Korea Securities Depository June, 2008. Contents Cross-border Securities Transactions and KSD Services Cross-border Securities Transactions and KSD Services

Korea Securities DepositoryKorea Securities DepositoryKorea Securities DepositoryKorea Securities Depository

June, 2008June, 2008

ContentsContents

Cross-border Securities Transactions and KSD ServicesCross-border Securities Transactions and KSD ServicesⅠⅠ

KSD Custody ServicesKSD Custody ServicesⅡⅡ

Custody Services Using CSD linkageCustody Services Using CSD linkageⅢⅢ

I .I . Cross-border Securities Transactions Cross-border Securities Transactions

and KSD Services and KSD Services

I .I . Cross-border Securities Transactions Cross-border Securities Transactions

and KSD Services and KSD Services

1.1. What are International Services?What are International Services?

2.2. International Services of KSDInternational Services of KSD



1. What are International Services?1. What are International Services?Capital Market Structure and Cross-border Securities Capital Market Structure and Cross-border Securities TransactionsTransactionsCapital Market Structure and Cross-border Securities Capital Market Structure and Cross-border Securities TransactionsTransactions

DomesticDomestic

Issuer

ExchangeExchange

SecuritiesSecurities

InvestorInvestorInvestorInvestor

OverseasOverseas

Issuer

ExchangeExchange

SecuritiesSecurities

InvestorInvestorInvestorInvestor

I. Cross-border Securities Transactions and KSD ServicesI. Cross-border Securities Transactions and KSD Services

1. What are International Services?1. What are International Services?

① Out-bound : from Domestic to Overseas ① Out-bound : from Domestic to Overseas

Issuer Stock ADR Bond (CB·BW·EB)

Investor Stock DR Bond

Local Custodian for Original Shares

CB·BW·EB AgentPaying Agent

Local Custodian for Original Shares

CB·BW·EB AgentPaying Agent

ICSDGlobal Custodian

ICSDGlobal Custodian

Ⅰ. Cross-border Securities Transactions and KSD ServicesⅠ. Cross-border Securities Transactions and KSD Services


② In-bound : from Overseas to Domestic ② In-bound : from Overseas to Domestic

Issuer

Investor

Transfer AgentDR Custodian

Disclosure Agent

Transfer AgentDR Custodian

Disclosure Agent

Standing ProxyLocal CustodianStanding ProxyLocal Custodian

Stock KDR Bond · ETF

Stock KDR Bond · ETF


1. What are International Services?1. What are International Services?Responsive to Rapid Changes in International Financial Responsive to Rapid Changes in International Financial Environment Environment Responsive to Rapid Changes in International Financial Responsive to Rapid Changes in International Financial Environment Environment

NetworkNetwork

ChangeChangeRisk

+Opportunity

Risk+

Opportunity

R & D R & D



International Cooperation and New Service IntroductionInternational Cooperation and New Service IntroductionInternational Cooperation and New Service IntroductionInternational Cooperation and New Service Introduction

Network

R & D

CSDISSA·ICMA

ECSDA

CSDISSA·ICMA

ECSDA

Lead managerLaw firm

CSDADB

Lead managerLaw firm

CSDADB

Organizing int’l conference Consulting Exporting infrastructure

RSI CSD Linkage Cross-listing


ⅠⅠ.. Cross-border Securities Transactions Cross-border Securities Transactions and KSD Services and KSD Services

ⅠⅠ.. Cross-border Securities Transactions Cross-border Securities Transactions and KSD Services and KSD Services





2. International Services of KSD2. International Services of KSD

Major International ServicesMajor International ServicesMajor International ServicesMajor International Services

RSICSD linkage

Co-listing

ConferenceConsultingInfra Export

Local CustodyDisclosure agent

CustodianBond agents

Int’l settlement

Transfer agentDepositary


Foreign Securities Deposit & Settlement ServiceForeign Securities Deposit & Settlement ServiceForeign Securities Deposit & Settlement ServiceForeign Securities Deposit & Settlement Service

ForeignForeignSecurities Securities

DepositDeposit& &

SettlementSettlementServiceService

ForeignForeignSecurities Securities

DepositDeposit& &

SettlementSettlementServiceService

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.

2. International Services of KSD2. International Services of KSDⅠ. Cross-border Securities Transactions and KSD ServicesⅠ. Cross-border Securities Transactions and KSD Services

DR Underlying Share Custody & Overseas Bond AgentDR Underlying Share Custody & Overseas Bond Agent DR Underlying Share Custody & Overseas Bond AgentDR Underlying Share Custody & Overseas Bond Agent

OverseasBond Agent

OverseasBond Agent

DRDR underlying underlying

sharesharecustodycustody

DRDR underlying underlying

sharesharecustodycustody

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%.

2. International Services of KSD2. International Services of KSDⅠ. Cross-border Securities Transactions and KSD ServicesⅠ. Cross-border Securities Transactions and KSD Services

Listing of Foreign Corporations and Local Custody (1)Listing of Foreign Corporations and Local Custody (1)Listing of Foreign Corporations and Local Custody (1)Listing of Foreign Corporations and Local Custody (1)

LocalLocalCustodyCustody LocalLocal

CustodyCustody

TransferTransferAgentAgent

DepositaryDepositary

TransferTransferAgentAgent

DepositaryDepositary

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.

2. International Service of KSD2. International Service of KSDⅠ. Cross-border Securities Transactions and KSD ServicesⅠ. Cross-border Securities Transactions and KSD Services

ⅡⅡ.. KSD Custody ServicesKSD Custody ServicesⅡⅡ.. KSD Custody ServicesKSD Custody Services

1.1. Custody Service OverviewCustody Service Overview

2.2. Major Custody ServicesMajor Custody Services


2.2. Major Custody ServicesMajor Custody Services

Ⅱ. KSD Custody ServicesⅡ. KSD Custody Services

1. Custody Service Overview1. Custody Service Overview

Custody Service & Custody MarketCustody Service & Custody MarketCustody Service & Custody MarketCustody Service & Custody Market

Concept of Custody ServiceConcept of Custody Service11

Foreign investors should appoint standing proxy and a custodian for safekeeping their securities holdings in Korea

Market ratio of Custody ServiceMarket ratio of Custody Service22

C 23. 1%

E 25. 4%

B 36. 0%Others 7. 9%KSD 1. 9%A 2. 7%

D 3. 0%

(December, 2007)(December, 2007)(December, 2007)(December, 2007)

ⅡⅡ.. KSD Custody ServicesKSD Custody ServicesⅡⅡ.. KSD Custody ServicesKSD Custody Services


2.2. Major Custody Services Major Custody Services


2.2. Major Custody Services Major Custody Services

Scope of serviceScope 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)

22

Ⅱ. KSD Custody ServicesⅡ. KSD Custody Services

2. Major Custody Services2. Major Custody Services

Related Laws & Regulations and ServicesRelated Laws & Regulations and ServicesRelated Laws & Regulations and ServicesRelated Laws & Regulations and Services

Related Laws & RegulationsRelated Laws & Regulations11

LawLaw

RegulationRegulation

SecuritiesSecurities CashCash

Securities and Exchange ActSecurities and Exchange ActSecurities and Exchange ActSecurities and Exchange Act Foreign Exchange Transactions ActForeign Exchange Transactions ActForeign Exchange Transactions ActForeign Exchange Transactions Act

Regulation on Supervision of Regulation on Supervision of Securities BusinessSecurities BusinessRegulation on Supervision of Regulation on Supervision of Securities BusinessSecurities Business

Foreign Exchange Transactions Foreign Exchange Transactions RegulationRegulationForeign Exchange Transactions Foreign Exchange Transactions RegulationRegulation

Regulation on Supervision of Regulation on Supervision of Securities BusinessSecurities BusinessRegulation on Supervision of Regulation on Supervision of Securities BusinessSecurities Business

ⅢⅢ.. Custody Services using CSD LinkageCustody Services using CSD LinkageⅢⅢ.. Custody Services using CSD LinkageCustody Services using CSD Linkage

1.1. CSD Linkage OverviewCSD Linkage Overview

2.2. CSD Linkage Structure & ProcedureCSD Linkage Structure & Procedure

3.3. Migration ProceduresMigration Procedures

4.4. Corporate ActionCorporate Action





Scope of CSD LinkageScope of CSD LinkageScope of CSD LinkageScope of CSD Linkage

1. CSD Linkage Overview1. CSD Linkage OverviewⅢ. Custody Services using CSD LinkageⅢ. Custody Services using CSD Linkage

CSD Linkage for International SettlementCSD Linkage for International Settlement

- Foreign Securities Transaction & Settlement

- Overseas Custodian in issuing country

CSD Linkage for Co- ListingCSD Linkage for Co- Listing

- DR Depositary & CSD in Listing country

- Underlying share Custody

CSD Linkage for International SettlementCSD Linkage for International Settlement

- Foreign Securities Transaction & Settlement

- Overseas Custodian in issuing country

CSD Linkage for Co- ListingCSD Linkage for Co- Listing

- DR Depositary & CSD in Listing country

- Underlying share Custody

Roles of KSD depending on Different Co-listing MethodsRoles of KSD depending on Different Co-listing MethodsRoles of KSD depending on Different Co-listing MethodsRoles of KSD depending on Different Co-listing Methods


DivisionDivisionForeign CompanyForeign Company

in KRXin KRXDomestic CompanyDomestic Company

in Overseas Marketin Overseas Market

DRDR KDR DepositaryKDR Depositary Custodian of Custodian of Underlying SharesUnderlying Shares

StockStock Transfer Agent & Transfer Agent & CSDCSD --

CSD LinkageCSD Linkage

(Stock)(Stock)CSDCSD Custodian of Custodian of

Foreign CSDForeign CSD

Requirements for Co-Listing through CSD LinkageRequirements for Co-Listing through CSD LinkageRequirements for Co-Listing through CSD LinkageRequirements for Co-Listing through CSD Linkage


Listing Listing CountryCountryListing Listing CountryCountry

Applicable Laws and Regulations

- Listing regulation of Exchange

- CSD regulation on paperless deposit

Issuing CountryIssuing Country

CSD acting as a Custodian

- Corporate Action, Standing proxy

ProgressProgressProgressProgress

OverviewOverviewOverviewOverviewIn case a domestic company is listed on a foreign

exchange, KSD provides custody services through CSD linkage.

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

1. CSD Linkage Overview1. CSD Linkage Overview

Service Overview and ProgressService Overview and ProgressService Overview and ProgressService Overview and Progress

Ⅲ. Custody Services using CSD LinkageⅢ. Custody Services using CSD Linkage

ⅢⅢ.. Custody Services using CSD Linkage Custody Services using CSD LinkageⅢⅢ.. Custody Services using CSD Linkage Custody Services using CSD Linkage









Foreign CSD

Selling broker Selling broker A/CA/C

Selling broker Selling broker A/CA/C

KSDF-CSD A/C

KSDF-CSD A/C

Foreign ExchangeForeign

ExchangeSelling Selling BrokerBrokerSelling Selling BrokerBroker

Buying broker Buying broker A/CA/C

Buying broker Buying broker A/CA/C

Buying Buying BrokerBrokerBuying Buying BrokerBroker

Custody Custody agreementagreementCustody Custody

agreementagreement

CSD Linkage StructureCSD Linkage StructureCSD Linkage StructureCSD Linkage Structure


Application for listingApplication for listing

SellingSelling ’’BuyingBuying

Data of tradingData of trading

IssuerIssuerIssuerIssuer

OverseasOverseas

KoreaKorea

2. CSD Linkage Structure & Procedure2. CSD Linkage Structure & Procedure

Stocks issuing & depositStocks issuing & deposit (through brokers)(through brokers)

Notification of depositNotification of deposit (Migration)(Migration)

KRX(300)KRX(300) Overseas(300)Overseas(300)

Participant 1Participant 1

20 20 shares


10 10 shares

Foreign CSDForeign CSD

JASDEC A/C100 shares

Participant B50 shares

Participant A150 shares

KSDKSD


70 70 shares

2. CSD Linkage Procedure & Structure2. CSD Linkage Procedure & Structure

Listing Structure under CSD LinkageListing Structure under CSD Linkage











Foreign CSD A/C

Participant A

KSDKSD

KRX KRX TradingTrading

OverseasOverseas

TradingTrading

3. Migration Procedures3. Migration Procedures

Migration Between ExchangesMigration Between Exchanges


F- CSD

A/CBroker

/Custodian

KSDKSD Foreign CSDForeign CSD

Custodian

(1)(1)

(1-1)(1-1)

(2-1)(2-1)

(2)(2)

(3)(3)

(3-1)(3-1)

(4)(4)

(5)(5)

(5)(5)


Migration Migration from KRX to Foreign Exchangefrom KRX to Foreign Exchange


F-CSD A/C

Broker/Custodian

KSDKSD Foreign CSDForeign CSD

Custodian

(1-1)(1-1)

(1)(1)

(2)(2)

(2-1)(2-1)

(4)(4)

(3)(3)

(6)(6)

(5)(5)

(7)(7)

(5-1)(5-1)


Migration Migration from Foreign Exchange to KRXfrom Foreign Exchange to KRX











KSDKSD

IssuingIssuingcompanycompany

ForeignForeignCSDCSD

InvestorInvestor

InvestorInvestor

InvestorInvestor

4. Corporate Action4. Corporate Action

Dividend Dividend


KSDKSD IssuingIssuingcompanycompany

Foreign Foreign CSDCSD

InvestorInvestor

InvestorInvestor

InvestorInvestor

4. Corporate Action4. Corporate Action

Voting Right ExercisingVoting Right Exercising


ⅣⅣ.. Vision VisionⅣⅣ.. Vision Vision

1.1. Current Status & ChallengesCurrent Status & Challenges

2.2. CSD linkage in AsiaCSD linkage in Asia



Current StatusCurrent StatusCurrent StatusCurrent Status

Ⅳ. Vision Ⅳ. Vision

1. Current Status & Challenges1. Current Status & Challenges

• 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

• 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

ChallengesChallengesChallengesChallenges

1. Current Status & Challenges1. Current Status & Challenges Ⅳ. Vision Ⅳ. Vision

• Different Laws & Regulation

- Physical Certificate Deposit

- Qualification for Opening account in CSD

• Tax

- Beneficial shareholder statement, etc.

• Different Laws & Regulation

- Physical Certificate Deposit

- Qualification for Opening account in CSD

• Tax

- Beneficial shareholder statement, etc.

ⅣⅣ.. Vision VisionⅣⅣ.. Vision Vision





CSD linkage in AsiaCSD linkage in Asia

2. CSD linkage in Asia2. CSD linkage in Asia Ⅳ. Vision Ⅳ. Vision

CSD Linkage CSD Linkage

• • makes CSD act as a Major Playermakes CSD act as a Major Player • • improves efficiencyimproves efficiency • • provide participantsprovide participants with varied varied choiceschoices

in Cross- border Transaction & Co-in Cross- border Transaction & Co-Listing in AsiaListing in Asia

CSD Linkage CSD Linkage

• • makes CSD act as a Major Playermakes CSD act as a Major Player • • improves efficiencyimproves efficiency • • provide participantsprovide participants with varied varied choiceschoices

in Cross- border Transaction & Co-in Cross- border Transaction & Co-Listing in AsiaListing in Asia

Minhee LeeMinhee Lee

International Services Planning Team Korea SecurInternational Services Planning Team Korea Securities Depository ities Depository Tel : 82-2-3774-3442Tel : 82-2-3774-3442E-mail : [email protected] : [email protected]

Minhee LeeMinhee Lee

International Services Planning Team Korea SecurInternational Services Planning Team Korea Securities Depository ities Depository Tel : 82-2-3774-3442Tel : 82-2-3774-3442E-mail : [email protected] : [email protected]

Thank youThank youThank youThank you

Documents

Korea Securities Depository June, 2008. Contents Cross-border Securities Transactions and KSD Services Cross-border Securities Transactions and KSD Services