Regulations Governing Securities Investment Trust Funds Article 54

A SITE shall invest the assets of a privately placed fund in accordance with the provisions of the securities investment trust agreement, and shall comply with the following provisions except where otherwise provided by the FSC:1. The fund may not invest in securities other than those listed under Article 6 of the Securities and Exchange Act.2. The fund may not engage in transactions other than for securities-related products.3. The fund may not loan funds.4. The fund may not engage in trading of securities or securities-related products with the various funds, collective trust funds, discretionary accounts, or accounts for trading of securities with self-owned funds under the management of the SITE, provided that this shall not apply in the case of cross-trades unintentionally occurring on a centralized securities exchange market or on Over-the-Counter Markets.5. The fund may not invest in securities issued by the SITE under which it is managed or in securities issued by an interested company in relation to the SITE.6. The fund may not be used to purchase the certificates of beneficial interest of that same fund, provided that this restriction shall not apply in the case of beneficiaries' requests for redemption of certificates of beneficial interest or when certificates of beneficial interest are redeemed due to the discontinuance of all or some part of the fund.7. The fund may not transfer or sell proxy forms for the shareholders' meeting of an issuing company whose shares are purchased by the fund.8. Amounts held in the manners described in Article 18, paragraph 1, subparagraphs 2-4 may not exceed the ratios prescribed by regulation.9. The fund may not accept the designation of a specific person that it assist in evading income tax or any other operation that would influence its performance in accordance with the principles of good faith and professional investment management.10. The fund may not engage in any other activity prohibited by the FSC.The provisions of Article 11 shall apply mutatis mutandis to defining "an interested company in relation to the SITE" as referred to in subparagraph 5 of the preceding paragraph.The term "various funds" in paragraph 1, subparagraph 4 includes securities investment trust funds and futures trust funds publicly or privately offered by a SITE.Risk exposure in the trading of securities or securities-related products by a privately offered fund may not exceed 40 percent of the net asset value of the fund.A SITE shall expressly state in the trust agreement for a privately offered fund the limits applicable to trades of securities-related products, securities margin trades, securities borrowing, and borrowing for financing, and shall set out related measures for monitoring and control of risk in the offering memorandum.A SITE that has received FSC approval for concurrent operation of a futures trust enterprise may be exempt from the restrictions of paragraph 4 in regard to trading ratios only when it has reported to and received approval from the FSC for its internal control system with regard to risk control mechanisms in the utilization of a privately offered fund to trade in securities-related products. Risk exposure, however, may not exceed 100 percent of the net asset value of the given fund.The internal control system of the preceding paragraph shall make an assessment of the possible types of risk for each respective type of securities-related product being traded, and shall adopt a sound and thorough plan for control and management that includes the method of assessing each type of risk, relevant parameters, standards for assessment, and mechanisms for periodic testing.