Korea Development Bank 424B2 Prospectus for primary offering

Korea Development Bank 424B2Prospectus for primary offering

Filed Pursuant to Rule 424(b)(2)

Registration No. 333-246071

PROSPECTUS SUPPLEMENT

(To Prospectus Dated July 2, 2021)

LOGO

The Korea Development Bank

US$1,000,000,000 2.000% Notes due 2025

US$500,000,000 2.250% Notes due 2027

Our US$1,000,000,000 aggregate principal amount of notes due 2025 (the “2025 Notes”) will bear interest at a rate of 2.000% per annum and our US$500,000,000 aggregate principal amount of notes due 2027 (the “2027 Notes”, and together with the 2025 Notes, the “Notes”) will bear interest at a rate of 2.250% per annum. Interest on the Notes is payable semi-annually in arrears on February 24 and August 24 of each year, in each case beginning on August 24, 2022. The 2025 Notes will mature on February 24, 2025 and the 2027 Notes will mature on February 24, 2027.

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.


	2025 Notes				2027 Notes
	Per Note		Total		Per Note		Total
Public offering price		99.633%	US$	996,330,000		99.489%	US$	497,445,000
Underwriting discount		0.300%	US$	3,000,000		0.300%	US$	1,500,000
Proceeds to us (before deduction of expenses)		99.333%	US$	993,330,000		99.189%	US$	495,945,000

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including February 24, 2022.

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 February 24, 2022.

Joint Bookrunners and Lead Managers

BNP PARIBAS

BofA Securities

HSBC

J.P. Morgan

KDB Asia

Société Générale

Corporate & Investment Banking

UBS

Co-Manager

KEXIM Asia Limited

Prospectus Supplement Dated February 16, 2022

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

TABLE OF CONTENTS

Prospectus Supplement


	Page
Summary of the Offering		S-5
Use of Proceeds		S-7
Recent Developments		S-8
Description of the Notes		S-152
Clearance and Settlement		S-154
Taxation		S-157
Underwriting		S-158
Legal Matters		S-164
Official Statements and Documents		S-164
General Information		S-164

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		170
Land and History		170
Government and Politics		172
The Economy		175
Principal Sectors of the Economy		184
The Financial System		191
Monetary Policy		196
Balance of Payments and Foreign Trade		200
Government Finance		208
Debt		210
Tables and Supplementary Information		213

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	Page
DESCRIPTION OF THE SECURITIES		216
Description of Debt Securities		216
Description of Warrants		223
Terms Applicable to Debt Securities and Warrants		223
Description of Guarantees to be Issued by Us		224
Description of Guarantees to be Issued by The Republic of Korea		225
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS		226
TAXATION		227
Korean Taxation		227
U.S. Federal Income Tax Considerations		229
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

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Certain Defined Terms

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

Our separate financial information as of December 31, 2020, June 30, 2021 and September 30, 2021 and for the six months ended June 30, 2020 and 2021 and the nine months ended September 30, 2020 and 2021 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 July 2, 2021. 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$1,000,000,000 aggregate principal amount of 2.000% notes due February 24, 2025 (the “2025 Notes”) and US$500,000,000 aggregate principal amount of 2.250% notes due February 24, 2027 (the “2027 Notes”, and together with the 2025 Notes, the “Notes”).

The 2025 Notes will bear interest at a rate of 2.000% per annum and the 2027 Notes will bear interest at a rate of 2.250% per annum, in each case payable semi-annually in arrears on February 24 and August 24 of each year, beginning on August 24, 2022. Interest on the Notes will accrue from February 24, 2022 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 less 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 February 24, 2022, 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 net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$1,489,275,000. We will use the net proceeds from the sale of the 2025 Notes and the 2027 Notes for our general operations, including extending foreign currency loans and repayment of our maturing debt and other obligations.

S-7

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 July 2, 2021. 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, 2021, we hadW167,372.2 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), total assets ofW275,830.0 billion and total equity ofW39,758.9 billion, as compared toW159,083.6 billion of loans outstanding,W251,852.0 billion of total assets andW30,382.5 billion of total equity as of December 31, 2020. For the six months ended June 30, 2021, we recorded interest income ofW1,993.3 billion, interest expense ofW1,206.3 billion and net income ofW2,377.6 billion, as compared toW2,353.1 billion of interest income,W1,771.8 billion of interest expense andW369.3 billion of net income for the six months ended June 30, 2020. See “—Selected Financial Statement Data.”

Capitalization

As of September 30, 2021, our authorized capital wasW30,000 billion and our capitalization was as follows:


	September 30, 2021⁽¹⁾
	(billions of won)
	(unaudited)
Long-term debt⁽²⁾⁽³⁾:
Won currency borrowings		3,852.6
Industrial finance bonds		86,895.0
Foreign currency borrowings		505.7

Total long-term debt		91,253.3

Capital:
Paid-in capital		21,886.6
Capital surplus		2,479.0
Retained earnings⁽⁴⁾		7,732.1
Accumulated other comprehensive income		6,335.1

Total capital		38,432.7

Total capitalization		129,686.0

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2021.

(2)	We have translated borrowings in foreign currencies into Won at the rate of W1,184.90 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 30, 2021.

S-8

(3)	As of September 30, 2021, we had confirmed acceptances and guarantees totaling W7,449.6 billion under outstanding guarantees issued on behalf of our clients.

(4)

Includes planned regulatory reserve for credit losses of W482.9 billion as of September 30, 2021. 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 contributedW510.0 billion andW610.8 billion in cash to our capital in January and May 2021. As of September 30, 2021, our paid-in capital wasW21,886.6 billion compared toW20,765.7 billion as of December 31, 2020.

Selected Financial Statement Data

Recent Developments

As of September 30, 2021, we hadW173,623.1 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), total assets ofW282,252.9 billion and total equity ofW38,432.7 billion, as compared toW159,083.6 billion of loans outstanding,W251,852.0 billion of total assets andW30,382.5 billion of total equity as of December 31, 2020. For the nine months ended September 30, 2021, we recorded interest income ofW3,012.2 billion, interest expense ofW1,812.1 billion and net income ofW2,843.9 billion, as compared toW3,434.4 billion of interest income,W2,497.1 billion of interest expense andW456.5 billion of net income for the nine months ended September 30, 2020.

The following tables present our selected separate financial information for the nine months ended September 30, 2020 and 2021 and as of December 31, 2020 and September 30, 2021, which has been derived from our unaudited separate financial statements as of December 31, 2020 and September 30, 2021 and for the nine months ended September 30, 2021 and 2020 prepared in accordance with K-IFRS.

Separate K-IFRS Financial Statement Data


	Nine Months Ended September 30,
	2020		2021
	(billions of Won) (unaudited)
Income Statement Data
Total Interest Income		3,434.4		3,012.2
Total Interest Expenses		2,497.1		1,812.1
Net Interest Income		937.3		1,200.1
Operating Income		985.6		3,203.6
Income before Income Tax		583.1		3,644.4
Income Tax Expense		126.7		800.5
Net Income		456.5		2,843.9

S-9


	As of December 31, 2020		As of September 30, 2021
	(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		159,083.6		173,623.1
Total Borrowings⁽²⁾		204,780.7		221,299.1
Total Assets		251,852.0		282,252.9
Total Liabilities		221,469.5		243,820.2
Equity		30,382.5		38,432.7

(1)

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

Nine Months Ended September 30, 2021

For the nine months ended September 30, 2021, we had net income ofW2,843.9 billion compared to net income ofW456.5 billion in the corresponding period of 2020, on a separate K-IFRS basis. The principal factors for such increase in net income included:

•

a net gain on disposal of loans measured at fair value through profit or loss ofW1,850.3 billion in the nine months ended September 30, 2021 compared to a net loss on disposal of such loans ofW17.5 billion in the corresponding period of 2020, primarily as a result of gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares, which took place in June 2021;

•

a reversal of impairment loss on investments in subsidiaries and associates ofW466.8 billion in the nine months ended September 30, 2021, primarily due to a reversal of impairment losses recognized in connection with the upcoming sale of our stake in Daewoo Engineering & Construction, compared to an impairment loss on such investments ofW155.1 billion in the corresponding period of 2020;

•

an increase in dividend income toW1,037.8 billion in the nine months ended September 30, 2021 fromW543.0 billion in the corresponding period of 2020, primarily due to an increase in dividends received from the Korea Electric Power Corporation during the nine months ended September 30, 2021 compared to the corresponding period of 2020; and

•

an increase in net interest income toW1,200.1 billion in the nine months ended September 30, 2021 fromW937.3 billion in the corresponding period of 2020, primarily due to a decrease in interest expense toW1,812.1 billion in the nine months ended September 30, 2021 fromW2,497.1 billion in the corresponding period 2020, which outpaced the decrease in interest income toW3,012.2 billion in the nine months ended September 30, 2021 fromW3,434.4 billion in the corresponding period of 2020. The decreases in our interest expense and interest income primarily reflected the decrease in the general level of interest rates in Korea in the nine months ended September 30, 2021 compared to the corresponding period of 2020.

The above factors were partially offset by an increase in income tax expense toW800.5 billion in the nine months ended September 30, 2021 fromW126.7 billion in the corresponding period of 2020, primarily due to an increase in income before income tax toW3,644.4 billion in the nine months ended September 30, 2021 fromW583.1 billion in the corresponding period of 2020.

S-10

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.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd., Hyundai Doosan Infracore Co., Ltd. (formerly, Doosan Infracore Co.), Ltd. and GM Korea Company. As of September 30, 2021, our credit extended to these companies totaledW23,483.7 billion, accounting for 8.3% of our total assets as of such date.

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, 2020		As of September 30, 2021		Primary Reason for Change
	(billions of won)
HMM Company Limited	W	4,771.5	W	12,447.8	Increase due to an increase in the value of perpetual bonds
DSME		4,463.1		5,848.4	Increase due to an increase in refund guarantees and an increase in the value of the shares of DSME
Doosan Heavy Industries & Construction		1,644.2		1,520.9	Decrease due to redemption of loans
Daehan Shipbuilding		1,047.4		1,034.7	Decrease due to redemption of loans
KG Dongbu Steel		695.9		788.7	Increase due to an increase in foreign currency loans
HJ Shipbuilding & Construction		927.2		759.0	Decrease due to a decrease in loans
GM Korea Company		436.9		402.9	Decrease due to a decline in the value of the shares of GM Korea Company
K Shipbuilding		531.3		392.3	Decrease due to a decrease in loans
Hyundai Doosan Infracore		688.2		288.9	Decrease due to redemption of loans

Total	W	15,205.7	W	23,483.6

As of September 30, 2021, we established allowances ofW32.3 billion for our exposure to HMM Company Limited,W785.7 billion for DSME,W14.0 billion for Doosan Heavy Industries & Construction,W386.1 billion for Daehan Shipbuilding,W3.4 billion for KG Dongbu Steel,W14.1 billion for HJ Shipbuilding & Construction, none for GM Korea,W17.7 billion for K Shipbuilding andW1.0 billion for Hyundai Doosan Infracore.

DSME, one of the largest shipbuilding and offshore construction companies in Korea, has suffered from financial difficulties resulting from a prolonged slowdown in the global shipbuilding industry, and we have been the largest shareholder of DSME since 2015 through a series of financing arrangements. See “—Results of Operations—Loans to Financially Troubled Companies.” In March 2019, Hyundai Heavy Industries entered into an agreement with us to acquire DSME, pursuant to which we had planned to transfer all of our shares in DSME amounting to approximatelyW2 trillion (in the form of contributions-in-kind) to a newly established sub-holding company spun off from Hyundai Heavy Industries. However, in January 2022, the European Commission announced that it would not grant approval for the acquisition of DSME by Hyundai Heavy Industries due to anti-competition concerns for LNG carriers, and the consummation of the acquisition currently remains uncertain.

In the first nine months of 2021, we sold non-performing loans worthW244.2 billion to UAMCO Ltd.

S-11

Results of Operations

The following tables present our selected separate financial information as of December 31, 2020 and June 30, 2021 and for the six months ended June 30, 2020 and 2021, which has been derived from our unaudited separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 prepared in accordance with K-IFRS and included in this prospectus supplement.

Separate K-IFRS Financial Statement Data


	Six Months Ended June 30,
	2020		2021
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		2,353.1		1,993.3
Total Interest Expenses		1,771.8		1,206.3
Net Interest Income		581.3		786.9
Operating Income		688.9		2,362.4
Income before Income Tax		473.8		2,991.6
Income Tax Expense (Benefit)		104.5		614.0
Net Income		369.3		2,377.6


	As of December 31, 2020		As of June 30, 2021
	(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		159,083.6		167,372.2
Total Borrowings⁽²⁾		204,780.7		215,119.8
Total Assets		251,852.0		275,830.0
Total Liabilities		221,469.5		236,071.1
Equity		30,382.5		39,758.9

(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, 2021 and for the six months ended June 30, 2021 and 2020 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, 2021

In the first half of 2021, we had net income ofW2,377.6 billion compared to net income ofW369.3 billion in the corresponding period of 2020, on a separate basis. The principal factors for the increase in net income included:

•

an increase in gains on disposal of loans measured at fair value through profit or loss toW1,832.6 billion in the first half of 2021 fromW2.7 billion in the corresponding period of 2020, primarily due to the exercise of our right to convert our convertible bonds of HMM Company Limited into common shares, the value of which increased significantly subsequent to such conversion in in the first half of 2021;

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•

an increase in net interest income toW786.9 billion in the first half of 20201 fromW581.3 billion in the corresponding period of 2020, primarily due to a decrease in interest expense that outpaced the decrease in interest income, which reflected a decrease in the general level of interest rates in Korea in the first half of 2021 compared to the corresponding period of 2020; and

•

an increase in dividend income toW642.6 billion in the first half of 2021 fromW400.6 billion in the corresponding period of 2020, primarily due to an increase in dividends received from Korea Electric Power Corporation in the first half of 2021 compared to the corresponding period of 2020.

The above factors were partially offset by an increase in provision for credit losses toW836.1 billion in the first half of 2021 fromW204.7 billion in the corresponding period of 2020, 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.

Allowances for Loan Losses and Loans in Arrears

As of June 30, 2021, we had established allowances ofW4,474.3 billion for loan losses under Korean IFRS.

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2021, we have provided loans ofW938.7 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2021, we had established allowances ofW440.0 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, 2021⁽¹⁾
		Loan Amount		Loan Loss Allowances
		(in billions of won, except percentages)
Loan Classification	Normal⁽²⁾	W	161,421.2	W	2,024.2
	Precautionary		3,238.2		879.7
	Substandard		1,563.4		731.2
	Doubtful		152.2		133.9
	Expected Loss		997.2		705.3

	Total	W	167,372.2	W	4,474.3

(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, 2021, our non-performing loans totaledW2,712.8 billion, representing 1.6% of our outstanding loans as of such date. Non-performing loans are defined as loans that are classified as substandard or below. On June 30, 2021, our legal reserve wasW1,551.2 billion, representing 0.9% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

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Co., Ltd.), HJ Shipbuilding & Construction (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd., Hyundai Doosan Infracore Co., Ltd. (formerly, Doosan Infracore Co., Ltd.) and GM Korea Company. As of June 30, 2021, our credit extended to these companies totaledW26,349.2 billion, accounting for 9.6% of our total assets as of such date.


Company	As of December 31, 2020		As of June 30, 2021		Primary Reason for Change
	(billions of won)
HMM Company Limited	W	4,771.5	W	15,191.8	Increase due to increase in the value of perpetual bonds
DSME		4,463.1		5,656.8	Increase due to increase in refund guarantees and an increase in the value of the shares of DSME
Doosan Heavy Industries & Construction		1,644.2		1,332.7	Decrease due to redemption of loans
Daehan Shipbuilding		1,047.4		989.5	Decrease due to redemption of loans
HJ Shipbuilding & Construction		927.2		860.9	Decrease due to decrease in loans
KG Dongbu Steel		695.9		746.8	Increase due to an increase in usance bills
Hyundai Doosan Infracore		688.2		633.9	Decrease due to redemption of loans
K Shipbuilding		531.3		533.9	Increase due to increase in loans
GM Korea Company		436.9		402.9	Decrease due to a decline in the value of the shares of GM Korea Company

Total	W	15,205.7	W	26,349.2

As of June 30, 2021, we established allowances ofW35.6 billion for our exposure to HMM Company Limited,W1,235.2 billion for DSME,W92.6 billion for Doosan Heavy Industries & Construction,W432.8 billion for Daehan Shipbuilding,W136.4 billion for HJ Shipbuilding & Construction Co., Ltd.,W4.1 billion for KG Dongbu Steel,W1.7 billion for Hyundai Doosan Infracore,W415.3 billion for K Shipbuilding, 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.

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In July 2016, HMM Company Limited 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 HMM Company Limited, which resulted in us becoming the largest shareholder of HMM Company Limited. In October 2018, we injectedW1 trillion in emergency aid into HMM Company Limited in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by HMM Company Limited. In June 2021, we exercised our right to convertW300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. As a result of such conversion, our equity interest in HMM Company Limited amounted to 25.0% as of June 30, 2021.

In January 2019, Hanjin Heavy Industries and Construction Philippines, a subsidiary of HJ Shipbuilding & 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 HJ Shipbuilding & Construction, as a result of which we became the largest shareholder of HJ Shipbuilding & Construction. In September 2021, creditors of HJ Shipbuilding & Construction (including us) sold a 66.85% interest in the company to a consortium led by Dongbu Corporation.

K Shipbuilding has faced financial difficulties for the past several years due to prolonged slowdowns in the Korean shipbuilding and shipping industries. K 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. In November 2020, we selected a consortium consisting of KH Investment and UAMCO Ltd. as the preferred bidder for the sale of shares of K Shipbuilding. In July 2021, the consortium acquired a 97% interest in K Shipbuilding forW250 billion.

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. As of June 30, 2021, our equity interest in KG Dongbu Steel amounted to 4.0%.

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 agreed to provide Doosan Heavy Industries with loans amounting toW500 billion,W400 billion andW600 billion in March, April and June 2020, respectively. In August 2021, as part of the self-rescue plan, a consortium comprised of Hyundai Heavy Industries Holdings Co. and KDB Investment, our investment unit, purchased a 35.0% equity interest in Hyundai Doosan Infracore from Doosan Heavy Industries & Construction Co., Ltd. forW850 billion.

In the first half of 2021, we sold non-performing loans worthW244.2 billion to UAMCO Ltd.

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. For example, COVID-19, an infectious disease that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the World Health Organization in March 2020, has spread globally over the course of 2020 and 2021 to date and has led to significant global and domestic economic

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and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” 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 throughout 2020 and 2021 to date.

In May 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 Lines Co., Ltd., a subsidiary of Hanjin Group and Korea’s largest airline and flagship carrier, in order to provide liquidity support. As of June 30, 2021, our loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to Korean Air Lines amounted toW1,233.9 billion, a decrease fromW1,374.5 billion as of December 31, 2020.

In April 2020, we provided 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, we decided to injectW2.4 trillion from the Key Industry Stabilization Fund (explained further below) 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. Subsequently, in November 2020, we signed an investment agreement with Hanjin KAL, the parent company of Korean Air Lines, to injectW800 billion (consisting ofW500 billion through participation in a rights offering andW300 billion through purchase of perpetual exchangeable bonds) into Hanjin KAL in connection with Korean Air Lines’ acquisition of a 63.9% stake in Asiana Airlines through a transaction valued atW1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to approximately 10.7%. In December 2020, Asiana Airlines’ shareholders approved a 3-to-1 share capital reduction plan, which was aimed at offsetting part of Asiana Airlines’ deficits in preparation for the Acquisition. The consummation of the Acquisition currently remains subject to a number of factors, including uncertainties regarding opposition to the Acquisition by labor unions of Korean Air Lines and Asiana Airlines, and approval of the Acquisition from antitrust authorities of a number of jurisdictions, including Korea, the United States, the European Union, China, Japan and Vietnam, which have yet to be obtained. If the Acquisition is completed, Asiana Airlines would become Korean Air Lines’ consolidated subsidiary. In June 2021, we approved an integration plan pursuant to which Korean Air Lines would merge with Asiana Airlines by 2024.

In addition, the ongoing global outbreak of the COVID-19 pandemic has prompted the Government in 2020 and 2021 to date to implement various emergency aid initiatives involving Korean banks, including us, to provide liquidity assistance to a range of financially troubled companies. Such initiatives include, among others, the provision of new loans provided to financially troubled companies, extension of maturity dates for existing loans and suspension of interest payment obligations for an extended period of time. 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. The Key Industry Stabilization Fund has supported those businesses that meet certain pre-determined criteria, including those aimed at stabilizing the job markets. 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.

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A 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 worsens, 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.

Operations

Loan Operations

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2021:

Loans⁽¹⁾


	June 30, 2021
	(billions of won)
Equipment Capital Loans:
Domestic currency	W	53,224.3
Foreign currency		8,570.5

		61,794.8

Working Capital Loans:
Domestic currency⁽²⁾		65,554.5
Foreign currency		10,164.9

		75,719.4

Other Loans⁽³⁾		29,858.0

Total loans	W	167,372.2

(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, 2021, we hadW167,372.2 billion in outstanding loans, which represents a 5.2% increase fromW159,083.6 billion of outstanding loans as of December 31, 2020.

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Maturities of Outstanding Loans

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

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


	June 30, 2021		As % of June 30, 2021 Total
	(billions of won, except percentages)
Loans with remaining maturities of one year or less	W	58,634.7		42.6	%
Loans with remaining maturities of more than one year		78,879.5		57.4

Total	W	137,514.2		100.0	%

(1)	Includes loans extended to affiliates.

Loans by Industrial Sector

The following table sets out the total amount of our outstanding equipment capital and working capital loans, categorized by industry sector as of June 30, 2021:

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


	June 30, 2021			As % of June 30, 2021 Total
	(billions of won, except percentages)
Manufacturing	W	63,787.6			46.4	%
Banking and Insurance		33,340.8			24.2
Transportation		10,200.3			7.4
Public Administration		635.9			0.5
Electric, Gas and Water Supply Industry		3,839.4			2.8
Others⁽²⁾		25,710.2			18.7

Total	W	137,514.2			100.0	%

Percentage increase from December 31, 2020		4.0	%

(1)	Includes loans extended to affiliates.

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

The manufacturing sector accounted for 46.4% of our outstanding equipment capital and working capital loans as of June 30, 2021. As of June 30, 2021, loans to the auto vehicle and trailer manufacturing businesses and the chemical and chemical product manufacturing businesses accounted for 12.8% and 12.7%, respectively, of our outstanding equipment capital and working capital loans to the manufacturing sector.

Industrial Bank of Korea was our single largest borrower as of June 30, 2021, accounting for 5.3% of our outstanding equipment capital and working capital loans. As of June 30, 2021, our five largest borrowers and 20 largest borrowers accounted for 13.2% and 23.9%, respectively, of our outstanding equipment capital and working capital loans.

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The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2021 by industry sector:

20 Largest Borrowers by Industry Sector


	As % of June 30, 2021 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Banking and Insurance		54.0	%
Manufacturing		29.0
Transportation		11.5
Others⁽¹⁾		5.5

Total		100.0

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

Loans by Categories

The following table sets out equipment capital and working capital loans by categories as of June 30, 2021:


	Equipment Capital Loans					Working Capital Loans
	June 30, 2021		%			June 30, 2021		%
	(billions of won, except percentages)
Industrial fund loans	W	48,432.8		78.4	%	W	48,627.2		64.2	%
On-lending loans		2,917.3		4.7			16,002.4		21.1
Foreign currency loans		5,794.5		9.4			1,517.2		2.1
Local currency loans denominated in foreign currencies		2.6		0.0			25.5		0.1
Offshore loans in foreign currencies		2,428.3		3.9			7,753.5		10.2
Government fund loans		115.8		0.2			—		—
Overdraft		—		—			102.0		0.1
Others⁽¹⁾		2,103.4		3.4			1,691.6		2.2

Total	W	61,794.8		100.0	%	W	75,719.4		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, 2021:


	June 30, 2021
	(billions of won)
Acceptances	W	332.4
Guarantees on local borrowings		856.9
Guarantees on foreign borrowings		5,794.7
Letters of guarantee for importers		88.7

Total	W	7,072.7

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Investments

Our equity investments increased toW42,117.3 billion as of June 30, 2021 fromW38,227.6 billion as of December 31, 2020. As of June 30, 2021, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaledW19,598.3 billion, equal to 41.0% of our equity investment ceiling.

The following table sets out our equity investments by industry sector on a book value basis as of June 30, 2021:

Equity Investments


	Book Value as of June 30, 2021
	(billions of won)
Electric, Gas and Water Supply Industry	W	18,010.2
Banking and Insurance		11,277.9
Transportation		5,475.0
Real Estate Business		3,777.5
Construction		1,025.0
Manufacturing		660.9
Others		1,890.8

Total	W	42,117.3

As of June 30, 2021, we held total equity investments, on a book value basis, ofW602.8 billion in one of our five largest borrowers andW2,928.0 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, 2021, the aggregate value of our equity investments accounted for approximately 92.5% of their aggregate cost basis.

Other Activities

As of June 30, 2021, we held in trust cash and other assets totalingW35,989.8 billion, and we generated in the first half of 2021 trust fee income equalingW63.9 billion.

Source of Funds

Borrowings from the Government

The following table sets out our Government borrowings as of June 30, 2021:


Type of Funds Borrowed	As of June 30, 2021
	(billions of won)
General purpose	W	117.0
Special purpose		4,254.5

Total	W	4,371.5

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Domestic and International Capital Markets

The following table sets out the outstanding balance of our industrial finance bonds as of June 30, 2021:


Outstanding Balance	As of June 30, 2021
	(billions of won)
Denominated in Won	W	110,087.6
Denominated in other currencies		34,524.7

Total	W	144,612.3

As of June 30, 2021, 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, 2021) wasW156,806.0 billion, equal to 21.9% of our authorized amount under the KDB Act, which wasW717,617.9 billion.

Foreign Currency Borrowings

As of June 30, 2021, the outstanding amount of our foreign currency borrowings was US$12.9 billion. Our long-term and short-term foreign currency borrowings increased toW14,562.4 billion as of June 30, 2021 fromW12,795.0 billion as of December 31, 2020.

Deposits

As of June 30, 2021, demand deposits held by us totaledW1,832.3 billion and time and savings deposits held by us totaledW43,344.2 billion.

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of June 30, 2021:

Debt Principal Repayment Schedule⁽¹⁾


Currency⁽²⁾⁽³⁾	Maturing on or before December 31,
	2021		2022		2023		2024		2025		Thereafter
	(billions of won)
Won	W	25,878.0	W	43,339.2	W	23,310.9	W	7,942.3	W	4,073.7		W9,870.7
Foreign		15,365.5		9,979.6		6,887.6		6,214.1		4,615.3		5,364.2

Total Won Equivalent	W	41,243.4	W	53,318.8	W	30,198.5	W	14,156.4	W	8,698.0		W15,234.9

(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, 2021, 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.

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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	Dae Hyon Choi	January 2, 2025
Auditor	Tae Hyun Joo	March 14, 2024
Independent Non-executive Directors	Han Hong Cho	June 27, 2023
	Dong Han Yook	June 28, 2022
	Yeong Ook Kim	May 25, 2023
	Kyo Deog Son	March 29, 2022
	Dong Il Jung	November 30, 2023

Financial Statements and the Auditors

Our interim separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 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, 2021 and for the six months ended June 30, 2021 and 2020 included in this prospectus supplement.

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Korea Development Bank

Interim Separate Statements of Financial Position

June 30, 2021 (Unaudited) and December 31, 2020


(In millions of won)	Notes		June 30, 2021		December 31, 2020
Assets
Cash and due from banks		4,45,46,49	W	11,269,255		10,528,978
Securities measured at FVTPL		5,45,46,49		10,272,772		8,320,631
Securities measured at FVOCI		6,39,45,46,49		42,010,506		34,141,325
Securities measured at amortized cost		7,39,45,46,49		2,417,134		785,264
Loans measured at FVTPL		8,45,46,49		701,288		1,434,514
Loans measured at amortized cost		9,45,46,49		162,894,536		155,300,178
Derivative financial assets		10,45,46,47,49		5,146,121		8,329,376
Investments in subsidiaries and associates		11,48		28,325,984		25,553,561
Property and equipment, net		12,48		811,219		811,382
Investment property, net		13,48		81,313		81,065
Intangible assets, net		14,48		167,784		188,417
Current tax assets				1,783		3,722
Assets held for sale		16		2,207,733		1,713,347
Other assets		15,45,46,49		9,522,565		4,660,285

Total assets			W	275,829,993		251,852,045

Liabilities
Financial liabilities measured at FVTPL		17,45,46,49	W	1,892,708		1,694,957
Deposits		18,45,46,49		48,875,219		45,879,419
Borrowings		19,45,46,49		20,975,895		18,887,611
Debentures		20,45,46,49		143,375,963		138,318,728
Derivative financial liabilities		10,45,46,47,49		3,653,173		6,305,287
Net defined benefit liabilities		21		70,474		50,546
Provisions		22		1,445,904		1,515,170
Deferred tax liabilities		37		4,821,576		1,719,100
Current tax liabilities				25,104		29,691
Other liabilities		23,45,46,49		10,935,050		7,069,006

Total liabilities				236,071,066		221,469,515

Equity
Issued capital		1,24		21,886,559		20,765,729
Capital surplus		24		2,479,010		2,484,398
Accumulated other comprehensive income		24		8,142,327		2,064,371
Retained earnings		24		7,251,031		5,068,032
(Regulatory reserve for credit losses ofW482,885 million as of June 30, 2021 andW1,146,038 million as of December 31, 2020, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses ofW76,926 million as of June 30, 2021 andW(663,153) million as of December 31, 2020, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses ofW76,926 million as of June 30, 2021 andW(663,153) million as of December 31, 2020, respectively)

Total equity				39,758,927		30,382,530

Total liabilities and equity			W	275,829,993		251,852,045

See accompanying notes to the interim separate financial statements.

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Korea Development Bank

Interim Separate Statements of Comprehensive Income

Six-month periods ended June 30, 2021 and 2020 (Unaudited)


			June 30, 2021						June 30, 2020
(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	999,352			1,993,256			1,170,560			2,353,110
Interest expense		25		(592,784	)		(1,206,346	)		(853,780	)		(1,771,847	)

Net interest income		48		406,568			786,910			316,780			581,263

Net fees and commission income		26		83,928			168,268			77,161			162,846
Dividend income		27		111,067			642,599			140,416			400,605
Net gain (loss) on securities measured at FVTPL		28		5,721			(3,887	)		44,090			67,178
Net gain (loss) on financial liabilities measured at FVTPL		29		28,477			106,104			(28,799	)		(28,499	)
Net gain (loss) on securities measured at FVOCI		30		(6,462	)		(9,890	)		33,429			52,013
Net gain (loss) on derivatives		31		(30,382	)		(131,082	)		117,034			(79,021	)
Net gain on foreign currency transaction		32		33,580			108,720			21,065			214,221
Other operating income (expense), net		33		989,810			1,900,478			(72,713	)		(124,309	)

Non-interest income, net				1,215,739			2,781,310			331,683			665,034

Provision for credit losses		34		901,759			836,089			102,828			204,697

General and administrative expenses		35,48		178,727			369,716			172,058			352,701

Operating income		48		541,821			2,362,415			373,577			688,899

Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates				132,334			126,248			(155,388	)		(165,865	)
Other non-operating income		36		448,205			508,944			863			2,540
Other non-operating expense		36		(745	)		(6,011	)		807,691			(51,781	)

Non-operating income (expense), net				579,794			629,181			653,166			(215,106	)

Profit before income taxes				1,121,615			2,991,596			1,026,743			473,793

Income tax expense		37		198,686			613,988			256,665			104,450

Profit for the period		24		922,929			2,377,608			770,078			369,343
(Profit for the period adjusted for regulatory reserve for credit losses:W1,081,638 million andW2,300,682 million for the three-month and six-month periods ended June 30, 2021, respectively;W861,829 million andW404,373 million for the three-month and six-month periods ended June 30, 2020, 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				(13,756	)		(56,026	)		285,871			173,298
Exchange differences on translation of foreign operations				(3,098	)		41,880			(16,508	)		32,160
Valuation gain on cash flow hedge				23			657			23			235
Net gain (loss) on hedges of net investments in foreign operations				2,013			(23,963	)		9,881			(19,355	)

				(14,818	)		(37,452	)		279,267			186,338

Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI				3,083,003			6,130,023			39,295			(142,912	)
Fair value changes on financial liabilities designated at fair value due to credit risk				(300	)		414			(6,720	)		657

				3,082,703			6,130,437			32,575			(142,255	)

				3,067,885			6,092,985			311,842			44,083

Total comprehensive income for the period			W	3,990,814			8,470,593			1,081,920			413,426

Earnings per share
Basic and diluted earnings per share (in won)		38	W	215			558			202			98

See accompanying notes to the interim separate financial statements.

S-24

Korea Development Bank

Interim Separate Statements of Changes in Equity

Six-month periods ended June 30, 2021 and 2020 (Unaudited)


(In millions of won)	Issued capital		Capital surplus			Accumulated other comprehensive income			Retained earnings			Total equity
Balance at 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 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

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

Balance at January 1, 2021	W	20,765,729		2,484,398			2,064,371			5,068,032			30,382,530
Profit for the period		—		—			—			2,377,608			2,377,608
Net gain on securities measured at FVOCI		—		—			6,058,968			15,029			6,073,997
Exchange differences on translation of foreign operations		—		—			41,880			—			41,880
Valuation gain on cash flow hedge		—		—			657			—			657
Net loss on hedges of net investments in foreign operations		—		—			(23,963	)		—			(23,963	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			414			—			414

Total comprehensive income for the period		—		—			6,077,956			2,392,637			8,470,593

Dividends		—		—			—			(209,638	)		(209,638	)
Paid in capital increase		1,120,830		(5,388	)		—			—			1,115,442

Transaction with owners		1,120,830		(5,388	)		—			(209,638	)		905,804

Balance at June 30, 2021	W	21,886,559		2,479,010			8,142,327			7,251,031			39,758,927

See accompanying notes to the interim separate financial statements.

S-25

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2021 and 2020 (Unaudited)


(In millions of won)	Notes		2021			2020
Cash flows from operating activities
Profit for the period			W	2,377,608			369,343
Adjustments for:
Income tax expense		37		613,988			104,450
Interest income		25		(1,993,256	)		(2,353,110	)
Interest expense		25		1,206,346			1,771,847
Dividend income		27		(642,599	)		(400,605	)
Gain on valuation of securities measured at FVTPL		28		(1,514	)		(31,895	)
Gain on disposal of securities measured at FVTPL				(3,736	)		(12,745	)
Loss (gain) on financial liabilities measured at FVTPL		29		(106,104	)		28,499
Loss (gain) on securities measured at FVOCI		30		9,890			(52,013	)
Impairment loss on securities measured at amortized cost		7		89			2
Gain on loans measured at FVTPL		33		(1,933,124	)		(55,338	)
Loss (gain) on valuation of derivatives				587,596			(638,510	)
Net loss (gain) on fair value hedged items		31		(201,419	)		492,044
Gain on foreign exchange translations		32		(119,440	)		(214,547	)
Gain on disposal of investments in subsidiaries and associates		33		(77,546	)		(10,623	)
Impairment loss (reversal of impairment loss) on investments in subsidiaries and associates				(126,248	)		165,865
Provision for loan loss allowance		34		928,606			338,691
Increase of provision for other assets		34		5,077			1,681
Reversal of provision for payment guarantees		22		(47,063	)		(167,940	)
Reversal of provision for unused commitments		22		(22,477	)		(8,568	)
Increase (reversal) of financial guarantee provision		22		(28,054	)		40,833
Increase of provision for possible losses from lawsuits		22		1,122			—
Reversal of provision for restoration		22		(1,211	)		(269	)
Defined benefit costs		21		19,974			19,238
Depreciation of property and equipment		35		36,874			33,971
Impairment loss (reversal of impairment loss) on assets held for sale		36		(499,976	)		46,775
Gain on disposal of property and equipment		36		(3,220	)		(604	)
Gain on disposal of assets held for sale		36		(3,610	)		—
Depreciation of investment property		36		1,246			604
Amortization of intangible assets		35		26,623			27,212
Loss on redemption of debentures				—			3

				(2,373,166	)		(875,052	)


Changes in operating assets and liabilities:
Due from banks				(451,496	)		(2,756,511	)
Securities measured at FVTPL				(903,120	)		378,702
Loans measured at FVTPL				8,350			108,695
Loans measured at amortized cost				(6,630,749	)		(18,015,223	)
Derivative financial instruments				(88,601	)		(10,837	)
Other assets				(4,811,520	)		(3,282,400	)
Financial liabilities measured at FVTPL				290,878			—
Deposits				2,992,486			15,490,684
Defined benefit liabilities				(46	)		(109	)
Other liabilities				4,037,287			3,202,650

				(5,556,531	)		(4,884,349	)


Income taxes refund (paid)				190,594			(177,446	)
Interest received				1,988,788			2,378,040
Interest paid				(1,356,846	)		(1,738,176	)
Dividends received				646,459			399,389

Net cash used in operating activities			W	(4,083,094	)		(4,528,251	)

(Continued)

S-26

Korea Development Bank

Interim Separate Statements of Cash Flows, Continued

Six-month periods ended June 30, 2021 and 2020 (Unaudited)


(In millions of won)	Notes		2021			2020
Cash flows from investing activities
Net decrease (increase) of securities measured at FVTPL			W	(1,044,527	)		(1,218,560	)
Disposal of securities measured at FVOCI				20,308,243			19,139,143
Acquisition of securities measured at FVOCI		6		(19,575,204	)		(30,145,312	)
Redemption of securities measured at amortized cost		7		170,000			1,340,002
Acquisition of securities measured at amortized cost		7		(1,804,677	)		(657,702	)
Disposal of property and equipment				9,518			5,192
Acquisition of property and equipment		12		(16,611	)		(13,289	)
Acquisition of intangible assets		14		(5,945	)		(2,199	)
Disposal of investments in subsidiaries and associates				395,129			317,211
Acquisition of investments in subsidiaries and associates				(305,758	)		(295,661	)
Disposal of assets held for sale				9,200			—

Net cash used in investing activities				(1,860,632	)		(11,531,175	)


Cash flows from financing activities
Increase of financial liabilities measured at FVTPL				50,000			120,000
Decrease of financial liabilities measured at FVTPL				(36,452	)		(731,288	)
Proceeds from borrowings				20,352,814			26,812,220
Repayment of borrowings				(18,280,199	)		(25,137,667	)
Proceeds from issuance of debentures				62,262,832			67,721,628
Repayment of debentures				(57,069,434	)		(50,012,932	)
Decrease in lease liabilities				(11,492	)		(12,308	)
Dividends				(209,638	)		(111,978	)
Paid in capital increase				1,115,442			448,334

Net cash provided by financing activities				8,173,873			19,096,009


Effects from changes in foreign currency exchange rate for cash and cash equivalents held				100,705			338,998
Net increase in cash and cash equivalents				2,330,852			3,375,581

Cash and cash equivalents at beginning of the period				5,729,194			5,252,825

Cash and cash equivalents at end of the period		43	W	8,060,046			8,628,406

See accompanying notes to the interim separate financial statements.

S-27

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

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 isW21,886,559 million with 4,377,311,768 shares of issued and outstanding as of June 30, 2021 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, 2021 is as follows:


	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		61		10		7		8		87

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, 2021 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, 2021. The nature and the impact of each new standard or amendment are described below:

Amendments to K-IFRS 1109 ‘Financial Instruments’, K-IFRS 1039 ‘Financial Instruments: Recognition and Measurement’, K-IFRS 1107 ‘Financial Instruments: Disclosure’, K-IFRS 1104 ‘Insurance Contracts’ and K-IFRS 1116 ‘Lease’ – Interest Rate Benchmark Reform

In relation to interest rate benchmark reform, the amendments provide a practical expedient allowing entities to change the effective interest rate instead of changing the carrying amount and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The amendment does not have a significant impact on the separate financial statements.

S-28

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

2. Basis of Preparation, Continued

(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, 2021, 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 1103 ‘Business Combination’ – Reference to the Conceptual Framework

The amendments update a reference of definition of assets and liabilities to qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’, and K-IFRS 2121 ‘Levies’. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Amendments to K-IFRS 1016 ‘Property, Plant and Equipment’ – Proceeds before intended use

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize and disclose the proceeds from selling such items, and the costs of producing those items, as profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Amendments to K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ – Onerous Contracts: Cost of Fulfilling a Contract

The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’ – Classification of Liabilities as Current or Non-current

The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the management’s expectations thereof. Also, the settlement of liability includes the transfer of the entity’s own equity instruments; however, it would be excluded if an option to settle the liability by the transfer of the entity’s own equity instruments is recognized separately from the liability as an equity component of a compound financial instrument. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

S-29

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

2. Basis of Preparation, Continued

Amendments to K- IFRS 1116 ‘Lease’ – Covid-19-Related Rent Concessions etc. beyond June 30, 2021

The application of the 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, is extended to lease payments originally due on or before 30 June 2022. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. The amendments should be applied for annual periods beginning on or after April 1, 2021, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Annual improvements to K-IFRS 2018-2020

Annual improvements of K-IFRS 2018-2020 Cycle should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

•

K-IFRS 1109 ‘Financial Instruments’ – Fees related to the 10% test for derecognition of financial liabilities

The amendment clarifies that in applying the ‘10 per cent’ test to assess whether to derecognise a financial liability, an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.

•

K-IFRS 1101 ‘First time Adoption of Korean International Financial Reporting Standards’ – Subsidiaries that are first-time adopters

•

K-IFRS 1116 ‘Leases’ – Lease incentives

•

K-IFRS 1041 ‘Agriculture’ – Measuring fair value

(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

•

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.

S-30

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

2. Basis of Preparation, Continued

(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 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 2021 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, 2021 is disclosed in Note 49. (2) and the exposures by industries could be changed according to economic fluctuations.

S-31

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

2. Basis of Preparation, Continued

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 of June 30, 2021. 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 2021 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.

(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

S-32

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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 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.

S-33

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

(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 separate 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.

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.

S-34

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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 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 separate 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.

S-35

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

(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.

(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

S-36

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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

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

S-37

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

(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 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

S-38

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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 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

S-39

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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.

(ii) Trading purpose derivatives

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

(10) Day one profit or loss recognition

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

(11) Property and equipment

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

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

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


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

S-40

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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.

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.

S-41

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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 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

S-42

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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.

(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.

S-43

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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

(iii) Retirement benefits: defined benefit plans

The Bank classifies all the pensions as defined benefit plans except defined contribution 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.

S-44

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

(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 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 of time 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.

S-45

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

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

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

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

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

Deferred income tax assets and liabilities 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

S-46

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

3. Significant Accounting Policies, Continued

shareholders of the Bank by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting net profit attributable to common shareholders of the Bank, considering dilution effects from all potential common shares, and the weighted average number of common shares outstanding.

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Cash	W	53,847		52,240
Due from banks in Korean won:
Due from Bank of Korea		4,158,855		4,140,277
Other due from banks in Korean won		580,636		347,074

		4,739,491		4,487,351

Due from banks in foreign currencies / off-shores		6,475,917		5,989,387

	W	11,269,255		10,528,978

(2)	Restricted due from banks as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Reserve deposit	W	3,644,433		3,052,883
Deposit of monetary stabilization account		700,000		1,300,000
Others		405,986		216,549

	W	4,750,419		4,569,432

S-47

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

5. Securities Measured at FVTPL

(1)	Details of securities measured at fair value through profit or loss as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		865,077		739,169
Equity investments		—		285,098		312,240
Beneficiary certificates		—		6,384,689		6,574,017
Government and public bonds		1,618,000		1,583,369		1,574,273
Financial bonds		335,000		336,164		335,502
Others		40,000		40,193		40,040

		1,993,000		9,494,590		9,575,241
Securities denominated in foreign currencies/off-shores:
Equity investments		—		26,291		51,284
Beneficiary certificates		—		674,879		642,882
Debt securities		3,390		3,313		3,365

		3,390		704,483		697,531

	W	1,996,390		10,199,073		10,272,772


	December 31, 2020
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		745,860		622,918
Equity investments		—		233,467		291,984
Beneficiary certificates		—		5,726,787		5,841,059
Government and public bonds		1,024,950		1,031,165		1,023,738

		1,024,950		7,737,279		7,779,699
Securities denominated in foreign currencies/off-shores:
Equity investments		—		21,177		19,800
Beneficiary certificates		—		555,149		507,518
Debt securities		13,600		14,532		13,614

		13,600		590,858		540,932

	W	1,038,550		8,328,137		8,320,631

S-48

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

5. Securities Measured at FVTPL, Continued

(2)	Securities measured at fair value through profit or loss with disposal restrictions as of June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

Company

Number of
shares

Carrying
amount

Restricted period

National Happiness Fund Co., Ltd.

34,066

47,647

Undecided

Shinhan Metal Co., Ltd.

7,692

—

Until December 31, 2021

41,758

47,647

December 31, 2020

Company

Number of
shares

Carrying
amount

Restricted period

National Happiness Fund Co., Ltd.

34,066

66,934

Undecided

Shinhan Metal Co., Ltd.

7,692

—

Until December 31, 2021

41,758

66,934

6. Securities Measured at FVOCI

(1)	Details of securities measured at FVOCI as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,159,230		10,479,901
Government and public bonds		970,000		977,750		971,397
Financial bonds		2,670,000		2,675,915		2,672,381
Corporate bonds		8,292,641		8,294,165		8,250,448
Others		2,141,115		2,137,849		13,013,856

		14,073,756		24,244,909		35,387,983
Securities denominated in foreign currencies/off-shores:
Equity securities		—		1,657		998
Debt securities		5,634,704		5,787,500		5,762,364

		5,634,704		5,789,157		5,763,362
Loaned securities:
Loaned securities		870,000		864,198		859,161

	W	20,578,460		30,898,264		42,010,506

S-49

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

6. Securities Measured at FVOCI, Continued


	December 31, 2020
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		9,964,039		10,060,520
Government and public bonds		1,900,000		1,923,926		1,918,765
Financial bonds		4,230,000		4,236,741		4,237,990
Corporate bonds		7,570,541		7,570,748		7,558,145
Others		2,141,115		2,137,849		4,803,611

		15,841,656		25,833,303		28,579,031
Securities denominated in foreign currencies/off-shores:
Equity securities		—		1,640		984
Debt securities		5,104,050		5,206,146		5,271,504

		5,104,050		5,207,786		5,272,488

Loaned securities:
Debt securities		290,000		289,641		289,806

	W	21,235,706		31,330,730		34,141,325

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, 2021 and 2020 andW20,729 million of gain andW89,603 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, 2021 and 2020 are as follows:


	2021			2020
Beginning balance	W	34,141,325			24,249,160
Acquisition		19,575,204			30,145,312
Disposal		(20,294,995	)		(19,164,238	)
Change due to amortization		(22,899	)		(24,236	)
Change in fair value		8,333,060			205,116
Foreign exchange differences		197,447			203,509
Others (*)		81,364			13,513

Ending balance	W	42,010,506			35,628,136

(*)

For the six-month period ended June 30, 2021, others represent the increase in securities measured at FVOCI including shares of DAEHAN SHIPBUILDING CO., LTD., HEUNG-A SHIPPING CO.,LTD. and others acquired in accordance with the workout plan decided by the Council of Financial Creditors and shares of Woongjin Energy Co., Ltd acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act. 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 shares of Barun Electronics Co., Ltd., Korea Heat

S-50

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

6. Securities Measured at FVOCI, Continued

Exchanger Co.,Ltd., SUNGCHANG ENGINEERING & CONSTRUCTION CO., LTD., NEOV INC. and others acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act.

(3)	Securities measured at FVOCI with disposal restrictions in securities measured at FVOCI as of June 30, 2021 and December 31, 2020 are as follows:


*Company (1)**	June 30, 2021
*Company (1)**	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	160,818	Undecided
High Gain Antenna Co., Ltd.		18,138		265	Undecided
Engine Tech Co., Ltd.		500,000		1	Undecided
CREA IN Co., Ltd.		14,383		107	Until December 21, 2021
Heung-A Shipping Co., Ltd.		3,019,800		3	Until July 11, 2022
Kumho Tire Co., Inc.		21,339,320		171,141	Until July 6, 2023(*2)
POSCO Plantec Co., Ltd.		1,838,744		2,214	Until December 31, 2023 or listing date

	26,843,435		W 334,549

(*1)	For the six-month period ended June 30, 2021, shares of Taihan Electric Wire Co., Ltd. held as of December 31, 2020 have been sold.

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


Company	December 31, 2020
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	150,244	Undecided
High Gain Antenna Co., Ltd.		18,138		—	Undecided
Engine Tech Co., Ltd.		500,000		1	Undecided
Taihan Electric Wire Co., Ltd.		15,892,055		21,772	Undecided
POSCO Plantec Co., Ltd.		1,838,744		2,468	Until June 9, 2021
CREA IN Co., Ltd.		14,383		140	Until December 21, 2021
Kumho Tire Co., Inc.		21,339,320		80,769	Until July 6, 2023(*)

	39,715,690		W255,394

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

S-51

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

6. Securities Measured at FVOCI, Continued

(4)	Changes in the loss allowance in relation to securities measured at FVOCI for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
				Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	9,671			1,209			70,398		81,278
Transfer to 12-month expected credit loss		76			(76	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(1,895	)		1,895			—		—
Transfer to credit-impaired debt		—			—			—		—
Provision for loss allowance		1,292			1,290			345		2,927
Disposal		(542	)		—			—		(542	)
Foreign currency translation and others		1,585			(1,238	)		196		543

Ending balance	W	10,187			3,080			70,939		84,206


	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 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, 2021 and 2020 (Unaudited), and December 31, 2020

7. Securities Measured at Amortized Cost

(1)	Securities measured at amortized cost as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	1,094,179			1,094,179
Financial bonds		1,040,319			1,040,284
Corporate bonds		282,734			282,671

		2,417,232			2,417,134
Less: loss allowance		(98	)		—

	W	2,417,134			2,417,134


	December 31, 2020
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	665,183			665,183
Financial bonds		120,090			120,081

		785,273			785,264
Less: loss allowance		(9	)		—

	W	785,264			785,264

(2)	Changes in securities measured at amortized cost for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Beginning balance	W	785,264			1,501,947
Acquisition		1,804,677			657,702
Redemption		(170,000	)		(1,340,002	)
Change due to amortization		(2,718	)		(2,247	)
Impairment loss		(89	)		(2	)

Ending balance	W	2,417,134			817,398

S-53

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

8. Loans Measured at FVTPL

(1)	Loans measured at FVTPL as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021				December 31, 2020
	Amortized cost		Fair value (Carrying amounts)		Amortized cost		Fair value (Carrying amounts)
Loans in Korean won:
Privately placed corporate bonds	W	467,762		696,048		795,871		1,429,258
Loans in foreign currencies/off-shores:
Privately placed corporate bonds		5,650		5,240		5,440		5,256

	W	473,412		701,288		801,311		1,434,514

(2)	Gains (losses) related to loans measured at FVTPL for the six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	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	1,820,467			1,832,631			1,171			2,678
Transaction losses		(3,494	)		(4,461	)		(13,948	)		(17,188	)

		1,816,973			1,828,170			(12,777	)		(14,510	)
Valuation gains (losses) on loans measured at FVTPL
Valuation gains		(830,230	)		121,556			43,623			62,057
Valuation losses		(1,111	)		(4,899	)		(1,407	)		(6,719	)

		(831,341	)		116,657			42,216			55,338

	W	985,632			1,944,827			29,439			40,828

S-54

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

9. Loans Measured at Amortized Cost

(1)	Loans measured at amortized cost and loss allowance for loan as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021					December 31, 2020
	Amortized cost			Fair value		Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	65,337,331			63,612,342		63,711,135			62,132,170
Loans for facility development		53,224,325			52,256,010		51,237,311			50,692,553
Loans for households		217,119			216,641		238,011			240,468
Inter-bank loans		2,864,969			2,690,196		2,710,868			2,589,344

		121,643,744			118,775,189		117,897,325			115,654,535
Loans in foreign currencies:
Loans		18,908,566			18,653,701		17,196,875			16,860,390
Inter-bank loans		2,488,936			2,488,529		1,636,589			1,636,166
Off-shore loans		15,453,865			15,097,262		14,697,580			14,387,438

		36,851,367			36,239,492		33,531,044			32,883,994
Other loans:
Bills bought in foreign currency		2,210,969			2,209,807		2,198,964			2,198,079
Advances for customers on acceptances and guarantees		39,447			9,789		49,908			10,776
Privately placed corporate bonds		1,120,043			909,380		1,182,436			969,648
Others		5,506,649			5,384,093		4,223,895			4,102,454

		8,877,108			8,513,069		7,655,203			7,280,957

					163,527,750					155,819,486

Less:
Loss allowance for loan		(4,474,340	)				(3,776,491	)
Present value discount		(16,128	)				(15,906	)
Deferred loan origination costs and fees		12,785					9,003

	W	162,894,536					155,300,178

S-55

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

9. Loans Measured at Amortized Cost, Continued

(2)	Changes in loss allowance for loan for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	640,094			1,398,461			1,737,936			3,776,491
Transfer to 12-month expected credit loss		7,761			(7,761	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(602,527	)		602,583			(56	)		—
Transfer to credit-impaired		(152,782	)		(241,699	)		394,481			—
Provision for loss allowance		393,374			421,122			114,110			928,606
Write-offs		—			—			(20,000	)		(20,000	)
Recovery		—			—			38,992			38,992
Disposal		—			—			(195,323	)		(195,323	)
Debt-to-equity swap		—			—			(118,676	)		(118,676	)
Foreign currency translation		2,252			19,747			9,561			31,560
Other		(2,199	)		19,566			15,323			32,690

Ending balance	W	285,973			2,212,019			1,976,348			4,474,340


	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

S-56

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

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, 2021 and 2020 are as follows:


	June 30, 2021					June 30, 2020
	Three-month period ended		Six-month period ended			Three-month period ended			Six-month period ended
Provision for loan allowance for loan	W	(838,872)		(928,606	)		(139,199	)		(338,691	)
Gains(losses) on disposal of loan		4,129		32,525			(39,296	)		(41,783	)

	W	(834,743)		(896,081	)		(178,495	)		(380,474	)

(4)	Changes in net deferred loan origination costs and fees for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Beginning balance	W	9,003			7,188
New deferrals		11,060			7,963
Amortization		(7,278	)		(6,025	)

Ending balance	W	12,785			9,126

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.

The Bank applies net investment hedge accounting by designating non-derivative financial instruments as hedging instruments and any gain or loss on the hedging instruments relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the foreign currency translation reserve.

Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operation.

S-57

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		1,784,822		—			—
Swaps		200,478,063		200,477,826		1,027,740			614,939
Options		8,518,394		13,037,459		290,111			327,618

		208,996,457		215,300,107		1,317,851			942,557
Currency
Futures		16,950		—		—			—
Forwards		67,811,241		52,534,086		1,082,293			1,005,986
Swaps		53,101,754		65,242,631		1,738,484			1,637,398
Options		240,979		241,302		1,816			1,171

		121,170,924		118,018,019		2,822,593			2,644,555
Stock
Options		355,321		485,257		8,596			439
Allowance and other adjustments		—		—		(22,721	)		(642	)

		330,522,702		333,803,383		4,126,319			3,586,909
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		23,714,892		23,714,892		586,723			30,763
Currency
Swaps		9,008,004		8,703,870		433,438			39,698
Allowance and other adjustments		—		—		(359	)		(4,197	)

		32,722,896		32,418,762		1,019,802			66,264

	W	363,245,598		366,222,145		5,146,121			3,653,173

(*)	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, 2021 and 2020 (Unaudited), and December 31, 2020

10. Derivative Financial Instruments, Continued


	December 31, 2020
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	55,000		151,200		—			—
Swaps		187,095,329		187,096,172		1,493,796			811,643
Options		9,055,649		12,890,976		291,068			329,946

		196,205,978		200,138,348		1,784,864			1,141,589
Currency
Futures		16,320		—		—			—
Forwards		58,129,120		49,012,225		1,807,677			2,251,316
Swaps		50,228,615		56,919,490		3,285,228			2,808,945
Options		422,146		403,029		2,909			5,299

		108,796,201		106,334,744		5,095,814			5,065,560
Stock
Options		53,571		7,315		8,214			661
Allowance and other adjustments		—		—		(7,921	)		(908	)

		305,055,750		306,480,407		6,880,971			6,206,902
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		18,877,120		18,877,120		885,364			19,567
Currency
Swaps		8,308,800		7,985,902		563,558			83,201
Allowance and other adjustments		—		—		(517	)		(4,383	)

		27,185,920		26,863,022		1,448,405			98,385

	W	332,241,670		333,343,429		8,329,376			6,305,287

(*)	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.

(2)	The notional amounts outstanding for the hedging instruments by period as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	50,000		1,023,346		3,366,541		14,690,423		4,584,582		23,714,892
Currency:
Notional amounts outstanding	W	340,938		716,220		926,812		6,284,581		739,453		9,008,004

S-59

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

10. Derivative Financial Instruments, Continued



	December 31, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	47,200		154,043		3,015,053		10,843,135		4,817,689		18,877,120
Currency:
Notional amounts outstanding	W	77,504		290,040		1,851,289		5,711,249		378,718		8,308,800

(3)	Details of the balances of the hedging instruments by risk type as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Notional amounts				Balances				Changes in fair value for the period
	Buy		Sell		Assets		Liabilities		Changes in fair value for the period
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	79,100		79,100		—		—		962
Fair value hedge accounting:
Interest rate risk:
Swaps		23,635,792		23,635,792		586,723		30,763		(342,181	)
Currency risk:
Swaps		9,008,004		8,703,870		433,438		39,698		(143,716	)

		32,643,796		32,339,662		1,020,161		70,461		(485,897	)

	W	32,722,896		32,418,762		1,020,161		70,461		(484,935	)


	December 31, 2020
	Notional amounts				Balances				Changes in fair value for 2020
	Buy		Sell		Assets		Liabilities		Changes in fair value for 2020
Cash flow hedge accounting:
Interest rate risk
Swaps	W	76,160		76,160		—		—		23
Fair value hedge accounting:
Interest rate risk
Swaps		18,800,960		18,800,960		885,364		19,567		358,347
Currency risk
Swaps		8,308,800		7,985,902		563,558		83,201		502,957

		27,109,760		26,786,862		1,448,922		102,768		861,304

	W	27,185,920		26,863,022		1,448,922		102,768		861,327

S-60

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Carrying amounts				Change in value of the hedged item					Changes in fair value for the period			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities		Changes in fair value for the period			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		79,100		—			—		—			953
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		2,006,650		—		(64,837	)		—		(21,208	)		—
Debt debentures		—		22,248,893		—			290,748		358,272			—
Other liabilities (Deposits, etc.)		—		118,661		—			5,611		6,430			—

		2,006,650		22,367,554		(64,837	)		296,359		343,494			—
Currency risk:
Debt debentures		—		9,041,822		—			251,458		148,226			—

		2,006,650		31,409,376		(64,837	)		547,817		491,720			—

	W	2,006,650		31,488,476		(64,837	)		547,817		491,720			953


	December 31, 2020
	Carrying amounts				Change in value of the hedged item					Changes in fair value for 2020			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities		Changes in fair value for 2020			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk
Debt debentures	W	—		76,160		—			—		—			47
Fair value hedge accounting:
Interest rate risk
Securities measured at FVOCI		1,922,565		—		18,217			—		47,606			—
Debt debentures		—		18,549,949		—			628,869		(396,922	)		—
Other liabilities (Deposits, etc.)		—		120,394		—			11,594		(8,770	)		—

		1,922,565		18,670,343		18,217			640,463		(358,086	)		—
Currency risk
Debt debentures		—		8,413,087		—			24,675		(503,895	)		—

		1,922,565		27,083,430		18,217			665,138		(861,981	)		—

	W	1,922,565		27,159,590		18,217			665,138		(861,981	)		47

S-61

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	2021		2020
Interest rate risk	W	1,313		(4,447	)
Currency risk		4,510		(179	)

	W	5,823		(4,626	)

(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 periods ended June 30, 2021 and 2020 is as follows:

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

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

(7)	Details of net investments in foreign operations for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	Changes in fair value	Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W 33,052	15,923

	2020
	Changes in fair value	Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W (43,437)	48,975

S-62

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Carrying amount		Changes in fair value for the period			Change in the value of the hedging instrument recognized in other comprehensive income for the period			Hedge ineffectiveness recognized in profit or loss for the period
Debentures in foreign currencies	W	944,270		(33,052	)		(33,052	)		—

	December 31, 2020
	Carrying amount		Changes in fair value for 2020			Change in the value of the hedging instrument recognized in other comprehensive income for 2020			Hedge ineffectiveness recognized in profit or loss for 2020
Debentures in foreign currencies	W	732,566		43,437			43,437			—

(9)

In relation to interest rate benchmark reform, the amendments provide a practical expedient allowing entities to change the effective interest rate instead of changing the carrying amount and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The Bank’s notional amounts outstanding for hedging derivative instruments affected by Interest Rate Benchmark Reform as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
USD 3M LIBOR	W	22,775,296		17,393,414
KRW 3M CD		3,705,000		2,635,000
EUR 3M EURIBOR		516,376		537,149
EUR 6M EURIBOR		672,210		669,120
GBP 6M LIBOR		216,293		205,904
JPY 3M LIBOR		22,487		23,194

S-63

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates

(1)	Investments in subsidiaries and associates as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Subsidiaries:(*1)
KDB Asia Ltd.	W	332,907		332,907
KDB Bank Europe Ltd.(*2)		144,790		144,659
KDB Ireland Ltd.		62,389		62,389
KDB Bank Uzbekistan Ltd.		47,937		47,937
Banco KDB Do Brazil S.A.(*3)		34,032		31,270
KDB Indonesia Ltd.		40,288		40,233
KDB Silicon Valley LLC		5,565		—
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		149,526		156,109
Korea Railroad Financing 1		87,469		90,316
Korea Education Financing		47,939		50,274
KDB Infrastructure Investment Asset Management Co., Ltd.		16,843		16,843
Korea Infrastructure Financing Co.(*4)		—		2,313
KDB Investment PEF No.1(*5)		1,137,683		977,570
KDB Consus Value PEF(*6)		157,525		157,759
KDB Sigma PEF II		10,356		18,468
KDB Value PEF VII(*7)		350		9,231
KDB-IAP OBOR PEF(*8)		—		6,086
KDB Asia PEF		36,672		26,326
KDB Small Medium Mezzanine PEF		81,740		81,740
Corporate Liquidity Assistance Agency Co., Ltd.		1,000,000		1,000,000

		4,062,801		3,921,220

Associates:
Korea Electric Power Co., Ltd.		16,921,067		16,921,067
Korea Tourism Organization		337,286		337,286
Korea Infrastructure Financing 2 Co.		213,028		219,902
Korea Ocean Business Corporation		631,777		631,777
Korea Real Estate Board		58,492		58,492
HMM Co., Ltd.		2,736,835		78,835
GM Korea Company(*9)		402,942		436,930
Hanjin Heavy Industries & Construction Co., Ltd.(*10)		—		—
HANJIN KAL		500,000		500,000
Multi Asset Electronic Power PEF(*11)		—		19,464
Shinbundang Railroad Co., Ltd.(*12)		30,999		30,999
Troika Resources Investment PEF(*13)		2,294		2,336
Others(*14)		2,428,463		2,395,253

		24,263,183		21,632,341

	W	28,325,984		25,553,561

S-64

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*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 year ended December 31, 2020, considering the impaired capital of Daehan Shipbuilding Co., Ltd. as objective evidence of impairment.

(*2)

For the period ended June 30, 2021, the Bank recognizedW131 million of reversal of impairment losses considering increase in value in use due to enhancement of expected cash flows from the shares held by the Bank, while for the year ended December 31, 2020 the Bank recognizedW58,965 million of impairment losses.

(*3)

For the period ended June 30, 2021, the Bank recognizedW2,762 million of reversal of impairment losses considering increase in value in use due to enhancement of expected cash flows from the shares held by the Bank, while for the year ended December 31, 2020 the Bank recognizedW14,279 million of impairment losses.

(*4)	For the period ended June 30, 2021, Korea Infrastructure Financing Co. was liquidated and excluded from the Bank’s subsidiaries.

(*5)

The Bank recognizedW146,779 million andW2,153 million of reversal of impairment losses for the period ended June 30, 2021 and the year ended December 31, 2020, respectively, considering the increase in the value in use of the shares of Daewoo Engineering & Construction Co., Ltd. held by KDB Investment PEF NO.1 as objective evidence of recovery of impairment.

(*6)

The Bank made a stock purchase agreement with JC Partners on the December 31, 2020 to sell the Bank’s shares of KDB Life Insurance Co., Ltd., the Bank’s sub-subsidiary. The Bank recognizedW234 million andW176,327 million of impairment losses for the period ended June 30, 2021 and the year ended December 31, 2020, respectively, based on the expected cash flows distributed to the Bank through the disposal of KDB Life Insurance Co., Ltd.

(*7)	The Bank recognizedW2,200 million of impairment losses for the period ended June 30, 2021, considering the decline in net asset values due to the decrease in fair value of assets held as objective evidence of impairment.

(*8)	The Bank recognizedW6,086 million andW28,054 million of impairment losses for the period ended June 30, 2021 and the year ended December 31, 2020, respectively, considering the decline in net asset values due to the decrease in fair value of assets held as objective evidence of impairment.

(*9)	For the period ended June 30, 2021, the Bank recognizedW33,988 million of impairment losses considering decrease in value in use due to deterioration of operating cash flows, while for the year ended December 31, 2020 the Bank recognizedW35,417 million of reversal of impairment losses.

(*10)

As described in Note 16, the Bank selected Dongbu-led consortium as the preferred bidder for Hanjin Heavy Industries & Construction Co., Ltd. on December 22, 2020, and made the share purchase agreement on April 15, 2021. The relevant investments in associates were reclassified as assets held for sale. The Bank recognizedW11,613 million of reversal of impairment losses for the year ended December 31, 2020 based on the expected cash flows distributed to the Bank through the disposal of Hanjin Heavy Industries & Construction Co., Ltd.

(*11)

For the period ended June 30, 2021, Multi Asset Electronic Power PEF was liquidated and excluded from the Bank’s subsidiaries.

(*12)

The Bank recognizedW21,577 million of reversal of impairment losses for the year ended December 31, 2020, respectively, considering increase in fair value due to improvement of expected dividend cash flows from the shares held by the Bank.

(*13)

The Bank recognizedW42 million andW1,222 million of impairment losses for the period ended June 30, 2021 and the year ended December 31, 2020, respectively, considering the decline in net asset values due to the decrease in fair value of assets held as objective evidence of impairment.

S-65

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*14)

The Bank recognizedW19,126 million of impairment losses for KoFC Value-up Private Equity Fund and 16 other companies for the period ended June 30, 2021. The Bank recognizedW29,503 million of impairment losses for KBS KDB PEF and 19 other companies for the year ended December 31, 2020.

(2)	The market value of marketable investments in subsidiaries and associates as of June 30, 2021 and December 31, 2020 are as follows:


	Market value				Carrying amounts
	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Korea Electric Power Co., Ltd.	W	5,249,196		5,787,846		16,921,067		16,921,067
HMM Co., Ltd.		4,442,649		574,730		2,736,835		78,835
HANJIN KAL		466,102		445,621		500,000		500,000
KG Dongbu Steel Co., Ltd.		71,511		127,359		24,652		67,599

(3)	The key financial information of subsidiaries and associates invested and ownership ratios as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	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	3,001,896		2,494,360		507,536			67,250		18,848			36,169			100
KDB Bank Europe Ltd.	Hungary		December	Finance		1,064,542		948,913		115,629			17,754		1,806			4,234			100
KDB Ireland Ltd.	Ireland		December	Finance		514,786		411,133		103,653			9,193		962			4,553			100
KDB Bank Uzbekistan Ltd.	Uzbekistan		December	Finance		672,128		594,928		77,200			12,978		4,725			11,313			86.32
Banco KDB Do Brazil S.A.	Brazil		December	Finance		368,628		304,161		64,467			29,818		598			5,901			100
KDB Indonesia Ltd.	Indonesia		December	Finance		85,196		55,484		29,712			4,332		(963	)		(724	)		84.65
KDB Silicon Valley LLC	USA		December	Finance		5,652		—		5,652			2		2			—			100
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea		December	Manufacturing		9,816,076		7,189,675		2,626,401			2,171,179		(1,246,945	)		(1,241,471	)		55.68
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea		December	Manufacturing		256,441		237,764		18,677			38,022		(3,664	)		(3,664	)		100
Daehan Shipbuilding Co., Ltd.(*1)	Korea		December	Manufacturing		564,950		758,020		(193,070	)		379,533		(38,731	)		(38,731	)		70.04
KDB Capital Corporation	Korea		December	Specialized Credit Finance		7,201,847		6,018,893		1,182,954			293,389		120,105			121,691			99.92
Korea BTL Financing 1(*2)	Korea		Semi- annually	Financial investment		381,425		245		381,180			9,098		8,549			8,549			41.67
Korea Railroad Financing 1(*2)	Korea		Semi- annually	Financial investment		186,069		5		186,064			3,677		3,451			3,451			50
Korea Education Financing(*2)	Korea		Semi- annually	Financial investment		104,118		7		104,111			1,970		1,621			1,621			50
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea		December	Asset management		56,823		9,423		47,400			17,862		9,097			9,097			84.16
KDB Investment Co., Ltd.	Korea		December	Finance		78,211		2,336		75,875			4,556		1,272			1,272			100
KDB Biz Co., Ltd.	Korea		December	Services		6,748		4,624		2,124			11,999		(176	)		(176	)		100
KDB Investment PEF No.1	Korea		December	Financial investment		10,718,947		7,928,160		2,790,787			4,219,728		136,810			152,468			99.40
KDB Consus Value PEF	Korea		December	Financial investment		19,633,259		19,380,190		253,069			2		(8,585	)		(259,601	)		68.20
KDB Sigma PEF II	Korea		December	Financial investment		15,117		2		15,115			24		(3,316	)		(3,316	)		60

S-66

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	June 30, 2021
	Country	Fiscal year end		Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
KDB Value PEF VII(*3)	Korea		December	Financial investment		18,362		—		18,362			5		(1,137	)		(1,137	)		50
KDB-IAP OBOR PEF(*3)	Korea		December	Financial investment		52,473		52,187		286			—		(72,020	)		(70,094	)		33.52
KDB Asia PEF(*3)	Korea		December	Financial investment		69,180		181		68,999			—		(1,842	)		1,634			50
KDB Small Medium Mezzanine PEF	Korea		December	Financial investment		102,162		218		101,944			8,182		(8,159	)		(7,371	)		66.67
Corporate Liquidity Assistance Agency Co., Ltd.	Korea		December	Financial investment		4,417,448		3,398,050		1,019,398			39,305		16,689			16,689			100
Components and Materials M&A PEF	Korea		December	Financial investment		1,047		1,831		(784	)		1		(33	)		(33	)		83.33

Associates:
Korea Electric Power Co., Ltd.	Korea		December	Electricity Generation		206,982,941		137,290,234		69,692,707			28,594,215		(610,120	)		(275,589	)		32.90
Korea Tourism Organization	Korea		December	Culture and Tourism administration		1,236,590		369,410		867,180			160,124		(70,915	)		(68,557	)		43.58
Korea Infrastructure Financing 2 Co.	Korea		December	Financial investment		839,048		44,724		794,324			32,424		6,069			6,069			26.67
Korea Ocean Business Corporation	Korea		December	Finance		19,780,026		7,073,807		12,706,219			10,719,866		7,718,473			7,725,648			22.11
Korea Real Estate Board	Korea		December	Appraisal		299,149		76,072		223,077			99,958		13,958			13,771			30.60
GM Korea Company (*4)	Korea		December	Manufacturing		4,853,377		3,464,004		1,389,373			3,961,834		(293,362	)		(290,418	)		17.02
HMM Co., Ltd.(*5)	Korea		December	Foreign cargo transportation		12,467,253		7,290,562		5,176,691			5,334,746		364,570			465,962			24.96
HANJIN KAL(*4)	Korea		December	Holding compnay		3,510,994		1,977,693		1,533,301			175,667		(118,275	)		(109,509	)		10.66
Shinbundang Railroad Co., Ltd.(*6)	Korea		December	Other		654,510		973,492		(318,982	)		66,206		(191,263	)		(191,263	)		10.98
Troika Resources Investment PEF(*7)	Korea		December	Financial investment		5,573		1,371		4,202			51		(9	)		(9	)		54.94


	December 31, 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	2,693,398		2,222,031		471,367			132,319		12,603			(18,151	)		100
KDB Bank Europe Ltd.	Hungary		December	Finance		1,191,023		1,079,628		111,395			55,804		(15,780	)		(26,355	)		100
KDB Ireland Ltd.	Ireland		December	Finance		468,754		369,654		99,100			23,062		4,572			(1,828	)		100
KDB Bank Uzbekistan Ltd.	Uzbekistan		December	Finance		628,874		562,988		65,886			24,028		8,401			(4,776	)		86.32
Banco KDB Do Brazil S.A.	Brazil		December	Finance		315,666		257,100		58,566			96,007		1,917			(19,812	)		100
KDB Indonesia Ltd.	Indonesia		December	Finance		87,891		57,455		30,436			12,345		1,831			1,831			84.65
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Korea		December	Manufacturing		10,320,775		6,451,804		3,868,971			7,030,175		86,573			114,107			55.68
Sam Woo Heavy Industries Co., Ltd.(*1)	Korea		December	Manufacturing		253,735		231,394		22,341			135,932		1,037			1,104			100
Daehan Shipbuilding Co., Ltd.(*1)	Korea		December	Manufacturing		636,255		790,594		(154,339	)		765,204		(5,518	)		(5,704	)		70.04
KDB Capital Corporation	Korea		December	Specialized Credit Finance		6,607,724		5,518,888		1,088,836			431,722		173,681			171,657			99.92
Korea BTL Financing 1(*2)	Korea		Semi- annually	Financial investment		395,038		259		394,779			14,120		6,822			6,822			41.67

S-67

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2020
	Country	Fiscal year end		Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Korea Railroad Financing 1(*2)	Korea		Semi- annually	Financial investment		190,706		9		190,697			9,681		9,201			9,201			50
Korea Education Financing(*2)	Korea		Semi- annually	Financial investment		108,656		7		108,649			7,275		6,994			6,994			50
KDB Infrastructure Investment Asset Management Co., Ltd.	Korea		December	Asset management		59,818		10,715		49,103			35,072		17,972			17,951			84.16
KDB Investment Co., Ltd.	Korea		December	Finance		77,601		2,997		74,604			9,420		3,042			3,054			100
KDB Biz Co., Ltd.	Korea		December	Services		8,207		5,907		2,300			25,468		1,149			603			100
Korea Infrastructure Financing Co.	Korea		December	Financial investment		2,777		12		2,765			191		(22	)		(22	)		85
KDB Investment PEF No.1	Korea		December	Financial investment		9,701,074		7,233,393		2,467,681			8,361,795		58,745			23,799			99.40
KDB Consus Value PEF	Korea		December	Financial investment		19,548,528		19,015,550		532,978			8		(140,754	)		(172,013	)		68.20
KDB Sigma PEF II	Korea		December	Financial investment		39,432		1		39,431			51,694		51,465			52,715			60
KDB Value PEF VII(*3)	Korea		December	Financial investment		27,294		82		27,212			763		(154	)		(154	)		50
KDB-IAP OBOR PEF(*3)	Korea		December	Financial investment		119,687		49,307		70,380			—		(23,969	)		(28,026	)		33.52
KDB Asia PEF(*3)	Korea		December	Financial investment		46,847		175		46,672			—		4,910			(5,606	)		50
KDB Small Medium Mezzanine PEF	Korea		December	Financial investment		120,692		377		120,315			9,416		(4,740	)		(5,655	)		66.67
Corporate Liquidity Assistance Agency Co., Ltd.	Korea		December	Financial investment		2,992,986		1,990,277		1,002,709			20,419		2,709			2,709			100
Components and Materials M&A PEF	Korea		December	Financial investment		1,076		1,827		(751	)		2		(13	)		(13	)		83.33

Associates:
Korea Electric Power Co., Ltd.	Korea		December	Electricity Generation		203,142,111		132,475,265		70,666,846			58,569,314		1,991,347			1,802,824			32.90
Korea Tourism Organization	Korea		December	Culture and Tourism administration		1,351,779		388,854		962,925			488,285		(56,712	)		(60,819	)		43.58
Korea Infrastructure Financing 2 Co.	Korea		December	Financial investment		874,470		31,518		842,952			68,022		47,318			47,318			26.67
Korea Ocean Business Corporation	Korea		December	Finance		8,826,068		3,842,127		4,983,941			3,597,982		2,689,659			2,690,496			22.33
Korea Real Estate Board (formerly known as Korea Appraisal Board)	Korea		December	Appraisal		263,852		52,438		211,414			177,955		5,540			3,093			30.60
GM Korea Company(*4)	Korea		December	Manufacturing		5,415,322		3,739,509		1,675,813			8,504,588		(302,847	)		(302,847	)		17.02
HMM Co., Ltd.(*5)	Korea		December	Foreign cargo transportation		9,373,360		7,684,812		1,688,548			6,413,270		123,889			(33,766	)		12.61
HANJIN KAL(*4)	Korea		December	Holding compnay		3,488,569		1,824,304		1,664,265			408,827		(269,846	)		(222,157	)		10.66
Multi Asset Electronic Power PEF	Korea		December	Financial investment		70,913		213		70,700			36,330		36,218			36,218			50
Shinbundang Railroad Co., Ltd.(*6)	Korea		December	Other		679,176		999,986		(320,810	)		76,427		(50,329	)		(50,329	)		10.98
Troika Resources Investment PEF(*7)	Korea		December	Financial investment		5,496		1,286		4,210			312		(131	)		(131	)		54.94

(*1)	The Bank consolidates the investees which were subsidiaries of Daewoo Shipbuilding & Marine Engineering Co., Ltd. as the Bank has had control over the investees through the commencement of the administrative proceeding since the past.

S-68

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*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 is less than 20%, the Bank has significant influence considering the right to elect the investees’ directors and the Bank classifies the companies as associates.

(*5)	Although the Bank’s shareholding is less than 20%, the Bank is considered to have significant influence as the principal creditor bank for the year ended December 31, 2020. For the period ended June 30, 2021, the Bank exercised the conversion right and hold more than 20% of the shares.

(*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 does not have the ability to direct the relevant activities unilaterally.

S-69

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

12. Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	January 1, 2021		Acquisition/ depreciation		Disposal				Reclassification			Foreign exchange differences			June 30, 2021
Acquisition cost:
Land	W	305,836		—		(62	)			(543	)		—			305,231
Buildings and structures		600,627		2,548		(660	)			(525	)		—			601,990
Leasehold improvements		42,180		578		(4,525	)			—			23			38,256
Vehicles		734		—		—				—			15			749
Equipment		54,528		1,385		(1,704	)			—			67			54,276
Construction in progress		13,615		8,712		—				(573	)		—			21,754
Right-of-use assets (Real estate)		81,203		26,163		(17,371	)			—			1,365			91,360
Right-of-use assets (Vehicles)		5,989		703		(516	)			—			24			6,200
Right-of-use assets (Others)		27		—		—				—			1			28
Others		179,109		3,388		(32,878	)			—			105			149,724

		1,283,848		43,477		(57,716	)			(1,641	)		1,600			1,269,568

Accumulated depreciation:
Buildings and structures(*)		200,349		8,463		(289	)			(147	)		—			208,376
Leasehold improvements		36,025		1,839		(3,997	)			—			(2	)		33,865
Vehicles		533		31		—				—			8			572
Equipment(*)		44,197		1,527		(1,186	)			—			50			44,588
Right-of-use assets (Real estate)		39,533		15,315		(13,059	)			—			446			42,235
Right-of-use assets (Vehicles)		2,604		1,038		(273	)			—			11			3,380
Right-of-use assets (Others)		24		4		—				—			1			29
Others		143,817		8,657		(32,614	)			—			60			119,920
								��
		467,082		36,874		(51,418	)			(147	)		574			452,965

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

		5,384		—		—				—			—			5,384

	W	811,382		6,603		(6,298	)			(1,494	)		1,026			811,219

(*)	The amounts include government grants.

S-70

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

12. Property and Equipment, Continued


	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-71

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

13. Investment Property

Changes in investment property for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	January 1, 2021		Acquisition/ depreciation			Reclassification			June 30, 2021
Acquisition cost:
Land	W	57,778		—			543			58,321
Buildings and structures		56,089		—			1,098			57,187

		113,867		—			1,641			115,508
Accumulated depreciation:
Buildings and structures		29,827		1,246			147			31,220

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

		2,975		—			—			2,975

	W	81,065		(1,246	)		1,494			81,313


	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

The fair value of the Bank’s investment property, as determined based on valuation by an independent appraiser, amounts toW97,264 million andW96,959 million as of June 30, 2021 and December 31, 2020, 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, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

14. Intangible Assets

Changes in intangible assets for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	January 1, 2021		Acquisition		Disposal		Amortization			Foreign exchange differences		June 30, 2021
Development expense	W	155,479		2,676		—		(21,740	)		5		136,420
Equipment usage right		482		—		—		(22	)		16		476
Other deposits provided		11,940		—		—		—			19		11,959
Others		20,516		3,269		—		(4,861	)		5		18,929

	W	188,417		5,945		—		(26,623	)		45		167,784


	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

15. Other Assets

Other assets as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021			December 31, 2020
Accounts receivable	W	7,216,599			2,662,879
Unsettled domestic exchange receivables		1,747,817			1,313,958
Accrued income		366,955			343,901
Guarantee deposits		205,658			193,003
Financial guarantee asset		19,238			22,982
Prepaid expenses		13,712			14,121
Advance payments		7,996			7,953
Others		29,880			182,484

		9,607,855			4,741,281
Loss allowance for other assets		(84,077	)		(79,474	)
Present value discount		(1,213	)		(1,522	)

	W	9,522,565			4,660,285

The carrying amounts of financial assets included in other assets above amounted toW9,487,732 million andW4,463,726 million as of June 30, 2021 and December 31, 2020, respectively, and their fair value amounted toW9,486,382 million andW4,461,117 million as of June 30, 2021 and December 31, 2020, respectively.

S-73

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

16. Assets Held for Sale

Assets held for sale as of June 30, 2021 and December 31, 2020 are as follows:


	2021
	Acquisition cost		Fair value less costs to sell		Carrying amount		Reversal of impairment loss
Assets held for sale:
Investments in subsidiaries(*1)	W	2,244,664		2,129,428		2,129,428		(499,949	)
Investments in associates(*2)		78,278		78,305		78,305		(27	)

	W	2,322,942		2,207,733		2,207,733		(499,976	)


	2020
	Acquisition cost		Fair value less costs to sell		Carrying amount		Impairment loss
Assets held for sale:
Investments in subsidiaries(*1)	W	2,244,664		1,629,479		1,629,479		25,926
Investments in associates(*2)		78,278		78,278		78,278		—
Property and equipment		5,590		5,590		5,590		—

	W	2,328,532		1,713,347		1,713,347		25,926

(*1)

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 January 22, 2021, 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.

(*2)	The Bank selected Dongbu-led consortium as the preferred bidder for Hanjin Heavy Industries & Construction Co., LTD. on December 22, 2020, and made the share purchase agreement on April 15, 2021. The relevant investments in associates were reclassified as assets held for sale.

S-74

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

17. Financial Liabilities Measured at FVTPL

(1)	Financial liabilities designated at fair value through profit or loss as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Debentures	W	1,449,313		1,510,793
Deposits		443,395		184,164

	W	1,892,708		1,694,957

Changes in fair value of structured debentures and deposits 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 and deposits, 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, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Carrying amount	W	1,892,708		1,694,957
Contractual cash flow amounts		1,885,000		1,580,800

Difference	W	7,708		114,157

18. Deposits

Deposits as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021				December 31, 2020
	Amortized cost		Fair value		Amortized cost		Fair value
Deposits in Korean won:
Demand deposits	W	109,226		109,226		109,570		109,570
Time and savings deposits		39,748,850		39,732,134		37,097,869		37,110,866
Certificates of deposit		27,135		27,059		467,329		467,342

		39,885,211		39,868,419		37,674,768		37,687,778

Deposits in foreign currencies:
Demand deposits		1,130,402		1,130,402		1,534,717		1,534,717
Time and savings deposits		3,595,362		3,594,596		2,775,150		2,774,425
Certificates of deposit		3,671,536		3,654,389		3,289,651		3,271,530

		8,397,300		8,379,387		7,599,518		7,580,672

Off-shore deposits in foreign currencies:
Demand deposits		592,708		592,708		605,133		605,133

	W	48,875,219		48,840,514		45,879,419		45,873,583

S-75

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

19. Borrowings

(1)	Borrowings as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.15	W	4,371,533			4,363,152
Borrowings in foreign currencies		—		5.25		11,915,755			11,912,412
Off-shore borrowings in foreign currencies		—		1.89		1,988,201			1,987,854
Others		0.01		3.29		2,700,581			2,699,971

						20,976,070			20,963,389

Deferred borrowing costs						(175	)

					W	20,975,895


	December 31, 2020
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.15	W	4,216,659			4,210,221
Borrowings in foreign currencies		—		3.86		9,996,208			9,988,337
Off-shore borrowings in foreign currencies		—		2.50		1,790,665			1,791,294
Others		0.01		2.55		2,884,139			2,884,301

						18,887,671			18,874,153

Deferred borrowing costs						(60	)

					W	18,887,611

(2)	Borrowings in Korean won before adjusting for gains and losses on deferred borrowing costs as of June 30, 2021 and December 31, 2020 are as follows:

Lender

Classification

Annual
interest rate
(%)

June 30,
2021

December 31,
2020

Ministry of Economy and Finance

Borrowings from government fund(*)

0.47 ~ 0.76

117,023

125,101

Korea SMEs and Startups Agency

Borrowings from small and medium enterprise promotion fund

0.51 ~ 2.76

61,766

64,892

Ministry of Culture, Sports and Tourism

Borrowings from tourism promotion fund

0.20 ~ 2.00

3,081,365

2,934,681

Korea Energy Agency

Borrowings from fund for rational use of energy

0.25 ~ 2.30

292,741

295,088

Local governments

Borrowings from local small and medium enterprise promotion fund

0.00 ~ 2.95

32,857

37,198

The Bank of Korea

Borrowings from Bank of Korea

0.25

387,829

373,881

Others

Borrowings from petroleum enterprise fund and others

0.00 ~ 3.15

397,952

385,818

4,371,533

4,216,659

(*)	Borrowings from government fund are subordinated borrowings.

S-76

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:

Lender

Classification

Annual

interest rate (%)

June 30, 2021

December 31,
2020

Mizuho and others

Bank loans from foreign funds

3M Libor + 0.24 ~
3M Libor + 0.78

452,000

435,200

Ministry of Economy and Finance

Exchange equalization fund borrowings in foreign currencies

3M Libor + 0.22 ~
3M Libor + 0.74

190,439

183,360

Central Bank of the Republic Uzbekistan and others

Off-shore short term borrowings

0.16 ~ 1.89

1,207,328

1,487,973

HSBC and others

Off-shore long term borrowings

3M Libor + 0.36

780,873

302,692

Others

Short-term borrowings in foreign currencies

0.08 ~ 5.25

10,571,801

8,567,852

Long term borrowings in foreign currencies

0.10 ~ 1.02

701,515

809,796

13,903,956

11,786,873

20. Debentures

Details of debentures as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.60		6.60	W	108,756,966			109,033,706
Discount on debentures						(59,755	)
Valuation adjustment for fair value hedges						(57,622	)

						108,639,589

Debentures in foreign currencies:
Debentures		—		6.90		19,038,337			20,309,452
Discount on debentures						(36,096	)
Premium on debentures						1,490
Valuation adjustment for fair value hedges						369,818

						19,373,549

Off-shore debentures:
Debentures		—		7.00		15,160,939			15,436,622
Discount on debentures						(28,163	)
Premium on debentures						39
Valuation adjustment for fair value hedges						230,010

						15,362,825

					W	143,375,963			144,779,780

S-77

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

20. Debentures, Continued


	December 31, 2020
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.55		6.60	W	107,480,364			108,542,792
Discount on debentures						(57,255	)
Valuation adjustment for fair value hedges						49,070

						107,472,179

Debentures in foreign currencies:
Debentures		—		6.90		15,799,118			16,883,195
Discount on debentures						(31,438	)
Premium on debentures						1,677
Valuation adjustment for fair value hedges						452,330

						16,221,687

Off-shore debentures:
Debentures		—		7.00		14,496,508			14,662,046
Discount on debentures						(23,869	)
Premium on debentures						79
Valuation adjustment for fair value hedges						152,144

						14,624,862

					W	138,318,728			140,088,033

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, 2021 and December 31, 2020 are as follows:


	June 30, 2021			December 31, 2020
Present value of defined benefit obligation	W	427,349			415,529
Fair value of plan assets		(356,875	)		(364,983	)

	W	70,474			50,546

S-78

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	2021
	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning balance	W	415,529			(364,983	)		50,546
Current service costs		19,668			—			19,668
Interest expense (income)		4,925			(4,619	)		306
Benefits paid by the plan		(12,773	)		12,727			(46	)

Ending balance	W	427,349			(356,875	)		70,474


	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

(3)	Fair value of plan assets for each type as of June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

December 31, 2020

Quoted
market
prices

Unquoted
market
prices

Quoted
market
prices

Unquoted
market
Prices

Due from banks

—

356,875

—

364,983

(4)	Defined benefit costs recognized in profit or loss for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021				June 30, 2020
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Current service costs	W	9,834		19,668		9,386		18,778
Interest expense (income), net		154		306		230		460

	W	9,988		19,974		9,616		19,238

S-79

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

21. Net Defined Benefit Liabilities, Continued

(5)	The principal actuarial assumptions used as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Discount rate (%)		2.54		2.54
Future salary increasing rate (%)		6.08		6.08

(6)	The present value sensitivity of defined benefit obligation as changes in principal actuarial assumptions as of December 31, 2020 is as follows:


	Sensitivity
	1% increase in assumption		1% decrease in assumption
Discount rate		10.16% decrease		12.06% increase
Future salary increasing rate		11.51% increase		9.94% decrease

(7)	The weighted average duration of defined benefit obligation is 11.82 years as of December 31, 2020.

22. Provisions

(1)	Details of provisions as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Provision for unused commitments	W	764,099		770,760
Provision for financial guarantee		49,444		77,498
Provision for payment guarantees		568,867		603,648
Provision for possible losses from lawsuits		1,563		441
Provision for restoration		14,490		15,365
Other provision		47,441		47,458

	W	1,445,904		1,515,170

(2)	Changes in provision for unused commitments for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	479,933			290,827			—		770,760
Transfer to 12-month expected credit loss		294,249			(294,249	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(61,883	)		61,883			—		—
Transfer to credit-impaired		(2,887	)		(4,324	)		7,211		—
Impairment loss (gain)		(321,210	)		298,565			168		(22,477	)
Foreign currency translation		14,763			1,024			29		15,816

Ending balance	W	402,965			353,726			7,408		764,099

S-80

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

22. Provisions, Continued


	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

(3)	Changes in provision for financial guarantee for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	45,567			26,007			5,924			77,498
Transfer to 12-month expected credit loss		97			(17	)		(80	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(5,593	)		5,792			(199	)		—
Transfer to credit-impaired		(8,063	)		(93	)		8,156			—
Impairment loss (gain)		(31,012	)		3,700			(742	)		(28,054	)

Ending balance	W	996			35,389			13,059			49,444


	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

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

S-81

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

22. Provisions, Continued

(4)	Changes in provision for payment guarantees for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	183,963			155,646			264,039		603,648
Transfer to 12-month expected credit loss		27,229			(27,229	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(55,070	)		55,070			—		—
Transfer to credit-impaired exposures		(4,820	)		(761	)		5,581		—
Provision for (reversal of) unused commitments		2,736			(77,483	)		27,684		(47,063	)
Foreign currency translation		1,597			2,802			7,883		12,282

Ending balance	W	155,635			108,045			305,187		568,867


	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 exposures		(954	)		954			—			—
Provision for (reversal of) unused commitments		(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

(5)	Changes of lawsuit provision and other provision for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	Lawsuit provision		Provision for restoration			Other provision
Beginning balance	W	441		15,365			47,458
Increase (decrease) of provision		1,122		(1,211	)		—
Provision used and others		—		336			(17	)

Ending balance	W	1,563		14,490			47,441

S-82

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

22. Provisions, Continued


	2020
	Lawsuit provision		Provision for restoration			Other provision
Beginning balance	W	12,302		15,167			38,983
Increase (decrease) of provision		—		(269	)		—
Provision used and others		—		391			—

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

(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, 2021, the Bank is involved in 21 lawsuits as a plaintiff and 32 lawsuits as a defendant. The aggregate amounts of claims as a plaintiff and a defendant amounted toW196,869 million andW213,778 million, respectively. The Bank provided a provision against contingent loss from pending lawsuits as of June 30, 2021 and additional losses may be incurred depending on the result of pending lawsuits.

S-83

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

22. Provisions, Continued

Major lawsuits in progress as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	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
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^st trial in progress
Korea Land & Housing Corporation	Claim for return of residual property		4,568	2^ndtrial in progress
Kappa Korea and one other	Claim for loans		1,000	1^st trial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^st trial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1^st, 2^nd trial ruled partially against the Bank; 3^rd trial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^st trial ruled in favor of the Bank; 2^nd trial ruled against the Bank; 3^rd trial in progress
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^st trial in progress
Hana Bank	Claim for settlement money and others		7,500	1^st, 2^nd trial ruled in favor of the Bank; 3^rd trial in progress


	December 31, 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
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^st trial in progress
Dadae Construction Co., Ltd.	Absence of liens		2,900	1^sttrial ruled in favor of the Bank; 2^ndtrial 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^st trial in progress
Defense Acquisition Program Administration	Claim for guaranteed debt		56,977	1^st, 2^nd trial ruled partially against the Bank; 3^rd trial in progress

S-84

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

22. Provisions, Continued


	December 31, 2020
	Contents	Amounts		Status of lawsuit
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^st trial ruled in favor of the Bank; 2^nd trial ruled against the Bank; 3^rd trial in progress
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^st trial in progress
Woori Bank	Claim for disposal of debt		12,470	1^st, 2^nd trial ruled in favor of the Bank; 3^rd trial in progress

(9)	Other provision

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

23. Other Liabilities

(1)	Other liabilities as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021			December 31, 2020
Accounts payable	W	6,880,712			2,623,207
Lease liabilities		133,840			75,523
Accrued expense		1,494,709			1,657,438
Advance received		—			920
Unearned income		33,110			45,344
Deposits withholding tax		22,912			22,019
Guarantee money received		398,896			720,932
Foreign exchanges payable		26,873			307,935
Domestic exchanges payable		410,087			587,194
Borrowing from trust accounts		1,494,132			973,885
Financial guarantee liability		21,660			25,347
Others		103,604			64,153

		11,020,535			7,103,897
Present value discount		(85,485	)		(34,891	)

	W	10,935,050			7,069,006

The carrying amount of financial liabilities included in other liabilities above amounted toW10,751,127 million andW6,896,581 million as of June 30, 2021 and December 31, 2020, respectively, and their fair value amounted toW10,739,115 million andW6,889,375 million as of June 30, 2021 and December 31, 2020, respectively.

S-85

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

23. Other Liabilities, Continued

(2)	Details of lease liabilities as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Face value		Discount			Carrying amounts
Real estate	W	129,858		(82,540	)		47,318
Vehicles		3,981		(1,059	)		2,922
Others		1		—			1

	W	133,840		(83,599	)		50,241


	December 31, 2020
	Face value		Discount			Carrying amounts
Real estate	W	71,207		(31,964	)		39,243
Vehicles		3,923		(639	)		3,284
Others		393		(197	)		196

	W	75,523		(32,800	)		42,723

(3)	The amount related to lease recognized in the separate statement of comprehensive income for the six-month periods ended June 30, 2021 and 2020 is as follows:


	June 30, 2021				June 30, 2020
	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	7,322		15,315		6,293		13,983
Vehicles		527		1,038		265		819
Others		1		4		3		6

		7,850		16,357		6,561		14,808

Interest expenses on the lease liabilities		342		357		217		477
Expense relating to short-term leases		—		—		—		66
Expense relating to leases of low-value assets		3,342		3,776		79		150

	W	11,534		20,490		6,857		15,501

(4)	Cash flows used in lease liabilities for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021		2020
Decrease in lease liabilities	W	11,492		12,308
Lease payments relating to short-term leases		—		66
Lease payments relating to leases of low-value assets		3,776		150

	W	15,268		12,524

S-86

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

23. Other Liabilities, Continued

(5)	Maturity analysis of undiscounted lease payments relating to lease liabilities as of June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

15,328

36,174

82,338

—

133,840

December 31, 2020

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

10,659

26,225

38,639

—

75,523

24. Equity

(1) Issued capital

The Bank is authorized to issue up to 6,000 million shares of common stock and has 4,377,311,768 shares issued and 4,153,145,768 shares issued as of June 30, 2021 and December 31, 2020, respectively, and outstanding with a total par value (W5,000 of par value per share) ofW21,886,559 million andW20,765,729 million as of June 30, 2021 and December 31, 2020, respectively.

(2) Capital surplus

Capital surplus as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Paid-in capital in excess of par value	W	44,142		49,530
Surplus from capital reduction(*1)		44,373		44,373
Other capital surplus(*2)		2,390,495		2,390,495

	W	2,479,010		2,484,398

(*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-87

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

24. Equity, Continued

(3) Accumulated other comprehensive income

(i)	Accumulated other comprehensive income as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021			December 31, 2020
Net gain (loss) on securities measured at FVOCI
Valuation gain (loss) on securities measured at FVOCI (before tax)	W	11,141,788			2,787,519
Loss allowance for securities measured at FVOCI (before tax)		84,206			81,278
Income tax effect		(3,087,148	)		(788,919	)

		8,138,846			2,079,878

Exchange differences on translation of foreign operations:
Exchange differences on translation of foreign operations (before tax)		(19,032	)		(60,912	)
Income tax effect		—			—

		(19,032	)		(60,912	)

Valuation gain (loss) on cash flow hedge:
Valuation gain (loss) on cash flow hedge (before tax)		953			47
Income tax effect		(262	)		(13	)

		691			34

Net gain on hedges of net investments in foreign operations:
Net gain on hedges of net investments in foreign operations (before tax)		15,923			48,975
Income tax effect		(4,379	)		(13,468	)

		11,544			35,507

Remeasurements of defined benefit liabilities:
Remeasurements of defined benefit liabilities (before tax)		21,562			21,562
Income tax effect		(5,928	)		(5,928	)

		15,634			15,634

Fair value changes on financial liabilities designated at fair value due to credit risk:
Valuation loss on financial liabilities designated at fair value due to credit risk (before tax)		(7,388	)		(7,959	)
Income tax effect		2,032			2,189

		(5,356	)		(5,770	)

	W	8,142,327			2,064,371

S-88

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

24. Equity, Continued

(ii)	Changes in accumulated other comprehensive income for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	January 1, 2021			Increase (Decrease)			Tax Effect			June 30, 2021
Gain (loss) on Securities Measured at FVOCI	W	2,079,878			8,357,197			(2,298,229	)		8,138,846
Exchange differences on translation of foreign operations		(60,912	)		41,880			—			(19,032	)
Valuation gain (loss) on cash flow hedge		34			906			(249	)		691
Valuation gain (loss) on hedges of net investments in foreign operations		35,507			(33,052	)		9,089			11,544
Remeasurements of defined benefit liabilities		15,634			—			—			15,634
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		(5,770	)		571			(157	)		(5,356	)

	W	2,064,371			8,367,502			(2,289,546	)		8,142,327


	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

(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.

S-89

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

24. Equity, Continued

(i)	Retained earnings as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Legal reserve	W	1,551,154		1,356,142
Voluntary reserve
Regulatory reserve for loan losses		482,885		1,146,038
Unappropriated retained earnings		5,216,992		2,565,852

	W	7,251,031		5,068,032

(ii)	Changes in legal reserve for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021		2020
Beginning balance	W	1,356,142		1,177,851
Transfer from retained earnings		195,012		178,291

Ending balance	W	1,551,154		1,356,142

(iii)

Changes in unappropriated retained earnings for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Beginning balance	W	2,565,852			2,327,769
Contribution to legal reserve		(195,012	)		(178,291	)
Transfer from regulatory reserve for credit losses		663,153			81,662
Dividends		(209,638	)		(111,978	)
Reclassification of gain or loss on equity securities measured at FVOCI		15,029			(64,962	)
Profit for the period		2,377,608			369,343

Ending balance	W	5,216,992			2,423,543

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Beginning balance	W	482,885		1,146,038
Planned provision for (reversal of) regulatory reserve for credit losses		76,926		(663,153	)

Ending balance	W	559,811		482,885

S-90

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	June 30, 2021					June 30, 2020
	Three-month period ended		Six-month period ended			Three-month period ended		Six-month period ended
Profit for the period	W	922,929		2,377,608			770,078		369,343
Obligated amount of reversal of (provision for) regulatory reserve for credit losses		158,709		(76,926	)		91,751		35,030

Profit after adjusting regulatory reserve for credit losses	W	1,081,638		2,300,682			861,829		404,373

Earnings per share after adjusting regulatory reserve for credit losses (in won)	W	252		540			226		107

25. Net Interest Income

Net interest income for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income:
Due from banks	W	6,289			13,234			20,566			39,070
Securities measured at FVTPL		7,916			13,724			5,647			15,246
Securities measured at FVOCI		84,687			169,696			103,114			194,100
Securities measured at amortized cost		4,742			7,464			3,623			9,590
Loans measured at FVTPL		5,635			9,703			10,789			14,803
Loans measured at amortized cost		890,083			1,779,435			1,026,821			2,080,301

		999,352			1,993,256			1,170,560			2,353,110
Interest expense:
Financial liabilities measured at FVTPL		(20,204	)		(38,721	)		(20,458	)		(43,103	)
Deposits		(83,906	)		(167,904	)		(144,234	)		(281,609	)
Borrowings		(31,116	)		(62,883	)		(81,612	)		(179,772	)
Debentures		(457,558	)		(936,838	)		(607,476	)		(1,267,363	)

		(592,784	)		(1,206,346	)		(853,780	)		(1,771,847	)

	W	406,568			786,910			316,780			581,263

S-91

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Fees and commission income:
Loan commissions	W	29,142			58,413			31,037			63,836
Underwriting and investment consulting commissions		26,644			48,470			22,767			46,297
Brokerage and agency commissions		1,935			3,388			2,056			3,539
Trust and retirement pension plan commissions		8,879			17,553			8,235			17,109
Fees on asset management		662			1,156			445			805
Other fees		24,333			54,759			20,433			47,339

		91,595			183,739			84,973			178,925
Fees and commission expenses:
Brokerage and agency fees		(1,963	)		(3,509	)		(2,362	)		(4,723	)
Other fees		(5,704	)		(11,962	)		(5,450	)		(11,356	)

		(7,667	)		(15,471	)		(7,812	)		(16,079	)

	W	83,928			168,268			77,161			162,846

27. Dividend Income

Dividend income for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021				June 30, 2020
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Securities measured at FVTPL	W	34,329		67,101		66,316		93,036
Securities measured at FVOCI		1,939		112,366		1,820		122,994
Investments in subsidiaries and associates		74,799		463,132		72,280		184,575

	W	111,067		642,599		140,416		400,605

S-92

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	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	11,391			18,214			16,945			62,626
Gains on valuation		58,803			125,947			61,157			112,471

		70,194			144,161			78,102			175,097
Losses on securities measured at FVTPL:
Losses on sale		(13,413	)		(23,496	)		(9,414	)		(27,304	)
Losses on valuation		(50,943	)		(124,433	)		(24,593	)		(80,576	)
Purchase related expense		(117	)		(119	)		(5	)		(39	)

		(64,473	)		(148,048	)		(34,012	)		(107,919	)

	W	5,721			(3,887	)		44,090			67,178

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, 2021 and 2020 are as follows:


	June 30, 2021					June 30, 2020
	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
Gains on valuation		28,365		106,413			(9,326	)		4,459

		28,365		106,413			(9,326	)		4,555
Losses on financial liabilities measured at FVTPL:
Losses on redemption		—		(309	)		(3,506	)		(6,101	)
Losses on valuation		112		—			(15,967	)		(26,953	)

		112		(309	)		(19,473	)		(33,054	)

	W	28,477		106,104			(28,799	)		(28,499	)

S-93

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on securities measured at FVOCI:
Gains on sale	W	2,549			7,794			36,918			67,134
Reversal of impairment losses		(175	)		—			—			—

		2,374			7,794			36,918			67,134
Losses on securities measured at FVOCI:
Losses on sale		(6,574	)		(14,757	)		(1,211	)		(7,252	)
Impairment losses		(2,262	)		(2,927	)		(2,278	)		(7,869	)

		(8,836	)		(17,684	)		(3,489	)		(15,121	)

	W	(6,462	)		(9,890	)		33,429			52,013

31. Net Gain (Loss) on Derivatives

Net gain (loss) on derivatives for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	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	350,922			1,391,147			501,482			1,703,007
Currency		983,473			5,529,736			6,433			7,660,733
Stock		2,243			4,140			9,613			21,875
Gains on adjustment of derivatives		(246	)		2,939			(25	)		1,461

		1,336,392			6,927,962			517,503			9,387,076
Losses on trading purpose derivatives:
Interest		(357,110	)		(1,401,176	)		(470,199	)		(1,772,695	)
Currency		(1,013,039	)		(5,339,116	)		(115,102	)		(7,397,381	)
Stock		(1,216	)		(3,270	)		(863	)		(15,929	)
Losses on adjustment of derivatives		(10,379	)		(18,911	)		22,339			(30,049	)

		(1,381,744	)		(6,762,473	)		(563,825	)		(9,216,054	)

		(45,352	)		165,489			(46,322	)		171,022
Net gain (loss) on hedging purpose derivatives:
Gains on hedging purpose derivatives:
Interest		(4,169	)		8,306			77,446			609,865
Currency		81,548			183,844			89,899			143,339
Gains on adjustment of derivatives		(37	)		181			(61	)		36

		77,342			192,331			167,284			753,240

S-94

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

31. Net Gain (Loss) on Derivatives, Continued


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Losses on hedging purpose derivatives:
Interest	W	(27,355	)		(347,618	)		(9,361	)		(54,285	)
Currency		97,512			(342,458	)		105,723			(456,560	)
Losses on adjustment of derivatives		(140	)		(245	)		(179	)		(394	)

		70,017			(690,321	)		96,183			(511,239	)

		147,359			(497,990	)		263,467			242,001
Net gain (loss) on fair value hedged items:
Gains on fair value hedged items:
Gains on valuation		(61,894	)		424,743			(120,631	)		292,534
Gains on redemption		22,681			99,671			138,970			171,820

		(39,213	)		524,414			18,339			464,354
Losses on fair value hedged items:
Losses on valuation		(65,111	)		(217,629	)		(75,028	)		(907,902	)
Losses on redemption		(28,065	)		(105,366	)		(43,422	)		(48,496	)

		(93,176	)		(322,995	)		(118,450	)		(956,398	)

		(132,389	)		201,419			(100,111	)		(492,044	)

	W	(30,382	)		(131,082	)		117,034			(79,021	)

Related with cash flow hedge, the Bank recognizedW56 million of gain andW60 million of loss in the statement of comprehensive income as the ineffective portion for the period ended June 30, 2021 and 2020, 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, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on foreign exchange transactions:
Gains on foreign exchange transactions	W	112,166			245,413			180,378			346,058
Losses on foreign exchange transactions		(117,936	)		(256,133	)		(180,514	)		(346,384	)

		(5,770	)		(10,720	)		(136	)		(326	)
Net gain on foreign exchange translations:
Gains on foreign exchange translations		425,213			3,760,632			(16,068	)		4,086,100
Losses on foreign exchange translations		(385,863	)		(3,641,192	)		37,269			(3,871,553	)

		39,350			119,440			21,201			214,547

	W	33,580			108,720			21,065			214,221

S-95

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	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	31,927			60,323			7,422			7,959
Gains on disposal of loans measured at FVTPL		1,820,467			1,832,631			1,171			2,678
Gains on valuation of loans measured at FVTPL		(830,230	)		121,556			43,623			62,057
Gains on disposal of investments in subsidiaries and associates		72,508			78,121			10,963			10,963
Reversal of provisions		398			1,580			33			353
Others		5,542			8,977			5,833			9,129

		1,100,612			2,103,188			69,045			93,139
Other operating expenses:
Losses on sale of loans		(27,798	)		(27,798	)		(46,718	)		(49,742	)
Losses on disposal of loans measured at FVTPL		(3,494	)		(4,461	)		(13,948	)		(17,188	)
Losses on valuation of loans measured at FVTPL		(1,111	)		(4,899	)		(1,407	)		(6,719	)
Losses on disposal of investments in subsidiaries and associates		—			(575	)		(339	)		(340	)
Increase of provisions		178			(1,492	)		(31	)		(84	)
Insurance expenses		(18,265	)		(35,796	)		(15,929	)		(29,441	)
Credit guarantee fund salary		(46,894	)		(94,207	)		(42,807	)		(79,792	)
Educational taxes		(11,407	)		(24,310	)		(14,314	)		(21,680	)
Foreign security contributions		(22	)		(1,939	)		(2,972	)		(4,878	)
Others		(1,989	)		(7,233	)		(3,293	)		(7,584	)

		(110,802	)		(202,710	)		(141,758	)		(217,448	)

	W	989,810			1,900,478			(72,713	)		(124,309	)

34. Provision for Credit Losses

Provision for credit losses for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021					June 30, 2020
	Three-month period ended		Six-month period ended			Three-month period ended			Six-month period ended
Provision for loss allowance for loan	W	838,872		928,606			139,199			338,691
Provision for loss allowance for other assets		1,791		5,077			417			1,681
Provision for (reversal of) unused commitments		24,131		(22,477	)		44,395			(8,568	)
Provision for (reversal of) financial guarantee		7,107		(28,054	)		37,259			40,833
Provision for (reversal of) payment guarantees		29,858		(47,063	)		(118,442	)		(167,940	)

	W	901,759		836,089			102,828			204,697

S-96

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

35. General and Administrative Expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021				June 30, 2020
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Payroll costs:
Short-term employee benefits	W	82,114		174,264		80,253		170,344
Defined benefit costs		9,988		19,974		9,616		19,238
Defined contribution costs		340		937		836		2,648

		92,442		195,175		90,705		192,230
Depreciation and amortization:
Depreciation of property and equipment		17,899		36,874		16,403		33,971
Amortization of intangible assets		13,368		26,623		13,514		27,212

		31,267		63,497		29,917		61,183
Other:
Employee welfare benefits		9,118		17,356		8,291		16,125
Rent expenses		1,518		3,337		1,624		3,449
Taxes and dues		5,198		12,808		4,446		13,118
Advertising expenses		3,127		4,825		3,080		4,933
Electronic data processing expenses		20,496		41,084		19,322		32,477
Fees and charges		8,272		17,364		9,142		15,625
Others		7,289		14,270		5,531		13,561

		55,018		111,044		51,436		99,288

	W	178,727		369,716		172,058		352,701

36. Other Non-Operating Income and Expense

Other non-operating income and expense for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021				June 30, 2020
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Other non-operating income:
Gains on disposal of assets held for sale	W	—		3,610		—		—
Reversal of impairment losses on assets held for sale		446,451		499,976		—		—
Gains on disposal of property and equipment		1,260		3,391		537		604
Rental income on investment property		122		246		156		362
Others		372		1,721		170		1,574

		448,205		508,944		863		2,540

S-97

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

36. Other Non-Operating Income and Expense, Continued


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other non-operating expenses:
Impairment losses on assets held for sale	W	—			—			808,796			(46,775	)
Losses on disposal of property and equipment		(59	)		(171	)		—			—
Depreciation of investment property		(625	)		(1,246	)		(43	)		(604	)
Donations		(132	)		(257	)		(166	)		(678	)
Others		71			(4,337	)		(896	)		(3,724	)

		(745	)		(6,011	)		807,691			(51,781	)

	W	447,460			502,933			808,554			(49,241	)

37. Income Tax Expense

(1)	Income tax expense for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Current income tax(*)	W	(224,351)			(193,242	)		(102,571	)		135,808
Changes in deferred income taxes on temporary differences		1,587,891			3,102,476			483,781			(26,837	)
Deferred income tax recognized directly to equity
Other comprehensive income		(1,159,765	)		(2,289,546	)		(147,448	)		(29,162	)
Retained earnings		(5,089	)		(5,700	)		22,903			24,641

Income tax expense	W	198,686			613,988			256,665			104,450

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

(2)	Profit before income taxes and income tax expense for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Profit before income taxes	W	2,991,596			473,793
Income taxes calculated using enacted tax rates		822,689			130,293
Adjustments:
Non-deductible losses and tax-free gains		(47,172	)		(15,159	)
Non-recognition effect of deferred income taxes and others		(130,608	)		(16,101	)
Net adjustments for prior years		(34,033	)		1,100
Others		3,112			4,317

		(208,701	)		(25,843	)

Income tax expense	W	613,988			104,450

Effective tax rate (%)		20.52			22.05

S-98

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

37. Income Tax Expense, Continued

(3)	Changes in deferred income taxes recognized directly to equity for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	June 30, 2021						January 1, 2021
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain (loss) on securities measured at FVOCI	W	8,138,846			(3,087,148	)		2,079,878			(788,919	)		(2,298,229	)
Exchange differences on translation of foreign operations		(19,032	)		—			(60,912	)		—			—
Net gain (loss) on valuation of cash flow hedge		691			(262	)		34			(13	)		(249	)
Net gain on hedges of net investments in foreign operations		11,544			(4,379	)		35,507			(13,468	)		9,089
Remeasurements of defined benefit liabilities		15,634			(5,928	)		15,634			(5,928	)		—
Fair value changes on financial liabilities designated at fair value due to credit risk		(5,356	)		2,032			(5,770	)		2,189			(157	)

	W	8,142,327			(3,095,685	)		2,064,371			(806,139	)		(2,289,546	)

Income tax benefit recognized direct to retained earnings amounting toW5,700 million is the tax effect of realized income amounting toW20,729 million from disposal of equity securities measured at FVOCI.


	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	W	(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 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	)

Income tax expense recognized direct to retained earnings amounting toW24,641 million is the tax effect of realized loss amounting toW89,603 million from disposal of equity securities measured at FVOCI.

S-99

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

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, 2021 and 2020 are computed as follows:

(i) Basic earnings per share


	June 30, 2021				June 30, 2020
	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	922,930,059,256		2,377,608,342,739		770,077,848,944		369,342,875,100
Weighted-average number of ordinary shares outstanding (B)		4,295,420,273		4,260,178,807		3,820,739,548		3,776,679,658

Basic earnings per share (A/B) (in won)	W	215		558		202		98

(ii) Weighted-average number of ordinary shares outstanding


	2021
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		4,153,145,768		91		377,936,264,888
Increased paid-in capital (B)		102,000,000		91		9,282,000,000
Increased paid-in capital (C)		122,166,000		30		3,664,980,000
Cumulative shares (D = A+B+C)						390,883,244,888

Weighted-average number of ordinary shares outstanding (D/91)						4,295,420,273

Six-month period ended:
Number of ordinary shares outstanding (A)		4,153,145,768		181		751,719,384,008
Increased paid-in capital (B)		102,000,000		154		15,708,000,000
Increased paid-in capital (C)		122,166,000		30		3,664,980,000

Cumulative shares (D = A+B+C)						771,092,364,008

Weighted-average number of ordinary shares outstanding (D/181)						4,260,178,807

S-100

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

38. Earnings per Share, Continued


	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

(2) Diluted earnings per share

Diluted and basic earnings per share for the three-month and six-month periods ended June 30, 2021 and 2020 are equal because there is no potential dilutive instrument.

39. Pledged Assets

Assets pledged by the Bank as collateral as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021				December 31, 2020
	Pledged assets		Related liabilities		Pledged assets		Related liabilities
Securities measured at FVOCI(*)	W	3,646,158		2,429,469		5,701,903		2,249,385
Securities measured at amortized cost(*)		1,432,377				313,631

	W	5,078,535		2,429,469		6,015,534		2,249,385

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

S-101

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

40. Guarantees and Commitments

Guarantees and commitments as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Confirmed acceptances and guarantees:
Acceptances in foreign currency	W	332,372		408,155
Guarantees for bond issuance		2,424,483		2,281,329
Guarantees for loans		522,378		485,483
Letter of guarantee		88,711		42,965
Guarantees for on-lending debt		9,202		11,127
Others		3,695,542		3,734,283

		7,072,688		6,963,342

Unconfirmed acceptances and guarantees:
Letter of credit		2,194,279		1,252,411
Others		3,079,299		1,882,381

		5,273,578		3,134,792

Commitments:
Commitments on loans		42,376,831		42,787,113
Others		2,078,318		2,075,621

		44,455,149		44,862,734

Bills endorsed:
With recourse		—		971

	W	56,801,415		54,961,839

41. Trust Accounts

(1)	Trust accounts as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Accrued trust fee	W	13,667		8,010
Borrowings from trust accounts		1,415,518		906,843
Accrued expense		884		909

(2)	Transactions with trust accounts for the three-month and six-month periods ended June 30, 2021 and 2020 are as follows:


	June 30, 2021						June 30, 2020
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Trust management fee	W	8,223			16,077			7,648			15,714
Interest expenses on deposits		—			—			(1	)		(3	)
Interest expenses of borrowings from trust accounts		(1,459	)		(2,715	)		(1,475	)		(5,314	)

S-102

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

41. Trust Accounts, Continued

(3)	The carrying amounts of principals guaranteed trust and principals and interest guaranteed trust as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Principals guaranteed trust	W	243,714		251,006
Principals and interest guaranteed trust		236,651		238,320

	W	480,365		489,326

Principal of money and property trust	W	443,217		450,445
Accrued trust profit		37,148		38,881

42. Related Party Transactions

(1)	The Bank’s related parties as of June 30, 2021 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, KDB Indonesia and 9 others, KDB Investment PEF No. 1, KDB Value PEF VII, KDB Consus Value PEF, Components and Materials M&A PEF and 4 others, Principals guaranteed trust accounts of KDB, Principals and interests guaranteed interest trust accounts of KDB, UBest 5th Securitization Specialty Co., Ltd. and 6 others, KIAMCO Road Investment Private Fund Special Asset Trust 2 and 22 others

Associates		Korea Electric Power Co., Ltd., Korea Tourism Organization, KOREA REAL ESTATE BOARD, GM Korea Company, HMM Co., Ltd., Hanjin Heavy Industries & Construction Co., Ltd., HANJIN KAL, Korea Ocean Business Corporation and 76 others, Troika Resources Investment PEF and 99 others, KIP Overseas Expansion Platform Fund and 114 others

Others		Key management personnel

S-103

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued

(2)	Significant balances with related parties as of June 30, 2021 and December 31, 2020 are as follows:


	Account	June 30, 2021			December 31, 2020
Subsidiaries:
KDB Capital Corporation	Loans	W	5,669			7,188
	Allowance for loan losses		(2	)		(3	)
	Derivative financial assets		665			293
	Other assets		5			7
	Deposits		588			2,762
	Derivative financial liabilities		618			3,756
	Other liabilities		35,304			35,513
KDB Infrastructure Investment Asset Management Co., Ltd.	Deposits		8,873			17,767
	Other liabilities		86			162
KDB Ireland Ltd.	Loans		402,558			358,393
	Allowance for loan losses		(105	)		(94	)
	Derivative financial assets		7,376			9,673
	Other assets		136			179
KDB Bank Europe Ltd.	Cash and due from banks		298,433			264,697
	Derivative financial assets		439			552
	Other assets		—			47
	Derivative financial liabilities		—			278
	Other liabilities		849			762
Banco KDB Do Brazil S.A.	Cash and due from banks		79,100			48,960
	Loans		155,375			60,384
	Allowance for loan losses		(53	)		(30	)
	Other assets		241			85
KDB Indonesia Ltd.	Loans		22,600			21,760
	Allowance for loan losses		(6	)		(6	)
	Other assets		11			12
KDB Asia Ltd.	Cash and due from banks		1,152,600			783,360
	Loans		45,200			261,120
	Allowance for loan losses		(12	)		(68	)
	Derivative financial assets		—			1,051
	Other assets		931			825
	Deposits		2			2
	Borrowings		21,163			10,736
	Derivative financial liabilities		739			370
	Other liabilities		14			23
KDB Investment PEF No.1	Loans		633,900			732,640
	Allowance for loan losses		(2,780	)		(3,443	)
	Derivative financial assets		2,423			3,109
	Other assets		9,725			8,985

S-104

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2021			December 31, 2020
	Allowance of other assets	W	(34	)		(35	)
	Deposits		8,543			4,553
	Derivative financial liabilities		206			585
	Other liabilities		885			31
	Other provisions		1,510			1,003
KDB Consus Value PEF	Securities		40,686			40,857
	Derivative financial assets		2,096			243
	Other assets		345			345
	Deposits		116			104
	Derivative financial liabilities		4,517			9,923
	Other liabilities		705			703
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Loans		1,358,035			1,322,265
	Allowance for loan losses		(604,419	)		(437,867	)
	Derivative financial assets		43,107			6,533
	Other assets		3,334			3,406
	Deposits		508,392			593,439
	Derivative financial liabilities		40,230			153,516
	Other liabilities		9,243			238,642
	Other provisions		656,737			769,944
Corporate Liquidity Assistance Agency Co., Ltd.	Loans		440,000			220,000
	Allowance for loan losses		(128	)		(64	)
	Other assets		14,142			4,452
	Allowance of other assets		(4	)		(1	)
	Deposits		1,421,848			696,350
	Other liabilities		186			90
	Other provisions		120			168
Others	Loans		846,347			1,032,466
	Allowance for loan losses		(330,543	)		(368,449	)
	Derivative financial assets		905			738
	Other assets		16,959			13,142
	Allowance of other assets		(6,848	)		(5,190	)
	Deposits		104,971			86,364
	Borrowings		—			42,527
	Derivative financial liabilities		6,388			25,090
	Other liabilities		865			15,675
	Other provisions		237,884			170,380

S-105

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2021			December 31, 2020
Associates:
Korea Electric Power Co., Ltd.	Securities	W	28,003			5,779
	Loans		91,906			197,539
	Allowances for loan losses		(1,590	)		(1,778	)
	Derivative financial assets		36,036			80,203
	Other assets		11,323			20,631
	Deposits		61,863			135,837
	Borrowings		22,871			53,107
	Derivative financial liabilities		78,001			41,212
	Other liabilities		994			10,599
	Other provisions		27			10
KG Dongbu Steel Co., Ltd.	Loans		666,671			614,062
	Allowances for loan losses		(3,199	)		(55,321	)
	Other assets		109,785			622
	Deposits		23,962			3,871
	Other liabilities		165			129
	Other provisions		917			15,320
HMM Co., Ltd.	Securities		11,928,326			3,866,467
	Loans		200,571			1,040,638
	Allowances for loan losses		(31,476	)		(93,017	)
	Other assets		15,009			7,302
	Deposits		1,209,097			440,127
	Other liabilities		7,877			2,536
	Other provisions		4,126			8,200
Hanjin Heavy Industries & Construction Co., Ltd.	Loans		215,887			213,052
	Allowances for loan losses		(2,228	)		—
	Other assets		440			—
	Deposits		53,957			110,914
	Other liabilities		1,055			1,464
	Other provisions		121,804			128,819
HANJIN KAL	Securities		—			20,098
	Loans		490,273			390,902
	Other assets		1,073			616
Korea Ocean Business Corporation	Loans		15,292			15,464
	Allowances for loan losses		(1	)		(1	)
	Other assets		16			17
	Other liabilities		59			4

S-106

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued


	Account	June 30, 2021			December 31, 2020
Others	Securities	W	665			—
	Loans		800,538			803,266
	Allowances for loan losses		(353,742	)		(355,141	)
	Other assets		6,530			6,390
	Deposits		577,292			439,113
	Other liabilities		1,566			2,169
	Other provisions		45,952			60,070

(3)	Significant profit or loss with related parties for the six-month periods ended June 30, 2021 and 2020 are as follows:


	Account	2021			2020
Subsidiaries:
KDB Capital Corporation	Interest income	W	52			71
	Dividend income		27,956			42,866
	Reversal of allowance for loan losses		1			3
	Fees and commission income, other income		3,214			3,895
	Interest expenses		(206	)		(4	)
	Other operating expenses		(435	)		(2,554	)
KDB Infrastructure Investments Asset Management Co., Ltd.	Dividend income		9,089			12,287
	Interest expenses		(67	)		(236	)
KDB Ireland Ltd.	Interest income		625			2,596
	Fees and commission income, other income		2,730			9,054
	Interest expenses		—			(3	)
	Provision for loan losses		(8	)		(6	)
	Other operating expenses		(3,334	)		(1,743	)
KDB Bank Europe Ltd.	Interest income		494			3,458
	Reversal of allowance for loan losses		—			2
	Fees and commission income, other income		174			136
	Other operating expenses		(206	)		(135	)
Banco KDB Do Brazil S.A.	Interest income		485			1,954
	Provision for loan losses		(22	)		(3	)
KDB Indonesia Ltd.	Interest income		81			—
KDB Asia Ltd.	Interest income		4,011			8,140
	Reversal of allowance for loan losses		59			19
	Fees and commission income, other income		836			2,273
	Interest expenses		(31	)		(26	)
	Other operating expenses		(2,440	)		(1,376	)

S-107

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued


	Account	2021			2020
KDB Investment PEF No.1	Interest income	W	12,247			15,746
	Fees and commission income, other income		865			3,252
	Interest expenses		(14	)		(363	)
	Provision for loan losses		(672	)		—
	Other operating expenses		(1,233	)		(6,714	)
KDB Consus Value PEF	Interest income		799			799
	Fees and commission income, other income		10,626			13,935
	Interest expenses		(3	)		(6	)
	Other operating expenses		(1,102	)		(298	)
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Interest income		13,571			18,170
	Fees and commission income, other income		339,490			411,520
	Interest expenses		(2,406	)		(3,149	)
	Provision for loan losses		(150,506	)		(62,212	)
	Other operating expenses		(55,394	)		(85,935	)
Corporate Liquidity Assistance Agency Co., Ltd.	Interest income		9,690			—
	Fees and commission income, other income		47			—
	Interest expenses		(4,440	)		—
	Provision for loan losses		(64	)		—
	Other operating expenses		(3	)		—
Others	Interest income		22,179			16,646
	Dividend income		25,810			64,423
	Reversal of allowance for loan losses		87,817			44,692
	Fees and commission income, other income		140,915			118,211
	Interest expenses		(310	)		(581	)
	Provision for loan losses		(27,259	)		(31,095	)
	Other operating expenses		(187,981	)		(88,673	)
Associates:
Korea Electric Power Co., Ltd.	Interest income		1,397			2,586
	Dividend income		256,862			—
	Reversal of allowance for loan losses		188			—
	Fees and commission income, other income		8,441			18,767
	Interest expenses		(505	)		(1,385	)
	Provision for loan losses		—			(22	)
	Other operating expenses		(116,233	)		(133,154	)

S-108

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued


	Account	2021			2020
KG Dongbu Steel Co., Ltd.	Interest income	W	5,851			11,959
	Dividend income		1,101			—
	Reversal of allowance for loan losses		52,122			93,914
	Fees and commission income, other income		18,964			37,739
	Interest expenses		(7	)		(20	)
	Other operating expenses		(3,553	)		(7,278	)
HMM Co., Ltd.	Interest income		22,171			18,828
	Reversal of allowance for loan losses		61,540			3,541
	Fees and commission income, other income		1,824,314			53,975
	Interest expenses		(1,262	)		(1,129	)
	Other operating expenses		(16,505	)		(8,786	)
Hanjin Heavy Industries & Construction Co., Ltd.	Interest income		2,735			3,093
	Fees and commission income, other income		22,267			4,408
	Interest expenses		(118	)		(193	)
	Provision for loan losses		(2,228	)		(8	)
	Other operating expenses		(12,273	)		(1,694	)
HANJIN KAL	Interest income		3,610			—
	Fees and commission income, other income		99,421			—
Korea Ocean Business Corporation	Interest income		108			253
	Fees and commission income, other income		593			678
	Interest expenses		(59	)		—
	Other operating expenses		—			(1	)
Others	Interest income		6,255			6,127
	Dividend income		163,508			78,637
	Reversal of allowance for loan losses		2,722			1,604
	Fees and commission income, other income		28,231			46,573
	Interest expenses		(961	)		(2,423	)
	Provision for loan losses		(801	)		(5,339	)
	Other operating expenses		(8,980	)		(11,778	)

S-109

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued

(4)	Details of guarantees and commitments to the related parties as of June 30, 2021 and December 31, 2020 are as follows:


	Account	June 30, 2021		December 31, 2020
Subsidiaries:
KDB Capital Corporation	Commitments	W	320,000		320,000
KDB Investment PEF No.1	Unconfirmed acceptances and guarantees		6,933		7,854
	Commitments		404,667		298,706
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Confirmed acceptances and guarantees		1,160,689		1,226,351
	Unconfirmed acceptances and guarantees		1,069,548		557,377
	Commitments		4,846,495		5,084,798
Corporate Liquidity Assistance Agency Co., Ltd.	Commitments		560,000		780,000
Others	Confirmed acceptances and guarantees		296,935		337,604
	Unconfirmed acceptances and guarantees		254,585		175,716
	Commitments		65,000		178,200
Associates:
KG Dongbu Steel Co., Ltd.	Confirmed acceptances and guarantees		1,704		—
	Unconfirmed acceptances and guarantees		78,386		20,265
	Commitments		239,473		339,823
HMM Co., Ltd.	Confirmed acceptances and guarantees		13,560		13,056
Hanjin Heavy Industries & Construction Co., Ltd.	Confirmed acceptances and guarantees		347,886		414,630
	Unconfirmed acceptances and guarantees		3,359		3,337
	Commitments		91,080		22,614
Others	Confirmed acceptances and guarantees		53,075		76,628
	Unconfirmed acceptances and guarantees		53,973		28,431
	Commitments		332,894		244,384

		W	10,200,242		10,129,774

S-110

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

42. Related Party Transactions, Continued

(5)	Details of compensation to key management personnel for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021		2020
Short-term employee benefits	W	337		330
Post-employment benefits		3		—

	W	340		330

(6)	The Bank are not pledged any assets as collaterals to the related parties and from the related parties as of June 30, 2021 and December 31, 2020.

43. Statements of Cash Flows

(1)	Cash and cash equivalents in the separate statements of cash flows as of June 30, 2021 and 2020 are as follows:


	June 30, 2021		June 30, 2020
Cash and due from banks:
Cash and foreign currencies	W	53,847		59,917
Due from banks in Korean won		4,739,491		4,854,243
Due from banks in foreign currencies		6,475,917		7,531,806

		11,269,255		12,445,966

Less: Restricted due from banks, others		(6,075,890)		(6,123,060	)
Add: Financial instruments reaching maturity within three months from date of acquisition
Loans measured at amortized cost:
Call-loans		1,564,172		1,234,328
Inter-bank loans		1,302,509		1,071,172

		2,866,681		2,305,500

	W	8,060,046		8,628,406

(2)	Significant transactions not involving cash flows for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Decrease in loans due to write-offs	W	20,000			122,638
Increase in securities measured at FVOCI due to debt-to-equity swap		81,364			13,513
Increase in investments in subsidiaries and associates due to debt-to-equity swap		2,658,000			750
Increase in accumulated other comprehensive income due to securities valuation		8,357,197			131,514
Deferred income tax effect due to securities valuation		(2,298,229	)		(36,166	)
Transfer from investment property to property and equipment		—			1,655

S-111

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

43. Statements of Cash Flows, Continued


Transfer from property and equipment to investment property	1,494	—
Recognition of right-of-use assets and lease liabilities	26,866	16,171

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, 2021 and December 31, 2020 are as follows:


	June 30, 2021				December 31, 2020
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	1,974,244		2,041,640		2,762,065		1,875,504
Loaned securities		859,161		—		289,806		—

	W	2,833,405		2,041,640		3,051,871		1,875,504

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.

S-112

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,574,273		1,415,111		7,283,388		10,272,772
Securities measured at FVOCI		2,155,521		16,685,193		23,169,792		42,010,506
Loans measured at FVTPL		—		—		701,288		701,288
Derivative financial assets		179		5,137,525		8,417		5,146,121

	W	3,729,973		23,237,829		31,162,885		58,130,687

Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,892,708		—		1,892,708
Derivative financial liabilities		217		3,647,605		5,351		3,653,173

	W	217		5,540,313		5,351		5,545,881


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,023,738		1,064,829		6,232,064		8,320,631
Securities measured at FVOCI		2,439,145		17,067,639		14,634,541		34,141,325
Loans measured at FVTPL		—		—		1,434,514		1,434,514
Derivative financial assets		—		8,321,162		8,214		8,329,376

	W	3,462,883		26,453,630		22,309,333		52,225,846

Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,694,957		—		1,694,957
Derivative financial liabilities		—		6,298,836		6,451		6,305,287

	W	—		7,993,793		6,451		8,000,244

S-113

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(ii)

Changes in the fair value of level 3 financial instruments for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	Financial assets														Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets		Total			Derivative financial liabilities
January 1, 2021	W	6,232,064			14,634,541			1,434,514			8,214		22,309,333			6,451
Profit or loss		21,782			—			116,657			203		138,642			(1,100	)
Other comprehensive income		—			8,427,801			—			—		8,427,801			—
Acquisition / Issue		1,174,381			348,188			17,500			—		1,540,069			—
Sale / Settlement		(144,839	)		(150,920	)		(867,383	)		—		(1,163,142	)		—
Transfer out(*)		—			(89,818	)		—			—		(89,818	)		—
Transfer in(*)		—			—			—			—		—			—

June 30, 2021	W	7,283,388			23,169,792			701,288			8,417		31,162,885			5,351


	2020
	Financial assets														Financial liabilities
	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(*)		(1,178	)		(21,575	)		—			—		(22,753	)		—
Transfer in(*)		—			71,697			—			—		71,697			—

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

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

(iii)

Changes in deferred day one profit or loss for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021			2020
Beginning balance	W	4,375			4,763
Amortization		(191	)		(193	)

Ending balance	W	4,184			4,570

S-114

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(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, 2021 and December 31, 2020 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-115

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:


		June 30, 2021
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	6.49 ~ 13.68
	method, Relative value	Rate of increase in	—
	approach, Net asset	liquidation value
	value approach	Rate of increase in	—
		property disposal price
		Volatility	14.35 ~ 37.31
Securities measured at FVOCI
Equity securities	Discounted cash flow	Discount rate	7.38 ~ 18.72
	method, Relative value	Growth rate	—
	approach, Net asset	Volatility	16.63 ~ 34.96
	value approach
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model, LSMC	Volatility	14.35 ~37.31
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	38.89 ~ 49.27
		Correlation coefficient	0.74 ~ 0.80
Interest rate options	Modified Black model	Volatility	38.89 ~ 49.27
Stock index options	Black-Scholes model	Volatility	8.10 ~ 50.60
Equity options	Discounted cash flow	Volatility	25.67 ~ 34.96
	method and others

S-116

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


		December 31, 2020
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	0.72 ~ 19.05
	method, Relative value	Rate of increase in	—
	approach, Net asset	liquidation value
	value approach	Rate of increase in	—
		property disposal price
		Volatility	17.53 ~ 33.00
Securities measured at FVOCI
Equity securities	Discounted cash flow	Discount rate	0.20 ~19.05
	method, Relative value	Growth rate	—
	approach, Net asset	Volatility	18.49 ~ 26.45
	value approach
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model	Volatility	17.53 ~ 32.59
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	36.02 ~ 44.87
		Correlation coefficient	0.83 ~ 0.91
Interest rate options	Modified Black model	Volatility	36.02 ~ 44.87
Stock index options	Black-Scholes model	Volatility	17.20 ~ 27.30
Equity options	Discounted cash flow	Volatility	18.49 ~ 33.00
	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, 2021 and December 31, 2020 is as follows:


	December 31, 2020
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL(*1)	W	8,549		(6,903	)		—		—
Securities measured at FVOCI(*1)		—		—			63,426		(97,729	)
Loans measured at FVTPL(*2)		56,861		(54,828	)		—		—
Derivative financial assets(*2)		4,244		(1,778	)		—		—

	W	69,654		(63,509	)		63,426		(97,729	)

S-117

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2020
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL(*1)	W	8,478		(7,355	)		—		—
Securities measured at FVOCI(*1)		—		—			45,231		(75,780	)
Loans measured at FVTPL(*2)		64,022		(28,054	)		—		—
Derivative financial assets(*2)		4,364		(1,846	)		—		—

	W	76,864		(37,255	)		45,231		(75,780	)

(*1)

Sensitivity amounts of equity securities are calculated by increasing and decreasing the correlations between the discount rates 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. Also, for financial instruments categorized within level 3 as of June 30, 2021 and December 31, 2020,W17,702,274 million andW20,500,366 million, respectively, are excluded from the sensitivity disclosure because it is impossible to calculate the sensitivity due to changes in unobservable variables for practical reasons.

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

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

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

•

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

•

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

•

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

•

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

S-118

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

•

Borrowings: The fair value of industrial financial debentures is computed using the discounted cash flow method by the Bank’s Fair Value Evaluation System. 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 is computed using the discounted cash flow method by the Bank’s Fair Value Evaluation System.

•

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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks(*)	W	5,193,365		6,075,890		—		11,269,255
Securities measured at amortized cost		1,094,179		1,322,955		—		2,417,134
Loans measured at amortized cost(*)		—		1,564,172		161,963,578		163,527,750
Other financial assets(*)		—		8,402,449		1,083,933		9,486,382

	W	6,287,544		17,365,466		163,047,511		186,700,521

Financial liabilities:
Deposits(*)	W	—		1,832,336		47,008,178		48,840,514
Borrowings(*)		—		658,941		20,304,448		20,963,389
Debentures		—		144,779,780		—		144,779,780
Other financial liabilities(*)		—		7,064,215		3,674,900		10,739,115

	W	—		154,335,272		70,987,526		225,322,798


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks(*)	W	4,904,584		5,624,394		—		10,528,978
Securities measured at amortized cost		665,183		120,081		—		785,264
Loans measured at amortized cost(*)		—		465,485		155,354,001		155,819,486
Other financial assets(*)		—		3,831,087		630,030		4,461,117

	W	5,569,767		10,041,047		155,984,031		171,594,845

Financial liabilities:
Deposits(*)	W	—		2,249,420		43,624,163		45,873,583
Borrowings(*)		—		1,008,635		17,865,518		18,874,153
Debentures		—		140,088,033		—		140,088,033
Other financial liabilities(*)		—		3,104,887		3,784,488		6,889,375

	W	—		146,450,975		65,274,169		211,725,144

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

S-119

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(iii)

Details of valuation technique and inputs used in the fair value measurement categorized within level 2 and level 3 of the fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2021 and December 31, 2020 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

46. Categories of Financial Assets and Liabilities

Categories of financial assets and liabilities as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	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	5,193,365		—		—		—		—		6,075,890		—		11,269,255
Securities measured at FVTPL		—		10,272,772		—		—		—		—		—		10,272,772
Securities measured at FVOCI		—		—		—		18,515,751		23,494,755		—		—		42,010,506
Securities measured at amortized cost		—		—		—		—		—		2,417,134		—		2,417,134
Loans measured at FVTPL		—		701,288		—		—		—		—		—		701,288
Loans measured at amortized cost		2,866,681		—		—		—		—		160,027,855		—		162,894,536
Derivative financial assets		—		4,126,319		—		—		—		—		1,019,802		5,146,121
Other financial assets		—		—		—		—		—		9,487,732		—		9,487,732

	W	8,060,046		15,100,379		—		18,515,751		23,494,755		178,008,611		1,019,802		244,199,344

S-120

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

46. Categories of Financial Assets and Liabilities, Continued


	June 30, 2021
	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 liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,892,708		—		—		—		—		1,892,708
Deposits		—		—		—		—		—		48,875,219		—		48,875,219
Borrowings		—		—		—		—		—		20,975,895		—		20,975,895
Debentures		—		—		—		—		—		143,375,963		—		143,375,963
Derivative financial liabilities		—		3,586,909		—		—		—		—		66,264		3,653,173
Other financial liabilities		—		—		—		—		—		10,751,127		—		10,751,127

	W	—		3,586,909		1,892,708		—		—		223,978,204		66,264		229,524,085


	December 31, 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	4,904,584		—		—		—			—		5,624,394		—		10,528,978
Securities measured at FVTPL		—		8,320,631		—		—			—		—		—		8,320,631
Securities measured at FVOCI		—		—		—		19,276,210			14,865,115		—		—		34,141,325
Securities measured at amortized cost		—		—		—		—			—		785,264		—		785,264
Loans measured at FVTPL		—		1,434,514		—		—			—		—		—		1,434,514
Loans measured at amortized cost		824,610		—		—		—	��		—		154,475,568		—		155,300,178
Derivative financial assets		—		6,880,971		—		—			—		—		1,448,405		8,329,376
Other financial assets		—		—		—		—			—		4,463,726		—		4,463,726

	W	5,729,194		16,636,116		—		19,276,210			14,865,115		165,348,952		1,448,405		223,303,992

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,694,957		—			—		—		—		1,694,957
Deposits		—		—		—		—			—		45,879,419		—		45,879,419
Borrowings		—		—		—		—			—		18,887,611		—		18,887,611
Debentures		—		—		—		—			—		138,318,728		—		138,318,728
Derivative financial liabilities		—		6,206,902		—		—			—		—		98,385		6,305,287
Other financial liabilities		—		—		—		—			—		6,896,581		—		6,896,581

	W	—		6,206,902		1,694,957		—			—		209,982,339		98,385		217,982,583

S-121

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	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	5,146,121		—		5,146,121		2,261,781		270,615		2,613,725
Unsettled spot exchange receivables(*)		6,654,631		—		6,654,631		6,653,380		—		1,251
Unsettled domestic exchange receivables		3,469,076		1,721,259		1,747,817		—		—		1,747,817
Security pledged as collateral for repurchase agreements		1,974,244		—		1,974,244		2,041,640		—		(67,396	)
Reverse repurchase agreements		785,600		—		785,600		785,600		—		—
Loaned securities		859,161		—		859,161		859,161		—		—
Receivables from securities transaction		401,990		—		401,990		401,990		—		—

	W	19,290,823		1,721,259		17,569,564		13,003,552		270,615		4,295,397


	June 30, 2021
	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	3,653,173		—		3,653,173		2,598,470		101,022		953,681
Unsettled spot exchange payables(*)		6,654,129		—		6,654,129		6,653,380		—		749
Unsettled domestic exchange payables		2,131,346		1,721,259		410,087		—		—		410,087
Repurchase agreements		2,041,640		—		2,041,640		2,041,640		—		—
Payables from securities transaction		112,156		—		112,156		112,156		—		—

	W	14,592,444		1,721,259		12,871,185		11,405,646		101,022		1,364,517

S-122

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

47. Offsetting of Financial Assets and Liabilities, Continued


	December 31, 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	8,329,376		—		8,329,376		5,414,190		526,608		2,388,578
Unsettled spot exchange receivables(*)		2,517,129		—		2,517,129		2,516,540		—		589
Unsettled domestic exchange receivables		2,731,336		1,417,378		1,313,958		—		—		1,313,958
Security pledged as collateral for repurchase agreements		2,762,065		—		2,762,065		1,875,504		—		886,561
Reverse repurchase agreements		1,440,000		—		1,440,000		1,440,000		—		—
Loaned securities		289,806		—		289,806		289,806		—		—
Receivables from securities transaction		18,519		—		18,519		18,519		—		—

	W	18,088,231		1,417,378		16,670,853		11,554,559		526,608		4,589,686


	December 31, 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	6,305,287		—		6,305,287		4,261,659		40,158		2,003,470
Unsettled spot exchange payables(*)		2,517,693		—		2,517,693		2,516,540		—		1,153
Unsettled domestic exchange payables		2,004,572		1,417,378		587,194		—		—		587,194
Repurchase agreements		1,875,504		—		1,875,504		1,875,504		—		—
Payables from securities transaction		14,766		—		14,766		14,766		—		—

	W	12,717,822		1,417,378		11,300,444		8,668,469		40,158		2,591,817

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

S-123

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

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, 2021 and 2020 are as follows:


	2021
	Corporate finance			Investment finance		Asset management		Others			Total
Operating income from external customers	W	18,227			1,730,000		13,064		601,124			2,362,415
Operating income (loss) from intersegment sales		(12,026	)		403,962		—		(391,936	)		—

	W	6,201			2,133,962		13,064		209,188			2,362,415


	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

(3)	Details of segment results for the Bank’s reportable segments for the six-month periods ended June 30, 2021 and 2020 are as follows:


	2021
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	610,452			(33,082	)		381			209,159			786,910
Non-interest income
Income related to securities(*1)		12,074			(35,130	)		—			9,279			(13,777	)
Other non-interest income		480,696			2,176,824			18,447			(14,026	)		2,661,941

		492,770			2,141,694			18,447			(4,747	)		2,648,164
Provision for loan losses and others(*2)		(783,463	)		75,236			—			5,284			(702,943	)
General and administrative expenses		(313,558)			(49,886	)		(5,764	)		(508	)		(369,716	)

Operating income	W	6,201			2,133,962			13,064			209,188			2,362,415

S-124

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

48. Operating Segments, Continued


	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, 2021 and 2020 and the geographical non-current asset information as of June 30, 2021 and December 31, 2020 are as follows:


	*Revenues (1)**				*Non-current assets (2)**
	2021		2020		June 30, 2021		December 31, 2020
Domestic	W	15,368,839		17,317,451		29,346,230		26,606,309
Overseas		665,469		855,124		40,070		28,116

	W	16,034,308		18,172,574		29,386,300		26,634,425

(*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-125

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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 three 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

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-126

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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.

(iv) Performance of risk management committee

The Risk Management Committee performs comprehensive reviews of all the affairs related to risk management and deliberates the decisions of the board of directors. For the year ended June 30, 2021, the key activities of the Risk Management Committee are as follows:

•

Major decision

•

Risk management plan for 2021

•

Setting and managing exposure limits by country for 2021

•

Contingency funding plan for 2021

•

Major reporting

•

Result of integrated crisis analysis for the second half of 2020

•

Result of assessment of suitability for internal capital for 2020

•

Resolution of Credit Committee for the fourth quarter of 2020

•

Result of ex-post validation of credit rating system and default rates, and verification of risk measurement factors for internal purposes

(v) Improvement of risk management system

For the continuous improvement of risk management, financial soundness and capital adequacy, the Bank performs the following:

•

Continuous improvement of Basel

•

Improvements in the internal capital adequacy assessment system, in line with the guidelines set by the Financial Supervisory Service (FSS) in 2008, to manage capital adequacy more effectively

•

Improvements in the credit assessment system on Low Default Portfolio (LDP)

•

Elaboration of risk measuring criteria including credit risk parameters and measurement logics

•

Development of the application system for timely calculation of LCR and NSFR

•

Rebuilding the Corporate Credit Rating System (approved by Financial Supervisory Services on October 26, 2017)

•

Establishment of the system to calculate Basel Interest Rate Risk in the Banking Book coming to domestic in September 2018

•

Establishment of the system to comply with the amended regulation relating to risk-weighted assets under Basel III in December 2020

S-127

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

•

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	Measure by Advanced Measurement Approach
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

(*)	To comply with the amended regulation relating to risk-weighted assets under Basel III, the upgrade of relevant systems was completed in March 2021.

S-128

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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 completed the consultation and the development of the relevant systems and the amended regulation has been applied since the calculation of the BIS ratio at the end of 2020.

(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. The internal capital adequacy report including the assessment results at the end of the year is prepared and reported to the Risk Management Policy Committee.

•

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.

S-129

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

•

Goal setting of internal capital management

The Bank sets up and manages an internal capital limit on an annual basis, through the approval of the Risk Management Committee, to maintain internal capital adequacy by managing internal capital (integrated risks) within the extent of available capital.

The prior year’s internal capital, analysis of domestic and foreign environment changes in the current year, and the direction and size of operations are all reflected in the goal setting of internal capital management to calculate the integrated internal capital scale. Moreover, Bank for International Settlements(BIS) capital adequacy ratio and risk appetite are taken into consideration in the goal setting of internal capital management.

•

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.

S-130

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

At the individual credit level, the relationship manager (RM), the credit officer (CO) and the Credit Review Committee manage each borrower’s credit risk.

Post management and insolvent borrower management

The Bank monitors the borrower’s credit rating from the date of the loan to the date of the final collection of debt consistently and inspects the borrower’s status regularly and frequently to prevent the generation of new bad debts and to stabilize the number of debt recoveries.

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-131

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

Details of loans by credit rating as of June 30, 2021 and December 31, 2020 are as follows:


< Corporate >

	June 30, 2021
	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	129,490,010		114,044,676		15,445,334		—
BBB2 ~ CCC		35,106,425		10,220,515		23,055,370		1,830,540
Below CC		2,558,665		—		53,258		2,505,407

	W	167,155,100		124,265,191		38,553,962		4,335,947


	December 31, 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	119,275,121		116,563,480		2,711,641		—
BBB2 ~ CCC		36,638,249		22,365,102		14,262,908		10,239
Below CC		2,932,191		—		85,070		2,847,121

	W	158,845,561		138,928,582		17,059,619		2,857,360

< Retail >

	June 30, 2021
	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	213,300		201,641		11,635		24
Grade 7 ~ Grade 8		3,182		—		3,127		55
Grade 9 ~ Grade 10		637		—		—		637

	W	217,119		201,641		14,762		716


	December 31, 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	234,096		223,180		10,623		293
Grade 7 ~ Grade 8		3,561		—		3,444		117
Grade 9 ~ Grade 10		354		—		—		354

	W	238,011		223,180		14,067		764

S-132

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows:


< Corporate >

	June 30, 2021
	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	33,439,515		30,974,518		2,464,997		—
BBB2 ~ CCC		8,926,129		4,575,438		4,295,125		55,566
Below CC		—		—		—		—

	W	42,365,644		35,549,956		6,760,122		55,566

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	6,371,249		5,381,161		990,088		—
BBB2 ~ CCC		5,274,696		2,656,257		2,561,738		56,701
Below CC		700,321		—		—		700,321

	W	12,346,266		8,037,418		3,551,826		757,022


	December 31, 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	32,811,121		32,391,593		419,528		—
BBB2 ~ CCC		9,970,279		6,922,824		3,047,455		—
Below CC		97		—		97		—

	W	42,781,497		39,314,417		3,467,080		—

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	4,743,686		4,412,348		331,338		—
BBB2 ~ CCC		4,665,561		2,814,897		1,846,293		4,371
Below CC		689,858		—		1,351		688,507

	W	10,099,105		7,227,245		2,178,982		692,878

S-133

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


< Retail >

	June 30, 2021
	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	68,872		68,354		518		—
Grade 7 ~ Grade 8		1		—		1		—
Grade 9 ~ Grade 10		38		—		—		38

	W	68,911		68,354		519		38


	December 31, 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	60,583		59,203		1,380		—
Grade 7 ~ Grade 8		59		—		59		—
Grade 9 ~ Grade 10		—		—		—		—

	W	60,642		59,203		1,439		—

(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-	20.0%	0.0%	20.0%
A+ ~ A-	50.0%	20.0%	30.0%
BBB+ ~ BBB-	75.0%	50.0%	50.0%
BB+ ~ BB-	100.0%	100.0%	100.0%
B+ ~ B-	150.0%	100.0%	100.0%
Below B-	150.0%	150.0%	150.0%
Unrated	100.0% (*)	100.0%	Rating based on due diligence

(*)	In case of small and medium-sized business, 85.0% is applied.

S-134

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

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.

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 December 31, 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, retail, residential mortgage, commercial properties
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 and others

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.

S-135

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

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.

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 rating process control structure

According to the Principle of Checks and Balances, the Bank has established the credit rating 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 RiskValidation 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.

S-136

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk of impaired financial assets as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Securities measured at FVOCI	W	70,939		70,397
Loans measured at amortized cost		4,384,695		3,009,118
Other assets		33,736		21,817

(iv) Credit exposure

Geographical information of credit exposure as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	6,014,384		405,372		71,974		501,257		6,992,987
Securities measured at FVOCI:
Bonds (excluding government bonds)		10,353,184		1,087,839		686,921		1,628,373		13,756,317
Loans		150,100,711		1,714,363		1,334,026		12,109,060		165,258,160
Derivative financial assets		1,009,002		—		—		11,220		1,020,222
Other assets		9,412,366		47,170		8,913		161,535		9,629,984

		176,889,647		3,254,744		2,101,834		14,411,445		196,657,670

Guarantees (including financial guarantees)		12,239,840		—		83,990		22,436		12,346,266
Commitments		41,044,161		339,123		164,271		886,999		42,434,554

		53,284,001		339,123		248,261		909,435		54,780,820

	W	230,173,648		3,593,867		2,350,095		15,320,880		251,438,490


	December 31, 2020
	Korea		UK		USA		Others		Total
Due from banks (excluding due from BOK)	W	5,468,189		238,108		129,309		465,850		6,301,456
Securities measured at FVOCI:
Bonds (excluding government bonds)		9,821,122		1,082,184		628,370		1,322,310		12,853,986
Loans		144,418,267		1,530,962		1,167,894		10,506,187		157,623,310
Derivative financial assets		1,432,559		—		—		16,347		1,448,906
Other assets		4,436,564		72,082		7,943		60,769		4,577,358

		165,576,701		2,923,336		1,933,516		12,371,463		182,805,016

Guarantees (including financial guarantees)		9,977,111		—		82,408		39,586		10,099,105
Commitments		41,901,283		287,840		128,131		524,886		42,842,140

		51,878,394		287,840		210,539		564,472		52,941,245

	W	217,455,095		3,211,176		2,144,055		12,935,935		235,746,261

S-137

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

Industry information of credit exposure as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		6,470,566		522,421		6,992,987
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,650,142		8,511,249		2,594,926		13,756,317
Loans		70,838,082		81,930,518		12,489,560		165,258,160
Derivative financial assets		—		1,020,222		—		1,020,222
Other assets		116,566		197,138		9,316,280		9,629,984

		73,604,790		98,129,693		24,923,187		196,657,670

Guarantees (including financial guarantees)		8,936,595		3,107,564		302,107		12,346,266
Commitments		18,509,131		17,185,436		6,739,987		42,434,554

		27,445,726		20,293,000		7,042,094		54,780,820

	W	101,050,516		118,422,693		31,965,281		251,438,490


	December 31, 2020
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		5,909,550		391,906		6,301,456
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,570,583		7,762,090		2,521,313		12,853,986
Loans		70,089,916		75,782,918		11,750,476		157,623,310
Derivative financial assets		—		1,448,906		—		1,448,906
Other assets		115,348		176,753		4,285,257		4,577,358

		72,775,847		91,080,217		18,948,952		182,805,016

Guarantees (including financial guarantees)		7,622,494		2,197,060		279,551		10,099,105
Commitments		16,211,814		15,785,658		10,844,668		42,842,140

		23,834,308		17,982,718		11,124,219		52,941,245

	W	96,610,155		109,062,935		30,073,171		235,746,261

S-138

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(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, 2021 and December 31, 2020 are as follows and the exposures by industries could be changed according to economic fluctuations.


	June 30, 2021
			Securities measured at FVOCI
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commit- ments		Subtotal		Total
Manufacturing:
Display	W	—		—		716,704		—		3,002		719,706		173,997		249,598		423,595		1,143,301
Semiconductor /Mobile phone		—		186,524		3,924,500		—		8,387		4,119,411		141,733		588,548		730,281		4,849,692
Automotive		—		231,300		10,447,567		—		13,366		10,692,233		379,013		1,491,312		1,870,325		12,562,558
Refinery/Chemical/Energy		—		679,083		12,342,492		—		22,022		13,043,597		204,753		4,737,044		4,941,797		17,985,394
Steel/Metal		—		135,684		10,138,314		—		12,210		10,286,208		912,395		1,906,119		2,818,514		13,104,722
Others		—		1,417,551		33,268,505		—		57,579		34,743,635		7,124,704		9,536,510		16,661,214		51,404,849

		—		2,650,142		70,838,082		—		116,566		73,604,790		8,936,595		18,509,131		27,445,726		101,050,516

Service:
Air transportation		—		5,634		3,267,983		—		8,613		3,282,230		293,729		21,000		314,729		3,596,959
Sea transportation		—		—		2,265,698		—		18,773		2,284,471		84,461		323,602		408,063		2,692,534
Other transportation		—		125,317		6,056,295		—		11,668		6,193,280		14,367		3,594,361		3,608,728		9,802,008
Leisure/Travel industry		—		—		180,631		—		413		181,044		—		3,387		3,387		184,431
Food/Accommodation		—		72,435		2,156,095		—		3,830		2,232,360		51,695		302,175		353,870		2,586,230
Automotive-related		—		—		534,256		—		687		534,943		14,383		53,429		67,812		602,755
Finance/Insurance		2,558		108,222		229,219		—		682		340,681		—		473,120		473,120		813,801
Others		6,468,008		8,199,641		67,240,341		1,020,222		152,472		83,080,684		2,648,929		12,414,362		15,063,291		98,143,975

		6,470,566		8,511,249		81,930,518		1,020,222		197,138		98,129,693		3,107,564		17,185,436		20,293,000		118,422,693

Other:
Construction		—		297,468		2,590,516		—		3,615		2,891,599		180,388		1,140,658		1,321,046		4,212,645
Others		522,421		2,297,458		9,899,044		—		9,312,665		22,031,588		121,719		5,599,329		5,721,048		27,752,636

		522,421		2,594,926		12,489,560		—		9,316,280		24,923,187		302,107		6,739,987		7,042,094		31,965,281

	W	6,992,987		13,756,317		165,258,160		1,020,222		9,629,984		196,657,670		12,346,266		42,434,554		54,780,820		251,438,490

S-139

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


	December 31, 2020
	Due from banks (excluding due from BOK)		Securities measured at FVOCI		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commit- ments		Subtotal		Total
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commit- ments		Subtotal		Total
Manufacturing:
Display	W	—		—		739,944		—		3,016		742,960		168,168		236,421		404,589		1,147,549
Semiconductor /Mobile phone		—		146,790		4,403,204		—		8,850		4,558,844		104,489		399,119		503,608		5,062,452
Automotive		—		176,401		10,602,271		—		13,778		10,792,450		314,583		1,363,455		1,678,038		12,470,488
Refinery/Chemical/Energy		—		623,842		11,147,364		—		20,666		11,791,872		158,665		4,010,584		4,169,249		15,961,121
Steel/Metal		—		182,011		10,269,067		—		14,946		10,466,024		684,582		1,905,452		2,590,034		13,056,058
Others		—		1,441,539		32,928,066		—		54,092		34,423,697		6,192,007		8,296,783		14,488,790		48,912,487

		—		2,570,583		70,089,916		—		115,348		72,775,847		7,622,494		16,211,814		23,834,308		96,610,155
				��
Service:
Air transportation		—		3,156		3,437,648		—		7,991		3,448,795		287,309		28,000		315,309		3,764,104
Sea transportation		—		—		2,331,411		—		16,875		2,348,286		28,297		327,689		355,986		2,704,272
Other transportation		—		90,643		5,543,443		—		9,307		5,643,393		32,136		2,269,016		2,301,152		7,944,545
Leisure/Travel industry		—		—		177,498		—		403		177,901		—		3,315		3,315		181,216
Food/Accommodation		—		104,057		2,093,370		—		3,917		2,201,344		48,226		281,437		329,663		2,531,007
Automotive-related		—		—		475,921		—		669		476,590		18,174		35,615		53,789		530,379
Finance/Insurance		2,013		139,662		8,948		—		944		151,567		—		300		300		151,867
Others		5,907,537		7,424,572		61,714,679		1,448,906		136,647		76,632,341		1,782,918		12,840,286		14,623,204		91,255,545

		5,909,550		7,762,090		75,782,918		1,448,906		176,753		91,080,217		2,197,060		15,785,658		17,982,718		109,062,935

Other:
Construction		—		210,744		2,505,959		—		3,806		2,720,509		160,829		1,110,573		1,271,402		3,991,911
Others		391,906		2,310,569		9,244,517		—		4,281,451		16,228,443		118,722		9,734,095		9,852,817		26,081,260

		391,906		2,521,313		11,750,476		—		4,285,257		18,948,952		279,551		10,844,668		11,124,219		30,073,171

	W	6,301,456		12,853,986		157,623,310		1,448,906		4,577,358		182,805,016		10,099,105		42,842,140		52,941,245		235,746,261

Credit exposures of debt securities by credit rating as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	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	20,901,797		20,559,403		342,394		—
BBB2 ~ CCC		31,088		21,067		10,021		—
Below CC		—		—		—		—

	W	20,932,885		20,580,470		352,415		—

S-140

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


	December 31, 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	20,015,223		19,837,158		178,065		—
BBB2 ~ CCC		46,251		36,205		10,046		—
Below CC		—		—		—		—

	W	20,061,474		19,873,363		188,111		—

(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.

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.

S-141

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

The BIS capital adequacy ratio and capital in accordance to Basel III standards as of June 30, 2021 and December 31, 2020 are as follows:

BIS capital adequacy ratio


	June 30, 2021			December 31, 2020
Equity capital based on BIS (A):
Tier 1 capital:
Common Equity Tier 1	W	45,527,997			36,021,786
Additional Tier 1 capital		—			—

		45,527,997			36,021,786
Tier 2 capital		3,406,176			4,312,476

	W	48,934,173			40,334,262

Risk-weighted assets (B):
Credit risk-weighted assets	W	299,499,823			246,279,611
Market risk-weighted assets		1,930,386			1,490,013
Operational risk-weighted assets		6,522,832			4,880,008

	W	307,953,041			252,649,632

BIS capital adequacy ratio (A/B):		15.89	%		15.96	%
Tier 1 capital ratio:		14.78	%		14.26	%
Common Equity Tier 1 ratio		14.78	%		14.26	%
Additional Tier 1 capital ratio		—			—
Tier 2 capital ratio		1.11	%		1.71	%

Equity capital based on BIS


	June 30, 2021			December 31, 2020
Tier 1 capital (A):
Common Equity Tier 1
Capital stock	W	21,886,559			20,765,729
Capital surplus, etc.		1,030,452			1,036,196
Retained earnings		14,763,294			12,326,526
Accumulated other comprehensive income		8,479,619			2,324,417
Common stock deductibles		(631,927	)		(431,082	)

		45,527,997			36,021,786

Tier 2 capital (B):
Allowance for doubtful accounts, etc.		537,147			1,057,559
Qualified capital securities		2,652,000			2,780,000
Non-qualified capital securities		258,060			516,119
Additional stock deductibles		(41,031	)		(41,202	)

S-142

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


		3,406,176	4,312,476

Equity capital (A+B)	W	��48,934,173	40,334,262

(4) Market risk

(i) Concept

Market risk is defined as the possibility of potential loss resulting from fluctuations in interest rates, foreign exchange rates and the price of stocks and commodities. 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.

Capital Requirements for Market risk

The Bank’s Capital Requirements for Market risk as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
Interest rate risk	W	82,521		45,739
Equity risk		620		—
Foreign exchange (FX) risk		24,960		32,118
Option risk		29,437		30,055

	W	137,538		107,912

(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.

S-143

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

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 June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021		December 31, 2020
EVE	W	714,541		461,158
NII		135,027		90,081

(iv) Foreign currency risk

Outstanding balances by currency with significant exposure as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	KRW		USD		EUR		JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	4,776,770		6,163,509		41,251		33,048			21,492			233,185			11,269,255
Securities measured at FVTPL		9,575,239		625,624		—		855			—			71,054			10,272,772
Securities measured at FVOCI		36,247,144		5,323,108		25		259,038			—			181,191			42,010,506
Securities measured at amortized cost		2,417,134		—		—		—			—			—			2,417,134
Loans measured at FVTPL		696,048		5,240		—		—			—			—			701,288
Loans measured at amortized cost		120,613,307		36,510,224		2,534,041		1,187,795			636,436			1,412,733			162,894,536
Derivative financial assets		3,653,695		1,375,258		60,455		809			34,416			21,488			5,146,121
Other financial assets		5,537,172		2,238,767		239,704		41,667			120,867			1,309,555			9,487,732

		183,516,509		52,241,730		2,875,476		1,523,212			813,211			3,229,206			244,199,344

Financial liabilities:
Financial liabilities measured at FVTPL		1,774,006		118,702		—		—			—			—			1,892,708
Deposits		39,885,211		8,652,354		45,454		290,826			69			1,305			48,875,219
Borrowings		6,413,661		13,199,181		148,661		610,377			158			603,857			20,975,895
Debentures		108,891,048		24,922,262		1,922,846		737,684			827,947			6,074,176			143,375,963
Derivative financial liabilities		2,739,492		875,461		5,814		4,750			10,752			16,904			3,653,173
Other financial liabilities		5,871,511		3,038,387		297,263		54,200			122,232			1,367,534			10,751,127

		165,574,929		50,806,347		2,420,038		1,697,837			961,158			8,063,776			229,524,085

Net financial position	W	17,941,580		1,435,383		455,438		(174,625	)		(147,947	)		(4,834,570	)		14,675,259

S-144

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


	December 31, 2020
	KRW		USD		EUR		JPY			GBP			Others			Total
Financial assets:
Cash and due from banks	W	4,523,911		5,783,607		34,968		71,912			17,964			96,616			10,528,978
Securities measured at FVTPL		7,779,699		488,359		—		316			—			52,257			8,320,631
Securities measured at FVOCI		28,868,837		5,018,056		25		206,249			—			48,158			34,141,325
Securities measured at amortized cost		785,264		—		—		—			—			—			785,264
Loans measured at FVTPL		1,429,258		5,256		—		—			—			—			1,434,514
Loans measured at amortized cost		117,661,851		32,590,755		1,977,320		1,281,467			434,845			1,353,940			155,300,178
Derivative financial assets		6,395,927		1,736,642		86,654		353			72,523			37,277			8,329,376
Other financial assets		3,034,997		877,574		230,329		12,274			32,848			275,704			4,463,726

		170,479,744		46,500,249		2,329,296		1,572,571			558,180			1,863,952			223,303,992

Financial liabilities:
Financial liabilities measured at FVTPL		1,578,544		116,413		—		—			—			—			1,694,957
Deposits		37,674,768		7,870,846		26,068		305,890			85			1,762			45,879,419
Borrowings		6,092,647		11,794,352		160,347		679,535			—			160,730			18,887,611
Debentures		107,496,854		21,485,451		1,923,888		674,748			818,290			5,919,497			138,318,728
Derivative financial liabilities		5,103,794		1,122,091		10,475		6,639			32,574			29,714			6,305,287
Other financial liabilities		3,831,466		2,630,783		73,055		13,336			26,678			321,263			6,896,581

		161,778,073		45,019,936		2,193,833		1,680,148			877,627			6,432,966			217,982,583

Net financial position	W	8,701,671		1,480,313		135,463		(107,577	)		(319,447	)		(4,569,014	)		5,321,409

(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.

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

•

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.

(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, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	9,158,104		93,636		581,486		754,482		—		10,587,708
Securities measured at FVTPL		36,619		57,413		1,769,342		2,052,045		8,935,694		12,851,113
Securities measured at FVOCI		728,887		1,580,952		4,000,385		10,782,740		13,926,470		31,019,434
Securities measured at amortized cost		—		170,000		690,000		610,000		—		1,470,000
Loans		12,942,089		20,029,586		49,466,396		63,251,891		14,939,395		160,629,357
Other financial assets		6,865,304		—		—		—		1,238,201		8,103,505

	W	29,731,003		21,931,587		56,507,609		77,451,158		39,039,760		224,661,117

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


	June 30, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial liabilities:
Financial liabilities measured at FVTPL	W	25,852		102,214		677,280		300,606		224,659		1,330,611
Deposits		24,742,126		6,321,471		14,484,247		3,207,806		113,484		48,869,134
Borrowings		3,489,272		5,268,002		8,236,988		2,832,432		1,132,152		20,958,846
Debentures		5,359,025		10,916,270		43,537,667		76,871,577		6,918,239		143,602,778
Other financial liabilities		8,600,763		1,744,406		—		—		459,562		10,804,731

	W	42,217,038		24,352,363		66,936,182		83,212,421		8,848,096		225,566,100


	December 31, 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	9,137,776		91,051		464,395		760,273		21,263		10,474,758
Securities measured at FVTPL		136,016		124,287		915,490		1,883,117		8,107,999		11,166,909
Securities measured at FVOCI		553,784		1,025,117		4,845,370		11,070,430		13,737,878		31,232,579
Securities measured at amortized cost		—		—		210,000		570,000		—		780,000
Loans		9,232,537		13,540,396		56,829,822		60,814,868		14,671,105		155,088,728
Other financial assets		3,831,145		—		—		—		705,630		4,536,775

	W	22,891,258		14,780,851		63,265,077		75,098,688		37,243,875		213,279,749

Financial liabilities:
Financial liabilities measured at FVTPL	W	49,541		—		500,167		605,760		238,914		1,394,382
Deposits		22,271,587		6,814,661		12,791,098		3,881,550		109,333		45,868,229
Borrowings		3,873,926		3,441,014		7,757,486		2,688,791		1,125,536		18,886,753
Debentures		4,822,104		10,036,440		45,530,833		70,427,784		7,428,100		138,245,261
Other financial liabilities		4,110,621		1,766,297		—		—		1,074,478		6,951,396

	W	35,127,779		22,058,412		66,579,584		77,603,885		9,976,361		211,346,021

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued

Remaining contractual maturity risks of derivative financial instruments as of June 30, 2021 and December 31, 2020 are as follows:

Net settlement of derivative financial instruments


	June 30, 2021
	Within 1 month			1~3 months			3~12 months			1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	(336	)		—			—			—			—		(336	)
Interest rate		6,950			(21,778	)		(22,859	)		(161,736	)		468,586		269,163
Stock		4			—			—			—			—		4
Hedging purpose derivatives:
Interest rate		98,918			128,691			256,954			668,001			619,003		1,771,567

	W	105,536			106,913			234,095			506,265			1,087,589		2,040,398


	December 31, 2020
	Within 1 month			1~3 months			3~12 months			1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	(2,240	)		259			—			—			—		(1,981	)
Interest rate		(12,099	)		(8,965	)		(21,956	)		(154,170	)		311,267		114,077
Hedging purpose derivatives:
Interest rate		60,484			118,050			397,587			679,232			596,098		1,851,451

	W	46,145			109,344			375,631			525,062			907,365		1,963,547

Gross settlement of derivative financial instruments


	June 30, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	48,801,717		39,919,528		66,031,885		83,717,112		8,769,291		247,239,533
Outflow		48,420,722		39,894,034		65,834,405		83,805,021		8,806,267		246,760,449

Hedging purpose derivatives:
Currency
Inflow		1,811,193		2,179,933		1,966,090		16,606,973		2,319,898		24,884,087
Outflow		1,794,614		2,178,794		2,347,443		17,428,848		2,308,370		26,058,069

Total inflow	W	50,612,910		42,099,461		67,997,975		100,324,085		11,089,189		272,123,620

Total outflow	W	50,215,336		42,072,828		68,181,848		101,233,869		11,114,637		272,818,518

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2021 and 2020 (Unaudited), and December 31, 2020

(In millions of won)

49. Risk Management, Continued


	December 31, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	41,628,937		28,120,676		70,926,683		68,814,581		7,423,977		216,914,854
Outflow		41,747,705		28,165,683		71,251,634		68,700,868		7,415,793		217,281,683

Hedging purpose derivatives:
Currency
Inflow		126,703		743,865		5,321,106		15,865,301		1,175,969		23,232,944
Outflow		235,842		868,872		5,398,633		16,129,256		1,162,943		23,795,546

Total inflow	W	41,755,640		28,864,541		76,247,789		84,679,882		8,599,946		240,147,798

Total outflow	W	41,983,547		29,034,555		76,650,267		84,830,124		8,578,736		241,077,229

Remaining contractual maturity risks of guarantees and commitments as of June 30, 2021 and December 31, 2020 are as follows:


	June 30, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,303,086		1,651,849		2,785,263		6,196,066		410,002		12,346,266
Commitments		124,812		99,341		472,460		2,217,918		41,540,618		44,455,149

	W	1,427,898		1,751,190		3,257,723		8,413,984		41,950,620		56,801,415


	December 31, 2020
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,289,198		981,555		2,624,952		4,693,645		509,755		10,099,105
Commitments		73,583		79,569		762,853		1,751,963		42,194,766		44,862,734

	W	1,362,781		1,061,124		3,387,805		6,445,608		42,704,521		54,961,839

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THE REPUBLIC OF KOREA

The Economy

Gross Domestic Product

Based on preliminary data, GDP growth in the first nine months of 2021 was 4.0% at chained 2015 year prices, primarily due to an increase in exports of goods and services by 11.1% and an increase in aggregate private and general government consumption expenditures by 3.2%, the effect of which was offset in part by an increase in imports of goods and services by 8.0%, each compared with the corresponding period of 2020.

Principal Sectors of the Economy

Prices, Wages and Employment

Based on preliminary data, the inflation rate was 2.1% and the unemployment rate was 3.9% in the first nine months of 2021.

The Financial System

Securities Markets

The Korea Composite Stock Price Index was 3,296.7 on June 30, 2021, 3,202.3 on July 30, 2021, 3,199.3 on August 31, 2021, 3,068.8 on September 30, 2021, 2,970.7 on October 29, 2021, 2,839.0 on November 30, 2021, 2,977.7 on December 30, 2021, 2,663.3 on January 28, 2022 and 2,676.5 on February 15, 2022.

Monetary Policy

Interest Rates

The Bank of Korea raised its policy rate from 0.50% to 0.75% on August 26, 2021, to 1.00% on November 25, 2021, and to 1.25% on January 14, 2022, in response to rising levels of household debt and inflationary pressures.

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 1,130.0 to US$1.00 on June 30, 2021, Won 1,147.4 to US$1.00 on July 30, 2021, Won 1,164.4 to US$1.00 on August 31, 2021, Won 1,184.9 to US$1.00 on September 30, 2021, Won 1,171.7 to US$1.00 on October 29, 2021, Won 1,193.4 to US$1.00 on November 30, 2021, Won 1,185.5 to US$1.00 on December 31, 2021, Won 1,202.4 to US$1.00 on January 28, 2022 and Won 1,198.3 to US$1.00 on February 15, 2022.

Balance of Payments and Foreign Trade

Balance of Payments

Based on preliminary data, the Republic recorded a current account surplus of US$70.1 billion in the first nine months of 2021. The current account surplus in the first nine months of 2021 increased from the current account surplus of US$43.0 billion in the corresponding period of 2020, primarily due to a decrease in deficit from the services account, and to a lesser extent, increases in surpluses from the income account and the goods account.

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Trade Balance

Based on preliminary data, the Republic recorded a trade surplus of US$25.3 billion in the first nine months of 2021. Exports increased by 26.2% to US$467.7 billion in the first nine months of 2021 from US$370.6 billion in the corresponding period of 2020, primarily due to an improvement in the domestic economic conditions of the Republic’s major trading partners. Imports increased by 28.6% to US$442.5 billion in the first nine months of 2021 from US$344.0 billion in the corresponding period of 2020, primarily due to an increase in domestic production and an improvement in consumer sentiment reflecting gradual recovery from the COVID-19 pandemic.

Foreign Currency Reserves

The amount of the Government’s foreign currency reserves was US$461.5 billion as of January 31, 2022.

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 the second supplementary budget of 2021 amounting to Won 34.9 trillion in July 2021. The second supplementary budget, most of which was funded through the Government’s excess tax revenue, has been used mainly for the following purposes: (i) provision of relief packages, including support for small businesses and direct payments to eligible individuals, (ii) various forms of financial support for local communities through subsidies, (iii) purchases of vaccines and disease prevention and treatment efforts and (iv) employment support and aid for low-income households.

In December 2021, the National Assembly approved the Republic’s budget for 2022 in the amount of Won 607.7 trillion, a significant portion of which is expected to be used for measures to continue to mitigate the adverse effects of the COVID-19 pandemic on the Korean economy. As of the date of this prospectus supplement, the Republic’s plans to return to life as normal have been put on hold in light of the surge in the number of new daily cases of COVID-19 infections in recent months as well as the ongoing spread of the new Omicron variant of COVID-19.

For further information regarding the COVID-19 pandemic and the Republic’s past budgets (including 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.

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DESCRIPTION OF THE NOTES

The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the forms of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the United States Securities and Exchange Commission as exhibits to the registration statement no. 333-246071.

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 2025 Notes and the 2027 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 2025 Notes are initially limited to US$1,000,000,000 aggregate principal amount and the 2027 Notes are initially limited to US$500,000,000 aggregate principal amount. The 2025 Notes will mature on February 24, 2025 (the “2025 Notes Maturity Date”) and the 2027 Notes will mature on February 24, 2027 (the “2027 Notes Maturity Date”, and together with the 2025 Notes Maturity Date, the “Maturity Dates”). The 2025 Notes will bear interest at the rate of 2.000% per annum and the 2027 Notes will bear interest at the rate of 2.250% per annum, in each case payable semi-annually in arrears on February 24 and August 24 of each year (each, an “Interest Payment Date”), beginning on August 24, 2022. Interest on the Notes will accrue from February 24, 2022. 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

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prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear or Clearstream if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”

The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

For so long as the Notes are listed on 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 less than a de minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

Notices

All notices regarding the Notes will be published in London in the Financial Times and in New York in The Wall Street Journal (U.S. Edition). If we cannot, for any reason, publish notice in any of those newspapers, we will choose an appropriate alternate English language newspaper of general circulation, and notice in that newspaper will be considered valid notice. Notice will be considered made on the first date of its publication.

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CLEARANCE AND SETTLEMENT

We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.

Introduction

The Depository Trust Company

DTC is:

•

a limited-purpose trust company organized under the New York Banking Law;

•

a “banking organization” under the New York Banking Law;

•

a member of the Federal Reserve System;

•

a “clearing corporation” under the New York Uniform Commercial Code; and

•

a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934.

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates.

Euroclear and Clearstream

Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.

Ownership of the Notes through DTC, Euroclear and Clearstream

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the Notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may also hold your beneficial interests in the Notes through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.

We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered

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holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of the Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The participant would then either authorize you to take the action or act for you on your instructions.

DTC may grant proxies or authorize its participants, or persons holding beneficial interests in the Notes through such participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the Fiscal Agency Agreement or the Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the Notes or the Fiscal Agency Agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.

Transfers Within and Between DTC, Euroclear and Clearstream

Trading Between DTC Purchasers and Sellers

DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.

Trading Between Euroclear and/or Clearstream Participants

Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.

Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser

When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account, and the Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.

Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is 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

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finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participant’s account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on the Notes which the participant earns during 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.

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TAXATION

Korean Taxation

For a discussion of certain Korean tax considerations that may be relevant to you if you invest in the Notes, see “Taxation—Korean Taxation” in the accompanying prospectus.

U.S. Federal Income Tax Considerations

For a discussion of certain 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—U.S. Federal Income Tax Considerations” in the accompanying prospectus.

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UNDERWRITING

Relationship with the Underwriters

We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated February 16, 2022 (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 2025 Notes	Principal Amount of the 2027 Notes
BNP Paribas	US$ 142,857,000	US$ 71,428,000
BofA Securities, Inc.	142,858,000	71,432,000
The Hongkong and Shanghai Banking Corporation Limited	142,857,000	71,428,000
J.P. Morgan Securities LLC	142,857,000	71,428,000
KDB Asia Limited	142,857,000	71,428,000
Société Générale	142,857,000	71,428,000
UBS AG Hong Kong Branch	142,857,000	71,428,000
KEXIM Asia Limited	—	—

	US$1,000,000,000	US$500,000,000

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 2025 Notes is US$993,330,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2025 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 2025 Notes.

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The amount of our net proceeds from the 2027 Notes is US$495,945,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with the 2027 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 2027 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 February 24, 2022, 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.

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Prohibition of Sales to EEA

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 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)

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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 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 2001 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.

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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).

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”

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as defined in NI 31-103. By purchasing any Notes and accepting delivery of a purchase confirmation a purchaser is representing to the underwriters and the dealer from whom the purchase confirmation is received that it is an “accredited investor” and “permitted client” as defined above. The distribution of the Notes in Canada is being made on a private placement basis only and any resale of the Notes must be made in accordance with applicable Canadian securities laws, which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with prospectus and registration requirements or exemptions from the prospectus and registration requirements.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this preliminary prospectus or prospectus (including any amendment hereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Under Canadian securities law, National Instrument 33-105 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).

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. 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.

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LEGAL MATTERS

The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Lee & Ko, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by 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 Lee & Ko, and Lee & Ko may rely as to matters of New York law upon the opinions of Cleary Gottlieb Steen & Hamilton LLP.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chief Executive Officer and Chairman of the Board of Directors, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Korea Development Bank.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.

GENERAL INFORMATION

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended. The address of our registered office is 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

Our Board of Directors can be reached at the address of our registered office: c/o 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

The issue of the Notes has been authorized by a resolution of our Board of Directors passed on December 22, 2021 and a decision of our Chief Executive Officer and Chairman of the Board of Directors dated January 27, 2022. On February 7, 2022, 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
2025 Notes	US500630DQ87	500630 DQ8
2027 Notes	US500630DR60	500630 DR6

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HEAD OFFICE OF THE BANK

14, Eunhaeng-ro

Yeongdeungpo-gu, Seoul 07242

The Republic of Korea

FISCAL AGENT AND PRINCIPAL PAYING AGENT

The Bank of New York Mellon

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

Lee & Ko Hanjin Building 63 Namdaemun-ro, Jung-gu Seoul 04532 The Republic of Korea		Cleary Gottlieb Steen & Hamilton LLP c/o 19th Floor, Ferrum Tower 19 Eulji-ro 5-gil, Jung-gu Seoul 04539 The Republic of Korea

LEGAL ADVISOR TO THE UNDERWRITERS

as to U.S. law

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

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