A. Tax on trust assets

   In order to protect investors from double taxation, the trust itself is generally not liable to pay tax on any income or gains arising from its holding of any investments.

B. Tax on Investors

1) Withholding tax on income and taxable income

   Although the trust itself is generally not liable to pay tax, any amounts payable from the trust to investors may be subject to withholding taxes at the time of distribution of dividends or redemption proceeds.

   Capital gains from bond transactions and income gains arising from dividend and interest payments are generally subject to withholding tax payments, while capital gains from stock transactions are generally not subject to withholding tax payments. For non-resident investors, the withholding tax treatment will depend upon the double taxation avoidance agreement between Korea and their country of residence. In the absence of such a treaty income and capital gains will be subject to withholding taxes.

   A taxable NAV is calculated to differentiate the NAV that should be used for tax purposes from that used for purchases and sales of beneficial certificates. The taxable NAV is calculated by separating taxable income from non-taxable income. While income gains arising from dividend and interest payments are generally subject to tax, realised and unrealised capital gains from listed companies on the stock exchange or the Kosdaq market and venture companies are generally exempt from tax.

2) Classification by asset composition

   Depending upon the composition of the assets of a trust, income gains are categorized as interest income or dividend income and tax is payable at the respective rate on interest income or dividend income as appropriate. In general, a trust that has 50% or more of its assets in bonds at the time of tax assessment (bond-type trust) is subject to interest income tax on all dividend and income gains; while a trust with less than 50% of its assets in bonds (equity-type trust) is subject to dividend income tax on all dividend and interest gains.

3) Classification by the type of investors

   Individual investors are subject to withholding tax at the time of receipt of dividends and/or interest. Institutional investors are also subject to withholding tax on income from the trusted assets, and they are entitled to deduct this amount from their corporate tax base.

* Domestic financial institutions are exempt from withholding tax under the Income Tax Law.

A. Tax on the fund assets

   Since an SIC is a corporation under the Commercial Code it is liable to taxation. All gains made by an SIC are taxable; however, in order to protect investors from double taxation some gains are exempt under certain clauses of the Income Tax Law. The Tax Code designates the SIC as a financial institution and thereby it is exempt from withholding tax on gains from investment products. This enables the SIC to obtain a tax refund on interest arising from bonds in the SIC's assets. As is the case of investment trusts, capital gains from investments in listed companies and venture companies are exempt from tax.

B. Deduction of corporate tax

   As a corporation, SIC is subject to corporate tax on the income received during an accounting period; however, if an SIC distributes over 90% of distributable income from an accounting period, it may obtain tax-deductions through subtracting the distributed amount from the corporate tax base. A private placement fund (which does not follow the procedures of a public offering as described in the Securities Exchange Act) is not eligible for the corporate tax deduction.

C. Taxation on Investors

1) Dividend paid to shareholders of SICs

   As the SIC is a corporation, dividend tax is payable on dividend income received by shareholders of an SIC. As is the case with contractual-type investment trusts, capital gains from the investments in listed companies and venture companies are exempt from tax.

2) Trading profit from shares of listed SICs

   As is the case with other securities, capital gains from the trading of shares of an SIC are exempt from tax on condition that the SIC is listed on the stock exchange or KOSDAQ market.

D. Taxation on non-residents

   Non-resident refers to non-Koreans who do not have a domicile or address in the Republic of Korea or non-Korean companies or institutions that do not have a branch office or a place of business in the Republic of Korea . Non-residents are permitted to acquire the shares of domestic-domiciled SICs without restriction on the basis of national treatment under the General Agreement on Trade in Services, paragraph 1, Article 2. Non-residents will be subject to withholding taxes on the payment of distributions or redemption of holdings.

   Residents of a country with which Korea has signed a double taxation avoidance treaty will be subject to the rate of tax specified in the treaty (please refer to ?able of Tax Rates?. In the absence of any such treaty, the withholding tax rate shall be as follows:

Income tax: 25% of the income gain
Resident tax: 10% of the income tax
Transfer income tax: the lesser of 27.5% of the capital gains and 11% of the redemption proceeds

* Notes

1. The rates in the table were excerpted from "The International Taxation" prepared by the National Taxation Service, and may differ from rates actually applied. Please refer to the original convention at National Taxation Service (www.nts.go.kr) or Ministry of Foreign Affairs and Trade (www.mofat.go.kr) for practical use.

2. Rates vary depending on whether the dividend paying company is owned over a certain percentage by the dividend receiving company (the range of share ownership is from over 10% or over 25%).

3. Tax treaties with Canada , the Philippines , and the USA do not cover resident surtax, and the tax rate above represents the effective tax rate.

4. No capital gains tax is payable unless the shares sold are of a corporation in which the seller holds 25% or more of the shares.

5. Rates vary depending on whether the bank that receives interest carries out a bona fide business practice.

6. Rates vary depending on the maturity of a loan or a debenture.

7. A 10% tax rate will be applied if the dividend paying company is owned up to 20% or more by the dividend receiving company.

8. No capital gains tax is payable unless the shares are sold by a shareholder with a share holding of 25% or more within the last two years.

9. Rates vary depending on whether the interest is paid from public issues of bonds, debentures, or similar obligations.

10. Normal rate will be applied in case the securities sold were held for one year or less.

11. Normal rates will be applied in case the company that receives interest, dividend, or capital gains is owned 25% or more by persons who are not residents of the USA and in case tax levied on interest, dividend, and capital gains was substantially less than the usual tax levied on the corporate profits.

12. Interest tax is exempt in case the payee is a bank or similar financial institution and the maturity of the debt instrument is at least seven years.

13. Rates vary depending on whether the dividend paying company is owned by the dividend receiver.

14. A tax rate of 10% will be applied if the recipient of interest is a bank and the loan was granted for a period of at least seven years in order to purchase industrial equipment or for a research project.