1. Korean Discount Chun Hobin Kim Jaesun Park Jungho TEAM 5

2.  Introduction Problem of Korean Discount  Body Reasons  Conclusion Solutions & Recommendation Contents

3. 2001 PER2008 PER MSCI world25.712.5 Emerging Markets13.011.9 Asia (Ex-Japan) Emerging Europe Latin America 14.3 11.3 13.1 11.3 Korea10.011.26 Merrill Lynch August 3, 2001 Analyst’s Report Hana Securites May 5, 2008 Stocks in Morgan Stanley Capital International(MSCI) Korean Discount

4. NationPERS&P Sovereign Credit Rating Moody’s Sovereign Credit Rating Brazil11.2BBB-Ba2 Chile15.6BBBA2 China14.2AA2 Hong Kong16.7AAAA2 Korea11.2AA2 India16.7BBBBaa3 Taiwan13.4AA-Aa3 United States13.9AAAAaa Singapore13.5AAAAaa Japan13.2AAAaa 1) PER – MSCI May 4 2008 2) Moody's Rating - Country ceiling long-term foreign currency bond rating 2008 3) S&P rating - Sovereign rating 2008 PER & Sovereign Credit Rating

5.  2007 Operating Profit(E) – 594 Billion KRW  2008 Operating Profit(E) – 987 Billion KRW  2007 Debt ratio – 26.50%  2008 Debt ratio(E) – 25.23%  2007 PER – 12.74  2008 PER(E) – 11.49 Samsung Electronics

6. CompanyNationMarket ShareSales(US$Mn.)2007 EPS SamsungKorea 25.2%1,933$43 HynixKorea23.3%1,529$0.7 QimondaGermany12.9%992-$7.1 ElpidaJapan12.6%905-$318.89 MicronUSA11.2%828-$1.84 DRAMeXchange, November 2007 Reuters Competitors

7.  Influence on Sovereign Credit Rating 0.35 % interest rate difference by 1 level Foreign Exchange Equalization Fund  Vulnerability to Hostile Takeover ex) SK versus Sovereign Global  Underestimation of corporate value Problems

8.  Political Problems 1) North Korea 2) Government Regulations 3) Militant labor union & Anti-FI culture  Economic problems 1) Corporate Governance 2) Accounting Principle 3) Low Dividend Yield Reasons

9.  Cross Share holding  Illegal Insider Trading Corporate Governance

10. Samsung Group

11.  Window dressing settlement SK global  Different from Global Standard IFRS versus K-GAAP Accounting Standards

12. 0801Country Opacity ScoreAccounting Corporate Governance Opacity 11Finland91 22Hong Kong121 33Singapore14 44Sweden151 55Australia151 66Denmark1610 77Austria1610 16 Japan2521 2819Taiwan3430 4220Brazil4621 4123India4433 2431South Korea3130 Milken Institute, 2008 Opacity Index by Milken Institute

13. NationDividend Yield 1Taiwan4.06% 2Thailand3.37% 3Hong Kong3.36% 4Malaysia2.76% 5China1.82% 6South Korea1.5% 7Japan1.28% 8India0.81% Hanhwa Securities, 2008 Low Dividend Yield

14.  Deregulation  Change of militant labor and Anti-Foreign Capital culture  Deal with North Korea Risk Solutions for Political reasons

15.  Improvement on Corporate Governance Transformation to Holdings Company Division between Ownership and Management ex) LG  Introduction to IFRS  Change of Anti-Shareholder culture and policy Solutions for Economic reasons

16. LG (Before transforming to Holding Company) LG Electronics LG Chemical LG Cable LG International Corps LG Securites LG Petrochemical LG Card LG Caltex LG Retail LG IT LG Telecom Goo & Huh’s Families LG Home shopping

17. LG GS Chemical Retail Home shopping Chemi cal Electr onics Dacom Telecom … Holdings Company Structure … LS LG Holdings April 2003 - PER 3.9 7,760 won June 2008 – PER 13.6 80,200 won

18.  Some of Top 30 Chaebols declared transformation to Holdings Company 2007 – Kumho, CJ, SK, Hanjin, Dongyang 2008 – Doosan  Introduction to IFRS 2009- LG, Samsung Electronics 2011 – All Korean Companies Recommendation

19.  Momentum to increase corporate value & Competitiveness of each son company  Easy M&A(Global & Domestic)  Power shift from Owner to Shareholders  Division between Ownership and Management -> Good Chance to Invest Paradigm Shift from 70s Model to new Model Recommendation