REGULATION

ON

SUPERVISION OF SECURITIES INVESTMENT TRUST BUSINESS

Regulation on Supervision of Securities Investment Trust Business

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Definitions

II.	Authorization or Licensing

Section 1. Procedures for Authorization or Licensing

§3.	Classification of Procedures for Authorization or Licensing

§4.	Introduction to Procedures for Authorization or Licensing

§5.	Receipt of Application for Preliminary Authorization or Licensing

§6.	Public Notice of Application and Collection of Opinions

§7.	Review of Preliminary Authorization or Licensing

§8.	Decision on Preliminary Authorization or Licensing

§9.	Waiver of Preliminary Authorization or Licensing

§10.	Receipt of Application for Authorization or Licensing

§11.	Authorization or Licensing

§12.	Supplement of Data

Section 2. Review Standards

§13.	Review Standards in Granting License

§14.	Review Standards in Granting Authorization for Merger

§14-2.	The Standards for Authorization on Transfer of Business and Conversion of	Business

§14-3.	Application for Business Expansion

III.	Supervision of Management Soundness

Section 1. Accounting and Disclosure

§15.	Fiscal Year

§16.	Accounting Standards

§17.	Separation of Accounting

§18.	Statements of Final Accounts

§19.	Quarterly Reports

§20.	Classification of Asset Soundness

§21.	Assets Subject to Classification

§22.	Accumulation Standards of Allowance for Loan

§23.	Management Disclosure

Section 2. Asset Management

§24.	Standards for Use of Asset Value

§25.	Fluctuation of Asset Price

§26.	Restrictions on Securities Ownership

§27.	Restrictions on Debt Guarantee

§28.	Restrictions on Foreign Currency Asset Ownership

§29.	Restrictions on Purchase of Notes

Section 3. Maintenance of Financial Soundness

Subsection 1. Management Performance Evaluation

§30.	Management Performance Evaluation

Subsection 2. Ratio of Equity to Risks

§30-2.	Ratio of Equity to Risk

§30-3.	Calculation of Market Risk

§30-4.	Calculation of Fundamental Risk

§30-5.	Calculation of Trust Property Risk

§30-6.	Subordinated Borrowings

Subsection 3. Prompt Corrective Action

§30-7.	Management Improvement Recommendation

§30-8.	Management Improvement Requirement

§30-9.	Management Improvement Order

§30-10. Reprieve of Prompt Corrective Action

§30-11. Submission and Evaluation of Management Improvement Plan

§30-12. Implementation Period of Management Improvement Plan

§30-13. Report on Implementation of Management Improvement Plan and Request	for Correction

§30-14. Measures on Non-fulfillment of Management Improvement Plan

§30-15. Emergency Measures

§30-16.	Conclusion of Management Improvement Agreement

Section 4. Determination of Ailing Management Companies

§31.	Scope of Valuation

§32.	Valuation Standards

§33.	Management Companies Subject to Valuation

§34.	Valuation Procedures

Section 5. Internal Control

§35.	Keeping Record on Off-Balance Sheet Transactions

§36.	Risk Management Guidelines

§37.	Reorganization of Risk Management System

§37-2.	Internal Control Standards

IV.	Supervision of Affairs

Section 1. Accumulation of Reserves

§38.	Issuance of Beneficiary Certificates with Condition of Replenishing Principal

§39.	Accumulation of Reserve

§39-2.	Investment Trust Under Securities Placement

Section 2. Management and Disclosure of Trust Property

§40.	Method of Granting Easy Access to Trust Agreement

§41.	Restriction on Securities Trading between Management Company's Own	Property and Trust Property

§42.	Restrictions on Securities Trading between Converted Securities Companies and	Investment Trust

§43.	Restrictions on Cross Trading

§44.	Transfer of Securities between Trust Property

§45.	Restrictions on Investment in Non-guaranteed Bonds

§46.	Restrictions on Giving Management Instructions for Trust Property

§47.	Restrictions on Investment in Privately-Placed Bonds

§48.	Restrictions on Investment in Subordinated Bonds

§49.	Restrictions on MMF Management

§50.	Loan of Securities

§51.	Scope of Selling Companies Exercising de facto Control

§52.	Easy Access to Audit Report

§53.	Reports on Trust Assets

§54.	Preparation, Distribution of Prospectus

§55.	Preparation, Distribution of Simplified Prospectus

§56.	Preparation, Distribution of Report on Trust Property Management

§57.	Comparison and Disclosure of Management Results

§58.	Scope of Books and Documents related to Investment Trust

§58-2.	Limit to the Provision of Information

§58-3.	Payment of Performance Fee

§58-4. Reporting on Formulation·Correction of Trust Term and Conditions

§58-5. Risk Calculation for Securities Option

§59.	Detailed Standards

Section 3. Valuation of Trust Property

Subsection 1. Common Provisions

§60.	Basic Principle in Valuation of Trust Property

Subsection 2. Valuation of Bonds

§61.	Valuation of Listed Bonds

§62.	Valuation of Non-listed Bonds

§63.	Valuation of Dishonored Bonds

Subsection 3. Valuation of Stocks

§64.	Valuation of Listed Stocks

§65.	Valuation of Non-listed Stocks

Subsection 4. Valuation of Futures and Options, etc.

§66.	Valuation of Futures and Options

§67.	Valuation of Beneficiary Certificates, etc.

Subsection 5. Valuation of Securities Denominated in Foreign currencies

§68.	Base Date for Valuation

§69.	Applicable Exchange Rate

§70.	Valuation of Listed Bonds

§71.	Valuation of Listed Stocks

§72.	Valuation of Other Securities

Section 4. Declaration, Report by Management Companies

§73.	Public Notice of Closure of Investment Trust Business

§74.	Approval for Securities Trading by Officers and Employees of Management	Companies

§75.	Restriction on Domestic Investment through Management Companies' Offshore	Funds

Section 5. Domestic Sale of Foreign Beneficiary Certificates

§76.	Application of Requisites for Foreign Management Companies

§77.	Eligibility Standards of Foreign Beneficiary Certificates

§78.	Declaration of Sale

§79.	Declaration of Changed Matters

§80.	Declaration of Discontinuance of Sale Agency

§81.	Solicitation for Investment

§82.	Disclosure of Basis Price

§83.	Refusal of Acceptance

§84.	Restriction on Unfair Trading

§85.	Provision of Declaration Form

§86.	Exception of Application to Institutional Investors

Section 6. Trustee Companies and Selling Companies, etc.

§87.	Good Faith Duty of Trustee Companies

§88.	Compulsory Rejection for Improper Management Instructions

§89.	Disclosure of Objection by Trustee Companies

§90.	Sale Solicitation Advertising for Beneficiary Certificates

V.	Supplementary Provisions

§91.	Assistance in Duties

Addenda

Enacted on April 1, 1998

Amended November 13, 1998

Amended November 27, 1998

Amended December 29, 1998

Amended May 21, 1999

Amended June 25, 1999

Amended September 10, 1999

Amended November 3, 1999

Amended December 24, 1999

Amended May 10, 2000

Amended May 26, 2000

Amended June 9, 2000

Amended November 15, 2000

Wholly Amended December 29, 2000 FSC 2000-128

Amended March 1, 2001

Amended March 30, 2001. FSC 2001-17

Amended May 16, 2001. FSC 2001-33

Amended July 3, 2001. FSC 2001-43

Amended September 29, 2001. FSC 2001-71

Amended December 19, 2001. FSC 2001-99

Amended April 2, 2002. FSC 2002-15

Amended May 1, 2002. FSC 2002-26

Amended August 1, 2002. FSC 2002-49

Amended October 2, 2002. FSC 2002-66

Amended January 3, 2003. FSC 2002-84

Amended March 6, 2003. FSC 2003-14

CHAPTER I.

GENERAL PROVISIONS

§1. Purpose

The purpose of this Regulation is to prescribe the matters delegated to the FSC and the specifics necessary for the enforcement thereof under the Securities Investment Trust Act (hereinafter, "the Act"), its Enforcement Decree (hereinafter, "the Decree"), its Enforcement Rules (hereinafter, "Enforcement Rules"), Act on Structural Improvement of Financial Industry, Act on Establishment of Financial Supervisory Organizations, its Enforcement Decree, and any other relevant statues thereof.

§2. Definitions

The terms used herein this Regulation shall be defined pursuant to the Act, Decree, and the Enforcement Rules, unless defined otherwise.

1. The term "shareholders' equity"(or "equity") refers to the amount calculated in accordance with the following formula:

Shareholders' equity = Total capital as of the end of the preceding fiscal year + amount of new shares issued for the current fiscal year

2. The term "off-balance sheet transaction" refers to the transaction not expressed on the financial statements, such as contingent liabilities incurred in relation to asset management and other transactions.

3. The term "guarantee of debts" refers to, the guarantee, endorsement, provision of collateral, obligation of additional investment, or other contracts similar thereto, that are made directly or indirectly so as to secure the fulfillment of a third party's liabilities.

4. The term "management company" refers to an investment trust company (referring to the company that has obtained the License pursuant to article 9 paragraph (1) subparagraph 2 of the Act) or an investment trust management company (referring to the company that has obtained the License pursuant to article 9 paragraph (1) subparagraph 1 of the Act) and merchant banking corporation (referring to the company engaging in the securities investment trust business prescribed in article 7 of the Merchant Banking Corporation Act), whose business is to be a truster of investment trust. However, in the application of the provisions of paragraphs (2) and (3), merchant banking corporation shall not be deemed as management company.

5. The term "standard terms and conditions for a trust" refers to the trust agreement separately determined by the Korea Investment Trust Companies Association so as to provide a standard with management companies in formulating their trust agreement pursuant to Article (22) paragraph (1)p of the Act.

6. The term "bond investment trust" refers to the investment trust where its portfolio does not hold stocks and at least 60/100 of its total assets are invested in bonds (including interest futures) and the very short-term investment trust of which the management method and investment objectives are separately determined by the Governor (hereinafter, "MMF"), and the term "stock investment trust" refers to the investment trust where at least 60/100 of its total assets are invested in stocks (including stock index futures and options), and the term "mixed-investment trust" refers to the investment trust other than a bond investment trust or a stock investment trust.

7. The term "selling company" refers to a company which falls under any Subparagraph of Article 2 paragraph (5) of the Act and is registered with the FSC pursuant to Article 41-2 of the Act.

8. The term "valuation date" refers to the day before the public notice of basis price stipulated in Article 14 paragraph (1) of the Decree.

9. The term "closing price" refers to a price set in the last transaction completed during a day's trading session on the KSE prescribed in Article 71 of the Securities and Exchange Act and the KOSDAQ market (including special quotation).

10. The term "dishonored bonds and others" refers to the securities whose principal and interest may be deemed difficult to be collected due to the nonpayment, application for composition, application for commencement of company reorganization, or proceeding of bankruptcy procedures on the part of the issuer of such securities.

11. The term "securities and others" under subparagraph 10 refer to the securities prescribed in Article 2 paragraph (1) subparagraph 2 to 4 and 7 [in Subparagraph 7, "subparagraph 1 to 6" shall be regarded as "subparagraph 1 to 4"] of the Securities and Exchange Act and the commercial papers stipulated in Article 2-3 subparagraph 4 of the Enforcement Decree of the same Act.

12. The term "difference in dividend" refers to the difference between an amount of dividend to be received from old stocks and that from new stocks.

13. The term "basis price" refers to a price which serves as a base when the KSE determines the daily price change limit of the stock concerned in the cases of new listing of stocks, listing of new stock, ex-right, ex-dividend, capital retirement, or merger.

14. The term "futures trading" refers to the futures trading of the securities index prescribed in Article 2-2 paragraph (2) of the Securities and Exchange Act and those prescribed in Article 3 subparagraph 1 item a and b of the Futures Trading Act.

15. The term "options" refers to the securities options stipulated in Article 2-3 subparagraph 5 of the Enforcement Decree of the Securities and Exchange Act and the options prescribed in Article 3 subparagraph 1 item c of the Futures Trading Act.

16. The term "overseas futures trading" refers to the trading prescribed under Article 3 subparagraph 2 of the Futures Trading Act.

17. The term "sales agent" refers to an investment trust company or a distributor company.

18. The term "privately-placed bonds" refers to bonds issued in a way other than the public offering or secondary distribution prescribed in Article 2 paragraphs (3) and (4) of the Securities and Exchange Act.

19. The term "net investment trust assets" refers to an amount obtained by subtracting the total liabilities and trust stabilization fund from the total assets entered in the ledger of investment trust account.

20. The term "credit rating agency" refers to the company authorized pursuant to Article 4 paragraph (4) subparagraph 4 of the Enforcement Decree of the Use and Protection of Credit Information Act.

21. The term "commercial paper" refers to the bill designated by the minister of the Ministry of Finance and Economy according to Article 2-3 subparagraph 4 of the decree of Securities and Exchanges Law

22. "Privately placed investment trust" means an investment trust, as under Article 33 paragraph (2) of the Act. <Added January 3, 2003>

23. "Publicly placed investment trust" means an investment trust that is not a privately placed investment trust. <Added January 3, 2003>

24. "Privately placed single investment trust" means a privately placed investment trust that has a single beneficiary. <Added January 3, 2003>

25. "Publicly placed single investment trust" means a publicly placed investment trust that has a single beneficiary. <Added January 3, 2003>

CHAPTER II.

AUTHORIZATION OR LICENSING

Section 1.

Procedures for Authorization or Licensing

§3. Classification of Procedures for Authorization or Licensing

The procedures for Authorization or Licensing shall be classified into preliminary authorization or licensing (referring to an intention preliminarily expressed for a prior review of the matters subject to authorization or licensing and for securing the surety in execution thereof before granting the authorization or licensing, and which has no effect of the authorization or licensing) and the authorization or licensing, that are shown in the annexed Table 1.

§4. Introduction to Procedures for Authorization or Licensing

With regard to the questions about the procedures for authorization or licensing, reviewing criteria, application documents raised by any person or his agent intending to obtain the authorization or licensing (hereinafter referred to as "applicant"), the Governor may answer such question in writing, or by having interview or consulting with such applicant.

§5. Receipt of Application for Preliminary Authorization or Licensing

Any applicant for preliminary authorization or licensing shall file with the FSC an application for preliminary authorization or licensing which is shown in the annexed Forms 2 through 5.(including the documents to be attached) for each matter requiring such authorization or licensing,

§6. Public Notice of Application and Collection of Opinions

(1) In the event any application for preliminary authorization or licensing is filed, the FSC shall publicly announce the application date, applicant, purpose and contents of application, method of and deadline for presenting opinion through press release, Internet home page, etc. for the collection of opinions from interested parties

(2) In addition to the public notice pursuant to paragraph (1), the FSC may, when it deems necessary, request the relevant authorities and interested parties to express their opinions on the application for preliminary authorization or licensing.

(3) In the event any of the opinions collected pursuant to paragraph (1) and (2) is judged disadvantageous to the applicant, the FSC shall notify such opinion to such applicant to give the applicant an opportunity to explain the reasons therefor within certain period of time.

(4) In the event the FSC deems necessary, it may hold a public hearing for any application that may exert a significant influence on the financial market.

§7. Review of Preliminary Authorization or Licensing

(1) The Governor shall confirm whether the contents of the application are true, and review whether such application contents satisfy the reviewing standards prescribed in the relevant statutes and Section 2 of this Chapter considering the opinions collected from interested parties, the general public, and the relevant authorities.

(2) The Governor may organize and operate an evaluation committee to evaluate the feasibility of the business plan.

(3) The Governor may conduct an on-site investigation to confirm the application contents and to conduct interviews with promoters and the management.

§8. Decision on Preliminary Authorization or Licensing

(1) The FSC shall decide whether to grant the preliminary authorization or licensing in accordance with the reviewing standards prescribed in the relevant statues and Section 2 of this Chapter.

(2) In the event the FSC grants the preliminary authorization or licensing, it may attach any condition thereto, and in the event it rejects to grant the preliminary authorization or licensing, it shall notify to the applicant of the fact in writing.

§9. Waiver of Preliminary Authorization or Licensing

In the event the FSC deems that any application for authorization or licensing falls under any of the following subparagraph, it may waive the procedures for preliminary authorization or licensing.

1. Case where a prompt merger, conversion, or transfer of business is necessary for restructuring the financial industry;

2. Cases where the requirements for authorization or licensing have been already satisfied at the time of applying for the preliminary authorization or licensing;

3. Other cases where it is necessary to grant promptly the authorization or licensing in order to maintain credit market order among financial industries or for protection of customers

§10. Receipt of Application for Authorization or Licensing

Any applicant shall, after fulfilling the contents and conditions under preliminary authorization or licensing, file with the FSC an application for authorization or licensing (including the documents to be attached) for each business requiring authorization or licensing, which is provided in the annexed Forms 6 through 9.

§11. Authorization or Licensing

(1) The FSC shall decide whether to grant the authorization or licensing in accordance with the reviewing standards prescribed in the relevant statutes with respect to the application for authorization or licensing filed by an applicant, and when the FSC refuses to grant the authorization or licensing, it shall notify such applicant of the fact in writing.

(2) The Governor may conduct on-site inspections to confirm whether the contents and conditions under the preliminary authorization or licensing are satisfied.

(3) The FSC may grant the authorization or licensing on any of the following conditions:

1. A condition that the largest shareholder of any management company which has obtained the licensing pursuant to Article 9 of the Act and any person having a special relationship therewith are required to hold and not to transfer their respective equity holdings from the day of licensing;

2. A condition that is deemed necessary for the purpose of the statutes governing the authorization and Licensing, the protection of customers, and the maintenance of soundness of the financial industry.

(4) Any applicant shall commence the authorized or permitted business within 6 months from the date of authorization or licensing. However, this provision shall not apply to the case where the FSC has otherwise determined such period or approved the extension of such period.

§12. Supplement of Data

(1) In the event the Governor deems that any supplementary documents or additional data for the review of preliminary authorization or licensing or of authorization or licensing are necessary, he or she may require the applicant concerned to file such documents or data by specifying a deadline.

(2) In the event there is any condition attached at the time of granting the preliminary authorization or licensing or the authorization or licensing, the Governor shall confirm the status on the fulfillment of such condition.

Section 2.

Review Standards

§13. Review Standards in Granting License

(1) The specified standards concerning the detailed requirements for manpower, physical facilities, and business plan stipulated in Article 6-2 paragraphs (1) and (2) of the Decree are the same as provided in the Annexed Table 10.

(2) The specified standards concerning the detailed requirements for the principal investors stipulated in Article 6-2 paragraph (4) of the Decree are the same as provided in the annexed Table 11. However, with regard to "the related party of the largest shareholder" stipulated in Article 6-2 paragraph (3) subparagraph 2 of the Decree, when any of the following parties satisfies the detailed requirements, all of "the related party of the largest shareholder" shall be deemed to have satisfied such detailed requirements:

1. In the case where the largest shareholder is a corporation, the largest shareholder(when any person exercising de facto control over any corporation, that is the largest shareholder, is apparently not the largest shareholder of such corporation, including such person) and representative of such corporation; and

2. In the case where the largest shareholder is an individual, the related party of such individual who are shareholders.

(3) In case any criminal litigation and investigation against any principal shareholder are underway by the Public Prosecutions Authority, Fair Trade Commission, National Tax Service, and the FSS, and when it is deemed that any suspected fact may significantly affect the review for authorization or licensing, the FSC may waive such review until such suspected fact is cleared.

§14. Review Standards In Granting Authorization for Merger

In the event the FSC intends to grant the authorization for merger to any management company pursuant to Article 15 of the Act and Article 4 of the ACT on Structural Improvement of Financial Industry, The FSC shall review whether the following standards are satisfied:

1. The business or business category, after the merger shall be adequate in the light of the purposes of the merger;

2. The order of financial market order should not be disturbed by the merger;

3. There shall be no unfair disadvantages to investors because of the merger;

4. There shall be no flaws of both the procedures and contents of the merger in the light of the Act, the Commercial Code, the Act on Monopoly Regulation and Fair Trade, and the other relevant laws and regulations;

5. The Fair Trade Commission's opinion on the merger shall be adequate;

6. It shall be certain that the business and operations such as the observance of relevant laws and regulations of the management company after the merger be performed with fairness and efficiency,

7. The merger shall have no room for causing any damages such as conflict of interest to customers;

8. The principal investor shall be qualified pursuant to the Annexed Table 11.

§14-2. The Standards for Authorization on Transfer of Business Takeover and	Conversion of Business

Article 14 shall be applied to authorization of the transfer of business of management company pursuant to Article 15 of the Act, and to that of conversion of business pursuant to Article 4 of the Act on Structural Improvement of Financial Industry. However, Subparagraph 5 of Article 4 of the Act on Structural Improvement of Financial Industry may be waived.

§14-3. Application to Business Expansion.

Subparagraph 8 of Article 14 shall be applied mutatis mutandis to approval of additional investment to other company pursuant to Article 24 of the Act on Structural Improvement of Financial Industry.

CHAPTER III.

SUPERVISION OF MANAGEMENT SOUNDNESS

Section 1.

Accounting and Disclosure

§15. Fiscal Year

The fiscal year of every management company shall be from April 1 to March 31 of the next year

§16. Accounting Standards

(1) In accounting and in preparing financial statements, every management company shall comply with the Accounting Procedure for Securities Investment Trust Business and the Financial Accounting Standards.

(2) The detailed accounting procedures shall be determined by the Governor, such as accounting, the titles of accounts and the arrangement order thereof, etc. that are not stipulated in the Accounting Procedure for Securities Investment Trust Business mentioned in paragraph (1) and Financial Accounting Standards.

§17. Separation of Accounting

Every management company shall distinctively separate the investment trust property from its own property in accounting.

§18. Statements of Final Accounts

(1) Every management company shall file with the Governor the statements of final accounts stipulated in Article 12-5 paragraph (1) subparagraph 1 of the Decree and the following documents within three months from the closing date of the fiscal year concerned:

1. Business report;

2. Supplementary schedules of financial statements;

3. List of shareholders;

4. When the financial statements prepared by any management company is inconsistent with those adjusted as a result of a CPA audit (hereinafter referred to as "adjusted financial statements"), capital adequacy ratio report (referring to the ratio of equity to risks stipulated in Article 30-2 paragraph (1); the same hereinafter) to be calculated on the basis of adjusted financial statements.

(2) The forms of paragraph (1) subparagraph 1 and 3 and information required therein shall be determined by the Governor.

(3) When the contents of closing documents filed by any management company pursuant to paragraph (1) is inconsistent with those of the periodical reports prepared as of the closing date of a fiscal year pursuant to Article 19 paragraph (1) and filed thereafter, the data explaining the details and reasons thereof shall be filed together with the closing reports.

§19. Quarterly Reports

(1) Every management company shall prepare the following documents as of the end of every quarter and file with the Governor by the 15th day of the following month:

1. Balance sheet;

2. Income statement;

3. Statement of asset classification; and

4. Capital adequacy ratio report.

5. Other matters deemed necessary for supervising financial soundness of management company by the Governor.

(2) The Governor shall determine the standard forms and the accounting treatment for each account title of the balance sheet and income statement pursuant to paragraph (1) subparagraph 1 and 2 as well as the forms for quarterly reports providing information as prescribed under paragraph (1) subparagraphs 3 through 5.

(3) Every management company may file documents provided under each subparagraph of paragraph (1) in writing or in electronic data in such manner as determined by the Governor.

§20. Classification of Asset Soundness

(1) Every management company shall periodically classify its holding assets into five categories: "normal", "precautionary", "substandard", "doubtful", and "presumed loss", and accumulate and maintain appropriate allowances.

(2) Every management company shall classify the soundness of its assets stipulated in paragraph (1) on the basis of the end of every quarter in accordance with the standards as provided in the annexed Table 12.

(3) Every management company shall, out of the assets classified as "substandard" or below substandard as of the end of every quarter pursuant to paragraph (2), calculate the estimated recoverable amount in accordance with the standards as provided in the annexed Table 13.

§21. Assets Subject to Classification

(1) The assets stipulated under Article 20 paragraph (1) correspond to the following:

1. Loans;

2. Accounts receivables;

3. Accrued income;

4. Prepaid amount;

5. Dishonored notes receivables; and

6. Dishonored bonds receivables.

(2) The assets stipulated under paragraph (1) subparagraph 1 through 6 shall be the claims subject to accumulation of allowance for loan losses.

§22. Accumulation Standards of Allowance for Loan

Every management company shall accumulate at least the amount equivalent to the standard ratios as provided in the following as an allowance for loan losses with respect to the assets subject to accumulation of allowance for loan losses:

1. The assets classified as "normal" : 0.5/100 of book value;

2. The assets classified as "precautionary : 2/100 of book value;

3. The assets classified as "substandard" 20/100 of book value;

4. The assets classified as "doubtful", 75/100 of book value; and

5. The assets classified as "presumed loss" ; 100/100 of book value.

§23. Management Disclosure

(1) Every management company must disclose the matters prescribed by each of the following subparagraphs within four months from the settlement date. However, disclosure on the results of every quarterly settlement shall be made within two months from the end of every quarter:

1. Matters on organization and manpower;

2. Matters on finance, profit and loss;

3. Matters on supply and use of funds;

4. Matters on management indicators regarding soundness, profitability, productivity, and etc.;

5. Matters which may significantly influence the management of any management company such as business policy, risk management, and that are separately requested by the FSC.

(2) Detailed items, methods, etc. of the disclosure stipulated in paragraph (1) shall be determined by the disclosure standards to be prepared by the Korea Investment Trust Companies Association prescribed in Article 49 of the Act (hereinafter referred to as "KITCA").

(3) A management company must disclose the relevant contents, in the event the soundness of its management either has been damaged or is likely to be damaged due to cases applicable under the following subparagraphs:

1. Cases where a big loss or financial scandal occurs;

2. Cases to be determined by the Governor, from among those corresponding to subparagraph 1.

(4) The subjects, contents, methods, time, etc. of the disclosure pursuant to the provision under paragraph(3) shall be otherwise determined by the Governor,

(5) In the event a management company makes disclosure of matters prescribed under paragraphs (1) through (4) without due diligence through false statement(s) or omission(s) of material facts of information, the Governor may require the securities company of re-disclosure(s) or correction(s).

Section 2.

Asset Management

§24. Standards for Use of Asset Value

Unless otherwise specifically stipulated, the value of assets to be used in this Section shall be book value.

§25. Fluctuation of Asset Price

When any management company exceeds the ceilings on holding of various assets stipulated in the Decree and this Regulation due to the change in its shareholders' equity or asset price, exercise of rights, receipt of debt redemption, receipt of gifts, capital expenditures for the maintenance and repair of buildings (excluding the extension, remodeling, and reconstruction of buildings), or other similar reasons, it deems that such management company has not exceeded such ceilings.

§26. Restrictions on Securities Ownership

(1) No management company shall own securities. However, when falling under any of the following cases, such cases shall be deemed to have obtained the approval of the FSC pursuant to Article 15-2 paragraph (1)p of the Decree: <Amended July 3, 2001>

1. In case it owns any of the following securities within its equity:

a. securities stipulated in each items of Article 16 paragraph (1) subparagraph 1 of the Decree;

b. securities stipulated in Article 16 paragraph (1) subparagraph 2 item a and b of the Decree;

c. securities stipulated in Article 2 paragraph (1) subparagraph 3 of the Securities Exchange Act

2. In case it disposed of the securities acquired through the exercise of rights, receipt of debt payment and receipt of gifts immediately after such acquisition;

3. In case it acquires, within its reserve for retirement allowance, the beneficiary certificates for retirement trust issued by other management company or the beneficiary certificates issued by trust companies under the Trust Business Act;

4. In case it acquires beneficiary certificate pursuant to Article 38 of this regulation;

5. In case it obtains the approval of the governor because of unavoidable reasons such as the improvement of efficiency in asset management, etc.

(2) Any management company shall, when acquiring the securities owned by investment trust pursuant to Article 41 paragraph (2), dispose of such securities within six months from the date of acquisition. However, in such unavoidable case as stock market is bearish etc., it may extend the disposition deadline with the Governor's approval.

§27. Restrictions on Debt Guarantee

No management company shall guarantee other person's debt. However, this provision shall not apply to the case where it obtains the approval of the Governor for unavoidable reasons such as the improvement of efficiency in asset management, etc.

§28. Restrictions on Foreign Currency Asset Ownership

(1) No management company shall, except the cases in the following, acquire foreign currency assets:

1. Case where it acquires the real estate for its overseas branch or representative office building or for its staff's housing;

2. Case where it acquires the facilities, furniture, and equipment needed for its overseas branch or representative office's business use; or

3. Case where it obtains the approval of the Governor for the improvement of efficiency in asset management, etc.

§29. Restrictions on Purchase of Notes

No management company shall manage its assets such that the average monthly outstanding balance of notes bought, call loans, and short-term loans exceeds the amount equivalent to any of the following ratios with respect to its shareholders' equity. However, this provision shall not apply to the case where it obtains the approval of the Governor for unavoidable reasons such as the improvement of efficiency in asset management, etc.;

1. For management companies of which the ratio of borrowings (referring to the borrowings as of the end of the preceding month; the same hereinafter) to shareholders' equity is 50/100 or lower: 30/100; or

2. For management companies of which the ratio of borrowing to shareholders' equity is 50/100 or higher: 15/100.

Section 3.

Maintenance of Financial Soundness

<Amended March 30, 2001>

Subsection 1.

Management Performance Evaluation

＿Established on March 30, 2001ａ

§30. Management Performance Evaluation

(1) The Governor shall comprehensively and systematically analyze, evaluate (hereinafter, "management performance evaluation"), and supervise the status of the property and affairs of a management company in order to judge the soundness in their management and finance.

(2) The management performance evaluation shall be implemented through examination and the management performance of the institutions subject to evaluation shall be evaluated based on the following categories, and the comprehensive evaluation shall be made in consideration of the result of such partial evaluation.

1. Capital adequacy;

2. Management and control;

3. Profitability;

4. Liquidity; and

5. Adequacy of trust property management.

(3) During the period other than the examination period, the evaluation shall be performed only with respect to the items availing quantitative evaluation among the partial evaluation criteria stipulated under paragraph (2), and the Governor shall make it a principle to perform such an evaluation on a quarterly basis.

(4) The ratings of evaluation shall be classified into five grades: 1st grade (excellent), 2nd grade (good), 3rd grade (mediocre), 4th grade (weak), and 5th grade (risky).

(5) The Governor may reflect the result of management performance evaluation of management companies in his supervisory and examining functions.

(6) Detailed matters for the management performance evaluation pursuant to paragraph (2) shall be determined by the Governor.

Subsection 2.

Ratio of Equity to Risks

[Established on March 30, 2001]

§30-2. Ratio of Equity to Risks

(1) The term "ratio of equity to risks" refers to a figure represented by a percentage of net equity to gross risks of any management company (excluding merchant banking corporations, from among management companies stipulated under Article 2 subparagraph 4; the same hereinafter in this section), which is the equity ratio prescribed under Article 10 paragraph (1) of the Act on Structural Improvement of Financial Industry.

(2) The gross risks stipulated under paragraph (1) shall be the aggregate of the amounts under subparagraphs 1 through 5:

1. Market risk amount;

2. Counter-party risk amount;

3. Credit concentration risk amount;

4. Fundamental risk amount; and

5. Offset risk amount.

(3) The net equity stipulated under paragraph (1) corresponds to the amount subtracting the liabilities from the assets calculated pursuant to Article 32 (hereinafter, "net assets") and adding the subordinated borrowing stipulated in Article30-6.

§30-3. Calculation of Market Risk

(1) The provision of Subsection 2 of Section 2 of Chapter 2 of Part Ⅱ of the Regulation on Securities Business shall apply mutatis mutandis to the calculation of risk amount under Article 30-2 paragraph (2) subparagraph 1 to 3. In this case, "securities company" and "net capital" shall be construed as "management company" and "net capital" shall be construed as "management company" and "net equity," respectively.

(2) When the Governor deems that the mutatis mutandis application of any provisions of Subsection 2 of Section 2 of Chapter 2 of Part Ⅱ of the Regulation on Securities Business to management companies should be unreasonable in calculating the risk amount pursuant to the provisions under paragraph (1), such provisions may not apply thereto.

§30-4 Calculation of Fundamental Risk

(1) The fundamental risk amount refers to any loss caused to any management company due to any accident, error, illegal or unfair practices of its executives or employees, or due to the aggravation of other business circumstances which shall be the amount equivalent to 1/4 of the aggregate of the ordinary expenditures and the financing expense exceeding financing revenue for the last 12 months including the month in which the base date is included. However, in case the last months including the month in which the base date is included is shorter than 12 months, the amount shall converted on the basis of 12 months.

(2) The ordinary expenditures pursuant to the provisions under paragraph (1) shall the amount subtracting depreciation, loss from allowance for bad debt, research and development expense, training expense and amortization for intangible assets from sales expense and administration expense.

(3) The financing expense pursuant to the provisions under paragraph (1) refers to interest expenses; the financing revenue shall be calculated by aggregating interest income, dividend received, and distribution money received.

§30-5 Calculation of Trust Property Risk

(1) The trust property risk amount refers to any loss caused to any management company due to any practice violating the statutes or the trust service agreement when such management company manages trust property.

(2) The trust property risk amount shall be calculated by multiplying the total net investment trust assets in management by any management company as of the base date by the risk ratio.

(3) The risk ratio prescribed under paragraph (2) shall be 0.1% for the investment trust whose trust property is valued at market value referring to the market value pursuant to Article 49 paragraph (5), 0.2% for the investment trust (including MMF) whose trust property is valued at book value referring to the book value pursuant to Article 49 paragraph (5)

§30-6 Subordinated Borrowings

(1) The subordinated borrowings prescribed in Article30-2 paragraph (3) shall be those satisfying the following requirements. However, any borrowing from other management companies shall not be added thereto. In case the period to maturity is less than one year, 25% of such amount shall be subtracted every quarter;

1. A condition that, when the company goes bankrupt, such borrowings shall be repayable only in case there is any remaining property after all other debts have been satisfied shall be clearly stated;

2. A condition that the maturity of principal from the borrowing date shall be at least two years;

3. A condition that, such borrowings shall not be redeemed in the case where the ratio of equity to risks decreases to 100% or less due to such redemption even when the repayment date of their principal becomes due under the agreement,;

4. A condition that the agreement shall include the prohibition of furnishing of collateral, offsetting, redemption prior to expiration (excluding the redemption prior to expiration with the prior approval of the Governor) shall be stated, and such agreement shall not pervert the nature of subordinated borrowings.

(2) Any management company shall, when intending to raise subordinated borrowings, declare such fact to the Governor in advance.

(3) The total amount of the subordinated borrowings to be added to the net assets shall not exceed the amount equivalent to 100/100 of the net assets. However, this provision shall not apply to the case where the approval is obtained from the Governor in advance.

(4) Any management company may, when satisfying the following requirements, redeem the subordinated borrowings concerned before the maturity with the prior approval of the Governor:

1. The ratio of equity to risks as of the end of the immediately preceding quarter shall be 200% or more;

2. It is clearly proven before the redemption that the subordinated borrowings to be redeemed shall be replaced by any fund-raising whose nature of capital is stronger than that of such subordinated borrowings, and such amount shall be at least the amount of such subordinated borrowings to be redeemed;

3. It shall be clearly stated in the agreement of subordinated borrowings that the borrower may voluntarily redeem such borrowings before maturity with the prior approval of the Governor, or there shall be an agreement on such redemption between the parties;

4. It shall be deemed that the interest level of such subordinated borrowings becomes significantly disadvantageous due to the changes in conditions of financial market.

(5) Any management company intending to redeem subordinated borrowings before maturity pursuant to the provision of paragraph (4) shall request the Governor to grant the approval by attaching the data proving the fact of satisfying the requirements stipulated in such paragraph and its replacement fund-raising plan.

(6) Any management company obtaining the approval of the Governor pursuant to the provision of paragraph (4) shall redeem such subordinated borrowing after (or at the same time when) its replacement fund-raising is completed.

Subsection 3.

Prompt Corrective Action

[Established on March 30, 2001]

§30-7. Management Improvement Recommendation

(1) The Governor shall, in case any management company falls under any of the following, recommend such management company to take necessary measures:

1. Case where its ratio of equity to risks falls below 150%;

2. Case where the overall rating as a result of management status evaluation pursuant to Article 30 is the third grade (less than satisfactory) or higher, but the rating in capital adequacy is the fourth grade (deficient) or lower;

3. Case where such company is adjudged certain to fall under the standards mentioned in Subparagraph 1 or 2 due to occurrence of big financial scandal or bad credits.

(2) Necessary measures stipulated under paragraph (1) correspond to any or whole of the following measures;

1. Improvement of management of manpower and organization;

2. Curtailment of expenditures;

3. Disposition of non-performing assets;

4. Restrictions on investment in fixed assets, entry into new business, and new equity investment;

5. Increase or reduction of capital stock; and

6. Restriction on dividends.

(3) The Governor may, when making a recommendation pursuant to the provisions under paragraph (1), issue an attention or warning letter to the management concerned or related executives thereof.

(4) Any management company shall, when its ratio of equity to risks falls under 150%, report such fact to the Governor, without any delay.

(5) Any management company pursuant to paragraph (4) shall report its monthly ratio of equity to risks to the Governor by the 15th day of the following month until such ratio reaches 150%.

§30-8. Management Improvement Requirement

(1) The FSC shall, in case any management company falls under any of the following, require such management company to take necessary measures:

1. Cases where its ratio of equity to risks falls below 120%; or

2. Cases where the overall rating as a result of management status evaluation pursuant to Article 30 is the fourth grade (deficient) or lower;

3. Cases where such company is judged certain to fall under the standards applicable under subparagraph 1 or 2 due to occurrence of a big financial scandal or bad debts.

(2) Necessary measures stipulated under paragraph (1) correspond to any or whole of the following measures:

1. Restriction on holding high risky assets and disposition assets;

2. Curtailment of organization;

3. Streamlining of subsidiaries;

4. Demand for change of executives;

5. Suspension of part of the business;

6. Establishment of the plan for merger, acquisition by a third party, assignment of business in whole or in part, or inclusion in a financial holding company under the Financial Holding Company Act (hereinafter, "financial holding company") as a subsidiary (including the inclusion as a subsidiary after establishing a financial holding company alone or jointly with any other financial institution; the same hereinafter); and

7. Measures stipulated in Article 30-7 paragraph (2).

§30-9. Management Improvement Order

(1) The FSC shall, in case any management company falls under any of the following, order such management company to take necessary measures:

1. Cases where its ratio of equity to risks falls below 100%;

2. Cases where it falls under an ailing financial institution prescribed in Article 2 subparagraph 3 of the Financial Restructuring Act.

(2) Necessary measures stipulated under paragraph (1) correspond to any or whole of the following measures:

1. Retirement of stocks in part or in whole;

2. Suspension of business execution of executives and appointment of administrator;

3. Merger, or inclusion as a subsidiary in a financial holding company;

4. Assignment of business in whole or in part;

5. Takeover of the management company by a third party;

6. Suspension of business for up to six months;

7. Transfer of contracts in whole or in part; and

8. Measures stipulated in Article 30-8 paragraph (2).

(3) Of the measures stipulated under paragraph (2), those of suspension or assignment of business in whole, transfer of contracts in whole, and retirement of stocks in whole shall be limited only to the case where any management company falls under any of the following:

1. Cases where any management company falls under the provisions of paragraph (1) subparagraph 1 and it is deemed that it may seriously harm the sound credit order or the right and interest of investors; or

2. Cases falling under the provisions of paragraph (1) subparagraph 2.

§30-10. Postponement of Prompt Corrective Action

(1) The Governor may postpone a prompt corrective action for a specified period of time, when such management company, even though it falls under the standards stipulated under Article 30-7 paragraph (1), is certain not to have fallen, or is judged not to fall in a short period of time, under such standards through the increase of its capital or sale of its assets and so on.

(2) The FSC may postpone a prompt corrective action for a specified period of time, when such management company, even though it falls under the standards stipulated under Article 30-8 paragraph (1) or Article 30-9 paragraph (1), is certain not to have fallen, or is judged not to fall in a short period of time, under such standards through the increase of its capital or sale of its assets and so on.

§30-11. Submission and Evaluation of Management Improvement Plan

(1) Any management company which has received management improvement recommendation, requirement, or the order pursuant to Article 30-7 to Article 30-9 shall submit a plan reflecting the contents of the action (hereinafter, "management improvement plan")to the Governor by the deadline to be determined by the administrative authority concerned, within the limit of two months from the day when the action is taken. <Amended July 3, 2001>

(2) The decision as to whether to approve the management improvement plan submitted by any management company which has received the management improvement recommendation pursuant to Article 30-7 shall be made by the Governor; the decision as to whether to approve the management improvement plan submitted by any management company which has received the management improvement requirement or order pursuant to Article 30-8 and Article 30-9 shall be made by the FSC, within one month after such plan is received, respectively.

(3) For the issuance of a management improvement recommendation, requirement, or order pursuant to the provisions of Article 30-7 through Article 30-9, the Governor shall receive a review of the Management Assessment Committee comprised of outside professionals in advance prior to making an approval decision pursuant to the provisions under paragraph (2). This, however, shall not apply in the event of emergency or deliberation deemed unnecessary by the Governor.

(4) The Governor shall, when he deems that the management improvement plan submitted by any management company which has received the management improvement recommendation pursuant to Article 30-7 paragraph (1) is not feasible, disapprove such plan. In this case, the FSC shall require such company to implement all or part of the measures stipulated under Article 30-8 paragraph (2).

(5) The FSC shall, when it deems that the management improvement plan submitted by any management company which has received the management improvement requirement pursuant to Article 30-8 paragraph (1) is not feasible, disapprove such plan, and require such company to implement all or part of the measures stipulated under Article 30-8 paragraph (2); and when it deems that the management improvement plan reflecting the contents of such requirement is not feasible, it shall disapprove such plan, and order such company to implement all or part of the measures mentioned in Article 30-9 paragraph (2).

(6) The FSC shall, when it deems that the management improvement plan submitted by any management company which has received the management improvement order pursuant to Article 30-9 paragraph (1) is not feasible, disapprove such plan, and may take all or part of the actions stipulated under Article 30-14 paragraph (3).

(7) The Governor shall determine specific matters pertaining to the organization and operation of the Management Assessment Committee under paragraph (3).

§30-12. Implementation Period of Management Improvement Plan

(1) The period for implementing the management improvement plan of any management company which has received the management improvement recommendation pursuant to Article 30-7 shall be within six months after such plan is approved.

(2) The period for implementing the management improvement plan of any management company which has received the management improvement requirement pursuant to Article 30-8 shall be within one year after such plan is approved. However, in case any management company which has received the management improvement recommendation pursuant to Article 30-7 receives the management improvement requirement in the course of implementing such plan, such period shall not exceed one year from the date on which the management improvement plan for such recommendation is approved.

(3) The period for implementing the management improvement plan of any management company which has received the management improvement order pursuant to Article 30-9 shall be determined by the FSC.

(4) When any management company which has received the management improvement recommendation, requirement, or order, has made a substantial improvement in its management conditions through an early achievement of the major elements in its management improvement plan such as capital increase or resolution of non-performing assets and so on, the administrative authority concerned may alleviate the contents of the initial prompt corrective action, or exempt the implementation thereof.

(5) When it is adjudged that any management company which has received the management improvement recommendation, requirement, or order, has achieved a sufficient normalization in its management through implementing the management normalization plan sincerely upon expiration of the implementation period, the administrative authority concerned shall notify such management company that the initial prompt corrective action has been released. In case such company falls under the standard stipulated in Article 30-7 paragraph (1), Article 30-8 paragraph (1), or Article 30-9 paragraph (1) due to the failure in achieving the normalization of its management, such administrative authority shall take necessary prompt corrective action in accordance with the same Articles.

§30-13. Report on Implementation of Management Improvement Plan and Request for Correction.

(1) Any management company which has obtained the approval for the management improvement plan pursuant to Article 30-11 paragraph (2) shall file with the Governor the quarterly implementation result of such plan within 10 days from the end of each quarter.

(2) The Governor may, when the implementation result of any management plan is behind the target or it deems that it is difficult to implement such plan due to the changes in condition, such as changes in relevant system, etc., take necessary action, such as request for modification of such plan, demand for implementation within a specified period of time, etc. However, the Governor shall, when requesting the modification or demanding the implementation from any management company which has received the management improvement requirement or order, report such fact to the FSC in advance.

(3) Article 30-11 paragraph (2) to (6) shall apply mutatis mutandis to the case where any management company files its management improvement plan whose material part was modified in accordance with the provision of paragraph (2).

(4) Any management company which has implemented the management improvement plan pursuant to Article 30-12 paragraph (1) to (3) shall promptly file with the Governor the implementation result of such plan.

§30-14. Measures on Non-fulfillment of Management Improvement Plan

(1) When the Governor judges that any management company which has received the management improvement recommendation pursuant to Article 30-7 paragraph (1) fails to sincerely implement the management improvement plan, the FSC shall require such company to implement all or part of the measures stipulated in Article 30-8 paragraph (2) within a specified period of time.

(2) The FSC shall, when it judges that any management company which has received the management improvement requirement, even though it was urged to implement the management improvement plan pursuant to Article 30-8 paragraph (2) due to the failure in implementing the material part of such plan, will be unable to normalize its management because such company does not, or is unable to, implement such plan, order such company to take part or all of the measures stipulated in Article 30-9 paragraph (2).

(3) The FSC may, when it judges that any management company which has received the management improvement order pursuant to Article 30-9 paragraph (1) failed to normalize its management because such company did not implement the material part of the management improvement plan within the period stipulated in Article 30-12, take part or all of the following measures against such company:

1. Measures stipulated in Article 30-9 paragraph (2);

2. Revocation of Licensing granted to such management company;

3. Recommendation on dismissal of executives; and

4. Other measures necessary for the protection of investors.

§30-15. Emergency Measures

(1) Notwithstanding Article 30-7 to Article 30-9, the FSC may take necessary measures when it judges that it is difficult for any management company to normally manage its business because its financial condition is significantly aggravated or that the continuation of its business may lead to the detriment of the protection of investors or stability of the securities market due to any of the following reasons:

1. Cases where issued notes or checks are dishonored or the transactions with banks are suspended or prohibited;

2. Cases where it is unable to meet the request for repurchase by selling companies due to rush to repurchase beneficiary certificates; or

3. Cases where it is impossible and difficult to do normal business due to the suspension of operations or suspension of business.

(2) Necessary emergency measures stipulated under paragraph (1) correspond to those in the following:

1. Prohibition of repaying debts;

2. Measures stipulated in Article 30-9 paragraph (2); and

3. Other measures necessary for the protection of investors.

§30-16. Conclusion of Management Improvement Agreement

The Governor may, in the cases falling hereunder, have the management company concerned submit a plan or covenant for the improvement or conclude a management improvement agreement with such management company. However, this provision shall not apply to any management company which has received the management improvement recommendation, requirement, or order pursuant to Article 30-7 to Article 30-9:

1. Cases where ratio of equity to risks is likely to fall, or has temporarily fallen below 150% due to the occurrence of big loss or increase of risks; and

2. Cases where such company is judged as having any weakness in management as a result of examination or management performance evaluation pursuant to Article 30.

Section 4.

Determination of Ailing Management Companies

§31. Scope of Valuation

In principle, each account title of the assets, liabilities, and footnotes on the balance sheet of any management company as of the end of the latest month shall be the objects for the valuation and calculation of the assets and liabilities, in order to determine the ailing financial institution prescribed under Article 2 subparagraph 3 of the Act on Structural Improvement of Financial Industry (hereinafter, "ailing management company" in this section).

§32. Valuation Standards

(1) The valuation pursuant to Article 31 shall be made in accordance with the following standards:

1. Any Subparagraph the book value of which reflects its real value should be valuated by such book value;

2. Any item the book value of which does not reflect its real value should be valuated by market price or by the real value adjusted after subtracting estimated losses; and

3. Estimated losses calculated out of footnotes should be counted as liabilities.

(2) Detailed valuation and calculation standards for each item of the assets, liabilities, and footnotes stipulated under paragraph (1) shall be otherwise determined by the Governor.

§33. Management Companies Subject to Valuation

(1) Any management company the assets and liabilities of which are subject to valuation for the determination of ailing management company shall be the company falling under any of the following subparagraph:

1. Any management company the asset soundness of which has severely deteriorated due to a heavy loss in investment, and therefore which the FSC judges as falling into a state that its liabilities exceed its assets; or

2. Any management company which is judged as being extremely inferior as a result of the management evaluation under Section 3.

(2) The FSC may take the valuation procedures stipulated under Article 34 against the management companies subject to valuation pursuant to the provisions under paragraph (1).

§34. Valuation Procedures

(1) The Governor may require any management company subject to valuation to file materials necessary for the valuation and calculation of its assets and liabilities, and when it is deemed necessary, the Governor may conduct an on-site due diligence audit of the assets and liabilities of such company.

(2) The Governor shall, when he has conducted a due diligence audit of the assets and liabilities of any management company pursuant to the provisions under paragraph (1), report the result thereof to the FSC.

Section 5.

Internal Control

§35. Keeping Record on Off-Balance Sheet Transactions

(1) Every management company shall prepare and keep the record on all off-balance sheet transactions.

(2) Matters necessary for preparing and keeping the record on off-balance sheet transactions pursuant to the provisions under paragraph (1) shall be otherwise determined by the Governor.

§36. Risk Management Guidelines

(1) Every management company shall formulate guidelines necessary for securing the efficiency in asset management and for managing risks (hereinafter, "risk management guidelines").

(2) Information required in the risk management guidelines shall be otherwise determined by the Governor.

(3) Any management company shall, when it has formulated its risk management guidelines, report the fact to the Governor, and the Governor may, when deemed necessary, require such management company to improve its guidelines.

(4) The governor shall report to the FSC every quarter the handling results concerning the matters requiring the improvement of such management company's risk management guidelines pursuant to the provisions under paragraph (3).

§37. Reorganization of Risk Management System

(1) Every management company shall establish and operate an organization that comprehensively administers and controls the fulfillment of its risk management company's risk management guidelines and record-keeping of off-balance sheet transactions (hereafter referred to as "risk management system").

(2) Necessary matters such as the establishment, operation and authority of the risk management system pursuant to the provisions under paragraph (1) shall be otherwise determined by the Governor.

§37-2. Internal Control Standards <Added January 3, 2003>

In defining the internal control standards pertinent to the division of responsibilities and organizational structure under Article 8-3 paragraph (1) subparagraph 1 of the Enforcement Decree, the management company shall include matters for separating the entity that manages trust assets of the privately or publicly placed single investment trust from the entity that manages trust asets of the publicly placed investment trust, and vice versa.

CHAPTER Ⅳ.

SUPERVISION OF AFFAIRS

Section 1.

Accumulation of Reserves

§38. Issuance of Beneficiary Certificates with Condition of Replenishing	Principal

Any management company shall, when intending to issue beneficiary certificates which stipulate the guarantee of principal replenishment pursuant to Article 19 paragraph (2) of the Act, obtain the approval of the Governor after satisfying the following requirements: <Amended July 3, 2001>

1. Investment trust at least 50/100 of whose total assets are invested in the bonds with credit rating grade of BB+ or lower, or in the CP's with credit rating grade of B+ or lower, rated by an independent credit rating agency, or in the subordinated securities(limited to those issued by providing bonds as collateral pursuant to Article 31 or Article 32 of the Act on Asset Securitization);

2. The management company or the distributor should acquire at least 5/100 of the total number of beneficiary certificates when the investment trust concerned is established; and

3. The investment trust principal of the beneficiaries excluding the management company concerned or the distributor concerned should be preferentially replenished within the limit of valuation amount of the beneficiary certificates acquired by the management company or the distributor pursuant to subparagraph 2.

§39. Accumulation of Reserve

(1) Any management company shall, when intending to accumulate the reserve prescribed in Article 20 paragraph (1) of the Act, accumulate part of the gains arising from the trust property management at the ratio to be determined by the Governor.

(2) The Governor may, in accordance with Article 20 paragraph (2) of the Act, order any management company to accumulate a reserve for the replenishment of trust property principal and equalization of distribution when it is deemed necessary to do so.

(3) The trust stabilization reserve stipulated in Article 11 of the Decree (hereafter referred to as "trust stabilization reserve") shall be administered in an separated account within the investment trust concerned.

(4) Every management company shall use the trust stabilization reserve only for the replenishment of the tryst property principal concerned and for the stabilization of distribution.

(5) Detailed standards such as standard for using trust stabilization reserve, as well as accumulation standard and limit, and management method thereof shall be stipulated by the Governor.

§39-2. Investment Trust Under Securities Placement <Added January 3, 2003>

(1) In the event a management company intends to issue beneficiary certificates after securities, etc. are placed by the investors pursuant to Article 6 paragraph (8) of the Act, each of the following requirements shall be complied with;

1. That it shall be a privately placed single investment trust; and

2. That the securities, etc. placed by the investors shall not be any of the following, which includes

a. Dishonored bonds, etc.;

b. Stock certificates listed on the securities market or registered with the Association brokerage market, and designated by the securities market or the Association brokerage market as precautionary or risky;

c. Stock certificates neither listed on the securities market or nor registered with the Association brokerage market; and

d. Securities, etc. that may not be liquid with immediacy.

(2) In the event a management company intends to issue beneficiary certificates after securities, etc. are placed by the investors pursuant to paragraph (1), the securities, etc. shall be valuated in accordance with the methods stipulated under Article 14 paragraphs (2) and (3) of the Enforcement Decree.

Section 2.

Management and Disclosure of Trust Property

§40. Method of Granting Easy Access to Trust Agreement

(1) Every management company and selling company shall, pursuant to Article 22 paragraph (7) of the Act, keep the trust agreement at the following places where beneficiaries can have easy access thereto from the establishment date of the investment trust concerned until the expiration date of trust contract or until the date on which the three months elapse after the rescission date thereof;

1. management company Head office (in case of an investment trust company, its head office, branches, and business offices); and

2. Selling company : Head office, branches, and business offices.

(2) Every management company and selling company shall disclose its trust agreement through electronic media such as internet.

§41. Restrictions on Securities Trading between Management Company's Own Property and Trust Property

(1) Except the cases in the following, no management company shall conduct securities trading with the investment trust under its own management:

1. Cases where such management company establishes an investment trust with its own securities; or

2. Cases where the securities trading concerned may not harm the public interests or the interest of beneficiaries and where the approval of the Governor is obtained.

(2) In case any management company instructs the trustee company to sell the securities owned by investment trust to itself, the securities intended for sales shall satisfy the following requirements. However, this provision shall not apply to the cases pursuant to paragraph (1) subparagraph 2:

1. Such securities should not be dishonored bonds;

2. In case the securities intended for sales are bonds, such bonds should be the bonds with a yield that is nearest to the weighted average yield of the total bonds held by the trust property concerned as of the date preceding the selling date of such bonds (referring to a yield calculated by summing the difference between the redemption amount at maturity and the purchase price of each bond included in such investment trust and the amount accruing during the term to maturity and dividing that number by the number of days to maturity thereof and then averaging daily yields of total bonds by taking into account the valuation amount of each bond of as of the two days prior to selling each bond).

(3) Where a management company purchases or sells securities pursuant to the provisions of paragraphs (1) and (2), the purchase or sales price shall be the amount valuated under the following subparagraph; provided, however, where any investment trust acquires the subordinated bonds issued by asset-backed securitization companies, which are underlaid by the claims, etc. pursuant to Article 31 of the Act on Asset Securitization, and obtained approval of the Governor pursuant to paragraph (1) subparagraph 2, the price valuated by the securities valuation committee under Article 62 paragraph (4) may be used, notwithstanding the provisions of paragraph (3).

1. For securities other than bonds, the purchase or sales price valuated in accordance with the methods stipulated under Section 3 of Chapter IV (excluding subsection 2) as of the purchase or sales date

2. For listed bonds, the price valuated pursuant to the provisions of Article 61 as of the purchase or sales date

3. For non listed bonds (including bonds provided under Article 62 paragraph (2), the price valuated pursuant to the provisions of Article 62 paragraph (1) as of the purchase or sales date

(4) Selling or buying procedures, methods, and other detailed standards necessary for trading between management company and investment trust shall be determined by the Governor.

§42. Restrictions on Securities Trading between Converted Securities	Companies and Investment Trust

(1) Except the cases in the followings, any investment trust management company (hereinafter, "trust management company") established in the course of any investment trust company being converted into a securities company prescribed in the Securities and Exchange Act under the Act on Structural Improvement of Financial Industry shall not give any management instructions to the trustee company asking the investment trust to purchase the securities (limited to the securities purchased by the converted securities company pursuant to the provisions under paragraph (2)) owned by such converted securities company (hereinafter referred to as "converted securities company" in this article):

1. Cases of establishing an investment trust with the securities owned by the converted securities company; or

2. Cases where such management instructions may not harm the public interest or the interest of beneficiaries and where the approval of the Governor is obtained.

(2) Except the cases in the following, no trust management company shall give any management instructions asking trustee company to sell the securities owned by the investment trust under its own management to converted securities company:

1. Cases where any converted securities company purchases the securities (excluding stocks) owned by the investment trust concerned in order to meet the repurchase requests pursuant to Article 7 of the Act

2. Cases where any converted securities company purchases the securities owned by the investment trust concerned in order to make payments for redemption due to the whole rescission of any investment trust; and

3. Cases where such management instructions may not harm the public interests and the interest of beneficiaries and where the approval of the Governor is obtained.

(3) In case any trust management company gives management instructions, pursuant to paragraph (2) subparagraph 1 and 2, asking the trustee company to sell the securities owned by the investment trust to converted securities companies, the securities for sale shall satisfy the requirements under each subparagraph of Article 41 paragraph (2)

(4) In case any trust management company sells or buys securities pursuant to the provision of paragraph (1) and (2), the selling or buying price thereof shall be the amount valuated in accordance with the methods stipulated in the Section 3 of Chapter Ⅳ as of the selling or buying date (in the case of bonds, the date preceding the selling or buying date). However, Article 62 paragraph (2) shall not apply to the case of selling or buying bonds.

§43. Restrictions on Cross Trading

(1) With the exclusion of the cases applicable under any of the following, no management company shall instruct its trustee company to conduct cross trading (referring to a trading whereby between investment trusts one party sells and another party simultaneously buys the same issue in the same quantity; the same hereinafter in this Article) of stocks (including stock index futures; the same hereinafter) or bonds between the investment trusts under its own management. Between a privately or publicly placed single investment trust and a publicly placed investment trust, however, cross trading of stocks or bonds may be conducted to the extent it is applicable under subparagraph 4.

1. Cases where it is unavoidable if the management company is to comply with the investment ceiling as provided in the investment agreement or the prospectus of the first-established investment trusts;

2. Cases where it is unavoidable if the management company is to perform the partial rescission of investment trust pursuant to Article 7 of the Act;

3. Cases where the investment trust concerned is obliged to dispose of its own securities for the smooth payment of redemption following the whole rescission of investment trust contracts or the expiration of investment trust contract period; or

4. Cases where such management instructions may not harm the public interests and the interest of beneficiaries, with the approval of the Governor.

(2) [Deleted]

(3) In the event any management company conducts cross trading of the bonds pursuant to paragraph (1), the selling or purchasing price thereof shall be the amount valuated in accordance with the methods stipulated under Article 61 and Article 62 (excluding paragraph (2)), and Article 41 paragraph (2) shall apply mutatis mutandis to the bonds intended for cross trading.

(4) The procedures, methods, and other specific standards needed to conduct cross trading pursuant to paragraph (1) shall be determined by the Governor.

§44. Transfer of Securities between Trust Property

(1) Any management company may, when falling under any of the following Subparagraph, give management instructions asking the trustee company to transfer the stocks owned by the investment trust concerned to another investment trust only on the expiration date of the investment trust contract period or the rescission date of the investment trust contract concerned.

1. Cases where such investment trust contract period expires; or

2. Cases where all of such investment trust contract are rescinded.

(2) The selling or buying price that is applicable at the time of transferring securities between trust property pursuant to the provisions under paragraph (1) shall be the amount valuated in accordance with the methods to be stipulated in Section 3 of the Chapter Ⅳ.

§45. Restrictions on Investment in Non-guaranteed Bonds

(1) Non-guaranteed bonds that any management company may acquire with its trust property shall be limited to those whose credit has been rated by at least two institutions (in such unavoidable cases as the suspension of credit rating agency's business, at least one institution) out of the institutions that the Governor designated as independent credit rating agencies for non-guaranteed bonds. However, this provision shall not apply to the non-guaranteed bonds whose credit has been rated within three months retroactive from the issuance date of such non-guaranteed bonds. <Amended July 3, 2001>

(2) With respect to the non-guaranteed bonds to be newly issued after the credit rating grade of already issued non-guaranteed bonds was adjusted from investment grade (BBB or higher grade) to speculation grade (BB or lower grade) by one or more independent credit rating agencies, notwithstanding the proviso of paragraph (1), the non-guaranteed bonds which any management company may acquire with its trust property shall be limited to those newly rated by two or more independent credit rating agencies.

§46. Restrictions on Giving Instructions on the management Trust Property

(1) No management company shall give instructions to the trustee company to extend short-term loans (limited to call loan; hereinafter referred to as "call loan") to its affiliates or the party stipulated in Article 12-2 paragraph (2) of the Decree in excess of 10/100 of the total assets of each investment trust.

(2) Notwithstanding paragraph (1), no management company shall give instructions to the trustee company to manage its trust property in any of the following ways for itself, its largest shareholder (referring to the largest shareholder stipulated under Article 6-2 paragraph (3) subparagraph 1 of the Decree; hereinafter, "largest shareholder" in this Article), principal shareholders (referring to the principal shareholders stipulated in Article 6-2 paragraph (3) subparagraph 3 of the Decree; hereinafter referred to as "principal shareholder" in this Article), selling company (referring to the selling company stipulated in Article 12-2 paragraph (2) subparagraph 1 of the Decree; hereinafter, "selling company" in this Article ):

1. Cases of extending call loans through money brokerage companies or purchasing the bills issued by the Korea Securities Finance Corporation for the purpose of borrowing funds on the part of management company, the largest shareholder, principal shareholders, and selling company (hereinafter referred to as "related persons");

2. Cases of providing funds to the related party in a way mentioned Subparagraph 1 by making use of another management company's trust property in order to achieve the purpose under subparagraph 1; or

3. Cases of providing funds to the related party in an indirect way in order to avoid the ways under subparagraphs 1 and 2.

(3) No management company shall give instructions to the trustee company to conduct any transaction falling under Article 10 paragraph (1) subparagraph 1 (excluding call loan) and 2 of the Decree with the party stipulated in Article 12-2 paragraph (2) of the Decree, in direct or indirect ways, in excess of 10/100 of the total assets of each investment trust.

(4) No management company shall, when conducting the futures trading or overseas futures trading prescribed in Article 18 paragraph (1) subparagraph 2 of the Act, give management instructions to the trustee company to conduct physical settlement with the assets underlying such trading.

(5) Any management company may, only in any of the following cases, give management instructions to the trustee company to sell bonds owned by its investment trust under the repurchase agreement within the ratio to be determined by the Governor within 10/100 of the total assets of each investment trust. However, the Governor may otherwise determine such ratio when it is deemed that any management company needs to prepare emergency funds for repurchase due to reasons such as request for repurchase in large quantity at a time:

1. Cases where it needs to prepare funds for repurchase due to the partial rescission of investment trust: or

2. Cases to be determined by the Governor, from among those that may not harm the subscription of new stocks and the soundness in trust property management.

§47. Restrictions on Investment in Privately-Placed Bonds

(1) No management company shall give management instructions to the trustee company to purchase of privately-placed bonds which are issued by the listed corporations or the registered corporations prescribed under Article 2 paragraph (15) of the Securities and Exchange Act but whose credit rating grade by an independent credit rating agency is lower than "A" grade.

(2) When any management company acquires privately-placed bonds with its trust property pursuant to paragraph (1), it shall not acquire them in excess of 3/100 of the total assets of each investment trust (in the case of privately-placed bonds issued by the persons having a special relationship stipulated in Article 16 paragraph (4) of the Decree, 2/100 of the total assets of each investment trust).

(3) Where the regulation of paragraph (1) is applied to any investment trust pursuant to Article 33 paragraph (2) of the Act, "any privately-placed bonds whose credit rating grade by an independent credit rating agency is lower than A grade" are regarded as "the privately-placed bonds which are not evaluated by an independent credit rating agency", and the Regulation of paragraph (2) is not applied to any investment trust pursuant to Article 33 paragraph (2) of the Act. In this case the credit rating grade of the privately-placed bond, that can be purchased with the trust asset, should be written in contract terms and conditions of investment trust and prospectus of investment trust. [Established on 3 July, 2001]

(4) The regulations of paragraph (1) and (2) are not applied to the investment trust whose contract terms and conditions stipulates that at least 50/100 of investment asset is invested in the privately-placed bonds with the condition that the Korea Technology Credit Guarantee Fund pursuant to the Act on the Financial Assistance to New Technology Business or the Korea Credit Guarantee Fund guarantees the principal and its interests. [Established on 3 July, 2001]

§48. Restrictions on Investment in Subordinated Bonds

No management company shall give instructions to the trustee company with its trust asset, to purchase bonds with a condition that in case the issuer of bonds go bankrupt, such bonds can claim the issuer's assets in the event of the remaining of the residual assets after the other debts have been preferentially redeemed (hereinafter referred to as "subordinated bonds"). The cases in the followings this provision shall apply otherwise : <Amended July 3, 2001>

1. In the case where the management company reports the trust contract terms and conditions approving the investment in subordinated bonds to the Governor in advance.

2. In the case where any investment trust acquires the subordinated bonds issued by asset securitization companies, which are underlaid by the claims, etc. transferred from a specified investment trust pursuant to Article 31 of the Act an Asset Securitization, within 50/100 of the transferred amount of such claims.

§49. Restrictions on MMF Management

(1) The weighted average term to maturity for all trust properties in MMF shall not exceed 120 days (and 90 days where treasury bonds and monetary stabilization bonds of the Bank of Korea are excluded).

(2) The bonds that any management company may invest with its MMF trust asset are as follows: <Amended July 3, 2001>

1. Securities prescribed in Article 16 paragraph (1) subparagraph 1 of the Decree;

2. Securities prescribed in Article 16 paragraph (1) subparagraph 2 items a and b of the Decree;

3. Securities prescribed in Article 2 paragraph (1) subparagraph 3 of Securities and Exchange Act; and

4. Corporate bonds (excluding stock-related bonds and privately-placed bonds)

(3) The bonds pursuant to the provision of paragraph (2) shall satisfy the following requirements as of the date on which such bonds are included in investment trust: <Amended July 3, 2001>

1. Credit rating grade of bonds evaluated by independent credit rating agencies should be BBB- or higherlimited to the bonds mentioned in paragraph (2) subparagraphs 3 and 4. In this case, when such bonds have been evaluated by two or more independent credit rating agencies, the lowest credit grade out of them should be BBB- or higher; and

2. Term-to-maturity of bonds should not exceed one year.

(4) CPs a management company may include in MMF shall meet the following requirements as of the date on which such CPs are incorporated in trust property.

1. Credit rating shall be at least A3- evaluated by independent credit rating agencies. In this case, where such CPs are evaluated by at least two independent credit rating agencies, the lowest credit rating shall be at least A3-.

2. The term to maturity shall be less than a year.

(5) Every management company shall check at all times the difference between the amount evaluated by adding the accrued interest at an issuance rate to the acquisition price(referring to the amount obtained by proportionally distributing the gain or loss from redemption to the number of the days to maturity of the bond concerned and adding or subtracting that number to or from the acquisition cost) of the bonds included in MMF (hereinafter referred to as "book value") and the market value prescribed in Article 29 paragraph (2) of the Act(hereinafter referred to as "market value"). And it shall, when the market value of trust asset fall or is likely to fall by 5/1,000 or more of its book value, promptly take appropriate actions such as adjustment of the price of such bonds or sale thereof and report the fact to the Governor. <Amended July 3, 2001>

(6) Any management company shall, when the credit rating grade of the bonds included in MMF falls below the grades stipulated under paragraphs (3) and (4), promptly adjust the price of such bonds in accordance with the lowered grade or dispose of them within one month after the downgrade in such credit rating grade.

(7) In addition to those prescribed under paragraphs (1) through (6), detailed standards necessary for maintaining the soundness in MMF trust property shall be determined by the Governor.

§50. Loan of Securities

(1) Except the cases in the following, no management company shall instruct the trustee to loan the securities owned by investment trust (referring to the securities, etc. stipulated in Article 10 paragraph (1) subparagraph 1-2 of the Decree; the same hereinafter in this Article):

1. The information concerning the loan of securities should be disclosed in the trust agreement and the prospectus concerned;

2. It should be possible to ask for the return of the loaned securities at any time when necessary for the exercise of voting rights to the issuer of the securities owned by investment trust

3. It should be possible to rescind the securities loan contract at any time without paying any penalty

4. Sufficient collateral needed for fulfillment of loaned securities obligation should be secured from borrower. In this case, the value of collateral should always exceed the net asset value of loaned securities;

5. Various revenues including fees arising from the loan of securities, etc. should belong to investment trust;

6. The loan should not be provided to the related person (referring to the related persons stipulated in Article 6-2 paragraph (3) subparagraph 1 of the Decree). However, this provision shall not apply to the case where the approval of the Governor is obtained; and

7. Loan transaction should be made through the intermediation of the securities companies prescribed in Article 28 of the Securities and Exchange Act, the securities finance companies prescribed in Article 145 of the same Act, or the Korea Securities and Depository prescribed in Article 173 of the same Act (limited to the cases where such companies and third party who received an entrustment therefrom performs the administrative affairs of collateral provided by borrowers).

(2) The Governor may determine the detailed standards necessary for the loan of securities pursuant to the provisions under paragraph (1).

§51. Scope of Selling Companies Exercising de facto Control

"The selling company which has sold beneficiary certificates in excess of the ratio to be determined by the FSC" stipulated in Article 12-2 paragraph (2) subparagraph 1 of the Decree refers to a company that has sold 10/100 or more of the beneficiary certificates issued by any management company as of the end the most recent fiscal year.

§52. Easy Access to Audit Report

Article 40 shall apply mutatis mutandis to the method of providing beneficiaries with easy access to the audit report pursuant to Article 12-11 of the Decree. In this case, "trust terms and conditions" in Article 40 shall be construed as "audit report".

§53. Reports on Trust Assets

(1) Pursuant to Article 26 paragraph (1) of the Act, every management company shall file with the Governor and the KITCA its business reports, stating the following information within 20 days from the end of each quarter.

1. Performance of investment trust creation and sale and repurchase of beneficiary certificates;

2. Performance of investment trust management and schedule of base price changes of beneficiary certificates;

3. Details of portfolios including securities held by investment trust; and

4. Details of the difference between the book value and the market value of bonds held by investment trust.

(2) A management company shall classify and prepare report on the final accounts of the investment trust pursuant to Article 26 paragraph (1) of the Act in accordance with the following subparagraphs and file with the Governor or the Korea Investment Trust Companies Association within two months from the date of expiration of trust contract or the end date of trust accounting period.

1. Balance sheet of investment trust

2. Income statement of investment trust

3. Statement of base prices for beneficiary certificates

4. External audit reports (excluding investment trusts applicable under Article 12-7 paragraph (2) of the Enforcement Decree)

(3) A management company shall, when terminating trust contract pursuant to Article 23 or 31 of the Act, file reports on final accounts pursuant to paragraph (2) to the Governor within two months from the date of termination.

(4) The forms, preparation method, and etc. for the business reports pursuant to the provisions under paragraph (1) of this Article shall be determined by the Governor.

§54. Preparation and Distribution of Prospectus

(1) Any management company shall, in the case of preparing a prospectus pursuant to Article 27 paragraph (1) of the Act, prepare such prospectus in order that investors may identify the information on the investment trust including the risks involved in the investment, and shall neither exaggerate any of the items to be presented in prospectus nor include an expression which may bring any misunderstanding to investors.

(2) Any management company shall, when there is any modification of the material information required in prospectus which may significantly influence the judgment of investors, immediately supplement and correct such prospectus.

(3) Any management company, in the case of selling beneficiary certificates through a selling company, distribute prospectuses to such selling company by one day prior to the date on which sale of beneficiary certificates is commenced, and such selling company shall retain them at its head office, branches, and business offices for distributing or mailing them to the parties intending to acquire beneficiary certificates.

(4) Every management company and selling company shall explain the major contents of prospectus to the parties planning to purchase beneficiary certificates, and it shall keep trust terms and conditions for public perusal and when any request for access to such trust agreement is received from the persons intending to acquire beneficiary certificates, it shall sincerely cooperate with such request.

(5) Any management company or selling company shall, when entering into a sale contract of beneficiary certificates with an investor, receive a signature (substituted by the electronic signature prescribed under Article 2 subparagraph 2 of the Electronic Signature Act) of the investor on the application for trading, confirming the fact that the prospectus has been distributed or sent and also the major contents thereof have been explained.

(6) Notwithstanding paragraph (3) and (4), the dissemination of prospectus by management companies or selling companies may be waived when a beneficiary additionally acquires same beneficiary certificates with those already purchased. However, this provision shall not apply to the case where the prospectus is supplemented or corrected pursuant to paragraph (2).

(7) Every management company or selling company may provide prospectus with the parties intending to purchase beneficiary certificates by using electronic media including Internet, etc. in such manners as to be determined by the Governor.

(8) The forms, preparation method of prospectus shall be determined by the Governor.

§55. Preparation and Distribution of Simplified Prospectus

(1) Every management company or selling company may, notwithstanding Article 54, solicit investors for the acquisition of beneficiary certificates by using a simplified prospectus in which the major contents of prospectus are summarized (hereinafter, "simplified prospectus").

(2) Any management company or selling company shall, when soliciting investors for the acquisition of beneficiary certificates by using simplified prospectus, phrase the language of simplified prospectus in easy and understandable manner.

(3) Information stated in the simplified prospectus shall not be different form those in the prospectus.

(4) Article 54 paragraph (1) to (3) and (6) to (8) shall apply mutatis mutandis to the simplified prospectus. In this case, "prospectus" under Article 54 shall be construe as "simplified prospectus".

§56. Preparation and Distribution of Report on Trust Property Management

(1) Every management company shall distribute or send the report on trust property management prepared pursuant to Article 27 paragraph (4) of the beneficiaries of the investment trust concerned within one month from the base date stipulated under Article 13 paragraph (3) subparagraph 1 of the Decree (hereinafter referred to as "base date for preparation").

(2) Any management company shall, when it has sold beneficiary certificates through a selling company, send the report on trust property management to the selling company, and such selling company shall distribute or send such report to the beneficiaries of the investment trust concerned within one month from the base date for preparation.

(3) Every management company or selling company shall keep the report on trust property management at the following places for the beneficiaries' perusal for one month from the preparation date;

1. Management companies : head office (in the case of investment trust companies, head office, branches, and business offices); and

2. Selling companies : head office, branches, and business offices.

(4) Every management company may supply its beneficiaries with the report on trust property management pursuant to the provisions under paragraph (1) by using electronic media including Internet in such manner as determined by the Governor.

(5) The form, preparation method, etc. of the report on trust property management pursuant to the provisions under paragraph (1) shall be determined by the Governor.

§57. Comparison and Disclosure of Management Results

(1) The KITCA shall classify and prepare the data reflective of the comparative management results of each investment trust by type, privately placed investment trust, and publicly placed investment trust, based upon base price, rate of return, distribution rate and size of the assets under management, then shall disclose them through publication and electronic media such as the Internet.

(2) The KITCA shall prepare the data on the management results of each investment trust in which the following information are included, and disclose such data in book and by using electronic media such as Internet.

1. Names of each management company and investment trust:

2. Fund managers;

3. Amount and weight of each type of investment securities;

4. Asset volume and base price;

5. Rate of increase or decrease in base price; and

6. Special remarks related to the charges in base price.

(3) The KITCA may request any management company to submit the prospectus of each investment trust and the data on base price, etc., within the range necessary for the disclosure of the comparative management results of investment trust pursuant to paragraphs (1) and (2). In this case, such management company shall sincerely comply with such request except for unavoidable cases.

(4) The KITCA may stipulate the classification of investment trust, disclosure interval, comparison method, disclosure standards, method of management company's data submission, comparison and disclosure of management results, and detailed standards necessary for the implementation of disclosure affairs.

§58. Scope of Books and Document related to Investment Trust

(1) "The books and documents to be determined by the FSC" prescribed under Article 28 paragraph (3) of the Act refer to the following:

1. Trust property list;

2. Book in which the base price of beneficiary certificates is entered;

3. Financial statement and supplementary schedules; and

4. Securities trading specifications.

(2) Any management or selling company may, notwithstanding paragraph (1), refuse to accept a beneficiary's request after presenting a justifiable reason by letter, if any, to such beneficiary.

§58-2. Limit to the provision of information [Established on July 3, 2001]

(1) Pursuant to the provision of the Article 16-4 paragraph (2) subparagraph 3 the management company can provide for the selling company(including the affiliates of the management company) the information of the investment trust concerned (referring to the matters before retroactive 1 month from the date the information concerned is provided), under the followings.

1. The account book(s) and document(s) pursuant to Article 58 paragraph (1) subparagraph 1 of the regulation

2. Other information, to be determined by the Governor, that may not harm the interest of beneficiaries.

(2) The selling company can use the information pursuant to paragraph (1) only if it provides the information for the beneficiaries of the investment trust concerned, and it may not use the information for the company itself or those other than the beneficiaries of the investment trust concerned.

(3) Despite the regulation of paragraph (2), the management company and the selling company can provide the investment trust information pursuant to paragraph (1) for the investment trust rating agencies designated by KITCA in accordance with the way the KITCA determines.

§58-3. Payment of Performance Fee [Established on 3 July, 2001]

(1) In the case of investment trust pursuant to Article 33 paragraph (2) of the Act, management company may pay the fee in proportion to management performance(hereinafter referred to as "performance fee") in addition to the fee of the definite proportion of the trust property.

(2) In the event of paying the performance fee pursuant to paragraph (1), the management company must write the followings in trust terms and conditions pursuant to Article 54 and prospectus(including the simplified prospectus pursuant to the Article 55) of investment trust concerned

1. Calculation methods of performance fee

2. Comparative index used in measuring performance fee and the characteristic(s) and the measurement period of comparative index.

3. The fact that this can be more exposed to the investment risk than other investment trust not paying performance fee, as it pays performance fee.

4. Fee scheme of investment trust including performance fee

(3) The Governor may determine the specifics in respect of the payment of performance fee.

58-4. Reporting on Formulation·Correction of Trust Terms and Conditions

(1) When the Korea Investment Trust Companies Association intends to formulate or revise the standard terms and conditions for a trust, it shall report the fact to the governor in advance attaching such documents as the details of the reason etc.

(2) The Governor may, in accordance with Article 22 of the Act, require management companies or the Korean Investment Trust Companies Association to correct or supplement terms and conditions of the trusts reported where they are likely to violate statutes or injure interests of beneficiaries.

(3) Specific standards needed to report on standard terms and conditions for a trust or trust terms and conditions pursuant to paragraphs (1) and (2) shall be determined by the Governor.

58-5. Risk Calculation for Securities Option

(1) "Risks by transaction type incurred from securities option transactions of the identical category" under Article 33 paragraph (1) subparagraph 1-2 of the Act means the total sum of unsettled yield payment for securities options applicable under identical type of identical category. In this case the unsettled yield payment shall be calculated as follows;

Unsettled yield payment = Market value of underlying stock for securities option transaction Number of underlying stock Number of contracts

(2) "Identical category" under paragraph (1) means the category under which underlying stock is identical to the securities option transaction concerned, and "transaction type" means purchase of securities call option, sale of securities call option, purchase of securities put option, and sale of securities put option.

(3) "Market value of underlying stock for securities option transaction" for calculating unsettled yield payment pursuant to paragraph (1) means the closing market price (or those related back in sequence, absent closing market price for the day concerned)_ applicable under the category of underlying stock for securities option from the day before ceiling provided under the provisions of Article 33 paragraph (1) subparagraph 1-2 of the Act is applied; "number of underlying stock" means the number of underlying stock traded and resulted from exercising rights under each contract for securities option transaction.

(4) "Total risks incurred from securities option transactions under identical category" under Article 33 paragraph (1) subparagraph 1-2 of the Act means the absolute value of the difference between the total sum of risks calculated for purchase of securities call option and sale of securities put option by transaction type and the total sum of risks calculated for sale of securities call option and purchase of securities put option.

§59. Detailed Standards

Necessary detailed standards related to the disclosure of investment trust under the provision of this Section shall be determined by the Governor.

Section 3.

Valuation of Trust Property

Subsection 1.

Common Provisions

§60. Basic Principle in Valuation of Trust Property

The Valuation of trust property, in the case of calculating the base price of a beneficiary certificate, shall be made in accordance with the Financial Accounting Standards prescribed under Article 13 paragraph (1) of the Act on External Audit of Corporations and the accounting practices which are generally regarded as fair and appropriate, unless otherwise provided in the Act, Decree, Enforcement Regulation, and this Section.

Subsection 2.

Valuation of Bonds

§61. Valuation of Listed Bonds

(1) Listed bonds, whose prices have been quoted on the KSE (including special quotations; the same hereinafter) for at least ten days per month for three consecutive months retroactive from the month preceding to the valuation date of securities, shall be valuated at the closing price of the valuation date.

(2) Article 62 shall apply mutatis mutandis to the valuation of listed bonds other than those mentioned under paragraph (1) and those whose prices were not quoted on the valuation date.

§62. Valuation of Non-listed Bonds

(1) Any non-listed bond shall be valuated on the basis of the price information provided by more than 2 institutions (hereinafter, "designated valuation institution") designated as a bond price valuation institution by the Governor. In this case, every management company shall maintain consistency in applying the valuation method. <Amended July 3, 2001>

(2) Every management company may, notwithstanding paragraph (1), valuate the bonds (excluding the listed bonds pursuant to Article 61 paragraph (1); the same hereinafter in this Article), that are owned by the investment trust established under the contract terms and conditions separately determined by the Governor, by book value. <Amended July 3, 2001>

(3) [Deleted July 3, 2001]

(4) Every management company shall, for the purpose of executing the following affairs, establish and operate a securities valuation committee as an internal organization to conduct the task under followings: <Amended July 3, 2001>

1. Detailed methods in the event of valuating the unlisted bonds pursuant to paragraph (1);

2. Other Matters concerning the valuation of the trust property.

(5) Every management company shall prepare and keep the procedure for and method of evaluating trust property in writing pursuant to paragraph (4), and maintain consistency in their operation.

(6) The Governor may stipulate detailed standards concerning the establishment and operation of the securities valuation committee.

(7) The valuation methods of trust property pursuant to paragraphs (1) through (4) shall be disclosed to beneficiaries, in advance, by describing them in the trust terms and conditions and prospectus of the investment trust concerned.

§63. Valuation of Dishonored Bonds

(1) Every management company shall classify dishonored bonds of trust property, by taking into account the possibility of collecting the principal and interest of such dishonored bonds in four categories; potentially non performing, non performing, improving, and deteriorating stage, and properly valuate them accordingly. In this case, Article 62 paragraphs (1) and (2) shall not apply.

(2) Every management company shall formulate and enforce the procedure, method, and standards necessary for the proper valuation of dishonored bonds pursuant to paragraph (1), and maintain consistency in their operation.

(3) Necessary detailed standards related to the classification and valuation of dishonored bonds pursuant to paragraph (1) shall be determined by the Governor.

Subsection 3.

Valuation of Stocks

§64. Valuation of Listed Stocks

(1) In case any stocks are listed on two or more stock exchanges, such stocks shall be valuated at the closing price as of the valuation date on the stock exchange which has the largest trading volume of such stocks.

(2) Out of the listed stocks stipulated under paragraph (1), listed stocks whose closing price is not available as of the valuation date shall be valuated at the closing price on the stock exchange which has the largest trading volume of such stocks, retroactive in regular sequence from the valuation date.

(3) The method of valuating the listed stocks which went ex-right and ex-dividend, newly listed stocks before the formation of market prices, and newly listed warrants(limited to detachable warrants) shall be determined by the Governor.

§65. Valuation of Non-listed Stocks

Non-listed stocks (excluding the non-listed stocks stipulated in Article 14 paragraph (2) subparagraph 1 item b of the decree) shall be valuated at the acquisition cost. However, when it is deemed that the acquisition cost does not reflect the fair value of the non-listed stocks concerned, the valuation method of such non-listed stocks may be separately determined by the securities valuation committee pursuant to Article 62 paragraph (4).

Subsection 4.

Valuation of Futures and Options, etc.

§66. Valuation of Futures and Options

(1) Futures shall be valuated at the futures settlement prices of the valuation date to be published by the exchange concerned. However, if such price as of the valuation date is not available, futures shall be valuated at the settlement price as of the immediately preceding date.

(2) An option shall be valuated at the base price of member margin or similar margin as of the valuation date to be published by the exchange concerned. However, if such base price as of the valuation date is not available, option shall be valuated at the base price as of the immediately preceding date.

(3) The provision of paragraph (1) or (2) shall apply mutatis mutandis to the valuation of overseas futures trading.

§67. Valuation of Beneficiary Certificates, etc.

Beneficiary certificates or stocks issued by the open-end securities investment companies prescribed in Article 45 paragraph (1) of the Securities Investment Company Act (hereinafter referred to as "beneficiary certificates and others" in this Article ) shall be valuated at the base price( at the net asset value pursuant to Article 54 paragraph (2) of the same Act, in the case of stocks issued by the open-end securities investment companies) of the beneficiary certificates and others concerned as of the valuation date. Beneficiary certificates of the exchanged traded fund under Article 2 paragraph (2) of the Act, however, shall be valued according to the closing market price in the securities market or the Association brokerage market. <Amended October 2, 2002>

Subsection 5.

Valuation of Securities Denominated in Foreign Currencies

§68. Base Date for Valuation

The base date for the valuation of securities denominated in foreign currencies shall be the date on which the last transaction of such securities market is completed at the closing time of the domestic exchange, and in case the last transaction is not completed by then, the preceding date shall be the base date. However, when it is impossible to reflect the fair value of the securities denominated in foreign currencies concerned since there occurred a cause before the valuation date after the completion of the last transaction on a foreign securities market which may have significant effect on the price of such securities, the securities valuation committee may otherwise determine the valuation method of such securities.

§69. Applicable Exchange Rate

The exchange rate applicable at the time of converting foreign currencies into the won currency shall be the basic exchange rate of each foreign currency (referring to the basic exchange rate pursuant to Article 1-2 subparagraph 6 of Regulation on Foreign Exchange Transaction) <Amended July 3, 2001>

§70. Valuation of Listed Bonds

Listed bonds shall be valuated at the closing price (for the listed bonds traded in more than one country, the closing price on the stock exchange located in the country where the bond concerned has been acquired shall be applicable, in principle) as of the base date for valuation pursuant to Article 68. In case such closing price does not include accrued interest, however, they shall be valuated by adding such accrued interest to the closing price.

§71. Valuation of Listed Stocks

Listed stocks shall be valuated at the closing price (for the listed stocks traded in more than one country, the closing price on the stock exchange located in the country where the stock concerned has been acquired shall be applicable, in principle) as of the base date for valuation pursuant to Article 68 on the valuation date.

§72. Valuation of Other Securities

The valuation method of listed warrants and other securities denominated in foreign currencies shall be otherwise determined by the Governor.

Section 4.

Declaration and Report by Management Companies

§73. Public Notices of Closure of Investment Trust Business

(1) Any management company shall, when intending to discontinue, close, or resume all or part of the business prescribed in Article 10 paragraph (1) of the Act (for an investment trust company, including the case of discontinuation, closure , or resumption of its branch's or business prescribed in Article 10 paragraph (1) of the act make efforts in order not to be detrimental to the interest of its customers in relation to the transfer of accounts.

(2) Any management company shall, when intending to close all or part of the business prescribed in Article 10 paragraph (1) of the Act (for an investment trust company, including the case of closing its branch's or business office's business), publicly announce its intention of the closing through two or more nationwide daily newspapers at least three times, 30 days prior to the date of disclosure, and it shall individually notify its creditors whose address is known.

(3) Necessary matters concerning the suspension of any business place or the declaration of its resumption pursuant to Article 15-2 of the Act shall be determined by the Governor.

§74. Approval for Securities Trading by Executives and Employees of	Management Companies

(1) Any executives or employee of management companies shall, when intending to trade or entrust trading of the stocks issued by listed corporations prescribed under Article 2 paragraph (13) subparagraph 3 of the Securities and Exchange Act or by registered corporations prescribed under Article 2 paragraph (15) of the same Act pursuant to Article 16-3 of the Decree, obtain the approval of the Governor.

(2) The detailed criteria necessary for the approval pursuant to the provision of paragraph (1) shall be determined by the Governor.

§75. Restrictions on Domestic Investment through Management Companies' Offshore Funds

Every management company shall not allow its overseas branches or its overseas subsidiaries to make excessive investment with their assets in any offshore fund that mainly aims to invest in domestic securities, and it shall formulate and enforce its internal control standards necessary for restricting such excessive investment.

Section 5.

Domestic Sale of Foreign Beneficiary Certificates

§76. Application of Requisites for Foreign Management Companies

(1) "The size to be determined by the FSC" stipulated under Article 22-3 paragraph (1) subparagraph 1 of the Decree corresponds to KRW 5 trillion.

(2) In the application of the provisions under Article 22-3 paragraph (1) of the Enforcement Decree, when any foreign management company has entrusted all of its asset management business to another company (hereinafter, "foreign asset management company"), such foreign asset management company shall be deemed a foreign management company.

§77. Eligibility Standards of Foreign Beneficiary Certificates

(1) "The beneficiary certificates to be stipulated by the FSC from among those issued by foreign management companies" stipulated in Article 22-3 paragraph (2) of the Decree refer to those which satisfy the following requirements:

1. Their issuance should be intended for unspecified parties and at least 25/100 of total issuance amount should be sold in countries other than Korea;

2. At least 80/100 of total net assets should be invested and managed in foreign securities;

3. Repurchase should be allowed directly or indirectly at the request of beneficiaries;

4. The statutes of the country in which beneficiary certificates were issued should not lack a marked degree of equity in the light of domestic laws; and

5. Other matters to be determined by the Governor, which are necessary for the public interests and protection of investors.

(2) In the case of foreign beneficiary certificates where several umbrella foreign investment trusts using the same trust agreement have been registered as one investment trust under foreign statues, each umbrella foreign beneficiary certificate should satisfy the requirements pursuant to the provisions under paragraph (1).

(3) Detailed criteria on the foreign beneficiary certificates pursuant to paragraph (1) shall be determined by the Governor.

§78. Declaration of Sale

(1) Any foreign management company intending to sell foreign beneficiary certificates in Korea shall make a declaration to the Governor through its sales agent by attaching the declaration for domestic sale of foreign beneficiary certificates (hereinafter referred to as "sales declaration" in this Section) together with the following documents. And such foreign management company may sell them only after such declaration is accepted by the governor:

1. Trust terms and conditions;

2. Business explanatory note;

3. Prospectus;

4. Annual report of the foreign management company;

5. A copy of sales agency contract;

6. Documents certifying the authority of the representative whose name is stated in the sales agency contract.

(2) In case any of the documents pursuant to paragraph (1), are not written in Korean, a summary in Korean shall be attached thereto. In this case, when the contents in the summary differ from original documents, the summary shall take precedence over the original ones.

(3) In case the Governor has failed to give any notice with regard to the declaration made pursuant to the provisions under paragraph (1) within 14 days from the declaration date, such declaration shall be deemed to have been accepted on the day when 14 days elapse.

(4) In case the contents of the sales declaration pursuant to the provision of paragraph (1) are different from the facts, the Governor may take actions such as an order for correction, suspension of sale, etc. against the sales agent of foreign beneficiary certificates concerned and the foreign management company concerned, that are necessary for the protection of beneficiaries.

(5) The form, filling-out method, etc of the declaration pursuant to the provision of paragraph (1) shall be determined by the Governor.

§79. Declaration of Changed Matters

(1) Any foreign management company shall, when any of the following among the matters declared pursuant to Article 78 paragraph (1) is changed, promptly make a declaration of such change to the Governor through its sales agent by attaching the documents evidencing, changed matters :

1. Change in various expenses to be beneficiaries;

2. Change of the custodian, or foreign management company;

3. When any foreign management company, have been punished with fine or business suspension by the foreign supervision authorities, such fact;

4. Matters to be determined by the Governor, which may significantly affect beneficiaries' profits.

(2) In case the Governor has failed to give any notice with regard to the declaration made pursuant to the provisions under paragraph (1) within seven days from the declaration date, such declaration shall be deemed to have been accepted.

(3) Any foreign management company shall, when the declaration of changed matters pursuant to paragraph (1) takes effect.

(4) Every foreign management company shall report the monthly domestic sales result through its sales agent to the Governor within 20 days from the end of each month.

(5) Article 78 paragraph (4) shall apply mutatis mutandis to the case of declaration of changed matters pursuant to paragraph (1).

§80. Declaration of Discontinuance of Sales Agency

(1) Any sales agent shall, when intending to discontinue its sales agency business, declare the reason for discontinuation and information concerning the measures for beneficiary protection and the transfer of sales agency business following the discontinuation to the governor, in writing.

(2) In the case of paragraph (1), the sales agent shall, when there is no one doing the sales business with respect to the foreign beneficiary certificates sold thereby, continue to do such sales business for a considerable period of time necessary for the protection of beneficiaries.

(3) Article 79 paragraph (2) and (3) shall apply mutatis mutandis to the case of declaration of discontinuation of sales agency pursuant to the provisions under paragraph (1).

(4) Detailed criteria necessary for the protection of beneficiaries, such as trading method, with respect to the domestic sale of foreign beneficiary certificates shall be determined by the Governor.

§81. Solicitation for Investment

(1) When soliciting purchase of foreign beneficiary certificates to investors, every sales agent shall fully take into account and investment experiences, as well as funding capabilities.

(2) Every sales agent shall, when soliciting for investment pursuant to the provisions under paragraph (1), distribute a written reminder of investment describing the fact that investors may suffer from losses due to a fall in the value of money as well as a decline in securities prices, and receive a signature (including the electronic signature prescribed under Article 2 subparagraph 2 of the Electronics Signature Act) of the beneficiary confirming the distribution of such reminder.

§82. Disclosure of Basis Price

(1) Every sales agent shall publicly announce or post the basis price of the beneficiary certificates concerned at its business offices or through electronic media including Internet, etc.

(2) Every sales agent shall provide beneficiaries with prospectuses and reports on trust property management written in Korean on behalf of foreign management companies.

§83. Refusal of Acceptance

Various expenses to be borne by beneficiaries, regardless of their titles, shall be disclosed to beneficiaries, and the Governor may refuse to accept the sales declaration for the protection of investors when it deems that such expenses as fees are excessively high in the light of international practice.

§84. Restriction on Unfair Trading

The Governor may issue a correction order to the sales that committed any practices detrimental to fair trading, or order such sales agent to take other necessary actions for the public interests and the protection of beneficiaries.

§85. Provision of Declaration Form

Every sales agent shall provide various forms including the sales declaration forms which are necessary for the investment decision by beneficiaries with respect to the domestic sales of foreign beneficiary certificates, and always make them available for beneficiaries' free access.

§86. Exception of Application to Institutional Investors

Articles 76 through 79 shall not apply where any foreign management company sells foreign beneficiary certificates only to institutional investors as stipulated under Article 1-2 subparagraph 4 of the Regulation on Foreign Exchange Transactions.

Section 6.

Trustee Companies and Selling Companies, etc.

§87. Good Faith Duty of Trustee Companies

Every trustee company shall, in carrying out the affairs prescribed under Article 38 of the Act, make efforts for the profits of beneficiaries with the care of a bona fide administrator of trust property.

§88. Compulsory Rejection for Improper Management Instructions

Any trustee company shall, when it finds out the fact, in performing the affairs prescribed under Article 38 of the, that any management instruction by the management company falls under any of the following subparagraph, demand such management company to withdraw, alter, or correct such instruction:

1. Practices of trading securities with unfairly manipulated prices;

2. Practices of increasing the trading volume of specific securities or of making the market price fluctuated for the unjustifiable purpose;

3. Practices conducted by a fund manager, who is registered with the KITCA and in charge of the management of a specific trust property, for the purpose of his own or a third party's benefits other than trust property's benefits; or

4. Practices that any selling company covers all or part of losses in favor of any beneficiary of the beneficiary certificates which were publicly offered or distributed in the secondary market, or provides benefits in property to beneficiaries or a third party.

§89. Disclosure of Objection by Trustee Companies

(1) Any trustee company shall, when it has filed with the Governor an objection because its management company failed to comply with its requirement pursuant to Article 41 paragraph (1) of the Act, post the following at its head office, branches, and business offices for public disclosure immediately after the decision on such objection is issued by the FSC.:

1. The contents of the management instructions on trust property given by such management company,;

2. Among the contents of management instructions on trust property by a management company, any violation of statutes, trust agreement or prospectus;

3. The contents of the objection filed with the FSC by such trustee company; and

4. The contents of the decision on such objection made by the FSC.

(2) The trustee company concerned shall disclose the matters prescribed under each subparagraph of paragraph (1) through electronic media including Internet and others.

§90. Sales Solicitation Advertising for Beneficiary Certificates

(1) Neither management company nor selling company shall perform any of the following practices when offering publicly or selling beneficiary certificates:

1. Practices of soliciting the investment in beneficiary certificates by providing a conclusive judgment that their prices are certain to rise;

2. Practices of a false indication or an indication which may cause misunderstanding on material facts;

3. Practices of promising the undertaking of all or the losses in the investment (excluding the cases permitted under laws); or

4. Practices of promising to provide special benefits to investors.

(2) Any management company and company shall, when advertising the management results of investment trust for soliciting the acquisition of beneficiary certificates, comply with the following:

1. The method of indicating management results should be the same as that in prospectus and simplified prospectus;

2. The management period of such investment trust and the base date for final valuation should be indicated;

3. The management result as of the latest date before such advertising should be indicated;

4. The fact should be indicated that the management results of such investment trust were achieved in the past, and therefore the future management results may differ from the past ones;

5. In addition to the management results of such investment trust, the comparative indicators providing a basis for properly evaluating the management results of such investment trust should also be indicted; and

6. In addition to a yield simply realized an average annualized yield should be also indicated.

(3) When any management company and selling company advertise the management results of its trust in comparison with another investment trust, the investment trust intended for comparison and comparison standard should be impartial and proper.

(4) Detailed standards for an advertisement indicating management results and comparative advertisement pursuant to paragraphs (2) and (3) shall be determined by the Governor.

CHAPTER Ⅴ.

SUPPLEMENTARY PROVISIONS

§91. Assistance in Duties

The Governor shall assist the duties of the FSC by the following method:

1. Processing of declaration documents, applications for approval, and reports made to the FSC;

2. Preparation of agenda or reports to the FSC;

3. Execution of regulation or resolution of the FSC; and

4. Carrying out the duties delegated by the FSC.

Addenda

(December 29, 2000)

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Repeal of Related Regulations

(1) The Enforcement Procedures of the Regulation on Supervision of Securities Investment Trust Business shall be repealed on the effective date of this Regulation:

§3. Application Examples of Restrictions on Securities Trading between	Converted Securities Companies and Investment Trust

Article 42 shall apply until June 30, 2001 only to the cases where any investment trust management company, which was established after January 1,2000 in the course of any investment trust company being converted into a securities company under the Securities and Exchange Act in accordance with the Act on Structural Improvement of Financial Industry, gives management instructions with respect to securities trading between such converted securities company and investment trust.

§4. Interim Measures on Restrictions of Call Loans by Trust Property

(1) The application of Article 46 paragraph (2) to Korea Investment Trust Management Corporation, Daehan Investment Trust Management Corporation, and Hyundai Investment Trust Management Corporation shall be suspended until the date to be separately determined by the Governor.

(2) Hyundai Investment Trust Management Corporation shall reduce the outstanding bridge loans by its trust property as of the effective date of this regulation to within the amount equivalent to 31/100 of the outstanding bridge loans of its trust property as of the June 30, 1998 until February 28, 2001.

§5. Applicability to MMF

The proviso of Article 49 paragraph (3) subparagraph 1 and (4) of this Regulation shall apply to the investment trust to be established for the first time or established in accordance with the changed trust agreement after the effective date of this Regulation.

§6. Interim Measures

(1) Notwithstanding Article 62 paragraph (1), MMFs and bonds held by the investment trusts established before November 14, 1998 may be valuated by adding the accrued interest at the issuance interest rate to the acquisition amount (referring to the amount obtained by proportionally distributing the gain or loss from redemption to the number of the days to maturity of the bond concerned and adding or subtracting that number to or from the acquisition cost).

(2) The investment trusts pursuant to paragraph (1) excluding MMFs and installment-type investment trust provided under paragraph (3) may additionally sell beneficiary certificates only by June 30, 2000 within the limit not exceeding the amount established in such investment trust as of August 31, 1999.

(3) Among the investment trusts pursuant to paragraph (1), installment-type investment trusts (referring to private pension trust, long-term household investment trust, investment trust for employee with tax benefits, and general installment-type investment trust) may additionally sell beneficiary certificates only to the beneficiaries who join them before June 30, 2000. In this case, notwithstanding paragraph (1), Article 62 paragraph (1) shall apply to the bonds to be included by the money to be additionally trusted after July 1, 2000.

Addenda

(March 1, 2001)

§1. Effective Date

The Regulation shall be effective on March 1, 2001.

§2. Interim Measures on Restrictions of Call Loans by Trust Property

Notwithstanding Article 4 paragraph (2) dated December 29, 2000, Hyundai Investment Trust Management Corporation shall reduce the outstanding bridge loans by its trust property as of the effective date of this regulation to within the amount equivalent to 31/100 of the outstanding bridge loans by its trust property as of the June 30, 1998 until September 30, 2001.

Addenda

(March 30, 2001)

§1. Effective Date

The Regulation shall be effective on April 1, 2001.

§2. Interim Measures

(1) Any action pursuant to Article 30-7 to Article 30-9 shall be postponed for one year from the effective date of this Regulation to any management company whose ratio of equity to risks or rating as a result of management status evaluation as of effective date of this Regulation falls under the management improvement recommendation, requirement, or order stipulated in such Article s

(2) The goodwill of any trust management company pursuant to Article 42 shall be deemed assets for two years from the effective date of this Regulation in calculation of the capital adequacy part from among the items of management status evaluation mentioned in Article 30 and net assets mentioned under Article 30-2 paragraph (2), respectively.

Addendum

(May 16, 2001)

The Regulation shall be effective on the date of promulgation.

Addenda

(July 3, 2001)

§1. Effective Date

The Regulation shall be effective on the date of public announcement.. However, the Amended provisions of Article 62 shall be effective on September 1, 2001.

§2. Application case on Restrictions of MMF and Interim Measures

(1) The Amended provisions of Article 49 paragraph (3) subparagraph 2 shall apply to the bonds that nearly enter MMF from the effective date of this regulation. However, in the event the bonds to newly enter MMF are government bonds or monetary stabilization bonds, residual terms to maturity shall be equal to or less than one year and a half notwithstanding the Amended provisions of Article 49 paragraph (3) subparagraph 2.

(2) Notwithstanding the Amended provisions of Article 49 paragraph (5), The "5 to 1,000" of this provision shall be "75 to 10,000" for six months from the effective date of this regulation.

(3) The management company shall make the MMF violating the requirement under paragraph (2) meet the requirement within three months from the date of the effective date of this regulation, and make the MMF violating the requirement under the Amended provisions of Article 49 paragraph (5) as of the date of the effective date of this regulation meet the requirement within three months after six months from the date of the effective date of this regulation.

§3. Application Case on Evaluation of Non-listed Bonds.

(1) The Amended provisions under Article 62 shall preferentially apply to the investment trust by trust contract made after the effective date under the proviso of Article 1 of the addenda and to non-listed bonds that newly entered investment trust created prior to the effective date.

(2) In the event of subordinated corporate bonds that a Special Purpose Company has issued on the basis of claims transferred from a specified investment trust pursuant to Article 31 of the Act on Asset Securitization prior to the effective date of the proviso of Article 1 of the addenda, notwithstanding the provisions of Article 62 the securities evaluation committee may determine the evaluation method differently.

(3) The Amended provisions of Article 62 paragraph (1) shall become ineffective on the day after three years have passed since this regulation becomes effective.

Addenda

(October 1, 2001)

§1 Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Interim Measures for Restrictions on Call Loans, Trust Property, and Etc.

Notwithstanding the provisions of Article 2 of the Addenda (March 1, 2001), Hyundai Investment Trust Management Company, Ltd. shall reduce outstanding bridge loans of trust property as of the effective date of this Regulation to 31/100 of the total outstanding bridge loans as of June 30, 1998 by March 31, 2002.

Addendum

(December 19, 2001)

This Regulation shall be effective on the date of promulgation.

Addenda

(April 1, 2002)

§1 Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Interim Measures for Restrictions on Call Loans, Trust Property, and Etc.

Notwithstanding the provisions of Article 2 of the Addenda (September 29, 2001), Hyundai Investment Trust Management Company, Ltd. shall reduce outstanding bridge loans of trust property as of the effective date of this Regulation to 31/100 of the total outstanding bridge loans as of the June 30, 1998 by September 30, 2002.

Addendum

(May 1, 2002)

This Regulation shall be effective on the date of promulgation.

Addenda

(August 1, 2002)

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Interim Measures on Restrictions on MMF Management

(1) Management company shall ensure that MMF exceeding 120 days of the weighted average term to maturity for all trust properties meet requirements provided under the Amended provisions of Article 49 paragraph (1) within six months from the effective date of this Regulation.

(2) The Amended provisions of Article 49 paragraph (4) shall apply to the CPs newly invested in MMF from the effective date of this Regulation.

Addenda

(October 2, 2002)

§1. Enforcement Date

This Regulation shall enter into force on October 1, 2002.

§2. Interim Measures on Restrictions, such as Call Loans of Trust Assets

"September 30, 2002" among the provisions of Article 2 of Addenda(April 2, 2002) shall be changed to "February 28, 2003."

Addendum

(January 2, 2003)

This Regulation shall be effective on the date of promulgation.

Addenda

(March 6, 2003)

§1. Enforcement Date

This Regulation shall enter into force on March 1, 2003.

§2. Interim Measures on Restrictions, such as Call Loans of Trust Assets

"February 28, 2002" among the provisions of Article 2 of Addenda(October 2, 2002) shall be changed to "February 29, 2004."