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KOSDAQ : A Window into the Korean Capital Market

K O S D A Q S t o c k M a r k e t I n c . M A Y 10 ~ 14. 2 0 0 4. 9 th XBRL International Conference (Auckland, New Zealand). KOSDAQ : A Window into the Korean Capital Market. TABLE of CONTENTS. I : About KOSDAQ. 01. KOREA & IT Industrial Development

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KOSDAQ : A Window into the Korean Capital Market

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  1. K O S D A Q S t o c k M a r k e t I n c . M A Y 10 ~ 14. 2 0 0 4 9th XBRL International Conference (Auckland, New Zealand) KOSDAQ : A Window into the Korean Capital Market

  2. TABLE of CONTENTS I : About KOSDAQ 01. KOREA & IT Industrial Development 02. KOSDAQ is … 03. Key Statistics Mission of KOSDAQ XBRL Project 9th XBRL International Conference A Window into the Korean Capital Market II : Review of XBRL Pilot Project 01. Introduction 02. Approach 03. XBRL Pilot Service at KOSDAQ III : Star Index Project (Expansion Project) K O S D A Q 01. Introduction 02. Enhanced Features compared with the Pilot Project 03. Benefits Ⅳ : Global Investor Relations Management Project 01. Introduction 02. Approach 03. Benefits Summary of KOSDAQ XBRL Project Ⅴ : Next Steps 01. KOSDAQ’s Efforts 02. Next Step 03. KOSDAQ: Role in the Korean Economy

  3. I : About KOSDAQ 01. KOREA & IT Industrial Development (World competitiveness) 12th 12th 5th 2nd GDP (2002) Trade Scale (2003) Automobile Shipbuilding 1st 1st 2nd 5th Internet User [2003] Mobile Phone User [2003] Semiconductor TFT-LCD

  4. I : About KOSDAQ 02. KOSDAQ is … • KOSDAQ has achieved unprecedented growth along with that of Korea's flourishing IT industry. • Entrepreneurial pioneers in the IT, BT, and CT industries are making their dreams come true through KOSDAQ and they form a vital resource for Korea's future economic growth. • Listed companies (2003.12) • New Index composition

  5. 1,078 1,078 I : About KOSDAQ 03. Key Statistics – Among Asia New Markets # listed Co’s Trading Value 874 Daily Avg. Trading Value (DEC, 2003) 843 (Unit: bil.KRW) (Unit: Co’s) 702 1000 1,728 1,205 500 395 359 429 Gre Tai (Taiwan) JASDAQ (Japan) KOSDAQ (Korea) 4 ‘97 ‘99 ‘01 ‘02 ‘03 ‘97 ‘99 ‘01 ‘02 ‘03

  6. I : About KOSDAQ 03. Key Statistics - Global Status (US$ bil.) * WFE Dec. 2003

  7. Mission of KOSDAQ XBRL Project Mission of KOSDAQ Project Evolution Phase1 Active support of companies seeking growth (Increase brand value) Pilot Project Phase2 Protect investors thru increased transparency (Build investor confidence) Star Index Project Phase3 Make efforts to set global standars for a sound capital market (Enhance market integrity) Global IR Management Project

  8. KOSDAQ -PwC -UB Matrix Faster Update of F/S & Enhanced Analytical Tools Standardized Financial Statements Simpler Process Investor Trust COMPANIES INVESTORS Investment Pilot II : Review of XBRL Pilot Project 01. Introduction - Project Goal Establish K-GAAP Taxonomy - Approval from XBRL International- XBRL adoption among participating Korean Companies Increasing Market Transparency - Provide standardized Financial Statements through XBRL - Empower investors by providing enhanced analytical tools Frontier in XBRL Technology in Korea - KOSDAQ is the first organization in Korea to deploy XBRL

  9. Pilot II : Review of XBRL Pilot Project 02. Approach – Tasks & Steps Phase 2. Extended FSS Taxonomy (Commercial & Industrial) Phase 1. K-GAAP Taxonomy (Korean Standards) Phase 3. Company Extension K-GAAP Taxonomy Definition/ Establishment based on Korean Companies Accounting Principles In actual industry accounting practices over 2,500 accounts were used, FSS Element Extension Naming and defining down to the level of Individual Company’s User defined Accounts (excluded in FSS Accounts Schema) * * FSS : Financial Supervisory Service

  10. Pilot II : Review of XBRL Pilot Project 03. XBRL Pilot Service in KOSDAQ GAAP Taxonomy (686 representative accounts) FSS Taxonomy (2,541 detail accounts) Expansion Auditor’s Report in Annual Report(SGML) Mapping Table XBRL Instance Document Converter View/ Analyze On-line Viewers (Web) Off-line Viewers (Excel)

  11. Pilot II : Review of XBRL Pilot Project 03. XBRL Pilot Service at KOSDAQ Excel-based Financial Analytical Tool KOSDAQ Web-based Financial Analytical Site

  12. Star STAR Index Selection III : Star Index Project 01. Introduction – Why Star Index Project? Increase Visibility ofBlueChip Index Success of XBRL Pilot Service & Recognition of Value of XBRL Improve Corporate Image & Brand Recognition Expansion ofInvestment Pool STAR Index Project Increased Demand for XBRL Services by Listed companies Improve & Expand Scopes Of Pilot Project Platform Leading intoGlobal IR Project Maximizing Value of XBRL thru Selection of High Quality Companies

  13. Star III : Star Index Project 01. Introduction – What is Star Index? Star Index – Companies chosen based on SUPERIOR earnings performance, financial soundness, corporate governance, liquidity and market cap.(37.5%) Corporate governance Financial soundness Earnings performance “BLUECHIP” Index of KOSDAQ NASDAQ  Nasdaq100 KOSDAQ  Star30

  14. Star III : Star Index Project 01. Introduction – Project Goal To provide corporate information with XBRL technology for 30 Star Index companies to all Market Participants • Contractor : PwC(Samil), UB Matrix • - Personnel : Accounting Consultants(4), Engineer (5) • - Software : UBmatrix Automator, Web Analyzer, Oracle, JSP, Excel • - Duration : 29 Mar 2004 ~ 17 Jun 2004 • - Samples : 30 Star Index Companies • Project Deliverables - Korean GAAP Taxonomy + 30 Company Level Taxonomies - 5-year annual reports (Instance Documents) of 30 companies - Web Analyzer (CoA, Notes, Market Data, Annual Reports) - Excel Analyzer (CoA, Notes)

  15. Star III : Star Index Project 02. Enhanced Features of Star Index Project Pilot Project Star Index Project 15 sample companies 30 Star index Companies FSS Taxonomy Company Level Taxonomy (1) SGML Code KOSDAQ Code (2) Additional Non-Financial Information Financial Information only (3) Pilot Application Advanced Application (4) Taxonomy Versioning (5)

  16. Star III : Star Index Project 02. Enhanced Features of Star Index Project [ Pilot Project ] [ STAR Index Project ] Architecture Inheritance GAAP Taxonomy GAAP Taxonomy Data Flow Element Name Element Name FSS Taxonomy A Company Taxonomy B Company Taxonomy C Company Taxonomy SGML Code KOSDAQ Code A’s Auditor’s Report B’s Auditor’s Report C’s Auditor’s Report A’s Annual Report B’s Annual Report C’s Annual Report

  17. III : Star Index Project Star 03. Benefits Individual Companies Can Manage Taxonomy Elements Non-Financial Information Can be Standardized Structured Taxonomy Elements will be Mapped to Each Company’s Accounting System Key Performance Indicators from Annual Report will be provided to Investors in XBRL Global IR Management Project is the Best Case for Standardization of Value-based Management of Corporate Information XBRL formatted Financial Information will be Saved in Repository as Data Base KOSDAQ Code acts as a Buffer Adjusting to Changes in Company’s New Transaction & Accounting Terms Linking Financial Statements to Non-Financial Information will Enhance Corporate Performance Analysis

  18. Ⅳ : Global IR Management Project 01. Introduction – Why Global IRM Project? Future Business Reporting Model The traditional financial reporting model is no longer adequate • Declining relevance of historical data as an indicator of future performance • The market wants more information about non-financial factors True Value Global IR Management Project Star Index Project XBRL Pilot Project Under-value Additional Non-Financial Information Financial Information

  19. IRM Ⅳ : Global IR Management Project 01. Introduction – Why Global IRM Project? To Provide "value embedded Corporate Management Contents" to the market more efficiently NOW After Global IRM Project Information needs Information needs “Information Gap” Added Value Reporting “Information Gap” Analyst Corporate Reports & Forecasts Analyst Corporate Reports & Forecasts Reporting to Financial Supervisor Reporting to Financial Supervisor Typical Financial Information Typical Financial Information ? Time 2000 Time

  20. IRM Question 1. Question 2. Ⅳ : Global IR Management Project 01. Introduction – Why Global IRM Project? KOSDAQ CEO Survey (’03.11.18) Do you believe your share price accurately reflects the true underlying value of your company?Over 80% companies believe they’re “undervalued” Does the market fully reflect a company’s true valuation? What more could KOSDAQ do for the companies to be evaluated correctly in the market? - More IR & Promotion to domestic/overseas 81.4%

  21. IRM Ⅳ : Global IR Management Project 01. Introduction – Project Goal “Quality Marketplace for Shareholders & Venture Firms” Capital Market Efficiency Do the Right Thing Do Things Right Integrity of Informationusing XBRL Correct Evaluation of companies with New Global IR Model Global IR Best practicesEstablishing Benchmarks

  22. IRM Ⅳ : Global IR Management Project 01. Introduction - Project concept Listed Companies Market On-line Viewers (applet) Taxonomy Builder Build Data Elements Value Reporting Data Achieve Correct Corporate Evaluation & Efficient Capital Market F/S, Disclosure Data Off-line Viewers (eNumerate, Excel, etc.) Marketing Data VR F/S View/Analyze Apply inDomestic/ Overseas IR & Fair Disclosure Investor Briefing Standardized Report

  23. IRM Ⅳ : Global IR Management Project 02. Approach • Analytical Review of Disclosure, Corporate Information • CEO, CFO Interview/Survey Analyze Current Status of Sample Companies • Review of Analyst, Fund Manager reports • Capital Market Stakeholders’ Interview/Survey Review & Verify Market Information • Industry KPI to meet Global IR Standards • Industry Standardized Investor Briefing Model Establishment of Standardized IB Model • Industry Standardized IB & KPI Taxonomy • Reference check for KPI validation Industry StandardizedTaxonomy • Web Design & Application support • Provide Information on the Web Web Designing& Mapping

  24. IRM Attractive & EfficientCapital market Ⅳ : Global IR Management Project 03. Benefits Market Participants Benefits GOAL More Financial Resources Your Market Of Choice in NE ASIA Upgrades Service for Star Index Companies Visibility (Greater BrandValue) Correct evaluation Transparent Information Builds Investor Confidence Enhanced Application Tool Better Investment Decisions Increase the Market Stability Improved MarketQuality & Integrity New Biz Model Promotion of IR Model

  25. Summary of KOSDAQ XBRL Project Value Strategy Managing for Value Document Database Web Server XBRL : Global Standard for Corporate Financial Reporting, “Container” of Corporate Disclosure Information, Global IR Management Framework : “Contents”to analyze Corporate Management Key Performance Indicators KOSDAQ Stock Market : Increased self-regulatory capability enhances Financial Information Supply Chain eXtensible Business Reporting Language Container Key Performance Indicators Contents Enhanced Reporting Analysis Service Business • Create Instance Document thru Corporate Regulatory Reports & Creation of Taxonomies • XBRL Application to Star Index • Financial Institutions’ Analysiswith KPI of Global IR Mgmt • On-Line Analytical Processing & Marketing of Financial Institution’s Analysis Application to Star Index companies Global IR Mgmt Framework Financial Institutions KOSDAQ Reports Strategy Market Overview Taxonomy ( e.g. <deposit>100</deposit>) Excel Server Value Platform

  26. “Foreign investors presently hold 18.0% of ’s total market cap.” Star Index Launch XBRL Education for Star Companies XBRL Project Pilot Project Launch Star Index Project Launch Global IR Mgmt Project Launch Meeting with the Press for promotion of XBRL XBRL KOSDAQ Local Seminar Ⅴ : Next Step 01. KOSDAQ’s Efforts 20% Asia New Market Forum (Seoul, Taipei) MOU with Gretai Securities (Taipei) & Shenzhen Stock Exchange (China) 15% Global IR (NY, HK, London) 10% 7.0% 5% 0% ‘01 ‘02 ‘03 Mar. ‘04 ‘00

  27. Ⅴ : Next Step 02. Next Step • Co-operate with FSS, KSE for Korea Standardization in Working Group • Announce K-GAAP Taxonomy as Standard Financial Reporting for Korean Companies with the aid of FSS, KSE & KASB • Co-operation with FSS to improve e-disclosure infrastructure from existing SGML to XBRL & XML. XBRL Int’l Approval on KGAAP Taxonomy • Stock Exchanges adopting XBRL (Canada, New Zealand, Japan, China etc.) & Global Information Vendors (Bloomberg, Reuters etc.) • Sharing Knowledge of XBRL Project know-how - XBRL Format Financial Information Exchange - English Disclosure Exchange Strategic Global Alliances • Value Reporting Enhancement • ASP Service using XBRL • Expand participating companies by Market Consolidation (2004) After Global IR Management Project

  28. Ⅴ : Next Step 03. KOSDAQ: Role in the Korean Economy Building Public Trust Restoring growth balance between SMEs & Conglomerate Facilitating growth in Knowledge-based industries Enhancing competitiveness of exchange industry COMPANIES INVESTORS Providing Venture Capital Providing various investment tools through XBRL

  29. Thank you

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