Hyo-Sang Yoo October 2 2008 Korea Securities Depository

Hyo-Sang Yoo October 2, 2008 Korea Securities Depository

KSD Overview Central Securities Depository of Korea ※ Participants of KSD Founded in 1974 under the Commercial Code and transformed in 1994 under the Securities & Exchange Act 69 shareholders including KRX, securities companies, banks, etc and 1, 000 participants including securities companies, banks, insurance companies, etc. (Dec. 31, 2007) Supervised by Ministry of Strategy & Finance, Financial Services Commission (FSC), and Financial Supervisory Service (FSS) Korea Securities Depository 1

Models for Cross-border Settlement Cross-border Securities Settlements Global Custodian Local Agent ICSD 6 Models Direct Access CSD Linkage Multi CSD Model These models vary by “legislation structure”, “market practices for investment” and “openness foreign financial organization” Korea Securities Depository 2

Global custody for Korean investors Cross-border custody, settlement and corporate action services over the 34 markets of 32 countries with 6 custodians for overseas investment by domestic investors Europe ICSDs Austria Euroclear Denmark Clearstream Finland France Germany Greece Mid East Ireland United Arab Italy Emirates Netherlands Norway Portugal Spain Switzerland United Kingdom Asia Australia China(Shanghai) China(Shenzen) Hong Kong Indonesia Japan New Zealand Philippines Singapore Thailand Americas Argentina Canada Chile Mexico United States * Custody Network Euroclear, Clearstream, Citibank, BNY Mellon, SSB, Pershing Korea Securities Depository 3

Global custody for Korean investors ※ Cross-border settlement volume ※ Increasing settlements on 3 Asian markets (Bil. , USD) Category China Hong Kong Japan Total Korea Securities Depository 2005 2006 2007 No. of Settlement 1, 312 4, 044 13, 468 Increasing rate - 208% 233% No. of Settlement 1, 417 8, 676 57, 660 Increasing rate - 512% 565% No. of Settlement 1, 532 2, 001 5, 513 Increasing rate - 31% 176% No. of Settlement 4, 261 14, 721 76, 641 Increasing rate - 245% 421% 4

Local custody - Disintermediation KSD’s custody service (1998) - custodian services: securities and cash account opening and management, settlement and balance report, etc. - standing proxy services: exercise of voting right and dividend distribution, reports to the regulator, investment registration to FSS, etc. Unique model that CSD functions as a local custodian by DISINTERMEDIATION to crossborder investment Foreign Investor Global Custodian DISINTERMEDIATION by KSD’s local custody service - Direct access to CSD - Custody a/c as a participant’s a/c and legal ledger Korea Securities Depository Multi-tier structure foreign investors Local Custodian KSD 5

Local custody - Disintermediation Prerequisite conditions for custody service by CSD - stipulation by laws or decrees for cross-border securities deposit and settlement business by account opening with foreign CSDs or foreign institutional organizations Advantages of KSD’s custody service - direct access to CSD, custody a/c as a participant’s a/c and legal ledger - precise corporate actions by CSD - stable and firm legal basis as CSD - reasonable fee Weakness of KSD’s custody service Overcoming the weakness: - non-commercial banking institution (cash management or FX not available directly) - alliance with commercial bank for cash management and FX - no global network Korea Securities Depository 6

CSD Linkage Base of CSD linkage – Local custody service Co-listing of Korean securities on Tokyo Stock Exchange - Kodex 200 co-listed on KRX and TSE in November, 2007 - arbitrage trading between Korea and Japan - STP through SWIFT for migration (1 BUSINESS DAY) CSD linkage between KSD-HKMA for bond settlement - no transaction since linkage setup (1999) - CSD linkage SHOULD BE BASED on the MARKET DEMAND Korea Securities Depository 7

CSD Linkage KSD-JASDEC linkage Selling ’ Buying TSE Selling Broker Japan Buying Broker Data of trading Application for listing JASDEC Selling broker Buying broker Issuer Korea Notification of deposit (Migration) Stocks issuing & deposit (through brokers) Korea Securities Depository KSD Custody agreement JASDEC A/C 8

Transfer Agent Linkage - Share Migration Share migration service by transfer agent linkage for co-listed company - STX Pan Ocean, a Korean entity listed on SGX (July 2005) and KRX (Sep. 2007) - Share migration demand from Singaporean shareholder and setup of transfer agent linkage ※ Transfer agent linkage model M Application for Migration M+1 Migration form notice M+2 Form acceptance Share holder Singapore T. A. M+2~5 Ready to issue M+6 Share issue KSD Singapore T. A. Share holder Inefficiency for migration and risks of arbitrage trading comparing to CSD linkage - 6 BUSINESS DAYS to migrate for arbitrage trading Korea Securities Depository 9

Issuance of KDR and shares foreign companies' listing in Korea Current foreign candidates for KRX listing - Mostly Chinese and Japanese companies - Cayman holding companies which have subsidiaries in mainland China - U. S, Germany, Canadian companies also considering listing to Korean market ※ Foreign Companies’ Listing to Korean Market Companies Establish ment Issuing country Foreign listing Migration Listing type Listing schedule 3 NOD Digital Cayman Korea Non-listing X Share Aug. 2007 Huafeng Group Holdings Cayman Hong Kong O KDR Nov. 2007 Cowell E Holdings Cayman Korea Non-listing X Share Feb. 2008 6 more companies Japan Hong Kong Cayman Korea Japan Non-listing O X Share or KDR November December Korea Securities Depository 10

Fund. NET Development (Background) Obstacles to Advancement of the Securities Market Loss of Investor Confidence Due to Decreased Transparency High-Cost, Low-Efficiency Operation Processes Inadequate Asset Management Industry Infrastructure Securities Companies Advancement of the Securities Market Through Development of the Asset Management Industry Regained Investor Confidence With Transparent Fund Management Low-Cost, High-Efficiency Back-office Infrastructure Asset Management Industry Information Infrastructure Securities Companies Trustees IMs Trus tees Information Infrastructure IMs Trus tees Fund Admin Korea Securities Depository Fund Admin IMs 11

Fund. NET – Operating Structure Investment Managers Fund Administrator 1 2 4 3 3 1 Distributors 4 2 Fund. Net E/R System Fund Asset D/S System 7 Broker/ Dealers 5 6 5 7 8 Custodians/ Trustees Korea Securities Depository 12

Thank You! Korea Securities Depository 13