Filed Pursuant to Rule 424(b)(5)

Registration No. 333-265886

 

The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary prospectus supplement and the accompanying prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED AUGUST 30, 2022   PRELIMINARY PROSPECTUS SUPPLEMENT (To Prospectus Dated August 16, 2022)

 

The Korea Development Bank

US$                             % Notes due 20    

US$                             % Notes due 20    

US$                     Floating Rate Notes due 20    

EUR                             % Notes due 20    

Our US$                     aggregate principal amount of notes due 20                     (the “20                     Fixed Rate US$ Notes”) will bear interest at a rate of                     % per annum, our US$                     aggregate principal amount of notes due 20                     (the “20                     Fixed Rate US$ Notes”) will bear interest at a rate of                     % per annum and our EUR                     aggregate principal amount of notes due 20                     (the “Euro-denominated Notes”) will bear interest at a rate of                     % per annum. Interest on the 20                     Fixed Rate US$ Notes and the 20                     Fixed Rate US$ Notes is payable semi-annually in arrears on                      and                      of each year, in each case beginning on                     , 2023. Interest on the Euro-denominated Notes is payable annually in arrears on                      of each year beginning on                     , 2023. The 20                     Fixed Rate US$ Notes will mature on                     , 20                    , the 20                     Fixed Rate US$ Notes will mature on                     , 20                     and the Euro-denominated Notes will mature on             , 20                    .

Our US$                     aggregate principal amount of floating rate notes due 20                     (the “Floating Rate US$ Notes”, together with the 20                     Fixed Rate US$ Notes and the 20                     Fixed Rate US$ Notes, the “U.S. dollar-denominated Notes”) will bear interest at a rate equal to SOFR Index Average (as defined herein) plus                     % per annum. Interest on the Floating Rate US$ Notes is payable quarterly in arrears on                     ,                     ,                      and                      of each year, subject in each case to adjustment in accordance with the Modified Following Business Day Convention, as explained herein (each, a “Floating Rate US$ Notes Interest Payment Date”). The first interest payment on the Floating Rate US$ Notes will be made on the Floating Rate US$ Notes Interest Payment Date falling on or nearest to                     , 2022 in respect of the period from (and including)                     , 2022 to (but excluding) the Floating Rate US$ Notes Interest Payment Date falling on or nearest to                     , 2022. The Floating Rate US$ Notes will mature on the Floating Rate US$ Notes Interest Payment Date falling on or nearest to                     , 20                    .

The U.S. dollar-denominated Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Euro-denominated Notes will be issued in minimum denominations of €100,000 principal amount and integral multiples of €1,000 in excess thereof. The U.S. dollar-denominated Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company, as depositary. The Euro-denominated Notes will be represented by one or more global securities registered in the name of a nominee of, and deposited with the common depositary for, Euroclear Bank SA/NV and Clearstream Banking, S.A., as depositary.

The payment of interest and the repayment of principal on the U.S. dollar-denominated Notes and the Euro-denominated Notes (together, the “Notes”) will not be guaranteed by the Government (as defined herein).

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

20     Fixed Rate US$ Notes

20     Fixed Rate US$ Notes

Floating Rate US$ Notes

Euro-denominated Notes

Per Note

Total

Per Note

Total

Per Note

Total

Per Note

Total

Public offering price

%

US$

%

US$

%

US$

%

EUR

Underwriting discount

%

US$

%

US$

%

US$

%

EUR

Proceeds to us (before deduction of expenses)

%

US$

%

US$

%

US$

%

EUR

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

 

Applications will be made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes. Currently, there is no public market for the Notes.

We expect to make delivery of the U.S. dollar-denominated Notes to investors through the book-entry facilities of The Depositary Trust Company, and the Euro-denominated Notes to investors through the book-entry facilities of Euroclear Bank SA/NV and Clearstream Banking, S.A., in each case on or about                     , 2022.

 

 

Joint Bookrunners and Lead Managers

BofA Securities

Citigroup

Crédit Agricole CIB

Credit Suisse

HSBC

ING

KDB Asia

 

 

Prospectus Supplement Dated                     , 2022

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

 

 

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

		Page
Summary of the Offering			S-5
Use of Proceeds			S-7
Recent Developments			S-8
Description of the Notes			S-13
Clearance and Settlement			S-21
Taxation			S-25
Underwriting			S-26
Legal Matters			S-34
Official Statements and Documents			S-34
General Information			S-34

 

Prospectus

 

		Page
CERTAIN DEFINED TERMS AND CONVENTIONS			1
USE OF PROCEEDS			2
THE KOREA DEVELOPMENT BANK			3
Overview			3
Capitalization			5
Business			6
Selected Financial Statement Data			8
Operations			15
Sources of Funds			22
Debt			24
Overseas Operations			25
Property			26
Directors and Management; Employees			26
Tables and Supplementary Information			26
Financial Statements and the Auditors			33
THE REPUBLIC OF KOREA			175
Land and History			175
Government and Politics			177
The Economy			180
Principal Sectors of the Economy			189
The Financial System			196
Monetary Policy			201
Balance of Payments and Foreign Trade			205
Government Finance			213
Debt			216
Tables and Supplementary Information			219

 

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

 

S-2

Certain Defined Terms

 

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

 

Our separate financial information as of December 31, 2021 and March 31, 2022 and for the three months ended March 31, 2021 and 2022 included in this prospectus supplement has been prepared in accordance with International Financial Reporting Standards as adopted in Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

 

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

 

Additional Information

 

The information in this prospectus supplement is in addition to the information contained in our prospectus dated August 16, 2022. The accompanying prospectus contains information regarding us and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea and the Notes in registration statement no. 333-265886, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.

 

We are Responsible for the Accuracy of the Information in this Document

 

We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes.

 

Not an Offer if Prohibited by Law

 

The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and should not be used to make an offer, in any state or country which prohibits the offering.

 

The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions.”

 

S-3

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

 

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

 

Information Presented Accurate as of Date of Document

 

This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.

 

S-4

 

S-5

 

S-6

USE OF PROCEEDS

 

The net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$                     for the U.S. dollar-denominated Notes and EUR                     for the Euro-denominated Notes. We will use the net proceeds from the sale of the Notes for our general operations, including extension of foreign currency loans and repayment of our maturing debt and other obligations.

 

S-7

RECENT DEVELOPMENTS

 

This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated August 16, 2022. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.

 

THE KOREA DEVELOPMENT BANK

 

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS (“K-IFRS”).

 

Overview

 

As of March 31, 2022, we had W180,640.9 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets of W295,025.6 billion and total equity of W37,162.2 billion, as compared to W174,917.2 billion of loans outstanding, W276,421.9 billion of total assets and W36,502.9 billion of total equity as of December 31, 2021. For the three months ended March 31, 2022, we recorded interest income of W1,157.2 billion, interest expense of W731.3 billion and net income of W682.7 billion, as compared to W993.9 billion of interest income, W613.6 billion of interest expense and W1,454.7 billion of net income for the three months ended March 31, 2021. See “—Selected Financial Statement Data.”

 

Capitalization

 

As of March 31, 2022, our authorized capital was W30,000 billion and our capitalization was as follows:

 

		March 31, 2022(1)
		(billions of won)
		(unaudited)
Long-term debt(2)(3)(4):
Won currency borrowings			3,951.3
Industrial finance bonds			141,994.3
Foreign currency borrowings			2,592.0
Total long-term debt			148,537.6
Capital:
Paid-in capital			22,278.6
Capital surplus			2,477.1
Retained earnings(5)			7,219.6
Accumulated other comprehensive income			5,187.0
Total capital			37,162.2
Total capitalization			185,699.8

 

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since March 31, 2022.

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

(3)	We have translated borrowings in foreign currencies into Won at the rate of W1,210.8 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on March 31, 2022.

 

S-8

(4)	As of March 31, 2022, we had confirmed acceptances and guarantees totaling W8,291.8 billion under outstanding guarantees issued on behalf of our clients.

(5)

Includes planned regulatory reserve for credit losses of W247.3 billion as of March 31, 2022. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings.

 

Business

 

Government Support and Supervision

 

As of March 31, 2022, our paid-in capital was W22,278.6 billion compared to W21,886.6 billion as of December 31, 2021. In July 2022, the Government contributed W308 billion in cash to our capital.

 

Selected Financial Statement Data

 

Results of Operations

 

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

 

Separate K-IFRS Financial Statement Data

 

		Three Months Ended March 31,
		2021				2022
		(billions of won) (unaudited)
Income Statement Data
Total Interest Income			993.9				1,157.2
Total Interest Expenses			613.6				731.3
Net Interest Income			380.3				425.9
Operating Income			1,820.6				719.2
Income Before Income Tax			1,870.0				830.3
Income Tax Expense			415.3				147.6
Net Income			1,454.7				682.7

 

		As of December 31, 2021				As of March 31, 2022
		(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans(1)			174,917.2				180,640.9
Total Borrowings(2)			222,288.3				229,693.2
Total Assets			276,421.9				295,025.6
Total Liabilities			239,919.0				257,863.4
Equity			36,502.9				37,162.2

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

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

 

S-9

Three Months Ended March 31, 2022

 

In the first three months of 2022, we had net income of W682.7 billion compared to W1,454.7 billion in the corresponding period of 2021, on a separate basis. The principal factor for the decrease in net income was a change to net other operating loss of W6.3 billion in the first three months of 2022 from net other operating income of W910.7 billion in the corresponding period of 2021, primarily due to a significant decrease in net gains on valuation of loans measured at fair value through profit or loss to W10.6 billion in the first three months of 2022 from W948.0 billion in the corresponding period of 2021. Such decrease resulted primarily from an increase in the value of the convertible bonds of HMM Company Limited that we held in the first quarter of 2021, which did not recur in the first three months of 2022.

 

The above factor was partially offset by a decrease in income tax expense to W147.6 billion in the first three months of 2022 from W415.3 billion in the corresponding period of 2021, primarily due to a decrease in income before income tax to W830.3 billion in the first three months of 2022 from W1,870.0 billion in the corresponding period of 2021.

 

Loans to Financially Troubled Companies

 

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies, including DSME, HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd. and GM Korea Company. As of March 31, 2022, our credit extended to these companies totaled W21,293.9 billion, accounting for 7.2% of our total assets as of such date.

 

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

 

Company		As of December 31, 2021				As of March 31, 2022				Primary Reason for Change
		(billions of won)
DSME		W	6,016.3			W	6,748.6			Increase due to an increase in guarantees and a rise in foreign currency exchange rates
HMM Company Limited			10,452.0				11,070.3			Increase due to an increase in the value of perpetual bonds
HJ Shipbuilding & Construction			854.0				776.3			Decrease due to a decrease in guarantees
Daehan Shipbuilding			1,226.6				1,094.8			Decrease due to a decrease in guarantees and repayment of loans
K Shipbuilding			394.6				470.0			Increase due to increases in loans and refund guarantees
KG Dongbu Steel			825.5				751.2			Decrease due to a decrease in loans
GM Korea Company			402.9				382.7			Decrease due to a decrease in the value of stocks
Total		W	20,171.9			W	21,293.9

 

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Debt

 

Debt Repayment Schedule

 

The following table sets out our principal repayment schedule as of March 31, 2022:

 

Debt Principal Repayment Schedule⁽¹⁾

 

		Maturing on or before December 31,
Currency(2)(3)		2022				2023				2024				2025				Thereafter
		(billions of won)
Won		W	42,215.9			W	35,605.4			W	18,161.5			W	7,141.1			W	10,867.1
Foreign			20,416.1				9,115.9				7,190.7				7,029.6				8,659.7
Total Won Equivalent		W	62,632.0			W	44,721.2			W	25,352.2			W	14,170.7			W	19,526.8

 

(1)	Excludes bonds sold under repurchase agreements and call money.

(2)	Borrowings in foreign currencies have been translated into Won at the market average exchange rates on March 31, 2022, as announced by the Seoul Money Brokerage Services Ltd.

(3)	We categorize debt with respect to which we have entered into currency swap agreements by our repayment currency under such agreements.

 

Directors and Management; Employees

 

Currently, the members of our Board of Directors are:

 

Position		Name		Expiration of Term
Chief Executive Officer and Chairman of the Board of Directors		Seoghoon Kang		June 6, 2025
Chief Operating Officer and Vice Chairman of the Board of Directors		Dae Hyon Choi		January 2, 2025
Auditor		Tae Hyun Joo		March 14, 2024
Independent Non-executive Directors		Han Hong Cho		June 27, 2023
		Dong Il Jung		November 30, 2023
		Yeong Ook Kim		May 25, 2023

 

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THE REPUBLIC OF KOREA

 

The Financial System

 

Securities Markets

 

The Korea Composite Stock Price Index was 2,426.9 on August 29, 2022.

 

Monetary Policy

 

Interest Rates

 

On August 25, 2022, The Bank of Korea raised its policy rate to 2.50% from 2.25% in response to rising levels of household debt and inflationary pressures.

 

Foreign Exchange

 

The market average exchange rate between the Won and the U.S. Dollar (in Won per one U.S. Dollar) as announced by the Seoul Money Brokerage Service Ltd. was Won 1,332.5 to US$1.00 on August 29, 2022.

 

Balance of Payments and Foreign Trade

 

Balance of Payments

 

Based on preliminary data, the Republic’s current account surplus in the first half of 2022 decreased to US$24.8 billion from the current account surplus of US$41.8 billion in the corresponding period of 2021, primarily due to decreases in surpluses from the goods account and the income account, the effect of which was offset in part by a change from a deficit to a surplus from the services account.

 

Foreign Currency Reserves

 

The amount of the Government’s foreign currency reserves was US$438.6 billion as of July 31, 2022.

 

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DESCRIPTION OF THE NOTES

 

The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the forms of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the United States Securities and Exchange Commission as exhibits to the registration statement no. 333-265886.

 

The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.

 

Governed by Fiscal Agency Agreement

 

We will issue the Notes under the fiscal agency agreement, dated as of February 15, 1991, as amended and supplemented from time to time, between us and The Bank of New York (now The Bank of New York Mellon), as fiscal agent (the “Fiscal Agency Agreement”). The fiscal agent will maintain a register for the Notes.

 

Payment of Principal and Interest

 

U.S. dollar-denominated Fixed Rate Notes

 

The 20                     Fixed Rate US$ Notes are initially limited to US$                     aggregate principal amount and the 20                     Fixed Rate US$ Notes (together with the 20                     Fixed Rate US$ Notes, the “U.S. dollar-denominated Fixed Rate Notes”) are initially limited to US$                     aggregate principal amount. The 20                     Fixed Rate US$ Notes will mature on                     , 20                     (the “20                     Fixed Rate US$ Notes Maturity Date”) and the 20                     Fixed Rate US$ Notes will mature on                     , 20                     (the “20                     Fixed Rate US$ Notes Maturity Date”, and together with the 20                     Fixed Rate US$ Notes Maturity Date, the “U.S. dollar-denominated Fixed Rate Notes Maturity Dates”). The 20                     Fixed Rate US$ Notes will bear interest at the rate of                     % per annum and the 20                     Fixed Rate US$ Notes will bear interest at the rate of                     % per annum, in each case payable semi-annually in arrears on                      and                      of each year (each, a “U.S. dollar-denominated Fixed Rate Notes Interest Payment Date”), beginning on                     , 2023. Interest on the U.S. dollar-denominated Fixed Rate Notes will accrue from                     , 2022. If any U.S. dollar-denominated Fixed Rate Notes Interest Payment Date or any U.S. dollar-denominated Fixed Rate Notes Maturity Date shall be a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, then such payment will not be made on such date but will be made on the next succeeding day which is not a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall be payable in respect of any such delay. We will pay interest to the person who is registered as the owner of a U.S. dollar-denominated Fixed Rate Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the U.S. dollar-denominated Fixed Rate Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the U.S. dollar-denominated Fixed Rate Notes in immediately available funds in U.S. dollars.

 

Floating Rate US$ Notes

 

The Floating Rate US$ Notes are initially limited to US$                     aggregate principal amount. The Floating Rate US$ Notes will mature on the Floating Rate US$ Notes Interest Payment Date (as defined below) on or nearest to                      (the “Floating Rate US$ Notes Maturity Date”). The Floating Rate US$ Notes will bear interest at a rate equal to SOFR Index Average (as defined herein) plus                     % per annum, payable quarterly in arrears on                     ,                     ,                      and                      of each year, subject in each case to adjustment in accordance with the Modified Following Business Day Convention, as explained herein (each, a “Floating Rate US$ Notes Interest Payment Date”), beginning on the Floating Rate US$ Notes Interest Payment Date falling on or nearest to                     , 2022, and if redeemed early, the date of such redemption. In

 

S-13

no event shall the rate of interest for the Floating Rate US$ Notes be less than 0% for any Floating Rate US$ Notes Interest Period (as defined herein).

 

Interest on the Floating Rate US$ Notes will accrue from (and including)                     , 2022 to (but excluding) the Floating Rate US$ Notes Maturity Date. If any Floating Rate US$ Notes Interest Payment Date or the Floating Rate US$ Notes Maturity Date falls on a day that is not a business day (as defined below), that Floating Rate US$ Notes Interest Payment Date or the Floating Rate US$ Notes Maturity Date will be adjusted in accordance with the Modified Following Business Day Convention. The term “Modified Following Business Day Convention” means that the relevant date shall be postponed to the first following day that is a business day (and interest will continue to accrue to but excluding such following date that is a business day) unless that day falls in the next calendar month in which case that date will be the first preceding day that is a business day and interest shall accrue to but excluding such preceding business day. The term “business day” as used herein means a U.S. Government Securities Business Day (as defined herein) and a day other than a Saturday, a Sunday or any other day on which banking institutions in Seoul are authorized or required by law or executive order to remain closed.

 

We will pay interest to the person who is registered as the owner of a Floating Rate US$ Note at the close of business on the fifteenth day (whether or not a business day) preceding the related Floating Rate US$ Notes Interest Payment Date. Interest on the Floating Rate US$ Notes will be computed on the basis of the actual number of days in the applicable Floating Rate US$ Notes Observation Period (as defined herein) divided by 360. We will make principal and interest payments on the Floating Rate US$ Notes in immediately available funds in U.S. dollars.

 

1. Definition of SOFR Index Average

 

The term “SOFR Index Average” means the compounded average of daily Secured Overnight Financing Rate (“SOFR”) and will be determined by the Calculation Agent (as defined herein) on the relevant Floating Rate US$ Notes Interest Determination Date (as defined herein) in accordance with the following formula, and the resulting percentage will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, 0.000005% being rounded upwards (e.g., 9.876541% (or .09876541) being rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being rounded up to 9.87655% (or .0987655)):

 

(		SOFR Index End		—		1		)		X		(		360		)
		SOFR Index Start												dc

 

where:

 

“d_c” means the number of calendar days in the Floating Rate US$ Notes Observation Period;

 

“SOFR Index_End” means the SOFR Index (as defined herein) value on the date that is five U.S. Government Securities Business Days preceding the Floating Rate US$ Notes Interest Payment Date for such Floating Rate US$ Notes Interest Period;

 

“SOFR Index_Start” means the SOFR Index value on the date that is five U.S. Government Securities Business Days preceding the first day of the relevant Floating Rate US$ Notes Interest Period;

 

“SOFR Index”, with respect to any U.S. Government Securities Business Day, means the SOFR Index value as published on the SOFR Administrator’s Website at the SOFR Determination Time on such U.S. Government Securities Business Day, provided that if a SOFR Index_Start or SOFR Index_End is not published on the associated Floating Rate US$ Notes Interest Determination Date and a Benchmark Transition Event (as defined herein) and its related Benchmark Replacement Date (as defined herein) have not occurred with respect to SOFR, “SOFR Index Average” means, for the applicable Floating Rate US$ Notes Interest Period for which such index is not available, the rate of return on a daily compounded interest investment calculated in accordance with the formula for SOFR Averages, and definitions required for such formula, published on the SOFR Administrator’s Website

 

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at https://www.newyorkfed.org/markets/treasury-repo-reference-rates-information. For the purposes of this provision, references in the SOFR Averages compounding formula and related definitions to “calculation period” shall be replaced with “Floating Rate US$ Notes Observation Period” and the words “that is, 30-, 90-, or 180-calendar days” shall be removed. If the daily SOFR (“SOFR_i”) does not so appear for any day “i” in the Floating Rate US$ Notes Observation Period, SOFR_i for such day “i” shall be SOFR published in respect of the first preceding U.S. Government Securities Business Day for which SOFR was published on the SOFR Administrator’s Website;

 

“Floating Rate US$ Notes Interest Determination Date” means the date three U.S. Government Securities Business Days before each Floating Rate US$ Notes Interest Payment Date;

 

“Floating Rate US$ Notes Interest Period” refers to the period from (and including)                     , 2022 to (but excluding) the first Floating Rate US$ Notes Interest Payment Date and each successive period from (and including) a Floating Rate US$ Notes Interest Payment Date to (but excluding) the next Floating Rate US$ Notes Interest Payment Date;

 

“Floating Rate US$ Notes Observation Period” means, in respect of each Floating Rate US$ Notes Interest Period, the period from (and including) the date that is five U.S. Government Securities Business Days preceding the first day of the relevant Floating Rate US$ Notes Interest Period to (but excluding) the date that is five U.S. Government Securities Business Days preceding the Floating Rate US$ Notes Interest Payment Date for such Floating Rate US$ Notes Interest Period;

 

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, or any successor source;

 

“SOFR Determination Time” means, in relation to any U.S. Government Securities Business Day, approximately 5:00 p.m. New York City time on such U.S. Government Securities Business Day; and

 

“U.S. Government Securities Business Day” means any day except for a Saturday, a Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

 

The Bank of New York Mellon will serve as the “Calculation Agent” for the Floating Rate US$ Notes. In the absence of manifest error, the Calculation Agent’s determination of SOFR Index Average and its calculation of the applicable interest rate for each Floating Rate US$ Notes Interest Period will be final and binding. The Calculation Agent will make available the interest rates for current and preceding Floating Rate US$ Notes Interest Periods by delivery of such notice through such medium as is available to participants in DTC, Euroclear and Clearstream, or any successor thereof, and in accordance with such applicable rules and procedures as long as the Floating Rate US$ Notes are held in global form. In the event that the Floating Rate US$ Notes are held in certificated form, the interest rates for current and preceding Floating Rate US$ Notes Interest Periods will be published in the manner described below under “—Notices”. We have the right to replace the Calculation Agent with another leading commercial bank or investment bank in New York or London. If the appointed office of the Calculation Agent is unable or unwilling to continue to act as the Calculation Agent or fails to determine the interest rate for any Floating Rate US$ Notes Interest Period, we have a duty to appoint such other leading commercial bank or investment bank in New York or London.

 

2. Benchmark Transition

 

Notwithstanding anything to the contrary in the documentation relating to the Floating Rate US$ Notes, if the Calculation Agent is notified by the Determination Agent on or prior to the relevant Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date (each as defined herein) have occurred with respect to the then-current Benchmark, then the Benchmark Replacement will replace the then-

 

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current Benchmark for all purposes relating to the Floating Rate US$ Notes in respect of all determinations on such date and for all determinations on all subsequent dates.

 

In connection with the implementation of a Benchmark Replacement, the Determination Agent will have the right to make Benchmark Replacement Conforming Changes (as defined herein) from time to time.

 

Any determination, decision or election that may be made by the Determination Agent or us pursuant to the Benchmark Replacement provisions described herein, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection:

 

a.

will be conclusive and binding absent manifest error, may be made in the Determination Agent’s sole discretion, and, notwithstanding anything to the contrary herein relating to the Floating Rate US$ Notes;

 

b.

if made by us, will be made in our sole discretion;

 

c.

if made by the Determination Agent, will be made after consultation with us, and the Determination Agent will not make any such determination, decision or election to which we object; and

 

d.

shall become effective without consent from any other party.

 

Any determination, decision or election pursuant to the Benchmark Replacement provisions not made by the Determination Agent will be made by us on the basis as described above. The Calculation Agent shall have no liability for not making any such determination, decision or election. In addition, we may designate an entity (which may be our affiliate) to make any determination, decision or election that we have the right to make in connection with the benchmark replacement provisions set forth herein.

 

None of the fiscal agent, paying agent or calculation agent shall be under any obligation (i) to monitor, determine or verify the unavailability or cessation of SOFR or the SOFR Index, or whether or when there has occurred, or to give notice to any other transaction party of the occurrence of, any Benchmark Transition Event or related Benchmark Replacement Date, (ii) to select, determine or designate any Benchmark Replacement, or other successor or replacement benchmark index, or whether any conditions to the designation of such a rate or index have been satisfied, (iii) to select, determine or designate any Benchmark Replacement Adjustment, or other modifier to any replacement or successor index, or (iv) to determine whether or what Benchmark Replacement Conforming Changes are necessary or advisable, if any, in connection with any of the foregoing, including, but not limited to, adjustments as to any alternative spread thereon, the business day convention, interest determination dates or any other relevant methodology applicable to such substitute or successor benchmark. In connection with the foregoing, each of the fiscal agent, paying agent and calculation agent shall be entitled to conclusively rely on any determinations made by us or the Determination Agent without independent investigation, and none of the fiscal agent, paying agent or the calculation agent will have any liability for actions taken at our direction in connection therewith. None of the fiscal agent, paying agent or calculation agent shall be liable for any inability, failure or delay on its part to perform any of its duties as a result of the unavailability of SOFR, the SOFR Index or other applicable Benchmark Replacement, including as a result of any failure, inability, delay, error or inaccuracy on the part of any other transaction party in providing any direction, instruction, notice or information required or contemplated by the terms hereof and reasonably required for the performance of such duties. None of the fiscal agent, paying agent or calculation agent shall be responsible or liable for our actions or omissions or for those of the Determination Agent, or for any failure or delay in the performance by us or the Determination Agent, nor shall any of the fiscal agent, paying agent or calculation agent be under any obligation to oversee or monitor our performance or that of the Determination Agent.

 

For purposes of these Benchmark Replacement provisions:

 

“Benchmark” means, initially, SOFR Index Average, as such term is defined above; provided that if the Determination Agent determines on or prior to the Reference Time that a Benchmark Transition Event and its

 

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related Benchmark Replacement Date have occurred with respect to SOFR Index Average (including the daily published component used in the calculation thereof) or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement;

 

“Benchmark Replacement” means the first alternative set forth in the order below that can be determined by us or the Determination Agent as of the Benchmark Replacement Date:

 

I.

the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body (as defined herein) as the replacement for the then-current Benchmark and (b) the Benchmark Replacement Adjustment (as defined herein);

 

II.

the sum of: (a) the ISDA Fallback Rate (as defined herein) and (b) the Benchmark Replacement Adjustment; or

 

III.

the sum of: (a) the alternate rate of interest that has been selected by us or the Determination Agent as the replacement for the then-current Benchmark giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment;

 

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by us or the Determination Agent as of the Benchmark Replacement Date:

 

I.

the spread adjustment (which may be a positive or negative value or zero), or method for calculating or determining such spread adjustment that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement (as defined herein);

 

II.

if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment (as defined herein); and

 

III.

the spread adjustment (which may be a positive or negative value or zero) that has been selected by us or the Determination Agent giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate notes at such time;

 

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definitions or interpretations of interest period, the timing and frequency of determining rates and making payments of interest, the rounding of amounts or tenors, and other administrative matters) that the Determination Agent decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Determination Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Determination Agent determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Determination Agent determines is reasonably practicable);

 

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

 

I.

in the case of clause (I) or (II) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark (or such component); or

 

II.

in the case of clause (III) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

 

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For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.

 

For the avoidance of doubt, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references to Benchmark also include any reference rate underlying such Benchmark;

 

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

 

I.

a public statement or publication of information by or on behalf of the administrator of the Benchmark (or such component) announcing that such administrator has ceased or will cease to provide the Benchmark (or such component), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component);

 

II.

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark (or such component), the central bank for the currency of the Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark (or such component), which states that the administrator of the Benchmark (or such component) has ceased or will cease to provide the Benchmark (or such component) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

 

III.

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative;

 

“Determination Agent” means an independent bank of international repute selected by and acting as our agent for the purposes of the conditions of the Floating Rate US$ Notes and notified to the Fiscal Agent in writing. The Fiscal Agent shall not be responsible for the calculations made by, or the actions or omissions of, the Determination Agent and shall not be liable for any losses caused thereby;

 

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time;

 

“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor;

 

“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment;

 

“Reference Time” with respect to any determination of the Benchmark means (1) if the Benchmark is SOFR Index Average, the SOFR Determination Time, as such time is defined herein, and (2) if the Benchmark is not SOFR Index Average, the time determined by the Determination Agent in accordance with the Benchmark Replacement Conforming Changes;

 

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto; and

 

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“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

 

Euro-denominated Notes

 

The Euro-denominated Notes are initially limited to EUR                     aggregate principal amount. The Euro-denominated Notes will mature on                     , 20                     (the “Euro-denominated Notes Maturity Date”). The Euro-denominated Notes will bear interest at the rate of                     % per annum, in each case payable annually in arrears on                      of each year (the “ Euro-denominated Notes Interest Payment Date”), beginning on                     , 2023. Interest on the Euro-denominated Notes will accrue from                     , 2022. If any Euro-denominated Notes Interest Payment Date or the Euro-denominated Notes Maturity Date shall be (i) a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (“TARGET”) System is not operating or (ii) a day on which commercial banks are not open for dealings in Euro deposits in the London interbank market, then such payment need not be made on such date at such place but may be made on the next succeeding day at such place which is not a day on which the TARGET System is not operating or commercial banks are not open for dealings in Euro deposits in the London interbank market, with the same force and effect as if made on the date for such payment, and no interest shall be payable in respect of any such delay. We will pay interest to the person who is registered as the owner of a Euro-denominated Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. If interest on the Euro-denominated Notes is required to be calculated for any period of less than a year, it will be calculated based on the actual number of days elapsed divided by 365 or (in the case of a leap year) 366. We will make principal and interest payments on the Euro-denominated Notes in immediately available funds in Euros.

 

Denomination

 

The U.S. dollar-denominated Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Euro-denominated Notes will be issued in minimum denominations of €100,000 principal amount and integral multiples of €1,000 in excess thereof.

 

Redemption

 

We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.

 

Form and Registration

 

U.S. dollar-denominated Notes

 

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

 

Euro-denominated Notes

 

We will issue each series of the Euro-denominated Notes in the form of one or more fully registered global notes, registered in the name of a nominee of and deposited with the custodian for Euroclear and Clearstream.

 

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Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Euro-denominated Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in Euroclear and Clearstream, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts.

 

General

 

The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

 

For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, in the event that any of the global notes are exchanged for Notes in definitive registered form, we will appoint and maintain a paying agent in Singapore, where the certificates representing the Notes may be presented or surrendered for payment or redemption. In addition, in the event that any of the global notes are exchanged for Notes in definitive registered form, an announcement of such exchange will be made through the SGX-ST by or on behalf of us. Such announcement will include all material information with respect to the delivery of the certificates representing the Notes, including details of the paying agent in Singapore.

 

Further Issues

 

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have less than a de minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

 

Notices

 

All notices regarding the Notes will be published by us in London in the Financial Times and in New York in The Wall Street Journal (U.S. Edition). If we cannot, for any reason, publish notice in any of those newspapers, we will choose an appropriate alternate English language newspaper of general circulation, and notice in that newspaper will be considered valid notice. Notice will be considered made on the first date of its publication.

 

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CLEARANCE AND SETTLEMENT

 

We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.

 

Introduction

 

The Depository Trust Company

 

DTC is:

 

•

a limited-purpose trust company organized under the New York Banking Law;

 

•

a “banking organization” under the New York Banking Law;

 

•

a member of the Federal Reserve System;

 

•

a “clearing corporation” under the New York Uniform Commercial Code; and

 

•

a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934.

 

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates.

 

Euroclear and Clearstream

 

Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.

 

Ownership of the U.S. dollar-denominated Notes through DTC, Euroclear and Clearstream

 

We will issue the U.S. dollar-denominated Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may hold your beneficial interests in the global notes through Euroclear or Clearstream, if you are a DTC participant in such systems, or indirectly through organizations that are DTC participants in such systems. Euroclear and Clearstream will hold their Euroclear/Clearstream participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.

 

We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the U.S. dollar-denominated Notes for all purposes. Once we and the fiscal agent make payments to the registered holder, we and the fiscal agent will no longer be liable on the U.S. dollar-denominated

 

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Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the U.S. dollar-denominated Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The DTC participant would then either authorize you to take the action or act for you on your instructions.

 

DTC may grant proxies or authorize its DTC participants, or persons holding beneficial interests in the U.S. dollar-denominated Notes through such DTC participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the fiscal agency agreement or the U.S. dollar-denominated Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the U.S. dollar-denominated Notes or the fiscal agency agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.

 

The fiscal agent will not charge you any fees for the U.S. dollar-denominated Notes, other than reasonable fees and indemnity satisfactory to the fiscal agent for the replacement of lost, stolen, mutilated or destroyed U.S. dollar-denominated Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

 

Ownership of the Euro-denominated Notes through Euroclear and Clearstream

 

We will issue the Euro-denominated Notes in the form of one or more fully registered global notes which will be deposited with the common depositary for, and registered in the name of a nominee of, Euroclear and Clearstream. Beneficial interests in the Euro denominated Notes can only be held in the form of book-entry interests through Euroclear/Clearstream participants in such systems, or indirectly through organizations that are Euroclear/Clearstream participants in such systems.

 

We and the fiscal agent generally will treat the registered holder of the Euro-denominated Notes, initially The Bank of New York Depository (Nominees) Limited, as the absolute owner of the Euro-denominated Notes for all purposes. Once we and the paying agent for Euroclear and Clearstream make payments to the registered holder, we and the paying agent for Euroclear and Clearstream will no longer be liable on the Euro-denominated Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Euro-denominated Notes, including Euroclear, Clearstream and their respective Euroclear/Clearstream participants, to exercise any of the rights granted to holders of Euro-denominated Notes.

 

Transfers Within and Between DTC, Euroclear and Clearstream

 

Trading Between DTC Purchasers and Sellers

 

DTC participants will transfer interests in the U.S. dollar-denominated Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.

 

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Trading Between Euroclear and/or Clearstream Participants

 

Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.

 

Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser

 

When the U.S. dollar-denominated Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the U.S. dollar-denominated Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account, and the U.S. dollar-denominated Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the U.S. dollar-denominated Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the U.S. dollar-denominated Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.

 

Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the U.S. dollar-denominated Notes by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the U.S. dollar-denominated Notes are credited to their accounts one day later.

 

As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the U.S. dollar-denominated Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the U.S. dollar-denominated Notes were credited to the participant’s account. However, interest on the U.S. dollar-denominated Notes would accrue from the value date. Therefore, in many cases the interest income on the U.S. dollar-denominated Notes which the participant earns during that one-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.

 

Since the settlement will occur during New York business hours, a DTC participant selling an interest in the U.S. dollar-denominated Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.

 

Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:

 

•

borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day trader’s Euroclear or Clearstream account, in accordance with the clearing system’s customary procedures;

 

•

borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or

 

S-23

•

staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant.

 

Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser

 

Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer U.S. dollar-denominated Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the U.S. dollar-denominated Notes to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.

 

If the Euroclear or Clearstream participant selling the U.S. dollar-denominated Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the U.S. dollar-denominated Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.

 

Settlement in other currencies between DTC and Euroclear and Clearstream is possible using free-of-payment transfers to move the U.S. dollar-denominated Notes, but funds movement will take place separately.

 

S-24

TAXATION

 

Korean Taxation

 

For a discussion of certain Korean tax considerations that may be relevant to you if you invest in the Notes, see “Taxation—Korean Taxation” in the accompanying prospectus.

 

U.S. Federal Income Tax Considerations

 

For a discussion of certain U.S. federal income tax considerations that may be relevant to you if you are a beneficial owner of the Notes and are a U.S. holder, see “Taxation—U.S. Federal Income Tax Considerations” in the accompanying prospectus.

 

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UNDERWRITING

 

Relationship with the Underwriters

 

We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated                     , 2022 (the “Terms Agreement”) with respect to the Notes relating to the Underwriting Agreement—Standard Terms (together with the Terms Agreement, the “Underwriting Agreement”) filed as an exhibit to the registration statement. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally and not jointly, and each of the Underwriters has, severally and not jointly, agreed to purchase, the following principal amount of the Notes set out opposite its name below:

 

Name of Underwriters

Principal Amount of the 20     Fixed Rate US$ Notes

Principal Amount of the 20     Fixed Rate US$ Notes

Principal Amount of the 20     Floating Rate US$ Notes

BofA Securities, Inc.

US$

US$

US

Citigroup Global Markets Inc.

Crédit Agricole Corporate and Investment Bank

Credit Suisse (Hong Kong) Limited

The Hongkong and Shanghai Banking Corporation Limited

ING Financial Markets LLC.

KDB Asia Limited

US$

US$

US$

 

Name of Underwriters		Principal Amount of the Euro-denominated Notes
Merrill Lynch International		EUR
Citigroup Global Markets Limited
Crédit Agricole Corporate and Investment Bank
Credit Suisse (Hong Kong) Limited
The Hongkong and Shanghai Banking Corporation Limited
ING Bank N.V.
KDB Asia Limited
		EUR

KDB Asia Limited, one of the underwriters, is our affiliate and has agreed to offer and sell the Notes only outside the United States to non-U.S. persons.

 

Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any series of the Notes, then the Underwriters are obligated to take and pay for all of the Notes of such series.

 

The Underwriters initially propose to offer the Notes directly to the public at the offering price described on the cover page of this prospectus supplement. After the initial offering of the Notes, the Underwriters may from time to time vary the offering price and other selling terms.

 

If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Underwriters or any affiliate of the Underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Underwriter or its affiliate on our behalf in such jurisdiction.

 

The Notes are a new class of securities with no established trading market. Applications will be made to the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any

 

S-26

market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.

 

We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.

 

The amount of our net proceeds from the 20                     Fixed Rate US$ Notes is US$                     after deducting underwriting discounts but not estimated expenses. Expenses associated with the 20                     Fixed Rate US$ Notes offering are estimated to be US$                    . The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 20                     Fixed Rate US$ Notes.

 

The amount of our net proceeds from the 20                     Fixed Rate US$ Notes is US$                     after deducting underwriting discounts but not estimated expenses. Expenses associated with the 20                     Fixed Rate US$ Notes offering are estimated to be US$                    . The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 20                     Fixed Rate US$ Notes.

 

The amount of our net proceeds from the 20                     Floating Rate US$ Notes is US$                     after deducting underwriting discounts but not estimated expenses. Expenses associated with the 20                     Floating Rate US$ Notes offering are estimated to be US$                    . The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 20                     Floating Rate US$ Notes.

 

The amount of our net proceeds from the Euro-denominated Notes is EUR                     after deducting underwriting discounts but not estimated expenses. Expenses associated with the Euro-denominated Notes offering are estimated to be EUR                    . The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the Euro-denominated Notes.

 

The Underwriters and certain of their affiliates may have performed certain commercial banking, investment banking and advisory services for us and/or our affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for us and/or our affiliates in the ordinary course of their business.

 

The Underwriters or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution. The Underwriters or their respective affiliates may purchase Notes for their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of us or our subsidiaries or affiliates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this prospectus supplement relates (notwithstanding that such selected counterparties may also be purchasers of Notes).

 

Notice to capital market intermediaries and prospective investors pursuant to paragraph 21 of the Hong Kong SFC Code of Conduct—Important Notice to CMIs (including Private Banks)

 

This notice to CMIs (including Private Banks) is a summary of certain obligations the Code imposes on CMIs, which require the attention and cooperation of other CMIs (including Private Banks).

 

Prospective investors who are the directors, employees or major shareholders of the issuer, a CMI or its group companies would be considered under the Code as having an Association with the issuer, the CMI or the relevant group company. CMIs should specifically disclose whether their investor clients have any Association when submitting orders for the Notes. In addition, Private Banks should take all reasonable steps to identify whether their investor clients may have any Associations with the issuer or any CMI (including its group companies) and inform the Underwriters accordingly.

 

S-27

CMIs are informed that the marketing and investor targeting strategy for the offering includes institutional investors, sovereign wealth funds, pension funds, hedge funds, family offices and high net worth individuals, in each case, subject to the selling restrictions and any MiFID II product governance language set out elsewhere in this prospectus supplement.

 

CMIs should ensure that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e. two or more corresponding or identical orders placed via two or more CMIs). CMIs should enquire with their investor clients regarding any orders which appear unusual or irregular. CMIs should disclose the identities of all investors when submitting orders for the Notes. CMIs should not place “X-orders” into the order book.

 

CMIs should segregate and clearly identify their own proprietary orders (and those of their group companies, including Private Banks as the case may be) in the order book and book messages.

 

CMIs (including Private Banks) should not offer any rebates to prospective investors or pass on any rebates provided by the issuer. In addition, CMIs (including Private Banks) should not enter into arrangements which may result in prospective investors paying different prices for the Notes.

 

The Code requires that a CMI disclose complete and accurate information in a timely manner on the status of the order book and other relevant information it receives to targeted investors for them to make an informed decision. In order to do this, those Underwriters in control of the order book should consider disclosing order book updates to all CMIs.

 

When placing an order for the Notes, Private Banks should disclose, at the same time, if such order is placed other than on a “principal” basis (whereby it is deploying its own balance sheet for onward selling to investors). Private Banks who do not provide such disclosure are hereby deemed to be placing their order on such a “principal” basis. Otherwise, such order may be considered to be an omnibus order pursuant to the Code. Private Banks should be aware that placing an order on a “principal” basis may require the Underwriters to apply the “proprietary orders” of the Code to such order and will require the Underwriters to apply the “rebates” requirements of the Code (if applicable) to such order.

 

Delivery of the Notes

 

We expect to make delivery of the Notes, against payment in same-day funds on or about                     , 2022, which we expect will be the                      business day following the date of this prospectus supplement. Under Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in two business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on any day prior to the second business day from the settlement, because the Notes will initially settle in T+                    , you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.

 

Foreign Selling Restrictions

 

Each Underwriter has agreed, severally and not jointly, to the following selling restrictions in connection with the offering with respect to the following jurisdictions:

 

Korea

 

Each Underwriter has severally represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea, or to, or for the account or benefit of, any resident of Korea, except as otherwise permitted by applicable Korean laws and regulations, and (ii) any securities dealer to whom the Underwriters may sell the Notes will agree that it will not offer any Notes, directly

 

S-28

or indirectly, in Korea, or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any other dealer who does not so represent and agree.

 

United Kingdom

 

Each Underwriter has severally represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to us, and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

 

Prohibition of Sales to EEA

 

Each Underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision, the expression “retail investor” means a person who is one (or more) of the following:

 

(a)

a retail client as defined in point (11) of Article 4(1) of MiFID II; or

 

(b)

a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II: or

 

Prohibition of Sales to UK Retail Investors

 

Each Underwriter has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus as contemplated by the final terms in relation thereto to any retail investor in the UK. For the purposes of this provision, the expression “retail investor” means a person who is one (or more) of the following:

 

(a)

a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; or

 

(b)

a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.

 

Spain

 

The proposed offer of Notes has not been registered with the Comisión Nacional del Mercado de Valores (the “CNMV”). Accordingly, each of the Underwriters has represented and agreed that Notes can only be offered in Spain to qualified investors pursuant to and in compliance with the consolidated text of the Securities Market Law approved by Spanish Royal Legislative Decree 4/2015, Spanish Royal Decree 1310/2005, both as amended from time to time, and any regulation issued thereunder.

 

Japan

 

Each Underwriter has severally represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the

 

S-29

“Financial Instruments and Exchange Act”). Accordingly, each Underwriter has severally represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.

 

Hong Kong

 

Each Underwriter has severally represented and agreed that:

 

•

it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and

 

•

it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

 

Singapore

 

Each Underwriter has acknowledged that this prospectus supplement and the accompanying prospectus have not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act 2001 of Singapore (the “SFA”).

 

Accordingly, each Underwriter has severally represented and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or the accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA; (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

 

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

(a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

(b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

 

S-30

securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

 

(i)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA;

 

(ii)

where no consideration is or will be given for the transfer;

 

(iii)

where the transfer is by operation of law;

 

(iv)

as specified in Section 276(7) of the SFA; or

 

(v)

as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.

 

Notification under Section 309B(1)(c) of the SFA — We have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

 

Australia

 

No prospectus or other disclosure document (as defined in the Corporations Act 2001 of Australia) in relation to the offering of the Notes has been or will be lodged with or registered by Australian Securities and Investments Commission or the Australian Securities Exchange Limited. Each Underwriter has represented and agreed that it has not:

 

(a)

made or invited, and will not make or invite, an offer of the Notes for issue or sale in Australia (including an offer or invitation which is received by a person in Australia); and

 

(b)

distributed or published and will not distribute or publish any draft, preliminary or final form offering memorandum, advertisement or other offering material relating to the Notes in Australia,

 

unless:

 

(i)

the minimum aggregate consideration payable by each offeree is at least AUD 500,000 (or its equivalent in an alternate currency) (disregarding money lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors in accordance with Part 6D.2 and Part 7 of the Corporations Act 2001 of Australia; and

 

(ii)

such action complies with all applicable laws, directives and regulations and does not require any document to be lodged with, or registered by, the Australian Securities and Investments Commission.

 

Each Underwriter has agreed that it will not sell the Notes in circumstances where employees of the Underwriter aware of, or involved in, the sale know, or have reasonable grounds to suspect, that the Notes, or an interest in or right in respect of the Notes, was being, or would later be, acquired either directly or indirectly by a resident of Australia, or a non-resident who is engaged in carrying on business in Australia at or through a permanent establishment of that non-resident in Australia (the expressions “resident of Australia”, “non-resident” and “permanent establishment” having the meanings given to them by the Australian Tax Act).

 

Canada

 

Prospective Canadian investors are advised that the information contained within the preliminary prospectus and prospectus has not been prepared with regard to matters that may be of particular concern to Canadian

 

S-31

investors. Accordingly, prospective Canadian investors should consult with their own legal, financial and tax advisers concerning the information contained within the preliminary prospectus and prospectus and as to the suitability of an investment in the Notes in their particular circumstances.

 

Each Underwriter has severally represented and agreed that the Notes may only be offered or sold in the provinces of Alberta, British Columbia, Ontario and Québec or to or for the benefit of a resident of these provinces pursuant to an exemption from the requirement to file a prospectus in such province in which such offer or sale is made, and only by a dealer duly registered under the applicable securities laws of that province or by a dealer that is relying in that province on the “international dealer” exemption provided by section 8.18 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103). Furthermore, the Notes may only be offered or sold to or for the benefit of a resident of any such province provided that such resident is both an “accredited investor” as defined in National Instrument 45-106 Prospectus Exemptions (NI 45-106) or subsection 73.3 (1) of the Securities Act (Ontario) and a “permitted client” as defined in NI 31-103. By purchasing any Notes and accepting delivery of a purchase confirmation a purchaser is representing to the underwriters and the dealer from whom the purchase confirmation is received that it is an “accredited investor” and “permitted client” as defined above. The distribution of the Notes in Canada is being made on a private placement basis only and any resale of the Notes must be made in accordance with applicable Canadian securities laws, which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with prospectus and registration requirements or exemptions from the prospectus and registration requirements.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this preliminary prospectus or prospectus (including any amendment hereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Under Canadian securities law, National Instrument 33-105 Underwriting Conflicts (NI 33-105) provides disclosure requirements with respect to potential conflicts of interest between an issuer and underwriters, dealers or placement agents, as the case may be. To the extent any conflict of interest between us and any of the Underwriters (or any other placement agent acting in connection with this offering) may exist in respect of this offering, the applicable parties to this offering are relying on the exemption from these disclosure requirements provided to them by section 3A.3 of NI 33-105 (exemption based on U.S. disclosure).

 

Upon receipt of this prospectus, each Canadian purchaser hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce prospectus, chaque acheteur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

 

Price Stabilization and Short Position

 

In connection with this offering, any of the Underwriters appointed and acting in its capacity as stabilizing manager (the “Stabilizing Manager”) or any person acting for it, on behalf of the Underwriters, may purchase and sell the Notes in the open market. These transactions may include over-allotment, covering transactions, penalty bids and stabilizing transactions. Over-allotment involves sales of the Notes in excess of the principal amount of Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. A penalty bid occurs when a particular Underwriter repays to the

 

S-32

Underwriters a portion of the underwriting discount received by it because the Underwriters or the Stabilizing Manager has repurchased Notes sold by or for the account of such Underwriter in stabilizing or short covering transactions. Stabilizing transactions consist of certain bids or purchases of Notes in the open market for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Manager may conduct these transactions in the over-the-counter market or otherwise. If the Stabilizing Manager commences any of these transactions, it may discontinue them at any time, and must discontinue them after a limited period.

 

S-33

LEGAL MATTERS

 

The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Lee & Ko, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Linklaters LLP, Seoul, Korea. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Linklaters LLP may rely as to matters of Korean law upon the opinion of Lee & Ko, and Lee & Ko may rely as to matters of New York law upon the opinions of Cleary Gottlieb Steen & Hamilton LLP.

 

OFFICIAL STATEMENTS AND DOCUMENTS

 

Our Chief Executive Officer and Chairman of the Board of Directors, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Korea Development Bank.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.

 

GENERAL INFORMATION

 

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended. The address of our registered office is 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

 

Our Board of Directors can be reached at the address of our registered office: c/o 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

 

The issue of the Notes has been authorized by a resolution of our Board of Directors passed on December 22, 2021 and a decision of our Chief Executive Officer and Chairman of the Board of Directors dated August 23, 2022. On August 24, 2022, we filed our reports on the proposed issuance of the Notes with the Ministry of Economy and Finance of Korea.

 

The registration statement with respect to us and the Notes has been filed with the U.S. Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, United States.

 

The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:

 

		ISIN		CUSIP
20                      Fixed Rate US$ Notes
20                      Fixed Rate US$ Notes
Floating Rate US$ Notes

 

		ISIN		Common Code
Euro-denominated Notes

 

S-34

PROSPECTUS

 

US$11,847,380,000

The Korea Development Bank

Debt Securities

Warrants to Purchase Debt Securities

Guarantees

The Republic of Korea

Guarantees

 

 

 

We will provide the specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This prospectus is dated August 16, 2022

TABLE OF CONTENTS

 

		Page
CERTAIN DEFINED TERMS AND CONVENTIONS			1
USE OF PROCEEDS			2
THE KOREA DEVELOPMENT BANK			3
Overview			3
Capitalization			5
Business			6
Selected Financial Statement Data			8
Operations			15
Sources of Funds			22
Debt			24
Overseas Operations			25
Property			26
Directors and Management; Employees			26
Tables and Supplementary Information			26
Financial Statements and the Auditors			33
THE REPUBLIC OF KOREA			175
Land and History			175
Government and Politics			177
The Economy			180
Principal Sectors of the Economy			189
The Financial System			196
Monetary Policy			201
Balance of Payments and Foreign Trade			205
Government Finance			213
Debt			216
Tables and Supplementary Information			219
DESCRIPTION OF THE SECURITIES			222
Description of Debt Securities			222
Description of Warrants			229
Terms Applicable to Debt Securities and Warrants			229
Description of Guarantees to be Issued by Us			230
Description of Guarantees to be Issued by The Republic of Korea			231
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS			232
TAXATION			233
Korean Taxation			233
U.S. Federal Income Tax Considerations			235
PLAN OF DISTRIBUTION			243
LEGAL MATTERS			244
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES			244
OFFICIAL STATEMENTS AND DOCUMENTS			244
EXPERTS			244
FORWARD-LOOKING STATEMENTS			245
FURTHER INFORMATION			247

 

i

CERTAIN DEFINED TERMS AND CONVENTIONS

All references to the “Bank”, “we”, “our” or “us” mean The Korea Development Bank. All references to “Korea” or the “Republic” contained in this prospectus mean The Republic of Korea. All references to the “Government” mean the government of Korea.

Unless otherwise indicated, all references to “won”, “Won” or “W” contained in this prospectus are to the currency of Korea, references to “U.S. dollars”, “Dollars”, “$”, “USD” or “US$” are to the currency of the United States of America, references to “Euro”, “EUR” or “€” are to the currency of the European Union, references to “Japanese Yen”, “JPY” or “¥” are to the currency of Japan, references to “Singapore dollar” or “SGD” are to the currency of Singapore, references to “Swiss franc” or “CHF” are to the currency of Switzerland, references to “pound sterling”, “GBP” or “£” are to the currency of the United Kingdom, references to “Chinese offshore renminbi” or “CNH” are to the currency of the People’s Republic of China traded outside of mainland China, references to “Hong Kong dollar” or “HKD” are to the currency of Hong Kong, S.A.R., references to “Mexican Peso” or “MXN” are to the currency of the United Mexican States, references to “New Zealand Dollar” or “NZD” are to the currency of New Zealand, references to “Australian dollar” or “AUD” are to the currency of Australia, references to “Norwegian krone” or “NOK” are to the currency of Norway, references to “Brazilian real” or “BRL” are to the currency of the Federative Republic of Brazil, references to “Indonesian Rupiah” or “IDR” are to the currency of Indonesia, references to “Indian Rupee” or “INR” are to the currency of India and references to “Swedish Krona” or “SEK” are to the currency of Sweden.

All discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

Our separate financial information as of and for the years ended December 31, 2021 and 2020 included in this prospectus has been prepared in accordance with International Financial Reporting Standards as adopted in Korea, or Korean IFRS or K-IFRS. References in this prospectus to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries. KDB Financial Group, or KDBFG, a financial holding company, and Korea Finance Corporation, or KoFC, a public policy financing vehicle and the parent company of KDBFG, both of which had originally been established by spinning off a portion of our assets, liabilities and equity in October 2009, merged with and into us on December 31, 2014.

 

1

USE OF PROCEEDS

Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities for our general operations.

 

2

THE KOREA DEVELOPMENT BANK

Overview

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended, or the KDB Act. Since our establishment, we have been the leading bank in the Republic with respect to the provision of long-term financing for projects designed to assist the nation’s economic growth and development. The Government directly owns all of our paid-in capital. Our registered office is located at 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul, The Republic of Korea. Our primary purpose, as stated in the KDB Act, the KDB Decree and our Articles of Incorporation, is to “furnish funds in order to expedite the development of the national economy.” We make loans available to major industries for equipment, capital investment and the development of high technology, as well as for working capital.

As of December 31, 2021, we had W174,917.2 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets of W276,421.9 billion and total equity of W36,502.9 billion, as compared to W159,083.6 billion of loans outstanding, W251,852.0 billion of total assets and W30,382.5 billion of total equity as of December 31, 2020. In 2021, we recorded interest income of W4,125.3 billion, interest expense of W2,466.7 billion and net income of W2,461.8 billion, as compared to W4,441.6 billion of interest income, W3,162.0 billion of interest expense and W487.5 billion of net income in 2020. See “—Selected Financial Statement Data.”

Currently, the Government directly holds 100% of our paid-in capital. In addition to contributions to our capital, the Government provides direct financial support for our financing activities, in the form of loans or guarantees. The Government has the power to elect or dismiss our Chairman and Chief Executive Officer, members of our Board of Directors and Auditor. The Government may dismiss each such person if he/she (i) violates the KDB Act, an order issued thereunder, or the Articles of Incorporation or (ii) is unable to perform his/her duties due to physical or mental disability. The Chairman may be dismissed by the President of the Republic at the recommendation of the chairman of the Financial Services Commission. The Chief Executive Officer and members of the Board of Directors may be dismissed by the Financial Services Commission at the recommendation of the Chairman and the Auditor may be dismissed by the Financial Services Commission. There is no prescribed timeline for dismissal. Pursuant to the KDB Act, the Financial Services Commission has supervisory power and authority over matters relating to our general business including, but not limited to, capital adequacy and managerial soundness.

The Government supports our operations pursuant to Article 32 of the KDB Act. Article 32 provides that “the annual net losses of the Korea Development Bank shall be offset each year by the reserve, and if the reserve be insufficient, the deficit shall be replenished by the Government.” As a result of the KDB Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserve, consisting of our surplus and capital surplus items, is insufficient to cover our annual net losses. In light of the above, if we had insufficient funds to make any payment under any of our obligations, including the debt securities and guarantees covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 32 do not, however, constitute a direct guarantee by the Government of our obligations under the debt securities or the guarantees, and the provisions of the KDB Act, including Article 32, may be amended at any time by action of the National Assembly.

In January 1998, the Government amended the KDB Act to:

 

•

subordinate our borrowings from the Government to other indebtedness incurred in our operations;

 

•

allow the Government to offset any deficit that arises if our reserve fails to cover our annual net losses by transferring Government-owned property, including securities held by the Government, to us; and

 

•

allow direct injections of capital by the Government without prior National Assembly approval.

 

3

The Government amended the KDB Act in May 1999 and the KDB Decree in March 2000, to allow the Financial Services Commission to supervise and regulate us in terms of capital adequacy and managerial soundness.

In March 2002, the Government amended the KDB Act to enable us, among other things, to:

 

•

obtain low-cost funds from The Bank of Korea and from the issuance of debt securities (in addition to already permitted industrial finance bonds), which funds may be used for increased levels of lending to small and medium size enterprises;

 

•

broaden the scope of borrowers to which we may extend working capital loans to include companies in the manufacturing industry, enterprises which are “closely related” to enhancing the corporate competitiveness of the manufacturing industry and leading-edge high-tech companies; and

 

•

extend credits to mergers and acquisitions projects intended to facilitate corporate restructuring efforts.

In July 2005 and May 2009, the Government amended the KDB Act to provide that:

 

(1)

our annual net profit, after adequate allowances are made for depreciation in assets, shall be distributed as follows:

 

(i)

40% or more of the net profit shall be credited to reserve, until the reserve amounts equal the total amount of paid-in capital; and

 

(ii)

any net profit remaining following the apportionment required under subparagraph (i) above shall be distributed in accordance with the resolution of our Board of Directors and the approval of our shareholders;

 

(2)

accumulated amounts in reserve may be capitalized after offsetting any net losses; and

 

(3)

any distributions made in accordance with paragraph (1)(ii) above may be in the form of cash dividends or dividends in kind, provided that any distributions of dividends in kind must be made in accordance with applicable provisions of the KDB Decree.

In February 2008, the Government further amended the KDB Act, primarily to transfer most of the Government’s supervisory authority over us from the Ministry of Economy and Finance to the Financial Services Commission.

In May 2009, the Government amended the KDB Act to facilitate our privatization. The amendment provided for, among others:

 

•

the preparation for the transformation of us from a special statutory entity into a corporation, including the application of the Banking Act as applicable;

 

•

the expansion of our operation scope that enables us to engage in commercial banking activities, including retail banking (which was subsequently adjusted due to a change in the Government’s decision to halt its plan for our privatization and to consolidate and strengthen our public financing role, utilizing our rich experience and expertise in public policy financing);

 

•

the provision of government guarantees for our mid-to-long term foreign currency debt outstanding at the time of initial sale of the Government’s stake in KDBFG (subject to the National Assembly’s authorization of the Government guarantee amount) and possible guarantees for our foreign currency debt incurred for the refinancing of such mid-to-long term foreign currency debt with the government guarantee during the period when the Government owns more than 50% of our shares; and

 

•

the establishment of KDBFG and KoFC and application of the Financial Holding Company Act to KDBFG.

 

4

In May 2014, the Government and the National Assembly amended the KDB Act to streamline the financial policy roles among Government-owned banks and financial corporations in order to better respond systematically to rapidly changing domestic and international economic conditions by merging KDBFG and KoFC into us. The amended KDB Act provides, among others, that:

 

•

the Government will halt its plan for our privatization;

 

•

public policy financing will be consolidated and strengthened through the newly merged entity;

 

•

we will comprehensively succeed to the properties, rights and obligations of KDBFG and KoFC upon the consummation of the merger;

 

•

the bonds issued by KDBFG and the policy bank bonds issued by the KoFC shall be deemed as the industrial financial bonds issued by us;

 

•

the business engaged in by KoFC in accordance with the Korea Finance Corporation Act or other laws and decrees will be continuously performed by us; and

 

•

the repayment of the principal of and interest on foreign currency debt (with an original maturity of one year or more at the time of issuance) incurred by KoFC and us before this amended KDB Act comes into force shall be guaranteed by the Government at the time of initial sale by the Government of its equity interest in us, subject to the approval by the National Assembly.

In May 2020, the Government amended the KDB Act in order to provide statutory grounds for the establishment of the Key Industry Stabilization Fund to support businesses in certain key industries that face financial difficulties resulting from the ongoing COVID-19 pandemic. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties” and “—Selected Financial Statement Data—Loans to Financially Troubled Companies.”

The Minister of Economy and Finance of the Republic has, on behalf of the Republic, signed the registration statement of which this prospectus forms a part.

Capitalization

As of December 31, 2021, our authorized capital was W30,000 billion and our capitalization was as follows:

 

		December 31, 2021(1)
		(billions of won)
Long-term debt(2):
Won currency borrowings		W	3,951.6
Industrial finance bonds			144,355.6
Foreign currency borrowings			2,308.2
Total long-term debt			150,615.4	(3)(4)
Capital:
Paid-in capital			21,886.6
Capital surplus			2,479.0
Retained earnings(5)			7,363.8
Accumulated other comprehensive income			4,773.5
Total capital			36,502.9
Total capitalization		W	187,118.3

 

(1)	Except as disclosed in this prospectus, there has been no material adverse change in our capitalization since December 31, 2021.

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

(3)	We have translated borrowings in foreign currencies into Won at the rate of W1,185.5 to US$1.00, which was the market average exchange rate, as announced by the Seoul Monetary Brokerage Services Ltd., on December 31, 2021.

 

5

(4)	As of December 31, 2021, we had confirmed acceptances and guarantees totaling W7,748.8 billion under outstanding guarantees issued on behalf of our clients. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2021 and 2020—Note 40.”

(5)

Includes regulatory reserve for credit losses of W482.9 billion as of December 31, 2021. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2021 and 2020—Note 24.”

Business

Purpose and Authority

Since our establishment, we have been the leading bank in the Republic in providing long-term financing for projects designed to assist the nation’s economic growth and development.

Under the KDB Act, the KDB Decree and our Articles of Incorporation, our primary purpose is to “contribute to the sound development of the financial industry and the national economy by supplying and managing funds necessary for the development and promotion of industries, expansion of social infrastructure, development of regions, stabilization of the financial markets and facilitation of sustainable growth.” Since we serve the public policy objectives of the Government, we do not seek to maximize profits. We do, however, strive to maintain a level of profitability to strengthen our equity base and support growth in the volume of our business.

Under the KDB Act, we may:

 

•

carry out activities necessary to accomplish the expansion of the national economy, subject to the approval of the Financial Services Commission;

 

•

provide loans or discount notes;

 

•

subscribe to, underwrite or invest in securities;

 

•

guarantee or assume indebtedness;

 

•

raise funds by accepting demand deposits and time and savings deposits from the general public, issuing securities, borrowing from the Government, The Bank of Korea or other financial institutions, and borrowing from overseas;

 

•

execute foreign exchange transactions, including currency and interest swap transactions;

 

•

provide planning, management, research and other support services at the request of the Government, public bodies, financial institutions or enterprises;

 

•

manage and operate various funds established pursuant to Government-led initiatives; and

 

•

carry out other businesses incidental to the foregoing (subject to the approval of the Financial Services Commission).

Government Support and Supervision

The Government owns directly all of our paid-in capital. Since our establishment, the Government has made capital contributions not only in cash but also in the form of shares of common stock of Government-affiliated entities. Recent examples include the Government’s contributions to our capital of (i) W250 billion in the form of shares of common stock of Incheon Port Authority and Yeosu Gwangyang Port Authority, W80 billion in cash and W65 billion in cash in May 2017, September 2017 and December 2017, respectively, (ii) W170 billion in cash in June 2018, (iii) W500 billion in cash and W55 billion in cash in March 2019 and September 2019, respectively, (iv) W451 billion in cash and W1,652 billion in cash in April 2020 and July 2020, respectively, and (v) W510 billion in cash and W611 billion in cash in January 2021 and May 2021, respectively. Taking into account these capital contributions, as of December 31, 2021, our total paid-in capital was W21,886.6 billion. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2021 and 2020—Note 24.” In March 2022, the Government contributed W392 billion in cash to our capital.

 

6

In addition to capital contributions, the Government directly supports our financing activities by:

 

•

lending us funds to on-lend;

 

•

allowing us to administer Government loans made from a range of special Government funds;

 

•

allowing us to administer some of The Bank of Korea’s surplus foreign exchange holdings; and

 

•

allowing us to receive credit from The Bank of Korea.

The Government also supports our operations pursuant to Articles 31 and 32 of the KDB Act. Article 31 provides that “40% or more of the annual net profit of the Korea Development Bank shall be transferred to reserve, until the reserve amounts equal the total amount of paid-in capital” and that accumulated amounts in reserve may be capitalized. Article 32 provides that “the net losses of the Korea Development Bank shall be offset each fiscal year by the reserve, and if the reserve be insufficient, the deficit shall be replenished by the Government.”

As a result of the KDB Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserve, consisting of our surplus and capital surplus items, is insufficient to cover our annual net losses. In light of the above, if we had insufficient funds to make any payment under any of our obligations, including the debt securities and the guarantees covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 32 do not, however, constitute a direct guarantee by the Government of our obligations under the debt securities or the guarantees, and the provisions of the KDB Act, including Article 32, may be amended at any time by action of the National Assembly.

The Government closely supervises our operations in the following ways:

 

•

the Government has the power to elect or dismiss our Chairman and Chief Executive Officer, members of our Board of Directors and Auditor;

 

•

within three months after the end of each fiscal year, we must submit our financial statements for the fiscal year to the Financial Services Commission;

 

•

the Financial Services Commission has broad authority to require reports from us on any matter and to examine our books, records and other documents. On the basis of the reports and examinations, the Financial Services Commission may issue any orders deemed necessary to enforce the KDB Act;

 

•

the Financial Services Commission must approve our operating manual, which sets out the guidelines for all principal operating matters;

 

•

the Financial Services Commission may supervise our operations to ensure managerial soundness based upon the KDB Decree and the Bank Supervisory Regulations of the Financial Services Commission and may issue orders deemed necessary for such supervision; and

 

•

we may amend our Articles of Incorporation only with the approval of the Financial Services Commission.

We have had our annual financial statements for years commencing 1998 audited by an external auditor. See “—Financial Statements and the Auditors” and “Experts.”

Pursuant to our most recently approved program of operations, we expect to support the reform and restructuring of the Republic’s economic and industrial structure, including financing of promising small and medium sized enterprises, providing export finance and encouraging investments in infrastructure necessary to promote consumer demand and industrial reorganization.

 

7

Selected Financial Statement Data

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS.

Consolidated Statements of Financial Position Data

The following table presents selected statements of financial position data regarding our assets, liabilities and shareholders’ equity on a consolidated basis as of December 31, 2021 and 2020, which have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020.

 

		As of December 31,
		2020				2021
		(billions of won)
Statements of Financial Position Data
Total Loans (measured at amortized cost)(1)			166,336.5				182,507.3
Total Borrowings(2)			216,528.4				234,482.2
Total Assets			304,996.5				333,898.2
Total Liabilities			264,007.0				287,740.1
Equity			40,989.5				46,158.2

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

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

Consolidated Income Statement Data

Our selected income statement data included in the following table have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020.

 

		Year Ended December 31,
		2020				2021
		(billions of Won)
Income Statement Data
Total Interest Income			4,876.6				4,613.0
Total Interest Expense			3,328.6				2,627.5
Net Interest Income			1,547.9				1,985.5
Operating Income			716.9				2,444.6
Non-operating Income			1,862.7				724.9
Profit before Income Tax			2,579.6				3,169.5
Income Tax Expense			659.5				954.5
Net Income			1,961.3				1,323.5

 

8

Separate Financial Statement Data

The following tables present selected separate financial information as of and for the years ended December 31, 2021 and 2020, which has been derived from our audited separate financial statements as of and for the years ended December 31, 2021 and 2020 and included in this prospectus. You should read the following financial statement data together with the financial statements and notes included in this prospectus.

 

		As of December 31,
		2020				2021
		(billions of won)
Statements of Financial Position Data
Total Loans (measured at amortized cost)(1)			159,083.6				174,917.2
Total Borrowings(2)			204,780.7				222,288.3
Total Assets			251,852.0				276,421.9
Total Liabilities			221,469.5				239,919.0
Equity			30,382.5				36,502.9

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

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

As of December 31, 2021, our total assets increased by 9.8% to W276,421.9 billion from W251,852.0 billion as of December 31, 2020, primarily due to an increase in loans measured at amortized cost to W170,763.4 billion as of December 31, 2021 from W155,300.2 billion as of December 31, 2020 and an increase in securities measured at fair value through other comprehensive income to W37,875.1 billion as of December 31, 2021 from W34,141.3 billion as of December 31, 2020, as well as an increase in investments in subsidiaries and associates to W28,710.1 billion as of December 31, 2021 from W25,553.6 billion as of December 31, 2020.

As of December 31, 2021, our total liabilities increased by 8.3% to W239,919.0 billion from W221,469.5 billion as of December 31, 2020, primarily due to an increase in debentures to W145,365.3 billion as of December 31, 2021 from W138,318.7 billion as of December 31, 2020 and an increase in deposits to W52,792.1 billion as of December 31, 2021 from W45,879.4 billion as of December 31, 2020, as well as an increase in borrowings to W22,063.8 billion as of December 31, 2021 from W18,887.6 billion as of December 31, 2020.

As of December 31, 2021, our total equity increased by 20.1% to W36,502.9 billion from W30,382.5 billion as of December 31, 2020, primarily due to an increase in accumulated other comprehensive income to W4,773.5 billion as of December 31, 2021 from W2,064.4 billion as of December 31, 2020 and an increase in our retained earnings to W7,363.8 billion as of December 31, 2021 from W5,068.0 billion as of December 31, 2020.

 

9

Our selected income statement data included in the following table have been derived from our audited separate financial statements as of and for the years ended December 31, 2021 and 2020 included in this prospectus.

 

		Year Ended December 31,
		2020				2021
		(billions of Won)
Income Statement Data
Total Interest Income			4,441.6				4,125.3
Total Interest Expense			3,162.0				2,466.7
Net Interest Income			1,279.6				1,658.6
Operating Income			894.5				3,550.2
Income before Income Tax			620.9				3,655.4
Income Tax Expense			133.3				1,193.5
Net Income			487.5				2,461.8

2021

We had net income of W2,461.8 billion in 2021 compared to W487.5 billion in 2020, on a separate basis. The principal factors for the increase in net income included:

 

•

an increase in net other operating income to W1,738.6 billion in 2021 from W227.0 billion in 2020, primarily due to a change in net gain (loss) on disposal of loans measured at fair value through profit or loss to a net gain of W1,850.7 billion in 2021 from a net loss of W24.6 billion in 2020 resulting primarily from gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares, which took place in June 2021;

 

•

a reversal of impairment loss on investments in subsidiaries and associates of W363.1 billion in 2021, primarily due to a reversal of impairment losses recognized in connection with the upcoming sale of our stake in Daewoo Engineering & Construction, compared to an impairment loss on investments in subsidiaries and associates of W239.5 billion in 2020; and

 

•

an increase in dividend income to W1,259.6 billion in 2021 from W670.6 billion in 2020, primarily due to an increase in dividends received from Korea Electric Power Corporation during 2021 compared to 2020.

The above factors were partially offset by an increase in income tax expense to W1,193.5 billion in 2021 from W133.3 billion in 2020, primarily due to an increase in income before income tax to W3,655.4 billion in 2021 from W620.9 billion in 2020.

2020

We had net income of W487.5 billion in 2020 compared to W445.7 billion in 2019, on a separate basis. The principal factors for the increase in net income included:

 

•

net other operating income of W227.0 billion in 2020 compared to net other operating expense of W341.7 billion in 2019, primarily due to an increase in net gain on valuation of loans measured at fair value through profit or loss to W649.3 billion in 2020 from W42.9 billion in 2019;

 

•

a net gain on derivatives of W397.2 billion in 2020 compared to a net loss on derivatives of W8.3 billion in 2019, primarily due to a decrease in net loss on fair value hedged items resulting from fluctuations in interest rates, foreign exchange rates and the prices of stocks and derivatives;

 

•

a decrease in impairment loss on investments in subsidiaries and associates to W239.5 billion in 2020 from W542.9 billion in 2019, primarily due to a decrease in impairment losses recognized in connection with our holdings of equity interest in Daewoo Shipbuilding & Marine Engineering Co., Ltd., or DSME, and GM Korea; and

 

10

•

an increase in net interest income to W1,279.6 billion in 2020 from W1,062.3 billion in 2019, primarily due to a decrease in interest expense to W3,162.0 billion in 2020 from W4,038.9 billion in 2019, which outpaced the decrease in interest income to W4,441.6 billion in 2020 from W5,101.2 billion in 2019.

The above factors were partially offset by an increase in provision for loan loss allowance to W1,177.0 billion in 2020 from W59.8 billion in 2019, primarily due to an increase in expected credit losses in anticipation of a deterioration in the overall asset quality of our loan portfolio due to the ongoing COVID-19 pandemic.

Allowances for Loan Losses and Loans in Arrears

We establish allowances for losses from problem loans, including guarantees and other extensions of credit, based on the length of the delinquent periods and the nature of the loans, including guarantees and other extensions of credit. Under K-IFRS 1109, for annual periods commencing on or after January 1, 2018, we establish allowances for credit losses based on expected credit losses instead of incurred losses (as was the case under K-IFRS 1039) by assessing changes in expected credit losses and recognizing such changes as impairment loss (or reversal of impairment loss) in profit or loss. Under K-IFRS 1109, the allowance required to be established with respect to a loan or receivable is the amount of the expected 12-month credit loss or the expected lifetime credit loss for the applicable loan or receivable, according to three stages of credit risk deterioration since initial recognition.

As of December 31, 2021, we established allowances of W4,154.3 billion for loan losses, which was 10.0% higher than the allowances as of December 31, 2020 of W3,776.5 billion, primarily due to an increase in expected credit losses in anticipation of a deterioration in the overall asset quality of our loan portfolio due to the ongoing COVID-19 pandemic. Allowances for loan losses under K-IFRS are recorded for loans based on expected credit losses, depending on whether there has been a significant increase in credit risk or a credit impairment since initial recognition and, if our allowances for loan losses are deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for loan losses within retained earnings. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2021 and 2020—Notes 3(27), 9(1), 24(4) and 24(5).”

Certain of our customers have restructured loans with their creditor banks. As of December 31, 2021, we have provided loans of W853.1 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of December 31, 2021, we had established allowances of W375.2 billion for loan losses with respect to such companies. We cannot assure you that actual results of the credit loss from the loans to these customers will not exceed the allowances established.

The following table provides information on our loan loss allowances.

 

				As of December 31, 2020(1)								As of December 31, 2021(1)
				Loan Amount				Loan Loss Allowances				Loan Amount				Loan Loss Allowances
				(billions of won)
Loan Classification		Normal(2)		W	152,753.7			W	1,200.7			W	169,518.3			W	2,045.2
		Precautionary			3,300.8				805.6				3,182.5				901.2
		Substandard			1,880.7				936.5				1,326.4				542.1
		Doubtful			285.7				218.0				148.9				119.2
		Expected Loss			862.7				615.7				741.1				546.6
		Total		W	159,083.6			W	3,776.5			W	174,917.2			W	4,154.3

 

11

 

(1)

These figures include loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

(2)	Includes loans guaranteed by the Government. Under Korean IFRS, we establish loan loss allowances for all loans including loans guaranteed by the Government.

As of December 31, 2021, our non-performing loans totaled W2,216.4 billion, representing 1.3% of our outstanding loans as of such date. Non-performing loans are defined as loans that are classified as substandard or below. On December 31, 2021, our legal reserve was W1,551.2 billion, representing 0.9% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including DSME, HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd., Doosan Enerbility Co., Ltd. (formerly, Doosan Heavy Industries & Construction Co., Ltd.) and GM Korea Company. As of December 31, 2021, our credit extended to these companies totaled W21,071.2 billion, accounting for 7.6% of our total assets as of such date.

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

 

		As of December 31,
Company		2020				2021				Primary Reason for Change
		(billions of won)
DSME		W	4,463.1			W	6,016.3			Increase due to an increase in refund guarantees
HMM Company Limited			4,771.5				10,452.0			Increase due to an increase in the value of perpetual bonds and conversion of convertible bonds into stocks
HJ Shipbuilding & Construction			927.2				854.0			Decrease due to sales of stocks and a decrease in guarantees
Daehan Shipbuilding			1,047.4				1,226.6			Increase due to an increase in refund guarantees
K Shipbuilding			531.3				394.6			Decrease due to conversion of loans into stocks and repayment of loans
KG Dongbu Steel			695.9				825.5			Increase due to an increase in loans
Doosan Enerbility			1,644.2				899.3			Decrease due to a decrease in loans
GM Korea Company			436.9				402.9			Decrease due to a decline in the value of stocks
Total		W	15,205.7			W	21,071.2

As of December 31, 2021, we established allowances of W701.8 billion for our exposure to DSME, W17.6 billion for HMM Company Limited, W26.3 billion for HJ Shipbuilding & Construction, W488.5 billion for Daehan Shipbuilding, W30.2 billion for K Shipbuilding, W4.1 billion for KG Dongbu Steel, W7.5 billion for Doosan Enerbility and none for GM Korea Company.

During 2015, DSME, one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of

 

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offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Export-Import Bank of Korea, would extend additional financing of up to W4.2 trillion to DSME by the end of 2016 in the form of debt-to-equity swaps, extension of additional loans and provision of other forms of liquidity support. In this connection, in December 2015, we acquired W382.9 billion of new equity shares of DSME, which increased our equity interest in DSME from 31.5% to 49.7%, and we became its largest shareholder. In December 2016, we increased our equity interest in DSME to 79.0% through an additional debt for equity swap. In March 2017, we and The Export-Import Bank of Korea announced a second joint plan to provide an additional W2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we provided additional debt-to-equity swaps of W0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount of W1.28 trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. Pursuant to such agreement, we plan to transfer all of our shares in DSME amounting to approximately W2 trillion (in the form of contributions-in-kind) to Korea Shipbuilding & Offshore Engineering, a newly established sub-holding company spun off from Hyundai Heavy Industries to control its shipbuilding companies, in return for an equity stake in Korea Shipbuilding & Offshore Engineering. However, in January 2022, the European Commission announced that it would not grant approval for such acquisition due to anti-competition concerns for LNG carriers, and the consummation of the acquisition currently remains uncertain.

In July 2016, HMM Company Limited executed a debt-to-equity swap with us and other creditors, as part of its continued restructuring led by us as its largest creditor, and affiliates of the Hyundai group reduced their shareholdings in HMM Company Limited, which resulted in us becoming the largest shareholder of HMM Company Limited. In October 2018, we injected W1 trillion in emergency aid into HMM Company Limited in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by HMM Company Limited. In June 2021, we exercised our right to convert W300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. We have since terminated the joint management of HMM Company Limited with Korea Ocean Business Corporation following an improvement in the financial performance of HMM Company Limited, and are currently considering the sale of our equity stake in HMM Company Limited, which amounted to 20.7% as of December 31, 2021.

In January 2019, HJ Shipbuilding & Construction Philippines, a subsidiary of HJ Shipbuilding & Construction at Subic Bay in the Philippines, declared bankruptcy and filed for corporate rehabilitation with a regional trial court following its failure to comply with loan obligations to its Philippine lenders. In March 2019, creditors in Korea (including us) and lenders in the Philippines agreed on, and executed, a business normalization plan including a debt-to-equity swap and capital reduction for HJ Shipbuilding & Construction, as a result of which we became the largest shareholder of HJ Shipbuilding & Construction. In September 2021, creditors of HJ Shipbuilding & Construction (including us) sold a 66.85% interest in the company to a consortium led by Dongbu Corporation.

K Shipbuilding has faced financial difficulties for the past several years due to prolonged slowdowns in the Korean shipbuilding and shipping industries. K Shipbuilding, which had filed for court receivership in May 2016 and executed debt-to-equity swaps with their creditors (including us) in December 2016 under a rehabilitation plan through which we increased our equity interest to 43.9% and became its largest shareholder, exited court receivership in July 2017. In November 2020, we selected a consortium consisting of KH Investment and UAMCO., Ltd. as the preferred bidder for the sale of shares of K Shipbuilding. In July 2021, the consortium acquired a 97% interest in K Shipbuilding for W250 billion. In December 2021, we terminated our creditor management of K Shipbuilding, and as of December 31, 2021, our equity interest in K Shipbuilding amounted to 2.6%.

Dongbu Steel has also been facing financial difficulties for the past several years due to the prolonged slowdown in the Korean construction industry and in the Korean economy in general. Dongbu Steel entered into

 

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a voluntary workout agreement with its creditors, including us, in October 2015. Such agreement expired in September 2019 when KG Steel, a subsidiary of KG Group established in May 2019, became the largest shareholder of Dongbu Steel, which was subsequently re-named to KG Dongbu Steel. As of December 31, 2021, our equity interest in KG Dongbu Steel amounted to 1.5%.

Doosan Enerbility has also faced financial difficulties due to the prolonged slowdown in the Korean heavy and construction industries and in the Korean economy in general, as well as the Government’s initiative to support clean and renewable energy sources while phasing out nuclear and coal-fired plants in recent years. Doosan Enerbility submitted a self-rescue plan to its creditors, including us, and we agreed to provide Doosan Enerbility with loans amounting to W500 billion, W400 billion and W600 billion in March, April and June 2020, respectively. In August 2021, as part of the self-rescue plan, a consortium comprised of Hyundai Heavy Industries Holdings Co. and KDB Investment, our investment unit, purchased a 35.0% equity interest in Doosan Infracore from Doosan Enerbility for W850 billion, and subsequently renamed the company as Hyundai Doosan Infracore Co., Ltd. In March 2022, Doosan Enerbility repaid its outstanding loans to its creditors, including us, and exited the debt restructuring program.

In 2021, we sold non-performing loans worth W314.5 billion to UAMCO., Ltd.

Our large exposure to financially troubled companies in Korea means that we are also exposed to financial difficulties experienced by our borrowers as a result of, among other things, adverse economic conditions in Korea and globally, which could disrupt the business, activities and operations of many of our borrowers, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. For example, COVID-19, an infectious disease that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the World Health Organization in March 2020, has spread globally over the course of 2020, 2021 and 2022 to date and has led to significant global and domestic economic and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which has been in significant need of liquidity following a sharp decline in aircraft traffic and a dramatic increase in the number of suspended flights due to entry restrictions imposed by many countries in response to COVID-19 throughout 2020, 2021 and 2022 to date.

In May 2020, we injected W720 billion (consisting of W420 billion in securities collateralized by income receivables, W180 billion in perpetual bonds and W120 billion in loans) into Korean Air Lines Co., Ltd., a subsidiary of Hanjin Group and Korea’s largest airline and flagship carrier, in order to provide liquidity support. As of December 31, 2021 and 2020, our loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to Korean Air Lines amounted to W1,167.2 billion and W1,374.5 billion, respectively.

In April 2020, we provided Asiana Airlines, a subsidiary of Kumho Asiana Group and the second-largest airline in Korea, with liquidity support by providing a credit line in the amount of W1.2 trillion. Our decision to take such measure was largely driven by a need to address Asiana Airlines’ financial difficulties resulting from the negative impact of the COVID-19 pandemic on the airline industry. In September 2020, we decided to inject W2.4 trillion from the Key Industry Stabilization Fund (explained further below) into Asiana Airlines in order to normalize its operations following the cancellation of plans by a consortium led by HDC Hyundai Development to acquire Asiana Airlines. Subsequently, in November 2020, we signed an investment agreement with Hanjin KAL, the parent company of Korean Air, to inject W800 billion (consisting of W500 billion through participation in a rights offering and W300 billion through purchase of exchangeable bonds) into Hanjin KAL in connection with Korean Air’s acquisition of a 63.9% stake in Asiana Airlines through a transaction valued at W1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to approximately 10.7%. In December 2020, Asiana Airlines’ shareholders approved a 3-to-1 share capital reduction plan, which was aimed at offsetting part of Asiana Airlines’ deficits in preparation for the Acquisition. However, the consummation of the Acquisition currently remains subject to a number of factors, including

 

14

uncertainties regarding opposition to the Acquisition by labor unions of Korean Air Lines and Asiana Airlines, and approval of the Acquisition from antitrust authorities of a number of jurisdictions, including the United States, the European Union, China, Japan and Vietnam, which have yet to be obtained. If the Acquisition is completed, Asiana Airlines would become Korean Air Lines’ consolidated subsidiary. In June 2021, we approved an integration plan pursuant to which Korean Air Lines would merge with Asiana Airlines by 2024.

In addition, the ongoing COVID-19 pandemic has prompted the Government in 2020, 2021 and 2022 to date to implement various emergency aid initiatives involving Korean banks, including us, to provide liquidity assistance to a range of financially troubled companies. Such initiatives include, among others, the provision of new loans provided to financially troubled companies, extension of maturity dates for existing loans and suspension of interest payment obligations for an extended period of time. Most recently, in May 2020, the Government provided for the establishment of the Key Industry Stabilization Fund, a fund amounting to W40 trillion to be administered by us mainly through the issuance of industrial finance bonds, to support businesses in certain key industries that face financial difficulties resulting from the ongoing COVID-19 pandemic, such as the air transport and maritime industries. The Key Industry Stabilization Fund has supported those businesses that meet certain pre-determined criteria, including those aimed at stabilizing the job markets. Our participation in such Government-led initiatives may lead us to extend credit to financially troubled borrowers that we would not otherwise extend, or offer terms for such credit that we would not otherwise offer, in the absence of such initiatives. Furthermore, there is no guarantee that the financial condition and liquidity position of our financially troubled borrowers benefiting from such initiatives will improve sufficiently for them to service their debt on a timely basis, or at all. Accordingly, increases in our exposure to financially troubled borrowers resulting from such Government-led initiatives may have a material adverse effect on our financial condition and results of operations.

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

Operations

Loan Operations

We mainly provide equipment capital loans, project loans and working capital loans to private Korean enterprises that undertake major industrial projects either directly or indirectly through on-lending. The loans generally cover over 50%, and in some cases as much as 100%, of the total project cost. Equipment capital loans include loans to major industries for development of high technology and for acquisition, improvement or repair of machinery and equipment. We disburse loan proceeds in installments to ensure that the borrower uses the loan for its intended purpose.

Before approving a loan, we consider:

 

•

the economic benefits of the project to the Republic;

 

•

the extent to which the project serves priorities established by the Government’s industrial policy;

 

•

the project’s operational feasibility;

 

•

the loan’s and the project’s profitability; and

 

•

the quality of the borrower’s management.

 

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The interest rate we charge on our loans varies based on a number of factors, including the purpose of the loan, maturity date and the borrower’s credit ratings. Certain loans bear interest at below market rates. Equipment capital loans generally have original maturities of three to five years, although we occasionally make equipment capital loans with longer maturities. Working capital loans usually mature within two years.

The Business Planning Department functions as our centralized policy-making and planning division with respect to our lending activities. The Business Planning Department formulates and revises our internal regulations on loan programs as well as setting basic lending guidelines.

We have multiple levels of loan approval authority, depending on the loan amount and other factors such as the availability of collateral or guarantee, debt repayment ability and business prospects. The Credit Review Committee, Division Credit Review Committee, Division Credit Review Sub-Committee, General Manager each has authority to approve loans up to a specified amount. The amount differs depending on the type of loan and certain other factors, for example, whether a loan is collateralized or guaranteed.

In 2020, 2021 and 2022 to date, many of our corporate borrowers have experienced financial difficulties due to the ongoing COVID-19 pandemic. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” We have significant exposure to certain industries particularly affected by the ongoing outbreak of the COVID-19 pandemic, such as the transportation (including airlines), hotel and leisure industries, the banking and insurance industries, the retail and wholesale industries and the manufacturing industry], among others. In the event that the financial condition of these companies to which we extended credits deteriorates in the future, we may be required to record additional allowances for loan losses, as well as charge-offs and impairment losses or losses on disposal, which may have a material adverse impact on our results of operations and financial condition.

Our overall risk management policy is set by the Risk Management Committee. For detailed information regarding our risk management policy and procedures, see “—Financial Statements and Auditors—Notes to Separate Financial Statements of December 31, 2021 and 2020—Note 49.”

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

Loans⁽¹⁾

 

		December 31,
		2020				2021
		(billions of won)
Equipment Capital Loans:
Domestic Currency		W	51,237.3			W	56,414.4
Foreign Currency			7,789.1				10,088.7
			59,026.4				66,503.1
Working Capital Loans:
Domestic Currency(2)			63,949.1				65,120.5
Foreign Currency			9,270.2				11,967.5
			73,219.3				77,088.0
Other Loans(3)			26,837.9				31,326.1
Total Loans		W	159,083.6			W	174,917.2

 

(1)	Includes loans extended to affiliates.

(2)	Includes loans on households.

(3)	Includes inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

 

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As of December 31, 2021, we had W174,917.2 billion in outstanding loans, which represents a 10.0% increase from W159,083.6 billion of outstanding loans as of December 31, 2020.

Maturities of Outstanding Loans

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

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

 

		December 31,								As % of December 31, 2021 Total
		2020				2021
		(billions of won, except percentages)
Loans with Remaining Maturities of One Year or Less		W	58,273.9			W	59,416.3				41.4	%
Loans with Remaining Maturities of More Than One Year			73,971.8				84,174.8				58.6
Total		W	132,245.7			W	143,591.1				100.0	%

 

(1)	Includes loans extended to affiliates.

Loans by Industrial Sector

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

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

 

		December 31,								As % of December 31, 2021 Total
		2020				2021
		(billions of won, except percentages)
Manufacturing		W	62,964.5			W	65,421.6				45.6	%
Banking and Insurance			30,478.6				33,979.3				23.7
Transportation			10,034.6				10,348.8				7.2
Public Administration			590.9				626.9				0.4
Electric, Gas and Water Supply Industry			3,784.4				5,211.4				3.6
Others(2)			24,392.8				28,003.2				19.5
Total		W	132,245.7			W	143,591.1				100.0	%
Percentage increase (decrease) from previous period			15.0	%			8.6	%

 

(1)	Includes loans extended to affiliates.

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

The manufacturing sector accounted for 45.6% of our outstanding equipment capital and working capital loans as of December 31, 2021. As of December 31, 2021, loans to the transportation equipment manufacturing businesses and the metal product manufacturing businesses accounted for 10.6% and 9.6%, respectively, of our outstanding equipment capital and working capital loans to the manufacturing sector.

Industrial Bank of Korea was our single largest borrower as of December 31, 2021, accounting for 4.8% of our outstanding equipment capital and working capital loans. As of December 31, 2021, our five largest borrowers and 20 largest borrowers accounted for 12.2% and 23.4%, respectively, of our outstanding equipment capital and working capital loans.

 

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The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of December 31, 2021 by industry sector:

20 Largest Borrowers by Industry Sector

 

		As % of December 31, 2021 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Manufacturing			27.5	%
Banking and Insurance			50.5
Transportation			11.5
Electric, Gas and Water Supply Industry			3.5
Others(1)			7.0
Total			100.0	%

 

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

The following table categorizes the new loans made by us by industry sector:

New Loans by Industry Sector

 

		Year Ended December 31,								As % of Year Ended December 31, 2021 Total
		2020				2021
		(billions of won, except percentages)
Manufacturing		W	39,368.4			W	42,998.5				53.2	%
Banking and Insurance			10,404.0				13,582.3				16.8
Transportation			3,856.2				3,768.8				4.7
Electric, Gas and Water Supply Industry			2,330.3				3,474.6				4.3
Public Administration			181.0				319.9				0.4
Others(1)			15,118.6				16,645.0				20.6
Total		W	71,258.5			W	80,789.1				100.0	%
Percentage increase (decrease) from previous period			18.6	%			13.4	%

 

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

Loans by Categories

In addition to dividing our loans into equipment capital and working capital loans, we classify loans into several groupings, the most important being:

 

•

industrial fund loans;

 

•

on-lending loans;

 

•

foreign currency loans;

 

•

local currency loans denominated in foreign currencies;

 

•

offshore loans in foreign countries; and

 

•

government fund loans.

 

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