DGB Financial : FY2023 Audit Report(Separate)

DGB FINANCIAL GROUP CO., LTD.

Separate Financial Statements

As of and for the years ended December 31, 2023 and 2022

DGB FINANCIAL GROUP CO., LTD.

Contents

	Page(s)
Independent Auditor's Report		1 - 3
Separate Statements of Financial Position		4
Separate Statements of Comprehensive Income		5
Separate Statements of Changes in Equity		6
Separate Statements of Cash Flows		7
Notes to the Separate Financial Statements	8	- 69
Independent Auditor's Report on Internal Control over Financial Reporting	70	- 71
ICFR Operating Status Report		72

Independent Auditor's Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of DGB Financial Group Co., LTD.

Opinion

We have audited the accompanying separate financial statements of DGB Financial Group Co., LTD. (the Company), which comprise the separate statement of financial position as at December 31, 2023 , and the separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including material accounting policy information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of DGB Financial Group Co., LTD. as at December 31, 2023 and its separate financial performance and its separate cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

We also have audited, in accordance with Korean Standards on Auditing, the Company's Internal Control over Financial Reporting as of December 31, 2023, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting, and our report dated March 13, 2024 expressed an unqualified opinion.

Basis for Opinion

We conducted our audit in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key Audit Matters

There is no key audit matter identified to be described in this audit report.

Other Matters

The Company's separate financial statements for the year ended December 31, 2022 were audited by Ernst & Young Han Young who expressed an unqualified opinion on those statements on March 13, 2023.

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

1

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes

our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
  report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

2

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the

key audit matters. We describe these matters in our auditor's report unless law or regulation precludes

public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Sungeun Jin, Certified Public Accountant.

Seoul, Korea

March 13, 2024

This report is effective as of March 13, 2024, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

3

DGB FINANCIAL GROUP CO., LTD.

Separate Statements of Financial Position

As of December 31, 2023 and 2022

(In millions of Korean won)
			December 31,	December 31,
	Note		2023	2022
Assets
Cash and due from banks	4,27,28,29	W	194,391	213,507
Financial assets at fair value
through profit or loss	5,28,29		280,086	264,214
Loans receivable at amortized cost	7,28,29		9,951	59,866
Investments in subsidiaries	8		3,928,697	3,662,655
Property and equipment	9,28		4,128	5,774
Intangible assets	10		6,207	4,671
Net defined benefit assets	13		412	1,282
Derivative financial instruments	6,28,29,31		19,341	8,168
Deferred tax assets	25		2,253	6,926
Other assets	11,28,29		34,233	126,940
Total assets		W	4,479,699	4,354,003
Liabilities
Debentures	12,29		1,049,026	928,977
Borrowings	12,29		-	95,000
Derivative financial instruments	6,28,29,31		4,357	1,919
Current tax liabilities	14,25		25,115	73,520
Other liabilities	14,28,29		21,207	19,680
Total liabilities		W	1,099,705	1,119,096
Equity
Capital stock	1,15		845,729	845,729
Hybrid equity securities	15		613,765	498,098
Capital surplus	15		1,560,628	1,560,628
Capital adjustments	15		(20,578)	-
Accumulated other comprehensive loss	17		(1,176)	(117)
Retained earnings	16		381,626	330,569
Total equity			3,379,994	3,234,907
Total liabilities and equity		W	4,479,699	4,354,003

See accompanying notes to the separate financial statements.

4

DGB FINANCIAL GROUP CO., LTD.

Separate Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022

(In millions of Korean won, except earnings per share)
	Note		2023	2022
Interest income		W	1,532	2,172
Interest expense			32,208	25,673
Net interest expense	18,28,29		(30,676)	(23,501)
Fee and commission income			1,940	1,021
Fee and commission expense			3,848	3,672
Net fees and commission expense	19,28		(1,908)	(2,651)
Dividend income	20		231,085	234,244
Provision for credit losses(reversal)	7,21,28,29		(230)	(51)
General and administrative expenses	22,28		35,489	32,771
Gain (loss) on financial instruments at fair value
through profit or loss	28,29		30,505	(24,513)
Operating profit			193,747	150,859
Net non-operating income (expenses)	24,28		(5,524)	(9,007)
Profit before income tax expense			188,223	141,852
Income tax expense (income)	25		5,147	(8,384)
Net income for the year		W	183,076	150,236
Other comprehensive income (loss)			(1,059)	1,543
1. Comprehensive income (loss) that will never be
reclassified to profit or loss			(1,059)	1,543
1-1. Remeasurement of the defined benefit plans	13,17		(1,059)	1,543
Total comprehensive income		W	182,017	151,779
Basic earnings per share in Korean won	26		959	780

See accompanying notes to the separate financial statements. 5

DGB FINANCIAL GROUP CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(In millions of Korean won)
			Hybrid			Accumulated
			equity			other
		Capital		Capital	Capital	comprehensive	Retained	Total
		stock	securities	surplus	adjustments	income	earnings	equity
Balance at January 1, 2022	W	845,729	498,098	1,560,628	-	(1,660)	305,219	3,208,014
Dividends for hybrid equity
securities		-	-	-	-	-	(18,325)	(18,325)
Remeasurement of defined
benefit plans		-	-	-	-	1,543	-	1,543
Annual dividend		-	-	-	-	-	(106,562)	(106,562)
Net Income		-	-	-	-	-	150,237	150,237
Balance at December 31, 2022	W	845,729	498,098	1,560,628	-	(117)	330,569	3,234,907
Balance at January 1, 2023	W	845,729	498,098	1,560,628	-	(117)	330,569	3,234,907
Dividends for Hybrid equity
securities		-	-	-	-	-	(22,074)	(22,074)
Issuance of hybrid equity
securities		-	265,068	-	-	-	-	265,068
Repayments of hybrid equity
securities		-	(149,401)	-	(599)	-	-	(150,000)
Acquisition of treasury shares		-	-	-	(19,979)	-	-	(19,979)
Remeasurement of defined
benefit plans		-	-	-	-	(1,059)	-	(1,059)
Annual dividend		-	-	-	-	-	(109,945)	(109,945)
Net Income		-	-	-	-	-	183,076	183,076
Balance at December 31, 2023	W	845,729	613,765	1,560,628	(20,578)	(1,176)	381,626	3,379,994

See accompanying notes to the separate financial statements.

6

DGB FINANCIAL GROUP CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(In millions of Korean won)
	Note		2023	2022
Cash flows from operating activities
(1) Net income		W	183,076	150,237
(2) Adjustments for non-cash items			(222,671)	(181,419)
(3) Changes in assets and liabilities			15	17,508
(4) Interest paid			(27,986)	(23,338)
(5) Interest received			1,680	2,292
(6) Dividends received			283,835	384,936
(7) Income tax received(paid)			784	(1,294)
I. Net cash provided by operating activities			218,733	348,922
Cash flows from investing activities
Decrease in loans receivable at amortized cost			50,000	25,000
Acquisition of investment shares in subsidiaries			(271,720)	(60,000)
Acquisition of property and equipment,			(264)	(541)
Acquisition of intangible assets			(1,515)	(1,699)
Increase in prepayment			(978)	(1,467)
Increase in deposits			-	(100)
Acquisition of Financial assets measured at FVTPL			-	(295,000)
II. Net cash used in investing activities			(224,477)	(333,807)
Cash flows from financing activities
Issuance of debentures			219,581	349,309
Repayments of debentures			(100,000)	(120,000)
Proceeds from borrowings			53,000	92,774
Repayments of borrowings			(148,000)	-
Decrease in lease liabilities			(1,023)	(1,151)
Acquisition of treasury shares			(19,979)	-
Dividends paid			(109,945)	(106,562)
Dividends paid on hybrid equity securities			(22,074)	(18,325)
Issuance of hybrid equity securities			265,068	-
Repayments of hybrid equity securities			(150,000)	-
III. Net cash provided by (used in) financing activities			(13,372)	196,045
IV. Net increase (decrease) in cash and cash equivalents(I+II+III)			(19,116)	211,160
V. Cash and cash equivalents at the beginning of the year			213,505	2,345
VI. Cash and cash equivalents at the end of the year	27	W	194,389	213,505

See accompanying notes to the separate financial statements.

7

DGB FINANCIAL GROUP CO., LTD.

Notes to the Separate Financial Statements

As of and for the years ended December 31, 2023 and 2022

1. Reporting Entity
   DGB Financial Group Co., Ltd. (the Company) was established on May 17, 2011 by transferring shares from shareholders of Daegu Bank, Daegu Credit Information Corporation, and Cardnet Corporation for the purpose of controlling, managing, and providing financial services to subsidiaries or subsidiaries closely related to the financial business through ownership of stocks. As of December 31, 2023, the capital stock is W845,729 million and was listed on the Korea Exchange on June 7, 2011.
2. Basis of Preparation
   The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying separate financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
   Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Company's financial position, financial performance or cash flows, is not presented in the accompanying separate financial statements.
   (2-1) Statement of compliance
   The separate financial statements have been prepared in accordance with Korean IFRS, as prescribed in the Article 5, Paragraph 1, and Subparagraph 1 of the Act on External Audits of Corporations.
   The separate financial statements were authorized for issue by the Board of Directors on February 7, 2024, which will be submitted for approval to the stockholder's meeting to be held on March 28, 2024.
   The Company's separate financial statements are in accordance with Korean IFRS 1027 Separate Financial Statements, which are prepared on the basis of the financial performance of the parent company, investors of the related companies. They are presented in accordance with accounting standards based on direct equity investments.
   (2-2) Basis of measurement
   The separate financial statements have been prepared on the basis of historical cost except for the major items in the following statement of financial position.
3. • derivative financial instruments measured at fair value
   • financial instruments at fair value through profit or loss measured at fair value
   • defined benefit liabilities recognized at the net of the total present value of defined benefit obligations less the fair value of plan assets
   • liabilities for cash-settledshare-based payment arrangements measured at fair value

(2-3) Functional and presentation currency

The separate financial statements are prepared in accordance of functional currency and the presentation currency of the main economic environment in which the Company's operating activities are recorded in Korean won.

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