cr partner for new possibilities

Partner for New Possibilities2017 Mugunghwa Trust Corporate report

Approved by the Korea financial Investment Association (No. 17-01647, from Apr. 11 to Dec. 31, 2017)

2017

CRCorporate report

19F, Glass Tower, 534 Teheran-ro, Gangnam-gu, Seoul, Korea 16181

TEL 02.3456.0000 / FAX : 02.6499.2434 / www.mghat.com

CEO

G

August 26, 2009

Choi Byung-gil

KRW 27,072 million(as of the end of March 2017)

155(as of the end of March, 2017)

Real estate trust business, PFV

19F, Glass Tower, 534 Teheran-ro, Gangnam-gu, Seoul, Korea

http://www.mghat.com

Date of business permit

CEO

Owner's equity

Number of employees

Business areas

Address of headquarters

Homepage

General Information

Status of shareholders (as of the end of March 2017)

Other financial institutions

3.8%

Other general shareholders

52.1%

Korea Investment & Securities

7.7%

NH Investment Securities

9.0%

Shinhan Bank

9.0%

Oh Chang-seok

18.4%

Partner for New Possibilities

TABLE OF CONTENTS

Mugunghwa Trust is not afraid of taking on challenges, we lead in making a change and always place a top priority

on customer satisfaction.

A companion for new possibilities!You can look forward to our bright future.

Company overview General Information, 01

Status of shareholders

CEO's Message 08

Board of Directors 10

2020 Mission 12

BUSineSS area Collateral trust 16

Land trust 17

Management-type land trust 18

Sales management trust 19

Agency service 20

Disposal trust 21

Management trust 22

affiliated Company K-REITS & PARTNERS 24

REITs 26

Brief History 28

Company overview

CEO

32

Corporate Report

TALENT MANAGEMENT

We think that human resources are the most

important factor in notching a success.

We select excellent people with

outstanding strategy, high ideals and right values,

and reward them for their performances.

We suggest a way to create a better future

by offering service through

human resources-based management.

Company overview BUSineSS area affiliated Company

Company overview

CEO

54

Corporate Report

INNOvATION MANAGEMENT

New ideas lead to new values and possibilities.

The newest thing of today will become an old one tomorrow.

Something newer than the newest thing of today is

the true meaning of newness that

Mugunghwa Trust wants to show to its customers.

Mugunghwa Trust creates new experiences

and value that only Mugunghwa Trust can deliver.


Company overview

CEO

76

Corporate Report

CuSTOmEr-OrIENTEd

MANAGEMENTWe have built and taken our ways.

Mugunghwa Trust has pioneered ways to new territories.

Our enhanced strategic alliances and marketing activities

will guide you to your successful future.


Company overview

98

CEO's Message · Board of Directors · 2020 Mission

Corporate Report

Ceo's message

Dear our respected customers,

We proactively responded to changes in external environments by doing our business in

a systematic and organized way to cope with them. Let me share some of our major tasks

that we will focus on this year.

First, we are planning to establish a solid external business network and a stable

internal management and support system.

We will form a close network with developers, contractors, and financial institutions and make

efforts to build an internal support system and IT environment to support the network.

Second, we are planning to advance and expand our trust business.

In accordance with the changes in the trust law and trust business, we will further research

advanced markets and expand our business scope into trust related fields.

Third, we will discover and cultivate human talent.

We will grow into a national leading real estate financial group through the daring recruitment

of talented human resources and the discovery and cultivation of human talent.

I wish that you, customers, will watch Mugunghwa Trust progress step by step and give

support to us.

Thank you.

Choi Byung-gil,

CEO of Mugunghwa Trust

Company overview

1110


Corporate Report

[Non-executive director]

Ahn Man-shikIncumbent non-executive director at Mugunghwa Trust Incumbent representative of Lee Hyun Tax FirmIncumbent representative of BDO Lee Hyun Accounting Firm

[Standing Advisor]

Won Cheol-heeIncumbent Standing Advisor at Mugunghwa Trust- Lawmaker of 16th National Assembly- President of NH Nonghyup - Secretary of agriculture, forestry and fisheries at Presidential Secretariat

[Audit chairperson]

Kwon Hyuk-seIncumbent chairperson of Audit Committee at Mugunghwa Trust- The 8th President of the Financial Supervisory Commission (Mar. `11 ~ Mar. `13)- Director of Property Tax Office at Ministry of Strategy and Finance

Board of directors

Kim Sung-hwanIncumbent outside director at Mugunghwa Trust Incumbent vice president at Korea Investment & Securities (general management and planning)

Cho Han-hongIncumbent outside director at Mugunghwa Trust Incumbent advisor to Mirae Asset Life- President of Mirae Asset Securities

Kim Keun-beomIncumbent outside director at Mugunghwa Trust Incumbent CEO of Appro International- CEO of D&J Investment

Jeon Don-heeIncumbent non-executive director at Mugunghwa Trust - CEO of Korea Development Finance

Ho Jong-ilIncumbent Standing Advisor at Mugunghwa TrustIncumbent President of Hosung promotion of industries- CEO of Lions Tourism Hotel

Kim Jeong-ha Incumbent Standing Advisor at Mugunghwa TrustIncumbent Senior Advisor atLaw Firm Gwangjang- Secretary General of Board of Audit and Inspection- Deputy assistant secretary general at Board of Audit and Inspection

Lee Yong-manIncumbent chairman of Mugunghwa Trust- Director of Banking Supervision Commission- President of Korea Exchange Bank- President of Shinhan Bank

- Minister of Finance

Kwon Jun-myungIncumbent Vice president of Trust Business Division at Mugunghwa Trust - Head of Development Business Division at Hankook Real Estate Trust - Korea Appraisal Board

Won Seok-heeIncumbent President of Strategy Sales Division at Mugunghwa Trust - Head of support for 23rd chairman of NACF in taking over work from previous chairman- NH Bank

Oh Chang-seokIncumbent vice chairman of Mugunghwa TrustIncumbent ICSID conciliator - Partner lawyer at Law Firm Gwangjang- Non-standing director of Korea Deposit Insurance Corporation

Choi Byung-gilIncumbent president of Mugunghwa Trust- President of Seoul Land- Vice president of Hanil Cement- Secretary at Samsung Group

[Outside Director]

Lee Pal-sungIncumbent outside director at Mugunghwa Trust Incumbent Senior Advisor to Law Firm Kim & Chang- Chairman of Woori Financial Group- CEO, Woori Investment & Securities

Lee Gwang-sunIncumbent outside director atMugunghwa Trust - Head of Gangnam Enterprise Finance HQ at Hana Bank- Vice chairman at Samwoo D&C- Vice Chairman at Daekyo D&C

Company overview

1312


Corporate Report

2020 mission

Leading real Estate Financial Group That Creates Customer Value

A general financial group that creates customer value

Period to reinforce business foundation

Take-off period Period to vitalize new business models

•Creating practical portfolio structure in accordance with

changes in real estate business and capabilities

•Ramping up new investment and organizational adaptability

step by step

• Enhancing corporate identity and reliability

•Increasing proportion of development projects based on

aggressive sales and financial power

•Expanding our influence on maintenance and improvement

of urban areas

• Creating synergies within our product portfolio

•Sales in entire stage from business planning to sale and

disposition based onvarious product portfolio

and capabilities

20172018 2019 2020

•Owner's equity KRW 27 billion

•Net income KRW 10.3 billion (based on FY2016)

•Owner's equity KRW 130 billion

•Net income KRW 50 billion

Present Core ValueMugunghwa Trust

in 2020

vISION 2020

4 Within 4 years

5 To achieve KRW 50 billion in operating income

6 Becoming the 6th largest trust company

GOAL

Orders KRW 120 billion

Operating KRW 100 billionincome

Net income KRW 50 billion

COrE vALuEChallenge Sincerity Honesty

STrATEGyHuman resources-based management

Innovation-based management

Customer-oriented management

HonestySincerity

Challenge

BUSINESS AREA Corporate Report

15

BuSINESSAREA


Collateral trust

Land trust

Management-type land trust

Sales management trust

Agency service

Disposal trust

Management trust


Collateral trust · Land trust · Management-type land trust · Sales management trust · Agency service · Disposal trust · Management trust

1716

Business area

land trust Land development to maximizing profit

A land trust is a product through which a landowner who lacks development know-how or

financial resources trusts his or her land to a trust company for the purpose of earning profits

by efficiently utilizing the land. A trust company combines the landowner’s opinions and

expertise to finance the construction, develop residential land or build a building, and then to

return proceeds from the sale or lease of the land to the landowner.

01 Effective land development by experts even without funds or construction experience02 Avoidable financial burdens and procedural hassles from business operation03 Maximizing profit of landowner04 Salability can be raised as business operator with high creditworthiness directly sell and lease real estate

Advantages

vendee(tenant)

financial institution

landowner(consignor, beneficiary)

7. Sale(lease)

1. Trust

8. Sale price, rent 11. Transfer of ownership

6. Transfer of building

9. Repayment of funds4. Financing

2. Issuing certificate of beneficiary right

10. Apportionment

12. Trust property

3. Construction order

5. Payment

Construction company

Collateral trust Advanced security system that is economical and convenient

A collateral trust is a product that a customer can conveniently receive a loan with a real

estate asset as collateral by way of an advanced mortgage system that costs less and is more

convenient than a mortgage system. It is a trust product in which a real estate owner obtains

a beneficial property certificate issued by a trust company for real estate owned by a trust

company, provides it to a financial institution as collateral, and receives a loan.

01 A collateral trust costs a debtor less than a mortgage.02 A real estate investment trust company facilitates the management of loans through an investigation in target real estate and the management of trust assets after the execution of a loan when a financial institution makes a decision about the loan.03 During trust periods, customers can be protected from unexpected third-party bonds.04 In case of default of an obligation, a trust property is converted and the converted money is given to creditors as debt payment, and the remaining amount is distributed to the consignor

Advantages

trusted property (collateral property)

land owner (real estate owner)

Creditor

(Trustee)

3. Loan

2. Issuing certific

ate of

beneficiary right

4. Repayment

6. Request of

trust property conversion

7. Calculation

ConversionManagement

1. Conclusion of trust

agreement5. Termination of trust agreement



1918

Business area

management-type land trust

Maximize stability of business and sale

A management-type land trust is a product through which an entrustor directly procures

business expenses from financial institutions and construction companies and pays them. The trust

is similar to a general land (development) trust. There is a difference between the two’s funding

methods. On top of that, this trust is able to hedge the risk of going bankrupt, pushing forward with

the stable development of development projects and preventing the risk of problems in sale.

01 In the event of an entrustor’s bankruptcy, trust assets are managed as independent property and stable business can be implemented since the trust company is a business operator02 A sale(lease) contract under the name of a trust company is able to prevent trade accidents such as duplicate contracts and the misappropriation of payments for buildings03 A management-type land trust prevents delays in construction completion and in residents' moving-in due to unexpected disputes between contractors and developers including the prevention of a breach of contract and an unfair act and enables interested parties to pursue their rights

Advantages

vendee(tenant)

financial institution

2. Issuing certificate of beneficiary right

4. Sale(lease)

1. PF for land rent 1. Payment guarantee for PF

6. Repayment of loan (Within scope of sale proceeds)

5. Receipt of payment of building price or rent

landowner(Consignor, beneficiary)

Construction company

1. Conclusion of trust agreement 3. Construction

contract

7. Apportionment of final profits

(Trustee)

Sales management trust

01 Reduce early burdens on operators due to post-construction sale so that pre-construction sale can be implemented according to the Act on the Sale of Buildings02 Pursuing the transparency of a sale process and the stability of transaction by preventing damage to a buyer as a lot for construction and a construction permit are not secured03 Increasing sale rates as a means of safeguarding the rights of buyers

Advantages

ConsignerSeller

interested parties (construction

companies, etc.)

permitting authorities

Buyer preferred beneficiary (financial institution)

2. Signing construction contract

7. Execution of business expenses

1. Arrangement of loan

9. Calculation of proceeds

8. Repayment of loan

3.Applying for sale report

4.Reception of sale report

5.Signing sale contract

6. Payment of price

1. Signed sales management trust contract and agency work contract

(Trustee)

Protecting buyers and providing business credibility

A sales management trust is to systematize the sale and management of stores based on

thorough sale, process management and stability, so that an trustee can secure the ownership

of the trust property in the sale of buildings such as stores in accordance with the Act on Sale

of Buildings. This trust aims to convert and sell off trust real estate and calculate payments at

the time of an entrustor’s default of an obligation.



2120

Business area

disposal trust Create excellent effects with various sales techniques and information networks

A disposal trust is a product in which a real estate owner entrusts real estate that is

difficult to sell off such as a large real estate, high-priced real estate, or complicated real

estate to a trust company. The trust company finds a suitable customer and stably sells

off the real estate and gives the payment to the beneficiary. Unlike general brokerage,

this is a system through which a buyer can safely purchase real estate as a trust company

has the rights and status of a seller after real estate was trusted.

01 In the case of long-term real estate which takes much time to finish payment of remainders, this trust keeps ownership safe02 Unlike general brokerage, a reliable trust company becomes a seller, so buyers can safely buy.03 Real estate can be sold off quickly and safely in right way.

Advantages

tenant(lessee)

real estate owner (consignor, beneficiary)

Buyer

(Trustee)

1. Conclusion of trust agreement

5. Revenue grant 2. Conclusion of sale contract

3. Receipt of payment

4. Transfer of ownership

Rent Lease contract

agency service Stable fund management based on high credibility

Agency service is a product to handle complex real estate related business such as business

planning, land purchase, funding, business licensing, sale, and fund management in place of

a customer.

01 Enhancing a chance of making a success of various types of transactions based on credibility02 Through the expertise and intelligence of a trust company, it is possible to map out an thorough business plan, select a construction company and to shorten a period to receive approval or permit03 If a trust company manages income from sale, a trust company will relieve buyers who signed sale contracts of anxiety, thereby promoting the sale of a building and making it easier to receive funds from financial institutions

Advantages

1. Signing contract on sale management trust and agency service

7. Profit calculation

3. Signing sale contract

2. Arrangement of loan

4. Payment of price

5. Payment of business expenses

6. Repayment of loan

Consigner interested parties (construction companies, supervisory companies,

etc.)

financial institutionBuyer



22

management trust Reasonable tool for efficient property management

A management trust is a product that cuts back on management cost and raises the value

of real estate through professional real estate management. This trust is divided into Type A

Management Trust which generally manages real estate such as real estate ownership, lease,

facility maintenance, legal affairs and tax management, and Type B Management Trust that

manages the ownership of a trust property only.

Business area

AFFILIATEdCOMPANY


K-reITS & PArTNerS

tenant(lessee)

land owner (real estate owner)

2. Lease contract

(Trustee)

3. Rent

4. Trust property

Conclusion of management contract

management service company

[type a management trust]

[type B management trust]

Consignor (real estate owner)


(Trustee)2. Transfer of trust asset after managing ownership

01 Pursuing the value and profit of real estate based on the trustworthiness and sales network of a trust company02 Enabling professional and efficient real estate management and dramatically slashing property management costs

Advantages


affiliated company

K-ReitS & paRtneRS · Reits

2524

Corporate Report

K-reitS & partnerS

Company name K-REITS & PARTNERS CO., LTD

Capital KRW 14.5 billion

Year of establishment May 2007

Organization 2 Business HQ & Management Strategy HQ

Address 18F, B Building of Pine Avenue, 100, Euljiro, Jung-gu, Seoul, Korea

Main business

Business 1Establishment and management of consigned-management REITs and corporate restructuring REITs

Business 2Establishment and management

of rental housing REITs and development REITs

Business 3Consultation on project finance

vehicle (PFV) management business and real estate

investment and development

Asset management company (AMC)

An asset management company (AMC) is a company which manages investment assets

by acquiring, developing, managing, and selling off property. An AMC realizes a return on

investment through stable dividends to investors based on the management of the entire

management process and risk management by establishing new REITs for investment assets

and putting them under real estate professionals' management.

Status of company

apr. 2014Moved into new office building(B Building of Pine Avenue in Euljiro, Seoul)

apr. 2014Established KR No. 7 Rental Housing REITs

Company history Oct. 2007 Established KR No. 1 CR REITs

Feb. 2016 Government approved KEB Hana Stay REITs

Busan(Gwangan-dong, Yangjeong-dong)

daegu(Pohjeong-dong, Daemyeong-dong)

Studio apartment development and lease business(719 households in total)

nov. 2010Established KR No. 5 REITs

June 2010Established KR No. 4 Development REITs

mar. 2008Established KR No. 3 CR REITs

may 2008Listed KR No. 2 on Korea Exchange

oct. 2007Established KR No. 1 CR REITs Established KR No. 2 Development REITs

June 2007Ures Meritz No. 1 CR REITs asset management was consigned

may 2007Min i s t r y o f Land , Transpor t and Maritime Affairs approved establishment

KR No. 1 is a large major REITs amounting to KRW 1.09 trillion that operates and pays dividends via

lease in Korea. The REITs purchased Seoul Square Building, a large landmark building across Seoul

Station, and remodeled it into an intelligent building for two years to enhance its asset value.

affiliated company

K-ReitS & paRtneRS · Reits

2726

Corporate Report

reits

reits A REITs is a real estate indirect investment method with many advantages in terms of profitability, stability and investment opportunities as well as tax privileges

excellent profitability

· Real estate investment through thorough market research and analysis can provide

a high return on investment compared to investment risk.

· Additional profits can be made by raising the value of real estate through professional and

systematic asset management such as remodeling.

Strong reliability

· Since REITs target real property, the risk of decline in investment value decreases

significantly if prices increase.

· In the worst case, we can minimize the loss of investment capital by selling off real estate

and pursue stable shareholder return through reasonable investment analysis of rent,

vacancy rates and management cost among others.

Convenient liquidity

· In the case of listed REITs, you can sell your holdings for cash when necessary.

expansion of investment opportunity

· Small-scale funds such as individual investors can also provide opportunities

for large-scale real estate investment.

Tax privileges

· If you allocate more than 90% of profit that can become dividends, there is almost

no corporate tax. (Article 51-2 of Corporate Income Tax Act)

· In case of direct investment, property tax and general real estate tax will be progressively

applied to land (the highest tax rate is 0.7%). However, when investing through REITs, land

property tax is applied at a flat tax rate of 0.2% and the land is free from general real estate

tax. (Article 106 of the Local Tax Act and Article 102 of the Enforcement Decree of the same Act)

[advantages of reits investment]

investors(institutional and individual)

reits

Investment/Dividend

Purchase of building Lease of facilities

Payment of price Rent

Seller tenant

asset custodian amC(asset management

Company)

K-reitS & partnerS

General office work management company

Borrowing/Interest

We pursue stable profits with professional asset management and scientific investment techniques.

REITs are companies or investment trusts that collect funds from a large number of

investors and allocate the profits (rental income, profit on sale, development income, etc.)

generated by investing and managing the property to investors.

28

mugunghwa trust that nicely approaches customers

Customer satisfaction

A financial institution that puts customers first and impresses them

Leading change

A financial institution that is not afraid to challenge and leads change

Nurture of experts

A financial institution that nurture the excellent professionals who tirelessly study

Fair and transparent

A trusted financial institution with fair and transparent business practices

Brief History

Mugunghwa Trust

plans and moves

ahead step by step.

Aug. 26, 2009Received approval of real estate trust business and began it

Jan. 25, 2017Investment through PEF of K-REITS & PARTNERS

Aug. 19, 2016

Change of the largest shareholder

Sep. 08, 2016Choi Byung-gil took office as CEO

· We are obligated to fully explain trust agreement, and hope that investors will listen to our explanations before investing.

· A trust contract may lead to the loss of a principal.

cr partner for new possibilities

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