REGULATION

ON

SUPERVISION OF TRUST BUSINESS

Regulation on Supervision of Trust Business

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Definitions

§3.	Alteration, etc. of the Articles of Incorporation

II.	Business

Section 1. Types of Trust Business and Terms of Transaction

§4.	Types of Trust Business

§5.	Termination of Trust Contract Before Maturity

§6.	Preservation of a Principal or a Profit

§7.	Trust Proceeds

§8.	Trust Fees

§9.	Authorization for the Issuance of Beneficiary Certificates

Section 2. Standards For Operation and Management of Trust Property

§10.	Scope of Corporate Bonds Suitable for Trust Property

§11.	Standards, etc. for Trust Fund Management

§12.	Management Standards for a Specified Money Trust Fund

§13.	Management Standards for a Real Estate Investment Trust Fund

§14.	Cross Transactions of Trust Operating Assets

§15.	Purchase Price of Beneficiary Certificates

§16.	Restriction on Borrowing Working Expenses For Real Estate Trust

§17.	Risk Management of Trust Property

§18.	Public Disclosure Concerning Exercise of Voting Rights

III.	Accounting and Report

§19.	Accounting Standards

§20.	Evaluation Committee for Securities, etc.

§21.	Monthly and Annual Report

IV.	Auditing of the Trust Property

§22.	Auditor's Report

§23.	Report on the Appointment of an Auditor

§24.	Auditing Standards for Trust Assets

§25.	Inspection by the Beneficiary

V.	Sound Management and Protection of Investors

§26.	Deposits

§27.	Management Disclosure

§28.	Asset Classification of Real Estate Trust Companies

§29.	Assets Subject To Classification

§30.	Loan Loss Provisioning Standards

§31.	Criteria For The Drafting And Application of Standard Contract Terms And Conditions on Trust Transaction

§32.	Report, etc. of Standard Contract Terms and Conditions

§33.	Public Disclosure of Terms on Trust Transactions

§34.	Prohibition against Unsound Business Acts

§35.	Separation of Banking Business and Trust Business

VI.	Korean Branches of Foreign Financial Institutions

§36.	Operational Funds in The Branches of Foreign Financial Institutions

§37.	Preservation of Operational Funds in the Branch of Foreign Financial Institutions

§38.	Exception To Application

VII.	Secured Corporate Bond Trust

§39.	Registration Of The Secured Corporate Bond Trust Business

§40.	Report

§41.	Provisions Applicable to Secured Corporate Bond Trust Company

VIII.	Supplementary Provisions

§42.	Assistance of Service

§43.	Report

Addenda

Enacted on April 1, 1998

Amended on July 24, 1998

Amended on November 27, 1998

Amended on December 11, 1998

Amended on December 28, 1998

Amended on February 26, 1999

Amended on August 6. 1999

Amended on September 14. 1999

Amended on December 11. 1999

Amended on February 11. 2000

Amended on February 25. 2000

Amended on May 26. 2000

Amended entirely on January 29. 2001 FSC 2001-1

Amended on November 28, 2001 FSC 2001-92

Amended on May 15, 2002 FSC 2002-31

CHAPTER I.

GENERAL PROVISIONS

§1. Purpose

The purpose of this Regulation is to prescribe details necessary for the enforcement of pertinent matters relating to the supervision of trust business by the Financial Supervisory Commission (hereinafter the FSC), articulated in the Trust Business Act (hereinafter referred to as the Act) and its Enforcement Decree (hereinafter referred to as the Decree), the Secured Corporate Bond Trust Act and its Enforcement Decree, the Act concerning the Establishment of Financial Supervisory Organization and its Enforcement Decree, and any other relevant statutes and decrees.

§2. Definitions

(1) The terms used in this Regulation shall be defines as follows:

1. The term "trust company" means a company authorized to engage in trust business in accordance with Article 3 of the Act;

2. The term "trust bank" means a banking institution under the Banking Act, authorized to engage in trust business in accordance with Article 3 of the Act;

3. The term "real estate trust company" means a company authorized to specialize in real estate trust business in accordance with Article 3 of the Act;

4. The term "secured corporate bond trust company" means a company registered at the FSC to engage in trust business of secured corporate bonds in accordance with Article 5 of the Secured Corporate Bond Trust Act.

(2) Terms employed in this Regulation, except the terms of paragraph (1), shall have same meaning to those under the Act and Decree.

§3. Alteration, etc. of the Articles of Incorporation

(1) If a trust company has altered its articles of incorporation, or the type or manner of its business in accordance with Article 8 paragraph (2) of the Act, it shall report to the Governor of the Financial Supervisory Service (hereinafter referred to as "the Governor") with documents stating the reason and contents thereof. If a trust company has stated or reported the alteration of its articles of incorporation in accordance with relevant statutes and decrees, the statement or report will be presumed to be compliant with the reporting obligation under this paragraph.

(2) The Governor may, when contents reported in accordance with paragraph (1) seem to violate relevant statutes and decrees or disturb the soundness of the trust transaction system, require modification thereof.

CHAPTER II.

BUSINESS

Section 1.

Types of Trust Business and Terms of Transaction

§4. Types of Trust Business

(1) Trust companies may engage in businesses under the following subparagraphs to such an extent authorized and reported in accordance with Article 3 paragraph (1) and Article 8 paragraph (2) of the Act:

1. Money trust:

a. Specified money trust; and

b. Unspecified money trust;

2. Trust of securities;

3. Trust of money receivables;

4. Trust of movable properties;

5. Trust of land and its fixtures; and

6. Trust of superficies, registered lease or unregistered land lease.

(2) Trust companies may engage in businesses ancillary to trust business provided in Article 13 paragraph (1) of the Act to such an extent authorized and reported in accordance with Article 3 paragraph (1) and Article 8 paragraph (2) of the Act.

§5. Termination of Trust Contract Before Maturity

(1) A truster may terminate a trust contract before its maturity, pursuant to Article 10 paragraph (2) of the Act and Article 10 subparagraph 1 of the Decree. Trust proceeds in this case are calculated by subtracting the agreed fee of termination before maturity under the trust contract from trust proceeds under Article 7.

(2) Notwithstanding the second clause of paragraph (1), the fee of termination before maturity shall not be subtracted in cases under the following subparagraphs, which are regarded as special terminations before maturity:

1. Case where the trust terminated is one exempted from the payment of income tax pursuant to the Act concerning the Restriction on Exceptions to Taxation, its Enforcement Decree and other relevant statutes and decrees relating to taxation, and the termination before maturity of the trust is still subject to an exception to taxation without regard to termination before maturity;

2. Case where a trust contract is terminated before maturity due to inconveniences in transactions caused by closing, merger or movement of business offices in the course of merger or business rationalization of the trust company; and

3. Case where a trust contract is terminated before maturity for the purpose of correcting the unsound business practices under Article 34 subparagraph 1.

§6. Preservation of a Principal or a Profit

(1) In accordance with the provisions of Article 10 paragraph (2) of the Act and Article 10 subparagraph 2 of the Decree, a trust company shall not make a contract preserving a principal or a profit accrued to the property which the company has received at the time of trust. However, a trust company may make a contract preserving a principal in such cases as trusts for pension or retirement, specially designated by the Governor.

(2) If operation profits fall short of the principal or the profit agreed upon in a trust contract, the trust company shall cover the deficiency thereof in the following order: (i) special reserves under Article 19 paragraph (3) subparagraph 1, (ii) trust fees, and (iii) its own property.

§7. Trust Proceeds

Trust proceeds under Article 10 paragraph (2) of the Act and Article 10 subparagraph 3 of the Decree, shall be computed on the basis of the operational results of trust assets.

§8. Trust Fees

Trust fees under Article 10 paragraph (2) of the Act and Article 10 subparagraph 3 of the Decree, shall be determined by trust contracts.

§9. Authorization for the Issuance of Beneficiary Certificates

(1) In order to obtain authorization for the issuance of beneficiary certificates pursuant to Article 17-2 paragraph (2) of the Act, a trust company shall submit to the FSC an application for authorization with the following documents attached thereto:

1. Issuing plan of beneficiary certificates;

2. Fund operation plan; and

3. Standard contract terms and conditions of trust or trust deeds.

(2) The FSC shall, when an application for authorization mentioned in paragraph (1) is submitted, review it based on the following criteria:

1. It shall neither violate relevant statutes and decrees nor impair the essential nature of a trust company;

2. It shall not infringe upon the rights and interests of interested parties such as truster and beneficiaries; and

3. It shall not be detrimental to the sound management of the trust company and shall contribute to the enhancement of profitability.

Section 2.

Standards For Operation and Management of Trust Property

§10. Scope of Corporate Bonds Suitable for Trust Property

(1) As a trust company operates money belonging to an unspecified money trust in accordance with Article 15-2 paragraph (3) of the Act and Article 13 subparagraph 5 of the Decree, private placement unguaranteed corporate bonds of the corporate bonds provided under Article 12 paragraph (1) subparagragh 2 of the Decree (including corporate bonds provided under Article 6 subparagraph 1 of the Enforcement Regulation of the Trust Business Act; the same applies hereinafter) shall not exceed 3/100 of the trust property.

1. [Deleted]

2. [Deleted]

(2) As for private placement guaranteed corporate bonds, only those whose payment of principal and interest are guaranteed by the financial institutions stipulated under the provisions of Article 12 paragraph (1) subparagraph 1 of the Decree, those guaranteed by the Korea Credit Guarantee Fund under the Credit Guarantee Fund Act or the Korea Technology Credit Guarantee Fund under the Act on Financial Assistance to New Technology Venture Business, and those issued under the Act on the Secured Corporate Bond Trust are applicable.

§11. Standards, etc. for Trust Fund Management

(1) A trust company shall, pursuant to Article 15-2 paragraph (3) of the Act and Article 13 of the Decree, operate money belonging to an unspecified money trust in accordance with the following standards. However, this shall not apply otherwise approved by the Governor:

1. Loans to a single person or corporation shall not exceed 5/100 of total outstanding loans of the trust fund as of the end of a previous fiscal year;

2. Purchase or possession of stocks issued by corporation shall not exceed 15/100 of total stocks issued by the corporation in question; and

3. Fund Management on stocks issued by other corporations, stock index futures and options under the Securities and Exchange Act, futures under the Futures Trading Act, and overseas futures, shall not exceed 50/100 of trust assets by each product.

(2) In case a trust company engages in trading of stock index futures, options, futures, and overseas futures pursuant to Article 11 paragraph (2) of the Decree, the total amount deposited as exchange margin shall not exceed 15/100 of the trust property by each product.

(3) Unless approved otherwise by the Governor, a trust account shall not be drawn from trust company's own account, except for the undertaking of trust under Article 4 paragraph (1) subparagraph 5 and 6 pursuant to Article 13 of the Decree.

(4) The Governor shall, in case granting approval pursuant to proviso of paragraph (3), make report thereof without delay to the FSC.

§12. Management Standards for a Specified Money Trust Fund

(1) Pursuant to Article 15-2 paragraph (3) of the Act and Article 13 subparagraph 5 of the Decree, the management of a specified money trust fund shall be performed in accordance with the method specified by a truster.

(2) The truster shall specify methods of fund management, corresponding to the trust fund management methods under the Act, Decree and other relevant statutes, which must be expressly written in the trust contract.

(3) Notwithstanding paragraphs (1) and (2), in case there is an outstanding balance which may not be operated in accordance with methods specified by the truster, trust company may operate it in the same manner as Article 11 subparagraphs 1 and 2 of the Decree.

(4) Money belonging to a specified money trust shall not be jointly managed.

(5) In case a trust company acquires stocks issued by a truster of a specified money trust pursuant to Article 189-2 paragraph (2) of the Securities and Exchange Act, such an acquisition shall be made in the securities market or KOSDAQ under Article 2 paragraph (12) and (14) of the Securities and Exchange Act, or through tender offers under Chapter IV of the Securities and Exchange Act.

§13. Management Standards for Real Estate Investment Trust Fund

Pursuant to Article 15-2 paragraph (3) of the Act and Article 13 subparagraph 5 of the Decree, more than 70/100 of annual average amounts of a real estate investment trust fund shall be employed in the purchase or development of real estate, loans for purchase or development of real estate, and investment to marketable securities related to real estate.

§14. Cross Transaction of Trust Operating Assets

(1) Disposal of trust operating assets shall be made, in principle, through sales in the market, and the cross transaction of trust operating assets shall not be made for the purpose of increasing profit in a specific trust product.

(2) Notwithstanding paragraph (1), in the event the sale of operating assets in the market is deemed to be impracticable even under the circumstances where the disposal of operating property is badly needed due to the termination of a trust contract, payments of interest, tax and public charges, and payment of trust fees after account settlements, the cross transaction of such assets between separate trust funds based upon the market price may be allowed within the scope necessary. As for unmarketable assets, the constructive market price reflecting on credit-assessment allowances shall be applied thereto.

§15. Purchase Price of Beneficiary Certificates

When a trust company purchases beneficiary certificates as its own assets pursuant to the provisions of Article 17-6 of the Act, the purchasing price shall be determined pursuant to the provisions of Article 5 paragraph (1).

§16. Restriction on Borrowing Working Expenses for Real Estate Trust

The amount of money borrowed by a real estate trust company for each real estate trust project shall not exceed 70/100 of the total amount necessary for the real estate trust project concerned; provided that, however, the amount for leasing trust project shall not exceed 90/100.

§17. Risk Management of Trust Property

For the purpose of enhancing the soundness of trust asset management, trust companies shall establish a comprehensive risk management system for all the types of risks arising from trust asset management, such as credit risk, liquidity risk, interest rate risk, price fluctuation risk, etc., together with the adequate administrations of internal control and self-auditing.

§18. Public Disclosure concerning Exercise of Voting Rights

(1) In making a public disclosure concerning exercise of voting rights pursuant to Article 17-9 of the Act, a trust company shall make the public disclosure of the contents thereof within five days before the date of the shareholders' meeting through the Korea Stock Exchange under Article 71 of the Securities and Exchange Act or through the KOSDAQ under Article 2 paragraph (14) of the same Act. In case the corporation having issued the shares in question is not a listed corporation or an KOSDAQ-registered corporation under the Securities and Exchange Act, the trust company shall post up the results thereof in its business offices for public knowledge.

(2) In case where the disclosure in paragraph (1) can not be made until five days before the date of shareholders' meeting due to the specifics of its subject matter being yet undecided, a trust company shall make public disclosure of such circumstances before the date of the shareholders' meeting and shall make public disclosure concerning the contents thereof within five days from the date of the shareholders' meeting. Such a public disclosure shall be made in the same manner as paragraph (1).

CHAPTER III.

ACCOUNTING AND REPORT

§19. Accounting Standards

(1) Accounting standards for trust banks and real estate trust companies pursuant to Article 20 paragraph (2) of the Act and Article 15 paragraph (2) of the Decree shall be as following:

1. Trust bank : a balance sheet and a statement of profit and loss pertaining to a trust account; and

2. Real estate trust company :

a. Own account : a balance sheet and a statement of profit and loss

b. Trust account : a balance sheet, a statement of profit and loss, and specifications for construction cost of land trust

(2) A trust company shall maintain fairness and objectivity in its accounting procedures through reasonably specifying its financial condition and management results as mandated by the Governor and through accumulating sufficient funds in reserve for the maintenance of soundness in trust assets pursuant to the provisions under Article 20 paragraph (2) of the Act and Article 15 paragraph (3) of the Decree.

(3) Sufficient funds in reserve under paragraph (2) may be classified as following:

1. Special reserve : amounts reserved by a trust bank for preserving principal or profit guarantee trust;

2. Trust risk reserve : amounts reserved by a real estate trust company for trusts other than a land trust, in preparation of its liability from the trust business operations; and

3. Trust business reserve : the amount reserved by a real estate trust company for a loss preservation from its trust business.

§20. Evaluation Committee for Securities, etc.

(1) For the purposes of fair classification and evaluation of non-marketable securities, etc., a trust company may establish and operate a securities evaluation committee (hereinafter referred to as "evaluation committee").

(2) The evaluation committee shall conduct the following businesses:

1. Determination of applicable interest rates in respect of the risk spread when selling bonds at lower price(s);

2. Valuation of bonds whose price information presented by valuating institutions under Article 62 paragragh (1) of the Regulation on Supervision of Securities Investment Trust Business is not applicable; and

3. Determination of any other matters related to the evaluation of trust property.

(3) Trust companies may prescribe the details of operation, etc., related to the evaluation committee.

§21. Monthly and Annual Report

(1) Pursuant to Article 19 of the Act and Article 14 of the Decree, trust companies shall submit to the Governor a monthly report within the 20th day of a next month, and an annual report within a month from the end of a business year.

(2) The monthly and the annual report shall be signed and sealed by representatives and persons in charge, or their agents.

(3) The type and format of the monthly and the annual report pursuant to paragraph (1) shall be determined by the Governor.

(4) In addition to the monthly and the annual business report mentioned in paragraph (1), trust companies shall submit any other materials to the Governor in response to requests from the latter for ensuring its effectiveness.

CHAPTER IV.

AUDITING OF THE TRUST PROPERTY

§22. Auditor's Report

When deemed necessary for protecting the public or beneficiaries pursuant to Article 12-2 paragraph (2) of the Act, the Governor may order an auditor to submit materials or reports concerning the auditing of trust assets or to take any other measures necessary within a specified period.

§23. Report on the Appointment of an Auditor

(1) In the event a trust company appoints or replaces its auditor pursuant to Article 12-2 paragraph (4) of the Act and Article 10-3 of the Decree, it shall report to the Governor within a week from the date of such an appointment or replacement the fact with the following documents attached:

1. Document showing the resolution of the audit committee or the consent of internal auditors; and

2. Document containing profiles of auditors, appointed or replaced.

(2) Pursuant to Article 12-2 paragraph (4) of the Act and Article 10-6 of the Decree, trust companies shall submit auditor's report to the Governor.

§24. Auditing Standards for Trust Assets

Auditing standards under the "Accounting Principles and Auditing Standards for Trust Assets," drafted and promulgated by the FSC through the review of the Securities and Futures Commission pursuant to Article 12-9 of the enforcement decree of the Securities Investment Trust Business Act, shall be applied to the auditing of trust assets pursuant to Article 12-2 paragraph (4) of the Act and Article 10-4 of the Decree.

§25. Inspection by the Beneficiary

(1) A trust company shall make available its audit report to beneficiaries for two years in specified places within its headquarters, branches, agencies and other places of business, pursuant to the provisions of Article 12-2 paragraph (4) of the Act and Article 10-6 paragraph (3) of the Decree.

(2) Pursuant to Article 17-10 of the Act, beneficiaries may request to the trust company for the inspection or issuance of a certified copy or abstract of:

1. balance sheets of the trust products;

2. statements of profit and loss of the trust products; and

3. asset management report.

CHAPTER V.

SOUND MANAGEMENT AND PROTECTION OF INVESTORS

§26. Deposits

(1) Trust Companies shall, pursuant to Article 16 of the Act, deposit any greater amounts of 1/100 of their paid-in capital and 10/100 of their profits for the fiscal year concerned within the 20th day from the date of regular shareholders' meetings until the deposited amounts reach to 10/100 of their paid-in capital. As for trust banks, however, the amounts deposited shall be the amounts equivalent to 1/2000 of the paid-in capital.

(2) The place of deposit under paragraph (1) shall be the place where the headquarter office of a trust company is located.

(3) Assessment of the deposited government bonds shall be made on their par value, whereas assessment of securities shall be made on the average price during one month before the settlement date of the trust company.

(4) When a trust company has placed the deposit pursuant to paragraph (1), it shall submit to the Governor without delay, documents stating the contents of deposited amounts and its ratio to the capital, with copy of the deposit receipts attached thereto.

§27. Management Disclosure

(1) Pursuant to Article 25-3 of the Act and Article 16-2 of the Decree, real estate trust companies shall make public disclosure of the following items, within three months from the date of account settlement and within two months from the date of first-half provisional account settlement:

1. Organizational structure and personnel;

2. Finance, and profit and loss;

3. Supply and management of fund; and

4. Progress in the real estate trust business by stages.

(2) In addition to paragraph (1), real estate trust companies shall make public disclosure of relevant matters, in the event the soundness of management has been or is likely to be severely damaged due to any case of the following subparagraphs:

1. Losses incurred, exceeding any amount equivalent to 5/100 of the total equity capital as of the end of the previous month, except for losses less than KRW 1 billion.

2. Bankruptcy of a construction company or a truster, for the land trust business.

3. Losses incurred or which would foreseeably incur, exceeding any amount equivalent to 1/100 of the total equity capital as of the end of the previous month due to financial accidents under the Regulation on Disciplines against Financial Institutions, except for losses less than KRW 500 million.

4. When subject to measures under Articles 28 and 29-2 of the Act, Article 10 or 14 of the Act Concerning the Structural Improvement of Financial Industry, the substance and nature of such measure(s).

(3) Details on contents, methods, time, etc. of the public disclosure mentioned in paragraph (2) shall be determined by the Governor

(4) The public disclosure on the management performance of trust banks pursuant to Article 25-3 of the Act and Article 16-2 of the Decree, shall be complied with the Regulation on the Supervision of Banking Business.

(5) The Governor may, in case where a trust company makes unfaithful public disclosure such as false disclosure of matters articulated in paragraph (1) through (4), omission of material matters, etc., request the trust company in question to correct the public disclosure or to make another public disclosure.

§28. Asset Soundness Classification of Real Estate Trust Companies

(1) A real estate trust company shall classify the soundness of their holding assets into five different categories of "normal," "precautionary," "substandard," "doubtful," and "estimated loss" while considering the contents of trust business and the debt-repayment capability of the borrowers , and accumulate and maintain adequate loss provisioning, including allowances for payment guarantees

(2) For asset soundness classification under paragraph (1), a real estate trust company shall establish standards for asset soundness classification by reflecting applicable ones from the standards prescribed in the Regulation on the Supervision of Banking Business. However, for the lending to Trust Account, the asset classification shall be based on such standards as set forth in <Appendix Table>.

(3) A real estate trust company shall report to the Governor on establishment and alteration of the standards of assets soundness classification under paragraph (2) and the reults of asset soundness classification and loan loss provisioning accumulation on the said standards.

(4) The Governor may examine adequacy of  asset soundness classification and loan loss provisioning accumulation of a real estate trust company and require the corrections thereof when determining their inadequacy .

(5) Real estate trust companies shall secure the soundness of their assets through the early write-off of their assets classified as "doubtful" or "estimated loss" pursuant to paragraph (1) (hereinafter, "non-performing assets").

(6) The Governor may require such real estate trust companies to write off the specific non-performing assets  when he deems that the write-off performance of the non-performing assets of a real estate trust company is insufficient.

§29. Assets Subject to Classification

Holding assets under Article 28 paragraph (1) corresponds to the assets determined under the following subparagraphs

1. Loans, including lendings to trust account and trade receivable, hereinafter as such;

2. Securities;

3. Suspense payments and accounts receivables; and

4. Other assets recognized by a real estate trust company necessary for classification.

§30. Loan Loss Provisioning Standards

(1) As for loans, suspense payments of credit character, and accounts receivables as of the date of account settlement (including quarterly provisional account settlement; hereinafter as such), real estate trust companies shall accumulate reserves for loss provisioning corresponding to the amounts under the following subparagraphs in accordance with the results of assets classification:

1. 0.5/100 or more of assets classified as "normal";

2. 2/100 or more of assets classified as "precautionary";

3. 20/100 or more of assets classified as "substandard";

4. 50/100 or more of assets classified as "doubtful"; and

5. 100/100 of assets classified as "estimated loss".

(2) Notwithstanding paragraph(1), the Governor may require the relevant real estate trust company to accumulate the total amounts of expected loss into special loss provisioning by the end of a relevant quarter in the event a financial accident under the Regulation for the Examination of Financial Institutions has led or is expected to lead to losses exceeding the amounts equivalent to 1/100 of equity capital as of the end of the previous month.

(3) In the event asset soundness classification of the expected loss is determined after special loss provisioning has been made under paragraph (2), the real estate trust company may accumulate the loan loss provisioning pursuant to paragraph (1).

§31. Criteria for the Drafting and Application of Standard Contract Terms and Conditions on Trust Transaction

Pursuant to Article 25-2 of the Act, trust companies shall draft and apply standard contract terms and conditions, or a model contract relating to trust transaction(s) (hereinafter referred to as "standard contract terms and conditions of trust transaction") in accordance with the criteria provided in the following items:

1. They shall be drafted and applied fairly in accordance with the principle of good faith;

2. They shall protect the rights and interests of the truster, beneficiary and any other users of the trust company to the utmost extent;

3. They shall help maintain the soundness of the trust transaction system; and

4. They shall not violate relevant statutes and decrees, such as the Act Concerning the Regulation on Standard Contract Terms and Conditions, etc..

§32. Report, etc. of Standard Contract Terms and Conditions

(1) In case a trust company intends to formulate or amend its standard contract terms and conditions pursuant to Article 25-2 paragraph (2) of the Act, it shall submit to the Governor the standard contract terms and conditions concerned and other documents necessary for understanding the contents thereof. This does not apply to cases where the amendment is made identically with relevant statute or mandates of the FSC, or where the amendment is made only in terms of expression without actual change of contents.

(2) Pursuant to Article 25-2 paragraph (2), the Governor may, when deemed necessary to maintain the soundness of trust transactions, order the trust company in question to modify the contents of standard contract terms and conditions which have been already reported pursuant to paragraph (1),

(3) A trust company subject to the modification order pursuant to paragraph (2), shall comply with the order and report its modifications to the Governor.

(4) Pursuant to Article 25-2 paragraph (3) of the Act, the time, procedures on the formulation and amendment of the standard contract terms, and other important matters shall be in compliance with those mandated by the Governor.

§33. Public Disclosure of Terms on Trust Transactions

(1) Pursuant to Article 25-2 paragraph (4) of the Act, trust companies shall, in order to protect the rights and interests of users, precisely disclose the contract terms of trust transactions, etc.

(2) Trust companies shall not engage acts falling under the following subparagraphs when disclosing the contract terms thereof mentioned in paragraph (1):

1. Acts of indicating or expressing unsettled matters in a trust transaction as being settled;

2. Acts of expressing its comparative advantages over other trust products in a vague yet attractive manner without providing precise reasons and contents thereof;

3. Acts of guaranteeing an advance yield for a trust product which is not allowed at all;

4. Acts of presenting an estimate yield manifestly or tacitly, by distributing brochures to specified or not-specified large numbers of people; and

5. Acts of employing expressions which may give rise to misunderstanding or dispute.

(3) With respect to a trust product for which any contract of preserving a principal is not permitted, the trust company must expressly state in the trust passbook(s) or in any other appropriate instrument(s) that losses in principal investment may be incurred according to the results of trust asset management.

(4) Trust companies shall, when disclosing yields for real fiduciary account products, comply with requirements under the following subparagraphs:

1. Trust companies shall post up daily dividend rates or base prices of real fiduciary account products in their places of business;

2. Trust companies shall, in case providing dividend rates or base prices as references, indicate the fact that dividend rates or base prices may be changeable due to fluctuations in interest rate or management performance; and

3. Trust companies shall post up the average dividend rate in last month if they provide one dividend rate yield-displayed products, and shall post up dividend rates chronologically from the latest to the oldest if they provide more than one dividend rate on such products.

§34. Prohibition against Unsound Business Acts

A trust company shall not engage in unsound business acts including unfair trust transactions under the following subparagraphs;

1. Acts of restricting borrower's uses of funds or increasing the financial cost by compelling the borrower to place deposits or installment savings into either trust or bank accounts, when granting trust loans, purchasing securities, or performing any activities related to the management of a trust fund;

2. Acts of purchasing its own stocks with trust assets (except any acquisition subject to the management instruction from a truster in a specified money trust);

3. Acts of purchasing stocks, notes, or corporate bonds whose issuers are the truster of a trust in question or his affiliated companies, or acts of extending credits to such a truster or affiliated companies, with the money in a specified money trust. (this does not apply to the purchase of the stocks issued by the truster pursuant to the Article 189-2 paragraph (2) of the Securities Exchange Act);

4. Acts of establishing a trust in exchange for a hidden financial support;

5. Acts of investing in stocks by officers or employees in the stock management department of a trust company; and

6. Acts unfairly infringing the rights or interests of trusters, beneficiaries, or any other persons of interest, or acts disturbing the soundness of the financial transaction system.

§35. Separation of Banking Business and Trust Business

(1) Trust banks shall operate a system to prevent a conflict of interests between its bank accounts and trust accounts in terms of organization management, fund management, and information exchange.

(2) The Governor may, in case the system preventing a conflict of interests mentioned in paragraph (1) is deemed inappropriate, require the trust bank of its corrections.

CHAPTER VI.

KOREAN BRANCHES OF FOREIGN FINANCIAL INSTITUTIONS

§36. Operational Funds in the Branches of Foreign Financial Institutions

(1) Operational funds in the branches of foreign financial institutions under Article 29-5 paragraph (2) of the Act and Article 16-4 of the Decree, shall be 3 billion Won or more per branch.

(2) The operational fund under paragraph (1) refers to the fund of Article 16-4 paragraph (2) subparagraphs 1 through 3 of the Decree.

(3) In case a foreign bank operates more than two branches in Korea, the aggregate amounts of each branch shall be regarded as the capital of the foreign bank.

§37. Preservation of Operational Funds in the Branch of Foreign Financial Institutions

(1) Pursuant to Article 29-5 paragraph (2) of the Act and Article 16-4 paragraph (3) the Decree, in the event assets held in the Republic of Korea are short of the amounts equivalent to the operational funds, the branch of a foreign financial institution must replenish the funds within sixty days from the date of settlement of accounts.

(2) The assets held in the Republic of Korea pursuant to paragraph (1) shall be computed by deducting liabilities from all the assets denominated either in the Korean Won or in foreign currency, which have been operated and located in the Republic of Korea by the branch of a foreign financial institution.

(3) The Governor may order the replenishment, if necessary, before the date of settlement of accounts pursuant to paragraph (1), and the branch(es) of foreign financial institution(s) must implement the order(s) within thirty days from the receiving date of such order(s).

(4) The replenishment pursuant to paragraphs (1) and (3) shall be made through the collection of assets from overseas or supply of funds from a headquarter, and the branch of a foreign financial institution must report to the Governor without delay on the result of replenishment.

§38. Exception to Application

As to the branches of foreign banks conducting trust business concurrently, the relevant provisions under the Regulation on the Supervision of Banking Business relating to operational funds shall be applied instead of Articles 36 and 37.

CHAPTER VII.

SECURED CORPORATE BOND TRUST

§39. Registration of the Secured Corporate Bond Trust Business

(1) Any person intending to conduct trust business in terms of secured corporate bonds shall submit to the Governor a registration application with the documents (hereinafter referred to as "a registration application, etc.") pursuant to Article 5 paragraphs (3) and (4) of the Secured Corporate Bond Trust Act.

(2) The Governor may not reject the application, except cases of there being a false statement on or an omission of material matters in the registration application, etc. mentioned in paragraph (1). When a registration is made, a certificate of registration stating the items under each subparagraph of Article 5 paragraph (5) of the Secured Corporate Bond Trust Act shall be given.

(3) In applying paragraph (2), the Governor may, in case of omission or minor error, etc., request its corrections within a specific period.

(4) In the event the Governor rejects the application pursuant to paragraph (2), he shall notify the applicant thereof without delay.

(5) Within the scope of the registration pursuant to Article 5 paragraph (1) of the Secured Corporate Bond Trust Act, a secured corporate bond trust company may engage in any ancillary businesses.

§40. Report

(1) In the event a secured corporate bond trust company appoints its representative pursuant to Article 11 paragraph (4) of the Secured Corporate Bond Trust Act, it shall report to the Governor either the name and address of the representative, or company name and its headquarter.

(2) In the event a secured corporate bond trust company submits a report to the Governor on its substitution of trust business pursuant to Article 89 paragraph (2) of the Secured Corporate Bond Trust Act, the report shall be accompanied by following documents:

1. A copy of the substitution contract; and

2. A statement of accounts on the trust business.

(3) When a secured corporate bond trust company has completed the substitution of trust business pursuant to Article 93 paragraph (1) of the Secured Corporate Bond Trust Act, it shall report to the Governor thereon in writing.

§41. Provisions Applicable to Secured Corporate Bond Trust Company

Unless otherwise provided in the relevant statutes and decrees, or otherwise mandated by the FSC, Articles 21, 31 and 32 shall apply mutatis mutandis to secured corporate bond trust companies. However, when monthly or annual business reports are submitted pursuant to Article 21, corporate bond specifications shall be attached thereto.

CHAPTER VIII.

SUPPLEMENTARY PROVISIONS

§42. Assistance of Services

Pursuant to Article 37 subparagraph 3 of the Act Concerning the Establishment of Financial Supervisory Organizations, the Governor shall assist the FSC in the following services:

1. Receiving statements, reports and applications in lieu of the FSC;

2. Drafting proposals and reports to the FSC;

3. Enforcing or implementing provisions or decisions of the FSC; and

4. Conducting, etc. matters delegated or directed by the FSC.

§43. Report

With respect to matters in the following subparagraphs, the Governor must make a quarterly report to the FSC on the results thereof :

1. auditor report(s) pursuant to Article 22;

2. report(s) on auditor(s) appointment pursuant to Article 23;

3. report(s) on trust transaction clauses pursuant to Article 32;

4. registration of secured corporate bond trust business(es) pursuant to Article 39; and

5. report(s) pursuant to Article 40.

Addenda

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Period of Application

Article 11 paragraph (1) subparagraph 3 of this Regulation shall be in effect for five years from the date of entering into force, and unless its period of effect is extended following deliberation request pursuant to Article 8 paragraph (3) of the Basic Act on Administrative Regulation or unless it is amended within the five-year period, it shall lose its effect after the period.

§3. Interim Provisions

(1) Notwithstanding Article 5 paragraph (2), causes for special termination before maturity recognized under the prior Regulation shall be regarded as such recognized under this Regulation.

(2) Article 6 shall not be applicable to any development trust created before January 1. 1999.

(3) Articles 7 and 8 shall be applied to newly created trust products or newly undertaken trust businesses after November 28, 1998. Article 8, however, may also be applied where customer protection becomes necessary due to such special circumstances as rapid fluctuations in investment asset prices.

(4) Article 10 shall be applicable to corporate bonds issued after January 1. 1999. However, notwithstanding paragraph (1) subparagraph 1, as for not-guaranteed corporate bonds issued before the entering into force of this Regulation, "within last three months" shall be replaced by "within last six months".

(5) [Deleted]

Addenda

(November 28, 2001)

§1 Effective Date

This Regulation shall be effective on the date of promulgation.

§2 Cases within Scope of Corporate Bonds Suitable for Trust Property

Notwithstanding the provisions of Article 10  paragraph (1), where a trust property created and managed before the promulgation of this Regulation exceeds limitations of private placement unguaranteed corporate bonds, it shall not exceed the limit yielded from the date of promulgation.

Addendum

(May 15, 2002)

This Regulation shall be effective on the date of promulgation.