1

Cultural Contents Korea Where Success Knows No Limits Index

The global cultural contents industry 3 CAGR by Region ( ) ( ) Global Market Size (2013) (2013) USD trillion $ $ $ $ Average CAGR 5 %  The global market is estimated at USD trillion, a 4.9% increase YoY.  The market is expected to achieve average CAGR of 5% until 2018, reaching USD 2.27 trillion.  The Asia Pacific and Central and South American regions are forecast to grow faster than other regions for the next 5 years.

Status of the cultural contents industry of Korea  Korea ranked 7 th in terms of the global market share, at 2.8%. 4 CAGR by Nation ( ) Size and Prospects of the Cultural Contents Market by Nation (Unit: USD mn) RankingNationPortion2013 1USA32.30%572,874 2Japan9.50%168,862 3China7.40%130,934 4Germany6.40%112,833 5U.K.5.10%90,514 6France4.30%75,880 7Korea2.80%49,225 8Canada2.60%46,626 RankingNation13-'18 CAGR 1China10.90% 2Canada5.00% 3USA4.80% 4Korea4.20% 5U.K.3.10% 6France3.10% 7Germany1.90% 8Japan0.70%

Sales trends 5 Average CAGR: 7.6 % Unit: KRW mn

Export status by region 6 Unit: KRW mn Southeast Asia North America

Major export items  Games: Game exports rank 1 st among all export items, at 57.2%. Game exports achieved an average CAGR of 24.6% from 2008 to  Entertainment: Entertainment exports increased 19.9% YoY, recording an average CAGR of 94.4% for the past 5 years. 7 GameGameEntertainmentEntertainment

High employment inducement factors 8 Source: MCST (2014) version Computing

Sustainable and high added values 9 Source: MCST (2014) version (Unit: KRW mn) Annual Average Rate of Change 8.6%

Cultural industries cluster Busan Daegu Daejeon Bucheon Cheonan Jeju Incheon Goyang Seongnam Andong Chuncheon Cheongju Cultural Industries Cluster Cultural Industry Promotion Districts Cultural Industry Promotion Agency 10

Benefits of cultural industries cluster Items Exemption of various liabilities License/permission benefits Tax benefits Cultural Industries Cluster 5 items, including alternative forest resource creation costs and farmland preservation expenses 34 items, including public sewage work and stream/road construction Exemption for acquisition and registration tax, 50% discount on property taxes, etc. Cultural Industry Promotion Districts 4 items, including replacement charge for forest resources 9 items, including public sewage work and stream/road construction - Cultural Industry Promotion Agency 7 items, including the alleviation of costs for development and overcrowded conditions - Exemption for acquisition and registration tax, 50% discount on property taxes, etc. 11

Operational structure 12 source : MCST(2014), p.90 Cultural Contents Specialist Investor Producer Distributor Project manager Asset manager Asset management fee Asset management consignment agreement Investment capital Investment profits Project management fee Project management consignment agreement Distribution (management and supervision) Production (management and supervision) Capital expenditure Requirement of capital needsStrengths National tax exemption + Transparent capital management

Size of fund & profitability rate Fund of funds  The government seeks funds and invests them in cultural contents so as to produce projects with the aim of reducing risks and securing autonomy through indirect investments. 13 Fund duration 30 years ( ) KRW 1.5 trillion $ $ (as of end of ) Average Earning Rate 8.72%

Culture Market 14 Eco-system and value chain of industry FDI is usually made in the domain of production and distribution

FDI trends 15 FDI from China Amount of FDI 37.9% (Unit : billion) 84.9% (Unit : billion) $ $

SuccessCases Types of success cases 16

[Paid-in capital increase by third-party allotment] KRW bn Tencent – CJ Games [Paid-in capital increase] KRW bn  Became the 3 rd largest shareholder of CJ Games through strategic share investment  Signed game service contracts (for Everybody’s Marble and Pong Pong Pong) 17

Film: A Wedding Invitation  This is a good example of collaboration among production staff from both countries as well as a Chinese-state-run distributor. This is a business model for global Korea-China projects. China, April 2013 Co-production Net profit = 6 x production costs 18 In China China’s 8 th most popular romance film ever 8th Production cost

ACC SM 娱乐 Cine 21 ACC – Ilshin Investment CO., LTD  The Ilshin New Korean Wave Investment Association, organized by Ilshin Investment Co., Ltd., is a KRW 30.5 billion-sized fund that is invested in broadcasting drama projects marketable overseas. (5-yr duration) Ilshin New Korean Wave Investment Association KRW 30.5 bn Note ACC is a contents-specialized company that has AVEX, NHK Enterprise and two satellite broadcasters as its major shareholders. SM NEOWIZ Internet Fund of funds The Ministry of Culture, Sports and Tourism invested KRW 15 bn 19

Google Campus  Google is launching its first Asian campus (third in the world) in a 2,000-square meter-area near Samseong Station, which can accommodate about 30,000 people. The campus is scheduled to open in the early half of To become a global startup hub