Form 424B2 KOREA DEVELOPMENT BANK

February 9, 2023 6:20 AM EST

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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-265886

PROSPECTUS SUPPLEMENT

(To Prospectus Dated August 16, 2022)

LOGO

The Korea Development Bank

US$1,000,000,000 4.375% Notes due 2028

US$1,000,000,000 4.375% Notes due 2033

Our US$1,000,000,000 aggregate principal amount of notes due 2028 (the “2028 Notes”) will bear interest at a rate of 4.375% per annum and our US$1,000,000,000 aggregate principal amount of notes due 2033 (the “2033 Notes,” and together with the 2028 Notes, the “Notes”) will bear interest at a rate of 4.375% per annum. Interest on the Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023. The 2028 Notes will mature on February 15, 2028 and the 2033 Notes will mature on February 15, 2033.

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, 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.


	2028 Notes				2033 Notes
	Per Note		Total		Per Note		Total
Public offering price		99.769%	US$	997,690,000		99.217%	US$	992,170,000
Underwriting discount		0.300%	US$	3,000,000		0.300%	US$	3,000,000
Proceeds to us (before deduction of expenses)		99.469%	US$	994,690,000		98.917%	US$	989,170,000

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including February 15, 2023.

Applications will be made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any 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 Depositary Trust Company on or about February 15, 2023.

Joint Bookrunners and Lead Managers

ANZ

Citigroup

J.P. Morgan

KB Securities

KDB Asia

MUFG

Nomura

Société Générale

Corporate & Investment Banking

Standard Chartered Bank

Prospectus Supplement Dated February 8, 2023

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-6
Use of Proceeds		S-8
Recent Developments		S-9
Description of the Notes		S-158
Clearance and Settlement		S-160
Taxation		S-163
Underwriting		S-164
Legal Matters		S-172
Official Statements and Documents		S-172
General Information		S-172

Prospectus


	Page
CERTAIN DEFINED TERMS AND CONVENTIONS		1
USE OF PROCEEDS		2
THE KOREA DEVELOPMENT BANK		3
Overview		3
Capitalization		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		175
Land and History		175
Government and Politics		177
The Economy		180
Principal Sectors of the Economy		189
The Financial System		196
Monetary Policy		201
Balance of Payments and Foreign Trade		205
Government Finance		213
Debt		216
Tables and Supplementary Information		219

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	Page
DESCRIPTION OF THE SECURITIES		222
Description of Debt Securities		222
Description of Warrants		229
Terms Applicable to Debt Securities and Warrants		229
Description of Guarantees to be Issued by Us		230
Description of Guarantees to be Issued by The Republic of Korea		231
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS		232
TAXATION		233
Korean Taxation		233
U.S. Federal Income Tax Considerations		235
PLAN OF DISTRIBUTION		243
LEGAL MATTERS		244
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES		244
OFFICIAL STATEMENTS AND DOCUMENTS		244
EXPERTS		244
FORWARD-LOOKING STATEMENTS		245
FURTHER INFORMATION		247

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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, 2021, June 30, 2022 and September 30, 2022 and for the six months ended June 30, 2021 and 2022 and the nine months ended September 30, 2021 and 2022 included in this prospectus supplement has been prepared in accordance with International Financial Reporting Standards as adopted in Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

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

Additional Information

The information in this prospectus supplement is in addition to the information contained in our prospectus dated August 16, 2022. 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. 333-265886, 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.

Notice to Capital Market Intermediaries and Prospective Investors pursuant to Paragraph 21 of the Hong Kong SFC Code of Conduct—Important Notice to Prospective Investors

Prospective investors should be aware that certain intermediaries in the context of this offering of the Notes, including all underwriters, are “capital market intermediaries” (“CMIs”) subject to Paragraph 21 of the SFC Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “SFC Code”). This notice to prospective investors is a summary of certain obligations the SFC Code imposes on such CMIs, which require the attention and cooperation of prospective investors. Certain CMIs may also be acting as “overall coordinators” (“OCs”) for this offering and are subject to additional requirements under the SFC Code. Prospective investors who are the directors, employees or major shareholders of the The Korea Development Bank (the “Issuer”), a CMI or its group companies would be considered under the SFC Code as having an association (“Association”) with the Issuer, the CMI or the relevant group company. Prospective investors associated with the Issuer or any CMI (including its group companies) should specifically disclose this when placing an order for the Notes and should disclose, at the same time, if such orders may negatively impact the price discovery process in relation to this offering.

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Prospective investors who do not disclose their Associations are hereby deemed not to be so associated. Where prospective investors disclose their Associations but do not disclose that such order may negatively impact the price discovery process in relation to this offering, such order is hereby deemed not to negatively impact the price discovery process in relation to this offering. Prospective investors should ensure, and by placing an order prospective investors are deemed to confirm, that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e., two or more corresponding or identical orders placed via two or more CMIs). If a prospective investor is an asset management arm affiliated with any underwriter, such prospective investor should indicate when placing an order if it is for a fund or portfolio where the underwriter or its group company has more than 50% interest, in which case it will be classified as a “proprietary order” and subject to appropriate handling by CMIs in accordance with the SFC Code and should disclose, at the same time, if such “proprietary order” may negatively impact the price discovery process in relation to this offering.

Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. If a prospective investor is otherwise affiliated with any underwriter, such that its order may be considered to be a “proprietary order” (pursuant to the SFC Code), such prospective investor should indicate to the relevant underwriter when placing such order. Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. Where prospective investors disclose such information but do not disclose that such “proprietary order” may negatively impact the price discovery process in relation to this offering, such “proprietary order” is hereby deemed not to negatively impact the price discovery process in relation to this offering.

Prospective investors should be aware that certain information may be disclosed by CMIs (including private banks) which is personal and/or confidential in nature to the prospective investor. By placing an order, prospective investors are deemed to have understood and consented to the collection, disclosure, use and transfer of such information by the underwriters and/or any other third parties as may be required by the SFC Code, including to the Issuer, any OCs, relevant regulators and/or any other third parties as may be required by the SFC Code, it being understood and agreed that such information shall only be used for the purpose of complying with the SFC Code, during the bookbuilding process for this offering. Failure to provide such information may result in that order being rejected.

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.”

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

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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.

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SUMMARY OF THE OFFERING

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

The Notes

We are offering US$1,000,000,000 aggregate principal amount of 4.375% notes due February 15, 2028 (the “2028 Notes”) and US$1,000,000,000 aggregate principal amount of 4.375% notes due February 15, 2033 (the “2033 Notes,” and together with the 2028 Notes, the “Notes”).

The 2028 Notes will bear interest at a rate of 4.375% per annum and the 2033 Notes will bear interest at a rate of 4.375% per annum, in each case payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023. Interest on the Notes will accrue from February 15, 2023 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 payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government.

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

Listing

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

Form and Settlement

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

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Further Issues

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have 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 15, 2023, 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. KB Securities Co., Ltd., one of the underwriters, has also agreed to offer and sell the Notes only outside the United States to non-U.S. persons. See “Underwriting—Relationship with the Underwriters”.

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USE OF PROCEEDS

The net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$1,983,860,000. We will use the net proceeds from the sale of the Notes for our general operations, including extension of foreign currency loans and repayment of our maturing debt and other obligations.

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RECENT DEVELOPMENTS

This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated August 16, 2022. 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, 2022, we had W187,520.9 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets of W307,308.5 billion and total equity of W35,617.0 billion, as compared to W174,917.2 billion of loans outstanding, W276,421.9 billion of total assets and W36,502.9 billion of total equity as of December 31, 2021. For the six months ended June 30, 2022, we recorded interest income of W2,558.1 billion, interest expense of W1,659.3 billion and net income of W469.5 billion, as compared to W1,993.3 billion of interest income, W1,206.3 billion of interest expense and W2,377.6 billion of net income for the six months ended June 30, 2021. See “—Selected Financial Statement Data.”

Capitalization

As of September 30, 2022, our authorized capital was W30,000 billion and our capitalization was as follows:


	September 30, 2022⁽¹⁾

	(billions of won)
	(unaudited)
Long-term debt^(2)(3)(4):
Won currency borrowings		4,009.8
Industrial finance bonds		159,781.6
Foreign currency borrowings		4,169.2

Total long-term debt		167,960.6

Capital:
Paid-in capital		22,586.6
Capital surplus		2,475.6
Retained earnings⁽⁵⁾		6,269.7
Accumulated other comprehensive income		2,532.0

Total capital		33,863.9

Total capitalization		201,824.5

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2022.

(2)	Defined as debt that has a maturity at issuance of one year or more.

(3)	We have translated borrowings in foreign currencies into Won at the rate of W1,434.8 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 30, 2022.

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(4)	As of September 30, 2022, we had confirmed acceptances and guarantees totaling W9,427.0 billion under outstanding guarantees issued on behalf of our clients.

(5)

Includes planned regulatory reserve for credit losses of W247.3 billion as of September 30, 2022. 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

In July 2022, the Government contributed W308 billion in cash to our capital. As of September 30, 2022, our paid-in capital was W22,586.6 billion compared to W21,886.6 billion as of December 31, 2021. In December 2022, the Government contributed W565 billion in the form of shares of common stock of Korea Land and Housing Corporation to our capital.

Selected Financial Statement Data

Recent Developments

As of September 30, 2022, we had W198,654.3 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 of W324,470.9 billion and total equity of W33,863.9 billion, as compared to W174,917.2 billion of loans outstanding, W276,421.9 billion of total assets and W36,502.9 billion of total equity as of December 31, 2021. For the nine months ended September 30, 2022, we recorded interest income of W4,380.7 billion, interest expense of W3,058.2 billion and net loss of W354.1 billion, as compared to W3,012.2 billion of interest income, W1,812.1 billion of interest expense and W2,843.9 billion of net income for the nine months ended September 30, 2021.

The following tables present our selected separate financial information for the nine months ended September 30, 2021 and 2022 and as of December 31, 2021 and September 30, 2022, which has been derived from our unaudited separate financial statements as of December 31, 2021 and September 30, 2022 and for the nine months ended September 30, 2022 and 2021 prepared in accordance with K-IFRS.

Separate K-IFRS Financial Statement Data


	Nine Months Ended September 30,
	2021		2022
	(billions of Won) (unaudited)
Income Statement Data
Total Interest Income		3,012.2		4,380.7
Total Interest Expenses		1,812.1		3,058.2
Net Interest Income		1,200.1		1,322.5
Operating Income		3,203.6		885.5
Income (Loss) before Income Tax		3,644.4		(383.6	)
Income Tax Expense (Benefit)		800.5		(29.5	)
Net Income (Loss)		2,843.9		(354.1	)

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	As of December 31, 2021		As of September 30, 2022
	(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		174,917.2		198,654.3
Total Borrowings⁽²⁾		222,288.3		251,130.4
Total Assets		276,421.9		324,470.9
Total Liabilities		239,919.0		290,607.0
Equity		36,502.9		33,863.9

(1)

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

Nine Months Ended September 30, 2022

For the nine months ended September 30, 2022, we had net loss of W354.1 billion compared to net income of W2,843.9 billion in the corresponding period of 2021, on a separate K-IFRS basis, principally due to the following factors:

•

a decrease in net gain on disposal of loans measured at fair value through profit or loss to W0.6 billion in the nine months ended September 30, 2022 from W1,850.3 billion in the corresponding period of 2021, primarily due to gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares in June 2021, which did not recur in the first nine months of 2022;

•

impairment loss on investments in subsidiaries and associates of W1,267.9 billion in the nine months ended September 30, 2022 compared to a reversal of such loss of W466.8 billion in the corresponding period of 2021, primarily due to decreases in the recoverable amounts of our investments in HMM Company Limited, DSME and Hanjin KAL, each resulting from decreases in the fair value of such investments; and

•

an increase in net loss on derivatives to W1,414.8 billion in the nine months ended September 30, 2022 from W339.0 billion in the corresponding period of 2021, primarily due to an increase in net loss on hedging purpose derivatives on interest rates to W1,787.4 billion in the nine months ended September 30, 2022 from W451.9 billion in the corresponding period of 2021.

The above factors were partially offset by the following factors:

•

an income tax benefit of W29.5 billion in the nine months ended September 30, 2022 compared to an income tax expense of W800.5 billion in the corresponding period of 2021, primarily due to a change in profit (loss) before income tax to a loss of W383.6 billion in the nine months ended September 30, 2022 from a profit of W 3,644.4 billion in the corresponding period of 2021;

•

an increase in net gain on foreign exchange transaction to W921.1 billion in the nine months ended September 30, 2022 from W264.6 billion in the corresponding period of 2021, primarily due to an increase in net gain on foreign currency translations to W908.3 billion in the nine months ended September 30, 2022 from W270.9 billion in the corresponding period of 2021; and

•

an increase in net gain on financial liabilities measured at fair value through profit or loss to W524.0 billion in the nine months ended September 30, 2022 from W139.6 billion in the corresponding

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period of 2021, primarily due to an increase in net gain on valuation gains on financial liabilities measured at fair value through profit or loss to W518.5 billion in the nine months ended September 30, 2022 from W140.0 billion in the corresponding period of 2021.

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.), Daehan Shipbuilding Co., Ltd., HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding) and GM Korea Company. As of September 30, 2022, our credit extended to these companies totaled W19,167.1 billion, accounting for 5.9% 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, 2021		As of September 30, 2022		Primary Reason for Change
	(billions of won)
DSME	W	6,016.3		8,148.4	Increase due to an increase in refund guarantees
HMM Company Limited		10,452.0		8,079.7	Decrease due to a decrease in the value of perpetual bonds and repayment of loans
Daehan Shipbuilding		1,226.6		918.6	Decrease due to repayment of loans and debt-to-equity swap
HJ Shipbuilding & Construction		854.0		896.7	Increase due to increases in refund guarantees and letters of credit
K Shipbuilding		394.6		758.1	Increase due to increases in short-term loans, refund guarantees and letters of credit
GM Korea Company		402.9		365.6	Decrease due to a decline in the value of stocks

Total	W	19,346.4	W	19,167.1

As of September 30, 2022, we established allowances of W1,090.6 billion for our exposure to DSME, W2.9 billion for HMM Company Limited, W160.6 billion for Daehan Shipbuilding, W39.7 billion for HJ Shipbuilding & Construction, W139.4 billion for K Shipbuilding and none for GM Korea Company.

In the first nine months of 2022, we sold non-performing loans worth W367.3 billion to UAMCO., Ltd.

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Results of Operations

The following tables present our selected separate financial information as of December 31, 2021 and June 30, 2022 and for the six months ended June 30, 2021 and 2022, which has been derived from our unaudited separate financial statements as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 prepared in accordance with K-IFRS and included in this prospectus supplement.

Separate K-IFRS Financial Statement Data


	Six Months Ended June 30,
	2021		2022
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		1,993.3		2,558.1
Total Interest Expenses		1,206.3		1,659.3
Net Interest Income		786.9		898.9
Operating Income		2,362.4		522.8
Income before Income Tax		2,991.6		566.9
Income Tax Expense		614.0		97.5
Net Income		2,377.6		469.5


	As of December 31, 2021		As of June 30, 2022
	(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		174,917.2		187,520.9
Total Borrowings⁽²⁾		222,288.3		237,300.4
Total Assets		276,421.9		307,308.5
Total Liabilities		239,919.0		271,691.5
Equity		36,502.9		35,617.0

(1)

Gross amount, which includes 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 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, 2022 and for the six months ended June 30, 2022 and 2021 included in this prospectus supplement.

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

Six Months Ended June 30, 2022

In the first half of 2022, we had net income of W469.5 billion compared to W2,377.6 billion in the corresponding period of 2021, on a separate K-IFRS basis, principally due to a change to net other operating expense of W153.3 billion in the first half of 2022 from net other operating income of W1,900.5 billion in the corresponding period of 2021, primarily due to a significant decrease in net gains on disposal of loans measured at fair value through profit or loss to W0.6 billion in the first half of 2022 from W1,850.3 billion in the corresponding period of 2021, resulting primarily from gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares in June 2021, which did not recur in the first half of 2022.

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This was partially offset by the following factors:

•

a decrease in income tax expense to W97.5 billion in the first half of 2022 from W614.0 billion in the corresponding period of 2021, primarily due to a decrease in profit before income tax to W566.9 billion in the first half of 2022 from W2,991.6 billion in the corresponding period of 2021; and

•

a decrease in provision for credit losses to W434.1 billion in the first half of 2022 from W836.1 billion in the corresponding period of 2021, primarily due to a decrease in expected credit losses in anticipation of an improvement in the overall asset quality of our loan portfolio resulting from a recovery from the COVID-19 pandemic.

Allowances for Loan Losses and Loans in Arrears

As of June 30, 2022, we had established allowances of W3,796.9 billion for loan losses under Korean IFRS.

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2022, we have provided loans of W491.8 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2022, we had established allowances of W280.0 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, 2022⁽¹⁾
		Loan Amount		Loan Loss Allowances

		(in billions of won, except percentages)
Loan Classification	Normal⁽²⁾	W	183,102.2	W	2,120.1
	Precautionary		2,937.2		886.9
	Substandard		866.8		301.5
	Doubtful		135.6		123.4
	Expected Loss		479.1		365.0

	Total	W	187,520.9	W	3,796.9

(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, 2022, our non-performing loans totaled W1,481.5 billion, representing 0.8% 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, 2022, our legal reserve was W2,535.9 billion, representing 1.4% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), DSME, 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) and GM Korea Company. As of June 30, 2022, our credit extended to these companies totaled W20,442.5 billion, accounting for 6.7% of our total assets as of such date.

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Company	As of December 31, 2021		As of June 30, 2022		Primary Reason for Change
	(billions of won)
HMM Company Limited	W	10,452.0		9,693.6	Decrease due to a decrease in the value of perpetual bonds and repayment of loans
DSME		6,016.3		7,982.1	Increase due to an increase in refund guarantees
HJ Shipbuilding & Construction		854.0		891.2	Increase due to increases in refund guarantees and letters of credit
Daehan Shipbuilding		1,226.6		888.0	Decrease due to repayment of loans and debt-to-equity swap
K Shipbuilding		394.6		604.9	Increase due to increases in short-term loans, refund guarantees and letters of credit
GM Korea Company		402.9		382.7	Decrease due to a decline in the value of stocks

Total	W	19,346.4	W	20,442.5

As of June 30, 2022, we established allowances of W2.9 billion for our exposure to HMM Company Limited, W966.0 billion for DSME, W38.3 billion for HJ Shipbuilding & Construction, W284.8 billion for Daehan Shipbuilding, W125.5 billion for K Shipbuilding and none for GM Korea.

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 injected W1 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. We also concurrently entered into an agreement to jointly manage HMM Company Limited together with Korea Ocean Business Corporation until December 2020, which was subsequently extended to January 2022. In June 2021, we exercised our right to convert W300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. Following an improvement in the financial performance of HMM Company Limited, we ended our joint management of HMM Company Limited in January 2022, upon which Korea Ocean Business Corporation became its sole manager. We are currently pursuing the sale of our equity stake in HMM Company Limited, which amounted to 20.7% as of June 30, 2022.

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 to W4.2 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 acquired W382.9 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 additional W2.9 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 of W0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount of W1.28

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trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. However, in January 2022, the European Commission announced that it would not grant approval for such acquisition due to anti-competition concerns for LNG carriers. In December 2022, Hanwha Group entered into a definitive agreement with us to acquire a 49.3% equity stake in DSME for approximately W2 trillion. The consummation of the acquisition currently remains subject to various conditions, including regulatory approval from a number of relevant jurisdictions.

In January 2019, HJ Shipbuilding & 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 for W250 billion. In December 2021, we terminated our creditor management of K Shipbuilding, and as of June 30, 2022, our equity interest in K Shipbuilding amounted to 2.5%, which we currently intend to sell.

In the first half of 2022, we sold non-performing loans worth W367.3 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 to 2023 to date and has led to significant global and domestic economic and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties” in the accompanying prospectus. The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which needed significant 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 during the course of the pandemic.

In May 2020, we injected W720 billion (consisting of W420 billion in securities collateralized by income receivables, W180 billion in perpetual convertible bonds and W120 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, 2022, 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 to W1,423.3 billion, an increase from W1,167.2 billion as of December 31, 2021. In June 2022, we exercised our right to convert our W180 billion worth of perpetual convertible bonds of Korean Air Lines into 12.2 million shares of equity, which increased our equity ownership in Korean Air Lines to 3.31% as of June 30, 2022.

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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 of W1.2 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 inject W2.4 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 inject W800 billion (consisting of W500 billion through participation in a rights offering and W300 billion through purchase of exchangeable bonds) into Hanjin KAL in connection with Korean Air Lines’ acquisition of a 63.9% stake in Asiana Airlines through a transaction valued at W1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to approximately 10.6%. 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. However, 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 the United States, the European Union, China and Japan, 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 COVID-19 pandemic has prompted the Government in recent years 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 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 to W40 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 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.

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.

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Operations

Loan Operations

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2022:

Loans⁽¹⁾


	June 30, 2022

	(billions of won)
Equipment Capital Loans:
Domestic currency	W	58,640.5
Foreign currency		11,920.1

		70,560.6

Working Capital Loans:
Domestic currency⁽²⁾		68,293.2
Foreign currency		12,362.1

		80,655.3

Other Loans⁽³⁾		36,305.0

Total loans	W	187,520.9

(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, 2022, we had W187,520.9 billion in outstanding loans, which represents a 7.2% increase from W174,917.2 billion of outstanding loans as of December 31, 2021.

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, 2022		As % of June 30, 2022 Total

	(billions of won, except percentages)
Loans with remaining maturities of one year or less	W	63,594.4		42.1	%
Loans with remaining maturities of more than one year		87,621.5		57.9

Total	W	151,215.9		100.0	%

(1)	Includes loans extended to affiliates.

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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, 2022:

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


	June 30, 2022			As % of June 30, 2022 Total

	(billions of won, except percentages)
Manufacturing	W	68,081.4			45.0	%
Banking and Insurance		37,260.7			24.6
Transportation		10,659.9			7.0
Public Administration		618.2			0.4
Electric, Gas and Water Supply Industry		4,381.5			2.9
Others⁽²⁾		30,214.2			20.0

Total	W	151,215.9			100.0	%

Percentage increase from December 31, 2021		5.3	%

(1)	Includes loans extended to affiliates.

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

Industrial Bank of Korea was our single largest borrower as of June 30, 2022, accounting for 4.9% of our outstanding equipment capital and working capital loans. As of June 30, 2022, our five largest borrowers and 20 largest borrowers accounted for 12.5% and 23.1%, respectively, of our outstanding equipment capital and working capital loans.

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2022 by industry sector:

20 Largest Borrowers by Industry Sector


	As % of June 30, 2022 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Banking and Insurance		53.0	%
Manufacturing		31.1
Transportation		10.9
Others⁽¹⁾		5.0

Total		100.0

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

S-19

Loans by Categories

The following table sets out equipment capital and working capital loans by categories as of June 30, 2022:


	Equipment Capital Loans					Working Capital Loans
	June 30, 2022		%			June 30, 2022		%
	(billions of won, except percentages)
Industrial fund loans	W	52,949.8		75.0	%	W	50,876.1		63.1	%
On-lending loans		3,273.0		4.7			16,500.5		20.5
Foreign currency loans		8,311.3		11.8			1,813.4		2.2
Local currency loans denominated in foreign currencies		0.8		0.0			23.1		0.0
Offshore loans in foreign currencies		3,300.6		4.7			9,426.7		11.7
Government fund loans		99.9		0.1			—		—
Overdraft		—		—			43.3		0.1

Others⁽¹⁾		2,625.2		3.7			1,972.2		2.4

Total	W	70,560.6		100.0	%	W	80,655.3		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, 2022:


	June 30, 2022
	(billions of won)
Acceptances	W	377.5
Guarantees on local borrowings		886.3
Guarantees on foreign borrowings		7,716.7
Letters of guarantee for importers		89.5

Total	W	9,070.0

Investments

Our equity investments decreased to W41,864.7 billion as of June 30, 2022 from W41,998.7 billion as of December 31, 2021. As of June 30, 2022, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaled W19,396.8 billion, equal to 38.7% of our equity investment ceiling.

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The following table sets out our equity investments by industry sector on a book value basis as of June 30, 2022:

Equity Investments


	Book Value as of June 30, 2022
	(billions of won)
Electric, Gas and Water Supply Industry	W	18,023.1
Banking and Insurance		10,775.7
Transportation		5,335.8
Real Estate Business		3,792.1
Construction		1,009.4
Manufacturing		732.3
Others		2,196.3

Total	W	41,864.7

As of June 30, 2022, we held total equity investments, on a book value basis, of W552.2 billion in one of our five largest borrowers and W2,357.8 billion in three 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, 2022, the aggregate value of our equity investments accounted for approximately 91.6% of their aggregate cost basis.

Other Activities

As of June 30, 2022, we held in trust cash and other assets totaling W30,382.5 billion, and we generated in the first half of 2022 trust fee income equaling W88.0 billion.

Source of Funds

Borrowings from the Government

The following table sets out our Government borrowings as of June 30, 2022:


Type of Funds Borrowed	As of June 30, 2022
	(billions of won)
General purpose	W	101.0
Special purpose		4,232.3

Total	W	4,333.3

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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, 2022:


Outstanding Balance	As of June 30, 2022
	(billions of won)
Denominated in Won	W	112,943.6
Denominated in other currencies		39,916.3

Total	W	152,859.9

As of June 30, 2022, 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, 2022) was W166,213.4 billion, equal to 22.1% of our authorized amount under the KDB Act, which was W751,851.1 billion.

Foreign Currency Borrowings

As of June 30, 2022, the outstanding amount of our foreign currency borrowings was US$14.3 billion. Our long-term and short-term foreign currency borrowings increased to W18,572.3 billion as of June 30, 2022 from W16,426.4 billion as of December 31, 2021.

Deposits

As of June 30, 2022, demand deposits held by us totaled W2,581.7 billion and time and savings deposits held by us totaled W52,370.7 billion.

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of June 30, 2022:

Debt Principal Repayment Schedule⁽¹⁾


Currency⁽²⁾⁽³⁾	Maturing on or before December 31,
	2022		2023		2024		2025		2026		Thereafter
			(billions of won)
Won	W	28,526.4	W	43,307.4	W	20,531.4	W	10,921.7	W	3,739.3	W	10,250.7
Foreign		18,967.1		13,033.8		8,491.6		8,064.5		4,869.1		5,062.6

Total Won Equivalent	W	47,493.5	W	56,341.2	W	29,023.0	W	18,986.2	W	8,608.4	W	15,313.3

(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, 2022, 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	Seog Hoon Kang	June 6, 2025
Auditor	Tae Hyun Joo	March 14, 2024
Independent Non-executive Directors	Yeong Ook Kim	May 25, 2023
	Dong Il Jung	November 30, 2023
	Seog Hwan Lee	September 27, 2024
	Sam Mo Kang	September 27, 2024

Financial Statements and the Auditors

Our interim separate financial statements as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 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, 2022 and for the six months ended June 30, 2022 and 2021 included in this prospectus supplement.

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Korea Development Bank

Interim Separate Statements of Financial Position

June 30, 2022 (Unaudited) and December 31, 2021


(In millions of won)	Notes		June 30, 2022		December 31, 2021
Assets
Cash and due from banks		4,45,46,49	W	11,885,822		11,975,767
Securities measured at FVTPL		5,45,46,49		11,104,203		9,818,811
Securities measured at FVOCI		6,39,45,46,49		39,549,739		37,875,136
Securities measured at amortized cost		7,39,45,46,49		3,705,433		2,968,877
Loans measured at FVTPL		8,45,46,49		572,619		644,412
Loans measured at amortized cost		9,45,46,49		183,726,201		170,763,394
Derivative financial assets		10,45,46,47,49		11,513,355		5,305,572
Investments in subsidiaries and associates		11,48		29,101,937		28,710,062
Property and equipment, net		12,48		811,385		872,157
Investment property, net		13,48		83,623		82,860
Intangible assets, net		14,48		125,204		147,699
Defined benefit assets		21		—		9,353
Current tax assets				2,016		2,841
Assets held for sale		16		—		1,371,052
Other assets		15,45,46,49		15,126,989		5,873,907

Total assets			W	307,308,526		276,421,900

Liabilities
Financial liabilities measured at FVTPL		17,45,46,49	W	1,681,113		2,067,144
Deposits		18,45,46,49		60,849,932		52,792,121
Borrowings		19,45,46,49		24,386,530		22,063,777
Debentures		20,45,46,49		150,382,825		145,365,330
Derivative financial liabilities		10,45,46,47,49		13,545,287		4,757,841
Net defined benefit liabilities		21		47,052		—
Provisions		22		1,881,011		1,567,530
Deferred tax liabilities		37		3,239,445		3,957,522
Current tax liabilities				536,115		254,882
Other liabilities		23,45,46,49		15,142,170		7,092,896

Total liabilities				271,691,480		239,919,043
Equity
Issued capital		1,24		22,278,559		21,886,559
Capital surplus		24		2,477,125		2,479,010
Accumulated other comprehensive income		24		3,782,897		4,773,474
Retained earnings		24		7,078,465		7,363,814
(Regulatory reserve for credit losses of W247,252 million as of June 30, 2022 and W482,885 million as of December 31, 2021, respectively)
(Required reversal of regulatory reserve for credit losses of W30,182 million as of June 30, 2022 and W235,633 million as of December 31, 2021, respectively)
(Planned reversal of regulatory reserve for credit losses of W30,182 million as of June 30, 2022 and W235,633 million as of December 31, 2021, respectively)

Total equity				35,617,046		36,502,857

Total liabilities and equity			W	307,308,526		276,421,900

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, 2022 and 2021 (Unaudited)


			June 30, 2022						June 30, 2021
(In millions of won, except earnings per share information)	Notes		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income		25	W	1,400,953			2,558,130			999,352			1,993,256
Interest expense		25		(927,963	)		(1,659,255	)		(592,784	)		(1,206,346	)

Net interest income		48		472,990			898,875			406,568			786,910
Net fees and commission income		26		99,242			205,430			83,928			168,268
Dividend income		27		69,726			503,140			111,067			642,599
Net gain (loss) on securities measured at FVTPL		28		(54,156	)		(86,701	)		5,721			(3,887	)
Net gain on financial liabilities measured at FVTPL		29		200,315			374,412			28,477			106,104
Net loss on securities measured at FVOCI		30		(3,592	)		(28,106	)		(6,462	)		(9,890	)
Net loss on derivatives		31		(454,498	)		(600,209	)		(30,382	)		(131,082	)
Net gain on foreign currency transaction		32		210,748			270,570			33,580			108,720
Other operating income (expense), net		33		(146,948	)		(153,296	)		989,810			1,900,478

Non-interest income (expense), net				(79,163	)		485,240			1,215,739			2,781,310
Provision for credit losses		34		412,868			434,146			901,759			836,089
General and administrative expenses		35,48		177,340			427,141			178,727			369,716

Operating income (expense)		48		(196,381	)		522,828			541,821			2,362,415
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates				(66,246	)		45,115			132,334			126,248
Other non-operating income		36		982			3,085			448,205			508,944
Other non-operating expense		36		(1,689	)		(4,101	)		(745	)		(6,011	)

Non-operating income (expense), net				(66,953	)		44,099			579,794			629,181

Profit (loss) before income taxes				(263,334	)		566,927			1,121,615			2,991,596
Income tax expense (benefit)		37		(50,120	)		97,477			198,686			613,988

Profit (loss) for the period		24		(213,214	)		469,450			922,929			2,377,608
(Profit (loss) for the period adjusted for regulatory reserve for credit losses: W(136,112) million and W499,632 million for the three-month and six-month periods ended June 30, 2022, respectively; W1,091,638 million and W2,300,682 million for the three-month and six-month periods ended June 30, 2021, respectively)
Other comprehensive income (loss) for the period, net of tax		24
Items that are or may be reclassified subsequently to profit or loss:
Net loss on securities measured at FVOCI				(242,676	)		(464,225	)		(13,756	)		(56,026	)
Exchange differences on translation of foreign operations				96,620			118,674			(3,098	)		41,880
Valuation gain on cash flow hedge				1,088			3,069			23			657
Net gain (loss) on hedges of net investments in foreign operations				(51,156	)		(66,255	)		2,013			(23,963	)

				(196,124	)		(408,737	)		(14,818	)		(37,452	)
Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI				(1,145,708	)		(524,930	)		3,083,003			6,130,023
Fair value changes on financial liabilities designated at fair value due to credit risk				9,879			21,380			(300	)		414

				(1,135,829	)		(503,550	)		3,082,703			6,130,437

				(1,331,953	)		(912,287	)		3,067,885			6,092,985

Total comprehensive income (loss) for the period			W	(1,545,167	)		(442,837	)		3,990,814			8,470,593

Earnings (loss) per share
Basic and diluted earnings (loss) per share (in won)		38	W	(48	)		106			215			558

See accompanying notes to the interim separate financial statements.

S-25

Korea Development Bank

Interim Separate Statements of Changes in Equity

Six-month periods ended June 30, 2022 and 2021 (Unaudited)


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

Balance at January 1, 2022	W	21,886,559		2,479,010			4,773,474			7,363,814			36,502,857
Profit for the period		—		—			—			469,450			469,450
Net gain (loss) on securities measured at FVOCI		—		—			(1,067,445	)		78,290			(989,155	)
Exchange differences on translation of foreign operations		—		—			118,674			—			118,674
Valuation gain on cash flow hedge		—		—			3,069			—			3,069
Net loss on hedges of net investments in foreign operations		—		—			(66,255	)		—			(66,255	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			21,380			—			21,380

Total comprehensive income (loss) for the period		—		—			(990,577	)		547,740			(442,837	)

Dividends		—		—			—			(833,089	)		(833,089	)
Paid in capital increase		392,000		(1,885	)		—			—			390,115

Transaction with owners		392,000		(1,885	)		—			(833,089	)		(442,974	)

Balance at June 30, 2022	W	22,278,559		2,477,125			3,782,897			7,078,465			35,617,046

See accompanying notes to the interim separate financial statements.

S-26

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2022 and 2021 (Unaudited)


(In millions of won)	Notes		2022			2021
Cash flows from operating activities
Profit for the period			W	469,450			2,377,608
Adjustments for:
Income tax expense		37		97,477			613,988
Interest income		25		(2,558,130	)		(1,993,256	)
Interest expense		25		1,659,255			1,206,346
Dividend income		27		(503,140	)		(642,599	)
Loss (gain) on valuation of securities measured at FVTPL		28		60,109			(1,514	)
Gain on disposal of securities measured at FVTPL				(17,727	)		(3,736	)
Gain on financial liabilities measured at FVTPL		29		(374,412	)		(106,104	)
Loss on securities measured at FVOCI		30		28,106			9,890
Impairment loss (reversal of impairment loss) on securities measured at amortized cost		7		(8	)		89
Loss (gain) on loans measured at FVTPL		33		73,069			(1,933,124	)
Loss on valuation of derivatives				2,489,527			587,596
Net gain on fair value hedged items		31		(923,619	)		(201,419	)
Gain on foreign exchange translations		32		(260,903	)		(119,440	)
Gain on disposal of investments in subsidiaries and associates		33		(16,626	)		(77,546	)
Reversal of impairment loss on investments in subsidiaries and associates				(45,115	)		(126,248	)
Provision for loan loss allowance		34		153,271			928,606
Increase (reversal) of provision for other assets		34		(3,779	)		5,077
Increase (reversal) of provision for payment guarantees		22		493,621			(47,063	)
Reversal of provision for unused commitments		22		(182,089	)		(22,477	)
Reversal of financial guarantee provision		22		(26,878	)		(28,054	)
Increase (reversal) of provision for possible losses from lawsuits		22		(1,492	)		1,122
Reversal of provision for restoration		22		(1,244	)		(1,211	)
Defined benefit costs		21		68,288			19,974
Depreciation of property and equipment		12		35,659			36,874
Reversal of impairment loss on assets held for sale				—			(499,976	)
Loss (gain) on disposal of property and equipment		36		513			(3,220	)
Gain on disposal of assets held for sale				—			(3,610	)
Depreciation of investment property		13		1,116			1,246
Amortization of intangible assets		14		27,121			26,623

				271,970			(2,373,166	)
Changes in operating assets and liabilities:
Due from banks				1,456,721			(451,496	)
Securities measured at FVTPL				(233,383	)		(903,120	)
Loans measured at FVTPL				(1,276	)		8,350
Loans measured at amortized cost				(11,595,400	)		(6,630,749	)
Derivative financial instruments				2,983			(88,601	)
Other assets				(9,079,117	)		(4,811,520	)
Financial liabilities measured at FVTPL				30,112			290,878
Deposits				8,035,676			2,992,486
Defined benefit liabilities				(11,883	)		(46	)
Other liabilities				7,828,902			4,037,287

				(3,566,665	)		(5,556,531	)

S-27

(Continued)

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2022 and 2021 (Unaudited)


(In millions of won)	Notes		2022			2021
Income taxes refund (paid)				(141,419	)		190,594
Interest received				2,467,608			1,988,788
Interest paid				(1,454,056	)		(1,356,846	)
Dividends received				500,896			646,459

Net cash used in operating activities			W	(1,452,216	)		(4,083,094	)

Cash flows from investing activities
Net increase of securities measured at FVTPL			W	(1,097,551	)		(1,044,527	)
Disposal of securities measured at FVOCI		6		7,407,158			20,308,243
Acquisition of securities measured at FVOCI		6		(10,058,190	)		(19,575,204	)
Redemption of securities measured at amortized cost		7		772,000			170,000
Acquisition of securities measured at amortized cost		7		(1,507,687	)		(1,804,677	)
Disposal of property and equipment		12		70,375			9,518
Acquisition of property and equipment		12		(6,825	)		(16,611	)
Acquisition of intangible assets		14		(4,519	)		(5,945	)
Disposal of investments in subsidiaries and associates				1,648,264			395,129
Acquisition of investments in subsidiaries and associates				(616,286	)		(305,758	)
Disposal of assets held for sale				—			9,200

Net cash used in investing activities				(3,393,261	)		(1,860,632	)
Cash flows from financing activities
Increase of financial liabilities measured at FVTPL				115,000			50,000
Decrease of financial liabilities measured at FVTPL				(127,241	)		(36,452	)
Proceeds from borrowings				22,119,602			20,352,814
Repayment of borrowings				(19,859,656	)		(18,280,199	)
Proceeds from issuance of debentures				63,428,658			62,262,832
Repayment of debentures				(57,457,696	)		(57,069,434	)
Decrease in lease liabilities		23		(11,756	)		(11,492	)
Dividends				(833,089	)		(209,638	)
Paid in capital increase				390,115			1,115,442

Net cash provided by financing activities				7,763,937			8,173,873
Effects from changes in foreign currency exchange rate for cash and cash equivalents held				204,645			100,705
Net increase in cash and cash equivalents				3,123,105			2,330,852
Cash and cash equivalents at beginning of the period				5,066,135			5,729,194

Cash and cash equivalents at end of the period		43	W	8,189,240			8,060,046

See accompanying notes to the interim separate financial statements.

S-28

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

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 is W22,278,559 million with 4,455,711,768 shares of issued and outstanding as of June 30, 2022 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, 2022 is as follows:


	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		60		11		7		7		86

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, 2022 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, 2022. The nature and the impact of each new standard or amendment 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 amendment does not have a significant impact on the separate financial statements.

S-29

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

2. Basis of Preparation

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 amendment does not 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 amendment does not have a significant impact on the separate financial statements.

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 amendment does not have a significant impact on the separate financial statements.

Annual improvements to K-IFRS 2018-2020

The amendments related to the annual improvements to K-IFRS 2018-2020 do not 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

S-30

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

2. Basis of Preparation

(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, 2022, 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 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.

Amendments to Korean IFRS No.1001 Presentation of Financial Statements

The amendments require an entity to define and disclose their material accounting policy information. IFRS Practice Statement 2 Making Materiality Judgements was amended to explain and demonstrate how to apply the concept of materiality. The amendments should be applied for annual reporting 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.

Amendments to Korean IFRS No.1008 Accounting Policies, Changes in Accounting Estimates and Errors

The amendments introduce the definition of accounting estimates and clarify how to distinguish changes in accounting estimates from changes in accounting policies. The amendments should be applied for annual reporting 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.

Amendments to Korean IFRS No.1012 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

The amendments narrow the scope of the deferred tax recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendments should be applied for annual reporting 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.

(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

S-31

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

2. Basis of Preparation

•

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.

(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.

S-32

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

2. Basis of Preparation

(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 2022 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, 2022 is disclosed in Note 49. (2) and the exposures by industries could be changed according to economic fluctuations.

Taking these circumstances into account comprehensively, the Bank recalculated the forward-looking information used to estimate the expected credit loss in accordance with K-IFRS 1109 ‘Financial Instruments’ as of June 30, 2022. 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 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.

S-33

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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 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.

S-34

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(ii) Foreign operations

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

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

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

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

(iii) Foreign exchange of net investment in foreign operations

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

(5) Recognition and measurement of financial instruments

(i) Initial recognition

The Bank recognizes a financial asset or a financial liability in its 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.

S-35

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(ii) Subsequent measurement

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

Amortized cost

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

Fair value

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

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

The Bank uses valuation models that are commonly used by market participants and customized for the Bank to determine fair values of 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.

S-36

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(iii) Derecognition

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

Derecognition of financial assets

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

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

Derecognition of financial liabilities

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

(iv) Offsetting

Financial assets and liabilities are offset and the net amount reported in the 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.

(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

S-37

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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 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.

S-38

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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

(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.

S-39

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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 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.

S-40

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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 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.

S-41

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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

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

S-42

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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.

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

S-43

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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 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).

S-44

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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.

(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.

S-45

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

(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.

(22) Interest income and expense

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

Upon the calculation of the effective interest rate, the Bank estimates future cash flows by taking into consideration all contractual terms of the financial instrument, but not future credit loss. The calculation also

S-46

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

reflects any fees or points paid or received, transaction costs and any related premiums or discounts. In the case that the cash flow and expected duration of a financial instrument cannot be estimated reliably, the effective interest rate is calculated by the contractual cash flow during the contract period.

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

(23) Fees and commission income

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

(i) Fees and commission from financial instruments

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

(ii) Fees and commission from services

Fees and commission income charged in exchange for services to be performed during a certain period 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.

The Bank recognizes deferred income tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, except to the extent that the Bank can control the timing of the reversal of

S-47

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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

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

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

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

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

(26) Accounting for trust accounts

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

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

(27) Regulatory reserve for credit losses

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

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

(28) Earnings per share

The Bank represents its diluted and basic earnings per common share in the separate statement of comprehensive income. Basic earnings per share (EPS) is calculated by dividing net profit attributable to shareholders of the Bank by the weighted average number of common shares outstanding during the reporting

S-48

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

3. Significant Accounting Policies, Continued

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

(29) Corrections of errors

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

S-49

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

4. Cash and Due from Banks, Continued

4. Cash and Due from Banks

(1)	Cash and due from banks as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022		December 31, 2021
Cash	W	61,531		55,083
Due from banks in Korean won:
Due from Bank of Korea		3,844,269		5,673,412
Other due from banks in Korean won		359,264		334,272

		4,203,533		6,007,684
Due from banks in foreign currencies / off-shores		7,620,758		5,913,000

	W	11,885,822		11,975,767

(2)	Restricted due from banks as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022		December 31, 2021
Reserve deposit	W	3,378,018		4,387,441
Deposit of monetary stabilization account		900,000		1,500,000
Others		463,786		518,886

	W	4,741,804		6,406,327

5. Securities Measured at FVTPL

(1)	Details of securities measured at fair value through profit or loss as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,326,623		1,204,572
Equity investments		—		589,461		676,175
Beneficiary certificates		—		6,865,649		7,184,440
Government and public bonds		773,000		707,311		658,924
Financial bonds		363,000		360,436		359,555
Others		30,470		30,515		30,357

		1,166,470		9,879,995		10,114,023
Securities denominated in foreign currencies/off-shores:
Equity investments		—		55,044		89,770
Beneficiary certificates		—		954,531		900,410
Debt securities		—		—		—

		—		1,009,575		990,180

	W	1,166,470		10,889,570		11,104,203

S-50

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

5. Securities Measured at FVTPL, Continued


	December 31, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,011,501		884,330
Equity investments		—		451,937		490,230
Beneficiary certificates		—		6,559,758		6,835,319
Government and public bonds		632,000		605,809		606,007
Financial bonds		165,000		164,048		163,787
Others		50,470		50,659		50,436

		847,470		8,843,712		9,030,109
Securities denominated in foreign currencies/off-shores:
Equity investments		—		37,157		62,286
Beneficiary certificates		—		671,071		673,050
Debt securities		53,348		52,985		53,366

		53,348		761,213		788,702

	W	900,818		9,604,925		9,818,811

(2)	Securities measured at fair value through profit or loss with disposal restrictions as of June 30, 2022 and December 31, 2021 are as follows:

June 30, 2022

Company

Number of
shares

Carrying
amount

Restricted period

National Happiness Fund Co., Ltd.

34,066

28,873

Undecided

Shinhan Metal Co., Ltd.

7,692

—

Until December 31, 2022

41,758

28,873

December 31, 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, 2022

41,758

47,647

S-51

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

6. Securities Measured at FVOCI

(1)	Details of securities measured at FVOCI as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,254,416		10,706,715
Government and public bonds		2,435,000		2,421,382		2,372,273
Financial bonds		2,970,000		2,955,965		2,930,278
Corporate bonds		7,975,134		7,974,712		7,687,474
Others		1,957,849		1,957,849		7,204,924

		15,337,983		25,564,324		30,901,664
Securities denominated in foreign currencies/off-shores:
Equity securities		—		8,338		7,557
Debt securities		9,080,138		9,304,151		8,517,231

		9,080,138		9,312,489		8,524,788
Loaned securities:
Loaned securities		130,000		127,175		123,287

	W	24,548,121		35,003,988		39,549,739


	December 31, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,202,849		10,473,759
Government and public bonds		1,160,000		1,158,713		1,157,222
Financial bonds		1,820,000		1,820,839		1,817,298
Corporate bonds		8,444,966		8,445,272		8,343,980
Others		2,137,849		2,137,850		8,399,919

		13,562,815		23,765,523		30,192,178
Securities denominated in foreign currencies/off-shores:
Equity securities		—		7,594		6,955
Debt securities		7,179,340		7,393,555		7,258,363

		7,179,340		7,401,149		7,265,318

Loaned securities:
Debt securities		420,000		416,002		417,640

	W	21,162,155		31,582,674		37,875,136

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, 2022 and 2021 and W107,986 million of gain and W20,729 million of gain, respectively, which are directly recognized in retained earnings.

S-52

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued

(2)	Changes in securities measured at FVOCI for the six-month periods ended June 30, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	37,875,136			34,141,325
Acquisition		10,058,190			19,575,204
Disposal		(7,325,468	)		(20,294,995	)
Change due to amortization		(9,565	)		(22,899	)
Change in fair value		(1,701,035	)		8,333,060
Reclassification		9,268			—
Foreign exchange differences		642,166			197,447
Others^(*)		1,047			81,364

Ending balance	W	39,549,739			42,010,506

(*)

For the six-month period ended June 30, 2022, others represent the increase in securities measured at FVOCI including ordinary shares of TETOS CO., LTD. and others acquired through exercise of stock warrants of the privately placed corporate bonds and shares of BUWON INDUSTRIAL CO., LTD. and EN TECHNOLOGIES INC. acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act. For the six-month period ended June 30, 2021, others represent the increase in securities measured at FVOCI including shares of DAE SUN SHIPBUILDING & ENGINEERING 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.

(3)	Securities measured at FVOCI with disposal restrictions in securities measured at FVOCI as of June 30, 2022 and December 31, 2021 are as follows:


Company	June 30, 2022
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	172,241		Undecided
High Gain Antenna Co., Ltd.		18,138		285		Undecided
Heung-A Shipping Co., Ltd.		3,019,800		8,788		Until July 11, 2022
TAESUNG CO., LTD.		794,443		2,240		Until July 29, 2022
K Shipbuilding Co., Ltd.		1,115,242		—		Until August 3, 2022
WOOJEON CO., LTD.		591,118		1		Until November 12, 2022
Kumho Tire Co., Inc.		21,339,320		90,052		Until July 6, 2023^(*)
TETOS CO., LTD.		375,000		1,012		Until one month from listing date

		27,366,111	W	274,619

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

S-53

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued


*Company^(1)**	December 31, 2021
*Company^(1)**	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	176,628		Undecided
High Gain Antenna Co., Ltd.		18,138		273		Undecided
DNGV., Co. Ltd.^(*2)		500,000		1		Undecided
HEUNG-A SHIPPING CO., LTD.		3,019,800		8,153		Until July 11, 2022
K Shipbuilding Co., Ltd.		1,115,242		1,258		Until August 3, 2022
WOOJEON CO., LTD.		591,118		1		Until November 12, 2022
Kumho Tire Co., Inc.		21,339,320		98,374		Until July 6, 2023^(*3)
POSCO Plantec Co., Ltd.		1,838,744		1,806		Until December 31, 2023 or listing date

		28,535,412	W	286,494

(*1)	For the year ended December 31, 2021, shares of Taihan Electric Wire Co., Ltd., CREA IN Co., Ltd. held as of December 31, 2020 have been sold.

(*2)	For the year ended December 31, 2021, the name of Engine Tech Co., Ltd. has been changed to DNGV., Co. Ltd.

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

(4)	Changes in the loss allowance in relation to securities measured at FVOCI for the six-month periods ended June 30, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	11,661			3,120			71,668		86,449
Transfer to 12-month expected credit loss		156			(156	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(2,185	)		2,185			—		—
Provision for loss allowance		829			334			439		1,602
Disposal		(371	)		—			—		(371	)
Foreign currency translation and others		1,820			(1,156	)		983		1,647

Ending balance	W	11,910			4,327			73,090		89,327

S-54

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued


	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			—		—
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

7. Securities Measured at Amortized Cost

(1)	Securities measured at amortized cost as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	1,631,750			1,631,750
Financial bonds		1,713,729			1,713,669
Corporate bonds		360,104			360,014

		3,705,583			3,705,433
Less: loss allowance		(150	)

	W	3,705,433			3,705,433


	December 31, 2021
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	1,437,496			1,437,496
Financial bonds		1,079,249			1,079,204
Corporate bonds		452,290			452,177

		2,969,035			2,968,877
Less: loss allowance		(158	)

	W	2,968,877			2,968,877

S-55

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

7. Securities Measured at Amortized Cost, Continued

(2)	Changes in securities measured at amortized cost for the six-month periods ended June 30, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	2,968,877			785,264
Acquisition		1,507,687			1,804,677
Redemption		(772,000	)		(170,000	)
Change due to amortization		861			(2,718	)
Impairment loss		—			(89	)
Reversal of impairment losses		8			—

Ending balance	W	3,705,433			2,417,134

8. Loans Measured at FVTPL

(1)	Loans measured at FVTPL as of June 30, 2022 and December 31, 2021 are as follows:

June 30, 2022

December 31, 2021

Amortized cost

Fair value
(Carrying amounts)

Amortized cost

Fair value
(Carrying amounts)

Loans in Korean won:

Privately placed corporate bonds

475,075

572,619

471,645

644,412

(2)	Gains (losses) related to loans measured at FVTPL for the six-month periods ended June 30, 2022 and 2021 are as follows:


	June 30, 2022						June 30, 2021
	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	76			1,035			1,820,467			1,832,631
Transaction losses		(1,557	)		(3,189	)		(3,494	)		(4,461	)

		(1,481	)		(2,154	)		1,816,973			1,828,170
Valuation gains (losses) on loans measured at FVTPL:
Valuation gains		(10,343	)		5,591			(830,230	)		121,556
Valuation losses		(73,347	)		(78,660	)		(1,111	)		(4,899	)

		(83,690	)		(73,069	)		(831,341	)		116,657

	W	(85,171	)		(75,223	)		985,632			1,944,827

S-56

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

9. Loans Measured at Amortized Cost

(1)	Loans measured at amortized cost and loss allowance for loan as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022					December 31, 2021
	Amortized cost			Fair value		Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	68,102,296			66,630,613		64,913,903			63,346,107
Loans for facility development		58,640,523			56,704,959		56,414,412			55,263,451
Loans for households		190,940			182,185		206,579			204,895
Inter-bank loans		2,894,520			2,544,411		2,827,972			2,639,400

		129,828,279			126,062,168		124,362,866			121,453,853
Loans in foreign currencies:
Loans		24,518,823			24,230,490		22,276,205			21,974,270
Inter-bank loans		2,280,511			2,276,338		2,391,409			2,390,650
Off-shore loans		18,224,870			17,702,175		16,990,941			16,581,263

		45,024,204			44,209,003		41,658,555			40,946,183
Other loans:
Bills bought in foreign currency		3,411,104			3,386,162		2,581,399			2,579,637
Advances for customers on acceptances and guarantees		5,820			559		17,416			7,068
Privately placed corporate bonds		1,592,621			1,557,875		1,039,406			1,022,432
Others		7,658,906			7,475,991		5,257,538			5,130,169

		12,668,451			12,420,587		8,895,759			8,739,306

		187,520,934			182,691,758		174,917,180			171,139,342

Less:
Loss allowance for loan		(3,796,905	)				(4,154,330	)
Present value discount		(17,007	)				(15,881	)
Deferred loan origination costs and fees		19,179					16,425

	W	183,726,201					170,763,394

S-57

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(2)	Changes in loss allowance for loan for the six-month periods ended June 30, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	342,959			2,242,499			1,568,872			4,154,330
Transfer to 12-month expected credit loss		17,392			(17,075	)		(317	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(188,032	)		207,437			(19,405	)		—
Transfer to credit-impaired		(33,567	)		(137,812	)		171,379			—
Provision for (reversal of) loss allowance		132,039			(70,240	)		91,472			153,271
Write-offs		—			—			(92,696	)		(92,696	)
Recovery		—			—			19,970			19,970
Disposal		—			—			(148,282	)		(148,282	)
Debt-to-equity swap		—			—			(363,719	)		(363,719	)
Foreign currency translation		4,910			(21,366	)		87,285			70,829
Other		586			3,500			(884	)		3,202

Ending balance	W	276,287			2,206,943			1,313,675			3,796,905


	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

S-58

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(3)	Gains (losses) related to loans measured at amortized cost for the three-month and six-month periods ended June 30, 2022 and 2021 are as follows:


	June 30, 2022						June 30, 2021
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Provision for loan allowance for loan	W	(497,671	)		(153,271	)		(838,872	)		(928,606	)
Gains on disposal of loan		21,516			21,516			4,129			32,525

	W	(476,155	)		(131,755	)		(834,743	)		(896,081	)

(4)	Changes in net deferred loan origination costs and fees for the six-month periods ended June 30, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	16,425			9,003
New deferrals		9,011			11,060
Amortization		(6,257	)		(7,278	)

Ending balance	W	19,179			12,785

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-59

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

10. Derivative Financial Instruments, Continued

(1)	The notional amounts outstanding for derivative contracts and the carrying amounts of the derivative financial instruments as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate:
Futures	W	—		1,148,708		—			—
Swaps		289,301,359		289,301,359		1,193,566			1,471,130
Options		8,297,704		15,166,361		456,114			507,869

		297,599,063		305,616,428		1,649,680			1,978,999
Currency:
Futures		19,394		—		—			—
Forwards		78,177,495		58,750,500		4,045,588			2,590,250
Swaps		62,256,626		78,242,306		5,820,050			7,932,659
Options		424,272		427,603		7,934			4,981

		140,877,787		137,420,409		9,873,572			10,527,890
Stock:
Options		98,429		703,136		14,007			393
Allowance and other adjustments		—		—		(205,294	)		(1,810	)

		438,575,279		443,739,973		11,331,965			12,505,472
Hedging purpose derivative financial instruments:
Interest rate^(*):
Swaps		28,172,682		28,172,682		59,039			380,241
Currency:
Swaps		11,682,097		11,922,605		122,388			663,579
Allowance and other adjustments		—		—		(37	)		(4,005	)

		39,854,779		40,095,287		181,390			1,039,815

	W	478,430,058		483,835,260		11,513,355			13,545,287

(*)	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.

S-60

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

10. Derivative Financial Instruments, Continued


	December 31, 2021
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate:
Futures	W	—		702,640		—			—
Swaps		244,579,384		244,578,686		864,321			488,956
Options		8,369,912		14,664,094		305,022			377,850

		252,949,296		259,945,420		1,169,343			866,806

Currency:
Futures		17,783		—		—			—
Forwards		68,100,960		53,060,246		1,771,579			1,134,731
Swaps		57,834,161		70,349,339		1,919,679			2,499,896
Options		377,494		375,834		889			578

		126,330,398		123,785,419		3,692,147			3,635,205

Stock:
Options		53,753		50,736		10,068			221
Allowance and other adjustments		—		—		(94,686	)		(854	)

		379,333,447		383,781,575		4,776,872			4,501,378

Hedging purpose derivative financial instruments:
Interest rate^(*):
Swaps		23,795,059		23,795,059		330,758			45,989
Currency:
Swaps		9,073,004		9,076,498		198,077			214,502
Allowance and other adjustments		—		—		(135	)		(4,028	)

		32,868,063		32,871,557		528,700			256,463

	W	412,201,510		416,653,132		5,305,572			4,757,841

(*)	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, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	75,076		846,850		3,277,118		20,279,694		3,693,944		28,172,682
Currency:
Notional amounts outstanding	W	249,758		483,258		2,899,669		6,786,103		1,263,309		11,682,097

S-61

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2022 and 2021 (Unaudited), and December 31, 2021

(In millions of won)

10. Derivative Financial Instruments, Continued


	December 31, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	224,896		1,271,477		1,279,617		17,395,158		3,623,911		23,795,059
Currency:
Notional amounts outstanding	W	—		17,178		2,412,941		5,159,516		1,483,369		9,073,004

(3)	Details of the balances of the hedging instruments by risk type as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022
	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	90,503		90,503		—		—		4,308
Fair value hedge accounting:
Interest rate risk:
Swaps		28,082,179		28,082,179		59,039		380,241		(1,201,530	)
Currency risk:
Swaps		11,682,097		11,922,605		122,388		663,579		(586,871	)

		39,764,276		40,004,784		181,427		1,043,820		(1,788,401	)

	W	39,854,779		40,095,287		181,427		1,043,820		(1,784,093	)

December 31, 2021

Notional amounts

Balances

Changes
in fair value
for 2021

Buy

Sell

Assets

Liabilities

Cash flow hedge accounting:

Interest rate risk:

Swaps

82,985

—

2,035

Fair value hedge accounting:

Interest rate risk:

Swaps

23,712,074

330,758

45,989