1. Current Status and Future Outlook of Korean SLB Market - for New Service Initiative Task Force session June 28 th, 2006 Korea Securities Depository

2. Outline n Growth of SLB Market n Characteristics of SLB Market n CSD as SLB intermediary n Development since ACG9 n Future Outlook of SLB Market 1

3. n History  KSD is authorized as SLB intermediary (Aug. 1996)  Foreign Investors are allowed in SLB (July 1998)  KSFC (July 2000) and Securities companies (Sept. 2000) are allowed to act as SLB intermediary  Foreigner’s borrowing limit expanded to KRW 10 billion (July 2005)  Approval system to ‘Foreigner’s securities borrowing over KRW 10 billion’ was changed to ‘Prior-reporting System’ (Jan. 2006) Growth of SLB Market (1) 2

4. Growth of SLB Market (2) n Size of SLB Transactions 58286359227615752541462131002trading amount 06 1) 05040302010099989796year (Unit: 100 million shs) n Foreigner’s SLB Transactions 1) 86% 89% 12,712 431,548 10,990 384,109 2006 2) 83%82% 17,136 589,129 14,213 483,7432005 64%57% 12,872 425,305 8,281 242,3102004 65%56% 6,203 219,179 4,044 123,3222003 valuevolumevaluevolumevaluevolume foreigner's ratiototalforeigners (Unit: million shs, KRW billion) 1) KSD ’ s SLB statistics only 2)From Jan. through May for 2006 1)From Jan. through May for 2006 3

5. Characteristics of SLB Market (1) n SLB through Intermediaries n Blind Transaction n Active Participation of Foreigners n Tight Regulation 4

6. Characteristics of SLB Market (2) n SLB through Intermediaries  KSD, Securities Companies &KSFC act as intermediaries Foreigners should use intermediaries to SLB in Korea n Blind Transaction  Bid-Offer Transaction taking roots Cost efficient Easy to find the lender  Recall from lenders Not vis-à-vis contract Not reluctant to recall 5

7. Characteristics of SLB Market (3) n Active Participation of Foreigners  Borrower oriented market  High ratio of foreigners SLB trade Foreign investment ratio in Korean Stock Market: 37.17% SLB ratio of foreigner : over 80% n Tight regulation  FOL Foreigner’s SLB of FOL names are limited  Prior-report to BOK When borrow from onshore over 10billion Complicate reporting procedure  IRC etc. 6

8. CSD as SLB Intermediary n Strength  Corporate action service for lent shares n Weakness  Tight internal regulation  Limited risk taking Collateral ratio vs. Credit line  etc. 7

9. Development since ACG9 (1) n F/X deregulation n Borrowing of funds and banks are allowed n Completion of SLB consulting to TSD 8

10. Development since ACG9 (2) n F/X Deregulation  Prior-reporting system Foreigners who want to borrow more than KRW10 billion from onshore lender should submit prior report to BOK Changed from ‘approval system’ to ‘report system’  Way to market opening F/X liberalization plan (2009) n Borrowing of funds and bank are allowed  Financial institutions are allowed Securities Borrowing  Limited purpose Risk hedge, fail-cover, arbitrage 9

11. Development since ACG9 (3) n Completion of SLB consulting to TSD  Dispatch ‘System Consulting Team’ to TSD From July 2005 to March 2006, 6 members SLB & Repo system consulting System architecture design, system technical design, source coding, test & training  Scope of system consulting RepoSLBCommonTotal No. of screen46431099 No. of printout4572-117 Batch Program712-19 External Interface--55 10

12. Future Outlook of SLB Market n SLB liberalization  F/X liberalization is under way Prior-reporting system will be abolished in 2009 Foreign currency as collateral for SLB n High Potential for Growth  Funds & Banks SLB From July 2006, funds & banks will join SLB as borrower Aggregate value of funds : KRW 137 trillion  SLB amount: 1% of Securities Trading Amount 11

13. Thank You