Plaintiff (Law Firm Sejong, Attorneys Kim head-sik et al., Counsel for the plaintiff-appellant)

KTB Asset Management Co., Ltd. and one other (LLC, Kim & Lee LLC, Attorneys Kim Man-man et al., Counsel for the plaintiff-appellant)

October 24, 2013

1. The Defendants jointly and severally pay to the Plaintiff KRW 600,000,000 as well as 5% per annum from April 18, 2006 to November 21, 2013, and 20% per annum from the next day to the day of full payment.

2. The plaintiff's remaining claims are dismissed.

3. 7/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendants, respectively.

4. Paragraph 1 can be provisionally executed.

The defendants jointly and severally pay to the plaintiff 2,00,000,000 won with 5% interest per annum from April 18, 2006 to the service date of a copy of the complaint of this case, and 20% interest per annum from the next day to the day of complete payment.

1. Basic factual basis within the scope necessary to determine the cause of the claim;

(a) Status of a party;

The plaintiff is the representative director and the major shareholder of the host Investment Company, etc. who conducts investment business, etc.

Defendant KB Asset Management Co., Ltd. (hereinafter “Defendant Co., Ltd.”) is a corporation established for asset management business, etc., and Defendant 2 is the representative director of Defendant Co., Ltd.

The plaintiff became aware of the defendant 2 as his personal seal with the non-party 10, who is the largest shareholder and the representative director of the case investment securities of the defendant company, the largest shareholder of the defendant company.

(b)Composition of a consortium with the Bank for the underwriting of the Bank for the Bank for the Bank for the Bank for the Bank for the Bank for the Bank for the Bank for the Savings;

Around Jan. 2006, the Defendant Company: (a) formed a consortium with (i) Busan District Savings Bank (U.S.) and (ii) formed a consortium (U.S. Savings Bank (U.S.) around Sep. 29, 2010; hereinafter “U.S. Savings Bank”); (b) formed a Central Mutual Savings Bank (U.S.) on Apr. 24, 2006; (c) respectively changed the trade name to the Central Busan District Savings Bank; (d) September 30, 2010; hereinafter “Central Savings Bank”); (b) decided to establish a private equity fund and participate as a financial investor; (c) the Defendant Company established a “KB Savings Bank’s restructuring” as an executive partner under the Commercial Act for five years to invite investors; and (d) accordingly, Defendant Company prepared the following investment plans for the Plaintiff Company, a corporate investor, a general investor, and (e) made an investment proposal (see subparagraph 1).

(2) Sale of part of the shares held by the PEF to a third party within 2-3 years after the listing of shares of the 3-year Ex 100 billion won (in the case of an insolvent financial institution, the PEF will sell part of the shares held by the PEF to a third party: listed securities market or KOSDAQ at an early stage after normalization of management / [4] Estimated investment profit rate of 12.0% (in the case of Ex 1 through M&A or listing), average of 12.0% of the total amount of shares held by the acquiring company to be distributed to the 3-year financial market (the 1-year financial market) and outstanding shares of the 1-year financial market (the 1-year financial market) and the 1-year financial market (the 4-year financial market). The PEF will offer to the 1-year financial market and the 1-year financial market (the 1-year financial market value of the 1-year financial market).

C. Establishment of the private equity fund of this case

On February 2, 2006, Defendant Company established a private equity fund (KTB-SB) (hereinafter “instant private equity fund”) and became a general partner and representative member.

Some of the articles of incorporation (No. 5) of the instant private equity fund are as follows.

Article 11 of the Table included in the main sentence of this Act (Restrictions on the liability of members with unlimited liability) No general partner or his/her related persons shall be liable for the damage of any company or other members caused by any act related to the following subparagraphs (including omission): Provided, That this shall not apply where the damage was caused by the intention or gross negligence of the company concerned:

D. Conclusion of this case’s investment agreement

On February 3, 2006, the Defendant Company entered into the instant investment agreement with the Busan Savings Bank and the non-party 1 and the non-party 2, who is its major shareholder (see, e.g., evidence 3); hereinafter “A” refers to the Defendant Company, “B,” “B,” and “the disease” refer to the non-party 1 and the non-party 2, who are the major shareholders of the Busan Savings Bank.

(2) The term “PEF” in the main text of Article 2 provides that the “PEF” in the capacity of the managing partner shall be jointly and severally established for the purpose of participating in the acquisition and acquisition of shares of the “subject company” and new subscription for new shares. Article 3(1) provides that the “PEF” shall be 5% of the total acquisition amount of shares within the scope of 5% of the subscription amount of the “PF” and that the “PF” shall be 10,000,000,000,000,000,000 won (the “PF” shall be 12,50,000,000,000,000,000,000,0000,000,000,000,000,000,000,000,000,000,000,000,00,000,00,00,00,00.

E. The Plaintiff’s acquisition of shares of the instant private equity fund and investment in the central savings bank of the instant private equity fund

The Plaintiff, around January 2006, was solicited to make an investment based on the investment proposal of this case by the Defendant Company, and accordingly, became a partner with limited liability of the said Company by investing KRW 2 billion in the private equity fund of this case on April 18, 2006 (hereinafter “instant investment”).

After all, the plaintiff 2 billion won, (5 billion won of the Seoul Development Fund, (5 billion won of the Seoul Development Fund, (5 billion won of the 12.5 billion won of the company, and the defendant company's 500 billion won of the company. Accordingly, from April 2006 to June 2006, the company acquired 2,035,000 shares of the Central Savings Bank (5.5% of the shares). Meanwhile, the Busan Savings Bank invested 6.6 billion won of the 6.6 billion won and acquired 30% of the shares of the Central Savings Bank.

Accordingly, on April 24, 2006, the defendant company's non-party 3 was appointed as a director of the Central Busan Savings Bank (outside director) and resigned on April 24, 2009 (one day from August 31, 2007 to April 24, 2009).

F. Plaintiff’s request for put options, etc.

On April 1, 2009, the Plaintiff requested the Defendant Company to exercise put options against the Busan Savings Bank. However, the instant private equity fund did not exercise put options. At that time, the Defendant Company assumed that the date of disposal of stocks was December 10, 2009 and applied 12% welfare per annum from April 18, 2006 to December 31, 2008, which is the Plaintiff’s date of disposal of stocks, to the Plaintiff. From January 1, 2009, the Defendant Company prepared a list that calculated anticipated profits when applying 15% welfare per annum.

In addition, the defendant company presented to the plaintiff the date of disposal of shares as of December 31, 2010, and made and put up a list of profits expected to be derived from the application of 15% per annum from January 1, 2009 as above.

On October 14, 2010, the instant private equity fund concluded a contract on October 14, 2010 with the social loan E&P to sell the shares of the said Central Savings Bank held by the instant private equity fund, but it was no longer effective on December 2010.

(g) Capital erosion and bankruptcy of the central installment savings bank; and

On February 19, 2011, the central savings bank was subject to a disposition of business suspension from the Financial Services Commission due to liquidity shortage, and on April 29, 201, it was ordered by the Financial Services Commission as an insolvent financial institution to improve its business management for six months, including business suspension, etc.

After January 2012, the Central Savings Bank filed a petition for bankruptcy with the Seoul Central District Court (Seoul Central District Court 2012Hahap2) and was declared bankrupt on February 23, 2012.

H. Current status of changes in investors of the instant private equity fund;

At the time of the establishment of the private equity fund of this case, the defendant company owned 500 million shares, 5 billion shares, 5 billion shares, 5 billion shares of the Seoul Development Fund of this case, and 2.5 billion shares of the plaintiff. However, on April 2, 2007, 2.5 billion shares of the Seoul Development Fund were transferred to 2.5 billion shares, and on January 25, 2008, the shares of 2.5 billion shares were transferred to the non-party 7, and on July 9, 2008, 2.5 billion shares were transferred to the non-party 2.5 billion shares of the above 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 2.5 billion shares of the 19.25 billion shares of the 20.5 billion shares of the 25 billion shares of the 1 billion shares of the 200.3 billion shares of the company.

(i) Declaration of bankruptcy of Busan Savings Bank and related cases;

On July 14, 2011, the instant private equity fund filed a lawsuit against the Busan Savings Bank claiming KRW 12,500,000 for the purchase price of shares on the ground that it exercised put options against the Busan Savings Bank (Seoul Central District Court 201Gahap7290).

On August 16, 2012, when the lawsuit was pending, the Busan Savings Bank was declared bankrupt (the Busan District Court 2012Hahap4), and the Korea Deposit Insurance Corporation was appointed as the bankruptcy trustee of the Busan Savings Bank.

Accordingly, the Korea Deposit Insurance Corporation taken over the lawsuit of the Busan Savings Bank. From April 18, 2006, the date of payment for the share purchase price of KRW 12,500,000,000 and the agreement calculated by the ratio of 12.5% per annum from August 16, 2012, the date of bankruptcy of the Busan Savings Bank, to August 16, 2012, the Plaintiff amended the purport of the claim by asserting that there was a bankruptcy claim equivalent to KRW 25,300,000 within the scope of the total amount. In the foregoing case, the judgment accepting the claim of the instant private equity fund was rendered on May 24, 2013, and the Seoul High Court was currently pending in the appellate trial (Seoul High Court 2013Na40898).

On the other hand, Defendant 2 was indicted for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and the Financial Investment Services and Capital Markets Act (Seoul Central District Court Decision 2011Gohap1372) in relation to the act that had been conducted at the time of soliciting investment in capital increase with capital increase in Busan Savings Bank on October 31, 201 (Seoul Central District Court Decision 201Gohap1372).

【Fact-finding without a dispute over the basis of recognition】: Gap's evidence 1 through 14, 19 (including branch numbers), Eul's evidence 1 through 4, 9, the purport of the whole pleadings

2. Determination as to the plaintiff's claim

A. Summary of the cause of the claim

As the assets of the instant private equity fund, which are the assets of the instant private equity fund, the Plaintiff lost the value equivalent to the total amount of KRW 2 billion invested by the Plaintiff. The Defendants are liable for damages as follows. As such, Defendant 2 is liable to compensate for damages suffered by the Plaintiff pursuant to Article 750 of the Civil Act as an actor, and Defendant Company is jointly and severally liable with Defendant 2 and the Plaintiff pursuant to Articles 389(3) and 210 of the Commercial Act.

(1) Violation of the intended deception or duty to protect investors at the stage of soliciting investment.

(A) Violation of the duty to protect investors regarding the availability of put options

From the lapse of one year after investment, the Defendants recommended the Plaintiff to make an investment by exercising put options against Busan Savings Bank, thereby recovering the principal and interest of investment. However, the Busan Savings Bank already acquired 30% of the shares of the Central Savings Bank and the Busan Savings Bank was sentenced to a fine on October 18, 2004 due to a violation of the Securities and Exchange Act, etc. As such, the approval of the Financial Supervisory Commission, which is necessary for acquiring additional shares, was impossible to implement put options in principle. The Defendants cannot be deemed to have prepared an investment recovery scheme in conformity with the investment proposal presented to the Plaintiff, and thus, failed to fulfill their duty to protect investors.

(B) Violation of duty to explain and violation of duty to protect investors due to provision of conclusive judgment

In the process of soliciting investment, the Defendants did not notify at all the risk of not being able to exercise put option itself because it is difficult to approve by the Financial Supervisory Commission due to the situation of Busan Savings Bank, which is the other party to put put option option, at the time of guaranteeing the profit of 12% per annum. The Defendants emphasized only the safety of the instant investment, such as guaranteeing the profits of 12% per annum and guaranteeing the same. The Defendants provided information that lost balance concerning the profits and risks of the instant investment.

(2) Violation of the duty to protect investors at the operating stage.

(A) The Defendants’ delay in exercising put options, and deception on the grounds of such delay

On April 2009, the Plaintiff requested the Defendants to exercise put options against the Busan Savings Bank. However, the Defendants, as seen above, should be recognized by the Financial Services Commission even if the acquisition of shares of the Busan Savings Bank following the exercise of put options was legally impossible. However, the Defendants delayed the exercise of put options by paying profits calculated at 15% per annum to the Plaintiff.

(B) Liability for damages caused by concealment of financial situation of the Central Bank of Korea

On April 24, 2006, the Defendants concealed the actual financial situation despite that it was a situation in which the actual financial situation of the central installment savings bank was sufficiently known, such as dispatching Nonparty 3 employees of the Defendant Company to outside directors of the central installment savings bank.

B. Determination as to the establishment of liability for damages

(1) Establishment of Defendant Company’s liability

In full view of the facts acknowledged in Paragraph (1) and the following circumstances based on each evidence, the Defendant Company suffered considerable loss from the Plaintiff due to the Plaintiff’s failure to provide accurate information on the financial situation of the Busan Savings Bank, which is the contractual partner, at the time of exercising put options or as a strategic investor, at the time of soliciting the Plaintiff’s investment in this case (it may be recognized that Defendant Company’s obligation was violated at the operating stage; however, the Plaintiff did not sufficiently assert and prove the amount of damages therefrom, and thus, it should be considered at the stage of limiting liability).

① Under Article 10-2(4) and (5) of the former Mutual Savings Banks Act (wholly amended by Act No. 8143, Dec. 30, 2006); Article 7(2) of the Enforcement Decree of the said Act (wholly amended by Presidential Decree No. 19464, May 3, 2006); subparagraph 1(c)(1)(1)(i) of the requirements for acquiring shares of a mutual savings bank for the prevention of financial accidents, a person who intends to acquire or become a major shareholder in excess of 30/10 of total number of shares of the mutual savings bank must not be subject to punishment in violation of finance-related statutes for the last five years. However, according to the purport of the evidence evidence and arguments, the Busan Savings Bank, which was sentenced to a fine of 30,000,000 won on October 18, 200, was difficult to view that it was difficult for the Plaintiff to have an investment option savings in Busan to have been designated by the parties to the said agreement.

② According to Paragraph (1) of this case, the Busan Savings Bank, which participated in strategic investors pursuant to the investment agreement of this case, acquired 30% of the shares of the Central Busan Savings Bank, and the private equity fund of this case participating as financial investors, decided to acquire 55% of the shares of the Central Savings Bank. In addition, according to the evidence No. 20 through No. 23 of this case, the non-party 1 and non-party 2, the representative director of the Busan Savings Bank, and the non-party 2, etc. have personal relations, such as the relationship with the defendant 2, the representative director of the Busan Savings Bank, and the non-party 1, etc. of the Busan Savings Bank proposed to acquire the Central Savings Bank with the defendant 2 by soliciting private equity funds (the Busan Savings Bank had the purpose of acquiring the Central Savings Bank and managing it). However, in light of the fact that the Busan Savings Bank did not know that it was 30% of the shares of the Central Savings Bank, at least the defendant 2, the representative director of the Korea Central Savings Bank, and the defendant 2.

(3) Nevertheless, the representative director or the person in charge of the defendant company did not verify the grounds for supporting the horses of the non-party 1 and the non-party 2, who is the representative director or the major shareholder of the Busan Savings Bank, and without collecting objective information, emphasizes that the private equity fund of this case can be guaranteed the principal and 12% interest per annum by using put options to the Busan Savings Bank after one year from the time of investment solicitation. In particular, it did not mention the possibility of implementing put options to the Busan Savings Bank, which is the other party to put options, and rather did not provide information necessary for determining the investment.

④ The Defendant Company asserts that the Plaintiff’s assertion based on the premise that the exercise of put options against Busan Savings Bank is not the only means of put options, but the only means of put options. However, the Defendant Company is not the only means of put options, as seen earlier, but the only means of put options to put options to put options to put options to the Plaintiff, and thus, is not the only means of put options to pay options to the Plaintiff. However, the Defendant Company’s offering of listed stocks presented as a different means of put options or the collection of investment proceeds through selling to a third party (the case where the instant investment is successful) is expected to have been successful (the case where the instant investment is successful) and the Defendant Company prepared a means of “use of put options” in preparation for the difficult occurrence of such profits. As seen earlier, as long as it appears to have invested in mind, it cannot be said that the Plaintiff’s offering of put options to put options to

⑤ The Defendant Company asserts that the Plaintiff did not take advantage of the Plaintiff’s transfer of equity shares in order to obtain greater profits. However, it is difficult to view that the transfer of equity shares was a collection method in principle that the instant investment was scheduled. Even if the Plaintiff’s delayed delay and the Plaintiff incurred losses therefrom, this would be an element to be considered in limiting liability. As long as the Defendant Company’s violation of the above obligation at the stage of soliciting investment in this case is acknowledged, the circumstance that the Plaintiff transferred equity shares and the possibility of recovering the investment amount would not be grounds for denying Defendant Company’s liability.

④ Although the representative director of the Defendant Company or a person in charge of the Busan Savings Bank was able to know the possibility of implementing put option, it did not provide the Plaintiff with sufficient information on the risk of the instant investment (the same as seen above), and did not give sufficient notice on the risk of the instant investment (the Defendant Company emphasized the instant private equity fund’s exercise of put option against Busan Savings Bank in the process of soliciting investment). At least on April 2009, the Defendant Company could not deny the Defendant Company’s liability by taking into account the following: (a) although it was clearly aware that the instant private equity fund could not acquire stocks even if it exercised put option, it appears that the Busan Savings Bank would not make efforts to recover the investment amount by exercising put option after the Plaintiff’s failure to explain the cause; or (b) it appears that it did not make any effort to recover the investment amount by exercising put option, etc. even after the Plaintiff’s investment business.

(2) Defendant 2’s liability for damages is established

The subject of the duty to explain in relation to investors is a financial institution that solicits investments, and the mere representative director of a financial institution is not enough to interpret that an investor is jointly and severally liable for damages arising from a violation of the duty to explain by the financial institution. Therefore, in order to recognize the representative director of a financial institution’s liability for damages, the general requirements of Article 750 of the Civil Act ought to be proved. Even if the general requirements of Article 750 of the Civil Act have been proved,

Considering the special nature of the instant case based on the facts acknowledged under paragraph (1) and each evidence, Defendant 2, the representative director of the Defendant Company, was negligent in failing to notify the Plaintiff of the fact in spite of the fact that it was impossible for the Plaintiff to perform put-in options by neglecting the duties of the representative director at the investment solicitation stage of the instant case. As long as Defendant 2’s negligence and the negligence of the Defendant Company are concurrent with that of the Plaintiff to make the instant investment, Defendant 2 is jointly and severally liable for

① According to the evidence of Paragraph (1) and the evidence of No. 27 and No. 28, the instant investment is a private equity fund that is not an unspecified majority but an investment for a specific small number, and the Plaintiff became aware of the instant investment in accordance with the introduction by Defendant 2, which was known to the Plaintiff in the course of the introduction by a person (the Defendant 2 also recognized that the Plaintiff proposed the instant investment), and in the course of management, the Plaintiff was able to exercise put-in options by directly communicating Defendant 2 with the Plaintiff. In light of the fact that Defendant 2 was not only merely proposing the instant investment to the Plaintiff, but also actively recommended the instant investment in relation to the Plaintiff.

② As seen earlier, in light of the fact that the Defendant Company recruited investors of this case, the representative director of the Busan Savings Bank or the major shareholders of the Busan Savings Bank demanded solicitation and the Busan Savings Bank was an strategic investor who acquired only 30% of the shares while participating in the acquisition of the Central Savings Bank, etc., Defendant 2 was aware that at least, as stated in the investment proposal of this case, Defendant 2 could not immediately exercise put options against the Busan Savings Bank after one year from the time of investment. Nevertheless, Defendant 2 did not confirm whether there was any ground to support the horses of Nonparty 1 and Nonparty 2, and did not collect objective information, and did not instruct the person in charge of investment to collect objective additional information necessary for the investment.

③ Taking into account the relationship between the Plaintiff and Defendant 2 as seen earlier and the specificity of the instant investment, the mere fact that part of the acts of employees of other Defendant Company are involved does not deny Defendant 2’s leading intervention in the investment solicitation phase. Furthermore, insofar as Defendant 2 actively recommended the Plaintiff to make the instant investment, Defendant 2 is obligated to provide the Plaintiff with correct information within the reasonable scope he knows. Nevertheless, Defendant 2’s provision of false information as to the possibility of performing put-in options to the Plaintiff can be evaluated as an act contrary to the principle of trust and good faith in relation to the Plaintiff.

④ In light of the Plaintiff’s investment experience and knowledge, it is a matter to be considered in the limitation of liability that the Plaintiff predicted such risk, or that the Plaintiff’s trust to Defendant 2 was excessive.

(3) Determination as to the Defendants’ assertion

The Defendants asserted that the amount should be deducted from the amount of damage to the extent of the amount to be distributed in the bankruptcy proceedings against the Busan Savings Bank, but there is no evidence to acknowledge it [it is difficult to conclude that the Plaintiff obtained the benefit therefrom solely on the ground that the bankruptcy claim of the instant private equity fund was recognized in the relevant case (Seoul Central District Court 201Gahap7290). The Defendants’ above assertion is not accepted.

C. Limitation of damages

However, as seen in Paragraph 1, other partners of the private equity fund of this case, who transferred equity shares and recovered the investment amount (the transferee through the Defendant company or Busan Savings Bank). Although the Plaintiff had avoided the use of put options with the Defendant company, it seems that the Defendant company did not have an opportunity to dispose of the defects that guarantee the profits of 15% per annum. Accordingly, the Plaintiff’s losses were further expanded, and in light of the Plaintiff’s investment experience, it is anticipated that the risk of principal loss would have been well known in the investment of high risk, and the possibility of receiving dividends through bankruptcy procedures, etc., the Defendants’ liability is limited to 30%.

D. Sub-committee

The Defendants are jointly and severally liable to pay to the Plaintiff the amount of KRW 600,000 (2,00,000 investment deposit x 30% x 30%) as damages for the said tort, and to pay damages for delay calculated at each rate of 5% per annum as prescribed by the Civil Act from April 18, 2006, which is the date when this judgment is rendered until November 21, 2013, and 20% per annum as stipulated by the Act on Special Cases concerning the Promotion, etc. of Legal Proceedings, from the following day to the date when the Defendants fully repay their obligations.

3. Relevant laws and precedents

This case was determined in accordance with laws, legal principles, and evidence rules.

A. 1: Articles 2, 4 through 22, and 144-2 through 144-18, etc. of the former Indirect Investment Asset Management Business Act (amended by Act No. 8516, Jul. 19, 2007)

B. Law 2: Articles 268 through 287, Article 389, etc. of the Commercial Act

C. Law No. 3: Articles 2, 393, 535, and 750 of the Civil Act, etc.

D. Law No. 4: Articles 202, 208(2), and 288 of the Civil Procedure Act

E. Supreme Court Decision 1: Supreme Court Decision 201Do11237 Decided May 24, 2012; Supreme Court Decision 94Da38199 Decided August 23, 1996; Supreme Court Decision 93Da26205 Decided January 11, 1994

F. Supreme Court Decision 2: Supreme Court Decision 201Da10532, 10549 Decided November 15, 2012; Supreme Court Decision 2010Da76368 Decided July 28, 201; Supreme Court Decision 2004Da53197 Decided September 6, 2007; Supreme Court Decision 93Da26205 Decided January 11, 1994

4. Conclusion

Therefore, the plaintiff's claim against the defendants is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.

Judges Yoon-gu (Presiding Judge) (Presiding Judge)