Hyo-Sang Yoo October 2, 2008

1. Hyo-Sang Yoo October 2, 2008 KSD and International Experiences

2. KSD Overview ※Participants of KSD Central Securities Depository of Korea 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)

3. Models for Cross-border Settlement • Cross-border Securities Settlements Global Custodian Local Agent ICSD 6 Models Direct Access CSD Linkage Multi CSD Model • These modelsvary by “legislation structure”, “market practices for investment” and “openness for foreign financial organization”

4. Europe Austria Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Switzerland United Kingdom ICSDs Euroclear Clearstream Asia Australia China(Shanghai) China(Shenzen) Hong Kong Indonesia Japan New Zealand Philippines Singapore Thailand Americas Argentina Canada Chile Mexico United States Mid East United Arab Emirates 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 * Custody Network Euroclear, Clearstream, Citibank, BNY Mellon, SSB, Pershing

5. Global custody for Korean investors ※Cross-border settlement volume ※Increasing settlements on 3 Asian markets (Bil., USD)

6. 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 cross-border investment Foreign Investor Multi-tier structure for foreign investors Global Custodian DISINTERMEDIATION by KSD’s local custody service Local Custodian - Direct access to CSD - Custody a/c as a participant’s a/c and legal ledger KSD

7. Local custody - Disintermediation • 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 • 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 • Overcoming the weakness: • - alliance with commercial bank for cash • management and FX • Weakness of KSD’s custody service • - non-commercial banking institution (cash • management or FX not available • directly) • - no global network

8. CSD Linkage • Base of CSD linkage – Local custody service • Co-listing of Korean securities on Tokyo Stock Exchange • - Kodex200 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

9. CSD Linkage • KSD-JASDEC linkage TSE  Selling ’ Buying Selling Broker Buying Broker Japan  Data of trading  Application for listing JASDEC Selling broker Buying broker Issuer Custody agreement  Notification of deposit (Migration) Korea KSD JASDEC A/C  Stocks issuing & deposit (through brokers)

10. M+1 Migration form notice M Application for Migration M+2 Form acceptance M+2~5 Ready to issue M+6 Share issue Share holder KSD KSD Share holder Singapore T.A. KSD Singapore T.A. Singapore T.A. 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 • Inefficiency for migration and risks of arbitrage trading comparing to CSD linkage • - 6 BUSINESS DAYS to migrate for arbitrage trading

11. Issuance of KDR and shares for 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

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

13. Investment Managers Fund Administrator 1 4 2 3 3 Fund Fund Asset E/R System D/S System 1 2 Distributors FundNet Broker/ Dealers 4 7 5 5 6 7 8 6 5 Custodians/ Trustees FundNET – Operating Structure

14. Thank You!