KSD Overview

December 14, 2001

Tashkent, Uzbekistan

H.S. Yoo

Outline

Overview of Korean Securities Market

KSD Profile

Scope of Business

Overview of Korean Securities Market

Securities Market Infrastructure

Overview of Trade & Settlement in Korea

Market Statistics

4

Securities Market Structure

: Audit & Inspection

: Planning & Admission

: Decision-MakingMinistry of Finance & Economy

Financial Supervisory Commission

Financial Supervisory Service

K S E KOSDAQ K O F E XOTC

Equity,Bond

KOSPI 200

Equity

Bond Equity Futures

Options

KOSCOMK S D

Deposit

Settlement

Computer System

Overview

5

Overview of Trade & Settlement in Korea

Members

Trade volume(year 2000)

Clearing

Settlement

Delivery

Payment

Netting

Settlement Cycle

K S E I N A S OTC(Bond) KOFEXKOSDAQ

SecuritiesCompanies

InstitutionalInvestors

InstitutionalInvestors

FuturesCompanies

SecuritiesCompanies

USD 506.2 bln USD 58 bln USD 1,416 bln USD 179.6 blnUSD 449.5 bln

K S E K S D K S D K O F E XK S D

K S D K S D K S D K O F E XK S D

Book-entryTransfer

Book-entryTransfer

Book-entryTransfer -

Book-entryTransfer

DesignatedBank

DesignatedBank B O K Designated

BankDesignated

Bank

Multilateral Bilateral R T G S MultilateralMultilateral

T+2 T+2 T T+1T+2

Overview

6

Market Statistics

Market Value

KSE 237 trillion KRW(182 billion USD)

KOSDAQ 45 trillion KRW(35 billion USD)

Total Market Value 282 trillion KRW(217 billion USD)

Listed Shares

KSE 19 billion shares

KOSDAQ 7.2 billion shares

Total Listed Shares 26.2 billion shares

Overview

(as of June, 2001)

KSD Profile

Foundation

Participants

Financial Highlights

8

Foundation

KSD Profile

December 1974

Commercial Code

Wholly-owned Subsidiary

of KSE

December 1974

Commercial Code

Wholly-owned Subsidiary

of KSE

April 1994

Securities & Exchange

Act (SEA)

Over 100 shareholders

Non-Profit Seeking

Special Public Organization

Sole CSD under the SEA

April 1994

Securities & Exchange

Act (SEA)

Over 100 shareholders

Non-Profit Seeking

Special Public Organization

Sole CSD under the SEA

KSSC KSD

9

Participants964 accounts for 456 participants (Oct. 2001)

KSD Profile

15%

14%

10%

8%

46%

7%Broker/Dealer(71)

Bank(62)

ITC(47)

Insurance (35)

Other Financial Institution (210)

Others(32)

10

Financial highlights (Dec. 31, 2000)

Total assets of 753 billion KRW

(579 million USD)Shareholder’s equity of 241 billion KRW

(185 million USD)Net income of 69 billion KRW

(53 million USD)

KSD Profile

Scope of Business

Centralized Deposit and SettlementEligible SecuritiesAccount BookKSE SettlementKOSDAQ SettlementDebt Settlement (OTC)Institutional Settlement(INAS)

Corporate Actions Cross-border Securities Settlement Derivative Settlement Services

Deposit & Settlement

Eligible Securities Account Book KSE Settlement KOSDAQ Settlement Debt Settlement (OTC) Institutional Settlement(INAS)

Scope of business

13

Eligible Securities

Securities listed on the KSE;

Securities registered on the KOSDAQ;

Short-term monetary instruments including CD

s and CPs; and

Securities deemed appropriate by KSD

Deposit & SettlementScope of business

14

Account Book

Participant

Client

Client A/C Book

Participant A/C BookProprietary Client

Deposit

Redeposit

Deposit & SettlementScope of business

15

KOSCOM

KSE Market Settlement

KSE

Broker/DealerBroker/Dealer4. Settlement(T+2, 4 p.m.)

3. Settlement Statement(T+2 Morning)

2. Clearing Data(T+1)

1. Trade (T) / Confirmation (T) 1. Trade (T) / Confirmation (T)

3. Settlement Statement(T+2 Morning)

4. Settlement(T+2, 4 p.m.)

Deposit & SettlementScope of business

16

KOSCOM

KOSDAQ Settlement

KOSDAQ

Broker/DealerBroker/Dealer4. Settlement(T+2, 4 p.m.)

3. Settlement Statement(T+2 Morning)

2. Trade Data(T)

1. Trade (T) / Confirmation(T) 1. Trade (T) / Confirmation(T)

3. Settlement Statement(T+2 Morning)

4. Settlement(T+2, 4 p.m.)

Deposit & SettlementScope of business

17

1. IDB and participants enter the trade details into the SAFE 21.

2. KSD matches the trade details from each trade counterpart and sends matching report to them.

3-1 KSD checks if the seller’s account has enough securities to settle the trade. If yes, KSD restricts the securities from disposal.

3-2 KSD transmits the fund transfer instruction to BOK.(KSD a/c→Seller a/c)

4. The buyer transfers the settlement fund into KSD’s a/c

5. Simultaneously BOK-wire transfers the settlement fund into the seller’s a/c

6. BOK-wire transmits the message that the settlement fund is credited into seller’s a/c.

Simultaneously, KSD transfers the securities into the buyer’s a/c.

Buyer`s a/c

KSD’s a/c

[BOK]

④ Fund ransfer

Seller`s a/c

③Transmission

⑤ Fund Transfer

Participants

Matching System

<Seller’s a/c>enough securities ?

Queuesystem

[KSD]

no

Restriction of Bonds

yes

Bonds Transfer

Trade details

②Matching report

Fund Transfer Instruction

(KSD→Seller)

Transfer Results(Simultaneously)

[Interface]

⑥Transmission

Debt Settlement (OTC)

Deposit & SettlementScope of business

18

INAS System

Deposit & SettlementScope of business

Institutional Investor

Securities Company

Order OrderExecution

KSE

4. Settlement(Book-Entry:T+2)

2. Confirmation & Affirmation(T+1)

3. Preliminary

Settlement Data (T+1) 3. Preliminary

Settlement Data (T+1)

1. Trade Data (T)

19

Beneficial Owner’s BookBeneficial Owner’s Book

Corporate Actions : Beneficial Owner System Beneficial Owner : The persons whose stocks are deposited with

KSD and registered in KSD’s name

Streamlined procedure for rights exercising by beneficial owners

Efficient way of securities management for issuers & participants

Issuer(Transfer Agent)Issuer(Transfer Agent)

Client a/c BookClient a/c Book

ParticipantsParticipants

Participant a/c BookParticipant a/c Book

Beneficial OwnerBeneficial Owner

KSDKSD

Right Exercising(Direct)

Request for Right Exercising

Beneficial Owners’ Statement

Right Exercising(Indirect)

Notification

Request for rights exercising

Redeposit

Beneficial Owners’ Statement

Deposit

ClientClient ProprietaryProprietary

Scope of business

Cross-border Securities Settlement

Outbound Settlement System- Settlement system for Korean investors who invest in foreign securities market

Inbound Settlement System- Settlement system for foreign investors who

invest in Korean securities market

Scope of business

21

Outbound Settlement SystemGlobal Custody - General Investors : Mandatory - Institutional Investors : OptionalCross-border Clearing Network(CCN) - 42 Countries covered - Sub-Custodian : Euroclear, Clearstream, State Street Bank, BNY - Communication : SAFE21, SWIFT, Sub-Custodian’s proprietary S/W

CSD A(Or Global Custodian)CSD A(Or Global Custodian) KSD

<Overseas> <Korea>

Participant 1 Participant 2 KSD Participant 5Participant 4Participant 3

Cross-border Securities SettlementScope of business

22

Inbound Settlement System(Local Custody Services)

Agent Services (Investment Registration) Custody & Settlement of Securities Cash Management / Corporate Actions Services Linkage with Foreign CSDs : HKMA, JSCC Total Assets under Custody (Oct. 30, 2000) Equity : 3.5 trillion KRW (2.7 billion USD) Debt Securities :28.5 billion KRW (22.5 million USD)

CSD A(or Global Custodian)CSD A(or Global Custodian) KSD

<Overseas> <Korea>

CSD A(or LC)CSD A(or LC)Participant 1 Participant 2 Participant3 Participant 5Participant 4

Cross-border Securities SettlementScope of business

23

Securities Lending / Repo Securities Lending & Settlement Services

Lender : FeeBorrower

– Arbitrage trading– Settlement Coverage

Triparty Repo ServicesLending and Borrowing of funds by collateralizing sec

uritiesSettlement and collateral management on behalf of part

icipants

Scope of business

24