3. Summary of significant accounting policies (cont’d) 3.18 Lease (cont’d) 3.18.2 Operating lease The Company presents operating lease assets in the statements of financial position according to the nature of the assets. Initial direct costs incurred by lessors in negotiating and arranging the lease contract are added to the carrying amount of the operating lease assets and recognized as an expense over the period of the lease contract corresponding to the amount of lease revenues. Depreciation of operating lease assets is calculated using the same method of other similar assets. 3.19 Intangible assets An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Company. Intangible assets include industrial right, software, development cost and others. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment loss.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and they are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of comprehensive income in the expense category consistent with the function of the intangible asset. An intangible asset with an indefinite useful life shall not be amortized but are tested for impairment annually and its useful life shall be reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. 3.20 Non-current assets held for sale The Company classifies a non-current asset or disposal group as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through counting use. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition and its sale must be highly probable. The Company measures a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell.

Depreciation method Years Industrial property, software, system development, trademark rights Straight-line method 5

Core deposit Straight-line method 7 Client membership Straight-line method 10 Others Straight-line method 1 to 7


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3. Summary of significant accounting policies (cont’d) 3.21 Impairment of non-financial assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assets recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 3.22 Retirement benefits The Company has both defined benefit (“DB plan”) and defined contribution (“DC plan”) plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service rendered in the current and prior periods. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation. The defined benefit liability comprises the present value of the defined benefit obligation less unrecognized past service costs and less the fair value of plan assets out of which the obligations are to be settled directly, less unrecognized actuarial losses. The cost of providing benefits under the defined benefit plan is determined separately using the projected unit credit actuarial valuation method. The present value of the defined benefit liability is recorded in the same currency as the payment itself and is calculated by discounting the expected future cash flow and using the interest rate of other reputable companies with similar payment and end of reporting dates. Changes in the actuarial estimates and actuarial gains and losses between estimates and results are recognized in the period they occur as part of other comprehensive income. The past service cost is recognized immediately. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.


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3. Summary of significant accounting policies (cont’d) 3.23 Share-based payment transactions The Company grants share options to its employees in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments or they are granted share appreciation rights, which can only be settled in cash. If the goods or services provide cannot be reliably measured, the endowed equity is indirectly estimated at fair value and the Company accounts for compensation costs and equity. The cost of cash-settled transactions is measured initially at fair value at the grant date, taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to and including the settlement date, which changes in fair value recognized in the statement of comprehensive income. Also, in the case of a selectable share-based payment transaction in which the employees have a choice between a cash-settled transaction and an equity-settled transaction, the Company records the amount depending on its materiality. 3.24 Income tax expenses and deferred tax assets and liabilities Income taxes comprise of current and deferred taxes. All items related to taxes, other than those recognized directly in equity, are accounted for in the statement of comprehensive income. Accordingly, items recognized directly in equity and the related taxes are accounted for as other comprehensive income in the consolidated statements of comprehensive income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. If the applied tax laws require an interpretation, the Company calculates income tax payable expected to be paid to the taxation authorities based on the opinion made when the taxes were reported. Deferred tax is provided on the temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred liabilities are recognized for all taxable temporary differences, except: When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit loss. In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The Company and its wholly owned subsidiaries have adopted a Consolidated Tax Return which is calculated based on the consolidated taxable income generated on or after January 1, 2010. Under the Consolidated Tax Return, the Company recognizes the current tax liabilities on behalf of its subsidiary and also recognizes accounts receivable or accounts payable for the amount to be collected from or to be paid to the subsidiary for its share of the consolidated taxation. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and taxation authority.


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3. Summary of significant accounting policies (cont’d) 3.25 Insurance contracts Hana Life Insurance’s significant accounting policies relating to insurance contracts are as follows. 3.25.1 Reinsurance assets The Company does not offset the reinsurance assets against the related reinsurance liabilities. If a reinsurance asset is impaired, the Company reduces its carrying amount accordingly and recognizes that impairment loss in profit or loss. 3.25.2 Deferred acquisition costs The Company amortized the acquisition costs arising from long-duration contracts during the term of the contracts in the straight-line methed in accourdance with Accounting standards for insurance business article 31 and article 3 of the supplementary provisions. If the acquisition costs exceed the expected amount or the additional premiums are setted highly for earlier term of the contracts to collect the acquisition costs in early stage, the acquisition costs are recognized in the period they occur as profit or loss. The deferred acquisition costs are amortized over the term of the contracts within the limits of 7 years. The unamortized costs of surrendered insurance contract are amortized in the period it is surrendered. 3.25.3 Liablities reserves The Company recognizes liabilities reserves by types of insurance contracts as of the reporting date in accordance with the Insurance Business Act and the related regulations. The liablilities reserves refer to an amount calculated pursuant to the the premiums and liabilities reserves calculation manual for payment of claims, bonus return and policyholders dividend. 3.25.4 Valuation of special accounts assets and liabilities The Company designates and operates any of the retirement insurance contracts, retirement dividend insurance contracts and variable insurance contracts(including variable universal insurance contracts) as special accounts pursuant to Article 108 (1) of the Actand Article 52 of the Regulations on Supervision of Insurance Business . 3.26 Equity 3.26.1 Classification of equity The Company classifies financial instruments at initial recognition as either a liability or equity depending on the contractual materiality. In the case where it is possible to avoid the related contractual obligations, the financial item is classified as equity. 3.26.2 Stock issuance costs Additional stock issuance costs or incremental costs related to the stock issuance for business combinations are recorded as a deduction from issued capital net of tax effects.


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3. Summary of significant accounting policies (cont’d) 3.26 Equity (cont’d) 3.26.3 Dividends on common stock Dividends from common stock are deducted from the Company’s equity and recognized as a liability when the shareholders’ meeting of the Company approves the dividends. Dividends declared for the year that are approved after the reporting date are disclosed as asubsequent event. 3.26.4 Treasury stock Equity instruments of the Company which are acquired by the Company or any of its subsidiaries are deducted from its equity and recorded at acquisition cost, including transaction costs. Consideration received on the sale or issuance of the Company’s own equity instruments is recognized directly in equity. 3.27 Per share amounts Basic and diluted earnings per share are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the year. 3.28 Accounting basis for trust accounts The Company separates trust properties from proprietary properties in accordance with the Supervisory Regulatons on Financial Investment Business. The Company recognizes funds lended or borrowed to trust accounts as accounts receivables or account payables, respectively. The Company recognizes trust commissions earned from trust accounts as income from trust operations. When a loss is incurred on a trust account that includes a guarantee of principal repayment, the corresponding loss is recognized as a loss from trust operations. 3.29 Merchant banking accounts As permitted by the Restructuring of Financial Institutions Act, the Company may continue its merchant banking operations, including the leasing business, until the existing contracts acquired from Korea International Merchant Bank upon merger are terminated. Significant accounting policies applied to the Company‟s merchant banking operations are summarized as follows: 3.29.1 Revenue recognition on discounted notes Interest income on discounted notes is accrued over the term of the notes. Income from the sale of the discounted notes is recognized at the date of sale based on the difference between the purchase and sales prices of the notes, adjusted for interest earned during the holding period. 3.29. 2 Cash Management Accounts (“CMA”) The Company recognizes interest income from CMA investments and interest expense from CMA deposits as other income and other expenses, respectively.


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3. Summary of significant accounting policies (cont’d) 3.30 Interest income and interest expense For all financial instruments measured at amortized cost, interest bearing financial assets classified as available–for–sale and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The Company takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. Once the recorded value of a financial asset has been reduced due to an impairment loss, interest income continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. 3.31 Fee and commission income The Company earns fees and commissions income from a diverse range of services it provides to its customers. Fees and commissions income from financial services are accounted for based on the related accounting standards of financial instruments and their purpose of such fees and commissions. Fees and commissions income are accounted for as follows:

- When the earned fees and commissions are a significant component of EIR from the related financial assets, the income is accounted for using the EIR method.

- Fees and commissions income earned from rendering services are recognized throughout the service period.

- Fees and commissions income earned through financial services are recognized immediately when the services are complete.

3.32 Dividend income Dividend income is recognized when the Company’s right to receive the payment is established.


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards New and amended standards adopted as of January 1, 2013 are as below, and the financial statements of prior fiscal year were restated in accordance with KIFRS 1019 Employee Benefits and KIFRS 1110 Consolidated Financial Statements. 3.33.1 KIFRS 1001 Presentation of Items of Other Comprehensive Income (Amendment) The amendment to KIFRS 1001 introduces a grouping of items presented in other comprehensive income (OCI). Items that could be recycled to profit or loss at a future point in time now have to be presented separately from items that will never be recycled. The amendment affected presentation only and had no impact on the Company’s financial position or performance. The amendment to KIFRS 1001 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional voluntarily comparative information does not need to be presented in a complete set of financial statements. An opening statement of financial position (known as the ‘third balance sheet’) must be presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does not have to be accompanied by comparative information in the related notes. Under KIFRS 1034, the minimum items required for interim condensed financial statements do not include a third balance sheet. 3.33.2 KIFRS 1019 Employee Benefits (Amendment) The KASB has issued numerous amendments to KIFRS 1019. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The Company made a voluntary change in accounting policy to recognize actuarial gains and losses in other comprehensive income in the current period. However, the amended standard will impact the net benefit expense as the expected return on plan assets will be calculated using the same interest rate as applied for the purpose of discounting the benefit obligation.The amendment becomes effective for the annual periods beginning on or after January 1, 2013. Reconciliation of the amendments to the interim condensed consolidated statements of financial position ended as of December 31 2013 and 2012 and the interim condensed consolidated statements of comprehensive income for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions and per share amounts in units):


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) - The effect of the adoption of the revised KIFRS 1019 to the condensed consolidated statements of financial position December 31, 2013 December 31, 2012 January 1, 2012

Before adoption

After

Adoption

Before adoption

After

Adoption Before

adoption

After

Adoption

Defined benefit Obligation

₩ 162,053 ₩ 162,053 ₩ 109,429 ₩ 109,429

₩ 40,737

₩ 40,737

Other comprehensive Income

101,288

(9,740)

359,853

306,583

299,946

277,944

Retained earnings 7,871,810 7,982,838 7,116,148 7,169,418 5,665,642 5,687,644 - The effect of the adoption of the revised KIFRS 1019 to the condensed consolidated statements of comprehensive income Year ended December 31, 2013 Year ended December 31, 2012 Before

adoption After

adoption Before

adoption After

adoption Operating income ₩ 1,088,811 ₩ 1,165,010 ₩ 1,976,099 ₩ 2,017,351 Income tax benefit 258,864 277,305 253,048 263,031 Net income 935,210 992,968 1,697,912 1,729,180 Basic earning per Share 3,183 3,399 6,530 6,648

Diluted earning per Share 3,173 3,388 6,513 6,631

3.33.3 KIFRS 1028 Investments in Associates and Joint Ventures (Amendment) As a consequence of the new KIFRS 1111 Joint Arrangements, and KIFRS 1112 Disclosure of Interests in Other Entities, KIFRS 1028 Investments in Associates, has been renamed KIFRS 1028 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. 3.33.4 KIFRS 1032 Financial instruments: Presentations (Amendment) The amendment to KIFRS 1032 Financial Instruments: Presentation clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with KIFRS 1012 Income Taxes. The amendment removes existing income tax requirements from KIFRS 1012 and requires entities to apply the requirements in KIFRS 1012 to any income tax arising from distributions to equity holders.


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) 3.33.5 KIFRS 1107 Financial Instruments (Amendment) The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements. The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with KIFRS 1032 Financial Instruments: Presentation. 3.33.6 KIFRS 1110 Consolidated Financial Statements(Enactment), KIFRS 1027 Consolidated and Separate Financial Statements (Amendment) KIFRS 1110 replaces the portion of KIFRS 1027 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in KIFRS 2012 Consolidation — Special Purpose Entities. KIFRS 1110 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by KIFRS 1110 will require management to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in KIFRS 1027. The application of the standard includes two structured entities and 25 trust accounts guaranteeing the repayment of principal in the Company’s scope of consolidation and the impact of this standard on the condensed consolidated financial statements are as follows. (Korean won in millions and per share amounts in units) - The effect of the adoption of KIFRS 1110 to the condensed consolidated statements of financial position December 31, 2012 January 1, 2012 Before adoption After adoption Before adoption After adoption Total asset ₩ 283,735,266 ₩ 284,915,088 ₩ 178,234,994 ₩ 178,863,609 Total liability 263,421,530 264,572,651 163,437,902 164,045,533 Retained earnings 7,145,797 7,169,418 5,666,659 5,687,644 Non-controlling interests 4,613,033 4,618,112 739,758 739,758 Total equity 20,313,736 20,342,437 14,797,092 14,818,076


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) - The effect of the adoption of KIFRS 1110 to the condensed consolidated statement of comprehensive income Year ended December 31, 2012 Before adoption After adoption Operating income ₩ 2,013,411 ₩ 2,017,351 Non-operating expense (27,254) (25,140)Income tax expense 263,393 263,031 Net income 1,722,764 1,729,180 Net income attributable to the equity holder of the parent 1,613,769 1,621,531

Net income attributable to non-controlling interest 108,995 107,649 Basic earning per share 6,616 6,648 Diluted earning per share 6,599 6,631

3.33.7 KIFRS 1111 Joint Arrangements (Enactment) KIFRS 1111 replaces KIFRS 1031 Interests in Joint Ventures and KIFRS 2013 Jointly-controlled Entities – Non-monetary Contributions by Ventures. KIFRS 1111 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. 3.33.8 KIFRS 1112 Disclosure of Interests in Other Entities (Enactment) KIFRS 1112 includes all of the disclosures that were previously in KIFRS 1027 related to consolidated financial statements, as well as all of the disclosures that were previously included in KIFRS 1031 and KIFRS 1028. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Company’s financial position or performance.


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) 3.33.8.1 Financial support to consolidated structured entities Characteristics and Intentions of contractual commitments offered by the company to consolidated structured entities are as follows:

Entity The Characteristics and Purposes Intention Hana CSP Co., Ltd.

The Company offers purchase commitment amount of ₩230,000million for ABCP issued by Hana CSP Co., Ltd. If there are not enough investors who acquire the ABCP, the company required to acquire the deficit amount of ABCP.

Credit risk mitigation on liquidation plan

16 trust accounts including development trust

The Company offers principal conservation commitment to trust accounts. The company required to conserve the deficit amount in case the trust account stands below the principal as a result of the operation .

Credit risk mitigation on financial management of

trust account Athene 1st Co.,Ltd.

The Company lends ₩11,500 million to Athene 1st Co.,Ltd. which takes over private corporate bonds amounting to ₩10,200 million issued by other banks. The Company established the right of pledge on the bonds. Due to business activities

Athene 2nd Co.,Ltd.

The Company lends ₩5,200 million to Athene 2nd Co.,Ltd. which takes over private corporate bonds amounting to ₩4,800 million issued by other banks. The Company established the right of pledge on the bonds. Due to business activities

Trust accounts with guarantee of the repayment of principa and interest

The Company offers principal and interest conservation commitment to trust accounts. The Company required to conserve the deficit amount in case the trust account stands below the principal and interest as a result of the operation . Due to business activity

Trust accounts with guarantee of the repayment of principal

The Company offers principal conservation commitment to trust accounts. TheCompany required to conserve the deficit amount in case the trust account stands below the principal as a result of the operation . Due to business activity


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) 3.33.8.1 Financial support to consolidated structured entities (cont’d)

Entity The Characteristics and Purposes Intention Saenggakdaero T 10th Securitization Specialty Co., Ltd.

The Company transferred installmentfinancial assets purchased to Saenggak -daero T 10th Securitization Specialty Co., Ltd. and takes over subordinated bonds issued with the underlying assets of transferred assets.

Due to smooth raise in unsubordinated bonds

Saenggakdaero T 11th Securitization Specialty Co., Ltd.

The Company transferred installment financial assets purchased to Saenggak-daero T 11th Securitization Specialty Co.,Ltd. and takes over subordinated bonds issued with the underlying assets of transferred assets.



The Company transferred installment financial assets purchased to Saenggak-daero T 12th Securitization Specialty Co., Ltd. and takes over subordinated bonds issued with the underlying assets of transferred assets.



The Company transferred installment financial assets purchased to Saenggak-daero T 17th Securitization Specialty Co., Ltd. and takes over subordinated bonds issued with the underlying assets of transferred assets.



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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) 3.33.8.2 Unconsolidated structured entities Details of the nature of the Company’s interests in unconsolidated structured entities as of December 31, 2013 are as follows (Korean won in millions):

Classification Purpose Financing arrangement Total assets Special purpose company Financing through asset

liquidation and securitization Issuing ABL/ABCP and others ₩ 14,274,804

Real estate finance Operation for real estate (including SOC) development Investment and borrowing 24,161,773

Shipping finance and accepting finance

Financing to purchase ships, NPL and ownership Investment and borrowing 25,021,180

Investment fund and trust Managing investment fund and trust Issuing beneficiary certificates 15,817,339

Details of the Company’s maximum exposure to loss from its interests in unconsolidated structured entities as of December 31, 2013 are as follows (Korean won in millions):

December 31, 2013

Classification

Special purpose company

Real estate finance

Shipping finance and accepting

finance Investment

fund and trustAssets: Loans receivable (A) ￦ 1,030,602 ￦ 2,085,171 ￦ 2,225,174 ￦ 1,040,417 Securities (B) 94,899 99,780 - 976,106 Derivatives (C) 1,998 33,913 1,968 5,902 Others (D) 27,516 5,913 11,932 10,190

Liabilities: Derivatives 16,950 - - 14,544 Provision 277 435 41 -Others 21,228 564 - 1,718

Net asset 1,116,560 2,223,778 2,239,033 2,016,353 Maximum exposure to loss Financial assets (A+B+C+D) 1,155,015 2,224,777 2,239,074 2,032,615 Credit and other commitment 1,363,627 153,404 41,248 631


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3. Summary of significant accounting policies (cont’d) 3.33 New and amended standards (cont’d) 3.33.9 KIFRS 1113 Fair Value Measurement (Enactment) KIFRS 1113 establishes a single source of guidance under KIFRS for all fair value measurements. KIFRS 1113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under KIFRS when fair value is required or permitted. 3.34 Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s consolidated financial statements are as follows: 3.34.1 KIFRS 1110, 1112, and 1027 (Amendment) These amendments are effective for annual periods beginning on or after January 1, 2014 which provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under KIFRS 1110. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the company, since none of the entities in the company would qualify to be an investment entity under KIFRS 1110. 3.34.2 KIFRS 1032 Financial Instrument : Presentation (Amendment) The amendment clarifies the meaning of “currently has a legally enforceable right to set–off”. The amendments also clarify the application of the K–IFRS 1032 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to materially impact the Company’s financial position or performance and become effective for the annual periods beginning on or after January 1, 2014. 3.34.3 K-IFRS 1036 : Impairment of Assets (Amendment) These amendments remove the unintended consequences of KIFRS 1113 on the disclosures required under KIFRS 1036. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognized or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after January 1, 2014. 3.34.4 KIFRS 1039: Novation of Derivatives and Continuation of Hedge Accounting (Amendment) These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after January 1, 2014. The company has not novated its derivatives during the current period. However, these amendments would be taken into consideration for future novations.

Hana Financial Group Inc.Notes to the consolidated financial statementsDecember 31, 2013 and 2012

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3. Summary of significant accounting policies (cont’d)

3.34 Standards issued but not yet effective (cont’d)

3.34.5 KIFRS 2121 : Levies (Enactment)

KIFRS 2121 clarifies that an entity recognizes a liability for a levy when the activity that triggerspayment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching aminimum threshold, the interpretation clarifies that no liability should be anticipated before thespecified minimum threshold is reached. KIFRS 2121 is effective for annual periods beginning on orafter January 1, 2014. The company does not expect that KIFRS 2121 will have material financialimpact on future financial statements.

The Company has not early adopted any other standard, interpretation or amendment thereonissued but not yet effective.

4. Significant judgements and accounting estimates

The preparation of the Company’s consolidated financial statements requires management to makejudgments, estimates and assumptions that affect the reported amounts of revenues, expenses,assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.However, uncertainty about these assumptions and estimates could result in outcomes that require amaterial adjustment to the carrying amount of the asset or liability affected in future periods.

In the process of applying the Company’s accounting policies, management has made the followingjudgmentshthat have a significant effect on the amounts recognized in the consolidated financialstatements.

4.1 Fair value of financial instruments

Where the fair values of financial assets and financial liabilities recorded on the statement of financialposition cannot be derived from active markets, they are determined using a variety of valuationtechniques that include the use of mathematical models. The inputs to these models are derived fromobservable market data where possible, but where observable market data is not available, a degreeof judgment is required to establish fair values. The judgments include considerations of liquidity andmodel inputs such as volatility for longer dated derivatives and discount rates, prepayment rates anddefault rate assumptions for asset backed securities.

4.2 Impairment losses on available-for-sale equity instruments

The Company assesses its equity securities classified as available–for–sale investments at the end ofeach reporting period whether there is any indication that an asset may be impaired.

The Company also records impairment charges on available–for–sale equity investments when therehas been a significant or prolonged decline in the fair value of the investment below their cost. Thedetermination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, theCompany evaluates, among other factors, historical share price movements and duration and extentto which the fair value of an investment is less than its cost.


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4. Significant judgements and accounting estimates (cont’d)

4.2 Impairment losses on available-for-sale equity instruments (cont’d)

When the fair value below the cost of available-for-sale equity instruments is significant or prolonged,the Company reclassifies the cumulative loss and is recognized as other comprehensive income fromequity to profit or loss.

4.3 Impairment losses on loans

The Company assesses its individually significant loans at the end of each reporting period whetherthere is any indication that an asset may be impaired. In particular, management judgment is requiredfor the estimation of the amount and timing of future cash flows. These estimates are based onassumptions regarding a number of factors and actual results may differ, causing future changes tothe allowance.

Loans that have been assessed individually and found not to be impaired and all individuallyinsignificant loans are then assessed collectively, in groups of assets with similar risk characteristics,to determine whether provision should be made due to incurred loss events for which there isobjective evidence but whose effects are not yet evident. The collective assessment takes account ofdata from the loan portfolio (such as levels of arrears, credit utilization, loan to collateral ratios, etc.),and judgments to the effect of concentrations of risks and economic data (including levels ofunemployment, real estate prices indices, country risk and the performance of different individualgroups).

4.4 Provision for severance and retirement benefits

The cost of providing benefits under the defined benefit plans is determined separately for each planusing the projected unit credit method. Actuarial assumptions were made for the discount rate, theoverall expected rates of return on assets, and an increase in the future pay rate. Severance andretirement benefits include significant uncertainties in the estimates due to the long duration of theperiod.4.5 Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverableamount, which is the higher of its fair value less costs to sell and its value in use. The fair value less coststo sell calculation is based on available data from binding sales transactions conducted at arm’s lengthtransaction for similar assets or observable market prices less incremental costs for disposing of the asset.The value in use calculation is based on a discounted cash flow model. The cash flows are derived fromthe budget for the next five years and do not include restructuring activities that the Company is not yetcommitted to or significant future investments that will enhance the asset’s performance of the cashgenerating unit being tested. The recoverable amount is most sensitive to the discount rate used for thediscounted cash flow model as well as the expected future cash inflows and the growth rate used forextrapolation purposes.


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4. Significant judgements and accounting estimates (cont’d)

4.6 Deferred tax assets

Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxableprofit will be available against which the losses can be utilized. Significant judgment is required todetermine the amount of deferred tax assets that can be recognized, based upon the likely timing andthe level of future taxable profits, together with future tax planning strategies.

4.7 Share-based payment transactions

The Company measured the compensation cost of share-based payment tranactoins at fair value.The fair value is estimated by applying appropriate valuation model taking into account the terms ofconditions upon which those equity instruments were granted. The Company should determine andassume the inputs of valuation model including the expected life, volatility and dividend ratio of theshare option. The applied assumptions and models are described in Note 56.

5. Fair value measurement of financial assets and financial liabilities

The following standards are applied in measuring fair value of financial assets and financialliabilities:

- Financial assets and financial liabilities traded in active markets at the reporting date are basedon their quoted market price or dealer price quotations (bid price for long positions and ask pricefor short positions), without any deduction for transaction costs. For all other financial instrumentsnot traded in an active market, the fair value is determined by using appropriate valuationtechniques.

- Valuation techniques include the discounted cash flow method, comparison with the similarinstruments for which market observable prices exist, options pricing models, credit models andother relevant valuation models. These techniques incorporate the Company’s estimate ofassumptions that a market participant would make when valuing the instruments. Valuationtechniques which provide reliable estimates on mark–to–market prices are applied.

- When determining fair value by using the valuation techniques, comparison with the currentmarket transaction of another instrument that is substantially the same as the financial instrumentneeded to be objectively substantiated or inclusion of variables in the marketable data must beperformed. Not all of the significant market variables are observable and in relevant cases, thereasonable estimates or assumptions are required to determine the fair value.

- Investments in equity instruments that do not have a quoted market price in an active market aswell as the derivatives that are linked to these equity instruments are accounted for using thecost method when it is determined that their fair values cannot be reliably measured.


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5. Fair value measurement of financial assets and financial liabilities (cont’d)

The fair value hierarchy of financial instruments as of December 31, 2013 and 2012 is as follows(Korean won in millions):

December 31, 2013Fair Value

Level 1 Level 2 Level 3 TotalFinancial assets : Financial assets

held-for-trading through profit or loss Debt securities ￦ 1,915,091 ￦ 8,610,537 ￦ - ￦ 10,525,628

Equity securities 181,280 1,526 20,591 203,397 Derivative assets

used for trading 3,579 3,371,558 648,443 4,023,580 Others 7,709 137,394 868,651 1,013,754

2,107,659 12,121,015 1,537,685 15,766,359Financial assets at fair value

through profit or loss - 138,895 101,702 240,597Available–for–salefinancial assets

Debt securities 8,076,468 18,272,078 65,196 26,413,742Equity securities (*) 1,411,813 773,839 911,149 3,096,801

Others 89 - 18,524 18,6139,488,370 19,045,917 994,869 29,529,156

Derivative assets used forhedging - 82,137 13,931 96,068

￦ 11,596,029 ￦ 31,387,964 ￦ 2,648,187 ￦ 45,632,180Financial liabilities :Financial liabilitiesheld-for-tradingtradingSecurities sold 699,353 - - 699,353Derivative liabilitiesused for trading 3,540 3,201,036 469,586 3,674,162

702,893 3,201,036 469,586 4,373,515Financial liabilitiesat fair value - 640,011 4,264,160 4,904,171

Derivative liabilitiesused for hedging - 132,431 7,650 140,081

￦ 702,893 ￦ 3,973,478 ￦ 4,741,396 ￦ 9,417,767


- 58 -


December 31, 2012Fair Value

Level 1 Level 2 Level 3 TotalFinancial assets : Financial assets

held-for-trading through profit or loss

Debt securities ￦ 1,593,187 ￦ 8,272,104 ￦ - ￦ 9,865,291Equity securities 216,777 461 18,852 236,090

Derivative assetsused for trading 1,025 3,315,114 581,455 3,897,594

Others 115,318 40,761 733,270 889,3491,926,307 11,628,440 1,333,577 14,888,324

Financial assets at fair value through profit or loss - - 65,212 65,212Available–for–sale financialassets

Debt securities 8,860,319 14,113,651 104,328 23,078,298Equity securities 709,003 236,618 1,394,638 2,340,259

Others 510 38,511 13,988 53,0099,569,832 14,388,780 1,512,954 25,471,566

Derivative assets used forhedging - 151,745 15,775 167,520

￦11,496,139 ￦ 26,168,965 ￦ 2,927,519 ￦ 40,592,623Financial liabilities :Financial liabilitiesheld–for–tradingSecurities sold 636,542 - - 636,542Derivative liabilities

used for trading 20,364 3,195,961 108,872 3,325,197656,906 3,195,961 108,872 3,961,739

Financial liabilitiesat fair value - 383,546 3,972,090 4,355,636

Derivative liabilitiesused for hedging - 14,151 - 14,151

￦ 656,906 ￦ 3,593,658 ￦ 4,080,962 ￦ 8,331,526

(*) Available–for–sale financial assets in the amount of \47,738 million and \55,367 million werevalued at cost as of December 31, 2013 and 2012, respectively. Since their fair values were not ableto be reasonably estimated, they are included in Level 3 in the fair value hierarchy.


- 59 -


Fair value, valuation method, and input variables used to measure fair value of financial instrumentsclassified as fair value hierarchy Level 2 are as follows (Korean won in millions):

Fair value Valuation method Input variableFinancial assets: Financial assets

held-for-trading Debt securities ￦ 8,610,537 DCF model, etc Discount rate, etc

Equity securities 1,526 DCF model, etc Discount rate, etc

Derivative assets held-for-trading 3,371,558

Black-Scholes modelHull-White 1 factor modelBlack model, DCF model

Volatility, Discountrate, Exchange rateInterest rate

Others 137,394 DCF model, etc Discount rate, etc12,121,015

Financial assets atfair value throughprofit or loss 138,895 DCF model, etc Discount rate, etc

Available-for-salefinancial assets

Debt securities 18,272,078 DCF model Discount rate Equity securities 773,839 DCF model Discount rate

19,045,917Derivative assetsused for hedging 82,137

Hull-White 1 factor modelBlack model

VolatilityDiscountrate

￦ 31,387,964

Financial liabilities : Financial liabilities at

fair value throughprofit or loss 640,011 DCF model, etc Discount rate, etc

Derivative liabilitiesused for trading 3,201,036

Black-Scholes modelHull-white 1 factor modelBlack model, DCF model

Volatility, Discountrate, Exchangerate, Interest rate

Derivative liabilitiesused for hedging 132,431

Hull-White 1 factor modelBlack model

VolatilityDiscount rate

￦ 3,973,478


- 60 -


Fair value, valuation method, input variables and significant unobservable input variables information used to measure fair value of financial instrumentsclassified as fair value hierarchy Level 3 are as follows (Korean won in millions):

Fair value Valuation method Input variableSignificant unobservable

input variables RangeEffect on fair

value

Financial assets :Financial assets held-for-trading Equity securities

\ 20,591 DCF model, etc Discount rate etcDerivative assets used for trading

648,443 Black model KRW interest swap yield curveKRW treasury bond yield curvevolatility of interest ratecorrelation of underlying assets

correlation of underlyingassets -1.0~+1.0 Negative

KRW treasury bond yield curvevolatility of KRW treasury bond yieldcorrelation of underlying assets

correlation of underlyingassets -1.0~+1.0 Positive

Others

868,651 DCF model, etc Discount rate, etc Discount rate, etc.

1,537,685

Financial assets at fair value through profit or loss

101,702Available-for-sale financial assets

Debt securities65,196 DCF model, etc Discount rate, etc Discount rate, etc.


- 61 -


Fair value Valuation method Input variableSignificant unobservable

input variables RangeEffect on fair

valueEquity securities

\ 911,149 DCF model Growth rateDiscount rateLiquidation valueIncrease rate of sales price of RealestateRental cash flow discount rate

growth rate – PositiveComparative onsimilar business

discount rate3.03~17.18 Negative

Valuation on net assetvalue

liquidation value– Positive

Using historicaltransaction method

increase rate of sales priceof real estate

3.00 Positiverental cash flow discountrate 8.18 Negative

Others18,524 DCF model

Comparative on similarbusiness

Discount rate Discount rate6.46

Negative

Volatilitydiscount rate

Bid rate Bid rate55.12

Positive994,869

Derivative assets used for hedging13,931 Hull-White 1 factor

modelKRW interest swap yield curveUSD treasury bond yield curvevolatility of interest ratecorrelation of underlying assetscorrelation between USD interest rateand KRW/USD exchange rate

correlation of underlyingassets -1.0~+1.0 Positive

correlation between USDinterest rate and KRW/USDexchange rate -1.0~+1.0 Positive

\ 2,648,187


- 62 -


Fair value Valuation method Input variable

Significantunobservable input

variables RangeEffect onfair value

Financial liabilities :Financial liabilities at fair value through profit or loss

\ 4,264,160 DCF model Discount rate Discount rateDerivative liabilities used for trading

469,586 Black model KRW interest swap yield curveKRW treasury bond yield curvevolatility of interest ratecorrelation of underlying assets

correlation ofunderlying assets -1.0~+1.0 Negative

KRW treasury bond yield curvevolatility of KRW treasury bond yieldcorrelation of underlying assets

correlation ofunderlying assets -1.0~+1.0 Positive

Derivative liabilities used for hedging7,650 Hull-White 1 factor

modelKRW interest swap yield curveUSD treasury bond yield curvevolatility of interest ratecorrelation of underlying assetscorrelation between USD interest rateand KRW/USD exchange rate

correlation ofunderlying assets -1.0~+1.0 Positivecorrelation betweenUSD interest rate andKRW/USD exchangerate -1.0~+1.0 Positive

\ 4,741,396


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Changes in the fair value of Level 3 financial instruments for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions)

Financial assetsheld-for-trading

Financialassets atfair valuethrough

Available-for-sale financial assetsFinancial

liabilities atfair valuethrough

Net derivative instruments

Equitysecurities Others

Debtsecurities

Equitysecurities Others

Held-for-trading

Heldfor-hedging

January 1, 2013 \ 18,852 \ 733,270 \ 65,212 \ 104,328 \ 1,394,638 \ 13,988 \ 3,972,090 \ 472,584 \ 15,775Increase due to the

businesscombination - - - - 12,283 - - - -

From Level 3 to

other - - - 5,431 (330,664) - - - -

Net income 1,739 16,090 (26,330) 9,717 (44,531) - 85,357 (19,504) (1,364)Othercomprehensiveincome - - - (8,903) (28,734) 314 - - (479)

Buy / Issue - 313,163 63,845 - 161,021 47 2,909,904 79,718 (7,651)

Sell / Settlement - (193,872) (1,025) (45,377) (252,864) 4,175 (2,703,191) (353,941) -

December 31, 2013 \ 20,591 \ 868,651 \ 101,702 \ 65,196 \ 911,149 \ 18,524 \ 4,264,160 \ 178,857 \ 6,281


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Financial assets held-for-trading

Financialassets atfair valuethrough

Available-for-sale financial assetsFinancial

liabilities atfair valuethrough

Net derivative instrumentsEquity

securities OthersDebt

securitiesEquity

securities Others Held-for-tradingHeld

for-hedgingJanuary 1, 2012 \ - \ 462,340 \ 54,148 \ 92,175 \ 1,571,235 \ 12,690 \ 2,918,936 \ 315,847 \ 18,131Increase due to thebusinesscombination - - - - (16,904) - - - -

From Level 3 toother - - - - 8,822 - - - -

Net income 549 19,642 (3,272) 4,681 150,850 - (65,620) 132,749 (2,846)Othercomprehensiveincome - - - 2,803 (109,974) - - - -

Buy / Issue 18,303 270,965 44,267 11,138 138,381 1,298 2,761,837 197,489 293Sell / Settlement - (19,677) (29,931) (6,469) (347,772) - (1,643,063) (173,501) 197December 31, 2012 \ 18,852 \ 733,270 \ 65,212 \ 104,328 \ 1,394,638 \ 13,988 \ 3,972,090 \ 472,584 \ 15,775


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Gains relating to financial instruments classified as Level 3 for the years ended December 31, 2013and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012

Income or lossduring the

reporting period

Income or lossrelated to financialinstruments heldat the end of thereporting period

Income or lossduring the

reporting period

Income or lossrelated to financialinstruments heldat the end of thereporting period

Gain on financial instrumentsat held-for-trading \ (1,675) \ 18,483 \ 152,939 \ 22,951

Gain on financial instrumentsat fair value through profit orloss 59,027 28,067 (68,892) 172,548

Derivative instruments usedfor hedging (1,364) (1,636) (2,846) (3,435)

Other income related tofinancial instruments 56,738 8,041 208,379 4,201

Impairment related to financialinstruments (91,552) (91,175) (52,848) (181,813)

\ 21,174 \ (38,220) \ 236,732 \ 14,452

Changes in significant unobservable input variables are subject of a sensitivity analysis, whichmeasures the impact on the fair value of financial instruments classified as Level 3. The amount ofimpact reported as favorable and unfavorable changes are as follows(Korean won in millions):

December 31, 2013

Favorable changesUnfavorable

changesFinancial assets : Derivative assets held-for-trading(*1) \ 1,466 \ (1,461) Available-for-sale financial assets

Equity securities(*2) 216,289 (95,054)Others(*1) 7,775 (7,434)

\ 225,530 \ (103,949)

Financial liabilities : Derivative liabilities used for hedging(*1) 432 (424)

\ 432 \ (424)


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(*1) (i). correlation between interest rate swap rate of KRW, (ii) correlation between interest rates oftreasury, (iii) correlation between interest rate swap and interest rate of treasury, (iv) correlationbetween KRW-USD interest rate swap, and (v) correlation between KRW/USD exchange rate andinterest rate swap rate of USD is subject of sensitivity analysis, which measures the impact of areasonable 10% fluctuation on the fair value , with all other variables held constant.

(*2) Fair value variation of equity securities is measured by changing growth rate(0.0~1.0%) anddiscount rate, or liquidation value(-1.0~1.0%) and discount rate. In case of income securities, it isimpossible to calculate sensitivity in practice. It only consists of real estate, increase or decreasediscount rate of rental cash flow(-1.0~1.0%) and growth rate of sale price of real estate(-1.0~1.0%)to measure the impact on fair value.

Fair value hierarchy of financial instruments disclosured as fair value though it cannot be measuredas fair value is as follows (Korean won in millions):

Fair Value

TotalLevel 1 Level 2 Level 3

Financial assets :

Cash and due frombanks \ 2,102,863 \ 17,151,213 \ - \ 19,254,076

Financial assets held–to–maturity 1,513,826 3,313,581 - 4,827,407

Loans - 21,262 203,443,460 203,464,722 Others - 6,439 14,796,491 14,802,930

\ 3,616,689 \ 20,492,495 \ 218,239,951 \ 242,349,135

Financial liabilities : Deposits \ 25,985 \ 115,422,057 \ 72,356,398 \ 187,804,440 Borrowings - 9,909,534 12,568,351 22,477,885 Debentures - 29,275,587 1,539,170 30,814,757 Others - 150,024 23,922,675 24,072,699

\ 25,985 \ 154,757,202 \ 110,386,594 \ 265,169,781

The Company uses the following hierarchy for determining and disclosing the fair value of financialinstruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for similar assets or liabilitiesLevel 2: Other techniques in which all significant inputs and significant value drivers are observable inactive marketsLevel 3: Techniques, such as pricing models, discounted cash flow methodologies, or similartechniques based on significant unobservable inputs, as well as management judgments or estimatesthat are significant to valuation


- 67 -


Fair value, valuation method, and input variables of financial instruments disclosured as fair valuethough it cannot be measured as fair value and the fair value hierarchy Level 2 is as follows(Korean won in millions):

Fair Value Valuation method Input variables

Financial assets : Cash and due from

banks \ 17,151,213 DCF model, etc Credit and other spread, Financial assets

held–to-maturity 3,313,581 DCF model, etc Discount rate Loans

21,262 DCF model, etcCredit and other spread,Rate of advanced redemption

Others 6,439 DCF model, etc Other spread\ 20,492,495

Financial liabilities : Deposits \ 115,422,057 DCF model, etc Other spread,

Rate of advanced redemption Borrowings 9,909,534 DCF model, etc Other spread Debentures 29,275,587 DCF model, etc Other spread,

Rate of inherence bankruptcy Others 150,024 DCF model, etc Other spread

\ 154,757,202

Fair value, valuation method, and input variables of financial instruments disclosured as fair valuethough it cannot be measured as fair value and the fair value hierarchy Level 3 is as follows(Korean won in millions):

Fair ValueValuationmethod Input variables

Financial assets : Loans

\ 203,443,460 DCF model, etcCredit and other spread,Rate of advanced redemption

Others 14,796,491 (*)\ 218,239,951

Financial liabilities : Deposits \ 72,356,398 DCF model, etc Other spread,

Rate of advanced redemption Borrowings 12,568,351 DCF model, etc Other spread Debentures 1,539,170 DCF model, etc Other spread,

Rate of inherence bankruptcyOthers 23,922,675 (*)

\ 110,386,594

(*) Other financial instruments are temporary accounts derived from various transactions, withmaturity not fixed or short. Therefore, the Company doesn’t apply DCF method to calculate fairvalue and disclosure book value as fair value.


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Changes in deferred Day 1 gain (loss), for the years ended December 31, 2013 and 2012 aresummarized as follows (Korean won in millions):

December 31, 2013 December 31, 2012Beginning balance \ (27,272) \ (28,244)Increase (18,228) (34,974)Profit or loss 19,706 35,945Ending balance \ (25,795) \ (27,273)

6. Fair value of financial assets and liabilities

Details of carrying amount and fair value of financial instruments as of December 31, 2013 and 2012are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Carrying amount Fair value Carrying amount Fair value

Financial assets:Cash and due from banks \ 19,343,218 \ 19,254,076 \ 18,890,870 \ 18,890,870Financial assets held-for-trading 15,766,359 15,766,359 14,888,324 14,888,324Financial assets at fair valuethrough profit and loss 240,597 240,597 65,212 65,212

Available-for-sale financial assets 29,529,156 29,529,156 25,471,566 25,471,566Held-to-maturity investments 4,736,987 4,827,407 7,219,480 7,381,665Loans 203,597,827 203,464,722 196,435,133 197,183,856Derivative assets used forhedging purposes 96,068 96,068 167,520 167,520

Others 14,806,516 14,802,930 15,446,302 15,433,555\ 288,116,728 \ 287,981,315 \ 278,584,407 \ 279,482,568


- 69 -

6. Fair value of financial assets and liabilities (cont’d)

December 31, 2013 December 31, 2012Carrying amount Fair value Carrying amount Fair value

Financial liabilitiesFinancial liabilities held-for-trading \ 4,373,515 \ 4,373,515 \ 3,961,739 \ 3,961,739Financial liabilities at fair value through profit and loss 4,904,171 4,904,171 4,355,636 4,355,636Deposits 187,225,676 187,804,440 178,262,815 178,262,815Borrowings 21,833,638 22,477,885 22,361,914 22,251,983Debentures 30,419,564 30,814,757 32,432,503 32,876,692Derivative liabilities used forhedging purposes 140,081 140,081 14,151 14,151

Others 24,072,336 24,072,699 21,515,825 21,515,857\ 272,968,981 \ 274,587,548 \ 262,904,583 \ 263,238,873

The following standards are applied in measuring the fair value of financial instruments

- Loans and receivable: Expected cash flows, current market interest rates and discount ratesincluding borrowers’ credit risks are factors used when calculating fair value of loans andreceivables. For lines of credit and loans that have a short term maturity (less than threemonths), it is assumed that the carrying amounts approximate to their fair value.

- Financial assets at fair value through profit or loss fair value of financial assetsheld-to-maturity are as stated by the market, broker, or by credible sources. If none of theinformation from these entities is usable, the published market price of financial instrumentswith similar credit rating, maturity, and ROI is used to estimate the fair value.

- Depository liabilities: For deposits with no interests, deposits without an explicit maturityperiod, deposits that have a short term maturity (less than three months), and deposits witha floating rate readjustment period of less than three months, it is assumed that the carryingamounts approximate to their fair value. The estimated fair value of fixed interest bearingdeposits is based on discounted cash flows using prevailing money-market interest rates fordebts with similar credit risk and maturity.

- Borrowing liabilities: For borrowings that have a short term maturity (less than three months)and borrowings with a floating rate readjustment period of less than three months, it isassumed that the carrying amounts approximate to their fair value. The estimated fair valueof fixed interest bearing borrowings is based on the discounted cash flows using prevailingmoney-market interest rates for debts with similar credit risk and maturity.

- Debentures: For quoted debt issued the fair values are determined based on the quotedmarket prices. For those notes issued where quoted market prices are not available, adiscounted cash flow model is used based on the current interest rate yield curveappropriate for the remaining term to maturity and credit spreads.


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7. Categories of financial assets and financial liabilities

Categories of financial assets and financial liabilities as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013


Financialinstruments at

fair valuethrough profit

and loss

Available-for-sale

financial assetsHeld-to-maturity

investments

Amortized cost of afinancial asset orfinancial liability

Derivativesfor hedgingpurposes Total

Financial assets:

Cash and due from banks \ - \ - \ - \ - \ 19,343,218 \ - \ 19,343,218

Financial assets held-for-trading 15,766,359 - - - - - 15,766,359Financial assets at fair valuethrough profit and loss - 240,597 - - - - 240,597

Available-for-sale financial assets - - 29,529,156 - - - 29,529,156

Held-to-maturity investments - - - 4,736,987 - - 4,736,987

Loans receivable - - - - 203,597,827 - 203,597,827Derivative assets used for hedgingpurposes - - - - - 96,068 96,068

Others - - - - 14,806,516 - 14,806,516\ 15,766,359 \ 240,597 \ 29,529,156 \ 2,289,567 \ 237,747,561 \ 96,068 \ 288,116,728

Financial liabilities:

Financial liabilities held-for-trading \ 4,373,515 \ - \ - \ - \ - \ - \ 4,373,515Financial liabilities at fair value through profit and loss - 4,904,171 - - - - 4,904,171

Deposits - - - - 187,225,676 - 187,225,676

Borrowings - - - - 21,833,638 - 21,833,638

Debentures - - - - 30,419,564 - 30,419,564Derivative liabilities used forhedging purposes - - - - - 140,081 140,081

Others - - - - 24,072,336 - 24,072,336

\ 4,373,515 \ 4,904,171 \ - \ - \ 263,551,214 \ 140,081 \ 272,968,981


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7. Categories of financial assets and financial liabilities (cont’d)

December 31, 2012


Financialinstruments at

fair value throughprofit and loss

Available-for-sale

financial assetsHeld-to-maturity

investments

Amortized cost of afinancial asset orfinancial liability

Derivativesfor hedgingpurposes Total

Financial assets:

Cash and due from banks \ - \ - \ - \ - \ 18,890,870 \ - \ 18,890,870

Financial assets held-for-trading 14,888,324 - - - - - 14,888,324Financial assets at fair valuethrough profit and loss - 65,212 - - - - 65,212

Available-for-sale financial assets - - 25,471,566 - - - 25,471,566Held-to-maturity investments - - - 7,219,480 - - 7,219,480Loans receivable - - - - 196,435,133 - 196,435,133Derivative assets used for hedgingpurposes - - - - - 167,520 167,520

Others - - - - 15,446,302 - 15,446,302\ 14,888,324 \ 65,212 \ 25,471,566 \ 7,219,480 \ 230,772,305 \ 167,520 \ 278,584,407

Financial liabilities:

Financial liabilities held-for-trading \ 3,961,739 \ - \ - \ - \ - \ - \ 3,961,739Financial liabilities at fair value through profit and loss - 4,355,636 - - - - 4,355,636Deposits - - - - 178,262,815 - 178,262,815Borrowings - - - - 22,361,914 - 22,361,914Debentures - - - - 32,432,503 - 32,432,503Derivative liabilities used for

hedging purposes - - - - - 14,151 14,151Others - - - - 21,515,825 - 21,515,825

\ 3,961,739 \ 4,355,636 \ - \ - \ 254,573,057 \ 14,151 \ 262,904,583


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8. Offsetting of financial assets and liabilities

Financial assets offset, the executable master netting arrangements and financial assets subject toa similar agreement as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013

Related amounts not set off in thestatement of financial position (*)

Grossamounts ofrecognized

financialliabilities

Gross amountsof recognized

financial assetsset off in thestatement of

financial position

Net amounts offinancialliabilities

presented inthe statement

of financialposition

Financialinstruments

Financialcollateralpledged Net amount

Derivatives ￦ 2,822,534 ￦ - ￦ 2,822,534 ￦ (1,847,197) ￦ (278,059) ￦ 697,278Equity securities 170,382 - 170,382 - (170,382) -Bonds purchasedunder resaleagreement 2,215,700 - 2,215,700 - (2,212,800) 2,900

Receivables unpaidspot exchanges 108,575 - 108,575 (108,565) - 10

Domestic exchangesettlement debts 22,886,526 (20,524,867) 2,361,659 - - 2,361,659

Others 153,714 (137,574) 16,140 - - 16,140

￦ 28,357,431 ￦ (20,662,441) ￦ 7,694,990 ￦ (1,955,762) ￦ (2,661,241) ￦ 3,077,987

December 31, 2012

Related amounts not set off in the

statement of financial position (*)





financial position

Net amountsof financialliabilities





Derivatives \ 3,005,597 ￦ - ￦ 3,005,597 ￦ (1,831,660) ￦ (240,284) ￦ 933,653Bonds purchasedunder resaleagreement 1,497,300 - 1,497,300 - (1,497,300) -

Receivables unpaidspot exchanges 7,819 - 7,819 (7,813) - 6

Domestic exchangesettlement debts 14,480,887 (13,049,859) 1,431,028 - - 1,431,028

\ 18,991,603 ￦ (13,049,859) ￦ 5,941,744 ￦ (1,839,473) ￦ (1,737,584) ￦2,364,687

(*) The rights to offset exist only in case of default, insolvency or bankruptcy. Accordingly, theamounts are not offset in the statement of financial position as they do not meet the criteria foroffsetting.


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8. Offsetting of financial assets and liabilities (cont’d)

Financial liabilities offset, the executable master netting arrangements and financial liabilities subjectto a similar agreement as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013

Related amounts not set off in thestatement of financial position (*)

Grossamounts of

recognizedfinancialliabilities


financial assets

set off in thestatement of

financial position

Net amounts offinancialliabilities

presented in

the statementof financial

positionFinancial

instruments


Derivatives \ 2,613,086 \ - \ 2,613,086 \ (1,847,197) \ (14,323) \ 751,566Bonds sold underrepurchaseagreements 654,175 - 4,377,946 (190) (653,985) 3,723,771

Payables unpaid spotexchange 108,576 - 108,576 (108,565) - 11

Domestic exchangesettlement credits 22,568,559 (20,524,867) 2,043,692 - (974,242) 1,069,450

Others 147,920 (137,574) 10,346 - - 10,346\ 26,092,316 \ (20,662,441) \ 9,153,646 \ (1,955,952) \ (1,642,550) \ 5,555,144

December 31, 2012

Related amounts not set off in the

statement of financial position (*)





financial position

Net amountsof financialliabilities





Derivatives \ 2,635,382 \ - \ 2,635,382 \ (1,831,660) \ (57,940) \ 745,782Bonds sold underrepurchaseagreements 661,944 - 661,944 (190) (194,185) 467,569

Payables unpaid spotexchange 7,813 - 7,813 (7,813) - -

Domestic exchangesettlement credits 15,714,951 (13,049,859) 2,665,092 - (1,352,062) 1,313,030

\ 19,020,090 \ (13,049,859) \ 5,970,231 \ (1,839,663) \ (1,604,187) \ 2,526,381

(*) The rights to offset exist only in case of default, insolvency or bankruptcy. Accordingly, theamounts are not offset in the statement of financial position as they do not meet the criteria foroffsetting.


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9. Risk management

The Company is exposed to credit risk, liquidity risk, market risk and operational risk of its financialinstruments. Risk management is the basic activities to use the Company’s limited capital effectivelyunder the rapidly changing financial circumstances. The ultimate goal of risk management is tomaximize the Company’s shareholder value with minimizing the sudden fluctuation of its incomethrough a proper balance between risks and returns.

To keep the consistent risk management on a group level basis, the Company establishes andmanages the group risk management policies and each of its subsidiaries also establishes its ownrisk management systems and policies suitable for the subsidiaries’ industry through the riskcommittees and working-level councils under the group risk management policies. The Companyidentifies improvements by diagnosing the subsidiaries’ risk management performance at least oncea year and continuously enforces the subsidiaries’ risk management activities to make them reflectthe improvements.

The group risk management committee is the top decision-making organization of the group riskmanagement and has responsibilities to establish and monitor risk management strategies andpolicies, allowable risk limits and investment limits, and capital allocation, which are required to bemanaged on a group level basis. The subsidiaries’ risk management committees (or board ofdirectors) are responsible for its own risk management strategies, policies and monitoring. Ifnecessary, the group risk management committee or group risk management execution committeecan apply separate risk management standards considering distinct characteristics of eachsubsidiary.

9.1 Credit risk

Credit risk is the risk that the Company will incur a loss because its customers’ or counterparties’credit rating goes down or fail to discharge their contractual obligations. Credit risk is the highest riskexposed to the Company. Credit risk arises from on-balance and off-balance accounts including loans,financial guarantees, securities and derivatives. The purpose of managing credit risk is to control therelevant losses upon counterparties’ default, for a certain period, within the allowable range.

The Company’s group risk management committee and group risk management execution committeeexamines its credit risk on a regular basis. The Company continuously monitors whether credit limitsset for each individual, corporation, borrower, subsidiary and major shareholder are complied andreviews the subsidiaries’ asset quality. The Company also checks the status of change of riskexposure, residual limit, delinquency rate and change of loan loss provision, etc. at least on aquarterly basis.

The Company classifies expected loss and unexpected loss calculating the credit risk. The expectedloss is assessed based on estimated LGD (Loss Given Default). The LGD is calculated by using EAD(Exposure at Default), estimated PD (Probability of Default), which is based on a historical default rate,and historical collection rate. The assessed expected loss is reflected on the interest rates on new orrolled over loans and loan loss provision. The unexpected loss, which means a potential volatilitybetween estimate loss and actual loss, is estimated as a credit risk exposure of a portfolio usingstatistical models. The unexpected loss is used for the Company’s internal management purpose.


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9. Risk management (cont’d)

9.1 Credit risk (cont’d)

The maximum exposure to credit risk as of December 31, 2013 and 2012 are as follows. Thefollowing table shows the maximum exposure to credit risk for the items in the statement of financialposition, including derivatives, by geography of counterparty and by industry before the effect ofmitigation through the use of master netting and collateral agreements. Equity securities in the tradingfinancial assets and financial assets available-for-sale are excluded (Korean won in millions):

December 31, 2013 December 31, 2012On balance accounts:Due from banks \ 15,828,349 \ 15,538,429Financial assets held-for-trading: Debt securities 10,525,628 9,865,292 Derivative assets held-for-trading 4,023,580 3,897,595 Others 859,695 772,960Financial assets at fair value through profit and loss 148,380 -Available-for-sale financial assets 26,423,561 23,078,298Held-to-maturity investments 4,736,987 7,219,480Derivative assets for hedging purposes 96,068 167,520Loans receivable:Household loans 80,536,681 80,826,572Large business 49,955,806 47,367,773Small business and medium business 56,514,897 53,180,968Public institution and others 10,924,632 9,727,256Credit card loans 5,668,953 5,318,462

203,600,969 196,421,031Adjustments due to the business combination (3,142) 14,102

203,597,827 196,435,133Others 14,806,516 15,446,302

\ 281,046,591 \ 272,421,009Off balance accounts:Financial guarantees \ 2,537,653 \ 2,217,161Guarantee contracts 26,212,655 24,527,466Commitment 125,902,602 124,715,384

\ 154,652,910 \ 151,460,011


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Details of collateral management and credit risk mitigation as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013Impaired Unimpaired

Individualassessment

Collectiveassessment Past due Non past due Total

Guarantees \ 153,135 \ 121,677 \ 72,706 \ 15,887,391 \ 16,234,909Deposit 7,127 15,954 15,669 3,185,072 3,223,822Movable assets 21,948 2,162 394 1,504,840 1,529,344Real estate 683,731 419,724 247,777 79,319,606 80,670,838Securities 36,786 8,389 3,491 2,697,280 2,745,946Others - 348 4,000 265,807 270,155

\ 902,727 \ 568,254 \ 344,037 \ 102,859,996 \ 104,675,014

December 31, 2012Impaired Unimpaired

Individualassessment

Collectiveassessment Past due Non past due Total

Guarantees \ 25,374 \ 83,781 \ 77,930 \ 13,909,458 \ 14,096,543Deposit 7,471 24,450 19,631 4,010,239 4,061,791Movable assets 94,211 4,234 562 198,330 297,337Real estate 745,121 481,546 369,227 74,960,905 76,556,799Securities 135,619 8,887 3,894 3,326,206 3,474,606

\ 1,007,796 \ 602,898 \ 471,244 \ 96,405,138 \ 98,487,076


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Details of delinquency rates on loans and receivable as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013

Corporate loans

Household

loans

Large

business

Small andmedium

business

Public institution

and others

Credit card

loans Total

Neither past duenor impaired \ 79,547,129 \ 49,102,532 \ 55,697,469 \ 10,875,718 \ 5,555,712 \ 200,778,560

Past duebut unimpaired 353,226 1,336 140,293 19,229 162,051 676,135

Impaired 684,852 1,643,343 1,562,121 118,091 133,715 4,142,122

80,585,207 50,747,211 57,399,883 11,013,038 5,851,478 205,596,817Deferred loan fees 189,423 (23,636) 12,770 5,174 (81) 183,650Present value premium

(discount) 2,485 - (787) - (1,283) 415Allowance for

possible loan losses (240,434) (767,769) (896,969) (93,580) (181,161) (2,179,913)

\ 80,536,681 \ 49,955,806 \ 56,514,897 \ 10,924,632 \ 5,668,953 203,600,969

Adjustments due to the business combination:

Loans (3,960)Present value

discount (3,482)Allowance for

possible loan losses 4,300

(3,142)

\ 203,597,827


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December 31,2012

Corporate loans

Household

loans

Large

business

Small andmedium

business

Public institution

and othersCredit card

loans Total

Neither past duenor impaired \ 79,479,715 \ 46,859,347 \ 52,561,342 \ 9,711,798 \ 5,133,629 \ 193,745,831

Past duebut unimpaired 635,239 16,564 156,160 6,742 230,668 1,045,373

Impaired 734,228 1,293,713 1,333,255 122,141 120,078 3,603,415

80,849,182 48,169,624 54,050,757 9,840,681 5,484,375 198,394,619Deferred loan fees 203,293 (19,578) 3,526 2,435 (102) 189,574

Present value premium

(discount) 14,572 (1,107) 250 - (1,857) 11,858Allowance for

possible loan losses (240,475) (781,166) (873,565) (115,860) (163,954) (2,175,020)

\ 80,826,572 \ 47,367,773 \ 53,180,968 \ 9,727,256 \ 5,318,462 196,421,031

Adjustments due to the

business combination:Loans (85,825)Present value

premium 14,102Allowance for possible loan losses 85,825

14,102

\ 196,435,133

Delinquency occurs when a counterparty is unable to make principle and interest payments at the duedate. A financial item is deemed impaired if, and only if, there is objective evidence of impairment as aresult of one or more events that has occurred after the initial recognition of the item (an incurred ‘lossevent’) and that loss event (or events) has an impact on the estimated future cash flows, such aschanges in arrears or economic conditions that correlate with defaults, delinquency in interest formore than 90 days, credit deterioration resulting in misleading information, damages incurred due topoor exposure.


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Details on loans with no impairment or overdue payments as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013Corporate loans

Householdloans

Largebusiness

Small andmediumbusiness

Publicinstitutionand others

Credit cardloans Total

Grade 1 \ 48,202,637 \ 29,907,440 \ 11,419,451 \ 4,420,112 \ 1,374,318 \ 95,323,958Grade 2 28,593,069 17,443,857 38,894,306 4,505,863 3,943,995 93,381,090Grade 3 728,356 1,257,028 3,921,356 935,919 237,392 7,080,051Others 2,023,067 494,207 1,462,356 1,013,824 7 4,993,461

\ 79,547,129 \ 49,102,532 \ 55,697,469 \ 10,875,718 \ 5,555,712 \ 200,778,560


Householdloans

Largebusiness




Grade 1 \ 45,638,467 \ 28,046,872 \ 6,347,875 \ 3,407,752 \ 1,509,314 \ 84,950,280Grade 2 30,743,057 16,710,694 41,209,243 3,995,668 3,413,488 96,072,150Grade 3 1,312,936 1,779,153 3,873,017 816,428 210,827 7,992,361Others 1,785,255 322,628 1,131,207 1,491,950 - 4,731,040

\ 79,479,715 \ 46,859,347 \ 52,561,342 \ 9,711,798 \ 5,133,629 \ 193,745,831

The Company classifies the grade of loans in accordance with a credit rating chart below, based onthe character of the borrowers.

Household loans Corporate loans SOHOGrade 1 Less or equal to 0.36% of PD A1+ ~ A3 Grade 1Grade 2 From 0.36% to 8.79% of PD B1+ ~ B3 Grade 2 ~ 16Grade 3 From 8.79% to 100% of PD C1 ~ C3 Grade 17 ~ 25

Types of unimpaired loans and receivables with delinquent payments as of December 31, 2013 and2012 are as follows (Korean won in millions):


Householdloans

Largebusiness




Less than 30 days \ 277,489 \ 1,336 \ 95,100 \ 5,698 \ 123,851 \ 503,47431 to 60 days 49,638 - 26,181 985 17,737 94,54161 to 90 days 26,099 - 18,731 11,556 9,614 66,000Others - - 281 990 10,849 12,120

\ 353,226 \ 1,336 \ 140,293 \ 19,229 \ 162,051 \ 676,135


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Householdloans

Largebusiness




Less than 30 days \ 474,739 \ 16,446 \ 105,481 \ 5,609 \ 187,797 \ 790,07231 to 60 days 109,884 34 28,865 372 20,666 159,82161 to 90 days 50,558 84 19,973 563 13,350 84,528Others 58 - 1,841 198 8,855 10,952

\ 635,239 \ 16,564 \ 156,160 \ 6,742 \ 230,668 \ 1,045,373

Types of impaired loans and receivables as of December 31, 2013 and 2012 are as follows (Koreanwon in millions):


Householdloans

Largebusiness




Individualimpairment:Book value \ 5,345 \ 1,424,410 \ 1,235,583 \ 99,652 \ - \ 2,764,990Deferred loanfees andexpenses - (135) (179) 36 - (278)Allowance forpossible loanlosses (2,566) (481,860) (557,994) (61,763) - (1,104,183)

2,779 942,415 677,410 37,925 - 1,660,529Collectiveimpairment:Book value 679,507 218,933 326,538 18,439 133,715 1,377,132Deferred loanfees andexpenses 1,383 - (24) 8 - 1,367

Present valuepremium(discount) 60 - 1 - (36) 25Allowance forpossible loanlosses (122,456) (7,909) (75,315) (4,963) (103,099) (313,742)

558,494 211,024 251,200 13,484 30,580 1,064,782\ 561,273 \ 1,153,439 \ 928,610 \ 51,409 \ 30,580 \ 2,725,311


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Householdloans

Largebusiness




Individualimpairment:Book value \ 1,895 \ 1,246,258 \ 990,152 \ 112,092 \ - \ 2,350,397Deferred loanfees andexpenses - (158) (151) - - (309)

Allowance forpossible loanlosses (1,209) (542,272) (309,822) (74,427) - (927,730)

686 703,828 680,179 37,665 - 1,422,358Collectiveimpairment:Book value 732,333 47,455 343,103 10,049 120,078 1,253,018Deferred loanfees andexpenses 2,872 - 134 7 - 3,013

Present valuepremium(discount) 309 - 11 - (41) 279

Allowance forpossible loanlosses (114,104) (5,108) (69,607) (3,018) (93,570) (285,407)

621,410 42,347 273,641 7,038 26,467 970,903\ 622,096 \ 746,175 \ 953,820 \ 44,703 \ 26,467 \ 2,393,261

Interest income on impaired loans and receivables as of December 31, 2013 and 2012 is as follows(Korean won in millions):

Year ended December 31, 2013Corporate loans

Householdloans

Largebusiness




Individualimpairment \ 84 \ 56,807 \ 30,185 \ 1,469 \ - \ 88,545

Collectiveimpairment 36,898 2,957 10,605 618 5,080 56,158

\ 36,982 \ 59,764 \ 40,790 \ 2,087 \ 5,080 \ 144,703


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Year ended December 31, 2012Corporate loans

Householdloans

Largebusiness




Individualimpairment \ 76 \48,296 \ 47,662 \ 908 \ - \ 96,942

Collectiveimpairment 32,555 3,451 15,743 698 4,297 56,744

\ 32,631 \ 51,747 \ 63,405 \ 1,606 \ 4,297 \ 153,686

Overdue payments on debt securities as of December 31, 2013 and 2012 are as follows (Korean wonin millions):

December 31, 2013

Financialassets held-for-trading

Financialassets at fairvalue throughprofit or loss


Held-to-maturity

investments TotalNeither past duenor impaired \ 10,525,628 \ 148,380 \ 26,406,382 \ 4,736,987 \ 41,817,377

Impaired - - 7,360 - 7,360\ 10,525,628 \ 148,380 \ 26,413,742 \ 4,736,987 \ 41,824,737

December 31, 2012Financial

assets held-for-trading


Held-to-maturity

investments TotalNeither past duenor impaired \ 9,865,292 \ 23,072,292 \ 7,219,480 \ 40,157,064

Impaired - 6,006 - 6,006\ 9,865,292 \ 23,078,298 \ 7,219,480 \ 40,163,070

Internal credit ratings of debt securities as of December 31, 2013 and 2012 are as follows (Koreanwon in millions):

December 31, 2013

Financialassets held-for-trading

Financialassets at fairvalue throughprofit or loss


Held-to-maturity

investments TotalGrade 1 \ 2,491,735 \ - \ 24,458,256 \ 4,424,314 \ 31,374,305Grade 2 - - 1,374,683 130,514 1,505,197Grade 3 - - 265,732 58,397 324,129Others 8,033,893 148,380 315,071 123,762 8,621,106

\ 10,525,628 \ 148,380 \ 26,413,742 \ 4,736,987 \ 41,824,737


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December 31, 2012Financial

assets held-for-trading

Available-for-sale financial

assets

Held-to-maturity

investments TotalGrade 1 \ 2,468,276 \ 22,239,194 \ 7,055,477 \ 31,762,947Grade 2 - 423,604 50,653 474,257Grade 3 - 364,013 37,981 401,994Others 7,397,016 51,487 75,369 7,523,872

\ 9,865,292 \ 23,078,298 \ 7,219,480 \ 40,163,070

The credit rating classification of debt securities, which is rated by external rating agencies andapplied by Hana Bank, is as follows:

Internal rating

Domesticrating

agencies

Overseas rating agencies

Moody’s S&P FitchGrade 1 A1+ ~ A3 AAA ~ A- Aaa ~ Baa2 AAA ~ BBB AAA ~ BBBGrade 2 B1+ ~ B3 BBB+ ~ BB Baa3 ~ B3 BBB- ~ B- BBB- ~ B-Grade 3 C1 ~ C3 BB ~ B- Caa1 ~ Caa3 CCC+ ~ CCC- CCC+ ~ CCC-

Credit risk concentration in each major industry as of December 31, 2013 and 2012 is as follows(Korean won in millions):

December 31, 2013

Industry Korean wonForeigncurrency

TotalAmount Ratio (%)

On balance accounts:Due from banks Financial services \ 7,744,924 \ 7,762,205 \ 15,507,129 98.0

Publicadministration - 64,630 64,630 0.4Others - 256,590 256,590 1.6

7,744,924 8,083,425 15,828,349 100.0Financial assetsheld-for-trading Financial services 3,995,234 149,989 4,145,223 39.4

Manufacturing 1,259,381 8,097 1,267,478 12.0Publicadministration 2,815,616 7,605 2,823,221 26.8

Construction 337,708 - 337,708 3.2Wholesale & retail 60,866 - 60,866 0.6Others 1,867,777 23,355 1,891,132 18.0

10,336,582 189,046 10,525,628 100.0


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December 31, 2013



Financial assets at fair valuethrough profitand loss Financial services \ 89,556 \ 58,824 \ 148,380 100.0

Available-for-salefinancial assets Financial services 10,458,381 1,129,245 11,587,626 43.9

Manufacturing 576,248 77,529 653,777 2.5Publicadministration 10,741,890 65,445 10,807,335 40.9

Construction 129,309 - 129,309 0.5Wholesale & retail 91,438 38,585 130,023 0.5Others 2,770,129 345,362 3,115,491 11.7

24,767,395 1,656,166 26,423,561 100.0Held-to-maturityinvestments Financial services 1,733,374 96,375 1,829,749 38.6


Construction 40,000 - 40,000 0.8Others 926,581 - 926,581 19.6Adjustments due tothe businesscombination 11,977 1,168 13,145 0.3

4,586,655 150,332 4,736,987 100.0Loans receivable:Household loans 79,917,175 668,032 80,585,207 39.6Credit card loans 5,847,686 3,792 5,851,478 2.9Business loans Manufacturing 29,664,153 14,932,285 44,596,438 21.9

Construction 4,095,758 639,693 4,735,451 2.3Wholesale & retail 10,839,281 5,753,935 16,593,216 8.1Financial services 5,806,383 4,193,006 9,999,389 4.9Real estate rental 13,787,562 910,346 14,697,908 7.2Transportation 15,742,844 2,784,438 18,527,282 9.1Electricity, gas andwater supply 464,119 93,808 557,927 0.3

Others 5,851,490 3,601,031 9,452,521 4.6


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December 31, 2013



Deferred loan feesand expenses \ 189,256 \ (5,606) \ 183,650 0.1

Present valuepremium 415 - 415 -

Allowance for possible loanlosses (1,946,930) (232,983) (2,179,913) (1.0)

170,259,192 33,341,777 203,600,969 100.0Adjustments dueto the businesscombination:Loans (3,960)Present valuepremium (3,482)

Allowance for possible loan

losses 4,300203,597,827

\ 261,260,732Off-balanceaccounts:Financialguarantees Manufacturing \ 552,318 \ 717,657 \ 1,269,975 50.0

Construction 70,237 45,963 116,200 4.6Wholesale & retail 266,989 123,590 390,579 15.4Real estate rental 22,254 13,297 35,551 1.4Transportation 100 24,069 24,169 1.0Electricity, gas andwater supply 2,400 3,166 5,566 0.2

Others 328,819 366,794 695,613 27.41,243,117 1,294,536 2,537,653 100.0

Guaranteecontracts Manufacturing 906,042 12,283,286 13,189,328 50.4

Construction 397,740 4,511,264 4,909,004 18.7Wholesale & retail 545,443 3,864,316 4,409,759 16.8Financial services 13,954 1,326,605 1,340,559 5.1Real estate rental 15,884 160,307 176,191 0.7Transportation 108,590 176,429 285,019 1.1Electricity, gas andwater supply 329 342,817 343,146 1.3

Others 513,839 1,045,810 1,559,649 5.92,501,821 23,710,834 26,212,655 100.0


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December 31, 2013



Commitment Manufacturing \ 27,559,817 \ 14,924,381 \ 42,484,198 33.7Construction 3,680,520 838,964 4,519,484 3.6Wholesale & retail 4,456,176 1,810,748 6,266,924 5.0Financial services 6,823,948 2,819,535 9,643,483 7.7Real estate rental 4,829,791 329,541 5,159,332 4.1Transportation 813,957 140,533 954,490 0.8Electricity, gas andwater supply 21,857,416 1,841,027 23,698,443 18.8

Others 32,628,773 547,475 33,176,248 26.3102,650,398 23,252,204 125,902,602 100.0

\ 106,395,336 \ 48,257,574 \ 154,652,910

December 31, 2012



On balanceaccounts:Due from banks Financial services \ 8,748,874 \ 6,373,951 \ 15,122,825 97.3

Publicadministration - 2,728 2,728 0.1

Others 180,486 232,390 412,876 2.68,929,360 6,609,069 15,538,429 100.0

Financial assetsheld-for-trading Financial services 4,174,488 182,526 4,357,014 44.2

Manufacturing 1,027,186 91,108 1,118,294 11.3Publicadministration 2,290,894 1,706 2,292,600 23.2

Construction 477,486 - 477,486 4.8Wholesale & retail 20,423 - 20,423 0.2Others 1,599,475 - 1,599,475 16.3

9,589,952 275,340 9,865,292 100.0 Available-for-sale

financial assets Financial services 9,033,188 860,065 9,893,253 42.9Manufacturing 615,791 63,885 679,676 2.9Publicadministration 9,552,554 261,441 9,813,995 42.5

Construction 160,119 3,455 163,574 0.7Wholesale & retail 152,480 - 152,480 0.7Others 2,113,239 262,081 2,375,320 10.3

21,627,371 1,450,927 23,078,298 100.0


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December 31, 2012



Held-to-maturityinvestments Financial services \ 3,992,933 \ 71,160 \ 4,064,093 56.3


Construction 29,987 - 29,987 0.4Others 964,248 - 964,248 13.4Adjustments due tothe business

combination: 22,203 1,753 23,956 0.37,099,079 120,401 7,219,480 100.0

Loans receivable: Household loans 80,186,113 663,069 80,849,182 41.2 Credit card loans 5,482,286 2,089 5,484,375 2.8Corporate loans Manufacturing 28,574,589 14,979,417 43,554,006 22.2

Construction 5,318,288 583,173 5,901,461 3.0Wholesale & retail 10,374,231 4,765,481 15,139,712 7.7Financial services 4,874,690 3,813,131 8,687,821 4.4Real estate rental 11,242,465 950,346 12,192,811 6.2Transportation 1,027,675 1,217,518 2,245,193 1.1Electricity, gas andwater supply 384,198 143,230 527,428 0.3

Others 18,952,038 4,860,592 23,812,630 12.1Deferred loan feesand expenses 192,142

(2,568)189,574 0.1

Present valuepremium 11,858 - 11,858 -

Allowance forpossible loanlosses (1,926,880) (248,140) (2,175,020) (1.1)

164,693,693 31,727,338 196,421,031 100.0Adjustments dueto the businesscombination:Loans (85,825)Present valuepremium 14,102

Allowance forpossible loanlosses 85,825

196,435,133\ 252,136,632


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December 31, 2012



Off-balanceaccounts:

Financialguarantees Manufacturing \ 638,564 \ 458,236 \ 1,096,800 49.5

Construction 29,108 26,522 55,630 2.5Wholesale & retail 221,273 11,983 233,256 10.5Financial services 70 3,106 3,176 0.1Real estate rental 22,093 8,877 30,970 1.4Transportation 11,768 29,786 41,554 1.9Electricity, gas andwater supply 2,400 5,747 8,147 0.4

Others 427,483 320,145 747,628 33.71,352,759 864,402 2,217,161 100.0

Guaranteecontracts Manufacturing 955,503 12,023,927 12,979,430 52.9

Construction 249,923 3,590,990 3,840,913 15.7Wholesale & retail 642,341 3,608,057 4,250,398 17.3Financial services 3,469 1,105,109 1,108,578 4.5Real estate rental 21,394 93,801 115,195 0.5Transportation 78,006 143,438 221,444 0.9Electricity, gas andwater supply 2,240 494,908 497,148 2.0

Others 471,418 1,042,942 1,514,360 6.22,424,294 22,103,172 24,527,466 100.0

Commitment Manufacturing 26,466,223 12,638,049 39,104,272 31.4Construction 3,486,246 1,298,697 4,784,943 3.8Wholesale & retail 6,943,945 4,341,683 11,285,628 9.0Financial services 7,532,895 181,958 7,714,853 6.2Real estate rental 2,950,262 6,859 2,957,121 2.4Transportation 1,360,024 114,817 1,474,841 1.2Electricity, gas andwater supply 3,662,512 360,406 4,022,918 3.2

Others 51,782,354 1,588,454 53,370,808 42.8104,184,461 20,530,923 124,715,384 100.0

\ 107,961,514 \ 43,498,497 \ 151,460,011


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Credit risk concentration in each country as of December 31, 2013 and 2012 is as follows (Koreanwon in millions):

December 31, 2013

Country Korean wonForeigncurrency


On balance accounts:Due from banks Korea \ 7,744,924 \ 1,462,896 \ 9,207,820 58.2

U.S - 2,637,604 2,637,604 16.7China - 2,087,057 2,087,057 13.2Japan - 171,478 171,478 1.1

Singapore - 171,536 171,536 1.1Hong Kong - 31,795 31,795 0.2

Brazil - 2,054 2,054 -Others - 1,519,005 1,519,005 9.5

7,744,924 8,083,425 15,828,349 100.0Financial assetsheld-for-trading Korea 10,336,582 93,493 10,430,075 99.1

U.S - 42,838 42,838 0.4Others - 52,715 52,715 0.5

10,336,582 189,046 10,525,628 100.0Financial assets at fairvalue through profitand loss Korea 89,556 - 89,556 60.4

Others - 58,824 58,824 39.689,556 58,824 148,380 100.0

Available-for-salefinancial assets Korea 24,767,395 1,116,153 25,883,548 97.9

U.S - 162,812 162,812 0.6Japan - 14,322 14,322 0.1

Hong Kong - 5,153 5,153 -Others - 357,726 357,726 1.4

24,767,395 1,656,166 26,423,561 100.0Held-to-maturityinvestments Korea 4,574,678 27,324 4,602,002 97.2

U.S - 15,932 15,932 0.3Singapore - 5,837 5,837 0.1

Brazil - 27,146 27,146 0.6Others - 72,926 72,926 1.5

Adjustmentsdue to thebusinesscombination 11,977 1,167 13,144 0.3

4,586,655 150,332 4,736,987 100.0


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December 31, 2013



Loans receivable Korea \171,482,449 \20,319,223 \191,801,672 94.2U.S 104,345 1,976,622 2,080,967 1.0

China 11,494 3,864,486 3,875,980 1.9Japan 13,485 729,717 743,202 0.4

Singapore 2,905 1,056,292 1,059,197 0.5Hong Kong 2,792 673,972 676,764 0.3

Panama - 435,551 435,551 0.2Germany 1,165 213,506 214,671 0.1Others 397,816 4,310,997 4,708,813 2.3

Deferred loan fees and expenses 189,256 (5,606) 183,650 0.1Present value premium 415 - 415 -Allowance for

possible loan losses (1,946,930) (232,983) (2,179,913) (1.0)170,259,192 33,341,777 203,600,969 100.0

Adjustments due to the business combinationLoans (3,960)Present value premium (3,482)Allowance for possible loan losses 4,300

203,597,827\261,260,732

Off-balance accounts:Financial guarantees Korea \ 1,243,117 \ 1,294,536 \ 2,537,653 100.0Guarantee contracts Korea 2,500,209 20,662,064 23,162,273 88.4

U.S - 568,569 568,569 2.2China - 1,481,817 1,481,817 5.7Japan - 57,555 57,555 0.2


Saudi Arabia 346 62,679 63,025 0.2Panama - 9,514 9,514 -Others 1,266 592,794 594,060 2.3

2,501,821 23,710,834 26,212,655 100.0


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December 31, 2013



Commitment Korea \102,645,690 \21,028,123 \123,673,813 98.2U.S 93 766,832 766,925 0.6

China 878 41,697 42,575 -Japan - 63,166 63,166 0.1

Singapore - 258,480 258,480 0.2Hong Kong - 140,017 140,017 0.1Australia - 189,810 189,810 0.2Indonesia - 98,977 98,977 0.1

Others 3,737 665,102 668,839 0.5102,650,398 23,252,204 125,902,602 100.0

\106,395,336 \48,257,574 \154,652,910

December 31, 2012



On balance accounts:Due from banks Korea \ 8,929,360 \ 745,432 \ 9,674,792 62.3

U.S - 2,579,992 2,579,992 16.6China - 1,904,595 1,904,595 12.3Japan - 173,058 173,058 1.1


Brazil - 2,736 2,736 -Others - 1,042,124 1,042,124 6.6

8,929,360 6,609,069 15,538,429 100.0Financial assetsheld-for-trading Korea 9,589,952 225,861 9,815,813 99.5

U.S - 5,789 5,789 0.1U.K - 40,255 40,255 0.4

Czech - 3,435 3,435 -Others - - - -

9,589,952 275,340 9,865,292 100.0Available-for-salefinancial assets Korea 21,627,371 1,041,118 22,668,489 98.2

U.S - 76,760 76,760 0.4Japan - 11,362 11,362 -

Hong Kong - 5,110 5,110 -Others - 316,577 316,577 1.4

21,627,371 1,450,927 23,078,298 100.0


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December 31, 2012



Held-to-maturityinvestments Korea \ 7,076,876 \ 27,866 \ 7,104,742 98.4

U.S - 10,711 10,711 0.1Singapore - 6,143 6,143 0.1

Brazil - 26,456 26,456 0.4Others - 47,472 47,472 0.7

Adjustmentsdue to thebusinesscombination 22,203 1,753 23,956 0.3

7,099,079 120,401 7,219,480 100.0Loans receivable Korea 164,786,201 20,724,003 185,510,204 94.4

U.S 96,973 3,845,401 3,942,374 2.0China 10,696 1,121,218 1,131,914 0.6Japan 22,998 812,996 835,994 0.4

Singapore 2,342 320,619 322,961 0.2Hong Kong 2,765 578,368 581,133 0.3

Panama - 470,375 470,375 0.2Germany 1,482 507,578 509,060 0.3Others 1,493,116 3,597,488 5,090,604 2.6

Deferred loan fees and expenses 192,142 (2,568) 189,574 0.1Present value premium 11,858 - 11,858 -Allowance for

possible loan losses (1,926,880) (248,140) (2,175,020) (1.1)164,693,693 31,727,338 196,421,031 100.0

Adjustments due to the business combinationLoans (85,825)Present value premium 14,102Allowance for possible loan losses 85,825

196,435,133\252,136,632

Off-balance accounts:Financial guarantees Korea 1,352,759 864,277 2,217,036 100.0

Others - 125 125 -1,352,759 864,402 2,217,161 100.0


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December 31, 2012



Guarantee contracts Korea \ 2,422,268 \ 18,943,658 \ 21,365,926 87.1U.S - 652,133 652,133 2.7

China - 1,316,726 1,316,726 5.4Japan - 60,352 60,352 0.2

Singapore 50 156,955 157,005 0.6Hong Kong - 138,250 138,250 0.6

Saudi Arabia 772 59,565 60,337 0.2Panama - 28,801 28,801 0.1Others 1,204 746,732 747,936 3.1

2,424,294 22,103,172 24,527,466 100.0Commitment Korea 104,182,895 18,374,891 122,557,786 98.3

U.S 363 249,745 250,108 0.2China 140 552,443 552,583 0.4Japan - 52,670 52,670 -

Singapore - 257,562 257,562 0.2Hong Kong - 174,509 174,509 0.1Australia - 130,802 130,802 0.1Indonesia - 104,046 104,046 0.1

Others 1,063 634,255 635,318 0.6104,184,461 20,530,923 124,715,384 100.0

\107,961,514 \ 43,498,497 \151,460,011

9.2 Liquidity risk

Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligationsassociated with financial liabilities. The purpose to manage liquidity risk is to early identify thepotential risk factors upon raising and operating the Company’s funds and to obtain a stable revenuebase maintaining an appropriate level of the Company’s liquidity by systematically managing the risk.The targets of liquidity risk management are all assets and liabilities outstanding in the Company’sstatements of financial position.

The Company’s principles regarding liquidity risk management are as follows:

- Set up and comply with tolerable limits to liquidity risk - Maintain liquidity by regularly forecasting cash requirements on a regular basis - Establish an emergency plan against a liquidity crisis to prepare an unexpected liquidity risk- Evaluate and manage the effect of a large amount of money that is loaned out, invested, or

procured on liquidity risks

The Company assesses and manages liquidity ratio of the relevant assets and liabilities denominatedin Korean Won and in foreign currency by applying the relevant supervisory regulations. TheCompany also establishes an acceptable limit and emergency plan for liquidity risk through its grouprisk management executive committee, whereby the subsidiaries maintain an adequate liquidity ratio.


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9.2 Liquidity risk (cont’d)

The table below summarizes the maturity profile of the contractual undiscounted cash flows of the Company’s financial assets. The maturity of financialassets as of December 31, 2013 and 2012 is summarized as follows (Korean won in millions):

December 31, 2013

On demand Within 1 month

After 1 month~ but no laterthan 3 months

After 3 months~ but no laterthan 6 months

After 6 months~ but no laterthan 1 year

After 1 year~ but no laterthan 3 years

After 3 years~ but no laterthan 5 years After 5 years Total

Cash and due from banks ￦ 14,421,454 ￦ 2,695,201 ￦ 829,080 ￦ 773,842 ￦ 539,741 ￦ 3,317 ￦ 56,488 ￦ 24,095 ￦ 19,343,218Financial assets held-for-

trading 18,476,561 - - - 123,593 12,960 - - 18,613,114Financial assets at fair

value through profit andloss 240,597 - - - - - - - 240,597

Available-for-sale

financial assets 471,276 314,206 1,021,317 1,196,230 3,336,943 13,314,191 6,641,577 2,361,880 28,657,620Held-to-maturity

investments 131 149,469 851,872 760,693 570,659 1,022,406 715,065 1,095,505 5,165,800Loans receivable 11,208,384 23,605,190 34,420,421 27,244,012 38,409,829 34,662,388 12,407,295 40,435,514 222,393,033Derivatives used for

hedging purposes 23,820 (5,914) 219 34,614 18,422 49,268 (4,945) 22,418 137,902Others 1,396,360 4,945,034 1,188,969 1,294,062 1,327,734 1,477,497 1,210,191 1,259,848 14,099,695

￦ 46,238,583 ￦ 31,703,186 ￦ 38,311,878 ￦ 31,303,453 ￦ 44,326,921 ￦ 50,542,027 ￦ 21,025,671 ￦ 45,199,260 ￦ 308,650,979


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December 31, 2012







Cash and due from banks ￦ 14,169,708 ￦ 2,753,816 ￦ 897,582 ￦ 710,843 ￦ 301,521 ￦ 6,935 ￦ 50,000 ￦ 465 ￦ 18,890,870Financial assets held-for-trading 16,201,377 597,745 597,745 597,745 50,322 50,352 - - 18,095,286

Financial assets at fair

value through profit and

loss 65,212 - - - - - - - 65,212Available-for-sale

financial assets 188,492 1,529,629 1,809,983 1,234,347 2,868,877 8,698,404 6,761,675 3,147,963 26,239,370Held-to-maturity

investments - 35,379 402,958 1,866,446 1,114,956 2,859,996 505,167 927,265 7,712,167Loans receivable 9,427,766 21,772,427 33,894,127 29,621,829 37,883,544 31,249,864 11,415,247 37,532,452 212,797,256Derivatives used for

hedging purposes 588 884 9,865 42,334 23,163 136,174 47,023 64,020 324,051Others 6,650,834 6,733,898 211,712 124,460 486,685 653,877 151,577 141,339 15,154,382

￦ 46,703,977 ￦ 33,423,778 ￦ 37,823,972 ￦ 34,198,004 ￦ 42,729,068 ￦ 43,655,602 ￦ 18,930,689 ￦ 41,813,504 ￦ 299,278,594


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The table below summarizes the maturity profile of the contractual undiscounted cash flows of the Company’s financial liabilities. The maturity offinancial liabilities as of December 31, 2013 and 2012 is summarized as follows (Korean won in millions):

December 31, 2013







On balance accounts:Financial liabilities

held-for-trading ￦ 3,760,188 ￦ 16,155 ￦ 10,493 ￦ 30,946 ￦ 146,343 ￦ 288,987 ￦ 35,936 ￦ 84,467 ￦ 4,373,515Financial liabilities

designated at fair valuethrough profit and loss 4,904,171 - - - - - - - 4,904,171

Deposits 65,839,249 19,681,449 27,822,122 25,031,262 42,302,330 6,291,673 813,868 2,878,440 190,660,393Borrowings 3,302,075 4,754,236 5,492,817 2,266,496 2,671,058 2,277,413 887,892 446,551 22,098,538Debentures 9,978 1,099,609 930,983 2,766,126 5,087,994 12,654,535 5,288,267 4,812,731 32,650,223Derivative liabilities used

for hedging purposes 14,938 797 8,897 13,545 (8,339) 22,077 (336) (116,730) (65,151)Others 4,295,509 13,838,590 98,861 18,754 98,355 177,828 18,712 209,570 18,756,179

82,126,108 39,390,836 34,364,173 30,127,129 50,297,741 21,712,513 7,044,339 8,315,029 273,377,868Off balance accounts:

Financial guarantees 2,537,653 - - - - - - - 2,537,653Commitment 125,863,781 10 - - 469 35,000 1 3,341 125,902,602

128,401,434 10 - - 469 35,000 1 3,341 128,440,255￦ 210,527,542 ￦ 39,390,846 ￦ 34,364,173 ￦ 30,127,129 ￦ 50,298,210 ￦ 21,747,513 ￦ 7,044,340 ￦ 8,318,370 ￦ 401,818,123


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December 31, 2012







On balance accounts:Financial liabilitiesheld-for-trading ￦ 3,733,278 ￦ 2,750 ￦ 11,687 ￦ 18,897 ￦ 22,943 ￦ 103,045 ￦ 48,504 ￦ 20,635 ￦ 3,961,739

Financial liabilities

designated at fair value

through profit and loss 4,355,636 - - - - - - - 4,355,636Deposits 60,869,039 19,519,348 24,921,720 25,659,230 41,447,573 4,812,628 789,400 2,042,602 180,061,540Borrowings 5,337,098 2,824,754 2,285,876 5,290,652 2,851,411 2,811,723 693,798 708,609 22,803,921Debentures 3,835,912 942,423 1,856,397 2,694,382 4,565,746 11,667,944 5,128,893 4,362,924 35,054,621Derivative liabilities used

for hedging purposes 3,526 - (1,565) (3,103) (4,882) (17,780) (2,364) 431 (25,737)Others 2,586,074 16,754,961 48,446 39,545 59,301 180,774 10,863 214,970 19,894,934

80,720,563 40,044,236 29,122,561 33,699,603 48,942,092 19,558,334 6,669,094 7,350,171 266,106,654Off balance accounts:Financial guarantees 2,217,161 - - - - - - - 2,217,161Commitment 124,595,355 2,714 26,315 25 197 90,778 - - 124,715,384

126,812,516 2,714 26,315 25 197 90,778 - - 126,932,545￦ 207,533,079 ￦ 40,046,950 ￦ 29,148,876 ￦ 33,699,628 ￦ 48,942,289 ￦ 19,649,112 ￦ 6,669,094 ￦ 7,350,171 ￦ 393,039,199

Derivative liabilities used for hedging purposes are denominated based on the net cash flow because the accounts consist of interest rate swap only.Available assets that exist in redeeming financial liabilities and unused loan commitments are cash and bank deposits, debt securities, equity securities,and loans. In addition, the Company is able to cope with unexpected cash flows through the sale of securities and additional sources of funding, similarto asset backed securitization.


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9.3 Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate dueto the changes in market variables such as interest rates, equity prices, exchange ratios in themarket .

The purpose of market risk management is to maintain the loss of assets and liabilities incurred due tochanges in market variables such as interest rates, foreign exchanges and equity prices within theallowable limits in order to ensure profitability and stability. Market risk management targets includemarketable securities, foreign currency net positions, derivatives and other assets and liabilities withembedded market risks, and in case of H&DS, the short-term trading securities of its own accountsare included in the targets. Significant risks exposed to the Company as of the reporting date areinterest rate risk, currency risk and equity price risk.

For market risk management, the Company measures and monitors the relevant risk exposures on aregular basis. The Company also established and complies with market risk limits, whereby it canmanage the exposures arising from changes of market variables within an adequate level. Thesubsidiaries exposed to market risks, such as Hana Bank and H&DS, set up and operate their ownmarket risk management system. The group-level market risk exposures are consistently calculatedthrough the group-integrated risk management system. The Company reports its current status ofmarket risk management to the group risk management execution committee and group riskmanagement committee on a monthly and quarterly basis.

The trading positions include positions of interest rate, equity price, commodity and foreign exchangeheld for trading purpose:

- Financial instruments for the purpose of acquiring the differences incurred due to short-termtrading or price fluctuations.

- Financial instruments for the purpose of hedging risks- Financial instruments for the purpose of acquiring arbitrages- Financial instruments for the purpose of acquisition, brokerage, and market-making- Monetary financial instruments expressed in other currencies other than the functional

currency

The Company establishes group-level trading policies, which clearly defines types of financialinstruments to be included into trading positions by risk factors. The Company’s subsidiaries complywith the policies.

The Company’s principles to manage market risk of its trading positions are to measure its market riskstatus on a regular basis and to establish and comply with the various market risk limits. TheCompany analyzes whether the return against risk are appropriate reviewing its profit and risk on aregular basis.


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9.3 Market risk (cont’d)

Value at Risk (“VaR”) is a primary method that manages and measures the degree of market risks ofthe trading portfolio subject to exposure, which estimates the potential loss of the trading portfolio thatis not expected to be exceeded if the current market risk positions were to be held unchanged for oneday. The Company calculates the VaR for a standard 10 days in the 99% confidence level. In addition,to account for the method’s limited use, stress tests are performed in order to measure the extent ofthe loss in extreme cases.

Risk types of VaR as of December 31, 2013 and 2012 are summarized as follows (Korean won inmillions):

December31, 2013 Average Min Max

December31, 2012

Interest rates risk ￦ 45,619 ￦ 38,594 ￦ 17,269 ￦ 61,226 ￦ 21,658Foreign exchange rates risk 54,711 47,592 24,539 92,093 59,920Stock price risk 16,552 20,278 4,456 61,465 10,633Total risk ￦ 101,522 ￦ 84,420 ￦ 33,819 ￦ 157,378 ￦ 70,920

The calculation of the total risk VaR takes into consideration the correlation and diversification effectsbetween each risk factor and therefore, is not the same as the arithmetic additions of all the VaRs.

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows orthe fair values of financial instruments. The Company manages interest rate risk in order to maintainthe stability of net interest income and net asset value.

- Financial assets with interest rates such as bank deposits, debt securities, and loans- Financial liabilities with interest rates such as depository liabilities, borrowings, and debentures- Financial derivatives such as interest rate swaps

To manage interest rate risk, the Company mainly monitors the interest rate gap and VaR, andestablishes the relevant limits in advance. The interest rate VaR is an estimated maximum loss of netasset due to adverse changes of interest rate.

Details of interest rate VaR of the Company as of December 31, 2013 and 2012 are as follows(Korean won in millions):

December31, 2013 Average Min Max

December31, 2012

Interest rate VaR ￦ 180,082 ￦ 273,211 ￦ 125,239 ￦ 459,283 ￦ 241,517


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Interest rate VaR is calculated by using the maturity bucket repricing gap, interest maturity bucket onmodified durations, and expected gap due to interest rate fluctuation in accordance with BISstandards. Assets classified as below substandard and amounts in checking accounts and temporarydeposits are excluded from the amount calculated.

Equity price risk is the risk that the fair value of equities results in changes in the level of relatedrevenue and capital. Effects on capital due to fluctuations in equity price risk as of December 31, 2013and 2012 are as follows (Korean won in millions):

December 31, 201320% decline 10% decline 10% rise 20% rise

Equity price risk ￦ (287,766) ￦ (143,883) ￦ 143,883 ￦ 287,766

December 31, 201220% decline 10% decline 10% rise 20% rise

Equity price risk ￦ (196,839) ￦ (98,420) ￦ 98,420 ￦ 196,839

The Company measures the non-trading equity price risk on the domestic available-for-sale equitysecurities only.

Currency risk is the risk that the value of a financial instrument or future cash flows will fluctuate dueto changes in foreign exchange rates. Currency risk arises in financial instruments expressed incurrencies other than the functional currency. Currency risk does not arise in financial instrumentsexpressed in the functional currency or in non-monetary items measured using historical foreignexchange rates. In order to establish stop loss and limits, the Company manages the foreignexchange net exposure amount of the trading and non-trading portfolios by each currency.

Significant assets and liabilities denominated in foreign currencies as of December 31, 2013 and2012 are as follows (Korean won in millions or U.S. dollar in thousands):

December 31, 2013

CurrencyAmount in foreigncurrency in units U.S. dollars (*)

Korean wonequivalent

Assets:Cash and due frombanks USD 4,663,763,758 US$ 4,663,764 ￦ 5,013,546

JPY 27,409,222,292 262,565 282,257EUR 357,872,431 487,925 524,519CNY 9,887,953,685 1,634,042 1,756,595IDR 356,948,010,241 29,353 31,554BRL 6,918,003 2,916 3,135HKD 411,161,075 53,000 56,975

Others 959,884 1,031,8768,093,449 8,700,457


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December 31, 2013



Financial assetsheld-for-trading USD 540,068,940 US$ 540,069 ￦ 580,574

JPY 971,165,619 9,303 10,001EUR 17,925,009 24,439 26,272CHY 183,264,494 30,286 32,557HKD 14,996,218 1,933 2,078

Others 3,009 3,235609,039 654,717

Financial assetsdesignated at fairvalue throughprofit and loss USD 54,720,256 54,720 58,824

Available-for-salefinancial assets USD 1,174,492,287 1,174,492 1,262,579

CNY 193,787,208 32,024 34,426IDR 236,481,188,413 19,446 20,905

Others 314,657 338,2561,540,619 1,656,166

Held-to-maturityinvestments USD 34,800,086 34,800 37,410

EUR 529,366 722 776IDR 789,391,457,518 64,914 69,782BRL 75,383,311 31,773 34,156

Others 7,634 8,208139,843 150,332

Loans receivable USD 22,229,518,313 22,229,518 23,776,008JPY 201,540,612,034 1,930,647 2,063,825EUR 947,372,937 1,291,653 1,387,090CNY 17,851,789,615 2,950,112 3,166,886IDR 5,597,090,500,202 460,263 492,203BRL 281,868,110 118,804 127,345HKD 645,681,257 83,230 89,472CAD 1,223,907,655 1,097,179 1,176,668AUD 256,141,984 225,379 241,847

Others 628,825 820,433US$ 31,015,610 ￦ 33,341,777


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December 31, 2013



Derivative assetsused for hedgingpurposes USD 71,966,222 US$ 71,966 ￦ 77,364

Other assets USD 2,957,052,660 2,957,053 3,178,832JPY 42,818,018,620 410,173 440,936EUR 138,428,897 188,735 202,890CNY 237,796,159 39,297 42,244IDR 68,044,949,020 5,596 6,015BRL 7,816,585 3,295 3,542HKD 549,741,269 70,863 76,178CAD 20,953,049 18,783 20,192AUD 8,438,002 7,425 7,981

Others 306,570 329,5634,007,790 4,308,373

US$ 45,533,036 ￦ 48,948,010Liabilities:Financial liabilitiesheld-for-trading USD 257,479,824 US$ 257,480 ￦ 276,791

JPY 954,654,099 9,145 9,831EUR 7,659,267 10,443 11,226HKD 35,192,014 4,536 4,877

Others 1,782 1,915283,386 304,640

Deposits USD 14,539,029,235 14,539,029 15,629,456JPY 190,181,402,103 1,821,832 1,958,469EUR 939,588,920 1,281,040 1,377,118CNY 25,326,436,467 4,185,341 4,499,241IDR 3,381,648,875,986 278,082 298,938BRL 138,558,149 58,401 62,781HKD 1,063,026,000 137,027 147,304CAD 1,137,054,229 1,019,319 1,095,768AUD 95,248,336 83,809 90,094

Others 906,291 974,263US$ 24,310,171 ￦ 26,133,432


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December 31, 2013



Borrowings USD 7,283,028,099 US$ 7,283,028 ￦ 7,829,255JPY 59,127,713,247 566,410 608,891EUR 581,087,351 792,257 851,676CNY 228,954,588 37,836 40,674IDR 990,610,136,323 81,460 87,570BRL 101,906,777 42,953 46,174HKD 2,726,586 351 378CAD 867,419 778 836AUD 86,220,355 75,865 81,555

Others 38,429 41,3128,919,367 9,588,321

Debentures USD 4,918,429,666 4,918,430 5,287,312JPY 37,335,877,987 357,657 384,481HKD 304,451,902 39,245 42,188AUD 50,154 44 47

Others 609,941 655,6865,925,317 6,369,714

Derivative liabilitiesused for hedgingpurposes USD 78,858,686 78,859 84,773

Other liabilities USD 3,888,736,302 3,888,736 4,180,392JPY 20,157,976,851 193,102 207,585EUR 217,354,908 296,343 318,568CNY 701,084,597 115,858 124,548IDR 59,662,696,622 4,906 5,274BRL 20,360,059 8,582 9,225HKD 34,175,143 4,405 4,736CAD 145,805,837 130,708 140,512AUD 27,293,813 24,016 25,817

Others 287,603 309,1734,954,259 5,325,830

US$ 44,471,359 ￦ 47,806,710


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December 31, 2012



Assets:Cash and due frombanks USD 3,817,921,113 US$ 3,817,921 ￦ 4,089,375

JPY 24,165,025,136 281,448 301,459EUR 490,565,585 648,649 694,768CNY 8,635,434,458 1,385,733 1,484,258IDR 649,766,714,403 67,397 72,189BRL 6,778,147 3,317 3,553HKD 316,465,285 40,826 43,729

Others 535,768 573,8626,781,059 7,263,193

Financial assets held-for-trading USD 590,584,634 590,585 632,575

JPY 1,314,157,792 15,306 16,394EUR 24,048,143 31,798 34,058HKD 37,240 5 5

637,694 683,032Available-for-salefinancial assets USD 974,270,708 974,271 1,043,541

CNY 211,806,670 33,989 36,405IDR 126,918,680,000 13,165 14,101

Others 333,190 356,8801,354,615 1,450,927

Held-to-maturityinvestments USD 37,651,896 37,652 40,329

EUR 508,142 672 720IDR 390,230,241,053 40,477 43,355BRL 50,472,526 24,700 26,456

Others 8,909 9,541112,410 120,401

Loans receivable USD 20,795,920,437 20,795,920 22,274,510JPY 263,695,295,231 3,071,234 3,289,599EUR 981,776,454 1,298,152 1,390,451CNY 13,474,213,863 2,162,214 2,315,948IDR 4,568,916,307,048 473,911 507,607BRL 173,721,639 85,013 91,058HKD 525,104,474 67,742 72,559CAD 981,430,591 985,966 1,056,068AUD 394,256,441 409,101 438,188

Others 272,010 291,350US$ 29,621,263 ￦ 31,727,338


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December 31, 2012



Derivative assets used for hedging purposes USD 97,916,343 US$ 97,916 ￦ 104,878

Other assets USD 3,633,730,919 3,633,731 3,892,089JPY 69,273,559,319 806,823 864,188EUR 259,391,355 342,980 367,366CNY 113,633,643 18,235 19,531IDR 67,712,577,742 7,023 7,523BRL 1,454,305 712 762HKD 477,332,465 61,579 65,958CAD 11,310,698 11,363 12,171AUD 11,116,219 11,535 12,355

Others 241,939 259,1415,135,920 5,501,084

US$ 43,740,877 ￦ 46,850,853Liabilities:Financial liabilities held-for-trading USD 150,147,405 US$ 150,147 ￦ 160,823

JPY 1,325,401,758 15,437 16,534EUR 9,988,884 13,208 14,147

178,792 191,504Deposits USD 12,666,460,801 12,666,461 13,567,046

JPY 175,085,795,552 2,039,208 2,184,195EUR 1,602,020,257 2,118,268 2,268,877CNY 19,012,818,341 3,050,997 3,267,923IDR 3,222,045,099,459 334,207 357,969BRL 265,668,911 130,009 139,253HKD 826,212,757 106,588 114,166CAD 897,667,084 901,816 965,935AUD 117,577,471 122,005 130,679

Others 774,647 829,726US$ 22,244,206 ￦ 23,825,769


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December 31, 2012



Borrowings USD 6,682,816,362 US$ 6,682,816 ￦ 7,157,965JPY 128,042,720,021 1,491,301 1,597,333EUR 647,615,570 856,308 917,192CNY 44,496,830 7,140 7,648IDR 16,414,490,443 1,703 1,824BRL 116,559,983 57,041 61,096CAD 23,545,731 23,655 25,336AUD 196,377,903 203,772 218,260

Others 128,596 137,7409,452,332 10,124,394

Debentures USD 3,958,386,085 3,958,386 4,239,827JPY 60,896,951,054 709,261 759,689AUD 31,800,470 32,998 35,344

Others 681,955 730,4435,382,600 5,765,303

Derivative liabilities used for hedging purposes USD 422,726 423 453

Other liabilities USD 4,928,107,478 4,928,107 5,278,496JPY 20,003,980,398 232,984 249,550EUR 349,216,567 461,751 494,581CNY 305,128,347 48,964 52,445IDR 50,399,503,311 5,228 5,599BRL 5,491,480 2,687 2,878HKD 174,965,630 22,572 24,177CAD 114,167,212 114,695 122,850AUD 151,204,719 156,898 168,053

Others 311,952 334,1316,285,838 6,732,760

US$ 43,544,191 ￦ 46,640,183


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9.4 Operational risk

Operational risk is the risk of loss arising from systems failure, human error, fraud or other externalevents. Risks related to strategy or damaging reputation are excluded but legal or regulatoryimplications are identified as operational risks. Operational risk includes non-financial risks related tolosses due to internal operational problems and externalities such as natural disasters and terroristattacks. Operational risk does not have a direct correlation with income and the Company needs tomitigate such risk through internal controls and insurance.

The Company measures and monitors its operational risk on a regular basis and complies with thepredetermined risk limits, whereby the Company manages and controls its operational risk arisingfrom changes of its operation environments and internal controls within an appropriate level. TheCompany’s subsidiaries measures the operational risk exposures using their own approachessuitable to the relevant supervisory regulations of each industry and the group-level operational riskexposures are consistently calculated through the group-integrated risk management system. TheCompany reports its current status of operational risk management to the group risk managementexecution committee and group risk management committee on a monthly and quarterly basis.

9.5 Capital management

The Company implements the BIS capital requirement system in order to secure capital adequacyand comply with the supervisory regulations. The Company maintains over 8% capital torisk-weighted asset ratio (BIS ratio) in accordance with BIS capital requirement system. In addition,the Company performs a capital adequacy assessment in order to cope with an unexpected loss.

Risk-weighted assets calculated per each risk type when calculating BIS ratio are as follows:

- Credit risk incurs when potential loss arises from default of a borrower or counterpartyor downgrading of its credit rating Risk-weighted assets of credit risk of bank subsidiaries arecalculated using the internal model approved by Financial Supervisory Service.Risk-weighted assets of credit risk are calculated by multiplying risk weights reflectingcounterparty credit rating, maturity, collateral and guarantees granted according to thestandardized model of Basel III.

- Market risk incurs when potential loss arises from the fluctuation of market price of stocks,interest rates and foreign currency rates. Risk-weighted assets of market risk are calculated bymultiplying 12.5 to the required capital of market risk, which consists of the interest rate risk,equity price risk, foreign currency risk, commodity risk and option risk, according to thestandardized model of Supervisory Regulations on Financial Holding Companies.

- Operational risk incurs when loss arises from systems failure, human error, business process.Risk-weighted assets of operational risk are calculated by multiplying 12.5 to the requiredcapital of operational risk according to Detailed Regulations on Supervisory of BankingBusiness.


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9.5 Capital management (cont’d)

Regulatory capital in accordance with the Regulations on the Supervision of Banking Business forcalculating BIS ratio is as follows:

- Common Equity Tier 1: common shares issued by the bank that meet the criteria forclassification as common shares for regulatory purposes, stock surplus (share premium)resulting from the issue of instruments included in Common Equity Tier 1, retained earnings,Accumulated other comprehensive income and other disclosed reserves, common sharesissued by consolidated subsidiaries of the bank and held by third parties (ie minority interest)that meet the criteria for inclusion in Common Equity Tier 1 capital, regulatory adjustmentsapplied in the calculation of Common Equity Tier 1

- Additional Tier 1: instruments issued by the bank that meet the criteria for inclusion inAdditional Tier 1 capital, stock surplus (share premium) resulting from the issue ofinstruments included in Additional Tier 1 capital, instruments issued by consolidatedsubsidiaries of the bank and held by third parties that meet the criteria for inclusion inAdditional Tier 1 capital and are not included in Common Equity Tier 1, regulatoryadjustments applied in the calculation of Additional Tier 1

- Tier 2 capital: Instruments issued by the bank that meet the criteria for inclusion in Tier 2capital (and are not included in Tier 1 capital), Stock surplus (share premium) resulting fromthe issue of instruments included in Tier 2 capital, Instruments issued by consolidatedsubsidiaries of the bank and held by third parties that meet the criteria for inclusion in Tier 2capital and are not included in Tier 1 capital, Certain loan loss provisions, Regulatoryadjustments applied in the calculation of Tier 2 Capital

Regulatory capital and BIS ratios as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

December 31, 2013 December 31, 2012 (*1)

Common Equity Tier 1 capital ￦ 16,401,549 ￦ -Additional Tier 1 capital 667,323 -

17,068,872 16,759,947Tier 2 capital 5,605,619 7,214,694

22,674,491 23,974,641

Risk-weighted assets:Credit risk-weighted assets 166,992,229 197,824,265Market risk-weighted assets 7,176,912 7,898,762Operational risk-weighted assets 10,516,488 -

￦ 184,685,629 ￦ 205,723,027BIS capital ratio:

Common Equity Tier 1 ratio 8.88% -Additional Tier 1 capital ratio 9.24% 8.15%Tier 2 capital ratio 3.04% 3.50%Total capital ratio 12.28% 11.65%

(*1) BIS ratios as of December 31, 2012 were calculated according to the standardized model ofBasel I.


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9.5 Capital management (cont’d)

Internal capital is the amount that allows for continuous operation of business while accounting for allrisks. Internal capital is defined as the size of capital needed to cope with unexpected loss under acertain rate. The purpose of managing the internal capital is to compare the size of internal capital andavailable capital (“Tier 1”) and to serve as a measure of financial strength. Managing the internalcapital also provides the amount of risk-adjusted capital and the basis for measurement. Theindicators consist of risk appetite ratio as well as exhaustion ratio of foreign holding limits. The riskappetite ratio is an internal capital ratio established after taking into consideration a capital buffer inTier 1 capital. The exhaustion ratio of foreign holding limits is a ratio used to measure the amount ofinternal capital used against the internal capital limits.

Internal capital limits are established after accounting for the size of current and subsequent Tier 1capital as well as the components, quality, risk appetite, target credit rating, operational strategy andbusiness plans. The Risk Committee determines risk types and internal capital limits for HFG andeach subsidiary more than once a year. In the case where new operations or expansion of operationsresult in the amount exceeding the internal capital limits, an approval from the Risk.Committee isneeded beforehand. If such a situation occurs in cases outlined as exceptions, an approval from theRisk Committee is needed for the information on exceeded amount, post hoc results, as well assubsequent plans.

10. Operating segments information

The Company is organized into five operating segments based on their financial information of eachlegal entities used for making decisions about resources to be allocated to the segment andassessing its performance. Details of operating segments are presented below:

- Hana Bank and its subsidiaries (“Hana Bank”)- KEB and its subsidiaries (“KEB”)- H&DS and its subsidiaries (“H&DS)- Hana SK Card and its subsidiaries (“Hana SK Card”)- Others: consist of Hana Financial Group’s separate performance and its other subsidiaries

such as Hana Capital, Hana Asset Trust, Hana INS, HIF, Hana Savings Bank, Hana LifeInsurance, etc.


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10. Operating segments information (cont’d)

The net income of the operating segments for the years ended December 31, 2013 and 2012 is as follows (Korean won in millions):

Year ended December 31, 2013

Hana Bank KEB H&DSHana SK

Card Others Subtotal Adjustments Total

Net interest Income (loss) ￦ 2,617,902 ￦ 1,730,895 ￦ 151,224 ￦ (83,310) ￦ 74,168 ￦ 4,490,879 ￦ (5,838)￦ 4,485,041

Net fee and commissionincome 352,720 667,849 189,638 362,080 17,823 1,590,110 2,706 1,592,816

Net other operating Income (loss) 264,302 450,531 (22,639) 23,096 16,341 731,631 (66,143) 665,488Total operating income 3,234,924 2,849,275 318,223 301,866 108,332 6,812,620 (69,275) 6,743,345

Impairment loss(recovery) onfinancial assets 567,234 533,792 (2,118) 108,511 56,490 1,263,909 7,746 1,271,655

Net operation income 2,667,690 2,315,483 320,341 193,355 51,842 5,548,711 (77,021) 5,471,690General and

administrative expenses 1,544,399 1,540,227 290,751 175,212 168,413 3,719,002 127,307 3,846,309Net other operating

income (loss) (322,504) (186,724) 26,151 (15,285) 159,264 (339,098) (121,273) (460,371)Operating income (loss) 800,787 588,532 55,741 2,858 42,693 1,490,611 (325,601) 1,165,010Net non-operating Income (loss) 74,128 (21,485) 28,771 6,258 (53,048) 34,624 70,639 105,263Income tax expenses 166,175 122,923 22,467 5,594 18,885 336,044 (58,739) 277,305Net income(loss) ￦ 708,740￦ 444,124 ￦ 62,045 ￦ 3,522 ￦ (29,240) ￦ 1,189,191 ￦ (196,223)￦ 992,968


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Card Others Subtotal Adjustments Total

Net interest income(loss) ￦ 2,809,617 ￦ 1,778,701 ￦ 134,852 ￦ (8,287) ￦ 18,903 ￦ 4,733,786 ￦ (135,120) ￦ 4,598,666Net fee and commissionIncome (loss) 385,958 639,845 212,789 302,112 (942) 1,539,762 12,411 1,552,173

Net other operating Income (loss) 321,584 618,177 26,777 4,352 5,974 976,864 (223,677) 753,187Total operating income 3,517,159 3,036,723 374,418 298,177 23,935 7,250,412 (346,386) 6,904,026Impairment loss(recovery) on financialassets 733,326 684,095 40,106 118,738 56,715 1,632,980 (5,996) 1,626,984

Net operating income ￦ 2,783,833 ￦ 2,352,628 ￦ 334,312 ￦ 179,439 ￦ (32,780) ￦ 5,617,432 ￦ (340,390) ￦ 5,277,042General andadministrativeexpenses ￦ 1,608,797 ￦ 1,402,901 ￦ 334,079 ￦ 196,981 ￦ 130,492 ￦ 3,673,250 ￦ 96,528 ￦ 3,769,778

Net other operatingincome (loss) (369,942) (147,077) 22,693 (13,498) 16,915 (490,909) 1,000,996 510,087

Operating income (loss) 805,094 802,650 22,926 (31,040) (146,357) 1,453,273 564,078 2,017,351Net non-operating Income (loss) 609 12,607 10,964 1,846 (23,959) 2,067 (27,207) (25,140)Income tax expenses 129,019 235,404 11,204 310 14,123 390,060 (127,029) 263,031Net income (loss) ￦ 676,684 ￦ 579,853 ￦ 22,686 ￦ (29,504) ￦ (184,439) ￦ 1,065,280 ￦ 663,900 ￦ 1,729,180


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The net income of operating segments for the years ended December 31, 2013 and 2012 is as follows (Korean won in millions):



Card Others Subtotal Adjustments TotalRevenue from externalcustomers ￦ 3,257,774 ￦ 2,804,658 ￦ 328,817 ￦ 351,886 ￦ 62,593 ￦ 6,805,728 ￦ (69,275)￦ 6,736,453

Revenue (expense) frominternal transactions (22,850) 44,617 (10,594) (50,020) 45,739 6,892 - 6,892

￦ 3,234,924 ￦ 2,849,275 ￦ 318,223 ￦ 301,866 ￦ 108,332 ￦ 6,812,620 ￦ (69,275)￦ 6,743,345



Card Others Subtotal Adjustments TotalRevenue from externalcustomers ￦ 3,597,586 ￦ 2,999,733 ￦ 380,076 ￦ 312,053 ￦ (39,625) ￦ 7,249,823 ￦ (346,386)￦ 6,903,437

Revenue (expense) frominternal transactions (80,427) 36,990 (5,658) (13,876) 63,560 589 - 589

￦ 3,517,159 ￦ 3,036,723 ￦ 374,418 ￦ 298,177 ￦ 23,935 ￦ 7,250,412 ￦ (346,386)￦ 6,904,026


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Significant non-cash transactions included in income of operating segment for the years ended December 31, 2013 and 2012 are as follows (Korean wonin millions):



Card Others Subtotal Adjustments TotalGain (loss) on equitymethod ￦ 76,067 ￦ (821)￦ 11,906 ￦ 487 ￦ 125 ￦ 87,764 ￦ (2,551) ￦ 85,213

Depreciation andamortization 148,300 108,832 13,511 25,282 23,279 319,204 180,338 499,542

￦ 224,367 ￦ 108,011 ￦ 25,417 ￦ 25,769 ￦ 23,404 ￦ 406,968 ￦ 177,787 ￦ 584,755



Card Others Subtotal Adjustments TotalGain (loss) on equitymethod ￦ 68,291 ￦ (678)￦ 14,452 ￦ 326 ￦ 120 ￦ 82,511 ￦ (15,720) ￦ 66,791

Depreciation andamortization 135,012 97,243 14,641 25,319 19,280 291,495 164,100 455,595

￦ 203,303 ￦ 96,565 ￦ 29,093 ￦ 25,645 ￦ 19,400 ￦ 374,006 ￦ 148,380 ￦ 522,386


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Revenue from external customers for the years ended December 31, 2013 and 2012 and non-currentassets as of December 31, 2013 and 2012 are as follows (Korean won in millions):

Revenue from external customers Non-current assetsYear ended

December 31,2013

Year endedDecember 31,

2012December 31,

2013December 31,

2012Domestic ￦ 6,353,701 ￦ 6,782,776 ￦ 3,512,483 ￦ 3,594,737Foreign: Hong Kong 67,750 64,789 4,483 4,922 Singapore 28,007 24,252 439 367 U.S 33,260 38,083 661 985 Japan 23,813 33,399 5,322 6,445 China 127,712 134,256 42,474 36,208 Canada 59,664 50,699 4,364 3,456 U.K 13,784 16,896 179 115 Indonesia 32,421 33,874 3,883 3,329 Others 65,615 70,799 4,104 2,325

452,027 467,047 65,909 58,152Adjustments (69,275) (346,386) 1,082,676 1,195,475

￦ 6,736,453 ￦ 6,903,437 ￦ 4,661,068 ￦ 4,848,364

Non-current assets consist of property and equipment, investment properties, and intangible assetsand are classified as either domestic or overseas depending on its geographic proximity.

11. Cash and due from banks

Cash and due from banks as of December 31, 2013 and 2012 are as follows (Korean won in millions):

CounterpartyInterestrate (%)

December 31,2013

December 31,2012

Cash \ 3,514,869 \ 3,352,441Due frombanks inKorean won

Reserve depositswith BOK

Bank of Korea(“BOK”) 0.00~2.50 4,870,082 5,240,771

Certificates ofdeposit Other banks 1.65~4.35 1,151,438 1,868,060

Other deposits Other financialinstitutions 0.00~3.70 1,723,404 1,820,529

\ 7,744,924 \ 8,929,360


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11. Cash and due from banks (cont’d)

CounterpartyInterestrate (%)

December 31,2013

December 31,2012

Due frombanks Inforeigncurrencies

Due from bankson demand BOK, etc. 0.00~2.50 \ 4,917,418 \ 3,840,045

Time deposits Bayern LB and others 0.00~4.10 2,325,622 1,463,462

Due from otherson demand

Other financialinstitutions 0.00~1.25 840,385 1,305,562

8,083,425 6,609,069\ 19,343,218 \ 18,890,870

Restricted balances in due from banks as of December 31, 2013 and 2012 are summarized as follows(Korean won in millions):

December 31,2013

December 31,2012 Restrictions

Due from banks in Korean won:Reserve depositswith BOK \ 4,870,082 \ 5,240,771 The Bank of Korea Act

Reserve forfutures trading 3,532 2,537 Margin for trading account

Reserve for claims of customers’ deposits 245,983 417,001

Regulation on brokerage business ofsecurities company, etc

Other deposits 219,000 584,924 For the right of pledge, etc5,338,597 6,245,233

Due from banks in foreign currencies:Due from bankson demand 1,344,800 2,208,963 Reserve for payment of deposits, etc

Due from otherson demand 365,078 569,981 OTC derivative contracts, etc

1,709,878 2,778,944\ 7,048,475 \ 9,024,177


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12. Financial assets held-for-trading

Financial assets held-for-trading as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

DetailsInterestrate (%)

Fair value (Book value)December 31,

2013December 31,

2012Equity securities LG Corp. and others - \ 174,127 \ 232,478Government and public bonds Government bonds 1.9~5.8 1,579,180 1,422,133

Housing bonds 1.7~3.5 85,629 136,781Others 2.3~3.9 219,599 207,869

1,884,408 1,766,783Finance bonds Commercial bank bonds 2.6~4.1 572,976 564,999

Industrial financial debenture 2.6~5.5 627,589 351,206Small & medium industryfinance bonds 2.5~5.0 347,704 255,112

Currency stabilization bonds 2.5~3.6 990,280 1,075,743KEXIM bond 2.6~5.2 118,611 178,603Others 2.7~5.1 1,509,100 1,826,086

4,166,260 4,251,749Corporate bonds Corporate bonds and others 2.6~5.6 4,285,914 3,571,420Beneficiarycertificates - 147,738 116,388

Securitiesdenominatedin foreigncurrencies

Equity securities in foreign currencies - 27,745 6Bonds in foreign currencies 3.1~12.0 189,046 275,340Beneficiary certificates in foreign currencies - 6,322 -

223,113 275,346Other securities - 861,219 776,565Derivatives assets held for trading purpose (*) - 4,023,580 3,897,595

\ 15,766,359 \ 14,888,324

(*) Refer to Note 19.


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12. Financial assets held-for-trading (cont’d)

Debt securities included in trading securities as of December 31, 2013 and 2012 consist of thefollowing (Korean won in millions):

December 31, 2013

Par valueAcquisition

costAmortized

costFair value

(Book value)Government andpublic bonds \ 1,898,001 \ 1,890,349 \ 1,887,655 \ 1,884,408

Finance bonds 3,934,595 4,232,468 4,231,625 4,166,260Corporate bonds 4,225,891 4,271,101 4,269,692 4,285,914Bonds in foreign currencies 136,239 196,751 196,511 189,046

\ 10,194,726 \ 10,590,669 \ 10,585,483 \ 10,525,628

December 31, 2012


costAmortized

CostFair value

(Book value)Government andpublic bonds \ 1,747,107 \ 1,765,263 \ 1,762,499 \ 1,766,783

Finance bonds 4,227,423 4,243,910 4,242,576 4,251,749Corporate bonds 3,550,180 3,580,062 3,579,624 3,571,420Bonds in foreign currencies 136,239 287,399 287,399 275,340

\ 9,660,949 \ 9,876,634 \ 9,872,098 \ 9,865,292

13. Financial assets designated at fair value through profit or loss

Financial assets designated at fair value through profit or loss as of December 31, 2013 and 2012 areas follows (Korean won in millions):

December 31, 2013 December 31, 2012Derivative linked securities \ 58,824 \ -Deferred day 1 profit or loss 4,175 7,312Equity securities 92,217 57,900Debt securities 85,381 -

\ 240,597 \ 65,212


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14. Available-for-sale financial assets

Available-for-sale financial assets as of December 31, 2013 and 2012 are as follows (Korean won inmillions):


Fair value (Book value)December 31, 2013 December 31, 2012

Equity securities POSCO and others - \ 1,989,668 \ 1,758,464Investments inpartnerships

United PF 1ST CorporateFinancial Stability andothers - 221,805 245,475

Government andpublic bonds Treasury bonds 2.5~5.8 6,362,189 6,886,998

Housing bonds 2.25~3.99 1,859,322 1,137,077Others 3.48~4.23 351,807 463,431

8,573,318 8,487,506Finance bonds Currency

stabilization bonds 2.5~3.6 4,303,709 3,974,239Deposit money commercial bank bonds 2.6~4.1 755,914 652,357Small & mediumindustry finance bonds 2.5~8.35 666,636 637,809

Industrialfinancial debenture 2.6~6.12 1,286,413 867,632

KEXIM bonds 2.6~5.2 391,513 353,8677,404,185 6,485,904

Corporate bonds Non-financialcorporate bonds 2.6~5.94 2,345,607 2,446,429

SOE bonds 2.8~7.1 5,678,274 4,162,081Others - 756,192 45,451

8,780,073 6,653,961Beneficiary

certificates 768,503 221,912Securitiesdenominatedin foreigncurrencies

Equity securitiesin foreign currencies - 81,709 74,551

Bonds in foreigncurrencies 0.59~12.00 1,656,166 1,450,927

Investment in foreigncurrencies - 36,223 41,712

Beneficiary certificatesin foreign currencies - 83 488

1,774,181 1,567,678Other securities Beneficiary certificates - 17,423 50,666

\ 29,529,156 \ 25,471,566


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14. Available-for-sale financial assets (cont’d)

Equity securities (including equity securities denominated in foreign currencies) as of December 31,2013 and 2012 are as follows (Korean won in millions):

Book valuebefore valuation

Accumulatedother

comprehensiv-e income

Fair value (Book value)

December 31, 2013

December 31,2012

Marketableequity securities \ 1,013,050 \ 226,193 \ 1,239,243 \ 1,003,672

Non-marketableequity securities 860,599 (28,465) 832,134 829,343

\ 1,873,649 \ 197,728 \ 2,071,377 \ 1,833,015

Non-marketable equity securities including Korea Asset Management Corporation amounting to\25,949million and \53,661million as of December 31, 2013 and 2012, respectively, were valued atcost as their fair values could not be reasonably estimated.

The fair value of the available-for-sale non-marketable equity securities such as Korea HousingGuarantee Co., Ltd. was measured by an independent valuer using actuarial assumptions. The fairvalue was determined based on more than one valuation model such as the Discounted Cash Flow(DCF) model, Imputed Market Value (IMV) model, and Risk Adjusted Discounted Cash Flow (RADCF)model, depending on the characteristic of the equity securities as deemed appropriate.

Shares held by the Company with disposal restrictions as of December 31, 2013 are summarized asfollows (Korean won in millions):

December 31, 2013Number of

shares Book value Disposal restrictionElcomtec Co.,Ltd. 507,954 \ 2,261 Until November 21, 2014Kumho Industrial Co., Ltd. 928,181 12,755 Until December 31, 2014Kumho Tire Co., Ltd. 3,153,755 36,268 Until December 31, 2014Ajin P and P Co., Ltd. 53,850 782 Until December 31, 2014SAMT Co., Ltd. 9,446,693 20,405 Until December 31, 2014Young Gwang Stainless Co.,Ltd. 10,000 14 Until December 31, 2014Jaeyoung Solutec Co., Ltd. 305,333 414 Until December 31, 2014Chinheung International Co.,Ltd. 2,976,400 4,792 Until December 31, 2014Cosmotec Co., Ltd. 2,126,000 555 Until December 31, 2014Ssangyong Engineering & Construction 666,666 8,349 Until June 31, 2014Daiyang Metal Co., Ltd. 7,563,000 8,281 Until June 4, 2014Taihan Electric Wire Co.,Ltd.(Common stock) 7,300,000 17,411 Until December 31, 2015

Taihan Electric Wire Co.,Ltd.(Convertible preferred stock) 11,775,100 140,419 Until December 31, 2015

Kores Co., Ltd. 492,000 417 Until December 31, 2015Oriental Precision & Engineering Co.,Ltd. 14,777,331 19,210 Until December 31, 2016


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December 31, 2013

Number of shares Book value Disposal restriction

STX Engine Co., Ltd. 3,638,000 16,734 Until December 31, 2017STX Offshore & Shipbuilding Co.,Ltd. 673,889 4,515 Until December 31, 2017STX Heavy Industries Co., Ltd. 2,250,000 7,245 Until December 31, 2017Force TEC Co., Ltd. 2,524,280 3 Until December 31, 2017Pumyang Construction Co., Ltd. 42,253 255 Until the end of the period of

safeguard depositKukje, Machinery Co., Ltd. 438,000 1,468 Until M&A be madeSsangyongEngineering&Construction 15,671 122 Until its co-disposal is

completedSamho International Co., Ltd. 788,000 4,961 Until the end of the period ofPantech Co., Ltd. 18,426,419 9,029 Until resolution of shareholders

associationOthers 6,282,942 - (*)

\ 316,665

(*) Of the shares included in others that are embedded with restrictions on disposal, 4,297,142shares of Daewoo Electronics Co., Ltd. are restricted except when the investee undergoesliquidation procedures, 1,844,400 shares of Kohap Co., Ltd. are restricted until the end of liquidation,and 101,400 shares of YoungGwang Stainless Co., Ltd. are restricted until December 31, 2014.

Debt securities as of December 31, 2013 and 2012 are summarized as follows (Korean won inmillions):

December 31, 2013


costAmortized

costFair value

(Book value)Governmentand publicbonds \ 8,459,694 \ 8,604,106 \ 8,366,603 \ 8,573,318

Finance bonds 7,389,139 7,396,781 7,311,436 7,404,185Corporatebonds 8,667,800 8,758,984 7,797,355 8,780,073

Bondsdenominatedin foreigncurrencies 1,606,383 1,656,458 1,553,620 1,656,166

\ 26,123,016 \ 26,416,329 \ 25,029,014 \ 26,413,742


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December 31, 2012


costAmortized

costFair value

(Book value)Governmentand publicbonds \ 8,167,149 \ 8,384,153 \ 8,356,600 \ 8,487,506

Finance bonds 6,481,279 6,476,988 6,474,917 6,485,904Corporatebonds 6,530,012 6,637,034 6,573,730 6,653,961

Bondsdenominatedin foreigncurrencies 1,368,937 1,409,859 1,400,472 1,450,927

\ 22,547,377 \ 22,908,034 \ 22,805,719 \ 23,078,298

The fair value of available-for-sale debt securities is measured based on the the valuations providedby KIS Pricing Inc. or Korea Asset Pricing Co.

Beneficiary certificates securities as of December 31, 2013 and 2012 are summarized as follows(Korean won in millions):

December 31, 2013

Acquisition costBook value

before valuation

Accumulated othercomprehensive

income Book value Beneficiary certificates \ 370,004 \ 370,004 \ 3,219 \ 373,223Securities certificates 79,984 79,984 3,140 83,124Other certificates 306,315 307,594 4,645 312,239

\ 756,303 \ 757,582 \ 11,004 \ 768,586

December 31, 2012

Acquisition cost

Book valuebefore

valuation

Accumulated othercomprehensive

income Book value Beneficiary certificates \ 80,000 \ 80,000 \ 279 \ 80,279Securities certificates 20,000 20,018 (890) 19,128Other certificates 118,633 120,893 2,100 122,993

\ 218,633 \ 220,911 \ 1,489 \ 222,400


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Changes in the unrealized gain (loss) of the Company’s available-for-sale financial assets for theyears ended December 31, 2013 and 2012 are as follows (Korean won in millions):

Year ended December 31, 2013Beginningbalance

Unrealizedgain (loss)

Realizedloss Tax effect

Endingbalance

Equity securities \ 178,416 \ 91,217 \ (11,970) \ (16,431) \ 241,232investmentsin partnerships (2,418) 25,627 (7,813) (3,232) 12,164

Government andpublic bonds 88,199 (72,482) (47,650) 29,358 (2,575)

Finance bonds 8,140 (622) (8,445) 2,537 1,610Corporate bonds 67,746 95,702 (162,761) 17,728 18,415Securities denominatedin foreign currencies 45,854 (37,647) (11,781) 11,733 8,159

\ 385,937 \ 101,795 \ (250,420) \ 41,693 \ 279,005

Year ended December 31, 2012Beginningbalance

Unrealizedgain (loss)

Realizedgain (loss) Tax effect

Endingbalance

Equity securities \ 118,086 \ (5,349) \ 85,131 \ (19,452) \ 178,416investmentsin partnerships 8,174 (5,084) (7,352) 1,844 (2,418)

Government andpublic bonds 52,185 94,101 (46,569) (11,518) 88,199

Finance bonds 2,934 9,340 (2,455) (1,679) 8,140Corporate bonds 22,888 52,092 7,082 (14,316) 67,746Securities denominatedin foreign currencies 15,241 43,321 (2,971) (9,737) 45,854

\ 219,508 \ 188,421 \ 32,866 \ (54,858) \ 385,937

Realized gain and loss from disposal of available-for-sale financial assets for the years endedDecember 31, 2013 and 2012 are as follows (Korean won in millions):

Year ended December 31, 2013Realized gain Realized loss

Equity securities \ 117,274 \ 53,493Other equity securities 539 1,990Government and public bonds 84,469 9,953Finance bonds 6,390 503Corporate bonds 17,622 77Securities denominated in foreign currencies 37,167 1,226

\ 263,461 \ 67,242


- 123 -


Year ended December 31, 2012Realized gain Realized loss

Equity securities \ 77,386 \ 47,337Other equity securities 12,402

223,204

Government and public bonds 99,1619

2,002Finance bonds 11,982

1772

Corporate bonds 62,1642

17,879Securities denominated in foreign currencies 12,209

21,569

\ 275,304 \ 92,763

Dividend gain on available-for-sale financial assets for the years ended December 31, 2013 and 2012is as follows (Korean won in millions):

Year endedDecember 31, 2013


Equity securities \ 28,685 \ 37,471Investment in partnerships 8,250 21,593

\ 36,935 \ 59,064

Transferred financial assets that are not fully derecognized as of December 31, 2013 are as follows(Korean won in millions):

December 31, 2013Book value Fair value

AssetsAvailable-for-sale financial assets (*) \ 1,418,706 \ 1,188,787Held-to-maturity investments 181,700 187,667

1,600,406 1,376,454LiabilitiesBonds sold under repurchase agreements 654,365 655,739

Net position \ 946,041 \ 720,715

(*) Loaned available-for-sale securities with no associated liabilities recognized amounting to\132,831 million have been included.


- 124 -


December 31, 2012Book value Fair value

AssetsAvailable-for-sale financial assets (*) \ 1,030,868 \ 1,030,868Held-to-maturity investments 186,997 190,621

1,217,865 1,221,489LiabilitiesBonds sold under repurchase agreements 661,944 664,497

Net position \ 555,921 \ 556,992

(*) Loaned available-for-sale securities with no associated liabilities recognized amounting to\307,783 million have been included.

15. Held-to-maturity investments

Held-to-maturity investments as of December 31, 2013 and 2012 consist of the following (Korean wonin millions):


Book valueDecember 31,2013 December 31, 2012

Government andpublic bonds Treasury bonds 3.00~5.8 \ 699,414 \ 651,983

Housing bonds 2.25~3.99 497,450 438,439Regionaldevelopmentbonds 2.50~4.23 124,797 24,397

1,321,661 1,114,819Finance bonds Finance bonds 2.78~3.59 850,313 3,227,913

Commercial bankBonds 3.40~8.35 593,076 503,531

Small & medium industryfinance bonds 3.40~8.35 100,409 70,000

Industrial financial bond 6.12~6.12 11,788 10,320Others - 10,003 -

1,565,589 3,811,764Corporate bonds SOE bonds 3.40~7.00 796,171 1,621,139

Corporate bonds 3.40~6.00 843,234 551,357Specific law bonds - 60,000 -

1,699,405 2,172,496Bondsdenominated inforeign currencies

Bonds in foreigncurrencies 0.59~7.63 150,332 120,401

\ 4,736,987 \ 7,219,480


- 125 -

15. Held-to-maturity investments (cont’d)

Details of held-to-maturity securities as of December 31, 2013 and 2012 are summarized as follows(Korean won in millions):

December 31, 2013


costAmortized

cost Book valueGovernment and public bonds \ 1,358,191 \ 1,324,142 \ 1,321,661 \ 1,321,661Finance bonds 1,560,000 1,573,018 1,565,589 1,565,589Corporate bonds 1,684,997 1,719,981 1,699,405 1,699,405Bonds denominatedin foreign currencies 152,004 152,219 150,332 150,332

\ 4,755,192 \ 4,769,360 \ 4,736,987 \ 4,736,987

December 31, 2012


costAmortized

cost Book valueGovernment and public bonds \ 1,134,598 \ 1,108,493 \ 1,114,819 \ 1,114,819Finance bonds 3,800,000 3,828,580 3,811,764 3,811,764Corporate bonds 2,168,897 2,205,020 2,172,496 2,172,496Bonds denominatedin foreign currencies 120,014 120,380 120,401 120,401

\ 7,223,509 \ 7,262,473 \ 7,219,480 \ 7,219,480

16. Structured securities included in financial assets held-for-trading, available-for-salefinancial assets and held-to-maturity investments

Structured securities included in financial assets held-for-trading, available-for-sale financial assetsand held-to-maturity investments as of December 31, 2013 and 2012 are summarized as follows(Korean won in millions and U.S. dollar in thousands and Brazilian real in thousands):

December 31, 2013Type Issuer Par value Issued date Maturity Book value Risk

< Available-for-sale financial assets >Structured securities in foreign currencies:Credit Collateralized debt

obligation

MERLION CAPITAL

FUNDING $ 20,064 2007.03.06 2015.09.15 \ 23,024 Credit

< Held-to-maturity investments >Structured securities in Korean won:Interest Range accrual note Woori Bank ₩ 50,000 2006.04.10 2016.04.10 \ 50,000 Interest

Range accrual note Shinhan Bank 50,000 2006.06.16 2016.06.16 50,000 Interest

Range accrual noteSC Bank of Korea.,Ltd. 50,000 2006.06.30 2016.06.30 50,000 Interest

₩ 150,000 \ 150,000


- 126 -

16. Structured securities included in financial assets held-for-trading, available-for-salefinancial assets and held-to-maturity investments (cont’d)

December 31, 2012Type Issuer Par value Issued date Maturity Book value Risk

< Available-for-sale financial assets >Structured securities in foreign currencies:Credit Collateralized debt

obligation

MERLION CAPITAL

FUNDING $ 20,064 2007.03.06 2015.09.15 \ 21,491 Credit

< Held-to-maturity investments >Structured securities in Korean won:Interest Range accrual note Woori Bank \ 50,000 2006.04.10 2016.04.10 \ 50,000 Interest

Range accrual note Shinhan Bank 50,000 2006.06.16 2016.06.16 50,000 Interest

Range accrual noteSC Bank of Korea.,Ltd. 50,000 2006.06.30 2016.06.30 50,000 Interest

\ 150,000 \ 150,000

In addition, the Company holds structured securities included in loans that are privately-placedsecurities (Company has 19 and 26 privately-placed securities as of December 31, 2013 and 2012,respectively) amounting to ₩ 38,498 million and ₩ 46,909 million as of December 31, 2013 and 2012,respectively.

17. Pledged assets

Assets pledged as collateral for the purpose of resale agreement bonds from other banks, futuresoptions and securities deposits for membership maintenance at the stock exchange for tradingfinancial assets, available-for-sale financial assets and held-to-maturity investments as of December31, 2013 and 2012 are as follows (Korean won in millions):

Book valueDetails December 31, 2013 December 31, 2012

Financial assetsheld-for-trading Pledged securities \ 1,900,938 \ 1,467,664

Derivative instruments 180,214 261,258KRX, etc 255,427 229,077Client RP 3,140,347 835,959

5,476,926 2,793,958


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17. Pledged assets (cont’d)

Book valueDetails December 31, 2013 December 31, 2012

Available-for-salefinancial assets Futures \ 127,315 \ 55,833

Daylight credit 502,599 102,887Client RP 2,629 -Foreign currencyborrowing 687,188 886,105

Pledged securities 179,859 311,849Borrowings 493,086 433,280BOK payment 1,794,840 1,739,840Contract fulfillmentguarantees 10,602 591

Borrowingdenominated inforeign currency(CSA) 390,177 46,069

BOK RP - 50,006Others 83,525 60,361

4,271,820 3,686,821Held-to-maturityinvestments

Foreign currencyborrowing 640,111 967,781

Futures 350,176 409,557BOK payment 941,586 1,093,828Daylight credit 180,311 580,915Borrowings 171,476 239,758Client RP 182,609 123,910Securities paid 5,066 50,113Borrowingdenominated inforeign currency(CSA) 148,646 511,768

Others 164,316 174,9482,784,297 4,152,578

\ 12,533,043 \ 10,633,357


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18. Loans receivable

Details of loans receivable as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

December 31, 2013 December 31, 2012Loans and receivables:

Loans in Korean won \ 158,052,842 \ 150,015,179Loans in foreign currencies 17,692,716 16,168,490Domestic import usance 5,175,778 5,648,631Call loans 3,029,566 3,240,039Bills purchased in Korean won 742,859 798,648Bills purchased in foreign currencies 6,751,429 6,042,477Advance payments on acceptances and guarantees 45,395 50,146Credit card loans 5,851,477 5,484,376Bonds purchased under resale agreement 2,215,700 1,497,300Installment receivables purchased 3,660,433 6,751,151Privately-placed corporate bonds 1,355,256 1,586,348Lease receivables 1,019,406 1,026,009

205,592,857 198,308,794Plus (less):

Deferred loan fees and expenses 183,650 189,574Present value premium (discount) (3,067) 25,960Allowance for possible loan losses (2,175,613) (2,089,195)

\ 203,597,827 \ 196,435,133


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18. Loans receivable (cont’d)

Allocations of loans in Korean won and in foreign currencies by customer as of December 31, 2013and December 31, 2012 are listed as follows (Korean won in millions):

December 31, 2013

Korean wonForeign

currencies TotalCorporate loans:Large business \ 31,980,795 \ 18,766,416 \ 50,747,211Small andmedium business 49,807,594 7,592,289 57,399,883

Public sector and others 4,463,201 6,549,837 11,013,03886,251,590 32,908,542 119,160,132

Household loans 79,917,175 668,032 80,585,207Credit card loans 5,847,686 3,792 5,851,478

172,016,451 33,580,366 205,596,817Plus (less):Deferred loan fees and expenses 189,256 (5,606) 183,650Present value premium 415 - 415Allowance for possibleloan losses (1,946,930) (232,983) (2,179,913)

170,259,192 33,341,777 203,600,969Adjustments due to thebusiness combination:

Loans (3,960) Present value discount (3,482)Allowance for possibleloan losses 4,300

(3,142)\ 203,597,827


- 130 -

18. Loans receivable (cont’d)

December 31, 2012

Korean wonForeign

currencies TotalCorporate loans:Large business \ 30,660,462 \ 17,509,160 \ 48,169,622Small andmedium business 46,218,202 7,832,555 54,050,757

Public sector and others 3,869,509 5,971,172 9,840,68180,748,173 31,312,887 112,061,060

Household loans 80,186,115 663,069 80,849,184Credit card loans 5,482,286 2,089 5,484,375

166,416,574 31,978,045 198,394,619Plus (less):Deferred loan fees andexpenses 192,142 (2,568) 189,574Present value premium 11,858 - 11,858

Allowance for possibleloan losses (1,926,881) (248,139) (2,175,020)

164,693,693 31,727,338 196,421,031Adjustments due to thebusiness combination:

Loans (85,825) Present value premium 14,102Allowance for possibleloan losses 85,825

14,102\ 196,435,133

Changes in deferred loan fees, net of expenses, for the years ended December 31, 2013 and 2012are summarized as follows (Korean won in millions):


January1, 2013

Increasedue to thebusiness

combination Increase DecreaseDecember31, 2013

Deferred loan fees, net of expenses \ 189,574 \ (1,647) \ 119,359 \ (123,636) \ 183,650


January1, 2012

Increasedue to thebusiness

combination Increase DecreaseDecember31, 2012

Deferred loan fees, net of expenses \ 113,690 \ 1,569 \ 144,903 \ (70,588) \ 189,574


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18. Loans and receivable (cont’d)

Changes in allowance for possible loan losses for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):


Loans in Koreanwon

Loans inforeign

currencies

Advancepayments onacceptances

andguarantees

Bills purchasedin foreigncurrencies

Credit cardloans

Privatelyplaced

corporatebonds Others Total

As of January 1, 2013 \ 1,534,714 \ 189,044 \ 30,970 \ 18,904 \ 163,954 \ 29,095 \ 122,514 \ 2,089,195Increase due to the business combination - 4,452 - - - - - 4,452Adjustments due to the business

combination 66,623 12,801 758 389 - 673 281 81,525Disposal of non-performing loans (65,431) - - - (6,993) - (29) (72,453)Write-offs (1,065,159) (35,186) (16,912) (27,166) (199,244) (1) (26,768) (1,370,436)Collection of loans written-off in priorperiods 268,252 2 - - 46,965 - 2,372 317,591

Debt-to-equity swap (9,567) - - - 140 - - (9,427)Changes in exchange rate and others 126,240 1,872 1 7,589 (5) 34 49 135,780Provisions of allowance for possible loanlosses 880,797 26,111 9,726 9,675 181,424 (6,493) (8,837) 1,092,403

Interest income from impaired loans (78,441) (3,573) (1,088) (243) (5,080) 467 (5,059) (93,017)

As of December 31, 2013 \ 1,658,028 \ 195,523 \ 23,455 \ 9,148 \ 181,161 \ 23,775 \ 84,523 \ 2,175,613


- 132 -

18. Loans and receivable (cont’d)


Loans inKorean won

Loans inforeign

currencies

Advancepayments onacceptances

andguarantees

Bills purchasedin foreigncurrencies

Credit cardloans

Privatelyplaced

corporatebonds Others Total

As of January 1, 2012 \ 848,823 \ 138,629 \ 38,680 \ 3,719 \ 73,693 \ 21,843 \ 61,712 \ 1,187,099Increase due to the business combination 482,470 142,469 5,343 2,750 71,245 4,893 28,771 737,941Adjustments due to the business

combination (66,623) (17,101) (758) (389) - (673) (281) (85,825)Disposal of non-performing loans (117,049) (5,974) - - (2,841) - - (125,864)Write-offs (626,117) (101,610) (59,121) - (203,287) - (59,762) (1,049,897)Collection of loans written-off in priorperiods 99,660 7,100 843 - 45,080 - 197 152,880

Debt-to-equity swap 7,447 - - - 226 - - 7,673Changes in exchange rate and others (2,898) (44,305) (3,029) (759) (12) (13) 3,142 (47,874)Provisions of allowance for possible loanlosses 998,175 78,250 52,207 13,798 184,146 4,036 94,259 1,424,871

Interest income from impaired loans (89,174) (8,414) (3,195) (215) (4,297) (991) (5,523) (111,809)

As of December 31, 2012 \ 1,534,714 \ 189,044 \ 30,970 \ 18,904 \ 163,953 \ 29,095 \ 122,515 \ 2,089,195


- 133 -

19. Derivative instruments

Unsettled derivative contracts held for trading purpose as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013Notionalamounts

Net valuationgain

Net valuationloss Assets Liabilities

Currency: Forwards \ 121,790,486 \ 1,567,038 \ 1,570,465 \ 1,671,973 \ 1,742,708 Swap 39,767,442 548,551 477,665 1,060,481 741,772 Options purchased 1,831,270 10,852 14,952 34,032 - Options sold 2,294,877 18,231 14,342 - 45,430 Futures 321,737 133 157 31 10

166,005,812 2,144,805 2,077,581 2,766,517 2,529,920Interest: ForwardsSwap 100,398,979 380,142 373,807 529,681 572,292

Options purchased 1,128,500 381 2,844 12,153 - Options sold 4,775,000 10,540 871 - 53,128 Futures 2,791,400 690 6 662 6

109,093,879 391,753 377,528 542,496 625,426Stock: Swap 5,785,892 22,596 70,354 497,494 318,632 Options purchased 745,412 6,338 23,299 24,152 3,386 Options sold 1,551,350 11,875 3,216 859 45,965 Futures 80,303 812 119 680 19

8,162,957 41,621 96,988 523,185 368,002Credit:Credit swap 2,940,011 28,097 28,626 88,398 21,674

Others: Other swap 2,366,154 86,395 114,706 98,393 120,426 Options purchased 316,682 3,645 (61) 4,591 - Options sold 359,285 - 4,994 - 8,713

3,042,121 90,040 119,639 102,984 129,139\ 289,244,780 \ 2,696,316 \ 2,700,361 \ 4,023,580 \ 3,674,161


- 134 -

19. Derivative instruments (cont’d)

December 31, 2012Notionalamounts

Net valuationgain

Net valuationloss Assets Liabilities

Currency: Forwards \ 100,624,637 \ 1,365,465 \ 1,426,255 \ 1,582,444 \ 1,586,161 Swap 31,410,098 765,510 610,940 869,419 704,040 Options purchased 2,387,707 6,279 6,440 32,866 - Options sold 2,661,414 4,885 17,184 - 46,539 Futures 89,249 - - - -

137,173,105 2,142,139 2,060,819 2,484,729 2,336,740Interest: Swap 93,084,869 327,681 326,838 775,773 806,122 Options purchased 1,738,500 3,645 2,912 21,592 - Options sold 4,955,000 4,794 10,618 - 67,272 Futures 3,637,696 - - - -

103,416,065 336,120 340,368 797,365 873,394Stock: Swap 2,529,630 229,132 - 495,041 32,448 Options purchased 535,059 124,820 96,442 55,141 2,857 Options sold 844,748 111,795 120,200 513 27,191 Futures 81,277 - - - -

3,990,714 465,747 216,642 550,695 62,496Credit:Credit swap 2,605,449 16,257 6,280 24,535 17,100

Others:Other swap 1,646,105 27,786 46,229 35,094 26,596

Options purchased 148,129 5,518 326 5,178 - Options sold 137,037 - 5,000 - 8,872

1,931,271 33,304 51,555 40,272 35,468\ 249,116,604 \ 2,993,567 \ 2,675,664 \ 3,897,596 \ 3,325,198


- 135 -


Unsettled derivative contracts held for hedging purpose as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013

Notional amountsNet valuation

gainNet valuation

loss Assets LiabilitiesFair value hedge:Currency swap \ 5,978,214 \ 2,060 \ 163,996 \ 95,232 \ 92,423

Cash flow hedge:Currency swap 578,520 - 35,483 86 45,281Interest swap 693,000 - - 750 2,377

1,271,520 - 35,483 836 47,658\ 7,249,734 \ 2,060 \ 199,479 \ 96,068 \ 140,081

December 31, 2012

Notional amountsNet valuation

gainNet valuation

loss Assets LiabilitiesFair value hedge:Currency swap \ 629,460 \ 20,680 \ - \ - \ 10,172Interest swap 4,729,802 43,247 10,013 166,931 453

5,359,262 63,927 10,013 166,931 10,625Cash flow hedge:Interest swap 503,000 - - 589 3,526

\ 5,862,262 \ 63,927 \ 10,013 \ 167,520 \ 14,151

For derivative transactions involving both Korean Won and foreign currency, the fair value of theunsettled amount for such transaction is presented using the basic foreign exchange rate of thecontract amount in foreign currency. For a derivative transaction involving only foreign currency, thefair value of the unsettled amount is presented using the basic foreign exchange rate of the foreigncurrency purchased at the reporting date.

The Company recorded a provision for liquidity adjustments and a provision for credit risk adjustmentsfor derivative instruments amounting to \16,206 million and \22,830 million, respectively, onDecember 31, 2013 and \16,341 million and \29,271 million, respectively, on December 31, 2012.


- 136 -


Credit derivatives entered into by the Company as of December 31, 2013 and 2012 are as follows(Korean won in millions and US dollar in thousands):

December 31, 2012Counterparty Amount Transaction type Reference entity

Credit default swap DAISHIN SECURITIES CO.,LTD, etc \ 1,309,710

Purchased creditderivative

Doosan Heavy Industries& Construction Co.,Ltd,etc

Credit default swap KoreaInvestment &Securities Co.,Ltd., etc \ 1,549,961 Sold credit derivative Woori Bank, etc

Credit Linked Note HSBC, etc \ 52,765 Sold credit derivative Republic of KoreaTotal Return Swap Standard

CharteredSecurities, etc \ 27,576

Purchased creditderivative

China RailwayConstruction

December 31, 2012Counterparty Amount Transaction type Reference entity

Credit default swap Woori I&S $ 50,000 Sold credit derivative Woori BankCredit default swap Woori I&S $ 50,000 Sold credit derivative Shinhan BankCredit default swap Daishin

Securities, etc \ 1,043,504Purchased credit derivative Doosan HI&C, etc

Credit default swap Korea I&S, etc \ 1,454,836 Sold credit derivative Woori Bank, etc

When a reference entity ceases to be able to secure its financial commitments due to a sharp declineor default in credit rating, the Company guarantees losses incurred arising from transactions for creditderivative instruments on its behalf.


- 137 -

20. Investments in associates and joint ventures

Details of investments in associates and joint ventures as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013

Type CountryNumberof shares

Ownership(%) Book value

Mirae Credit Information ServicesCorp Associates Korea 186,000 31.0 \ 7,605

UAM Co., Ltd. (*2) Associates Korea 85,050 17.5 139,286Bank of Jilin (*2) Associates China 1,200,000,000 17.0 485,900Hana UBS Asset Management Associates Korea 4,410,000 49.0 33,201Odin 2 LLC (*4) Associates Korea 13,340,000 26.7 61,855Doosan Capital (*2)(*3)(*4) Associates Korea 2,116,580 8.8 12,532Taewon Lighting co.,ltd. (*2)(*4) Associates Korea 10,800 18.0 22,619Korea Finance Security Co., Ltd. Associates Korea 268,560 22.4 5,321Plakor Co., Ltd. (*4) Associates Korea 2,630,567 42.3 45,061Najeon Co.,Ltd. (*4) Associates Korea 546,093 31.1 5,264LIG Nex1 Co., Ltd. (*2)(*4) Associates Korea 2,333,333 11.7 102,973Sambo Motors Co., Ltd. Associates Korea 1,500,000 16.7 13,692Others 13,377

\ 948,686

December 31, 2012

Type CountryNumberof shares

Ownership(%) Book value

Hana HSBC Insurance (*5) Joint venture Korea 11,020,101 50.0 \ 97,035Mirae Credit Information ServicesCorp Associates Korea 186,000 31.0 7,335

Taesan LCD Co., Ltd. (*1)(*7) Associates Korea 13,761,494 64.3 20,725UAM Co., Ltd. (*2) Associates Korea 85,050 17.5 120,916Bank of Jilin (*2) Associates China 1,200,000,000 17.0 433,828Hana UBS Asset Management Associates Korea 4,410,000 49.0 32,435AJ Rentacar (*6) Associates Korea 4,788,300 21.6 39,925Odin 2 LLC (*4) Associates Korea 13,340,000 26.7 65,834Doosan Capital (*2)(*3)(*4) Associates Korea 2,116,580 8.8 21,555Taewon Lighting Co.,Ltd. (*2)(*4) Associates Korea 10,800 18.0 22,916Korea Finance Security Co., Ltd. Associates Korea 268,560 22.4 5,190Others 14,253

\ 881,947

(*1) The investment in associate is classified as an investment in associates and joint ventures, not asa affiliated company because the Company is not entitled to exercise substantial control as theCompany is proceeding in a corporate restructuring. Also, the disposal will be limited until the end of2013.(*2) The Company exercises significant influence on the investee’s Board of Directors and therefore,is included as part of affiliated companies under the equity method.


- 138 -

20. Investments in associates and joint ventures (cont’d)

(*3) The Company considered the treasury stock owned by Doosan Capital when assessing whetherthe Company has significant influence on Doosan Capital owned by Hana First PEF, a subsidiary ofH&DS.(*4) The investment in associate was calculated based on the unaudited financial statements.(*5) The Company was included in the consolidation scope for the year ended December 31, 2013.(*6) The Company was excluded from the consolidation scope for the year ended December 31,2013.(*7) The Company was recognized the impairment loss amounting to \513 milliion for the year endedDecember 31, 2013.

The Company owns 54,000 shares (14.88% equity interest) of Korea Travels and 165,000 shares(1.92% equity interest) of Flossom Co., Ltd. However, the carrying values for the investments as ofDecember 31, 2013 are below nil, which has led to the suspension of the equity method application.After suspending the equity method of Korea Travels and Flossom Co., Ltd., the unrecognized amountof change in the unreflected share is in the amount of 28 million and (-)128 million for the currentperiod and unrecognized accumulated amount of change in the unreflected share is (-)1,698 millonand (-)180 million for the prior period, respectively.

The condensed financial information of investments in associates and joint ventures as of December31, 2013 and 2012 is as follows (Korean won in millions):

December 31, 2013

Assets Liabilities

Equity(accumulated

deficit) Revenue (*)

Netincome(loss) (*)

Othercomprehen

-sive income(loss) (*)

Comprehensiveincome(loss) (*)

Mirae Credit

InformationServices Corp \ 31,821 \ 7,290 \ 24,531 \ 48,397 \ 1,852 \ - \ 1,852

UAM Co., Ltd. 4,365,097 3,567,972 797,125 708,035 105,085 - 105,085Bank of Jilin 44,511,256 41,837,236 2,674,020 1,271,384 428,132 - 428,132Hana UBS Asset

Management 72,090 4,333 67,757 29,824 14,815 (51) 14,764

Odin 2 LLC 389,229 157,391 231,838 - (13,826) 2,516 (11,310)Doosan Capital 2,585,179 2,299,730 285,449 236,114 (113,534) (2,255) (115,789)Taewon Lighting

Co.,Ltd. 68,154 27,398 40,756 84,861 (444) - (444)Korea FinanceSecurity Co.,

Ltd 26,310 3,593 22,717 48,961 945 - 954Plakor Co., Ltd. 199,370 92,931 106,439 181,171 1,487 94 1,581Najeon Co.,Ltd 53,512 36,591 16,921 58,539 469 - 469LIG Nex1 Co.,Ltd 1,507,557 1,202,666 304,891 767,792 25,482 (15,867) 9,615

Sambo Motors

Co., Ltd. 485,565 340,958 144,607 - - - -


- 139 -


December 31, 2012

Assets Liabilities

Equity(accumulated

deficit) Revenue (*)

Netincome

(loss) (*)

Othercomprehen

-sive income

(loss) (*)

Comprehensive

income(loss) (*)

Hana LifeInsurance \ 2,744,524 \ 2,561,141 \ 183,383 \ 356,777 \ (22,808) \ 66,273 \ 43,465

Mirae CreditInformation

Services Corp 27,774 4,112 23,662 49,962 1,521 - 1,521Taesan LCDCo., Ltd. 238,526 208,288 30,238 477,813 (26,579) (1,797) (28,376)

Korea CreditBureau 57,014 15,356 41,658 47,795 4,586 - 4,586

UAM Co., Ltd. 4,906,010 4,215,061 690,949 599,570 95,828 - 95,828

Bank of Jilin 37,070,607 34,700,645 2,369,962 1,248,393 366,834 - 366,834Hana UBS Asset

Management 71,886 5,693 66,193 41,344 14,518 17 14,535AJ Rentacar 683,046 517,353 165,693 367,141 15,762 (6,301) 9,461Odin 2 LLC 394,370 147,612 246,758 - (3,620) (4,838) (8,458)Doosan Capital 2,902,243 2,571,250 330,993 197,942 6,981 1,739 8,720Taewon Lighting

Co.,Ltd. 71,034 28,629 42,405 60,430 7,312 - 7,312Korea FinanceSecurity Co.,Ltd 25,457 3,325 22,132 45,945 884 - 884

(*) Income for the period after the acquisition date is presented if investment in associates wasacquired for the years ended December 31, 2013 and 2012.


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Changes in the investments in associates and joint ventures for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):


Equity method valuation

Owner

-ship

(%)Beginning

balance Addition Replace Dividend

Book value

before

valuation

Earnings

(loss)

Other

comprehe

-nsive

income Disposal

Impairment

loss Book value

Goodwill

and etc

Proportionate

net asset

Mirae Credit Information

Services Corp 31.0 \ 7,335 \ - \ - \ (186) \ 7,149 \ 457 \ (1) \ - \ - \ 7,605 \ - \ 7,605UAM Co., Ltd. 17.5 120,916 - - - 120,916 18,388 (18) - - 139,286 (211) 139,497

Bank of Jilin 17.0 433,828 - - (17,679) 416,149 72,393 (2,642) - - 485,900 31,851 454,049Hana UBS Asset

Management 49.0 32,435 - - (6,468) 25,967 7,260 (26) - - 33,201 - 33,201Odin 2 LLC 26.7 65,834 - - - 65,834 (3,689) (290) - - 61,855 - 61,855Doosan Capital 8.8 21,555 - - - 21,555 (9,958) (552) 1,487 - 12,532 - 12,532Taewon Lighting

Co.,Ltd. 18.0 22,916 - - (180) 22,736 (117) - - - 22,619 15,283 7,336Korea Finance Security Co., Ltd 22.4 5,190 - - (81) 5,109 212 - - - 5,321 237 5,084Plakor Co., Ltd. 42.3 - 34,416 - - 34,416 10,606 39 - - 45,061 - 45,061Najeon Co.,Ltd 31.1 - 4,417 - - 4,417 847 - - - 5,264 - 5,264LIG Nex1 Co., Ltd 11.7 - 100,000 - - 100,000 2,973 - - - 102,973 67,402 35,571

Sambo Motors Co., Ltd. (*) 16.7 - 9,570 - - 9,570 4,122 - - - 13,692 - 13,692

Others 171,938 1,595 (102,220) (975) 70,338 (18,281) 4,205 (42,372) (513) 13,377 1,064 12,313

\ 881,947 \ 149,998 \ (102,220) \ (25,569) \ 904,156 \ 85,213 \ 715 \ (40,885) \ (513) \ 948,686 \ 115,626 \ 833,060

(*)The Company recognizes gain on valuation of investment in associates amounting to the differences with the fair value of the net assets acquired and the consideration transterred


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Equity method valuation

Owner

-ship

(%)

Beginning

balance

Increase due

to the

business

combination

Addition and

etc Dividend

Book value

before

valuation

Earnings

(loss)

Other

comprehe

-nsive

income Disposal

Impairment

loss Book value

Goodwill

and etc

Proportionate

net asset

Hana Life Insurance 50.0 \ 73,284 \ - \ 25,000 \ - \ 98,284 \ (11,404) \ 10,155 \ - \ - \ 97,035 \ 5,344 \ 91,691

Mirae Credit Information Services

Corp 31.0 7,211 - - (186) 7,025 311 (1) - - 7,335 - 7,335Taesan LCD Co., Ltd. 64.3 104,179 3,583 - - 107,762 (17,973) (1,058) - (68,006) 20,725 10,724 10,001UAM Co., Ltd. 17.5 104,220 - - - 104,220 16,770 (74) - - 120,916 - 120,916

Bank of Jilin 17.0 409,571 - - (13,106) 396,465 62,290 (24,927) - - 433,828 31,399 402,429Hana UBS Asset Management 49.0 32,529 - - (6,762) 25,767 6,659 9 - - 32,435 - 32,435AJ Rentacar 21.6 38,950 - - - 38,950 6,826 (1,447) (4,404) - 39,925 4,100 35,825Odin 2 LLC 26.7 68,092 - - - 68,092 (966) (1,292) - - 65,834 - 65,834Doosan Capital 7.6 21,199 - - - 21,199 203 153 - - 21,555 (3,468) 25,023Taewon Lighting Co.,Ltd. 18.0 - - 21,600 - 21,600 1,316 - - - 22,916 15,283 7,633

Korea Finance Security Co., Ltd. 22.4 - 2,427 807 (81) 3,153 2,204 (167) - - 5,190 4,953 237

Others 22,351 4,296 - (59) 26,588 555 (373) (12,517) - 14,253 688 13,565

\ 881,586 \ 10,306 \ 47,407 \ (20,194) \ 919,105 \ 66,791 \ (19,022) \ (16,921) \ (68,006) \ 881,947 \ 69,023 \ 812,924


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21. Property and equipment

Details of property and equipment as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

December 31, 2013

Acquisition costAccumulateddepreciation Book value

Land \ 1,597,177 \ - \ 1,597,177Buildings 845,789 (124,109) 721,680Leaseholdimprovements 390,552 (317,522) 73,030

Vehicles, furnitureand fixtures 1,453,773 (1,179,186) 274,587

Constructionin progress 11,101 - 11,101

Operating leaseassets 30,310 (19,434) 10,876

\ 4,328,702 \ (1,640,251) \ 2,688,451

December 31, 2012

Acquisition costAccumulateddepreciation Book value

Land \ 1,597,015 \ - \ 1,597,015Buildings 823,729 (99,720) 724,009Leaseholdimprovements 369,118 (303,509) 65,609

Vehicles, furnitureand fixtures 1,434,644 (1,148,173) 286,471

Constructionin progress 11,516 - 11,516

Operating leaseassets 32,171 (16,460) 15,711

\ 4,268,193 \ (1,567,862) \ 2,700,331


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21. Property and equipment (cont’d)

Changes in property and equipment for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):


January 1,2013

Increase dueto the business

combination Addition Disposal DepreciationTransfer in

(out) Others (*)December 31,

2013Land \ 1,597,015 \ 1,112 \ 983 \ (240) \ - \ (1,334) \ (359) \ 1,597,177Buildings 724,009 1,359 21,844 (456) (26,897) 1,663 (74) 721,448Leasehold improvements 65,609 671 39,616 (2,443) (30,665) 1,376 (902) 73,262Vehicles, furniture and fixtures 286,471 2,212 105,626 (1,851) (117,370) 335 (836) 274,587Construction in progress 11,516 34 7,504 - - (7,953) - 11,101Operating lease assets 15,711 - 15,020 (13,424) (6,431) - - 10,876

\ 2,700,331 \ 5,388 \ 190,593 \ (18,414) \ (181,363) \ (5,913) \ (2,171) \ 2,688,451

Year ended December 31, 2012January 1,

2012 Addition Disposal Depreciation ImpairmentTransfer in

(out) Others (*)December 31,

2012Land \ 813,067 \ 799,003 \ 256 \ (17,061) \ - \ 2,060 \ (310) \ 1,597,015Buildings 444,787 289,761 22,862 (4,388) (24,382) (3,723) (908) 724,009Leasehold improvements 25,265 24,916 42,429 (2,382) (29,100) 2,219 2,262 65,609Vehicles, furniture and fixtures 176,969 81,234 134,136 (1,622) (104,411) 615 (450) 286,471Construction in progress 9,162 322 8,856 - - (6,505) (319) 11,516Operating lease assets 25,649 852 22,599 (25,580) (7,809) - - 15,711

\ 1,494,899 \ 1,196,088 \ 231,138 \ (51,033) \ (165,702) \ (5,334) \ 275 \ 2,700,331

(*) Includes the effect of exchange rate differences.


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21. Property and equipment (cont’d)

Details of insured property and equipment as of December 31, 2013 and 2012 are summarized asfollows (Korean won in millions):

Insured amountInsurance providerDecember 31, 2013 December 31, 2012

Buildings ￦ 354,088 ￦ 362,341Hyundai Fire & Marine Insurance Co.,Ltd.

Leasehold improvements 59,387 53,101Samsung Fire & Marine Insurance Co.,Ltd.

Vehicles, furnitureand fixtures 297,404 302,572 Dongbu Insurance Co.,Ltd.

￦ 710,879 ￦ 718,014

The Company maintains general liability insurance for its registered directors and officers for up to￦50,000 million as of December 31, 2013 and 2012, respectively, and fidelity guarantee insurance forup to \5,780 million as of December 31, 2013.

22. Investment properties

Details of investment properties as of December 31, 2013 and 2012 are summarized as follows(Korean won in millions):

December 31, 2013

Acquisition costAccumulateddepreciation

Accumulatedimpairment loss Book value

Land \ 391,445 \ - \ (2,356) \ 389,089Buildings 156,111 (27,381) (2,388) 126,342

\ 547,556 \ (27,381) \ (4,744) \ 515,431

December 31, 2012

Acquisition costAccumulateddepreciation


Land \ 381,919 \ - \ (2,356) \ 379,563Buildings 146,414 (20,766) (2,388) 123,260

\ 528,333 \ (20,766) \ (4,744) \ 502,823


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22. Investment properties (cont’d)

Changes in investment properties for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):


January1, 2013

Increase due tothe businesscombination Addition

Depreci-ation

Reclassi-fication

December31, 2013

Land \ 379,563 \ 6,335 \ 1,818 \ - \ 1,373 \ 389,089Buildings 123,260 - 3,123 (4,581) 4,540 126,342

\ 502,823 \ 6,335 \ 4,941 \ (4,581) \ 5,913 \ 515,431


January1, 2012

Increase dueto the

businesscombination Addition Disposal

Depreci-ation

Reclassi-fication

December31, 2012

Land \ 268,478 \ 113,393 \ - \ (344) \ - \ (1,964) \ 379,563Buildings 64,296 55,552 37 - (3,923) 7,298 123,260

\ 332,774 \ 168,945 \ 37 \ (344) \ (3,923) \ 5,334 \ 502,823

The Company uses the straight-line depreciation method to measure its buildings’ market value andtheir useful lives range from 40 to 50 years. The fair value of the investment properties provided byindependent valuers amounts to \556,477 million.

Rental income and operating expenses arising from the Company’s investment properties for theyears ended December 31, 2013 and 2012 are as follows (Korean won in millions):



Rental income \ 8,888 \ 5,850Operating expenses 2,993 3,513

23. Finance leases and operating leases

Gross and net investment in the finance leases as of December 31, 2013 and 2012 are summarizedas follows (Korean won in millions):

December 31, 2013Short-term Long-term Total

Present value of minimumlease payment \ 333,265 \ 660,690 \ 993,955

Initial direct cost 1,660 23,790 25,450Net investment in the lease 334,925 684,480 1,019,405Unearned finance income 52,261 42,225 94,486Gross investment in the lease \ 387,186 \ 726,705 \ 1,113,891


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23. Finance leases and operating leases (cont’d)

December 31, 2012Short-term Long-term Total

Present value of minimumlease payment \ 323,734 \ 680,874 \ 1,004,608

Initial direct cost 1,707 19,694 21,401Net investment in the lease 325,441 700,568 1,026,009Unearned finance income 55,912 41,833 97,745Gross investment in the lease \ 381,353 \ 742,401 \ 1,123,754

The maturities of gross and net investment in the finance leases as of December 31, 2013 and 2012are as follows (Korean won in millions):

December 31, 2013Gross investment Net investment

Within 1 year \ 387,092 \ 334,931After 1 year but no later than 5 years 726,632 684,315Later than 5 years 167 159

\ 1,113,891 \ 1,019,405

December 31, 2012Gross investment Net investment

Within 1 year \ 381,353 \ 325,441After 1 year but no later than 5 years 740,430 698,704Later than 5 years 1,971 1,864

\ 1,123,754 \ 1,026,009

Amounts to be collected as operating lease revenues for each upcoming period as of December 31,2013 and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Within 1 year \ 3,039 \ 6,733After 1 year but no later than 5 years 811 2,261

\ 3,850 \ 8,994


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24. Intangible assets

Details of intangible assets as of December 31, 2013 and 2012 are summarized as follows (Koreanwon in millions):

December 31, 2013

Acquisition costAccumulatedamortization


Goodwill \ 98,594 \ - \ (18,722) \ 79,872Industrial property 35,413 (185) - 35,228Core deposits 727,189 (7,071) (3,116) 717,002Client relationship 325,851 (1,380) - 324,471Software andsystem development 871,387 (668,178) (366) 202,843

Membership 88,579 (260) (31,664) 56,655Others 92,424 (51,039) (270) 41,115

\ 2,239,437 \ (728,113) \ (54,138) \ 1,457,186

December 31, 2012

Acquisition costAccumulatedamortization


Goodwill \ 98,784 \ - \ (15,618) \ 83,166Industrial property 56,881 (10,486) - 46,395Core deposits 987,219 (129,891) (3,116) 854,212Client relationship 326,792 (29,956) - 296,836Software andsystem development 799,955 (550,060) (347) 249,548

Membership 90,251 (227) (21,456) 68,568Others 80,460 (33,732) (243) 46,485

\ 2,440,342 \ (754,352) \ (40,780) \ 1,645,210

Details of goodwill as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013

Acquisition costAccumulated

impairment loss Book ValueHana Savings Bank ￦ 75,229 ￦ (18,722) ￦ 56,507Hana Asset Trust 22,377 - 22,377Others 988 - 988

￦ 98,594 ￦ (18,722) ￦ 79,872

December 31, 2012

Acquisition costAccumulated

impairment loss Book ValueHana Savings Bank ￦ 75,229 ￦ (15,618) ￦ 59,611Hana Asset Trust 22,377 - 22,377Others 1,178 - 1,178

￦ 98,784 ￦ (15,618) ￦ 83,166


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24. Intangible assets (cont’d)

The Company allocated goodwill to cash-generating units which are composed of operating segmentsor its sub-segments. Impairment test was performed regularly on an annual basis and at times there isany indication of impairment through comparing the carrying amount of cash-generating unitsincluding goodwill with its recoverable amount.

The recoverable amount of a cash-generating unit is estimated to be the higher of the cash-generatingunit’s fair value and its value in use. The fair value is based on the best information available to reflectthe amount that the Company could obtain, at the end of the reporting period, from the disposal of theassets or the transfer of the liabilities in formal transaction between participants, after deducting thecosts of disposal. However, if the fair value could not be measured with sufficient reliability, it ispossible applying the value in use which is present value of future cash flows. The Company estimatesfuture cash flows based on the financial budget authorized by management. The estimation periodcannot exceed 5 years without reasonable causes.

The Company regards Hana Savings Bank as a one cash-generating unit for the impairment test as ofDecember 31, 2013.

AmountValue in use (recoverable amount) \ 146,646Carrying amount of net assets 149,750Value in use which exceeds carrying amount of net assets (3,104)

The Company estimates future cash flows based on the assumption that cash flows will continue togrow at 2.8% over 5 years referred to a recent macroeconomic indicator provided by EIU (EconomistIntelligence Unit). The pre-tax discount rate used for discounting future cash flows is calculated basedon the assumption of risk-free interest rate, market risk premium, systematic risk of cash generatingunit and other factors.

Changes in the carrying amount of intangible assets for the years ended December 31, 2013 and2012 are as follows (Korean won in millions):


January

1, 2013

Increase dueto the

businesscombination Additions Disposal Amortization

Impair-mentloss

Reclassi-fication Others (*)

December31, 2013

Goodwill \ 83,166 \ - \ - \ - \ - \ (3,104) \ - \ (190) \ 79,872

Industrialproperty 46,395 - 120 - (11,386) - 99 - 35,228

Core deposits 854,212 4,305 - - (141,515) - - - 717,002Client

relationship 296,836 61,694 - - (34,059) - - - 324,471Software and

systemdevelopment 249,548 5,489 58,104 (19) (110,061) - - (218) 202,843

Membership 68,568 806 2,506 (4,649) (49) (8,872) - (1,655) 56,655Others 46,485 3,855 7,482 - (16,528) - (99) (80) 41,115

\ 1,645,210 \ 76,149 \ 68,212 \ (4,668) \ (313,598) \ (11,976) \ - \ (2,143) \ 1,457,186


- 149 -

24. Intangible assets (cont’d)


January

1, 2012

Increase dueto the

businesscombination Additions Disposal Amortization

Impair-mentloss

Reclassi-fication Others (*)

December31, 2012

Goodwill \ 23,725 \ 74,499 \ 730 \ - \ - \ (15,618) \ - \ (170) \ 83,166

Industrialproperty 145 56,572 64 - (10,419) - 33 - 46,395

Core deposits - 987,218 - - (129,890) (3,116) - - 854,212Client

relationship - 326,792 - - (29,956) - - - 296,836Software and

systemdevelopment 232,123 63,128 59,463 (21) (104,857) - 575 (863) 249,548

Membership 55,675 10,965 3,906 (2,815) (48) (9,256) - 10,141 68,568Others 28,427 10,556 20,917 - (10,800) (240) (608) (1,767) 46,485

\ 340,095 \ 1,529,730 \ 85,080 \ (2,836) \ (285,970) \ (28,230) \ - \ 7,341 \ 1,645,210

(*) Includes the effect of exchange rate differences.

25. Non-current assets held for sale

Non-business use tangible assets appropriated as estimated non-current assets were acquired withthe purpose of loan repayment. Due to the decision of disposal the assets were classified asscheduled to be disposed non-current assets, but currently as of the reporting date areunappropriated.

Details of non-current assets held for sale as of December 31, 2013 and 2012 are as follows (Koreanwon in millions) :

December 31, 2013 December 31, 2012Acquisiton cost \ 871 \ 1,439Accumulated impairment loss (211) -Book value \ 660 \ 1,439

26. Other assets

Other assets as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Guarantee deposits \ 1,515,259 \ 1,516,414Accounts receivable 6,911,623 9,100,252Accounts receivable on disposal of assets 4,204 5,734Accrued income 999,924 975,541Prepaid expenses 232,275 208,178Advance payments 45,507 109,806Reinsurance assets 1,872 -


- 150 -

26. Other assets (cont’d)

December 31, 2013 December 31, 2012Unamortized new contract 2,894 -Separate account assets 1,055,866 -Receivables from spot exchange 2,361,659 1,434,280Others 3,175,492 2,779,580Allowance for possible losses (91,473) (152,433)

\ 16,215,102 \ 15,977,352

Changes in the allowance for possible losses for the years ended December 31, 2013 and 2012 are asfollows (Korean won in millions):



Beginning balance \ 152,433 \ 133,592Increase due to the business combination 90 9,625Write-offs (67,659) (10,267)Debt-to-equity swap 699 (2,358)Provision for possible losses 16,948 21,675Interest income from impaired assets (228) (305)Others (10,810) 471

\ 91,473 \ 152,433

Changes in insurance assets for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):

January 1,2013

Increase due tothe businesscombination Increase Decrease

December 31,2013

Reinsuranceassets \ - \ 1,896 \ 52 \ (76) \ 1,872

Unamortizednew contract - - 11,890 (8,996) 2,894

\ - \ 1,896 \ 11,942 \ (9,072) \ 4,766

27. Financial liabilities held-for-trading

Financial liabilities held-for-trading as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

December 31, 2013 December 31, 2012Derivative liabilities from losses on trade (*) \ 3,674,162 \ 3,325,197Securities sold 699,353 636,542

\ 4,373,515 \ 3,961,739

(*) Refer to Note 19.


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28. Financial liabilities designated at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss as of December 31, 2013 and 2012are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Derivative linked securities sold \ 4,888,641 \ 4,334,240Deferred day 1 profit or loss 15,530 21,396

\ 4,904,171 \ 4,355,636

29. Deposits

Details of deposits as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Demand deposits:Demand deposits in Korean won:Checking deposits \ 1,499,298 \ 335,510Household checking deposits 30,675 25,947Temporary deposits 2,154,569 2,154,394Passbook deposits 18,680,607 18,142,488Public fund deposits 221,943 205,211National Treasury deposits 345 382Nonresident’s deposit in Korean won 222,411 273,512Nonresident’s ‘free-won’ account 22,430 31,084Others 3,573 3,670

22,835,851 21,172,198Demand deposits in foreign currency:Checking deposits 2,750,917 2,630,864Passbook deposits 10,450,025 10,057,794Notice deposits 7 15,726Temporary deposits 29,457 21,403

13,230,406 12,725,78736,066,257 33,897,985

Time and saving deposits:Time and saving deposits in Korean won:Households saving deposits 12,754,647 10,990,153Free saving deposits 478,549 451,332Corporate savings deposits 14,957,884 14,852,910Time deposits 98,813,168 97,729,000Apartment-application deposits 496,918 499,357Installment savings deposits 3,123,138 2,575,140Nonresident’s deposit in Korean won 440,576 381,919Nonresident’s ‘free-won’ account 328,032 530,409


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29. Deposits (cont’d)

December 31, 2013 December 31, 2012Long-term housing savings deposits \ 571,347 \ 698,535Workers’ preferential savings deposits 448 646Mutual installment deposits 4,748,244 3,036,954Mutual installment for housing 44,777 55,461Worker`s asset building savings deposits 103,962 -Trust deposits 519,970 517,987Others 77,469 5,670

137,459,129 132,325,473Time and saving deposits in foreigncurrency:Time deposits in foreign currency 12,681,928 10,955,321Others 219,820 144,508

12,901,748 11,099,829150,360,877 143,425,302

Certificate of deposits 797,264 937,461187,224,398 178,260,748

Adjustments due to the business combination 1,278 2,067\ 187,225,676 \ 178,262,815

Allocations of deposits by customer as of December 31, 2013 and 2012 are listed as follows (Koreanwon in millions):

December 31, 2013 December 31, 2012Individuals \ 68,283,578 \ 63,606,092Corporations 55,637,679 52,534,955Other banks 6,497,815 6,565,646Public institutions 3,600,143 3,192,242Other financial institutions 23,999,612 28,459,192Government 4,928,382 3,216,468Non-profit corporations 12,246,864 10,308,629Foreign corporations 7,604,708 8,471,836Others 4,425,617 1,905,688

187,224,398 178,260,748Adjustments due to the business combination 1,278 2,067

\ 187,225,676 \ 178,262,815


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30. Borrowings

Borrowings as of December 31, 2013 and 2012 are as follows (Korean won in millions):

LenderInterestrate (%)

December 31,2013

December 31,2012

Borrowings in Korean won:BOK borrowings BOK 0.50~1.00 \ 681,362 \ 894,147Government borrowings Korean government 0.00~3.65 3,357,874 2,447,915Other borrowings Korea Energy

ManagementCorporation, etc 0.00~5.10 2,478,219 2,902,645

6,517,455 6,244,707Borrowingsin foreign currencies:

Bank overdrafts Foreign Banks, etc. 1.83~15.75 235,547 200,268Other borrowings Mizuho Corporate bank

Seoul branch, etc 0.20~9.30 7,734,037 9,042,2927,969,584 9,242,560

Call money:Call money inKorean won

ING InvestmentManagement KoreaLtd. 2.30~2.54 1,732,400 2,005,600

Call money in foreign currencies

Export Import Bank ofKorea, etc. 0.10~7.80 1,054,834 332,244

2,787,234 2,337,844Bonds sold underrepurchase agreements:Bonds sold underrepurchase agreementsin Korean won

Korea Defense IndustryAssociation and others 2.80~3.95 3,814,042 3,812,186

Bonds sold underrepurchase agreementsin foreign currencies

NomuraInternational, etc. 0.90~2.30 563,903 549,590

4,377,945 4,361,776Other borrowings:Bills sold WonJung Steel

Co.Ltd, etc 2.00~3.00 181,420 175,027\ 21,833,638 \ 22,361,914


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31. Debentures

Debentures as of December 31, 2013 and 2012 are as follows (Korean won in millions):

LenderInterestrate (%)

December 31,2013

December 31, 2012

Korean won: Debentures Financial

institutions 2.60~5.59 \ 17,145,800 \ 20,483,800 Subordinated bonds Various investors 2.60~8.40 6,895,304 6,143,364 Net gain on fair value

hedges (this term) 412 - Net gain on fair

value hedges(before the previous term) 9,217 11,882

Issuance premium(less present valuediscount) (884) 28,154

24,049,849 26,667,200Foreign currencies: Debentures (*) Morgan Stanley,

etc. 0.40~4.88 6,040,391 5,393,650 Subordinated bonds Barclays, etc. 3.04~4.63 209,917 - Floating rate bonds HSBC, etc 1.27~2.37 52,765 177,965 Net gain (loss) on fair value

hedges (this term) (74,215) 119,415Net gain on fair valuehedges(before the previous term) 147,422 70,637

Issuance premium(less present valuediscount) (6,566) 3,636

6,369,714 5,765,303\ 30,419,563 \ 32,432,503


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32. Severance and retirement benefits

Actuarial assumptions as of December 31, 2013 and 2012 are as follows (%):

Ratio (%)December 31,

2013December 31,

2012 NotesDemographic assumptions:

Mortality 0.00~2.40 0.00~2.40 Table from Korea insurancedevelopment institute andetc.

Rates of employee turnover 2.50~41.21 2.50~35.96 Table from Korea insurancedevelopment institute andetc.

Financial assumptions:Expected rate of salary increase 0.65~21.98 0.65~13.25Inflation rate 1.63~3.50 1.63~3.07Discount rate 3.21~4.25 2.80~4.13

Details of post-employment benefit obligation as of December 31, 2013 and 2012 are as follows(Korean won in millions):

December 31, 2013 December 31, 2012Present value of defined benefit obligation ￦ 954,338 ￦ 744,398Fair value of plan assets (792,285) (634,969)Net defined benefit liability ￦ 162,053 ￦ 109,429

Changes in present value of defined benefit obligation for the years ended December 31, 2013 and2012 are as follows (Korean won in millions):



Beginning balance ￦ 744,398 ￦ 326,611Increase due to the business combination 6,012 227,219Current service cost 126,998 110,092Past service cost 10,958 80,151Interest cost on benefit obligation 26,808 44,628Remeasurements of the net defined benefit liability 79,682 43,725Benefits paid (39,884) 11,490Others (634) (99,518)

￦ 954,338 ￦ 744,398


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32. Severance and retirement benefits (cont’d)

Details of losses incurred from defined benefit obligations for the years ended December 31, 2013 and2012 are as follows (Korean won in millions):



Current service cost ￦ 126,998 ￦ 110,092Past service cost 10,958 80,151Net interest on the net defined benefit liability 4,899 4,076

142,855 194,319Benefits paid for the defined contribution plan 2,243 2,869Long-term employee payment and others 24,104 14,439

￦ 169,202 ￦ 211,627

Plan assets for severance benefit as of December 31, 2013 and 2012 consist of the followings(Korean won in millions):

December 31, 2013 December 31, 2012Plan assets which have market pricequoted in an active market:Time deposit ￦ 666,505 ￦ 457,100ELS 1,936 1,878Bonds 63,679 78,456Others 60,165 97,535

￦ 792,285 ￦ 634,969

Changes in the fair value of plan assets for the years ended December 31, 2013 and 2012 are asfollows (Korean won in millions):



Beginning balance of fair value of plan assets ￦ 634,969 ￦ 285,874Increase due to the business combination 1,519 183,186Employer contributions 172,586 156,291Expected return on plan assets 21,909 40,552Remeasurements of the plan assets 519 (1,055)Benefits paid (38,704) (9,163)Others (513) (20,716)

￦ 792,285 ￦ 634,969


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32. Severance and retirement benefits (cont’d)

Details of remeasurements of the net defined benefit liability for the years ended December 31, 2013and 2012 are as follows (Korea won in millions):



Actual gains (losses)Changes in demographic assumptions ￦ (7,804) ￦ (32,833)Changes in financial assumptions (9,855) (14,004)Experience adjustments (58,650) 3,112

(76,309) (43,725)Income on planned assets Actual income on planned assets 22,428 39,497

Amounts included in net interest on the net definedbenefit liability 21,909 40,552

519 (1,055)￦ (75,790) ￦ (44,780)

A quantitative sensitivity analysis for significant assumptions as of December 31, 2013 is as follows(Korea won in millions):

(1) Discount rateYear ended

December 31, 20131% pointincrease

1% pointdecrease

Present value of defined benefit obligation ￦ 954,338 ￦ 862,934 ￦ 1,022,626

(2) Expected rate of salary increaseYear ended

December 31, 20131% pointincrease

1% pointdecrease

Present value of defined benefit obligation ￦ 954,338 ￦ 1,022,878 ￦ 861,613

The sensitivity analyses above has been determined based on a method that extrapolates the impacton defined benefit obligation as a result of reasonable changes in key assumptions occurring at theend of the reporting period.

Employer contributions are reasonably estimated to be ￦112,067 million for the year endedDecember 31, 2014 and the average durations of the defined benefit plan obligation as of December31, 2013 and 2012 are 7.20~13.97 years and 7.44~13.24 years, respectively.


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33. Provisions

33.1 Provisions

Details of provisions as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Allowance for possible losses on acceptances and

guarantees:Financial acceptances and guarantees (*) ￦ 2,066 ￦ 4,419

Non-financial acceptances and guarantees 65,000 53,190 Bills endorsed 277 770

67,343 58,379Allowances for unused commitments 117,265 120,448Other allowance: Allowances for retirement obligation 42,271 45,968 Allowances for reward points 30,976 27,256 Allowance for lawsuits 142,514 85,560

Allowance for liquidity adjustment 16,206 16,341Allowance for credit valuation adjustment 22,830 29,271

Others 9,567 54,832264,364 259,228

￦ 448,972 ￦ 438,055

(*) The Company recognizes the amount of financial guarantee contracts subsequently measured thatexceed the unamortized balance as provisions for acceptances and guarantees on initial recognition.The unamortized balance amounts to ￦30,468 million and ￦42,571 million as of December 31,2013 and 2012, respectively and is categorized as financial guarantee contract liability.

Changes in provisions for the years ended December 31, 2013 and 2012 are as follows (Korean wonin millions):


January1, 2013

Increase dueto the

businesscombination

Net loss ofallowance(reversal ofallowance)

Allowanceused Others

December31, 2013

Allowance for possible losses on acceptances and guarantees ￦ 58,379 ￦ - ￦ 9,203 ￦ - ￦ (239) ￦ 67,343Allowances for unused commitments 120,448 106 (2,967) - (322) 117,265Other allowance:Allowance for possible

losses on acceptances and guarantees 45,968 355 (1,414) (1,918) (720) 42,271 Allowances for reward points 27,256 - 33,848 (51,030) 20,902 30,976

Allowance for lawsuits 85,560 21 35,378 (19,874) 41,429 142,514


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33. Provisions (cont’d)

33.1 Provisions (cont’d)


January1, 2013

Increase dueto the

businesscombination



December31, 2013

Allowance for liquidityadjustment 16,341 - (133) - (2) 16,206

Allowance for creditvaluation adjustment 29,271 - (6,438) - (3) 22,830

Others 54,832 743 (651) (3,265) (42,092) 9,567259,228 1,119 60,590 (76,087) 19,514 264,364

￦ 438,055 ￦ 1,225 ￦ 66,826 ￦ (76,087) ￦ 18,953 ￦ 448,972


January1, 2013

Increase dueto the business

combination



December31, 2013

Allowance for possible losses on acceptances and guarantees ￦ 27,276 ￦ 41,419 ￦ (8,808) ￦ - ￦ (1,508) ￦ 58,379Allowances for unused commitments 56,972 53,495 10,472 - (491) 120,448Other allowance:Allowance for possible

losses on acceptances and guarantees 25,056 12,581 3,643 (1,300) 5,988 45,968 Allowances for reward

points 2,993 8,666 27,706 (29,736) 17,627 27,256 Allowance for lawsuits 9,561 42,676 31,597 (231) 1,957 85,560Allowance for liquidityadjustment 8,715 3,464 4,166 - (4) 16,341

Allowance for creditvaluation adjustment 9,903 16,232 3,136 - - 29,271

Others 11,781 79,631 (9,560) (26,625) (395) 54,83268,009 163,250 60,688 (57,892) 25,173 259,228

￦ 152,257 ￦ 258,164 ￦ 62,352 ￦ (57,892) ￦ 23,174 ￦ 438,055


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33.2 Guarantees and commitments

Details of guarantees as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31,2013

December 31,2012

Financial acceptances and guarantees in Korean won: Corporate debentures ￦ - ￦ 70 Collateral for loans 134,853 123,431 Loans for purchase 1,092,784 1,203,339Others 15,480 25,919

1,243,117 1,352,759Financial acceptances and guarantees in foreign currencies:Local financial acceptances and guarantees 1,294,536 864,402

Confirmed acceptances and guarantees in Korean won 2,321,372 2,242,654Confirmed acceptances and guarantees in foreign currencies:Acceptance on letter of credit 1,252,191 1,499,297Acceptance on letter of guarantees 157,337 139,130Others 14,700,739 13,439,709

16,110,267 15,078,136Contingent acceptances and guarantees: Letters of credit 6,465,496 6,385,894 Others 1,268,532 792,959

7,734,028 7,178,853Bills endorsed 46,988 27,823

￦ 28,750,308 ￦ 26,744,627

Details of unused commitments as of December 31, 2013 and 2012 are as follows (Korean won inmillions):

December 31,2013

December 31,2012

Commitments on loans in Korean won ￦ 100,209,239 ￦ 101,040,894Commitments on loans in foreign currencies 23,235,319 20,530,923Commitments on off-shore loans in foreign currencies 16,885 -Commitments on purchase of asset-backed commercial papers 493,367 667,059Commitments on credit lines on asset-backed securities 1,244,850 1,777,816Commitments on purchase of securities 702,942 698,692

￦ 125,902,602 ￦ 124,715,384


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33.3 Pending litigations and others

As of December 31, 2013, the Company is involved in 1,785 lawsuits as a plaintiff and 473 lawsuits asa defendant. The aggregate amount of claims as a plaintiff and a defendant amounted toapproximately ￦640,488 million and ￦787,824 million, respectively. The Company’s materiallawsuits in progress as a defendant are as follows (Korean won in millions):

Defendant Plaintiff AmountStatus of lawsuit

First trial On appeal ContentKEB Hyundai Merchant

Marine Co., Ltd. ￦ 81,522 Loss - Return of performance bondLone Star FundsLimited 69,122 In-progress - Return of reimbursement

Kang Daegyu and 4others 46,947 Loss - Return of embezzlement

Fairfield Sentry LimitedBankruptcyadministrator 35,451 In-progress - Return of a prepayment

Hana Bank MtekVision Co., Ltd 32,782 Win In-progress Return of improper gains

Trust accounts with a guarantee of principal repayment as of December 31, 2013 and 2012 are asfollows (Korean won in millions):

December 31, 2013 December 31, 2012 Guarantee of principal repayment Fair value ￦ 403,991 ￦ 390,390

Book value 113,853 216,280￦ 517,844 ￦ 606,670

Principal of money trust 500,156 626,269Accrued profit from trust 29,002 24,782

33.4 The Supreme Court Decision on Ordinary Wages

The ordinary wages include regular bonuses and allowances paid for a fixed period in accordance withthe Supreme Court decision on ordinary wages on December 18, 2013. The Company does notrecognize provisions related to ordinary wages because the Company assesses that it is unlikely forthe Company to pay additional past wages resulting from changes in ordinary wages. A sufficientlyreliable estimate of the amount of outflow cannot be made as of December 31, 2013.

33.5 Split plan of the credit card department of KEB

On December 24, 2013, the Board of diretors of KEB approved the equity spinoff of the credit carddepartment in order to strengthen its competitiveness and application for split of the credit carddepartment and credit card business approval of the new credit card company which will beestablished. The shareholders’ general meeting will decide on the split after obtaining the approvalthe Financial Committee.


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33.6 Schedule of merger between subsidiaries of the Banks

In accordance with the regulations of the Bank of Indonesia, 2 or more local banks with the sameultimate parent company are forbidden to operate as an independent entity in Indonesia.Accordingly, PT Bank Hana, which is a subsidiary of the Bank, and PT Bank KEB Indonesia (“KEBI”),which is a subsidiary of the Korea Exchange Bank, are undergoing a merger process as ofDecember 31, 2013.

34. Other liabilities

Details of other liabilities as of December 31, 2013 and 2012 are as follows (Korean won in millions):

December 31, 2013 December 31, 2012Accounts payable ￦ 7,210,429 ￦ 9,388,284Accrued expense payables 2,305,308 2,585,987Advances 64,767 60,565Income in advance 276,909 243,970Policy reserve 1,716,595 -Separate account liabilities 1,061,566 -Borrowing from trust accounts 3,401,877 2,283,090Foreign exchanges settlement credits 459,232 515,091Domestic exchange settlement credits 2,043,692 2,667,759Deposits for letter of guarantees and others 573,361 745,882Taxes withheld 171,506 136,488Security deposits received 21,040 2,593Accounts for agency businesses 238,329 167,687Government account 2,682,562 2,326,234Others 2,243,219 1,176,639Present value discount (14,499) (14,991)

￦ 24,455,893 ￦ 22,285,278

Details of policy reserve as of December 31, 2013 are as follows (Korean won in millions):

December 31, 2013Premium reserve \ 1,694,851Prepaid premium reserve 747Guaranteed reserve 6,157Outstanding claim 14,840

\ 1,716,595


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34. Other liabilities (cont’d)

Changes in the policy reserve for the years ended December 31, 2013 are as follows (Korean won inmillions):

January 1,2013

Increase due tothe businesscombination Increase Decrease

December 31,2013

Premium reserve \ - \ 1,535,734 \ 179,421 \ (20,304) \ 1,694,851Prepaid premiumreserve - 1,399 18 (670) 747

Guaranteed reserve - 6,050 4,296 (4,189) 6,157Outstanding claim - 13,079 2,206 (445) 14,840

\ - \ 1,556,262 \ 185,941 \ (25,608) \ 1,716,595

35. Capital stock and capital surplus

Details of capital stock as of December 31, 2013 and 2012 are as follows:

December 31, 2013 December 31, 2012Number of shares authorized 800,000,000 shares 800,000,000 sharesPar value per share ￦ 5,000 ￦ 5,000Number of shares issued 289,894,062 shares 243,049,763 shares

Changes in capital stock and capital surplus from December 1, 2005 (inception) to December 31, 2013are as follows (Korean won in millions except for number of shares):

Date Shares Common stock Capital surplusIncorporation Dec. 1, 2005 204,256,243 ￦ 1,021,281 ￦ 5,075,488Stock dividends Mar. 24, 2006 2,042,562 10,213 -Shares swap (*1) Oct. 13, 2006 5,552,788 27,764 215,427Paid-in capital increase Feb. 21, 2011 31,198,170 155,991 1,168,759Shares swap (*2) Apr. 5, 2013 46,844,299 234,221 1,511,856

289,894,062 ￦ 1,449,470 ￦ 7,971,530

(*1) Represents transactions the Company conducted to incorporate HD&S (formerly, Hana IB) into itssubsidiaries(*2) Represents transactions the Company conducted to incorporate KEB into its wholly ownedsubsidiaries.


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35. Capital stock and capital surplus (cont’d)

Details of hybrid equity securities classified as equity attributable to equity holders of the parent as ofDecember 31, 2013 and 2012 are as follows (Korean won in millions):

Issuance date MaturityInterestrate (%)

AmountDecember 31,

2013December 31,

2012The 1st Hybrid Tier I Feb. 21, 2011 Feb. 21, 2041 6.43 ￦ 170,000 ￦ 170,000The 2nd Hybrid Tier I Feb. 28, 2011 Feb. 28, 2041 6.27 130,000 130,000

300,000 300,000Issuance cost (879) (879)

￦ 299,121 ￦ 299,121

Capital surplus as of December 31, 2013 and 2012 consists of the followings (Korean won in millions):

December 31, 2013 December 31, 2012Paid-in capital in excess of par value ￦ 7,971,530 ￦ 6,459,674Gain on disposal of treasury stock 71,750 72,759Other capital surplus 2,337,294 282,470

￦ 10,380,574 ￦ 6,814,903

36. Capital adjustment

Details of capital adjustment as of December 31, 2013 and 2012 are summarized as follows (Koreanwon in millions):

December 31, 2013 December 31, 2012Treasury stock ￦ (170,023) ￦ (80,144)Other capital adjustment (238) (805)

￦ (170,261) ￦ (80,949)

Changes in the Company’s treasury stock for the year ended December 31, 2013 are summarized asfollows (Korean won in millions):

January 1,2013 Acquisition Disposal

December 31,2013

Number of shares 2,020,000 14,052,135 (11,730,258) 4,341,877Carrying amount 80,144 548,173 (458,294) 170,023


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37. Accumulated other comprehensive income

Changes in accumulated other comprehensive income for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):


Gain (loss) onvaluation ofavailable-for

-sale financial assets

Changes inunrealized gain

(loss) on valuation ofequity methodinvestments

Net gain (loss) oncash flow hedges

Exchangedifferences ontransaction of

foreign operations

Remeasurementsof the net definedbenefit liabilities

(assets) TotalJanuary 1, 2013 ￦ 385,937 ￦ 42,549 ￦ (1,168) ￦ (67,465) ￦ (53,270) ￦ 306,583Changes in the unrealized loss of available-for-sale securities 101,795 - - - - 101,795

Realized gain of available-for-sale securities (250,420) - - - - (250,420)

Changes in unrealized gainon valuation of equitymethod investments - (47,765) - - - (47,765)

Changes in net gain (loss)on cash flow hedges - - 644 - - 644

Changes in exchange differences on transactionof foreign operations - - - (152,923) - (152,923)

Changes in remeasurements of the net definedbenefit liability (asset) - - - - (76,197) (76,197)

Income tax effect 41,693 11,559 (156) 37,007 18,440 108,543December 31, 2013 ￦ 279,005 ￦ 6,343 ￦ (680) ￦ (183,381) ￦ (111,027) ￦ (9,740)


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37. Accumulated other comprehensive income (cont’d)


Gain (loss) onvaluation ofavailable-for

-sale financial assets

Changes inunrealized gain

(loss) on valuation ofequity methodinvestments

Net gain (loss) oncash flow hedges

Exchangedifferences ontransaction of

foreign operations

Remeasurementsof the net definedbenefit liabilities

(assets) TotalJanuary 1, 2012 ￦ 219,508 ￦ 52,457 ￦ (39) ￦ 28,020 ￦ (22,002) ￦ 277,944Changes in the unrealized loss of available-for-sale securities 188,421 - - - - 188,421

Realized gain of available-for-sale securities 32,866 - - - - 32,866

Changes in unrealized gainon valuation of equitymethod investments - (13,071) - - - (13,071)

Changes in net gain (loss)on cash flow hedges - - (1,490) - - (1,490)

Changes in exchange differences on transactionof foreign operations - - - (125,970) - (125,970)

Changes in remeasurements of the net definedbenefit liability (asset) - - - - (41,251) (41,251)

Income tax effect (54,858) 3,163 361 30,485 9,983 (10,866)December 31, 2012 ￦ 385,937 ￦ 42,549 ￦ (1,168) ￦ (67,465) ￦ (53,270) ￦ 306,583


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38. Retained earnings

Retained earnings as of December 31, 2013 and 2012 consist of the following (Korean won inmillions):

December 31, 2013 December 31, 2012Legal reserve (*) ￦ 458,261 ￦ 458,261Voluntary reserve 4,058,226 4,350,630Unappropriated retained earnings 3,466,351 2,360,527

￦ 7,982,838 ￦ 7,169,418

(*) In accordance with the Financial Holding Company Act, whenever dividends are paid, an amountequal to at least 10% of net income is required to be appropriated as a legal reserve until the reserveamount equals the aggregate par value of common stock. The legal reserve may not be utilized forcash dividends but may only be used to offset a deficit, if any, or be transferred to capital.

Changes in retained earnings for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):



Beginning balance ￦ 7,169,418 ￦ 5,687,644Net income 933,877 1,621,531Dividends (103,545) (120,515)Dividends on hybrid equity securities (19,082) (19,082)Others 2,170 (160)

￦ 7,982,838 ￦ 7,169,418

39. Regulatory reserve for bad debts

In accordance with the Regulations for Supervision of the Financial Holding Companies, whenprovisions for credit loss under K-IFRS are deemed insufficient for regulatory purposes, the Companycompensates for the differences, if any, as a regulatory reserve for bad debts in retained earnings.

Regulatory reserve for bad debt reserve is as follows (Korean won in millions):

December 31,2013

December 31,2012

Beginning balance ￦ 2,047,850 ￦ 1,152,640Increase due to the business combination - 636,070Planned reserve for bad debts 132,572 259,140Ending balance ￦ 2,180,422 ￦ 2,047,850

Attributable to equity holders of the parent 2,100,229 1,671,030Attributable to non-controlling interests 80,193 376,820


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39. Regulatory reserve for bad debts (cont’d)

Provisions for bad debt reserve and income adjusted for deductions of provisions for bad debt for theyears ended December 31, 2013 and 2012 are as follows (Korean won in millions and per share inunits):



Net income attributable to equity holders of the parent before deducting provisions for bad debt ￦ 933,877 ￦ 1,621,531Provisions for bad debt reserve 113,663 218,219Adjusted income after deducting provisions for bad debt 800,214 1,403,312Basic earnings per share on adjustment 2,902 5,743Diluted earnings per share on adjustment 2,893 5,728

40. Operating income and expense

Total operating income for the years ended December 31, 2013 and 2012 is as follows (Korean won inmillions):



Interest income ￦ 10,534,899 ￦ 11,433,226Fee and commission income 2,478,039 2,378,739Gain on financial assets and liabilities held-for-trading 9,225,566 10,192,964Gain on financial assets and liabilities designated atfair value through profit and loss 215,060 29,479

Gain on derivative instruments used for hedgingpurpose 174,801 87,455

Gain on financial instruments 383,683 378,357Gain on foreign currency transactions 1,910,904 1,707,701Recovery of impairment loss on financial assets 1,002 1,386Other operating income 564,597 1,250,440

￦ 25,488,551 ￦ 27,459,747


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40. Operating income and expense (cont’d)

Total operating expense for the years ended December 31, 2013 and 2012 is as follows (Korean wonin millions):



Interest expense ￦ 6,049,858 ￦ 6,834,560Fee and commission expense 885,223 826,566Loss on financial assets and liabilities held-for-trading 8,992,009 9,803,486Loss on financial assets and liabilities designated at fair value through profit and loss 278,685 399,263Loss on derivative instruments used forhedging purpose 212,044 76,430

Loss on financial instruments 98,206 160,977Loss on foreign currency transactions 1,663,582 1,202,613Impairment loss of financial assets 1,272,657 1,628,370General and administrative expense 3,846,309 3,769,778Other operating expense 1,024,968 740,353

￦ 24,323,541 ￦ 25,442,396

41. Net interest income

Interest income for the years ended December 31, 2013 and 2012 is as follows (Korean won inmillions):



Interest income on due from banks ￦ 175,698 ￦ 264,222Interest income on available-for-sale financial assets 782,286 770,233Interest income on held-to-maturity investments 216,148 237,723Interest income on loans receivable 8,743,707 9,597,878Others 246,087 206,003

10,163,926 11,076,059Interest income on financial assets designatedat fair value through profit or loss 1,003 -

Interest income on financial assets held-for-trading 369,970 357,167￦ 10,534,899 ￦ 11,433,226


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41. Net interest income (cont’d)

Interest expense for the years ended December 31, 2013 and 2012 is as follows (Korean won inmillions):



Interest expense on deposit liabilities ￦ 4,076,492 ￦ 4,624,753Interest expense on borrowings 414,676 500,242Interest expense on debentures 1,169,574 1,370,138Others 389,116 339,427

￦ 6,049,858 ￦ 6,834,560

42. Net fee and commission income

Fee and commission income for the years ended December 31, 2013 and 2012 is as follows (Koreanwon in millions):



Fee and commission received from loans and others ￦ 784,748 ￦ 810,874Fee and commission received on credit card 1,356,788 1,229,459Fee and commission received on guarantee 80,975 76,224Fee and commission received from redemptionbefore maturity 5,927 5,209

Fee and commission related foreign exchange 249,601 256,973￦ 2,478,039 ￦ 2,378,739

Fee expenses for the years ended December 31, 2013 and 2012 are as follows (Korean won inmillions):



Commission paid borrowings and others ￦ 261,731 ￦ 254,013Commission paid on credit card 616,738 558,067Commission related foreign exchange 6,683 14,350Commission paid trust 71 136

￦ 885,223 ￦ 826,566


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43. Gain (loss) on financial assets and liabilities held-for-trading

Gain (loss) on financial assets and liabilities held-for-trading for the years ended December 31, 2013and 2012 is as follows (Korean won in millions):



Gain on financial assets and liabilities held-for-trading:Trading securities:Gain on valuation ￦ 37,970 ￦ 48,877Gain on disposal 117,523 188,726Gain on redemption 199 672Dividend income 5,655 4,404

161,347 242,679Derivatives held for trading purpose:Gain on valuation of derivatives:Currency related derivatives 2,144,805 2,142,139Interest related derivatives 391,753 336,120Stock related derivatives 41,621 465,747Credit related derivatives 28,097 16,257Others related derivatives 90,040 33,304

2,696,316 2,993,567Gain on settlement of derivatives:Currency related derivatives 5,408,754 5,654,717Interest related derivatives 596,806 532,667Stock related derivatives 99,158 547,025Credit related derivatives 705 10,063Others related derivatives 246,005 205,170

6,351,428 6,949,642Gain on securities sold 16,476 7,076

9,225,567 10,192,964Loss on financial assets and liabilities held-for-trading:Trading securities:Loss on valuation 46,245 17,811Loss on disposal 174,685 125,565Loss on redemption 10,321 8,810

￦ 231,251 ￦ 152,186


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43. Gain (loss) on financial assets and liabilities held-for-trading (cont’d)



Derivatives held for trading purpose:Loss on valuation of derivatives:Currency related derivatives ￦ 2,077,581 ￦ 2,060,819Interest related derivatives 377,528 340,368Stock related derivatives 96,988 216,642Credit related derivatives 28,626 6,280Others related derivatives 119,638 51,555

2,700,361 2,675,664Loss on settlement of derivatives:Currency related derivatives 5,246,489 5,723,712Interest related derivatives 580,764 574,453Stock related derivatives 96,325 300,343Credit related derivatives 889 4,266Others related derivatives 108,235 362,169

6,032,702 6,964,943Loss on securities sold 27,696 10,693

8,992,010 9,803,486￦ 233,557 ￦ 389,478

44. Gain (loss) on financial assets and liabilities designated at fair value through profit orloss

Gain (loss) on financial assets and liabilities designated at fair value through profit or loss for the yearsended December 31, 2013 and 2012 is as follows (Korean won in millions):



Gain on financial assets and liabilities designatedat fair value through profit and loss:Securities designated at fair value through profit and loss:Gain on valuation ￦ 2,379 ￦ 623Gain on redemption 210 -Gain on disposal 5 278

￦ 2,594 ￦ 901


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44. Gain (loss) on financial assets and liabilities designated at fair value through profit orloss (cont’d)



Derivative linked securities purchased:Gain on valuation ￦ - ￦ 29

Derivative linked securities sold:Gain on valuation 194,012 3,677Gain on redemption 18,454 24,872

212,466 28,549215,060 29,479

Loss on financial assets and liabilities designatedat fair value through profit and loss:Securities designated at fair value through profit and loss:Loss on valuation 26,632 1,277Loss on disposal 111 -

Derivative linked securities purchased:Loss on valuation 6,436 2,333

Derivative linked securities sold:Loss on valuation 87,405 260,582Loss on redemption 158,101 135,071

245,506 395,653278,685 399,263

￦ (63,625) ￦ (369,784)

45. Gain (loss) on derivative instruments used for hedging purpose

Gain (loss) on derivative instruments used for hedging purpose for the years ended December 31,2013 and 2012 is as follows (Korean won in millions):



Gain on derivative instruments used for hedgingpurposes:Hedged item:Gain on valuation of hedged item:Available-for-sale financial assets ￦ - ￦ 47Debentures 81,921 6,111Deposits 86,862 3,175

168,783 9,333


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45. Gain (loss) on derivative instruments used for hedging purpose (cont’d)



Gain on disposal of hedged item:Debentures 2,109 10,474Deposits 1,579 1,567

￦ 3,688 ￦ 12,041Derivative instruments used for hedging purposes:Gain on valuation of derivatives:Currency related derivatives ￦ 566 ￦ 20,680Interest related derivatives 1,494 43,247

2,060 63,927Gain on settlement of derivatives:Currency related derivatives 264 65Interest related derivatives 6 2,089

270 2,154174,801 87,455

Loss on derivative instruments used forhedging purposes:Hedged item:Loss on valuation of hedged item:Loans receivable - 22Debentures 8,118 46,663Deposits 140 5,613

8,258 52,298Loss on disposal of hedged item:Debenture - 72Deposits - 1,797

- 1,869Derivative instruments used for hedging purposes:Loss on valuation of derivatives:Currency related derivatives 35,483 -Interest related derivatives 163,996 10,013

199,479 10,013Loss on settlement of derivatives:Currency related derivatives 618 210Interest related derivatives 3,689 12,040

4,307 12,250212,044 76,430

￦ (37,243) ￦ 11,025


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46. Net other income on financial instruments

Net other income on financial instruments for the years ended December 31, 2013 and 2012 is asfollows (Korean won in millions):



Other income on financial instruments:Available-for-sale financial assets:Gain on disposal ￦ 237,110 ￦ 243,599Gain on redemption 26,352 31,705Dividend income 36,935 59,064

300,397 334,368Held-to-maturity investments:Gain on disposal 345 9

Loans receivable:Gain on disposal 82,941 43,980

383,683 378,357Other loss on financial instruments:Available-for-sale financial assets:Loss on disposal 67,242 92,545Loss on redemption - 218

Loans receivable:Loss on disposal 30,964 68,214

98,206 160,977￦ 285,477 ￦ 217,380

47. Impairment loss of financial instruments

Impairment loss on financial instruments for the years ended December 31, 2013 and 2012 is asfollows (Korean won in millions):



Available-for-sale financial assetsImpairment loss ￦ 163,306 ￦ 181,826Recovery of impairment loss (1,002) (1,386)

Loans receivableProvision for possible loan losses 1,092,402 1,424,871

Other assetsProvision for possible other assets losses 16,949 21,673

￦ 1,271,655 ￦ 1,626,984


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48. General and administrative expenses

General and administrative expenses for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):



Salaries ￦ 1,678,137 ￦ 1,780,732Provision for severance and retirement benefits 148,912 192,728Termination benefits 51,611 45,131Employee benefits 240,355 220,374Rental expenses 296,333 289,709Entertainment expenses 42,740 41,241Depreciation on property and equipment 173,918 157,389Depreciation on investment property 4,581 3,923Amortization 312,503 284,917Taxes and dues 131,834 135,604Advertising expenses 135,950 160,642Servicing expenses 164,650 225,884Supplies expense 10,622 13,136Others 454,163 218,368

￦ 3,846,309 ￦ 3,769,778

49. Other operating income

Other operating income for the years ended December 31, 2013 and 2012 is as follows (Korean wonin millions):



Reversal of allowances for unused commitments ￦ 2,967 ￦ -Reversal of allowance for possible losseson acceptances and guarantees - 8,808

Reversal of allowance for restoration cost 1,414 -Adjustment for offered price 133 -Reversal of credit valuation adjustment 6,438 -Trust commissions 89,081 82,248Gain on redemption of debenture 2,914 90Gains on bargain purchase 73,602 1,068,381Income from recovery of bad debts 19,594 -Insurance profit 244,641 -Others 123,813 90,913

￦ 564,597 ￦ 1,250,440


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50. Other operating expense

Other operating expenses for the years ended December 31, 2013 and 2012 are as follows (Koreanwon in millions):



Provision of allowances forpossible losses on acceptancesand guarantees ￦ 9,203 ￦ -

Provision for unused commitments - 10,472Provision of allowance for restoration cost - 3,643Provision for reward points 33,848 27,706Provision for lawsuits 35,378 31,597Adjustment for offered price - 4,166Provision of credit valuation adjustment - 3,136Contribution to guarantee fund 245,869 239,911Insurance fee on deposit 269,847 248,707Contribution to housing credit guarantee fund 63,992 59,662Insurance cost 78,776 -Provision for policy reserves 160,333 -Others 127,722 111,353

￦ 1,024,968 ￦ 740,353

51. Other non-operating income

Other non-operating income for the years ended December 31, 2013 and 2012 is as follows (Koreanwon in millions):



Rental fee income ￦ 9,917 ￦ 6,813Disposal of property and equipment 583 8,434Disposal of investment property 65 3,093Disposal of investment in associates 47,921 983Others 80,124 93,476

￦ 138,610 ￦ 112,799


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52. Other non-operating expense

Other non-operating expenses for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):



Disposal of property and equipment ￦ 1,610 ￦ 1,470Disposal of investment in associates 4 4,404Contribution 64,205 55,179Impairment loss on intangible assets 12,055 28,230Impairment loss on investments in associates andjoint venture 513 68,006

Commissions received on collection of special bond 3,229 3,373Others 36,944 44,068

￦ 118,560 ￦ 204,730

53. Income taxes

The major components of income tax expense for the years ended December 31, 2013 and 2012 areas follows (Korean won in millions):



Current income taxes:Income taxes ￦ 321,356 ￦ 501,209Additional refundof prior year’s income tax (32,344) (2,430)

Changes of deferred income taxesdue to the tax effect of temporary differences (11,055) (195,231)

Current and deferred income taxesrecognized directly to equity 12,282 (33,771)

Tax effect of consolidated tax returns (12,934) (6,746)Income tax expense ￦ 277,305 ￦ 263,031


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53. Income taxes (cont’d)

Reconciliations of income tax expense applicable to income before income tax at the Korea statutorytax rate to income tax expense at the effective income tax rate of the Company for the years endedDecember 31, 2013 and 2012 are as follows (Korean won in millions):



Income before income tax ￦ 1,270,273 ￦ 1,992,211Tax at domestic statutory income tax rate of 24.2% 307,406 482,115Income not subject to tax (16,545) (17,286)Expenses not deductible for tax purposes 29,017 21,439Tax deduction (7,687) (7,936)Income tax expense offoreign branches and subsidiaries 25,181 54,499

Tax effect of consolidated tax return (12,934) (6,746)Additional refund of prior year’s income tax (32,344) (2,430)Tax effect of bargain purchase (17,812) (258,548)Effect of tax rates change, etc 2,694 3,364Others 329 (5,440)Income tax expense ￦ 277,305 ￦ 263,031Effective income tax rate (%) 21.8 13.2

Temporary differences and deferred income tax assets (liabilities) as of December 31, 2013 and 2012are as follows (Korean won in millions):

December 31, 2013Deductible

(taxable) temporarydifferences

Deferred incometax assets(liabilities)

Gain on valuation of trading securities ￦ (498,977) ￦ (119,699)Impairment loss on investments 554,664 134,098Gain on valuation of investments in subsidiaries (196,461) (46,734)Gain on valuation of derivatives (204,049) (49,445)Deemed dividends 4,006 968Deferred loan fees and expenses (106,984) (25,568)Accrued interest income (367,351) (87,983)Allowance for temporary depreciation 420 102Accrued expenses 167,031 40,091Allowance for acceptance guarantees 65,473 15,845Deposit for severance and retirement benefits (738,655) (178,649)Provision for severance and retirement benefits 784,251 189,627Allowance for other losses 349,341 83,959Loans written-off 690,348 166,725Depreciation 36,231 8,752Fair value valuation resulting from merger (11,358) (2,749)Dormant deposits 4,909 1,188


- 180 -





Advanced depreciation provision (180,315) (43,636)Deemed cost for property and equipment (597,773) (144,661)Available-for-sale financial assets (323,589) (78,119)Tax loss carryforwards 232,843 45,263Investment in kind 137,879 33,367Financial acceptances and guarantees 28,872 6,981Deferred point income 66,515 16,097Fair value differences due to the business combination (972,018) (235,228)Others (96,144) (151)

￦ (1,170,891) ￦ (269,559)Domestic deferred income tax liabilities (269,559)Foreign deferred income tax assets (*) 45,595Foreign deferred income tax liabilities (*) (34,888)

￦ (258,852)




Gain on valuation of trading securities ￦ (336,142) ￦ (81,244)Impairment loss on investments 340,390 82,226Gain on valuation of investments in subsidiaries (19,723) (2,638)Gain on valuation of derivatives (79,748) (19,296)Deemed dividends 3,229 781Deferred loan fees and expenses (116,394) (28,187)Accrued interest income (289,089) (69,903)Allowance for temporary depreciation (41) (10)Accrued expenses 168,904 40,847Allowance for acceptance guarantees 40,590 9,823Deposit for severance and retirement benefits (592,858) (143,288)Provision for severance and retirement benefits 626,898 151,496Allowance for other losses 353,786 85,612Loans written-off 715,510 173,131Depreciation 31,291 7,837Fair value valuation resulting from merger (12,641) (3,059)Dormant deposits 31,163 7,541Advanced depreciation provision (180,315) (43,636)Deemed cost for property and equipment (597,106) (144,500)Available-for-sale financial assets (529,541) (127,926)Tax loss carryforwards 148,675 27,040Investment in kind 137,879 33,367Financial acceptances and guarantees 25,276 6,111


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Deferred point income 52,836 12,786Fair value differences due to the business combination (1,112,792) (269,296)Others (295,958) (2,125)

￦ (1,485,921) ￦ (296,510)Domestic deferred income tax liabilities (296,510)Foreign deferred income tax assets (*) 18,772Foreign deferred income tax liabilities (*) (4,033)

￦ (281,771)

(*) Deferred income tax assets of foreign branches are not offset against the deferred income taxliabilities due to differences in tax jurisdictions.

The effective income tax rate of 24.2% is applied when calculating deferred income tax assets orliabilities that will be realized since 2013. Also, deferred income tax assets are recognized when it isforeseeable that future taxable income will be incurred and that future tax credits will be realized.

Details of deferred income taxes charged (credited) directly to equity as of December 31, 2013 and2012 are as follows (Korean won in millions):

December 31, 2013

Before taxamounts


Gain on valuation of available-for-sale financial assets ￦ 352,083 ￦ (81,090)Loss on valuation of derivative instruments 139 (71)Gain on valuation of equity method investments 8,766 (1,688)Loss on valuation of equity method investments (866) 131Exchange differences on translation of foreign operations (14,199) 3,444Remeasurements of the net defined benefit liability(asset) (42,834) 10,347

￦ 303,089 ￦ (68,927)


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December 31, 2012

Before taxamounts


Gain on valuation of available-for-sale financial assets ￦ 495,439 ￦ (116,970)Loss on valuation of derivative instruments (1,540) 373Gain on valuation of equity method investments 60,307 (14,578)Loss on valuation of equity method investments (4,195) 1,015Exchange differences on translation of foreign operations (8,617) 2,085Remeasurements of the net defined benefit liability(asset) (29,492) 7,137

￦ 511,902 ￦ (120,938)

54. Dividends

Details of the Company’s dividend including interim dividend for the years ended December 31, 2013and 2012 are as follows (Korean won in units):

Year ended December 31, 2013Number of

sharesDividend per

shareDividend per

share ratio (%) DividendsCash dividend (interim) 288,583,804 \ 150 3.00 \ 43,287Cash dividend (annual) 289,894,062 250 5.00 72,474

\ 115,761

Year ended December 31, 2012Number of

sharesDividend per

shareDividend per

share ratio (%) DividendsCash dividend (interim) 241,029,763 \ 200 4.00 \ 48,206Cash dividend (annual) 241,029,763 250 5.00 60,257

\ 108,463

Details of the Company’s dividend payout ratio and dividend yield ratio for the years endedDecember 31, 2013 and 2012 are as follows.

Calculating formula


2013


2012Dividend payout ratio (%) Cash dividends / Net income 11.66 6.27Dividend yield ratio (%) Cash dividends per share /

Market value per share atreporting date 0.91 1.30


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54. Dividends (cont’d)

Details of dividends on hybrid equity securities for the years ended December 31, 2013 and 2012 aresummarized as follows (Korean won in millions):



Par value ￦ 300,000 ￦ 300,000Weighted-average interest rate 6.36 % 6.36 %Total dividends ￦ 19,082 ￦ 19,082

55. Earnings per share

Weighted-average numbers of common shares for the years ended December 31, 2013 and 2012 arecalculated as follows (shares in units):



Beginning 241,029,763 241,029,763Share swap 34,780,288 -Issuance of common shares (10,425,858) -Disposal of treasury shares 3,782,023 -Weighted-average number of shares of

common stocks outstanding 269,166,216 241,029,763

The Company’s basic earnings per share for the years ended December 31, 2013 and 2012 arecalculated as follows (Korean won and per share amounts in units):



Net income for the period ￦ 933,876,852,111 ￦ 1,621,531,149,980

Dividends on hybrid equity securities (19,082,000,000) (19,082,000,000)Net income attributable to common stock ￦ 914,794,852,111 ￦ 1,602,449,149,980Weighted-average number of shares of

common stocks outstanding 269,166,216 shares 241,029,763 sharesBasic earnings per share ￦ 3,399 ￦ 6,648


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55. Earnings per share (cont’d)

Weighted-average numbers of common shares adjusted for the effect of dilution for the years endedDecember 31, 2013 and 2012 are calculated as follows (shares in units):



Weighted-average number ofcommon shares of outstanding forbasic earnings per share 269,166,216 241,029,763

Dilution effect due to:Stock grants 869,210 623,660

Weighted-average number of common shares (Diluted) 270,035,426 241,653,423

The Company’s diluted earnings per share for the years ended December 31, 2013 and 2012 arecomputed as follows (Korean won and number of shares in units):



Net income attributable to common stock holders ￦ 914,794,852,111 ￦ 1,602,449,149,980Weighted-average number of shares of

common stocks outstanding (Diluted) 270,035,426 shares 241,653,423 sharesDiluted earnings per share ￦ 3,388 ￦ 6,631


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56. Share-based payment transactions

The Company has granted employees and directors of HFG and its subsidiaries share options whichmay be settled by the issuance of additional shares or by cash payment equal to the differencebetween the market value and exercise price.

Details of outstanding share options granted by HFG as of December 31, 2013 are as follows:

Grant date

Settle-ment

methodExercise

priceExercisable

periodMatu-

rity

Assumptions to estimate fair value of the stock options

Optionpricingmodel

Riskfreerate(%)

Expectedexerciseperiod

Estimatedshare

volatility(%) (*3)

Expecteddividend

Stockprice at

the grantdate

Fairvalue ofshare

options<KEB>2009.03.12 (*1) 5,800 2011.03.13

~2016.03.12 (*4)

Black-Scholes 2.68 5.9 27.56 882 5,700 1,986

2009.08.04 (*1) 10,900 2011.08.05~

2016.08.04 (*4)Black

-Scholes 2.71 5.9 29.06 882 11,700 2152010.03.10 (*1) 13,200 2013.03.11

~2017.03.10 (*4)

Black-Scholes 2.77 5.9 31.38 882 13,450 161

2010.03.30 (*1) 13,500 2013.03.31~

2017.03.30 (*4)Black

-Scholes 2.78 5.9 31.77 882 13,600 1582010.08.04 (*1) 12,400 2013.08.05

~2017.08.04 (*4)

Black-Scholes 2.81 5.9 38.18 882 12,300 446

2010.09.29 (*1) 13,500 2013.09.29~

2017.09.28 (*4)Black

-Scholes 2.83 5.9 37.60 882 13,550 3542011.08.10 (*1) 9,100 2014.08.11

~2018.08.10 (*4)

Black-Scholes 2.95 5.9 37.82 882 8,060 964

2011.08.26 (*1) 8,500 2014.08.27~

2018.08.26 (*4)Black

-Scholes 2.96 5.9 37.82 882 7,720 1,0812011.09.02 (*1) 8,400 2014.09.03

~2018.09.02 (*4)

Black-Scholes 2.96 5.9 37.72 882 7,930 1,098

(*1) HFG chooses one of the following at its discretion: additional equity issue grants, treasury stockgrant or cash settlement.(*2) The above stock options will vest after a two-year vesting period and become exercisable within 3years after the vesting date, except if the Company’s employees or directors retire at the regularretirement age or for reasons not attributable to the fault of the employees or directors, such optionswill vest and become exercisable immediately within 6 months from the retirement date (one year forthe second granted options), or if death of the Company’s employee or director occurs, such optionswill vest and become exercisable immediately within two years from the date of death. In addition, ifthe Company’s employee or director is terminated voluntarily after the options have become vested,such options should be exercised within 30 days from the termination date.(*3) Estimated share volatility is assessed based on the volatility of the Company’s share price for thesame period as the expected exercise period.(*4) The expiration date of the exercisable period and the maturity date are identical.


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56. Share-based payment transactions (cont’d)

Changes in stock options granted by the Company for the year ended December 31, 2013 aresummarized as follows (number of shares in units):

<KEB>

Grant date Company Beginning Forfeited Exercised Exercisable2009.03.12 KEB 490,000 (56,260) (155,205) 278,5352009.08.04 KEB 470,000 (54,390) - 415,6102010.03.10 KEB 350,000 (37,650) - 312,3502010.03.30 KEB 360,000 (122,860) - 237,1402010.08.04 KEB 420,000 (168,110) - 251,8902010.09.29 KEB 90,000 (72,190) - 17,8102011.08.10 KEB 550,000 (217,000) - 333,0002011.08.26 KEB 100,000 (57,710) - 42,2902011.09.02 KEB 30,000 (18,750) - 11,250

2,860,000 (804,920) (155,205) 1,899,875

The details of stock grants as of December 31, 2013 are summarized as follows:

Grant dateSettlement

methodExercisable period(appraisal period)

Paymentdate

Estimatedvested shares

as ofDecember 31

2013<HFG>

Grant in 2011 2011.01.01 (*1) 2011.01.01~2013.12.31 2013.12.31 298,280 (*2)Grant in 2012 2012.01.01 (*1) 2012.01.01~2014.12.31 2014.12.31 138,310 (*2)Grant in 2013 2013.01.01 (*1) 2013.01.01~2015.12.31 2015.12.31 120,050 (*2)

<KEB>Grant in 2009 2009.12.11 Cash settlement 2009.12.11 ~ 2011.12.11 2011.12.11 11,070Grant in 2010 2010.08.04 Cash settlement 2010.08.04 ~ 2012.08.04 2012.08.04 22,650Grant in 2010 2010.02.19 Cash settlement 2010.02.19 ~ 2011.02.19 2012.02.19 10,630Grant in 2010 2010.03.19 Cash settlement 2010.03.19 ~ 2012.03.19 2012.03.19 1,405Grant in 2010 2010.08.11 Cash settlement 2010.08.11 ~ 2011.08.11 2011.08.11 3,205Grant in 2010 2010.08.11 Cash settlement 2010.08.11 ~ 2012.08.11 2012.08.11 3,555Grant in 2011 2011.09.21 Cash settlement 2011.09.21 ~ 2013.09.21 2013.09.21 316,180Grant in 2011 2011.02.21 Cash settlement 2011.02.21 ~ 2012.02.21 2012.02.21 10,190Grant in 2011 2011.02.21 Cash settlement 2011.02.21 ~ 2013.02.21 2013.02.21 4,140Grant in 2011 2011.02.21 Cash settlement 2011.02.21 ~ 2012.02.21 2012.02.21 9,835Grant in 2011 2011.02.21 Cash settlement 2011.02.21 ~ 2013.02.21 2013.02.21 4,760Grant in 2011 2011.03.21 Cash settlement 2011.03.21 ~ 2012.03.20 2012.03.20 50Grant in 2011 2011.03.21 Cash settlement 2011.03.21 ~ 2013.03.20 2013.03.20 316Grant in 2011 2011.03.21 Cash settlement 2011.03.21 ~ 2014.03.20 2014.03.20 1,470Grant in 2011 2011.09.08 Cash settlement 2011.09.08 ~ 2012.09.08 2012.09.08 1,770Grant in 2011 2011.09.08 Cash settlement 2011.09.08 ~ 2013.09.08 2013.09.08 1,770


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56. Share-based payment transactions (cont’d)

Grant dateSettlement

methodExercisable period(appraisal period)

Paymentdate

Estimatedvested shares

as ofDecember 31

2013Grant in 2012 2012.02.21 Cash settlement 2012.02.21 ~ 2013.02.22 2013.02.22 7,105Grant in 2012 2012.02.21 Cash settlement 2012.02.21 ~ 2014.02.22 2014.02.22 21,635Grant in 2012 2012.02.21 Cash settlement 2012.02.21 ~ 2013.02.22 2013.02.22 19,560Grant in 2012 2012.02.21 Cash settlement 2012.02.21 ~ 2014.02.22 2014.02.22 42,225

(*1) HFG chooses one of the following at its discretion: treasury stock grant or cash settlement.(*2) The maximum number of shares to be compensated is pre-determined before the grant date,and vested shares are determined by performance measures. The performance assessmentconsists of the group performance assessment (relative shareholder return) constituting 40% andthe business unit performance assessment (unit ROE, ROIC) constituting 60% of the totalperformance scorecard.

The stock grant liabilities in accounts payable are in the amount ￦29,278 million as of December31, 2013. The Company uses the cash settlement method in connection with the stock grantliabilities based on past practice, and compensation costs are recorded by re-measuring fair value ofliabilities at the end of every vesting year.

57. Cash flow information

Cash and cash equivalent as of December 31, 2013 and December 31, 2012 is summarized as follows(Korean won in millions):

December 31, 2013 December 31, 2012Cash ￦ 3,514,869 ￦ 3,352,441Due from banks in Korean won 7,744,924 8,929,360Due from banks in other foreign currencies 8,083,425 6,609,069

19,343,218 18,890,870Restricted balances 7,048,475 9,024,177Due from banks with original maturities exceeding three months from the date of acquisition 2,280,151 2,197,193

￦ 10,014,592 ￦ 7,669,500


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57. Cash flow information (cont’d)

Significant non-cash transactions for the years ended December 31, 2013 and 2012 are as follows(Korean won in millions):



Loans written-off ￦ 1,370,436 ￦ 1,049,897Changes in gain or loss on valuation of available-for-sale financial assets, net (141,071) 219,563Debt-to-equity swap 9,427 (7,673)Decrease in allowance for possible loan lossesdue to sale of non-performing loans 72,453 125,864

Cash flows from interest and dividend for the years ended December 31, 2013 and 2012 are asfollows (Korean won in millions):



Interest receipts ￦ 10,500,748 ￦ 11,141,698Interest payments 6,301,499 5,825,030Dividend receipts 68,369 62,660Dividend payments 103,545 120,515

Details of net cash payment for the Company to obtain control through a business combination are asfollows (Korean won in million):

AmountsTotal consideration transferred by cash and cash equivalents ￦ (63,655)Cash and cash equivalents in the subsidiary acquired 335,831

￦ 272,176

58. Related party transactions

Details of transactions with related parties for the years ended December 31, 2013 and 2012 aresummarized as follows (Korean won in millions):

Year ended December 31, 2013Related party Type Income Expense

Mirae Credit Information Services Corp. Associate ￦ 13 ￦ 4,307Taesan LCD Co., Ltd. Associate 1,050 357Korea Credit Bureau Associate 1 1,831Darby-Hana Infrastructure FundManagement Associate - 180

UAM Co., Ltd. Associate 5,686 1,413Hana UBS Asset Management Associate 1,604 34Odin 2.LLC Associate 1,777 -


- 189 -

58. Related party transactions (cont’d)


F&U Credit Information Associate 178 17,739Korea Travels Associate 378 640MIDAN City Development Co., Ltd. Associate 1,314 -Najeon Co., Ltd. Associate 118 64LIG NEX1 Co., Ltd. Associate 179 -Sambo Motors Co., Ltd. Associate 175 -

￦ 12,473 ￦ 26,565


Hana Life Insurance Joint venture ￦ 15,090 ￦ 205Mirae Credit Information Services Corp. Associate - 1,333Taesan LCD Co., Ltd. Associate 929 229Korea Credit Bureau Associate - 74Darby-Hana Infrastructure Fund

Management Associate 2 189UAM Co., Ltd. Associate 3,550 15Hana UBS Asset Management Associate 1,742 412AJ Rent a Car Co., Ltd Associate 2,763 369Odin 2.LLC Associate 1,602 -Doosan Capital Co., Ltd. Associate 810 -F&U Credit Information Associate - 18,606Korea Travels Associate 484 74121st Century Shipbuilding Co., Ltd. Associate 2,449 770

￦ 29,421 ￦ 22,943

Outstanding balances with related parties arising from the below transactions as of December 31,2013 and 2012 are summarized as follows (Korean won in millions):

December 31, 2013Related party Type Assets Liabilities

Mirae Credit Information Services Corp. Associate ￦ 1,177 ￦ 5,193Taesan LCD Co., Ltd. Associate 7,356 11,813Korea Credit Bureau Associate 2 2,012Darby-Hana Infrastructure FundManagement Associate - 6,126

UAM Co., Ltd Associate 125,634 3Hana UBS Asset Management Associate 100,058 2,290Odin2.LLC Associate 29,070 -F&U Credit Information Associate 291 1,182Korea Travels Associate 8 7,052MIDAN City Development Co., Ltd Associate 19,723 34


- 190 -



Najeon Co., Ltd. Associate ￦ 2,200 ￦ 1,796LIG NEX1 Co., Ltd. Associate - 3Sambo Motors Co., Ltd. Associate 4,000 -

￦ 289,519 ￦ 37,504


Hana Life Insurance Joint venture ￦ 11,170 ￦ 9,150Mirae Credit Information Services Corp. Associate - 9,729Taesan LCD Co., Ltd. Associate 32,013 17,519Korea Credit Bureau Associate - 2,008Darby-Hana Infrastructure FundManagement Associate - 5,310

UAM Co., Ltd Associate 148,705 3Hana UBS Asset Management Co., Ltd. Associate 70,060 8,207AJ Rent a Car Co., Ltd Associate 22,133 976Odin2.LLC Associate 24,201 -F&U Credit Information Associate 352 -Korea Travels Associate - 10,27821st Century Shipbuilding Co., Ltd. Associate 122,552 1

￦ 431,186 ￦ 63,181

Collateral provided between related parties as of December 31, 2013 and 2012 is summarized asfollows (Korean won in millions):

December 31, 2013Related parties

Transactions Amounts ContentBenefactor BeneficiaryHana Bank LIG NEX1 Co., Ltd. Guarantee for F/X ￦ 24,640 Unconfirmed guaranteeHana Bank LIG NEX1 Co., Ltd. Guarantee 16,570KEB LIG NEX1 Co., Ltd. Issuance of Import L/C 356KEB LIG NEX1 Co., Ltd. Guarantee 18,232

December 31, 2012Related parties

Transactions Amounts ContentBenefactor BeneficiaryHana Bank Wooree E&L Co., Ltd. Guarantee for F/X ￦ 47 Confirmed guaranteeHana Bank Wooree E&L Co., Ltd. Guarantee for F/X 8 Unconfirmed guaranteeKEB 21st Century Shipbuilding Co.,

Ltd. Guarantee 126KEB Doosan Capital Co., Ltd. Guarantee for F/X 190


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Details of compensation paid to key management personnel for the years ended December 31, 2013and 2012 are summarized as follows (Korean won in millions and number of personnel in units):


Registereddirectors

Non-registereddirectors

Employeepayment

Severancepayment

Share-basedcompensation

expenses TotalHFG 12 13 \ 6,377 \ 255 \ 2,393 \ 9,025Hana Bank 15 14 6,959 469 1,863 9,291KEB 10 6 2,838 203 (5) 3,036H&DS 7 9 3,817 192 1,130 5,139Hana Capital 3 - 852 169 259 1,280Hana INS 3 2 855 - - 855Hana SK Card 7 5 2,059 49 687 2,795Hana Asset Trust 3 7 1,557 110 532 2,199HIF 4 1 210 - 18 228Hana Savings Bank 5 - 413 29 (22) 420Hana Life Insurance 5 8 948 58 122 1,128Hana Bancorp, Inc. 9 2 428 9 - 437

83 67 \ 27,313 \ 1,543 \ 6,977 \ 35,833


Registereddirectors

Non-registereddirectors

Employeepayment

Severancepayment

Share-basedcompensation

expenses TotalHFG 12 13 \ 12,975 \ 195 \ 1,198 \ 14,368Hana Bank 16 18 10,181 268 542 10,991KEB 10 8 4,819 1,298 9,800 15,917H&DS 7 14 10,666 212 464 11,342Hana Capital 3 - 846 67 256 1,169Hana INS 3 2 1,171 - - 1,171Hana SK Card 7 7 2,264 128 488 2,880Hana Asset Trust 5 6 981 159 365 1,505HIF 4 1 161 - 1 162Hana Savings Bank 5 6 444 - 31 475

72 75 \ 44,508 \ 2,327 \ 13,145 \ 59,980


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59. Business combination

59.1 Additional acquisition of equity of Hana Life Insurance

As of May 10, 2013, the Company has acquired 11,020,099 shares which are 50 percent minus 1share of Hana HSBC Life Insurance from HSBC Insurance Asia Pacific. Due to the transaction theCompany has acquired a controlling interest of Hana HSBC Life Insurance and Hana HSBC LifeInsurance subsequently changed its name to Hana Life Insurance.

Details of acquisition date fair value of the total consideration transferred are as follows (Korean wonin millions):

AmountCash \ 32,000Acquisition-date fair value of the equity interest held bythe Company before the acquisition date 104,556

\ 136,556

Details of assets acquired and liabilities assumed as of the acquisition date are as follows (Koreanwon in millions):

AmountAssets acquired: \

Cash and due from banks 269,554Financial assets held-for-trading 111,362Available-for-sale financial assets 1,182,337Held-to-maturity investments 108,238Loans receivable (*1) 36,795Property and equipment 2,521Intangible assets (*2) 67,990Reinsurance assets 1,896Other assets 70,318Separate account assets 1,051,614

Total Assets 2,902,625Liabilities assumed:

Policy reserve 1,556,262 Insurance account payable 2,757 Advances in premium 52,470 Retirement benefits 4,439

Provisions 377Deferred income tax liabilities 9,972Other liabilities 11,013Separate account liabilities 1,056,223

Total Liabilities 2,693,513Total identifiable net assets \ 209,112


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59. Business combination (cont’d)

59.1 Additional acquisition of equity of Hana Life Insurance (cont’d)

(*1) Details of acquired loans receivable as of the acquisition date are as follows (Korean won inmillions):

AmountFair value of loans receivable \ 36,795Contractual total amount of loans receivable 36,395

(*2) The Company recognized intangible assets in its consolidated financial statements in theamount of \67,990 million as a result of its business combination. Details of intangible assetsrecognized are as follows (Korean won in millions):

AmountMembership \ 806Software 2,276Development cost 3,214Intangible asset related to insurance contract (*) 61,694

\ 67,990

(*) As a method to measure the fair value of insurance liabilities, the difference between the fairvalue and book value was recognized as intangible assets. To estimate the value of intangibleassets the EV (Embedded value) was calculated by estimating the future cash flow of the holdingcontract and discounting the cash flow using an appropriate discount rate.

Details of gain on a bargain purchase recognized as other operating income in the Company’sconsolidated statement of comprehensive income as a result of the business combination are asfollows (Korean won in millions):

AmountFair value of net assets (A) \ 209,112Consideration transferred 32,000Acquisition-date fair value of the equity interest held bythe Company before the acquisition date 104,556

Total (B) 136,556Gain on a bargain purchase (A-B) \ 72,556


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Details of revenue and profit or loss of Hana Insurance since the acquisition date reflected in theconsolidated statement of comprehensive income for the year ended December 31, 2013 are asfollows (Korean won in millions):

Beforeadjustment (*) Adjustments Total

Net interest income \ 44,393 \ (13,171) \ 31,222Net fee and commission income 9,760 - 9,760Other income related to financial instruments 7,737 (20,864) (13,127)General and administrative expenses (27,636) (1,379) (29,015)Other operating income 244,671 - 244,671Other operating expense (256,129) 13,901 (242,228)Total operating income 22,796 (21,513) 1,283Non-operating income, net 261 - 261Net income before income taxes 23,057 (21,513) 1,544Income taxes (4,921) 4,495 (426)Net income \ 18,136 \ (17,018) \ 1,118

Details of revenue and profit or loss of the combined entity under the assumption that the acquisitiondate for all business combinations is the beginning of the annual reporting period for the year endedDecember 31, 2013 are as follows (Korean won in millions):

AmountNet interest income \ 4,506,008Net fee and commission income 1,601,086Other income related to financial instruments (599,893)General and administrative expenses (3,859,861)Other operating income 705,204Other operating expense (1,187,220)Total operating income 1,165,105Non-operating income, net 105,048Net income before income taxes 1,270,153Income taxes (277,514)Net income \ 992,639

Changes in deferred income tax liabilities resulting from the business combination are as follows(Korean won in millions):

Temporary differencesDeferred income tax

liabilitiesLoans receivable \ 400 \ 97Held-to-maturity investments 10,666 2,581Intangible assets 61,694 14,930New contract cost (52,499) (12,705)

\ 20,261 \ 4,903


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Cash flows from the business combination are as follows (Korean won in millions):

AmountPaid in cash \ (32,000)Cash and cash equivalents of acquired company 269,554

\ 237,554

59.2 Acquisition of equity of Hana Bancorp, Inc.

As of August 30, 2013, the Company acquired 4,955,674 shares (share ratio 52.29%) of BNB FSC(Financial Service Corporation). Due to the transaction the Company has acquired a controllinginterest of BNB FSC and subsequently changed its name to Hana Bancorp Inc. The Companyadditionally acquired 1,808,800 shares of ownership of Hana Bancorp, Inc. and consequently has71.37% ownership as of December 31, 2013.

Details of acquisition date fair value of the total consideration transferred are as follows (Korean wonin millions):

AmountCash \ 31,655

Details of assets acquired and liabilities assumed as of the acquisition date are as follows (Koreanwon in millions):

AmountAssets acquired: \

Cash and due from banks 66,277Available-for-sale financial assets 60,689Loans receivable (*1) 223,249Property and equipment 2,962Investment properties 6,027Intangible assets (*2) 8,827Deferred income tax assets 1,949Other assets 4,857

Total Assets 374,837


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59.2 Acquisition of equity of Hana Bancorp, Inc. (cont’d)

AmountLiabilities assumed:

Deposits 294,386 Borrowings 2,211 Debentures 5,727

Provisions 894Other liabilities 9,078

Total Liabilities 312,296Total identifiable net assets \ 62,541

(*1) Details of acquired loans receivable as of the acquisition date are as follows (Korean won inmillions):

AmountFair value of loans receivable \ 223,249Contractual total amount of loans receivable 227,935

(*2) The Company recognized intangible assets in its consolidated financial statements in theamount of \8,827 million as a result of its business combination. Details of intangible assetsrecognized are as follows (Korean won in millions):

AmountCore deposits (*i) \ 4,643Other intangible assets (*ii) 4,184

\ 8,827

(*i) The cost reduction approach was used to assess the fair value of the core deposits. The costreduction approach is a method which recognizes the saving cost value caused by owning a certainasset as the value of the asset. The cost savings for each year mean the difference between thecost financed by alternative methods except core deposits and the cost raised by core deposits. Andthe intangible assets are evaluated by discounting the cost savings.

(*ii) Other intangible assets are related to mortgage management services contract. Their valuesare the present values of exceeded fee and commission income which is calculated bysubstracting adequate servicing fees from fee and commission computed considering a residualmaturity and constant prepayment rate.


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Details of gain on a bargain purchase recognized as other operating income in the Company’sconsolidated statements of comprehensive income as a result of the business combination are asfollows (Korean won in millions):

AmountConsideration transferred \ 31,655Non-controlling shareholders’ equity 29,840Total 61,495Fair value of net assets 62,541Gain on a bargain purchase \ 1,046

Details of revenue and profit or loss of Hana Bancorp, Inc. since the acquisition date reflected in theconsolidated statement of comprehensive income for the year ended December 31, 2013 are asfollows (Korean won in millions):

Beforeadjustment (*) Adjustments Total

Net interest income \ 2,584 \ 363 \ 2,947Net fee and commission income 258 - 258Other income related to financial instruments (3,500) - (3,500)General and administrative expenses (3,747) (146) (3,893)Other operating income 48 - 48Other operating expense (124) - (124)Total operating income (4,481) 217 (4,264)Non-operating income, net (14) (38) (52)Net income before income taxes (4,495) 179 (4,316)Income taxes 1,886 (61) 1,825Net income \ (2,609) \ 118 \ (2,491)

Details of revenue and profit or loss of the combined entity under the assumption that the acquisitiondate for all business combinations is the beginning of the annual reporting period for the year endedDecember 31, 2013 are as follows (Korean won in millions):

AmountNet interest income \ 4,490,862Net fee and commission income 1,593,949Other income related to financial instruments (611,424)General and administrative expenses (3,853,070)Other operating income 566,270Other operating expense (1,025,330)Total operating income 1,161,257Non-operating income, net 105,270


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AmountNet income before income taxes 1,266,527Income taxes (275,180)Net income \ 991,347

Changes in deferred income tax assets resulting from the business combination are as follows(Korean won in millions):

Temporary differencesDeferred income tax

assetsLoans receivable \ 112 \ (38)Deposits (1,727) 587Core deposits 4,643 (1,578)Other intangible assets 2,348 (798)Real estate for business 1,143 (389)Investment properties 712 (242)

\ 7,231 \ (2,458)

Cash flows from the business combination are as follows (Korean won in millions):

AmountPaid in cash \ (31,655)Cash and cash equivalents of acquired company 66,277

\ 34,622

59.3 Additional information on the acquisition of the prior period (Korean Exchange Bank)

As of Feburary 9, 2012 the Company received 329,042,672 shares of Korea Exchange Bank (shareratio 51.02%) and 40,314,387 shares (share ration 6.25%) from LSF-KEB Holding, SCA and KEXIM,respectively, therefore exercising substantive control. Due to the transaction the Company’s shareincreased from 0.07% to 57.34%.

As of January 28, 2013 the board of directors came to a resolution on the comprehensive stockcontract with its subsidiary Korea Exchange Bank, and on March 15, 2013 at the general meeting ofstockholders approved and entered the contract. A share exchange of 1 common stock of KoreaExchange Bank for 0.1894302 share of the Company was completed. Also, as of April 3, 2013 theCompany made a stock purchase right payment to the shareholders that opposed of the shareexchange and exercised their stock purchase right. The Company’s share exchange date is April 5,2013 and after the share exchange Korea Exchange Bank became a wholly owned subsidiary of theCompany.


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60. Restatement of the financial statements for the prior period

60.1 Restatement of the financial statements of H&DS

With respect to the agreement including a clawback clause for disposal of interest in UBS Hana AssetManagement Co., Ltd. (ex. Daehan Investement Trust Management Co., Ltd.) with UBS AG, H&DSrecognized financial liability in the amount of \30 billion retrospectively and restated the financialstatements for the prior period.

The impact of the amendments to the condensed statements of financial position for the prior period isas follows (Korean won in millions):

December 31, 2012 December 31, 2011LiabilityFinancial liability \ 30,000 \ 30,000

Deferred tax liability (7,260) (7,260)Equity Retained earning (22,740) (22,740)

60.2 Restatement of the financial statements of Hana Bank

With respect to the long term deposits with no activity, Hana Bank regards accounts with 5 years ofinactiveness from the final transaction as completed extinctive prescription dormant deposits andrecognized some accounts (including corporate accounts) as profits of waiver of an obligation anddonated other accounts in dormant deposit management foundations. But in accordance to theSupreme Court judgment made as of August 17, 2012 in case Hana Bank has made any depositinterest after the final transaction, this action is regarded as an act of acknowledgement of debt and asof the reporting date an obligation of return to the deposits exists and the extinctive prescription isdeemed not completed. The financial statements of the year ended December 31, 2012 are restatedto reflect this judgement.

In case of holding hybrid instruments, Hana Bank has classified it as debt security. Hana Bankreclassified the hybrid instruments as equity securities if its issuer classified it as equity instrument.The financial statements of the year ended December 31, 2012 are restated to reflect thereclassification. The restatement has no significant impact on the Company’s financial statements ofcash flows and the impact on the condensed financial statements of financial position as of December31, 2012 and 2011 and condensed financial statement of comprehensive income for the year endedDecember 31, 2012 which are as follows. (Korean won in millions and per share amounts in units)


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60. Restatement of the financial statement for the prior period (cont’d)

60.2 Restatement of the financial statement of Hana Bank (cont’d)

- The effects of the restatements of condensed financial statements of financial position

December 31, 2012 December 31, 2011Available-for-sale financial assets \ 3,365 \ 4,134Current income tax assets 261 -Other assets 2,587 1,978Deposits 3,668 3,437Financial liabilities designated at fairvalue though profit or loss 3,720 4,134

Current income tax liabilities - (352)Deferred income tax liabilities (85) -Retained earnings (6,267) (9,624)Accumulated other comprehensiveincome 5,177 8,517

- The effects of the restatements of condensed financial statement of comprehensive income

Year ended December 31, 2012Operating income \ 4,051Non-operating income 379Income tax expense (1,072)Net income 3,358Other comprehensive income(loss) (3,340)Total comprehensive income 18Basic earnings per share 14Diluted earnings per share 14

60.3 Restatement of the financial statement of KEB

With respect to the long term deposits with no activity, KEB regards accounts with 5 years ofinactiveness from the final transaction as completed extinctive prescription dormant deposits andrecognized some accounts (including corporate accounts) as profits of waiver of an obligation anddonated other accounts in dormant deposit management foundations. But in accordance to theSupreme Court judgment made as of August 17, 2012 in case KEB has made any deposit interestafter the final transaction, this action is regarded as an act of acknowledgement of debt and as of thereporting date an obligation of return to the deposits exists and the extinctive prescription is deemednot completed. The financial statements of the year ended December 31, 2012 are restated to reflectthis judgement.

On March 5, 2013, KEB was subject to an institutional warning for the instructions to raise additionalinterest rate according to pricing guideline. KEB was investigated by Public Prosecutors’s Office andKEB’s seven former and current employees were prosecuted on July 25, 2013. The prosecutionrequested Financial Supervisory Service to make KEB revert interest received illegally to its customers.The financial statements of the year ended December 31, 2012 are restated to reflect this fulfilment ofcorrective measure.


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60. Restatement of the financial statement for the prior period (cont’d)

60.3 Restatement of the financial statement of KEB (cont’d)

KEB restated the financial statements for the prior periods regarding the corrections of gain or loss onderivatives transaction and valuation.

The restatement has no significant impact on the Company’s condensed financial statements of cashflows and the impact on the condensed financial statement of financial position as of December 31,2012 and comprehensive income for the year ended December 31, 2012 are as follows (Korean wonin millions and per share amounts in units)

- The effects of the restatements of condensed financial statement of financial position

December 31, 2012Other assets \ 7,746Deposits 21,310Deferred income tax liabilities 2,437Other provisions (10,072)Other liabilities 30,031Retained earnings (21,600)Non-controlling interest (14,361)

- The effects of the restatements of condensed financial statement of comprehensive income

Year ended December 31, 2012Operating income \ (13,301)Non-operating income (3,916)Income tax expense 2,437Net income (19,655)Basic earnings per share (49)Diluted earnings per share (49)

Gain on financial instruments held-for-trading (139,031)Loss on financial instruments held-for-trading (139,031)

61. Virtually committed date of financial statements and approval authority

The 2013 consolidated financial statements of the Company were approved by the Board ofDirectors on March 5, 2014.

hana financial group inc.vpr.hkma.gov.hk/pdf/100123/ar_13/ar_13_pt01.pdfhana financial group inc....

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