Korea Development Bank 424B2 Prospectus for primary offering

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-246071

PROSPECTUS SUPPLEMENT

(To Prospectus Dated August 25, 2020)

LOGO

The Korea Development Bank

US$700,000,000 0.400% Notes due 2024

US$500,000,000 0.800% Notes due 2026

US$300,000,000 1.625% Notes due 2031

Our US$700,000,000 aggregate principal amount of notes due 2024 (the “2024 Notes”) will bear interest at a rate of 0.400% per annum, our US$500,000,000 aggregate principal amount of notes due 2026 (the “2026 Notes”) will bear interest at a rate of 0.800% per annum, and our US$300,000,000 aggregate principal amount of notes due 2031 (the “2031 Notes”, and together with the 2024 Notes and the 2026 Notes, the “Notes”) will bear interest at a rate of 1.625% per annum. Interest on the 2024 Notes is payable semi-annually in arrears on June 19 and December 19 of each year, beginning on June 19, 2021, and interest on the 2026 Notes and the 2031 Notes is payable semi-annually in arrears on January 19 and July 19 of each year, beginning on July 19, 2021. The 2024 Notes will mature on June 19, 2024, the 2026 Notes will mature on July 19, 2026, and the 2031 Notes will mature on January 19, 2031.

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.


	2024 Notes				2026 Notes					2031 Notes
	Per Note		Total		Per Note			Total		Per Note			Total
Public offering price		99.756%	US$	698,292,000		99.759	%	US$	498,795,000		99.715	%	US$	299,145,000
Underwriting discount		0.300%	US$	2,100,000		0.300	%	US$	1,500,000		0.300	%	US$	900,000
Proceeds to us (before deduction of expenses)		99.456%	US$	696,192,000		99.459	%	US$	497,295,000		99.415	%	US$	298,245,000

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including January 19, 2021.

Approvals in-principle have been received from 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 of the 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 listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us 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 January 19, 2021.

Joint Bookrunners and Lead Managers

BNP PARIBAS

BofA Securities

J.P. Morgan

KDB Asia

Société Générale

Corporate & Investment Banking

Standard Charted Bank

UBS

Co-manager

KEXIM Asia Limited

Prospectus Supplement Dated January 11, 2021

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-9
Description of the Notes		S-156
Clearance and Settlement		S-158
Taxation		S-161
Underwriting		S-162
Legal Matters		S-169
Official Statements and Documents		S-169
General Information		S-169

Prospectus


	Page
CERTAIN DEFINED TERMS AND CONVENTIONS		1
USE OF PROCEEDS		2
THE KOREA DEVELOPMENT BANK		3
Overview		3
Capitalization		5
Business		6
Selected Financial Statement Data		8
Operations		15
Sources of Funds		22
Debt		24
Overseas Operations		25
Property		26
Directors and Management; Employees		26
Tables and Supplementary Information		26
Financial Statements and the Auditors		33
THE REPUBLIC OF KOREA		169
Land and History		169
Government and Politics		171
The Economy		174
Principal Sectors of the Economy		183
The Financial System		190
Monetary Policy		195
Balance of Payments and Foreign Trade		199
Government Finance		207
Debt		209
Tables and Supplementary Information		211

S-1


	Page
DESCRIPTION OF THE SECURITIES		215
Description of Debt Securities		215
Description of Warrants		222
Terms Applicable to Debt Securities and Warrants		222
Description of Guarantees to be Issued by Us		223
Description of Guarantees to be Issued by The Republic of Korea		224
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS		225
TAXATION		226
Korean Taxation		226
United States Tax Considerations		228
PLAN OF DISTRIBUTION		237
LEGAL MATTERS		238
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES		238
OFFICIAL STATEMENTS AND DOCUMENTS		238
EXPERTS		238
FORWARD-LOOKING STATEMENTS		239
FURTHER INFORMATION		241

S-2

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, 2019, June 30, 2020 and September 30, 2020 and for the six months ended June 30, 2019 and 2020 and the nine months ended September 30, 2019 and 2020 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 August 25, 2020. The accompanying prospectus contains information regarding us 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. 333-246071, 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. The SGX-ST assumes no responsibility for the correctness of any of the 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 listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us 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.”

S-3

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 (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

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 United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made under the Insurance Distribution Directive, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.

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.

S-4

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$700,000,000 aggregate principal amount of 0.400% notes due June 19, 2024 (the “2024 Notes”), US$500,000,000 aggregate principal amount of 0.800% notes due July 19, 2026 (the “2026 Notes”), and US$300,000,000 aggregate principal amount of 1.625% notes due January 19, 2031 (the “2031 Notes”, and together with the 2024 Notes and the 2026 Notes, the “Notes”).

The 2024 Notes will bear interest at a rate of 0.400% per annum, payable semi-annually in arrears on June 19 and December 19 of each year, beginning on June 19, 2021. The 2026 Notes will bear interest at a rate of 0.800% per annum and the 2031 Notes will bear interest at a rate of 1.625% per annum, in each case payable semi-annually in arrears on January 19 and July 19 of each year, beginning on July 19, 2021. Interest on the Notes will accrue from January 19, 2021 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.” Interest on the Notes will accrue from January 19, 2021 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

Approvals in-principle have been received from 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.”

S-5

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.

Delivery of the Notes

We expect to make delivery of the Notes, against payment in same-day funds on or about January 19, 2021, which we expect will be the fifth business day following the date of this prospectus supplement, referred to as “T+5.” You should note that initial trading of the Notes may be affected by the T+5 settlement. See “Underwriting—Delivery of the Notes.”

Underwriting

KDB Asia Limited, one of the underwriters, is our affiliate and has agreed to offer and sell the Notes only outside the United States to non-U.S. persons. See “Underwriting—Relationship with the Underwriters.”

S-6

USE OF PROCEEDS

The 2024 Notes

Use of Proceeds from the Sale of the 2024 Notes

The net proceeds from the issue of the 2024 Notes, after deducting the underwriting discount but not estimated expenses, will be US$696,192,000. An amount equal to the net proceeds of the 2024 Notes (the “Green Bond Proceeds”) will be allocated toward financing and/or refinancing of new and/or existing projects from the Eligible Green Categories as set forth in the KDB Sustainable Bond Framework, for which we have obtained a second party opinion from Sustainalytics, an external consultant, in June 2019 (the “Second Party Opinion”). In particular, we intend to focus on allocating the Green Bond Proceeds to projects related to the manufacture of rechargeable batteries for electric vehicles and/or the construction or expansion of renewable energy production facilities, including those that use solar power and wind power (the “Eligible Green Projects”), which satisfy the eligibility criteria under the “Clean Transportation” category and the “Renewable Energy” category, respectively, of the KDB Sustainable Bond Framework. The KDB Sustainable Bond Framework and the Second Party Opinion are publicly available on the following website: https://www.kdb.co.kr/index.jsp.

Project Evaluation and Selection Process

We will use our existing project evaluation and selection process to select Eligible Green Projects by evaluating their financial viability and environmental and social impact. In this process, the Business Planning Department, the Environmental & Social Team and the Credit Review Division, among others, will be responsible for conducting due diligence, project approval review, and technical monitoring in respect of environment and social risk management and supervising mitigation activities throughout the project life cycle.

Management of the Green Bond Proceeds

The Green Bond Proceeds will be allocated and managed by the Treasury Department based on an internal management system that will track the allocation of proceeds to selected Eligible Green Projects within its internal management system, including brief descriptions of the projects, the regions in which the projects are located and the amount of proceeds allocated to the projects. Pending allocation, the Green Bond Proceeds may be invested in cash, cash equivalents and/or marketable securities, in accordance with our cash management policies.

Reporting

With respect to use of the Green Bond Proceeds, we plan to include information regarding the allocation of the Green Bond Proceeds on an annual basis in an investor newsletter, which will be made available on our website. Such information will include amounts allocated to Eligible Green Projects, a brief description of select projects and, where feasible, the environmental and/or social impact of such projects on a per project or project portfolio basis. Disclosure of the allocation of the Green Bond Proceeds and impact reporting on a per project basis will be subject to any restrictions included in the disclosure agreement with the relevant borrower.

Investment Considerations

The 2024 Notes may not be a suitable investment for all investors seeking exposure to green assets. The description of the Eligible Green Projects provided herein is for illustrative purposes only and no assurance can be provided that loans to entities with these specific characteristics will be made by us during the term of the 2024 Notes.

S-7

There is currently no market consensus on what precise attributes are required for a particular loan or series of notes to be defined as “green,” and therefore no assurance can be provided to investors that selected Eligible Green Projects will meet all investor expectations regarding environmental impact. Although the Eligible Green Projects will be selected in accordance with the categories recognized under the ICMA Green Bond Principles, and will be developed in accordance with relevant legislation and standards, there can be no guarantee that the loans will deliver the environmental benefits as anticipated, or that adverse environmental impact will not occur during the term of the 2024 Notes. In addition, our use of the Green Bond Proceeds may not comply with all or part of the ICMA Green Bond Principles or any relevant legislation or standards, and where any negative impact is insufficiently mitigated, any loans extended may become controversial and may be criticized by activist groups or other stakeholders.

In addition, although we have agreed to certain reporting and use of proceeds obligations in connection with certain environmental criteria, our failure to comply with such obligations will not constitute a breach or an event of default under the 2024 Notes. Any failure by us to use an amount equivalent to the net proceeds from the issuance of the 2024 Notes on Eligible Green Projects or to meet or continue to meet the investment requirements of certain environmentally-focused investors with respect to the 2024 Notes may affect the value of the 2024 Notes and may have consequences for certain investors with portfolio mandates to invest in green assets.

No assurance can be provided that the 2024 Notes will fulfill the criteria required to qualify as green bonds. Each potential purchaser of the 2024 Notes should determine for itself the relevance of the information contained in this prospectus supplement and the accompanying prospectus regarding the use of the net proceeds from the issuance of the 2024 Notes and its purchase of the 2024 Notes should be based upon such investigation as it deems necessary. Neither the KDB Sustainable Bond Framework nor the Second Party Opinion is incorporated into, or forms part of, this prospectus supplement or the accompanying prospectus.

The 2026 Notes and the 2031 Notes

The aggregate amount of the net proceeds from the issue of the 2026 Notes and the 2031 Notes, after deducting the underwriting discount but not estimated expenses, will be US$795,540,000. We will use the net proceeds from the sale of the 2026 Notes and the 2031 Notes for our general operations, including extending foreign currency loans and repayment of our maturing debt and other obligations.

S-8

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 August 25, 2020. 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”).

Overview

As of June 30, 2020, we hadW160,909.6 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines, without adjusting for allowance for loan losses, present value discounts and deferred loan fees),W257,373.7 billion of total assets andW26,552.6 billion of total equity, as compared toW142,986.1 billion of loans outstanding,W217,835.3 billion of total assets andW25,802.8 billion of total equity as of December 31, 2019. For the six months ended June 30, 2020, we recordedW2,353.1 billion of interest income,W1,771.8 billion of interest expense andW369.3 billion of net income, as compared toW2,581.2 billion of interest income,W2,063.8 billion of interest expense andW529.1 billion of net income for the six months ended June 30, 2019. See “—Selected Financial Statement Data.”

Capitalization

As of September 30, 2020, our authorized capital wasW30,000 billion and our capitalization was as follows:


	September 30, 2020⁽¹⁾
	(billions of won)
	(unaudited)
Long-term debt⁽²⁾⁽³⁾:
Won currency borrowings		3,694.5
Industrial finance bonds		142,424.0
Foreign currency borrowings		2,779.3

Total long-term debt		148,897.8

Capital:
Paid-in capital		20,765.7
Capital surplus		2,484.4
Retained earnings⁽⁴⁾		5,011.4
Accumulated other comprehensive income		727.3

Total capital		28,988.8

Total capitalization		177,886.6

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2020.

(2)	We have translated borrowings in foreign currencies into Won at the rate ofW1,173.50 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 29, 2020.

S-9

(3)	As of September 30, 2020, we had confirmed acceptances and guarantees totalingW7,482.7 billion under outstanding guarantees issued on behalf of our clients.

(4)

Includes planned regulatory reserve for credit losses ofW1,146.0 billion as of September 30, 2020. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings.

Business

Government Support and Supervision

The Government contributedW450.5 billion andW1,652.1 billion in cash to our capital in April and July 2020, respectively. As of September 30, 2020, our paid-in capital wasW20,765.7 billion compared toW18,663.1 billion as of December 31, 2019.

Selected Financial Statement Data

Recent Developments

As of September 30, 2020, we hadW162,015.9 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines, without adjusting for allowance for loan losses, present value discounts and deferred loan fees),W256,814.3 billion of total assets andW28,988.8 billion of total equity, as compared toW142,986.1 billion of loans outstanding,W217,835.3 billion of total assets andW25,802.8 billion of total equity as of December 31, 2019. For the nine months ended September 30, 2020, we recordedW3,434.4 billion of interest income,W2,497.1 billion of interest expense andW456.5 billion of net income, as compared toW3,861.5 billion of interest income,W3,083.1 billion of interest expense andW431.6 billion of net income for the nine months ended September 30, 2019.

The following tables present our selected separate financial information for the nine months ended September 30, 2019 and 2020 and as of December 31, 2019 and September 30, 2020, which has been derived from our unaudited separate financial statements as of December 31, 2019 and September 30, 2020 and for the nine months ended September 30, 2020 and 2019 prepared in accordance with K-IFRS.

Separate K-IFRS Financial Statement Data


	Nine Months Ended September 30,
	2019		2020
	(billions of Won) (unaudited)
Income Statement Data
Total Interest Income		3,861.5		3,434.4
Total Interest Expenses		3,083.1		2,497.1
Net Interest Income		778.4		937.3
Operating Income		839.0		985.6
Income before Income Tax		485.8		583.1
Income Tax Expense		54.2		126.7
Net Income		431.6		456.5

S-10


	As of December 31, 2019		As of September 30, 2020
	(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		142,986.1		162,015.9
Total Borrowings⁽²⁾		177,923.4		211,445.7
Total Assets		217,835.3		256,814.3
Total Liabilities		192,032.5		227,825.5
Equity		25,802.8		28,988.8

(1)

(2)	Total borrowings include financial liabilities designated at fair value through profit or loss, deposits, borrowings and debentures.

Nine Months Ended September 30, 2020

For the nine months ended September 30, 2020, we had net income ofW456.5 billion compared to net income ofW431.6 billion in the corresponding period of 2019, on a separate K-IFRS basis. The principal factors for such increase in net income included:

•

a decrease in impairment loss on investments in subsidiaries and associates toW155.1 billion in the nine months ended September 30, 2020 fromW504.9 billion in the corresponding period of 2019, primarily due to the re-classification of our interest in DSME to assets held for sale in the nine months ended September 30, 2020 from investments in subsidiaries and associates in the corresponding period of 2019;

•

a net gain on derivatives ofW37.6 billion in the nine months ended September 30, 2020 compared to a net loss on derivatives ofW265.4 billion in the corresponding period of 2019, primarily due to an increase in gains on fair value hedged items resulting from fluctuations in interest rates, foreign exchange rates and the prices of stocks and derivatives; and

•

an increase in net interest income toW937.3 billion in the nine months ended September 30, 2020 fromW778.4 billion in the corresponding period of 2019, primarily due to an increase in the average volume of our interest-bearing assets.

The above factors were partially offset by:

•

impairment loss on assets held for sale ofW240.0 billion in the nine months ended September 30, 2020 compared to reversal of impairment loss on assets held for sale ofW157.5 billion in the corresponding period of 2019, primarily due to impairment loss resulting from a decline in the value of the shares of DSME during the nine months ended September 30, 2020;

•

an increase in provision for credit losses toW409.3 billion in the nine months ended September 30, 2020 fromW128.1 billion in the corresponding period of 2019, primarily due to an increase in expected credit loss in anticipation of a deterioration in the overall asset quality of our loan portfolio due to the ongoing global outbreak of the COVID-19 pandemic; and

•

an increase in income tax expense toW126.7 billion in the nine months ended September 30, 2020 fromW54.2 billion in the corresponding period of 2019, primarily due to (i) an increase in income before income tax toW583.1 billion in the nine months ended September 30, 2020 fromW485.8 billion in the corresponding period of 2019 and (ii) a decrease in the non-recognition effect of deferred income taxes and others toW26.1 billion in the nine months ended September 30, 2020 fromW67.1 billion in the corresponding period of 2019.

S-11

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, HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), Hanjin Heavy Industries and Construction Co., Ltd., Daehan Shipbuilding Co., Ltd., Asiana Airlines Inc., STX Offshore & Shipbuilding Co., Ltd., KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd., Doosan Infracore Co., Ltd. and GM Korea Company. As of September 30, 2020, our credit extended to these companies totaledW16,657.2 billion, accounting for 6.5% of our total assets as of such date.

The following table provides the loan amounts (including loans classified as substandard or below and equity investments classified as estimated loss or below) extended to these companies as of the dates indicated:


Company	As of December 31, 2019		As of September 30, 2020		Primary Reason for Change
	(billions of won)
DSME	W	5,277.1	W	4,434.7	Decrease due to a decrease in refund guarantees
HMM Company Limited		1,685.2		2,986.5	Increase due to purchase of perpetual bonds
Hanjin Heavy Industries and Construction		1,089.4		873.1	Decrease due to a decrease in loans
Daehan Shipbuilding		1,087.4		1,019.9	Decrease due to a decrease in refund guarantees
Asiana Airlines		1,017.9		2,660.4	Increase due to an increase in loans and purchase of perpetual bonds
STX Offshore & Shipbuilding		998.5		540.8	Decrease due to a decrease in refund guarantees
KG Dongbu Steel		755.4		695.3	Decrease due to a decrease in sales of stocks and redemption of loans
Doosan Heavy Industries & Construction		599.1		2,213.6	Increase due to an increase in loans
Doosan Infracore		641.8		805.2	Increase do to purchase of corporate bonds
GM Korea Company		401.5		427.6	Increase due to an increase in the value of the shares of GM Korea Company

Total	W	13,553.3	W	16,657.2

As of September 30, 2020, we established allowances ofW1,221.2 billion for our exposure to DSME,W101.5 billion for HMM Company Limited,W129.6 billion for Hanjin Heavy Industries and Construction,W369.2 billion for Daehan Shipbuilding,W15.9 billion for Asiana Airlines,W432.4 billion for STX Offshore & Shipbuilding,W32.0 billion for KG Dongbu Steel,W58.4 billion for Doosan Heavy Industries and Construction,W52.2 billion for Doosan Infracore Co., Ltd. and none for GM Korea.

In September 2020, we decided to injectW2.4 trillion from the Key Industry Stabilization Fund into Asiana Airlines in order to normalize its operations following the cancellation of plans by a consortium led by HDC Hyundai Development to acquire Asiana Airlines. See “—Loans to Financially Troubled Companies” as of June 30, 2020 below. Subsequently, in November 2020, we signed an investment agreement with Hanjin KAL, the parent company of Korean Air, to injectW800 billion (consisting ofW500 billion through participation in a rights offering andW300 billion through purchase of exchangeable bonds) into Hanjin KAL in connection with Korean Air’s acquisition of a 63.9% stake in Asiana Airlines through a transaction currently valued atW1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to 10.7%. In December 2020, Asiana Airlines’ shareholders approved a 3-to-1 share capital reduction plan, which is aimed at offsetting part of Asiana Airlines’ deficits in preparation for the Acquisition, which we expect to be completed by the second half of 2021. The consummation of the Acquisition currently remains subject to a number of factors, including uncertainties regarding the approval of the Acquisition by Korean Air’s shareholders, opposition to the Acquisition by labor unions of Korean Air and Asiana Airlines, and approval of

S-12

the Acquisition from antitrust authorities of a number of jurisdictions, including the United States, the European Union and China.

In the first nine months of 2020, we sold non-performing loans worthW243.2 billion to Hana F&I.

Results of Operations

The following tables present our selected separate financial information as of December 31, 2019 and June 30, 2020 and for the six months ended June 30, 2019 and 2020, which has been derived from our unaudited separate financial statements as of June 30, 2020 and for the six months ended June 30, 2020 and 2019 prepared in accordance with K-IFRS and included in this prospectus supplement.

Separate K-IFRS Financial Statement Data


	Six Months Ended June 30,
	2019			2020
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		2,581.2			2,353.1
Total Interest Expenses		2,063.8			1,771.8
Net Interest Income		517.4			581.3
Operating Income		732.4			688.9
Income before Income Tax		528.9			473.8
Income Tax Expense (Benefit)		(0.1	)		104.5
Net Income		529.1			369.3


	As of December 31, 2019		As of June 30, 2020
	(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		142,986.1		160,909.6
Total Borrowings⁽²⁾		177,923.4		212,983.3
Total Assets		217,835.3		257,373.7
Total Liabilities		192,032.5		230,821.0
Equity		25,802.8		26,552.6

(1)

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. See Note 9 of the notes to our unaudited separate financial statements as of June 30, 2020 and for the six months ended June 30, 2020 and 2019 included in this prospectus supplement.

(2)	Total borrowings include financial liabilities designated at fair value through profit or loss due to customers, borrowings and debt issued.

Six Months Ended June 30, 2020

In the first half of 2020, we had net income ofW369.3 billion compared to net income ofW529.1 billion in the corresponding period of 2019, on a separate basis. The principal factors for the decrease in net income included:

•

impairment loss on assets held for sale ofW46.8 billion (net of reversals) in the first half of 2020 compared to reversal of impairment loss on assets held for sale ofW282.3 billion in the corresponding period of 2019, primarily due to impairment loss resulting from a decline in the value of the shares of DSME during the first half of 2020; and

S-13

•

provision for credit losses ofW204.7 billion in the first half of 2020 compared to a reversal of provision for credit losses ofW33.1 billion in the corresponding period of 2019, primarily due to an increase in expected credit loss in anticipation of a deterioration in the overall asset quality of our loan portfolio due to the ongoing global outbreak of the COVID-19 pandemic.

The above factors were partially offset by a decrease in impairment loss on investments in subsidiaries and associates toW165.9 billion in the first half of 2020 fromW484.7 billion in the corresponding period of 2019, primarily due to the re-classification of our interest in DSME from investments in subsidiaries and associates in the first half of 2019 to assets held for sale in the corresponding period of 2020.

Allowances for Loan Losses and Loans in Arrears

As of June 30, 2020, we had established allowances ofW3,224.1 billion for loan losses under Korean IFRS.

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2020, we have provided loans ofW823.4 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2020, we had established allowances ofW397.0 billion for loan losses with respect to such companies. We cannot assure you that actual credit losses from the loans to these customers will not exceed the allowances established.

The following table provides information on our loan loss allowances.


		As of June 30, 2020⁽¹⁾
		Loan Amount		Loan Loss Allowances
		(in billions of won, except percentages)
Loan Classification	Normal⁽²⁾	W	154,559.0	W	602.8
	Precautionary		3,334.5		867.7
	Substandard		1,605.4		687.2
	Doubtful		273.1		202.2
	Expected Loss		1,137.6		864.2

	Total	W	160,909.6	W	3,224.1

(1)

These figures include loans for facility development, loans for working capital, loans for households, 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 allowances for all loans including loans guaranteed by the Government.

As of June 30, 2020, our non-performing loans totaledW3,016.1 billion, representing 1.9% 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, 2020, our legal reserve wasW1,356.1 billion, representing 0.8% 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, Hyundai Merchant Marine Co., Ltd., Hanjin Heavy Industries and Construction Co., Ltd., Daehan Shipbuilding Co., Ltd., Asiana Airlines Inc., STX Offshore & Shipbuilding Co., Ltd., KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd. and GM Korea Company. As of June 30, 2020, our credit extended to these companies totaledW14,296.3 billion, accounting for 5.6% of our total assets as of such date.

S-14

The following table provides the loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to these companies as of the dates indicated:


Company	As of December 31, 2019		As of June 30, 2020		Primary Reason for Change
	(billions of won)
DSME	W	5,277.1	W	4,120.3	Decrease due to a decline in the value of the shares of DSME
Hyundai Merchant Marine		1,685.2		2,173.9	Increase due to purchase of perpetual bonds
Hanjin Heavy Industries and Construction		1,089.4		868.6	Decrease due to a decrease in loans
Daehan Shipbuilding		1,087.4		1,051.1	Decrease due to a decrease in refund guarantees
Asiana Airlines Inc.		1,017.9		2,183.0	Increase due to purchase of perpetual bonds
STX Offshore & Shipbuilding		998.5		916.4	Decrease due to a decrease in refund guarantees
KG Dongbu Steel		755.4		783.0	Increase due to an increase in issuance of letters of credit
Doosan Heavy Industries & Construction		599.1		1,798.4	Increase due to an increase in loans
GM Korea Company		401.5		401.5	—

Total	W	12,911.5	W	14,296.3

As of June 30, 2020, we established allowances ofW1,263.2 billion for our exposure to DSME,W101.4 billion for Hyundai Merchant Marine,W121.2 billion for Hanjin Heavy Industries and Construction,W394.6 billion for Daehan Shipbuilding,W10.3 billion for Asiana Airlines,W807.4 billion for STX Offshore & Shipbuilding,W28.6 billion for KG Dongbu Steel,W43.8 billion for Doosan Heavy Industries and Construction and none for GM Korea.

During 2015, DSME, one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Export-Import Bank of Korea, would extend additional financing of up toW4.2 trillion to DSME by the end of 2016 in the form of debt-to-equity swaps, extension of additional loans and provision of other forms of liquidity support. In this connection, in December 2015, we acquiredW382.9 billion of new equity shares of DSME, which increased our equity interest in DSME from 31.5% to 49.7%, and we became its largest shareholder. In December 2016, we increased our equity interest in DSME to 79.0% through an additional debt for equity swap. In March 2017, we and The Export-Import Bank of Korea announced a second joint plan to provide an additionalW2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we provided additional debt-to-equity swaps ofW0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount ofW1.28 trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. Pursuant to such agreement, we plan to transfer all of our shares in DSME amounting to approximatelyW2 trillion (in the form of contributions-in-kind) to Korea Shipbuilding & Offshore Engineering, a newly established sub-holding company spun off from Hyundai Heavy Industries to control its shipbuilding companies, in return for an equity stake in Korea Shipbuilding & Offshore Engineering. It is expected that, following the completion of this transaction, Hyundai Heavy Industries will become the largest shareholder of DSME, followed by us holding the second largest stake in DSME. The completion of this transaction is subject to various conditions, including approval from the antitrust authorities of the European Union and applicable countries.

S-15

In July 2016, Hyundai Merchant Marine executed a debt-to-equity swap with us and other creditors, as part of its continued restructuring led by us as its largest creditor, and affiliates of the Hyundai group reduced their shareholdings in Hyundai Merchant Marine, which resulted in us becoming the largest shareholder of Hyundai Merchant Marine. In October 2018, we injectedW1 trillion in emergency aid into Hyundai Merchant Marine in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by Hyundai Merchant Marine. Subsequently, in April 2020, Hyundai Merchant Marine issued perpetual bonds amounting toW720 billion, which we and Korea Ocean Business Corporation each purchased in equal amounts. As of June 30, 2020, our equity interest in Hyundai Merchant Marine amounted to 12.9%.

In January 2019, Hanjin Heavy Industries and Construction Philippines, a subsidiary of Hanjin Heavy Industries and Construction at Subic Bay in the Philippines, declared bankruptcy and filed for corporate rehabilitation with a regional trial court following its failure to comply with loan obligations to its Philippine lenders. In March 2019, creditors in Korea (including us) and lenders in the Philippines agreed on, and executed, a business normalization plan including a debt-to-equity swap and capital reduction for Hanjin Heavy Industries and Construction, as a result of which we have become the largest shareholder of Hanjin Heavy Industries and Construction.

STX Offshore & Shipbuilding has faced financial difficulties for the past several years due to prolonged slowdowns in the Korean shipbuilding and shipping industries. STX Offshore & Shipbuilding, which had filed for court receivership in May 2016 and executed debt-to-equity swaps with their creditors (including us) in December 2016 under a rehabilitation plan through which we increased our equity interest to 43.9% and became its largest shareholder, exited court receivership in July 2017. As of June 30, 2020, our exposure to STX Offshore & Shipbuilding was classified as expected loss.

Dongbu Steel has also been facing financial difficulties for the past several years due to the prolonged slowdown in the Korean construction industry and in the Korean economy in general. Dongbu Steel entered into a voluntary workout agreement with its creditors, including us, in October 2015. Such agreement expired in September 2019 when KG Steel, a subsidiary of KG Group established in May 2019, became the largest shareholder of Dongbu Steel, which was subsequently re-named to KG Dongbu Steel. All of KG Dongbu Steel’s outstanding debt to its creditors, including us, is currently scheduled to mature at the end of 2025.

Doosan Heavy Industries & Construction Co., Ltd. has also faced financial difficulties due to the prolonged slowdown in the Korean heavy and construction industries and in the Korean economy in general, as well as the Government’s initiative to support clean and renewable energy sources while phasing out nuclear and coal-fired plants in recent years. Doosan Heavy Industries submitted a self-rescue plan to its creditors, including us, and we provided Doosan Heavy Industries with loans amounting toW500 billion,W400 billion andW600 billion in March, April and June 2020, respectively.

In the first half of 2020, we sold non-performing loans worthW243.2 billion to Hana F&I.

Our large exposure to financially troubled companies in Korea means that we are also exposed to financial difficulties experienced by our borrowers as a result of, among other things, adverse economic conditions in Korea and globally, which could disrupt the business, activities and operations of many of our borrowers, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which has been in significant need of liquidity following a sharp decline in aircraft traffic and a dramatic increase in the number of suspended flights due to entry restrictions imposed by many countries in response to COVID-19 in recent months.

As of June 30, 2020, our exposure (including loans classified as substandard or below and equity investment classified as estimated loss or below) to Korean Air Co., Ltd., a subsidiary of Hanjin Group and Korea’s largest airline and flagship carrier, amounted toW1,884.0 billion, an increase fromW1,401.3 billion as of December 31,

S-16

2019. In April 2020, we injectedW720 billion (consisting ofW420 billion in securities collateralized by income receivables,W180 billion in perpetual bonds andW120 billion in loans) into Korean Air in order to provide liquidity support.

In April 2020, we agreed to provide Asiana Airlines, a subsidiary of Kumho Asiana Group and the second-largest airline in Korea, with liquidity support by providing a credit line in the amount ofW1.2 trillion. Our decision to take such measure was largely driven by a need to address Asiana Airlines’ financial difficulties resulting from the negative impact of the COVID-19 pandemic on the airline industry. In September 2020, a consortium formed by HDC Hyundai Development Company and Mirae Asset Daewoo cancelled its plans to acquire Asiana Airlines, and we are currently considering separate sales of the subsidiaries of Asiana Airlines. We have also recently decided to injectW2.4 trillion from the Key Industry Stabilization Fund (described below) into Asiana Airlines in order to normalize its operations.

Most recently, in May 2020, the Government provided for the establishment of the Key Industry Stabilization Fund, a fund amounting toW40 trillion to be administered by us mainly through the issuance of industrial finance bonds, to support businesses in certain key industries that face financial difficulties resulting from the ongoing global outbreak of the COVID-19 pandemic, such as the air transport and maritime industries. Our participation in such Government-led initiatives may lead us to extend credit to financially troubled borrowers that we would not otherwise extend, or offer terms for such credit that we would not otherwise offer, in the absence of such initiatives. Furthermore, there is no guarantee that the financial condition and liquidity position of our financially troubled borrowers benefiting from such initiatives will improve sufficiently for them to service their debt on a timely basis, or at all. Accordingly, increases in our exposure to financially troubled borrowers resulting from such Government-led initiatives may have a material adverse effect on our financial condition and results of operations.

A continued deterioration in the financial condition of our borrowers, including those described above as well as other companies under workout, court receivership, court mediation and other restructuring procedures, could result in a deterioration in the quality of our loan portfolio. This, in turn, could result in an increase in delinquency ratios, increased charge-offs and higher provisioning, as well as an increase in impairment losses on such loans, particularly if businesses remain closed, the impact of the COVID-19 pandemic on the global economy continues to worsen, or more of our borrowers draw on their lines of credit or seek additional loans from us to help finance their business, which could have a material adverse impact on our business, financial condition or results of operations.

S-17

Operations

Loan Operations

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2020:

Loans⁽¹⁾


	June 30, 2020
	(billions of won)
Equipment Capital Loans:
Domestic currency	W	49,142.4
Foreign currency		8,145.9

		57,288.3

Working Capital Loans:
Domestic currency⁽²⁾		62,049.9
Foreign currency		9,523.9

		71,573.8

Other Loans⁽³⁾		32,047.5

Total loans	W	160,909.6

(1)	Includes loans extended to affiliates.

(2)	Includes loans on households.

(3)	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, 2020, we hadW160,909.6 billion in outstanding loans, which represents a 12.5% increase fromW142,986.1 billion of outstanding loans as of December 31, 2019.

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, 2020		As % of June 30, 2020 Total
	(billions of won, except percentages)
Loans with remaining maturities of one year or less	W	4,085.1		3.2	%
Loans with remaining maturities of more than one year		124,776.9		96.8

Total	W	128,862.0		100.0	%

(1)	Includes loans extended to affiliates.

S-18

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, 2020:

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


	June 30, 2020			As % of June 30, 2020 Total
	(billions of won, except percentages)
Manufacturing	W	63,497.5			49.3	%
Banking and Insurance		29,931.1			23.2
Transportation		9,206.8			7.1
Public Administration		664.6			0.5
Electric, Gas and Water Supply Industry		2,818.8			2.2
Others⁽²⁾		22,743.2			17.6

Total	W	128,862.0			100.0	%

Percentage increase from December 31, 2019		12.1	%

(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, 2020. As of June 30, 2020, loans to the transportation equipment manufacturing businesses and the metal product manufacturing businesses each accounted for 10.9% 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, 2020, accounting for 5.1% of our outstanding equipment capital and working capital loans. As of June 30, 2020, our five largest borrowers and 20 largest borrowers accounted for 12.6% and 23.4%, respectively, of our outstanding equipment capital and working capital loans.

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2020 by industry sector:

20 Largest Borrowers by Industry Sector


	As % of June 30, 2020 Total Outstanding Equipment Capital and Working Capital Loans
Banking and Insurance		50.2	%
Manufacturing		36.3
Transportation		9.6
Others⁽¹⁾		4.0

Total		100.0

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

S-19

Loans by Categories

The following table sets out equipment capital and working capital loans by categories as of June 30, 2020:


	Equipment Capital Loans					Working Capital Loans
	June 30, 2020		%			June 30, 2020		%
	(billions of won, except percentages)
Industrial fund loans	W	44,369.1		77.4	%	W	48,212.5		67.4	%
On-lending loans		2,868.9		5.0			12,764.3		17.8
Foreign currency loans		5,121.3		8.9			1,962.4		2.7
Local currency loans denominated in foreign currencies		5.6		0.0			29.0		0.0
Offshore loans in foreign currencies		2,517.3		4.4			6,882.4		9.6
Government fund loans		138.3		0.2			0.0		0.0
Overdraft		0.0		0.0			120.3		0.2
Others⁽¹⁾		2,267.8		4.0			1,602.9		2.2

Total	W	57,288.3		100.0	%	W	71,573.8		100.0	%

(1)	Includes loans on households and loans extended to affiliates.

Guarantee Operations

The following table shows our outstanding guarantees as of June 30, 2020:


	June 30, 2020
	(billions of won)
Acceptances	W	409.3
Guarantees on local borrowing		939.5
Guarantees on foreign borrowing		6,117.5
Letters of guarantee for importers		38.0

Total	W	7,504.3

Investments

Our equity investments decreased toW36,478.1 billion as of June 30, 2020 fromW36,616.5 billion as of December 31, 2019. As of June 30, 2020, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaledW14,084.3 billion, equal to 32.6% of our equity investment ceiling.

S-20

The following table sets out our equity investments by industry sector on a book value basis as of June 30, 2020:

Equity Investments


	Book Value as of June 30, 2020
	(billions of won)
Electric, Gas and Water Supply Industry	W	17,982.3
Construction		1,033.2
Banking and Insurance		9,935.4
Real Estate Business		3,771.2
Manufacturing		465.0
Transportation		2,268.3
Others		1,022.7

Total	W	36,478.1

As of June 30, 2020, we held total equity investments, on a book value basis, ofW463.8 billion in one of our five largest borrowers andW2,210.8 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, 2020, the aggregate value of our equity investments accounted for approximately 90.5% of their aggregate cost basis.

Other Activities

As of June 30, 2020, we held in trust cash and other assets totalingW41,844.5 billion, and we generated in the first half of 2020 trust fee income equalingW92.5 billion.

Source of Funds

Borrowings from the Government

The following table sets out our Government borrowings as of June 30, 2020:


Type of Funds Borrowed	As of June 30, 2020
	(billions of won)
General purpose	W	139.7
Special purpose		3,922.5

Total	W	4,062.2

S-21

Domestic and International Capital Markets

The following table sets out the outstanding balance of our industrial finance bonds as of June 30, 2020:


Outstanding Balance	As of June 30, 2020
	(billions of won)
Denominated in Won	W	108,525.4
Denominated in other currencies		31,476.6

Total	W	140,002.0

As of June 30, 2020, 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, 2020) wasW149,017.7 billion, equal to 23.0% of our authorized amount under the KDB Act, which wasW648,473.4 billion.

Foreign Currency Borrowings

As of June 30, 2020, the outstanding amount of our foreign currency borrowings was US$12.9 billion. Our long-term and short-term foreign currency borrowings increased toW15,509.6 billion as of June 30, 2020 fromW14,275.2 billion as of December 31, 2019.

Deposits

As of June 30, 2020, demand deposits held by us totaledW2,692.0 billion and time and savings deposits held by us totaledW43,522.9 billion.

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of June 30, 2020:

Debt Principal Repayment Schedule⁽¹⁾


Currency⁽²⁾⁽³⁾			Maturing on or before December 31,
	2020		2021		2022		2023		2024		Thereafter
			(billions of won)
Won	W	22,860.1	W	44,559.2	W	22,395.6	W	8,392.8	W	3,706.3	W	12,880.5
Foreign		15,379.7		8,308.8		6,358.2		5,744.4		4,117.7		7,137.4

Total Won Equivalent	W	38,239.8	W	52,868.0	W	28,753.8	W	14,137.2	W	7,824.0	W	20,017.9

(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, 2020, 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-22

Directors and Management; Employees

Currently, the members of our Board of Directors are:


Position	Name	Expiration of Term
Chief Executive Officer and Chairman of the Board of Directors	Dong Gull Lee	September 10, 2023
Chief Operating Officer and Vice Chairman of the Board of Directors	Joo Yung Sung	January 2, 2022
Auditor	Cheol Hwan Seo	February 25, 2021
Independent Non-executive Directors	Nam Joon Kim	June 27, 2021
	Dong Han Yook	June 28, 2022
	Yoon Lee	July 31, 2021
	Chae Yeol Yang	May 25, 2021
	Kyo Deog Son	March 29, 2022

Financial Statements and the Auditors

Our interim separate financial statements as of June 30, 2020 and for the six months ended June 30, 2020 and 2019 appearing in this prospectus supplement were prepared in conformity with K-IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2020 and for the six months ended June 30, 2020 and 2019 included in this prospectus supplement.

S-23

Korea Development Bank

Interim Separate Statements of Financial Position

June 30, 2020 (Unaudited) and December 31, 2019


(In millions of won)	Notes		June 30, 2020		December 31, 2019
Assets
Cash and due from banks		4,45,46,49	W	12,445,966		6,592,174
Securities measured at FVTPL		5,45,46,49		8,705,573		7,822,359
Securities measured at FVOCI		6,39,45,46,49		35,628,136		24,249,160
Securities measured at amortized cost		7,39,45,46,49		817,398		1,501,947
Loans measured at FVTPL		8,45,46,49		551,023		604,380
Loans measured at amortized cost		9,45,46,49		157,678,419		139,871,642
Derivative financial assets		10,45,46,47,49		6,733,332		5,432,807
Investments in subsidiaries and associates		11,48		24,014,060		24,190,102
Property and equipment, net		12,48		826,910		832,851
Investment property, net		13,48		64,150		66,409
Intangible assets, net		14,48		205,973		230,929
Current tax assets				2,208		5,107
Assets held for sale		16		1,608,631		1,655,406
Other assets		15,45,46,49		8,091,881		4,780,051

Total assets			W	257,373,660		217,835,324

Liabilities
Financial liabilities measured at FVTPL		17,45,46,49	W	1,881,846		2,465,541
Deposits		18,45,46,49		50,192,518		34,663,952
Borrowings		19,45,46,49		21,883,545		20,170,513
Debentures		20,45,46,49		139,025,431		120,623,388
Derivative financial liabilities		10,45,46,47,49		4,849,219		4,171,668
Net defined benefit liabilities		21		72,270		53,141
Provisions		22		1,422,536		1,519,864
Deferred tax liabilities		37		904,531		931,368
Current tax liabilities				105,898		150,435
Other liabilities		23,45,46,49		10,483,253		7,282,623

Total liabilities				230,821,047		192,032,493

Equity
Issued capital		1,24		19,113,599		18,663,099
Capital surplus		24		2,492,338		2,494,504
Accumulated other comprehensive income		24		20,953		(88,092	)
Retained earnings		24		4,925,723		4,733,320
(Regulatory reserve for credit losses ofW1,146,038 million as of June 30, 2020 andW1,227,700 million as of December 31, 2019, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses ofW(35,030) million as of June 30, 2020 andW(81,662) million as of December 31, 2019, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses ofW(35,030) million as of June 30, 2020 andW(81,662) million as of December 31, 2019, respectively)

Total equity				26,552,613		25,802,831

Total liabilities and equity			W	257,373,660		217,835,324

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

S-24

Korea Development Bank

Interim Separate Statements of Comprehensive Income

Three-month and six-month periods ended June 30, 2020 and 2019 (Unaudited)


			June 30, 2020						June 30, 2019
(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		25	W	1,170,560			2,353,110			1,302,276			2,581,233
Interest expense		25		(853,780	)		(1,771,847	)		(1,034,254	)		(2,063,833	)

Net interest income		48		316,780			581,263			268,022			517,400

Net fees and commission income		26		77,161			162,846			91,299			156,062
Dividend income		27		140,416			400,605			100,047			353,220
Net gain on securities measured at FVTPL		28		44,090			67,178			73,330			228,904
Net gain (loss) on financial liabilities measured at FVTPL		29		(28,799	)		(28,499	)		(25,291	)		(42,927	)
Net gain (loss) on securities measured at FVOCI		30		33,429			52,013			22,720			26,017
Net gain (loss) on derivatives		31		117,034			(79,021	)		(27,204	)		(183,252	)
Net gain on foreign currency transaction		32		21,065			214,221			44,319			103,145
Other operating expense, net		33		(72,713	)		(124,309	)		(87,749	)		(139,105	)

Non-interest income, net				331,683			665,034			191,471			502,064

Provision for (reversal of) credit losses		34		102,828			204,697			(30,090	)		(33,081	)

General and administrative expenses		35,48		172,058			352,701			156,357			320,189

Operating income		48		373,577			688,899			333,226			732,356

Impairment loss on investments in subsidiaries and associates				(155,388	)		(165,865	)		(116,129	)		(484,654	)
Other non-operating income		36		809,659			811,336			283,636			285,167
Other non-operating expense		36		(1,105	)		(860,577	)		(1,653	)		(3,921	)

Non-operating expense, net				653,166			(215,106	)		165,854			(203,408	)

Profit before income taxes				1,026,743			473,793			499,080			528,948

Income tax expense (benefit)		37		256,665			104,450			170,605			(132	)

Profit for the period		24		770,078			369,343			328,475			529,080
(Profit (loss) for the period adjusted for regulatory reserve for credit losses:W861,829 million andW404,373 million for the three-month and six-month periods ended June 30, 2020, respectively;W282,612 million andW520,463 million for the three-month and six-month periods ended June 30, 2019, respectively)

Other comprehensive income for the period, net of tax		24
Items that are or may be reclassified subsequently to profit or loss:
Net gain (loss) on securities measured at FVOCI				285,871			173,298			(15,586	)		41,396
Exchange differences on translation of foreign operations				(16,508	)		32,160			14,256			27,583
Valuation gain (loss) on cash flow hedge				23			235			(448	)		436
Net gain (loss) on hedges of net investments in foreign operations				9,881			(19,355	)		—			—

				279,267			186,338			(1,778	)		69,415

Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI				39,295			(142,912	)		(15,867	)		(16,105	)
Fair value changes on financial liabilities designated at fair value due to credit risk				(6,720	)		657			2,219			(7,027	)

				32,575			(142,255	)		(13,648	)		(23,132	)

				311,842			44,083			(15,426	)		46,283

Total comprehensive income for the period			W	1,081,920			413,426			313,049			575,363

Earnings per share
Basic and diluted earnings per share (in won)		38	W	202			98			88			144

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

S-25

Korea Development Bank

Interim Separate Statements of Changes in Equity

Six-month periods ended June 30, 2020 and 2019 (Unaudited)


(In millions of won)	Issued capital		Capital surplus			Accumulated other comprehensive income			Retained earnings			Total equity
January 1, 2019	W	18,108,099		2,497,177			(32,698	)		4,412,649			24,985,227
Changes in accounting policy		—		—			—			65			65

January 1, 2019 (restated)		18,108,099		2,497,177			(32,698	)		4,412,714			24,985,292
Profit for the period		—		—			—			529,080			529,080
Net gain (loss) on securities measured at FVOCI		—		—			34,184			(8,893	)		25,291
Exchange differences on translation of foreign operations		—		—			27,583			—			27,583
Valuation gain on cash flow hedge		—		—			436			—			436
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			(7,027	)		—			(7,027	)

Total comprehensive income for the period		—		—			55,176			520,187			575,363
Dividends		—		—			—			(144,865	)		(144,865	)
Paid in capital increase		500,000		(2,406	)		—			—			497,594

Transaction with owners		500,000		(2,406	)		—			(144,865	)		352,729

June 30, 2019	W	18,608,099		2,494,771			22,478			4,788,036			25,913,384

January 1, 2020	W	18,663,099		2,494,504			(88,092	)		4,733,320			25,802,831
Profit for the period		—		—			—			369,343			369,343
Net gain (loss) on securities measured at FVOCI		—		—			95,348			(64,962	)		30,386
Exchange differences on translation of foreign operations		—		—			32,160			—			32,160
Valuation gain on cash flow hedge		—		—			235			—			235
Net loss on hedges of net investments in foreign operations		—		—			(19,355	)		—			(19,355	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			657			—			657

Total comprehensive income for the period		—		—			109,045			304,381			413,426
Dividends		—		—			—			(111,978	)		(111,978	)
Paid in capital increase		450,500		(2,166	)		—			—			448,334

Transaction with owners		450,500		(2,166	)		—			(111,978	)		336,356

June 30, 2020	W	19,113,599		2,492,338			20,953			4,925,723			26,552,613

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

S-26

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2020 and 2019 (Unaudited)


(In millions of won)	Notes		2020			2019
Cash flows from operating activities
Profit for the period			W	369,343			529,080
Adjustments for:
Income tax expense (benefit)		37		104,450			(132	)
Interest income		25		(2,353,110	)		(2,581,233	)
Interest expense		25		1,771,847			2,063,833
Dividend income		27		(400,605	)		(353,220	)
Gain on valuation of securities measured at FVTPL		28		(31,895	)		(60,607	)
Gain on disposal of securities measured at FVTPL				(12,745	)		(146,559	)
Loss on valuation of financial liabilities measured at FVTPL		29		28,499			43,590
Gain on disposal of securities measured at FVOCI		30		(59,882	)		(26,419	)
Provision for loss allowance for securities measured at FVOCI		30		7,869			402
Impairment loss on securities measured at amortized cost				2			—
Loss (gain) on valuation of loans measured at FVTPL		33		(55,338	)		1,055
Gain on valuation of derivatives				(638,510	)		(711,020	)
Net loss on fair value hedged items		31		492,044			823,659
Gain on foreign exchange translations		32		(214,547	)		(107,777	)
Gain on disposal of investments in subsidiaries and associates		33		(10,623	)		(3,302	)
Impairment loss on investments in subsidiaries and associates				165,865			484,654
Provision for (reversal of) loss allowance for loan		34		338,691			(68,420	)
Increase (decrease) of other provision		34		1,681			(1,745	)
Increase (decrease) of provision for payment guarantees		22		(167,940	)		82,910
Increase (decrease) of provision for unused commitments		22		(8,568	)		1,422
Increase (decrease) of provision for financial guarantee		22		40,833			(47,248	)
Reversal of provision for restoration		22		(269	)		—
Defined benefit costs		21		19,238			20,509
Depreciation of property and equipment		35		33,971			35,048
Reversal of impairment loss on assets held for sale		36		46,775			(282,323	)
Loss on disposal of property and equipment		36		(604	)		(973	)
Depreciation of investment property		36		604			512
Amortization of intangible assets		35		27,212			7,234
Loss (gain) on redemption of debentures				3			(13	)

				(875,052	)		(826,163	)

Changes in operating assets and liabilities:
Due from banks				(2,756,511	)		788,572
Securities measured at FVTPL				378,702			(1,725,011	)
Loans measured at FVTPL				108,695			25,168
Loans measured at amortized cost				(18,015,223	)		(2,707,109	)
Derivative financial instruments				(10,837	)		(6,241	)
Other assets				(3,282,400	)		(6,265,145	)
Deposits				15,490,684			2,892,828
Net defined benefit liabilities				(109	)		(32	)
Other liabilities				3,202,650			7,978,817

				(4,884,349	)		981,847

Income taxes paid				(177,446	)		(87,401	)
Interest received				2,378,040			2,538,677
Interest paid				(1,738,176	)		(2,340,829	)
Dividends received				399,389			343,335

Net cash provided by (used in) operating activities				(4,528,251	)		1,138,546

(Continued)

S-27

Korea Development Bank

Interim Separate Statements of Cash Flows, Continued

Six-month periods ended June 30, 2020 and 2019 (Unaudited)


(In millions of won)	Notes		2020			2019
Cash flows from investing activities
Net decrease (increase) of securities measured at FVTPL			W	(1,218,560	)		292,583
Disposal of securities measured at FVOCI		6		19,139,143			9,779,487
Acquisition of securities measured at FVOCI		6		(30,145,312	)		(10,967,219	)
Disposal of securities measured at amortized cost		7		1,340,002			20,000
Acquisition of securities measured at amortized cost		7		(657,702	)		(421,427	)
Disposal of property and equipment		12		5,192			1,281
Acquisition of property and equipment		12		(13,289	)		(51,865	)
Acquisition of intangible assets				(2,199	)		(4,436	)
Disposal of investments in subsidiaries and associates				317,211			829,892
Acquisition of investments in subsidiaries and associates				(295,661	)		(836,739	)

Net cash used in investing activities				(11,531,175	)		(1,358,443	)

Cash flows from financing activities
Increase (decrease) of financial liabilities measured at FVTPL				(611,288	)		118,296
Proceeds from borrowings				26,812,220			13,879,610
Repayment of borrowings				(25,137,667	)		(13,843,397	)
Proceeds from issuance of debentures				67,721,628			49,228,294
Repayment of debentures				(50,012,932	)		(51,228,430	)
Repayment of lease liabilities				(12,308	)		(15,125	)
Dividends				(111,978	)		(144,865	)
Paid in capital increase				448,334			497,594

Net cash provided by (used in) financing activities				19,096,009			(1,508,023	)

Effects from changes in foreign currency exchange rate for cash and cash equivalents held				338,998			229,265

Net increase (decrease) in cash and cash equivalents				3,375,581			(1,498,655)

Cash and cash equivalents at beginning of the period				5,252,825			6,849,335

Cash and cash equivalents at end of the period		43	W	8,628,406			5,350,680

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

S-28

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

1. Reporting Entity

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

The Bank is engaged in the banking industry under The Korea Development Bank Act and other applicable statutes, and in the fiduciary in accordance with the 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 isW19,113,599 million with 3,822,719,768 shares of issued and outstanding as of June 30, 2020 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, 2020 is as follows:


	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		69		9		5		9		93

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”) 1034 Interim 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, 2020 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, 2020. The nature and the impact of each new standard or amendment are described below:

Amendments to K- IFRS 1001 ‘Presentation of Financial Statements’ and K-IFRS 1008 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ – Definition of Materiality

The amendments clarify the explanation of the definition of material and amended K-IFRS 1001 and K-IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Bank. The amendment does not have a significant impact on the separate financial statements.

S-29

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

2. Basis of Preparation, Continued

Amendments to K- IFRS 1103 ‘Business Combination’ – Definition of a Business

To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets required would not represent a business. The amendment does not have a significant impact on the separate financial statements.

Amendments to K- IFRS 1109 ‘Financial Instruments’, K-IFRS 1039 ‘Financial Instruments: Recognition and Measurement’ and K-IFRS 1107 ‘Financial instruments: Disclosure’ – Interest Rate Benchmark Reform

The amendments allow to apply the exceptions when forward-looking analysis is performed in relation the application of hedge accounting while uncertainties arising from interest rate benchmark reform exist. The exceptions require the Bank assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based on is not altered as a result of interest rate benchmark reform, when determining whether the expected cash flows are highly probable, whether an economic relationship between the hedged item and the hedging instrument exists, and when assessing the hedging relationship is highly effective. The amendments do not have significant impact on the separate financial statements.

(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, 2020, and the Bank has not early adopted them. The nature and the impact of each new standard, amendment and enactments are described below:

Amendments to K- IFRS 1116 ‘Lease – Practical expedient for COVID-19-Related Rent Exemption, Concessions, Suspension’

As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the ren concession the same way it would account for the change applying this standard of the change were not a lease modification. These amendments should be applied for annual periods beginning on or after June 1, 2020, and earlier application of permitted. The Bank does not expect that these amendments have a significant impact on the 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

•

Financial instruments measured at fair value through other comprehensive income

•

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

S-30

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

2. Basis of Preparation, Continued

•

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 with K-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 instruments measured at fair value through profit or loss and other comprehensive income, and derivative instruments are recognized and measured at fair value. 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.

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

The Bank tests impairment and recognizes loss allowances on financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income and recognizes provisions for payment guarantee, financial guarantee and unused commitments. Accuracy of allowances and provisions for

S-31

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

2. Basis of Preparation, Continued

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.

The pandemic of COVID-19 in 2020 has a negative impact on the global economy despite of the Korean government’s financial and economic stabilization packages. It may have a negative impact on the financial position and financial performance of the Bank due to the increase of the expected credit losses on specific portfolios and the potential losses on financial assets. The detail of credit risk exposures by industry affected by the pandemic of COVID-19 as of June 30, 2020 is disclosed in Note 49. (2) and the exposures by industries could be changed according to economic fluctuations.

Taking these circumstances into account comprehensively, the Bank recalculated the forward-looking information used to estimate the expected credit loss in accordance with K-IFRS 1109 ‘Financial Instruments’ as at June 30, 2020. During the six-month period since the end of the previous year, there have been changes in the forward-looking information that affects expected credit losses, and it is predicted that major economic factors such as the 2020 unemployment rate and economic growth rate will deteriorate due to the impact of COVID-19. To reflect these changes, the Bank recalculated the forward-looking information by means of increasing the probability of recession used in generating future economic scenarios and will continue to monitor the forward-looking information on a quarterly basis.

(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.

(1) Investments in subsidiaries and associates

The accompanying financial statements are separate financial statements in accordance with K-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.

S-32

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

(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 transactions and translations of monetary items are recognised in profit or loss, except for differences arising on the translation of a financial instruments designated as hedges of the net investment in foreign operations, or cash flow hedge, which are recognised in other comprehensive income.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss shall be recognised in profit or loss.

(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

S-33

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 is re-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, are re-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 and re-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.

(ii) Subsequent measurement

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

S-34

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 common over-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.

(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

S-35

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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

Any non-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.

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 profit or loss.

S-36

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

(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 profit or loss, 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.

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 with K-IFRS:

•

General approach: for financial assets and off-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

S-37

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 to 12-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 following non-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.

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

S-38

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 is 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.

(9) Derivative financial instruments including hedge accounting

Derivative financial instruments are initially recognised at fair value at the inception of the contract and re-estimated at fair value subsequently. The recognition of profit or loss due to changes in fair value of derivative instruments is as described 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

S-39

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 the 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.

Hedges of net investments in foreign operations

The Bank designates non-derivative financial instruments as hedging instruments for foreign currency risk arising from net investments in foreign operations and recognises the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge in other comprehensive income. The cumulative amounts recognised in other comprehensive income relating to both the foreign exchange differences arising on translation of the results and financial position of the foreign operation and the gain or loss on the hedging instrument that is determined to be an effective hedge of the net investment are reclassed from equity to profit or loss as a reclassification adjustment when the Bank disposes of the foreign operation.

Trading purpose derivatives

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

S-40

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

(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
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 in non-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.

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 of de-recognition. Reclassification to other account is made if there is a change in use of corresponding investment property.

S-41

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 to 30-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 as non-finite, prospective measures are taken to consider such an asset as finite.

(14) Leases

The Bank recognizes a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments at the commencement date of the lease. The Bank elected not to apply the requirements to the short-term leases and leases of low value assets.

Right-of-use asset

The right-of-use asset is measured at its cost less subsequent accumulated depreciation and accumulated impairment loss with adjustments reflected arising from remeasurements of the lease liability. The cost of the right-of-use asset comprise the amount of the initial measurement of the lease liability, any initial direct costs incurred by the lessee and any lease payments made at or before the commencement date, less any lease incentive received. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis from the commencement date of the lease.

Lease liabilities

At the commencement date, the lease liability is measured at present value of the lease payments that are not paid at that date. Lease payments include fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the

S-42

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

lessee exercising an option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognized as an expense in the period in which the event or condition that triggers those payments occurs.

When measuring the present value, the lease payments are discounted using the interest rate implicit in the lease. If such implicit rate cannot be readily determined, the Bank uses the Bank’s incremental borrowing rate. The lease liability is subsequently increased by the amount of interest expenses recognized on the lease liability and reduced by the lease payments made.

Short-term lease and lease of low-value assets

The Bank does not apply the requirements of lessee accounting to Short-term leases and leases of low-value assets. The Bank recognizes the lease payments associated with these leases as expenses on a straight-line basis over the lease term.

(15) Impairment of non-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.

(16) 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 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.

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).

(17) Non-derivative financial liabilities

The Bank classifies non-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.

S-43

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated 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 related un-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 effective interest method.

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.

(18) 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.

S-44

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

(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.

(19) 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.

(20) 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 with K-IFRS 1109 ‘Financial Instruments’ and

•

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

(21) 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.

(22) 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

S-45

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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.

(23) 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.

(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 and K-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.

(24) Dividend income

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

(25) 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

S-46

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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 are off-set only if the Bank has a legally enforceable right to off-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.

(26) Accounting for trust accounts

The Bank, for financial reporting, differentiates trust assets from identifiable assets according to the Financial 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.

(27) 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 the Regulations 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.

(28) 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

S-47

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

3. Significant Accounting Policies, Continued

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.

(29) 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.

4. Cash and Due from Banks

(1)	Cash and due from banks as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Cash	W	59,917		53,529
Due from banks in Korean won:
Due from Bank of Korea		4,488,153		1,824,440
Other due from banks in Korean won		366,090		132,311

		4,854,243		1,956,751

Due from banks in foreign currencies / off-shores		7,531,806		4,581,894

	W	12,445,966		6,592,174

(2)	Restricted due from banks as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Reserve deposit	W	3,003,627		1,885,915
Deposit of monetary stabilization account		1,700,000		150,000
Others		229,862		239,788

	W	4,933,489		2,275,703

S-48

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

5. Securities Measured at FVTPL

(1)	Details of securities measured at fair value through profit or loss as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		600,275		497,099
Equity investments		—		204,483		243,257
Beneficiary certificates		—		5,878,748		5,966,275
Government and public bonds		1,362,540		1,381,389		1,381,494
Financial bonds		90,000		89,724		89,703

		1,452,540		8,154,619		8,177,828
Securities denominated in foreign currencies/off- shores:
Stocks		—		—		—
Equity investments		—		16,095		18,281
Beneficiary certificates		—		422,236		439,345
Debt securities		68,879		71,723		70,119

		68,879		510,054		527,745

	W	1,521,419		8,664,673		8,705,573


	December 31, 2019
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		534,558		422,297
Equity investments		—		192,546		235,946
Beneficiary certificates		—		3,738,987		3,760,541
Government and public bonds		1,408,000		1,405,998		1,405,368
Financial bonds		1,470,000		1,464,593		1,462,557

		2,878,000		7,336,682		7,286,709
Securities denominated in foreign currencies/off-shores:
Stocks		—		3,885		3,957
Equity investments		—		12,301		13,293
Beneficiary certificates		—		391,190		412,457
Debt securities		105,500		106,556		105,943

		105,500		513,932		535,650

	W	2,983,500		7,850,614		7,822,359

S-49

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

5. Securities Measured at FVTPL, Continued

(2)	Securities measured at fair value through profit or loss with disposal restrictions as of June 30, 2020 and December 31, 2019 are as follows:

June 30, 2020

Company

Number of
shares

Carrying
amount

Restricted period

National Happiness Fund Co., Ltd.

34,066

60,723

Undecided

Shinhan Metal Co., Ltd.

7,692

—

Until December 31, 2020

41,758

60,723

December 31, 2019

Company

Number of
shares

Carrying
amount

Restricted period

National Happiness Fund Co., Ltd.

34,066

73,320

Undecided

Shinhan Metal Co., Ltd.

7,692

—

Undecided

41,758

73,320

6. Securities Measured at FVOCI

(1)	Details of securities measured at FVOCI as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		9,936,314		9,932,583
Government and public bonds		1,950,000		1,973,561		1,976,000
Financial bonds		8,540,000		8,560,978		8,583,553
Corporate bonds		7,087,287		7,087,206		7,072,364
Others		2,097,849		2,097,850		1,971,316

		19,675,136		29,655,909		29,535,816
Securities denominated in foreign currencies/off- shores:
Equity securities		—		371		954
Debt securities		5,528,940		5,618,088		5,707,780

		5,528,940		5,618,459		5,708,734
Loaned securities:
Loaned securities		380,000		381,475		383,586

	W	25,584,076		35,655,843		35,628,136

S-50

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

6. Securities Measured at FVOCI, Continued


	December 31, 2019
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		9,990,765		10,094,512
Government and public bonds		919,000		925,392		924,846
Financial bonds		2,760,000		2,765,502		2,765,703
Corporate bonds		5,164,006		5,163,926		5,141,941
Others		1,342,650		1,342,649		1,024,299

		10,185,656		20,188,234		19,951,301
Securities denominated in foreign currencies/off- shores:
Equity securities		—		371		976
Debt securities		4,165,446		4,225,374		4,256,824

		4,165,446		4,225,745		4,257,800

Loaned securities:
Debt securities		40,000		40,005		40,059

	W	14,391,102		24,453,984		24,249,160

Equity instruments that are acquired due to debt-to-equity swap, investment in kind and investment in ventures and small and medium-sized enterprises are designated as measured at FVOCI. The realized pre-tax income and loss on disposal of equity securities for the six-month periods ended June 30, 2020 and 2019 andW89,603 million of loss andW12,267 million of loss, respectively, which are directly recognized in retained earnings.

(2)	Changes in securities measured at FVOCI for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Beginning balance	W	24,249,160			22,805,676
Acquisition		30,145,312			10,967,219
Disposal		(19,164,238	)		(9,762,613	)
Change due to amortization		(24,236	)		(1,908	)
Change in fair value		205,116			92,744
Foreign exchange differences		203,509			149,358
Others(*)		13,513			30,656

Ending balance	W	35,628,136			24,281,132

(*)

For the six-month period ended June 30, 2020, others represent the increase in securities measured at FVOCI including shares of SOLUM CO., LTD. acquired through exercise of conversion rights of the convertible bonds and Barun Electronics Co., Ltd., Korea Heat Exchanger Co.,Ltd., SUNGCHANG ENGINEERING & CONSTRUCTION CO., LTD., NEOV INC. and others acquired pursuant to debt-to-equity swap decision of the Council of Financial Creditors under the Corporate Restructuring

S-51

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

6. Securities Measured at FVOCI, Continued

Promotion Act. For the six-month period ended June 30, 2019, others represent the increase in securities measured at FVOCI including shares of Ecopro BM Co., Ltd., Kuk-Il Paper MFG Co., Ltd., Solid, Inc. and others acquired through exercise of conversion rights of the convertible bonds.

(3)	Securities measured at FVOCI with disposal restrictions in securities measured at FVOCI as of June 30, 2020 and December 31, 2019 are as follows:


Company	June 30, 2020
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		85,050		113,826	Undecided
Engine Tech Co., Ltd		500,000		1	Undecided
Taihan Electric Wire Co., Ltd.		15,892,055		10,632	Undecided
CREA IN Co., Ltd.		14,383		141	Until December 31, 2021
Kumho Tire Co., Inc.		21,339,320		64,338	Until July 6, 2023(*)

	37,830,808		W 188,938


Company	December 31, 2019
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		85,050	W	122,850	Undecided
Engine Tech Co., Ltd		500,000		77	Undecided
Taihan Electric Wire Co., Ltd.		15,892,055		9,790	Undecided
CREA IN Co., Ltd.		14,383		56	Until December 21, 2021
Kumho Tire Co., Inc.		21,339,320		89,518	Until July 6, 2023(*)

	37,830,808		W 222,291

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

(4)	Changes in the loss allowance in relation to securities measured at FVOCI for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
				Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	2,354			116			71,336		73,806
Transfer to 12-month expected credit loss		—			—			—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(189	)		189			—		—
Transfer to credit-impaired debt		—			—			—		—
Provision for (reversal of) loss allowance		7,139			248			482		7,869
Disposal		(63	)		—			—		(63	)
Foreign currency translation and others		462			(153	)		61		370

Ending balance	W	9,703			400			71,879		81,982

S-52

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

6. Securities Measured at FVOCI, Continued


	2019
				Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	3,479			2,169			70,846		76,494
Transfer to 12-month expected credit loss		21			(21	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		—			—			—		—
Transfer to credit-impaired debt		—			—			—		—
Provision for (reversal of) loss allowance		249			(6	)		159		402
Disposal		(699	)		—			—		(699	)
Foreign currency translation and others		12			—			345		357

Ending balance	W	3,062			2,142			71,350		76,554

7. Securities Measured at Amortized Cost

(1)	Securities measured at amortized cost as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020					December 31, 2019
	Amortized cost			Fair value		Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	697,270			697,270		291,338			291,339
Financial bonds		120,132			120,128		1,210,611			1,210,608

		817,402			817,398		1,501,949			1,501,947
Less: loss allowance		(4	)		—		(2	)		—

	W	817,398			817,398		1,501,947			1,501,947

(2)	Changes in securities measured at amortized cost for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Beginning balance	W	1,501,947			1,695,927
Acquisition		657,702			421,427
Redemption		(1,340,002	)		(20,000	)
Change due to amortization		(2,247	)		(572	)
Impairment loss		(2	)		—

Ending balance	W	817,398			2,096,782

S-53

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

8. Loans Measured at FVTPL

(1)	Loans measured at FVTPL as of June 30, 2020 and December 31, 2019 are as follows:

June 30, 2020

December 31, 2019

Amortized cost

Fair value

Amortized cost

Fair value

Loans in Korean won:

Privately placed corporate bonds

504,842

551,023

600,845

604,380

(2)	Gains (losses) related to loans measured at FVTPL for the six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Transaction gains (losses) on loans measured at FVTPL
Transaction gains	W	1,171			2,678			13,435			17,373
Transaction losses		(13,948	)		(17,188	)		(5,584	)		(5,931	)

		(12,777	)		(14,510	)		7,851			11,442
Valuation gains (losses) on loans measured at FVTPL
Valuation gains		43,623			62,057			16,534			35,363
Valuation losses		(1,407	)		(6,719	)		(21,130	)		(36,418	)

		42,216			55,338			(4,596	)		(1,055	)

	W	29,439			40,828			3,255			10,387

S-54

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

9. Loans Measured at Amortized Cost

(1)	Loans measured at amortized cost and loss allowance for loan as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020					December 31, 2019
	Amortized cost			Fair value		Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	61,772,976			60,499,377		53,197,392			51,817,885
Loans for facility development		49,162,028			49,106,897		45,905,137			45,694,511
Loans for households		257,235			262,445		320,911			323,902
Inter-bank loans		2,681,420			2,573,154		2,340,737			2,209,054

		113,873,659			112,441,873		101,764,177			100,045,352
Loans in foreign currencies:
Loans		17,837,496			17,666,403		15,902,373			16,262,859
Inter-bank loans		1,797,367			1,797,031		2,607,758			2,603,090
Off-shore loans		16,194,012			16,049,794		14,509,257			14,427,037

		35,828,875			35,513,228		33,019,388			33,292,986
Other loans:
Bills bought in foreign currency		2,352,165			2,350,932		1,908,750			1,903,395
Advances for customers on acceptances and guarantees		115,631			18,761		181,219			21,865
Privately placed corporate bonds		995,861			780,114		560,909			343,314
Others		7,743,414			7,700,167		5,551,613			5,497,315

		11,207,071			10,849,974		8,202,491			7,765,889

					158,805,075		142,986,056			141,104,227

Less:
Loss allowance for loan		(3,224,101	)				(3,105,782	)
Present value discount		(16,211	)				(15,820	)
Deferred loan origination costs and fees		9,126					7,188

	W	157,678,419					139,871,642

S-55

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(2)	Changes in loss allowance for loan for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	169,293			1,045,942			1,890,547			3,105,782
Transfer to 12-month expected credit loss		21,459			(21,459	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(146,311	)		153,243			(6,932	)		—
Transfer to credit-impaired		(41,745	)		(182,592	)		224,337			—
Provision for (reversal of) loss allowance		267,324			204,994			(133,627	)		338,691
Write-offs		—			—			(122,638	)		(122,638	)
Recovery		—			—			23,367			23,367
Disposal		—			—			(164,270	)		(164,270	)
Debt-to-equity swap		—			—			(21,116	)		(21,116	)
Foreign currency translation		1,680			17,511			10,457			29,648
Other		70			12,830			21,737			34,637

Ending balance	W	271,770			1,230,469			1,721,862			3,224,101


	2019
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	169,305			1,756,623			1,613,146			3,539,074
Transfer to 12-month expected credit loss		10,469			(10,413	)		(56	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(40,624	)		43,209			(2,585	)		—
Transfer to credit-impaired		(58,875	)		(814,133	)		873,008			—
Provision for (reversal of) loss allowance		80,581			(318,228	)		169,227			(68,420	)
Write-offs		—			—			(12,532	)		(12,532	)
Recovery		—			—			6,465			6,465
Disposal		—			—			(124,310	)		(124,310	)
Debt-to-equity swap		—			—			(8,867	)		(8,867	)
Foreign currency translation		1,417			10,360			12,601			24,378
Other		415			3,009			(3,219	)		205

Ending balance	W	162,688			670,427			2,522,878			3,355,993

S-56

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(3)	Gains (losses) related to loans measured at amortized cost for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Reversal of (provision for) loan allowance for loan	W	(139,199	)		(338,691	)		(17,891	)		68,420
Losses on disposal of loan		(39,296	)		(41,783	)		(27,082	)		(27,082	)

	W	(178,495	)		(380,474	)		(44,973	)		41,338

(4)	Changes in net deferred loan origination costs and fees for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Beginning balance	W	7,188			15,314
New deferrals		7,963			(3,833	)
Amortization		(6,025	)		(16,838	)

Ending balance	W	9,126			(5,357	)

10. 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.

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. Derivatives held-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-57

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. 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, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		317,301		—			—
Swaps		198,415,599		198,416,286		1,938,279			1,044,397
Options		9,262,932		13,125,856		390,030			480,122

		207,678,531		211,859,443		2,328,309			1,524,519
Currency
Futures		18,011		—		—			—
Forwards		62,672,126		53,255,939		1,444,343			1,039,858
Swaps		53,644,978		61,059,914		1,765,376			1,917,200
Options		318,902		292,122		3,080			3,834

		116,654,017		114,607,975		3,212,799			2,960,892
Stock
Futures		140		—		—			—
Options		53,571		21,422		19,361			740

		53,711		21,422		19,361			740
Allowance and other adjustments		—		—		(52,680	)		(742	)

		324,386,259		326,488,840		5,507,789			4,485,409
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		21,850,269		21,850,269		1,086,089			18,067
Currency
Swaps		8,426,934		8,814,611		139,842			350,341
Allowance and other adjustments		—		—		(388	)		(4,598	)

		30,277,203		30,664,880		1,225,543			363,810

	W	354,663,462		357,153,720		6,733,332			4,849,219

(*)	The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until April 29, 2025.

S-58

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. Derivative Financial Instruments, Continued


	December 31, 2019
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		1,885,190		—			—
Swaps		221,240,309		221,240,869		1,210,141			704,385
Options		7,480,126		12,736,326		246,636			312,188

		228,720,435		235,862,385		1,456,777			1,016,573
Currency
Futures		17,367		—		—			—
Forwards		91,778,527		85,052,344		1,743,010			1,519,732
Swaps		50,446,341		56,239,865		1,347,902			1,444,421
Options		214,646		171,284		1,134			2,813

		142,456,881		141,463,493		3,092,046			2,966,966
Stock
Futures		—		3,564		—			—
Options		59,964		89,672		10,054			641

		59,964		93,236		10,054			641
Allowance and other adjustments		—		—		(32,691	)		(628	)

		371,237,280		377,419,114		4,526,186			3,983,552
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		21,931,900		21,931,900		827,596			17,071
Currency
Swaps		7,681,686		7,869,665		79,333			175,833
Allowance and other adjustments		—		—		(308	)		(4,788	)

		29,613,586		29,801,565		906,621			188,116

	W	400,850,866		407,220,679		5,432,807			4,171,668

(*)	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-59

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. Derivative Financial Instruments, Continued

(2)	The notional amounts outstanding for the hedging instruments by period as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate	W	62,436		1,952,007		1,324,224		13,153,968		5,357,634		21,850,269
Currency		71,257		226,816		1,408,565		6,293,481		426,815		8,426,934

	December 31, 2019
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate	W	30,103		1,059,731		3,562,271		10,354,523		6,925,272		21,931,900
Currency		60,099		58,009		1,734,965		5,410,430		418,183		7,681,686

(3)	Details of the balances of the hedging instruments by risk type as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Notional amounts				Balances				Changes in fair value
	Buy		Sell		Assets		Liabilities		Changes in fair value
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	124,049		124,049		—		101		(40	)
Fair value hedge accounting:
Interest rate risk:
Swaps		21,726,220		21,726,220		1,086,089		17,966		554,443
Currency risk:
Swaps		8,426,934		8,814,611		139,842		350,341		(182,630	)

		30,153,154		30,540,831		1,225,931		368,307		371,813

	W	30,277,203		30,664,880		1,225,931		368,408		371,773


	December 31, 2019
	Notional amounts				Balances				Changes in fair value for 2019
	Buy		Sell		Assets		Liabilities		Changes in fair value for 2019
Cash flow hedge accounting:
Interest rate risk
Swaps	W	340,000		340,000		—		508		302
Fair value hedge accounting:
Interest rate risk
Swaps		21,591,900		21,591,900		827,596		16,563		493,545
Currency risk
Swaps		7,681,686		7,869,665		79,333		175,833		(19,778	)

		29,273,586		29,461,565		906,929		192,396		473,767

	W	29,613,586		29,801,565		906,929		192,904		474,069

S-60

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. Derivative Financial Instruments, Continued

(4)	Details of the balances of the hedged items by risk type as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Carrying amounts				Change in value of the hedged item				Changes in fair value			Cash flow hedge reserve
	Assets		Liabilities		Assets		Liabilities		Changes in fair value			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		124,049		—		—		—			(79	)
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		1,867,251		—		56,384		—		81,777			—
Debt debentures		—		28,571,749		—		884,695		(626,449	)		—
Other liabilities (Deposits, etc.)		—		137,404		—		17,334		(14,218	)		—

		1,867,251		28,709,153		56,384		902,029		(558,890	)		—
Currency risk:
Debt debentures		—		10,172,693		—		113,062		182,451			—

		1,867,251		38,881,846		56,384		1,015,091		(376,439	)		—

	W	1,867,251		39,005,895		56,384		1,015,091		(376,439	)		(79	)


	December 31, 2019
	Carrying amounts				Change in value of the hedged item				Changes in fair value			Cash flow hedge reserve
	Assets		Liabilities		Assets		Liabilities		Changes in fair value			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk
Debt debentures	W	—		340,000		—		—		—			(403	)
Fair value hedge accounting:
Interest rate risk
Securities measured at FVOCI		1,775,986		—		7,089		—		34,518			—
Debt debentures		—		29,448,480		—		288,378		(513,063	)		—
Other liabilities (Deposits, etc.)		—		118,785		—		3,005		(9,424	)		—

		1,775,986		29,567,265		7,089		291,383		(487,969	)		—
Currency risk
Debt debentures		—		9,384,387		—		43,847		15,932			—

		1,775,986		38,951,652		7,089		335,230		(472,037	)		—

	W	1,775,986		39,291,652		7,089		335,230		(472,037	)		(403	)

S-61

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. Derivative Financial Instruments, Continued

(5)	Details of hedge ineffectiveness recognized in profit or loss from derivatives for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Interest rate risk	W	(4,447	)		5,364
Currency risk		(179	)		(9,645	)

	W	(4,626	)		(4,281	)

(6)	The summary of the amounts that have affected the statement of comprehensive income as a result of applying cash flow hedge accounting for the six-month period ended June 30, 2020 and 2019 is as follows:


	2020
	Change in the value of the hedging instrument recognized in other comprehensive income		Hedge ineffectiveness recognized in profit or loss(*)			Amount reclassified from other comprehensive income to profit or loss(*)
Interest rate risk	W	20		(60	)		304

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

2019

Change in the value of the
hedging instrument
recognized in other
comprehensive income

Hedge ineffectiveness
recognized in profit
or loss(*)

Amount reclassified from
other comprehensive
income to profit or
loss(*)

Interest rate risk

(181)

1,635

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

(7)	Details of hedged items in hedge of net investments in foreign operations as of June 30, 2020 and December 31, 2019 are as follows:


	2020
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency risk (foreign exchange risk)	W	26,697		(21,159	)

	2019
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency risk (foreign exchange risk)	W	(5,538)		5,538

S-62

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

10. Derivative Financial Instruments, Continued

(8)	Details of hedging instruments in hedge of net investments in foreign operations as of June 30, 2020 and December 31, 2019 are as follows:


	2020
	Carrying amounts		Changes in fair value			Change in other comprehensive income			Hedge ineffectiveness recognized in profit or loss
Debt debentures	W	817,793		(26,697	)		(26,697	)		—

	2019
	Carrying amounts		Changes in fair value			Change in other comprehensive income			Hedge ineffectiveness recognized in profit or loss
Debt debentures	W	734,718		5,538			5,538			—

S-63

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates

(1)	Investments in subsidiaries and associates as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Subsidiaries:(*1)
KDB Asia Ltd.	W	332,907		332,907
KDB Bank Europe Ltd.(*2)		145,312		151,952
KDB Ireland Ltd.		62,389		62,389
KDB Bank Uzbekistan Ltd.		47,937		47,937
Banco KDB Do Brazil S.A.(*3)		34,030		45,548
KDB Investment Co., Ltd.		70,000		70,000
KDB Biz Co., Ltd.		1,500		1,500
KDB Capital Corporation		597,290		597,290
Korea BTL Financing 1		162,587		169,106
Korea Railroad Financing 1		93,177		96,015
Korea Education Financing		52,548		54,759
KDB Infrastructure Investment Asset Management Co., Ltd.		16,843		16,843
Korea Infrastructure Financing Co.(*4)		3,435		4,584
KDB Investment PEF No.1(*5)		935,365		948,758
KDB Consus Value PEF(*6)		158,118		334,086
KDB Sigma PEF II		30,326		116,445
KDB Value PEF VII		11,781		16,031
KDB-IAP OBOR PEF		34,140		34,140
KDB Asia PEF		17,212		15,157
KDB Small Medium Mezzanine PEF		67,741		47,741

		2,874,638		3,163,188


Associates:
Korea Electric Power Co., Ltd.		16,921,067		16,921,067
Korea Tourism Organization		337,286		337,286
Korea Infrastructure Financing 2 Co.		220,394		220,394
Korea Ocean Business Corporation		631,777		631,777
Korea Appraisal Board		58,492		58,492
Multi Asset Electronic Power PEF		20,729		20,749
Shinbundang Railroad Co., Ltd.(*7)		30,999		9,422
Troika Resources Investment PEF(*8)		2,520		3,558
HMM Co., Ltd.		78,835		78,835
GM Korea Company(*9)		427,599		401,512
Hanjin Heavy Industries & Construction Co., Ltd.(*10)		77,875		66,665
Others(*11)		2,331,849		2,277,157

		21,139,422		21,026,914

	W	24,014,060		24,190,102

(*1)	The Bank acquired an additional 172,732 of common shares of Daehan Shipbuilding Co., Ltd. and recognizedW1,727 million of impairment losses for the six-month period ended June 30, 2020, considering the impaired capital of Daehan Shipbuilding Co., Ltd. as objective evidence of impairment.

S-64

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*2)	The Bank recognizedW6,639 million of impairment losses for the years ended June 30, 2020, considering increase in fair value due to improvement of expected cash flows from the shares held by the Bank.

(*3)

The Bank recognizedW11,518 million of impairment losses andW1,907 million of reversal of impairment losses for six-month periods ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering increase in fair value due to improvement of expected cash flows from the shares held by the Bank.

(*4)	The Bank recognizedW127 million andW177 million of impairment losses for six-month periods ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering the decline in net asset values due to the decrease in fair value of assets held as objective evidence of impairment.

(*5)

For the year ended December 31, 2019, KDB Value PEF VI was liquidated and KDB Investment PEF NO.1 is acquired. Through this transaction, the shares of Daewoo Engineering & Construction Co., Ltd. held by KDB Value PEF VI as sub-subsidiary were transferred to KDB Investment PEF NO.1 whereby the Bank maintained its control over Daewoo Engineering & Construction Co., Ltd. The Bank considered the transfer as a transaction between subsidiaries under common control and does not recognized gain or loss on the transfer in the separate financial statements. Additionally, the Bank recognizedW26,703 million of impairment losses for six-month periods ended June 30, 2020 andW38,124 million of reversal of impairment losses for the year ended December 31, 2019, respectively, considering the change in the value in use of cash-generating units based on its estimation of expected cash flows.

(*6)

The Bank picked JC Partners, local private equity firm, as the preferred bidder for KDB Life Insurance Co., Ltd., the Bank’s sub-subsidiary. The Bank recognizedW175,969 million of impairment losses for the six-month period ended June 30, 2020 based on the expected cash flows distributed to the Bank through the disposal of KDB Life Insurance Co., Ltd. and recognizedW77,067 million of impairment losses for the year ended December 31, 2019.

(*7)	The Bank recognizedW21,577 million and ofW602 of reversal of impairment losses for the six-month period ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering increase in fair value due to improvement of expected dividend cash flows from the shares held by the Bank.

(*8)

The Bank recognizedW1,038 million andW5,292 million of impairment losses for six-month periods ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering decrease in fair value due to deterioration of expected cash flows from the assets held as objective evidence of impairment.

(*9)

The Bank recognizedW26,086 million of reversal of impairment losses and ofW48,991 of impairment losses for the six-month period ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering increase in value-in-use due to improvement of operating cash flows from the shares held by the Bank.

(*10)

For the year ended December 31, 2019, pursuant to debt-to-equity swap decision of the Council of Financial Creditors, the Bank acquired additional 12,231,957 shares of Hanjin Heavy Industries & Construction Co., Ltd. and recognizedW11,209 million of reversal of impairment losses andW72,445 of impairment losses for the six-month period ended June 30, 2020 and for the year ended December 31, 2019, respectively, considering changes in fair value less costs to sell of the shares held by the Bank.

(*11)

The Bank recognizedW1,016 million of impairment losses for KBS KDB PEF and 13 other companies for the six-month period ended June 30, 2020. The Bank recognizedW11,025 million of impairment losses for KBS KDB PEF and 18 other companies for the year ended December 31, 2019.

S-65

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(2)	The market value of marketable investments in subsidiaries and associates as of June 30, 2020 and December 31, 2019 are as follows:


	Market value				Carrying amounts
	June 30, 2019		December 31, 2019		June 30, 2019		December 31, 2019
Korea Electric Power Co., Ltd.	W	4,119,088		5,872,340		16,921,067		16,921,067
HMM Co., Ltd.		193,019		146,258		78,835		78,835
Hanjin Heavy Industries & Construction Co., Ltd.		78,224		67,001		77,875		66,665
KG Dongbu Steel Co., Ltd.		141,267		103,622		73,979		81,746

(3)	The key financial information of subsidiaries and associates invested and ownership ratios as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	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	2,884,409		2,377,384		507,025			93,802		4,859			17,507			100.00
KDB Bank Europe Ltd.	Hungary		December	Finance		1,223,269		1,150,134		73,135			32,213		(5,751	)		(12,942	)		100.00
KDB Ireland Ltd.	Ireland		December	Finance		470,156		366,262		103,894			16,726		2,284			2,966			100.00
KDB Bank Uzbekistan Ltd.	Uzbekistan		December	Finance		581,215		505,948		75,267			11,742		4,604			4,604			86.32
Banco KDB Do Brazil S.A.	Brazil		December	Finance		253,375		191,660		61,715			81,258		1,403			(16,663	)		100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea		December	Manufacturing		11,168,858		7,118,716		4,050,142			3,923,929		294,007			295,246			55.72
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea		December	Manufacturing		268,483		241,228		27,255			77,670		6,208			6,018			100.00
Daehan Shipbuilding Co., Ltd.(*1)	Korea		December	Manufacturing		625,400		778,852		(153,452	)		388,144		(4,817	)		(4,817	)		70.04
KDB Capital Corporation	Korea		December	Specialized Credit Finance		6,357,782		5,346,941		1,010,841			267,618		92,369			93,122			99.92
Korea BTL Financing 1(*2)	Korea		Semi- annually	Financial investment		408,614		267		408,347			7,190		(1,744	)		(1,744	)		41.67
Korea Railroad Financing 1(*2)	Korea		Semi- annually	Financial investment		197,478		7		197,471			8,121		7,879			7,879			50.00
Korea Education Financing(*2)	Korea		Semi- annually	Financial investment		113,074		6		113,068			5,296		5,153			5,153			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea		December	Asset management		49,754		9,165		40,589			17,701		9,437			9,437			84.16
KDB Investment Co., Ltd.	Korea		December	Finance		75,995		2,784		73,211			4,775		1,661			1,661			100.00
KDB Biz Co., Ltd.	Korea		December	Services		7,557		5,106		2,451			12,943		754			754			100.00
Korea Infrastructure Financing Co.	Korea		December	Financial investment		4,102		4		4,098			131		(58	)		(58	)		85.00
KDB Investment PEF No.1	Korea		December	Financial investment		10,116,141		7,609,596		2,506,545			4,077,773		24,004			43,009			99.46
KDB Consus Value PEF	Korea		December	Financial investment		19,273,144		18,697,329		575,815			5		(227,574	)		(149,500	)		68.20
KDB Sigma PEF II	Korea		December	Financial investment		60,760		9		60,751			51,691		56,145			57,396			60.00
KDB Value PEF VII(*3)	Korea		December	Financial investment		31,221		39		31,182			119		(1,884	)		(1,884	)		50.00

S-66

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	June 30, 2020
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
KDB-IAP OBOR PEF(*3)	Korea	December	Financial investment		159,762		53,930		105,832			—		3,802			7,427			33.52
KDB Asia PEF(*3)	Korea	December	Financial investment		31,322		189		31,133			—		7,117			362			50.00
KDB Small Medium Mezzanine PEF	Korea	December	Financial investment		99,722		373		99,349			185		(5,268	)		(5,621	)		66.67
Components and Materials M&A PEF	Korea	December	Financial investment		1,075		1,823		(748	)		1		(9	)		(9	)		83.33
KDB Venture M&A PEF	Korea	December	Financial investment		121		7,911		(7,790	)		—		—			—			57.56

Associates:
Korea Electric Power Co., Ltd.	Korea	December	Electricity Generation		201,225,213		132,265,182		68,960,031			28,165,660		189,191			44,457			32.90
Korea Tourism Organization	Korea	December	Culture and Tourism administration		1,470,225		432,406		1,037,819			236,137		(13,963	)		(13,963	)		43.58
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		934,869		85,470		849,399			35,573		19,844			19,844			26.67
Korea Ocean Business Corporation	Korea	December	Finance		5,052,083		2,714,232		2,337,851			109,070		55,762			49,119			22.37
Korea Appraisal Board	Korea	December	Appraisal		285,144		63,464		221,680			88,017		13,531			13,359			30.60
GM Korea Company(*4)	Korea	December	Manufacturing		5,257,125		3,307,668		1,949,457			4,095,830		(29,984	)		(29,984	)		17.02
HMM Co., Ltd.(*5)	Korea	December	Foreign cargo transportation		8,423,356		6,696,751		1,726,605			2,688,254		(37,509	)		(45,299	)		12.94
Hanjin Heavy Industries & Construction Co., Ltd.(*5)	Korea	December	Manufacturing		2,288,861		1,979,368		309,493			825,715		64,286			64,477			16.14
Multi Asset Electronic Power PEF	Korea	December	Financial investment		71,489		218		71,271			33,976		33,918			33,918			50.00
Shinbundang
Railroad Co., Ltd.(*6)	Korea	December	Other		692,718		988,949		(296,231	)		39,037		(25,750	)		(25,750	)		10.98
Troika Resources Investment PEF(*7)	Korea	December	Financial investment		5,833		1,329		4,504			351		162			162			54.94

S-67

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2019
	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	2,777,476		2,287,958		489,518			123,138		18,871			30,694			100.00
KDB Bank Europe Ltd.	Hungary		December	Finance		1,274,243		1,188,166		86,077			68,749		7,584			4,532			100.00
KDB Ireland Ltd.	Ireland		December	Finance		436,368		335,440		100,928			31,404		6,818			14,164			100.00
KDB Bank Uzbekistan Ltd.	Uzbekistan		December	Finance		466,389		395,726		70,663			29,555		11,291			5,403			86.32
Banco KDB Do Brazil S.A.	Brazil		December	Finance		304,220		225,841		78,379			76,423		6,099			5,933			100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea		December	Manufacturing		11,276,079		7,521,182		3,754,897			8,358,745		(46,485	)		(85,325	)		55.72
Shinhan Heavy Industries Co., Ltd.(*1)	Korea		December	Manufacturing		310,463		328,024		(17,561	)		235,832		(59,495	)		(58,749	)		89.22
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea		December	Manufacturing		270,365		249,128		21,237			155,997		(11,542	)		(12,036	)		100.00
Daehan Shipbuilding Co., Ltd.(*1)	Korea		December	Manufacturing		637,978		786,612		(148,634	)		642,586		(31,747	)		(32,901	)		70.04
KDB Capital Corporation	Korea		December	Specialized Credit Finance		5,884,821		4,924,781		960,040			454,281		104,141			104,287			99.92
Korea BTL Financing 1(*2)	Korea		Semi- annually	Financial investment		433,060		284		432,776			40,240		38,966			38,966			41.67
Korea Railroad Financing 1(*2)	Korea		Semi- annually	Financial investment		197,732		9		197,723			10,965		10,459			10,459			50.00
Korea Education Financing(*2)	Korea		Semi- annually	Financial investment		114,228		6		114,222			7,173		6,871			6,871			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea		December	Asset management		57,428		11,676		45,752			35,291		19,478			19,422			84.16
KDB Investment Co., Ltd.	Korea		December	Finance		74,223		2,673		71,550			4,556		1,737			1,675			100.00
KDB Biz Co., Ltd.	Korea		December	Services		5,135		3,438		1,697			12,966		197			197			100.00
Korea Infrastructure Financing Co.	Korea		December	Financial investment		5,526		5		5,521			663		595			595			85.00
KDB Investment PEF No.1	Korea		December	Financial investment		10,246,043		7,849,961		2,396,082			8,847,952		47,432			31,369			99.46
KDB Consus Value PEF	Korea		December	Financial investment		19,192,695		18,449,320		743,375			3,653,764		(157,839	)		(33,496	)		68.20
KDB Sigma PEF II	Korea		December	Financial investment		197,849		497		197,352			3,228		8,008			7,980			60.00
KDB Value PEF VII(*3)	Korea		December	Financial investment		41,729		163		41,566			32,913		21,502			21,502			50.00
KDB-IAP OBOR PEF(*3)	Korea		December	Financial investment		151,973		51,756		100,217			—		7,371			10,749			33.52
KDB Asia PEF(*3)	Korea		December	Financial investment		30,112		191		29,921			—		(3,986	)		2,401			50.00
KDB Small Medium Mezzanine PEF	Korea		December	Financial investment		75,726		756		74,970			5,018		4,754			4,880			66.67
Components and Materials M&A PEF	Korea		December	Financial investment		1,081		1,819		(738	)		5		(62	)		(62	)		83.33
KDB Venture M&A PEF	Korea		December	Financial investment		120		7,910		(7,790	)		—		—			—			57.56

Associates:
Korea Electric Power Co., Ltd.	Korea		December	Electricity Generation		197,597,792		128,708,143		68,889,649			59,172,890		(2,345,517	)		(2,239,147	)		32.90
Korea Tourism Organization	Korea		December	Culture and Tourism administration		1,569,185		497,038		1,072,147			787,216		6,803			5,430			43.58

S-68

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2019
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		929,296		70,245		859,051			106,095		99,085			99,085			26.67
Korea Ocean Business Corporation	Korea	December	Financial investment		4,358,100		2,069,521		2,288,579			205,269		(167,419	)		(167,181	)		22.37
Korea Appraisal Board	Korea	December	Appraisal		261,541		50,658		210,883			162,458		6,210			4,420			30.60
GM Korea Company (*4)	Korea	December	Manufacturing		5,492,399		3,550,438		1,941,961			8,438,789		(356,831	)		(356,831	)		17.02
HMM Co., Ltd.(*5)	Korea	December	Foreign cargo transportation		7,160,187		6,069,878		1,090,309			5,513,089		(589,927	)		(612,482	)		12.94
Hanjin Heavy Industries & Construction Co., Ltd.(*5)	Korea	December	Construction		2,470,222		2,225,228		244,994			1,628,751		305,753			267,121			16.14
Multi Asset Electronic Power PEF	Korea	December	Financial investment		64,187		256		63,931			28,674		28,489			28,489			50.00
Shinbundang Railroad Co., Ltd.(*6)	Korea	December	Other		704,546		975,027		(270,481	)		103,015		(18,938	)		(18,938	)		10.98
Troika Resources Investment PEF(*7)	Korea	December	Financial investment		5,687		1,345		4,342			135		3,458			3,458			54.94

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

(*2)

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.

(*3)	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.

(*4)	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.

(*5)	Although the Bank’s shareholding is less than 20%, the Bank is considered to have significant influence as the principal creditor bank.

(*6)	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.

(*7)	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-69

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

12. Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	January 1, 2020		Acquisition/ depreciation			Disposal			Reclassification			Foreign exchange differences			June 30, 2020
Acquisition cost:
Land	W	318,940		437			(120	)		1,128			—			320,385
Buildings and structures		607,036		2,137			(932	)		4,496			—			612,737
Leasehold improvements		43,058		1,982			(2,833	)		—			(25	)		42,182
Vehicles		740		—			(123	)		—			161			778
Equipment		53,170		1,754			(1,932	)		—			75			53,067
Construction in progress		1,588		6,217			—			(3,396	)		—			4,409
Right-of-use assets (Real estate)		74,792		14,943			(9,376	)		—			1,340			81,699
Right-of-use assets (Vehicles)		5,007		1,228			(441	)		—			17			5,811
Right-of-use assets (Others)		29		—			—			—			1			30
Others		165,032		1,032			(353	)		—			237			165,948

		1,269,392		29,730			(16,110	)		2,228			1,806			1,287,046

Accumulated depreciation:
Buildings and structures(*)		191,473		8,527			(210	)		573			—			200,363
Leasehold improvements		36,078		1,562			(1,807	)		—			(55	)		35,778
Vehicles		596		26			(113	)		—			10			519
Equipment(*)		43,348		1,488			(1,374	)		—			56			43,518
Right-of-use assets (Real estate)		29,059		13,983			(7,976	)		—			670			35,736
Right-of-use assets (Vehicles)		1,997		819			(5	)		—			(383	)		2,428
Right-of-use assets (Others)		13		6			—			—			1			20
Others		128,593		7,830			(37	)		—			4			136,390

		431,157		34,241			(11,522	)		573			303			454,752

Accumulated impairment losses:
Land		3,023		—			—			—			—			3,023
Buildings and structures		2,361		—			—			—			—			2,361

		5,384		—			—			—			—			5,384

	W	832,851		(4,511	)		(4,588	)		1,655			1,503			826,910

(*)	The amounts include government grants.

S-70

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

12. Property and Equipment, Continued


	2019
	January 1, 2019		Changes in accounting policy			January 1, 2019 (Restated)		Acquisition/ depreciation		Disposal			Reclassification		Foreign exchange differences			June 30, 2019
Acquisition cost:
Land	W	312,925		—			312,925		683		(29	)		3,462		(285	)		316,756
Buildings and structures		398,567		—			398,567		5,196		(857	)		1,918		1			404,825
Leasehold improvements		40,892		(40,892	)		—		—		—			—		—			—
Vehicles		831		—			831		—		(122	)		—		17			726
Equipment		52,680		—			52,680		830		(157	)		—		193			53,546
Construction in progress		108,587		—			108,587		38,089		—			—		—			146,676
Right-of-use assets (Real estate)		—		96,178			96,178		5,466		—			—		—			101,644
Right-of-use assets (Vehicles)		—		2,270			2,270		—		—			—		—			2,270
Right-of-use assets (Others)		—		148			148		—		—			—		—			148
Others		172,478		—			172,478		1,601		—			—		88			174,167

		1,086,960		57,704			1,144,664		51,865		(1,165	)		5,380		14			1,200,758

Accumulated depreciation:
Buildings and structures(*)		178,467		—			178,467		6,530		(628	)		1,073		(14	)		185,428
Leasehold improvements		32,501		(32,501	)		—		—		—			—		—			—
Vehicles		809		—			809		182		(110	)		—		(167	)		714
Equipment(*)		44,747		—			44,747		1,317		(119	)		—		162			46,107
Right-of-use assets (Real estate)		—		32,501			32,501		17,401		—			—		1,979			51,881
Right-of-use assets (Vehicles)		—		—			—		676		—			—		77			753
Right-of-use assets (Others)		—		—			—		70		—			—		8			78
Others		126,450		—			126,450		8,872		—			—		71			135,393

		382,974		—			382,974		35,048		(857	)		1,073		2,116			420,354

Accumulated impairment losses:
Land		3,023		—			3,023		—		—			—		—			3,023
Buildings and structures		2,361		—			2,361		—		—			—		—			2,361

		5,384		—			5,384		—		—			—		—			5,384

	W	698,602		57,704			756,306		16,817		(308	)		4,307		(2,102	)		775,020

(*)	The amounts include government grants.

S-71

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

13. Investment Property

Changes in investment property for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	January 1, 2020		Acquisition/ depreciation			Reclassification			June 30, 2020
Acquisition cost:
Land	W	49,913		—			(1,128	)		48,785
Buildings and structures		40,474		—			(1,100	)		39,374

		90,387		—			(2,228	)		88,159
Accumulated depreciation:
Buildings and structures		21,003		604			(573	)		21,034

Accumulated impairment losses:
Land		1,197		—			—			1,197
Buildings and structures		1,778		—			—			1,778

		2,975		—			—			2,975

	W	66,409		(604	)		(1,655	)		64,150


	2019
	January 1, 2019		Acquisition/ depreciation			Reclassification			June 30, 2019
Acquisition cost:
Land	W	52,922		—			(3,462	)		49,460
Buildings and structures		41,802		—			(1,918	)		39,884

		94,724		—			(5,380	)		89,344
Accumulated depreciation:
Buildings and structures		20,630		512			(1,073	)		20,069

Accumulated impairment losses:
Land		1,197		—			—			1,197
Buildings and structures		1,778		—			—			1,778

		2,975		—			—			2,975

	W	71,119		(512	)		(4,307	)		66,300

The fair value of the Bank’s investment property, as determined based on valuation by an independent appraiser, amounts toW73,215 million andW75,498 million as of June 30, 2020 and December 31, 2019, respectively. Additionally, fair value of investment in property is classified as level 3 according to the fair value hierarchy in Note 45.

S-72

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

14. Intangible Assets

Changes in intangible assets for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	January 1, 2020		Acquisition		Disposal		Amortization			Foreign exchange differences		June 30, 2020
Development expense	W	194,680		1,111		—		(22,318	)		—		173,473
Equipment usage right		553		—		—		(23	)		17		547
Other deposits provided		10,984		—		—		—			2		10,986
Others		24,712		1,088		—		(4,871	)		38		20,967

	W	230,929		2,199		—		(27,212	)		57		205,973


	2019
	January 1, 2019		Acquisition		Disposal		Amortization			Foreign exchange differences		June 30, 2019
Development expense	W	150,600		2,455		—		(4,455	)		—		148,600
Equipment usage right		593		—		—		(28	)		17		582
Other deposits provided		11,435		—		—		—			9		11,444
Others		11,258		1,981		—		(2,751	)		10		10,498

	W	173,886		4,436		—		(7,234	)		36		171,124

15. Other Assets

Other assets as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020			December 31, 2019
Accounts receivable	W	6,336,773			2,719,266
Unsettled domestic exchange receivables		1,275,441			1,623,482
Accrued income		416,889			405,113
Guarantee deposits		211,869			173,489
Financial guarantee asset		23,607			30,078
Prepaid expenses		12,765			12,429
Advance payments		8,119			8,386
Others		31,290			29,689

		8,316,753			5,001,932
Loss allowance for other assets		(223,097	)		(219,960	)
Present value discount		(1,775	)		(1,921	)

	W	8,091,881			4,780,051

The carrying amounts of financial assets included in other assets above amounted toW8,045,088 million andW4,735,372 million as of June 30, 2020 and December 31, 2019, respectively, and their fair value amounted toW8,118,492 million andW4,803,811 million as of June 30, 2020 and December 31, 2019, respectively.

S-73

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

16. Assets Held for Sale

For attracting investment in Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“Daewoo Shipbuilding & Marine Engineering”), the Bank’s subsidiary, the Bank and Hyundai Heavy Industries Co., Ltd. (“Hyundai Heavy Industries”) made the basic agreement on January 31, 2019 and the contract on investment on March 8, 2019. According to the contract, Hyundai Heavy Industries will make shipbuilding segment, special ship segment, industrial plant segment and engine & machinery segment into each new company and surviving company, Korea Shipbuilding & Offshore Engineering Co., Ltd. (“Korea Shipbuilding & Offshore Engineering”), into holding company defined in the Monopoly Regulation and Fair Trade Act. The Bank will invest the common shares of Daewoo Shipbuilding & Marine Engineering into the common shares and redeemable convertible preference shares of Korea Shipbuilding & Offshore Engineering. Also, Korea Shipbuilding & Offshore Engineering will finance new common shares of Daewoo Shipbuilding & Marine Engineering and be obliged to fund Daewoo Shipbuilding & Marine Engineering.

The Bank made the adjusted contract on investment with Korea Shipbuilding & Offshore Engineering Co., Ltd. on March 6, 2020, reflecting some adjustments to the previous contract on investment made between the Bank and Hyundai Heavy Industries on March 8, 2019.

The contract will be completed after the satisfaction of the contract’s precondition including governmental permission of different countries.

Assets held for sale as of June 30, 2020 and December 31, 2019 are as follows:

June 30, 2020

Acquisition cost

Fair value less
costs to sell

Carrying amount

Impairment loss

Assets held for sale:

Investments in subsidiaries and associates(*)

2,244,664

1,608,631

46,775

December 31, 2019

Acquisition cost

Fair value less
costs to sell

Carrying amount

Impairment loss

Assets held for sale:

Investments in subsidiaries and associates(*)

2,244,664

1,655,406

5,914

(*)	W583,344 million of accumulated impairment losses was included upon classified as assets held for sale.

17. Financial Liabilities Measured at FVTPL

(1)	Financial liabilities designated at fair value through profit or loss as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Debentures	W	1,881,846		2,465,541

S-74

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

17. Financial Liabilities Measured at FVTPL, Continued

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, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Carrying amount	W	1,881,846		2,465,541
Contractual cash flow amounts		1,712,140		2,323,560

Difference	W	169,706		141,981

18. Deposits

Deposits as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020				December 31, 2019
	Amortized cost		Fair value		Amortized cost		Fair value
Deposits in Korean won:
Demand deposits	W	452,846		452,846		111,588		111,588
Time and savings deposits		39,981,147		40,035,291		26,977,874		26,983,467
Certificates of deposit		28,996		29,050		188,375		188,310

		40,462,989		40,517,187		27,277,837		27,283,365

Deposits in foreign currencies:
Demand deposits		1,440,421		1,440,421		1,583,184		1,583,184
Time and savings deposits		3,541,745		3,547,440		2,202,739		2,202,737
Certificates of deposit		3,948,672		3,928,857		2,839,700		2,836,162

		8,930,838		8,916,718		6,625,623		6,622,083

Off-shore deposits in foreign currencies:
Demand deposits		798,691		798,691		760,492		760,492

	W	50,192,518		50,232,596		34,663,952		34,665,940

S-75

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

19. Borrowings

(1)	Borrowings as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.15	W	4,062,247			4,055,998
Borrowings in foreign currencies		—		4.40		12,215,629			12,213,608
Off-shore borrowings in foreign currencies		—		2.60		2,741,000			2,741,230
Others		0.14		2.55		2,864,739			2,865,890

						21,883,615			21,876,726

Deferred borrowing costs						(70	)

					W	21,883,545


	December 31, 2019
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.28	W	3,824,699			3,816,554
Borrowings in foreign currencies		—		5.49		12,094,102			12,074,960
Off-shore borrowings in foreign currencies		1.79		4.32		1,713,683			1,707,303
Others		0.01		3.66		2,538,134			2,537,824

						20,170,618			20,136,641

Deferred borrowing costs						(105	)

					W	20,170,513

S-76

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

19. Borrowings, Continued

(2)	Borrowings in Korean won before adjusting for gains and losses on deferred borrowing costs as of June 30, 2020 and December 31, 2019 are as follows:

Lender

Classification

Annual
interest rate
(%)

June 30,
2020

December 31,
2019

Ministry of Economy and Finance

Borrowings from government fund(*)

0.37 ~ 0.87

139,740

154,667

Industrial Bank of Korea

Borrowings from IT industry promotion fund

1.00

—

190

Korea SMEs and Startups Agency

Borrowings from small and medium enterprise promotion fund

0.55 ~ 2.76

70,800

73,709

Ministry of Culture, Sports and Tourism

Borrowings from tourism promotion fund

0.50 ~ 2.00

2,800,703

2,578,317

Korea Energy Agency

Borrowings from fund for rational use of energy

0.25 ~ 2.80

349,697

387,943

Local governments

Borrowings from local small and medium enterprise promotion fund

0.00 ~ 2.95

42,926

47,834

The Bank of Korea

Borrowings from Bank of Korea

0.25 ~ 0.75

284,301

224,356

Others

Borrowings from petroleum enterprise fund and others

0.00 ~ 3.15

374,080

357,683

4,062,247

3,824,699

(*) Borrowings from government fund are subordinated borrowings.

S-77

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

19. Borrowings, Continued

(3)	Borrowings and off-shore borrowings in foreign currencies before adjusting for gains and losses on deferred borrowing costs as of June 30, 2020 and December 31, 2019 are as follows:

Lender

Classification

Annual
interest rate
(%)

June 30,
2020

December 31,
2019

Mizuho and others

Bank loans from foreign funds

3M Libor + 0.20 ~
3M Libor + 0.78

720,420

694,680

Ministry of Economy and Finance

Exchange equalization fund borrowings in foreign currencies

3M Libor + 0.22 ~
3M Libor + 0.74

400,470

653,613

Central Bank of the Republic Uzbekistan and others

Off-shore short-term borrowings

0.33 ~ 2.60

2,506,164

1,487,621

HSBC and others

Off-shore long-term borrowings

3M Libor + 0.36 ~
3M Libor + 0.62

234,836

226,062

Others

Short-term borrowings in foreign currencies

0.04 ~ 4.40

10,033,596

9,465,368

Long-term borrowings in foreign currencies

0.09 ~ 2.49

1,061,143

1,280,441

14,956,629

13,807,785

S-78

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

20. Debentures

Details of debentures as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.03		6.60	W	106,893,609			108,468,140
Discount on debentures						(95,678	)
Premium on debentures						—
Valuation adjustment for fair value hedges						119,084

						106,917,015

Debentures in foreign currencies:
Debentures		0.05		6.90		16,287,101			17,626,051
Discount on debentures						(34,791	)
Premium on debentures						207
Valuation adjustment for fair value hedges						657,601

						16,910,118

Off-shore debentures:
Debentures		—		7.20		15,003,789			15,289,951
Discount on debentures						(26,683	)
Premium on debentures						120
Valuation adjustment for fair value hedges						221,072

						15,198,298

					W	139,025,431			141,384,142

S-79

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

20. Debentures, Continued


	December 31, 2019
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		1.22		6.60	W	92,789,345			93,864,631
Discount on debentures						(64,439	)
Premium on debentures						24
Valuation adjustment for fair value hedges						100,969

						92,825,899

Debentures in foreign currencies:
Debentures		—		6.97		14,872,187			15,765,324
Discount on debentures						(34,587	)
Premium on debentures						221
Valuation adjustment for fair value hedges						203,466

						15,041,287

Off-shore debentures:
Debentures		—		7.20		12,751,332			12,820,673
Discount on debentures						(23,075	)
Premium on debentures						155
Valuation adjustment for fair value hedges						27,790

						12,756,202

					W	120,623,388			122,450,628

21. Net 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 net defined benefit liabilities as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020			December 31, 2019
Present value of defined benefit obligation	W	394,446			379,728
Fair value of plan assets		(322,176	)		(326,587	)

	W	72,270			53,141

S-80

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

21. Net Defined Benefit Liabilities, Continued

(2)	Changes in net defined benefit liabilities for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning balance	W	379,728			(326,587	)		53,141
Current service costs		18,778			—			18,778
Interest expense (income)		4,393			(3,933	)		460
Benefits paid by the plan		(8,453	)		8,344			(109	)

Ending balance	W	394,446			(322,176	)		72,270


	2019
	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning balance	W	377,361			(315,210	)		62,151
Current service costs		19,879			—			19,879
Interest expense (income)		4,916			(4,286	)		630
Benefits paid by the plan		(13,751	)		13,719			(32	)

Ending balance	W	388,405			(305,777	)		82,628

(3)	Fair value of plan assets for each type as of June 30, 2020 and December 31, 2019 are as follows:

June 30, 2020

December 31, 2019

Quoted
market
prices

Unquoted
market
prices

Quoted
market
prices

Unquoted
market
Prices

Due from banks

—

322,176

—

326,587

(4)	Defined benefit costs recognized in profit or loss for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020				June 30, 2019
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Current service costs	W	9,386		18,778		9,936		19,879
Interest expense (income), net		230		460		315		630

	W	9,616		19,238		10,251		20,509

S-81

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

21. Net Defined Benefit Liabilities, Continued

(5)	The principal actuarial assumptions used as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Discount rate (%)		2.44		2.44
Future salary increasing rate (%)		6.00		6.00

(6)	The present value sensitivity of defined benefit obligation as changes in principal actuarial assumptions as of December 31, 2019 is as follows:


	Sensitivity
	1% increase in assumption		1% decrease in assumption
Discount rate		9.89% decrease		11.73% increase
Future salary increasing rate		10.99% increase		9.48% decrease

(7)	The weighted average duration of defined benefit obligation is 11.82 years as of December 31, 2019.

22. Provisions

(1)	Details of provisions as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Provision for unused commitments	W	751,951		742,592
Provision for financial guarantee		76,725		35,892
Provision for payment guarantees		527,286		674,928
Provision for possible losses from lawsuits		12,302		12,302
Provision for restoration		15,289		15,167
Other provision		38,983		38,983

	W	1,422,536		1,519,864

(2)	Changes in provision for unused commitments for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	428,388			314,204			—			742,592
Transfer to 12-month expected credit loss		5,354			(5,243	)		(111	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(7,735	)		7,735			—			—
Impairment loss (gain)		18,899			(27,578	)		111			(8,568	)
Foreign currency translation		16,317			1,610			—			17,927

Ending balance	W	461,223			290,728			—			751,951

S-82

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

22. Provisions, Continued


	2019
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	288,778			180,906			—		469,684
Transfer to 12-month expected credit loss		224,540			(224,540	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(3,246	)		3,246			—		—
Impairment loss (gain)		(240,059	)		241,481			—		1,422
Foreign currency translation		8,307			461			—		8,768

Ending balance	W	278,320			201,554			—		479,874

(3)	Changes in provision for financial guarantee for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired		Credit- impaired		Total
Beginning balance	W	1,123			23,121		11,648		35,892
Transfer to 12-month expected credit loss		—			—		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(2,368	)		2,368		—		—
Transfer to credit-impaired		(79	)		—		79		—
Impairment loss (gain)		2,968			3,790		34,075		40,833
Foreign currency translation		—			—		—		—

Ending balance	W	1,644			29,279		45,802		76,725


	2019
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	1,400			71,546			38,235		111,181
Transfer to 12-month expected credit loss		1			(1	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(455	)		455			—		—
Transfer to credit-impaired		(894	)		(543	)		1,437		—
Impairment loss (gain)		1,220			(49,036	)		568		(47,248	)
Foreign currency translation		18			955			87		1,060

Ending balance	W	1,290			23,376			40,327		64,993

S-83

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

22. Provisions, Continued

(4)	Changes in provision for payment guarantees for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	170,320			167,939			336,669			674,928
Transfer to 12-month expected credit loss		82			(82	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(954	)		954			—			—
Impairment loss (gain)		(24,112	)		(101,750	)		(42,078	)		(167,940	)
Foreign currency translation		1,508			3,868			14,922			20,298

Ending balance	W	146,844			70,929			309,513			527,286


	2019
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	292,946			247,521			247,298			787,765
Transfer to 12-month expected credit loss		89,928			(89,928	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(60,944	)		60,944			—			—
Transfer to credit-impaired		(283,491	)		(39,411	)		322,902			—
Impairment loss (gain)		116,275			66,182			(99,547	)		82,910
Foreign currency translation		5,032			8,154			11,429			24,615

Ending balance	W	159,746			253,462			482,082			895,290

S-84

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

22. Provisions, Continued

(5)	Changes in provision for possible losses from lawsuits and other provision for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	Provision for possible losses from lawsuits		Provision for restoration			Other provision
Beginning balance	W	12,302		15,167			38,983
Impairment loss (gain)		—		(269	)		—
Provision used		—		391			—

Ending balance	W	12,302		15,289			38,983


	2019
	Provision for possible losses from lawsuits		Other provision
Beginning balance	W	12,302		7,786
Provision used		—		(53	)

Ending balance	W	12,302		7,733

(6)	Provision for payment guarantees and financial guarantee

Confirmed acceptances and guarantees, unconfirmed acceptances and guarantees and bills endorsed are not recognized on the statement of financial position, but are disclosed as off-statement of financial position items in the notes to the financial statements. The Bank provides a provision for such off-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 provision for financial guarantee.

(7)	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.

(8)	Provision for possible losses from lawsuits

As of June 30, 2020, the Bank is involved in 18 lawsuits as a plaintiff and 46 lawsuits as a defendant. The aggregate amounts of claims as a plaintiff and a defendant amounted toW214,458 million andW226,936 million, respectively. The Bank provided a provision against contingent loss from pending lawsuits as of June 30, 2020 and additional losses may be incurred depending on the result of pending lawsuits.

S-85

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

22. Provisions, Continued

Major lawsuits in progress as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^sttrial ruled against the Bank; 2^ndtrial in progress
Gyeonggi Urban Innovation Corp.	Claim for refund of investments		19,100	1^stand 2^ndtrial ruled partially in favor of the Bank; 3^rdtrial in progress
KAMCO 1th JV Securitization Specialty Co., Ltd.	Claim for transfer of credit		8,792	1^sttrial in progress
Dadae Construction Co., Ltd.	Absence of liens		2,900	1^sttrial in progress
Korea Technology Finance Corporation	Claim for guarantee		872	1^sttrial ruled partially in favor of the Bank; 2^ndtrial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^sttrial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1^stand 2^ndtrial ruled partially in against the Bank; 3^rdtrial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^sttrial ruled in favor of the Bank; 2^ndtrial ruled against the Bank; 3^rdtrial in progress
Dongbu Corporation	Claim for objection against application		19,658	1^sttrial in progress
Woori Bank	Claim for disposal of debt		12,470	1^sttrial ruled in favor of the Bank; 2^ndtrial in progress

S-86

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

22. Provisions, Continued


	December 31, 2019
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^sttrial ruled against the Bank; 2^ndtrial in progress
Gyeonggi Urban Innovation Corp.	Claim for refund of investments		19,100	1^st,2^ndtrial ruled partially in favor of the Bank; 3^rdtrial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^sttrial in progress
STX Offshore and shipbuilding Co., Ltd.	Objection for trial for determination of investigation		4,800	1^sttrial in progress
Korea Land and Housing Corporation	Claim for guaranteed debt		3,533	1^sttrial ruled against the Bank; 2^ndtrial ruled partially in favor of the Bank; 3^rdtrial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^sttrial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1^st, 2^ndtrial ruled partially against the Bank; 3^rdtrial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^sttrial ruled in favor of the Bank; 2^ndtrial ruled against the Bank; 3^rdtrial in progress
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^sttrial in progress
Woori Bank	Claim for disposal of debt		12,470	1^sttrial ruled in favor of the Bank; 2^ndtrial in progress

(9)	Other provision

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

S-87

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

23. Other Liabilities

(1)	Other liabilities as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020			December 31, 2019
Accounts payable	W	6,270,568			2,524,985
Lease liabilities		45,094			43,362
Accrued expense		1,800,193			2,003,532
Advance received		—			42
Unearned income		50,853			48,484
Deposits withholding tax		25,022			24,414
Guarantee money received		368,882			557,385
Foreign exchanges payable		20,667			80,621
Domestic exchanges payable		688,928			363,546
Borrowing from trust accounts		1,097,585			1,535,048
Financial guarantee liability		26,711			31,426
Others		90,578			72,262

		10,485,081			7,285,107
Present value discount		(1,828	)		(2,484	)

	W	10,483,253			7,282,623

The carrying amount of financial liabilities included in other liabilities above amounted toW10,278,353 million andW7,089,686 million as of June 30, 2020 and December 31, 2019, respectively, and their fair value amounted toW10,273,684 million andW7,085,427 million as of June 30, 2020 and December 31, 2019, respectively.

(2)	Details of lease liabilities as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Face value		Discount			Carrying amounts
Real estate	W	41,840		(1,330	)		40,510
Vehicles		3,242		(244	)		2,998
Others		12		(1	)		11

	W	45,094		(1,575	)		43,519


	December 31, 2019
	Face value		Discount			Carrying amounts
Real estate	W	40,381		(2,169	)		38,212
Vehicles		2,964		(56	)		2,908
Others		17		(1	)		16

	W	43,362		(2,226	)		41,136

S-88

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

23. Other Liabilities, Continued

(3)	The amount related to lease recognized in the separate statement of comprehensive income for the six-month periods ended June 30, 2020 and 2019 is as follows:


	June 30, 2020				June 30, 2019
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Depreciation of right-of-use assets
Real estate	W	6,293		13,983		7,449		17,401
Vehicles		265		819		326		676
Others		3		6		35		70

		6,561		14,808		7,810		18,147

Interest expenses on the lease liabilities		217		477		708		1,304
Expense relating to short-term leases		—		66		22		90
Expense relating to leases of low-value assets		79		150		74		137

	W	6,857		15,501		8,614		19,678

(4) Cash flows used in lease liabilities for the six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020		December 31, 2019
Decrease in lease liabilities	W	12,308		15,125
Lease payments relating to short-term leases		66		90
Lease payments relating to leases of low-value assets		150		137

	W	12,524		15,352

(5)	Maturity analysis of undiscounted lease payments relating to lease liabilities as of June 30, 2020 and December 31, 2019 is as follows:

2020

Within 3
months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

6,019

14,784

24,291

—

45,094

2019

Within 3
months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

5,529

13,538

24,295

—

43,362

24. Equity

(1) Issued capital

The Bank is authorized to issue up to 6,000 million shares of common stock and has 3,822,719,768 shares issued and 3,732,619,768 shares issued as of June 30, 2020 and December 31, 2019, respectively, and outstanding with a total par value ofW19,113,599 million andW18,663,099 million as of June 30, 2020 and December 31, 2019, respectively. The issued shares of common stock and issued capital increased due to paid-in capital increase for the six-month period ended June 30, 2020.

S-89

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

24. Equity, Continued

(2) Capital surplus

Capital surplus as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Paid-in capital in excess of par value	W	57,470		59,636
Surplus from capital reduction (*1)		44,373		44,373
Other capital surplus (*2)		2,390,495		2,390,495

	W	2,492,338		2,494,504

(*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.

(*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.

S-90

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

24. Equity, Continued

(3) Accumulated other comprehensive income

(i)	Accumulated other comprehensive income as of June 30, 2020 and December 31, 2019 are as follows:


	December 31, 2020			December 31, 2019
Net gain (loss) on securities measured at FVOCI
Valuation gain (loss) on securities measured at FVOCI (before tax)	W	(87,580	)		(210,918	)
Loss allowance for securities measured at FVOCI (before tax)		81,982			73,806
Income tax effect		1,540			37,706

		(4,058	)		(99,406	)

Exchange differences on translation of foreign operations:
Exchange differences on translation of foreign operations (before tax)		25,002			(7,158	)
Income tax effect		—			—

		25,002			(7,158	)

Valuation loss on cash flow hedge:
Valuation loss on cash flow hedge (before tax)		(79	)		(403	)
Income tax effect		22			111

		(57	)		(292	)

Net gain (loss) on hedges of net investments in foreign operations
Net gain (loss) on hedges of net investments in foreign operations (before tax)		(21,159	)		5,538
Income tax effect		5,819			(1,523	)

		(15,340	)		4,015

Remeasurements of defined benefit liabilities:
Remeasurements of defined benefit liabilities (before tax)		26,662			26,662
Income tax effect		(7,331	)		(7,331	)

		19,331			19,331

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)		(5,414	)		(6,320	)
Income tax effect		1,489			1,738

		(3,925	)		(4,582	)

	W	20,953			(88,092	)

S-91

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

24. Equity, Continued

(ii)	Changes in accumulated other comprehensive income for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	January 1, 2020			Increase (Decrease)			Tax Effect			June 30, 2020
Gain (loss) on Securities Measured at FVOCI	W	(99,406	)		131,514			(36,166	)		(4,058	)
Exchange differences on translation of foreign operations		(7,158	)		32,160			—			25,002
Valuation gain (loss) on cash flow hedge		(292	)		324			(89	)		(57	)
Valuation gain (loss) on hedges of net investments in foreign operations		4,015			(26,697	)		7,342			(15,340	)
Remeasurements of defined benefit liabilities		19,331			—			—			19,331
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		(4,582	)		906			(249	)		(3,925	)

	W	(88,092	)		138,207			(29,162	)		20,953


	2019
	January 1, 2019			Increase (Decrease)			Tax Effect			June 30, 2019
Gain (loss) on Securities Measured at FVOCI	W	(12,465	)		47,151			(12,967	)		21,719
Exchange differences on translation of foreign operations		(33,017	)		27,583			—			(5,434	)
Valuation gain (loss) on cash flow hedge		(1,870	)		1,454			(1,018	)		(1,434	)
Remeasurements of defined benefit liabilities		11,476			—			—			11,476
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		3,178			(9,693	)		2,666			(3,849	)

	W	(32,698	)		66,495			(11,319	)		22,478

(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 to paid-in capital or offset an accumulated deficit.

In accordance with the Korea 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, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Legal reserve	W	1,356,142		1,177,851
Voluntary reserve
Regulatory reserve for loan losses		1,146,038		1,227,700
Unappropriated retained earnings		2,423,543		2,327,769

	W	4,925,723		4,733,320

S-92

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

24. Equity, Continued

(ii)	Changes in legal reserve for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020		2019
Beginning balance	W	1,177,851		173,913
Transfer from retained earnings		178,291		1,003,938

Ending balance	W	1,356,142		1,177,851

(iii)

Changes in unappropriated retained earnings for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Beginning balance	W	2,327,769			2,866,706
Changes in accounting policy		—			65
Contribution to legal reserve		(178,291	)		(1,003,938	)
Transfer from regulatory reserve for credit losses		81,662			144,330
Dividends		(111,978	)		(144,865	)
Reclassification of gain or loss on equity securities measured at FVOCI		(64,962	)		(8,893	)
Profit for the period		369,343			529,080

Ending balance	W	2,423,543			2,382,485

(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, 2020 and December 31, 2019 are as follows:


	June 30, 2020			December 31, 2019
Beginning balance	W	1,146,038			1,227,700
Planned provision for (reversal of) reserve for credit losses		(35,030	)		(81,662	)

Ending balance	W	1,111,008			1,146,038

S-93

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

24. 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 and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020				June 30, 2019
	Three-month period ended		Six-month period ended		Three-month period ended			Six-month period ended
Profit for the period	W	770,078		369,343		328,475			529,080
Obligated amount of provision for (reverse of) regulatory reserve for credit losses		91,751		35,030		(45,863	)		(8,617	)

Profit after adjusting regulatory reserve for credit losses	W	861,829		404,373		282,612			520,463

Earnings per share after adjusting regulatory reserve for credit losses (in won)	W	226		107		76			141

25. Net Interest Income

Net interest income for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income:
Due from banks	W	20,566			39,070			26,991			51,446
Securities measured at FVTPL		5,647			15,246			15,088			31,317
Securities measured at FVOCI		103,114			194,100			92,962			180,868
Securities measured at amortized cost		3,623			9,590			10,590			20,706
Loans measured at FVTPL		10,789			14,803			4,562			7,173
Loans measured at amortized cost		1,026,821			2,080,301			1,152,083			2,289,723

		1,170,560			2,353,110			1,302,276			2,581,233
Interest expense:
Financial liabilities measured at FVTPL		(20,458	)		(43,103	)		(22,211	)		(44,302	)
Deposits		(144,234	)		(281,609	)		(155,920	)		(301,437	)
Borrowings		(81,612	)		(179,772	)		(118,377	)		(233,786	)
Debentures		(607,476	)		(1,267,363	)		(737,746	)		(1,484,308	)

		(853,780	)		(1,771,847	)		(1,034,254	)		(2,063,833	)

	W	316,780			581,263			268,022			517,400

Interest received from impaired assets relating to loans measured at amortized cost and loans for the six-month periods ended June 30, 2020 and 2019 wereW13,929 million andW17,357 million, respectively, and there was no interest received from impaired assets related to financial assets other than loans.

S-94

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

26. Net Fees and Commission Income

Net fees and commission income for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Fees and commission income:
Loan commissions	W	31,037			63,836			39,426			70,941
Underwriting and investment consulting commissions		22,767			46,297			27,933			41,622
Brokerage and agency commissions		2,056			3,539			754			2,365
Trust and retirement pension plan commissions		8,235			17,109			7,825			16,348
Fees on asset management		445			805			739			1,687
Other fees		20,433			47,339			22,445			38,948

		84,973			178,925			99,122			171,911
Fees and commission expenses:
Brokerage and agency fees		(2,362	)		(4,723	)		(2,944	)		(5,134	)
Other fees		(5,450	)		(11,356	)		(4,879	)		(10,715	)

		(7,812	)		(16,079	)		(7,823	)		(15,849	)

	W	77,161			162,846			91,299			156,062

27. Dividend Income

Dividend income for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020				June 30, 2019
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Securities measured at FVTPL	W	66,316		93,036		28,769		92,727
Securities measured at FVOCI		1,820		122,994		563		110,131
Investments in subsidiaries and associates		72,280		184,575		70,715		150,362

	W	140,416		400,605		100,047		353,220

S-95

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

28. Net Gain on Securities Measured at FVTPL

Net gain related to securities measured at FVTPL for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on securities measured at FVTPL:
Gains on sale	W	16,945			62,626			27,952			174,017
Gains on valuation		61,157			112,471			51,982			132,951

		78,102			175,097			79,934			306,968
Losses on securities measured at FVTPL:
Losses on sale		(9,414	)		(27,304	)		(3,830	)		(5,647	)
Losses on valuation		(24,593	)		(80,576	)		(2,734	)		(72,344	)
Purchase related expense		(5	)		(39	)		(40	)		(73	)

		(34,012	)		(107,919	)		(6,604	)		(78,064	)

	W	44,090			67,178			73,330			228,904

29. 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 and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	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	—			96			399			663
Gains on valuation		(9,326	)		4,459			(126	)		1,265

		(9,326	)		4,555			273			1,928
Losses on financial liabilities measured at FVTPL:
Losses on redemption		(3,506	)		(6,101	)		—			—
Losses on valuation		(15,967	)		(26,953	)		(25,564	)		(44,855	)

		(19,473)			(33,054	)		(25,564	)		(44,855	)

	W	(28,799	)		(28,499	)		(25,291	)		(42,927	)

S-96

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

30. Net Gain (Loss) on Securities Measured at FVOCI

Net gain (loss) related to securities measured at FVOCI for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on securities measured at FVTPL:
Gains on sale	W	36,918			67,134			20,163			35,494
Losses on securities measured at FVTPL:
Losses on sale		(1,211	)		(7,252	)		(658	)		(9,075	)
Impairment losses		(2,278	)		(7,869	)		3,215			(402	)

		(3,489	)		(15,121	)		2,557			(9,477	)

	W	33,429			52,013			22,720			26,017

31. Net Gain (Loss) on Derivatives

Net gain (loss) on derivatives for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on trading purpose derivatives:
Gains on trading purpose derivatives:
Interest	W	501,482			1,703,007			691,364			1,406,131
Currency		6,433			7,660,733			3,373,153			5,697,325
Stock		9,613			21,875			9,635			13,271
Gains on adjustment of derivatives		(25	)		1,461			157			1,280

		517,503			9,387,076			4,074,309			7,118,007
Losses on trading purpose derivatives:
Interest		(470,199	)		(1,772,695	)		(675,405	)		(1,332,632	)
Currency		(115,102	)		(7,397,381	)		(3,270,094	)		(5,515,261	)
Stock		(863	)		(15,929	)		(8,000	)		(140,723	)
Losses on adjustment of derivatives		22,339			(30,049	)		(6,958	)		(38,909	)

		(563,825	)		(9,216,054	)		(3,960,457	)		(7,027,525	)

		(46,322	)		171,022			113,852			90,482
Net gain (loss) on hedging purpose derivatives:
Gains on hedging purpose derivatives:
Interest		77,446			609,865			284,308			529,630
Currency		89,899			143,339			36,788			103,389
Gains on adjustment of derivatives		(61	)		36			(10	)		19

		167,284			753,240			321,086			633,038

S-97

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

31. Net Gain (Loss) on Derivatives, Continued


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Losses on hedging purpose derivatives:
Interest	W	(9,361	)		(54,285	)		(27,791	)		(35,755	)
Currency		105,723			(456,560	)		9,840			(46,981	)
Losses on adjustment of derivatives		(179	)		(394	)		(192	)		(377	)

		96,183			(511,239	)		(18,143	)		(83,113	)

		263,467			242,001			302,943			549,925
Net gain (loss) on fair value hedged items:
Gains on fair value hedged items:
Gains on valuation		(120,631	)		292,534			18,910			51,247
Gains on redemption		138,970			171,820			9,023			11,043

		18,339			464,354			27,933			62,290
Losses on fair value hedged items:
Losses on valuation		(75,028	)		(907,902	)		(455,677	)		(865,118	)
Losses on redemption		(43,422	)		(48,496	)		(16,255	)		(20,831	)

		(118,450	)		(956,398	)		(471,932	)		(885,949	)

		(100,111	)		(492,044	)		(443,999	)		(823,659	)

	W	117,034			(79,021	)		(27,204	)		(183,252	)

Related with cash flow hedge, the Bank recognizedW60 million of loss andW1 million of gain in the statement of comprehensive income as the ineffective portion for the period ended June 30, 2020 and 2019, respectively.

32. Net Gain on Foreign Currency Transaction

Net gain on foreign currency transaction for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	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	180,378			346,058			140,676			237,541
Losses on foreign exchange transactions		(180,514	)		(346,384	)		(139,999	)		(242,173	)

		(136	)		(326	)		677			(4,632	)
Net gain on foreign exchange translations:
Gains on foreign exchange translations		(16,068	)		4,086,100			1,631,568			2,161,386
Losses on foreign exchange translations		37,269			(3,871,553	)		(1,587,926	)		(2,053,609	)

		21,201			214,547			43,642			107,777

	W	21,065			214,221			44,319			103,145

S-98

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

33. Other Operating Expense, net

Other operating income and expense for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	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	7,422			7,959			61,513			61,513
Gains on disposal of loans measured at FVTPL		1,171			2,678			13,435			17,373
Gains on valuation of loans measured at FVTPL		43,623			62,057			16,534			35,363
Gains on disposal of investments in subsidiaries and associates		10,963			10,963			3,308			3,324
Reversal of provisions		33			353			—			—
Others		5,833			9,129			3,028			4,533

		69,045			93,139			97,818			122,106
Other operating expenses:
Losses on sale of loans		(46,718	)		(49,742	)		(88,595	)		(88,595	)
Losses on disposal of loans measured at FVTPL		(13,948	)		(17,188	)		(5,584	)		(5,931	)
Losses on valuation of loans measured at FVTPL		(1,407	)		(6,719	)		(21,130	)		(36,418	)
Losses on disposal of investments in subsidiaries and associates		(339	)		(340	)		(13	)		(22	)
Increase of provisions		(31	)		(84	)		—			—
Insurance expenses		(15,929	)		(29,441	)		(11,755	)		(23,332	)
Credit guarantee fund salary		(42,807	)		(79,792	)		(38,920	)		(73,917	)
Educational taxes		(14,314	)		(21,680	)		(6,628	)		(14,274	)
Foreign security contributions		(2,972	)		(4,878	)		(4,936	)		(7,007	)
Others		(3,293	)		(7,584	)		(8,006	)		(11,715	)

		(141,758	)		(217,448	)		(185,567	)		(261,211	)

	W	(72,713	)		(124,309	)		(87,749	)		(139,105	)

S-99

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

34. Provision for Credit Losses

Provision for (reversal of) credit losses for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Provision for (reversal of) loss allowance for loan	W	139,199			338,691			17,891			(68,420	)
Provision for (reversal of) loss allowance for other assets		417			1,681			(1,924	)		(1,745	)
Provision for (reversal of) unused commitments		44,395			(8,568	)		48,685			1,422
Provision for (reversal of) financial guarantee		37,259			40,833			(52,124	)		(47,248	)
Provision for (reversal of) payment guarantees		(118,442	)		(167,940	)		(42,618	)		82,910

	W	102,828			204,697			(30,090	)		(33,081	)

35. General and Administrative Expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020				June 30, 2019
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Payroll costs:
Short-term employee benefits	W	80,253		170,344		81,240		170,615
Defined benefit costs		9,616		19,238		10,251		20,509
Defined contribution costs		836		2,648		424		1,141

		90,705		192,230		91,915		192,265
Depreciation and amortization:
Depreciation of property and equipment		16,403		33,971		16,516		35,048
Amortization of intangible assets		13,514		27,212		3,582		7,234

		29,917		61,183		20,098		42,282
Other:
Employee welfare benefits		8,291		16,125		8,711		16,336
Rent expenses		1,624		3,449		96		227
Taxes and dues		4,446		13,118		4,864		10,833
Advertising expenses		3,080		4,933		3,034		5,681
Electronic data processing expenses		19,322		32,477		11,554		23,477
Fees and charges		9,142		15,625		6,922		12,226
Others		5,531		13,561		9,163		16,862

		51,436		99,288		44,344		85,642

	W	172,058		352,701		156,357		320,189

S-100

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

36. Other Non-Operating Income and Expense

Other non-operating income and expense for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other non-operating income:
Reversal of impairment loss on assets held for sale	W	808,796			808,796			282,323			282,323
Gain on disposal of property and equipment		537			604			858			973
Rental income on investment property		156			362			221			395
Others		170			1,574			234			1,476

		809,659			811,336			283,636			285,167

Other non-operating expenses:
Impairment loss on assets held for sale		—			(855,571	)		—			—
Depreciation of investment property		(43	)		(604	)		(34	)		(512	)
Donations		(166	)		(678	)		(302	)		(468	)
Others		(896	)		(3,724	)		(1,317	)		(2,941	)

		(1,105	)		(860,577	)		(1,653	)		(3,921	)

	W	808,554			(49,241	)		281,983			281,246

37. Income Tax Expense (Benefit)

(1)	Income tax expense (benefit) for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020					June 30, 2019
	Three-month period ended		Six-month period ended			Three-month period ended			Six-month period ended
Current income tax(*)	W	(102,571)		135,808			(34,117	)		92,390
Changes in deferred income taxes on temporary differences		483,781		(26,837	)		194,316			(84,551	)
Deferred income tax recognized directly to equity
Other comprehensive income		(147,448)		(29,162	)		8,610			(11,319	)
Retained earnings		22,903		24,641			1,796			3,348

Income tax expense (benefit)	W	256,665		104,450			170,605			(132	)

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

S-101

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

37. Income Tax Expense (Benefit), Continued

(2)	Profit before income taxes and income tax expense (benefit) for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Profit before income taxes	W	473,793			528,948
Income taxes calculated using enacted tax rates		130,293			145,461
Adjustments:
Non-deductible losses and tax-free gains		(15,159	)		(14,166	)
Non-recognition effect of deferred income taxes and others		(16,101	)		(132,875	)
Net adjustments for prior years		1,100			(8,757	)
Others		4,317			10,205

		(25,843	)		(145,593	)

Income tax expense (benefit)	W	104,450			(132	)

Effective tax rate (%)		22.05			—

(3)	Changes in deferred income taxes recognized directly to equity for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	June 30, 2020						January 1, 2020
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain (loss) on securities measured at FVOCI		(4,058	)		1,540			(99,406	)		37,706			(36,166	)
Exchange differences on translation of foreign operations		25,002			—			(7,158	)		—			—
Losses on valuation of cash flow hedge		(57	)		22			(292	)		111			(89	)
Net gain (loss) on hedges of net investments in foreign operations		(15,340	)		5,819			4,015			(1,523	)		7,342
Remeasurements of defined benefit liabilities		19,331			(7,331	)		19,331			(7,331	)		—
Fair value changes on financial liabilities designated at fair value due to credit risk		(3,925	)		1,489			(4,582	)		1,738			(249	)

	W	20,953			1,539			(88,092	)		30,701			(29,162	)

S-102

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

37. Income Tax Expense (Benefit), Continued

W24,641 million of income tax benefits which is directly recognized in retained earnings consist of tax effects fromW89,603 million of realized loss on disposal of equity securities measured at FVOCI.


	2019
	June 30, 2019						January 1, 2019
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain (loss) on securities measured at FVOCI		21,719			(8,239	)		(12,465	)		4,728			(12,967	)
Exchange differences on translation of foreign operations		(5,434	)		—			(33,017	)		—			—
Losses on valuation of cash flow hedge		(1,434	)		(309	)		(1,870	)		709			(1,018	)
Remeasurements of defined benefit liabilities		11,476			(4,352	)		11,476			(4,352	)		—
Fair value changes on financial liabilities designated at fair value due to credit risk		(3,849	)		1,460			3,178			(1,206	)		2,666

	W	22,478			(11,440	)		(32,698	)		(121	)		(11,319	)

W3,348 million of income tax benefits which is directly recognized in retained earnings consist of tax effects fromW12,267 million of realized loss on disposal of equity securities measured at FVOCI andW89 million of increase in retained earnings due to the initial application of K-IFRS 1116 ‘Leases’.

38. Earnings per Share

(1) Basic earnings per share

The Bank’s basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 are computed as follows:

(i) Basic earnings per share


	June 30, 2020				June 30, 2019
	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	770,077,848,944		369,342,875,100		328,474,442,666		529,079,909,649
Weighted-average number of ordinary shares outstanding (B)		3,820,739,548		3,776,679,658		3,721,619,768		3,679,630,818

Basic earnings per share (A/B) (in won)	W	202		98		88		144

S-103

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

38. Earnings per Share, Continued

(ii) Weighted-average number of ordinary shares outstanding


	2020
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		3,732,619,768		91		339,668,398,888
Increased paid-in capital (B)		90,100,000		89		8,018,900,000
Cumulative shares (C = A+B)						347,687,298,888

Weighted-average number of ordinary shares outstanding (C/91)						3,820,739,548

Six-month period ended:
Number of ordinary shares outstanding (A)		3,732,619,768		182		679,336,797,776
Increased paid-in capital (B)		90,100,000		89		8,018,900,000

Cumulative shares (C = A+B)						687,355,697,776

Weighted-average number of ordinary shares outstanding (C/182)						3,776,679,658


	2019
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		3,721,619,768		91		338,667,398,888

Weighted-average number of ordinary shares outstanding (A/91)						3,721,619,768

Six-month period ended:
Number of ordinary shares outstanding (A)		3,621,619,768		181		655,513,178,008
Increased paid-in capital (B)		100,000,000		105		10,500,000,000

Cumulative shares (C = A+B)						666,013,178,008

Weighted-average number of ordinary shares outstanding (C/181)						3,679,630,818

(2) Diluted earnings per share

Diluted and basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 are equal because there is no potential dilutive instrument.

S-104

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

39. Pledged Assets

Assets pledged by the Bank as collateral as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020				December 31, 2019
	Pledged assets		Related liabilities		Pledged assets		Related liabilities
Securities measured at FVOCI(*)	W	5,786,420		2,311,329		4,886,371		2,070,284
Securities measured at amortized cost(*)		289,435		284,301		1,108,791		224,356

	W	6,075,855		2,595,630		5,995,162		2,294,640

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

40. Guarantees and Commitments

Guarantees and commitments as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Confirmed acceptances and guarantees:
Acceptances in foreign currency	W	409,256		325,218
Guarantees for bond issuance		2,518,245		2,427,525
Guarantees for loans		400,227		355,619
Letter of guarantee		38,032		51,461
Guarantees for on-lending debt		12,227		11,908
Others		4,126,289		4,456,862

		7,504,276		7,628,593

Unconfirmed acceptances and guarantees:
Letter of credit		1,463,193		1,662,658
Others		2,072,706		1,707,426

		3,535,899		3,370,084

Commitments:
Commitments on loans		31,422,361		30,936,286
Others		2,102,004		2,100,258

		33,524,365		33,036,544

Bills endorsed:
With recourse		562		515

	W	44,565,102		44,035,736

S-105

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

41. Trust Accounts

(1)	Trust accounts as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Accrued trust fee	W	13,306		7,037
Deposits		1		665
Borrowings from trust accounts		842,918		1,498,878
Accrued expense		1,091		1,612

(2)	Transactions with trust accounts for the three-month and six-month periods ended June 30, 2020 and 2019 are as follows:


	June 30, 2020						June 30, 2019
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Trust management fee	W	7,648			15,714			7,292			15,012
Interest expenses on deposits		(1	)		(3	)		(52	)		(112	)
Interest expenses of borrowings from trust accounts		(1,475	)		(5,314	)		(6,654	)		(11,914	)

(3)	The carrying amounts of principals guaranteed trust and principals and interest guaranteed trust as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Principals guaranteed trust	W	256,170		257,268
Principals and interest guaranteed trust		238,701		238,097

	W	494,871		495,365

Principal of money and property trust	W	455,159		456,890
Accrued trust profit		39,712		38,475

S-106

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions

(1)	The Bank’s related parties as of June 30, 2020 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 7 others, KDB Investment PEF No. 1, KDB Value PEF VII, KDB Consus Value PEF, Components and Materials M&A PEF and 5 others, Principals guaranteed trust accounts of KDB, Principals and interests guaranteed interest trust accounts of KDB, UBest 4th Securitization Specialty Co., Ltd. and 6 others, KIAMCO Road Investment Private Fund Special Asset Trust 2 and 27 others
Associates		Korea Electric Power Co., Ltd., Korea Tourism Organization, Korea Appraisal Board, GM Korea Company, HMM Co., Ltd., Hanjin Heavy Industries & Construction Co., Ltd., Korea Ocean Business Corporation and 80 others, Troika Resources Investment PEF and 96 others, KIP Overseas Expansion Platform Fund and 107 others
Others		Key management personnel

S-107

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued

(2)	Significant balances with related parties as of June 30, 2020 and December 31, 2019 are as follows:


	Account	June 30, 2020			December 31, 2019
Subsidiaries:
KDB Capital Corporation	Loans	W	7,932			36,427
	Allowance for loan losses		(2	)		(5	)
	Derivative financial assets		3,213			1,008
	Other assets		7			8
	Deposits		79			82
	Derivative financial liabilities		3,846			2,516
	Other liabilities		545			528
KDB Infrastructure Investment Asset Management Co., Ltd.	Deposits		13,567			40,038
	Other liabilities		135			338
KDB Ireland Ltd.	Loans		351,395			326,968
	Allowance for loan losses		(45	)		(33	)
	Derivative financial assets		12,674			5,841
	Other assets		477			685
	Derivative financial liabilities		—			40
KDB Bank Europe Ltd.	Cash and due from banks		493,676			440,762
	Loans		88,534			96,813
	Allowance for loan losses		(11	)		(12	)
	Derivative financial assets		739			731
	Other assets		1,016			404
Banco KDB Do Brazil S.A.	Cash and due from banks		24,014			75,257
	Loans		120,070			115,780
	Allowance for loan losses		(38	)		(24	)
	Other assets		1,724			2,074
	Allowance of other assets		(1	)		—
KDB Asia Ltd.	Cash and due from banks		780,455			567,322
	Loans		60,035			312,606
	Allowance for loan losses		(8	)		(24	)
	Derivative financial assets		1,558			849
	Other assets		1,053			1,888
	Deposits		2			2
	Derivative financial liabilities		1,083			144

S-108

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2020			December 31, 2019
KDB Investment PEF No.1	Loans	W	736,021			749,207
	Allowance for loan losses		(1,293	)		(1,226	)
	Derivative financial assets		1,683			—
	Other assets		9,514			9,001
	Allowance of other assets		(14	)		(13	)
	Deposits		41,546			45,870
	Derivative financial liabilities		6,944			4,810
	Other liabilities		646			105
	Other provisions		326			362
KDB Consus Value PEF	Securities		40,846			40,431
	Derivative financial assets		6,969			1,477
	Other assets		345			345
	Deposits		115			66
	Derivative financial liabilities		359			2,459
	Other liabilities		759			1,057
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Loans		1,419,540			1,422,406
	Allowance for loan losses		(561,078	)		(475,992	)
	Derivative financial assets		179,803			105,017
	Other assets		3,513			4,200
	Deposits		515,092			627,963
	Derivative financial liabilities		7,817			5,814
	Other liabilities		6,225			65,790
	Other provisions		717,144			827,258
Others	Loans		997,605			1,157,368
	Allowance for loan losses		(271,467	)		(347,970	)
	Derivative financial assets		11,767			8,369
	Other assets		22,354			18,307
	Allowance of other assets		(4,840	)		(4,907	)
	Deposits		136,219			90,729
	Borrowings		42,937			64,767
	Derivative financial liabilities		198			3,960
	Other liabilities		21,896			866
	Other provisions		184,203			177,474

S-109

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2020			December 31, 2019
Associates:
Korea Electric Power Co., Ltd.	Securities	W	1,206			26,263
	Loans		112,006			138,845
	Allowances for loan losses		(867	)		(844	)
	Derivative financial assets		2,367			10,719
	Other assets		15,742			11,777
	Deposits		391,595			82,202
	Borrowings		23,387			63,680
	Derivative financial liabilities		191,449			96,504
	Other liabilities		4,729			1,773
	Other provisions		13			3
KG Dongbu Steel Co., Ltd.	Loans		689,527			625,249
	Allowances for loan losses		(23,442	)		(117,356	)
	Other assets		368			369
	Deposits		69,829			—
	Other liabilities		253			415
	Other provisions		5,184			34,592
HMM Co., Ltd.	Securities		1,244,029			694,832
	Loans		542,489			513,801
	Allowances for loan losses		(94,236	)		(97,777	)
	Other assets		9,795			5,308
	Deposits		315,065			371,965
	Other liabilities		2,318			1,965
	Other provisions		7,369			—
Hanjin Heavy Industries & Construction Co., Ltd.	Loans		220,660			217,764
	Allowances for loan losses		(8	)		—
	Other assets		528			522
	Deposits		17,740			88,240
	Other liabilities		1,873			1,802
	Other provisions		121,192			119,882
Korea Ocean Business Corporation	Loans		17,882			18,031
	Other assets		25			45
Others	Securities		—			5,665
	Loans		1,043,986			1,006,600
	Allowances for loan losses		(736,080	)		(734,729	)
	Other assets		163,648			161,575
	Deposits		683,097			632,700
	Other liabilities		2,252			2,183
	Other provisions		75,568			105,880

S-110

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued

(3)	Significant profit or loss with related parties for the six-month periods ended June 30, 2020 and 2019 are as follows:


	Account	2020			2019
Subsidiaries:
KDB Capital Corporation	Interest income	W	71			108
	Dividend income		42,866			45,351
	Reversal of allowance for loan losses		3			—
	Fees and commission income, other income		3,895			4,814
	Interest expenses		(4	)		—
	Provision for loan losses		—			(25	)
	Other operating expenses		(2,554	)		(3,094	)
KDB Infrastructure Investments Asset Management Co., Ltd.	Dividend income		12,287			20,872
	Interest expenses		(236	)		(188	)
KDB Ireland Ltd.	Interest income		2,596			4,263
	Reversal of allowance for loan losses		—			3
	Fees and commission income, other income		9,054			7,455
	Interest expenses		(3	)		—
	Provision for loan losses		(6	)		—
	Other operating expenses		(1,743	)		(1,866	)
KDB Bank Europe Ltd.	Interest income		3,458			4,301
	Reversal of allowance for loan losses		2			—
	Fees and commission income, other income		136			998
	Other operating expenses		(135	)		(424	)
Banco KDB Do Brazil S.A.	Interest income		1,954			2,883
	Reversal of allowance for loan losses		—			6
	Provision for loan losses		(3	)		—
KDB Asia Ltd.	Interest income		8,140			5,338
	Reversal of allowance for loan losses		19			3
	Fees and commission income, other income		2,273			621
	Interest expenses		(26	)		—
	Other operating expenses		(1,376	)		(1,175	)
KDB Investment PEF No. 1	Interest income		15,746			23,835
	Fees and commission income, other income		3,252			1,058
	Interest expenses		(363	)		(51	)
	Other operating expenses		(6,714	)		(9,247	)

S-111

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued


	Account	2020			2019
KDB Consus Value PEF	Interest income	W	799			3,394
	Fees and commission income, other income		13,935			29,420
	Interest expenses		(6	)		—
	Other operating expenses		(298	)		(1,806	)
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Interest income		18,170			26,238
	Reversal of allowance for loan losses		—			161,736
	Fees and commission income, other income		411,520			539,791
	Interest expenses		(3,149	)		(3,678	)
	Provision for loan losses		(62,212	)		—
	Other operating expenses		(85,935	)		(535,002	)
Others	Interest income		16,646			19,566
	Dividend income		64,423			68,041
	Reversal of allowance for loan losses		44,692			271,538
	Fees and commission income, other income		118,211			189,324
	Interest expenses		(581	)		(241	)
	Provision for loan losses		(31,095	)		(141,859	)
	Other operating expenses		(88,673	)		(274,675	)
Associates:
Korea Electric Power Co., Ltd.	Interest income		2,586			2,096
	Fees and commission income, other income		18,767			5,724
	Interest expenses		(1,385	)		(158	)
	Provision for loan losses		(22	)		(149	)
	Other operating expenses		(133,154	)		(106,948	)
KG Dongbu Steel Co., Ltd.	Interest income		11,959			25,977
	Reversal of allowance for loan losses		93,914			—
	Fees and commission income, other income		37,739			15,834
	Interest expenses		(20	)		(54	)
	Provision for loan losses		—			(70,761	)
	Other operating expenses		(7,278	)		(12	)
HMM Co., Ltd.	Interest income		18,828			12,742
	Reversal of allowance for loan losses		3,541			1,056
	Fees and commission income, other income		53,975			171,528
	Interest expenses		(1,129	)		(2,503	)
	Other operating expenses		(8,786	)		—

S-112

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued


	Account	2020			2019
Hanjin Heavy Industries & Construction Co., Ltd.	Interest income	W	3,093			2,082
	Reversal of allowance for loan losses		—			62,713
	Fees and commission income, other income		4,408			5,871
	Interest expenses		(193	)		(312	)
	Provision for loan losses		(8	)		—
	Other operating expenses		(1,694	)		(135,933	)
Korea Ocean Business Corporation	Interest income		253			—
	Fees and commission income, other income		678			—
	Other operating expenses		(1	)		—
Others	Interest income		6,127			5,634
	Dividend income		78,637			87,235
	Reversal of allowance for loan losses		1,604			33,577
	Fees and commission income, other income		46,573			17,888
	Interest expenses		(2,423	)		(2,393	)
	Provision for loan losses		(5,339	)		—
	Other operating expenses		(11,778	)		(713	)

(4)	Details of guarantees and commitments to the related parties as of June 30, 2020 and December 31, 2019 are as follows:


	Account	June 30, 2020		December 31, 2019
Subsidiaries:
KDB Capital Corporation	Loan commitments	W	320,000		290,000
KDB Investment PEF No.1	Confirmed acceptances and guarantees		15,168		19,976
	Loan commitments		176,000		176,000
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Confirmed acceptances and guarantees		1,417,316		1,692,241
	Unconfirmed acceptances and guarantees		544,774		566,566
	Loan commitments		1,450,000		1,453,763
Others	Confirmed acceptances and guarantees		322,565		357,473
	Unconfirmed acceptances and guarantees		273,642		232,989
	Loan commitments		193,511		244,448

S-113

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2020		December 31, 2019
Associates:
KG Dongbu Steel Co., Ltd.	Confirmed acceptances and guarantees	W	—		37,111
	Unconfirmed acceptances and guarantees		11,259		11,285
	Loan commitments		126,250		117,765
HMM Co., Ltd.	Confirmed acceptances and guarantees		14,408		—
Hanjin Heavy Industries & Construction Co., Ltd.	Confirmed acceptances and guarantees		352,138		358,785
	Unconfirmed acceptances and guarantees		4,927		3,062
Others	Confirmed acceptances and guarantees		77,450		113,256
	Unconfirmed acceptances and guarantees		55,185		106,422
	Loan commitments		421,449		347,391

		W	5,776,042		6,128,533

(5)	Details of compensation to key management personnel for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020		2019
Short-term employee benefits	W	330		326
Post-employment benefits		—		40

	W	330		366

(6)	The Bank are not pledged any assets as collaterals to the related parties and from the related parties as of June 30, 2020 and December 31, 2019.

S-114

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

43. Statements of Cash Flows

(1)	Cash and cash equivalents in the separate statements of cash flows as of June 30, 2020 and 2019 are as follows:


	June 30, 2020		June 30, 2019
Cash and due from banks:
Cash and foreign currencies	W	59,917		62,163
Due from banks in Korean won		4,854,243		2,960,828
Due from banks in foreign currencies		7,531,806		3,190,972

		12,445,966		6,213,963

Less: Restricted due from banks, others		(6,123,060)		(3,802,998	)
Add: Financial instruments reaching maturity within three months from date of acquisition
Securities measured at FVTPL:
Government and public bonds		—		166,711
Loans measured at amortized cost:
Call-loans		1,234,328		1,964,126
Inter-bank loans		1,071,172		808,878

		2,305,500		2,773,004

		2,305,500		2,939,715

	W	8,628,406		5,350,680

(2)	Significant transactions not involving cash flows for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Decrease in loans due to write-offs	W	122,638			12,532
Increase in securities measured at FVOCI due to debt-to-equity swap		13,513			30,656
Increase in investments in subsidiaries and associates due to debt-to-equity swap		750			139,110
Decrease in accumulated other comprehensive income due to securities valuation		131,514			47,151
Deferred income tax effect due to securities valuation		(36,166	)		(12,967	)
Reclassification of investments in subsidiaries and associates to assets held for sale		—			1,661,319
Reclassification of investments in subsidiaries and associates to securities measured at FVTPL		—			4,100
Transfer from investment property to property and equipment		1,655			4,307
Recognition of right-of-use assets and lease liabilities		16,171			51,703
Reclassification of leasehold improvements and prepaid expenses to right-of-use assets		—			6,001

S-115

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

44. Transfers of Financial Instruments

Details of financial assets and liabilities related to repurchase agreements and loaned securities that do not qualify for derecognition as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020				December 31, 2019
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	3,302,223		2,311,329		3,273,273		2,070,284
Loaned securities		383,586		—		40,059		—

	W	3,685,809		2,311,329		3,313,332		2,070,284

45. 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, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,381,493		1,259,459		6,064,621		8,705,573
Securities measured at FVOCI		2,546,195		21,363,697		11,718,244		35,628,136
Loans measured at FVTPL		—		—		551,023		551,023
Derivative financial assets		—		6,713,971		19,361		6,733,332

	W	3,927,688		29,337,127		18,353,249		51,618,064

Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,881,846		—		1,881,846
Derivative financial liabilities		2		4,844,258		4,959		4,849,219

	W	2		6,726,104		4,959		6,731,065

S-116

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,409,326		1,608,875		4,804,158		7,822,359
Securities measured at FVOCI		1,219,680		12,164,468		10,865,012		24,249,160
Loans measured at FVTPL		—		—		604,380		604,380
Derivative financial assets		47		5,422,753		10,007		5,432,807

	W	2,629,053		19,196,096		16,283,557		38,108,706

Financial liabilities:
Financial liabilities designated at FVTPL	W	—		2,465,541		—		2,465,541
Derivative financial liabilities		342		4,171,251		75		4,171,668

	W	342		6,636,792		75		6,637,209

(ii)

Changes in the fair value of level 3 financial instruments for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets		Total			Derivative financial liabilities
January 1, 2020	W	4,804,158			10,865,012			604,380			10,007		16,283,557			75
Profit or loss		160,145			—			55,337			9,354		224,836			4,884
Other comprehensive income		—			82,366			—			—		82,366			—
Acquisition / Issue		1,303,693			829,765			13,000			—		2,146,458			—
Sale / Settlement		(202,197	)		(109,021	)		(121,694	)		—		(432,912	)		—
Transfer out(*)		—			71,697			—			—		71,697			—
Transfer in(*)		(1,178	)		(21,575	)		—			—		(22,753	)		—

June 30, 2020	W	6,064,621			11,718,244			551,023			19,361		18,353,249			4,959


	2019
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2019	W	5,037,128			10,191,950			778,884			139,377			16,147,339			66
Profit or loss		40,531			—			3,541			(377	)		43,695			23
Other comprehensive income		—			(60,842	)		—			—			(60,842	)		—
Acquisition / Issue		300,312			589,998			19,000			—			909,310			—
Sale / Settlement		(448,587	)		(113,870	)		(48,764	)		(128,063	)		(739,284	)		—
Transfer out(*)		—			(290,308	)		—			—			(290,308	)		—
Transfer in(*)		10,508			334,100			—			—			344,608			—

June 30, 2019	W	4,939,892			10,651,028			752,661			10,937			16,354,518			89

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

S-117

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(iii)

Changes in deferred day one profit or loss for the six-month periods ended June 30, 2020 and 2019 are as follows:


	2020			2019
Beginning balance	W	4,763			5,149
Amortization		(193	)		(189	)

Ending balance	W	4,570			4,960

(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, 2020 and December 31, 2019 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 and available-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, exchange rate,
Currency forwards and swaps	Black-Scholes model, Modified	volatility, commodity index,
Currency options	Black model, Formula model	etc.
Commodities options
Financial liabilities measured at FVTPL:
Debentures	Discounted cash flow method	Discount rate

S-118

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. 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, 2020 and December 31, 2019 are as follows:


		June 30, 2020
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	3.21 ~ 18.79
	method, Relative value	Rate of increase in	—
	approach, Net asset	liquidation value
	value approach	Rate of increase in	—
		property disposal price
		Volatility	21.71 ~ 50.35
Securities measured at FVOCI
Equity securities	Discounted cash flow	Discount rate	2.78 ~ 19.38
	method, Relative value	Growth rate	—
	approach, Net asset	Volatility	29.61 ~ 43.07
	value approach
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model	Volatility	26.13 ~ 43.07
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	39.02 ~ 46.94
		Correlation coefficient	0.89 ~ 0.94
Interest rate options	Modified Black model	Volatility	39.02 ~ 46.94
Stock index options	Black-Scholes model	Volatility	18.59 ~ 44.00
Stock options	Discounted cash flow,	Volatility	20.01 ~ 36.49
	etc.

S-119

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


		December 31, 2019
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	3.91 ~ 9.69
	method, Relative value	Rate of increase in	—
	approach, Net asset	liquidation value
	value approach	Rate of increase in	—
		property disposal price
		Volatility	16.02 ~ 34.72
Securities measured at FVOCI
Equity securities	Discounted cash flow	Discount rate	3.04 ~ 16.59
	method, Relative value	Growth rate	—
	approach, Net asset	Volatility	14.51 ~ 26.98
	value approach
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model	Volatility	12.70 ~ 36.32
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	20.41 ~ 34.21
		Correlation coefficient	0.89 ~ 0.97
Interest rate options	Modified Black model	Volatility	20.41 ~ 34.21
Stock index options	Black-Scholes model	Volatility	12.77 ~ 21.80
Equity options	Discounted cash flow	Volatility	14.51 ~ 21.85
	method and others

(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, 2020 and December 31, 2019 is as follows:


	June 30, 2020
	Profit(loss) for the period					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL(*1)	W	3,608		(5,011	)		—		—
Securities measured at FVOCI(*1)		—		—			3,279,158		(750,510	)
Loans measured at FVTPL(*2)		13,437		(5,800	)		—		—
Derivative financial assets(*2)		1,450		(613	)		—		—

	W	18,495		(11,424	)		3,279,158		(750,510	)

S-120

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2019
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL(*1)	W	11,703		(9,400	)		—		—
Securities measured at FVOCI(*1)		—		—			3,041,744		(425,615	)
Loans measured at FVTPL(*2)		6,521		(5,924	)		—		—
Derivative financial assets(*2)		1,259		(940	)		—		—

	W	19,483		(16,264	)		3,041,744		(425,615	)

(*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. The financial instruments, which are not included in sensitive analysis because it is practically impossible to calculate the sensitivity from changes in unobservable variables, are amounting toW14,897,655 million andW12,555,495 million as of June 30, 2020 and December 31, 2019, respectively.

(*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.

•

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.

•

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

•

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.

S-121

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

•

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. However, for borrowings including call money whose contractual maturity is three months or less, the Bank assumes the carrying amount as the fair value.

•

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.

(ii)	The fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks(*)	W	6,322,906		6,123,060		—		12,445,966
Securities measured at amortized cost		697,270		120,128		—		817,398
Loans measured at amortized cost(*)		—		1,234,327		157,570,748		158,805,075
Other financial assets(*)		—		7,074,551		1,043,941		8,118,492

	W	7,020,176		14,552,066		158,614,689		180,186,931

Financial liabilities:
Deposits(*)	W	—		2,691,958		47,540,638		50,232,596
Borrowings(*)		—		553,410		21,323,316		21,876,726
Debentures		—		141,384,142		—		141,384,142
Other financial liabilities(*)		—		6,488,500		3,785,184		10,273,684

	W	—		151,118,044		72,649,104		223,767,148

S-122

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks(*)	W	3,225,625		3,366,549		—		6,592,174
Securities measured at amortized cost		291,339		1,210,608		—		1,501,947
Loans measured at amortized cost(*)		—		1,423,090		139,681,137		141,104,227
Other financial assets(*)		—		4,042,106		761,705		4,803,811

	W	3,516,964		10,042,353		140,442,842		154,002,159

Financial liabilities:
Deposits(*)	W	—		2,455,470		32,210,470		34,665,940
Borrowings(*)		—		467,850		19,668,791		20,136,641
Debentures		—		122,450,628		—		122,450,628
Other financial liabilities(*)		—		2,781,527		4,303,900		7,085,427

	W	—		128,155,475		56,183,161		184,338,636

(*)	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.

(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, 2020 and December 31, 2019 are as follows:


	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

S-123

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

46. Categories of Financial Assets and Liabilities

Categories of financial assets and liabilities as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	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	6,322,906		—		—		—		—		6,123,060		—		12,445,966
Securities measured at FVTPL		—		8,705,573		—		—		—		—		—		8,705,573
Securities measured at FVOCI		—		—		—		23,723,283		11,904,853		—		—		35,628,136
Securities measured at amortized cost		—		—		—		—		—		817,398		—		817,398
Loans measured at FVTPL		—		551,023		—		—		—		—		—		551,023
Loans measured at amortized cost		2,305,500		—		—		—		—		155,372,919		—		157,678,419
Derivative financial assets		—		5,507,789		—		—		—		—		1,225,543		6,733,332
Other financial assets		—		—		—		—		—		8,045,088		—		8,045,088

	W	8,628,406		14,764,385		—		23,723,283		11,904,853		170,358,465		1,225,543		230,604,935

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,881,846		—		—		—		—		1,881,846
Deposits		—		—		—		—		—		50,192,518		—		50,192,518
Borrowings		—		—		—		—		—		21,883,545		—		21,883,545
Debentures		—		—		—		—		—		139,025,431		—		139,025,431
Derivative financial liabilities		—		4,485,409		—		—		—		—		363,810		4,849,219
Other financial liabilities		—		—		—		—		—		10,278,353		—		10,278,353

	W	—		4,485,409		1,881,846		—		—		221,379,847		363,810		228,110,912
										��

S-124

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

46. Categories of Financial Assets and Liabilities, Continued


	December 31, 2019
	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	3,225,625		—		—		—		—		3,366,549		—		6,592,174
Securities measured at FVTPL		—		7,822,359		—		—		—		—		—		7,822,359
Securities measured at FVOCI		—		—		—		13,129,373		11,119,787		—		—		24,249,160
Securities measured at amortized cost		—		—		—		—		—		1,501,947		—		1,501,947
Loans measured at FVTPL		—		604,380		—		—		—		—		—		604,380
Loans measured at amortized cost		2,027,200		—		—		—		—		137,844,442		—		139,871,642
Derivative financial assets		—		4,526,186		—		—		—		—		906,621		5,432,807
Other financial assets		—		—		—		—		—		4,735,372		—		4,735,372

	W	5,252,825		12,952,925		—		13,129,373		11,119,787		147,448,310		906,621		190,809,841

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		2,465,541		—		—		—		—		2,465,541
Deposits		—		—		—		—		—		34,663,952		—		34,663,952
Borrowings		—		—		—		—		—		20,170,513		—		20,170,513
Debentures		—		—		—		—		—		120,623,388		—		120,623,388
Derivative financial liabilities		—		3,983,552		—		—		—		—		188,116		4,171,668
Other financial liabilities		—		—		—		—		—		7,089,686		—		7,089,686

	W	—		3,983,552		2,465,541		—		—		182,547,539		188,116		189,184,748

S-125

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

47. Offsetting of Financial Assets and Liabilities

Details of financial instruments subject to offsetting, enforceable master netting agreements or similar agreements as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	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
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets(*)	W	6,733,332		—		6,733,332		4,428,375		171,369		2,133,588
Unsettled spot exchange receivables(*)		5,799,111		—		5,799,111		5,798,112		—		999
Unsettled domestic exchange receivables		2,857,477		1,582,036		1,275,441		—		—		1,275,441
Security pledged as collateral for repurchase agreements		3,302,223		—		3,302,223		2,311,329		—		990,894
Reverse repurchase agreements		2,300,000		—		2,300,000		2,300,000		—		—
Loaned securities		383,586		—		383,586		383,586		—		—
Receivables from securities transaction		212,233		—		212,233		212,233		—		—

	W	21,587,962		1,582,036		20,005,926		15,433,635		171,369		4,400,922

S-126

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

47. Offsetting of Financial Assets and Liabilities, Continued


	June 30, 2020
	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
	Gross amounts of recognized financial liabilities						Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities(*)	W	4,849,219		—		4,849,219		3,390,694		45,002		1,413,523
Unsettled spot exchange payables(*)		5,799,572		—		5,799,572		5,798,112		—		1,460
Unsettled domestic exchange payables		2,270,964		1,582,036		688,928		—		—		688,928
Repurchase agreements		2,311,329		—		2,311,329		2,311,329		—		—
Payables from securities transaction		344,064		—		344,064		344,064		—		—

	W	15,575,148		1,582,036		13,993,112		11,844,199		45,002		2,103,911


	December 31, 2019
			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
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets(*)	W	5,432,807		—		5,432,807		3,580,419		232,372		1,620,016
Unsettled spot exchange receivables(*)		2,418,623		—		2,418,623		2,417,633		—		990
Unsettled domestic exchange receivables		2,971,680		1,348,198		1,623,482		—		—		1,623,482
Security pledged as collateral for repurchase agreements		3,273,273		—		3,273,273		2,070,284		—		1,202,989
Reverse repurchase agreements		940,000		—		940,000		940,000		—		—
Loaned securities		40,059		—		40,059		40,059		—		—
Receivables from securities transaction		19,520		—		19,520		19,520		—		—

	W	15,095,962		1,348,198		13,747,764		9,067,915		232,372		4,447,477

S-127

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

47. Offsetting of Financial Assets and Liabilities, Continued


	December 31, 2019
	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
	Gross amounts of recognized financial liabilities						Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities(*)	W	4,171,668		—		4,171,668		3,158,950		48,392		964,326
Unsettled spot exchange payables(*)		2,417,981		—		2,417,981		2,417,633		—		348
Unsettled domestic exchange payables		1,711,744		1,348,198		363,546		—		—		363,546
Repurchase agreements		2,070,284		—		2,070,284		2,070,284		—		—
Payables from securities transaction		31,023		—		31,023		31,023		—		—

	W	10,402,700		1,348,198		9,054,502		7,677,890		48,392		1,328,220

(*)	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.

48. 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 the six-month periods ended June 30, 2020 are as follows:


	2020
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income (loss) from external customers	W	235,168			810,711			11,597		(368,577	)		688,899
Operating income (loss) from intersegment sales		(86,638	)		(361,048	)		—		447,686			—

	W	148,530			449,663			11,597		79,109			688,899

S-128

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

48. Operating Segments, Continued

(3)	Details of segment results for the Bank’s reportable segments for the six-month periods ended June 30, 2020 are as follows:


	2020
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	592,853			(15,920	)		(332	)		4,662			581,263
Non-interest income
Income related to securities(*1)		26,497			99,321			—			(6,627	)		119,191
Other non-interest income		264,352			197,674			17,901			81,307			561,234

		290,849			296,995			17,901			74,680			680,425
Provision for loan losses and others(*2)		(436,563	)		216,708			—			(233	)		(220,088	)
General and administrative expenses		(298,609	)		(48,120	)		(5,972	)		—			(352,701	)

Operating income	W	148,530			449,663			11,597			79,109			688,899

(*1)	Income related to securities is composed of net gain (loss) on securities measured at FVTPL, securities measured at FVOCI and securities measured at amortized cost.

(*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.

(4)	Geographical revenue information about the Bank’s operating segments for the six-month periods ended June 30, 2020 and 2019 and the geographical non-current asset information as of June 30, 2020 and December 31, 2019 are as follows:


	*Revenues (1)**				*Non-current assets (2)**
	2020		2019		June 30, 2020		December 31, 2019
Domestic	W	17,317,451		13,278,444		25,081,893		25,292,696
Overseas		855,124		748,617		29,200		27,595

	W	18,172,574		14,027,061		25,111,093		25,320,291

(*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.

S-129

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. 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.

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 five 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

S-130

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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 period ended June 30, 2020, the key activities of the Risk Management Committee are as follows:

•

Major decision

•

Risk management plan for 2020

•

Setting and managing exposure limits by country for 2020

•

Contingency funding plan for 2020

•

Major reporting

•

Result of integrated crisis analysis for the second half of 2019

•

Result of assessment of suitability for internal capital for 2019

•

Result of integrated crisis analysis against COVID-19

•

Setting major limit of credit portfolios

•

Allocation of internal capital limits

•

Result of BCP training against COVID-19

•

Resolution of Credit 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

S-131

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

•

Rebuilding the Corporate Credit Rating System (approved by Financial Supervisory Services on October 26, 2017)

•

Establishment of the system to calculate Basel Interest Rate Risk in the Banking Book coming to domestic in September 2018

•

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, run of IFRS 9 accounting system in January 2018

(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	Oct. 2017	Rebuilding the Corporate Credit Rating System
Market Risk Management System	Risk Watch	Jun. 2002 Feb. 2019	Summarize position, manage exposure limits and calculate Market VaR
	RS Model	Sep. 2012	Calculate regulatory capital by Standardized Approach
	Murex M/O	Apr. 2013	Supplement of RiskWatch to calculate VaR
Interest/Liquidity Risk Management System	In-house	May. 2019	Calculation of interest risk, liquidity risk, etc.

Operational Risk Management System	Standardized Approach	May. 2006	Manage process and calculate CSA, KRI and OP VaR, etc.
Operational Risk Management System	AMA	May. 2009
BIS Capital Ratio Calculation/Credit Risk Measurement System	Fermat RaY	Sep. 2006 Dec. 2013	Calculate equity, credit risk-weighted assets and credit risk, etc.

Loan Loss Allowance Calculation System	IFRS IFRS 9	Jan. 2011 Mar. 2017	Incurred loss model Expected loss model

(*)	Systems not used as of June 30, 2020 are excluded.

S-132

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

(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.

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 2013 year-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.

The Bank completed revised standards such as capital requirements for banks’ investments in funds in 2017, capital requirements for securitization in 2018, and the Standardised Approach for measuring counterparty credit risk (SA-CCR) in 2019.

To comply with the amended regulation relating to risk-weighted assets under Basel III, the Bank is receiving the consultation and establishing the relevant systems.

(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 three stages of ‘normal- 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.

S-133

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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.

•

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 and non- 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.

S-134

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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.

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.

A borrower that is likely to be insolvent is classified as an early warning borrower or a precautionary borrower, depending on the level of insolvency risk. 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.

S-135

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Details of loans by credit rating as of June 30, 2020 and December 31, 2019 are as follows:


< Corporate >

	June 30, 2020
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	120,498,569		117,761,301		2,737,268		—
BBB2 ~ CCC		37,186,507		21,845,309		15,259,949		81,249
Below CC		2,967,294		—		66,799		2,900,495

	W	160,652,370		139,606,610		18,064,016		2,981,744


	December 31, 2019
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	110,616,343		108,584,384		2,027,955		4,004
BBB2 ~ CCC		29,080,587		17,954,042		11,022,602		103,943
Below CC		2,968,215		—		81,603		2,886,612

	W	142,665,145		126,538,426		13,132,160		2,994,559

< Retail >

	June 30, 2020
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1 ~ Grade 6	W	253,806		239,494		13,943		369
Grade 7 ~ Grade 8		2,759		—		2,661		98
Grade 9 ~ Grade 10		670		—		—		670

	W	257,235		239,494		16,604		1,137


	December 31, 2019
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1 ~ Grade 6	W	314,643		297,795		16,848		—
Grade 7 ~ Grade 8		4,952		—		4,680		272
Grade 9 ~ Grade 10		1,316		—		—		1,316

	W	320,911		297,795		21,528		1,588

S-136

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Details of payment guarantees (including financial guarantees) and unused commitments by credit rating as of June 30, 2020 and December 31, 2019 are as follows:


< Corporate >

	June 30, 2020
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	26,588,060		26,375,933		212,127		—
BBB2 ~ CCC		4,870,974		2,472,030		2,398,944		—
Below CC		—		—		—		—

	W	31,459,034		28,847,963		2,611,071		—

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	5,433,924		5,210,130		223,794		—
BBB2 ~ CCC		4,835,164		2,712,834		2,110,478		11,852
Below CC		771,649		—		350		771,299

	W	11,040,737		7,922,964		2,334,622		783,151


	December 31, 2019
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	26,612,525		26,400,729		211,796		—
BBB2 ~ CCC		4,349,843		1,891,393		2,458,450		—
Below CC		985		—		—		985

	W	30,963,353		28,292,122		2,670,246		985

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	5,742,384		5,706,379		36,005		—
BBB2 ~ CCC		4,339,343		1,993,030		2,340,173		6,140
Below CC		917,465		—		—		917,465

	W	10,999,192		7,699,409		2,376,178		923,605

S-137

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued


< Retail >

	June 30, 2020
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1 ~ Grade 6	W	44,676		44,615		61		—
Grade 7 ~ Grade 8		60		—		60		—
Grade 9 ~ Grade 10		—		—		—		—

	W	44,736		44,615		121		—


	December 31, 2019
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1 ~ Grade 6	W	52,585		52,252		333		—
Grade 7 ~ Grade 8		11		—		11		—
Grade 9 ~ Grade 10		—		—		—		—

	W	52,596		52,252		344		—

(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
AAA ~ AA-	20.00%	0.00%	20.00%
A+ ~ A-	50.00%	20.00%	50.00%
BBB+ ~ BBB-	100.00%	50.00%	100.00%
BB+ ~ BB-	100.00%	100.00%	100.00%
B+ ~ B-	150.00%	100.00%	100.00%
Below B-	150.00%	150.00%	150.00%
Unrated	100.00%	100.00%	100.00%

The OECD is designated as foreign ECAI and Korea Investrors Service Co., Ltd., NICE Investors Services Co., Ltd. and the Korea Ratings Co., Ltd. are designated as domestic ECAI.

S-138

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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 requirement pre-set by the FSS.

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 June 30, 2020.

The Standardized Approach is applied to country exposures, public institution exposures and bank exposures permanently and applied to overseas subsidiary and the Bank’s branch pursuant to prior consultation with the FSS.


<Approved measurement method>
Measurement method		Exposure
Standardized Approach	Permanent
	SA	—Countries, public institutions and banks
	SA	—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

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 the set-off effects of transactions under legally enforceable rights to set-off to calculate exposures.

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 14 grades (AAA~D). To distinguish the difference between credits in the same grade, the Bank uses 20 stages as auxiliaries to 14 grades.

S-139

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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.

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 (Credit Rating Officer) 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 Risk Validation Team of the Financial Planning 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 Bank re-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, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Securities measured at FVOCI	W	71,878		71,336
Loans measured at amortized cost		3,000,800		3,035,401
Other assets		182,676		174,418

S-140

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

(iv) Credit exposure

Geographical information of credit exposure as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	7,140,467		233,971		114,647		358,608		7,847,693
Securities measured at FVOCI:
Bonds (excluding government bonds)		10,103,825		910,882		664,839		1,584,872		13,264,418
Loans		146,294,371		1,527,415		1,391,824		10,811,456		160,025,066
Derivative financial assets		1,203,945		—		—		21,962		1,225,907
Other assets		8,100,482		67,697		13,540		103,817		8,285,536

		172,843,090		2,739,965		2,184,850		12,880,715		190,648,620
Guarantees		10,914,595		—		94,161		31,981		11,040,737
Commitments		32,396,172		242,330		121,566		764,297		33,524,365

		43,310,767		242,330		215,727		796,278		44,565,102

	W	216,153,857		2,982,295		2,400,577		13,676,993		235,213,722


	December 31, 2019
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	3,863,113		229,164		182,661		484,564		4,759,502
Securities measured at FVOCI:
Bonds (excluding government bonds)		6,984,720		823,813		651,947		1,634,971		10,095,451
Loans		130,256,488		1,371,473		1,099,845		9,025,911		141,753,717
Derivative financial assets		899,141		103		—		7,977		907,221
Other assets		4,826,675		64,086		18,819		77,013		4,986,593

		146,830,137		2,488,639		1,953,272		11,230,436		162,502,484

Guarantees		10,874,769		—		88,031		36,392		10,999,192
Commitments		31,235,187		251,884		186,714		1,362,759		33,036,544

		42,109,956		251,884		274,745		1,399,151		44,035,736

	W	188,940,093		2,740,523		2,228,017		12,629,587		206,538,220

S-141

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Industry information of credit exposure as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		7,426,171		421,522		7,847,693
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,656,647		7,587,169		3,020,602		13,264,418
Loans		72,417,291		76,859,165		10,748,610		160,025,066
Derivative financial assets		—		1,225,907		—		1,225,907
Other assets		133,113		222,046		7,930,377		8,285,536

		75,207,051		93,320,458		22,121,111		190,648,620
Guarantees		8,534,443		2,185,789		320,505		11,040,737
Commitments		17,437,366		10,618,243		5,468,756		33,524,365

		25,971,809		12,804,032		5,789,261		44,565,102

	W	101,178,860		106,124,490		27,910,372		235,213,722


	December 31, 2019
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		4,343,929		415,573		4,759,502
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,475,329		6,110,639		1,509,483		10,095,451
Loans		63,704,865		67,711,892		10,336,960		141,753,717
Derivative financial assets		—		907,221		—		907,221
Other assets		129,268		201,700		4,655,625		4,986,593

		66,309,462		79,275,381		16,917,641		162,502,484

Guarantees		8,310,671		2,147,739		540,782		10,999,192
Commitments		28,183,356		4,572,876		280,312		33,036,544

		36,494,027		6,720,615		821,094		44,035,736

	W	102,803,489		85,995,996		17,738,735		206,538,220

S-142

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

The detail of credit exposures by industry affected by the pandemic of COVID-19 as of June 30, 2020 is as follows and the exposures by industries could be changed according to economic fluctuations.


	June 30, 2020
			Securities measured at FVOCI
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees		Commit- ments		Subtotal		Total
Manufacturing:
Display	W	—		—		793,046		—		3,176		796,222		185,225		270,885		456,110		1,252,332
Semiconductor /Mobile phone		—		131,212		4,532,155		—		11,949		4,675,316		117,891		877,870		995,761		5,671,077
Automotive		—		194,145		10,451,663		—		14,335		10,660,143		263,516		1,441,572		1,705,088		12,365,231
Refinery/Chemical /Energy		—		723,890		11,996,200		—		24,321		12,744,411		288,091		4,790,834		5,078,925		17,823,336
Steel/Metal		—		212,717		10,953,863		—		17,910		11,184,490		764,790		1,963,989		2,728,779		13,913,269
Others		—		1,394,683		33,690,364		—		61,422		35,146,469		6,914,930		8,092,216		15,007,146		50,153,615

		—		2,656,647		72,417,291		—		133,113		75,207,051		8,534,443		17,437,366		25,971,809		101,178,860

Service:
Air transportation		—		3,350		3,108,513		—		7,911		3,119,774		326,090		171,400		497,490		3,617,264
Sea transportation		—		—		2,216,287		—		14,807		2,231,094		34,707		604,407		639,114		2,870,208
Other transportation		—		100,878		5,293,920		—		9,260		5,404,058		24,528		4,954,548		4,979,076		10,383,134
Leisure/Travel industry		—		—		185,401		—		514		185,915		—		13,258		13,258		199,173
Food/Accommodation		—		113,828		2,214,319		—		3,781		2,331,928		19,258		309,418		328,676		2,660,604
Automotive-related		—		—		546,429		—		960		547,389		11,428		52,381		63,809		611,198
Finance/Insurance		2,130		104,982		126,631		—		2,133		235,876		—		689,100		689,100		924,976
Others		7,424,041		7,264,131		63,167,665		1,225,907		182,680		79,264,424		1,769,778		3,823,731		5,593,509		84,857,933

		7,426,171		7,587,169		76,859,165		1,225,907		222,046		93,320,458		2,185,789		10,618,243		12,804,032		106,124,490

Other:
Construction		—		341,245		2,500,687		—		5,850		2,847,782		190,672		1,095,748		1,286,420		4,134,202
Others		421,522		2,679,357		8,247,923		—		7,924,527		19,273,329		129,833		4,373,008		4,502,841		23,776,170

		421,522		3,020,602		10,748,610		—		7,930,377		22,121,111		320,505		5,468,756		5,789,261		27,910,372

	W	7,847,693		13,264,418		160,025,066		1,225,907		8,285,536		190,648,620		11,040,737		33,524,365		44,565,102		235,213,722

S-143

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Credit exposures of debt securities by credit rating as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	24,428,570		24,328,452		100,118		—
BBB2 ~ CCC		112,111		102,063		10,048		—
Below CC		—		—		—		—

	W	24,540,681		24,430,515		110,166		—


	December 31, 2019
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	14,582,903		14,550,867		32,036		—
BBB2 ~ CCC		48,417		48,417		—		—
Below CC		—		—		—		—

	W	14,631,320		14,599,284		32,036		—

(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 and accumulated other comprehensive income as common equity Tier 1.

•

Additional Tier 1 capital

Capital stock and capital surplus related to issuance of capital securities that are subordinated, have non-cumulative and conditional dividends or interests, and have no maturity or step-up conditions.

S-144

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

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, 2020 and December 31, 2019 are as follows:

BIS capital adequacy ratio


	June 30, 2020			December 31, 2019
Equity capital based on BIS (A):
Tier 1 capital:
Common Equity Tier 1	W	31,305,455			30,215,602
Additional Tier 1 capital		—			—

		31,305,455			30,215,602
Tier 2 capital		4,378,209			4,785,803

	W	35,683,664			35,001,405

Risk-weighted assets (B):
Credit risk-weighted assets	W	271,684,747			242,573,920
Market risk-weighted assets		1,393,173			1,933,641
Operational risk-weighted assets		4,585,996			4,574,554

	W	277,663,916			249,082,115

BIS capital adequacy ratio (A/B):		12.85	%		14.05	%
Tier 1 capital ratio:		11.27	%		12.13	%
Common Equity Tier 1 ratio		11.27	%		12.13	%
Additional Tier 1 capital ratio		—			—
Tier 2 capital ratio		1.58	%		1.92	%

S-145

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Equity capital based on BIS


	June 30, 2020			December 31, 2019
Tier 1 capital (A):
Common Equity Tier 1
Capital stock	W	19,113,599			18,663,099
Capital surplus		1,032,316			979,359
Retained earnings, etc.		11,002,263			10,642,865
Accumulated other comprehensive income		386,437			310,138
Common stock deductibles		(229,160	)		(379,859	)

		31,305,455			30,215,602
Tier 2 capital (B):
Allowance for doubtful accounts, etc.		802,090			951,624
Qualified capital securities		3,060,000			3,060,000
Non-qualified capital securities		516,119			774,179

		4,378,209			4,785,803

Equity capital (A+B)	W	35,683,664			35,001,405

(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 and 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 from non-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 measured one-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.

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.

S-146

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Capital Requirements for Market risk

The Bank’s Capital Requirements for Market risk as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
Interest rate risk	W	49,110		69,317
Equity risk		11		848
Foreign exchange (FX) risk		21,964		14,184
Option risk		21,093		61,742

	W	92,178		146,091

(iii) Market risks of non-trading positions

Management method on market risks arising from non-trading positions

The most critical market risk that arises in non-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 and are periodically reported to the Risk Management Policy Committee and the head of Risk Management Segment. The Risk Management Committee’s target of interest rate VaR and interest rate EaR are approved at the beginning of the year. To disclose the Bank’s interest risk, interest rate VaR and interest rate EaR are disclosed calculating change in economic value of equity (“ LOGO EVE”) and in net interest income (“ LOGO NII”) based on the application of IRRBB (“Interest Rate Risk in Banking Book”) method.

LOGO EVE and LOGO NII of the Bank’s non-trading positions as of December 31, 2019 are as follows:


	June 30, 2020		December 31, 2019
EVE	W	670,793		1,154,413
NII		324,536		91,538

S-147

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

(iv) Foreign currency risk

Outstanding balances by currency with significant exposure as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	KRW		USD		EUR		JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	4,895,007		7,358,421		31,805		36,074			13,150			111,509			12,445,966
Securities measured at FVTPL		8,177,828		426,878		—		372			—			100,495			8,705,573
Securities measured at FVOCI		29,919,402		5,502,052		25		206,657			—			—			35,628,136
Securities measured at amortized cost		817,398		—		—		—			—			—			817,398
Loans measured at FVTPL		551,023		—		—		—			—			—			551,023
Loans measured at amortized cost		115,976,921		36,859,049		2,072,015		1,121,793			526,031			1,122,610			157,678,419
Derivative financial assets		4,271,538		2,247,667		86,078		490			88,257			39,302			6,733,332
Other financial assets		5,184,609		2,344,074		88,567		8,484			14,783			404,571			8,045,088

		169,793,726		54,738,141		2,278,490		1,373,870			642,221			1,778,487			230,604,935
Financial liabilities:
Financial liabilities measured at FVTPL		1,631,751		250,095		—		—			—			—			1,881,846
Deposits		40,462,989		9,357,451		56,000		314,287			54			1,737			50,192,518
Borrowings		6,077,518		14,622,463		204,152		768,182			206,836			4,394			21,883,545
Debentures		107,030,076		22,943,609		1,960,004		560,031			736,069			5,795,642			139,025,431
Derivative financial liabilities		3,270,535		1,481,414		9,951		8,930			45,597			32,792			4,849,219
Other financial liabilities		5,962,487		3,767,878		42,827		10,324			5,504			489,333			10,278,353

		164,435,356		52,422,910		2,272,934		1,661,754			994,060			6,323,898			228,110,912

Net financial position	W	5,358,370		2,315,231		5,556		(287,884	)		(351,839	)		(4,545,411	)		2,494,023


	December 31, 2019
	KRW		USD		EUR			JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	1,992,662		4,428,131		16,091			27,901			14,060			113,329			6,592,174
Securities measured at FVTPL		7,286,709		468,477		3,836			391			—			62,946			7,822,359
Securities measured at FVOCI		19,991,360		4,057,585		24			200,191			—			—			24,249,160
Securities measured at amortized cost		1,501,947		—		—			—			—			—			1,501,947
Loans measured at FVTPL		604,380		—		—			—			—			—			604,380
Loans measured at amortized cost		101,349,420		34,594,315		1,479,850			1,128,442			496,257			823,358			139,871,642
Derivative financial assets		4,522,100		807,276		62,777			558			26,090			14,006			5,432,807
Other financial assets		2,818,075		1,833,030		45,636			28,173			21			10,437			4,735,372

		140,066,653		46,188,814		1,608,214			1,385,656			536,428			1,024,076			190,809,841

Financial liabilities:
Financial liabilities measured at FVTPL		2,228,158		237,383		—			—			—			—			2,465,541
Deposits		27,277,837		7,086,072		8,978			288,531			58			2,476			34,663,952
Borrowings		5,895,462		13,098,074		268,544			745,687			155,984			6,762			20,170,513
Debentures		92,869,745		19,589,528		1,954,226			499,506			737,037			4,973,346			120,623,388
Derivative financial liabilities		3,573,527		568,059		12,604			3,296			1,436			12,746			4,171,668
Other financial liabilities		5,114,505		1,853,159		15,052			34,318			2,746			69,906			7,089,686

		136,959,234		42,432,275		2,259,404			1,571,338			897,261			5,065,236			189,184,748

Net financial position	W	3,107,419		3,756,539		(651,190	)		(185,682	)		(360,833	)		(4,041,160	)		1,625,093

S-148

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

(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.

(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, NSFR and Mid- to long-term foreign currency fund management ratio

•

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.

•

LCR: (High quality liquid assets / Total net cash outflows over the next 30 calendar days) X 100

•

NSFR: Available Stable Funding / Required Stable Funding X 100

•

Mid- to long-term foreign currency fund management ratio: Foreign currency funding being repaid after 1 year / Foreign currency lending being collected after 1 year X 100

Early warning indicator

To identify prematurely and cope with worsening liquidity risk trends, the Bank has set up 15 indexes such as the “Foreign Exchange Stabilization Bond CDS Premium,” and measures the trend monthly 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-149

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

(iii) Analysis on remaining contractual maturity of financial instruments

Remaining contractual maturity risks of non-derivative financial instruments including interest payment as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	10,729,345		251,868		264,233		1,099,763		40,699		12,385,908
Securities measured at FVTPL		126,342		16,404		1,442,265		2,216,924		7,698,900		11,500,835
Securities measured at FVOCI		682,267		1,893,859		6,352,834		13,249,039		13,278,200		35,456,199
Securities measured at amortized cost		—		30,000		—		780,000		—		810,000
Loans		12,591,657		14,693,174		53,659,203		58,928,371		17,258,207		157,130,612
Other financial assets		7,075,919		—		—		—		965,184		8,041,103

	W	31,205,530		16,885,305		61,718,535		76,274,097		39,241,190		225,324,657

Financial liabilities:
Financial liabilities measured at FVTPL	W	69,747		138,263		179,994		994,215		249,532		1,631,751
Deposits		20,937,527		8,742,826		16,573,095		3,789,113		134,741		50,177,302
Borrowings		4,044,438		5,844,974		7,961,432		2,866,739		1,164,804		21,882,387
Debentures		4,276,956		8,192,003		43,921,522		73,409,578		9,244,940		139,044,999
Other financial liabilities		7,610,991		2,277,449		—		—		389,878		10,278,318

	W	36,939,659		25,195,515		68,636,043		81,059,645		11,183,895		223,014,757

S-150

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued


	December 31, 2019
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	5,065,652		282,897		329,130		803,600		40,959		6,522,238
Securities measured at FVTPL		484,770		661,617		504,044		1,385,041		7,448,954		10,484,426
Securities measured at FVOCI		277,092		725,605		4,061,877		6,515,165		12,845,290		24,425,029
Securities measured at amortized cost		40,000		430,002		900,000		130,000		—		1,500,002
Loans		9,282,526		12,642,049		47,936,243		52,723,675		16,477,990		139,062,483
Other financial assets		4,043,265		—		—		—		698,865		4,742,130

	W	19,193,305		14,742,170		53,731,294		61,557,481		37,512,058		186,736,308

Financial liabilities:
Financial liabilities measured at FVTPL	W	70,044		318,570		617,318		935,081		287,145		2,228,158
Deposits		16,302,374		4,719,336		10,402,593		3,112,615		122,435		34,659,353
Borrowings		2,761,940		5,156,150		8,125,070		2,923,577		1,197,682		20,164,419
Debentures		3,996,137		9,589,472		35,032,030		63,490,945		8,493,328		120,601,912
Other financial liabilities		4,335,854		2,128,782		—		—		634,148		7,098,784

	W	27,466,349		21,912,310		54,177,011		70,462,218		10,734,738		184,752,626

Remaining contractual maturity risks of derivative financial instruments as of June 30, 2020 and December 31, 2019 are as follows:

Net settlement of derivative financial instruments


	June 30, 2020
	Within 1 month			1~3 months			3~12 months			1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	(553	)		280			538			—			—		265
Interest rate		(5,470	)		(15,052	)		(28,786	)		(101,932	)		207,693		56,453
Hedging purpose derivatives:
Interest rate		31,462			67,520			388,269			990,352			647,064		2,124,667

	W	25,439			52,748			360,021			888,420			854,757		2,181,385

S-151

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued


	December 31, 2019
	Within 1 month			1~3 months		3~12 months			1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency	W	37			256		566			—		—		859
Interest rate		(5,662	)		9,583		(66,977	)		48,194		145,096		130,234
Stock		49			—		—			—		—		49
Hedging purpose derivatives:
Interest rate		16,579			26,520		256,124			1,147,552		1,530,039		2,976,814

	W	11,003			36,359		189,713			1,195,746		1,675,135		3,107,956

Gross settlement of derivative financial instruments


	June 30, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	41,418,557		29,640,935		67,554,635		71,117,381		8,288,561		218,020,069
Outflow		41,303,224		29,627,396		67,222,994		70,988,196		8,318,721		217,460,531

Hedging purpose derivatives:
Currency
Inflow		426,679		689,351		3,346,816		18,852,459		1,381,491		24,696,796
Outflow		439,603		723,607		4,226,268		19,128,008		1,405,729		25,923,215

Total inflow	W	41,845,236		30,330,286		70,901,451		89,969,840		9,670,052		242,716,865

Total outflow	W	41,742,827		30,351,003		71,449,262		90,116,204		9,724,450		243,383,746


	December 31, 2019
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	47,982,985		54,605,599		90,905,007		66,553,775		6,892,477		266,939,843
Outflow		48,107,220		54,610,094		90,954,368		66,361,083		6,944,885		266,977,650

Hedging purpose derivatives:
Currency
Inflow		206,431		239,439		3,909,213		16,077,393		1,357,557		21,790,033
Outflow		219,403		248,463		4,726,407		16,379,043		1,376,508		22,949,824

Total inflow	W	48,189,416		54,845,038		94,814,220		82,631,168		8,250,034		288,729,876

Total outflow	W	48,326,623		54,858,557		95,680,775		82,740,126		8,321,393		289,927,474

S-152

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

(In millions of won)

49. Risk Management, Continued

Remaining contractual maturity risks of guarantees and commitments as of June 30, 2020 and December 31, 2019 are as follows:


	June 30, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,383,477		1,238,926		2,907,094		4,991,161		520,079		11,040,737
Commitments		25,899		122,019		727,787		1,686,456		30,962,204		33,524,365

	W	1,409,376		1,360,945		3,634,881		6,677,617		31,482,283		44,565,102


	December 31, 2019
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,040,240		1,140,660		3,757,118		4,514,337		546,837		10,999,192
Commitments		70,984		80,021		839,470		2,293,423		29,752,646		33,036,544

	W	1,111,224		1,220,681		4,596,588		6,807,760		30,299,483		44,035,736

S-153

THE REPUBLIC OF KOREA

The Economy

Gross Domestic Product

Based on preliminary data, GDP in the first nine months of 2020 contracted by 0.9% at chained 2015 year prices, as aggregate private and general government consumption expenditures decreased by 1.7% and exports of goods and services decreased by 3.8%, which more than offset a decrease in imports of goods and services by 4.1% and an increase in domestic fixed capital formation by 3.2%, each compared with the corresponding period of 2019. The contraction of the Republic’s GDP in the first nine months of 2020 was primarily due the ongoing global outbreak of the COVID-19 pandemic.

Principal Sectors of the Economy

Prices, Wages and Employment

In the first nine months of 2020, the inflation rate was 0.6% and the unemployment rate was 4.1%.

The Financial System

Securities Markets

The Korea Composite Stock Price Index was 2,326.2 on August 31, 2020, 2,327.9 on September 29, 2020, 2,267.2 on October 30, 2020, 2,591.3 on November 30, 2020, 2,873.5 on December 30, 2020 and 3,152.2 on January 8, 2021.

Monetary Policy

Foreign Exchange

The market average exchange rate between the Won and the U.S. Dollar (in Won per one U.S. Dollar) as announced by the Seoul Money Brokerage Service Ltd. was Won 1,185.1 to US$1.00 on August 31, 2020, Won 1,173.5 to US$1.00 on September 29, 2020, Won 1,133.4 to US$1.00 on October 30, 2020, Won 1,104.4 to US$1.00 on November 31, 2020, Won 1,088.0 to US$1.00 on December 31, 2020 and Won 1,087.7 to US$1.00 on January 8, 2021.

Balance of Payments and Foreign Trade

Balance of Payments

Based on preliminary data, the Republic recorded a current account surplus of US$43.4 billion in the first nine months of 2020. The current account surplus in the first nine months of 2020 increased from the current account surplus of US$41.8 billion in the corresponding period of 2019, primarily due to decreases in deficits from the services account and the current transfers account, which were partially offset by a decrease in surplus from the goods account.

Trade Balance

Based on preliminary data, the Republic recorded a trade surplus of US$27.6 billion in the first nine months of 2020. Exports decreased by 8.6% to US$371.0 billion in the first nine months of 2020 from US$405.9 billion in the corresponding period of 2019, primarily due to adverse global economic conditions resulting mainly from the ongoing global outbreak of the COVID-19 pandemic. Imports decreased by 9.1% to US$343.4 billion in the first nine months of 2020 from US$377.5 billion in the corresponding period of 2019, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials, as well as decreased domestic consumption, which were mainly attributed to the ongoing global outbreak of the COVID-19 pandemic.

S-154

Foreign Currency Reserves

The amount of the Government’s foreign currency reserves was US$443.1 billion as of December 31, 2020.

Government Finance

As part of the Government’s continued efforts to mitigate the adverse effects of the ongoing global outbreak of the COVID-19 pandemic on the Korean economy, the National Assembly approved a fourth supplementary budget amounting to Won 7.8 trillion in September 2020 and the Government announced its COVID-19 relief package plan amounting to Won 9.4 trillion in December 2020, following a recent resurgence of COVID-19 cases in Korea. The fourth supplementary budget, which will be funded primarily through the issuance of treasury bonds by the Government, and the Government’s COVID-19 relief package, which will be funded primarily through reserve funds within general accounts, unappropriated surplus funds and adjustment of its 2021 spending plan, will be used mainly for the following purposes: (i) support for small businesses, low-income households and the unemployed, (ii) provision of emergency childcare support and (iii) disease prevention and treatment. For further information regarding the COVID-19 pandemic and the Republic’s past supplementary budgets, see “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties” and “The Republic of Korea—Government Finance” in the accompanying prospectus.

S-155

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. 333-246071.

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 2024 Notes, the 2026 Notes and the 2031 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 2024 Notes are initially limited to US$700,000,000 aggregate principal amount, the 2026 Notes are initially limited to US$500,000,000 aggregate principal amount, and the 2031 Notes are initially limited to US$300,000,000 aggregate principal amount. The 2024 Notes will mature on June 19, 2024 (the “2024 Maturity Date”), the 2026 Notes will mature on July 19, 2026 (the “2026 Maturity Date”), and the 2031 Notes will mature on January 19, 2031 (the “2031 Maturity Date”, and together with the 2024 Maturity Date and the 2026 Maturity Date, the “Maturity Dates”). The 2024 Notes will bear interest at the rate of 0.400% per annum, payable semi-annually in arrears on June 19 and December 19 of each year (the “2024 Interest Payment Dates”), beginning on June 19, 2021. The 2026 Notes will bear interest at the rate of 0.800% per annum, and the 2031 Notes will bear interest at the rate of 1.625% per annum, in each case payable semi-annually in arrears on January 19 and July 19 of each year (together with the 2024 Interest Payment Dates, the “Interest Payment Dates”), beginning on July 19, 2021. Interest on the Notes will accrue from January 19, 2021. Interest on the Notes will accrue from January 19, 2021. 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 a 360-day year consisting of twelve 30-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

S-156

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 the SGX-ST and the rules of the SGX-ST so require, in the event that any of 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. In addition, in the event that any of the global notes are exchanged for Notes in definitive registered form, an announcement of such exchange will be made through the SGX-ST by or on behalf of us. 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.

S-157

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

S-158

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 to pre-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 to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to

S-159

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 that one-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 using free-of-payment transfers to move the Notes, but funds movement will take place separately.

S-160

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

The second paragraph under “Taxation—United States Tax Considerations” in the accompanying prospectus shall be deleted and replaced with the following:

“This summary is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. This summary addresses only U.S. federal income tax consequences, and does not address consequences arising under state, local, or non-U.S. tax laws, the alternative minimum tax, or the Medicare tax on net investment income or under special timing rules prescribed under section 451(b) of the Code. This summary does not discuss tax considerations relevant to the ownership and disposal of bearer securities.”

The subheading and corresponding text under “Book/Tax Conformity” under “Taxation—United States Tax Considerations” in the accompanying prospectus shall be deleted in its entirety.

For a discussion of additional U.S. federal income tax considerations that may be relevant to you if you are a beneficial owner of the Notes and are a U.S. holder, see “Taxation—United States Tax Considerations” in the accompanying prospectus.

S-161

UNDERWRITING

Relationship with the Underwriters

We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated January 11, 2021 (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 2024 Notes		Principal Amount of the 2026 Notes		Principal Amount of the 2031 Notes
BNP Paribas		US$100,000,000		US$71,428,000		US$42,857,000
BofA Securities, Inc.		100,000,000		71,432,000		42,858,000
J.P. Morgan Securities LLC		100,000,000		71,428,000		42,857,000
KDB Asia Limited		100,000,000		71,428,000		42,857,000
Société Générale		100,000,000		71,428,000		42,857,000
Standard Chartered Bank		100,000,000		71,428,000		42,857,000
UBS AG Hong Kong Branch		100,000,000		71,428,000		42,857,000
KEXIM Asia Limited		—		—		—

		US$700,000,000		US$500,000,000		US$300,000,000

KDB Asia Limited, one of the underwriters, is our affiliate and has agreed to offer and sell the Notes only outside the United States to non-U.S. persons.

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. Approvals in-principle have been received from 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 our net proceeds from the 2024 Notes is US$696,192,000 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 amount of our net proceeds from the 2026 Notes is US$497,295,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2026 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 2026 Notes.

S-162

The amount of our net proceeds from the 2031 Notes is US$298,245,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2031 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 2031 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 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 in same-day funds on or about January 19, 2021, which we expect will be the fifth 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+5, 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 an 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 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 any Notes in, from or otherwise involving the United Kingdom.

Prohibition of Sales to EEA

S-163

this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto 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:

(a)

a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(b)

a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II: or

Prohibition of Sales to UK 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 which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto to any retail investor in the UK. For the purposes of this provision, the expression “retail investor” means a person who is one (or more) of the following:

(a)

a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; or

(b)

a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.

Spain

The proposed offer of Notes has not been registered with the Comisión Nacional del Mercado de Valores (the “CNMV”). Accordingly, each of the Underwriters has represented and agreed that Notes can only be offered in Spain to qualified investors pursuant to and in compliance with the consolidated text of the Securities Market Law approved by Spanish Royal Legislative Decree 4/2015, Spanish Royal Decree 1310/2005, both as amended from time to time, and any regulation issued thereunder.

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 Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Underwriter has severally represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations 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 (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO; or (b) 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 Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; 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, whether in Hong Kong or elsewhere, any advertisement, invitation

S-164

or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of 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 under the SFO.

Singapore

Each Underwriter has acknowledged that this prospectus supplement and the accompanying prospectus have not been and will not 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 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, this prospectus supplement or the accompanying 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) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

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 six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(i)

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;

(ii)

where no consideration is or will be given for the transfer;

(iii)

where the transfer is by operation of law;

(iv)

as specified in Section 276(7) of the SFA; or

(v)

as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.

Notification under Section 309B(1)(c) of the SFA — We have determined, and hereby notify 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).

S-165

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).

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 31-103 Registration 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 45-106 Prospectus Exemptions (NI 45-106) or subsection 73.3 (1) of the Securities 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.

S-166

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 33-105 Underwriting 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 of Form 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 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, any of the Underwriters appointed and acting in its capacity as stabilizing manager (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.

S-167

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 the over-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.

S-168

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 Bae, Kim & Lee LLC, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Linklaters LLP, Seoul, Korea. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Linklaters LLP may rely as to matters of Korean law upon the opinion of Bae, Kim & Lee LLC, and Bae, Kim & Lee LLC 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 30, 2020 and a decision of our Chief Executive Officer and Chairman of the Board of Directors dated December 21, 2020. On December 29, 2020, 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
2024 Notes		US500630DF23		500630 DF2
2026 Notes		US500630DG06		500630 DG0
2031 Notes		US500630DH88		500630 DH8

S-169

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

240 Greenwich Street

New York, NY 10286

United States of America

LEGAL ADVISORS TO THE BANK


as to Korean law		as to U.S. law

Bae, Kim & Lee LLC Tower B, Centropolis 26 Ujeongguk-ro, Jongno-gu Seoul 03161 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

Linklaters LLP

22nd Floor, Center One Building

26, Eulji-ro 5-gil, Jung-gu

Seoul 04539

The Republic of Korea

AUDITOR OF THE BANK

Nexia Samduk

12F, S&S Building

48 Ujeongguk-ro, Jongno-gu

Seoul 03145

The Republic of Korea

SINGAPORE LISTING AGENT

Shook Lin & Bok LLP

1 Robinson Road

#18-00 AIA Tower

Singapore 048542

LOGO

Korea Development Bank 424B2Prospectus for primary offering