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Korea Securities Depository

CSD Linkage Service by KSD. - Featuring Co-listing between Exchanges. June, 2008. Korea Securities Depository. Contents. Ⅰ. Cross-border Securities Transactions and KSD Services. Ⅱ. KSD Custody Services. Ⅲ. Custody Services Using CSD linkage.

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Korea Securities Depository

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  1. CSD Linkage Service by KSD - Featuring Co-listing between Exchanges June, 2008 Korea Securities Depository

  2. Contents Ⅰ Cross-border Securities Transactions and KSD Services Ⅱ KSD Custody Services Ⅲ Custody Services Using CSD linkage

  3. I . Cross-border Securities Transactions and KSD Services • What are International Services? • International Services of KSD

  4. Overseas Domestic Investor Investor Investor Investor Exchange Exchange Securities Securities Issuer Issuer I. Cross-border Securities Transactions and KSD Services 1. What are International Services? Capital Market Structure and Cross-border Securities Transactions

  5. Ⅰ. Cross-border Securities Transactions and KSD Services 1. What are International Services? ① Out-bound : from Domestic to Overseas Issuer Stock ADR Bond (CB·BW·EB) Local Custodian for Original Shares CB·BW·EB Agent Paying Agent Investor Stock DR Bond ICSD Global Custodian

  6. Ⅰ. Cross-border Securities Transactions and KSD Services 1. What are International Services? ② In-bound : from Overseas to Domestic Issuer Stock KDR Bond · ETF Transfer Agent DR Custodian Disclosure Agent Investor Stock KDR Bond · ETF Standing Proxy Local Custodian

  7. Ⅰ. Cross-border Securities Transactions and KSD Services 1. What are International Services? Responsive to Rapid Changes in International Financial Environment Risk + Opportunity Change Network R & D

  8. Ⅰ. Cross-border Securities Transactions and KSD Services 1. What are International Services? International Cooperation and New Service Introduction Network Organizing int’l conference Consulting Exporting infrastructure CSD ISSA·ICMA ECSDA Lead manager Law firm CSD ADB R & D RSI CSD Linkage Cross-listing

  9. Ⅰ. Cross-border Securities Transactions and KSD Services • What are International Services? • International Services of KSD

  10. RSI CSD linkage Co-listing Conference Consulting Infra Export Int’l settlement Transfer agent Depositary Custodian Bond agents Local Custody Disclosure agent Ⅰ. Cross-border Securities Transactions and KSD Services 2. International Services of KSD Major International Services

  11. Ⅰ. Cross-border Securities Transactions and KSD Services Foreign Securities Deposit & Settlement Service 2. International Services of KSD Foreign Securities Deposit & Settlement Service • In case where a Korean purchases foreign securities in a foreign country, KSD designates a foreign custodian, and deposits and settles them. • KSD has designated global custodians and ICSDs as the custodians. • Institutional investors may select a foreign custodian directly. Retail investors, however, are required to deposit their securities, which they purchased through domestic securities firms, with KSD • Currently, KSD provides international deposit & settlement services to 30-some countries including the U.S., Japan and China. • As of December, 2007, the number of participants for the foreign securities deposit & settlement services stands at 122 organizations including brokers, banks, and insurers, holding 178 accounts.

  12. Ⅰ. Cross-border Securities Transactions and KSD Services DR underlying share custody 2. International Services of KSD DR Underlying Share Custody & Overseas Bond Agent • In case where a domestic company issues DR overseas, KSD signs a custody agreement with a foreign DR custodian and acts as a custodian of DR underlying shares. • KSD has signed a custody agreement with four overseas custodians. • 46 issues of 39 companies issued DR overseas of which KSD acts a underlying share custodian for 44 issues of 38 companies (99%). • On behalf of the companies that issued overseas bonds including CB·BW·EB, KSD receives and takes care of rights exercising of bondholders as a conversion · warrant exercise · exchange · paying agent. • KSD competes with domestic and foreign financial institutions. What is impressive is the market share of KSD stands at about 90%. Overseas Bond Agent

  13. Transfer Agent Depositary Ⅰ. Cross-border Securities Transactions and KSD Services 2. International Service of KSD Listing of Foreign Corporations and Local Custody (1) • In case where a foreign company issues and lists stocks on the domestic market, KSD acts as a transfer agent. • In July, 2007, KSD signed a transfer agent agreement with 3NOD Digital Group, a Cayman Islands offshore holding company. • In August, 2007, 3NOD listed itself on Kosdaq, the first case as a foreign company • In case where a foreign company lists itself on Korea Exchange in the form of DR, KSD takes care of DR issuance and rights exercising. • In March, 2007, KSD signed a depositary agreement with Hua feng Textile Int’l Group Ltd.. • In November, 2007, Hua feng Textile was listed on Stock Market. • In case where a foreign investor invests in the domestic market, KSD carries out securities deposit & settlement services as a standing proxy and custodian. Local Custody

  14. Ⅱ.KSD Custody Services • Custody Service Overview • Major Custody Services

  15. Ⅱ. KSD Custody Services 1. Custody Service Overview Custody Service & Custody Market 1 Concept of Custody Service Foreign investors should appoint standing proxy and a custodian for safekeeping their securities holdings in Korea 2 Market ratio of Custody Service (December, 2007)

  16. Ⅱ.KSD Custody Services • Custody Service Overview • Major Custody Services

  17. Ⅱ. KSD Custody Services 2. Major Custody Services Related Laws & Regulations and Services 1 Related Laws & Regulations Securities Cash Law Securities and Exchange Act Foreign Exchange Transactions Act Regulation on Supervision of Securities Business Regulation on Supervision of Securities Business Foreign Exchange Transactions Regulation Regulation 2 Scope of service • Investment registration • Opening accounts at banks and securities companies • - Foreign currency and KRW account • - Securities account • Securities custody • Entitlement processing • Information provision (Corporate actions)

  18. Ⅲ.Custody Services using CSD Linkage • CSD Linkage Overview • CSD Linkage Structure & Procedure • Migration Procedures • Corporate Action

  19. Ⅲ. Custody Services using CSD Linkage 1. CSD Linkage Overview Scope of CSD Linkage • CSD Linkage for International Settlement • - Foreign Securities Transaction & Settlement • - Overseas Custodian in issuing country • CSD Linkage for Co- Listing - DR Depositary & CSD in Listing country - Underlying share Custody

  20. Ⅲ. Custody Services using CSD Linkage 1. CSD Linkage Overview Roles of KSD depending on Different Co-listing Methods

  21. Ⅲ. Custody Services using CSD Linkage 1. CSD Linkage Overview Requirements for Co-Listing through CSD Linkage • Applicable Laws and Regulations - Listing regulation of Exchange - CSD regulation on paperless deposit Listing Country Issuing Country • CSD acting as a Custodian - Corporate Action, Standing proxy

  22. Ⅲ. Custody Services using CSD Linkage 1. CSD Linkage Overview Service Overview and Progress • In case a domestic company is listed on a foreign exchange, KSD provides custody services through CSD linkage. Overview • In December, 2001, KSD signed a custody agreement and an MOS with JSCC. • In November 1, 2007 KSD signed a custody agreement and an MOS with JASDEC. • In November, 2007, Kodex200 ETF was listed on Tokyo Stock Exchange (TSE) • Samsung Investment Trust Management Co., Ltd. co-listed Kodex200, which was listed on KRX, on TSE in November, 2007 • Some Korean Investment trust companies plan to list ETF in overseas market Progress

  23. Ⅲ. Custody Services using CSD Linkage • CSD Linkage Overview • CSD Linkage Structure & Procedure • Migration Procedures • Corporate Action

  24. Foreign CSD Selling broker A/C Buying broker A/C Ⅲ. Custody Services using CSD Linkage 2. CSD Linkage Structure & Procedure CSD Linkage Structure Foreign Exchange Selling ’Buying Selling Broker Buying Broker Data of trading Application for listing Overseas Issuer Notification of deposit (Migration) Custody agreement KSD F-CSD A/C Korea Stocks issuing & deposit (through brokers)

  25. KSD Participant A 150 shares Participant B 50 shares JASDEC A/C 100 shares Ⅲ. Custody Services using CSD Linkage 2. CSD Linkage Procedure & Structure Listing Structure under CSD Linkage KRX(300) Overseas(300) Foreign CSD Participant 1 20 shares Participant 2 70 shares Participant 3 10 shares

  26. Ⅲ. Custody Services using CSD Linkage • CSD Linkage Overview • CSD Linkage Structure & Procedure • Migration Procedures • Corporate Action

  27. Ⅲ. Custody Services using CSD Linkage 3. Migration Procedures Migration Between Exchanges KSD Foreign CSD A/C Participant A KRX Trading Overseas Trading

  28. Ⅲ. Custody Services using CSD Linkage 3. Migration Procedures Migration from KRX to Foreign Exchange (3-1) KSD Foreign CSD (3) (4) F- CSD A/C Broker /Custodian (2-1) Custodian (2) (5) (1-1) (5) (1)

  29. Ⅲ. Custody Services using CSD Linkage 3. Migration Procedures Migration from Foreign Exchange to KRX (3) KSD Foreign CSD (5) (2-1) (6) F-CSD A/C Broker /Custodian (2) Custodian (4) (5-1) (1) (7) (1-1)

  30. Ⅲ. Custody Services using CSD Linkage • CSD Linkage Overview • CSD Linkage Structure & Procedure • Migration Procedures • Corporate Action

  31. Ⅲ. Custody Services using CSD Linkage 4. Corporate Action Dividend Investor Issuing company KSD Foreign CSD Investor Investor

  32. Investor Foreign CSD Investor Investor Ⅲ. Custody Services using CSD Linkage 4. Corporate Action Voting Right Exercising KSD Issuing company

  33. Ⅳ. Vision • Current Status & Challenges • CSD linkage in Asia

  34. Ⅳ. Vision 1. Current Status & Challenges Current Status • Co-listing between Korean Stock market and Foreign Markets - Korean ETF to be listed in Asian Markets - Foreign Securities to be listed in Korean Market through CSD Linkage

  35. Ⅳ. Vision 1. Current Status & Challenges Challenges • Different Laws & Regulation - Physical Certificate Deposit - Qualification for Opening account in CSD • Tax - Beneficial shareholder statement, etc.

  36. Ⅳ. Vision • Current Status & Challenges • CSD linkage in Asia

  37. Ⅳ. Vision 2. CSD linkage in Asia CSD linkage in Asia CSD Linkage • makes CSD act as a Major Player • improves efficiency • provide participants with varied choices in Cross- border Transaction & Co-Listing in Asia

  38. Thank you Minhee Lee International Services Planning Team Korea Securities Depository Tel : 82-2-3774-3442 E-mail : hsmini@ksd.or.kr

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