UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form CB

 

 

TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM

Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form:

 

Securities Act Rule 801 (Rights Offering)		☐
Securities Act Rule 802 (Exchange Offer)		☒
Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer)		☐
Exchange Act Rule 14d-1(c) (Third Party Tender Offer)		☐
Exchange Act Rule 14e-2(d) (Subject Company Response)		☐
Filed or submitted in paper if permitted by Regulation S-T Rule 101(b)(8)		☐

 

 

Woori Financial Capital Co., Ltd.

(Name of Subject Company)

 

 

Not Applicable

(Translation of Subject Company’s Name into English (if applicable))

The Republic of Korea

(Jurisdiction of Subject Company’s Incorporation or Organization)

Woori Financial Group Inc.

(Name of Person(s) Furnishing Form)

Common Shares of Woori Financial Capital Co., Ltd.

(Title of Class of Subject Securities)

Not Applicable

(CUSIP Number of Class of Securities (if applicable))

Kyong-Hoon Park

Woori Financial Capital Co., Ltd.

239, Daedeok-daero, Seo-gu

Daejeon, Korea

(Tel) +82-1544-8600

with a copy to:

Jinduk Han, Esq.

Cleary, Gottlieb, Steen & Hamilton LLP

Foreign Legal Consultant Office

19F, Ferrum Tower

19, Eulji-ro 5-gil, Jung-gu, Seoul 04539, Korea

(Tel) +82-2-6353-8020

(Name, Address (including zip code) and Telephone Number (including area code)

of Person(s) Authorized to Receive Notices and Communications on Behalf of Subject Company)

Not Applicable

(Date Tender Offer/Rights Offering Commenced)

 

 

 

PART I – INFORMATION SENT TO SECURITY HOLDERS

 

Item 1.

Home Jurisdiction Documents

 

(a)

Prospectus, dated July 14, 2021, attached hereto as Exhibit 1.

 

(b)

Not applicable

 

Item 2.

Informational Legends

A legend in compliance with Rule 802(b) under the Securities Act of 1933, as amended, has been included in Exhibit 1.

PART II – INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS

 

(1)

Not applicable

 

(2)

Not applicable

 

(3)

Not applicable

PART III – CONSENT TO SERVICE OF PROCESS

 

(1)

Woori Financial Group Inc. is filing with the Securities and Exchange Commission a written irrevocable consent and power of attorney on Form F-X concurrently with the furnishing of this Form CB.

 

(2)

Not Applicable

PART IV – SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

		/s/ Seok-Tae Lee
		(Signature)
		Seok-Tae Lee, Deputy President
		(Name and Title)
		Woori Financial Group Inc.
		July 14, 2021
		(Date)

Important information

This exchange offer involves the securities of a foreign company. The offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.

You should be aware that the issuer may purchase securities otherwise than in the exchange offer, such as in open market or privately negotiated purchases.

PROSPECTUS

SUMMARY INFORMATION

Note: Capitalized term used in this “Summary Information” section without definitions have the meanings ascribed to them in the main body of this document.

I. INVESTMENT RISK FACTORS

 

Business Risks		Woori Financial Group Inc.   A. Risk related to the competitiveness and business performance of the subsidiaries   Woori Financial Group Inc. (“Company” or “Woori Financial Group Inc.” or “Woori Financial Group”) is a financial holding company established under the FHCA. Financial holding companies like the Company are not allowed to engage in other profit-making businesses except for managing the business of their subsidiaries, such as financial support and investment support for a subsidiary, and the affairs incidental thereto. Hence, the major source of income is the dividends from their subsidiaries. Accordingly, the competitive elements of a financial holding company are directly related to the competitiveness of its subsidiaries within their respective industries. The Company engages in the financial industry, including its major subsidiary Woori Bank, and other subsidiaries in credit card, capital, merchant banking, asset management, and real estate trust industries. If the Company and its subsidiaries fail to have an efficient business management, such failure may have a negative impact on its overall business conditions. The market competitiveness and business performance of the subsidiaries may have a direct impact on the competitiveness and profit of the Company. Please be advised that investors should have a comprehensive review on the business of its subsidiaries to examine the business risks of the Company.   B. Risk associated with changes in the overall regulatory system   The financial industry is a country’s key industry and regulated industry. It is highly affected by the regulations of the financial authorities and the government policies. In other words, the Company and its subsidiaries are exposed to the risk of profitability fluctuations due to environmental and institutional changes affecting its subsidiaries. Therefore, investors should take into account not only the competitiveness of each subsidiary but also the external environments, such as macro-economics and government regulations.   C. Risks from changes in domestic and foreign financial markets   Risks from economic uncertainty at home and abroad have significant effects on the financial industry, which directly or indirectly affect the financial industry. Our Group, including the Company, is also greatly affected by changes in domestic and foreign financial markets with the result that fluctuations in interest rates, exchange rates, bond and stock prices, and other market factors directly or indirectly affect the Company’s business operations. Investors should be aware of such risks.   D. Risk related to increase of double leverage ratio   The double leverage ratio is a financial holding company’s total amount of investment in its subsidiaries compared to its equity capital. Any amount exceeding 100% is capital amount contributed by the holding company through its borrowing, and the financial authorities recommend the holding company not to exceed 130%. If the double leverage ratio of holding company exceeds such 130%, it may be adversely affected at the time of evaluation of business status.

 

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		The average double leverage ratio of Korean financial holding companies is 119.17% as of the end of 2020, which means that they are strengthening their financial roles by expanding funding sources and reducing funding costs. However, given their capital structures, which are largely rely on dividends from core subsidiaries, the double leverage ratio may exceed 130%, which is recommended by the financial authorities, due to uncertainty in the financial market and the regulators’ more tightened control. Investors should note that the Company may be sanctioned in case of exceeding such 130%.   E. Risks from fiercer competition due to restructuring of the financial industry   Financial companies are proceeding with M&As for the purpose of enlargement, diversification and creation of business synergy. As such, the financial industry is being restructured and competition is expected to be fiercer. Such fiercer competition may cause the profitability of financial holding companies, like the Company, to be worse in the future.   F. Risks related to personal information   Financial sector has often suffered leakage accidents of personal information, and hackers will continually attempt to hack customer information of financial companies, including the Company, in the future. Accordingly, it is necessary to tighten internal security through internal control procedures to protect customer information. Investors should note that any occurrence of such leakage accident may result in falling of reputation of the Company and its subsidiaries, costs related to claims for damages, and decrease in profits due to customer separation.   G. Risks of the Introduction and Growth of the Fintech Industry   The advance in innovative technologies pursuant to the fourth industrial revolution, a new type of financial service that combines technology with finance, Fintech (Fintech: Financial+Technology), is revamping the fundamentals of the financial industry. Accordingly, in the third regulation reform ministerial meeting held on May 2015, the government released the ‘Fintech Industry Promotion Method’, and proposed 3 major milestones and 11 detailed tasks, including the promotion of Fintech industry startups and growth, full-fledged public-friendly services, and establishment of the Fintech infrastructure. Further, the government announced the ‘Fintech Innovation Facilitation Method’ in March 2018, and suggested 4 policy directions towards achieving financial innovation: 1) testing and supporting innovative financial services, 2) sophistication of financial industry services, 3) expansion of Fintech market, 4) response to Fintech innovation risks.   In October 2018, the government conducted regulatory reform to facilitate Fintech by launching a ‘Regulatory Reform T/F for Financial Innovation including Fintech, Etc.’ Further, the FSC proclaimed January 2019 to be the ‘golden time’ for Fintech acceleration, and established a 6 milestone strategy plan for focused and systematic support (① full use of financial regulation sandbox, ② revamping old regulations, ③ increasing Fintech investment, ④ fostering new industry sector, ⑤ supporting global market entry, ⑥ strengthening digital finance/security). In October 2019, the government announced a regulatory innovation method for the promotion of Fintech, and soon thereafter, the FSS released the ‘Fintech scale-up strategy plan’ in December 2019.   In January 2020, the amendments of the Enforcement Decrees of the three major data laws passed the national assembly (the Personal Information Protection Act, Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc., Credit Information Act) and came into force on August 5, 2020. Key amendments made in the three major data laws include the establishment of a safe data combination procedure, stronger stability of pseudonymized information, unification of personal information related Enforcement Decrees, fostering financial sector mydata industry. Once the ‘mydata’ era arrives pursuant to the above Enforcement Decree, personal information would be provided to Fintech companies only upon consent of the customers. Accordingly the industry must establish response measures and gear the direction of business strategies in accordance therewith.

 

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		With the emergence of this Fintech industry, while previous banks are provided with new opportunities to service financial information using Fintech technologies, investors are advised to note that the banks may face excessive competition pressure and lower profits in the new financial environment, as non-financial companies may also enter the Fintech market.   H. Risks from the emergence of internet primary banks   In December of 2018, the FSC announced a plan to issue new licenses/ approvals for internet primary banks in order to promote financial innovation and competitiveness of the banking industry. In January of 2019, the Internet Primary Bank Act became effective, allowing the establishment of internet primary banks in which innovative ICT companies, etc. may hold 34% equity interest. Currently, K Bank and Kakao Bank are officially in operation.   Kakao Bank plans to be listed on the securities market in 2021, and submitted a securities registration statement on June 28, 2021. Kakao Bank expects to raise approximately KRW 2.1 trillion based on the lowest desired offering price, and will use such funds to promote new business activities such as financial technology R&D, M&A of fintech company, and participation in global market. Further, in May 2021, K Bank publicly disclosed a plan to raise approximately KRW 1.2 trillion through capital increase with consideration. As such, please note that the Company’s business performance may be adversely affected by the fiercer competition in the industry resulting from external growth of and active investment by internet primary banks.   As the FSC considered giving new licenses for internet primary banks, there were 3 entities which applied for new license, i.e., Anyband Smart Bank, Kium Bank, and Toss Bank. However, the application by Anyband Smart Bank was rejected due to inadequacy of the documents submitted; the other two failed to obtain a preliminary license due to lack of innovation in business plan (in the case of Kium Bank) and inadequacy of funding ability (in the case of Toss Bank). In July of 2019, the FSC issued a press release in which it stated that it would again go ahead with new licenses for internet primary banks, and announced a schedule for filing of applications for preliminary license in October of 2019. By October of 2019, a total of three applicants completed the filing of applications for preliminary license; Toss Bank obtained a preliminary license in December of 2019, and filed for a definitive license in February of 2021, followed by approval of the license in June of that year. It plans to commence its business in September, if possible, after the preparation period including test of actual transaction.   The launch of internet primary banks led to certain positive effects, such as cost-saving effects based on online services, and promotion of product development by existing financial institutions, while it could create negative effects, such as price competition and deteriorating profitability due to entry of additional market participants. As such, investors should take note of the above.   I. Risks from strengthened anti-money laundering obligations

 

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		Recently, finance companies’ anti-money laundering obligations are being strengthened in Korea and abroad. As is the case with inspections by the US financial authorities, the recent trend of inspections by the Korean financial authorities is to focus on the operational effectiveness in substance, rather than perfunctory compliance with the anti-money laundering system. Evaluation results, which are directly related to the competitiveness of financial business, are risk factors from the standpoint of finance companies, and could deteriorate the soundness of financial institutions subject to anti-money laundering regulation. Meanwhile, according to the “Procedures for Mutual Evaluations and Follow-Up of FATF (Financial Action Task Force)” (dated November 27, 2018) of the AML/CFT (Anti-Money Laundering/ Combating the Financing of Terrorism) Policy Council, Korea was evaluated in July of 2019 for the operation of AML/CFT system in accordance with the Mandate of FATF. Such evaluation involved checks by the international society of Korea’s AML/CFT system, and the results of such evaluation appear to be a measure of the transparency of Korea’s financial and judicial systems. Also, depending upon the results of such evaluation, Korea can be subject to subsequent checks, and can, if deemed negative based on such evaluation, be affected in, among others, the nation’s sovereign rating, financing costs of exporting companies, and foreign exchange transactions.
		Woori Financial Capital Co., Ltd.   A. Risks from market situations, funding and policy changes of a specialized credit financial company   The Company is a specialized credit financial company registered with the FSC and is engaged in a variety of credit financial business, including installment financing, lease financing, personal financing, and corporate financing. Considering the characteristics of the specialized credit finance business, whose dependency on borrowed capital is high, a specialized credit financial company is sensitive to changes in market situations, such as interest rate changes, and its funding can be shrunk as a result of an impact from the capital market. As such, specialized credit financial companies are exposed to refinancing risks all the time. Also, specialized credit financial companies’ profitability can possibly be decreased due to external policy variables, such as restrictions on interest rates and increased uncertainties in the financial markets.   B. Risks from high dependency of installment financing on automobile financing   With respect to purchase of consumer durables, etc. by a consumer, the term “installment financing” means a financing arrangement in which funds are loaned by an installment financing company to the consumer, in respect of which the consumer must make repayment in installments of the principal and interest thereon. In Korea, installment financing is mainly used for purchase of automobiles, and the structural characteristic of the installment financing market is that it depends on the domestic automobile market. As such, the profitability of the installment financing industry as a whole can be adversely affected if the growth of the automobile installment financing market slows down or the size of the market shrinks.   C. Risks due to high proportion of auto lease and more competition   A lease is a financial act, by which it guarantees the lessee use of an asset and guarantees the lessor regular payments for a specified period in exchange. Like the installment financing market, the portion of automobile lease has continuously increased in the lease market while the demands for lease of other items are not active. Auto lease market has been led by captive leasing companies, and since more companies are participating in the market, competition is being fiercer.   D. Risks due to more competition in lease/installment financing market   Since it is only required to be registered to engage in the installment lease business, it is relatively easy to enter this market. As such, more companies are participating in this market. Given such overpopulation and fierce competition in the market, participants in this market may suffer low profitability and difficulties in expanding new business.

 

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		E. Risks due to changes and adjustments in regulations of the authorities   The specialized credit financial companies are under supervision of regulators, and their business activities and financial conditions would be affected by policies of regulators. Besides, the FSS may issue a corrective order a specialized credit financial company that has violated the SCFBA or other relevant regulations.
Company Risks		Woori Financial Group Inc.   A. Risk of impact on profitability of financial holding company from changes in business performance of its subsidiaries   For the primary purpose of controlling, through ownership of shares, subsidiaries operating in the financial business or closely related to the financial business, the Company was established by way of comprehensive transfer of shares with shareholders of Woori Bank, Woori FIS Co., Ltd., Woori Financial Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd., and Woori Private Equity Asset Management Co., Ltd., on January 11, 2019 in accordance with the FHCA. A financial holding company, like the Company, may not engage in any business for profit other than the business management of its subsidiaries and other duties incidental thereto, such as provision and management of loans and equity capital to its subsidiaries, in accordance with the relevant laws. Thus, the dividends from its subsidiaries are its main source of income of the Company. As such, the competitiveness of financial holding company is directly related to the competitiveness of its subsidiaries in their respective industries.   Consolidated net income of the Company as of the end of the most recent quarter (first quarter of 2021) consist of the followings: 82.32% from banking business, 10.01% from credit card business, and 4.87% from capital business. Accordingly, the Company’s profitability and cash flow are greatly affected by its subsidiaries’ operating environment and financial condition, and in order to predict the Company’s future performance and competitiveness, it is necessary to review the overall financial industries to which its major subsidiaries, including banks, belong. Investors should keep this in mind.   B. Risks related to the soundness of assets of subsidiary bank   The asset soundness of the Company is similar to that of its subsidiary Woori Bank. The NPL ratio, which is a major soundness indicator of Woori Bank, has shown a continuous decline after recording 1.47% at the end of 2015, and recorded 0.32% as of the end of 2020. Woori Bank’s coverage ratio of allowance for bad debts has continuously increased since 2015, and recorded 153.95% as of the end of 2020. Such ratios are better than the average of local banks (NPL ratio 0.68%, coverage ratio of allowance for bad debts 145.60%).   However, we may not rule out the possibility of deterioration in the soundness of assets, given the continuing instability of global economy, the concerns about local real estate market, the excessive household loans compared to incomes, and the insolvency possibility of local manufacturers and small and medium-sized enterprises in case of economic slowdown. Investors should keep this in mind.   C. Possible decline in profitability if bank subsidiaries’ NIM falls   The composition of the Company’s NIM(Net Interest Margin) is expected to be more or less similar to the profit composition of Woori Bank. Domestic banks rely on a large share of interest profits among their total profits. Accordingly, NIM is the core profit indicator that has the greatest impact on bank profitability. As of the recent business year end, Woori Bank’s ROA and NIM recorded 0.38%, 1.33% respectively, showing positive overall profitability. However, with the base rate steadily declining and due to the economic downturn, the bank’s profitability indicator, NIM saw continued decline from 1.52% as of end of 2018, to 1.44% in end of 2019 and 1.33% in end of 2020. This indicator showed a slight rebound to 1.35% in 1Q of 2021, but there are little prospects that it would drastically improve in the future. The Bank of Korea (BOK) lowered the base rate to 0.75% at a provisional meeting of the monetary policy board (MPB) in March 2020, and further to 0.25% in the May 2020 meeting, adjusting the base rate to a record low of 0.50%. At the same time, the BOK declared that it would maintain this easing stance for monetary policies depending on how COVID-19 develops. Accordingly, the possibility that the base rate may be further lowered cannot be excluded. Additionally, there is a limit to generating profits through the expansion of loan assets, due to the government’s regulation of household debts. To the extent that this stance is maintained, Woori Bank’s NIM and other profitability indices may see further downturns.

 

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		Meanwhile, the Basel III Liquidity Coverage Ratio (LCR) regulation (high liquidity assets/ future net cash leakage for one month ³100%) that is in effect since 2015 is also expected to act as a burden to the bank’s profitability. This is because the banks must maintain a mandatory reserve of relatively low profit, high liquidity assets due to the regulations. With stronger government regulation related to household debts, and the implementation of LCR regulation, the bank’s asset management policy is shifting towards a more conservative stance. Investors are advised to take note of these issues.   D. Interest Rate Risks of the Bank Subsidiary   Before US shifted to a laxer monetary policy stance in 2019, the US FOMC raised the base rate over four occasions by 0.25%p only in 2018. BOK also increased the base rate by 0.25%p in November 2017, and additionally by 0.25%p in November 2018. This increased the interest rate of domestic financial companies.   However, the US FOMC changed its stance to a laxer interest policy due to sluggish domestic economic recovery, sustained trade disputes with China, and sluggish economic growth, etc. in 2019. In the July 2019 FOMC, due to uncertainties in achieving the policy target for the inflation rate and the global economic downturn, the base rate was lowered to 2.00 to 2.25% in ten years and seven months. Thereafter, in the September and October 2019 FOMCs, the base rate was lowered. The rate was maintained at 1.50 to 1.75% level until January 2020, but due to the spread of the COVID 19 that resulted in global economic uncertainties, and concerns over the US economy, the base rate was lowered from 1.50% to 1.75% to 0.00% to 0.25% in the March, April 2020 FOMCs.   In this backdrop, the Monetary Policy Board also lowered the base rate that it maintained at a 1.25% level for around six months to 0.75%, by 50bp, in March 2020, due to forecasts of an incremental growth of the domestic economy and low inflation pressure, and COVID 19’s economic impacts at home and abroad. In the May 2020 FOMC, the base rate was further lowered by 25bp to 0.50%, and presently remains the same level.   However, the economic cycle has hit the low point from 3Q of 2020 to 1Q of 2021, and with an optimistic outlook in global growth and price indices, the US bonds’ interest rate rose in February to March 2021. Also, considering the concerns of inflation due to excessive liquidity in the market, and the remarks of Yellen, US Secretary of Treasury, regarding a rate increase, the possibility of the base rate increasing exists at the same time.

 

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		As in the foregoing, the recent market rate at home and abroad are difficult to predict due to economic and political circumstances at home and abroad, as well as various market variables that are out of control. We cannot exclude the possibility that the market rate that sharply dropped when COVID 19 was stabilized, would pick up its upward trend. The increase in market interest rate may affect interest rates for financing and act unfavorably to the profitability of Woori Bank, a subsidiary to the Company. This may also undermine the profitability of the Company’s consolidated financial statement. Investors are advised to take note of these issues.   E. Possibility of satisfying capital adequacy under the Basel III system   As of the end of the first quarter of 2021, the Company’s BIS total equity ratio is 13.6%, while its Tier 1 and C-Tier 1 are 11.7% and 10.0% respectively, which satisfy such level (total equity ratio 10.5%, Tier 1 8.5%, C-Tier 1 7.0%), including conservation buffer (2.5%), as required by Basel III. As of the end of the first quarter of 2021, Woori Bank, a subsidiary of the Company, has BIS total equity ratio of 16.98%, Tier 1 of 14.94% and C-Tier 1 of 13.21%, which are higher than such level as required by Basel III.   However, in the future, the Company and its subsidiary Woori Bank may fail to satisfy the capital adequacy ratio because of the following reasons: increase in risky assets due to business deterioration resulting from economic depression in and out of Korea, increase in losses, increase in costs due to disposal of non-performing loans, downward adjustment of securities, increase in foreign exchange rates, change in the minimum capital adequacy ratio due to tightened capital adequacy system, change in calculation method of ratio, change in the Basel Committee standards, and other negative factors affecting the asset soundness and capital adequacy.   The Company and its subsidiary Woori Bank are trying to maintain the capital adequacy through increase of earned surplus, issuance of contingent convertible bonds and risk management in line with the D-SIB equity ratio (total equity ratio 11.5%, Tier 1 9.5%, C-Tier 1 8.0%) as well as the existing BIS equity ratio. However, investors should note that despite such efforts, there is still a risk that the Company’s capital adequacy may fail to meet such ratio as required by the government for capital control in the future.   F. Risks related to profitability of subsidiary engaging in card business   Woori Card Co., Ltd. accounts for approximately 10.01% (approximately KRW 72 billion) of the Company’s consolidated net income for the first quarter of 2021. Woori Card ranks second only to Woori Bank, and thus the performance of Woori Card affects the profitability and dividend income of the Company.   Korean credit card industry has undergone intensive restructuring since the credit card crisis in 2003 and is now in a mature stage. The profitability of Korean credit card industry is expected to decrease due to fiercer competition and downward adjustment of card fee rate of member stores that was made at the end of January 2019. Besides, given the stagnant growth of household income and the growth of household debts, the default ratio of card use charges may increase.   In 2021, use of credit cards is expected to increase thanks to the recovery of public consumption, while there are concerns about the fiercer competition in automobile finance/card loan services due to the deregulation of leverage and the worse soundness for vulnerable classes related to COVID-19.   Investors should note that deterioration of business profitability of Woori Card due to the above factors may give adverse effect to the financial condition of the Company on a consolidated basis.

 

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		G. Risk of profitability of subsidiary engaging in the merchant banking business   As of the end of the first quarter of 2021, Woori Investment Bank Co., Ltd. accounts for around 2.37% (approximately KRW 17 billion) of the Company’s consolidated net income. Competition has become fiercer in the merchant banking industry, which is the only financial industry permitting financial institutions to concurrently engage in other financial business activities, because more financial institutions are participating in this market. Accordingly, it is difficult for Woori Investment Bank to improve its profitability only based on spread between deposits and loans. Woori Investment Bank is trying to expand its business areas focusing on the IB business and to increase the portion of fee income. However, if Woori Investment Bank’s profitability deteriorates due to fiercer competition with other financial institutions and poor performance of new business, the profitability of the Company would be adversely affected thereby. Investors should keep this in mind.   H. Risks from contingent liabilities and commitments   Due to the nature of financial industry, to which the Company belongs, there may occur litigations and contingent liabilities in the course of business activities. If the amount of such litigations and contingent liabilities becomes large, it may give adverse effect not only to the performance of subsidiaries but also to that of the Company. As of the filing date of the SRS, there are outstanding payment guarantees, etc. of Woori Financial Group, which are related to pending litigations and business activities of its subsidiaries.   As of the end of the first quarter of 2021, there are 141 litigations brought by member companies of Woori Financial Group (total litigation value: KRW 323,528 million) and 485 litigations brought against member companies of Woori Financial Group (total litigation value: KRW 384,842 million). We cannot reasonably foresee the results of pending litigations, and the Company’s financial condition could be affected by the judgments thereof to certain extent. Besides, in connection with its consolidated business activities as of the end of the first quarter of 2021, Woori Financial Group has provided guarantees for fixed payments of KRW 7,186,752 million, unfixed payments of KRW 4,039,474 million, and commitments to purchase commercial papers of KRW 901,601 million. Investors should note that the Company’s reputation and profitability may be adversely affected by the results of such litigations, payment guarantees, etc.   I. Risks regarding legal regulation on financial holding companies   The Company is required to comply with such requirements as restrictions on capital contribution by financial holding companies under the Financial Holding Companies Act, restrictions on extending credit facilities to the same borrowers, the same companies and major investors and restricted acts of subsidiaries, etc. Investors should note that the said legal regulations may be applicable.   J. Matters related to including Woori Card., Ltd. as our wholly owned subsidiary after share exchange with Woori Card Co., Ltd.   The board of directors of the Company adopted a resolution to enter into a share exchange agreement with Woori Card Co., Ltd on June 21, 2019 to include it into a wholly owned subsidiary and take necessary steps in that regard. As a result, the Company acquired entire shares held by Woori Bank in Woori Card Co., Ltd. In consideration for the exchange, the Company delivered new issues of 42,123,377 shares (common shares) together with around 598.4 million won as grant to Woori Bank. Newly issued shares were listed as of September 26, 2019.

 

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		Capital expansion as a result of issuing new shares through share exchange improved part of the group management indicators (including double leverage ratio and debt ratio). However, the new shares issued for the exchange caused an increase of total number of outstanding shares which diluted the stake of existing shareholders. In addition, payment of grants reduced the total amount of cash and cash equivalents. It is necessary to exercise precaution in this regard.   K. Matters regarding Woori Investment Bank Co. Ltd.’s inclusion as the subsidiary of the Company and the completed paid-in capital increase   In order to include Woori Investment Bank Co., Ltd. as the subsidiary of the Company, the board of directors of the Company adopted a resolution on June 21, 2019 to purchase the shares of Woori Investment Bank Co., Ltd. held by Woori Bank, a subsidiary of the Company. As a result, the Company entered into the share purchase agreement (SPA) with Woori Bank, largest shareholder of Woori Investment Bank on June 21, 2019. On September 10, 2019, the Company acquired 403,404,538 Common shares of Woori Investment Bank held Woori Bank with an acquisition value of around KRW 392.8 billion under the agreement. With the acquisition, the largest shareholder of Woori Investment Bank was changed to the Company from Woori Bank (shareholding ratio: 59.83%). The acquisition of Woori Investment Bank’s position caused a decrease of cash and cash equivalents in the Company. Also, as Woori Investment Bank’s inclusion as a subsidiary of the Company increased the total investment amount, the double leverage ratio went up. Woori Investment Bank also adopted a resolution to proceed with paid-in capital increase in the form of public offering of forfeited shares after a allocating to existing shareholders in the amount of KRW 100 billion. On November 6, 2020, share issuance was completed and the issued shares were listed on November 7. As of the date of filing the Securities Registration Statement, the Company is the largest shareholder of Woori Investment Bank Co., Ltd. with a shareholding ratio of 58.70 percent. By joining this capital increase, cash and cash equivalent of the Company decreased, which requires due attention from Investors.   L. Risks involved in acquiring new companies   The board of directors of the Company adopted a resolution in March 2019 to take over Tongyang Asset Management Co., Ltd. and ABL asset management Co., Ltd. (formerly known as Allianz Asset Management) and also resolved to acquire the shares in Kukje Asset Trust Co., Ltd. in June 2019, the shares in Aju Capital Co., Ltd. in October 2020 and the shares in Woori Savings Bank Co., Ltd. in March 2021.   The (formerly known as) Tongyang Asset Management Co., Ltd. was then included as the subsidiary of the Company as of August 1, 2019 (ownership: 73%, acquisition amount: approximately KRW 122.4 billion) and changed its name as Woori Asset Management Corp. (See the disclosure on the inclusion as the subsidiary of the Company’s holding company on August 1, 2019).   The (formerly known as) ABL asset management Co., Ltd. became the subsidiary of the Company as of December 6, 2019 (ownership: 100%, acquisition amount: approximately KRW 33 billion) and changed its name as Woori Global Asset Management Co., Ltd. (See the disclosure on the inclusion as the subsidiary of the Company’s holding company on December 6, 2019).   On July 25, 2019, the Company entered into the share purchase agreement (SPA) to take over the ownership of (formerly known as) Kukje Asset Trust (renamed as Woori Asset Trust). The procedures for the inclusion of Woori Asset Trust as the subsidiary of the Company were completed on December 30, 2019 (ownership: 51%, acquisition amount: approximately KRW 224.2 billion). (See the disclosure on the inclusion as the subsidiary of the Company’s holding company on December 30, 2019).

 

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		After that, the Company completed the procedure for including (formerly known as) Aju Capital (renamed as Woori Financial Capital) as the subsidiary of the Company on December 10, 2020 by exercising the preferential right to purchase held by Woori Bank, a subsidiary of the Company (ownership 74%, acquisition amount: approximately KRW 572.4 billion) in order to improve competitiveness as a comprehensive financial group. With that, (formerly known as) Aju Savings Bank (renamed as Woori Savings Bank Co., Ltd.), a wholly owned subsidiary of Aju Capital, became a sub-subsidiary of the Company. The process was completed on March 12, 2021. (See the disclosure on the inclusion as the subsidiary of the Company’s holding company on March 12, 2021).   The Company will continue to diversify its business structure. Investors should note that the difference in such fields as management, business areas and business cultures arising from the Company’s pursuit of new businesses and the strategy of strengthening non-banking sector may affect the Company’s business.   M. Risks related to the disposal of shares by the largest shareholder   The largest shareholder of the Company is the Korea Deposit Insurance Corporation, holding 110,159,443 shares (15.25%). The FSC has announced in a statement dated June 24, 2019 that the Korea Deposit Insurance Corporation would sell 18.3%, the remaining position it held in Woori Financial Group within three years. The said plan was postponed due to the economic fallout from COVID-19 outbreaks that began in 2020. However, the Korea Deposit Insurance Corporation sold off 14,445,354 shares out of its shareholding in Woori Financial Group on April 9, 2021 through off-hours block trading. Following the said plan, it is expected that the Korea Deposit Insurance Corporation will dispose of its position in Woori Financial Group on several occasions until 2022 for its complete privatization.   Details of the disposition of the largest shareholder’s position have yet to be determined. It is also hard to assess the prospect impact upon the group from the disposal of shares by the largest shareholder for now. While the Company is making efforts to minimize such impact by building a stable management system, investors should be aware of the potential volatility.   N. Reputation risks due to fund sales by the bank subsidiary   Financial markets both at home and abroad are faced with increasing volatility caused by the possibility of global economic downturn, U.S.-China trade dispute, COVID-19 and so on. In particular, there are growing concerns for the losses from fluctuating global interest rates amid uncertainties surrounding the world economy.   Increasing interest rate volatility has posed the possibility of losses on the part of investors as the derivative products linked to overseas interest rates have fallen below the barrier price. The FSS conducted a joint inspection on financial institutions including Woori Bank in August 2019, followed by another inspection later.

 

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		In that regard, the FSC convened the fourth regular meeting in March 2020 and passed a resolution to enforce the measures the FSS had suggested after conducting an inspection on KEB Hana Bank Co., Ltd. and Woori Bank in connection with the derivative-linked financial products (DLF). Woori Bank was ordered (i) partial suspension on its business (i.e., no further sales of PEFs) for six months along with penalty and sanctions for violating the obligation of delivering investment prospectus and the regulations on advertisement of PEFs, and (ii) sanction against management for violating the obligation to prepare the internal control standards (reprimand warning, etc.). An administrative litigation requesting cancellation of the sanction against management is now in progress, and such sanction is temporarily invalid by the relevant court. Also with respect to the imposition of penalty, Woori Bank raised an objection, for which a court’s summary trial is now in progress, but it is difficult to predict the outcome thereof. Therefore, investors should note that the reputation risks may exist and affect the business of the Company as a financial holding company.   The Lime Asset Management announced in October 2019 that it would suspend redemption services on ‘Pluto FI D-1’ and ‘Tethys 2’ due to difficulties in securing liquidity. As a result, the redemption of the fund sold by Woori Bank was also delayed. As for the Lime’s delay of fund redemption, the FSS announced ‘Interim Results of the Investigation on Lime Asset Management and Corresponding Strategy’ in February 2020. As of the end of March 2021, the volume of funds under Lime’s management sold by Woori Bank, a subsidiary of the Company, subject to delay of redemption was KRW 270.3 billion in 1,348 accounts. (Source: 1Q Report of Woori Bank)   In June 2020, a dispute settlement committee in the FSS admitted (i) mistake in 4 disputed contracts of Lime Trade Finance Fund, and cancellation of such 4 contract, and (ii) ordered Woori Bank, which sold such contracts, to return the full amount of disputed investment. In June 2020, according to such order, Woori Bank returned KRW 64.75 billion, the full amount of disputed investment.   Lime Asset Management Co., Ltd.’s license as financial investment business entity was canceled in December 2020 and the funds whose redemption was delayed were transferred to the WellBridge Asset Management Co., Ltd. which was co-established by the distributors. A dispute settlement committee in the FSS was convened in February 2021 to address incomplete sales by distributors. With respect to 2 disputed investments, the committee ordered Woori Bank to respectively compensate 78% and 68% of each investor’s loss, and in the range between 40% and 80% of each individual investor’s loss (or between 30% and 80% of each corporate investor’s loss) with respect to other contracts sold by Woori Bank. Woori Bank held a board meeting on March 15, 2021 to accept such order of the committee and to review such range of compensation, and is confirming the facts and proceeding with the compensation procedures. From April 20, 2021, Woori Bank began to pay the compensation to customers who agreed on such decision of the committee. The total amount of compensation (changeable depending on the compensation percentage for each customer) is estimated to be KRW 175 billion, of which KRW 47.2 billion has been paid as of June 21, 2021. In principle, compensation for damage related to sale of fund is made after the damage is confirmed by redemption or liquidation of the fund, but Woori Bank agreed on such compensation for damages before redemption or liquidation as proposed by the FSS and the convocation of the committee meeting to expedite procedures of compensation. According to such procedures of compensation, (i) any amount undeemed by the fund is regarded as the amount of damage and paid based on such compensation percentage as determined by the committee, and (ii) if the fund later redeems the investment amount, the seller of fund pays the investor any balance after deducting the paid compensation from the redeemable amount.

 

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		As for the estimates for the down-payment to be returned and indemnification for loss that Woori Bank may have to pay as a result of dispute settlement by FSS regarding the losses on the part of the customers due to delayed fund redemption by Lime Asset Management, Woori Bank determined to deem the best estimates for the disbursement as provisions required to perform its obligation. As of the end of March 2021, Woori Bank recognized KRW 106.8 billion as estimated liabilities for the above dispute and KRW 114.5 billion as advance payment. (Source: 2021 1Q Report of Woori Bank)   In relation to the above dispute, in January 2021, the Seoul Southern District Prosecutors’ Office indicted Daishin Securities and Shinhan Financial Investment for fraudulent transactions and unfair solicitation under the FISCMA, and additionally indicted KB Securities in June 2021. Woori Bank is also under investigation by the Seoul Southern District Prosecutors’ Office, but has not been indicated.   In connection with the above disputes, at its third meeting held on April 8, 2021, a sanction review committee in the FSS ordered against Woori Bank (i) partial suspension on its business (i.e., no further sales of PEFs) for three months along with penalty for incomplete sales, and (ii) sanction against former management (reprimand warning, etc.). Such sanctions will be finally determined by the regular meeting of the FSC after review of the Securities and Futures Commission, etc., and may have a negative impact on the Group’s overall reputation. Investors should note that if any warning to institution or more serious sanction is finally determined against Woori Bank, it may have a negative impact on growth potential and profitability of Woori Bank, such as restriction on the entry into new business that requires approval from the financial authorities during the next one year.   Investors should note that the current situation related to its subsidiary bank may adversely affect the Company’s reputation in relation to it retail finance services provided to individual customers.   O. Risk of potential debt reclassification by the International Accounting Standards Board (IASB) for amortization-type contingency capital securities (hybrid capital securities)   The International Accounting Standards Board (IASB) presently seeks to amend the IAS32 Financial Instruments. Under the plan, amortization-type contingent capital securities (hybrid capital securities) are likely to be reclassified into liabilities.   As of the submission date of the SRS, the amount of the amortization-type contingency capital securities (hybrid capital securities) in the Company is KRW 2,095.4 billion. In the case of Woori Bank, a subsidiary of the Company, the book value of the contingent capital securities (hybrid capital securities) classified into capital is around KRW 3,405.1 billion. If the value of the amortization-type contingent capital securities (hybrid capital securities) of Woori Bank, amounting to around KRW 3,405.1 billion, and the total value of the amortization-type contingent capital securities (hybrid capital securities) issued by the Company in July and October 2019, February, June, October 2020 and April 2021, amounting to KRW 2,095.4 billion, are reclassified into liabilities in the future, the total amount of consolidated debt of the Company will increase to KRW 394,426.6 billion from KRW 388,926.1 billion as of the end of 1Q in 2021, an increase of 1.41%. The debt ratio on a consolidation basis may increase by 388.48 percentage point to 1,819.5% from 1,431.02% as of the end of 1Q in 2021. In addition, the amount of consolidated debt of Woori Bank will increase by 0.93% to KRW 369,788.8 billion from KRW 366,382.9 billion as of the end of 1Q in 2021. The debt ratio on a consolidation basis may increase by 282.43 percentage point to 1,844.92% from 1,562.49% as of the end of 1Q in 2021 (Any effects from exchange rate fluctuation are not reflected in reclassifying debts). Investors should be aware of such aspects.

 

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		P. Risks from Covid-19 outbreaks   Concerns over the influence from Covid-19 have spread across the world beyond Asia and the pandemic (outbreak of an infectious disease across the world) risk is affecting the prospects of global economy. Since it is impossible to predict actual impacts on the economic recovery and the stock markets, investors should note that the contraction in consumption and investment from economic slowdown may last longer than expected.   Woori Financial Capital Co., Ltd.   A. Risks from uneven business structure which is vulnerable to economic fluctuation   The profit structure of Woori Financial Capital is focused on auto financing and individual and general loans based on specialized credit financial business. As of the end of 1Q of 2021 the portion of the auto financing assets accounted for more than half of the entire assets, indicating its heavy reliance on auto financing assets. Such a profit structure may prove vulnerable to economic fluctuation or changes of conditions in the industry.   B. Risks related to asset quality and economic fluctuation   Considering the industrial aspect of specialized credit financial business, which is largely affected by economic fluctuation, it would be worth paying attention to the trend of asset quality of Woori Financial Capital amid economic downturn, etc. Woori Financial Capital has shown good asset quality in terms of mainly auto financing assets. However, burdens on asset quality may increase if economic recovery is delayed, which requires a constant attention from investors.   C. Risks from the possibility of becoming bad debts   Woori Financial Capital has set aside provisions for bad debts, but it may suffer additional losses the collection of receivables is not made as expected.   D. Risks from financing as a specialized credit financial company   Woori Financial Capital is a specialized credit financial company without a base of deposit. Accordingly, its financing structure is completely dependent upon the capital market and is likely to be exposed to risks from abrupt business fluctuations. Increasing financing costs following market interest hikes may affect the profitability of Woori Financial Capital adversely.   E. Risk relating to collecting and holding private information   Woori Financial Capital inevitably collects and holds private information in its capacity as a financial institution conducting such businesses as installment financing and leasing. Any incidents involving information security such as private information leakage, as was the case in the past, may bring about sanctions by regulatory authority as well as civil and/or criminal responsibilities. To prevent such incidents from occurring, Woori Financial Capital has secured safety and security of the information it retains through private information protection system. However, the Company cannot exclude completely the possibility of being exposed to security-related incidents including private information leakage.

 

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		F. Risks related to the change of largest shareholder   Woori Financial Group entered into a share transfer agreement in October 2020 under which it purchased 42,605,000 shares (shareholding ratio: 74.04%) in Woori Financial Capital held by Well to Sea at the amount of KRW 572.3 billion, in accordance with the preferential right to purchase held by Woori Bank, a subsidiary of Woori Financial Group. On December 10, 2020, Woori Financial Group became the largest shareholder by ultimately acquiring 74.04% of the shares of Woori Financial Capital. With Woori Financial Capital’s inclusion into Woori Financial Group, the Company expects some positive effects including enhanced synergies in the group. It is required, however, to continue to monitor the potential effect of the changed largest shareholder to the fundamentals of Woori Financial Capital. Investors should pay special attention in this regard and review sufficiently before making an investment decision.   G. Risks Related to Take-Over and Sell-Off of Woori Savings Bank Co., Ltd.   Woori Financial Capital took over 100% of the shares of Woori Savings Bank Co., Ltd. previously to diversify its business portfolio. After the inclusion of Woori Savings Bank Co., Ltd. into the Woori Financial Group, Woori Financial Capital sold off the shares of Woori Savings Bank Co., Ltd. to Woori Financial Group Inc. on March 12, 2021 with an aim to comply with Article 19(1) of the Financial Holding Companies Act (the “FHCA”) and enhance management efficiency (See related disclosure ‘Decision on the disposal of the shares and subscription certificates issued by other corporation on March 5, 2021’), which requires investors’ attention.
Other Risks		A. Risks from share price volatility of Woori Financial Group   The share price volatility of Woori Financial Group may increase due to various reasons. Investors should note that the share price of Woori Financial Group may change as a result of issuing new shares for the exchange of the Shares. Once the exchange of the Shares is completed, a registered common share of Woori Financial Capital is converted to 1.0567393 registered common share of Woori Financial Group. As the share exchange ratio is fixed without any additional modification to reflect price changes of the shares of Woori Financial Group and Woori Financial Capital, there are risks of share price volatility in connection with the shares of Woori Financial Group which the shareholders of Woori Financial Capital receive as a result of share exchange. Furthermore, as the new issues allocated to the treasury shares acquired as a result of appraisal right must be disposed of later to comply with the obligation of the disposal thereof, investors should note that it would also contribute to the share price volatility.   B. Risks related to suspension of old share certificates of Woori Financial Capital   The deadline for submitting old share certificates for the common shares of Woori Financial Capital, which will be a fully owned subsidiary, is scheduled to be August 9, 2021. Investors of Woori Financial Capital should note that transaction of the common shares of Woori Financial Capital will be suspended from August 6 to August 26, 2021 which is one day prior to the date on which transactions of the certificates of exchanged shares (common shares of Woori Financial Group) become possible.   C. Possibility of changes in legal and regulatory environment   Woori Financial Group and its subsidiaries conduct businesses in a legal and regulatory environment that is subject change. They are also subject to penalties and other regulatory dispositions for any violation of applicable regulations.

 

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		D. Standards for Management & Supervision at KRX being tightened   The standards for management and supervision applicable to Woori Financial Group and other similar listed corporation have been tightened recently. If Woori Financial Group violates the listing regulation or any other applicable regulations, it may be subject to sanctions including suspension of trading, designation as administrative issue, listing maintenance review and delisting by KRX.   E. Possibility of correction during the review of disclosure   This SRS, (preliminary) Prospectus and other accompanying documents are subject to partial change in the course of reviewing the relevant disclosure. If such changes are about the main points closely related to investment decision, they may cause some setbacks in the schedule. The schedule may also be changed in the course of business with related authorities. Accordingly, Investors should constantly check the progress.   F. Investment decisions and results are attributed to investors   Investors should not solely rely on the information on the risk factors provided above but use their own independent judgment in making investments. In addition, the fact that the SRS becomes effective does not necessarily acknowledge that the descriptions therein are true or correct nor guarantee or authorize the value of the Securities.   G. Regarding tax on share exchange   Investors should note that the Share Exchange comes under the over-the-counter trading (including the shareholders exercising appraisal right) and is thus subject to payments of income tax and securities transaction tax (0.43%). With the amended Income Tax Act that became effective in 2018, however, individual minority shareholders who are residents may be exempt from income tax on capital gains from share exchange and appraisal rights exercise.   The Share Exchange does not meet the requirements for continuity of shares under Article 38 of the Restriction of Special Taxation Act and thus is not a qualified comprehensive exchange. Therefore, the Share Exchange is not subject to Article 38 of the Restriction of Special Taxation Act.   H. Regarding shares with mutual ownership without voting rights   It should be noted that the shares which Woori Financial Capital, a subsidiary, receives in connection with the treasury shares acquired as a result of exercising appraisal rights by the shareholders dissenting from the Share Exchange are the shares in mutual ownership prescribed in Article 369(3) of the Commercial Act and thus do not have voting rights.   I. Risks related to Small-Scale Share Exchange / Simplified Share Exchange   The shares newly issued to Woori Financial Capital by Woori Financial Group with a view to exchange shares meet the requirements for small-scale share exchange prescribed under Article 360(1) of the Commercial Act because they represent 0.8% of the Total issued shares of Woori Financial Group. The exception for small-scale share exchange allows the approval of the general meeting of shareholders to substitute for the approval of the board resolution for the purpose of approval of share exchange. As such, the shareholders of Woori Financial Group are not granted appraisal right.   In the case of Woori Financial Capital, share exchange proceeds following the Simplified Share Exchange procedures pursuant to Article 360-9 of the Commercial Act. In December, Woori Financial Group became the largest shareholder of Woori Financial Capital by acquiring 42,605,000 shares (74.04%) therein from WelltoSea Investment Purpose Company No. 3. Thereafter, Woori Financial Group additionally acquired 7,395,000 shares (12.85%) of Woori Financial Capital from Aju Corporation, the second largest shareholder, in April 2021 and 2,064,059 treasury shares (3.59%) from Woori Financial Capital in May 2021, thereby causing its shareholding ratio to be 86.89% and 90.47% respectively. Accordingly, Woori Financial Capital, which becomes a wholly owned subsidiary, satisfies the requirements for simplified share exchange under Article 360-9 of the Commercial Act. It should be noted that the Simplified Share Exchange does not prohibit dissenting shareholders from exercising their appraisal right. It should also be noted that if the number of the shares eligible for appraisal right reaches a considerable level, it will increase the costs of share exchange and may reduce the capital of Woori Financial Capital, threatening to aggravate its financial conditions.

 

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		J. Risks related to de-listing Woori Financial Capital   Woori Financial Group is a KOSPI listed corporation in the securities market as of the submission date of the SRS and will continue to maintain the status after the comprehensive share exchange. Woori Financial Capital, which becomes a wholly owned subsidiary after the comprehensive share exchange, will be delisted on August 27, 2021 pursuant to the KOSPI Market Listing Regulation. The scheduled date for delisting, however, is currently the expected date as of disclosure and may be changed by consultation with relevant authorities. Investors who receive common shares of Woori Financial Group through a comprehensive share exchange before delisting of Woori Financial Capital or dissent from the comprehensive share exchange will receive cash (share purchase price as a result of exercising appraisal rights) by exercising appraisal rights. Please note that investors will have an opportunity to recover their investments before the date of delisting.   K. Risks related to disposal of fractional shares   The shares of Woori Financial Capital held by the shareholders listed on the register of shareholders of Woori Financial Capital, which will become a wholly owned subsidiary, as of the Share Exchange Date (expected to be at 00:00 a.m. on August 10, 2021) excluding Woori Financial Group (but including Woori Financial Capital itself for the treasury shares that Woori Financial Capital acquired due to the exercise of the appraisal rights of its shareholders opposing to the Share Exchange, hereinafter the “shareholders subject to share exchange”) shall be transferred to Woori Financial Group on the Share Exchange Date. In return for this exchange, Woori Financial Group shall allot a total of 5,792,866 newly issued common shares to the shareholders subject to share exchange at the exchange ratio of one common share of Woori Financial Capital (par value KRW 5,000) to 1.0567393 common shares of Woori Financial Group (par value KRW 5,000).   If a fractional share, which is less than one whole share, arises as Woori Financial Group allots its shares to the shareholders subject to share exchange according to the above exchange ratio, the shareholders subject to share exchange to whom such fractional share belongs shall be paid in cash the amount calculated based on the closing price of the listing day of the new shares issued as a result of the Share Exchange (i.e., the closing price of the shares traded on the KRX Securities Market) within one month from the Share Exchange Date. As such, investors should note that the amount paid to them in lieu of fractional shares in the transaction concerned may be affected by the closing price on the listing date of new shares.   L. Risks related to interim dividends by Woori Financial Group   Woori Financial Group, which will be the wholly-owning parent company through the Share Exchange, set a record date for interim dividends pursuant to its articles of incorporation at a meeting of its board of directors held on July 2, 2021, and the record date is July 30, 2021. According to the interpretation of the Commercial Act, the ceiling amount of such dividends must be specified in the Share Exchange Agreement. The parties to the Share Exchange Agreement determined the “limit prescribed by Article 462-3(2) of the Commercial Act (approximately KRW 245 billion)” as such ceiling amount when they executed an amendment to the Share Exchange Agreement (the “Amendment Agreement”) on July 2, 2021.

 

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		However, the actual implementation and amount of interim dividends will be determined by the board of directors of Woori Financial Group Inc. in comprehensive consideration of capital adequacy, etc. of Woori Financial Group. That is, the implementation of such interim dividends has not been finally determined, and the ceiling amount thereof stated in the Amendment Agreement is not the amount expected to be paid as interim dividend, but is the ceiling amount calculated in accordance with Article 462-3(2) of the Commercial Act.   Further, in the case of implementation by Woori Financial Group of interim dividends, such interim dividends will be paid to its shareholders named on the register of shareholders as of July 30, 2021, the record date for interim dividend set by the board of directors of Woori Financial Group. The Share Exchange is to be made on August 10, 2021, and thus the shareholders of Woori Financial Capital, who will be issued new shares of Woori Financial Group according to the Share Exchange, are not entitled to receive such interim dividends. Investors should keep this in mind.
Merger and Investment Risks		1. Risk Factors related to the Conditions for the Successful Share Exchange   A. Risks concerning the board of directors (substituting a general meeting of shareholders)   Woori Financial Group, which becomes the wholly owning parent company, meets the requirements for small-scale share exchange under Article 360-10 of the Commercial Act; hence, Woori Financial Group intends to carry out the Share Exchange in accordance with the procedures of the small-scale share exchange thereunder. Meanwhile, Woori Financial Capital, which becomes a wholly owned subsidiary, satisfies the requirements for simplified share exchange under Article 360-9 of the Commercial Act. Accordingly, Woori Financial Capital intends to carry out the Share Exchange in accordance with the procedures of the simplified share exchange thereunder. With regard to the Share Exchange, the approval of a general meeting of shareholders of both Woori Financial Group and Woori Financial Capital shall be substituted by the approval of their respective board of directors.   However, in cases where a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies his/her intent to oppose to the small-scale share exchange, the approval of its board of directors can no longer replace the approval of its general meeting of shareholders, which may constitute a reason for the contract cancellation or amendment under the Share Exchange Agreement. Moreover, if a party wishes to follow the procedures for common share exchange and get the approval of a general meeting of shareholders for the Share Exchange, but if the item on the approval of the Share Exchange is rejected at the said meeting, the entire Share Exchange may founder. Investors should be aware of this risk.   As of the filing date of this amended SRS (June 22, 2021), the period of receiving any notice of dissenting to a small-scale share exchange (June 9, 2021 ~ June 16, 2021) has expired. Since the number of shares held by the shareholders, who have given such dissenting notice, is less than 20/100 of the total number of issued shares, the Share Exchange will proceed according to the procedure of small-scale share exchange as proposed.

 

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		B. Risk concerning the amendment, cancellation, and invalidation of the Share Exchange Agreement   According to the Share Exchange Agreement between Woori Financial Group and Woori Financial Capital, if any of the following occurs, the Agreement may lose effect retrospectively, or may be changed or cancelled by written agreement of the parties.   Under Article 9 (Effective Date of the Agreement), if the item on the approval of the Agreement is rejected at the board of directors meeting of either Woori Financial Group or Woori Financial Capital, the Agreement may lose effect retrospectively without any action of the Parties. Also, the Parties may amend or cancel the Agreement pursuant to Article 10 (Amendment and Cancellation of the Agreement).   As the Share Exchange is carried out with the approval of the board of directors in lieu of the approval of the general meeting of shareholders, it is deemed less likely that the Share Exchange Agreement will be cancelled. However, please note that it is difficult to completely rule out the possibility of the cancellation due to a variety of reasons, including but not limited to a natural disaster, and other significant changes in the property and business of the Parties.   C. Risk concerning the purchase price for dissenting shareholders being lower than the trading price   The purchase price for dissenting shareholders of Woori Financial Capital in relation to the Share Exchange is KRW 11,539. Also, the closing price of the common shares of Woori Financial Capital on the stock exchanges on June 10, 2021, which is the day prior to the filing of the SRS, was KRW 11,800. Please be advised that the shareholders who exercise their appraisal rights may sustain financial disadvantages if the purchase price for dissenting shareholders is lower than the actual trading price of the shares of Woori Financial Capital.   D. Risk concerning the worse financial standing due to excessive appraisal rights   The shareholders of Woori Financial Group are not granted the appraisal rights because the Share Exchange constitutes a small-scale share exchange while the dissenting shareholders of Woori Financial Capital are granted the appraisal rights. Please note that if the number of shares subject to the appraisal rights reaches a level that may incur financial burden on Woori Financial Capital, the share exchange cost recognition and capital reduction as a result thereof may have a negative impact on the financial standing of Woori Financial Capital.   E. Risk concerning suits filed by minority shareholders   It is possible that some minority shareholders of the companies that will go through the Share Exchange will file a lawsuit seeking nullification of the Share Exchange on the basis of any procedural fault or unfair exchange ratio. Since the ratio of the Share Exchange was calculated in due compliance with the relevant statutes, and the procedure for the Share Exchange complies with the provisions stipulated in the relevant statutes, such as the Commercial Act, the possibility for the court to nullify the Share Exchange is deemed low. However, please be advised that it is difficult to completely rule out the possibility of a lawsuit being filed in relation to the Share Exchange.

 

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		F. Possibility of a separate agreement for the Share Exchange   Woori Financial Group and Woori Financial Capital may enter into a separate agreement on the matters that require further agreement for the Share Exchange, and such separate agreement shall be considered as part of the Agreement. After the execution of the Share Exchange Agreement, Woori Financial Group set a record date for interim dividends pursuant to its articles of incorporation at a meeting of its board of directors held on July 2, 2021, and the record date is July 30, 2021. According to the interpretation of the Commercial Act, the ceiling amount of such dividends must be specified in the Share Exchange Agreement. The parties to the Share Exchange Agreement determined the “limit prescribed by Article 462-3(2) of the Commercial Act (approximately KRW 245 billion)” as such ceiling amount when they executed an amendment to the Share Exchange Agreement on July 2, 2021. Investors should keep this in mind.   2. Listing of New Shares of the Wholly Owning Parent Company to Be Issued as a Result of the Share Exchange & Delisting of the Wholly Owned Subsidiary   A. Expected listing date of the new shares   The listing of exchanged new shares is scheduled to be on August 27, 2021. (However, it is subject to change based on consultation with relevant agencies.)   •   Share Exchange Date: August 10, 2021   •   Expected listing date: August 27, 2021   B. Delisting of the company becoming a wholly owned subsidiary following the share exchange   Woori Financial Capital, which is a listed company and will become a wholly owned subsidiary, is scheduled to be delisted on August 27, 2021 according to the securities market listing regulations. However, this date is only an estimated date as of the disclosure and is subject to change based on consultation with relevant agencies.

Note: The investment risk factors described above are a summary of the investment risk factors set forth in this Prospectus and do not reflect the only risks facing Woori Financial Group Inc. or Woori Financial Capital Co., Ltd. Additional risks not described herein may have a material adverse effect on Woori Financial Group Inc. or Woori Financial Capital Co., Ltd., their business, financial condition, results of operations or growth prospects. Investors should consider all of the information set forth in this Prospectus, including Section I. Summary of Comprehensive Share Exchange – VI. Investment Risk Factors.

II. FORM

Form                    Comprehensive share exchange

 

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III. SCHEDULE OF MAJOR EVENTS

 

Resolution of the board of directors				May 21, 2021
Date of share exchange agreement				June 4, 2021
Record Date				June 7, 2021
Approval of the shareholders meeting				n/a
Appraisal right exercise period and share purchase price upon exercise of appraisal rights		Start date		July 23, 2021
		End date		August 2, 2021
		Share purchase price suggested by Woori Financial Capital		KRW11,539
Major events for Woori Financial Group   Resolution of the board of directors approving the share exchange agreement Date of share exchange agreement				May 21, 2021 June 4, 2021
Record Date Public notice of small-scale share exchange Period to receive shareholders’ dissenting opinions to the small-scale share exchange				June 7, 2021 June 9, 2021 June 9, 2021 ~ June 16, 2021
Board meeting substituting a general meeting of shareholders on the approval of the share exchange				July 23, 2021
Date of the share exchange Expected date to deliver the new shares Expected date to list the new shares				August 10, 2021 August 27, 2021 August 27, 2021
Major events for Woori Financial Capital
Resolution of the board of directors approving the share exchange agreement Date of share exchange agreement Record Date Public notice of simplified share exchange Period to receive shareholders’ dissenting opinions to the simplified share exchange				May 21, 2021 June 4, 2021 June 7, 2021 June 9, 2021 June 9, 2021 ~ July 22, 2021
Board meeting substituting a general meeting of shareholders on the approval of the share exchange				July 23, 2021
Appraisal right exercise period				July 23, 2021 ~ August 2, 2021
Public notice of invalidation of share certificates and submission of old share certificates				August 3, 2021
Period of trading suspension of Woori Financial Capital				August 6, 2021 ~ August 26, 2021
Expected date of share purchase payment upon exercise of the appraisal rights Expected end date of period of submitting old share certificates Date of the share exchange Expected date to delist the shares				August 6, 2021 August 9, 2021 August 10, 2021 August 27, 2021

Note 1) With regard to the Share Exchange, Woori Financial Group and Woori Financial Capital will only need the approval of the board of directors instead of the approval of a general meeting of shareholders because the exchange will take the form of (in case of Woori Financial Group) a small-scale share exchange and (in case of Woori Financial Capital) a simplified share exchange. The shareholders of Woori Financial Group will not be granted the appraisal rights.

Note 2) Pursuant to Article 360-10(5) of the Commercial Act and Article 62-2(2) of the FHCA, in cases where a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies Woori Financial Group in writing of his/her intent to oppose to the small-scale share exchange within seven days from the date of a public notice to the shareholders of such small-scale share exchange, Woori Finance Holdings may no longer be able to carry out the small-scale share exchange.

Note 3) The “appraisal right exercise period and share purchase price upon exercise of appraisal rights” mentioned in the above table is the schedule applicable only to Woori Financial Capital, and only the shareholder of Woori Financial Capital who notified its dissenting opinion to the simplified share exchange during the period from June 9, 201 to July 22, 2021 may exercise such appraisal rights

Note 4) The schedule above is effective as of the date of this SRS, but may be subject to change due to amendment or correction of the SRS during the review of the regulator. The above schedule may be changed by the representative directors of Woori Financial Group and Woori Financial Capital as delegated by the board of directors of Woori Financial Group and Woori Financial Capital and the Share Exchange Agreement due to the review of or discussion with the regulator or the agreement between Woori Financial Group and Woori Financial Capital.

Note 5) As of September 16, 2019, the enforcement date of the Act on Electronic Registration of Stocks, Bonds, Etc., the share certificates of Woori Finance Holdings and Woori Financial Capital, both being listed companies, became null and void and were converted into electronically registered shares. This means that the shareholders of Woori Financial Capital do not need to submit their physical share certificates during the period of submitting old share certificates, and the new shares issued by Woori Finance Holdings following the Share Exchange will be electronically registered to the shareholders of Woori Financial Capital. There is no plan to issue physical share certificates.

 

20

IV. APPRAISAL AND ALLOTMENT OF NEW SHARES

(Unit: KRW, share)

Share exchange ratio		Woori Financial Group : Woori Financial Capital = 1 : 1.0567393
External appraisal agency		n/a
Shares to be issued by Woori Financial Group in consideration of share exchange		Type		Number		Par value		Offering(issue) price per share		Total Offering(issue) amount
		Registered common shares		5,792,866		5,000		11,044		63,976,412,104
Cash to be paid by Woori Financial Group in consideration of share exchange		No cash will be paid by Woori Financial Group other than payment to fractional shares arising from the share exchange

Note 1) Pursuant to Article 176-6(3) of the Enforcement Decree of the FSCMA, this share exchange does not require appraisal by an external appraisal agency.

Note 2) Woori Financial Group has no plan to deliver its existing treasury shares to the shareholders of Woori Financial Capital.

V. SUMMARY OF THE PARTIES TO THE COMREHENSIVE SHARE EXCHANGE

(Unit: million KRW, share)

Company name				Woori Financial Group Inc.		Woori Financial Capital Co., Ltd.
Classification				Parent Company		Wholly-owned subsidiary
Total number of issued shares		Common shares		722,267,683		57,545,890
		Preferred shares		—		—
Total assets				23,232,816		8,242,105
Share capital				3,611,338		287,729

Note 1) Total number of shares issued are as of the dare of this SRS. The total assets and total amount of share capital are based on the separate financial statements as of the end of the first quarter in 2021.

Note 2) Total assets of Woori Financial Group Inc. and Woori Financial Capital Co., Ltd. based on the consolidated financial statements as of as of the end of the first quarter in 2021 are KRW 416,104,384 million and 8,242,006 million respectively.

VI. OTHER MATTERS

 

[Report for major event]		Please refer to ‘Report for major event (comprehensive share exchange)’ dated May 21, 2021
[Other]		Please also refer to the report for major event of Woori Financial Capital which will become the wholly-owned subsidiary of Woori Financial Group upon this comprehensive share exchange publicly disclosed electronically on May 21, 2021.

 

21

SECTION 1. SUMMARY OF COMPREHENSIVE SHARE EXCHANGE

I. GENERAL ASPECTS OF COMPREHENSIVE SHARE EXCHANGE

1. Purpose of Share Exchange

A. Parties and Background of Share Exchange

(1) Overview of the Parties to Share Exchange

 

Company becoming the wholly owning parent company		Name		Woori Financial Group Inc.
		Address		51, Sogong-ro, Jung-gu, Seoul
		Representative Director		Tae-Seung Son
		Corporate Type		KOSPI listed corporation

 

Company becoming a wholly owned subsidiary		Name		Woori Financial Capital Co., Ltd.
		Address		239, Daedeok-daero, Seo-gu, Daejeon
		Representative Director		Kyong-Hoon Park
		Corporate Type		KOSPI listed corporation

(2) Background of the Share Exchange

Woori Financial Group established a financial holding company in January 2019 to provide comprehensive financial services. It was to preemptively respond to the risks expected in Korean banking industry, such as growing economic uncertainty at home and abroad, and possibility of a higher credit risk due to accumulated domestic household debts, and to the changing business environment in the sector resulting from expansion of Fintech and launch of direct banks. Accordingly, Woori Financial Group Inc. (“Woori Financial Group”) was established pursuant to the comprehensive share transfer under the Commercial Act, whereby Woori Bank and five subsidiaries of Woori Bank (i.e., Woori FIS Co., Ltd., Woori Financial Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd., Woori Private Equity Asset Management Co., Ltd.) transferred all of their shares to Woori Financial Group. In addition, in the same year, Woori Financial Group incorporated Woori Card Co., Ltd., one of its sub-subsidiaries, into a wholly owned subsidiary through a comprehensive share exchange and incorporated Woori Investment Bank Co., Ltd. as a subsidiary. Furthermore, in 2019, it took over Woori Asset Management Corp., Woori Global Asset Management Co., Ltd., and Woori Asset Trust, Ltd., pushing for early settlement of the holding company system and expansion of its business portfolio.

In the second half of 2020, Woori Financial Group incorporated Aju Capital (currently known as Woori Financial Capital Co., Ltd., hereinafter “Woori Financial Capital”) as a subsidiary by acquiring 74.04% of its shares in order to strengthen its non-banking business portfolio and maximize synergy between the group’s subsidiaries. Then, Woori Financial Group actively supported the business activities of Woori Financial Capital, thereby contributing to improving the profitability and increasing net assets of Woori Financial Capital, and increased its shareholding ratio in Woori Financial Capital, thereby promoting management efficiency and stabilization. However, as for the reason why Woori Financial Group has not made Woori Financial Capital its wholly owned subsidiary, it is deemed that there are some limitations in terms of management efficiency because the shareholders with different interests need to be persuaded.

 

22

Thus, we have determined that it is necessary to acquire 100% of the shares of Woori Financial Capital and incorporate it as a wholly owned subsidiary in order to ensure a more stable and efficient management system, and we hereby have agreed to execute this share exchange (the “Share Exchange”).

[Need for Incorporation as Wholly Owned Subsidiary & Expected Outcomes]

 

The incorporation of Woori Financial Capital, which is a major subsidiary in the non-banking sector of Woori Financial Group, as a wholly owned subsidiary is expected to contribute to the stability and maturity of the system of Woori Financial Group as a holding company and to the increase of enterprise value based on Woori Financial Capital’s higher market competitiveness and stronger synergy between the subsidiaries. Our goal is to establish such stable and efficient financial holding company system, thereby actively entering new businesses and expanding to the global market, promoting a comprehensive growth between the banking and non-banking sectors to diversify the financial business portfolio, and securing a more competitive business structure compared to other financial holding companies. We have conducted this comprehensive share exchange because it is deemed to improve shareholder value and enterprise value.

(3) Backdoor Listing

N/A

B. Major Impacts and Effects on the Company’s Management, Finance, and Sales, Etc.

(1) Impacts and Effects on the Company’s Management

Woori Financial Group will issue new shares to the applicable shareholders of Woori Financial Capital in return for the share exchange. Accordingly, the shareholding ratio of the existing shareholders of Woori Financial Group may be diluted according to the share exchange ratio. However, the Share Exchange will not result in any change of control related to the governance structure, and both Woori Financial Group and Woori Financial Capital will remain independent surviving entities. In addition, Woori Financial Group, which will become the wholly owning parent company after the Share Exchange, will continue to be a listed company while Woori Financial Capital, or a wholly owned subsidiary, will be changed to an unlisted company.

 

23

Moreover, under the comprehensive share exchange agreement, the term of office of the directors of Woori Financial Group and the members of the Audit Committee thereof who took office prior to the Share Exchange will continue to serve as previously agreed, notwithstanding Article 360-13 of the Commercial Act. No director will be newly appointed as a result of the Share Exchange.

(2) Major Impacts and Effects on the Company’s Finance and Sales, Etc.

As new shares are issued as a result of the Share Exchange, Woori Financial Group will have an increased equity. Consequently, capital expansion and improvement of some of the group’s management indices (ROE, double leverage ratio, debt ratio, etc.) may be expected. Also, as Woori Financial Capital becomes a wholly owned subsidiary, the net income of the controlling shareholders may increase. Lastly, the Share Exchange is expected to reinforce the group’s competitiveness as a comprehensive financial group, by, for instance, implementing the group’s growth strategy based on the expansion of the non-banking sector.

Woori Financial Capital will only have changes in shareholder composition without any change in assets or liabilities, and it is expected to have improved management efficiency, an increased credit rating, and a higher competitiveness in sales. Moreover, upon the completion of the Share Exchange, Woori Financial Capital becomes a wholly owned subsidiary of Woori Financial Group; hence, it is deemed that Woori Financial Capital will be able to improve management efficiency and increase capital in a timely manner. Furthermore, the Share Exchange will reduce business resources to manage minority shareholders. Taking all these into consideration, Woori Financial Capital is expected to play a leading role in ensuring the group’s stable growth in the non-banking finance sector in the future.

Once the Share Exchange is completed, Woori Financial Capital becomes a wholly owned subsidiary of Woori Financial Group. For additional information on the impacts and effects on the finance of Woori Financial Group, please refer to IX. Other Matters Necessary for Investor Protection – 3. Company’s Equity Change After the Share Exchange and 6. Balance Sheet After the Comprehensive Share Exchange, Etc. of these Securities Registration Statements (“SRS”).

(3) Plans for the Company’s Future Reorganization

After its acquisition of controlling shares (74.04%) of Woori Financial Capital in December 2020, Woori Financial Group additionally acquired the shares (12.85%) of Woori Financial Capital from Aju Corporation, the second largest shareholder, in April 2021 and the treasury shares (3.59%) from Woori Financial Capital, to make Woori Financial Capital as its wholly owned subsidiary.

As of the filing date of the SRS, Woori Financial Group holds 90.47% of the shares of Woori Financial Capital. Woori Financial Group entered into the comprehensive share exchange agreement with Woori Financial Capital on June 4, 2021 as part of its effort to improve management efficiency and reinforce the non-banking sector, and it intends to incorporate Woori Financial Capital as a wholly owned subsidiary through this Share Exchange process.

Through the transaction concerned, Woori Financial Group intends to increase management efficiency and enhance shareholder value by strengthening unity and synergy within the Group. Woori Financial Group will continue its strategies for effective management to strengthen the competitiveness of subsidiaries, establish strategies to enhance group value, and expand non-banking business portfolios.

As of the filing date of the SRS, nothing has been decided specifically in relation to the business reorganization after the completion of the Share Exchange, such as a merger with another company. If any additional reorganization occurs, such as an M&A with another subsidiary within the group, a separate disclosure will be made to inform the investors.

 

24

2. Overview of the Other Party to the Share Exchange

A. Outlook of the Other Party

(1) Overview of the Other Party

 

Classification		Detail
Name		Woori Financial Capital Co., Ltd.
Date of establishment		February 21, 1994
Address		239, Daedeok-daero, Seo-gu, Daejeon
Telephone		1544-8600
Website		https://www.woorifcapital.com/
Main business		Installment financing business, lease financing business

(2) Current Status of Executives and Employees

1) Executives

 

(As of June 11, 2021)		(Unit: Shares)

 

Name

Sex

Date of Birth

Position

Registered Executive (Y/N)

Full- time (Y/N)

Responsibilities

Major Career Background

No. of Shares Held

Relationship with the Largest Shareholder

Term in Office

Expiration of Term of Office

Voting Shares

Non-Voting Shares

Kyong-Hoon Park

M

Dec. 1962

Representative Director

Y

Y

General affairs, Member of the Executive Candidate Recommendation Committee

2008-2017 Woori Bank: Kuala Lumpur Office Head, Bundang Jeongja Branch Manager, Financial Controller, Director of HQ Corporate Sales #1, etc. 2017-2018 Woori Bank Global Group Managing Director, Future Strategy Group Managing Director 2019-2020 Woori Financial Group Vice President for Business Planning, Vice President for Business Planning & WM 2020-2020 Woori Financial Group Vice President for Finance 2021-present Woori Financial Capital Representative Director

3,000

-

Executive of an affiliate

0.4 years (1st term)

-

Seok-Tae Lee

M

July 1964

Non-Executive Director

Y

N

Member of the Risk Management Committee and the Renumeration Committee

2011-2019 Woori Financial Group Future Strategy Dept. Senior Deputy Director, Woori Bank Strategic Planning Director, Woori Bank Business Planning Group Associate Director for Sales 2019-2020 Woori Financial Group Strategic Planning Group Managing Director 2020-2020 Woori Financial Group Senior Managing Director for New Businesses 2020-present Woori Financial Group Vice President for Business Growth

-

-

Same as above

0.4 years (1st term)

-

No-Hyun Park

M

Aug. 1952

Outside Director

Y

N

Senior Outside Director, Member of the Audit Committee & the Risk Management Committee

1976-2012 Chief of Bundang Police Station, Chief of Seoul Jungbu Police Station, etc. 2013-2017 Shinhan University Dean of the Administration Office, Dean of the Management Office 2013-present Adjunct professor at Central Police Academy 2019-present Member of National Policy Agency Central Disciplinary Committee

-

-

Same as above

1.2 years (1st term)

-

 

25

Chang-Soon Lee

F

July 1953

Outside Director

Y

N

Chair of the Risk Management Committee, Member of the Renumeration Committee

1986-1989 The Next Korea Foundation, Head of Social Research Office 1990-present Professor at Dept. of Sociology, Kyung Hee University 1996-2000 Editor of the Korean Journal of Sociology 2012-2013 Advisory Professor, Korea Credit Bureau

-

-

Same as above

3.8 years (2nd consecutive term)

-

Yu-Kyung Kim

M

June 1958

Outside Director

Y

N

Chair of the Renumeration Committee, Member of the Executive Candidate Recommendation Committee

1997-present Professor at Dept. of Media and Communications, Hankuk University of Foreign Studies 1997-1998 President of Korea Advertising Society 2008-2012 Member of the Presidential Council on Nation Branding 2015-2017 Senior Vice President of Hankuk University of Foreign Studies

-

-

Same as above

3.8 years (2nd consecutive term)

-

Young-Hak Lim

M

Nov. 1954

Outside Director

Y

N

Chair of the Executive Candidate Recommendation Committee, Member of the Audit Committee

1998-2004 Korean Federation of Community Credit Cooperatives Saegoyang Branch, Chairman of the Board 2013-present Representative Director of My Loan Economy 2019-2021 Chairman of the Audit Committee and Outside Director at IBK Savings Bank

-

-

Same as above

0.4 years (1st term)

-

Ji-Yoon Lee

F

Dec. 1982

Outside Director

Y

N

Member of the Executive Candidate Recommendation Committee & the Audit Committee

2015-2020 Professor at George Washington University School of Business 2020-present Professor at Yonsei University School of Business

-

-

Same as above

0.4 years (1st term)

-

Young-Min Moon

M

July 1960

Director for Internal Audit

N

Y

Director for Internal Audit

1979 -1998 Bank of Korea Banking Supervision Authority 1999 -2016 Financial Supervisory Service (the “FSS”) 2016 -2020 Eugene Investment & Securities Auditing Director 2021-present Woori Financial Capital Director for Internal Audit

-

-

Same as above

0.3 years

-

Jang-Hyun Koh

M

Mar. 1968

Senior Managing Director

N

Y

Director of Auto Finance

2009-2010 Woori Financial Capital Director of Customer Happy Center 2011-2012 Woori Financial Capital, Business Support Division 2012-2013 Woori Financial Capital Marketing Division 2013-2018 Woori Financial Capital Director of Personal Finance 2018-present Woori Financial Capital Director of Auto Finance

3,753

-

Same as above

7.3 years

-

Baek-Chul Kim

M

Apr. 1963

Managing Director

N

Y

Director of Corporate Banking

2013 -2017 Woori Bank Director for Central Corporate Sales 2017 -2020 Woori Bank Director for Future Corporate Sales #1 2021-present Woori Financial Capital Director of Corporate Banking

-

-

Same as above

0.3 years

-

Gong-Jae Park

M

Mar. 1964

Managing Director

N

Y

Director of Synergy Finance

2016 -2017 Woori Bank Paju Financial Center Director 2017 -2020 Woori Bank Bucheon & Northern Incheon, Seodamun Sales Director 2021-present Woori Financial Capital Director of Synergy Finance

-

-

Same as above

0.3 years

-

Hwa-Young Kim

M

May 1963

Managing Director

N

Y

Director of Credit Review

2015 -2017 SME Review Division Manager 2017 -2020 Director of Corporate Improvement 2021-present Woori Financial Capital Director of Credit Review

-

-

Same as above

0.3 years

-

Dae-Joong Kim

M

Sep. 1968

Managing Director

N

Y

Director of Business Support

2011-2015 Woori Financial Capital HR Development Team Leader 2015-2016 Woori Financial Capital HR Training Team Leader 2016-2017 Woori Financial Capital HR Management Team Leader 2017-2021 Woori Financial Capital Director of Business Strategy 2021-present Woori Financial Capital Director of Business Support

-

-

Same as above

3.5 years

-

 

26

Sung-Wook Kim

M

Mar. 1972

Managing Director

N

Y

Director of Commercial Finance

2012-2013 Woori Financial Capital Business Development Team Leader 2013-2015 Woori Financial Capital Auto Planning Team #1 Team Leader 2015-2017 Woori Financial Capital Business Planning Team Leader 2017-2018 Woori Financial Capital Director of Risk 2018-2020 Woori Financial Capital Director of Commercial Finance 2020-2021 Woori Financial Capital Director of Corporate Finance 2021-present Woori Financial Capital Director of Commercial Finance)

-

-

Same as above

3.5 years

-

Sang-don Yoon

M

Sep. 1971

Managing Director

N

Y

Director of Risk Management

2018 -2018 Woori Savings Bank Director of Business Management 2018 -2018 Woori Financial Capital Director of Risk 2019 -2021 Woori Savings Bank Representative Director 2021-present Woori Financial Capital Director of Risk Management

-

-

Same as above

0.3 years

-

Hyun-Woo Park

M

Dec. 1973

Associate Managing Director

N

Y

Director of Personal Finance

1999-2012 Woori Financial Capital Funds Team, PR & IR Team 2013-2016 Woori Financial Capital Direct Sales Team Leader 2016-2018 Woori Financial Capital Personal Finance Team Leader 2018-present Woori Financial Capital Director of Personal Finance

3,450

-

Same as above

2.5 years

-

Yun-Seok Lee

M

Mar. 1968

Associate Managing Director

N

Y

Compliance Officer

2008-2017 Woori Financial Capital Debt Team, Special Debt Team Leader 2017-2018 Woori Financial Capital Head of Audit Office 2019-2020 Woori Financial Capital Director of Risk 2021-present Woori Financial Capital Compliance Officer

-

-

Same as above

2.4 years

-

Hee-Yeon Kim

M

Aug. 1968

Associate Director

N

Y

Director of Credit Management

1998-2016 Woori Financial Capital Debt Center 2016-2019 Woori Financial Capital Debt Team Leader 2020-2021 Woori Financial Capital Director of Debt 2021-present Woori Financial Director of Credit Management

-

-

Same as above

1.4 years

-

Seong-Heon Kim

M

July 1968

Associate Director

N

Y

Director of Digital Finance

2011 -2013 Woori Financial Capital IT Operations Team Leader 2013 -2020 Woori Financial Capital IT Director 2021-present Woori Financial Capital Director of Digital Finance

-

-

Same as above

0.3 years

-

Kang Park

M

Jan. 1970

Associate Director

N

Y

Director of Business Strategy

2016 -2017 Woori Financial Capital Head of Audit Office 2017 -2020 Woori Financial Capital Business Planning Team Leader 2020 -2020 Woori Financial Capital Head of Finance Dept. 2021-present Woori Financial Capital Director of Business Strategy

-

-

Same as above

0.3 years

-

The term of office refers to the term that the individuals have served as an executive at our company.

2) Executives Holding Concurrent Positions in the Company and Its Affiliates (Registered Executives)

(As of June 11, 2021)

 

Name		Relevant Company		Position		Date of Concurrent Position		Full-time (Y/N)
Seok-Tae Lee		Woori Financial Group		Vice President		January 13, 2021		Y

3) Employees

 

(As of March 31, 2021)		(Unit: No. of persons; KRW million)

 

27

Employees																				Non-affiliated Workers						Remarks
Business Sector		Sex		No. of Employees										Average Length of Service (in Years)		Total Salary Paid		Average Salary Per Person		M		F		Total
				Permanent Employees				Fixed-Term Workers				Total
				Total		(Part-time)		Total		(Part-time)
Entire Company		M		296		-		40		-		336		9.3		11,956		34		2		109		111		-
Entire Company		F		151		-		124		12		275		6.0		4,414		17								-
Total				447		-		164		12		611		7.8		16,369		26								-

Note) Woori Financial Capital has a total of 611 employees (including non-registered executives, excluding dispatched workers) as of the date on which the report was prepared, and their average length of service is 7.8 years. The total salary paid in 2021 for all employees is KRW 16,369 million, and an average salary per person is KRW 26 million (January-March 2021). Non-affiliated workers refer to dispatched workers, and there are 111 of them.

4) Major Shareholders

 

(As of June 11, 2021)		(Unit: No. of shares, %)

 

Name		Relationship		Share Type		No. of Shares Held & Shareholding Ratio								Remarks
						Beginning of the Term				End of the Term
						No. of Shares Held		Shareholding Ratio		No. of Shares Held		Shareholding Ratio
Woori Financial Group		Largest shareholder		Common share		42,605,000		74.04		52,064,059		90.47		-
Aju Corporation		Major shareholder		Common share		7,395,000		12.85		-		-
Total				Common share		50,000,000		86.89		52,064,059		90.47		-
				-		-		-		-		-		-

Note) As of the filing date of the SRS, the shareholding ratio of Woori Financial Group has changed due to the acquisition of the shares held by Aju Corporation and the acquisition of treasury share of Woori Financial Capital. As of the filing date of the SRS, Woori Financial Group holds a total of 52,064,059 shares (approximately 90.47%) of the total number of equities issued by Woori Financial Capital.

B. Summary Financial Information & External Audit in the Last Three Years

(1) Summary Consolidated Financial Statements

(Unit: KRW million)

 

Classification		28th FY				27th FY				26th FY
		2021 1Q				End of 2020				End of 2019
[Cash and Deposits]			395,850				358,409				323,227
[Securities]			362,634				587,986				422,222
[Financial Bonds]			6,226,625				6,662,551				5,540,398
[Lease Assets]			1,150,252				1,116,175				994,756
[Associates Investment and Joint Ventures]			1,545				2,236				1,567
[Tangible Assets]			4,640				7,208				7,476
[Intangible Assets]			6,220				31,078				69,045
[Other Assets]			94,240				106,664				104,308
[Invested Real Estate]			-				7,808				10,169
Total Assets			8,242,006				8,880,117				7,473,168
[Borrowings]			7,064,175				6,654,435				5,419,228

 

28

[Withholdings]			-				1,063,661				938,714
[Other Liabilities]			391,768				335,744				301,236
[Non-Controlling Interest Liabilities]			-				-				-
Total Liabilities			7,383,943				8,053,840				6,659,178
[Paid-in Capital]			287,729				287,729				287,729
[Capital Surplus]			20,355				20,355				20,355
[Capital Adjustment]			(21,527	)			(21,527	)			(11,835	)
[Other Accumulated Comprehensive Income]			(7,021	)			(7,944	)			(7,560	)
[Retained Earnings]			578,526				547,662				525,301
[Non-controlling Interest Equity]			-				-				-
Total Equity			858,063				826,277				813,990
		January 1, 2021 - March 31, 2021				January 1, 2020 - December 31, 2020				January 1, 2019 - December 31, 2019
Operating Revenue			205,647				832,511				726,369
Operating Income			49,677				138,100				133,756
Income and Loss Before Tax			33,665				98,921				133,905
Net Income			34,984				58,980				101,588
- Net Income for Controlling Shareholder’s Shares			34,984				58,980				101,588
- Net Income for Non-Controlling Shares			-				-				-
Total Comprehensive Income			35,907				58,596				98,971
No. of Subsidiaries subject to Consolidation			4				6				7

 

29

(2) Summary Separate Financial Statements

(Unit: KRW million)

 

Classification		28th FY				27th FY				26th FY
		2021 1Q				End of 2020				End of 2019
[Cash and Deposits]			183,820				98,649				114,209
[Investment and Financial Assets]			362,634				479,294				299,182
[Financial Bonds]			6,226,625				5,653,400				4,656,976
[Lease Assets]			1,150,252				1,116,175				994,756
[Associates and Subsidiaries Investments]			81,647				203,891				218,106
[Tangible Assets]			4,640				5,243				5,324
[Intangible Assets]			6,220				6,574				5,354
[Other Assets]			226,267				214,944				173,286
Total Assets			8,242,105				7,778,170				6,467,193
[Borrowings]			7,064,175				6,654,435				5,419,228
[Other Liabilities]			319,706				301,015				274,808
Total Liabilities			7,383,881				6,955,449				5,694,036
[Paid-in Capital]			287,729				287,729				287,729
[Capital Surplus]			20,355				20,355				20,355
[Capital Adjustment]			(21,527	)			(21,527	)			(11,835	)
[Other Accumulated Comprehensive Income]			(7,021	)			(7,542	)			(6,707	)
[Retained Earnings]			578,687				543,704				483,615
Total Equity			858,224				822,721				773,157
Valuation Method for Investment Securities in Associates, Subsidiaries, Joint Ventures			Cost method or fair value method				Cost method or fair value method				Cost method or fair value method
		January 1, 2021 - March 31, 2021				January 1, 2020 - December 31, 2020				January 1, 2019 - December 31, 2019
Operating Revenue			205,646				758,572				646,437
Operating Income			49,708				128,094				120,557
Income and Loss Before Tax			51,371				127,959				120,509
Net Income			39,104				96,707				90,850
Total Comprehensive Income			39,624				95,873				88,405
Basic Earnings per Share (in KRW)			705				1,733				1,595
Diluted Earnings per Share (in KRW)			705				1,733				1,595

 

30

(3) External Audits of the Financial Statements

 

Business Term		Auditor		Opinion		Remarks
28th FY (Current period)		KPMG Korea		—		—
27th FY (Previous period)		KPMG Korea		In our opinion, the accompanying consolidated financial statements of the consolidated entities present fairly, in all material respects, consolidated statement of financial position as of December 31, 2020 and December 31, 2019, and consolidated financial performance and consolidated cash flows of both reporting periods ending as of the same day in accordance with K-IFRS.		—
26th FY (One before the previous period)		KPMG Korea		In our opinion, the accompanying consolidated financial statements of the consolidated entities present fairly, in all material respects, consolidated statement of financial position as of December 31, 2019 and December 31, 2018, and consolidated financial performance and consolidated cash flows of both reporting periods ending as of the same day in accordance with K-IFRS.		—
25th FY (Two before the previous period)		KPMG Korea		In our opinion, the accompanying consolidated financial statements of the consolidated entities present fairly, in all material respects, consolidated statement of financial position as of December 31, 2018 and December 31, 2017, and consolidated financial performance and consolidated cash flows of both reporting periods ending as of the same day in accordance with K-IFRS.		—

3. Forms of the Share Exchange

A. Comprehensive Share Exchange

Woori Financial Group plans to incorporate Woori Financial Capital as a wholly owned subsidiary in the manner of a comprehensive share exchange.

B. Small-Scale Share Exchange, Simplified Share Exchange, and the Basis Thereof

The Share Exchange meets the requirements for small-scale share exchange pursuant to Article 360-10 of the Commercial Act; hence, Woori Financial Group intends to carry out the Share Exchange in accordance with the procedures of the small-scale share exchange thereunder.

Meanwhile, the parent company Woori Financial Group executed a share purchase agreement with Woori Financial Capital on May 21, 2021 to acquire the treasury share of Woori Financial Capital, and acquired the said treasury share on May 24, 2021. Therefore, Woori Financial Capital meets the requirements for simplified share exchange pursuant to Article 360-9 of the Commercial Act. Accordingly, Woori Financial Capital intends to carry out the Share Exchange in accordance with the procedures of the simplified share exchange thereunder.

Accordingly, the two Parties plan to conduct the Share Exchange with the approval of the board of directors on the matter of the Share Exchange in lieu of the approval of a general meeting of shareholders.

 

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C. Listing Plan for Entities Surviving the Comprehensive Share Exchange

Woori Financial Group, which becomes the wholly owning parent company after the Share Exchange, is a share market listed corporation as of the filing date of the SRS, and it will continue to keep the status of a share market listed corporation after the comprehensive share exchange. Woori Financial Capital, which becomes a wholly owned subsidiary after the Share Exchange, will be delisted as of August 27, 2021. However, the expected delisting date is only an estimated schedule at the time of the disclosure and is subject to change based on consultation with relevant agencies.

D. Special Note on the Methods of the Comprehensive Share Exchange

(1) Small-Scale Share Exchange of the Wholly Owning Parent Company

Woori Financial Group conducts the Share Exchange according to the small-scale share exchange procedure pursuant to Article 360-10 of the Commercial Act, so the appraisal rights of dissenting shareholders are not granted.

However, under Article 360-10(5) of the Commercial Act and Article 62-2(2) the Financial Holding Companies Act (the “FHCA”), in cases where a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies Woori Financial Group in writing of his/her intent to oppose to the small-scale share exchange within seven days from the date of a public notice or a notice to the shareholders of such small-scale share exchange under Article 360-10(4) of the Commercial Act, Woori Financial Group may no longer be able to carry out the Share Exchange in the small-scale share exchange method. Also, in such cases, the Parties may cancel or amend the share exchange agreement by written agreement.

 

 

32

(2) Shortening of the Share Exchange Schedule

The special provisions under Article 62-2 the FHCA may apply to the Share Exchange to shorten the duration of certain procedures under the Commercial Act. In this regard, according to Article 62-2 the FHCA, a public notice of the record date of shareholders may be made seven days prior to the record date.

However, to protect the interests of the shareholders of Woori Financial Group and Woori Financial Capital, both companies have, pursuant to Article 354(4) of the Commercial Act, set the record date as June 7, 2021, which is over two weeks from May 21, 2021, or the public notice of the record date to determine the shareholders, who can express their intents to oppose to the small-scale share exchange (for Woori Financial Group) and the simplified share exchange (for Woori Financial Capital).

Moreover, pursuant to Article 62-2 the FHCA, Woori Financial Capital may establish a period to receive shareholders’ dissenting opinions to the simplified share exchange as within seven days from the date of receipt of the public notice or notification of the simplified share exchange, but Woori Financial Capital decided to extend the period to July 22, the day prior to the board meeting replacing the general meeting of shareholders, to protect the interests of its shareholders.

The special provisions under the FHCA shall apply mutatis mutandis when conducting other procedures. Please see the below for the details of the special provisions under the FHCA.

[Comparison of timelines under the Commercial Act and the FHCA]

 

Classification		Commercial Act		Special Provisions under the FHCA
Notification of the closure of register of shareholders and record date		Two weeks prior to such closure period or record date		Seven days prior
Notification of small-scale or simplified share exchange of the company becoming a wholly owning parent company or a wholly owned subsidiary		Within two weeks from the date of the preparation of a share exchange agreement		Within seven days
Notification of shareholders’ intents to oppose to the small-scale or simplified share exchange by the shareholders of the company becoming a wholly owning parent company or a wholly owned subsidiary		Within two weeks from the date of public notice of the small-scale or simplified share exchange		Within seven days
The period for the exercise of the appraisal rights of the shareholders dissenting to the simplified share exchange of the wholly owned subsidiary		Within 20 days from the expiration of the period for the shareholders of the company becoming a wholly owned subsidiary to express their intents to oppose to the simplified share exchange		Within 10 days
Public notice of the procedures for invalidation of share certificates		One month prior to the share exchange date		Five days prior
Purchase of the shares subject to the appraisal rights of dissenting shareholders		Within two months from the expiration of a period during which a request for purchase can be made		Within one month

 

33

Note) The special provisions under Article 62-2(2) of the FHCA shall apply to the Parties to the comprehensive share exchange, i.e., both the financial holding company and its subsidiary.

The below are the details of the relevant provisions of Article 62-2(2) of the FHCA, and Articles 354, 360-5, 360-8, 360-9, 360-10, and 374-2 of the Commercial Act:

 

 

34

E. Matters concerning the Companies Becoming the Wholly Owning Parent Company and a Wholly Owned Subsidiary after the Comprehensive Share Exchange

(As of June 11, 2021)

 

Classification		wholly owning parent company		wholly owned subsidiary
Business name		Woori Financial Group Inc.		Woori Financial Capital Co., Ltd.
Address of the head office		51, Sogong-ro, Jung-gu, Seoul		239, Daedeok-daero, Seo-gu, Daejeon
Listed (Y/N)		KOSPI listed		KOSPI listed

 

35

Current subsidiaries		Woori Bank (shareholding ratio: 100%) Woori Card Co., Ltd. (shareholding ratio: 100%) Woori Financial Capital Co., Ltd. (shareholding ratio: 90.5%) Woori Investment Bank Co., Ltd. (shareholding ratio: 58.7%) Woori Asset Trust, Ltd. (shareholding ratio: 51.0%) Woori Asset Management Corp. (shareholding ratio: 73%) Woori Savings Bank Co., Ltd. (shareholding ratio: 100%) Woori Credit Information Co., Ltd. (shareholding ratio: 100%) Woori Fund Services Co., Ltd. (shareholding ratio: 100%) Woori Private Equity Asset Management Co., Ltd. (shareholding ratio: 100%) Woori Global Asset Management Co., Ltd. (shareholding ratio: 100%) Woori FIS Co., Ltd. (shareholding ratio: 100%) Woori Financial Research Institute Co., Ltd. (shareholding ratio: 100%)		-

 

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4. Share Exchange Schedule

A. Progress

 

•

May 21, 2021: The resolution of the board of directors approving the execution of the share exchange agreement for the comprehensive share exchange

 

•

June 4, 2021: The execution of the share exchange agreement for the comprehensive share exchange

 

•

June 7, 2021: The record date to determine shareholders eligible to submit their intent to oppose to the share exchange

 

•

June 11, 2021: The filing date of SRS

A. Important Milestones

The Share Exchange is conducted pursuant to Article 62-2 of the FHCA, Article 165-4 of the Financial Investment Services and Capital Markets Act (the “FISCMA”), Article 176-6 of the Enforcement Decree of the FISCMA, and Articles 360-2 through 360-14 of the Commercial Act.

With regard to the Share Exchange, Woori Financial Group will only need the approval of the board of directors instead of the approval of a general meeting of shareholders because the exchange will take the form of a small-scale share exchange. The shareholders of Woori Financial Group will not be granted the appraisal rights.

Pursuant to Article 360-10(5) of the Commercial Act and Article 62-2(2) of the FHCA, in cases where a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies Woori Financial Group in writing of his/her intent to oppose to the small-scale share exchange within seven days from the date of a public notice or a notice to the shareholders of such small-scale share exchange under Article 360-10(4) of the Commercial Act, Woori Financial Group may no longer be able to carry out the small-scale share exchange, and may cancel or amend the share exchange agreement by written agreement with Woori Financial Capital.

As for Woori Financial Capital, the approval of the board of directors may substitute the approval of a general meeting of shareholders according to Article 360-9(1) of the Commercial Act, and the share exchange will take the form of a simplified share exchange. The shareholders of Woori Financial Capital will be granted the appraisal rights.

 

Milestones				Woori Financial Group		Woori Financial Capital
Board meeting to approve the execution of the share exchange agreement				May 21, 2021		May 21, 2021
Public notice of the record date to determine the shareholders				May 21, 2021		May 21, 2021
Execution of the share exchange agreement				June 4, 2021		June 4, 2021
Record date to determine the shareholders				June 7, 2021		June 7, 2021
Public notice of small-scale/simplified share exchanges				June 9, 2021		June 9, 2021
Period to receive shareholders’ dissenting opinions to the small-scale/simplified share exchanges		Start date		June 9, 2021		June 9, 2021
		End date		June 16, 2021		July 22, 2021
Board meeting substituting a general meeting of shareholders on the approval of the share exchange				July 23, 2021		July 23, 2021
Period to exercise the appraisal rights		Start date		-		July 23, 2021
		End date		-		August 2, 2021

 

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Public notice and notification of invalidation of share certificates and submission of old share certificates				-		August 3, 2021
Period of submitting old share certificates				-		August 3 – August 9, 2021
Period of trading suspension of Woori Financial Capital				-		August 6 – August 26, 2021
Expected date of share purchase payment				-		August 6, 2021
(Expected) date to carry out the share exchange				August 10, 2021		August 10, 2021
Expected listing date of new shares				August 27, 2021		-
Expected delisting date				-		August 27, 2021

Note 1) The above matters and schedules may change by the parties’ agreement when it is deemed reasonably necessary to adjust the schedules due to the governmental approvals (e.g., approvals, permits, reporting from/to the supervisory authorities), or other reasons related to the procedure of the Share Exchange (e.g., review of the SRS). The rights to agree on such schedule change are delegated to the Representative Director of each party.

Note 2) As of September 16, 2019, the enforcement date of the Act on Electronic Registration of Stocks, Bonds, Etc., the share certificates of Woori Financial Group and Woori Financial Capital, both being listed companies, became null and void and were converted into electronically registered shares. This means that the shareholders of Woori Financial Capital do not need to submit their physical share certificates during the period of submitting old share certificates, and the new shares issued by Woori Financial Group following the Share Exchange will be electronically registered to the shareholders of Woori Financial Capital. There is no plan to issue physical share certificates.

5. Conditions for the Share Exchange

The share exchange agreement on the comprehensive share exchange entered into between Woori Financial Group and Woori Financial Capital on June 4, 2021 (the “Share Exchange Agreement”) shall become effective immediately upon execution, but if any of the following occurs, it may lose effect retrospectively without any action of the parties, or may be changed or cancelled by written agreement of the parties:

A. Grounds for the Share Exchange Agreement Becoming Null and Void

If the item on the approval of the Share Exchange Agreement is rejected at the board of directors meeting of either Woori Financial Group or Woori Financial Capital substituting a general meeting of shareholders, the Share Exchange Agreement shall lose effect retrospectively without any action of the parties, which founders the comprehensive share exchange.

B. Grounds for Amendment and Cancellation of the Share Exchange Agreement

The Share Exchange Agreement may be amended or cancelled if any of the following occurs thereunder:

 

 

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C. Invalidation of the Exercise of the Appraisal Rights in case of interruption of the Share Exchange Procedure

If the Share Exchange procedure is interrupted, such as invalidation or cancellation of the Share Exchange Agreement due to the occurrence of any of the grounds stated in the above A. and B., the effect of the exercise of the appraisal rights will become invalidated. Also, in this case, Woori Financial Capital will not purchase the shares whose appraisal rights have been exercised.

D. Requirements for the Resolution of the General Meeting of Shareholders in relation to the Share Exchange

 

•

Woori Financial Group

Woori Financial Group will follow a small-scale share exchange method under Article 360-10 of the Commercial Act, so it will carry out the Share Exchange with the approval of its board of directors in lieu of the approval of its general meeting of shareholders pursuant to Article 360-3(1) of the Commercial Act.

However, in cases where, under Article 360-10(5) of the Commercial Act and Article 62-2(2) the FHCA, a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies Woori Financial Group in writing of his/her intent to oppose to the small-scale share exchange within seven days from the date of a public notice or a notice to the shareholders of such small-scale share exchange under Article 360-10(4) of the Commercial Act, Woori Financial Group may no longer be able to carry out the Share Exchange in the small-scale share exchange method. In such cases, the Parties may cancel the Share Exchange Agreement by written agreement or change the small-scale share exchange into a general share exchange based on a separate agreement between the parties. Such cases require a special resolution of the general meeting of shareholders pursuant to Articles 360-3(1), 360-3(2), and 434 of the Commercial Act, which require the affirmative votes of at least two thirds of the voting rights of the shareholders present at the general meeting and of at least one third of the total number of issued and outstanding shares.

 

39

•

Woori Financial Capital

Woori Financial Capital will follow a simplified share exchange method under Article 360-9 of the Commercial Act, so it will carry out the Share Exchange with the approval of its board of directors in lieu of the approval of its general meeting of shareholders pursuant to Article 360-3(1) of the Commercial Act.

 

6. Regulations or Special Provisions on the Relevant Statutes

No governmental approvals or permits are required prior to the Share Exchange. However, the contents of the SRS for the Share Exchange may be corrected during the disclosure review process, which may result in changes in the expected schedules. In addition, the parties need to have prior consultation with the government authorities and relevant agencies with regard to the Share Exchange, such as the delisting of Woori Financial Capital and listing of exchanged new shares. This consultation may also change the expected schedules. Please note that if the schedule is changed due to the above consultation with or review by the government authorities and relevant agencies, the Representative Director of Woori Financial Group and Woori Financial Capital have the right to change the schedules as delegated by their respective board of directors and the Share Exchange Agreement.

Although no prior approvals are required for the Share Exchange, Woori Financial Group must submit the Post-Issuance Report to the Financial Supervisory Commission (the “FSC”) after the Share Exchange (Article 2-19 and the proviso of Article 5-15 of the Regulations on Issuance and Disclosure, etc. of Shares (the “IDSR”)). Moreover, under the FISCMA, it also needs to submit the Report on Shares, etc. Held in Bulk to the FSC and Korea Exchange (“KRX”) (Article 147), and the Report on Status of Specific Securities, etc. Owned by Executive Officers and Major Shareholders to the Securities & Futures Commission and the KRX (Article 173). Furthermore, Woori Financial Group have to register the changes in capital with regard to the exchanged new shares issued as a result of the Share Exchange in accordance with Articles 317(2)2 through 317(2)4 and Article 183 of the Commercial Act and Article 146 of the Commercial Registration Rules.

 

40

After the Share Exchange is completed, Woori Financial Capital shall submit the Completion Report on Merger, Etc. (Comprehensive Share Exchange) to the FSC (under Articles 2-19 and 5-15(5) of the IDSR) and submit the Report of Shareholding Changes including changes in the largest shareholder, etc. to the KRX under the Regulations on the Listing on the Securities Market (the “LSMR”) without delay. However, if the obligation to report under Article 147 or 173 of the FISCMA on the same shareholding changes has already been fulfilled within two days from the date on which such reason for report occurred, the Report of Shareholding Changes may not be submitted (Article 83 of the LSMR). In addition, if the number of shares held by a major shareholder or his/her specially-related person changes by at least one percent of the total number of outstanding voting shares, a specialized credit financial company is required to report relevant facts to the FSC within seven days from such change under Article 54(2) of the Specialized Credit Financial Business Act (the “SCFBA”). In accordance with the above provision, Woori Financial Capital needs to report the FSC about the change of shareholding exceeding one percent within seven days from the Share Exchange Date,

As for the special provisions stipulated in Article 62-2 of the FHCA in relation to the schedule of the Share Exchange, please refer to 3. Forms of the Share Exchange - D. Special Note on the Methods of the Comprehensive Share Exchange - (2) Shortening of the Share Exchange Schedule and 4. Share Exchange Schedule. Also, for the matters related to the appraisal rights, please refer to VII. Matters related to Appraisal Rights.

Moreover, Article 62-2(4) of the FHCA stipulates that a company that engages in a share exchange or a shareholder holding at least 30 percent of the number of shares subject to the appraisal opposes to the purchase price of the shares calculated under Article 62-2(3) of the FHCA, Article 33-2(1) of the Enforcement Decree of the FHCA, Article 165-5 of the FISCMA, and Article 176-7(3)1 of the Enforcement Decree of the FISCMA, the relevant company or shareholder may file an application for the adjustment of the purchase price with the FSC until ten days prior to the date of the share purchase payment; or, the relevant company or shareholder opposing to the share purchase price may request the court to determine the purchase price in accordance with Articles 360-5(3), 374-2(4) and 374-2(5) of the Commercial Act. However, please note that there is a possibility that the court may give a different interpretation of Article 62-2(3) of the FHCA with regard to whether the company or shareholder is eligible to make such request the court to determine the purchase price.

A part of the registered common shares of Woori Financial Group is listed on New York Stock Exchange in the form of depository receipts, and the voting rights of the shareholdings are vested in the holders of each depository receipt. Woori Financial Group plans to disclose the documents relevant to the Share Exchange to the U.S. Securities and Exchange Commission (SEC) according to its disclosure obligations under relevant regulations.

 

41

II. COMREHENSIVE SHARE EXCHANGE RATIO AND ITS BASIS OF CALCULATION

1. Share Exchange Ratio

 

				(Unit: in KRW)
Classification		Wholly owning parent company     (Woori Financial Group)		Wholly owned subsidiary (Woori Financial Capital)
Base share price		11,044		11,671
- Discount or premium rate		0%		0%
Average of asset and earnings values		—		—
- Asset value		—		—
- Earnings value		—		—
Exchange value (per share)		11,044		11,671
Exchange ratio		1		1.0567393
Relative value		—		—

* The exchange ratio of the common shares of Woori Financial Group and those of Woori Financial Capital has been determined to be 1:1.0567393. This means that the shareholders of common shares listed on the register of shareholders of Woori Financial Capital as of the Share Exchange Date (expected to be at 00:00 a.m. on August 10, 2021) (excluding Woori Financial Group but including Woori Financial Capital for the treasury shares that Woori Financial Capital acquired due to the exercise of the appraisal rights of the shareholders of Woori Financial Capital opposing to the Share Exchange) will be given 1.0567393 common shares of Woori Financial Group per common share of Woori Financial Capital.

2. Basis of Calculation

As both Woori Financial Group and Woori Financial Capital are listed companies, the base share prices were calculated based on Article 165-4 of the FISCMA and Articles 176-6(2) and 176-5(1)1 of the Enforcement Decree thereof, and the exchange ratio was calculated based on the base share prices.

 

 

42

 

43

Moreover, according to Articles 176-6(2) and 176-5(1)1 of the Enforcement Decree of the FISCMA, the value may be discounted or added up to 30 percent (10 percent in cases of a merger between affiliated companies) of the value computed in the above-mentioned methods, but the two Companies decided not to apply any discount rate based on individual reviews, mutual consultation and mutual agreement.

A. Company Becoming the Wholly Owning Parent Company: Woori Financial Group

 

Classification		Period		Value (in KRW)
Weighted average of the closing prices for the most recent one month (A)		April 21, 2021 – May 20, 2021			10,817
Weighted average of the closing prices for the most recent one week (B)		May 14, 2021 – May 20, 2021			11,166
The most recent closing price (C)		May 20, 2021			11,150
Share exchange value {D=(A+B+C)/3}		-			11,044

Note) The base share price was calculated by [(①+②+③)÷3] from the business day immediately preceding (May 20, 2021) the date the board of directors passes a resolution for the share exchange (May 21, 2021), with ① being the weighted arithmetic average of the closing prices for the most recent one month, ② being the weighted arithmetic average of the closing prices for the most recent one week, and ③ the most recent closing price.

Meanwhile, the closing prices and trading volumes of one month up to May 20, 2021 to calculate the base share price are as follows:

 

Date		Closing Price (in KRW)		Trading Volume (No. of shares)		Closing Price x Trading   Volume (in KRW)
2021-05-20		11,150		2,346,101		26,159,026,150
2021-05-18		11,300		2,048,082		23,143,326,600
2021-05-17		11,100		1,730,845		19,212,379,500
2021-05-14		11,100		1,811,715		20,110,036,500
2021-05-13		11,050		3,489,558		38,559,615,900
2021-05-12		11,050		3,495,281		38,622,855,050
2021-05-11		11,300		2,628,447		29,701,451,100
2021-05-10		11,300		2,750,105		31,076,186,500
2021-05-07		11,000		2,220,802		24,428,822,000
2021-05-06		10,950		4,710,798		51,583,238,100
2021-05-04		10,500		2,176,279		22,850,929,500
2021-05-03		10,550		2,078,620		21,929,441,000
2021-04-30		10,700		2,760,979		29,542,475,300
2021-04-29		10,750		2,288,584		24,602,278,000

 

44

2021-04-28		10,800		2,848,658		30,765,506,400
2021-04-27		10,650		2,381,397		25,361,878,050
2021-04-26		10,600		3,273,071		34,694,552,600
2021-04-23		10,500		3,361,830		35,299,215,000
2021-04-22		10,500		5,096,248		53,510,604,000
2021-04-21		10,150		3,713,285		37,689,842,750
A. Weighted arithmetic average of the closing prices for the most recent one month						10,817
B. Weighted arithmetic average of the closing prices for the most recent one week						11,166
C. The most recent closing price						11,150
D. Weighted average of the closing prices ([A+B+C]÷3)						11,044

 

45

B. Company Becoming a Wholly Owned Subsidiary: Woori Financial Capital

 

Classification		Period		Value (in KRW)
Weighted average of the closing prices for the most recent one month (A)		April 21, 2021 – May 20, 2021			11,807
Weighted average of the closing prices for the most recent one week (B)		May 14, 2021 – May 20, 2021			11,706
The most recent closing price (C)		May 20, 2021			11,500
Share exchange value {D=(A+B+C)/3}		-			11,671

Note) The base share price was calculated by [(①+②+③)÷3] from the business day immediately preceding (May 20, 2021) the date the board of directors passes a resolution for the share exchange (May 21, 2021), with ① being the weighted arithmetic average of the closing prices for the most recent one month, ② being the weighted arithmetic average of the closing prices for the most recent one week, and ③ the most recent closing price.

Meanwhile, the closing prices and trading volumes of one month up to May 20, 2021 to calculate the base share price are as follows:

 

Date		Closing Price (in KRW)		Trading Volume (No. of shares)		Closing Price x Trading   Volume (in KRW)
2021-05-20		11,500		65,055		748,132,500
2021-05-18		11,750		47,080		553,190,000
2021-05-17		11,750		77,328		908,604,000
2021-05-14		11,900		41,139		489,554,100
2021-05-13		11,850		108,834		1,289,682,900
2021-05-12		11,750		60,876		715,293,000
2021-05-11		11,900		55,662		662,377,800
2021-05-10		11,950		46,138		551,349,100
2021-05-07		11,900		54,663		650,489,700
2021-05-06		11,900		73,778		877,958,200
2021-05-04		11,850		57,057		676,125,450
2021-05-03		11,850		90,488		1,072,282,800
2021-04-30		11,900		66,860		795,634,000
2021-04-29		11,750		70,306		826,095,500
2021-04-28		11,800		77,926		919,526,800
2021-04-27		11,950		107,135		1,280,263,250
2021-04-26		12,000		187,044		2,244,528,000
2021-04-23		11,700		65,924		771,310,800
2021-04-22		11,550		85,025		982,038,750
2021-04-21		11,400		78,991		900,497,400
A. Weighted arithmetic average of the closing prices for the most recent one month						11,807

 

46

B. Weighted arithmetic average of the closing prices for the most recent one week						11,706
C. The most recent closing price						11,500
D. Weighted average of the closing prices ([A+B+C]÷3)						11,671

 

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3. Matters related to External Evaluation

The Share Exchange constitutes a share exchange between listed companies. The exchange value has been computed in accordance with Article 165-4 of the FISCMA, and Articles 176-6 and 176-5 of the Enforcement Decree thereof, and the exchange ratio has been calculated based on the said exchange value. Therefore, under Article 176-6(3) of the Enforcement Decree of the FISCMA, an evaluation by an external assessment institution to determine the fairness of the exchange value is not required.

 

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III. GUIDELINES FOR COMPREHENSIVE SHARE EXCHANGE

1. Share Exchange

A. Details of the Share Exchange

The shares of Woori Financial Capital held by the shareholders listed on the register of shareholders of Woori Financial Capital, which will become a wholly owned subsidiary, as of the Share Exchange Date (expected to be at 00:00 a.m. on August 10, 2021) excluding Woori Financial Group (but including Woori Financial Capital itself for the treasury shares that Woori Financial Capital acquired due to the exercise of the appraisal rights of its shareholders opposing to the Share Exchange, hereinafter “the shareholders subject to share exchange”) shall be transferred to Woori Financial Group on the Share Exchange Date. In return for this exchange, Woori Financial Group shall allot a total of 5,792,866 newly issued common shares to the shareholders subject to share exchange at the exchange ratio of one common share of Woori Financial Capital (par value KRW 5,000) to 1.0567393 common shares of Woori Financial Group (par value KRW 5,000). Woori Financial Group does not have any plan to transfer treasury shares to the shareholders subject to share exchange.

B. How to Deal with Fractional Shares Resulting from the Share Exchange

If a fractional share, which is less than one whole share, arises as Woori Financial Group allots its shares to the shareholders subject to share exchange according to the exchange ratio, the shareholders subject to share exchange to whom such fractional share belongs shall be paid in cash the amount calculated based on the closing price of the listing day of the new shares issued as a result of the Share Exchange (i.e., the closing price of the shares traded on the KRX Securities Market) within one month from the Share Exchange Date.

C. Matters related to Listing and Trading of New Shares

The new shares (registered common shares) of Woori Financial Group issued as a result of the Share Exchange are expected to be listed on August 27, 2021; provided, that this expected listing date may change based on the consultation with relevant agencies or the approval process.

2. Capital & Capital Reserves to be Increased

Following the Share Exchange, Woori Financial Group will see an increase in its capital of KRW 28,964,330,000 (= number of new shares issued: 5,792,866 × par value: KRW 5,000). An increase in the capital reserves will be the total issue price of the new shares of Woori Financial Group minus the total increased amount of the capital. However, in cases where there is a difference between the price calculated by the relevant statutes and K-IFRS and the price calculated in the above manner, the former may be considered the amount of the capital reserves.

3. Payment of Subsidiary, Etc.

Pursuant to the above III. Guidelines for Comprehensive Share Exchange & Transfer – 1. Share Exchange – B. How to Deal with Fractional Shares Resulting from the Share Exchange, there is no subsidiary that Woori Financial Group is required to pay to the shareholders subject to share exchange as a result of the Share Exchange other than the cash paid thereto.

 

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4. Compensation for Certain Shareholders

There is no additional direct or indirect compensation, such as special subsidiaries, that a Party or its special specially related person pays to a certain shareholder of the other Party in relation to the Share Exchange.

5. Expenses of the Share Exchange

It is agreed that any costs related to the Share Exchange, such as legal fees, tax fees, and financial advisory fees, shall be borne by each Party charged with such fees. The exact amount of the expenses has not been confirmed as of the filing date of the SRS, but the below shows an estimate thereof:

 

Classification		Amount         (in KRW million)				Basis of Calculation
Advisory fees			400			Legal, tax, and financial advisory services, etc.
Listing fees			13			Additional listing fees, etc.
Other expenses			170			Registration and license tax, education tax, PPM costs, etc.
Total			583			Excluding VAT

Note) The above expenses related to the Share Exchange are subject to change in the process.

 

6.

Shareholding of Treasury Shares and Handling Policy

 

Classification		Woori Financial Group		Woori Financial Capital
Current shareholding of treasury shares		2 weeks		N/A
How to handle treasury shares		Will not be utilized for the Share Exchange		The registered common shares of Woori Financial Group will be given or cash will be paid (for any fractional share) according to the exchange ratio. Note 1), Note 2)
Current shareholding of the other Party’s shares		52,064,059 common shares of Woori Financial Capital (90.47%)		—

Note 1) As of the filing date of the SRS. If there are additional treasury shares acquired due to the exercise of the appraisal rights of the shareholders of Woori Financial Capital following the Share Exchange, the registered common shares of Woori Financial Group shall be given or cash shall be paid for any fractional share according to the exchange ratio.

Note 2) A comprehensive share exchange is a system under which a company becoming the wholly owning parent company owns the total number of issued and outstanding shares of another company becoming a wholly owned subsidiary (Article 360-2(1) of the Commercial Act). With regard to the treasury shares held by a company becoming a wholly owned subsidiary as of the share exchange date, the Commercial Act acknowledges an exception to the restrictions on the acquisition of the parent company’s shares by a subsidiary on the premise that the shares of the company becoming the wholly owning parent company are allotted (Article 342-2(1)1). Accordingly, Woori Financial Group plans to allot its new shares based on the exchange ratio for the treasury shares held by Woori Financial Capital as of the Share Exchange Date (i.e., the treasury shares acquired as a result of the exercise of the appraisal rights by the shareholders of Woori Financial Capital). Woori Financial Capital is required to dispose the shares of Woori Financial Group allotted for the above treasury shares as of the Share Exchange Date in three years from the acquisition date (i.e., August 10, 2021 or the Share Exchange Date) pursuant to Article 62-2(1) of the FHCA, and such disposal of shares may affect the share prices of Woori Financial Group.

 

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Note 3) 52,064,059 common shares of Woori Financial Capital that Woori Financial Group holds as of the filing date of the SRS are not subject to the Share Exchange.

7. Transfer of Employment Contracts

N/A

8. Damages Suffered by Certain Class of Shareholders, Etc.

N/A

9. Creditors Protection Procedures

N/A

10. Other Share Exchange Conditions

The term of office of the directors and the members of the Audit Committee of Woori Financial Group who took office prior to the Share Exchange will continue to serve the term as previously agreed, notwithstanding Article 360-13 of the Commercial Act. No director will be newly appointed as a result of the Share Exchange.

Any details related to the Share Exchange, including any changes in the schedules thereof, will be delegated to the Representative Director of each Party within the scope of the resolution by the respective board of directors.

 

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IV. MATTERS RELATED TO BUSINESS AND ASSETS

N/A

 

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V. MATTERS RELATED TO MAJOR RIGHTS OF NEW SHARES

1. Registered Common shares Issued at the time of the Share Exchange and the Exchange Ratio

A. Among the shareholders listed on the register of shareholders of Woori Financial Capital, which will become a wholly owned subsidiary, as of the Share Exchange Date (expected to be at 00:00 a.m. on August 10, 2021), the shares of Woori Financial Capital held by the shareholders subject to share exchange excluding Woori Financial Group shall be transferred to Woori Financial Group on the Share Exchange Date. In return for this exchange, Woori Financial Group shall allot a total of 5,792,866 newly issued common shares to the shareholders subject to share exchange at the exchange ratio of one common share of Woori Financial Capital (par value KRW 5,000) to 1.0567393 common shares of Woori Financial Group (par value KRW 5,000). Woori Financial Group does not have any plan to transfer treasury shares to the shareholders subject to share exchange. Since the new shares of Woori Financial Group are allotted in return for the Share Exchange, the shareholders of Woori Financial Group may experience share dilution effect as a result.

The total number of exchanged new shares that Woori Financial Group plans to allot to the shareholders subject to share exchange is 5,792,866 common shares of Woori Financial Group. Please refer to the table below with regard to the share dilution effect.

 

Classification		Current		Increase		After share exchange
No. of issued shares		722,267,683		5,792,866		728,060,549
No. of outstanding shares		722,267,681		5,792,866		728,060,547

Note) As of the filing date of the SRS

The shareholder(s) holding the shares equivalent to 1.00000% of the total number of issued shares of Woori Financial Group will hold the shares equivalent to 0.99204% of the total number of issued shares after the Share Exchange.

Moreover, although Woori Financial Capital does not hold any treasury shares as of the filing date of the SRS, it may acquire treasury shares depending on whether its shareholders’ exercise of the appraisal rights prior to the Share Exchange Date, in which case the new shares of Woori Financial Group will be allotted in lieu of the treasury shares held by Woori Financial Capital as of the Share Exchange Date according to the exchange ratio. Woori Financial Capital is required to dispose the shares of Woori Financial Group allotted for the above treasury shares as of the Share Exchange Date in three years from the acquisition date (i.e., August 10, 2021 or the Share Exchange Date) pursuant to Article 62-2(1) of the FHCA, and such disposal of shares may affect the share prices of Woori Financial Group.

B. If a fractional share, which is less than one whole share, arises as Woori Financial Group issues new shares as a result of the Share Exchange, the shareholders subject to share exchange to whom such fractional share belongs shall be paid in cash the amount calculated based on the closing price of the listing day (expected to be August 27, 2021) of the new shares issued as a result of the Share Exchange (i.e., the closing price of the shares traded on the KRX Securities Market) within one month from the Share Exchange Date.

C. There is no subsidiary that Woori Financial Group is required to pay to the shareholders subject to share exchange as a result of the Share Exchange other than the cash paid thereto for the fractional shares.

2. Matters related to Major Rights of New Shares

A. The exchanged new shares are registered common shares.

B. There are no other special provisions in the articles of incorporation, etc. that restrict the exercise of shareholder rights, such as dividends or voting rights, in relation to exchanged new shares.

 

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3. Major Rights of New Shares to Be Issued by the Wholly Owning Parent Company

The following is an excerpt of the relevant provisions from the articles of incorporation of Woori Financial Group:

[Matters related to the par value, total number of authorized shares, and share classes]

 

[Matters related to the pre-emptive rights]

 

 

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[Matters related to the voting rights]

 

 

55

[Matters related to dividends]

 

 

56

Woori Financial Group set a record date for interim dividends pursuant to its articles of incorporation at a meeting of its board of directors held on July 2, 2021, and the record date is July 30, 2021. According to the interpretation of the Commercial Act, the ceiling amount of such dividends must be specified in the Share Exchange Agreement. The parties to the Share Exchange Agreement determined the “limit prescribed by Article 462-3(2) of the Commercial Act (approximately KRW 245 billion)” as such ceiling amount when they executed an amendment to the Share Exchange Agreement on July 2, 2021. However, the actual implementation and amount of interim dividends will be determined by the board of directors of Woori Financial Group. Even in the case of implementation of interim dividends, such interim dividends will be paid to its shareholders named on the list of shareholders as of July 30, 2021, the record date for interim dividend set by the board of directors of Woori Financial Group. The share exchange is to be made on August 10, 2021, and thus the shareholders of Woori Financial Capital, who will be issued new shares of Woori Financial Group according to the Share Exchange, are not entitled to receive such interim dividends.

 

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VI. INVESTMENT RISK FACTORS

1. Risk Factors related to the Conditions for the Successful Share Exchange

 

Woori Financial Group, which becomes the wholly owning parent company, intends to carry out the Share Exchange in accordance with the procedures of the small-scale share exchange under Article 360-10 of the Commercial Act because it meets the requirements therefor. In addition, Woori Financial Capital, which becomes a wholly owned subsidiary, will follow the procedures of the simplified share exchange under Article 360-9 of the Commercial Act because it satisfies the requirements therefor. Accordingly, for the Share Exchange, the approval of a general meeting of shareholders of both Woori Financial Group and Woori Financial Capital shall be substituted by the approval of their respective board of directors. The relevant provisions in the Commercial Act are as follows:

 

 

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Please note that in cases where a holder of shares equivalent to at least 20 percent of the total number of issued and outstanding shares of Woori Financial Group notifies his/her intent to oppose to the small-scale share exchange, the approval of its board of directors can no longer replace the approval of its general meeting of shareholders, which may constitute a reason for the contract cancellation or amendment under the Share Exchange Agreement.

Moreover, if a party wishes to follow the procedures for common share exchange and get the approval of a general meeting of shareholders for the Share Exchange, the approval requires the affirmative votes of at least two thirds of the voting rights of the shareholders present at the general meeting of Woori Financial Group and of at least one third of the total number of issued and outstanding shares. If not, the entire Share Exchange may founder. Investors should be aware of this risk.

As of the filing date of this amended SRS (June 22, 2021), the period of receiving any notice of dissenting to a small-scale share exchange (June 9, 2021 ~ June 16, 2021) has expired. Since the number of shares held by the shareholders, who have given such dissenting notice, is less than 20/100 of the total number of issued shares, the Share Exchange will proceed according to the procedure of small-scale share exchange as proposed.

 

The Share Exchange may be affected by a variety of conditions, which means that there is always a possibility of the Agreement being invalidated, the Share Exchange being delayed, or not completed at all.

 

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In particular, if any of the reasons for the contract invalidation, amendment, or cancellation stipulated in Share Exchange Agreement arises, the Agreement may lose effect retrospectively without any action of the Parties, or amended or cancelled by the Parties.

[Share Exchange Agreement]

 

As the Share Exchange is carried out with the approval of the board of directors in lieu of the approval of the general meeting of shareholders, it is deemed less likely that the Share Exchange Agreement will be cancelled. However, please note that it is difficult to completely rule out the possibility of the cancellation due to a variety of reasons, including but not limited to a natural disaster, and other significant changes in the property and business of the Parties.

 

[Purchase price for dissenting shareholders and trading price]

(Unit: in KRW)

 

Classification		Woori Financial Group		Woori Financial Capital
Purchase price for dissenting shareholders		—		11,539
Closing price on June 10, 2021		11,400		11,800

 

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The purchase price for dissenting shareholders of Woori Financial Capital in relation to the Share Exchange is KRW 11,539. Also, the closing price of the common shares of Woori Financial Capital on the stock exchanges on June 10, 2021, which is the day prior to the filing of the SRS, was KRW 11,800. Please be advised that the shareholders who exercise their appraisal rights may sustain financial disadvantages if the purchase price for dissenting shareholders is lower than the actual trading price of the shares.

 

As the Share Exchange constitutes a small-scale share exchange for the shareholders of Woori Financial Group, they are not given any appraisal rights. On the other hand, the dissenting shareholders of Woori Financial Capital are granted the appraisal rights. Since Woori Financial Capital is a listed company, the purchase price of the shares of Woori Financial Capital for shareholders opposing to the Share Exchange has been calculated as KRW 11,539 per share on the basis of Article 165-5(3) of the FISCMA and Article 176-6(3)1 of the Enforcement Decree thereof. This price is what the Company suggests for consultation with the shareholders. If no agreement is reached with the shareholders on the purchase price, the following process shall be followed to handle the matter:

[Process to follow in case the agreement is not reached]

 

•

Under Article 62-2(4) of the FHCA, if the company that will carry out a share exchange or a shareholder holding at least 30 percent of the number of the shares subject to the appraisal opposes to the above purchase price, the said company or the shareholder may file an application for the adjustment of the purchase price with the FSC until ten days prior to the due date of the purchase payment.

 

•

Also, under Articles 360-5(3), 374-2(4), and 374-2(5) of the Commercial Act, the said company or shareholder opposing to the above purchase price may request the court to determine the purchase price.

 

•

However, please note that there is a possibility that the court may give a different interpretation of Article 62-2(3) of the FHCA with regard to whether the company or shareholder is eligible to make such request the court to determine the purchase price.

 

•

Furthermore, even if the shareholders against the above purchase price request the FSC for adjustment or the court for determination, such request shall not have any effect on the process of the Share Exchange itself. The amount adjusted or determined from such request shall be valid only for the shareholders who made such request for adjustment or determination.

Please note that if the number of shares subject to the appraisal rights reaches a level that may incur financial burden on Woori Financial Capital as a result of the Share Exchange, the share exchange cost recognition and capital reduction resulting therefrom may have a negative impact on the financial standing of Woori Financial Capital.

 

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It is possible that some minority shareholders of the companies that will go through the Share Exchange will file a lawsuit seeking nullification of the Share Exchange on the basis of any procedural fault or unfair exchange ratio. If the court admits such nullification, there is a risk that the Share Exchange will become null and void.

The Share Exchange is being carried out in compliance with the procedures and regulations stipulated in the Commercial Act, the FISCMA, and the FHCA. In particular, in terms of the risk of possible nullification of the Share Exchange on the grounds of an unfair exchange ratio, we can refer to a Supreme Court’s precedent concerning a lawsuit seeking nullification of merger on the grounds of an unfair merger ratio. The precedent states, “When all or part of the companies subject to the merger are listed companies, if the merger price has been calculated in accordance with the methods and procedures stipulated in the relevant statutes, including the Securities and Exchange Act and the Enforcement Decree thereof, and if the merger ratio has been determined accordingly, the court cannot admit that the merger agreement shall be considered null and void on the grounds of remarkable unfairness of the merger ratio unless there are other special circumstances, such as the calculation of the merger price was based on false information or absurd estimates” (Supreme Court Decision No. 2007Da64136 rendered on January 10, 2008).

Both Woori Financial Group and Woori Financial Capital are listed companies, so the share exchange ratio was calculated in accordance with Article 165-4 of the FISCMA and Articles 176-5(1)1 and 176-6(2) of the Enforcement Decree thereof: the base share price calculated by the arithmetic mean of each company’s weighted arithmetic average of the closing prices for the most recent one month, each company’s weighted arithmetic average of the closing prices for the most recent one week, and each company’s most recent closing price was used as the exchange value.

As explained above, the ratio of the Share Exchange was calculated in due compliance with the relevant statutes, and the procedure for the Share Exchange complies with the provisions stipulated in the relevant statutes, such as the Commercial Act; hence, the possibility for the court to nullify the Share Exchange is deemed low. However, please be advised that it is difficult to completely rule out the possibility of a lawsuit being filed in relation to the Share Exchange.

 

 

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Woori Financial Group and Woori Financial Capital may enter into a separate agreement on the matters that require further agreement for the Share Exchange, and such separate agreement shall be considered as part of the Agreement. After the execution of the Share Exchange Agreement, Woori Financial Group set a record date for interim dividends pursuant to its articles of incorporation at a meeting of its board of directors held on July 2, 2021, and the record date is July 30, 2021. According to the interpretation of the Commercial Act, the ceiling amount of such dividends must be specified in the Share Exchange Agreement. The parties to the Share Exchange Agreement determined the “limit prescribed by Article 462-3(2) of the Commercial Act (approximately KRW 245 billion)” as such ceiling amount when they executed an amendment to the Share Exchange Agreement on July 2, 2021. Investors should keep this in mind.

 

2.	Listing of New Shares of the Wholly Owning Parent Company to Be Issued as a Result of the Share Exchange & Delisting of the Wholly Owned Subsidiary

A. Expected listing date of the new shares

The listing of exchanged new shares is scheduled to be on August 27, 2021. (However, it is subject to change based on consultation with relevant agencies.)

 

•

Share Exchange Date: August 10, 2021

 

•

Expected listing date: August 27, 2021

B. Delisting of the company becoming a wholly owned subsidiary following the share exchange

Woori Financial Capital, which is a listed company and will become a wholly owned subsidiary, is scheduled to be delisted on August 27, 2021 according to the securities market listing regulations. However, this date is only an estimated date as of the disclosure and is subject to change based on consultation with relevant agencies.

3. Any Put Option, Call Option, Put Back Option Agreements with the Other Party or a Third Party in relation to the Share Exchange

N/A as of the filing date of the SRS

4. Risk Factors to Consider concerning Investment in the Relevant Shares after the Successful Share Exchange

A. Note on investment risk factors

In preparing this section, Woori Financial Group has referred to the data of Woori Financial Group and Woori Financial Capital, and the data published by other institutions (e.g., Financial Statistics Information System (“FISIS”), statistics from Korea Federation of Banks, press releases from the Financial Supervisory Service (the “FSS”)) to help the investors make investment decisions. Also, please see the following definitions of the relevant terms for your better understanding of the investment risk factors:

 

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(12) Debt-to-income (DTI) ratio: It is a ratio of the amount of principal and interest payments of the borrower’s financial liabilities to his/her income, and it is one of the criteria for a secured loan. The principal and interest payments on a loan should be made primarily from the borrower’s income, so financial institutions consider the DTI ratio to reflect the borrower’s ability to repay the debt based on his/her income when they offer home mortgages.   (13) Debt service ratio (DSR): It is the ratio of the debt service (principal and interest) payments of new and existing loans divided by the borrower’s annual income. It is an indicator used to assess the borrower’s ability to repay the debt. The liabilities used for the calculation of DSR include home mortgages, credit loans, student loans, installments, and credit lines.   (14) Liquidity coverage ratio (LCR): Short-term LCR is an indicator that ensures financial institutions to hold a sufficient level of highly liquid assets without any constraints so that they can deal with a potential liquidity crisis for 30 days.   (15) Net stable funding ratio (NSFR): It is a ratio that indicates whether a financial institution has a sufficient level of long-term stable funds to cover large liabilities that are likely to be flow out within one year to compensate for liquidity risks inherent in the financial institution’s asset-liability structure.   (16) Bail-in: It requires shareholders and creditors to first bear the costs in their order of bearing loss to absorb losses and re-expand capital needed to normalize business and maintain core functions in the process of recovering and liquidating an insolvent financial company prior to a bail-out by the government using taxpayers’ money for funding.   (17) Total loan exposure: It refers to all assets that have credit exposure among the total loans (i.e., assets subject to the asset soundness classifications within the scope of credit facilities under the Attached Tables 2 & 3 of the Supervisory Regulations on Banking Business, which is the sum of the loans subject to the calculation of non-performing loans in accordance with the Report on the Classification of Loan Soundness (B2401) submitted to the FSS).   (18) Double leverage ratio: It indicates the stability of financial structure of a financial holding company. [Total capital contribution in a subsidiary based on the non-consolidated financial statements / total capital x100]   (19) Bail-out: It is when external parties provide large-scale public funds and normalize a bank that is about to go bankrupt. A typical example is the bail-out from the International Monetary Fund (IMF), which offered a bail-out to insolvent Korean banks in 1998 under harsh conditions.   (20) Administrative dispute: In broad terms, it includes both administrative trials before the administrative agencies and administrative litigations before the courts, but in the narrow sense, it only refers to the former. Administrative trials mean any administrative disputes in relation to an objection, request for appeal, request for re-resolution, and request for trial are judged by the administrative agencies (disposition agencies or higher authorities) or judgment agencies established within the administration. On the other hand, the administrative litigations mean the trials by the judiciary.

Investors shall carefully examine all the information included in the SRS, and all the information, including the investment risk factors described below and footnotes related to the financial statements of Woori Financial Group, which will become the wholly owning parent company. Any other investment risks and uncertainties that are unknown as of today or deemed insignificant, and any of the investment risk factors described below may, if realized, have a negative impact on the business, financial standing, and operation performance of Woori Financial Group, which will become the wholly owning parent company, and Woori Financial Capital, which will become a wholly owned subsidiary. Please note that in such case, the share prices may fall and investors may sustain loss for some or all of their investments accordingly.

[Business Risks]

 

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[Business Risks of the Wholly Owning Parent Company (Woori Financial Group)]

The Company is classified as a bank holding company under the FHCA. There are eight bank holding companies in Korea, and the following is a summary financial information of each company as of the end of the most recent business year.

 

[Summary financial information – bank holding companies]		(Unit: in KRW million, %)

Bank		Rating		Assets				Liabilities				Equities				Operating Income				Net Income				BIS Capital Adequacy Ratio				NPL ratio
Woori		AAA			399,081,017				372,355,172				26,725,845				2,080,394				1,515,249				13.84				0.42
Shinhan		AAA			605,234,104				558,877,246				46,356,858				4,929,736				3,498,076				15.74				0.53
KB		AAA			610,672,192				567,310,733				43,361,459				4,615,992				3,502,281				15.28				0.79
Nonghyup		AAA			483,460,697				457,417,852				26,042,845				3,223,859				2,048,761				15.18				0.48
Hana		AAA			460,313,302				428,713,014				31,600,288				3,836,422				2,684,878				14.20				0.40
BNK		AAA			114,156,871				104,530,589				9,626,282				748,191				562,556				12.93				0.70
DGB		AAA			79,971,805				74,167,758				5,804,047				490,031				376,805				12.41				0.58
JB		AA+			53,375,463				49,346,603				4,028,860				469,519				390,849				13.22				0.62

(Note 1) In the order of the amount of assets (except for Woori Financial Group)

(Note 2) The figures on the consolidated financial statements are used.

(Note 3) Net income column is based on the total net income.

(Source: 2020 Business Reports of each company)

The following is a summary financial information of each company as of the end of the first quarter of 2021.

 

[Summary financial information – bank holding companies]		(Unit: in KRW million, %)

Bank		Rating		Assets				Liabilities				Equities				Operating Income				Net Income				BIS Capital Adequacy Ratio				NPL ratio
Woori		AAA			378,214,148				352,409,156				25,804,992				773,338				557,771				13.61				0.39
Shinhan		AAA			578,098,127				536,156,102				41,942,025				1,257,391				949,540				15.90				0.53
KB		AAA			544,881,709				506,072,215				38,809,494				1,039,119				738,937				16.00				0.82
Nonghyup		AAA			450,854,105				426,357,048				24,497,057				606,775				348,901				14.99				0.47
Hana		AAA			439,689,407				410,610,731				29,078,676				879,003				674,052				16.32				n.a.
BNK		AAA			106,206,257				96,869,465				9,336,792				205,958				148,468				12.42				0.73
DGB		AAA			75,307,364				69,744,293				5,563,071				133,274				97,664				14.98				0.61
JB		AA+			49,145,638				45,276,514				3,869,124				136,420				101,607				13.22				0.63

(Note 1) In the order of the amount of assets (except for Woori Financial Group)

(Note 2) The figures on the consolidated financial statements are used.

(Note 3) Net income column is based on the total net income.

(Source: 2021 1Q Business Reports of each company)

 

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The Company is a financial holding company established in January 2019 under the FHCA. It is not allowed to engage in other profit-making businesses except for managing the business of its subsidiaries and the affairs incidental thereto, such as financial support for a subsidiary, fundraising to provide investment support for a subsidiary, administrative support to develop and sell joint products with a subsidiary or to jointly utilize the facilities and computer systems, and other tasks that do not require licensing, approvals or permits.

[Concerning financial holding company’s business – the FHCA]

 

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(Source: Ministry of Government Legislation)

[Concerning financial holding company’s business – Enforcement Decree of the FHCA]

 

(Source: Ministry of Government Legislation)

The major source of income of a financial holding company is the dividends from its subsidiaries, and it does not perform separate business activities. Therefore, the competitive elements of a financial holding company are directly related to the competitiveness of its subsidiaries within their respective industries. Moreover, the dividend payments by its subsidiaries are regulated by the Commercial Act, the Banking Act, and other supervisory regulations of different supervisory authorities on the capital levels and retained earnings. Here are some examples:

Under the Commercial Act, dividends can be paid out only if there are distributable profits. Distributable profits are calculated by deducting the sum of the company’s capital and various obligatory reserves from the net assets as of the end of each fiscal year.

 

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Under the Banking Act, a bank shall accumulate at least 10 percent of its net profits as earned surplus reserves until the reserve reaches the total amount of capital, whenever it pays dividends on earned net profits; provided, that the provisions on the earned surplus reserves of the Commercial Act and the Banking Act were amended in 2019 as follows:

[Accumulation of earned surplus reserves] (Amended in 2019)

Commercial Act		Accumulate at least 10 percent of its cash dividends until its reserve reaches half of the capital
Banking Act		Accumulate at least 10 percent of its net profits until the reserve reaches the total amount of capital

According to the Banking Act and the regulations enacted by the FSC, if a bank fails to meet the required capital adequacy ratio or if it is subject to the management improvement measures by the FSC, the FSC may restrict the bank from making a decision on dividend payment or from paying out dividends.

If a subsidiary of the Company fails to meet the statutes or other regulations that apply to dividend payments, the subsidiary may suspend the dividend payment to the Company or reduce the amount of the dividends, which may result in a negative impact on the dividend of the Company’s common shares.

The subsidiaries of the Company engage in the financial industry, including its major subsidiary Woori Bank, and other subsidiaries in credit card business, specialized credit financial business, and merchant banking business. The market competitiveness and business performance of these subsidiaries are what determines the competitiveness and profit of the Company. The following is the Company’s business performance on the basis of the consolidated financial statements:

 

[Woori Financial Group and Its Subsidiaries]		(Unit: in KRW million)

Item		2021 1Q				2020				2019
I. Operating Income			933,512				2,080,394				2,799,976
1. Net Interest Income			1,619,666				5,998,512				5,893,706
2. Net Fee and Commission Income			358,461				1,014,039				1,102,628
3. Dividend Income			66,590				138,543				107,959
4. Profit/Loss – Gain/Loss on FVOCI Financial Products			82,083				421,709				25,455
5. Other Comprehensive Income – Gain/Loss on FVOCI Financial Products			37,011				24,138				11,015
6. Gain/Loss on AC Financial Assets			34,676				44,443				102,115
7. Impairment Loss on Credit Loss			(135,993	)			(784,371	)			(374,244	)
8. General Administrative Costs			(917,607	)			(3,956,181	)			(3,766,077	)
9. Other Operating Profit/Loss			(211,375	)			(820,438	)			(302,581	)
II. Non-Operating Income			8,250				(79,143	)			(76,927	)
III. Income and Loss Before Tax			941,762				2,001,251				2,723,049
IV. Corporate Tax			(222,895	)			(486,002	)			(685,453	)
V. Net Income			718,867				1,515,249				2,037,596
1. Attribution of Net Income			718,867				1,515,249				2,037,596
(1) Controlling Shares			667,103				1,307,266				1,872,207
(2) Non-Controlling Shares			51,764				207,983				165,389

(Source: The Company’s quarterly and annual Business Reports)

 

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