I. Underlying Principles and Direction

1. Underlying Principles

1.1 Complete Implementation of Five Major Tasks

i On January 13, 1998 then President-elect Kim Dae-Jung together with major chaebol owners announced the implementation of five major tasks for corporate restructuring. These goals have been pushed forward aggressively with the aim to enhance transparency of corporate business practices to bring them into compliance with international best practices, thereby enhancing the global competitiveness of the Korean corporate sector.

* The Five Underlying Tasks

À Enhancement of management transparency Á Elimination of cross guarantees

 Improvement of capital structure à Selection of core competence
Ä Strengthening of accountability of controlling shareholders and management

1.2 Corporate Restructuring to Be Driven by Financial Institutions

i Major creditors financial institutions will take the leading role in implementing corporate restructuring policy.

* For this purpose, the creditors and debtors, i.e., the lead creditor banks (LBs) and the largest sixty-four chaebol, signed capital structure improvement plans (CSIPs).

1.3 Establishment of Fair Loss Sharing Practices

· The Top Five chaebol (Hyundai, Samsung, Daewoo, LG, and SK) which have the capacity to absorb losses arising during the course of restructuring are expected to bear the associated costs which restructuring entails. Small and Medium Enterprises (SMEs) which are much too weak financially to take on such a burden will be supported by the creditor financial institutions with which they are affiliated.

· The government will help improve banks’ capacity to push forward corporate restructuring efforts through various measures intended to facilitate restructuring within the financial institutions themselves, such as the disposal of non-performing loans (NPLs) as well as through support for mergers and acquisitions of financial institutions.

1.4 Adoption of Workout Concept as Core Principle

· In pursuing corporate restructuring, nonviable corporates will be forced to exit promptly, whereas viable corporates will be supported through workout program.

* Please refer to the attached PDF for details.