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Woori Bank – ‘CB’ on 9/25/14 re: Woori Bank – EX-99.(F)

On:  Thursday, 9/25/14, at 2:05pm ET   ·   Accession #:  1193125-14-352864   ·   File #:  5-79866

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/25/14  Woori Bank                        CB                    21:52M  Woori Bank                        RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: CB          Rights/Exchange/Tender Offer Notification/Response  HTML   7.73M 
 2: EX-99.(1)   Miscellaneous Exhibit                               HTML    140K 
 3: EX-99.(A)   Miscellaneous Exhibit                               HTML   1.88M 
 4: EX-99.(B)   Miscellaneous Exhibit                               HTML   1.89M 
 5: EX-99.(C)   Miscellaneous Exhibit                               HTML   2.11M 
 6: EX-99.(D)   Miscellaneous Exhibit                               HTML   1.63M 
 7: EX-99.(E)   Miscellaneous Exhibit                               HTML   2.09M 
 8: EX-99.(F)   Miscellaneous Exhibit                               HTML    476K 
 9: EX-99.(G)   Miscellaneous Exhibit                               HTML    329K 
10: EX-99.(H)   Miscellaneous Exhibit                               HTML    420K 
11: EX-99.(I)   Miscellaneous Exhibit                               HTML    541K 
12: EX-99.(J)   Miscellaneous Exhibit                               HTML    437K 
13: EX-99.(K)   Miscellaneous Exhibit                               HTML    553K 
14: EX-99.(L)   Miscellaneous Exhibit                               HTML   1.82M 
15: EX-99.(M)   Miscellaneous Exhibit                               HTML   2.26M 
16: EX-99.(N)   Miscellaneous Exhibit                               HTML   1.86M 
17: EX-99.(O)   Miscellaneous Exhibit                               HTML   2.26M 
18: EX-99.(P)   Miscellaneous Exhibit                               HTML   1.65M 
19: EX-99.(Q)   Miscellaneous Exhibit                               HTML   1.99M 
20: EX-99.(R)   Miscellaneous Exhibit                               HTML   1.71M 
21: EX-99.(S)   Miscellaneous Exhibit                               HTML   2.14M 

Appendix F

Independent Accountants’ Review Report

English Translation of a Report Originally Issued in Korean

To the Shareholders and the Board of Directors of

Woori Finance Holdings Co., Ltd.:

Report on the condensed separate financial statements

We have reviewed the accompanying condensed separate financial statements of Woori Finance Holdings Co., Ltd. (the “Company”). The condensed separate financial statements consist of the condensed separate statements of financial position as of June 30, 2014 and the related condensed separate statements of comprehensive income for the three months and six months ended June 30, 2014 and 2013, and the related condensed separate statements of changes in equity and cash flows, for the six months ended June 30, 2014 and 2013, respectively, all expressed in Korean won, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the condensed separate financial statements

The Company’s management is responsible for the preparation and fair presentation of the accompanying condensed separate financial statements and for such internal control as management determines is necessary to enable the preparation of condensed separate financial statements that are free from material misstatement, whether due to fraud or error.

Independent accountants’ responsibility

Our responsibility is to express a conclusion on the accompanying condensed separate financial statements based on our review.

We conducted our review in accordance with standards for review of interim financial statements in the Republic of Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Review conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed separate financial statements of the Company are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034, Interim Financial Reporting.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”),

its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities.

DTTL (also referred to as “Deloitte Global”) does not provide services to clients.

Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

Member of Deloitte Touche Tohmatsu Limited

F-1

Others

We audited the separate statement of financial position as of December 31, 2013 and the related separate statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2013, all expressed in Korean won, in accordance with auditing standards generally accepted in the Republic of Korea. We expressed an unqualified opinion in our independent auditors’ report dated on March 4, 2014. The condensed separate statement of financial position as of December 31, 2013 presented as a comparative purpose in the accompanying financial statements does not differ, in all material respects, from the audited separate statement of financial position as of December 31, 2013.

August 14, 2014

Notice to Readers

This report is effective as of August 14, 2014, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the report is read. Such events or circumstances could significantly affect the condensed separate financial statements and may result in modifications to the accountants’ review report.

F-2

WOORI FINANCE HOLDINGS CO., LTD.

SEPARATE STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

See accompanying notes to separate financial statements.

F-3

WOORI FINANCE HOLDINGS CO., LTD.

SEPARATE STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

See accompanying notes to separate financial statements.

F-4

WOORI FINANCE HOLDINGS CO., LTD.

SEPARATE STATEMENTS OF CHANGES IN EQUITY

FOR SIX MONTHS ENDED JUNE 30, 2014 AND 2013

See accompanying notes to separate financial statements.

F-5

WOORI FINANCE HOLDINGS CO., LTD.

SEPARATE STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Continued)

F-6

WOORI FINANCE HOLDINGS CO., LTD.

SEPARATE STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (CONTINUED)

See accompanying notes to separate financial statements.

F-7

WOORI FINANCE HOLDINGS CO., LTD.

NOTES TO SEPARATE FINANCIAL STATEMENTS

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

AND FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

Woori Finance Holdings Co., Ltd. (hereinafter referred to “Woori Finance Holdings” or the “Company”) was incorporated on March 27, 2001, to manage the following five financial institutions: Woori Bank Co., Ltd., Kyongnam Bank Co., Ltd.,, Kwangju Bank Co., Ltd.,, Peace Bank of Korea (merged into Woori Bank on March 31, 2004) and Woori Investment Bank (merged into Woori Bank on July 31, 2003), whose shares were contributed to the Company by the Korea Deposit Insurance Corporation (the “KDIC”) in accordance with the provisions of the Financial Holding Company Act. As a result of its functional restructuring and privatization plan, the Company owns 6 subsidiaries including Woori Bank and 76 second-tier subsidiaries including Woori Credit Information Co., Ltd. as of June 30, 2014.

Upon its incorporation, the Company’s stock amounted to 3,637,293 million Won, consisting of 727,458,609 common shares (5,000 Won per share) issued. As a result of several capital increases, exercise of warrants, conversion rights and Spin-Off completed since incorporation, the Company’s stock amounts to 3,381,392 million Won, consisting of 676,278,371 common shares issued, as of June 30, 2014. The KDIC owns 385,285,578 shares out of total outstanding shares, representing 56.97% ownership of the Company.

On June 24, 2002, the Company listed its common shares on the Korea Exchange (“KRX”). On September 29, 2003, the Company registered with the Securities and Exchange Commission in the United States of America and listed its American Depositary Shares on the New York Stock Exchange.

The Company’s condensed separate financial statements as of and for the three months and six months ended June 30, 2014 are prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034, Interim Financial Reporting. It is necessary to use the annual financial statements for the year ended December 31, 2013 for the understanding of the condensed separate financial statements.

The accompanying financial statements are the Company’s condensed separate financial statements in accordance with K-IFRS 1027, Separate Financial Statements.

Unless stated below, the accounting policies have been applied consistently with the annual separate financial statements in order to prepare the condensed separate financial statements for the six months ended June 30, 2014.

Amendments to K-IFRS 1032 – Financial Instruments: Presentation

The amendments to K-IFRS 1032 clarify the requirement for the offset presentation of financial assets and financial liabilities. That is, the right to offset must not be conditional on the occurrence of future events and can be exercised anytime during the contract periods. The right to offset is executable even in the case of default or insolvency. The adoption of the amendments has no significant impact on the Company’s separate financial statements.

F-8

Amendments to K-IFRS 1110, 1112 and 1027– Investment Entities

Investment Entities introduced an exception to the principle in K-IFRS 1110 Consolidated financial statement that all subsidiaries shall be consolidated. The amendments define an investment entity and require a parent that is an investment entity to measure its investment in particular subsidiaries at fair value through profit or loss instead of consolidating those subsidiaries in its consolidated financial statements. Also, the new disclosure requirements for investment entities in accordance with the amendments of K-IFRS 1110 have been introduced by consequential amendments to K-IFRS 1112, Disclosure of Interests in Other Entities, and K-IFRS 1027, Separate Financial Statements. The adoption of the amendments has no significant impact on the Company’s separate financial statements.

Amendments to K-IFRS 1039 – Financial Instruments: Recognition and Measurement

The amendments allowed the Company to use hedge accounting when, as a consequence of laws or regulations or the introduction of laws or regulations, the original counterparty to the hedging instrument is replaced by a central counterparty or an entity which is acting as counterparty in order to effect clearing by a central counterparty. The adoption of the amendments has no significant impact on the Company’s separate financial statements.

Enactment of K-IFRS 2121 – Levies

The enactment defines that the obligating event giving rise to the recognition of a liability to pay a levy is the activity that triggers the payment of the levy in accordance with the related legislation. The enactment has no significant impact on the Company’s separate financial statements.

In addition to the new amendments and enactments listed above, K-IFRS 1036, Impairment of Assets, had been amended to add clarifications about the disclosure requirement in relation to estimated recoverable amount for non-financial assets .The adoption of these amendments has no significant impact on the Company’s separate financial statements.

Amendments to K-IFRS 1019 – Employee Benefits

If the amount of the contributions not subject to service period, the Company is permitted to recognize such contributions as a reduction in the service cost in the period in which the related service is rendered. The amendments are effective for the annual periods beginning on or after July 1, 2014.

The Company anticipates that the amendment listed above may not have significant impact on the Company’s separate financial statements.

The significant accounting estimates and assumptions are continually evaluated and are based on historical experiences and various factors including expectations of future events that are considered to be reasonable. Actual results can differ from those estimates based on such definitions.

The significant judgments which management has made about the application of the Company’s accounting policies and key sources of uncertainty in estimate do not differ from those used in preparing the financial statements for the year ended December 31, 2013.

F-9

The Company’s operating activity is exposed to various financial risks. The Company is required to analyze and assess the level of complex risks, and determine the permissible level of risks and manage such risks. The Company’s risk management procedures have been established to improve the quality of assets for holding or investment purposes by making decisions as how to avoid or mitigate risks through the identification of the source of the potential risks and their impact.

The Company has established an approach to manage the acceptable level of risks and reduce the excessive risks in financial instruments in order to maximize its profit given the risks present, for which the Company has implemented processes for risk identification, assessment, control, and monitoring and reporting.

The risk is managed by the risk management department in accordance with the Company’s risk management policy. The Risk Management Committee makes decisions on the risk strategies such as the avoidance of concentration on capital at risk and the establishment of acceptable level of risk.

Credit risk represents the possibility of financial loss incurred when the counterparty fails to fulfill its contractual obligations. The goals of credit risk management are to maintain the Company’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk.

In order to measure its credit risk, the Company considers the possibility of failure of its counterparties in performing their obligations, credit exposure to the counterparty, the related default risk, and the rate of default loss.

The Company mitigates credit risk resulting from the obligor’s credit condition by using financial and physical collateral, guarantees, netting agreements and credit derivatives.

The Company’s maximum exposure to credit risk (recorded on the books) by customers and loan conditions is as follows (Unit: Korean won in millions):

All loans and receivables are maintained at or above the permissible level of credit rating except impaired loans and receivables as above

F-10

Market risk is the possible risk of loss arising from trading activities in the volatility of market factors such as interest rates, stock prices and foreign exchange rates.

Market risk occurs as a result of changes in the interest rates and foreign exchange rates for financial instruments that are not yet settled, and all contracts are exposed to a certain level of volatility according to the changes in the interest rates, credit spreads, foreign exchange rates and the price of equity securities.

For trading activities, the Company avoids, bears or mitigates risks by identifying the underlying source of the risks, measuring parameters and evaluating their appropriateness.

The Company uses both a standard-based and an internal model-based approach to measure market risk. The standard-based approach is used to calculate individual market risk of owned capital while the internal model-based approach is used to calculate general capital market risk and to measure internal risk.

As of June 30, 2014 and December 31, 2013, the Company is not exposed to market risk in connection with trading activities.

The Company performs the sensitivity analysis for both trading and non-trading activities. As of June 30, 2014 and December 31, 2013, the Company is exposed only to interest rate risk from non-trading activities.

Based on market risk sensitivity analysis of non-trading activities, Earning at Risk (“EaR”) and Value at Risk (“VaR”) are as follows (Unit: Korean won in millions):

The Company estimates and manages risks related to changes in interest rate due to the difference in the sensitivity of interest-yielding assets and liabilities. Cash flows related to principal amounts and interests from interest bearing assets and liabilities by maturity date are as follows (Unit: Korean won in millions):

F-11

Liquidity risk refers to the risk that the Company may encounter difficulties in meeting obligations from its financial liabilities.

Liquidity risk management prevents potential cash shortage as a result of mismatching use of funds (assets) and sources of funds (liabilities) or unexpected cash outflows. Among the financial liabilities on the separate statements of financial position, financial liabilities in relation to liquidity risk become the objects of liquidity risk management. Derivatives are excluded from those financial liabilities as they reflect expected cash flows for a pre-determined period.

The Company manages liquidity risk by identifying the maturity gap through various cash flows analysis (i.e. based on remaining maturity and contract period, etc.)

Cash flows of principals and interests by remaining contractual maturities of non-derivative financial liabilities are as follows are as follows (Unit: Korean won in millions):

The maturity analysis of non-derivative financial liabilities assumes that the contractual maturity is the same as the expected maturity.

In accordance with regulation for financial holding companies, the Company calculates and manages the debt ratio as ‘total liability divided by total equity subtracting regulatory reserve for credit loss’; and calculates the dual leverage ratio as ‘total invested amount on subsidiaries divided by total equity subtracting regulatory reserve for credit loss’, for capital risk management purposes.

The debt ratio and the dual leverage ratio are as follows:

F-12

Details of cash and cash equivalents are as follows (Unit: Korean won in millions):

Cash and cash equivalents on the statement of cash flows include the cash and cash equivalent directly associated with disposal group held for distribution to owners amounting to 21,856 million Won as of January 1, 2014 (Note 14).

Details of AFS financial assets are as follows (Unit: Korean won in millions):

F-13

The fair value hierarchy is determined by the levels of judgment involved in estimating fair values of financial assets and liabilities. The specific financial instruments characteristics and market condition such as volume of transactions and transparency are reflected to the market observable inputs. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value of its financial assets and financial liabilities. Fair value is measured based on the perspective of a market participant.

As such, even when market information is not readily available, the Company’s own assumptions reflect those the Company believes a market participant would use for measuring those specific assets or liabilities at the measurement date. The fair value measurement is described in the one of the following three levels used to classify fair value measurements:

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to a fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

F-14

Investments in subsidiaries and joint ventures accounted for using the cost method are as follows (Unit: Korean won in millions):

F-15

F-16

Details of other assets are as follows (Unit: Korean won in millions):

F-17

In accordance with Public Funds Oversight Committee’s plan for the privatization of the Company on June 26, 2013. The Company classified the related assets and liabilities of Woori Investment Securities Co., Ltd, Woori Financial Co., Ltd., Woori F&I Co., Ltd., Woori Asset Management Co., Ltd., Woori Aviva Life Insurance and Woori FG Savings Bank into assets held for sale as of the end of December 31, 2013.

The Company measured the fair value of the assets held for sale based on the market approach reflecting current market values of the businesses. The total net fair value was the amount of final bid price less incidental cost for disposal amounting to 1,805,895 million Won as of December 31, 2013, and classified into level 1 in the fair value hierarchy.

The Company measured assets held for sale at the lower of its carrying value and fair value less costs to sell. The impairment loss recognized on assets held for sale amounted to 12,357 million Won and 306,437 million Won for the six months ended June 30, 2014 and the year ended December 31, 2013, respectively. Also, the Company recognized 2,488 million Won as reversal of impairment losses on assets held-for-sale for the six months ended June 30, 2014.

The Company completed the sale of shares of Woori Investment & Securities Co., Ltd., Woori Financial Co., Ltd., Woori F&I Co., Ltd., Woori Asset Management Co., Ltd., Woori Aviva Life Insurance Co., Ltd. and Woori FG Savings Bank Co., Ltd.. The Company recognized gains on disposal of assets held for sale amounting to 207,636 million Won for the six months ended June 30, 2014 (Note 27).

In accordance with Public Funds Oversight Committee’s plan for the privatisation of Woori Finance Holdings Co., Ltd. on June 26, 2013, the Board of Directors of the Company approved the plan of spin-off of Kyongnam Bank Co., Ltd and Kwangju Bank Co., Ltd on August 27, 2013 (the “Spin-Off”). The Spin-Off is to take place through distributing of the shares of newly established companies which are receiving the investments to the shareholders of the Company. Therefore, the Company classified its assets and liabilities related to Kyongnam Bank Co., Ltd. and Kwangju Bank Co., Ltd. into disposal group held for distribution to owners as of the end of December 31, 2013. The Spin-Off of those banks was completed on May 1, 2014, which was the originally planned date. As of June 30, 2014, there are not carrying value that classified disposal group held for distribution to owners.

F-18

The Company measured disposal group held for distribution to owners at the lower of its carrying value and the fair value less costs for distribution. In addition, the fair value of the disposal group held for distribution to owners has been measured based on the market approach and income approach.

Fair value less cost to distribute of disposal group held for distribution to owners was amounting to 3,286,389 million Won as of December 31, 2013 and classified into level 3 due to the valuation technique(s) used when measuring fair value and the inputs used in the valuation technique that were not observable in the market. The Company did not recognize any impairment loss related to the disposal group held for distribution to owners for the six months ended June 30, 2014 and for the year ended December 31, 2013.

A description of valuation techniques used for fair value measurement of the disposal group held for distribution to owners and the related significant unobservable input variables as of December 31, 2013 are as follows:

The Company considered the market approach and income approach for the measurement of fair value of Kyongnam Bank Co., Ltd. and Kwangju Bank Co., Ltd. which had been classified to disposal group held for distribution to owners. Under the income approach, the discount cash flow method was applied and the present value of projected cash flows for the next 5 years and further periods, which were prepared based on the assumptions incorporating the expected long-term growth rate for banking industry and inflation rates, was calculated by applying the discount rates which represented the appropriate costs of capital for Kyongnam Bank Co., Ltd. and Kwangju Bank Co., Ltd. Meanwhile, under the market approach, the market multiples that were reflecting the market values of companies similar to the Kyongnam Bank Co., Ltd. and Kwangju Bank Co., Ltd. were considered. To measure the fair value of Kyongnam Bank Co., Ltd. and Kwangju Bank Co., Ltd., both methods were used comprehensively.

The key assumptions used under the income approach were as follows:

F-19

All debentures are to be paid in full at maturity.

F-20

Employees and directors with one or more years of service are entitled to receive a payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured by using the projected unit method, which takes account of projected earnings increases, using actuarial assumptions that give the best estimate of the future cash flows that will arise under the plan liabilities.

The Company is exposed to various risks through its defined benefit plan, and the most significant risks are as follows:

Volatility of Asset

The defined benefit obligation was estimated with a discount rate which is calculated based on the yield of high quality corporate bonds in Korea. A deficit may occur if the rate of return on plan assets falls short of the discount rate. The plan assets include equity instruments which are subject to volatility and risks.

Decrease in Yield of High Quality Bonds

A decrease in yield of high quality bonds may result in an increase in defined benefit liability although the increase in value of some debt securities would partially offset it.

Risk of Inflation

Defined benefit obligations are correlated to the inflation rate; the higher the inflation rate is, the higher the level of liabilities. As a result, a deficit may occur in the plan if inflation rates increase. The plan assets are less correlated to inflation since they mainly consist of debt securities with fixed rates and equity instruments.