Korea Development Bank 424B2 Prospectus for primary offering

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-217914

PROSPECTUS SUPPLEMENT

(To Prospectus Dated June 14, 2018)

The Korea Development Bank

US$500,000,000 3.00% Notes due 2022

US$500,000,000 3.25% Notes due 2024

Our US$500,000,000 aggregate principal amount of notes due 2022 (the “2022 Notes”) will bear interest at a rate of 3.00% per annum, and our US$500,000,000 aggregate principal amount of notes due 2024 (the “2024 Notes”, and together with the 2022 Notes, the “Notes”) will bear interest at a rate of 3.25% per annum. Interest on the Notes is payablesemi-annually in arrears on February 19 and August 19 of each year, beginning on August 19, 2019. Notwithstanding the foregoing, the last interest payment on the 2022 Notes will not be made on February 19, 2022 and will instead be made on March 19, 2022 in respect of the period from and including August 19, 2021 to but excluding March 19, 2022. The 2022 Notes will mature on March 19, 2022, and the 2024 Notes will mature on February 19, 2024.

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global notes registered in the name of a nominee of The Depository Trust Company, as depositary.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government (as defined herein).

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	2022 Notes					2024 Notes
	Per Note			Total		Per Note			Total
Public offering price		99.605	%	US$	498,025,000		99.575	%	US$	497,875,000
Underwriting discount		0.300	%	US$	1,500,000		0.300	%	US$	1,500,000
Proceeds to us (before deduction of expenses)		99.305	%	US$	496,525,000		99.275	%	US$	496,375,000

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including February 19, 2019.

Applications have been made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and the listing and quotation of any Notes on, the SGX-ST are not to be taken as an indication of the merits of the issuer or the Notes. Currently, there is no public market for the Notes.

We expect to make delivery of the Notes to investors through the book-entry facilities of The Depository Trust Company on or about February 19, 2019.

Joint Bookrunners and Lead Managers

BofA Merrill Lynch
	BNP PARIBAS
		Goldman Sachs International
			Mirae Asset Daewoo
				Mizuho Securities
					Société Générale Corporate & Investment Banking

Prospectus Supplement Dated February 12, 2019

You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer to sell these securities in any state or jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

Prospectus Supplement

	Page
Summary of the Offering		S-5
Use of Proceeds		S-7
Recent Developments		S-8
Description of the Notes		S-160
Clearance and Settlement		S-162
Taxation		S-165
Underwriting		S-166
Legal Matters		S-172
Official Statements and Documents		S-172
General Information		S-172

Prospectus

	Page
Certain Defined Terms and Conventions		1
Use of Proceeds		2
The Korea Development Bank		3
Overview		3
Capitalization		6
Business		6
Selected Financial Statement Data		9
Operations		14
Sources of Funds		21
Debt		23
Overseas Operations		24
Property		25
Directors and Management; Employees		25
Tables and Supplementary Information		25
Financial Statements and the Auditors		31
The Republic of Korea		154
Land and History		154
Government and Politics		156
The Economy		159
Principal Sectors of the Economy		167
The Financial System		174
Monetary Policy		179
Balance of Payments and Foreign Trade		182
Government Finance		190
Debt		192
Tables and Supplementary Information		194

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	Page
Description of the Securities		197
Description of Debt Securities		197
Description of Warrants		204
Terms Applicable to Debt Securities and Warrants		204
Description of Guarantees to be Issued by Us		205
Description of Guarantees to be Issued by The Republic of Korea		206
Limitations on Issuance of Bearer Debt Securities and Bearer Warrants		207
Taxation		208
Korean Taxation		208
United States Tax Considerations		210
Plan of Distribution		218
Legal Matters		219
Authorized Representatives in the United States		219
Official Statements and Documents		219
Experts		219
Forward-Looking Statements		220
Further Information		222

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Certain Defined Terms

All references to “we” or “us” mean The Korea Development Bank. All references to “Korea” or the “Republic” contained in this prospectus supplement mean The Republic of Korea. All references to the “Government” mean the government of Korea. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.

Our separate financial information as of December 31, 2017, June 30, 2018 and September 30, 2018 and for the six months ended June 30, 2017 and 2018 and the nine months ended September 30, 2017 and 2018 included in this prospectus supplement has been prepared in accordance with International Financial Reporting Standards as adopted in Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table, is due to rounding.

Additional Information

The information in this prospectus supplement is in addition to the information contained in our prospectus dated June 14, 2018. The accompanying prospectus contains information regarding ourselves and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea, and the Notes in registration statement no.333-217914, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.

We are Responsible for the Accuracy of the Information in this Document

We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. TheSGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and the listing and quotation of the Notes on, theSGX-ST are not to be taken as an indication of the merits of the issuer or the Notes.

Not an Offer if Prohibited by Law

The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and should not be used to make an offer, in any state or country which prohibits the offering.

The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions.”

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The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

Solely for the purposes of the manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturer’s target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.

Information Presented Accurate as of Date of Document

This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.

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SUMMARY OF THE OFFERING

This summary highlights selected information from this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. To understand the terms of our Notes, you should carefully read this prospectus supplement and the accompanying prospectus.

The Notes

We are offering US$500,000,000 aggregate principal amount of 3.00% notes due March 19, 2022 (the “2022 Notes”) and US$500,000,000 aggregate principal amount of 3.25% notes due February 19, 2024 (the “2024 Notes”, and together with the 2022 Notes, the “Notes”).

The 2022 Notes will bear interest at a rate of 3.00% per annum, and the 2024 Notes will bear interest at a rate of 3.25% per annum, in each case payable semi-annually in arrears on February 19 and August 19 of each year, beginning on August 19, 2019. Notwithstanding the foregoing, the last interest payment on the 2022 Notes will not be made on February 19, 2022 and will instead be made on March 19, 2022 in respect of the period from and including August 19, 2021 to but excluding March 19, 2022. Interest on the Notes will accrue from February 19, 2019 and will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest.”

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company (“DTC”), as depositary.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government.

We do not have any right to redeem the Notes prior to maturity.

Listing

Applications have been made to the SGX-ST for the listing and quotation of the Notes on the SGX-ST. Settlement of the Notes is not conditioned on obtaining the listing. For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of US$200,000.

Form and Settlement

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC, as depositary. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./N.V. (“Euroclear”) or Clearstream Banking,société anonyme(“Clearstream”) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”

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Further Issues

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have no more than ade minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

Delivery of the Notes

We expect to make delivery of the Notes, against payment insame-day funds on or about February 19, 2019, which we expect will be the fourth business day following the date of this prospectus supplement, referred to as “T+4.” You should note that initial trading of the Notes may be affected by the T+4 settlement. See “Underwriting—Delivery of the Notes.”

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USE OF PROCEEDS

The net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$992,900,000. We will use the net proceeds from the sale of the Notes for our general operations, including extending foreign currency loans and repayment of our maturing debt and other obligations.

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RECENT DEVELOPMENTS

This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated June 14, 2018. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.

THE KOREA DEVELOPMENT BANK

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS.

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 andreplaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accountingstandard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our unaudited separate financial statements as of and for the six months ended June 30, 2018 included in this prospectus supplement. As permitted by the transition rulesof K-IFRS 1109, our comparative separate financial statements as of December 31, 2017 and for the six months ended June 30, 2017 included in this prospectus supplement have not been restated to retroactivelyapply K-IFRS 1109 and are not directly comparable to our unaudited separate financial statements as of and for the six months ended June 30, 2018. For information regarding the impact of the applicationof K-IFRS 1109 on our separate financial statements, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017—Note 2(2).”

Overview

As of June 30, 2018, we hadW137,057.5 billion of loans outstanding (including loans for facility development, loans for working capital, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for possible loan losses, present value discounts and deferred loan fees), total assets ofW216,726.3 billion and total equity ofW23,161.0 billion, as compared toW140,005.2 billion of loans outstanding,W213,179.0 billion of total assets andW22,616.1 billion of total equity as of December 31, 2017. For the six months ended June 30, 2018, we recorded interest income ofW2,491.8 billion, interest expense ofW1,855.3 billion and net income ofW520.3 billion, as compared toW2,400.6 billion of interest income,W1,704.4 billion of interest expense andW1,273.1 billion of net income for the six months ended June 30, 2017.

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Capitalization

As of September 30, 2018, our authorized capital wasW30,000 billion and capitalization was as follows:

	September 30,  2018(1)
	(billions of won)
	(unaudited)
Long-term debt(2)(3):
Won currency borrowings		3,877.4
Foreign currency borrowings		4,555.0
Won currency industrial finance bonds		93,172.6
Foreign currency industrial finance bonds		24,677.9
Total long-term debt		126,282.9
Capital:
Issued capital		18,108.1
Capital surplus		2,497.2
Retained earnings(4)		2,750.1
Accumulated other comprehensive income		147.6
Total capital		23,502.9
Total capitalization		149,785.8

(1) Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2018.

(2) We have translated borrowings in foreign currencies into Won at the rate ofW1,112.70 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 30, 2018.

(3) As of September 30, 2018, we had contingent liabilities totalingW7,612.3 billion under outstanding guarantees issued on behalf of our clients.

(4) Includes planned regulatory reserve for loan losses ofW1,372.0 billion as of September 30, 2018. Under Korean IFRS, if our provision for loan losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for loan losses, which is shown as a separate item included in retained earnings.

Business

Government Support and Supervision

The Government contributed to our capitalW170 billion in cash in June 2018. As of September 30, 2018, ourpaid-in capital wasW18,108.1 billion compared toW17,938.1 billion as of December 31, 2017.

Selected Financial Statement Data

Recent Developments

Our unaudited separate financial information as of and for the nine months ended September 30, 2018 has reflected the application of the new accounting standard,K-IFRS 1109. As permitted by the transition rulesof K-IFRS 1109, our comparative separate financial information as of December 31, 2017 and for the nine months ended September 30, 2017 has not been restated to retroactivelyapply K-IFRS 1109 and is not directly comparable to our unaudited separate financial information as of and for the nine months ended September 30, 2018. For information regarding the impact of the applicationof K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017—Note 2(2)”

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As of September 30, 2018, we hadW137,930.5 billion of loans outstanding (including loans for facility development, loans for working capital, inter-bank loans, private loans,off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for possible loan losses, present value discounts and deferred loan fees), total assets ofW211,218.1 billion and total equity ofW23,502.9 billion, as compared toW140,005.2 billion of loans outstanding,W213,179.0 billion of total assets andW22,616.1 billion of total equity as of December 31, 2017, on a separateK-IFRS basis. For the nine months ended September 30, 2018, we recorded interest income ofW3,833.0 billion, interest expense ofW2,872.6 billion and net income ofW852.0 billion, as compared toW3,672.7 billion of interest income,W2,537.1 billion of interest expense andW1,262.8 billion of net income for the nine months ended September 30, 2017, on a separateK-IFRS basis.

The following tables present selected separate financial information for the nine months ended September 30, 2017 and 2018 and as of December 31, 2017 and September 30, 2018, which has been derived from our unaudited separate financial statements as of December 31, 2017 and September 30, 2018 and for the nine months ended September 30, 2017 and 2018 prepared in accordance with Korean IFRS.

SeparateK-IFRS Financial Statement Data

	Nine Months Ended September 30,
	2017		2018(1)
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		3,672.7		3,833.0
Total Interest Expenses		2,537.1		2,872.6
Net Interest Income		1,135.5		960.4
Operating Income (Expenses)		1,831.6		1,445.6
Net Income (Loss)		1,262.8		852.0

	As of December 31, 2017		As of September 30, 2018(1)
	(billions of won) (unaudited)
Balance Sheet Data
Total Loans(2)		140,005.2		137,930.5
Total Borrowings(3)		173,432.5		173,363.1
Total Assets		213,179.0		211,218.1
Total Liabilities		190,562.9		187,715.2
Equity		22,616.1		23,502.9

(1) Reflects the applicationof K-IFRS 1109. Our comparative unaudited separate financial information as of December 31, 2017 and for the nine months ended September 30, 2017 has not been restated to retroactivelyapply K-IFRS 1109 and is not directly comparable to our unaudited separate financial information as of and for the nine months ended September 30, 2018. For information regarding the impact of the applicationof K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017—Note 2(2)”

(2) Gross amount, which includes loans for facility development, loans for working capital, inter-bank loans, private loans,off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

(3) Total Borrowings include financial liabilities designated at fair value through profit or loss (“FVTPL”), due to customers, borrowings and debt issued.

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Nine Months Ended September 30, 2018

For the nine months ended September 30, 2018, we had net income ofW852.0 billion compared to net income ofW1,262.8 billion for the nine months ended September 30, 2017, on a separateK-IFRS basis.

Principal factors for the net income ofW852.0 billion for the nine months ended September 30, 2018 compared to the net income ofW1,262.8 billion in the corresponding period of 2017 included:

• a decrease in net gain onavailable-for-sale financial assets toW0 billion in the nine months ended September 30, 2018 fromW869.3 billion in the corresponding period of 2017; the net gain ofW869.3 billion in the nine months ended September 30, 2017 was mainly attributable to gains from the sale of our equity interest in Korea Aerospace Industries, Ltd. in June 2017;

• net loss on derivatives ofW16.8 billion in the nine months ended September 30, 2018 compared to net gain ofW376.1 billion in the corresponding period of 2017, primarily due to no recognition of valuation gain on embedded derivative instruments (such as conversion rights) in the nine months ended September 30, 2018 as a result of changes in accounting standards fromK-IFRS 1039 toK-IFRS 1109 in 2018;

• a decrease in net interest income toW960.4 billion in the nine months ended September 30, 2018 fromW1,135.5 billion in the corresponding period of 2017, primarily due to an increase in funding cost; and

• a decrease in dividend income toW682.8 billion in the nine months ended September 30, 2018 fromW784.9 billion in the corresponding period of 2017, primarily due to decreased dividends from investments in associates (including Korea Electric Power Corporation).

The above factors were partially offset by (i) a decrease in provision for credit losses toW45.2 billion in the nine months ended September 30, 2018 fromW888.3 billion in the corresponding period of 2017, primarily due to an improvement in loan quality and (ii) net gain on foreign exchange transactions ofW134.4 billion in the nine months ended September 30, 2018 compared to net loss ofW102.4 billion in the corresponding period of 2017, primarily due to the depreciation of the Won against the U.S. dollar in the nine months ended September 30, 2018 compared to the corresponding period of 2017.

Loans to Financially Troubled Companies

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“DSME”), STX Offshore & Shipbuilding, Dongbu Steel Co., Ltd., Hanjin Heavy Industries and Construction Co., Ltd., Hyundai Merchant Marine Co., Ltd., Daehan Shipbuilding Co., Ltd., Hanjin Shipping Co., Ltd. and STX Heavy Industries Co., Ltd. As of September 30, 2018, our credit extended to these companies totaledW11,110.7 billion, accounting for 5.3% of our total assets as of such date.

As of September 30, 2018, our exposure (including loans classified as substandard or below and equity investment classified as estimated loss or below) to DSME decreased to W4,387.0 billion from W4,712.8 billion as of December 31, 2017, primarily due to a decrease in guarantees. As of September 30, 2018, our exposure to STX Offshore & Shipbuilding was W1,051.2 billion, a decrease from W1,079.8 billion as of December 31, 2017, primarily due to the repayment of certain loans and a decrease in guarantees. As of September 30, 2018, our exposure to Dongbu Steel decreased to W1,155.5 billion from W1,212.1 billion as of December 31, 2017, primarily due to adebt-to-equity swap and impairment of Dongbu Steel shares. As of September 30, 2018, our exposure to Hanjin Heavy Industries and Construction increased slightly to W1,146.5 billion fromW1,145.4 billion as of December 31, 2017, primarily due to a slight increase in guarantees. As of September 30, 2018, our exposure to Hyundai Merchant Marine decreased to W1,049.2 billion from W1,095.5 billion as of December 31, 2017, primarily due to the repayment of certain loans. As of September 30, 2018, our exposure to Daehan Shipbuilding increased to W899.8 billion fromW756.9 billion as of December 31, 2017, primarily due

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to an increase in guarantees. As of September 30, 2018, our exposure to Hanjin Shipping increased to W168.2 billion from W119.6 billion as of December 31, 2017, primarily due to the reclassification of certain debt securities to loans as a result of changes in accounting standards fromK-IFRS 1039 toK-IFRS 1109 in 2018. As of September 30, 2018, our exposure to STX Heavy Industries decreased to W223.6 billion from W269.2 billion as of December 31, 2017, primarily due to a decrease in guarantees.

As of September 30, 2018, we established provisions ofW707.7 billion for our exposure to DSME,W879.7 billion for STX Offshore & Shipbuilding,W225.7 billion for Dongbu Steel,W137.6 billion for Hanjin Heavy Industries and Construction,W108.0 billion for Hyundai Merchant Marine,W149.4 billion for Daehan Shipbuilding,W168.2 billion for Hanjin Shipping andW154.0 billion for STX Heavy Industries.

In the event that the financial condition of these companies or other large corporations to which we extended credits deteriorate in the future, we may be required to record additional provisions for credit losses, as well as charge-offs and valuation or impairment losses or losses on disposal, which may have a material adverse effect on our financial condition and results of operations.

For the nine months ended September 30, 2018, we soldnon-performing loans worthW214.3 billion to Deasin F&I Co., Ltd. and Mirae Asset Global Investments Co., Ltd.

Results of Operations

The following tables present selected separate financial information as of December 31, 2017 and June 30, 2018 and for the six months ended June 30, 2017 and 2018, which has been derived from our unaudited separate financial statements as of December 31, 2017 and June 30, 2018 and for the six months ended June 30, 2017 and 2018 prepared in accordance with Korean IFRS and included in this prospectus supplement.

SeparateK-IFRS Financial Statement Data

	Six Months Ended June 30,
	2017		2018(1)
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		2,400.6		2,491.8
Total Interest Expenses		1,704.4		1,855.3
Net Interest Income		696.2		636.5
Operating Income (Expenses)		1,838.1		1,012.9
Net Income (Loss)		1,273.1		520.3

	As of December 31, 2017		As of June 30, 2018(1)
	(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans(2)		140,005.2		137,057.5
Total Borrowings(3)		173,432.5		174,576.4
Total Assets		213,179.0		216,726.3
Total Liabilities		190,562.9		193,565.3
Equity		22,616.1		23,161.0

(1) Reflects the applicationof K-IFRS 1109. Our comparative unaudited separate financial information as of December 31, 2017 and for the six months ended June 30, 2017 has not been restated to retroactivelyapply K-IFRS 1109 and is not directly comparable to our unaudited separate financial information as of and

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for the six months ended June 30, 2018. For information regarding the impact of the applicationof K-IFRS 1109, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017—Note 2(2)”.

(2) Gross amount, which includes loans for facility development, loans for working capital, inter-bank loans, private loans,off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

(3) Total Borrowings include financial liabilities designated at fair value through profit or loss (“FVTPL”), due to customers, borrowings and debt issued.

Six Months Ended June 30, 2018

In the first half of 2018, we had net income ofW520.3 billion compared to net income ofW1,273.1 billion in the corresponding period of 2017, on a separate basis.

Principal factors for the net income ofW520.3 billion in the first half of 2018 compared to the net income ofW1,273.1 billion in the corresponding period of 2017 included:

• a decrease in net gain onavailable-for-sale financial assets toW0 billion in the first half of 2018 fromW774.6 billion in the corresponding period of 2017; the net gain ofW774.6 billion in the first half of 2017 was mainly attributable to gains from the sale of our equity interest in Korea Aerospace Industries, Ltd. in June 2017;

• net loss on derivatives ofW115.1 billion in the first half of 2018 compared to net gain ofW454.2 billion in the corresponding period of 2017, primarily due to no recognition of valuation gain on embedded derivative instruments (such as conversion rights) in the first half of 2018 as a result of changes in accounting standards fromK-IFRS 1039 toK-IFRS 1109 in 2018; and

• a decrease in dividend income toW533.5 billion in the first half of 2018 fromW706.7 billion in the corresponding period of 2017, primarily due to decreased dividends from investments in associates (including Korea Electric Power Corporation).

The above factors were partially offset by (i) a decrease in provision for credit losses toW9.9 billion in the first half of 2018 fromW429.4 billion in the corresponding period of 2017, primarily due to an improvement in loan quality and (ii) net gain on foreign exchange transactions ofW167.3 billion in the first of 2018 compared to net loss ofW170.7 billion in the corresponding period of 2017, primarily due to the depreciation of the Won against the U.S. dollar in the first half of 2018 compared to the corresponding period of 2017.

Provisions for Possible Loan Losses and Loans in Arrears

As of June 30, 2018, we established provisions ofW3,306.1 billion for possible loan losses under Korean IFRS. The provisions for possible loan losses under Korean IFRS are recorded for those loans for which objective evidence of impairment exists as a result of one or more events that occurred after initial recognition and, if our provision for possible loan losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for possible loan losses, which will be deducted from retained earnings.

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2018, we have provided loans ofW2,370.2 billion for companies under workout, court receivership, court mediation and other restructuring procedures. In addition, as of such date, we held equity securities of such companies in the amount ofW61.6 billion followingdebt-to-equity swaps. As of June 30, 2018, we had established provisions ofW799.8 billion for possible loan losses for such companies. We cannot assure you that actual results of the credit loss from the loans to these customers will not exceed the provisions reserved.

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The following table provides information on our loan loss provisions.

		As of June 30, 2018(1)
		Loan Amount		Loan Loss Provisions
		(in billions of won, except percentages)
Loan Classification	Normal(2)	W	128,886.6	W	370.8
	Precautionary		4,644.3		1,001.0
	Substandard		2,171.0		916.8
	Doubtful		426.9		214.6
	Expected Loss		928.7		802.9
	Total	W	137,057.5	W	3,306.1

(1) These figures include loans for facility development, loans for working capital, inter-bank loans, private loans,off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

(2) Includes loans guaranteed by the Government. Under Korean IFRS, we establish loan loss provisions for all loans including loans guaranteed by the Government.

(3) See note 2 of the notes to our separate financial statements in this prospectus supplement for a summary of significant accounting policies with respect to impairment of loans.

As of June 30, 2018, ournon-performing loans totaledW3,526.6 billion, representing 2.6% of our outstanding loans as of such date.Non-performing loans are defined as loans that are classified as substandard or below. On June 30, 2018, our legal reserve wasW173.9 billion, representing 0.1% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including DSME, STX Offshore & Shipbuilding, Dongbu Steel Co., Ltd., Hanjin Heavy Industries and Construction Co., Ltd., Hyundai Merchant Marine Co., Ltd., Daehan Shipbuilding Co., Ltd., Hanjin Shipping Co., Ltd. and STX Heavy Industries Co., Ltd. As of June 30, 2018, our credit extended to these companies totaledW11,385.1 billion, accounting for 5.3% of our total assets as of such date.

As of June 30, 2018, our exposure (including loans classified as substandard or below and equity investment classified as estimated loss or below) to DSME decreased to W4,610.9 billion from W4,712.8 billion as of December 31, 2017, primarily due to a decrease in guarantees. As of June 30, 2018, our exposure to STX Offshore & Shipbuilding was W1,036.6 billion, a decrease from W1,079.8 billion as of December 31, 2017, primarily due to the repayment of certain loans and a decrease in guarantees. As of June 30, 2018, our exposure to Dongbu Steel decreased to W1,145.4 billion from W1,212.1 billion as of December 31, 2017, primarily due to adebt-to-equity swap and impairment of Dongbu Steel shares. As of June 30, 2018, our exposure to Hanjin Heavy Industries and Construction decreased to W1,093.0 billion from W1,145.4 billion as of December 31, 2017, primarily due to a decrease in guarantees. As of June 30, 2018, our exposure to Hyundai Merchant Marine decreased to W1.057.5 billion from W1,095.5 billion as of December 31, 2017, primarily due to the repayment of loans. As of June 30, 2018, our exposure to Daehan Shipbuilding increased to W853.7 billion fromW756.9 billion as of December 31, 2017, primarily due to an increase in guarantees. As of June 30, 2018, our exposure to Hanjin Shipping increased to W168.9 billion from W119.6 billion as of December 31, 2017, primarily due to the reclassification of certain debt securities to loans as a result of changes in accounting standards fromK-IFRS 1039 toK-IFRS 1109 in 2018. As of June 30, 2018, our exposure to STX Heavy Industries decreased to W230.0 billion from W269.2 billion as of December 31, 2017, primarily due to a decrease in guarantees.

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As of June 30, 2018, we established provisions ofW786.7 billion for our exposure to DSME,W821.3 billion for STX Offshore & Shipbuilding,W219.0 billion for Dongbu Steel,W107.2 billion for Hanjin Heavy Industries and Construction,W121.6 billion for Hyundai Merchant Marine,W72.2 billion for Daehan Shipbuilding,W168.9 billion for Hanjin Shipping andW162.2 billion for STX Heavy Industries.

In the event that the financial condition of these companies or other large corporations to which we extended credits deteriorate in the future, we may be required to record additional provisions for credit losses, as well as charge-offs and valuation or impairment losses or losses on disposal, which may have a material adverse effect on our financial condition and results of operations.

For the six months ended June 30, 2018, we soldnon-performing loans worthW214.3 billion to Deasin F&I Co., Ltd. and Mirae Asset Global Investments Co., Ltd.

Operations

Loan Operations

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2018:

Loans⁽¹⁾

	June 30, 2018
	(billions of won)
Equipment Capital Loans:
Domestic currency	W	46,579.5
Foreign currency(2)		6,532.2
		53,111.7
Working Capital Loans:
Domestic currency(3)		51,054.3
Foreign currency(2)		6,215.9
		57,270.2
Other Loans(4)		26,675.6
Total loans	W	137,057.5

(1) Includes loans extended to affiliates.

(2) Includes loans disbursed and repayable in Won, the amounts of which are based upon an equivalent amount of foreign currency. This type of loan totaledW7,367.0 billion as of June 30, 2018. See “The Korea Development Bank—Operations—Loan Operations—Loans by Categories—Local Currency Loans Denominated in Foreign Currencies” in the accompanying prospectus.

(3) Includes loans on households.

(4) Includes inter-bank loans, private loans,off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

As of June 30, 2018, we hadW137,057.5 billion in outstanding loans, which represents a 2.1% decrease fromW140,005.2 billion of outstanding loans as of December 31, 2017.

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Maturities of Outstanding Loans

The following table categorizes our outstanding equipment capital and working capital loans by their remaining maturities:

Outstanding Equipment Capital and Working Capital Loans by Remaining Maturities⁽¹⁾

	June 30, 2018		As % of June 30, 2018 Total
	(billions of won, except percentages)
Loans with remaining maturities of one year or less	W	47,617.7		43.1	%
Loans with remaining maturities of more than one year		62,764.2		56.9
Total	W	110,381.9		100.0	%

(1) Includes loans extended to affiliates.

Loans by Industrial Sector

The following table sets out the total amount of our outstanding equipment capital and working capital loans, categorized by industry sector as of June 30, 2018:

Outstanding Equipment Capital and Working Capital Loans by Industry Sector⁽¹⁾

	June 30, 2018			As % of June 30, 2018 Total
	(billions of won, except percentages)
Manufacturing	W	54,465.3			49.3	%
Banking and Insurance		26,214.5			23.7
Transportation		7,013.0			6.4
Public Administration		748.9			0.7
Electric, Gas and Water Supply Industry		3,470.4			3.1
Others(2)		18,469.8			16.8
Total	W	110,381.9			100.0	%
Percentage increase (decrease) from December 31, 2017		(1.0	)%

(1) Includes loans extended to affiliates.

(2) Includes wholesale and retail trade, real estate and leasing, and construction.

The manufacturing sector accounted for 49.3% of our outstanding equipment capital and working capital loans as of June 30, 2018. As of June 30, 2018, loans to transportation equipment manufacturing businesses and metal manufacturing businesses accounted for 12.9% and 13.6%, respectively, of our outstanding equipment capital and working capital loans to the manufacturing sector.

Industrial Bank of Korea was our single largest borrower as of June 30, 2018, accounting for 5.1% of our outstanding equipment capital and working capital loans. As of June 30, 2018, our five largest borrowers and 20

largest borrowers accounted for 13.7% and 24.4%, respectively, of our outstanding equipment capital and working capital loans.

S-16

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2018 by industry sector:

20 Largest Borrowers by Industry Sector

	As % of June 30, 2018 Total Outstanding Equipment Capital and Working Capital Loans
Banking and Insurance		59.9	%
Manufacturing		31.0
Transportation		5.1
Electric, Gas and Water Supply Industry		1.9
Others		2.1
Total		100.0	%

Loans by Categories

The following table sets out equipment capital and working capital loans by categories as of June 30, 2018:

	Equipment Capital Loans					Working Capital Loans
	June 30, 2018		%			June 30, 2018		%
	(billions of won, except percentages)
Industrial fund loans	W	40,771.6		76.8	%	W	36,739.6		64.2	%
On-lending loans		3,435.4		6.5			12,305.7		21.5
Foreign currency loans		4,129.6		7.8			1,574.8		2.7
Local currency loan denominated in foreign currencies		41.1		0.1			32.3		0.1
Offshore loans in foreign currencies		1,281.3		2.4			4,049.6		7.1
Government fund loans		226.3		0.4			—		—
Overdraft		—		—			125.7		0.2
Others(1)		3,226.4		6.0			2,442.5		4.2
Total	W	53,111.7		100.0	%	W	57,270.2		100.0	%

(1) Includes loans on households, special purpose fund loans, loans throughon-lending, interbank loans, call loans and other loans.

Guarantee Operations

The following table shows our outstanding guarantees as of June 30, 2018:

	June 30, 2018
	(billions of won)
Acceptances	W	597.5
Guarantees on local borrowing		1,114.6
Guarantees on foreign borrowing		6,125.0
Letter of guarantee for importers		57.2
Total	W	7,894.3

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Investments

Our equity investments, on a fair value basis, decreased toW34,204.4 billion as of June 30, 2018 fromW34,334.6 billion as of December 31, 2017.

As of June 30, 2018, the fair value basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation amounted to approximately 29.5% of our equity investment ceiling. For a discussion of Korean accounting principles relating to our equity investments, see “The Korea Development Bank—Financial Statements and the Auditors” in the accompanying prospectus.

The following table sets out our equity investments by industry sector on a fair value basis as of June 30, 2018:

Equity Investments

	Fair Value as of June 30, 2018
	(billions of won)
Electric, Gas and Water Supply Industry	W	18,025.3
Construction		974.2
Banking and Insurance		9,094.3
Real Estate Business		3,780.0
Manufacturing		421.0
Transportation		979.4
Others		930.2
Total	W	34,204.4

As of June 30, 2018, we held total equity investments, on a fair value basis, ofW697.9 billion in one of our five largest borrowers andW847.7 billion in four of our 20 largest borrowers.

When possible, we use the prevailing market price of a security to determine the value of our interest. However, if no readily ascertainable market value exists for our holdings, we record these investments at the cost of acquisition. With respect to our equity interests in enterprises in which we hold more than 15% of interest, we value these investments annually, with certain exceptions, on a net asset value basis when the investee company releases its financial statements. As of June 30, 2018, the aggregate value of our equity investments accounted for approximately 97.0% of their aggregate cost basis.

Other Activities

As of June 30, 2018, we held in trust cash and other assets totalingW31,357.1 billion, and we generated in the first half of 2018 trust fee income equalingW71.9 billion.

Source of Funds

Borrowings from the Government

The following table sets out our Government borrowings as of June 30, 2018:

Type of Funds Borrowed	As of June 30, 2018
	(billions of won)
General purpose	W	224.5
Special purpose		4,449.2
Total	W	4,673.7

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Domestic and International Capital Markets

The following table sets out the outstanding balance of our industrial finance bonds as of June 30, 2018:

Outstanding Balance	As of June 30, 2018
	(billions of won)
Denominated in Won	W	96,872.8
Denominated in other currencies		24,397.0
Total	W	121,269.8

As of June 30, 2018, the aggregate amount of our industrial finance bonds and guarantee obligations (including guarantee obligations relating to loans that had not been borrowed as of June 30, 2018) wasW133,849.0 billion, equal to 22.7% of our authorized amount under the KDB Act, which wasW589,621.3 billion.

Foreign Currency Borrowings

As of June 30, 2018, the outstanding amount of our foreign currency borrowings was US$12.1 billion. Our long term and short term foreign currency borrowings increased toW13,570.4 billion as of June 30, 2018 fromW11,875.7 billion as of December 31, 2017.

Deposits

As of June 30, 2018, demand deposits held by us totaledW1,376.1 billion and time and savings deposits held by us totaledW26,215.8 billion.

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of June 30, 2018:

Debt Principal Repayment Schedule

Currency(1)(2)	Maturing on or before December 31,
	2018		2019		2020		2021		2022		Thereafter
	(billions of won)
Won	W	23,475.2	W	37,323.6	W	14,481.0	W	3,793.5	W	3,366.6	W	18,482.7
Foreign		13,694.5		5,894.9		4,456.2		3,474.0		3,503.4		6,924.5
Total Won Equivalent	W	37,169.7	W	43,218.5	W	18,937.2	W	7,267.5	W	6,870.0	W	25,407.2

(1) Excludes bonds sold under repurchase agreements and call money.

(2) Borrowings in foreign currencies have been translated into Won at the market average exchange rates on June 30, 2018, as announced by the Seoul Money Brokerage Services Ltd.

(3) We categorize debt with respect to which we have entered into currency swap agreements by our repayment currency under such agreements.

S-19

Financial Statements and the Auditors

Our interim separate financial statements as of June 30, 2018 and December 31, 2017 and for the six months ended June 30, 2018 and 2017 appearing in this prospectus supplement were prepared in conformity with Korean IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017 included in this prospectus supplement.

K-IFRS 1109, Financial Instruments, which is aimed at improving and simplifying the accounting treatment of financial instruments, is effective for annual periods beginning on or after January 1, 2018 andreplaces K-IFRS 1039, Financial Instruments: Recognition and Measurement. We have applied the new accountingstandard, K-IFRS 1109, which requires all financial assets to be classified and measured on the basis of an entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, in our unaudited separate financial statements as of and for the six months ended June 30, 2018 included in this prospectus supplement. As permitted by the transition rulesof K-IFRS 1109, our comparative separate financial statements as of December 31, 2017 and for the six months ended June 30, 2017 included in this prospectus supplement have not been restated to retroactivelyapply K-IFRS 1109 and are not directly comparable to our unaudited separate financial statements as of and for the six months ended June 30, 2018. For information regarding the impact of the applicationof K-IFRS 1109 on our separate financial statements, see “—Notes to Separate Financial Statements as of June 30, 2018 and for the six months ended June 30, 2018 and 2017—Note 2(2).”

S-20

Korea Development Bank

Interim Separate Statements of Financial Position

June 30, 2018 (Unaudited) and December 31, 2017

(In millions of won)	Notes		June 30, 2018(*)		December 31, 2017(*)
Assets
Cash and due from banks		4,51,52,55	W	8,614,937		6,608,642
Securities measured at FVTPL		5,51,52,55		6,896,292		—
Financial assets held for trading		6,51,52,55		—		926,737
Securities measured at FVOCI		7,45,51,52,55		26,581,356		—
Available-for-sale financial assets		8,45,51,52,55		—		32,062,921
Securities measured at amortized cost		9,45,51,52,55		1,003,403		—
Held-to-maturity financial assets		10,51,52,55		—		12,313
Loans measured at FVTPL		11,51,52,55		1,162,785		—
Loans measured at amortized cost		12,51,52,55		133,757,232		—
Loans		13,51,52,55		—		136,279,322
Derivative financial assets		14,51,52,53,55		3,975,652		6,249,609
Investments in subsidiaries and associates		15,54		23,173,938		22,749,389
Property and equipment, net		16,54		618,973		592,884
Investment property, net		17,54		76,455		78,391
Intangible assets, net		18,54		119,493		90,502
Current tax assets				7,704		4,383
Assets held for sale		20		10,584		58,473
Other assets		19,51,52,55		10,727,482		7,465,441
Total assets			W	216,726,286		213,179,007
Liabilities
Financial liabilities measured at FVTPL		21,51,52,55	W	1,875,975		1,583,713
Deposits		22,51,52,55		30,519,949		33,058,179
Borrowings		23,51,52,55		22,693,359		20,971,629
Debentures		24,51,52,55		119,487,142		117,818,982
Derivative financial liabilities		14,51,52,53,55		3,894,700		5,907,803
Defined benefit liabilities		25		65,871		45,647
Provisions		26		1,344,841		1,363,951
Deferred tax liabilities		43		1,097,132		973,497
Current tax liabilities				144,250		337,978
Other liabilities		27,51,52,55		12,442,044		8,501,497
Total liabilities				193,565,263		190,562,876
Equity
Issued capital		28		18,108,099		17,938,099
Capital surplus		28		2,497,185		2,498,001
Accumulated other comprehensive income		28		139,143		436,749
Retained earnings		28		2,416,596		1,743,282
(Regulatory reserve for credit losses ofW1,372,030 million as of June 30, 2018 andW1,308,500 million as of December 31, 2017, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses ofW(206,260) million as of June 30, 2018 andW63,530 million as of December 31, 2017, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses ofW(206,260) million as of June 30, 2018 andW63,530 million as of December 31, 2017, respectively)
Total equity				23,161,023		22,616,131
Total liabilities and equity			W	216,726,286		213,179,007

(*) The interim separate statement of financial position as of June 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative separate statement of financial position as of December 31, 2017 was not retrospectively restated to apply Korean IFRS 1109.

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

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Korea Development Bank

Interim Separate Statements of Comprehensive Income

Three-month andsix-month periods ended June 30, 2018 and 2017 (Unaudited)

			June 30, 2018(*)						June 30, 2017(*)
(In millions of won, except earnings per share  information)	Notes		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income		29	W	1,277,376			2,491,801			1,207,795			2,400,629
Interest expense		29		(966,147	)		(1,855,258	)		(837,253	)		(1,704,383	)
Net interest income		54		311,229			636,543			370,542			696,246
Net fees and commission income		30		66,683			132,641			115,018			207,828
Dividend income		31		94,606			533,469			47,199			706,675
Net gain on securities measured at FVTPL		32		23,106			41,982			—			—
Net loss on financial assetsheld-for-trading		33		—			—			(4,367	)		(9,830	)
Net gain (loss) on financial liabilities measured at FVTPL		34		(5,693	)		27,187			(3,167	)		27,272
Net loss on securities measured at FVOCI		35		(95	)		(3,187	)		—			—
Net gain onavailable-for-sale financial assets		36		—			—			845,782			774,599
Net gain (loss) on derivatives		37		(78,565	)		(115,112	)		(129,131	)		454,245
Net foreign currency transaction gain (loss)		38		100,338			167,292			134,187			(170,746	)
Other operating expense, net		39		(35,343	)		(94,609	)		(62,854	)		(120,225	)
Non-interest income, net				165,037			689,663			942,667			1,869,818
Provision for (reverse of) credit losses		40		(30,700	)		9,886			174,410			429,405
General and administrative expenses		41,54		150,830			303,417			147,893			298,510
Operating income		54		356,136			1,012,903			990,906			1,838,149
Impairment loss on investments in subsidiaries and associates		15		(216,569	)		(216,739	)		(130,341	)		(130,341	)
Othernon-operating income		42		26,495			28,964			451			11,173
Othernon-operating expense		42		(4,517	)		(5,617	)		(4,978	)		(6,324	)
Non-operating expense, net				(194,591	)		(193,392	)		(134,868	)		(125,492	)
Profit before income taxes				161,545			819,511			856,038			1,712,657
Income tax expense		43		118,242			299,203			273,091			439,549
Profit for the period		28		43,303			520,308			582,947			1,273,108
(Profit (loss) for the period adjusted for regulatory reserve for credit losses:W(504,523) million andW718,306 million for the three-month andsix-month periods ended June 30, 2018, respectively;W537,875 million andW1,002,402 million for the three-month andsix-month periods ended June 30, 2017, respectively)

(Continued)

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Korea Development Bank

Interim Separate Statements of Comprehensive Income, Continued

Three-month andsix-month periods ended June 30, 2018 and 2017 (Unaudited)

			June 30, 2018(*)						June 30, 2017(*)
(In millions of won, except earnings per share  information)	Notes		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other comprehensive income for the period, net of tax		28
Items that are or may be reclassified subsequently to profit or loss:
Net loss on securities measured at FVOCI				(256	)		(7,119	)		—			—
Valuation loss onavailable-for-sale financial assets, net				—			—			(499,813	)		(627,635	)
Exchange differences on translation of foreign operations				34,601			39,199			15,087			(42,157	)
Valuation gain on cash flow hedge				298			795			1,016			2,909
				34,643			32,875			(483,710	)		(666,883	)
Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI				(17,883	)		3,540			—			—
Fair value changes on financial liabilities designated at fair value due to credit risk				(1,582	)		(201	)		—			—
				(19,465	)		3,339			—			—
Total comprehensive income for the period			W	58,481			556,522			99,237			606,225
Earnings per share
Basic and diluted earnings per share (in won)		44	W	12			145			165			362

(*) The interim separate statement of comprehensive income for the three-month andsix-month periods ended June 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative interim separate statements of comprehensive income for the three-month andsix-month periods ended June 30, 2017 were not retrospectively restated to apply Korean IFRS 1109.

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

S-23

Korea Development Bank

Separate Statements of Changes in Equity

Six-month periods ended June 30, 2018 and 2017 (Unaudited)

	Issued capital		Capital surplus			Accumulated other comprehensive income			Retained earnings			Total equity
(In millions of won)
Balance at January 1, 2017	W	17,543,099		2,499,947			1,213,465			1,308,500			22,565,011
Profit for the period		—		—			—			1,273,108			1,273,108
Valuation loss onavailable-for-sale financial assets		—		—			(627,635	)		—			(627,635	)
Exchange differences on translation of foreign operations		—		—			(42,157	)		—			(42,157	)
Valuation gain on cash flow hedge		—		—			2,909			—			2,909
Total comprehensive income for the period		—		—			(666,883	)		1,273,108			606,225
Paid in capital increase		250,000		(1,238	)		—			—			248,762
Transaction with owners		250,000		(1,238	)		—			—			248,762
Balance at June 30, 2017(*)	W	17,793,099		2,498,709			546,582			2,581,608			23,419,998
Balance at January 1, 2018	W	17,938,099		2,498,001			436,749			1,743,282			22,616,131
Changes in accounting policy		—		—			(324,629	)		290,907			(33,722	)
Restated balance at January 1, 2018		17,938,099		2,498,001			112,120			2,034,189			22,582,409
Profit for the period		—		—			—			520,308			520,308
Net gain (loss) on securities measured at FVOCI		—		—			(12,770	)		9,191			(3,579	)
Exchange differences on translation of foreign operations		—		—			39,199			—			39,199
Valuation gain on cash flow hedge		—		—			795			—			795
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			(201	)		—			(201	)
Total comprehensive income for the period		—		—			27,023			529,499			556,522
Dividends		—		—			—			(147,092	)		(147,092	)
Paid in capital increase		170,000		(816	)		—			—			169,184
														��
Transaction with owners		170,000		(816	)		—			(147,092	)		22,092
Balance at June 30, 2018(*)	W	18,108,099		2,497,185			139,143			2,416,596			23,161,023

(*) The interim separate statement of changes in equity for thesix-month period ended June 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative interim separate statement of changes in equity for thesix-month period ended June 30, 2017 was not retrospectively restated to apply Korean IFRS 1109.

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

S-24

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2018 and 2017 (Unaudited)

(In millions of won)	Notes		2018(*)			2017(*)
Cash flows from operating activities
Profit for the period			W	520,308			1,273,108
Adjustments for:
Income tax expense		43		299,203			439,549
Interest income		29		(2,491,801	)		(2,400,629	)
Interest expense		29		1,855,258			1,704,383
Dividend income		31		(533,469	)		(706,675	)
Gain on valuation of securities measured at FVTPL		32		(42,153	)		—
Gain on disposal of securities measured at FVTPL		32		(976	)		—
Loss on valuation of financial assets held for trading		33		—			7,229
Gain on valuation of financial liabilities measured at FVTPL		34		(27,187	)		(26,173	)
Loss on disposal of securities measured at FVOCI		35		7,084			—
Reversal of loss allowance for securities measured at FVOCI		35		(3,897	)		—
Gain on valuation of loans measured at FVTPL		39		(62,797	)		—
Gain on disposal ofavailable-for-sale financial assets		36		—			(879,996	)
Impairment loss onavailable-for-sale financial assets		36		—			105,397
Loss (gain) on valuation of derivatives		37		271,202			(495,456	)
Net gain on fair value hedged items		37		(218,153	)		(20,838	)
Loss (gain) on foreign exchange translations		38		(151,580	)		185,903
Gain on disposal of investments in subsidiaries and associates		39		(364	)		(1,978	)
Impairment loss on investments in subsidiaries and associates				216,739			130,341
Provision for (reversal of) loan losses allowance		12		(29,359	)		348,960
Increase of other provision		40		11,784			49,710
Reversal of provision for payment guarantees		26		(13,444	)		(146,658	)
Increase of provision for unused commitments		26		28,866			160,003
Increase of financial guarantee provision		26		12,039			17,390
Reversal of provision for possible losses from lawsuits		26		—			(3,120	)
Defined benefit costs		25		20,259			19,585
Depreciation of property and equipment		16		15,494			14,584
Gain on disposal of assets held for sale		42		(26,216	)		(9,195	)
Loss on disposal of property and equipment		42		36			19
Depreciation of investment property		17		1,001			1,017
Amortization of intangible assets		18		8,974			10,980
Loss (gain) on redemption of debentures				(7	)		47
				(853,464	)		(1,495,621	)
Changes in operating assets and liabilities:
Due from banks				(2,467,928	)		(685,518	)
Securities measured at FVTPL				(1,580,865	)		—
Financial assets held for trading				—			206,997
Loans measured at FVTPL				32,700			—
Loans measured at amortized cost				(714,207	)		—
Loans				—			(1,978,415	)
Derivative financial assets				1,865,502			2,603,406
Other assets				(3,353,998	)		(5,079,321	)
Financial liabilities measured at FVTPL				—			(80,099	)
Deposits				(2,541,132	)		(324,521	)
Derivative financial liabilities				(2,013,103	)		(2,752,546	)
Defined benefit liabilities				(35	)		(19	)
Other liabilities				3,522,033			5,860,316
				(7,251,033	)		(2,229,720	)
Income taxes received (paid)				(358,693	)		4,385
Interest received				2,472,159			2,304,512

(Continued)

S-25

Korea Development Bank

Interim Separate Statements of Cash Flows, Continued

Six-month periods ended June 30, 2018 and 2017 (Unaudited)

(In millions of won)	Notes		2018(*)			2017(*)
Interest paid				(1,403,447	)		(1,897,897	)
Dividends received				526,307			704,750
Net cash used in operating activities			W	(6,347,863	)		(1,336,483	)
Cash flows from investing activities
Net increase of securities measured at FVTPL			W	(700,036	)		—
Disposal of securities measured at FVOCI		7		6,138,101			—
Acquisition of securities measured at FVOCI		7		(4,748,316	)		—
Disposal ofavailable-for-sale financial assets		8		—			16,460,826
Acquisition ofavailable-for-sale financial assets		8		—			(13,490,480	)
Disposal of securities measured at amortized cost		9		12,236			—
Acquisition of securities measured at amortized cost		9		(1,002,716	)		—
Redemption ofheld-to-maturity financial assets		10		—			1,000
Disposal of property and equipment		16		342			96
Acquisition of property and equipment		16		(40,869	)		(6,478	)
Disposal of intangible assets		18		—			72
Acquisition of intangible assets		18		(37,934	)		(7,274	)
Disposal of investments in subsidiaries and associates				452,148			274,900
Acquisition of investments in subsidiaries and associates				(1,093,072	)		(889,472	)
Disposal ofnon-current assets held for sale				74,105			35,123
Net cash provided by (used in) investing activities				(946,011	)		2,378,313
Cash flows from financing activities
Increase of financial liabilities measured at FVTPL				319,172			—
Proceeds from borrowings				19,841,554			14,534,537
Repayment of borrowings				(18,142,150	)		(17,269,571	)
Proceeds from issuance of debentures				61,522,233			48,520,059
Repayment of debentures				(59,693,021	)		(49,021,073	)
Dividends				(147,092	)		—
Paid in capital increase				170,000			—
Stock issuance costs				(816	)		(1,238	)
Net cash provided by (used in) financing activities				3,869,880			(3,237,286	)
Effects from changes in foreign currency exchange rate for cash and cash equivalents held				182,339			(257,541	)
Net decrease in cash and cash equivalents				(3,241,655	)		(2,452,997	)
Cash and cash equivalents at beginning of the period				8,586,213			9,090,849
Cash and cash equivalents at end of the period		49	W	5,344,558			6,637,852

(*) The interim separate statement of cash flows for thesix-month period ended June 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative interim separate statement of cash flows for the six-month period ended June 30, 2017 was not retrospectively restated to apply Korean IFRS 1109.

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

S-26

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

1.Reporting Entity

Korea Development Bank (the “Bank”) was established on April 1, 1954, in accordance withThe Korea Development Bank Act to finance and manage major industrial projects.

The Bank is engaged in the banking industry underThe Korea Development Bank Act and other applicable statutes, and in the fiduciary in accordance withthe Financial Investment Services and Capital Markets Act.

Korea Finance Corporation (KoFC), the former ultimate parent company, and KDB Financial Group Inc. (KDBFG), the former immediate parent company, were established by spin-offs of divisions of the Bank as of October 28, 2009. KoFC and KDBFG were merged into the Bank, effective as of December 31, 2014. Issued capital is W18,108,099 million with 3,621,619,768 shares of issued and outstanding as of June 30, 2018 and 100% of the Bank’s shares are owned by the government of the Republic of Korea.

The Bank’s head office is located in 14,Eunhaeng-ro (Yeouido-dong),Yeongdeungpo-gu, Seoul and its service network as of June 30, 2018 is as follows:

	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		74		9		5		8		97

2.Basis of Preparation

(1) Application of accounting standards

These interim financial statements have been prepared in accordance with the Korean International Financial Reporting Standards(“K-IFRS”) 1034Interim Financial Reporting and provide less information as compared with its annual financial statements. The interim financial statements have been prepared in accordance with K-IFRS effective as of June 30, 2018 and the significant accounting policies applied in the preparation of these interim financial statements have been consistently applied to all periods presented unless otherwise specified.

(2) Changes and disclosures of accounting policies

(i) New and amended standards adopted

The Bank newly applied the following amended and enacted standards for the annual period beginning on January 1, 2018. The nature and the impact of each new standard or amendment are described below:

K-IFRS 1109 ‘Financial Instruments’

K-IFRS 1109‘Financial Instruments’ replaces the existing guidance inK-IFRS 1039‘Financial Instruments: Recognition and Measurement’.K-IFRS 1109 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. Also, KIFRS 1107 Financial Instruments: Disclosures has been amended in accordance withK-IFRS 1109.

S-27

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

The Bank’s accounting policies have been changed and the amounts recognized in the financial statements have been modified as a result of the adoption of KIFRS 1109 on January 1, 2018. In accordance with the transitional provisions, the financial statements for the year ended December 31, 2017 and those for the period ended June 30, 2017 have not been restated.

The main features of the standard include: a business model for the managing financial assets; classification and measurement of financial assets based on contractual cash flow characteristics of financial assets; an impairment model for financial instruments based on expected credit losses; the hedged item that meet the requirements of hedge accounting, increases in hedging instruments, or changes in the evaluation method for hedge effectiveness.

Classification and measurement of financial assets

K-IFRS 1109 requires a financial asset to be classified and measured subsequently at amortized cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL) based on the holder’s business model and instrument’s contractual cash flow characteristics as shown below. If a hybrid contract contains a host that is a financial asset, an embedded derivative is not separated from the host and the entire hybrid contract is classified according to the requirement ofK-IFRS 1109.

	Contractual cash flow characteristics
Business model	Composed solely of principal and interest	Other
Objective of collecting contractual cash flows	Measured at amortized cost(*1)
Objective of collecting contractual cash flows and selling financial assets	Measured at FVOCI(*1)	Measured at FVTPL(*2)
Objective of selling or others	Measured at FVTPL

(*1) Financial assets may be irrevocably designated as measured at FVTPL to eliminate or reduce accounting mismatch.

(*2) Investments in equity instruments not held for trading may be irrevocably designated as measured at FVOCI.

Classification and measurement of financial liabilities

K-IFRS 1109 requires that the amount of change in fair value of the financial liability designated as measured at FVTPL that is attributable to changes in the credit risk shall be presented in other comprehensive income and the amount shall not be reclassified as profit or loss. If the requirements create or enlarge an accounting mismatch in profit or loss, all gains or losses on that liability including the effects of changes in the credit risk shall be presented in profit or loss.

Impairment: financial assets and contract assets

InK-IFRS 1109, impairment of debt instruments measured at amortized costs or FVOCI, lease receivables, contract assets, loan commitments and financial guarantee contracts is recognized based on the expected credit loss (ECL) impairment model.

S-28

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

K-IFRS 1109 outlines a ‘three-stage’ model for impairment based on changes in credit risk since initial recognition. A loss allowance is measured based on the12-month ECL or life-time ECL which allows early recognition of credit loss compared to the incurred loss model ofK-IFRS 1039.

	Classification	Loss allowance
Stage 1	Assets with no significant increase in credit risk since initial recognition	12-month ECL: Expected credit losses that result from default events that are possible within 12 months after the reporting date.
Stage 2	Assets with significant increase in credit risk since initial recognition	Lifetime ECL: Expected credit losses that result from all possible default events over the expected life of the financial instrument.
Stage 3	Credit-impaired assets

InK-IFRS 1109, the cumulative changes in lifetime ECL since initial recognition are recognized as a loss allowance for originated credit-impaired financial assets.

Hedge accounting

K-IFRS 1109 maintains mechanics of hedge accounting (fair value hedge, cash flow hedge and a hedge of a net investment in a foreign operation) as set forth inK-IFRS 1039. However, unlike requirements inK-IFRS 1039 that are too complex and strict,K-IFRS 1109 is more practical, principle based and less strict and focuses on the entity’s risk management activities. Also,K-IFRS 1109 allows broader range of hedged items and hedging instruments. UnderK-IFRS 1039, a hedge is assessed to be highly effective only if the offset is in the range of

80-125 percentage by performing numerical test of effectiveness. InK-IFRS 1109, such requirements are alleviated.

S-29

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

Adjustments in the Separate statement of financial position as a result of the adoption ofK-IFRS 1109 The Bank’s categories and carrying amounts of financial assets perK-IFRS 1039 andK-IFRS 1109 as of January 1, 2018 (the date of the initial application ofK-IFRS 1109) are as follows:

Measurement categories		Carrying amounts
December 31, 2017 (K-IFRS 1039)	January 1, 2018 (K-IFRS 1109)	K-IFRS 1039	Reclassification			Remeasurement(*)			K-IFRS 1109
Cash and due from banks	Cash and due from banks	W6,608,642		—			—			6,608,642
Financial assets at fair value through profit or loss:
Financial assets held for trading (debt securities)	Securities measured at FVTPL	911,203		—			—			911,203
Financial assets held for trading (equity securities)		15,534		—			—			15,534
		926,737		—			—			926,737
Available-for-sale financial assets:
Available-for-sale financial assets (debt securities)	Securities measured at FVOCI	17,609,058		(25,073	)		—			17,583,985
	Loans measured at amortized cost	—		25,073			(75	)		24,998
Available-for-sale financial assets (equity securities)	Securities measured at FVTPL	—		3,966,146			(9,882	)		3,956,264
	Securities measured at FVOCI	14,453,863		(4,216,878	)		(55	)		10,236,930
	Loans measured at FVTPL	—		250,732			—			250,732
		32,062,921		—			(10,012	)		32,052,909
Held-to-maturity financial assets	Securities measured at amortized cost	12,313		—			(1	)		12,312
Loans	Loans measured at amortized cost	136,279,322		(492,460	)		(246,091	)		135,540,771
	Loans measured at FVTPL	—		630,810			251,146			881,956
		136,279,322		138,350			5,055			136,422,727

S-30

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

Measurement categories		Carrying amounts
December 31, 2017 (K-IFRS 1039)	January 1, 2018 (K-IFRS 1109)	K-IFRS 1039	Reclassification			Remeasurement(*)			K-IFRS 1109
Derivative financial assets:
Trading purpose derivative financial assets	Trading purpose derivative financial assets	5,628,135		(138,350	)		—			5,489,785
Hedging purpose derivative financial assets	Hedging purpose derivative financial assets	621,474		—			—			621,474
		6,249,609		(138,350	)		—			6,111,259
Other financial assets	Other financial assets	7,378,355		—			(4,709	)		7,373,646
		W189,517,899		—			(9,667	)		189,508,232

(*) The changes of provision for credit losses remeasured due to the adoption ofK-IFRS 1109 are included.

On January 1, 2018 (the date of the initial application ofK-IFRS 1109), W13,131 million of valuation loss from own credit risk of financial liabilities designated at fair value through profit or loss was reclassified to other

comprehensive income.

On January 1, 2018 (the date of the initial application ofK-IFRS 1109), the Bank classified certain financial assets, other than financial assets at amortized cost as at January 1, 2018, to amortized cost as follows:

Measurement categories		Fair value		Recognizable valuation gain or loss if not reclassified
After reclassification (K-IFRS 1109)	Before reclassification (K-IFRS 1039)
Loans measured at amortized cost (Privately placed public bonds)	Available-for-sale financial assets (Privately placed public bonds)	W	25,073		73

S-31

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

The reconciliation of the ending allowances/provision in accordance withK-IFRS 1039 to the opening allowances in accordance withK-IFRS 1109 are as follows:

Measurement categories		Allowances/Provision
December 31, 2017 (K-IFRS 1039)	January 1, 2018 (K-IFRS 1109)	K-IFRS 1039		Reclassification			Remeasurement		K-IFRS 1109
Loans and receivables
Due from banks	Due from banks	W	—		—			—		—
Loans	Loans measured at amortized cost		3,303,232		—			246,091		3,549,323
	Loans measured at FVTPL		212,221		(212,221	)		—		—
Other financial assets	Other financial assets		236,203		—			4,709		240,912
Available-for-sale financial assets
Debt securities	Securities measured at FVOCI(*)		—		—			119,331		119,331
Held-to-maturity financial assets
Debt securities	Securities measured at amortized cost		—		—			1		1
Guarantees and Commitments
Payment guarantees (financial guarantee contracts, etc.)	Payment guarantees (financial guarantee contracts, etc.)		773,543		—			17,956		791,499
Unused commitments	Unused commitments		445,946		—			18,886		464,832
		W	4,971,145		(212,221	)		406,974		5,165,898

(*) The provision for credit losses for securities measured at FVOCI was recognized as other comprehensive income.

S-32

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

On January 1, 2018 (the date of the initial application ofK-IFRS 1109), the impact on retained earnings is as follows:

Description	Impact of application
Retained earnings as of December 31, 2017 (before adoption ofK-IFRS 1109)	W	1,743,282
Reversal of impairment loss on equity securities measured at FVOCI		477,360
Reclassification of accumulated other comprehensive income relating toavailable-for-sale financial assets reclassified to financial assets measured at FVTPL		(23,535	)
Remeasurement after reclassified fromavailable-for-sale financial assets to financial assets measured at FVTPL		(9,882	)
Translation of equity securities denominated in foreign currencies		(425	)
Effect of changes in exchange differences on translation of foreign operations		(48	)
Effect of adjustment in convertible private bond, etc. classified as loans measured at FVTPL		251,146
Effect of adjustment in valuation loss from self-credit-risk of financial liabilities designated at fair value through profit or loss		(9,520	)
Measurement of expected credit losses of loans measured at amortized cost		(246,091	)
Measurement of expected credit losses of other financial assets		(4,709	)
Measurement of expected credit losses of debt securities measured at FVOCI		(119,331	)
Measurement of expected credit losses of securities measured at amortized cost		(1	)
Effect of changes in provision for payment guarantee and unused commitments		(36,842	)
Tax effect		12,785
Retained earnings as of January 1, 2018 (after adoption ofK-IFRS 1109)	W	2,034,189

On January 1, 2018 (the date of the initial application ofK-IFRS 1109), the impact on other comprehensive income is as follows:

Description	Impact of application
Other comprehensive income as of December 31, 2017 (before adoption ofK-IFRS 1109)	W	436,749
Reversal of impairment loss on equity securities measured at FVOCI		(477,360	)
Reclassified fromavailable-for-sale financial assets to financial assets measured at FVTPL		23,535
Effect of adjustment in valuation loss from self-credit-risk of financial liabilities designated at fair value through profit or loss		9,520
Measurement of expected credit losses of debt securities measured at FVOCI		119,331
Translation of equity securities denominated in foreign currencies		(55	)
Effect of changes in exchange differences on translation of foreign operations		48
Others		352
Other comprehensive income as of January 1, 2018 (after adoption ofK-IFRS 1109)	W	112,120

S-33

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

K-IFRS 1115 ‘Revenue from Contracts with Customers’

K-IFRS 1115‘Revenue from Contracts with Customers’ replaces the existing guidance inK-IFRS 1011‘Construction Contracts’,K-IFRS 1018‘Revenue’,K-IFRS 2113‘Customer Loyalty Programmes’,K-IFRS 2115‘Agreements for the Construction of Real Estate’,K-IFRS 2118‘Transfers of Assets from Customers’ andK-IFRS 2031‘Revenue—Barter Transactions Involving Advertising Services’. The core principle ofK-IFRS 1115 is that an entity shall recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and it introduces a five-step approach to revenue recognition and measurement in accordance with the core principle. The adoption ofK-IFRS 1115 has no significant impact on the financial statements of the Bank.

K-IFRS 1028 ‘Investments in Associates and Joint Ventures’

When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, a mutual fund, etc., the entity may elect to measure that investment at fair value through profit or loss. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture. The adoption ofK-IFRS 1028 has no significant impact on the financial statements of the Bank.

K-IFRS 1102 ‘Share-based Payment’

Amendment toK-IFRS 1102 clarifies the accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled and valuation method used to measure fair value of cash-settled share-based payment. The adoption ofK-IFRS 1102 has no significant impact on the financial statements of the Bank.

Enactments to Interpretation 2122‘Foreign Currency Transactions and Advance Consideration’

According to these enactments‘Foreign Currency Transactions and Advance Consideration’, the date of the transaction for determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes thenon-monetary asset ornon-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. The adoption of enactments to Interpretation 2122 has no significant impact on the financial statements of the Bank.

(ii) New standards and interpretations issued but not effective

The following new standards, interpretations and amendments to existing standards have been issued but not effective for annual periods beginning after January 1, 2018, and the Bank has not early adopted them.

K-IFRS 1116 ‘Leases’

KIFRS 1116‘Leases’ replaces the existing guidance inK-IFRS 1017‘Leases’,K-IFRS 2104‘Determining whether an Arrangement contains a Lease’,K-IFRS 2015‘Operating Leases-Incentives’ andK-IFRS 2027

S-34

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. The previous lease accounting model does not require a lessee to recognize assets and liabilities arising from operating leases. However,K-IFRS 1116 requires a lessee to recognize assets and liabilities for all leases for which the lease term is greater than 12 months and the underlying asset is not of low value.K-IFRS 1116 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. The Bank is in the process of evaluating the impact of this standard on its separate financial statements.

(3) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

• Derivative financial instruments measured at fair value

• Financial instruments measured at fair value through profit or loss

• Available-for-sale financial instruments measured at fair value

• Fair value hedged financial instruments with changes in fair value, due to hedged risks, recognized in profit or loss

• Liabilities for defined benefit plans, which are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets.

(4) Functional and presentation currency

These financial statements are presented in Korean won (“W”), which is the Bank’s functional currency and the currency of the primary economic environment in which the Bank operates.

(5) Use of estimates and judgments

The preparation of the financial statements in conformity withK-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment.

Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only.

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

(i) Fair value of financial instruments

Financial instrumentsheld-for-trading, financial instruments designated at fair value through profit or loss,available-for-sale financial assets and derivative instruments are recognized and measured at fair value. If the

S-35

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

2.Basis of Preparation, Continued

market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

Financial instruments, which are not actively traded in the market and those with less transparent market prices, will have less objective fair values and require broad judgment on liquidity, concentration, uncertainty in market factors and assumptions in price determination and other risks.

Diverse valuation techniques are used to determine the fair value of financial instruments, from generally accepted market valuation models to internally developed valuation models that incorporate various types of assumptions and variables.

(ii) Credit losses allowance (allowances for loan losses, provisions for payment guarantee, and unused commitments)

The Bank tests impairment and recognizes allowances for losses on financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income and recognizes provisions for guarantees, and unused loan commitments. Accuracy of provisions for credit losses is dependent upon estimation of expected cash flows of the borrower for individually assessed allowances of loans, and upon assumptions and methodology used for collectively assessed allowances for groups of loans, guarantees and unused loan commitments.

(iii) Deferred taxes

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax assets are recognised to the extent that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Actual income taxes in the future may not be identical to the recognised deferred tax assets and liabilities,

(iv) Defined benefit liabilities

The Bank operates a defined benefit plan. Defined benefit liability is calculated by annual actuarial valuations as of the reporting date. To perform the actuarial valuations, assumptions for discount rates, future salary increases and others are required to be estimated. Defined benefit plans contain significant uncertainties in estimations due to its long-term nature.

3.Significant Accounting Policies

The significant accounting policies applied by the Bank in preparation of its separate financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these separate financial statements.

S-36

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(1) Investments in subsidiaries and associates

The accompanying financial statements are separate financial statements in accordance withK-IFRS 1027‘Separate Financial Statements’ and investments in subsidiaries and associates are accounted for at cost, not by performance and net asset reported by the investee. Dividends received from subsidiaries and associates are recognised as income as of the time the right to receive the dividends is established.

(2) Business combination of entities under common control

The assets and liabilities acquired under business combinations under common control are recognised at the carrying amounts recognised previously in the consolidated financial statements of the ultimate parent. The difference between consideration transferred and carrying amounts of net assets acquired is recognised as part of share premium.

(3) Operating segments

The Bank makes decisions regarding allocation of resources to segments and categorizes segments, based on internal reports reviewed periodically by the chief operating decision maker, to assess performance. Information on segments reported to the chief operating decision maker includes items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets (such as the Bank Headquarters), head office expenses, and income tax assets and liabilities. The Bank recognises the CEO as the chief operating decision maker.

(4) Foreign exchange

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Bank, at exchange rates of the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on translation are recognised in profit or loss, except for differences arising on the translation of available for sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, or in a qualifying cash flow hedge, which are recognised in other comprehensive income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

S-37

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(ii) Foreign operations

If the presentation currency of the Bank is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

Unless the functional currency of foreign operations is in a state of hyperinflation, assets and liabilities of foreign operations are translated at the closing exchange rate at the end of the reporting period. Revenues and expenses on the statement of comprehensive income are translated at the exchange rates of the date of transaction. Foreign currency differences that arise from translation are recognized as other comprehensive income, and the disposal of a foreign operation isre-categorized as profit or loss as of the moment of the disposal profit or loss is recognized.

Any goodwill arising on the acquisition of a foreign operation, and any adjustments in fair value to the carrying amounts of assets and liabilities due to such acquisition, are treated as assets and liabilities of the foreign operation. Therefore, such are expressed in the functional currency of the foreign operations and, alongside other assets and liabilities of the foreign operation, translated at the closing exchange rate.

In the case of the disposal of a foreign operation, cumulative amounts of exchange difference regarding the foreign operation, recognized separately from other comprehensive income, arere-categorized from assets to profit or loss as of the disposal profit or loss is recognized.

(iii) Foreign exchange of net investment in foreign operations

Monetary items receivable from or payable to a foreign operation, with none or little possibility of being settled in the foreseeable future, are considered a part of the net investment in the foreign operation. Therefore, the exchange difference is recognised as comprehensive income or loss in the financial statement andre-categorized to profit or loss as of the disposal of the related net investment.

(5) Recognition and measurement of financial instruments

(i) Initial recognition

The Bank recognizes a financial asset or a financial liability in its statement of financial position when the Bank becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets is recognized and derecognized using trade date accounting.

The Bank classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, or financial assets at amortized cost on the basis of the Bank’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Bank classifies financial liabilities as financial liabilities at fair value through profit or loss, or financial liabilities at amortized cost.

At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

S-38

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(ii) Subsequent measurement

After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.

Amortized cost

The amortized cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

Fair value

Fair values, which the Bank primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

The Bank uses valuation models that are commonly used by market participants and customized for the Bank to determine fair values of commonover-the-counter (OTC) derivatives such as options, interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Bank uses internally developed models, which are usually based on valuation methods and techniques generally used within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions.

If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. Those factors include counterparty credit risk,bid-ask spread, liquidity risk and others.

The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Bank calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.

S-39

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(iii) Derecognition

Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Bank derecognizes a financial asset or a financial liability when, and only when:

Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Bank has not retained control. If the Bank neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Bank continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.

If the Bank transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Bank continues to recognize the transferred asset in its entirety and recognize a financial liability for the consideration received.

Derecognition of financial liabilities

Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expires.

(iv) Offsetting

Financial assets and liabilities are offset and the net amount reported in the statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously.

(6) Cash and cash equivalents

Cash and cash equivalents comprise balances with original maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair value, including cash on hand, deposits held at call with banks and other highly liquid short-term investments with original maturities of three months or less.

(7)Non-derivative financial assets

(i) Financial assets at fair value through profit or loss

Anynon-derivative financial asset classified as held for trading or not classified as financial assets at fair value through other comprehensive income or financial assets measured at amortized cost is categorized under financial assets at fair value through profit or loss.

S-40

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

The Bank may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income and dividend income from financial assets at fair value through profit or loss are also recognized in the statement of comprehensive income.

(ii) Financial assets at fair value through other comprehensive income

The Bank classifies financial assets as financial assets at fair value through other comprehensive income if they meet the following conditions: 1) debt instruments that are a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and consistent with representing solely payments of principal and interest on the principal amount outstanding or 2) equity instruments, not held for trading with the objective of generating a profit from short-term fluctuations in price or dealer’s margin, designated as financial assets at fair value through other comprehensive income.

After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gain and loss from changes in fair value, other than dividend income and interest income amortized using effective interest method and exchange differences arising on monetary items which are recognized directly in income as interest income or expense, are recognized as other comprehensive income in equity.

At disposal of financial assets at fair value through other comprehensive income, cumulative gain or loss is recognized as profit or loss for the reporting period. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not recycled to profit or loss at disposal.

Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences resulting from changes in amortized cost are recognized in profit or loss, and other changes are recognized as equity.

(iii) Financial assets measured at amortized cost

A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost. Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.

(8) Expected Credit Loss of Financial Assets

The Bank measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets measured at amortized cost and fair value through other comprehensive income with the exception of financial asset measured at fair value through profit or loss.

S-41

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

The expected credit loss (“ECL”) is the weighted average amount of possible outcomes within a certain range, reflecting the time value of money, estimates on the past, current and future situations, and information accessible without excessive cost of effort.

The Bank uses the following three measurement techniques in accordance withK-IFRS:

• General approach: for financial assets andoff-balance-sheet unused credit line that are not applied below two approaches

• Simplified approach: for receivables, contract assets and lease receivables

• Credit-impaired approach: for purchased or originated credit-impaired financial assets

The general approach is applied differently depending on the significance of the increase of the credit risk. If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, an entity shall measure the loss allowance for that financial instrument at an amount equal to12-month expected credit losses. If the credit risk on that financial instrument has increased significantly since initial recognition, an entity shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses at each reporting date.

The Bank applies the simplified approach to 1) trade receivables and contract assets that do not have a significant financing component or 2) trade receivables, contract assets and lease receivables upon determining the Bank’s accounting policies as the application of the simplified approach. The approach requires expected lifetime losses to be recognized from initial recognition of the financial assets. Under credit-impaired approach, the Bank shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets.

The followingnon-exhaustive list of information may be relevant in assessing changes in credit risk:

• Significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception

• Other changes in the rates or terms of an existing financial instrument that would be significantly different if the instrument was newly originated or issued at the reporting date

• An actual or expected significant change in the financial instrument’s external credit rating.

• An actual or expected internal credit rating downgrade for the borrower or decrease in behavioural scoring used to assess credit risk internally

• An actual or expected significant change in the operating results of the borrower

• Past due information

(i) Forward-looking information

The Bank uses forward-looking information, when it determines whether the credit risk has increased significantly since initial recognition and measures expected credit losses.

S-42

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

The Bank assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.

Forward looking information used in calculation of expected credit loss is derived after comprehensive consideration of a variety of factors including scenario in management planning, worst-case scenario used for stress testing, third party forecast, and others.

(ii) Measuring expected credit losses on financial assets at amortized cost

The amount of the loss on financial assets at amortized cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Bank estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).

For financial assets that are not individually significant, the Bank collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

Individual assessment of impairment

Individual assessment of impairment losses are calculated using management’s best estimate on present value of expected future cashflows. The Bank uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.

Collective assessment of impairment

Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.

The expected credit loss for financial assets measured at amortized cost is recognized as the loss allowance, and when the financial asset is determined to be irrecoverable, the carrying amount and loss allowance are decreased. If financial assets previously written off are recovered, the loss allowance is increased and the difference is recognized in the current profit or loss.

(iii) Measuring expected credit losses on financial assets at fair value through other comprehensive income

Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortized cost, except for changes in loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.

S-43

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(9) Derivative financial instruments including hedge accounting

Derivative financial instruments are initially recognised at fair value upon agreement of the contract andre-estimated at fair value subsequently. The recognition of profit or loss due to changes in fair value of derivative instruments is as stated below:

(i) Hedge accounting

Derivative financial instruments are accounted differently depending on whether hedge accounting is applied, and therefore, are classified into trading purpose derivatives and hedging purpose derivatives.

Upon the transaction of hedging purpose derivatives, two different types of hedge accounting are applied; a fair value hedge, and a cash flow hedge. A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. A cash flow hedge is a hedge of the exposure to variability in cash flows that (i) is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and (ii) could affect profit or loss.

At inception of the hedge relationship, the Bank formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge, and the method that will be used to assess the effectiveness of the hedging relationship.

Fair value hedge

For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in profit or loss in the statement of comprehensive income. Meanwhile, the change in the fair value of the hedged item, attributable to the risk hedged, is recorded as part of the carrying value of the hedged item and is also recognised in profit or loss in the statement of comprehensive income. When the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated. For hedged item recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the EIR.

Cash flow hedge

For designated and qualifying cash flow hedges, the effective portion of gain or loss on the hedging instruments is initially recognised directly in equity. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the statement of comprehensive income. When the hedged cash flow affects the profit or loss in statement of comprehensive income, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line in profit or loss in the statement of comprehensive income. When a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged forecasted transaction is ultimately recognised in the statement of comprehensive income. When a forecasted transaction is no longer expected to occur, the cumulative gain and loss that was reported in equity is immediately transferred to profit or loss in the statement of comprehensive income.

S-44

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

Trading purpose derivatives

For trading purpose derivatives transaction, changes in the fair value of derivatives are recognised in net income.

(10) Day one profit or loss recognition

For financial instruments classified as level 3 on the fair value level hierarchy measured using assess variables not observable in the market, the difference between the fair value at initial recognition and the transaction price, which is equivalent to Day one profit or loss, is amortized by using the straight-line method over time.

(11) Property and equipment

The Bank’s property and equipment are recognised at the carrying amount at historical costs less accumulated depreciation and accumulated impairment in value. Historical costs include the expenditures directly related to the acquisition of assets.

Subsequent costs are recognised in the carrying amount of assets or, if appropriate, as separate assets if the probabilities future economic benefits associated with the assets will flow into the Bank and the costs can be measured reliably; the carrying amount of the replaced part is derecognised. Furthermore, any other repairs or maintenances are charged to profit or loss as incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to the amount of residual value less acquisition cost over the following estimated useful lives:

Type	Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40
Leasehold improvements		4
Movable property		4

Property and equipment are impaired when the carrying amount exceeds the recoverable amount. The Bank assesses residual value and economic life of its assets at each reporting date and adjusts useful lives when necessary. Any gain or loss arising from the disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised innon-operating income (expense) in the statement of comprehensive income.

(12) Investment property

The Bank classifies property held for rental income or benefits from capital appreciation as investment property. Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, the cost model is applied. Subsequent to initial recognition, an item of investment property is carried at its cost less any accumulated depreciation and any accumulated impairment loss.

S-45

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

Investment properties are derecognised either when 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 recognised in the statement of comprehensive income in the period ofde-recognition. Reclassification to other account is made if there is a change in use of corresponding investment property.

Depreciation of investment property is calculated using the straight-line method over its estimated useful lives as follows:

Type	Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40

(13) Intangible assets

An intangible asset is recognised only when its cost can be measured reliably, and the probabilities future economic benefits from the asset will flow into the Bank are high. Separately acquired intangible assets are recognised at the acquisition cost, and subsequently, the cost less accumulated depreciation and accumulated impairment is recognised as the carrying amount.

Intangible assets with finite lives are amortized over the four-year to30-year period of useful economic lives using the straight-line method. At the end of each reporting period, the Bank reviews intangible assets for any evidence that indicate impairment, and upon the presence of such evidence, the Bank estimates the amount recoverable and recognises the loss accordingly.

Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually. Furthermore, the Bank reviews such intangible assets to determine whether it is appropriate to consider these assets to have indefinite useful lives. If in the case the Bank concludes an asset is not qualified to be classified asnon-finite, prospective measures are taken to consider such an asset as finite.

(14) Impairment ofnon-financial assets

The Bank tests for any evidence of impairment in assets and reviews whether the impairment has taken place by estimating the recoverable amount, at the end of each reporting period. The recoverable amount is the higher of the fair value less cost and value in use of an asset.

Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

(15) Assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. To be classified as held

S-46

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

The Bank recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized in accordance withK-IFRS 1036‘Impairment of Assets’.Non-current assets that are classified as held for sale or part of a disposal group classified as held for sale are not depreciated (or amortized).

(16)Non-derivative financial liabilities

The Bank classifiesnon-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities, in accordance with the substance of the contractual arrangement and the definitions of financial liability. The Bank recognizes these financial liabilities in the statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability.

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss in the current year include financial liabilities held for trading and financial liabilities designated at FVTPL upon initial recognition. Financial liabilities and derivatives are classified as financial instruments held for trading if they are acquired for repurchasing soon. Financial liabilities are classified as financial liabilities at FVTPL upon initial recognition, if the profit or loss from the liabilities indicates to be more purpose-appropriate to be recognised as profit or loss. Financial liabilities at FVTPL are designated at fair value in subsequent measurements, and any relatedun-realized profit or loss is recognised as profit or loss. In addition, for the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, the Bank present this change in other comprehensive income, and does not recycle this other comprehensive income to profit or loss, subsequently.

(ii) Financial liabilities measured at amortized cost

Financial liabilities measured at amortized cost are recognised at fair value less cost less transaction cost upon initial recognition, and subsequently at amortized costs. The difference between the proceeds (net of transaction cost) and the redemption value is recognised in the statement of comprehensive income over the periods of the liabilities using the EIR.

Fees paid on the establishment of a loan facility are recognised as transaction costs of the loan, if the probability that some or all the facility will be drawn down is high. If, however, there is not enough evidence to conclude a draw-down of some or all the facility will occur, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

(iii)De-recognition of financial liabilities

A financial liability isde-recognized when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially

S-47

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as ade-recognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.

(17) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled wholly before 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Bank during an accounting period, the Bank recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

(ii) Retirement benefits: defined contribution plans

A defined contribution plan is a pension plan under which the Bank pays fixed contributions into a separate fund. A defined benefit plan defines the amount of pension benefit that an employee will receive on retirement and is usually dependent on one or more factors such as years of service and compensation.

The Bank is no longer responsible for any foreseeable future liability after a certain amount or percentage of money is set aside for defined contribution plans. If the pension plan allows for early retirement, payments are recognised as employee benefits. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Bank recognises that excess as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

(iii) Retirement benefits: defined benefit plans

The Bank’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and have terms to maturity like the terms of the related pension liability.

Remeasurements of the net defined benefit liabilities (assets), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income.

(18) Provisions

Provisions are recognized when the Bank has a present legal or constructive obligation because 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.

S-48

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(19) Financial guarantees

Financial guarantee contracts are contracts that require the issuer (the Bank) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the original or changed terms of a debt instrument. Financial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given. Subsequent to initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of:

• The amount determined in accordance withK-IFRS 1109‘Financial Instruments’and

• The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance withK-IFRS 1115 ‘Revenue from Contracts with Customers’.

(20) Securities under resale or repurchase agreements

Securities purchased under agreements to resell are recorded as other loans and receivables and the related interest from these securities is recorded as interest income; securities sold under agreements to repurchase are recorded as other borrowings, and the related interest from these securities is recorded as interest expense.

(21) Interest income and expense

Interest income and expense are recognized in profit or loss using the effective interest method. The effective interest method measures the amortized costs of financial instruments and allocates the interest income or expense during the related period.

Upon the calculation of the effective interest rate, the Bank estimates future cash flows by taking into consideration all contractual terms of the financial instrument, but not future credit loss. The calculation also reflects any fees or points paid or received, transaction costs and any related premiums or discounts. In the case that the cash flow and expected duration of a financial instrument cannot be estimated reliably, the effective interest rate is calculated by the contractual cash flow during the contract period.

Once an impairment loss has been recognized on a financial asset or a group of similar assets, subsequent interest income is recognized on the interest rate that was used to discount future cash flow for measuring the impairment loss.

(22) Fees and commission income

Fees and commission income and expense are classified as follows according to related regulations:

(i) Fees and commission from financial instruments

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. It includes those related to evaluation of the borrowers’ financial status, guarantee, collateral, other agreements and related evaluation as well as business transaction, rewards for activities, such as document preparation and recording and setup fees incurred during issuance of financial liabilities. However, when financial instruments are classified as financial instruments at fair value through profit or loss, fees and commission are recognized as revenue upon initial recognition.

S-49

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(ii) Fees and commission from services

Fees and commission income charged in exchange for services to be performed during a certain period such as asset management fees, consignment fees and assurance service fees are recognized as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan andK-IFRS 1039‘Financial Instrument: Recognition and Measurement’is not applied for the commitment, the related loan commitment fees are recognized as revenue proportionally to time over the commitment period.

(iii) Fees and commission from significant transaction

Fees and commission from significant transactions, such as trading stocks and other securities, negotiation and mediation activities for third parties, for instance business transfer and takeover, are recognized when transactions are completed.

(23) Dividend income

Dividend income is recognized upon the establishment of the Bank’s right to receive the payment.

(24) Income tax expense

Income tax expense comprises current and deferred income tax. Current income tax and deferred income tax are recognized in profit or loss except to the extent that the tax arises from a transaction or event, which is recognized in other comprehensive income or directly in equity, or a business combination.

The Bank recognizes deferred income tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, except to the extent that the Bank can control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Bank recognizes deferred income tax assets for all deductible temporary differences arising from investments in associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the reporting period when the assets are realized, or the liabilities settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred income tax assets and liabilities reflects the income tax effects that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.

Deferred income tax assets and liabilities areoff-set only if the Bank has a legally enforceable right tooff-set the related current income tax assets and liabilities, and the assets and liabilities relate to income tax levied by the same tax authority and are intended to be settled on a net basis.

S-50

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

3.Significant Accounting Policies, Continued

(25) Accounting for trust accounts

The Bank, for financial reporting, differentiates trust assets from identifiable assets according to theFinancial Investment Services and Capital Markets Act. Furthermore, the Bank receives trust fees from the application, management and disposal of trust assets, and appropriates such amounts for fees from trust accounts.

Meanwhile, in the case the fee from an unspecified principal or interests guaranteed money in trust does not meet the principal or interest amount, even after appropriating deficit with trust fees and special reserve, the Bank fills in the remaining deficit in the trust account and appropriates such amounts for losses on trust accounts.

(26) Regulatory reserve for credit losses

When the total sum of allowance for possible credit losses is lower than the amount prescribed in Article 29(1) of theRegulations on Supervision of Banking Business, the Bank records the difference as regulatory reserve for credit losses at the end of each reporting period.

In the case that the existing regulatory reserve for credit losses exceeds the amount needed to be set aside at the reporting date, the surplus may be reversed. Furthermore, in the case that undisposed deficit exists, regulatory reserve for credit losses is saved from the time the undisposed deficit is disposed.

(27) Earnings per share

The Bank represents its diluted and basic earnings per common share in the separate statement of comprehensive income. Basic earnings per share (EPS) is calculated by dividing net profit attributable to shareholders of the Bank by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting net profit attributable to common shareholders of the Bank, considering dilution effects from all potential common shares, and the weighted average number of common shares outstanding.

(28) Corrections of errors

Prior period errors shall be corrected by retrospective restatement in the first set of financial statements authorised for issue after their discovery except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error.

S-51

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

4.Cash and Due from Banks

(1) Cash and due from banks as of June 30, 2018 and December 31, 2017 are as follows:

	��	June 30, 2018		December 31, 2017
Cash		W	78,453		62,862
Due from banks in Korean won:
Due from Bank of Korea			4,485,737		2,136,005
Other due from banks in Korean won			6,432		1,501,419
			4,492,169		3,637,424
Due from banks in foreign currencies / off-shores			4,044,315		2,908,356
		W	8,614,937		6,608,642

(2) Restricted due from banks as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Reserve deposit	W	3,112,256		1,248,969
Others		140,963		140,402
	W	3,253,219		1,389,371

5.Securities Measured at FVTPL

(1) Details of securities in financial assets at fair value through profit or loss as of June 30, 2018 are as follows:

	June 30, 2018
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		497,501		393,916
Equity investments		—		316,125		384,329
Beneficiary certificates		—		3,243,101		3,222,009
Government and public bonds		1,280,800		1,229,351		1,229,210
Financial bonds		1,050,000		1,043,869		1,044,125
		2,330,800		6,329,947		6,273,589
Securities denominated in foreign currencies/off-shores:
Stocks		—		6,195		5,954
Equity investments		—		24,734		24,785
Beneficiary certificates		—		402,008		409,318
Debt securities		184,186		184,246		182,646
		184,186		617,183		622,703
	W	2,514,986		6,947,130		6,896,292

S-52

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

5.Securities Measured at FVTPL, Continued

(2) Equity securities with disposal restrictions in financial assets at fair value through profit or loss as of June 30, 2018 are as follows:

	June 30, 2018
Company	Number of shares		Carrying amount		Restricted period
National Happiness Fund Co., Ltd.		34,066		68,757	Undecided

6.Financial Assets Held for Trading

(1) Financial assets held for trading as of December 31, 2017 are as follows:

	December 31, 2017
Financial assets held for trading denominated in Korean won:
Debt securities:
Government and public bonds	W	532,899
Financial assets held for trading denominated in foreigncurrencies/off-shores:
Equity securities		15,534
Debt securities		378,304
		393,838
	W	926,737

(2) Details of debt securities in financial assets held for trading as of December 31, 2017 are as follows:

	December 31, 2017
	Face value		Acquisition cost		Fair value (Carrying amounts)
Government and public bonds in Korean won	W	539,000		532,856		532,899
Debt securities in foreign currencies		379,283		379,734		378,304
	W	918,283		912,590		911,203

S-53

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

7.Securities Measured at FVOCI

(1) Details of securities measured at FVOCI as of June 30, 2018 are as follows:

	June 30, 2018
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		9,890,169		10,215,017
Government and public bonds		1,865,000		1,913,987		1,869,536
Financial bonds		3,807,000		3,801,165		3,805,212
Corporate bonds		6,797,694		6,798,527		6,751,452
		12,469,694		22,403,848		22,641,217
Securities denominated in foreign currencies/off-shores:
Equity securities		—		2,624		1,281
Debt securities		4,001,255		4,596,268		3,928,822
		4,001,255		4,598,892		3,930,103
Loaned securities:
Loaned securities		10,000		10,005		10,036
	W	16,480,949		27,012,745		26,581,356

Equity instruments that are held by acquisition due to conversion from debt instruments, investment in kind and investment in ventures and SMEs are designated as measured at FVOCI. The realizedpre-tax income on disposal of equity securities during thesix-month period ended June 30, 2018 is the amount ofW12,677 million, which is directly recognized in retained earnings.

(2) Changes in securities measured at FVOCI for thesix-month period ended June 30, 2018 are as follows:

	2018
Beginning balance	W	27,820,915
Acquisition		4,748,316
Disposal		(6,168,332	)
Change due to amortization		(10,128	)
Change in fair value		(765	)
Foreign exchange differences		183,599
Others(*1)		7,751
Ending balance	W	26,581,356

(*1) For thesix-month period ended June 30, 2018, others represent the increase in securities measured at FVOCI including shares of Wooyang HC Co., Ltd. and Namkwang Engineering & Construction Co., Ltd. acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act, shares of Ecomaister Co., Ltd., Aribio Co., Ltd. and others acquired through exercise of conversion rights of the convertible bonds, and shares of Interbex Technology Co., Ltd. acquired pursuant todebt-to-equity swap decision of the Council of Financial Creditors under the Corporate Restructuring Promotion Act.

S-54

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

7.Securities Measured at FVOCI, Continued

(3) Equity securities with disposal restrictions in securities measured at FVOCI as of June 30, 2018 are as follows:

	June 30, 2018
Company	Number of shares		Carrying amount		Restricted period
Kumho Tire Co., Inc.		21,339,320	W	134,651		Until July 6, 2023(*1)
Taihan Electric Wire Co., Ltd.(*2)		16,031,722		20,761		Undecided
Ajin P & P Co., Ltd.		516,270		5,339		Until IPO
Chinhung International Inc.		11,118,952		21,515		Until December 31, 2018
Hanjin Heavy Industries & Construction
Co., Ltd.		1,208,588		3,602		Until December 31, 2018
CREA IN Co., Ltd.		14,383		46		Until December 21, 2021
		50,229,235	W	185,914

(*1) From July 6, 2021, 50% of the shares may be sold every year.

(*2) For thesix-month period ended June 30, 2018, some shares have been disposed of in accordance with the decision of the council consisted of major shareholders, etc.

(4) Changes in the loss allowance in relation to securities measured at FVOCI during thesix-month period ended June 30, 2018 are as follows:

	2018
				Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	4,395			7,926			107,010			119,331
Transfer to12-month expected credit loss		66			(66	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired debt securities		(3,067	)		3,067			—			—
Transfer to credit-impaired debt securities		—			—			—			—
Provision for (reversal of) loss allowance		3,383			(6,073	)		(1,207	)		(3,897	)
Write-offs		—			—			(4,848	)		(4,848	)
Disposal		(936	)		(130	)		—			(1,066	)
Debt-to-equity swap		—			—			(30,950	)		(30,950	)
Foreign currency translation		72		��	1			917			990
Ending balance	W	3,913			4,725			70,922			79,560

S-55

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

8.Available-for-Sale Financial Assets

(1) Available-for-sale financial assets as of December 31, 2017 are as follows:

	December 31, 2017
Available-for-sale financial assets denominated in Korean won:
Equity securities:
Stocks and equity investments	W	10,959,862
Beneficiary certificates		2,937,542
Others		250,731
		14,148,135
Debt securities:
Government and public bonds		1,795,216
Financial bonds		4,639,828
Corporate bonds		7,762,985
		14,198,029
		28,346,164
Available-for-sale financial assets denominated in foreigncurrencies/off-shores:
Equity securities		305,728
Debt securities		3,411,029
		3,716,757
	W	32,062,921

Equity securities with no quoted market prices in active markets and for which the fair value cannot be measured reliably are recorded at cost in the amount ofW8,855,069 million as of December 31, 2017.

(2) Changes inavailable-for-sale financial assets for thesix-month period ended June 30, 2017 are as follows:

	2017
Beginning balance	W	36,680,130
Acquisition		13,740,480
Disposal		(15,580,223	)
Change due to amortization		(17,321	)
Change in fair value		(813,773	)
Impairment loss		(107,017	)
Reversal of impairment loss		1,620
Reclassification		1,200
Foreign exchange differences		(192,120	)
Others(*1)		45,369
Ending balance	W	33,758,345

(*1) For the period ended June 30, 2017, others represents the increase inavailable-for-sale equity securities acquired from STX Heavy Industries Co., Ltd. as a part of the rehabilitation plan based on the Debtor

S-56

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

8.Available-for-Sale Financial Assets, Continued

Rehabilitation and Bankruptcy Act,available-for-sale equity securities acquired from Chinhung International Inc. as a result ofdebt-to-equity swap decision of the Creditor Financial Institutions Committee, based upon the Corporate Restructuring Promotion Act, andavailable-for-sale equity securities acquired from Phoenix Materials Co., Ltd. and others after exercising conversion rights of the convertible bonds.

(3) Equity securities with disposal restrictions inavailable-for-sale financial assets as of December 31, 2017 are as follows:

Company	December 31, 2017
	Number of shares		Carrying amount		Restricted period
Kumho Tire Co., Inc.		21,339,320	W	94,426		Undecided
National Happiness Fund Co., Ltd.		34,066		56,710		Undecided
Taihan Electric Wire Co., Ltd.(*1)		16,476,369		18,536		Undecided
Ajin P & P Co., Ltd.		516,270		5,321		Undecided
Jaeyoung Solutec Co., Ltd.		1,962,000		3,532		Until May 18, 2018
Chinhung International Inc.(*2)		11,118,952		21,293		Until December 31, 2018
Hanjin Heavy Industries & Construction Co., Ltd.		1,208,588		4,000		Until December 31, 2018
CREA IN Co., Ltd.		14,383		46		Until December 21, 2021
		52,669,948	W	203,864

(*1) For the year ended December 31, 2017, some shares have been disposed of in accordance with the decision of the council consisted of major shareholders, etc.

(*2) The number of shares has changed after the decisions of capital reduction anddebt-to-equity swap for the year ended December 31, 2017.

(4) Details of debt securities inavailable-for-sale financial assets as of December 31, 2017 are as follows:

	December 31, 2017
	Face Value		Acquisition cost		Fair value (Carrying amounts)
Government and public bonds in Korean won	W	1,790,000		1,838,455		1,795,216
Financial bonds in Korean won		4,648,000		4,644,729		4,639,828
Corporate bonds in Korean won		7,932,157		7,932,488		7,762,985
Debt securities denominated in foreign currencies / off shores		3,401,971		4,440,330		3,411,029
	W	17,772,128		18,856,002		17,609,058

S-57

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

9.Securities Measured at Amortized Cost

(1) Securities measured at amortized cost as of June 30, 2018 are as follows:

	June 30, 2018
	Amortized cost		Fair value
Securities denominated in Korean won:
Government and public bonds	W	494,034		494,034
Financial bonds		509,369		509,369
	W	1,003,403		1,003,403

(2) Changes inavailable-for-sale financial assets for thesix-month period ended June 30, 2018 are as follows:

	2018
Beginning balance	W	12,312
Acquisition		1,002,716
Redemption		(12,236	)
Change due to amortization		575
Reversal of impairment loss		1
Foreign exchange differences		35
Ending balance	W	1,003,403

10.Held-to-Maturity Financial Assets

(1) Held-to-maturity financial assets as of December 31, 2017 are as follows:

	December 31, 2017
	Amortized cost		Fair value
Held-to-maturity financial assets in Korean won:
Government and public bonds	W	1,588		2,348
Held-to-maturity financial assets in foreign currencies:
Corporate bonds		10,725		10,725
	W	12,313		13,073

(2) Changes inheld-to-maturity financial assets for thesix-month period ended June 30, 2017 are as follows:

	2017
Beginning balance	W	15,867
Acquisition		—
Redemption		(1,000	)
Change due to amortization		17
Foreign exchange differences		(693	)
Ending balance	W	14,191

S-58

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

11.Loans Measured at FVTPL

(1) Loans measured at FVTPL as of June 30, 2018 are as follows:

	June 30, 2018
	Amortized cost		Fair value
Loans in Korean won:
Loans for facility development	W	251,763		301,063
Privately placed corporate bonds		887,039		861,722
	W	1,138,802		1,162,785

(2) Gains (losses) related to loans measured at FVTPL for thesix-month period ended June 30, 2018 are as follows:

	June 30, 2018
	Three-month period ended			Six-month period ended
Transaction gains (losses) on loans measured at FVTPL
Transaction gains	W	6,523			6,523
Transaction losses		(9,923	)		(11,491	)
		(3,400	)		(4,968	)
Valuation gains (losses) on loans measured at FVTPL
Valuation gains		62,785			72,790
Valuation losses		—			(9,993	)
		62,785			62,797
	W	59,385			57,829

S-59

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

12.Loans Measured at Amortized Cost

(1) Loans measured at amortized cost and allowance for loan losses as of June 30, 2018 are as follows:

	June 30, 2018
	Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	49,943,523			49,005,851
Loans for facility development		46,613,215			47,224,575
Loans for households		1,076,982			1,093,201
Inter-bank loans		2,316,436			2,116,601
		99,950,156			99,440,228
Loans in foreign currencies:
Loans		12,858,188			13,563,786
Inter-bank loans		3,610,400			3,627,654
Loans borrowed from overseas financial institutions		152,067			164,908
Off-shore loans		11,622,608			12,380,343
		28,243,263			29,736,691
Other loans:
Bills bought in foreign currency		1,864,752			1,794,860
Advances for customers on acceptances and guarantees		120,792			27,996
Privately placed corporate bonds		877,317			620,168
Others		6,001,238			5,945,758
		8,864,099			8,388,782
		137,057,518			137,565,701
Less:
Allowance for loan losses		(3,306,053	)
Present value discount		(342	)
Deferred loan origination costs and fees		6,109
	W	133,757,232

S-60

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

12.Loans Measured at Amortized Cost, Continued

(2) Changes in allowance for loan losses during thesix-month period ended June 30, 2018 are as follows:

	2018
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	226,114			1,292,255			2,030,954			3,549,323
Transfer to12-month expected credit loss		8,970			(8,970	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired loans		(87,717	)		87,717			—			—
Transfer to credit-impaired loans		(64,375	)		(157,045	)		221,420			—
Provision (reversal) for loss allowance		102,164			(299,726	)		168,203			(29,359	)
Write-offs		—			—			(97,308	)		(97,308	)
Recovery		—			—			67,687			67,687
Sale		(162	)		—			(90,627	)		(90,789	)
Debt-to-equity swap		—			—			(108,259	)		(108,259	)
Foreign currency translation		1,469			23,326			14,062			38,857
Other		1			(6,206	)		(17,894	)		(24,099	)
Ending balance	W	186,464			931,351			2,188,238			3,306,053

(3) Gains (losses) related to loans measured at amortized cost for the three-month andsix-month periods ended June 30, 2018 are as follows:

	June 30, 2018
	Three-month period ended			Six-month period ended
Reversal of allowance for loan losses	W	28,202			29,359
Losses on disposal of loan		(35,142	)		(32,632	)
	W	(6,940	)		(3,273	)

(4) Changes in net deferred loan origination costs and fees for thesix-month period ended June 30, 2018 are as follows:

	2018
Beginning balance	W	5,230
New deferrals		9,459
Amortization		(8,580	)
Ending balance	W	6,109

S-61

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

13.Loans and Allowance for Loan Losses

(1) Loans and allowance for loan losses as of December 31, 2017 are as follows:

	December 31, 2017
	Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	48,073,015			46,991,365
Loans for facility development		49,032,004			48,628,943
Loans for households		1,484,374			1,497,412
Inter-bank loans		2,173,687			1,963,261
		100,763,080			99,080,981
Loans in foreign currencies:
Loans		13,011,258			13,485,711
Inter-bank loans		1,694,398			1,696,023
Loans borrowed from overseas financial institutions		154,063			158,332
Off-shore loans		10,962,265			11,368,199
		25,821,984			26,708,265
Other loans:
Bills bought in foreign currency		2,253,141			2,191,273
Advances for customers on acceptances and guarantees		112,108			31,968
Privately placed corporate bonds		1,937,308			1,483,255
Others		9,117,599			9,025,687
		13,420,156			12,732,183
		140,005,220			138,521,429
Less:
Allowance for loan losses		(3,515,453	)
Present value discount		(215,809	)
Deferred loan origination costs and fees		5,364
	W	136,279,322

S-62

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

13.Loans and Allowance for Loan Losses, Continued

(2) Changes in allowance for loan losses for thesix-month period ended June 30, 2017 are as follows:

	2017
	Loans in Korean won												Other loans
	Loans for working capital			Loans for facility development			Others			Loans in foreign currencies			Privately placed corporate bonds			Others			Total
Beginning balance	W	1,159,738			519,942			6,742			730,848			524,215			371,919			3,313,404
Provision for loan losses		356,680			170,181			48			(244,328	)		32,323			34,056			348,960
Write-offs		(32,753	)		(21,366	)		(1,195	)		(897	)		—			(862	)		(57,073	)
Recovery		708			—			—			6,015			—			—			6,723
Sale		(64,880	)		(33,656	)		—			(6,435	)		(1,102	)		(14,169	)		(120,242	)
Debt-to-equity swap		(146,330	)		(72,604	)		—			(9,091	)		(192	)		(142,024	)		(370,241	)
Foreign exchange differences		—			—			—			(39,919	)		(9	)		(19,888	)		(59,816	)
Others		(35,375	)		(140	)		—			(4,257	)		(30,466	)		(7,606	)		(77,844	)
Ending balance	W	1,237,788			562,357			5,595			431,936			524,769			221,426			2,983,871

(3) Losses related to loans for the three-month andsix-month period ended June 30, 2017 are as follows:

	June 30, 2017
	Three-month period ended			Six-month period ended
Provision for loan losses	W	(90,666	)		(348,960	)
Gains on disposal of loan		2,295			4,652
	W	(88,371	)		(344,308	)

(4) Changes in net deferred loan origination costs and fees for thesix-month period ended June 30, 2017 are as follows:

	2017
Beginning balance	W	2,231
New deferrals		10,789
Amortization		(7,866	)
Ending balance	W	5,154

14.Derivative Financial Instruments

The Bank’s derivative financial instruments consist of trading derivatives and hedging derivatives, depending on the nature of each transaction. The Bank enters into hedging derivative transactions mainly for the purpose of hedging risk related to changes in fair values of the underlying assets and liabilities and future cash flows.

S-63

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

14.Derivative Financial Instruments, Continued

The Bank enters into trading derivative transactions such as futures, forwards, swaps and options for arbitrage transactions by speculating on the future value of the underlying asset. Derivativesheld-for trading transactions include contracts with the Bank’s clients and its liquidation position.

For the purpose of hedging the exposure to the variability of fair values and cash flows of funds in Korean won by changes in interest rate, the Bank mainly uses interest swaps or currency swaps. The main counterparties are foreign financial institutions and local banks. In addition, to hedge the exposure to the variability of fair values of bonds in foreign currencies by changes in interest rate or foreign exchange rate, the Bank mainly uses interest swaps or currency swaps.

S-64

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

14.Derivative Financial Instruments, Continued

(1) The notional amounts outstanding for derivative contracts and the carrying amounts of the derivative financial instruments as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	5,609		1,054,784		—			—
Swaps		250,837,667		250,837,667		997,155			867,577
Options		3,520,931		9,609,305		82,565			138,508
		254,364,207		261,501,756		1,079,720			1,006,085
Currency
Forwards		16,826		—		—			—
Futures		42,343,512		41,071,935		1,110,059			959,410
Swaps		46,037,550		45,732,493		1,261,335			1,262,123
Options		535,039		488,040		6,910			4,896
		88,932,927		87,292,468		2,378,304			2,226,429
Stock
Futures		13,426		—		—			—
Options		843,650		2,267,543		3,019			5,476
		857,076		2,267,543		3,019			5,476
Allowance and other adjustments		—		—		(16,341	)		(510	)
		344,154,210		351,061,767		3,444,702			3,237,480
Hedging purpose derivative financial instruments:
Interest rate(*1)
Swaps		19,495,927		19,495,927		476,676			343,030
Currency
Swaps		6,550,918		6,866,822		54,399			319,649
Allowance and other adjustments		—		—		(125	)		(5,459	)
		26,046,845		26,362,749		530,950			657,220
	W	370,201,055		377,424,516		3,975,652			3,894,700

(*1) The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until September 11, 2020.

S-65

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

14.Derivative Financial Instruments, Continued

	December 31, 2017
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate	W	263,106,943		269,454,550		1,094,066			1,048,654
Currency		95,220,871		94,686,514		4,401,846			4,371,560
Stock		706,531		1,777,606		491			2,436
Commodities		1,232		1,232		375			375
Embedded derivatives		657,821		250,000		138,350			—
Allowance and other adjustments		—		—		(6,993	)		(542	)
		359,693,398		366,169,902		5,628,135			5,422,483
Hedging purpose derivative financial instruments:
Interest rate		17,225,203		17,225,203		503,659			209,708
Currency		6,606,163		6,819,227		118,012			281,193
Allowance and other adjustments		—		—		(197	)		(5,581	)
		23,831,366		24,044,430		621,474			485,320
	W	383,524,764		390,214,332		6,249,609			5,907,803

(2) The notional amounts outstanding for the hedging instruments by period as of June 30, 2018 are as follows:

	June 30, 2018
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	216,564		860,850		2,492,541		6,223,745		9,702,227		19,495,927
Currency:
Notional amounts outstanding	W	557,173		214,473		1,789,940		3,457,093		532,239		6,550,918

(3) Details of the balances of the hedging instruments by risk type as of June 30, 2018 are as follows:

	June 30, 2018
	Notional amounts				Balances				Changes in fair  value for 2018
	Buy		Sell		Assets		Liabilities
Cash flow hedge accounting:
Interest rate risk Swaps	W	1,250,000		1,250,000		141		7,247		1,057
Fair value hedge accounting:
Interest rate risk Swaps		18,245,927		18,245,927		476,535		335,783		(256,614	)
Currency risk Swaps		6,550,918		6,866,822		54,399		319,649		(258,752	)
		24,796,845		25,112,749		530,934		655,432		(515,366	)
	W	26,046,845		26,362,749		531,075		662,679		(514,309	)

S-66

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

14.Derivative Financial Instruments, Continued

(4) Details of the balances of the hedged items by risk type as of June 30, 2018 are as follows:

	June 30, 2018
	Carrying amounts				Change in value of the hedged item						Changes in fair value for 2018			Cash  flow hedge reserve
	Assets		Liabilities		Assets			Liabilities
Cash flow hedge accounting:
Interest rate risk Debt debentures	W	—		1,250,000		—			—			—			(5,812	)
Fair value hedge accounting:
Interest rate risk Securities measured at FVOCI		1,407,540		—		(44,400	)		—			(22,917	)		—
Debt debentures		—		18,589,454		—			(587,898	)		274,272			—
Other liabilities (Deposits, etc.)		—		104,250		—			(7,920	)		6,101			—
		1,407,540		18,693,704		(44,400	)		(595,818	)		257,456			—
Currency risk Debt debentures		—		6,488,294		—			(337,082	)		263,306			—
		1,407,540		25,181,998		(44,400	)		(932,900	)		520,762			—
	W	1,407,540		26,431,998		(44,400	)		(932,900	)		520,762			(5,812	)

(5) Details of hedge ineffectiveness recognized in profit or loss from derivatives for thesix-month period ended June 30, 2018 is as follows:

	2018
	Hedge ineffectiveness recognized in profit or loss
Interest rate risk	W	842
Currency risk		4,554
	W	5,396

(6) The summary of the amounts thathave affected the statement of comprehensive income as a result of applying cash flow hedge accounting for thesix-month period ended June 30, 2018 is as follows:

	2018
	Change in the value of the hedging instrument recognized in other comprehensive income		Hedge ineffectiveness recognized in profit or loss(*1)		Amount reclassified from other comprehensive income to profit or loss(*1)
Interest rate risk	W	1,097		122		2,045

(*1) Recognized in gains or losses related to hedging purpose derivatives.

S-67

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates

(1) Investments in subsidiaries and associates as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Subsidiaries:
KDB Asia Ltd.	W	214,807		214,807
KDB Bank Europe Ltd.		151,952		151,952
KDB Ireland Ltd.		62,389		62,389
KDB Bank Uzbekistan Ltd.		47,937		47,937
Banco KDB Do Brazil S.A.		35,848		35,848
Daewoo Shipbuilding & Marine Engineering Co., Ltd.(*1)		15,124		15,124
Daehan Shipbuilding Co., Ltd.(*2)		—		—
KDB Capital Corporation		597,290		597,290
Korea BTL Financing 1		188,040		194,101
Korea Railroad Financing 1		104,503		152,692
Korea Education Financing		61,916		63,947
KDB Infrastructure Investment Asset Management Co., Ltd.		16,843		16,843
Korea Infrastructure Financing Co.(*3)		7,409		8,422
KDB Value PEF VI(*4)		617,553		599,982
KDB Consus Value PEF(*5)		411,154		110,823
KDB Sigma PEF II		129,330		129,330
KDB Value PEF VII		52,680		85,566
KDB-IAP OBOR PEF		34,140		34,140
Nvestor 2016 PEF		24,280		24,280
KDB Asia PEF		15,210		14,784
Others		2,357		3,382
		2,790,762		2,563,639
Associates:
Korea Electric Power Co., Ltd.		16,921,067		16,921,067
Korea Shipping and Maritime Transportation Co., Ltd.		500,000		452,500
Korea Tourism Organization		337,286		337,286
Korea Infrastructure Financing 2 Co.		221,306		221,468
Korea Maritime Guarantee Insurance Co., Ltd.		134,856		134,856
Korea Appraisal Board		58,492		58,492
Multi Asset Electronic Power PEF		42,638		42,997
Shinbundang Railroad Co., Ltd.(*6)		8,121		18,065
Troika Resources Investment PEF(*7)		8,996		9,035
Hyundai Merchant Marine Co., Ltd.(*8)		78,835		78,835
GM Korea Company(*9)		237,222		—
Others(*10)		1,834,357		1,911,149
		20,383,176		20,185,750
	W	23,173,938		22,749,389

S-68

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates, Continued

(*1) The Bank acquired additional 7,904,138 shares with voting rights of Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“DSME”) due todebt-to-equity swap for the year ended December 31, 2017. Considering the DSME’s financial difficulty due to a decrease in the possibility of increase in contract price for additional works and an unexpected increase in contract costs in offshore plants as objective evidence of impairment, the Bank recognizedW90,509 million of impairment losses for the years ended December 31, 2017.

(*2) The Bank recognizedW1,522 million of impairment losses for the year ended December 31, 2017, considering the decrease in the value in use of assets held due to the decline in expected cash flows as objective evidence of impairment.

(*3) The Bank recognizedW170 million andW1,977 million of impairment losses for the period ended June 30, 2018 and the year ended December 31, 2017, considering the decline in net asset values due to the decrease in fair value of assets held as objective evidence of impairment.

(*4) The Bank recognizedW517,040 million of impairment losses for the year ended December 31, 2017, considering the decrease in the value in use of cash-generating units due to the decline in expected cash flows from Daewoo Engineering & Construction Co., Ltd. as an objective evidence of impairment for the year ended December 31, 2017.

(*5) Considering the decline in the value in use of KDB Life Insurance Co., Ltd. due to reduced rates of return on investments, decline in persistency rate, and other changes in actuarial assumptions as objective evidence of impairment, the Bank recognizedW103,101 million of impairment losses for the year ended December 31, 2017.

(*6) Considering the encroachment of capital flow due to the delayed opening of railway and uncollected deposit of operating income as objective evidence of impairment, the Bank recognizedW9,944 million andW6,998 million of impairment losses for the period ended June 30, 2018 and the year ended December 31, 2017, respectively.

(*7) Considering the decrease in the value in use of assets held due to the decline in expected cash flows as an objective evidence of impairment, the Bank recognizedW39 million andW4,155 million of impairment losses for the period ended June 30, 2018 and the year ended December 31, 2017, respectively.

(*8) The Bank acquired additional 15,761,836 shares with voting rights of Hyundai Merchant Marine Co., Ltd. amounting toW78,809 million due to capital increase by allocation to stockholders for the year ended December 31, 2017.

(*9) According to Agreement of Management normalization on GM Korea Company, the Bank acquired 11,906,881 preferred shares. Additionally considering the decrease in the value in use of cash-generating units due to the decline in expected cash flows as an objective evidence of impairment, the Bank recognizedW167,291 million of impairment losses for thesix-month period ended June 30, 2018.

(*10) The Bank recognizedW39,295 million of impairment losses for KoFC KTB Frontier Champ2010-3 PEF and 10 other companies for the period ended June 30, 2018. The Bank recognizedW48,608 million of impairment losses for KoFC Mirae Asset Growth Champ2010-4 PEF and 18 other companies for the year ended December 31, 2017.

S-69

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates, Continued

(2) The market value of marketable investments in subsidiaries and associates as of June 30, 2018 and December 31, 2017 are as follows:

	Market value				Carrying amounts
	June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017
Korea Electric Power Co., Ltd.	W	6,759,528		8,058,625		16,921,067		16,921,067
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		1,612,932		830,361		15,124		15,124
Hyundai Merchant Marine Co., Ltd.		207,232		206,820		78,835		78,835
Dongbu Steel Co., Ltd.		84,544		69,229		19		13

(3) The key financial information of subsidiaries and associates invested and ownership ratios as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia Ltd.	Hong Kong	December	Finance	W	1,485,212		1,153,292		331,920			43,812		7,855			21,477			100.00
KDB Bank Europe Ltd.	Hungary	December	Finance		925,123		846,769		78,354			33,431		916			(3,222	)		100.00
KDB Ireland Ltd.	Ireland	December	Finance		450,413		365,250		85,163			12,814		2,928			5,589			100.00
KDB Bank Uzbekistan Ltd.	Uzbekistan	December	Finance		598,371		533,072		65,299			10,835		2,825			9,470			86.34
Banco KDB Do Brazil S.A.	Brazil	December	Finance		380,646		308,841		71,805			124,480		10,953			2,001			100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea	December	Manufacturing		11,308,087		7,789,269		3,518,818			4,581,884		456,761			467,498			55.72
Shinhan Heavy Industries Co., Ltd.(*1)	Korea	December	Manufacturing		324,355		294,523		29,832			119,654		953			928			89.22
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea	December	Manufacturing		274,627		236,224		38,403			59,937		5,219			5,219			100.00
Daehan Shipbuilding Co., Ltd.(*2)	Korea	December	Manufacturing		567,703		651,540		(83,837	)		259,364		(22,851	)		(22,469	)		70.04
KDB Capital Corporation	Korea	December	Specialized Credit Finance		5,497,491		4,665,580		831,911			237,177		52,079			52,824			99.92
Korea BTL Financing 1(*3)	Korea	Semi-annually	Financial investment		454,823		307		454,516			8,716		8,027			8,027			41.67
Korea Railroad Financing 1(*3)	Korea	Semi-annually	Financial investment		209,245		7		209,238			2,867		2,579			2,579			50.00
Korea Education Financing(*3)	Korea	Semi-annually	Financial investment		124,296		6		124,290			2,454		2,291			2,291			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea	December	Asset management		35,239		6,018		29,221			14,322		8,146			8,146			84.16
Korea Infrastructure Financing Co.	Korea	December	Financial investment		8,740		5		8,735			361		313			313			85.00
KDB Value PEF VI	Korea	December	Financial investment		10,594,651		8,616,901		1,977,750			5,707,610		49,445			57,653			99.84

S-70

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates, Continued

	June 30, 2018
	Country		Fiscal year end	Industry		Assets		Liabilities		Equity			Operating revenue			Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
KDB Consus Value PEF		Korea	December		Financial investment		18,036,024		17,475,377		560,647			2,017,158			1,505			(33,083	)		68.20
KDB Sigma PEF II		Korea	December		Financial investment		221,819		288		221,531			989			269			(330	)		60.00
KDB Value PEF VII(*4)		Korea	December		Financial investment		104,167		3,826		100,341			29,292			21,599			14,148			50.00
KoFC-KBIC Frontier Champ2010-5 PEF(*4)		Korea	December		Financial investment		295		—		295			1,285			1,282			1,282			50.00
KTB Korea-Australia Global Cooperation PEF		Korea	December		Financial investment		1,281		—		1,281			7			—			—			95.00
KDB Asia PEF(*4)		Korea	December		Financial investment		29,978		196		29,782			—			(2,884	)		2,772			50.00
Components and Materials M&A PEF		Korea	December		Financial investment		1,138		1,812		(674	)		2			(24	)		(24	)		83.33
KDB Venture M&A PEF		Korea	December		Financial investment		120		7,910		(7,790	)		—			—			—			57.56
KDB-IAP OBOR PEF(*4)		Korea	December		Financial investment		147,149		50,140		97,009			—			3,330			7,654			33.52
Subsidiaries:
Nvestor 2016 PEF		Korea	December		Financial investment	W	65,161		22,164		42,997			15,417			6,716			6,716			80.00
KDBC IP Investment Fund 2(*4)		Korea	December		Financial investment		9,859		3,051		6,808			624			510			510			33.33
KoFC-KDBC Pioneer Champ2010-4 Venture Investment Fund(*4)		Korea	December		Financial investment		11,194		74		11,120			1,345			(322	)		(322	)		50.00
Associates:
Korea Electric Power Co., Ltd.		Korea	December		Electricity Generation		185,786,125		114,507,734		71,278,391			29,043,203			(1,226,489	)		(1,196,851	)		32.90
Korea Shipping and Maritime Transportation Co., Ltd.		Korea	December		Transportation Leasing		974,082		127,253		846,829			21,736			(10,326	)		(47,975	)		50.00
Korea Tourism Organization		Korea	December		Culture and Tourism administration		1,382,377		336,728		1,045,649			337,613			4,082			4,081			43.58
Korea Infrastructure Financing 2 Co.		Korea	December		Financial investment		831,609		11,726		819,883			30,438			26,959			26,959			26.67
GM Korea Company(*5)		Korea	December		Manufacturing		5,845,697		3,957,129		1,888,568			4,759,763			(801,921	)		(800,603	)		17.02
Hyundai Merchant Marine Co., Ltd.(*6)		Korea	December		Foreign cargo transportation		3,542,400		3,023,937		518,463			2,350,812			(418,637	)		(398,221	)		13.13
Korea Appraisal Board		Korea	December		Appraisal		250,875		39,656		211,219			74,624			9,035			8,796			30.60
Korea Maritime Guarantee Insurance Co., Ltd.		Korea	December		Finance		334,346		21,441		312,906			5,064			868			899			41.88
Multi Asset Electronic Power PEF		Korea	December		Financial investment		83,039		754		82,285			795			739			739			50.00
Shinbundang Railroad Co., Ltd.(*7)		Korea	December		Other		740,765		976,802		(236,037	)		42,494			(18,255	)		(18,255	)		10.98
Troika Resources Investment PEF(*8)		Korea	December		Financial investment		21,813		5,373		16,440			(43	)		(1,014	)		(1,014	)		54.94

S-71

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates, Continued

	December 31, 2017
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia Ltd.	Hong Kong	December	Finance	W	1,481,387		1,171,441		309,946			76,587		22,762			(16,026	)		100.00
KDB Bank Europe Ltd.	Hungary	December	Finance		873,868		793,699		80,169			46,576		6,096			6,917			100.00
KDB Ireland Ltd.	Ireland	December	Finance		399,436		320,670		78,766			21,616		7,606			(1,212	)		100.00
KDB Bank Uzbekistan Ltd.	Uzbekistan	December	Finance		745,374		677,237		68,137			90,386		60,790			(42,187	)		86.34
Banco KDB Do Brazil S.A.	Brazil	December	Finance		363,222		293,418		69,804			140,860		10,046			1,048			100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea	December	Manufacturing		11,446,753		8,456,091		2,990,662			11,101,818		621,492			527,133			56.01
Shinhan Heavy Industries Co., Ltd.(*1)	Korea	December	Manufacturing		315,526		286,621		28,905			46,853		3,165			2,378			89.22
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea	December	Manufacturing		281,704		248,520		33,184			38,824		(3,361	)		(3,457	)		100.00
Daehan Shipbuilding Co., Ltd.(*2)	Korea	December	Manufacturing		543,676		602,057		(58,381	)		438,857		(6,352	)		(6,352	)		70.04
KDB Capital Corporation	Korea	December	Specialized Credit Finance		5,078,188		4,281,709		796,479			429,661		115,107			93,859			99.92
Korea BTL Financing 1(*3)	Korea	Semi-annually	Financial investment		469,776		321		469,455			18,526		17,072			17,072			41.67
Korea Railroad Financing 1(*3)	Korea	Semi-annually	Financial investment		309,417		12		309,405			13,879		13,040			13,040			50.00
Korea Education Financing(*3)	Korea	Semi-annually	Financial investment		128,391		7		128,384			5,011		4,668			4,668			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea	December	Asset management		38,805		6,729		32,076			25,456		13,418			13,480			84.16
Korea Infrastructure Financing Co.	Korea	December	Financial investment		9,775		6		9,769			865		751			751			85.00
KDB Value PEF VI	Korea	December	Financial investment		9,797,318		7,732,081		2,065,237			12,068,750		(458,586	)		(483,214	)		99.84
KDB Consus Value PEF	Korea	December	Financial investment		17,331,649		17,089,983		241,666			4,515,023		49,595			(14,937	)		58.08
KDB Sigma PEF II	Korea	December	Financial investment		222,435		574		221,861			2		4,595			4,525			60.00
KDB Value PEF VII(*4)	Korea	December	Financial investment		214,051		62,087		151,964			15,766		10,027			(3,105	)		50.00
KoFC-KBIC Frontier Champ2010-5 PEF(*4)	Korea	December	Financial investment		15,017		3		15,014			2,131		(294	)		18			50.00
KTB Korea-Australia Global Cooperation PEF	Korea	December	Financial investment		1,286		5		1,281			2		1,861			1,861			95.00
KDB Asia PEF(*4)	Korea	December	Financial investment		26,353		195		26,158			—		(2,619	)		(4,466	)		50.00

S-72

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15.Investments in Subsidiaries and Associates, Continued

	December 31, 2017
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Components and Materials M&A PEF	Korea	December	Financial investment		1,162		1,812		(650	)		4		(2,251	)		4,712			83.33
KDB Venture M&A PEF	Korea	December	Financial investment		120		7,910		(7,790	)		—		—			—			57.56
KDB-IAP OBOR PEF(*4)	Korea	December	Financial investment		140,592		47,894		92,698			—		(1,598	)		(8,062	)		33.52
Nvestor 2016 PEF	Korea	December	Financial investment	W	62,384		25,886		36,498			13,717		96			96			80.00
KDBC IP Investment Fund 2(*4)	Korea	December	Financial investment		9,398		3,000		6,398			2,167		2,162			1,776			33.33
KoFC-KDBC Pioneer Champ2010-4 Venture Investment Fund(*4)	Korea	December	Financial investment		11,621		179		11,442			3,410		3,227			1,571			50.00
Associates:
Korea Electric Power Co., Ltd.	Korea	December	Electricity Generation		181,788,915		108,824,274		72,964,641			59,814,862		1,298,720			1,230,194			32.90
Korea Shipping and Maritime Transportation Co., Ltd.	Korea	December	Transportation Leasing		765,050		5,122		759,928			39,671		(155,690	)		(144,956	)		50.00
Korea Tourism Organization	Korea	December	Culture and Tourism administration		1,402,083		359,898		1,042,185			732,967		20,934			17,383			43.58
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		829,503		9,885		819,618			29,627		43,704			43,704			26.67
GM Korea Company(*5)	Korea	December	Manufacturing		6,008,278		7,626,156		(1,617,878	)		10,913,237		(1,626,576	)		(1,629,680	)		17.02
Hyundai Merchant Marine Co., Ltd.(*6)	Korea	December	Foreign cargo transportation		3,602,418		2,705,498		896,920			5,028,016		(1,218,503	)		(1,325,963	)		13.13
Korea Appraisal Board	Korea	December	Appraisal		248,358		42,180		206,178			142,738		8,662			6,818			30.60
Korea Maritime Guarantee Insurance Co., Ltd.	Korea	December	Finance		331,270		19,051		312,219			14,135		(1,920	)		(1,859	)		41.88
Multi Asset Electronic Power PEF	Korea	December	Financial investment		84,417		805		83,612			847		5,833			5,833			50.00
Shinbundang Railroad Co., Ltd.(*7)	Korea	December	Other		755,225		973,007		(217,782	)		83,125		(55,814	)		(55,814	)		10.98
Troika Resources Investment PEF(*8)	Korea	December	Financial investment		30,895		4,106		26,789			3,406		3,834			3,834			54.94

(*1) The Bank consolidates directly the investee which was a subsidiary of Daewoo Shipbuilding& Marine Engineering Co., Ltd. as it has control over the investee through the commencement of the administrative proceeding for the year ended December 31, 2017.

S-73

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

15. Investments in Subsidiaries and Associates, Continued

(*2) Although the Bank’s shareholding in the investee is less than 50%, it controls the investee since it is exposed, or has right to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

(*3) The investees are financed by the Bank and managed by KDB Infrastructure Investments Asset Management Co., Ltd. They were included in the scope of consolidation even though the Bank holds less than half of the voting rights because the Bank is exposed to variable returns and has the ability to affect those returns through its power over the investee.

(*4) Although the Group’s shareholding in the investee is less than 50%, it controls the investee since it is exposed, or has right to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

(*5) Although the Bank’s shareholding in GM Korea Company is less than 20%, the equity method is applied as the Bank is considered to have significant influence over GM Korea Company by exercising rights to elect board of directors.

(*6) Although the Bank’s shareholding in Hyundai Merchant Marine Co., Ltd. is less than 20%, the Bank is considered to have significant influence as the principal creditor bank of Hyundai Merchant Marine Co., Ltd.

(*7) The shareholding is above 20% upon the consideration of shares owned by the Bank’s subsidiaries. Therefore, the Bank exercises significant influence over the associate.

(*8) Although the Bank’s shareholding in Troika Resources Investment PEF is above 50%, the Bank as joint managing member doesn’t have the ability to direct the relevant activities unilaterally.

S-74

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

16.Property and Equipment

Changes in property and equipment for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	January 1, 2018		Acquisition/ depreciation		Disposal			Reclassification		Foreign exchange differences			June 30, 2018
Acquisition cost:
Land	W	250,461		232		(63	)		922		16			251,568
Buildings and structures		388,423		3,984		(276	)		356		40			392,527
Leasehold improvements		39,870		1,104		(2,897	)		—		16			38,093
Vehicles		927		—		(108	)		—		17			836
Equipment		51,773		650		(326	)		—		211			52,308
Construction in progress		79,032		21,379		—			—		—			100,411
Others		141,822		13,520		(1,114	)		—		103			154,331
		952,308		40,869		(4,784	)		1,278		403			990,074
Accumulated depreciation:
Buildings and structures(*1)		165,607		5,745		(84	)		343		36			171,647
Leasehold improvements		31,684		1,870		(2,786	)		—		(56	)		30,712
Vehicles		860		30		(97	)		—		16			809
Equipment(*1)		42,920		1,378		(326	)		—		181			44,153
Others		112,969		6,471		(1,113	)		—		69			118,396
		354,040		15,494		(4,406	)		343		246			365,717
Accumulated impairment losses:
Land		3,023		—		—			—		—			3,023
Buildings and structures		2,361		—		—			—		—			2,361
		5,384		—		—			—		—			5,384
	W	592,884		25,375		(378	)		935		157			618,973

(*1) The amounts include government grants.

S-75

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

16.Property and Equipment, Continued

	2017
	January 1, 2017		Acquisition/ depreciation			Disposal			Reclassification			Foreign exchange differences			June 30, 2017
Acquisition cost:
Land	W	249,180		—			—			147			(5	)		249,322
Buildings and structures		381,918		721			(19	)		2,895			(11	)		385,504
Leasehold improvements		39,307		407			(570	)		—			(283	)		38,861
Vehicles		1,395		—			(90	)		—			(32	)		1,273
Equipment		50,851		673			(297	)		53			(130	)		51,150
Construction in progress		63,042		3,412			—			(2,731	)		—			63,723
Others		128,991		1,265			(57	)		—			(110	)		130,089
		914,684		6,478			(1,033	)		364			(571	)		919,922
Accumulated depreciation:
Buildings and structures(*1)		154,438		5,487			(10	)		44			(10	)		159,949
Leasehold improvements		28,982		1,932			(570	)		—			(194	)		30,150
Vehicles		1,244		45			—			—			(119	)		1,170
Equipment(*1)		40,589		1,520			(281	)		—			(96	)		41,732
Others		102,141		5,600			(57	)		—			(53	)		107,631
		327,394		14,584			(918	)		44			(472	)		340,632
Accumulated impairment losses:
Land		3,023		—			—			—			—			3,023
Buildings and structures		2,361		—			—			—			—			2,361
		5,384		—			—			—			—			5,384
	W	581,906		(8,106	)		(115	)		320			(99	)		573,906

(*1) The amounts include government grants.

S-76

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

17.Investment Property

Changes in investment property for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	January 1, 2018		Acquisition/ depreciation			Reclassification			June 30, 2018
Acquisition cost:
Land	W	58,843		—			(922	)		57,921
Buildings and structures		42,577		—			(356	)		42,221
		101,420		—			(1,278	)		100,142
Accumulated depreciation:
Buildings and structures		20,054		1,001			(343	)		20,712
Accumulated impairment losses:
Land		1,197		—			—			1,197
Buildings and structures		1,778		—			—			1,778
		2,975		—			—			2,975
	W	78,391		(1,001	)		(935	)		76,455

	2017
	January 1, 2017		Acquisition/ depreciation			Reclassification			June 30, 2017
Acquisition cost:
Land	W	60,215		—			(147	)		60,068
Buildings and structures		43,373		—			(217	)		43,156
		103,588		—			(364	)		103,224
Accumulated depreciation:
Buildings and structures		18,396		1,017			(44	)		19,369
Accumulated impairment losses:
Land		1,197		—			—			1,197
Buildings and structures		1,778		—			—			1,778
		2,975		—			—			2,975
	W	82,217		(1,017	)		(320	)		80,880

The fair value of the Bank’s investment property, as determined based on valuation by an independent appraiser, amounts toW84,433 million andW85,375 million as of June 30, 2018 and December 31, 2017, respectively. Additionally, fair value of investment in property is classified as level 3 according to the fair value hierarchy in Note 51.

S-77

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

18.Intangible Assets

Changes in intangible assets for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	January 1, 2018		Acquisition		Disposal		Amortization			Foreign exchange differences		June 30, 2018
Development expense	W	67,920		35,200		—		(6,645	)		—		96,475
Equipment usage right		626		—		—		(27	)		23		622
Other deposits provided		11,431		—		—		—			5		11,436
Others		10,525		2,734		—		(2,302	)		3		10,960
	W	90,502		37,934		—		(8,974	)		31		119,493

	2017
	January 1, 2017		Acquisition		Disposal			Amortization			Foreign exchange differences			June 30, 2017
Development expense	W	36,338		4,810		—			(7,993	)		—			33,155
Equipment usage right		791		—		(72	)		(29	)		(3	)		687
Other deposits provided		11,442		—		—			—			(2	)		11,440
Others		10,184		2,464		—			(2,958	)		(34	)		9,656
	W	58,755		7,274		(72	)		(10,980	)		(39	)		54,938

19.Other Assets

Other assets as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018			December 31, 2017
Accounts receivable	W	8,780,181			4,837,465
Unsettled domestic exchange receivables		1,382,633			2,144,474
Accrued income		547,754			453,712
Guarantee deposits		140,643			152,917
Financial guarantee asset		18,014			23,371
Prepaid expenses		3,134			3,253
Advance payments		13,884			12,244
Others		96,807			76,759
		10,983,050			7,704,195
Allowance for credit losses		(253,109	)		(236,203	)
Present value discount		(2,459	)		(2,551	)
	W	10,727,482			7,465,441

The carrying amounts of financial assets included in other assets above amounted toW10,629,350 million andW7,378,355 million as of June 30, 2018 and December 31, 2017, respectively, and their fair value amounted toW10,630,589 million andW7,382,912 million as of June 30, 2018 and December 31, 2017, respectively.

S-78

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

20.Assets Held for Sale

The Bank as the principal creditor bank of STX Engine Co., Ltd. and STX Corporation decided to sell its stake in STX Engine Co., Ltd. and STX Corporation in accordance with a resolution adopted by the council of financial creditors. During 2017, the council of financial creditors has selected UAMCO., Ltd. and AFC Korea Ltd. as the priority negotiation partners of STX Engine Co., Ltd. and STX Corporation, respectively. The sale of the Bank’s stake in STX Engine Co., Ltd. has been completed at June 28, 2018 and the sale procedure of its stake in STX Corporation is in progress as of June 30, 2018.

Assets held for sale as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Assets held for sale:
Investments in subsidiaries and associates	W	10,584		58,473

21.Financial Liabilities Measured at FVTPL

(1) Financial liabilities designated at fair value through profit or loss as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Debentures	W	1,875,975		1,583,713

Changes in fair value of structured debentures which hedge accounting are applied, are recognized in profit or loss, but structured debentures with no hedge accounting applied to, are measured at amortized costs. Therefore, such structured debentures, not applied to hedge accounting, have been designated at FVTPL to eliminate mismatch in measurements of accounting profit and loss.

(2) The difference between the carrying amount and contractual cash flow amount of financial liabilities designated at fair value through profit or loss as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Carrying amount	W	1,875,975		1,583,713
Contractual cash flow amounts		1,831,208		1,511,996
Difference	W	44,767		71,717

S-79

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

22.Deposits

Deposits as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018				December 31, 2017
	Amortized cost		Fair value		Amortized cost		Fair value
Deposits in Korean won:
Demand deposits	W	186,547		186,547		92,588		92,588
Time and savings deposits		23,983,653		24,252,911		24,736,965		24,722,973
Certificates of deposit		492,991		494,077		1,510,343		1,510,197
		24,663,191		24,933,535		26,339,896		26,325,758
Deposits in foreign currencies:
Demand deposits		766,088		766,088		1,396,322		1,396,322
Time and savings deposits		2,232,173		2,246,047		2,553,348		2,552,337
Certificates of deposit		2,435,028		2,455,772		2,388,267		2,388,049
		5,433,289		5,467,907		6,337,937		6,336,708
Off-shore deposits in foreign currencies:
Demand deposits		423,469		423,469		380,346		380,346
	W	30,519,949		30,824,911		33,058,179		33,042,812

23.Borrowings

(1) Borrowings as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.28	W	4,673,705			4,666,605
Borrowings in foreign currencies		0.05		5.45		12,441,478			12,544,416
Off-shore borrowings in foreign currencies		0.97		4.32		1,128,936			1,137,149
Others		0.15		4.70		4,450,176			4,477,551
						22,694,295			22,825,721
Deferred borrowing costs						(936	)
					W	22,693,359

S-80

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

23.Borrowings, Continued

	December 31, 2017
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.28	W	4,789,607			4,788,758
Borrowings in foreign currencies		0.05		5.50		10,573,215			10,624,837
Off-shore borrowings in foreign currencies		0.69		4.32		1,302,512			1,304,341
Others		0.01		5.30		4,307,593			4,307,428
						20,972,927			21,025,364
Deferred borrowing costs						(1,298	)
					W	20,971,629

(2) Borrowings in Korean won before adjusting for gains and losses on deferred borrowing costs as of June 30, 2018 and December 31, 2017 are as follows:

Lender	Classification	Annual interest rate (%)		June 30, 2018		December 31, 2017
Ministry of Strategy and Finance	Borrowings from government fund(*1)		1.48 ~ 1.98	W	224,485		248,829
Industrial Bank of Korea	Borrowings from IT industry promotion fund		0.10 ~ 1.00		2,777		3,183
Small & Medium Business Corp.	Borrowings from small and medium enterprise promotion fund		0.70 ~ 3.04		101,018		104,161
Ministry of Culture and Tourism	Borrowings from tourism promotion fund		0.02 ~ 2.50		2,680,227		2,563,235
Korea Energy Management Corporation	Borrowings from fund for rational use of energy		0.25 ~ 3.10		591,892		648,512
Local governments	Borrowings from local small and medium enterprise promotion fund		0.20 ~ 3.28		59,923		64,056
The Bank of Korea	Borrowings from Bank of Korea		0.50 ~ 0.75		721,949		871,314
Others	Borrowings from petroleum enterprise fund and others		0.00 ~ 3.15		291,434		286,317
				W	4,673,705		4,789,607

(*1) Borrowings from government fund are subordinated borrowings.

S-81

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

23.Borrowings, Continued

(3) Borrowings andoff-shore borrowings in foreign currencies before adjusting for gains and losses on deferred borrowing costs as of June 30, 2018 and December 31, 2017 are as follows:

Lender	Classification	Annual interest rate (%)		June 30, 2018		December 31, 2017
Japan Bank for International Cooperation (“JBIC”)	Borrowings from JBIC		1.73 ~ 2.16	W	152,067		154,063
Mizuho and others	Bank loans from foreign funds		3M Libor + 0.25 ~ 3M Libor + 0.78		1,177,785		1,285,680
Ministry of Strategy and Finance	Exchange equalization fund borrowings in foreign currencies		3M Libor + 0.22 ~ 3M Libor + 0.74		1,184,589		1,809,558
Central Bank of the Republic Uzbekistan and others	Off-shore short term borrowings		0.97 ~ 2.52		776,404		1,069,868
HSBC and others	Off-shore long term borrowings		3M Libor + 0.50 ~ 3M Libor + 0.62		336,510		214,280
JBIC	Off-shore borrowings from JBIC		4.27 ~ 4.32		16,022		18,364
Others	Short-term borrowings in foreign currencies		0.05 ~ 5.45		8,261,472		5,724,739
	Long term borrowings in foreign currencies		0.12 ~ 3.16		1,665,565		1,599,175
				W	13,570,414		11,875,727

S-82

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

24.Debentures

Debentures as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.03		6.90	W	96,248,971			96,872,791
Discount on debentures						(35,786	)
Premium on debentures						159
Valuation adjustment for fair value hedges						(243,943	)
						95,969,401
Debentures in foreign currencies:
Debentures		0.02		8.20		13,541,278			13,671,671
Discount on debentures						(31,798	)
Valuation adjustment for fair value hedges						(357,088	)
						13,152,392
Off-shore debentures:
Debentures		—		7.73		10,715,359			10,725,342
Discount on debentures						(26,061	)
Valuation adjustment for fair value hedges						(323,949	)
						10,365,349
					W	119,487,142			121,269,804

S-83

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

24.Debentures, Continued

	December 31, 2017
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		1.29		6.90	W	95,245,150			95,361,894
Discount on debentures						(47,122	)
Premium on debentures						203
Valuation adjustment for fair value hedges						(227,991	)
						94,970,240
Debentures in foreign currencies:
Debentures		0.16		8.20		12,932,807			12,599,884
Discount on debentures						(33,802	)
Valuation adjustment for fair value hedges						(345,622	)
						12,553,383
Off-shore debentures:
Debentures		—		7.73		10,628,444			10,331,998
Discount on debentures						(24,660	)
Valuation adjustment for fair value hedges						(308,425	)
						10,295,359
					W	117,818,982			118,293,776

25.Defined Benefit Liabilities

The Bank implements a defined benefit retirement pension plan based on employee compensation benefits and service periods. The plan assets are in trusts with Kookmin Bank, Samsung Life Insurance Co., Ltd., etc.

(1) Details of defined benefit liabilities as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018			December 31, 2017
Present value of defined benefit liabilities	W	360,123			343,887
Fair value of plan assets		(294,252	)		(298,240	)
	W	65,871			45,647

S-84

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

25.Defined Benefit Liabilities, Continued

(2) Changes in defined benefit liabilities for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	Present value of defined benefit liabilities			Fair value of plan assets			Defined benefit liabilities
Beginning balance	W	343,887			(298,240	)		45,647
Current service costs		19,721			—			19,721
Interest expense (income)		5,302			(4,764	)		538
Benefits paid by the plan		(8,787	)		8,752			(35	)
Ending balance	W	360,123			(294,252	)		65,871

	2017
	Present value of defined benefit liabilities			Fair value of plan assets			Defined benefit liabilities
Beginning balance	W	308,839			(265,122	)		43,717
Current service costs		19,014			—			19,014
Interest expense (income)		4,304			(3,733	)		571
Benefits paid by the plan		(6,654	)		6,635			(19	)
Others		(135	)		—			(135	)
Ending balance	W	325,368			(262,220	)		63,148

(3) Fair value of plan assets for each type as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018				December 31, 2017
	Quoted market prices		Unquoted market prices		Quoted market prices		Unquoted market Prices
Due from banks	W	—		294,252		—		298,240

(4) Defined benefit costs recognized in profit or loss for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018				June 30, 2017
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Current service costs	W	9,853		19,721		9,608		19,014
Interest expense (income), net		270		538		88		571
	W	10,123		20,259		9,696		19,585

S-85

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

25.Defined Benefit Liabilities, Continued

(5) The principal actuarial assumptions used as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Discount rate (%)		3.25		3.25
Future salary increasing rate (%)		6.50		6.50

(6) The present value sensitivity of defined benefit liabilities as changes in principal actuarial assumptions as of December 31, 2017 is as follows:

	Sensitivity
	1% increase in assumption		1% decrease in assumption
Discount rate		9.44% decrease		11.20% increase
Future salary increasing rate		10.72% increase		9.25% decrease

(7) The weighted average duration of defined benefit liabilities is 11.14 years as of December 31, 2017.

26.Provisions

(1) Changes in provisions for the years ended June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Provision for payment guarantees	W	508,343		445,946
Provision for unused commitments		162,022		135,321
Financial guarantee provision		652,321		638,222
Lawsuit provision		14,369		135,497
Other provision		7,786		8,965
	W	1,344,841		1,363,951

(2) Changes in provision for unused commitments during thesix-month period ended June 30, 2018 are as follows:

	2018
				Lifetime expected credit losses
	12-month expected credit loss			Noncredit- impaired			Credit- impaired			Total
Beginning balance	W	17,718			447,095			19			464,832
Transfer to12-month expected credit loss		301,922			(301,922	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(7,000	)		7,000			—			—
Provision for (reversal of) unused commitments		(5,081	)		33,966			(19	)		28,866
Foreign currency translation		13,931			714			—			14,645
Ending balance	W	321,490			186,853			—			508,343

S-86

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

26.Provisions, Continued

(3) Changes of financial guarantee provision during thesix-month period ended June 30, 2018 are as follows:

	2018
				Lifetime expected credit losses
	12-month expected credit loss			Noncredit- impaired			Credit- impaired			Total
Beginning balance	W	1,763			72,267			73,458			147,488
Transfer to12-month expected credit loss		363			(295	)		(68	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(496	)		548			(52	)		—
Transfer to credit-impaired exposures		—			(7,277	)		7,277			—
Provision for (reversal of) unused commitments		180			2,357			9,502			12,039
Foreign currency translation		6			2,191			298			2,495
Ending balance	W	1,816			69,791			90,415			162,022

(4) Changes in provision for payment guarantees during thesix-month period ended June 30, 2018 are as follows:

	2018
				Lifetime expected credit losses
	12-month expected credit loss			Noncredit- impaired			Credit- impaired			Total
Beginning balance	W	9,512			426,421			208,078			644,011
Transfer to12-month expected credit loss		114,022			(114,022	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(778	)		778			—			—
Transfer to credit-impaired exposures		(5,899	)		(2,670	)		8,569			—
Provision for (reversal of) unused commitments		66,340			(62,716	)		(17,068	)		(13,444	)
Foreign currency translation		3,734			10,739			7,281			21,754
Ending balance	W	186,931			258,530			206,860			652,321

(5) Changes of lawsuit provision and other provision during thesix-month period ended June 30, 2018 are as follows:

	2018
	Lawsuit provision			Other provision
Beginning balance	W	135,497			8,965
Provision used		(121,128	)		(1,179	)
Ending balance	W	14,369			7,786

S-87

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

26.Provisions, Continued

(6) Changes in provisions for thesix-month period ended June 30, 2017 are as follows:

	2017
	Provision for payment guarantees			Provision for unused commitments			Financial guarantee provision			Lawsuit provision			Other provision			Total
Beginning balance	W	835,766			195,431			35,935			129,342			4,776			1,201,250
Increase (reversal) of provision		(146,658	)		160,003			17,390			(3,120	)		—			27,615
Provision used		—			—			—			(15,276	)		(2,511	)		(17,787	)
Foreign exchange differences		(41,569	)		(6,184	)		(13	)		—			—			(47,766	)
Ending balance	W	647,539			349,250			53,312			110,946			2,265			1,163,312

(7) Provision for payment guarantees and financial guarantee provision

Confirmed acceptances and guarantees, unconfirmed acceptances and guarantees and bills endorsed are not recognized on the statement of financial position, but are disclosed asoff-statement of financial position items in the notes to the financial statements. The Bank provides a provision for suchoff-statement of financial position items, applying a Credit Conversion Factor (CCF) and provision rates under the Bank’s expected credit loss model, and records the provision as a reserve for expected credit losses on acceptances and guarantees.

In the case of financial guarantee contracts, when the amount calculated using the same method as above is greater than the initial amount less amortization of fees recognized, the difference is recorded as a financial guarantee provision.

(8) Provision for unused commitments

The Bank records a provision for a certain portion of unused credit lines which is calculated using a CCF as provision for unused commitments applying provision rates under the Bank’s expected credit loss model.

(9) Provision for possible losses from lawsuits

As of June 30, 2018, the Bank is involved in 28 lawsuits as a plaintiff and 29 lawsuits as a defendant. The aggregate amounts of claims as a plaintiff and a defendant amounted toW316,729 million andW191,324 million, respectively. The Bank provided a provision against contingent loss from pending lawsuits as of June 30, 2018 and additional losses may be incurred depending on the result of pending lawsuits.

S-88

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

26.Provisions, Continued

Major lawsuits in progress as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1sttrial in progress
Korea Credit Guarantee Fund	Claim for damages		60,100	1sttrial ruled against the Bank; 2ndtrial in progress
Korea Trade Insurance Corporation	Short-term export credit insurance		34,209	1sttrial ruled against the Bank; 2ndtrial in progress
Hyundai Engineering & Construction Co., Ltd. and two others	Claim for refund of special agreement settlement		27,180	1sttrial ruled in favor of the Bank; 2ndtrial in progress
Gyeonggi Urban Innovation Corp.	Claim for refund of investments		19,100	1st,2ndtrial ruled partially in favor of the Bank; 3rdtrial in progress
Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1sttrial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1sttrial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1sttrial in progress
KAMCO 8th JV Securitization Specialty Co., Ltd.	Claim for refund of impairment sale payment		13,898	1sttrial ruled partially against the Bank, 2ndtrial in progress

S-89

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

26.Provisions, Continued

	December 31, 2017
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1sttrial in progress
Korea Credit Guarantee Fund	Claim for damages		60,100	1sttrial ruled against the Bank; 2ndtrial in progress
Korea Trade Insurance Corporation	Short-term export credit insurance		34,209	1sttrial ruled against the Bank; 2ndtrial in progress
Hyundai Engineering & Construction Co., Ltd. and two others	Claim for refund of special agreement settlement		27,180	1sttrial ruled in favor of the Bank; 2ndtrial in progress
Gyeonggi Urban Innovation Corp.	Claim for refund of investments		19,100	1st,2ndtrial ruled partially in favor of the Bank; 3rdtrial in progress
Defendant:
Hanhwa Chemical Co., Ltd.	Performance guarantee		322,593	Retrial in progress after quashing
Shinhan Bank and one other	Claim for damages		58,474	1sttrial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1sttrial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1sttrial in progress
KAMCO 8th JV Securitization Specialty Co., Ltd.	Claim for refund of impairment sale payment		13,898	1sttrial ruled partially against the Bank, 2ndtrial in progress

(10) Other provision

The Bank recognised other provision as a reserve for other miscellaneous purpose.

S-90

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

27.Other Liabilities

Other liabilities as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018			December 31, 2017
Accounts payable	W	8,537,672			4,580,635
Accrued expense		1,954,145			1,729,336
Advance receipts		127			—
Unearned income		40,083			37,919
Deposits withholding tax		18,657			26,735
Guarantee money received		233,308			393,869
Foreign exchanges payable		28,397			77,289
Domestic exchanges payable		271,310			238,958
Borrowing from trust accounts		1,275,969			1,062,609
Financial guarantee liability		24,063			28,969
Others		58,601			325,444
		12,442,332			8,501,763
Present value discount		(288	)		(266	)
	W	12,442,044			8,501,497

The carrying amount of financial liabilities included in other liabilities above amounted toW12,326,826 million andW8,133,810 million as of June 30, 2018 and December 31, 2017, respectively, and their fair value amounted toW12,326,831 million andW8,133,787 million as of June 30, 2018 and December 31, 2017, respectively.

28.Equity

(1) Issued capital

The Bank is authorized to issue up to 6,000 million shares of common stock and has 3,621,619,768 shares issued and 3,587,619,768 shares issued as of June 30, 2018 and December 31, 2017, respectively, and outstanding with a total par value ofW 18,108,099 million andW17,983,099 million as of June 30, 2018 and December 31, 2017, respectively.

(2) Capital surplus

Capital surplus as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Paid-in capital in excess of par value	W	62,317		63,133
Surplus from capital reduction(*1)		44,373		44,373
Other capital surplus(*2)		2,390,495		2,390,495
	W	2,497,185		2,498,001

(*1) The Bank reducedW5,178,600 million of its issued capital in 1998 and 2000 to offset its accumulated deficit amounting toW5,134,227 million. As the result of the capital reduction,W44,373 million of surplus exceeding accumulated deficit was recorded in capital surplus in equity.

S-91

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

28.Equity, Continued

(*2) The difference in the amount of shares issued and the carrying value of net asset acquired occurring from the merger of the Bank with KDB Financial Group Inc. and Korea Finance Corporation are recognized as other capital surplus.

(3) Accumulated other comprehensive income

(i) Accumulated other comprehensive income as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018			December 31, 2017
Net gain (loss) on securities measured at FVOCI
Valuation gain (loss) on securities measured at FVOCI (before tax)	W	125,122			—
Loss allowance for securities measured at FVOCI (before tax)		79,560			—
Income tax effect		(56,287	)		—
		148,395			—
Valuation gain onavailable-for-sale financial assets:
Valuation gain onavailable-for-sale financial assets (before tax)		—			683,258
Income tax effect		—			(187,896	)
		—			495,362
Exchange differences on translation of foreign operations:
Exchange differences on translation of foreign operations (before tax)		(30,221	)		(69,467	)
Income tax effect		—			—
		(30,221	)		(69,467	)
Valuation loss on cash flow hedge:
Valuation loss on cash flow hedge (before tax)		(5,812	)		(6,910	)
Income tax effect		1,598			1,900
		(4,214	)		(5,010	)

	June 30, 2018			December 31, 2017
Remeasurements of defined benefit liabilities:
Remeasurements of defined benefit liabilities (before tax)	W	21,881			21,881
Income tax effect		(6,017	)		(6,017	)
		15,864			15,864
Fair value changes on financial liabilities designated at fair value due to credit risk
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk (before tax)		12,854			—
Income tax effect		(3,535	)		—
		9,319			—
	W	139,143			436,749

S-92

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

28.Equity, Continued

(ii) Changes in accumulated other comprehensive income for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	January 1, 2018			Increase (Decrease)			Tax Effect			June 30, 2018
Gain on Securities Measured at FVOCI	W	161,165			(17,620	)		4,850			148,395
Exchange differences on translation of foreign operations		(69,420	)		39,199			—			(30,221	)
Valuation loss on cash flow hedge		(5,009	)		1,097			(302	)		(4,214	)
Remeasurements of defined benefit liabilities		15,864			—			—			15,864
Valuation gain on financial liabilities designated at fair value due to credit risk		9,520			(277	)		76			9,319
	W	112,120			22,399			4,624			139,143
	2017
	January 1, 2017			Increase (Decrease)			Tax Effect			June 30, 2017
Valuation gain onavailable-for-sale financial assets	W	1,185,168			(828,014	)		200,379			557,533
Exchange differences on translation of foreign operations		22,169			(42,157	)		—			(19,988	)
Valuation loss on cash flow hedge		(13,000	)		3,838			(929	)		(10,091	)
Remeasurements of defined benefit liabilities		19,128			—			—			19,128
	W	1,213,465			(866,333	)		199,450			546,582

(4) Retained earnings

In accordance with the Korea Development Bank Act, the Bank is required to appropriate at least 40% of net income as a legal reserve. This reserve can be transferred topaid-in capital or offset an accumulated deficit.

In accordance with theKorea Development Bank Act, the Bank offsets an accumulated deficit with reserves. If the reserve is insufficient to offset the accumulated deficit, the Korean government is responsible for the deficit.

(i) Retained earnings as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Legal reserve	W	173,913		—
Voluntary reserve
Regulatory reserve for loan losses		1,372,030		1,308,500
Unappropriated retained earnings		870,653		434,782
	W	2,416,596		1,743,282

S-93

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

28.Equity, Continued

(ii) Changes in legal reserve for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018		2017
Beginning balance	W	—		3,578,770
Transfer from retained earnings		173,913		—
Coverage of deficits		—		(3,578,770	)
Ending balance	W	173,913		—

(iii) Changes in unappropriated retained earnings (accumulated deficits) for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018			2017
Beginning balance	W	434,782			(3,641,098	)
Changes in accounting policy		290,907			—
Transfer from (contribution to) legal reserve		(173,913	)		3,578,770
Transfer from (contribution to) regulatory reserve for credit losses		(63,530	)		62,328
Dividends		(147,092	)		—
Reclassification of gain or loss on equity securities measured at FVOCI		9,191			—
Profit for the period		520,308			1,273,108
Ending balance	W	870,653			1,273,108

(5) Regulatory reserve for credit losses

The Bank is required to provide a regulatory reserve for credit losses in accordance with Regulations on Supervision of Banking Business 29(1) and (2). The details of regulatory reserve for credit losses are as follows:

(i) Regulatory reserve for credit losses as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018			December 31, 2017
Beginning balance	W	1,372,030			1,308,500
Planned provision for (reversal of) reserve for credit losses
Changes in accounting policy		(8,262	)		—
Planned provision for (reversal of) reserve for credit losses		(197,998	)		63,530
		(206,260	)		63,530
Ending balance	W	1,165,770			1,372,030

S-94

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

28.Equity, Continued

(ii) Required reversal of regulatory reserve for credit losses and profit (loss) after adjusting regulatory reserve for loan losses for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018					June 30, 2017
	Three-month period ended			Six-month period ended		Three-month period ended			Six-month period ended
Profit for the period	W	43,303			520,308		582,947			1,273,108
Obligated amount of provision for regulatory reserve for credit losses		(547,826	)		197,998		(45,072	)		(270,706	)
Profit (loss) after adjusting regulatory reserve for credit losses	W	(504,523	)		718,306		537,875			1,002,402
Earnings (loss) per share after adjusting regulatory reserve for credit losses (in won)	W	(140	)		200		152			285

29.Net Interest Income

Net interest income for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income:
Due from banks	W	21,601			38,313			11,096			21,116
Securities measured at FVTPL		11,318			20,965			—			—
Financial assets held for trading		—			—			12,786			26,723
Securities measured at FVOCI		101,394			201,159			—			—
Available-for-sale financial assets		—			—			101,617			211,746
Loans measured at amortized cost		5,405			9,304			—			—
Held-to-maturity financial assets		—			—			50			246
Loans measured at FVTPL		9,621			17,135			—			—
Loans measured at amortized cost		1,128,037			2,204,925			—			—
Loans		—			—			1,082,246			2,140,798
		1,277,376			2,491,801			1,207,795			2,400,629
Interest expense:
Financial liabilities measured at FVTPL		(22,933	)		(37,462	)		(18,008	)		(35,992	)
Deposits		(121,574	)		(241,887	)		(119,252	)		(240,031	)
Borrowings		(108,320	)		(200,256	)		(70,495	)		(136,995	)
Debentures		(713,320	)		(1,375,653	)		(629,498	)		(1,291,365	)
		(966,147	)		(1,855,258	)		(837,253	)		(1,704,383	)
	W	311,229			636,543			370,542			696,246

S-95

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

29.Net Interest Income, Continued

Interest received from impaired assets relating to loans measured at amortized cost and loans for thesix-month periods ended June 30, 2018 and 2017 wereW25,666 million andW88,690 million, respectively, and there was no interest received from impaired assets related to financial assets other than loans.

30.Net Fees and Commission Income

Net fees and commission income for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Fees and commission income:
Loan commissions	W	35,562			69,944			45,464			88,792
Underwriting and investment consulting commissions		17,672			33,874			55,877			80,937
Brokerage and agency commissions		1,491			2,844			2,018			3,648
Trust and retirement pension plan commissions		5,510			14,767			7,261			11,560
Fees on asset management		805			1,796			608			889
Other fees		14,770			24,681			12,531			37,981
		75,810			147,906			123,759			223,807
Fees and commission expenses:
Brokerage and agency fees		(2,697	)		(4,875	)		(2,973	)		(5,472	)
Other fees		(6,430	)		(10,390	)		(5,768	)		(10,507	)
		(9,127	)		(15,265	)		(8,741	)		(15,979	)
	W	66,683			132,641			115,018			207,828

31. Dividend Income

Dividend income for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018				June 30, 2017
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Securities measured at FVTPL	W	31,633		53,528		—		—
Financial assets held for trading		—		—		109		109
Securities measured at FVOCI		1,497		127,409		—		—
Available-for-sale financial assets		—		—		28,548		169,378
Investments in subsidiaries and associates		61,476		352,532		18,542		537,188
	W	94,606		533,469		47,199		706,675

S-96

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

32.Net Gain on Securities Measured at FVTPL

Net gain related to securities measured at FVTPL for the three-month andsix-month periods ended June 30, 2018 are as follows:

	June 30, 2018
	Three-month period ended			Six-month period ended
Gains on securities measured at FVTPL:
Gains on sale	W	17,975			35,316
Gains on valuation		64,028			124,763
		82,003			160,079
Losses on securities measured at FVTPL:
Losses on sale		(17,864	)		(35,411	)
Losses on valuation		(40,992	)		(82,610	)
Purchase related expense		(41	)		(76	)
		(58,897	)		(118,097	)
	W	23,106			41,982

33. Net Loss on Financial Assets Held for Trading

Net loss related to financial assets held for trading for the three-month andsix-month periods ended June 30, 2017 are as follows:

	June 30, 2017
	Three-month period ended			Six-month period ended
Gains on financial assets held for trading:
Gains on sale	W	3,921			6,097
Gains on valuation		62			457
		3,983			6,554
Losses on financial assets held for trading:
Losses on sale		(4,926	)		(8,602	)
Losses on valuation		(3,368	)		(7,686	)
Purchase related expense		(56	)		(96	)
		(8,350	)		(16,384	)
	W	(4,367	)		(9,830	)

S-97

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

34.Net Gain (Loss) on Financial Liabilities Measured at FVTPL

Net gain (loss) related to financial liabilities designated at fair value through profit or loss (“FVTPL”) for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on financial liabilities measured at FVTPL:
Gains on redemption	W	—			—			1,099			1,099
Gains on valuation		(5,572	)		28,671			—			26,312
		(5,572	)		28,671			1,099			27,411
Losses on financial liabilities measured at FVTPL:
Losses on valuation		(121	)		(1,484	)		(4,266	)		(139	)
	W	(5,693	)		27,187			(3,167	)		27,272

35.Net Loss on Securities Measured at FVOCI

Net loss related to securities measured at FVOCI for the three-month andsix-month periods ended June 30, 2018 are as follows:

	June 30, 2018
	Three-month period ended			Six-month period ended
Gains on securities measured at FVTPL:
Gains on sale	W	4,718			7,594
Reversal of impairment losses		1,334			7,286
		6,052			14,880
Losses on securities measured at FVTPL:
Losses on sale		(6,147	)		(14,678	)
Impairment losses		—			(3,389	)
		(6,147	)		(18,067	)
	W	(95	)		(3,187	)

S-98

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

36.Net Gain onAvailable-for-Sale Financial Assets

Net gain onavailable-for-sale financial assets for the three-month andsix-month periods ended June 30, 2017 and are as follows:

	June 30, 2017
	Three-month period ended			Six-month period ended
Gains onavailable-for-sale financial assets:
Gains on sale	W	875,212			905,533
Reversal of impairment losses		—			1,620
		875,212			907,153
Losses onavailable-for-sale financial assets:
Losses on sale		(9,289	)		(25,537	)
Impairment losses		(20,141	)		(107,017	)
		(29,430	)		(132,554	)
	W	845,782			774,599

37.Net Gain (Loss) on Derivatives

Net gain (loss) on derivatives for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain on trading purpose derivatives:
Gains on trading purpose derivatives:
Interest	W	447,844			1,274,691			481,054			1,111,621
Currency		3,244,736			4,788,173			60,581			5,639,419
Stock		5,632			13,836			9,961			15,583
Commodity		—			743			1,471			3,797
Embedded derivatives		—			638			29,984			124,723
Gains on adjustment of derivatives		752			1,790			—			38,295
		3,698,964			6,079,871			583,051			6,933,438
Losses on trading purpose derivatives:
Interest		(402,637	)		(1,221,075	)		(479,663	)		(1,119,783	)
Currency		(2,997,791	)		(4,618,991	)		—			(5,739,583	)
Stock		(2,531	)		(12,506	)		(9,703	)		(14,308	)
Commodity		—			(743	)		(1,471	)		(3,797	)
Embedded derivatives		—			—			(145	)		(6,478	)
Losses on adjustment of derivatives		(13,290	)		(14,676	)		(17,987	)		(8,765	)
		(3,416,249	)		(5,867,991	)		(508,969	)		(6,892,714	)
		282,715			211,880			74,082			40,724

S-99

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

37.Net Gain (Loss) on Derivatives, Continued

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on hedging purpose derivatives:
Gains on hedging purpose derivatives:
Interest		16,270			29,706			55,360			68,260
Currency		—			122,971			233,073			506,697
Gains on adjustment of derivatives		72			178			5,809			5,959
		16,342			152,855			294,242			580,916
Losses on hedging purpose derivatives:
Interest		(53,204	)		(286,365	)		(7,123	)		(61,737	)
Currency		(414,841	)		(411,411	)		(97,209	)		(126,244	)
Losses on adjustment of derivatives		(94	)		(224	)		(103	)		(252	)
		(468,139	)		(698,000	)		(104,435	)		(188,233	)
		(451,797	)		(545,145	)		189,807			392,683
Net gain (loss) on fair value hedged items:
Gains on fair value hedged items:
Gains on valuation		81,622			358,758			—			143,224
Gains on redemption		174,663			176,330			82,382			107,396
		256,285			535,088			82,382			250,620
Losses on fair value hedged items:
Losses on valuation		—			(147,628	)		(403,791	)		(138,263	)
Losses on redemption		(165,768	)		(169,307	)		(71,611	)		(91,519	)
		(165,768	)		(316,935	)		(475,402	)		(229,782	)
		90,517			218,153			(393,020	)		20,838
	W	(78,565	)		(115,112	)		(129,131	)		454,245

Related with cash flow hedge, the Bank recognizedW122 million of gain andW265 million of loss in the statement of comprehensive income as the ineffective portion for the period ended June 30, 2018 and 2017, respectively.

S-100

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

38.Net Foreign Currency Transaction Gain (Loss)

Net foreign currency transaction gain (loss) for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on foreign exchange transactions:
Gains on foreign exchange transactions	W	112,682			254,923			194,312			388,271
Losses on foreign exchange transactions		(104,278	)		(239,211	)		(192,645	)		(373,114	)
		8,404			15,712			1,667			15,157
Net gain (loss) on foreign exchange translations:
Gains on foreign exchange translations		1,061,238			1,440,054			132,520			1,803,698
Losses on foreign exchange translations		(969,304	)		(1,288,474	)		—			(1,989,601	)
		91,934			151,580			132,520			(185,903	)
	W	100,338			167,292			134,187			(170,746	)

39.Other Operating Expense, net

Other operating income and expense for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018				June 30, 2017
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Other operating income:
Gains on sale of loans	W	15,197		17,986		117,328		124,302
Gains on disposal of loans measured at FVTPL		6,523		6,523		—		—
Gains on valuation of loans measured at FVTPL		62,785		72,790		—		—
Gains on disposal of investments in subsidiaries and associates		437		374		863		2,707
Reversal of provisions		—		—		1,651		3,120
Others		1,295		2,728		1,286		3,156
		86,237		100,401		121,128		133,285

S-101

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

39.Other Operating Expense, net, Continued

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other operating expenses:
Losses on sale of loans		(50,339	)		(50,618	)		(115,033	)		(119,650	)
Losses on disposal of loans measured at FVTPL		(9,923	)		(11,491	)		—			—
Losses on valuation of loans measured at FVTPL		—			(9,993	)		—			—
Losses on disposal of investments in subsidiaries and associates		—			(10	)		(343	)		(729	)
Insurance expenses		(11,569	)		(23,511	)		(12,538	)		(25,519	)
Credit guarantee fund salary		(34,629	)		(69,090	)		(33,979	)		(67,268	)
Educational taxes		(6,868	)		(15,433	)		(11,081	)		(21,072	)
Foreign security contributions		(3,453	)		(5,692	)		(4,577	)		(6,591	)
Others		(4,799	)		(9,172	)		(6,431	)		(12,681	)
		(121,580	)		(195,010	)		(183,982	)		(253,510	)
	W	(35,343	)		(94,609	)		(62,854	)		(120,225	)

40.Provision for Credit Losses

Provision for (reversal of) credit losses for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Provision for (reversal of) loss allowance	W	(28,202	)		(29,359	)		90,666			348,960
Provision for (reversal of) other assets		(6,289	)		11,784			7,466			49,710
Provision for (reversal of) unused commitments		(24,861	)		28,866			114,363			160,003
Financial guarantee provision		8,551			12,039			2,569			17,390
Provision for (reversal of) payment guarantees		20,101			(13,444	)		(40,654	)		(146,658	)
	W	(30,700	)		9,886			174,410			429,405

S-102

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

41.General and Administrative Expenses

General and administrative expenses for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018				June 30, 2017
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Payroll costs:
Short-term employee benefits	W	75,376		160,506		73,290		153,726
Defined benefit costs		10,123		20,259		9,696		19,585
Defined contribution costs		302		1,136		174		627
		85,801		181,901		83,160		173,938
Depreciation and amortization:
Depreciation of property and equipment		7,970		15,494		7,265		14,584
Amortization of intangible assets		4,575		8,974		5,175		10,980
		12,545		24,468		12,440		25,564
Other:
Employee welfare benefits		7,751		14,901		8,809		15,444
Rent expenses		7,187		14,470		7,006		14,245
Taxes and dues		4,493		9,596		3,922		9,603
Advertising expenses		3,915		5,520		5,482		6,750
Electronic data processing expenses		14,318		25,755		11,359		24,792
Fees and charges		5,761		10,401		6,431		10,974
Others		9,059		16,405		9,284		17,200
		52,484		97,048		52,293		99,008
	W	150,830		303,417		147,893		298,510

42.OtherNon-Operating Income and Expense

Othernon-operating income and expense for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018					June 30, 2017
	Three-month period ended			Six-month period ended		Three-month period ended		Six-month period ended
Othernon-operating income:
Gain on disposal ofnon-current assets held for sale	W	26,216			26,216		—		9,297
Gain on disposal of property and equipment		88			88		15		15
Rental income on investment property		305			475		265		424
Others		(114	)		2,185		171		1,437
		26,495			28,964		451		11,173

S-103

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

42.OtherNon-Operating Income and Expense, Continued

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Othernon-operating expenses:
Losses on disposal ofnon-current assets held for sale		—			—			—			(102	)
Losses on disposal of property and equipment		(123	)		(124	)		(33	)		(34	)
Depreciation of investment property		(502	)		(1,001	)		(509	)		(1,017	)
Donations		(3,800	)		(3,942	)		(220	)		(368	)
Others		(92	)		(550	)		(4,216	)		(4,803	)
		(4,517	)		(5,617	)		(4,978	)		(6,324	)
	W	21,978			23,347			(4,527	)		4,849

43.Income Tax Expense

(1) Income tax expense for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Current income tax (*1)	W	4,418			160,224			271,997			345,150
Changes in deferred income taxes on temporary differences		106,456			136,661			(158,152	)		(105,051	)
Deferred income tax recognized directly to equity
Other comprehensive income		9,674			4,624			159,246			199,450
Retained earnings		(2,306	)		(2,306	)		—			—
Income tax expense	W	118,242			299,203			273,091			439,549

(*1) Includes changes such as those that arise from final tax returns.

S-104

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

43.Income Tax Expense, Continued

(2) Profit before income taxes and income tax expense for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018			2017
Profit before income taxes	W	819,511			1,712,657
Income taxes calculated using enacted tax rates		225,366			414,232
Adjustments:
Non-deductible losses andtax-free gains		(31,894	)		(58,569	)
Non-recognition effect of deferred income taxes		66,831			112,675
Net adjustments for prior years		26,304			(27,261	)
Others		12,596			(1,528	)
		73,837			25,317
Income tax expense	W	299,203			439,549
Effective tax rate (%)		36.51			25.66

(3) Changes in deferred income taxes recognized directly to equity for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	June 30, 2018						January 1, 2018
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain on securities measured at FVOCI		148,395			(56,287	)		161,165			(61,137	)		4,850
Exchange differences on translation of foreign operations		(30,221	)		—			(69,420	)		—			—
Losses on valuation of cash flow hedge		(4,214	)		1,598			(5,009	)		1,900			(302	)
Remeasurements of defined benefit liabilities		15,864			(6,017	)		15,864			(6,017	)		—
Fair value changes on financial liabilities designated at fair value due to credit risk		9,319			(3,535	)		9,520			(3,611	)		76
	W	139,143			(64,241	)		112,120			(68,865	)		4,624

	2017
	June 30, 2017						January 1, 2017
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Gains on valuation ofavailable-for-sale financial assets	W	557,533			(177,999	)		1,185,168			(378,378	)		200,379
Exchange differences on translation of foreign operations		(19,988	)		—			22,169			—			—
Losses on valuation of cash flow hedge		(10,091	)		3,221			(13,000	)		4,150			(929	)
Remeasurements of defined benefit liabilities		19,128			(6,107	)		19,128			(6,107	)		—
	W	546,582			(180,885	)		1,213,465			(380,335	)		199,450

S-105

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

44.Earnings per Share

(1) Basic earnings per share

The Bank’s basic earnings per share for the three-month andsix-month periods ended June 30, 2018 and 2017 are computed as follows:

(i) Basic earnings per share

	June 30, 2018				June 30, 2017
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Profit attributable to ordinary shareholders of the Bank (A) (in won)	W	43,303,566,965		520,308,273,391		582,946,421,590		1,273,107,907,882
Weighted-average number of ordinary shares outstanding (B)		3,590,982,405		3,589,310,376		3,529,498,889		3,519,117,006
Basic earnings per share (A/B) (in won)	W	12		145		165		362

(ii) Weighted-average number of ordinary shares outstanding

	2018
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		3,587,619,768		91		326,473,398,888
Increasedpaid-in capital (B)		34,000,000		9		306,000,000
Cumulative shares (C = A+B)						326,779,398,888
Weighted-average number of ordinary shares outstanding (C/91)						3,590,982,405
Six-month period ended:
Number of ordinary shares outstanding (A)		3,587,619,768		181		649,359,178,008
Increasedpaid-in capital (B)		34,000,000		9		306,000,000
Cumulative shares (C = A+B)						649,665,178,008
Weighted-average number of ordinary shares outstanding (C/181)						3,589,310,376

S-106

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

44.Earnings per Share, Continued

	2017
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		3,508,619,768		91		319,284,398,888
Increasedpaid-in capital (B)		50,000,000		38		1,900,000,000
Cumulative shares (C = A+B)						321,184,398,888
Weighted-average number of ordinary shares outstanding (C/91)						3,529,498,889
Six-month period ended:
Number of ordinary shares outstanding (A)		3,508,619,768		181		635,060,178,008
Increasedpaid-in capital (B)		50,000,000		38		1,900,000,000
Cumulative shares (C = A+B)						636,960,178,008
Weighted-average number of ordinary shares outstanding (C/181)						3,519,117,006

(2) Diluted earnings per share

Diluted and basic earnings per share for the three-month andsix-month periods ended June 30, 2018 and 2017 are equal because there is no potential dilutive instrument.

45.Pledged Assets

Assets pledged by the Bank as collateral as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018				December 31, 2017
	Pledged assets		Related liabilities		Pledged assets		Related liabilities
Securities measured at FVOCI (*1)	W	7,821,259		4,503,812		—		—
Securities measured at amortized cost (*1)		819,148		167,193		—		—
Available-for-sale financial assets (*1)		—		—		8,472,566		4,339,565
	W	8,640,407		4,671,005		8,472,566		4,339,565

(*1) Pledged as collateral related to bonds sold under repurchase agreements and borrowings.

S-107

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

46.Guarantees and Commitments

Guarantees and commitments as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Confirmed acceptances and guarantees:
Acceptances in foreign currency	W	597,526		399,219
Guarantees for bond issuance		1,726,675		1,817,983
Guarantees for loans		431,634		664,148
Letter of guarantee		57,236		37,105
Guarantees foron-lending debt		20,131		28,272
Others		5,061,141		4,856,801
		7,894,343		7,803,528
Unconfirmed acceptances and guarantees:
Letter of credit		2,184,251		2,080,609
Others		1,702,766		1,397,251
		3,887,017		3,477,860
Commitments:
Commitments on loans		27,051,241		4,176,745
Others		2,166,701		2,180,792
		29,217,942		6,357,537
Bills endorsed:
With recourse		4,018		3,028
	W	41,003,320		17,641,953

47.Trust Accounts

(1) Trust accounts as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Accrued trust fee	W	28,636		25,581
Deposits		9,965		13,625
Borrowings from trust accounts		1,050,931		1,008,213
Accrued interest on deposits		1,187		1,383

S-108

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

47.Trust Accounts, Continued

(2) Transactions with trust accounts for the three-month andsix-month periods ended June 30, 2018 and 2017 are as follows:

	June 30, 2018						June 30, 2017
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Trust management fee	W	5,024			13,569			6,782			10,379
Interest expenses on deposits		(74	)		(153	)		(267	)		(554	)
Interest expenses of borrowings from trust accounts		(4,225	)		(8,544	)		(3,684	)		(6,083	)

(3) The carrying amounts of principals guaranteed money trust and principals and interest guaranteed money trust as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Principals guaranteed money trust	W	259,397		266,278
Principals and interest guaranteed money trust		234,820		231,445
	W	494,217		497,723
Principal of money trust	W	458,985		462,999
Income from trust deposits payable		35,232		34,724

S-109

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions

(1) The Bank’s related parties as of June 30, 2018 are as follows:

Classification	Corporate name
Subsidiaries	KDB Capital Corporation, Daewoo Shipbuilding & Marine Engineering Co., Ltd., KDB Infrastructure Investment Asset Management Co., Ltd., KDB Asia Ltd., KDB Ireland Ltd., KDB Bank Europe Ltd., Banco KDB Do Brazil S.A., KDB Bank Uzbekistan, Korea Infrastructure Financing Co. and 6 others, KDB Value PEF VI, KDB Value PEF VII, KDB Venture M&A PEF, KDB Consus Value PEF, Components and Materials M&A PEF and 6 others, KDBC IP Investment Fund 2, KoFC-KDBC Pioneer Champ2010-4 venture investment fund, Principals guaranteed trust accounts of KDB, Principals and interests guaranteed interest trust accounts of KDB,K-Five 5th Securitization Specialty Co., Ltd. and 8 others, KIAMCO Road Investment Private Fund Special Asset Trust 2 and 34 others
Associates	Korea Electric Power Co., Ltd., Korea Tourism Organization, Korea Appraisal Board, Korea Maritime Guarantee Insurance Co., Ltd., GM Korea Company, Hyundai Merchant Marine Co., Ltd., Dongbu Steel Co., Ltd. and 73 others, Troika Resources Investment PEF and 73 others, KoFC-KVIC Job Creation Fund II and 97 others
Others	Key management personnel

S-110

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions, Continued

(2) Significant balances with related parties as of June 30, 2018 and December 31, 2017 are as follows:

	Account	June 30, 2018			December 31, 2017
Subsidiaries:
KDB Capital Corporation	Loans	W	86,451			108,030
	Allowance for loan losses		(10	)		(30	)
	Derivative financial assets		2,274			1,183
	Other assets		14			49
	Deposits		147			71
	Derivative financial liabilities		1,482			3,689
	Other liabilities		504			529
KDB Infrastructure Investment Asset Management Co., Ltd.	Deposits		23,915			28,344
	Borrowings		—			1
	Other liabilities		1			—
KDB Ireland Ltd.	Loans		360,214			314,908
	Allowance for loan losses		(36	)		(112	)
	Derivative financial assets		1,198			1,868
	Other assets		681			446
	Derivative financial liabilities		3,655			1,094
KDB Bank Europe Ltd.	Cash and due from banks		302,859			430,567
	Loans		154,920			10,714
	Allowance for loan losses		(39	)		(12	)
	Derivative financial assets		2,691			1,583
	Other assets		798			528
	Derivative financial liabilities		750			21
Banco KDB Do Brazil S.A.	Cash and due from banks		112,170			107,140
	Loans		112,170			107,140
	Allowance for loan losses		(29	)		(120	)
	Other assets		222			148
	Allowance of other assets		—			(1	)
KDB Asia Ltd.	Cash and due from banks	W	179,472			192,852
	Loans		56,085			54,641
	Allowance for loan losses		(4	)		(6	)
	Derivative financial assets		—			287
	Other assets		1,150			310
	Deposits		2			2
	Derivative financial liabilities		245			47
	Other liabilities		649			—
KDB Value PEF VI	Loans		1,261,694			1,291,074
	Allowance for loan losses		(2,309	)		(3,628	)
	Derivative financial assets		896			15,573
	Other assets		21,294			48,748
	Allowance of other assets		(27	)		(51	)
	Deposits		63,506			64,725
	Borrowings		5,762			5,762

S-111

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions, Continued

	Account	June 30, 2018			December 31, 2017
	Derivative financial liabilities		1,672			1,597
	Other liabilities		33			26,998
	Other provisions		399			331
KDB Consus Value PEF	Securities		28,930			70,155
	Derivative financial assets		23,124			—
	Other assets		314			810
	Deposits		2			36
	Derivative financial liabilities		5,507			60,617
	Other liabilities		1,552			1,552
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Loans		1,650,049			1,766,654
	Allowance for loan losses		(560,556	)		(591,476	)
	Derivative financial assets		49,464			9,296
	Other assets		4,031			2,974
	Deposits		508,740			644,998
	Derivative financial liabilities		25,748			134,612
	Other liabilities		3,267			2,947
	Other provisions		676,099			598,086
Others	Loans		1,160,531			775,025
	Allowance for loan losses		(181,283	)		(153,892	)
	Derivative financial assets		3,496			4,349
	Other assets		21,145			8,328
	Allowance of other assets		(1,617	)		(343	)
	Deposits		63,730			21,083
	Derivative financial liabilities		10			—
	Other liabilities		579			578
	Other provisions		61,897			3,524
Associates:
Korea Electric Power Co., Ltd.	Securities	W	34,938			59,643
	Loans		153,234			134,792
	Allowances for loan losses		(86	)		(27	)
	Derivative financial assets		35,269			39,790
	Other assets		9,448			122
	Deposits		112,283			497,312
	Borrowings		14,909			15,129
	Derivative financial liabilities		32,873			290
	Other liabilities		9,346			282
	Other provisions		18			8
Dongbu Steel Co., Ltd.	Loans		946,379			1,046,630
	Allowances for loan losses		(200,811	)		(229,291	)
	Deposits		36,618			43,035
	Other liabilities		233			62
	Other provisions		18,205			12,183

S-112

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions, Continued

	Account	June 30, 2018			December 31, 2017
Hyundai Merchant Marine Co., Ltd.	Loans		539,153			584,021
	Allowances for loan losses		(67,614	)		(175,062	)
	Deposits		4,153			200,000
	Other liabilities		—			144
Others	Securities		—			186
	Loans		1,133,971			1,185,523
	Allowances for loan losses		(741,469	)		(746,685	)
	Other assets		152,669			150,011
	Deposits		1,028,805			721,013
	Other liabilities		234			2,222
	Other provisions		96,325			123,661

(3) Significant profit or loss with related parties for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	Account	2018			2017
Subsidiaries:
KDB Capital Corporation	Interest income	W	747			344
	Dividend income		44,109			35,225
	Fees and commission income, other income		4,331			2,754
	Provision for loan losses		(9	)		(66	)
	Other operating expenses		(1,289	)		(7,953	)
KDB Infrastructure Investments Asset Management Co., Ltd.	Dividend income		9,258			6,716
	Fees and commission income, other income		12			13
	Interest expenses		(194	)		(9	)
KDB Ireland Ltd.	Interest income	W	2,505			1,840
	Reversal of allowance for loan losses		—			21
	Fees and commission income, other income		248			630
	Provision for loan losses		(1	)		(11	)
	Other operating expenses		(2,571	)		(164	)
KDB Bank Europe Ltd.	Interest income		3,928			2,906
	Fees and commission income, other income		2,685			1,992
	Provision for loan losses		(1	)		—
	Other operating expenses		(1,288	)		(967	)
Banco KDB Do Brazil S.A.	Interest income		1,884			1,329
	Reversal of allowance for loan losses		—			63
	Provision for loan losses		(25	)		—
	Other operating expenses		(47	)		(7	)

S-113

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions, Continued

	Account	2018			2017
KDB Asia Ltd.	Interest income		2,376			1,948
	Reversal of allowance for loan losses		4			39
	Fees and commission income, other income		513			626
	Provision for loan losses		—			(41	)
	Other operating expenses		(1,691	)		(935	)
KDB Value PEF VI	Interest income		26,013			24,768
	Fees and commission income, other income		2,729			27,670
	Interest expenses		(26	)		(119	)
	Other operating expenses		(7,517	)		(18,474	)
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Interest income		16,993			38,705
	Reversal of allowance for loan losses		32,705			134,306
	Fees and commission income, other income		126,856			16,802
	Interest expenses		(4,091	)		(2,167	)
	Provision for loan losses		(78,713	)		—
	Other operating expenses		16,993			(313,732	)
Others	Interest income	W	26,465			7,969
	Dividend income		29,920			43,786
	Reversal of allowance for loan losses		—			2,311
	Fees and commission income, other income		44,458			28,422
	Interest expenses		(218	)		(40	)
	Provision for loan losses		(23,374	)		(4,383	)
	Other operating expenses		(44,988	)		(114,892	)
Associates:
Korea Electric Power Co., Ltd.	Interest income		2,282			3,160
	Dividend income		166,876			418,246
	Reversal of allowance for loan losses		—			3
	Fees and commission income, other income		5,465			19,482
	Interest expenses		(2,610	)		(751	)
	Provision for loan losses		(54	)		—
	Other operating expenses		(43,296	)		(2,233	)
Others	Interest income		39,701			117,500
	Dividend income		105,114			65,123
	Reversal of allowance for loan losses		33,314			—
	Fees and commission income, other income		38,502			136,412
	Interest expenses		(4,896	)		(5,492	)
	Provision for loan losses		(11,618	)		(166,846	)
	Other operating expenses		(6,215	)		(49,713	)
		W	535,261			452,116

S-114

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

48.Related Party Transactions, Continued

(4) Details of guarantees and commitments to the related parties as of June 30, 2018 and December 31, 2017 are as follows:

	Account	June 30, 2018		December 31, 2017
Subsidiaries:
KDB Value VI PEF	Confirmed acceptances and guarantees	W	126,420		125,154
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Confirmed acceptances and guarantees		2,236,758		2,098,718
	Unconfirmed acceptances and guarantees		700,465		799,035
Others	Confirmed acceptances and guarantees		227,758		—
	Loan commitments		206,100		315,500
Associates:
Dongbu Steel Co., Ltd.	Confirmed acceptances and guarantees		168,400		140,759
	Unconfirmed acceptances and guarantees		29,119		24,696
Others	Confirmed acceptances and guarantees		101,066		176,062
	Unconfirmed acceptances and guarantees		117,112		90,741
	Loan commitments		20,817		8,243
		W	3,934,015		3,778,908

(5) Details of compensation to key management personnel for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018		2017
Short-term employee benefits	W	308		287
Post-employment benefits		2		—
	W	310		287

(6) No asset pledged as collaterals to the related parties and from the related parties as of June 30, 2018 exists and details of assets pledged as collaterals from the related parties as of December 31, 2017 are as follows:

	December 31, 2017
	Carrying amounts		Amounts collateralized		Security provider
Securities denominated in foreign currencies	W	51,709		50,570	KDB Ireland Ltd.

S-115

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

49.Statements of Cash Flows

(1) Cash and cash equivalents in the statements of cash flows as of June 30, 2018 and 2017 are as follows:

	June 30, 2018			June 30, 2017
Cash and due from banks:
Cash and foreign currencies	W	78,453			69,628
Due from banks in Korean won		4,492,169			2,038,169
Due from banks in foreign currencies		4,044,315			3,334,331
		8,614,937			5,442,128
Less: Restricted due from banks, others		(5,773,059	)		(3,450,333	)
Add: Financial instruments reaching maturity within three months from date of acquisition
Financial assets held for trading:
Government and public bonds		134,861			60,328
Loans:
Call-loans		933,267			3,671,004
Inter-bank loans		1,434,552			914,725
		2,367,819			4,585,729
		2,502,680			4,646,057
	W	5,344,558			6,637,852

(2) Significant transactions not involving cash flows for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018			2017
Decrease in loans due to write-offs	W	97,308			57,073
Increase in securities measured at FVOCI due todebt-to-equity swap		7,751			—
Increase inavailable-for-sale financial assets due todebt-to-equity swap		—			45,369
Increase ofavailable-for-sale financial assets due to the contribution from the government		—			250,000
Decrease in accumulated other comprehensive income due to securities valuation		(17,620	)		(828,014	)
Deferred income tax effect due to securities valuation		4,850			200,379
Reclassification of investments in subsidiaries and associates toavailable-for-sale financial assets		—			1,200
Transfer from investment property to property and equipment		935			320

S-116

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

50.Transfers of Financial Instruments

Details of financial assets and liabilities related to repurchase agreements and loaned securities sold and loaned debt securities that do not qualify for derecognition as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018				December 31, 2017
Characteristics of transactions	Carrying amounts for transferred assets		Carrying amounts for related liabilities		Carrying amounts for  transferred assets		Carrying amounts for related liabilities
Repurchase agreements	W	5,095,581		3,949,057		4,612,255		3,516,978
Loaned securities		10,036		—		—		—
	W	5,105,617		3,949,057		4,612,255		3,516,978

51.Fair Value of Financial Assets and Liabilities

The Bank classifies and discloses fair value of the financial instruments into the following three-level hierarchy:

• Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.

• Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.

• Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.

(1) Fair value hierarchy of financial instruments measured at fair value

(i) The fair value hierarchy of financial instruments measured at fair value as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,235,165		1,270,892		4,390,235		6,896,292
Securities measured at FVOCI		2,267,129		14,485,486		9,828,741		26,581,356
Loans measured at FVTPL		—		—		1,162,785		1,162,785
Derivative financial assets		2,900		3,972,752		—		3,975,652
	W	3,505,194		19,729,130		15,381,761		38,616,085
Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,875,975		—		1,875,975
Derivative financial liabilities		3,842		3,882,827		8,031		3,894,700
	W	3,842		5,758,802		8,031		5,770,675

S-117

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets:
Financial assets held for trading	W	545,597		381,140		—		926,737
Available-for-sale financial assets		2,172,210		15,813,842		14,076,869		32,062,921
Derivative financial assets		372		6,110,887		138,350		6,249,609
	W	2,718,179		22,305,869		14,215,219		39,239,267
Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,583,713		—		1,583,713
Derivative financial liabilities		1,497		5,902,375		3,931		5,907,803
	W	1,497		7,486,088		3,931		7,491,516

(ii) Changes in the fair value of level 3 financial instruments for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	Financial assets												Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Total			Derivative financial liabilities
January 1, 2018	W	3,956,264			9,859,935			1,132,688			14,948,887			3,931
Profit or loss		58,804			—			62,797			121,601			4,100
Other comprehensive income		—			27,348			—			27,348			—
Acquisition / Issue		481,672			64			26,000			507,736			—
Sale / Settlement		(106,505	)		(55,298	)		(58,700	)		(220,503	)		—
Transfer out (*1)		—			(3,308	)		—			(3,308	)		—
June 30, 2018	W	4,390,235			9,828,741			1,162,785			15,381,761			8,031

	2017
	Financial assets									Financial liabilities
	Available-for-sale financial assets			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2017	W	11,969,493			146,513			12,116,006			14,690
Profit or loss		(36,344	)		114,196			77,852			1,869
Other comprehensive income		104,695			—			104,695			—
Acquisition / Issue		1,629,228			6,909			1,636,137			—
Sale / Settlement		(86,653	)		(6,270	)		(92,923	)		—
Transfer out (*1)		(11,215	)		—			(11,215	)		(14,690	)
June 30, 2017	W	13,569,204			261,348			13,830,552			1,869

(*1) When significant inputs become observable market data, the level 3 financial instruments are transferred to other levels.

S-118

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

(iii) Changes in deferred day one profit or loss for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018			2017
Beginning balance	W	5,538			1,155
New deferrals		—			5,797
Amortization		(193	)		118
Others (transfer to other levels, etc.)		—			(1,427	)
Ending balance	W	5,345			5,643

Deferred day one profit or loss arose from derivative financial instruments at level 3 on the fair value hierarchy.

(iv) Details of valuation technique and inputs used in the fair value measurement categorized within level 2 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2018 and December 31, 2017 are as follows:

	Valuation technique	Input
Securities measured at FVTPL and financial assets held for trading:
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Securities measured at FVOCI andavailable-for-sale financial assets:
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Derivatives financial assets:
Interest rate swaps	Discounted cash flow method,	Discount rate,
Currency forwards and swaps	Black-Scholes model,	exchange rate,
Currency options	Modified Black model,	volatility,
Commodities options	Formula model	commodity index, etc.
Financial liabilities measured at FVTPL:
Debentures	Discounted cash flow method	Discount rate

S-119

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

(v) Details of valuation technique and quantitative information about unobservable inputs used in the fair value measurement categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	3.21 ~ 16.28
	method, Relative value	Rate of increase in
	approach, Net asset	liquidation value	—
	value approach	Rate of increase in
		property disposal price	—
		Volatility	14.92 ~ 47.73
Securities measured at FVOCI
Equity securities	Discounted cash flow	Discount rate	4.33 ~ 18.73
	method, Relative value	Growth rate	—
	approach, Net asset	Rate of increase in
	value approach	liquidation value	—
		Rate of increase in
		property disposal price	—
		Volatility	22.00 ~ 40.69
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model	Volatility	6.75 ~ 8.25
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	18.87 ~ 21.72
		Correlation coefficient	0.61 ~ 0.84
Interest rate options	Modified Black model	Volatility	18.87 ~ 21.72
Stock index options	Black-Scholes model	Volatility	12.40 ~ 25.40

S-120

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

	December 31, 2017
	Valuation technique	Unobservable input	Range (%)
Available-for-sale financial assets
Equity securities	Discounted cash flow	Discount rate	3.70 ~ 20.26
	method, Relative value	Growth rate	—
	approach, Net asset	Rate of increase in
	value approach	liquidation value	—
		Rate of increase in
		property disposal price	—
		Discount rate of rent
		cash flow	7.66 ~ 9.31
		Volatility	11.45 ~ 25.79
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	19.20 ~ 23.60
		Correlation coefficient	(-)0.42 ~ 0.95
Interest rate options	Modified Black model	Volatility	19.20 ~ 23.60
Stock index options	Black-Scholes model	Volatility	11.00 ~ 21.00
Equity options	Finite difference method	Volatility	16.62 ~ 57.31
		Correlation coefficient	(-)0.11 ~ 0.75

(vi) The sensitivity analysis on changes in unobservable inputs for financial instruments categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2018 and December 31, 2017 is as follows:

	June 30, 2018
	Profit(loss) for the period					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL (*1)	W	19,531		(15,516	)		—		—
Securities measured at FVOCI (*1)		—		—			1,357,912		(323,267	)
Loans measured at FVTPL (*2)		28,963		(26,136	)		—		—
Derivative financial assets (*2)		17,047		(47,843	)		—		—
	W	46,010		(89,495	)		—		(323,267	)

	December 31, 2017
	Profit(loss) for the period					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Available-for-sale financial assets (*1)	W	—		—			928,359		(301,212	)
Derivative financial assets (*2)		24,296		(97,113	)		—		—
	W	24,296		(97,113	)		928,359		(301,212	)

S-121

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

(*1) Sensitivity amounts of equity securities are calculated by increasing and decreasing the correlations between the discount rates(-1~1%) and the growth rates (0~1%) or the rate of increase in liquidation value(-1~1%) which are significant unobservable inputs. Sensitivity amounts for beneficiary certificates are calculated by increasing and decreasing the correlations between the discount rate of rent cash flow(-1~1%) and the rate of increase in property disposal price(-1~1%), only when they consist of real properties. Other than that, it is difficult to measure the sensitivity amounts of beneficiary certificates for practical reasons.

(*2) Sensitivity amounts of loans measured at FVTPL and derivatives financial instruments are calculated by increasing and decreasing the correlation coefficient and volatility(-10~10%) which are significant unobservable inputs.

(2) Fair value hierarchy of financial instruments measured at amortized cost

(i) The Bank’s policies for measuring fair value of financial instruments at amortized costs are as follows:

• Cash and due from banks: Fair value of cash is considered equivalent to the carrying amount. In the case of due from banks on demand, which do not have a set maturity and can be realized instantly, the carrying amount is a close estimate of the fair value and is assumed so. In the case of other ordinary due from banks, the cash flow discount method is used to estimate the fair value.

• Securities measured at amortized cost: The fair value of securities measured at amortized cost is computed by widely-accepted appraisal agencies upon request.

• Loans measured at amortized cost: The fair value of loans measured at amortized cost is the expected future cash flows, reflecting premature redemption ratio, discounted by the market interest rate, adjusted by a spread sheet considering the probability of default. Exceptions to this method include loans with credit line facilities, loans with a maturity of three months or less left and impaired loans, which the Bank assumes the carrying amount as the fair value.

• Deposits: The fair value of deposits is computed using the discounted cash flow method. However, for deposits, whose cash flows cannot be estimated reasonably, the Bank assumes the carrying amount as the fair value.

• Borrowings: For borrowings in Korean won, the fair value is computed using the discounted cash flow method. For borrowings in foreign currency, the fair value is computed by widely-accepted appraisal agencies upon request.

• Debentures: The fair value of industrial financial debentures in Korean won, except structured debentures in Korean won, is computed using the discounted cash flow method. For structured industrial financial debentures in Korean won and industrial financial debentures in foreign currency, the fair value is computed by widely-accepted appraisal agencies upon request.

• Other financial assets and liabilities: The fair value of other financial assets and liabilities is computed using the discounted cash flow method. However, in cases cash flow cannot be estimated reasonably, the Bank assumes the carrying amount as the fair value.

S-122

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

(ii) The fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	2,841,878		5,773,059		—		8,614,937
Securities measured at amortized cost		494,034		509,369		—		1,003,403
Loans measured at amortized cost (*)		—		933,267		136,632,434		137,565,701
Other financial assets (*)		—		9,746,290		884,299		10,630,589
	W	3,335,912		16,961,985		137,516,733		157,814,630
Financial liabilities:
Deposits (*)	W	—		1,376,103		29,448,808		30,824,911
Borrowings (*)		—		500,136		22,325,585		22,825,721
Debentures		—		121,269,804		—		121,269,804
Other financial liabilities (*)		—		8,632,199		3,694,632		12,326,831
	W	—		131,778,242		55,469,025		187,247,267

			December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	3,303,511		3,305,131		—		6,608,642
Held-to-maturity financial assets		2,348		10,725		—		13,073
Loans (*)		—		4,126,167		134,395,262		138,521,429
Other financial assets (*)		—		6,632,670		750,242		7,382,912
	W	3,305,859		14,074,693		135,145,504		152,526,056
Financial liabilities:
Deposits (*)	W	—		1,869,256		31,173,556		33,042,812
Borrowings (*)		—		790,080		20,235,284		21,025,364
Debentures		—		118,293,776		—		118,293,776
Other financial liabilities (*)		—		4,726,539		3,407,248		8,133,787
	W	—		125,679,651		54,816,088		180,495,739

(*) For financial instruments categorized as level 2, the carrying amount is considered as a reasonable approximation of the fair value and is thus, disclosed by fair value.

S-123

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

51.Fair Value of Financial Assets and Liabilities, Continued

(iii) Details of valuation technique and inputs used in the fair value measurement categorized within level 2 and level 3 of the fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Valuation technique	Input
Level 2
Financial assets:
Securities measured at amortized cost	Discounted cash flow method	Discount rate
Financial liabilities:
Debentures	Discounted cash flow method	Discount rate
Level 3
Financial assets:
Loans measured at amortized cost	Discounted cash flow method	Credit spread, Other spread, Prepayment rate
Other financial assets	Discounted cash flow method	Other spread
Financial liabilities:
Deposits	Discounted cash flow method	Other spread, Prepayment rate
Borrowings	Discounted cash flow method	Other spread
Other financial liabilities	Discounted cash flow method	Other spread

	December 31, 2017
	Valuation technique	Input
Level 2
Financial assets:
Held-to-maturity financial assets	Discounted cash flow method	Discount rate
Financial liabilities:
Debentures	Discounted cash flow method	Discount rate
Level 3
Financial assets:
Loans	Discounted cash flow method	Credit spread, Other spread, Prepayment rate
Other financial assets	Discounted cash flow method	Other spread
Financial liabilities:
Deposits	Discounted cash flow method	Other spread, Prepayment rate
Borrowings	Discounted cash flow method	Other spread
Other financial liabilities	Discounted cash flow method	Other spread

S-124

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

52.Categories of Financial Assets and Liabilities

Categories of financial assets and liabilities as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Cash and cash equivalents		Financial instruments measured at FVTPL		Financial instruments designated at FVTPL		Financial instruments measured at FVOCI		Financial instruments designated at FVOCI		Financial instruments measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	2,841,878		—		—		—		—		5,773,059		—		8,614,937
Securities measured at FVTPL		134,861		6,761,431		—		—		—		—		—		6,896,292
Securities measured at FVOCI		—		—		—		16,365,058		10,216,298		—		—		26,581,356
Securities measured at amortized cost		—		—		—		—		—		1,003,403		—		1,003,403
Loans measured at FVTPL		—		1,162,785		—		—		—		—		—		1,162,785
Loans measured at amortized cost		2,367,819		—		—		—		—		131,389,413		—		133,757,232
Derivative financial assets		—		3,444,702		—		—		—		—		530,950		3,975,652
Other financial assets		—		—		—		—		—		10,629,350		—		10,629,350
	W	5,344,558		11,368,918		—		16,365,058		10,216,298		148,795,225		530,950		192,621,007
Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,875,975		—		—		—		—		1,875,975
Deposits		—		—		—		—		—		30,519,949		—		30,519,949
Borrowings		—		—		—		—		—		22,693,359		—		22,693,359
Debentures		—		—		—		—		—		119,487,142		—		119,487,142
Derivative financial liabilities		—		3,237,480		—		—		—		—		657,220		3,894,700
Other financial liabilities		—		—		—		—		—		12,326,826		—		12,326,826
	W	—		3,237,480		1,875,975		—		—		185,027,276		657,220		190,797,951

S-125

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

52.Categories of Financial Assets and Liabilities, Continued

	December 31, 2017
	Cash and cash equivalents		Financial instruments held for trading		Financial instruments designated at FVTPL		Available- for-sale financial instruments		Held-to- maturity financial instruments		Loans and receivables		Financial liabilities measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	3,303,511		—		—		—		—		3,305,131		—		—		6,608,642
Financial assets held for trading		444,643		482,094		—		—		—		—		—		—		926,737
Available-for- sale financial assets		—		—		—		32,062,921		—		—		—		—		32,062,921
Held-to-maturity financial assets		—		—		—		—		12,313		—		—		—		12,313
Loans		4,838,059		—		—		—		—		131,441,263		—		—		136,279,322
Derivative financial assets		—		5,628,135		—		—		—		—		—		621,474		6,249,609
Other financial assets		—		—		—		—		—		7,378,355		—		—		7,378,355
	W	8,586,213		6,110,229		—		32,062,921		12,313		142,124,749		—		621,474		189,517,899
Financial liabilities:
Financial liabilities designated at FVTPL	W	—		—		1,583,713		—		—		—		—		—		1,583,713
Deposits		—		—		—		—		—		—		33,058,179		—		33,058,179
Borrowings		—		—		—		—		—		—		20,971,629		—		20,971,629
Debentures		—		—		—		—		—		—		117,818,982		—		117,818,982
Derivative financial liabilities		—		5,422,483		—		—		—		—		—		485,320		5,907,803
Other financial liabilities		—		—		—		—		—		—		8,133,810		—		8,133,810
	W	—		5,422,483		1,583,713		—		—		—		179,982,600		485,320		187,474,116

S-126

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

53.Offsetting of Financial Assets and Liabilities

Details of financial instruments subject to offsetting, enforceable master netting agreements or similar agreements as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Gross amounts  of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral received
Derivative financial assets(*1)	W	3,975,652		—		3,975,652		2,731,419		56,427		1,187,806
Unsettled spot exchange receivables(*1)		8,363,657		—		8,363,657		8,358,977		—		4,680
Unsettled domestic exchange receivables		2,597,094		1,214,461		1,382,633		—		—		1,382,633
Security pledged as collateral for repurchase agreements		5,095,581		—		5,095,581		3,949,057		—		1,146,524
Reverse repurchase agreements		1,350,000		—		1,350,000		1,350,000		—		—
Loaned securities		10,036		—		10,036		10,036		—		—
Receivables from securities transaction		89,840		—		89,840		89,840		—		—
	W	21,481,860		1,214,461		20,267,399		16,489,329		56,427		3,721,643
	June 30, 2018
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged
Derivative financial liabilities(*1)	W	3,894,700		—		3,894,700		2,809,209		4,195		1,081,296
Unsettled spot exchange payables(*1)		8,360,889		—		8,360,889		8,358,977		—		1,912
Unsettled domestic exchange payables		1,485,771		1,214,461		271,310		—		—		271,310
Repurchase agreements		3,949,057		—		3,949,057		3,949,057		—		—
Payables from securities transaction		131,993		—		131,993		131,993		—		—
	W	17,822,410		1,214,461		16,607,949		15,249,236		4,195		1,354,518

S-127

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

53.Offsetting of Financial Assets and Liabilities, Continued

	December 31, 2017
	Gross amounts of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral received
Derivative financial assets(*1)	W	6,249,609		—		6,249,609		3,869,101		271,589		2,108,919
Unsettled spot exchange receivables(*1)		4,488,196		—		4,488,196		4,485,735		—		2,461
Unsettled domestic exchange receivables		3,658,339		1,513,865		2,144,474		—		—		2,144,474
Security pledged as collateral for repurchase agreements		4,612,255		—		4,612,255		3,516,978		—		1,095,277
Reverse repurchase agreements		1,448,727		—		1,448,727		1,448,727		—		—
Receivables from securities transaction		16,721		—		16,721		16,721		—		—
	W	20,473,847		1,513,865		18,959,982		13,337,262		271,589		5,351,131
	December 31, 2017
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged
Derivative financial liabilities(*1)	W	5,907,803		—		5,907,803		3,693,464		—		2,214,339
Unsettled spot exchange payables(*1)		4,487,581		—		4,487,581		4,485,735		—		1,846
Unsettled domestic exchange payables		1,752,823		1,513,865		238,958		—		—		238,958
Repurchase agreements		3,516,978		—		3,516,978		3,516,978		—		—
Payables from securities transaction		18,254		—		18,254		18,254		—		—
	W	15,683,439		1,513,865		14,169,574		11,714,431		—		2,455,143

(*1) For the derivatives covered by the ISDA derivative contracts, all contracts are settled and the net amount of derivative contracts is measured and paid based on the liquidation value if the counterparty files for bankruptcy or has any credit issues.

S-128

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

54.Operating Segments

(1) The Bank has four reportable segments, as described below, which are the Bank’s strategic business units. They are managed separately because each business requires different technology and marketing strategies.

The following summary describes general information about each of the Bank’s reportable segments:

Segments	General information
Corporate finance	Provides trade finance and loans to corporate customers
Investment finance	Provides consulting services to corporate such as capital finance, restructuring, etc.
Asset management	Provides asset management services to individual and corporate customers
Others	Any other segment not mentioned above

(2) Operating income (loss) from external customers and among operating segments for thesix-month periods ended June 30, 2018 and 2017 are as follows:

	2018
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income (loss) from external customers	W	490,076			546,173			22,994		(46,340	)		1,012,903
Operating income (loss) from intersegment sales		57,560			(350,788	)		—		293,228			—
	W	547,636			195,385			22,994		246,888			1,012,903
	2017
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income (loss) from external customers	W	395,559			1,580,772			16,673		(154,855	)		1,838,149
Operating income (loss) from intersegment sales		(4,567	)		(319,587	)		—		324,154			—
	W	390,992			1,261,185			16,673		169,299			1,838,149

S-129

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

54.Operating Segments, Continued

(3) Details of segment results for the Bank’s reportable segments for thesix-month periods ended June 30, 2018 and 2017 are as follows:

		2018
		Corporate finance			Investment finance			Asset management			Others			Total
Net interest income		W	733,053			(340,561	)		11,798			232,253			636,543
Non-interest income Income related to securities(*1)			26,651			(19,583	)		—			31,727			38,795
Othernon-interest income			82,849			550,212			15,928			(15,352	)		633,637
			109,500			530,629			15,928			16,375			672,432
Provision for loan losses and others(*2)			(41,683	)		49,220			—			(192	)		7,345
General and administrative expenses			(253,234	)		(43,903	)		(4,732	)		(1,548	)		(303,417	)
Operating income		W	547,636			195,385			22,994			246,888			1,012,903
		2017
		Corporate finance			Investment finance			Asset management			Others			Total
Net interest income		W	799,309			(178,474	)		8,757			66,654			696,246
Non-interest income Income related to securities(*1)			(8,222	)		760,116			—			12,875			764,769
Othernon-interest income			116,085			846,040			12,378			87,539			1,062,042
			107,863			1,606,156			12,378			100,414			1,826,811
Provision for loan losses and others(*2)			(269,393	)		(121,466	)		—			4,461			(386,398	)
General and administrative expenses	��		(246,787	)		(45,031	)		(4,462	)		(2,230	)		(298,510	)
Operating income		W	390,992			1,261,185			16,673			169,299			1,838,149

(*1) Income related to securities is composed of net gain (loss) on securities measured at FVTPL (financial assets held for trading for thesix-month period ended June 30, 2017) and securities measured at FVOCI(available-for-sale financial assets for thesix-month period ended June 30, 2017).

(*2) Provision for loan losses and others comprises of provision for loan losses, provision for derivative credit risks, gains (losses) on sales of loans, and increase (reversal) of provision.

S-130

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

54.Operating Segments, Continued

(4) Geographical revenue information about the Bank’s operating segments for thesix-month periods ended June 30, 2018 and 2017 and the geographicalnon-current asset information as of June 30, 2018 and December 31, 2017 are as follows:

	Revenues(*1)				Non-current assets(*2)
	2018		2017		June  30, 2018		December  31, 2017
Domestic	W	11,364,384		13,829,338		23,983,783		23,505,974
Overseas		626,619		394,870		5,076		5,192
	W	11,991,003		14,224,208		23,988,859		23,511,166

(*1) Revenues consist of interest income, fees and commission income, dividend income, income related to securities, foreign currency transaction gain, gain on derivatives, other operating income and provision for loan losses.

(*2) Non-current assets consist of investments in subsidiaries and associates, property and equipment, investment property and intangible assets.

55.Risk Management

(1) Introduction

(i) Objectives and principles

The Bank’s risk management aims to maintain financial soundness and effectively manage various risks pertinent to the nature of the Bank’s business. The Bank has set up and fulfilled policies to manage risks timely and effectively. Pursuant to the policies, the Bank’s risks shall be

• managed comprehensively and independently,

• recognized timely, evaluated exactly and managed effectively,

• maintained to the extent that the risks balance with profit,

• diversified appropriately to avoid concentration on specific segments,

• managed to prevent excessive exposure by the setting up and managing of tolerance limits and guidelines.

(ii) Risk management strategy and process

The Bank’s risk management business is separated into two different stages; the ‘metrification stage,’ in which risks are estimated and monitored, and the ‘integration stage,’ in which information gained during the risk management process is integrated and used in management strategies. Risk management is recognized as a key component of the Bank’s management and seeks to change from its previously adaptive and limited role to more leading and comprehensive role.

S-131

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Furthermore, the Bank focuses on consistent communication among different departments to establish a progressive consensus on risk management.

(iii) Risk management governance

Risk Management Committee

The Bank’s Risk Management Committee (the “Committee”) is composed of the President of the committee (an outside director), and four other commissioners. The Committee functions to establish policies of risk management, evaluate the capital adequacy of the Bank, discuss material issues relating to risk management, and present preliminary decisions on such matters.

The CEO of the Bank and the head of Risk Management Segment

The CEO of the Bank, according to the policies of risk management, performs his or her role to manage and direct risk management to sustain efficiency and internal control. The head of the Risk Management Segment is responsible for supervising the overall administration of the Bank’s risk management business and providing risk-related information to members of the board of directors and the Bank’s management.

Risk Management Policy Committee and Risk Management Practice Committee

The Bank’s Risk Management Policy Committee is composed of the leaders of all business segments. and exercises its role to decide important matters relating to the Bank’s portfolio including allocating internal capital limits by segment and setting exposure limits by industry within the scope that Risk Management Committee regulated.

The Bank’s Risk Management Practice Committee is composed of the planning department’s leaders of main business segments. The Risk Management Practice Committee exercises its role to preliminarily review matters for main decision of the Risk Management Committee.

(iv) Performance of risk management committee

The Risk Management Committee performs comprehensive reviews of all the affairs related to risk management and deliberates the decisions of the board of directors. For the year ended December 31, 2017, the key activities of the Risk Management Committee are as follows:

• Major decision

• Risk management plan for 2018

• Setting and managing exposure limits by country for 2018

• Contingency funding plan for 2018

• Adjustment of exposure limits for Vietnam in 2018

• Change in estimation criteria of risk components to calculate the IFRS 9 loss allowance

S-132

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

• Major considerations

• Amendment of risk management by laws

• Major reporting

• Management plan of credit portfolio for 2018

• Integrated crisis analysis in the second half of 2017

• The result of assessment of suitability for internal capital in 2017

• Resolution of Credit Committee on a quarterly basis

• The result of the verification on suitability of Credit Rating System, PD and internal purpose risk components

• The plan of internal capital allocation for 2018

• Change in management plan of credit portfolio

• Appointment of locum tenens in case of absence of chairman of risk management committee

(v) Improvement of risk management system

For the continuous improvement of risk management, financial soundness and capital adequacy, the Bank performs the following:

• Continuous improvement of Basel

• Improvements in the internal capital adequacy assessment system, in line with the guidelines set by the Financial Supervisory Service (FSS) in 2008, to manage capital adequacy more effectively

• Improvements in the credit assessment system on Low Default Portfolio (LDP)

• Elaboration of risk measuring criteria including credit risk parameters and measurement logics

• Development of the application system for timely calculation of LCR and NSFR

• Rebuilding the Corporate Credit Rating System (approved by Financial Supervisory Services on October 26, 2017)

• Expansion of risk management infrastructure

• Establishment of the RAPM system to reflect risks to the Bank’s business and support decision-making upon management, and application of performance assessment at the branch level since 2010

• Enforcement of risk management related to irregular compound derivatives and validation of the derivative pricing model developed by the Bank’s Front Office

• Establishment of IFRS 9 accounting system to calculate a loan loss allowances under IFRS 9 in March 2017 and, since then, parallel run of IFRS 9 accounting system with the current IAS 39 accounting system for mandatory implementation of IFRS 9 in January 2018

S-133

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

(vi) Risk management reporting and measuring system

The Bank endeavours consistently to objectively and rationally measure and manage all significant risks considering the characteristics of operational areas, assets and risks. In relation to reporting and measurement, the Bank has developed application systems as follows:

Application system	Approach	Completion date	Major function
Corporate Credit Rating System	Logit Model	Jun. 2004 Mar. 2008 Mar. 2010	Calculate corporate credit rating
		Mar. 2012	Corporate credit rating systembuild-up based onK-IFRS
		Oct. 2017	Rebuilding the Corporate Credit Rating System
Credit Risk Measurement System	Credit Risk+ Credit Metrics	Jul. 2003 Nov. 2007	Summarize exposures, manage exposure limits and calculate Credit VaR
Market Risk Management System	Risk Watch	Jun. 2002	Summarize position, manage exposure limits and calculate Market VaR
	RS Model	Sep. 2012	Calculate regulatory capital by Standardized Approach Supplement of RiskWatch to calculate
	Murex M/O	Apr. 2013	VaR
Interest/Liquidity Risk Management System	OFSA	Feb. 2006	Calculate repricing gap, duration gap, VaR and EaR
	Fermat	Mar. 2014	System update for liquidity risk following Basel III
Operational Risk Management System	Standardized Approach	May. 2006	Manage process and calculate CSA, KRI and OPVaR
	AMA	May. 2009	Pre-operate the AMA
BIS Capital Ratio Calculation System	Fermat RaY	Sep. 2006 Dec. 2013	Calculate equity and credit risk-weighted assets
Loan Loss Allowance Calculation System	IAS 39 IFRS 9	Jan. 2011 Mar. 2017	Incurred loss model Expected credit loss model (Implemented in 2018)

(vii) Response to Basel

The Korean financial authorities have implemented Basel II since January 2008, and the Standardized Approach and the Foundation Internal Ratings-Based Approach for calculating credit risk are applicable.

S-134

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

In conformity with the implementation roadmap of Basel II, the Bank obtained the approval to use the Foundation Internal Ratings-Based Approach on credit risk from the FSS in July 2008 and has applied the approach since late June 2008. The Bank applies the Standardized Approach on market risks and operational risks.

The Bank completed the Basel III standard risk management system in preparation of the adoption of the Basel III regulations announced on December 1, 2013. Starting from 2013year-end, the BIS capital adequacy ratio has been measured in accordance to the Basel III regulations.

Responding to the requirements of the financial authorities, the Bank recognizes interest rate risk, liquidity risk, credit bias risk and reputation risk besides Pillar I risks (credit risk, market risk and operational risk). The Bank has actively responded to the Pillar 2 regulation, including additional capital requirements based on comprehensive assessment of risk management levels since 2015. In addition, from the end of 2015, the Bank has applied the uniform standards for the public announcement of financial business for Basel compliance.

In addition, the Bank is responding to revised standards such as capital requirements for banks’ equity investments in funds, which will take effect in 2017, and the Standardised Approach for measuring counterparty credit risk(SA-CCR), which will take effect in 2018.

(viii) Internal capital adequacy assessment process

Internal capital adequacy assessment process is defined as the process that the Bank aggregates significant risks, calculates its internal capital, compares the internal capital with the available capital and assesses its internal capital adequacy.

• Internal capital adequacy assessment

For the internal capital adequacy assessment, the Bank calculates its aggregated internal capital by evaluating all significant risks and available capital considering the quality and components of capital, and then assesses the internal capital adequacy by comparing the aggregated internal capital with the available capital.

In addition, the Bank conducts periodic stress tests more than once every six months to assess potential weakness in crisis situations and uses its results to assess the internal capital adequacy. The Bank assumes the macroeconomic situation as four stages of ‘normal-aggravation-pessimistic-serious’ and is preparing countermeasures such as checking the adequacy of capital by each stage.

• Goal setting of internal capital management

The Bank sets up and manages an internal capital limit on an annual basis, through the approval of the Risk Management Committee, to maintain internal capital adequacy by managing internal capital (integrated risks) within the extent of available capital.

The prior year’s internal capital, analysis of domestic and foreign environment changes in the current year, and the direction and size of operations are all reflected in the goal setting of internal capital management to calculate the integrated internal capital scale. Moreover, Bank for International Settlements(BIS) capital adequacy ratio and risk appetite are taken into consideration in the goal setting of internal capital management.

S-135

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

• Allocation of internal capital

The Bank’s Risk Management Committee approves entire internal capital and the Risk Management Policy Committee allocates the capital to each segment and department, considering the extent of possible risk faced and size of operations. The allocated internal capital is monitored regularly and managed using various management methods. The results of monitoring and managing the allocated internal capital are reported to the Risk Management Committee. In case of any material changes in the Bank’s business plan or risk operation strategy, the Bank adjusts the allocations elastically.

• Composition of internal capital

Internal capital comprises all the significant risks of the Bank and is composed of quantifiable andnon-quantifiable risks. Quantifiable risks are composed of credit risk, market risk, interest rate risk, operational risk and credit concentration risk, foreign currency settlement risk, and are risks measured quantitatively by applying reasonable methodology using objective data.Non-quantifiable risks are composed of strategy risk, reputation risk, residual risk on asset securitization and furthermore.Non-quantifiable risks are those risks that cannot be measured quantitatively because of lack of data or the absence of appropriate measuring methodologies.

(2) Credit Risk

(i) Concept

Credit risk can be defined as potential loss resulting from the refusal to perform obligations or default of counterparties. More generally, it is used to refer to the possibility of loss from engaged bonds that cannot be redeemed properly or from substitute payments.

(ii) Approach to credit risk management

Summary of credit risk management

The Bank regards credit risk as the most significant risk area in its business operations, and accordingly, closely monitors its credit risk exposure. The Bank manages both credit risks at portfolio level and at individual credit level. At portfolio level, the Bank reduces credit concentration and restructures the portfolio in such a way to maximize profitability considering the risk level. To avoid credit concentration on a particular sector, the Bank manages credit limits by client, group, and industry. The Bank also resets exposure management directives for each industry by conducting an industry credit evaluation twice a year.

At the individual credit level, the relationship manager (RM), the credit officer (CO) and the Credit Review Committee manage each borrower’s credit risk.

Post management and insolvent borrower management

The Bank monitors the borrower’s credit rating from the date of the loan to the date of the final collection of debt consistently and inspects the borrower’s status regularly and frequently to prevent the generation of new bad debts and to stabilize the number of debt recoveries.

S-136

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

In addition, an early warning system is operated to spot borrowers that are highly likely to be insolvent. The early warning system provides financial information, financial transaction information, public information and market information of the borrower, and such information is used by the RM and the CO to monitor and manage changes in the borrower’s credit rating.

Under the early warning system, a borrower that is highly likely to be insolvent is classified as an early warning borrower or a precautionary borrower. The Bank sets up a specific and applicable stabilization plan for such a borrower considering the borrower’s characteristics. Furthermore,sub-standard borrowers are classified as insolvent borrowers, and are managed intensively by the Bank, which takes legal proceedings, disposals or corporate turnaround measures if necessary.

Classification of asset soundness and provision of allowance for loss

Classification of asset soundness is fulfilled by the analysis and assessment of credit risk. The classification is used to provide an appropriate allowance, prevent further occurrences of insolvent assets and promote the normalization of existing insolvent assets to enhance the stabilization of asset operations.

Based on the Financial Supervisory Regulations of the Republic of Korea, the Bank has established standards and guidelines on the classification of asset soundness, according to the Forward-Looking Criteria, which reflects not only the borrower’s past records of repayment but also their future debt repayment capability.

In conformity with these standards, the Bank classifies the soundness of its assets as “normal”, “precautionary”, “substandard”, “doubtful”, or “estimated loss” and differentiates the coverage ratio by the level of classification.

Details of loans by credit rating as of June 30, 2018 are as follows:

< Corporate >
	June 30, 2018
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
					Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	102,089,908		100,151,888		1,938,020		—
BBB2 ~ CCC		30,217,054		20,118,522		9,067,116		1,031,416
Below CC		3,673,574		—		283,018		3,390,556
	W	135,980,536		120,270,410		11,288,154		4,421,972

S-137

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

< Retail >

	June 30, 2018
					Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non  credit- impaired		Credit- impaired
Grade 1 ~ Grade 6	W	1,063,042		1,047,354		14,254		1,434
Grade 7 ~ Grade 8		13,646		—		13,456		190
Grade 9 ~ Grade 10		294		—		—		294
	W	1,076,982		1,047,354		27,710		1,918

Details of payment guarantees (including financial guarantees) and unused commitments by credit rating as of June 30, 2018 are as follows:

< Corporate >

	June 30, 2018
	Exposures		12-month expected credit loss		Lifetime expected credit losses
					Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	23,801,997		23,598,525		203,472		—
BBB2 ~ CCC		3,052,645		1,384,717		1,667,928		—
Below CC		196,550		85,979		109,171		1,400
		27,051,192		25,069,221		1,980,571		1,400
Payment guarantees (including financial guarantees):
AAA ~ BBB1		4,923,071		4,879,524		43,547		—
BBB2 ~ CCC		6,223,722		3,218,087		2,808,117		197,518
Below CC		638,585		1,091		149,994		487,500
	W	11,785,378		8,098,702		3,001,658		685,018
< Retail >
	June 30, 2018
	Exposures		12-month expected credit loss		Lifetime expected credit losses
					Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1 ~ Grade 6	W	145,567		137,717		7,850		—
Grade 7 ~ Grade 8		587		—		587		—
Grade 9 ~ Grade 10		—		—		—		—
	W	146,154		137,717		8,437		—

S-138

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Details of loans as of June 30, 2017 are as follows:

	December 31, 2017
Neither past due nor impaired	W	134,017,850
Past due but not impaired		79,422
Impaired		5,907,948
		140,005,220
Allowance for loan losses		(3,515,453	)
Present value discount		(215,809	)
Deferred loan origination costs and fees		5,364
Net value	W	136,279,322
Ratio of allowance for loan losses to total loans		2.51	%

Loans that are neither past due nor impaired as of December 31, 2017 are as follows:

	December 31, 2017
	Loans in Korean won								Other loans
	Loans for working capital		Loans for facility development		Others		Loans in foreign currencies		Privately placed corporate bonds		Others		Total
AAA ~ B-		W 43,629,209		46,555,052		3,647,881		23,814,695		1,059,912		10,763,637		129,470,386
CCC		1,902,339		114,993		—		1,369,865		70,398		142,237		3,599,832
CC		378,016		164,281		—		200,848		—		204,487		947,632
C		—		—		—		—		—		—		—
D		—		—		—		—		—		—		—
		W 45,909,564		46,834,326		3,647,881		25,385,408		1,130,310		11,110,361		134,017,850

Loans that are past due but not impaired as of December 31, 2017 are as follows:

	December 31, 2017
	Loans in Korean won								Other loans
	Loans for working capital		Loans for facility development		Others		Loans in foreign currencies		Privately placed corporate bonds		Others		Total
Within 30 days	W	12,918		18,450		7,278		19,172		1,000		12,291		71,109
30 ~ 60 days		62		825		944		—		—		111		1,942
60 ~ 90 days		511		5,848		12		—		—		—		6,371
	W	13,491		25,123		8,234		19,172		1,000		12,402		79,422

S-139

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Impaired loans as of December 31, 2017 are as follows:

	December 31, 2017
	Loans in Korean won								Other loans
	Loans for working capital		Loans for facility development		Others		Loans in foreign currencies		Privately placed corporate bonds		Others		Total
Impaired loans:
Individual	W	2,064,364		2,127,552		—		364,599		790,687		350,544		5,697,746
Collective		85,596		45,003		1,946		52,805		15,311		9,541		210,202
	W	2,149,960		2,172,555		1,946		417,404		805,998		360,085		5,907,948

(iii) Measurement methodology of credit risk

Pursuant to Basel III, the Bank selects the measurement methodology of credit risk considering the complexity of measurement, measurement factors, estimating methods and others. Measurement approaches are divided into Standardized Approach and Internal Ratings-Based Approach.

Standardized Approach (“SA”)

In the case of the Standardized Approach, the risk weights are applied according to the credit rating assessed by External Credit Assessment Institution (“ECAI”). Risk weights in each credit rating are as follows:

Credit rating	Corporate	Country	Bank	Asset securitization
AAA ~ AA-	20.00%	0.00%	20.00%	20.00%
A+ ~ A-	50.00%	20.00%	50.00%	50.00%
BBB+ ~ BBB-	100.00%	50.00%	100.00%	100.00%
BB+ ~ BB-	100.00%	100.00%	100.00%	350.00%
B+ ~ B-	150.00%	100.00%	100.00%	Deducted from Equity (1,250%)
Below B-	150.00%	150.00%	150.00%	”
Unrated	100.00%	100.00%	100.00%	”

The OECD, S&P, Moody’s and Fitch are designated as foreign ECAI and Korea Investors Service Co., Ltd., NICE Investors Services Co., Ltd. and the Korea Ratings Co., Ltd. are designated as domestic ECAI.

The Bank applies the credit rating based on the corresponding loan and same borrower’s unsecured senior loans. In the case the borrower’s risk weight is higher than the unrated exposure’s risk weight (100%), the higher weight is applied. In the case the borrower has more than one rating, the higher weight of the two lowest weights (second best criteria) is applied.

Internal Ratings-Based Approach (IRB)

To use the Internal Ratings-Based Approach, a bank must be approved by the FSS and should also meet the requirementpre-set by the FSS.

S-140

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

In relation to Basel II that has been adopted domestically as of January 2008, the Bank gained approval from the FSS to use the Foundation Internal Ratings-Based Approach in July 2008. The Bank has calculated credit risk-weighted assets using the approach since late June 2008.

Measurement method of credit risk-weighted asset

The Bank calculates credit risk-weighted assets of corporate exposures and asset securitization exposures using the Foundation Internal Ratings-Based Approach as of December 31, 2016.

The Standardized Approach is applied to country exposures, public institution exposures and bank exposures according to the interpretation of the FSS permanently and applied to overseas subsidiary and the Bank’s branch pursuant to prior consultation with the FSS.

The Standard Approach is applied to special finance,non-residents,non-banking financial institutions currently, and will be replaced by the Internal Ratings-Based Approach in the future.

<Approved measurement method>
Measurement method		Exposure
Standardized Approach	Permanent
	SA	—Countries, public institutions and banks
	SA(*1)	—Overseas subsidiaries and branches, and other assets
Foundation Internal Ratings-Based Approach		—Corporate, small and medium enterprises, asset securitization (at each credit level) and equity
Application of IRB by phase		—Special lending,non-residence,non-bank financial institutions

(*1) The Standardized Approach is applied, pursuant to prior consultation with the FSS, in the case the credit risk-weighted assets of a specific business segment are less than 15% of the entire credit risk-weighted assets.

The mitigated effect of credit risks reflects the related policies which consider eligible collateral and guarantees. The Bank calculates the credit risk-weighted assets using the capital adequacy ratio.

Upon the calculation of credit risk-weighted assets for derivatives, the Bank takes into consideration theset-off effects of transactions under legally enforceable rights toset-off to calculate exposures.

S-141

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Exposure after credit risk mitigation by asset type as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Exposure		Credit risk mitigation			Exposure after credit risk mitigation
Government	W	15,901,762		—			15,901,762
Bank		19,184,973		—			19,184,973
Corporate		129,139,117		(290,899	)		128,848,218
Stock		30,424,902		—			30,424,902
Indirect investments		8,204,730		(1,906,830	)		6,297,900
Asset securitization		3,087,008		(2,744	)		3,084,264
Over-the-counter derivatives		9,503,998		(4,603,808	)		4,900,190
Retail assets		1,105,393		(24,689	)		1,080,704
Others		52,676,505		(510,421	)		52,166,084
	W	269,228,388		(7,339,391	)		261,888,997

	December 31, 2017
	Exposure		Credit risk mitigation			Exposure after credit risk mitigation
Government	W	15,492,552		—			15,492,552
Bank		19,519,149		—			19,519,149
Corporate		129,607,364		(298,540	)		129,308,824
Stock		29,785,368		—			29,785,368
Indirect investments		7,672,509		(1,645,991	)		6,026,518
Asset securitization		4,366,731		—			4,366,731
Over-the-counter derivatives		11,620,076		(5,036,913	)		6,583,163
Retail assets		1,525,960		(26,260	)		1,499,700
Others		46,602,601		(460,376	)		46,142,225
	W	266,192,310		(7,468,080	)		258,724,230

Credit rating model

The results of credit rating are presented as grades through an assessment of the debt repayment capacity that the principal and interest of debt securities or loans are redeemed while complying with contractual redemption schedule.

Using the Bank’s internal credit rating model, the Bank classifies debtors’ credit rating into 10 grades (AAA~D). Plus sign (+) and minus sign (-) are attached to the grades (AA~B) to distinguish the difference between credits in the same grade. Thus, the Bank’s credit rating model uses 20 grades.

The Bank’s regular credit rating process is carried out once a year and in the case of the change of debtor’s credit condition, the credit rating is frequently adjusted as necessary to retain the adequacy of credit rating.

S-142

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

The results of credit rating are applied to various areas such as discrimination of loan processes, loan limit, loan interest rate, post loan management standard process, credit risk measurement, and allowance for loan losses assessment.

Credit process control structure

According to the Principle of Checks and Balances, the Bank has established the credit process control structure by which the credit rating system operates appropriately.

• Independent assessment of credit rating: The Bank’s business segment (RM) and credit rating assessment segment (CO) are independently operated.

• Independent control of credit rating system: The control of credit rating system including the development of credit rating model is independently implemented by the Bank’s Risk Management Department.

• Independent verification of credit rating system: Credit rating system is independently verified by the validation team of the Consulting Service Department.

• Internal audit of credit rating process: Credit rating process is audited by the Bank’s internal audit department.

• Role of the Board of Directors and the Bank’s management: Major issues relating to credit process are approved by the Board of Directors and are regularly monitored by the Bank’s top management.

The Bank reviews debt serviceability based on a credit analysis when handling loans. Depending on the results, credit loan preservation is adjusted as necessary using such methods as interest rate preservation due to credit risk.

The Bank evaluates the value of the collateral, performing ability and legal validity of the guarantee at the initial acquisition. The Bankre-evaluates the provided collateral and guarantees regularly for them to be reasonably preserved.

For guarantees, the Bank demands a corresponding written guarantee according to loan handling standards and the guarantor’s credit rating is independently calculated when in conformance with the credit rating endowment method.

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk of impaired financial assets as of June 30, 2018 are as follows:

	June 30, 2018
Securities measured at FVOCI	W	70,922
Loans measured at amortized cost		4,455,447
Other assets		216,631

S-143

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

(iv) Credit exposure

Geographical information of credit exposure as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	3,201,567		1,694		117,143		707,908		4,028,312
Securities measured at FVOCI:
Bonds (excluding government bonds)		8,819,784		697,145		611,139		408,600		10,536,668
Securities measured at amortized cost:
Bonds (excluding government bonds)		—		—		—		—		—
Loans		127,020,809		1,163,242		932,515		4,615,068		133,731,634
Derivative financial assets		522,112		6,033		—		2,928		531,073
Other assets		10,754,801		43,882		14,402		71,372		10,884,457
		150,319,073		1,911,996		1,675,199		5,805,876		159,712,144
Guarantees		11,672,104		—		95,971		17,303		11,785,378
Commitments		28,740,758		63,067		70,929		343,188		29,217,942
		40,412,862		63,067		166,900		360,491		41,003,320
	W	190,731,935		1,975,063		1,842,099		6,166,367		200,715,464
	December 31, 2017
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	3,603,430		3,237		101,001		680,679		4,388,347
Available-for-sale financial assets:
Bonds (excluding government bonds)		9,352,893		633,974		608,602		370,648		10,966,117
Held-to-maturity financial assets:
Bonds (excluding government bonds)		—		—		—		10,725		10,725
Loans		130,150,253		1,072,177		748,063		4,491,908		136,462,401
Derivative financial assets		615,912		3,722		—		2,032		621,666
Other assets		7,549,444		22,361		12,818		32,367		7,616,990
		151,271,932		1,735,471		1,470,484		5,588,359		160,066,246
Guarantees		11,010,380		—		137,907		136,129		11,284,416
Commitments		5,816,367		59,319		65,747		416,104		6,357,537
		16,826,747		59,319		203,654		552,233		17,641,953
	W	168,098,679		1,794,790		1,674,138		6,140,592		177,708,199

S-144

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Industry information of credit exposure as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		3,626,623		401,689		4,028,312
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,589,494		6,458,987		1,488,187		10,536,668
Securities measured at amortized cost:
Bonds (excluding government bonds)		—		—		—		—
Loans		61,265,352		62,597,157		9,869,125		133,731,634
Derivative financial assets		—		531,073		—		531,073
Other assets		149,207		209,301		10,525,949		10,884,457
		64,004,053		73,423,141		22,284,950		159,712,144
Guarantees		9,597,991		1,730,469		456,918		11,785,378
Commitments		166,989		4,997,370		24,053,583		29,217,942
		9,764,980		6,727,839		24,510,501		41,003,320
	W	73,769,033		80,150,980		46,795,451		200,715,464
	December 31, 2017
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		4,022,093		366,254		4,388,347
Available-for-sale financial assets:
Bonds (excluding government bonds)		2,683,738		7,094,979		1,187,400		10,966,117
Held-to-maturity financial assets:
Bonds (excluding government bonds)		—		10,725		—		10,725
Loans		62,566,742		63,829,681		10,065,978		136,462,401
Derivative financial assets		—		621,666		—		621,666
Other assets		138,509		196,787		7,281,694		7,616,990
		65,388,989		75,775,931		18,901,326		160,066,246
Guarantees		8,933,696		1,806,124		544,596		11,284,416
Commitments		207,903		6,016,498		133,136		6,357,537
		9,141,599		7,822,622		677,732		17,641,953
	W	74,530,588		83,598,553		19,579,058		177,708,199

S-145

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Credit exposures of debt securities by credit rating as of June 30, 2018 are as follows:

	June 30, 2018
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
					Non credit- impaired		Credit-impaired
AAA ~ BBB1	W	17,218,484		17,146,587		71,897		—
BBB2 ~ CCC		149,977		9,395		140,582		—
Below CC		—		—		—		—
	W	17,368,461		17,155,982		212,479		—

Credit exposures of due from banks and debt securities by credit rating as of December 31, 2017 are as follows:

	December 31, 2017
	Due from banks		Available-for-sale financial assets		Held-to-maturity financial assets		Total
AAA ~ AA-	W	126,594		2,031,854		—		2,158,448
A+ ~ A-		1,750,534		3,825,206		—		5,575,740
BBB+ ~ BB-		1,166,917		3,542,568		10,725		4,720,210
Below BB-		—		30,292		—		30,292
Unrated		1,344,302		1,536,197		—		2,880,499
	W	4,388,347		10,966,117		10,725		15,365,189

(3)Capital management activities

(i) Capital adequacy

The FSS approved the Bank’s use of the Foundation Internal Ratings-Based Approach in July 2008. The Bank has been using the same approach when calculating credit risk-weighted assets since the end of June 2008. The equity capital ratio and equity capital according to the standards of the Bank for International Settlements are calculated for such disclosure. The equity capital ratio and equity capital are calculated on a consolidated basis. In conformity with the Banking Act, which is based on the implementation of Basel III on December 1, 2013, the regulatory capital is divided into the following two categories.

Tier 1 capital

- Common Equity Tier 1

Regulatory capital that represents the most subordinated claim in liquidation of the Bank, takes the first and proportionately greatest share of any losses as they occur, and which principal is never repaid outside of liquidation meets the criteria for classification as common equity, including capital stock, capital surplus, retained earnings, qualifyingnon-controlling interests in subsidiaries, and accumulated other comprehensive income as common equity Tier 1.

S-146

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

- Additional Tier 1 capital

Capital stock and capital surplus related to issuance of capital securities that are subordinated, havenon-cumulative and conditional dividends or interests, and have no maturity orstep-up conditions.

Tier 2 capital (Supplementary Tier 2 capital)

Regulatory capital that fulfills supplementary capital adequacy requirements, and includes subordinated debt with maturities over 5 years and allowance for loan losses in conformity with external regulatory standards and internal standards.

The BIS capital adequacy ratio and capital in accordance to Basel III standards as of June 30, 2018 and December 31, 2017 are as follows:

BIS capital adequacy ratio

	June 30, 2018			December 31, 2017
Equity capital based on BIS (A):
Tier 1 capital:
Common Equity Tier 1	W	29,836,315			29,412,410
Additional Tier 1 capital		—			4,327
		29,836,315			29,416,737
Tier 2 capital		4,886,350			4,638,109
	W	34,722,665			34,054,846
Risk-weighted assets (B):
Credit risk-weighted assets	W	217,676,059			216,003,011
Market risk-weighted assets		2,115,645			2,413,057
Operational risk-weighted assets		4,941,393			4,801,430
	W	224,733,097			223,217,498
BIS capital adequacy ratio (A/B):		15.45	%		15.26	%
Tier 1 capital ratio:		13.28	%		13.18	%
Common Equity Tier 1 ratio		13.28	%		13.18	%
Additional Tier 1 capital ratio		—			—
Tier 2 capital ratio		2.17	%		2.08	%

S-147

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

Equity capital based on BIS

	June 30, 2018			December 31, 2017
Tier 1 capital (A=C+D):
Common Equity Tier 1 (C)
Capital stock	W	18,108,099			17,938,099
Capital surplus, etc.		1,483,077			1,548,609
Retained earnings		9,811,021			9,023,996
Non-controlling interests		—			2,639
Accumulated other comprehensive income		608,275			1,048,942
Common stock deductibles		(174,157	)		(149,875	)
		29,836,315			29,412,410
Additional Tier 1 capital (D)
Non-controlling interests		—			4,327
		29,836,315			29,416,737
Tier 2 capital (B):
Allowance for doubtful accounts, etc.		954,111			447,445
Qualified capital securities		2,900,000			2,900,000
Non-qualified capital securities		1,032,239			1,290,298
Non-controlling interests		—			366
		4,886,350			4,638,109
Equity capital (A+B)	W	34,722,665			34,054,846

(4) Market risk

(i) Concept

Market risk is defined as the possibility of potential loss on a trading position resulting from fluctuations in interest rates, foreign exchange rates and the price of stocks 1and derivatives. Trading position is exposed to risks, such as interest rate, stock price, and foreign exchange rate, etc.Non-trading position is mostly exposed to interest rates. Accordingly, the Bank classifies market risks into those exposed from trading position or those exposed fromnon-trading position.

(ii) Market risks of trading positions

Management method on market risks arising from trading positions

In estimating market risk, the Standardized Approach and the internal model are used. The Standardized Approach is used to calculate the required capital from market risk and the internal model is used to manage risks internally. Since July 2007, the Bank has measuredone-day VaR through the historical simulation method using the time series data of past 250 days under a 99% confidence level. The calculated VaR is monitored daily.

S-148

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

The Bank sets total limit of market risk based on annual business plan, risk appetite and others and monitors VaR limit of each department on a daily basis.

Market risk required capital

The Bank’s Market risk required capital as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018		December 31, 2017
Interest rate	W	75,230		53,628
Stock price		3,793		50,111
Foreign exchange rate		13,028		15,120
Option		69,700		60,891
	W	161,751		179,750

(iii) Market risks ofnon-trading positions

Management method on market risks arising fromnon-trading positions

The most critical market risk that arises innon-trading position is the interest rate risk. Interest rate risk is defined as the likely loss resulting from the unfavorable fluctuation of interest rate in the Bank’s financial condition and is measured by interest rate VaR and interest rate EaR.

Interest rate VaR is the maximum amount of decrease in net asset value resulting from the unfavorable fluctuation of interest rate. Interest rate EaR is the maximum amount of decrease in net interest income resulting from the unfavorable fluctuation of interest rate for a year.

The Bank’s interest rate VaR and interest rate EaR are measured through the simulation of conclusive interest rate scenario with the FERMAT and are monthly reported to the Risk Management Committee. The Management’s target of interest rate VaR and interest rate EaR are approved at the beginning of the year. Additionally, the interest rate VaR and interest rate EaR on consolidated basis are calculated using the Standardized Approach to retain the consistency in the methods used by the Bank and its subsidiaries.

S-149

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

VaR/EaR ofnon-trading positions

The Bank’s interest rate VaR and EaR ofnon-trading positions as of June 30, 2018 and December 31, 2017 are as follows:

June 30, 2018
Interest rate shock	Interest rate VaR	Interest rate EaR
2.00%	W  1,150,472	53,244
December 31, 2017
Interest rate shock	Interest rate VaR	Interest rate EaR
2.00%	W  856,927	26,219

S-150

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

(iv) Foreign currency risk

Outstanding balances by currency with significant exposure as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	KRW		USD		EUR		JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	4,553,792		3,899,482		27,028		26,418			5,238			102,979			8,614,937
Securities measured at FVTPL		6,273,589		479,469		68,374		—			—			74,860			6,896,292
Securities measured at FVOCI		22,651,253		3,782,412		24		147,667			—			—			26,581,356
Securities measured at amortized cost		1,003,403		—		—		—			—			—			1,003,403
Loans measured at FVTPL		1,162,785		—		—		—			—			—			1,162,785
Loans measured at amortized cost		99,582,758		31,463,219		1,084,971		1,034,467			170,933			420,884			133,757,232
Derivative financial assets		3,047,967		902,788		16,509		4,679			1,364			2,345			3,975,652
Other financial assets		5,969,618		4,021,713		204,558		89,030			1,040			343,391			10,629,350
		144,245,165		44,549,083		1,401,464		1,302,261			178,575			944,459			192,621,007
Financial liabilities:
Financial liabilities measured at FVTPL		1,618,778		257,197		—		—			—			—			1,875,975
Deposits		24,663,191		5,570,067		10,198		274,866			227			1,400			30,519,949
Borrowings		8,405,946		13,394,305		20,704		858,597			—			13,807			22,693,359
Debentures		95,632,320		16,835,023		407,839		152,196			805,521			5,654,243			119,487,142
Derivative financial liabilities		2,736,555		1,139,782		11,424		1,854			3,553			1,532			3,894,700
Other financial liabilities		6,893,147		4,812,124		243,873		54,968			7,393			315,321			12,326,826
		139,949,937		42,008,498		694,038		1,342,481			816,694			5,986,303			190,797,951
Net financial position	W	4,295,228		2,540,585		707,426		(40,220	)		(638,119	)		(5,041,844	)		1,823,056

S-151

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

	December 31, 2017
	KRW		USD		EUR			JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	3,686,931		2,609,945		38,551			22,349			4,711			246,155			6,608,642
Financial assets held for trading		532,899		341,291		37,013			—			—			15,534			926,737
Available-for-sale financial assets		28,346,164		3,551,367		22			130,433			—			34,935			32,062,921
Held-to-maturity financial assets		1,588		10,725		—			—			—			—			12,313
Loans		101,055,808		32,548,067		1,061,489			1,100,855			167,344			345,759			136,279,322
Derivative financial assets		5,589,047		637,902		13,200			3,939			2,103			3,418			6,249,609
Other financial assets		4,667,246		2,138,600		204,406			86,214			5,245			276,644			7,378,355
		143,879,683		41,837,897		1,354,681			1,343,790			179,403			922,445			189,517,899
Financial liabilities:
Financial liabilities designated at FVTPL		1,434,567		149,146		—			—			—			—			1,583,713
Deposits		26,339,896		6,427,270		22,876			266,509			432			1,196			33,058,179
Borrowings		8,095,006		12,078,010		41,795			748,354			—			8,464			20,971,629
Debentures		94,398,139		15,371,088		1,623,208			367,484			805,053			5,254,010			117,818,982
Derivative financial liabilities		5,240,676		649,181		12,016			2,690			2,444			796			5,907,803
Other financial liabilities		4,730,832		2,905,457		182,281			54,005			1,968			259,267			8,133,810
		140,239,116		37,580,152		1,882,176			1,439,042			809,897			5,523,733			187,474,116
Net financial position	W	3,640,567		4,257,745		(527,495	)		(95,252	)		(630,494	)		(4,601,288	)		2,043,783

(5) Liquidity risk management

(i) Concept

Liquidity risk is defined as the possibility of potential loss due to a temporary shortage in funds caused by a maturity mismatch or an unexpected capital outlay. Liquidity risk soars when funding rates rise, assets are sold below a normal price, or a good investment opportunity is missed.

S-152

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

(ii) Approach to liquidity risk management

The Bank manages its liquidity risks as follows:

Allowable limit for liquidity risk

• The allowable limit for liquidity risk sets LCR, foreign currency liquidity ratio, and remaining maturity gap

• The management standards with regards to the allowable limit for liquidity risk should be set using separate and stringent set ratios in accordance with the FSS guidelines.

<Measurement Methodology>

• LCR: (High quality liquid assets / Total net cash outflows over the next 30 calendar days) X 100

• Foreign currency liquidity ratio: (Maturing liquidity asset in the interval / Maturing liquidity liability in the interval) X 100

• Remaining maturity gap: (Maturing liquidity asset in the interval—Maturing liquidity liability in the interval) / total assets X 100

Early warning indicator

To identify prematurely and cope with worsening liquidity risk trends, the Bank has set up 17 indexes such as the “Foreign Exchange Stabilization Bond CDS Premium,” and measures the trend monthly, weekly and daily as a means for establishing the allowable liquidity risk limit complementary measures.

Stress-Test analysis and contingency plan

• The Bank evaluates the effects on the liquidity risk and identifies the inherent flaws. In the case where an unpredictable and significant liquidity crisis occurs, the Bank executes risk situation analysis quarterly based on crisis specific to the Bank, market risk and complex emergency, and reports to the Risk Management Committee for the Bank’s solvency securitization.

• The Bank established detailed contingency plan to manage the liquidity risks at every risk situations.

S-153

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

(iii) Analysis on remaining contractual maturity of financial instruments

Remaining contractual maturity risks ofnon-derivative financial instruments including interest payment as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	7,340,567		254,587		581,770		440,207		14,058		8,631,189
Securities measured at FVTPL		7,849,729		—		—		—		—		7,849,729
Securities measured at FVOCI		638,484		2,586,269		5,692,981		7,018,160		11,706,556		27,642,450
Securities measured at amortized cost		—		3,889		36,404		998,454		—		1,038,747
Loans		10,057,070		13,259,930		51,002,523		54,870,661		16,383,715		145,573,899
Other financial assets		9,749,990		—		—		—		886,186		10,636,176
	W	35,635,840		16,104,675		57,313,678		63,327,482		28,990,515		201,372,190
Financial liabilities:
Financial liabilities measured at FVTPL	W	56,026		112,165		966,225		458,454		604,141		2,197,011
Deposits		12,751,085		3,724,563		11,278,909		3,233,201		139,617		31,127,375
Borrowings		3,236,850		5,675,461		8,498,467		4,339,645		1,383,788		23,134,211
Debentures		5,404,726		9,306,672		42,991,710		53,990,230		15,616,487		127,309,825
Other financial liabilities		9,931,579		2,150,839		—		—		252,004		12,334,422
	W	31,380,266		20,969,700		63,735,311		62,021,530		17,996,037		196,102,844

S-154

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

	December 31, 2017
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	5,590,394		192,338		504,039		321,796		13,703		6,622,270
Financial assets held for trading		926,678		—		—		—		—		926,678
Available-for-sale financial assets		287,400		1,537,734		6,764,184		8,995,777		15,848,543		33,433,638
Held-to-maturity financial assets		1,504		—		10,848		115		—		12,467
Loans		12,524,041		14,449,933		49,137,375		54,726,337		15,952,742		146,790,428
Other financial assets		6,634,313		—		—		—		750,845		7,385,158
	W	25,964,330		16,180,005		56,416,446		64,044,025		32,565,833		195,170,639
Financial liabilities:
Financial liabilities designated at FVTPL	W	69,285		263,040		587,957		416,339		662,446		1,999,067
Deposits		14,237,933		6,423,163		9,678,063		3,117,355		147,189		33,603,703
Borrowings		3,558,421		4,189,089		7,898,567		4,340,343		1,435,422		21,421,842
Debentures		6,401,501		10,955,197		44,473,217		46,565,221		16,852,878		125,248,014
Other financial liabilities		5,865,093		1,820,414		—		—		456,243		8,141,750
	W	30,132,233		23,650,903		62,637,804		54,439,258		19,554,178		190,414,376

Remaining contractual maturity risks of derivative financial instruments as of June 30, 2018 and December 31, 2017 are as follows:

Net settlement of derivative financial instruments

	June 30, 2018
	Within 1 month			1 ~ 3 months		3 ~ 12 months			1 ~ 5 years		Over 5 years		Total
Trading purpose derivatives:
Currency	W	170			291		1,214			—		—		1,675
Interest rate		27,038			24,718		(91,985	)		267,739		77,154		304,664
Stock		(284	)		—		—			—		—		(284	)
Hedging purpose derivatives:
Interest rate		13,155			8,048		141,791			1,177,918		2,425,087		3,765,999
	W	40,079			33,057		51,020			1,445,657		2,502,241		4,072,054

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

	December 31, 2017
	Within 1 month			1 ~ 3 months			3 ~ 12 months			1 ~ 5 years			Over 5 years			Total
Trading purpose derivatives:
Currency	W	(79	)		498			(129	)		—			—			290
Interest rate		(3,242	)		(2,210	)		(86,807	)		(112,351	)		(40,505	)		(245,115	)
Stock		134			—			—			—			—			134
Hedging purpose derivatives:
Interest rate		20,569			19,411			134,695			1,127,275			2,480,383			3,782,333
	W	17,382			17,699			47,759			1,014,924			2,439,878			3,537,642

Gross settlement of derivative financial instruments

	June 30, 2018
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow		W  34,245,848		28,231,004		58,183,647		56,285,629		5,694,553		182,640,681
Outflow		34,162,988		28,200,005		57,947,398		56,153,011		5,774,772		182,238,174
Hedging purpose derivatives:
Currency
Inflow		2,756,766		659,347		6,291,437		11,441,139		1,740,144		22,888,833
Outflow		2,780,209		685,566		6,287,435		11,396,317		1,729,634		22,879,161
Total inflow		W  37,002,614		28,890,351		64,475,084		67,726,768		7,434,697		205,529,514
Total outflow		W  36,943,197		28,885,571		64,234,833		67,549,328		7,504,406		205,117,335

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2018 and 2017 (Unaudited), and December 31, 2017

(In millions of won)

55.Risk Management, Continued

	December 31, 2017
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 Years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow		W  39,285,254		35,664,287		67,286,704		51,321,999		5,411,444		198,969,688
Outflow		39,393,627		35,877,527		67,746,331		51,188,768		5,491,291		199,697,544
Hedging purpose derivatives:
Currency
Inflow		34,137		338,206		11,887,281		8,582,741		1,464,554		22,306,919
Outflow		34,608		359,082		11,987,081		8,453,255		1,439,125		22,273,151
Total inflow		W  39,319,391		36,002,493		79,173,985		59,904,740		6,875,998		221,276,607
Total outflow		W  39,428,235		36,236,609		79,733,412		59,642,023		6,930,416		221,970,695

Remaining contractual maturity risks of guarantees and commitments as of June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 years		Over 5 years			Total
Guarantees	W	1,541,542		1,816,441		4,545,959		3,872,798		8,638			11,785,378
Commitments		25,797		21,200		1,438,443		1,663,921		26,068,581			29,217,942
	W	1,567,339		1,837,641		5,984,402		5,536,719		26,077,219			41,003,320
	December 31, 2017
	Within 1 month		1 ~ 3 months		3 ~ 12 months		1 ~ 5 years		Over 5 years			Total
Guarantees	W	1,749,883		1,423,597		3,756,986		4,325,805		28,145			11,284,416
Commitments		289,450		166,927		1,612,032		2,135,849		2,153,279			6,357,537
											��
	W	2,039,333		1,590,524		5,369,018		6,461,654		2,181,424			17,641,953

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THE REPUBLIC OF KOREA

The Economy

Gross Domestic Product

Based on preliminary data, GDP growth in 2018 was 2.7% at chained 2010 year prices, as aggregate private and general government consumption expenditures increased by 3.5% and exports of goods and services increased by 4.0%, which more than offset a decrease in gross domestic fixed capital formation by 2.3% and an increase in imports of goods and services by 1.5%, each compared with 2017.

Prices, Wages and Employment

The inflation rate was 1.3% in 2018. The unemployment rate was 3.8% in 2018.

The Financial System

Securities Markets

The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:

June 29, 2018	2,326.1
July 31, 2018	2,295.3
August 31, 2018	2,322.9
September 28, 2018	2,343.1
October 31, 2018	2,029.7
November 30, 2018	2,096.9
December 28, 2018	2,041.0
January 31, 2019	2,204.9

Monetary Policy

Interest Rates

On November 30, 2018, The Bank of Korea raised its policy rate to 1.75% from 1.50%, in response to the continued sound growth of the global and domestic economy.

Foreign Exchange

The following table shows the exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Services, Ltd. as of the dates indicated:

June 29, 2018	1,121.7
July 31, 2018	1,116.7
August 31, 2018	1,108.8
September 28, 2018	1,112.7
October 31, 2018	1,140.6
November 30, 2018	1,121.8
December 31, 2018	1,118.1
January 31, 2019	1,117.2

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Balance of Payments and Foreign Trade

Balance of Payments

Based on preliminary data, the Republic recorded a current account surplus of approximately US$57.7 billion in the first nine months of 2018. The current account surplus in the first nine months of 2018 decreased from the current account surplus of US$61.2 billion in the corresponding period of 2017, primarily due to increases in deficit from the primary and secondary income accounts.

Trade Balance

Based on preliminary data, the Republic recorded a trade surplus of US$54.6 billion in the first nine months of 2018. Exports increased by 4.7% to US$450.3 billion and imports increased by 11.4% to US$395.7 billion from US$430.2 billion of exports and US$355.1 billion of imports, respectively, in the corresponding period of 2017.

Foreign Currency Reserves

The amount of the Government’s foreign currency reserves was US$403.7 billion as of December 31, 2018.

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DESCRIPTION OF THE NOTES

The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the forms of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the United States Securities and Exchange Commission as exhibits to the registration statement no.333-217914.

The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.

Governed by Fiscal Agency Agreement

We will issue the Notes under the fiscal agency agreement, dated as of February 15, 1991, as amended and supplemented from time to time, between us and The Bank of New York (now The Bank of New York Mellon), as fiscal agent (the “Fiscal Agency Agreement”). The fiscal agent will maintain a register for the Notes.

Payment of Principal and Interest

The 2022 Notes are initially limited to US$500,000,000 aggregate principal amount, and the 2024 Notes are initially limited to US$500,000,000 aggregate principal amount. The 2022 Notes will mature on March 19, 2022 (the “2022 Notes Maturity Date”), and the 2024 Notes will mature on February 19, 2024 (the “2024 Notes Maturity Date”, and together with the 2022 Notes Maturity Date, the “Maturity Dates”). The 2022 Notes will bear interest at the rate of 3.00% per annum, and the 2024 Notes will bear interest at the rate of 3.25% per annum, in each case payable semi-annually in arrears on February 19 and August 19 of each year (each, an “Interest Payment Date”), beginning on August 19, 2019. Notwithstanding the foregoing, the last interest payment on the 2022 Notes will not be made on February 19, 2022 and will instead be made on the 2022 Notes Maturity Date in respect of the period from and including August 19, 2021 to but excluding the 2022 Notes Maturity Date. Interest on the Notes will accrue from February 19, 2019. If any Interest Payment Date or any Maturity Date shall be a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, then such payment will not be made on such date but will be made on the next succeeding day which is not a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall be payable in respect of any such delay. We will pay interest to the person who is registered as the owner of a Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the Notes will be computed on the basis of a360-day year consisting of twelve30-day months. We will make principal and interest payments on the Notes in immediately available funds in U.S. dollars.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government.

Denomination

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof.

Redemption

We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.

Form and Registration

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of and deposited with the custodian for DTC. Except as described in the accompanying

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prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear or Clearstream if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”

The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

For so long as the Notes are listed on theSGX-ST and the rules of theSGX-ST so require, in the event that the global notes are exchanged for Notes in definitive registered form, we will appoint and maintain a paying agent in Singapore, where the certificates representing the Notes may be presented or surrendered for payment or redemption (if required). In addition, in the event that the global notes are exchanged for Notes in definitive registered form, an announcement of such exchange will be made through theSGX-ST by or on behalf of the issuer. Such announcement will include all material information with respect to the delivery of the certificates representing the Notes, including details of the paying agent in Singapore.

Further Issues

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have no more than a de minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

Notices

All notices regarding the Notes will be published in London in the Financial Times and in New York in The Wall Street Journal (U.S. Edition). If we cannot, for any reason, publish notice in any of those newspapers, we will choose an appropriate alternate English language newspaper of general circulation, and notice in that newspaper will be considered valid notice. Notice will be considered made on the first date of its publication.

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CLEARANCE AND SETTLEMENT

We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.

Introduction

The Depository Trust Company

DTC is:

• a limited-purpose trust company organized under the New York Banking Law;

• a “banking organization” under the New York Banking Law;

• a member of the Federal Reserve System;

• a “clearing corporation” under the New York Uniform Commercial Code; and

• a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934.

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates.

Euroclear and Clearstream

Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.

Ownership of the Notes through DTC, Euroclear and Clearstream

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the Notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may also hold your beneficial interests in the Notes through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.

We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered

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holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of the Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The participant would then either authorize you to take the action or act for you on your instructions.

DTC may grant proxies or authorize its participants, or persons holding beneficial interests in the Notes through such participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the Fiscal Agency Agreement or the Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the Notes or the Fiscal Agency Agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.

Transfers Within and Between DTC, Euroclear and Clearstream

Trading Between DTC Purchasers and Sellers

DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.

Trading Between Euroclear and/or Clearstream Participants

Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.

Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser

When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account, and the Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.

Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is topre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the Notes are credited to their accounts one day later.

As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not topre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to

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finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participant’s account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on the Notes which the participant earns during thatone-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.

Since the settlement will occur during New York business hours, a DTC participant selling an interest in the Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.

Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:

• borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day trader’s Euroclear or Clearstream account, in accordance with the clearing system’s customary procedures;

• borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or

• staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant.

Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser

Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the Notes to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.

If the Euroclear or Clearstream participant selling the Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.

Settlement in other currencies between DTC and Euroclear and Clearstream is possible usingfree-of-payment transfers to move the Notes, but funds movement will take place separately.

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TAXATION

Korean Taxation

For a discussion of certain Korean tax considerations that may be relevant to you if you invest in the Notes, see “Taxation—Korean Taxation” in the accompanying prospectus.

United States Tax Considerations

On December 13, 2018, the IRS proposed regulations, upon which taxpayers can rely, that defer FATCA withholding on foreign passthru payments. For a discussion of FATCA, see “Taxation—United States Tax Considerations—Foreign Account Tax Compliance Act” in the accompanying prospectus.

The last paragraph under “Taxation—United States Tax Considerations—Premium and Market Discount” in the accompanying prospectus is deleted.

For a discussion of additional U.S. federal income tax considerations that may be relevant to you if you invest in the Notes and are a U.S. holder, see “Taxation—United States Tax Considerations” in the accompanying prospectus.

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UNDERWRITING

Relationship with the Underwriters

We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated February 19, 2019 (the “Terms Agreement”) with respect to the Notes relating to the Underwriting Agreement—Standard Terms (together with the Terms Agreement, the “Underwriting Agreement”) filed as an exhibit to the registration statement. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally and not jointly, and each of the Underwriters has, severally and not jointly, agreed to purchase, the following principal amount of the Notes set out opposite its name below:

Name of Underwriters	Principal Amount of the 2022 Notes		Principal Amount of the 2024 Notes
BNP Paribas	US$	83,333,000	US$	83,333,000
Goldman Sachs International		83,333,000		83,333,000
Merrill Lynch, Pierce, Fenner & Smith                       Incorporated		83,335,000		83,335,000
Mirae Asset Daewoo Co., Ltd.		83,333,000		83,333,000
Mizuho Securities USA LLC		83,333,000		83,333,000
Société Générale		83,333,000		83,333,000
	US$	500,000,000	US$	500,000,000

Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any series of the Notes, then the Underwriters are obligated to take and pay for all of the Notes of such series.

The Underwriters initially propose to offer the Notes directly to the public at the offering price described on the cover page of this prospectus supplement. After the initial offering of the Notes, the Underwriters may from time to time vary the offering price and other selling terms.

If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Underwriters or any affiliate of the Underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Underwriter or its affiliate on our behalf in such jurisdiction.

The Notes are a new class of securities with no established trading market. Applications have been made to the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.

We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.

The amount of net proceeds from our 2022 Notes is US$496,525,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2022Notes offering are estimated to be US$100,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 2022 Notes.

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The amount of net proceeds from our 2024 Notes is US$496,375,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2024 Notes offering are estimated to be US$100,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 2024 Notes.

The Underwriters and certain of their affiliates may have performed certain commercial banking, investment banking and advisory services for us and/or our affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for us and/or our affiliates in the ordinary course of their business.

The Underwriters or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution. The Underwriters or their respective affiliates may purchase Notes for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of us or our subsidiaries or affiliates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this prospectus supplement relates (notwithstanding that such selected counterparties may also be purchasers of Notes).

Delivery of the Notes

We expect to make delivery of the Notes, against payment insame-day funds on or about February 19, 2019, which we expect will be the fourth business day following the date of this prospectus supplement. Under Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in two business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on any day prior to the second business day from the settlement, because the Notes will initially settle in T+4, you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.

Foreign Selling Restrictions

Each Underwriter has agreed, severally and not jointly, to the following selling restrictions in connection with the offering with respect to the following jurisdictions:

Korea

Each Underwriter has severally represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea, or to, or for the account or benefit of, any resident of Korea, except as otherwise permitted by applicable Korean laws and regulations, and (ii) any securities dealer to whom the Underwriters may sell the Notes will agree that it will not offer any Notes, directly or indirectly, in Korea, or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any other dealer who does not so represent and agree.

United Kingdom

Each Underwriter has severally represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) received by it in connection with the issue or sale of any of the Notes in circumstances in which section 21(1) of the FSMA does not apply to us, and (ii) it has complied, and will comply with, all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes, from or otherwise involving the United Kingdom.

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Prohibition of Sales to EEA Retail Investors

Each Underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the European Economic Area. For the purposes of this provision the expression “retail investor” means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(ii) a customer within the meaning of Directive 2002/92/EC, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

Japan

Each Underwriter has severally represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended); it has not offered or sold, and it will not offer or sell, directly or indirectly, any of the Notes in Japan or to, or for the account or benefit of, any resident of Japan or to, or for the account or benefit of, any resident for reoffering or resale, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan except (i) pursuant to an exemption from the registration requirements of, or otherwise in compliance with, the Financial Instruments and Exchange Law of Japan, and (ii) in compliance with the other relevant laws of Japan.

Hong Kong

Each Underwriter has severally represented and agreed that:

• it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and any rules made under the SFO; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “Companies Ordinance”) or which do not constitute an offer to the public within the meaning of the Companies Ordinance; and

• it has not issued, or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, any advertisement, invitation or document relating to the Notes, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are or are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.

Singapore

Each Underwriter has severally represented and agreed that neither the preliminary prospectus nor the prospectus has been or will be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289 of Singapore)(the “SFA”). Accordingly, each Underwriter has severally represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the preliminary prospectus or the prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

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Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.

Notification under Section 309B(1)(c) of the SFA—the Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Australia

No prospectus or other disclosure document (as defined in the Corporations Act 2001 of Australia) in relation to the offering of the Notes has been or will be lodged with or registered by Australian Securities and Investments Commission or the Australian Securities Exchange Limited. Each Underwriter has represented and agreed that it has not:

(a) made or invited, and will not make or invite, an offer of the Notes for issue or sale in Australia (including an offer or invitation which is received by a person in Australia); and

(b) distributed or published and will not distribute or publish any draft, preliminary or final form offering memorandum, advertisement or other offering material relating to the Notes in Australia,

unless:

(i) the minimum aggregate consideration payable by each offeree is at least AUD 500,000 (or its equivalent in an alternate currency) (disregarding money lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors in accordance with Part 6D.2 and Part 7 of the Corporations Act 2001 of Australia; and

(ii) such action complies with all applicable laws, directives and regulations and does not require any document to be lodged with, or registered by, the Australian Securities and Investments Commission.

Each Underwriter has agreed that it will not sell the Notes in circumstances where employees of the Underwriter aware of, or involved in, the sale know, or have reasonable grounds to suspect, that the Notes, or an interest in or right in respect of the Notes, was being, or would later be, acquired either directly or indirectly by a resident of Australia, or a non-resident who is engaged in carrying on business in Australia at or through a permanent establishment of that non-resident in Australia (the expressions “resident of Australia”, “non-resident” and “permanent establishment” having the meanings given to them by the Australian Tax Act).

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Canada

Prospective Canadian investors are advised that the information contained within the preliminary prospectus and prospectus has not been prepared with regard to matters that may be of particular concern to Canadian investors. Accordingly, prospective Canadian investors should consult with their own legal, financial and tax advisers concerning the information contained within the preliminary prospectus and prospectus and as to the suitability of an investment in the Notes in their particular circumstances.

Each Underwriter has severally represented and agreed that the Notes may only be offered or sold in the provinces of Alberta, British Columbia, Ontario and Québec or to or for the benefit of a resident of these provinces pursuant to an exemption from the requirement to file a prospectus in such province in which such offer or sale is made, and only by a dealer duly registered under the applicable securities laws of that province or by a dealer that is relying in that province on the “international dealer” exemption provided by section 8.18 of National Instrument 31-103Registration Requirements,Exemptions and Ongoing Registrant Obligations (NI 31-103). Furthermore, the Notes may only be offered or sold to or for the benefit of a resident of any such province provided that such resident is both an “accredited investor” as defined in National Instrument 45-106Prospectus Exemptions (NI 45-106) or subsection 73.3 (1) of theSecurities Act (Ontario) and a “permitted client” as defined in NI 31-103. By purchasing any Notes and accepting delivery of a purchase confirmation a purchaser is representing to the underwriters and the dealer from whom the purchase confirmation is received that it is an “accredited investor” and “permitted client” as defined above. The distribution of the Notes in Canada is being made on a private placement basis only and any resale of the Notes must be made in accordance with applicable Canadian securities laws, which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with prospectus and registration requirements or exemptions from the prospectus and registration requirements.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this preliminary prospectus or prospectus (including any amendment hereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Under Canadian securities law, National Instrument 33-105Underwriting Conflicts (NI 33-105) provides disclosure requirements with respect to potential conflicts of interest between an issuer and underwriters, dealers or placement agents, as the case may be. To the extent any conflict of interest between us and any of the Underwriters (or any other placement agent acting in connection with this offering) may exist in respect of this offering, the applicable parties to this offering are relying on the exemption from these disclosure requirements provided to them by section 3A.3 of NI 33-105 (exemption based on U.S. disclosure).

We and the Underwriters hereby notify prospective Canadian purchasers that: (a) we may be required to provide personal information pertaining to the purchaser as required to be disclosed in Schedule I ofForm 45-106F1 under NI 45-106 (including its name, address, telephone number and the aggregate purchase price of any Notes purchased) (“personal information”), which Form 45-106F1 may be required to be filed by us under NI 45-106, (b) such personal information may be delivered to the Ontario Securities Commission (the “OSC”) in accordance with NI 45-106, (c) such personal information is collected indirectly by the OSC under the authority granted to it under the securities legislation of Ontario, (d) such personal information is collected for the purposes of the administration and enforcement of the securities legislation of Ontario, and (e) the public official in Ontario who can answer questions about the OSC’s indirect collection of such personal information is the Administrative Support Clerk at the OSC, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8, Telephone: (416) 593-3684. Prospective Canadian purchasers that purchase Notes in this offering will be deemed to have authorized the indirect collection of the personal information by the OSC, and to have acknowledged and consented to its name, address, telephone number and other specified information, including

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the aggregate purchase price paid by the purchaser, being disclosed to other Canadian securities regulatory authorities, and to have acknowledged that such information may become available to the public in accordance with requirements of applicable Canadian laws.

Upon receipt of this prospectus, each Canadian purchaser hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only.Par la réception de ce prospectus, chaque acheteur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

Price Stabilization and Short Position

In connection with this offering, Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Stabilizing Manager”) or any person acting for it, on behalf of the Underwriters, may purchase and sell the Notes in the open market. These transactions may include over-allotment, covering transactions, penalty bids and stabilizing transactions. Over-allotment involves sales of the Notes in excess of the principal amount of Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. A penalty bid occurs when a particular Underwriter repays to the Underwriters a portion of the underwriting discount received by it because the Underwriters or the Stabilizing Manager has repurchased Notes sold by or for the account of such Underwriter in stabilizing or short covering transactions. Stabilizing transactions consist of certain bids or purchases of Notes in the open market for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Manager may conduct these transactions in theover-the-counter market or otherwise. If the Stabilizing Manager commences any of these transactions, it may discontinue them at any time, and must discontinue them after a limited period.

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LEGAL MATTERS

The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Lee & Ko, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Davis Polk & Wardwell LLP, New York, New York. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Davis Polk & Wardwell LLP may rely as to matters of Korean law upon the opinions of Lee & Ko, and Lee & Ko may rely as to matters of New York law upon the opinions of Cleary Gottlieb Steen & Hamilton LLP.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chief Executive Officer and Chairman of the Board of Directors, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Korea Development Bank.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.

GENERAL INFORMATION

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended. The address of our registered office is 14, Eunhaeng-ro,Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

Our Board of Directors can be reached at the address of our registered office: c/o 14, Eunhaeng-ro,Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

The issue of the Notes has been authorized by a resolution of our Board of Directors passed on December 28, 2018 and a decision of our Chief Executive Officer and Chairman of the Board of Directors dated January 28, 2019. On February 1, 2019, we filed our reports on the proposed issuance of the Notes with the Ministry of Economy and Finance of Korea.

The registration statement with respect to us and the Notes has been filed with the U.S. Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, United States.

The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:

	ISIN		CUSIP		Common Code
2022 Notes		US500630CV81		500630 CV8		195344892
2024 Notes		US500630CW64		500630 CW6		195338272

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HEAD OFFICE OF THE BANK

14, Eunhaeng-ro

Yeongdeungpo-gu, Seoul 07242

The Republic of Korea

FISCAL AGENT AND PRINCIPAL PAYING AGENT

The Bank of New York Mellon

101 Barclay Street, 21^st Floor West

New York, NY 10286

United States of America

LEGAL ADVISORS TO THE BANK

as to Korean law	as to U.S. law
Lee & Ko Hanjin Building 63 Namdaemun-ro, Jung-gu Seoul 04532 The Republic of Korea	Cleary Gottlieb Steen & Hamilton LLP c/o 19th Floor, Ferrum Tower 19 Eulji-ro 5-gil, Jung-gu Seoul 04539 The Republic of Korea

LEGAL ADVISOR TO THE UNDERWRITERS

as to U.S. law

Davis Polk & Wardwell LLP

c/o 18th Floor

The Hong Kong Club Building

3A Chater Road

Hong Kong

AUDITOR OF THE BANK

KPMG Samjong Accounting Corp.

10^th Floor, Gangnam Finance Center

152, Teheran-ro

Gangnam-gu, Seoul 06236

The Republic of Korea

SINGAPORE LISTING AGENT

Shook Lin & Bok LLP

1 Robinson Road

#18-00 AIA Tower

Singapore 048542