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

2. Contents Ⅰ Ⅱ Ⅲ KSD Custody Services Custody Services Using CSD linkage
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. 1. What are International Services?
I. Cross-border Securities Transactions and KSD Services
1. What are International Services?
Capital Market Structure and Cross-border Securities Transactions
Domestic
Issuer
Exchange
Securities
Investor
Overseas
Issuer
Exchange
Securities
Investor

5. 1. What are International Services?
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. 1. What are International Services?
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. 1. What are International Services?
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. 1. What are International Services?
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
R & D
RSI
CSD Linkage
Cross-listing
Lead manager
Law firm
CSD
ADB

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

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

11. 2. International Services of KSD
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Services of KSD
Foreign Securities Deposit & Settlement Service
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. 2. International Services of KSD
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Services of KSD
DR Underlying Share Custody & Overseas Bond Agent DR
underlying
share
custody
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. 2. International Service of KSD
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Service of KSD
Listing of Foreign Corporations and Local Custody (1)
Transfer
Agent
Depositary
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.
Local
Custody
In case where a foreign investor invests in the domestic market, KSD carries out securities deposit & settlement services as a standing proxy and custodian.

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

15. 1. Custody Service Overview
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. 2. Major Custody Services
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. 1. CSD Linkage Overview Scope of CSD Linkage
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. Custodian of Underlying Shares Custodian of Foreign CSD
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
Roles of KSD depending on Different Co-listing Methods
Division
Foreign Company
in KRX
Domestic Company
in Overseas Market DR
KDR Depositary
Custodian of Underlying Shares
Stock
Transfer Agent & CSD -
CSD Linkage
(Stock)
CSD
Custodian of Foreign CSD

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. 1. CSD Linkage Overview Service Overview and Progress Overview
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. 2. CSD Linkage Structure & Procedure
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
Foreign CSD
Selling broker A/C
Buying broker A/C
Issuer
Notification of deposit
(Migration)
Custody agreement
KSD
F-CSD A/C
Korea
Stocks issuing & deposit
(through brokers)

25. 2. CSD Linkage Procedure & Structure
Ⅲ. Custody Services using CSD Linkage
2. CSD Linkage Procedure & Structure
Listing Structure under CSD Linkage
KRX(300)
Overseas(300)
JASDEC A/C
100 shares
Participant B
50 shares
Participant A
150 shares
KSD
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. 3. Migration Procedures Migration Between Exchanges KSD KRX Trading
Ⅲ. Custody Services using CSD Linkage
3. Migration Procedures
Migration Between Exchanges
KSD
Foreign CSD
A/C
Participant A
Overseas
Trading
KRX Trading

28. 3. Migration Procedures Migration from KRX to Foreign Exchange KSD
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. 3. Migration Procedures Migration from Foreign Exchange to KRX KSD
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. 4. Corporate Action Dividend Investor Foreign KSD CSD Investor
Ⅲ. Custody Services using CSD Linkage
4. Corporate Action
Dividend
Investor
Issuing
company
KSD
Foreign
CSD
Investor
Investor

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

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

34. 1. Current Status & Challenges
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. 1. Current Status & Challenges
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. 2. CSD linkage in Asia CSD linkage in Asia
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 :