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

1. 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)

2. 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 for foreign financial organization”

3. 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
Americas
Argentina
Canada
Chile
Mexico
United States
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
Mid East
United Arab Emirates
* Custody Network Euroclear, Clearstream, Citibank, BNY Mellon, SSB, Pershing

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

5. 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

6. 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
- non-commercial banking institution (cash
management or FX not available
directly)
- no global network
Overcoming the weakness:
- alliance with commercial bank for cash
management and FX

7. 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

8. CSD Linkage KSD-JASDEC linkage TSE 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)

9. 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
Singapore T.A.
KSD
Singapore
T.A.
Share
holder M
Application for Migration
M+1
Migration form
notice
M+2
Form acceptance
M+2~5
Ready to
issue
M+6
Share issue

10. 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
Companies
Establish
ment
Issuing country
Foreign listing
Migration
Listing type
Listing schedule
3NOD Digital
Cayman
Korea
Non-listing X
Share
Aug. 2007
Huafeng Group Holdings
Hong Kong O
KDR
Nov. 2007
Cowell E Holdings
Feb. 2008
6 more companies
Japan
Share or KDR
November
December

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

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

13. Thank You!