Investment Overview. Company Name : Macquarie Korea Infrastructure Fund (Fund Code: 35801) Macquarie Korea Asset Management Co., Ltd.

Transcription

1 Investment Overview This investment overview has detailed information on Macquarie Korea Infrastructure Fund. It is advised that investors read this investment overview before making an investment decision. Company Name : Macquarie Korea Infrastructure Fund (Fund Code: 35801) Asset Manager : Sales Agents : Macquarie Korea Asset Management Co., Ltd. ( MKAM ) NH Investment & Securities and Samsung Securities (together Joint Lead Managers ) * The sales agents are NH Investment & Securities Co., Ltd., Samsung Securities Co., Ltd., Shinhan Investment Corp., Hanwha Investment & Securities Co., Ltd., Kyobo Securities Co., Ltd., and Yuanta Securities Co., Ltd. However, only NH Investment & Securities and Samsung Securities will act as the sales agents for this offering. Investment Overview Updated as of : 25 August 2017 Effective Date of Investment Overview : 25 August 2017 Type of Security Offered and Number of Security Units on Offer : Registered common shares with no par value 17,584,995 shares [Total Offering Size: KRW147,186,408,150] Offering Period : Investment Overview is available at : 14 September September 2017 (2 days) E-Document DART of Financial Supervisory Services Written Document Macquarie Korea Asset Management Co., Ltd. NH Investment & Securities Co., Ltd. Samsung Securities Co., Ltd. Korea Financial Investment Association -1-

2 The Financial Services Commission of Korea does not acknowledge the propriety and accuracy of this document nor does it guarantee or approve the value of MKIF s shares. We advise you to be as prudent as possible in making investment decisions as the investment may entail a loss of principal. This English translation of the Korean Prospectus is for information purposes only, and MKIF does not guarantee the accuracy and correctness of this translation. Investors must read the original Prospectus in Korean carefully before any investment decision. In the event of a difference between the Korean original and the English translation, the Korean original prevails. This English translation is neither prepared for the purpose of submission to any governmental entity, stock exchange or any other similar institution outside Korea nor legally binding on MKIF. MKIF will not be held liable for any use of this English translation or any information contained therein by any person. -2-

3 DISCLAIMER FOR INVESTORS READING THIS INVESTMENT OVERVIEW REQUIQRED UNDER FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT ( FSCMA ) 1. Investors should obtain and review copies of the registration statement, the prospectus and the summary prospectus of Macquarie Korea Infrastructure Fund ( MKIF or the Company or we ) before deciding to invest in MKIF. 2. Investors should review the investment risk level and the recommended investor type of the fund and consider their own investment history and investment preferences before deciding to invest in MKIF. 3. There is no assurance that the investment purposes or target returns of the investment strategies described in the registration statement, the prospectus and the summary prospectus will be realised in the future and the information about the past investment results should be used for reference purposes only as there is no assurance that the Company s past investment will be realized in the future. Therefore, in deciding whether to invest in the Company's publicly offered shares, the investor must independently investigate the risks associated with the publicly offered shares and make investments under their own responsibility. 4. Please refer to the investment risk section set forth in the registration statement, the prospectus and the summary prospectus for details on the investment risks related to the Company, such as loss of capital invested. 5. As of the reporting date of the securities registration, the Company has purchased an additional 23.03% of total outstanding shares in Incheon Bridge Co., Ltd. ( IBC ) and has entered into a subordinated loan agreement to increase the subordinated loan facility amounts and has provided such loan facility to IBC as part of the total invested capital. After the public offering is made at this time, MKIF will repay the outstanding loan facility amounts borrowed for the purpose of investing in this project. The investment capital balance to be left over after the investment into IBC will be further invested into other new projects, but if such investment is delayed, MKIF will repay the outstanding loan facility amounts so as to decrease the interest expenses and secure funding capacity for new investments in the future. Please note that it would be possible that during this process, due to unexpected circumstances, new investments may not be made. Please refer to Chapters 2 (Company Overview) and 10 (Risk Factors) for details on the purpose of this capital increase in the form of the public offering. 6. The major source of income for the 12 total operating businesses that MKIF is currently investing in is mainly highway tolls and it is affected by external factors that can t be controlled by MKIF such as traffic volume, and overall economic situation of Korea. Please note that such factors may affect the profitability of MKIF negatively. 7. MKIF distributes profits from the fund s investment results and is not subject to the Depositor Protection Act. Investors purchasing shares of MKIF from a bank or other financial institution subject to the Depositor Protection Act will not be protected under the Depositor Protection Act unlike bank deposits. 8. MKIF is a close-ended collective investment vehicle and even if MKIF s publicly offered shares are listed in the Korea Exchange for the purpose of enhancing the liquidity of such shares, the investors may be exposed to liquidity risk in the trading of MKIF shares as they may not be able to trade MKIF s shares at any time due to various reasons, including but not limited to a low trading volume. 9. The investment performances of MKIF are irrelevant to the investment performances of NH Investment & Securities Co., Ltd. and Samsung Securities Co., Ltd., which are the brokers and dealers for MKIF and brokers -3-

4 and dealers merely perform services relating to the sale of MKIF s shares (Offering of newly issued shares and outstanding shares) and do not exercise any influence over the value of MKIF s shares. 10. Creation and distribution of the registration statement, the prospectus and the summary prospectus does not mean that the asset management company, and the brokers and dealers are offering advisory services regarding the investment of these publicly offered shares. Please note that the asset management company and the brokers and dealers will not be liable for the results of the investment. 11. The offering schedule set forth in the prospectus is to be determined later and is subject to a further change, due to a request for adjustment from competent government agencies or relevant institutions or during the process of reviewing the prospectus. Limitation on Liability Investments in MKIF are not deposits with, or other liabilities of, Macquarie Korea Asset Management Co., Ltd. ( MKAM ), Macquarie Group Limited, or any entity in the Macquarie Group ( Macquarie Group ), and are subject to investment risk, including possible delays in repayment or loss of income and/or capital invested. Neither MKIF, nor any member of the Macquarie Group, including MKAM, guarantees the performance of MKIF, the repayment of capital or the payment of a particular rate of return on MKIF. This document is prepared in accordance with Financial Investment Services and Capital Markets Act. This document has not been, and will not be, authorized by the Securities and Futures Commission according to the Securities and Futures Ordinance, Cap. 571 ( SFO ). No action has been taken in Hong Kong to authorize this document or to permit the distribution of this document or any documents issued in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the new shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that ordinance. The contents of this document have not been reviewed by the Hong Kong regulation authorities. You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice. This document has not been registered as an offering circular or prospectus with the Monetary Authority of Singapore ( MAS ) and, accordingly, statutory liability under the Securities and Futures Act, Chapter 289 ( SFA ) in relation to the content of the prospectuses or the offering circulars does not apply, and you should consider carefully whether the investment is suitable for you. MKIF is not a collective investment scheme authorized under Section 286 of the SFA or recognized by the MAS under Section 287 of the SFA and the new shares are not allowed to be offered to the retailed public. This document and any other document or material in connection with the offer or sale, or invitation for subscription or purchaser of the new shares may not be circulated or distributed, nor may the new shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore, except to institutional investor (as defined in the SFA), or otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. -4-

5 This document has been given to you on the basis that you are an institutional investors (as defined under the SFA). In the event that you are not an institutional investor, please return this document immediately. You may not forward or circulate this document to any other person in Singapore. Any offer is not made to you with a view to the new shares being subsequently offered for sale to any other party. You are advised to acquaint yourself with the SFA provisions relating to resale restrictions in Singapore and comply accordingly. The new shares may not be distributed in Switzerland and will not be listed on the SIX Swiss Exchange ( SIX ) or other securities exchanges or regulated trading facilities in Switzerland. This document has been prepared without any regard to the disclosure standards for issuance prospectuses under Article 652a or Article 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under Article 27ff of the SIX Listing Rules or any other listing rules of any other share exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing materials relating to the new shares may be publicly disclosed or otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing materials relating to the new shares have been or will be filed with or approved by the Switzerland regulatory authorities. In particular, this document will not be filed with, and the offer of new shares will not be supervised by, the Swiss Financial Market Supervisory Authority ( FINMA ), and the offer of new shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Scheme ( CISA ). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of new shares. This document is for the recipient only and not for general circulation in Switzerland. This document is not provided for subscription, sale, or to recommend subscription in the US except when it is registered or exempted from registration according to the Securities Act 1933 and the Investment Company Act of 1940 as amended from time to time thereafter. This document cannot be distributed in the US and the subscription or sale of these securities to residents of the US are not permitted. Before investing in MKIF, the investors or the potential investors must consider whether the investment is appropriate in terms of the investor s own special requirements, purpose, and financial status and you should obtain independent professional advice, if necessary. MKIF or MKAM is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of this entity do not represent deposits or other liabilities of Macquarie Bank Limited ABN (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities. This Investment Overview may contain information regarding future expectations and forecasts (the Future Forecasts ). MKAM or Macquarie Group does not guarantee the accuracy or future fulfillment of the Future Forecasts. Furthermore, the propriety of the assumptions used for the Future Forecasts are not guaranteed. Investments entail risks and may incur a loss of principal. Neither the achievement of investment strategy or goals nor investor s returns are guaranteed. -5-

6 Chapter 1 Details on Offering of Newly Issued Shares or Outstanding Shares 1. Company Name Name of Company KOFIA 2 Fund Code Macquarie Korea Infrastructure Fund Macquarie Korea Infrastructure Fund ( MKIF ) will be hereafter referred to as the Company or the Issuer 2 Korea Financial Investment Association ( KOFIA ) 2. Company Description A. Type of Company Investment Company - B. Type of Invested Asset Special Assets - C. Open/Closed-end Type Closed-ended Type Shares of the Company are non-redeemable D. Accumulative/Unit Type Accumulative Type The Company can raise additional capital by offering new shares E. Special Form Indication - - * Please refer to Chapters 2 (Company Overview), Sections 8 (Investments) and 9 (Investment Strategies, Risk Management, and Revenue Structure) for details on investment targets and strategies. 3. Proposed Offering Amount (Unit : KRW, Shares) Type of Security Offered Number of Security Units on Offer Par Value Number of Offering(Sale) Price 1 Total Offering(Sale) Size Offering(Sale) Method Registered common shares 17,584,995 No par value 8, ,186,408,150 Public offering 1 Determination of the offering price (the Final Offering Price ) has been made by and among the Joint Lead Managers and the Company based on the book-building results on 11 September, 2017, and the Final Offering Price is KRW8,370. (Proposed) Offering Price Calculation Method The proposed offering price is calculated by adopting, mutatis mutandis, the method described in Article 5-18 of the Regulations on the Issuance and Disclosure of Securities for a follow-on offering. The trading day immediately preceding the date on which of the board of directors of the Company passed a resolution for this -6-

7 offering (14 August 2017) is taken as the value date and the volume-weighted average share price (the total traded value of the share at the exchange is divided by the total traded volume during the period) over the three day period between the 5 th and 3 rd trading days prior to the value date is the reference share price. No discount rate is applied to the reference share price for calculating the proposed offering price. The final offering price will be determined after applying the discount rate as determined through the book-building process scheduled to take place on 11 September 2017 (the final price will be rounded up the nearest trading unit price at the exchange). However, the discount rate cannot exceed 4.5%. Final Offering Price Calculation Results Category Date Traded Volume Traded Value Notes 1 Sept 7, ,847 6,683,469,640 (Unit : Shares, KRW) 2 Sept 8, ,040,865 8,693,572,210 3 Sept 11, ,124 5,953,964,460 - Total 2,550,836 21,331,006,310 Reference Share Price 8, = Total traded value / Total traded volume (rounded up to the nearest trading unit price) The Final Offering Price has been determined as KRW8,370 (rounded up to asking unit price) applying a final discount rate of 0.00% agreed upon by the issuer and the Joint Lead Managers based on the book-building results on 11 September, 2017 A. Capital Raised (Unit : KRW) Category Amount 1 Total offering or sales amount (1) 147,186,408,150 Issuance costs (2) 2,555,099,421 Net proceeds [ (1)-(2) ] 144,631,308,729 1 The above total offering of sales amount will be applied in accordance with the purpose of the capital and the Company will use its own funds to cover the issuance costs. B. Issuance Costs* (Unit : KRW) -7-

8 Category Amount Basis of Calculation Registration fee to FSS Fees to Joint Lead Managers 1 Fees for underwriting 2 7,359, % of the total offering amount 500,000,000-1,839,830,101 - Listing fee 3 7,910,000 Over 100 billion won and below 200 billion won (17.97 million won +120,000 won per billion won for the amount that exceeds 100 billion won) /3 Other expenses 4 200,000,000 Printing and mailing of the offering circular, printing and mailing of the subscription rights notification, etc. Total 2,555,099, Joint Lead Managers fee: 300,000,000 won - Global coordinator s fee: 200,000,000 won *Global Coordinator fee is provided for leading the overseas book-building process 2. - Underwriting fee: KRW1,177,491,265 (0.80% of total offering amount) - Book-building linked fee: Total offering amount (Maximum discount rate Final discount rate) x 10/100; Underwriting and book-building linked fees are calculated assuming approximately KRW147.2 billion of the total offering amount and the final discount rate of 0%. 3. Issuance costs are subject to change depending on the final offering price, the Company s share price at the Korea Exchange on the trading day immediately preceding the application date for listing or any changes to the policies of relevant institutions. 4. Other expenses are estimates that are subject to change. * Above amounts are based on the Final Offering Price. 4. Offering Process Review on Offering Method The Company is an infrastructure investment and financing company according to the Public-Private Partnerships in Infrastructure Act ("PPP Act"), an investment company and a close-ended collective investment vehicle according to the Financial Investment Services and Capital Markets Act, and according to the Commercial Code. -8-

9 The Company can issue new shares in accordance with Article 41-7 of the PPP Act and Article 34-5 of the Enforcement Decree of the PPP Act, Article 196 of the Financial Investment Services and Capital Markets Act and Article 16 of the Articles of Incorporation of the Company (the AOI ). Relevant Statutes <Act on Public-Private Partnerships in Infrastructure (the PPP Act )> Article 41-7 (Conditions on Issuing New Shares and Beneficiary Certificates) Where an infrastructure investment and financing company issues new shares after its incorporation or an infrastructure investment trust additionally issues beneficiary certificates after its establishment, the issuance price shall be computed pursuant to the methods prescribed by Presidential Decree on the basis of the net asset value of the collective investment vehicle. < Enforcement Decree of the Act on Public-Private Partnerships in Infrastructure > Article 34-5 (Conditions on Issuing New Shares or Additional Beneficiary Certificates) "Methods prescribed by Presidential Decree" in Article 41-7 of the Act means the methods of calculating the net asset value per share ( NAV per share ) of collective investment securities under Article 238 (6) of the Financial Investment Services and Capital Markets Act: Provided, That the issuing price of new shares or additional beneficiary certificates calculated by the said methods may be determined, taking into consideration a trading price at which the shares or beneficiary certificates of the relevant investment and financing collective investment vehicle are traded on the stock market (including multilateral-trade contracting companies under Article 8-2 (5) of the Financial Investment Services and Capital Markets Act) if they are listed on the stock market under Article 8-2 (4) 1 of the same Act, and the fair value of beneficiary certificates if not listed. <Financial Investment Services and Capital Markets Act> Article 196 (Investment Company's Shares) 1 An investment company's shares shall be in the registered form with no par value. 2 An investment company shall issue its shares in a manner prescribed in Article 309 (5) on the date of its formation or at the end of the time period for the payment for new shares without delay. 3 When an investment company issues new shares after its formation, the number of new shares, the issue value and the time limit for the payment therefor shall be determined by its board of directors: however, if the provisions of its articles of incorporation states otherwise it shall be followed accordingly. 4 When an investment company that is allowed to repurchase its own shares from a shareholder upon a request from the shareholder (hereafter referred to as an "open-end investment company" in this Article) issues new shares after its formation, its board of directors may determine the following matters. In this regard, such open-end investment company shall post the daily issue value fixed in a manner under subparagraph 3 at the branch offices and sales offices of the investment trader or the investment broker that sells the investment company's shares, and shall also disclose it through its Internet homepage, etc. 1. The time period for issuance of new shares 2. The maximum limit of the number of new shares issued within the time period for issuance under subparagraph 1 3. The daily issue value during the time period for issuance under subparagraph 1 and the method for determining the time limit for payment of the share price. 5 An investment company shall, if it issues new shares after its formation, make equal the issue value -9-

10 of new shares issued on the same day and other terms and conditions of issuance. In this regard, the issue value of new shares shall be determined in a manner prescribed by Presidential Decree based on net asset value of the assets owned by the investment company. 6 Article 194 (7) shall apply mutatis mutandis to the subscribers for shares when issuing new shares. 7 In cases where an investment company issues new shares after its formation, subscribers for the shares shall acquire the rights and duties of a shareholder simultaneously with the payment of the share price. <Articles Of Incorporation> Article 16. Issuance of New Shares 1 When the Company issues new shares after the effective date of the AOI, the board of directors shall decide the following: (1) Issuing number of new shares; (2) Method of determining the issue price and the payment date for the offering amount of shares. 2 The number of shares to be allotted upon the subscription for new shares is determined by dividing the subscription payment amount with the issue price per share. 3 Business Day hereinafter means all the days on which banks in Korea are open for the conduct of a substantial portion of their commercial banking business other than Saturdays, Sundays and days that are legal holidays,. 4 The unit of subscription of shares shall be one share. Also, the Company is an investment and financing company according to the PPP Act and the following regulations do not apply to the Company in issuing new shares pursuant to Article 44 Paragraph 1 of the PPP Act as well as Article Paragraph 1 Item 2 and Article 206 Paragraph 2 of the Financial Investment Services and Capital Markets Act. ㆍArticle (Special Cases concerning Issuance, Allocation of Shares, etc.) and Article 230 Paragraph 2, 3, 4 (Closed-ended Fund) of the Financial Investment Services and Capital Markets Act ㆍArticle 5-16 (Scope of Application and Definitions) and Article 5-18 (Determination of Issue Value in Capital Increase for Consideration) of the Regulations on the Issuance and Disclosure of Securities ㆍ Article 418 (Terms of Preemptive Rights, Designation and Public Notice of Record Date for Allotment), Article 419 (Peremptory Notice to Holders of Preemptive Rights), Article 420 (Share Subscription Forms), Article (Issuance of Certificates of Preemptive Rights), Article (Transfer of Preemptive Rights), Article (Electronic Registration of Preemptive Rights), and Article (Applications for Subscription by Certificates of Preemptive Rights) of the Commercial Code ㆍAll regulations in relation to public offering in the Regulations on Securities Underwriting Business, Etc. Therefore, when the Company issues new shares, the laws and regulation that ordinary listed companies must follow when offering new shares do not apply to the Company s offering and allotment process, nor the requirements that other close-ended funds are subject to when issuing new securities. None of the laws in relation to shareholder preemptive rights apply to the Company either. -10-

11 Relevant Statutes <Financial Investment Services and Capital Markets Act> Article 230 (Close-ended Fund) 2 The collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. may issue additional collective investment securities for a close ended fund only when there is no possibility of having an adverse effect on the existing investors' interests, as prescribed by Presidential Decree. 3 The collective investment business entity of an investment trust or an investment company shall, if there is no specific method provided for in the trust agreement or the articles of incorporation for guaranteeing the way of recovering the invested capital, etc. to investors, list the collective investment securities within ninety days from the day on which the collective investment securities of a close-ended fund are initially issued. 4 Article 238 (6) through (8) shall not apply to collective investment securities of a close-ended fund: Provided, That the provisions shall apply when the close-ended fund is allowed to issue additional collective investment securities in accordance with paragraph (2). <Regulations on the Issuance and Disclosure of Securities> Article 5-16 (Scope of Application and Definitions) 1 Matters concerning the standards for the management of the financial status of the listed corporations under Article of the Act and Article of the Decree shall be governed by the provisions of this Section. 2 "Capital increase by allotment to shareholders" in this Section means capital increase by issuing new shares under Article (1) 1 of the Act, while "capital increase by allotment to third parties" means capital increase by issuing new shares under Article (1) 2 of the Act. 3 "Capital increase by ordinary public offering" in this Section means capital increase under Article (1) 3 of the Act, and "capital increase by preemptive offering to shareholders" means capital increase under Article (4) 3 of the Act. 4 The "transaction day" in this paragraph refers to the day that the share is traded in the stock market. <Regulations on the Issuance and Disclosure of Securities> Article 5-18 (Determination of Issue Value in Capital Increase for Consideration) 1Where a listed corporation increases capital by ordinary public offering or by allotment to third parties for consideration, the issuance value shall be calculated by applying the discount rate determined by the listed corporation to the volume-weighted arithmetic mean share price, as the reference share price, over the three day period commencing from the trading date falling 5 trading days prior to, and ending on the trading date falling 3 trading days prior to, the trading day immediately preceding the subscription date: Provided, that the discount rate shall not be more than 30/100 in cases of capital increase by ordinary public offering, while the discount rate shall not be more than 10/100 in cases of capital increase by allotment to third parties. <Commercial Code> Article 418 (Terms of Preemptive Rights, Designation and Public Notice of Record Date for Allotment) 1 Each shareholder shall be entitled to the allotment of new shares in proportion to the number of shares which he/she holds. 2 A company may make an allotment of new shares to other persons than shareholders, as provided for in -11-

12 the articles of incorporation, notwithstanding the provisions of paragraph (1): Provided, That in such cases, it shall be limited to cases necessary for the achievement of the company's operational objectives, such as introduction of new technology, improvement of financial structures, etc. 3 A company shall fix a record date and shall, at least two weeks before such record date, give a public notice to the effect that shareholders entered in the register of shareholders as of such record date shall be entitled to the rights mentioned in paragraph (1) and that such preemptive rights are transferable, if applicable: Provided, That if the above record date is within the period set forth in Article 354 (1), the public notice shall be given at least two weeks before the first day of such period. 4 In cases where a company makes an allotment of new shares to other persons than its shareholders pursuant to paragraph (2), the company shall notify the shareholders of the matters set forth in subparagraphs 1, 2, 2-2, 3, and 4 of Article 416 by no later than two weeks before the date of payment of the subscription price, or shall publicly notify the same. Article 419 (Peremptory Notice to Holders of Preemptive Rights) 1 A company shall notify the holders of preemptive rights of the classes and number of shares subject to such preemptive rights and that their rights shall be forfeited if they fail to apply for subscription to new shares on or before a fixed date. In such cases, if the matters set forth in subparagraphs 5 and 6 of Article 416 have been determined, the details thereof shall also be notified. 2 A notice under paragraph (1) shall be given at least two weeks before the date set forth in paragraph (1). 3 In cases where a holder of preemptive rights fails to apply for subscription to new shares on or before the specified date after a notice under paragraph (1) is given, his/her rights shall be forfeited. Article 420 (Share Subscription Forms) Directors shall prepare a share subscription form containing the following matters: 1. Matters set forth in Article 289 (1) 2 through 4; 2. Matters set forth in Article 302 (2) 7, 9 and 10; 3. Matters set forth in subparagraphs 1 through 4 of Article 416; 4. Where the company issues shares in accordance with Article 417, the conditions of such issuance and the amount yet to be amortised; 5. Restrictions on the preemptive rights of shareholders or a provision that the preemptive rights are to be given to a particular third party, if applicable; 6. Date of the resolution on the issuance of shares. Article (Issuance of Certificates of Preemptive Rights) 1In cases where a company has provided for matters set forth in subparagraph 5 of Article 416, the company shall issue certificates of preemptive rights in accordance with subparagraph 6 of Article 416, if applicable, or issue them at least two weeks prior to the date under Article 419 (1), as the case may be. 2Each certificate of preemptive right shall contain a serial number in addition to the following and directors shall write their names and affix their seals, or shall affix their signatures, thereon: 1. A statement to the effect that it is a preemptive right; 2. Matters set forth in Article 420; 3. The class and number of shares subject to the preemptive right; 4. A statement to the effect that the right shall be forfeited if subscription to shares is not applied for on or before the specified date. Article (Transfer of Preemptive Rights) -12-

13 1A preemptive right shall be transferred only by the delivery of the certificate thereof. 2The provisions of Article 336 (2) of this Act and Article 21 of the Check Act shall apply mutatis mutandis to certificates of preemptive rights. Article (Electronic Registration of Preemptive Rights) As prescribed in the articles of incorporation, a company may register preemptive rights with the electronic registration ledger of an electronic registration agency, in lieu of issuing certificates of preemptive rights. In such cases, the provisions of Article (2) through (4) shall apply mutatis mutandis. Article (Applications for Subscription by Certificates of Preemptive Rights) 1If a certificate of preemptive right has been issued, subscription to shares shall be applied for by the certificate. In such cases, the provisions of Article 302 (1) shall apply mutatis mutandis. 2A person who has lost a certificate of preemptive right may apply for subscription to shares by the share subscription form: Provided, That such offer shall become null and void if the application for subscription to shares is made by a certificate of preemptive right. As listed above, the majority of the regulations on follow-on offering by ordinary listed companies do not apply to the Company. On the trading day immediately preceding the filing date of the Registration Statement, the Company s NAV per share was KRW 4, whereas the Company s share price at the exchange was KRW 8,640. Since the NAV per share is significantly lower than the share price, it is not appropriate to calculate the offering price based the Company s net asset value. Therefore, for the Company to issue new shares, the offering price should be calculated in consideration of the price that is traded in the share market and the only other legal requirements are the number of new shares, issuing price, and payment date are determined by the board of directors, while the majority of the requirements that ordinary listed companies are subject to do not apply. However, in order to avoid confusion to investors, the Company proposes to adopt, mutatis mutandis, one of the public offering processes defined in the Financial Investment Services and Capital Markets Act (Article Paragraph 1 Item 3 and Article Paragraph 4 Item 4 of the same Act), that determine the discount rate through book-building. Relevant Statutes < Financial Investment Services and Capital Markets Act > Article 165-6(Regulation on Securities Issuance and Disclosures) 1 Where new shares (in case of Item 3, it includes shares that have been already issued. Hereinafter, it is the same for this item and Item 4) are allotted in the following methods. 3. Method that grants the opportunity to subscribe for new shares in a manner other than Item 1 (including the owner of the shares of the relevant listed corporation) and allotting the shares according to such subscription 4 In the case where new shares are allotted in the method of Article 1 Paragraph 3, they shall be allotted in accordance with the resolution adopted by the board of directors under the articles of incorporation. In such cases, Article 418 (1) and the proviso to Article 418(2) of the Commercial Code shall not apply. 4. Offering specifically categorized persons an opportunity to make subscriptions for new shares in accordance with reasonable standards prescribed by Presidential Decree, such as a book-building prepared by sales agents as an underwriter or intermediary, which is a method acknowledged by the -13-

14 Financial Services Commission. The reference price, and final offering price accordingly, will be calculated by adopting, mutatis mutandis, the calculation method described in Article 5-18 of the Regulations on Issuance, Public Disclosure, Etc. of Securities. For calculating the proposed offering price, the trading day immediately preceding the date of resolution by the Board of Directors (14 August 2017) is taken as the value date and the reference price is the volume-weighted average price between the 5 th and 3 rd trading days prior to the value date without applying any. For calculating the final offering price, the reference price will be the volume-weighted average price between the 5 th and 3 rd trading days prior to the Subscription Date and the discount rate determined through consent between the Issuer and Joint Lead Managers based on the results of book-building (final price will be rounded up to the nearest trading unit price). Relevant Statutes <Regulations on the Issuance and Disclosure of Securities> Article 5-18 (Determination of Issue Value in Capital Increase for Consideration) 1Where a listed corporation increases capital by ordinary public offering or by allotment to third parties for consideration, the issuance value shall be calculated by applying the discount rate determined by the listed corporation to the volume-weighted arithmetic mean share price, as the reference share price, over the three day period commencing from the trading date falling 5 trading days prior to, and ending on the trading date falling 3 trading days prior to, the trading day immediately preceding the subscription date: Provided, that the discount rate shall not be more than 30/100 in cases of capital increase by ordinary public offering, while the discount rate shall not be more than 10/100 in cases of capital increase by allotment to third parties. Also, the allotment method for this follow-on offering adopts, mutatis mutandis, the allotment ratios of IPO. Article 9 of the Regulations on Securities Underwriting Business, Etc. defines the allotment ratios of IPO as following: 20% to employee share ownership programme, at least 20% to retail investors and the remaining shares to institutional investors (including at least 10% to high-risk high-return investment trusts). Since the Company has no employee share ownership programme, the 20% will be allotted to existing shareholders in order to give them a chance to minimize any potential dilution of shareholder value. Relevant Statutes <Regulations on Securities Underwriting Business, Etc.> Article 9 (Share Allocation) 1 The lead arranger of IPOs or OTC public offerings shall allot shares to a group of subscribers in accordance with the following manner: 1. In the case of IPOs for listing on the Stock Market, twenty (20) percent of the underwriting shares shall be allotted to the ESOA members in accordance with [ 38(1)] of the Framework Act on Labor Welfare. However, this Provision shall not apply to IPOs of foreign corporations, etc. 2. In the case of IPOs for listing on the KOSDAQ Market, twenty (20) percent of the underwriting shares shall be allotted in accordance with [Article 38(2)] of the Framework Act on Labor Welfare. 3. Twenty (20) percent of the share underwritten shall be allotted to general subscribers percent or more of the underwriting shares shall be allotted to high-yield high-risk investment trusts -14-

15 (which refers to bonds under Item 3 of [Article 469(2)] of the Commercial Code, limited to the cases where the combined holding ratio of non-well-performing bonds and KONEX-listed shares other than the securities that fall under Item 1 of [Article 4(7)] of the Act is over 45/100; hereinafter the same shall apply). In this case, if the relevant initial public offering involves listing on the KOSDAQ market, 5 percent or more of the publicly offered share shall be allotted to KONEX high-yield high-risk investment trusts. 5. The portion of shares remaining after the allotment pursuant to Items 1 through 4 shall be allotted to institutional investors. For this follow-on offering, the final offering price will be calculated by applying the discount rate, determined through bidding by institutional investors in a book-building process, to the reference price. The reference price will be the volume-weighted average price between the 5th and 3rd trading days prior to the Subscription Date. Article 5-18 of the Regulations on Issuance, Public Disclosure, Etc. of Securities sets a 30% limit on the discount rate for public offerings. For the book-building, minimum discount rate is 0.00% and the maximum discount rate is 4.50%. The range of possible discount rates is 0.00% % and the Final Offering Price has been determined as KRW8,370 by and among the Joint Lead Managers and the Company based on the bookbuilding results on 11 September, The allotment details for this follow-on offering by investor group are as follows. [ Allocation Details ] (Unit : Shares, %, KRW) Subscription Group Number of Shares Allotment Ratio Offering (Sale) Price Total Offering (Sales) Amount Institutional Investors Existing Shareholders 10,550, ,370 88,311,844,890 3,516, ,370 29,437,281,630 Retail Investors 3,516, ,370 29,437,281,630 Total 17,584, ,186,408,150 A. Terms of Offering or Sales Item Details Number of offered or sold shares 17,584,995 shares Offering or sale price per share Total offering amount or sale Scheduled Amount Final Amount Scheduled Amount - KRW8,

16 Item Details amount Final Amount KRW 147,186,408,150 1) Institutional investors : 1 share 2) Existing shareholders :1 share 3) Retail : Subscription Period Subscription Unit Public offering or sale Subscription Location Opening Date Closing Date Offering Method and Procedure Category Units of subscription 10 shares or more 100 shares or less Units of 10 shares Over 100 shares 500 shares or less Units of 50 shares Over 500 shares 1,000 shares or Units of 100 shares less Over 1,000 shares 5,000 shares or Units of 500 shares less Over 5,000 shares 10,000 shares or less Units of 1,000 shares Over 10,000 shares 50,000 shares or Units of 5,000 shares less Over 50,000 shares 100,000 shares or Units of 10,000 shares less Over 100,000 shares 500,000 shares or less Units of 50,000 shares Over 500,000 Shares Units of 100,000 shares 14 September September Headquarters and branches of NH Investment & Securities Co., Ltd. and Samsung Securities Co., Ltd. - One can subscribe by visiting the branches of NH Investment & Securities Co., Ltd. and Samsung Securities Co., Ltd. as well as on their websites or HTS, or by phone. -16-

17 Item Details (1) The subscription competition rates will be calculated separately by investor group, institutional investors, existing shareholders and retail investors, and shares will be allotted on a pro rata basis (for rounding the number of shares, any value 5 or below will be rounded down and any value 6 or above will be rounded up) for each group, the shares subscribed at different locations and by different means all will be combined into a single pool, only categorised by investor group to find competition rates. When the number of subscribed shares for any group exceeds the group s allotted shares, the shares will be allotted on a pro rata basis by the subscription competition rates (for rounding the number of shares, any value 5 or below will be rounded down and any value 6 or above will be rounded up). When the number of subscribed shares for any group (institutional investors, existing shareholders and retail investors) do not meet the group s allotted shares, the Joint Lead Managers may allot the unsubscribed shares to other groups. Allocation Method and Procedure (2) 60% of the total shares on offer, or 10,550,997 shares, are allotted to institutional investors. The shares are first allotted to the institutional investors that participated and allotted shares in the book-building process. When the number of subscribed shares does not exceed the allotment to institutional investors, the unsubscribed shares are allotted to existing shareholders. If there are still unsubscribed shares after allotting to existing shareholders, the shares are allotted to retail investors, and if there are still unsubscribed shares, the shares are reallotted to the institutional investors who additionally subscribe after the Offering Period but before the final date of allotment. Any unsubscribed shares will be acquired by the Joint Lead Managers as their joint and several liabilities. (3) 20% of the total shares on offer, or 3,516,999 shares, are allotted to the existing shareholders. The subscribed quantity within the allotted number of shares ( share per share. However, any value below 1 share shall be rounded downwards) that are allotted to the shareholders that are registered on the list of shareholders as of 18:00 of the new share allotment date (29 August 2017) (However, any value below 1 share shall be rounded downwards). Any unsubscribed shares after the first round of allotment to existing shareholders, will be allotted on a pro rata basis to the number of excess subscription shares for the existing shareholders (1.0 share per 1 share for limit for the number of excess subscription shares. However, any value below 1 share shall be rounded downwards). If there are still unsubscribed shares after allotting excess subscription shares, these shares will be allotted to institutional investors. If there are still unsubscribed shares after allotting them to the institutional investors, they will be allotted to retail investors, and if there are still unsubscribed shares, they will be reallotted to the institutional -17-

18 Item Details investors who additionally subscribe after the Offering Period but before the final date of allotment and any unsubscribed shares afterwards will be acquired by the Joint Lead Managers as their joint and several liabilities. Deposits for Subscription Institutional Investors Existing Shareholders Retail investors (4) 20% of the total public offering shares, or 3,516,999 shares are allotted to the retail investors. When the number of subscribed shares for the retail investors does not reach the allotted amount for the retail investors, the unsubscribed shares are allotted to institutional investors. If there are still unsubscribed shares after allotting them to institutional investors, they will be allotted to existing shareholders and if there are still unsubscribed shares, then they will be reallotted to the institutional investors who additionally subscribe after the Offering Period but before the final date of allotment. Any unsubscribed shares will be acquired by the Joint Lead Managers as their joint and several liabilities. 100% of offering price per share 100% of offering price per share 100% of offering price per share Payment Due Date 19 September 2017 Base Date Regarding Distributions 1 January 2017¹ on New Shares ¹However, the distribution for the first half of the year that has been paid out on 28 August 2017 will be excluded by Article 18 of the AOI. Footnotes 1) Please refer to Chapter 2 (Company Overview) Section 11 (Process of Purchase, Sale and Redemption of Shares) and Chapter 1 (Details on Offering of Newly Issued Shares or Outstanding Shares) Section 4 (Details and Procedure of Offering) for details on offering method. Footnote 2) The Financial Supervisory Services or FSS may request revision and during the review process for the registration statement and the schedule listed on this document may change according to the request for revision and others. An execution of the registration statement does not confirm that the listed items within this registration statement is true or correct and does not translate to the government guaranteeing or authorizing the value of these securities and therefore, the responsibilities for the investment on these securities fall solely on the shareholders and the investors. Footnote 3) Despite the offering period outlined above, any unsubscribed shares after the offering period can be subscribed additionally by the institutional investors until they are reallotted. B. Details of Offering (1) Offering method : Public offering This follow-on offering will be conducted through public offering. The Company is an investment company under the Financial Investment Services and Capital Markets Act and shall conduct the public offering method that grants opportunities to be allotted new shares through book-building to multiple subscribers of -18-

19 unspecified number by adopting, mutatis mutandis, Article Paragraph 4 Item 4 of the Financial Investment Services and Capital Markets Act. The final offering price will be determined by adopting, mutatis mutandis, the method as set forth in Article 5-18 of the Regulations on Issuance, Public Disclosure, Etc. of Securities and the discount rate will be determined based upon the book-building results. The final offering price is an offering price that is calculated by applying (x) to a reference share price, which is calculated by the volume-weighted average share price (which refers to the total transaction amount divided by the total transaction volume for the relevant shares traded in the share market during that period) over the three day period commencing from the trading date falling 5 trading days prior to, and ending on the trading date falling 3 trading days prior to, the trading day immediately preceding the date of subscription, and (y) a final discount rate of 0.00% agreed upon by the issuer and the Joint Lead Managers based on the book-building results. The final offering price is KRW8,370. Also, no preemptive rights will be given to the existing shareholders due to relevant statutes and this follow-on offering will implement the shareholder preferred public offering capitalisation method and preferentially allot 20% of the total public offering shares to the existing shareholders. The allotment details for each offering group are as the following. [ Allotment Details ] (Unit : Shares, %, KRW) Offering Portfolio Number of Shares Allotment Ratio Offering(Sale) Price Total Offering(Sale) Amount Institutional Investors Existing shareholders 10,550, ,370 88,311,844,890 3,516, ,370 29,437,281,630 Retail investors 3,516, ,370 29,437,281,630 Total 17,584, ,186,408,150 Footnote 1) Institutional investors: The term is defined as the person falling under any of the following Items in accordance with Article 2, Item 8 of Regulation on Securities Acquisition Task. A. A professional investor prescribed in Items 1 through 10 of Article 10(2) of the Enforcement Decree of the Act (in the case of Item 8, this is defined as a financial investment investor in Article 8(2) through (4) of the Act; the same hereinafter), Items 13 through 17, Item 3 of Paragraph (3) and Items 10 through 13 of Article 10(3). B. Collective investment vehicle which has been registered with the Financial Services Commission ( FSC ) in accordance with Article 182 of the Act or reported to the FSC in accordance with Article 249-6; C. The National Pension Service established pursuant to the National Pension Act; D. Korea Post pursuant to The Organization of Korea Post; E. Financial investors according to Article 8 Paragraph 6 of the Act (Hereinafter referred to as Discretionary Investment Companies ) -19-

20 F. A corporation equivalent to Sub-items A. through D., and established according to foreign laws and regulations. G. Persons other than Item H among financial investors listed under Article 8 Paragraph 7 of the Financial Investment Services and Capital Markets Act (This is limited to those participating in the book-building process as high-risk high-return investment trust according to Article 2 Item 18 of this regulation) H. Real estate trust managers listed under Article 3-4 Paragraph 1 of the Financial Investment Services and Capital Markets Act (Hereinafter referred to as Real estate trust company ). Footnote 2) The existing shareholders refer to the shareholders listed on the list of shareholders as of 18:00 of the new share allotment date (Scheduled at 29 August 2017). Footnote 3) Retail investors refer to persons that are not the institutional investors defined by Footnote 1). Footnote 4) When there are unsubscribed shares that remain among the allotments to institutional investors, existing shareholders, and retail investors, these shares will be allotted to other subscriber groups that have excess subscription. Please refer to Section 4 (Offering Process) I. (Allotment Method) for more details. Footnote 5) When there are any final remaining unsubscribed shares, the Joint Lead Managers shall acquire them with their own capital according to their respective acquisition ratios. If a Joint lead manager fails to fulfill its obligation to acquire, other lead arrangers acquire as a joint obligation. Footnote 6) The offering price and total offering amount has been determined by the Joint Lead Managers and the Company based on the results of the book-building which was conducted on 11 September 2017, and is subject to the final discount rate of 0.00%. Footnote 7) The Company is not required to comply with Article 9 Paragraph 1 Item 4 of the Regulations on Securities Underwriting Business, Etc. and therefore, this public offering will not assign 10% or more of the total publicly offered shares to the high-risk high-return investment trusts. [ Allotment Ratio Calculation per Share for Existing shareholders] Category Details A. Common Shares 331,459,341 Shares B. Preferred Shares - C. Total Number of Shares Issued (A + B) 331,459,341 Shares D. Treasury Shares + Treasury Share Trust - E. Total Number of Shares Issued Excluding Treasury Shares (C - D) 331,459,341 Shares F. Number of Shares for Recapitalization 17,584,995 Shares G. Recapitalization Rate % H. Allotment to Existing shareholders 3,516,999 Shares I. Allotment Ratio per Share for Existing shareholders (H/ E) Shares Footnote 1) The individual subscription limit for existing shareholders are determined by the number of allotted shares calculated by each share possessed by the shareholders enlisted on the list of shareholders as of the new share allotment date (Scheduled to be 29 August 2017) multiplied by the new share allotment ratio of -20-

21 and any value below 1 share will be rounded downwards. (i) Subscription limit for existing shareholders = Number of shares within allotment limit + Number of shares that exceed subscription limit (ii) Number or shares within allotment limit = Number of shares in possession x New share allotment ratio ( per share) (However, round down any value below 1 share) (iii) Number of shares that exceed subscription limit = Number of shares within allotment limit X Excess subscription ratio (100%) C. Method of Offering Price Decision (1) Public Offering Price Decision Procedure This follow-on offering is conducted by determining the discount rate and offering price through the bookbuilding process by applying, mutatis mutandis, Article Paragraph 4 Item 4 of the Financial Investment Services and Capital Markets Act. Relevant Statutes < Financial Investment Services and Capital Markets Act > Article 165-6(Regulation on Securities Issuance and Disclosures) 4 Where new shares are allotted in the manner referred to in paragraph (1) 3, they shall be allotted through any of the following methods in accordance with a resolution adopted by the board of directors in accordance with the articles of incorporation. In such cases, Article 418 (1) and the proviso to Article 418(2) of the Commercial Code shall not apply: 1. Allocating new shares to unspecified subscribers without specifying persons to whom an opportunity for making subscriptions for new shares is to be offered; 2. Offering unspecified persons an opportunity to make subscriptions for new shares including the shares that have been allotted to the members of an employee share ownership association under Article but failed to be subscribed; 3. Offering unspecified persons an opportunity to make subscriptions for new shares for which a preferential right to subscribe has been given to shareholders to make subscriptions therefor but which failed to be subcribed; 4. Offering specifically categorized persons an opportunity to make subscriptions for new shares in accordance with reasonable standards prescribed by Presidential Decree, such as a book-building prepared by sales agents as an underwriter or intermediary, which is a method acknowledged by the Financial Services Commission. On the other hand, the public offering decision procedure through book-building is as the following. [ Public Offering Price Decision Procedure Through Book-building ] Category Details Book-building Book-building notice announcement -21-

22 Category Details Notice Receipt of Book-building Book-building received by institutional investors Decision of Public Offering Price The Joint Lead Managers and the issuer should come to an agreement based on the bookbuilding results to determine the public offering price Allotment of Amount Allotment of amount for institutional investors that submitted discount rate below the final discount rate Announcement of Final Offering Price and Notification of Allotted Amount The final offering price will be announced on the websites of the Joint Lead Managers NH Securities & Investment Co., Ltd( and Samsung Samsung Securities Co., Ltd ( and the allotted amount for each institutional investor will be notified individually (2) Overview of Public Offering Price Calculation The final offering price will be determined by applying, mutatis mutandis, the method as set forth in Article 5-18 of the Regulations on Issuance, Public Disclosure, Etc. of Securities and the discount rate will be determined based upon the book-building results. The final offering price is an offering price that is calculated by applying (x) to a reference share price, which is calculated by the volume-weighted average share price (which refers to the total transaction amount divided by the total transaction volume for the relevant shares traded in the share market during that period) over the three day period commencing from the trading date falling 5 trading days prior to, and ending on the trading date falling 3 trading days prior to, the trading day immediately preceding the date of subscription, and (y) a proposed discount rate that would fall within the range of the proposed discount rates as agreed by the Joint Lead Managers and the issuer through book-building (However, any value below asking unit price is rounded up to the asking unit price.). The Joint Lead Managers, NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd. and the Company have determined the final offering price as KRW8,370 based on the book-building results, industrial prospect and the price traded on the stock market. Category Participants Portfolio Shares Range of Desirable Public Offering Discount Rate Final Offering Price Decision Method Details Institutional Investors 17,584,995 shares 0.00% ~ 4.50% The Joint Lead Managers and the issuer should come to an agreement based on the book-building results to determine the public offering price -22-

23 1) The final offering price for this offering has been determined by the Joint Lead Managers and the issuer based on the book-building results. D. Particulars of Book-building (1) Announcement and Date of Book-building Notice Category Details Other Date of Announcement 4 September 2017 Internet announcement1 Date of Bookbuilding 11 September am~ 21 pm (Korea Standard Time) ² Allotment Notice 12 September 2017 ³ Inquiry NH Securities & Investment Co., Ltd ( , 5524) Samsung Securities Co., Ltd ( , 7563) - ¹The book-building notice will be announced on the websites of NH Securities & Investment Co., Ltd( and Samsung Securities Co., Ltd ( in place of individual notifications. ²Please beware of the book-building deadline which is 9:00~21:00 on 11 September 2017 Korea Standard Time. Any participation, readjustments, and cancellations for book-building is impossible after the deadline, so please beware of the deadline. ³The Joint Lead Managers, NH Securities & Investment Co., Ltd. ( and Samsung Securities Co., Ltd ( will post the final offering price on their respective websites and the allotment per institution will be notified to the institutions participating in the book-building individually. Footnote 1) The schedule above may change due to the negotiation process with relevant institutions. (2) Qualification for Participation in Book-building The participation of book-building for this follow-on offering is limited to institutional investors and they refer to any entity that meets one of the following items listed under Article 2 Paragraph 8 of the Regulations on Securities Underwriting Business, etc. <Regulations on Securities Underwriting Business, Etc.> Article 2 (Definitions of Terms) 8. The term institutional investor is defined as the person falling under any of the following Items. A. A professional investor prescribed in Items 1 through 10 of Article 10(2) of the Enforcement Decree of the Act (in the case of Item 8, this is defined as a financial investment investor in Articles 8(2) through (4) of the Act; the same hereinafter), Items 13 through 17, Item 3 of Paragraph (3) and Items 10 through 13 of Article -23-

24 10(3). B. Collective investment vehicle which has been registered with the Financial Services Commission in accordance with Article 182 of the Act or reported to the Financial Services Commission in accordance with Article 249-6; C. The National Pension Service established pursuant to the National Pension Act D. Korea Post pursuant to The Organization of Korea Post E. Financial investors as set forth in Article 8 Paragraph 6 of the Act (Hereinafter referred to as Discretionary Investment companies ) F. A corporation equivalent to Sub-items A. through D., and established according to foreign laws and regulations. G. Financial investors other than those listed under Item H of Article 8 Paragraph 7 of the Act (Limited to those participating in book-buildings in form of high-risk high-return investment trust according to Article 2 Item 18 of this regulation) H. Real estate trust managers listed under Article 3-4 Paragraph 1 of Regulation on Financial Investment Business (Hereinafter referred to as Real estate manager ) Footnote) Article 9 Paragraph 1 Item 4 of the Regulation on Securities Underwriting Business, etc. does not apply to the Company and therefore, this follow-on offering does not allot any more than 10% of the publicly offered shares to the high-risk high-return investment trusts. (3) Details of Shares Subject to Book-building Category Number of Shares Ratio Other Institutional Investors 10,550,997 shares 60.0% - Footnote 1) The ratio above comes from the total number of publicly offered shares, which is 17,584,995 shares. Footnote 2) The allotted shares of 3,516,999 shares (20.0%) for retail investors and the allotted shares of 3,516,999 shares (20.0%) for existing shareholders are not subject to book-building. (4) Maximum and Minimum Limits of Shares Requesting to Participate in Book-building Category Maximum Minimum Institutional Investors 10,550,997 shares 1,000 shares (5) Quantity Unit and Discount Rate Unit for Shares in Book-building Category Quantity Unit Details 1,000 shares Discount Rate Unit 0.05% (6) Date and Method of Book-building Application -24-

25 The application for this book-building for follow-on offering can be applied through NH Securities & Investment, Co., Ltd and Samsung Securities, Co., Ltd via landline, fax, and . Date Location Inquiry 11 September 2017 (Mon) 9:00 AM ~ 21:00 PM (Korea Standard Time) NH Securities & Investment, Co., Ltd and Samsung Securities, Co., Ltd [ NH Securities & Investment, Co., Ltd] TEL : 02) , 5524 FAX : , theone@nhqv.com, jakang@nhqv.com [ Samsung Securities, Co., Ltd ] TEL : 02) ,7563 FAX : 02) changkyupark@samsung.com, cleanjs.lee@samsung.com 1) The Joint Lead Managers conduct the book-building and agree with the issuer to determine the discount rate and offering price. 2) The participants of the book-building are limited to only the institutional investors and the shares subject to the book-building are set at 60% of the total public offering shares or 10,550,997 shares. 3) The maximum number of shares in the book-building shall be set at 10,550,997 shares, the minimum number of shares at 1,000 shares, and the unit of discount rate at 0.05%. Only the participation method of suggesting only the quantity without the price at the book-building is recognised and it is considered as the participating institutional investor desires to be allotted at the discount rate the same as the lowest discount rate among discount rates which other institutional investors suggest. This consideration will be reflected at the time of determination of the final discount rate. 4) As for asset management companies and discretionary investment companies, they must participate as individual accounts by proprietary assets, collective investment assets, and discretionary investment assets. (7) Other Book-building Participation Related Details 1) Please beware of the application deadline as any participation, correction, or cancellation of book-building is impossible after the book-building deadline. 2) When the book-building participation application amount exceeds the maximum limit per book-building participant, it is considered as the participant participating at the maximum limit. 3) The participation itself is null and void if there is, or is confirmed that, any false information within the basic information for the participating institution entered at the book-building. 4) The discretionary investment companies that participate in this book-building must attach the following documents to prove that they meet all terms listed in Article 5-2 Paragraph 1 of the Regulations on Securities Underwriting Business, etc. : General book-building participation chart and Discretionary investment company s letter of commitment specifying Fund name, configured fund amount, and participation status for -25-

26 each fund 5) As for real estate trust companies, only the inherent assets can participate in the book-building by applying, mutatis mutandis, Article 5-2 Paragraph 3 of the Regulations on Securities Underwriting Business, etc.. 6) For asset management companies or discretionary investment companies, they must request for each individual account by collective investment assets, proprietary assets, high-risk high-return investment trusts, and discretionary investment assets and as for collective investment assets, they must participate in the bookbuilding with the same price as the price listed throughout the participation history by fund. Also, for each fund, you must apply after confirming the transfer limit and maturity date for each fund autonomously as well as the current agreement being approved and configured completely as of the book-building date. 7) The Joint Lead Managers can request for documents that prove that the investors are within the parameters of Article 2 Paragraph 8 Item F of the Regulations on Securities Underwriting Business, etc. from foreign institutional investors that participate in this book-building and when the foreign investors do not submit the requested documents, they may be at a disadvantage when it comes to allotment. 8) In relation to the unsubscribed shares among the allotments for institutional investors, existing shareholders, and retail investors, any institutional investors that did not participate in the book-building,, that did participate in the book-building but was not allotted any shares, that have been allotted the shares by participating in the book-building, or that desire to be allotted the shares additionally at the final offering price can apply for additional subscription. When unforeseen circumstances take place after the book-building and allotment, and the allotment itself is not smooth, the Joint Lead Managers may alter the standards for allotment. 9) Any residual quantity after the additional subscription for institutional investors will be allotted to the allotment for the existing shareholders and any residual quantity afterwards will be allotted to the allotment for the retail investors. (8) Discount Rate Decision Method The minimum desired public offering discount rate for public offering at the time of book-building is set at 0.00% with the maximum desired public offering discount rate set at 4.50%. In other words, the range of desired public offering discount rate is 0.00% ~ 4.50%. The final discount rate has been determined at 0.00% based on the book-building results. (9) Allotment Method Regarding the allotment of shares for the book-building participants, the institutional investors that suggest the lowest discount rates will be allotted first (even if participation on book-building was carried out with different discount rate, any value below asking unit price is rounded upwards to the asking unit price so that participated amount of book-building may remain the same, but even in this case, the institutional investors that presented the lower discount rate shall be subject to first-priority allotment). The Joint Lead Managers, in their sole discretion after considering investment preferences, management scale, and other factors of the participants, allot the shares for the institutional investors that participate with the final discount rate. When allotting the shares to asset management companies or discretionary investment companies, the shares will be allotted separately to collective investment assets, proprietary assets, and discretionary investment assets and the -26-

27 allotment for each fund of collective investment assets shall be allotted autonomously by the standards established by each asset management company. (10) Notification of Allotment Results The Joint Lead Managers, NH Securities & Investment Co., Ltd ( and Samsung Securities Co., Ltd ( will post the final offering price on their respective websites and the allotment per institution will be notified individually to the institutions participating in the book-building. (11) Book-building Results 1) Book-building Results Institutional Investors (Unit : Number, Shares) Number of Participation Subscribed Shares Simple Competition Rate 57 40,886, ) Range of Subscription Price (Based on Book-building Results) Range Number of Participation Subscribed Shares Percentage 0.00% 17 11,757, Above 0.00% ~ Not Exceeding 1.00% 6 2,880, Above 1.00% ~ Not Exceeding 2.00% 12 9,865, Above 2.00% ~ Not Exceeding 3.00% 16 12,584, Above 3.00% ~ Not Exceeding 4.00% 3 1,120, Above 4.00% 3 2,679, Total 57 40,886, ) Determination of Final Offering Price Upon consultation with the Company, the Joint Lead Managers, NH Securities & Investment Co., Ltd. and Samsung Securities Co., Ltd., have determined the final offering price as KRW8,370 based on the bookbuilding results and the market prospect. 4) Investors allotted with Shares Investors that offered discount rate of 0.00% E. Public Offering Schedule Date Work Details Notes 14 August 2017 Board of directors resolution - 14 August 2017 Submission of registration statement (Preliminary offering circular / Preliminary

28 Date Work Details Notes condensed offering circular) 14 August August 2017 Announcement of new share issuance and closing of shareholders list Base date for allotment of new shares (Confirmation of shareholders) Announcement through the Company s website ( List closed Aug.30 ~ Sep.5 4 September 2017 Announcement of book-building notice NH Securities & Investment Co., Ltd website ( Samsung Securities Co., Ltd website ( 6 September 2017 Notification of new share allotment - 11 September 2017 Book-building - 11 September 2017 Calculation of final offering price 3 trading days prior to the first day of subscription 12 September 2017 Announcement of final offering price - 12 September September 2017 Submission of revised registration statement (Confirmation of issuing price) Announcement of public offering subscription NH Securities & Investment Co., Ltd website ( Samsung Securities Co., Ltd website ( 14 September 2017~ 15 September 2017 Subscription through public offering - 19 September 2017 Announcement for subscription payment/refund/allotment - 26 September 2017 Distribution of share certificates - 27 September 2017 Scheduled date for listing of new shares - Footnote 1) The Financial Supervisory Services or FSS may request revision during the review process for the registration statement and the schedule listed on this document may change according to the request for revision and others. An execution of the registration statement does not confirm that the listed items within this document is true or correct and does not translate to the government guaranteeing or authorizing the value of these securities and therefore, the responsibilities for the investment on these securities fall solely on the shareholders -28-

29 and the investors. Footnote 2) The schedule above may change due to the negotiation process with relevant institutions. Footnote 3) The notification for subscription results and refund for excess subscription payment will be announced through the websites of Joint Lead Managers in place of individual notifications. F. Details of Subscription (1) The subscription unit for the institutional investors shall be 1 share and the subscription limit for each institutional investor shall be within 100% of the allotment for the institutional investors and any subscription exceeding the limit shall not be considered as a subscription. (2) The subscription unit for the existing shareholders shall be 1 share and the subscription limit for the existing shareholders shall be the sum of (x) the number of shares calculated by multiplying the ratio for new share allotment per share for every share that is listed on the list of shareholders as of the new share allotment date and (y) the number of subscription shares exceeding the limit (Number of shares calculated from multiplying 1.0 shares per share in possession and rounded downwards any value below 1 share) and any subscription exceeding the limit shall not be considered as a subscription. (i) Subscription limit for existing shareholders = Number of allotted shares within the limit + Number of subscription shares exceeding the limit (ii) Number of allotted shares within the limit = Number of shares in possession x Ratio for new share allotment ( shares)(however, round downwards any value below 1 share) (iii) Number of subscription shares exceeding the limit = Number of allotted shares within the limit x Ratio for excess subscription (100%) (3) The minimum unit of subscription for retail investors shall be 10 shares and the subscription limit for each ordinary investor shall be within 100% of the allotment for retail investors and any subscription exceeding the subscription limit will not be considered as a subscription. Category Subscription Unit 10 shares or more 100 shares or less Units of 10 shares Over 100 shares 500 shares or less Units of 50 shares Over 500 shares 1,000 shares or less Units of 100 shares Over 1,000 shares 5,000 shares or less Units of 500 shares Over 5,000 shares 10,000 shares or less Units of 1,000 shares Over 10,000 shares 50,000 shares or less Units of 5,000 shares Over 50,000 shares 100,000 shares or less Units of 10,000 shares Over 100,000 shares 500,000 shares or less Units of 50,000 shares Over 500,000 Shares Units of 100,000 shares (4) Institutional investors shall subscribe within the allotment for the institutional investors, and the existing shareholders shall subscribe within the allotment for the existing shareholders, while the retail investors subscribe within the allotment for retail investors. However, the institutional investors that are also the existing shareholders may subscribe within the allotments for both institutional investors and existing shareholders and shall comply with the restrictions on the unit and limit of subscription pursuant to Item (1) and (2) above. -29-

30 Also, retail investors who are also existing shareholders can subscribe within the allotments for both the retail investors and the existing shareholders and shall comply with the restrictions on the unit and limit of subscription according to Item (2) and (3) above. (5) Deposits for subscription: It is set at 100% of the offering amount. (6) Alternatives to deposits for subscription: The deposits for subscription may be waived if the subscription price for the shares are to be paid on the subscription date and no interest will be accrued for the deposits for subscriptions. (7) Subscription Method 1) Subscribers shall fill out the necessary items in the 2 copies of subscription applications in the designated format and submit them, simultaneously with the payment of the subscription deposits to the subscription agent. 2) Subscribers must receive the offering circular before subscription and must sign or affix its seal on the document confirming the receipt thereof. 3) Institutional investors can subscribe at the headquarters and branches of the NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd. 4) The beneficiary shareholders that have deposited their share certificates in the securities company among the existing shareholders can subscribe at the headquarters and branches of the securities company that they deposited their share certificates with or at the headquarters and branches of the NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd. However, any registered shareholders that have not deposited their share certificates into securities companies but holds their share certificates in their own names can submit a personal identification, together with the new share allotment notice and subscribe only at the headquarters and branches of the NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd. They must also fill out the necessary items in 2 copies of the subscription application in the designated format and submit them, simultaneously with the payment of the subscription deposits to the subscription agent. 5) Retail investors must subscribe in their real names in accordance with the Real Name Financial Transactions and Confidentiality Act and must submit a personal identification, together with the new share allotment notice to the headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd to subscribe. Retail investors can subscribe multiple times through various subscription agents but cannot subscribe twice with the same subscription agent. 6) Subscription can be made only in the specified unit of the subscription shares and any subscription that exceed the subscription limit per person shall not be deemed as a subscription and the subscription agent shall refund the excess subscription amount to such excess subscriber by the subscription payment date and no interests shall be accrued from the date the amount for the excess subscription was paid to the date of the refund to such excess subscriber. (8) Subscription Management Subscription Portfolio Location of Subscription Subscripti on Date Existing shareholders Institutional Investors Registered Shareholders (Shareholders that are Headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd Headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd 14 Sep ~ 15 Sep

31 Subscription Portfolio listed on the list of shareholders which are not the Beneficial Shareholders) Retail investors Beneficial Shareholders Location of Subscription 1) Headquarters and branches of securities companies that deposit shares of MKIF as of shareholder confirmation date 2) Headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd Headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd Subscripti on Date Footnote) Existing shareholders refer to the shareholders listed on the list of shareholders as of the date of new share allotment (Scheduled to be 18:00 of 29 August 2017). G. Allotment Method (1) The subscription competition rates will be calculated separately by groups of institutional investors, existing shareholders, and retail investors and allotted on a pro rata basis and by rounding downwards any value below from 5 and rounding upwards any value above from 6 and when calculating allotment for each group, the numbers of subscribed shares that are subscribed through subscription locations must be all combined and allotted with the same competition rates. When the number of subscribed shares exceed the allotted number of shares, the shares will be allotted on a pro rata basis according to the subscription competition rates calculated by rounding downwards any value below from 5 and rounding upwards any value above from 6 and when the number of subscribed shares for the groups (Institutional investors, existing shareholders, and retail investors) do not meet the number of allotted shares for each group, the Joint Lead Managers may allot the unsubscribed shares to other groups. (2) 60% of the total public offering shares, or 10,550,997 shares, are allotted to the institutional investors. The shares are first allotted to the institutional investors that participated in the book-building process and when the number of subscribed shares does not exceed the allotment for the institutional investors, the unsubscribed shares are allotted to the allotment for the existing shareholders. If there are still unsubscribed shares after allotting them to the allotment for the existing shareholders, they are reallotted to the retail investors, and if there are still unsubscribed shares, they are reallotted to the institutional investors who additionally subscribe during a period from a date on or after the date of subscription to a date after the date of allotment, and any unsubscribed shares will be acquired by the Joint Lead Managers with their own funds according to their respective acquisition ratios. If a party of the Joint Lead Managers could not acquire its share of unsubscribed shares, such unsubscribe shares will be acquired by the other party of the Joint Lead Managers as its joint and several liabilities. (3) 20% of the total public offering shares, or 3,516,999 shares, are allotted to the existing shareholders. The subscribed quantity within the allotted number of shares ( share per share. However, any value below 1 share shall be rounded downwards) that are allotted to the shareholders that are registered on the list of shareholders as of 18:00 of the new share allotment date (29 August 2017)(However, any value below 1 share -31-

32 shall be rounded downwards). Any unsubscribed shares within the allotment of allotted shares, will be allotted on a pro rata basis to the number of excess subscription shares for the existing shareholders (1.0 share per 1 share for limit for the number of excess subscription shares. However, any value below 1 share shall be rounded downwards). If there are still unsubscribed shares after allotting excess subscription shares, these shares will be allotted to the allotment for institutional investors. If there are still unsubscribed shares after allotting them to the institutional investors, they will be allotted to the retail investors, and if there are still unsubscribed shares, they will be reallotted to the institutional investors who additionally subscribe during a period from a date on or after the date of subscription to a date after the date of allotment and any unsubscribed shares afterwards will be acquired by the Joint Lead Managers with their own funds according to their respective acquisition ratios. If a party of the Joint Lead Managers could not acquire its share of unsubscribed shares, such unsubscribe shares will be acquired by the other party of the Joint Lead Managers as its joint and several liabilities. (4) 20% of the total public offering shares, or 3,516,999 shares are allotted to the retail investors. When the number of subscribed shares for the retail investors does not reach the allotted amount for the retail investors, the unsubscribed shares are allotted to the allotment for the institutional investors. If there are still unsubscribed shares after allotting them to the institutional investors, they will be reallotted to the existing shareholders and if there are still unsubscribed shares, then they will be reallotted to the institutional investors who additionally subscribe during a period from a date on or after the date of subscription to a date after the date of allotment and any unsubscribed shares will be acquired by the Joint Lead Managers with their own funds according to their respective acquisition ratios. If a party of the Joint Lead Managers could not acquire its share of unsubscribed shares, such unsubscribe shares will be acquired by the other party of the Joint Lead Managers as its joint and several liabilities.joint Lead ManagersJoint Lead ManagersJoint Lead Managers H. Distribution of the Offering Circular (1) By Article 124 of the Financial Investment Services and Capital Markets Act, the obligation to distribute the offering circular for subscription to this share shall be borne by the Company and the Joint Lead Managers. (2) Any investors that wish to subscribe to this share (except for professional investors as set forth in Financial Investment Services and Capital Markets Act Article 9 Paragraph 5 and those to whom the issuer is exempt from distributing the offering circular pursuant to Article 132 of the Financial Investment Services and Capital Markets Act are excluded) must receive the offering circular before subscription. (3) Location of distribution: Headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd (4) Distribution of the offering circular and date Category Distribution Method Distribution Date (Scheduled) Institutional Investors Exempt from distribution of prospectus due to ParagraphArticle 124 of Financial Investment Services and Capital Markets Act N/A -32-

33 Category Distribution Method Distribution Date (Scheduled) Existing shareholders Retail investors Distributed through methods 1), 2), 3) 1) Mailing 2) Distributed at the headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd 3) Distributed through websites or HTS of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd Distributed through methods 1), 2) 1) Distributed at the headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd 2) Distributed through websites or HTS of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd 1) When mailing : Receipt until the day before date of subscription 2) Distribution at the headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd: Until the termination date of the subscription (15 September 2017) 3) Distribution through websites or HTS of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd: Until the termination date of the subscription (15 September 2017) 1) Distribution at the headquarters and branches of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd: Until the termination date of the subscription (15 September 2017) 2) Distribution through websites or HTS of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd: Until the termination date of the subscription (15 September 2017) Please note that you cannot participate in this subscription for follow-on offering, if you do not confirm the receipt of the offering circular or have taken other measures. (5) Confirmation Process 1) When receiving prospectus via mail - When visiting a branch for subscription, please fill out the delivery confirmation document before proceeding with the subscription. - When you plan to subscribe via HTS, subscription is possible only after you check on the section for the download of the offering circular and the receipt confirmation therefor on the subscription screen. - When subscribing via phone, please confirm your identity via phone and then your receipt of the offering circular before proceeding with the subscription. 2) When collecting the offering circular through visiting branches - Please fill out the receipt confirmation document and proceed with the subscription. 3) Distribution via website or HTS - When you plan to subscribe via HTS, subscription is possible only after you check on the section for the download of the offering circular and the receipt confirmation therefor on the subscription screen. -33-

34 4) For this follow-on offering, the offering circular will be mailed to the shareholders listed on the list of shareholders after the registration statement becomes effective. For those investors that do not receive the offering circular due to returned mail and other reasons, you can visit the branches to receive the printout version of the offering circular or you can download it in the electronic form form through the websites of NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd. However, when receiving in the form of electronic document, subscription is only possible if each term of Article 124 Paragraph 1 of the Financial Investment Services and Capital Markets Act are complied with. Please note that you cannot participate in this subscription for follow-on offering, if you do not receive, or do not express your waiver of the delivery of, the offering circular. Relevant Statutes <Financial Investment Services and Capital Markets Act> Article 9 (Other Definitions) 5 The term "professional investor" in this Act means an investor who has an ability to take risks accompanying the investment in light of the expertise that it possesses in connection with financial investment instruments, the scale of assets owned by it, etc., and who falls under any of the following subparagraphs: Provided, That a financial investment business entity shall give consent to a professional investor prescribed by Presidential Decree when the investor notifies the financial investment business entity in writing of its intention to be treated as an ordinary investor, unless there is a justifiable ground otherwise, and such investor shall be treated as an ordinary investor when the financial investment business entity gives such consent. 1. The National Government; 2. The Bank of Korea; 3. Financial institutions as set forth in the Presidential Decree; 4. Share-listed corporations: Provided, That trading over-the-counter derivatives with a financial investment business entity shall be limited to cases where an investor notifies the financial investment business entity in writing of its intention to be treated as a professional investor; 5. Other persons as set forth in the Presidential Decree. Article 124 (Fair Use of Investment Offering Circular) 1 Any person shall be prohibited from causing a subscriber or investor to acquire securities or sell securities to such subscriber or investor, unless an offering circular (which refers to a short-form offering circular under paragraph (2) 3, if any investor in collective investment securities does not separately request the delivery of an offering circular under Article 123; hereafter the same shall apply in this paragraph and Article 132) prepared in conformity with Article 123 is delivered to the subscriber or investor (except for professional investors and those as set forth in the Presidential Decree) who intends to acquire the securities after the relevant registration statement becomes effective. In such cases, the offering circular shall be deemed to be delivered at the time the following requirements are fully satisfied, if the offering circular is delivered ion the form of an electronic document under Article The person to whom the electronic document is addressed (hereinafter referred to as "addressee of the electronic document") shall consent to the delivery of the offering circular in such form; 2. The addressee of the electronic document shall designate the kind of an electronic transmission medium and place for receiving the electronic document; 3. The addressee of the electronic document shall confirm his/her receipt of the electronic document; and 4. The contents of the electronic document shall be identical with those of the investment prospectus in writing -34-

35 <Enforcement Decree of Financial Investment Services and Capital Markets Act > Article 11 (Public Offering and Public Sale of Securities) 1 In calculating 50 persons in accordance with Article 9 (7) and (9) of the Act, the number of persons who have been invited to subscribe for securities of the same class as the securities in the instant case in any manner other than by public offering or public sale within six months before the public invitation to subscribe shall be included: Provided, That any of the following persons shall be excluded from such calculation: 1. Any of the following professionals: A. Professional investors B. Deleted <28 June 2016> C. Accounting firms under the Certified Public Accountant Act; D. Credit rating firms (which refers to companies that have obtained the license for credit rating businesses in accordance with Article of the Act; hereinafter the same shall apply); E. Persons who provide accounting, consulting, and similar services to the issuer with an officially recognised qualification certificate for a certified public accountant, appraiser, attorney-at-law, patent attorney, tax accountant, etc.; F. Other persons specified and publicly notified by the Financial Services Commission as professionals who are in a position to have good knowledge of financial status, business affairs, etc. of the issuer; and 2. Any of the following related persons: A. The largest shareholder (which refers to the largest shareholder under Article 2 (6) of the Act; hereinafter the same shall apply) of the issuer and shareholders who hold at least 5/100 of the total number of outstanding shares of the issuer; B. Executives (including a person under each subparagraph of Article (1) of the Commercial Code; hereafter the same shall apply in this subparagraph) of the issuer and members of the employee share ownership association under the Framework Act on Labor Welfare; C. Affiliates of the issuer and their executives; D. Shareholders of a share-unlisted corporation (except for a corporation that has a history of public offering or sales of its shares), where the issuer is the share-unlisted corporation; E. Executives and employees of a domestic affiliates of the issuer, where the issuer is a foreign enterprise established pursuant to laws and regulations of a foreign country, and sells shares of the foreign enterprise to executives and employees of the domestic affiliates in accordance with a share option plan, etc. for improving welfare of employees; F. Promoters of the issuer, if the issuer is in the progress of incorporation or creation; and G. Other related persons, as determined and publicly designated by the Financial Services Commission, who are in a position to have good knowledge of financial status, business affairs, etc. of the issuer. Article 132 (Persons Exempt from Issuing Investment Prospectus) "Those as set forth in the Presidential Decree" in the forepart of the main body of Article 124 (1) of the Act mean persons falling under any of the following subparagraphs. 1. Persons falling under any provision of Article 11 (1) 1 (c) through (f) and each item of Article 11 (1) 2; 1-2. Persons falling under Article 11 (2) 2 or 3; 2. Persons who expressed their intention to waive to receive an offering circular in writing, by phone, cable, facsimile, s or similar telecommunications, or other methods prescribed and publicly notified by the Financial Services Commission; 3. Persons who intend to acquire additional collective investment securities equivalent to those already acquired: Provided, That it shall be limited to cases where the offering circular in relation to the relevant collective investment securities provides the same details as the offering circular distributed immediately before. -35-

36 (6) Distribution of share certificates 1 Scheduled date of share certificate distribution : 26 September 2017 (However, the schedule may change during the negotiation with relevant institutions.) 2 Location of share certificate distribution: Korea Securities Depository ( KSD ) 3 When you apply for the subscription in accordance with Article 309 Paragraph 5 of the Financial Investment Services and Capital Markets Act, the shares allotted to the applicable subscriber will be issued all at once in the name of the Korea Securities Depository and these share certificates will be automatically deposited into the accounts listed on the books of the subscription agent. Relevant Statutes < Financial Investment Services and Capital Markets Act > Article 309 (Deposit, etc. in Securities Depository) 5Where a depositor or its investor acquires or subscribes for securities, etc. or requests issuance of securities, etc. for any other reason, the issuer of such securities, etc. may, upon the request of the depositor or its investor, issue or register (which refers to a registration under the National Bond Act or the Registration of Bonds and Debentures Act; hereafter in this Section, the same shall apply) such securities, etc. in the name of the Securities Depository on behalf of the depositor or its investor. (7) Replacement and refund of subscription deposits The subscription deposits are set at 100% of the offering amount and replaced as the subscription payment on the subscription payment date and no interest will be accrued on such subscription deposits. (8) Payment location for the subscription price : SC First Korea Bank WBO Center -36-

37 5. Underwriting [ Underwriting Method : Stand-by underwriting] Underwriter Name ID No. Address Types and Number of Underwritten Shares Terms of Underwriting Method of Underwriting NH Securities & Investment Co., Ltd Samsung Securities Co., Ltd , Yeoui-daero, Yeongdeungpo-gu, Seoul 11, Seocho-daero 74-gil, Seocho-gu, Seoul Registered common shares 17,584,995 shares ₁ Stand-by underwriting ₁ The Joint Lead Managers, NH Securities & Investment Co., Ltd and Samsung Securities Co., Ltd will underwrite the unsubscribed residual shares on a pro rata basis. For details on underwriting commission fees, please refer to Section 3 (Scheduled Offering Amount) of Chapter 1. (Details on Offering of Newly Issued Shares or Outstanding Shares). 6. Offering and Listing [ Schedule for Additional Listing] Date (Scheduled) Details 20 September 2017 Request for additional listing 27 September 2017 Listing of new shares (1) The Company is a close-ended investment company and the shares issued by the Company are listed in the stock market of Korea Exchange. (2) The shareholders can only recover their investments only by selling their shares in the stock market of Korea Exchange after the shares are listed. (3) However, if (x) the overall market interest increases so as to decrease the investment attractiveness which in turn causes the share price to decrease or (y) the lack of market participants leads to lack of trade volume in the market, the liquidity of these shares may be severely restricted. -37-

38 Chapter 2 Company Overview 1. Company Name Name of Company KOFIA Fund Code Macquarie Korea Infrastructure Fund History The details of the Company history are set out below. Please refer to the prospectus published on the Company s website ( for the details on the history of the Company prior to the IPO and at the time of the listing. Date Details December Incorporation of Korea Road Infrastructure Fund on 12 December MKAM was licensed by the FSC as an infrastructure asset management company under the Indirect Investment Asset Management Business Act (the IIAMBA ) - The Company s AOI have been amended in order to list MKIF, which requires MKIF to November 2005 be converted from a private investment company under the Securities Investment Company Act to a public investment company under the IIAMBA - Change of the Company name from Korea Road Infrastructure Fund to Macquarie Korea Infrastructure Fund February 2006 Registration of MKIF as an Investment Company under the IIAMBA - Capital raising of KRW 500 billion through initial public offering in Korea and placement to international institutional investors March Dual listing on the Stock Market Division of the Korea Exchange and Professional Securities market of the London Stock Exchange (as GDR) Acquisition of senior and subordinated loan commitments to Koda Development Co., Ltd., April 2006 the concessionaire of the Incheon Grand Bridge project Commitment to provide a subordinated loan of KRW 80 billion to Kyunggi Highway Co., October 2006 Ltd., the concessionaire of the Seosuwon-Osan-Pyungtaek Expressway project Commitment to invest subordinated loan in Seoul-Chuncheon Expressway Co., Ltd., the November 2006 project concessionaire February 2007 April 2007 Equity investment and initial utilisation of the subordinated loan to Kyungsu Expressway Co., Ltd., the concessionaire of the Yongin-Seoul Expressway Project - Received a credit rating of AA- (stable) from Korea Ratings - Refinancing of senior loans provided by third parties in Daegu Fourth Beltway East with MKIF-provided loan - Reached financial close on its subordinated loan investment in Kyunggi Highway Co., Ltd, the concessionaire of the Seosuwon-Osan-Pyungtaek Expressway Project -38-

39 Date May 2007 November 2007 December 2007 January 2008 March 2008 July 2008 March 2009 May 2009 January 2010 March 2010 November 2010 March 2011 April 2011 May 2011 June 2011 June 2012 October 2013 October 2013 February 2014 August 2015 October 2015 January 2016 Details Entered into a corporate loan facility (5-year term, not exceeding KRW 500 billion) Participated in the Third KRX IR EXPO organized by Korea Exchange Committed to provide subordinated loan of KRW 193 billion and equity of KRW 66.4 billion in Busan New Port Container Terminal, Ltd., the concessionaire of the Busan New Port Phase 2-3 Project Securitized the shareholder loan in Baekyang Tunnel Ltd. by issuing an asset-backed security Divested its entire holding of the convertible bond issued by New Daegu Busan Expressway Co., Ltd. (maturity of 5 years, 6.5% equity conversion, nominal value: KRW 32 billion) Financial close on purchasing the remaining 51% equity interest in MCB Co., Ltd. Divested its KRW 188 billion of senior loan commitment to Incheon Bridge Co., Ltd. Entered into an underwriting agreement related to securitization of MKIF s interest receivables on the subordinate loan provided to Cheonan Nonsan Expressway Co., Ltd. (execution of the first securitization transaction) Divested its subordinate loan commitment to Kyunggi Highway Co., Ltd, the concessionaire of the Seosuwon-Osan-Pyungtaek Expressway project Execution of the second securitization transaction related to securitization of the subordinated loan interest receivables from Cheonan-Nonsan Expressway Co., Ltd. Divested 30% equity interest in MCB Co., Ltd. concessionaire of the Machang Bridge project Execution of the third securitization transaction related to securitization of the subordinated loan interest receivables from Cheonan-Nonsan Expressway Co., Ltd. Domestic credit rating notched up to AA (stable) from AA- (stable) Issued KRW 250 billion aggregate principal amount of unsecured bonds (KRW 190 billion for 7 years, KRW 60 billion for 5 years) Amendment to the corporate credit facility terms (term extended to June 2016, commitment amount KRW 250 billion) Divested MKIF s entire investment, equity and subordinated loan to Daegu East Circulation Road Co., Ltd., concessionaire of the Daegu Fourth Beltway East Project Divested MKIF s entire investment, equity and subordinated loan to Seoul Metro Line 9 Co., Ltd., concessionaire of the Seoul Subway Line 9 Section 1 Project Additional subordinated loan commitment of KRW 50 billion in the Busan New Port Phase 2-3 Project Refinancing of the revolving credit facility (term extended to February 2019, commitment of KRW 250 billion) - Refinancing of Incheon International Airport Expressway (new financing agreement and capitalization) Executed the refinancing of Yongin-Seoul Expressway Project, raising MKIF s equity stake in Gyeongsu Highway Co., Ltd., concessionaire of the Project, from 35% to 43.75% (shareholding ratio in terms of voting rights also increased to 58.3%) - Restructuring of Woomyunsan Tunnel project (Implementation of revenue management method and new financing agreement) -39-

40 Date Details March 2016 Delisted the GDR from the Professional Securities market of the London Stock Exchange¹ Issuance of electronic short-term bonds (matures as of May 2018, agreed amount: KRW 60 May 2016 billion) Restructuring of Machang Bridge project (implementation of revenue management method January 2017 and new financing agreement) ¹At the time of MKIF s IPO in March 2006, GDRs were issued and listed on the London Stock Exchange to enable foreign investors to participate in the IPO process. However, the majority of the GDRs issued in the past have been cancelled and converted back to their original shares. Therefore, MKIF made the decision to delist its GDR as of 24 March 2016 considering the cost-benefit aspect of the program. 3. Term of Trust Agreement - The Company is a special asset collective investment vehicle that conforms to Article 229 Item 3 of the Financial Investment Services and Capital Markets Act and an investment company that conforms to Article 9 Paragraph 18 Item 2 of the same Act and an infrastructure investment and financing company that conforms to Article 41 of the PPP Act. - Duration of the Company: The duration of the Company commences from the date of the incorporation and ends on the date of its dissolution based on any of the events listed below. The Company shall be dissolved if any of the following events occurs: A. By a resolution adopted at the general meeting of shareholders B. Merger C. Insolvency D. Court s order or court s judgment E. Cancellation of registration by the order of the FSC If any of the above events occurs, a receiver or liquidator shall report to the FSC within 30 days of the dissolution. The duration during which the Company exists may differ from an investor s intended period of investment. ¹The Company has been incorporated in accordance with the Act on Private Investment in SOC Facilities, however, this Act was later amended to the Act on Public-private Partnerships in Infrastructure. 4. Asset Management Company A. Asset Management Company Overview Company Name Macquarie Korea Asset Management Co., Ltd. ( MKAM or the Manager ) -40-

41 9th Floor, Hanwha Building, 109 Sogong-ro, Jung-gu, Seoul (Postal code: 04525) Contact Phone: (1) Established Macquarie Infrastructure Fund in Korea on 17 October 2002 (2) Appointed as MKIF s asset manager on 13 December 2002 (3) Company name changed to Macquarie Korea Infrastructure Fund as of 23 December 2002 (4) Licensed as an infrastructure asset manager in Korea under the IIAMBA on 11 November 2005 (5) Licensed to manage funds investing in special assets (limited to infrastructure assets) on 4 February 2009 pursuant to the FSCMA (6) Licensed to manage funds investing in special assets (removal of the limitation to History investment in infrastructure assets) in June 2010 pursuant to the FSCMA (7) In February 2012, an affiliate of Macquarie Group purchased 50% of the common shares in MKAM, increasing Macquarie s shareholding in MKAM to 100% of the voting shares (changed its name from Macquarie Shinhan Infrastructure Asset Management to the current MKAM) (8) Expanded its collective investment license to include management of real estate funds in November 2013 (9) In October 2015, registered to manage private placement funds offered to professional investors pursuant to the amended FSCMA Footnote) Please refer to Chapter 4 Section 1 (Asset Management Company) for more details. 5. Registered Asset Managers A. Current Asset Management Professionals MKAM is licensed under the FSCMA to act as the manager of special asset funds (not limited to management of infrastructure funds). As part of its licensing requirements, MKAM is required to employ at least two infrastructure asset management professionals. Below is a list of MKIF s asset management professionals. [ Current Asset Management Professionals ] Management Status Name Year of Birth Position No. of other funds under management Sizes of other assets under management Career Jason Pak 1970 Division Director N/A N/A - Chief Operating Officer of MKAM - Head of MKIF management team (portfolio & capital management) - Capital Markets Division of Macquarie Securities from 2003 to Prior to joining Macquarie Group, 5 years of M&A Advisory at Corporate Finance of -41-

42 Management Status Name Year of Birth Position No. of other funds under management Sizes of other assets under management Career KPMG Seoul and London Jaewoo Jung 1981 Senior Manager Billion KRW - Infrastructure asset manager at MKAM - Member of MKIF management team (portfolio & capital management) - Prior to joining MKAM, worked in Corporate Finance and Asset Management at Korea Development Bank and Korea Securities Finance Corporation - Manager of a special assets fund investing in Korean private concession businesses since December 2012 Footnote 1) Please note that other fund under management has performance fee structure and AUM is calculated as of 30 June 2017 Footnote 2) Please refer to KOFIA website ( for more details on other funds and assets under management. B. Changes in Asset Management Professionals Period March 2016 ~ Current January 2015 ~ March 2016 January 2008 ~ January 2015 Asset Management Professionals Jason Pak, Jaewoo Jung Jason Pak, Jiroo Eoh Jonghyuck Park, Jongho Kim 6. Company Structure A. Type and Form of Company - Investment company, special assets, closed-ended (Non-redeemable), accumulative type - Infrastructure investment and financing company under the PPP Act The Company is an infrastructure investment and financing company which was established in accordance with the PPP Act in December 2002 and operates the collective investment assets (holding assets) through investments in companies engaged in the infrastructure businesses according to the PPP Act and aims to distribute the generated profit to its shareholders. -42-

43 B. Investment Structure of Company Shareholders Investment Allocation Service Providers General administration management company Custodian Brokerage service provider MKIF Investment Currently investing in 12 business entities Management agreement MKAM MKIF (Asset Management Company) MKIF Investment Structure 7. Investment Purposes The Company invests in shares, bonds and/or loans of business entities that develop and/or operate infrastructure businesses under the PPP Act. As an infrastructure investment company, the Company focuses on generating profits through dividends income and interest income on its investments and ultimately distributing the profits from investment activities to its shareholders. While infrastructure funds investing in the infrastructure assets are expected to generate stable returns, there is no guarantee that the initial investment goals and performance targets will be fulfilled in the event of unexpected outcome. 8. Investments A. Investment Portfolio The investment portfolio of the Company is comprised of stocks, bonds, collateralized bonds issued by the companies engaged in the infrastructure businesses (new construction, expansion, improvement, or operation) (the Concessionaire(s) ) (Article 43 Paragraph 1 of PPP Act). The Company generates profits from dividends and interests through investments and allots these profits to the investors of the Company. The asset portfolio of the Company is currently composed only of investments in the concessionaires of publicprivate partnership projects. A public-private partnership project is proposed by the private sector as prescribed in Article 9 of the PPP Act, or any concession project conducted by the concessionaire in accordance with a master plan for a public-private partnership project as prescribed in Article 10 of the PPP Act (defined in Article 2 Subparagraph 5 of the PPP Act). -43-

44 The Company currently invests in shares and bonds and extends loans to concessionaires that operate infrastructure facilities (as defined in the PPP Act including toll roads, ports, integrated energy facilities, airports, telecommunication facilities, sewage systems, etc.) under concessions from central or municipal governments, and the Company also intends to invest in entities that develop and/or operate infrastructure facilities or other assets permitted under relevant laws. As of 30 June 2017, the Company has invested, or has committed to invest KRW 1,668.7 billion in its target assets and it will continue to make similar investments. The Company has invested in 12 Korean infrastructure assets composed of 11 toll road projects, including bridges and tunnels and a single container terminal project. The table below summarizes our investments, or our commitments to invest, by asset as of 30 June Detailed information of the assets stated in the table below is available on the website of MKIF ( Name Status Commitment (KRW bn) Equity Equity Sub Debt Senior Debt Total Ownership(%) New Airport Hiway Co., Ltd. Operating Baekyang Tunnel Ltd. Operating Kwangju Ring Road Co., Operating Ltd Kwangju Beltway Investment Operating Co., Ltd ¹ Woomyunsan Infraway Co., Operating Ltd ² Cheonan-Nonsan Expressway Operating Co., Ltd Soojungsan Investment Co., Operating Ltd MCB Co., Ltd. Operating Seoul-Chuncheon Hiway Co., Operating Ltd Incheon Bridge Co., Ltd. Operating ³ Yongin Seoul Expressway Operating Co., Ltd BNCT Co., Ltd. Operating ⁴ Total , Percentage (%) ¹Includes KRW 3.2 billion of working capital facility ²As a result of the capital restructuring of Woomyunsan Tunnel project on 14 January 2016, the previous subordinated debt has been refinanced with a new shareholder under the loan tranche B ³Provided senior loan to Private Infrastructure Investment Korea in December 2016 as an advanced payment under the investment commitment for 23.03% of equity ownership for Incheon Bridge Co., Ltd. -44-

45 ⁴Includes working capital facility in the amount of KRW 50 billion Footnote 1) Based on investment amount (outstanding balance of the investment principal and commitment) Footnote 2) The senior loan which was senior to the subordinated loan in terms of priority of payment has been fully repaid or currently does not exist for Cheonan-Nonsan Expressway Co., Ltd. and MCB Co., Ltd. B. Investment Restrictions Pursuant to Article 43 of the PPP Act, the Company is only permitted to invest in the following assets. Relevant Statutes < ACT ON PUBLIC-PRIVATE PARTNERSHIPS IN INFRASTRUCTURE > Article 43 (Scope of Asset Management) 1 A collective investment vehicle may perform the following businesses 1. Acquisition of stocks, shares, and bonds issued by corporations with the purpose of implementing infrastructure projects; 2. Loans to and acquisition of loans against corporations with the purpose of implementing infrastructure projects; 3. Investments in a corporation (excluding the collective investment vehicle) with the purposes of investing by the mode of subparagraph 1 or 2 in the corporation with the purposes of implementing infrastructure projects; 4. Other investments approved as necessary for achieving the purposes under subparagraphs 1 through 3 by the Financial Services Commission. 2 When deemed necessary for running business under each subparagraph of paragraph (1), an collective investment vehicle may offer its assets as security or make guarantees. 3An collective investment vehicle may manage its surplus funds as follows: 1. Deposit into a financial institution, etc.; 2. Purchase of national or public bonds; 3. Purchase of bonds of the same credit rating as national or public bonds or corporate bills within the limit as prescribed by Presidential Decree. Restrictions on Operation of Assets as stipulated in Article 81 of the FSCMA shall not apply to the Company under Article 44 of the PPP Act. Relevant Statutes < Financial Investment Services and Capital Markets Act > Article 81 (Restrictions on Asset Management) 1No collective investment business entity shall commit any of the following acts while managing the collective trust property: Provided, That the entity may be allowed to undertake such act if there is no possibility of undermining the protection of investors and the stable management of the collective investment property, as prescribed by Presidential Decree: 1. Any of the following acts, committed while investing the collective investment property in securities (excluding collective investment securities and the other securities specified by Presidential Decree, but including the assets for investment as specified by Presidential Decree; hereinafter the same shall apply in this -45-

46 subparagraph) or derivatives: A. Investing the assets of each Collective Investment Vehicle managed by each collective investment business entity in an identical item of securities in excess of the ratio prescribed by Presidential Decree within the limit of 10/100 of the total assets of each Collective Investment Vehicle. In such cases, equity securities (including securities depositary receipts that are related to equity securities issued by a corporation, etc.; hereinafter the same shall apply in this Sub-Section) and other securities, excluding any equity securities issued by the identical corporation, etc., shall be deemed identical securities respectively; B. Investing the total assets of all Collective Investment Vehicles managed by each collective investment business entity in equity securities issued by an identical corporation, etc. in excess of 20/100 of the total number of equity securities; C. Investing the total assets of each Collective Investment Vehicle in equity securities issued by an identical corporation, etc. in excess of 10/100 of the total number of equity securities; D. Trading over-the-counter derivatives with a person who does not meet the qualification requirements prescribed by Presidential Decree; E. Investing assets in excess of the guidelines prescribed by Presidential Decree for the assessed risks contingent to trading derivatives; F. Investing the assets of each Collective Investment Vehicle to the extent that the assessed risks ensuing from price fluctuation in the securities issued by an identical corporation, etc. (including securities depositary receipts related to the securities issued by the corporation, etc.) out of the underlying assets exceed 10/100 of the total assets of each Collective Investment Vehicle; G. Investing assets of each Collective Investment Vehicle to the extent that the assessed risks of the opposite trading party ensuing from trading over-the-counter derivatives with the same opposite party exceed 10/100 of the total assets of each Collective Investment Vehicle; 2. Any of the following acts, committed while investing the collective investment property in real property; A. Disposing of real estate within a period of time prescribed by Presidential Decree not exceeding five years after the acquisition of real estate: Provided, That in cases where a parcel of land, buildings, etc. developed or constructed by a real estate development project (referring to a project for developing a parcel of land into housing lots, lots for industrial purposes, etc. or constructing or reconstructing a building or any other structure on the tract of land; hereinafter the same shall apply) are sold in lots or in units or where it is otherwise necessary for the protection of investors, as prescribed further by Presidential Decree, such disposal shall be excluded herefrom; B. Disposing of a parcel of land without any building or other structure thereon before executing a real estate development project for such a parcel of land: Provided, That in cases where the Collective Investment Vehicle is merged, terminated, or dissolved or where it is otherwise necessary for the protection of investors, as prescribed further by Presidential Decree, such disposal shall be excluded herefrom; 3. Any of the following acts, committed while investing the collective investment property in collective investment securities (including foreign collective investment securities under Article 279 (1); hereinafter the same shall apply in this subparagraph): A. Investing the assets of each Collective Investment Vehicle in the collective investment securities of a Collective Investment Vehicle (including foreign Collective Investment Vehicles under Article 279 (1)) managed by the same collective investment business entity (including foreign collective investment business entities under Article 279 (1)), in excess of 50/100 of the total assets of the Collective Investment Vehicle; B. Investing the assets of each Collective Investment Vehicle in the collective investment securities of the same Collective Investment Vehicle (including foreign Collective Investment Vehicles under Article 279 (1)), in excess of 20/100 of the total assets of the Collective Investment Vehicle; C. Investing assets in the collective investment securities of a Collective Investment Vehicle (including foreign Collective Investment Vehicles under Article 279 (1)), which is allowed to invest in collective investment -46-

47 securities in excess of 40/100 of the total assets; D. Investing assets in the collective investment securities of a privately placed fund (including foreign privately placed funds corresponding to the privately placed fund hereunder); E. Investing the collective investment property of each Collective Investment Vehicle in the collective investment securities of the same Collective Investment Vehicle (including foreign Collective Investment Vehicles under Article 279 (1)), in excess of 20/100 of the total number of the collective investment securities. In such cases, the calculation of the ratio shall be based on the day on which such investment is made; F. Investing assets in collective investment securities to the extent that the aggregate of sales commissions or sales remuneration paid to the investment trader or the investment broker, who sells the collective investment securities of a Collective Investment Vehicle, and sales commission or sales remuneration paid to the investment trader (including foreign investment traders (referring to persons who engage in a business corresponding to the investment trading business in a foreign country in accordance with the Acts and subordinate statutes of the foreign country), who sells the collective investment securities of other Collective Investment Vehicles (including foreign Collective Investment Vehicles under Article 279 (1)) in which the aforesaid Collective Investment Vehicle invests in, or the investment broker (including foreign investment brokers (referring to persons who engage in a business corresponding to the investment brokerage business in a foreign country in accordance with the Acts and subordinate statutes of the foreign country)), exceeds the guidelines prescribed by Presidential Decree; 4. Any other act specified by Presidential Decree as likely to undermine the protection of investors, the stable management of collective investment property, etc. 2 Matters pertaining to the method, etc. of determining the assessed risks under paragraph (1) 1 (e), the assessed risks under paragraph (1) 1 (f), and the assessed risks of the opposite trading party under paragraph (1) 1 (g) shall be determined by the Financial Services Commission and provided by public notice. 3 In cases where an investment has exceeded the investment limit under paragraph (1) owing to an unavoidable cause or event specified by Presidential Decree, such as price fluctuation in any investment asset, which belongs to the collective investment property, during the period prescribed by Presidential Decree beginning with the day on which the investment exceeded the prescribed limit, it shall be deemed that such investment was made in compliance with the investment limit. 4Paragraph (1) 1 (a), (e) through (g), 3 (a), 3 (b) and investment ratios under each subparagraph of Article 229 shall not apply to the period of time specified by Presidential Decree, not exceeding six months from the date of the original creation or establishment of the Collective Investment Vehicle. 9. Investment Strategy, Risk Management and Revenue Structure A. Investment Strategy and Risk Management (1) Investment Strategy (Asset Management Strategy and Investment Guidelines) The primary strategic objective of the Company is to generate profits for its shareholders through maximization of shareholder value and cash distribution, achieved by investing in entities that develop and/or operate infrastructure businesses in Korea under the PPP Act. The Company plans to achieve this goal by implementing the followings: 1) Investing in entities that develop and/or operate infrastructure businesses in Korea under the PPP Act; 2) Applying the asset management company s capabilities in identifying and originating promising infrastructure assets; -47-

48 3) Focusing on investments in loans, unlisted bonds, equity and equity-linked securities; 4) Investing in infrastructure assets that add value to the Company s portfolio; 5) Investing in infrastructure assets that offer opportunities to maximize the Company s financial returns through enhanced leverage or refinancing; 6) Investing in infrastructure assets that are expected to offer returns consistent with or greater than the associated risk of the underlying infrastructure asset; and 7) Focusing investment in Infrastructure Assets that will enable the Company to exercise significant influence or control over key strategic, commercial and financial functions. In addition to the asset types that the Company currently invests in, such as roads, bridges, tunnels and ports, the Company is contemplating on investing in a broader range of infrastructure assets defined under Article 2 Subparagraph 1 of the PPP Act. Notwithstanding the foregoing, the aforementioned investment strategy does not guarantee that the investment goals and performance targets suggested by the Company will be met. The Company will use the proceeds of the subscription price in the amount of approximately KRW147.2 billion to purchase an additional shares in Incheon Bridge Co., Ltd., ( IBC ) to increase the subordinated loan facility amounts (up to approximately KRW 90 billion) and to make new investments (the exact investment amount and schedule to be determined). [ Use of proceeds of the subscription price ] Investment Amount Investment Period Notes Incheon Bridge Co., Ltd. Approx. KRW 90 billion August, 2017 ~ September, 2017 Domestic Toll Road 1) Investment in IBC Private Infrastructure Investment Korea Co., Ltd. ( PIIK ) is a 100% subsidiary of the Company and holds 41.02% of the total outstanding shares in IBC, which is the concessionaire. For the transaction details, please refer to the below. [ Summary of IBC concession] Subject Details Concession Period Minimum Revenue Guarantee The minimum revenues will be guaranteed until the year of 2024 and its coverage extends to 80% of forecasted revenue. PIIK has purchased an additional 23.03% of total outstanding shares in IBC that were sold by the existing shareholder, AMEC, as of 14 August 2017, at price of KRW 46.2 billion and, on the same date, has entered into a subordinated loan agreement to increase the subordinated loan facility amounts. Prior to a date of a subscription at this time, such refinancing transaction as to the subordinated loan facility will be closed and the Company will provide such loan facility to IBC as part of the total invested capital. After the follow-on offering through the public offering is made at this time, the Company will repay the outstanding loan facility amounts -48-

49 borrowed for the purpose of investing in this project. A closing of this transaction is subject to the satisfaction of the relevant conditions precedent, including but not limited to the changes in the shareholding structure of IBC that are currently being discussed. However, please note that the transaction may not be closed due to unexpected circumstances. If this transaction closes as planned, the total amount of the investment in IBC by the Company will be increased by approximately 130 billion won. Out of such total amount, 40 billion won will be used for the payment of the unpaid interest under the existing subordinate loan made by the Company into IBC and will be refinanced as a new principal of a new subordinated loan facility. Accordingly, a net investment amount will be approximately 90 billion won. Such amount will be invested through additional funding by the Company from a third party and after this follow-on offering, the additionally funded amount will be repaid with the proceeds of the subscription price. The traffic volume of the Incheon Bridge has been increased continuously after its opening and the daily traffic volume for the first half of 2017 has been increased 10.1% YoY. [ IBC s Performance Trend ] Daily average traffic volume Daily average toll revenue Subject Number of vehicles / day First half of 2017 Second half of ,349 42,110 44,561 38,900 34,909 YoY 10.1% 14.2% 14.6% 11.4% 12.6% 1,000 won / day 247, , , , ,235 YoY 10.2% 17.8% 18.2% 11.2% 11.9% [ Transaction Summary] Shareholding MKIF (41.02%) AMEC (23.03%) KB Bank (14.99%) IBK (14.99%) Incheon City (5.97%) Equity KRW 164.6bn KRW 61.1bn Before After Key changes MKIF (64.05%) KB Bank (14.99%) IBK (14.99%) Incheon City (5.97%) - AMEC s 23.03% sold to MKIF at price of KRW 46.2 billion, increasing MKIF s shareholding from 41.02% to 64.05% - Capital redemption in proportion to shareholding (to be completed by the end of September) - Cash proceeds from capital redemption attributable to MKIF amounts to KRW 66.3bn -49-

50 Senior debt KRW 393.4bn (*) Floating 393.4bn at 3-yr corp. AA- (**) + 190bps p.a. Maturing in 4Q 2024 Subordinated debt KRW bn (*) Floating 154.7bn at 3-yr corp. AA- (**) + 600bps p.a. Maturing in 2Q 2026 KRW 450.0bn Floating 350.0bn at 3-yr corp. AA-(**) + 150bps p.a. Maturing in 1Q 2031 Fixed 100.0bn at 3.40% p.a. Maturing in 1Q 2031 KRW bn Fixed 296.0bn at 12% p.a. Maturing in 4Q Amount increased by KRW 56.6bn - Maturity extended by ~6 years % of the new senior debt is in fixed rate tranche - Amount increased by KRW 141.3bn - Maturity extended by ~11 years - Change from floating rate to fixed rate - MKIF s investment increased from KRW 89.4bn to KRW 241.0bn Unpaid interest KRW 73.7 bn (***) None - Entire unpaid interest settled - MKIF s portion is KRW 42.5bn Average toll fare (****) KRW 6,200 per vehicle KRW 5,500 per vehicle - ~11.3% decrease as per refinancing profit sharing MRG 80% of the Concession Same No change Agreement forecast for first 15 years (~2024) Competing road provision Yes Same No change (*) Projected figures as of the financial closing date (18 August 2017) (**) 2.34% as of 11 August 2017 (***) Projected unpaid interest on the existing subordinated debt as of the financial closing date (18 August 2017) (****) Small vehicle toll fare basis [MKIF investment in IBC] Pre-Transaction Post-Transaction Equity interest (shareholding) KRW 67.5 billion (41.02%) KRW 39.1 billion (64.05%) Equity premium KRW 7.0 billion KRW 15.3 billion Subordinated debt KRW 89.4 billion KRW billion Total investment KRW billion KRW billion % of MKIF portfolio (*) 10.1% (**) 16.8% (*) Weighted average on an investment amount basis (**) Disregarding the advance payment of KRW 46.2 billion made on 9 December 2016 to acquire AMEC s 23.03% equity interest 2) New investments The investment capital balance to be left over after the investment into IBC will be further invested into other new projects, but if such investment is delayed due to unexpected circumstances, including but not limited to a -50-

51 change in the terms of the investment or a change in the schedule, the Company will repay the outstanding loan facility amounts so as to decrease the interest expenses and secure funding capacity for new investments in the future. (2) Risk Management The Company manages its portfolio risks by way of diversifying its investments. In relation to any acquisition and divestment of assets, or any refinancing transaction, the Company performs due diligence on the target and its financials. In order to assess the key assumptions and to verify the key risk factors, the general work procedure of the Company is to analyze the risk factors from legal, accounting, tax, regulations, traffic, insurance, environment, technology and operation perspectives with the respective experts. The Company believes that it will continue to adequately find, evaluate and manage risk factors based on its expertise and experience in the infrastructure investment industry. B. Revenue Structure Investment performance of the Company may vary depending on cash inflow in the form of interest income, dividend income, fee income and disposal gain generated by the businesses that the Company has invested in. Major expenses of the Company are comprised of 1) interest expenses on its outstanding debts; and 2) fees and expenses to its service providers, including asset management fee to the asset management company. For detailed information on compensation to the service providers, please refer to Section 13 (Fees and Expenses) of Chapter 2. Pursuant to Article 41-5 of the PPP Act, the Company may borrow up to 30% of its total paid-in-capital and debt facilities are currently in use for investment, distributions payout and operational purposes with the aim to maximize shareholder value. -51-

52 10. Risk Factors The Company does not guarantee return of the investment principals. Accordingly, there is a risk of all or partial loss of the investment principal, and investors shall be fully responsible for any risks associated with potential losses of their investment principals. The Company, the asset manager of the Company, and the sales agents are not responsible for any losses incurred as a result of investors investments. Also, the Korea Deposit Insurance Corporation does not protect all or part of the investment principal pursuant to the Depositor Protection Act even if investors have purchased the fund from a bank subject to the protection of the bank deposits under the Depositor Protection Act. The contents below set out the details of the risks that an investor must be aware of prior to making an investment in the Company, but does not include all of the risks associated with investments made in the Company. A. General Risks (1) Risk of Decrease in Share Price This public offering may cause the share price of the Company in the stock market of the Korea Exchange to fall below the final offering price due to external factors such as changes in interest rates, supply and demand in the stock market, and economic, political, and social events in Korea and overseas, as well as other indexes related to the Company. Please be advised that investors purchasing the shares of the Company in this public offering may incur losses due to a decrease in share price, and investors should make investments accordingly. The Company discloses the net asset value (NAV) calculated in accordance with Chapter 2. Company Overview 12. Calculation of Net Asset Value (NAV) and Valuation of Assets. However, the NAV and the share price determined by the stock market may not always match due to the market participants expectation of the future value of the Company. Investors shall be responsible for any risks associated with potential and actual losses in their investment principals, and other entities including the Company, the asset manager for the Company, and the sales agents are not responsible for losses incurred as a result of investment. (2) Risk Relating to Distribution Payout There has been an ongoing need for additional funding due to the payment of distributions in order to maintain stable shareholder value and also to qualify for deduction of the taxable income pursuant to Article 51-2 of the Korean Corporate Tax Act (in the event over 90% of distributable income is paid as dividends, the amount of distribution is deducted from the taxable income of the applicable fiscal year). Pursuant to the FSCMA and also in accordance with our AOI, distributions may be paid to shareholders in the form of distributions and/or over-distributions of profits, in which case there is a possibility that the distributions may be made in excess of our net income in the relevant fiscal period in order to maintain shareholder value. Also, depending on the Company s financial conditions, the Company may provide distributions to shareholders in the form of new shares instead of payment in cash up to the amount of the profit distributions. The following shows the performance of our distribution per share. -52-

53 [ Performance of Distribution Per Share ] Category First Half of Normalised Income One-off Profit One-off Loss¹ - (57) (33) - Total Distribution ¹Including over-distribution of profits (Unit: KRW) Note 1) MKIF s board of directors has approved the payment of guided distribution of KRW 250 per share for the first half of 2017 (28 July ) Note 2) As an investor, please seek advice of a tax professional on tax treatment for dividend income Note 3) Past performance does not guarantee future profits (Source: Data provided by the Company) Distributions are derived from the interest income from the loans provide to the Company s project companies, among others. Interest income makes up 61.0% of the Company s revenue (as of 30 June 2017), and dividend income as of 30 June 2017 has increased by approximately KRW 20.1 billion from the previous corresponding period. The dividend income for 2014 (KRW 3.4 billion) was a one-off item (distribution from liquidation of the securitized SPC), but recurring dividend income has been generated since 2015 from New Airport Hiway Co., Ltd., Soojungsan Investment Co., Ltd., and Cheonan-Nonsan Expressway Co., Ltd. [ Profit and Loss of the Company ] (Unit: KRW million) First half of 2017 First half of Revenue 139, , , , ,243 Interest income 85,410 88, , , ,838 Dividend income¹ 54,311 34,227 40,227 40,923 3,386 Other income 272 8,690 9, Expense 26,982 69,094 96,938 65,677 55,418 Management fees 18,122 18,566 37,744 35,353 30,803 Performance fees - 41,111 41,111 7,835 - Interest expense 7,224 8,214 15,905 19,370 19,629 Other expenses 1,636 1,203 2,178 3,119 4,986 Net income 113,011 62, , , ,

54 First half of 2017 First half of Nomalised net income² 113,011 84, , , ,439 Earnings Per Share ( EPS )³ Nomalised EPS³ ¹Composition of dividend income (excluding one-off items) - First half of 2017: KRW 31.3 billion from New Airport Hiway Co., Ltd., KRW 23.0 billion from Cheonan-Nonsan Expressway Co., Ltd. - First half of 2016: KRW 24.1 billion from New Airport Hiway Co., Ltd : KRW 24.1 billion from New Airport Hiway Co., Ltd. and KRW 6.0 billion from Soojungsan Investment Co., Ltd : KRW 28.9 billion from New Airport Hiway Co., Ltd. and KRW 12.0 billion from Soojungsan Investment Co., Ltd. ²Net income excluding one-off items (one-off income and expenses, performance fees, etc.) - First half of 2016: dividend income of KRW 10.1 billion from the restructuring of Woomyunsan Infraway Co., Ltd. and prepayment charge (other operating income) of KRW 8.6 billion : dividend income of KRW 10.1 billion from the restructuring of Woomyunsan Infraway Co., Ltd. and prepayment charge (other operating income) of KRW 8.6 billion Commitment fee (other operating income) of KRW 750 million from the restructuring of Kwangju Beltway Investment Co., Ltd : write-off of effective interest of KRW 3.5 billion from the refinancing of Yongin-Seoul Expressway Co., Ltd., and prepayment charge (other operating income) of KRW 400 million from the refinancing for New Airport Hiway Co., Ltd : one-off dividend of KRW 3.4 billion from liquidation of the third securitized SPC of Cheonan- Nonsan Expressway Co., Ltd. 3 Based on a total of 331,459,341 outstandnig shares (Source: Data provided by the Company) Also, revenue contribution of dividend income from the project companies is expected to increase, as the Company s senior loans become fully redeemed and as the dividends start to flow in stages from the underlying assets whose payout pre-conditions have been eased as a result of restructuring. However, if the dividend income from the Company s underlying assets decreases in the future, distributions to MKIF s investors are also likely decrease. The net income of the Company may significantly vary depending on one-off income and expenses (including performance fees). This may result in a decrease in distribution to investors and in relation to the foregoing, the Company s approved distribution may differ from the previously announced distribution guidance for the first half or the second half of the respective year. As such, distributions paid by the Company have a close relationship with profitability of the Company. Therefore, we advise investors to closely monitor this particular feature of the Company. -54-

55 (3) Risk Associated with Influence in Decision Making The Company currently has investments in 12 infrastructure businesses. The Company has provided debt financing and invested in shares of the entities that develop and/or operate the businesses or corporate entities established with the purpose of investing in the entities that develop and/or operate infrastructure businesses. Therefore, the Company retains limited management control of such entities and these entities may have objectives different from those of the Company. The fact that the Company is unable to exercise managerial control over these entities business, strategy, and policy may adversely impact the Company s efforts to generate cash and pay distributions. Further, there are other shareholders to some of the project companies in which the Company has invested in, and such shareholders may have objectives different from those of the Company. Therefore, the Company may exercise control over certain matters, but the approval of the other shareholders or directors appointed by those shareholders may be required in other circumstances. In relation to the above, the Company may not be able to exercise significant control over business, dividend payouts, interest payments and other important decisions of the project companies, and we strongly advise that the investors in the Company carefully consider the above. (4) Risk Related to Uncertainty in Financing The Company contemplates to secure and finance its future investments by raising additional capital and issuing bonds or incurring additional debt. However, the Company s plans for financing may encounter difficulties due to the following reasons. 1 Due to the difficulty in predicting the effectiveness, timing, and size of investment alternatives, it may be difficult to secure financing in favorable terms within a short period of time. 2 According to the PPP Act, the debt to capital ratio may not exceed 30% and the loan may only be used for making investment and funding for operating costs. 3 If the Company maintains the current distribution policy of distributing the greater of the distributable income and the taxable income, surplus funds available for investment may be reduced. 4 The Company may not be able to issue the required number of shares or corporate bonds due to time constraints or the lack of investor demand. 5 Borrowing under favorable terms may be difficult due to market conditions or negative forecasts of the Company s businesses, and the failure to secure capital may hinder successful execution of the Company s investment strategies. Issuing new shares to raise additional capital, following this offering, may dilute the existing shareholder value. (5) Risks Relating to the Project Companies The entities that develop and/or operate infrastructure businesses (the Project Companies ) in which the Company has invested in, have significant debts owed to the Company and other lenders. Whether each Project Company fulfills its liabilities and repays its debts is dependent entirely upon the cash flow generated by such project company. The operating and/or capital expenditure spent by the Project Companies for the operation, maintenance, and -55-

56 management of infrastructure and related facilities may exceed the forecast, and may have an adverse effect on the cash flow of the Project Companies which may lead to a lower rate of investment return of the Company. Also, the Project Companies pay interests on subordinated loans or interests and loan principal on senior loans that have become due in accordance with the repayment schedule, before paying dividends. The Project Companies may reserve funds in a debt service account and there may be additional restrictions on the payment of subordinated loan principal and interests or dividend payout. The interests on the floating senior loans payable by the Project Companies may increase if the market interest rate rises. This may decrease the principal and interests or dividends to be received by the Company. If the cash flow of the Project Companies is weakened on the grounds beyond the control of the Company, or if the Project Companies fail to fulfill the conditions of financing agreements, they may be required to refinance all or part of the debt or raise additional capital. Also, if refinancing or additional funding cannot be obtained, the Project Companies may default. In turn, the relevant creditors may declare an event of default on the Project Companies and the value of the Company s invested assets on the Project Companies may also decrease. As discussed above, the investors to the Company should be aware that the Project Companies ability related to cash flow generation, repayment of debts, and payment of dividends may be influenced by factors beyond the control of the Company. However, in light of the financial support agreements with competitive government bodies and the fact that infrastructure businesses tend to have gradually improving performance over the course of time, we are of the view that the possibility of collecting investment funds and return on investments on subordinated loans and equity securities to be high. The operating period of each of the Company s investment business is as follows. (As of 30 June 2017) Project Company Baekyang Tunnel Ltd. Kwangju Beltway Investment Co., Ltd. New Airport Hiway Co., Ltd. Soojungsan Investment Co., Ltd. Cheonan-Nonsan Expressway Co., Ltd. Competitive Government Busan Metropolitan City Kwangju Metropolitan City Ministry of Land, Infrastructure and Transport Busan Metropolitan City Ministry of Land, Infrastructure and Transport Concession Period Remaining Concession Period Woomyunsan Infraway Co., Ltd. Seoul Special City Kwangju Ring Road Co., Ltd. Kwangju Metropolitan City MCB Co., Ltd. South Gyeongsang Province

57 Project Company Yongin-Seoul Expressway Co., Ltd. Seoul Chuncheon Highway Co., Ltd. Incheon Bridge Co., Ltd. BNCT Co., Ltd. Competitive Government Ministry of Land, Infrastructure and Transport Ministry of Land, Infrastructure and Transport Ministry of Land, Infrastructure and Transport Ministry of Maritime Affairs and Fisheries Concession Period Remaining Concession Period Weighted Average¹ ¹Weighted average based on the Company s investment (Source: Data provided by the Company) The book value of the invested assets in the Project Companies and interest receivables as of 30 June 2017 is KRW 2 trillion in aggregate, of which senior loans, subordinated loans, and equity securities respectively make up 11.7%, 45.6%, and 25.1% (proportion relative to the total book value of the invested assets). [ Investment Portfolio ] (Unit: KRW 100 million) 30 June Amount % Amount % Amount % Amount % Loan investment 11, % 11, % 10, % 10, % Senior Loan 2, % 2, % 1, % 2, % Subordinated Loan 9, % 9, % 8, % 8, % Equity Security 5, % 5, % 5, % 5, % Interest Receivable 3, % 3, % 4, % 4, % Total 20, % 20, % 20, % 20, % Note) Proportion relative to the total book value of the invested assets (Source: Data provided by the Company) The subordinated loans and equity securities which are subordinated in the repayment priority, take up a large portion of the Company s total investment assets. Therefore, the investors should be aware that delay in the repayment period may have an adverse effect on the collection of investment assets within the business operating period. (6) Legal Risks -57-

58 The Company is an investment and financing company for infrastructure facilities under the PPP Act and the Company s business is conducted in accordance with the PPP Act and the FSCMA. The Company aims to comply with applicable laws and requirements. However, unfavorable interpretation of applicable laws and subordinate regulations by competitive government bodies, changes in applicable laws or regulations, or enactment of new laws may have adverse effects on the Company which may lead to increased legal expenses. Investors should be aware that such changes in the legal environment may have an adverse effect on the Company. Infrastructure projects are widely affected by the government policy and the value of the Project Companies may fluctuate due to new tax policies and changes in legislation or basis of legal interpretation. Therefore, the loans or equity investments made by the Company to such Project Companies may also be affected. (7) Risks Relating to Performance fees The Company has designated Macquarie Korea Asset Management Co., Ltd. (the Manager ) as its asset manager, and entered into an asset management agreement which states that the Company pays the Manager performance fee in addition to the management fee. Performance fee is linked to management performance in accordance with the predetermined formula. Performance fee is calculated in accordance with the predetermined formula provided in the management agreement, and paid at the end of every quarter: 31 March, 30 June, 30 September and 31 December. The recent performance fees paid by the Company are as follows. [ Performance Fees ] (Unit: KRW 1,000) First Half of Performance Fees - 41,111,160 7,834,573 - (Source: Data provided by the Company) The Company is a collective investment vehicle with commitment to performance fee. Payment of performance fee may cause the distribution to be reduced. [ Distribution Per Share ] (Unit: KRW) First Half of Nomalised Income One-off Profit One-off Loss¹ - (57) (33) - Total Distribution

59 ¹Including over-distribution of profits Note 1) MKIF s board of directors has approved the payment of guided distribution of KRW 250 per share for the first half of 2017 (28 July ) Note 2) As an investor, please seek advice of a tax professional on tax treatment for dividend income Note 3) Past performance does not guarantee future profits (Source: Data provided by the Company) The Company paid performance fee to the Manager in the amount of KRW 41.1 million in 2016 which was KRW 33.3 million higher than the performance fee paid in the previous year. This was one of the reasons that the total distribution for 2016 was KRW 400 per share, or KRW 64 less per share than the total distribution paid in If performance fee is paid by the Company to the Manager, the shareholder return may be lower than expected. Please be advised that investing in the Company that pays performance fee may lead to higher investment risk than investing in a collective investment vehicle that does not pay performance fee. (8) Risks Relating to Restrictions on Merger Pursuant to the FSCMA, the Company is only permitted to merge or to be merged with investment companies that have the same corporate director. This means that there is only a limited pool of potential companies which the Company may merge with. Therefore, the synergy effect arising from a merger would be limited. Further, the value of the Company s investment portfolio may not be increased and the opportunity to increase the shareholders investment value following relevant transactions may be lost. (9) Risks Relating to Entrustment of Tasks The Company does not have full-time directors or employees and is required to designate a manager (collective investment company), a custodian, a sales agent, and an administrator. Therefore, the Company relies on service providers for overall management of the Company. The Company s Manager is required to obtain a collective investment business license pursuant to the regulations of the FSCMA in order to manage and operate the Company. The Manager operates and manages assets in accordance with the regulations of the FSCMA and the PPP Act, and is expected to hold the collective investment business license in the future. However, the foregoing cannot be stated with certainty. If the Manager no longer holds the collective investment business license, the Company may be required to appoint another collective investment company, and this may have an adverse impact on the financials and business of the Company. The Manager has been appointed as the Company s Manager. Korea Securities Finance Corporation ( KSFC ) has been appointed as the Company s custodian. NH Investment & Securities Co., Ltd., Samsung Securities Co., Ltd., Shinhan Investment Corp., Hanwha Investment & Securities Co., Ltd., Kyobo Securities Co., Ltd., and Yuanta Securities Co., Ltd. have been appointed as the Company s sales agents 1. Hana Investors Services has been appointed as the Company s administrator. The Company does not exercise control over the Manager, the custodian, the sales agents, or the administrator (the Service Providers ), and does not have the authority to appoint directors or employees of any of the Service Providers. The Company only controls the activities of the -59-

60 Service Providers in accordance with the relevant agreements entered into with each of the respective Service Providers. The business policy, HR, and business decisions made by the Service Providers may have an adverse effect on the financials and the business of the Company, and there is no guarantee that the Service Providers will continue to provide the level of service sought by the Company. In the event that a Service Provider, including the Manager, resigns or the relevant agreement expires, a timely appointment of a successor whose capability is satisfactory to the Company may not occur. In this case the Company may encounter difficulty in managing investments and carrying out its businesses. ¹The sales agents are NH Investment & Securities Co., Ltd. and Samsung Securities Co., Ltd., Shinhan Investment Corp., Hanwha Investment & Securities Co., Ltd., Kyobo Securities Co., Ltd., and Yuanta Securities Co., Ltd. However, only NH Investment & Securities and Samsung Securities will act as the sales agents for this offering. (10) Risks Relating to Key Management Personnel The Company is operated in teams and has a relatively low reliance on the key management personnel. Nonetheless, personnel loss resulting from resignation of a key management personnel may have an adverse impact on the quality of the service provided by the Manager, which can ultimately affect the financials and business of the Company. (11) Risks Relating to Change of the Manager Pursuant to the terms of the asset management agreement between the Company and the Manager newly amended on 27 February 2012, the Company may only terminate the asset management agreement with a majority approval of the total number of issued and outstanding shares at the 90 days prior written notice. The replacement of the Manager must be approved by at least two thirds of shareholders present at the shareholders meeting pursuant to the Company s Articles of Incorporation, which shall be more than one half of the total number of issued and outstanding shares. However, if the Company terminates the asset management agreement for a reason other than the Manager s intentional and illegal act, gross negligence, or substandard performance (determined by the terms of the asset management agreement) for at least 14 quarters out of 16 consecutive quarters, the Company must pay a penalty equal to the sum of the management fees for 4 quarters prior to the termination. As a result, terminating the asset management agreement with the Manager may incur a significant amount of expense. B. Special Risks (1) Risks Relating to Relevant Government Bodies and Other Government Agencies 1) Violation of Payment Obligation by Relevant Government Bodies and Other Government Agencies All of the 12 Investee Companies that the Company has invested in are concessionaires in public-private partnerships based on concession agreements with relevant government bodies. The concession agreements outline the obligations that each party must fulfill including the payment responsibilities by the relevant government body to the concessionaires. The following are examples of such payment obligations. ㆍMinimum Revenue Guarantee ("MRG") - If the amount of the operating income fails to meet the estimated operating income of the original -60-

61 concession agreement during a particular operating period, the relevant government body bears a portion of the market risk by making up for the deficit up to the amount determined in the concession agreement. - In the past, the MRG clause has been inserted in concession agreements for the purpose of attracting private investors, supporting outside loans and mitigating uncertainty during the early operating stages. The level of MRG has played an important role in determining the credibility of the private investment projects. - However, as the MRG has placed a heavy financial burden on the government, the government no longer provides the MRG for new public-private partnerships and is in the process of amending terms of the existing businesses for which the government has been covering the MRG (e.g. profit sharing through refinancing, project restructuring, etc.). However, this is only possible through agreement with the existing concessionaires. ㆍGuarantee of Difference Between Agreed Toll and Actual Toll - The concession agreement provides the toll amount that the concessionaire may collect from the users (the Agreed Toll ). As the actually collected toll (the Actual Toll ) is determined and approved by the relevant government body, if the Actual Toll is lower than the Agreed Toll, the relevant government body must guarantee the difference between the Agreed Toll and the Actual Toll (e.g. difference between the Agreed Toll and the Actual Toll x number of users) (For restructured businesses, the concessionaire s earnings may be guaranteed through means other than the guarantee of the difference between the Agreed Toll and the Actual Toll). ㆍPayment Based on Terms of Restructuring - For the restructured businesses, the relevant government body may calculate and guarantee the deficit payable to the concessionaire through means other than the MRG or the guarantee of the difference between the Agreed Toll and the Actual Toll (e.g. reimbursement of expenses) in accordance with the terms of restructuring. ㆍTermination Charge for Early Termination of Business - If the public-private partnership has been terminated prior to the agreed termination date, the relevant government body must pay the termination charge to the concessionaire in accordance with the concession agreement and the grounds for such termination. However, there may be a dispute between the relevant government body and the concessionaire relating to the grounds for the termination, the terms of calculation of the termination payment and other terms of payment. ㆍOther Exemptions and Additional Expenses Incurred by Relevant Government Body s Request - There exists various forms of toll discounts based on the government policy (e.g. local resident discount, city bus discount, environment friendly vehicle discount, holiday toll exemption, etc.) Some of the losses incurred by such toll discounts may be reimbursed by the relevant government bodies or other government agencies. - If the toll collection method has changed or additional capital expenditure is required based on a request by the relevant government body or a change in the relevant legislation, the relevant government body may be obligated to provide a compensation. - Additional payment obligations by the relevant government body may exist in accordance with the concession agreement and other related agreements. -61-

62 The relevant government body is required to pay the amount set out above to the concessionaire in accordance with the respective concession agreement, however, the payment obligation may be unfulfilled or delayed due to the government policy, financial difficulty of the relevant government body or other reasons during the deliberation or execution of budget of the relevant government body. If the payment obligation of the relevant government body or other government agencies is unfulfilled, the sales performance and the financial state of the investment entity which has not received the required amount may be adversely affected, weakening the overall credibility of the investment entity. This may result in reduced interests payment, principal repayment and dividends that the Company receive from the investment entity and may have an adverse impact on the Company s business and financial state. Previously in Woomyunsan Tunnel, Kwangju Second Beltway Section 1 and Machang Bridge projects, the relevant government bodies have refused to pay the MRG and guarantee of difference between the Agreed Toll and the Actual Toll. The disputes with the relevant government bodies were resolved through negotiating a project restructuring with the objective of preserving the value of the investment assets. Investment Project Woomyunsan Tunnel Time of Restructuring Terms of Financing Before Restructuring January 2016 MRG for entire operating period (79% until 2023, 78% after 2024) Summary of Business Structure After Restructuring ㆍ Introduced the revenue partitioning stucture¹. ㆍ Reserves the amount (the Reserve Amount ) applied towards operating expenses, the Shareholder Loan B (refinanced the existing subordinated loans) and the dividend (disposable income) upfront in every quarter. Set such upfront reserves in nominal amounts in the concession agreement. ㆍUse the revenue exceeding the Reserve Amount (surplus income) to pay corporate taxes and repay the Shareholder Loan A (refinanced Major Effects of Restructuring on Investment Assets ㆍReserving upfront the amount required for the payment of the Shareholder Loan B and dividends to the shareholders (which are the Company s investment assets) from the revenue. ㆍUnless the future toll revenue decreases by over 30% compared to the toll revenue as of December 2015, the return on investment estimated by the Company would be met (return on investment would not be dependent financial support). ㆍRelevant government authority to be responsible for the payment of corporate taxes and repayment of the Shareholder Loan A. ㆍAdded a clause restricting construction of (alternate) competitive roads as a replacement for MRG. -62-

63 Investment Project Time of Restructuring Terms of Financing Before Restructuring Summary of Business Structure After Restructuring the original senior loan and additional funding for the refinancing expenses). Relevant government authorities shall pay the deficit and collect the remaining balance. Major Effects of Restructuring on Investment Assets Kwangju Second Beltway, Section 1 December 2016 MRG 85% for entire operating period ㆍIntroduced the investment cost compensation scheme². ㆍSecured in advance the amount required to pay operating expenses and to repay investment principal. The relevant government body provides deficits on a quarterly basis. ㆍ The legal dispute over the capital structure restoration has ended and disputable matters based on the terms of the existing agreement has also ended. ㆍ Collected the overdue MRG in full. ㆍRelevant government authority to be responsible for paying corporate taxes. -63-

64 Investment Project Machang Bridge Time of Restructuring Terms of Financing Before Restructuring January 2017 MRG 75.78% for entire operating period Summary of Business Structure After Restructuring ㆍIntroduced the revenue allocation scheme¹. ㆍReserves the amount (the Reserve Amount ) applied towards operating expenses, repayment of the subordinated loan and the dividend payout (disposable toll income) upfront in accordance with the consumer price inflation rate and traffic volume (68.44% up to 100% of estimated traffic, 50% in excess of 100%). Major Effects of Restructuring on Investment Assets ㆍ It is anticipated that as the amount required for the payment of the subordinated loans and dividends for the shareholders (the subordinated loans and the shares are both the Company s assets) are reserved upfront, the repayment of the principal and interests of the subordinated loans will be repaid in a stable manner. ㆍ In the event that future traffic exceeds estimated traffic, additional return on investment could be expected. ㆍ Relevant government authority to be responsible for the payment of corporate tax and the repayment of the senior loans. ㆍ Added a minimum disposable toll income guarantee which replaces MRG. It is also anticipated that toll ㆍUse the revenue related disputes would be minimized. exceeding the Reserve Amount (disposable toll income subject to approval) to pay corporate taxes and repay the senior loan. Relevant government authorities pay the deficit and collect the remaining balance. ㆍAs a replacement of MRG, the relevant government authority guarantees minimum disposable toll income at the same level as MRG (75.78% of the estimated toll revenue) -64-

65 Investment Project Time of Restructuring Terms of Financing Before Restructuring Summary of Business Structure After Restructuring Major Effects of Restructuring on Investment Assets ¹It is a system which separates revenue into disposable toll income and disposal toll income subject to approval and manages them in separate accounts (disposable toll income account and disposal toll income subject to approval account). The concession agreement defines how the revenue is separated into each and the purpose of the amount reserved in each account is also defined in the concession agreement. ²The amount required for operating expenses and repayment of principal and interest on investment (which may differ from the concessionaire s actual interest expense and the repayment schedule of the investment principal) is defined in advance. If the revenue is insufficient to pay the operating expenses and investment expenses, the deficit is covered by the relevant government body. (Source: Data provided by the Company) ㆍRestructuring of Woomyunsan Tunnel Project - Cash flow of income from Woomyunsan Tunnel Project in accordance with the revenue partitioning structure Restructuring of Woomyunsan Tunnel (Source: Data provided by the Company) ㆍRestructuring of Kwangju Second Beltway, Section 1 Project - Comparison of cash flow before restructuring and cash flow under the investment cost compensation scheme -65-

66 Restructuring of Kwangju Second Beltway, Section 1 (Source: Data provided by the Company) ㆍRestructuring of Machang Bridge Project - Comparison of cash flow before restructuring and cash flow under the revenue allocation scheme Restructuring of Machang Bridge Project (Source: Data provided by the Company) Failure by relevant government bodies to fulfill payment obligations may result in lawsuits from related parties. As of 30 June 2017, Baekyang Tunnel Ltd. and Soojungsan Investment Co., Ltd. in which the Company has invested have brought lawsuits related to claim for the unpaid government subsidy against Busan Metropolitan City, the relevant government body. [ Lawsuit Status ] (As of 30 June 2017) Investment Entity Asset Proportion¹ Claim Amount 2 Proceedings Status -66-