Newsletter. KSFC News. Financial Market & Statistics. Special Features PUBLISHED BY KOREA SECURITIES FINANCE CORPORATION ISSUE #013 SUMMER, 2017

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1 Newsletter PUBLISHED BY KOREA SECURITIES FINANCE CORPORATION ISSUE #13 SUMMER, 217 Special Features KSFC News Financial Market & Statistics - KSFC Registers as Foreign Exchange Business Provider - Business News - CSR Activities - Trends in the Korean Financial Markets - KSFC Statistics

2 2 KSFC Newsletter I. SPECIAL FEATURES KSFC Registers as Foreign Exchange Business Provider KSFC registered with the Ministry of Strategy and Finance in May, 217 as a foreign exchange business provider, in accordance with the Foreign Exchange Transactions Act. KSFC has been pushing forth with the registration since last year, and the hard-earned registration now authorizes KSFC to begin in earnest its foreign exchange businesses, including provision of loans and trading RPs in foreign currency. In response to increasing investments overseas by financial investment companies, as well as expansion of their businesses abroad, KSFC has been considering many options to support their businesses via providing foreign currency liquidity and facilitating foreign currency financing. With the registration as a forex business provider, KSFC is now duly authorized to support financial investment companies through the provision of loans and RPs in foreign currency, in addition to its long-held role of providing such products in the Korean won. Going forward, KSFC will put its utmost effort to accurately identify foreign currency demand by collaborating with the financial investment industry. As the sole securities finance corporation in Korea, KSFC will continue to pursue mutual growth with market participants by supporting the capital market.

3 Issue # 13_ SUMMER, II. KSFC NEWS Business News Assets under custody hit an all-time high of 1 trillion won (Units: trillion won) Jun.1, 24 Oct.12, 25 Aug.18, 28 Oct.28, 211 Oct.3, 214 Jul.18, 216 Apr.14, 217 Launch of custodial business AUC of 1 trillion won AUC of 3 trillion won AUC of 5 trillion won AUC of 7 trillion won All-time high AUC of 9 trillion won All-time high AUC of 1 trillion won KSFC s assets under custody reached an all-time high of 1 trillion won in April, 217. Since launching of custodial business in June of 24, executives and employees at KSFC have cooperated for 13 ceaseless years to achieve such an impressive number. In the custody market bustling with conventional bank players, KSFC has indeed achieved great progress, while sparing no effort to diversify its assets under custody. As a result, KSFC has secured a solid position in the market, witnessed by its designation as a custodian for the public pension fund investment pool, with total assets of 1 trillion won. Going forward, KSFC will continue to identify and proactively meet the needs of customers, and provide an array of services to boost its competitive edge.

4 4 KSFC Newsletter II. KSFC NEWS Total term RP purchase reaches 3 trillion won KSFC s total purchase of term RPs set a new record at 3.35 trillion won in June, 217. Since the introduction of the Plan to Facilitate Money Markets by the financial authorities, KSFC has been striving to diversify money market investments, of which the lion s share (87.5%) was overnight RPs. As a result of raising its purchase volume for term RPs to facilitate term RP trading, the total purchase jumped 1.45 trillion won to reach 3.35 trillion won in just a year s time. KSFC further plans to take the lead in expanding the market for term RPs and triggering more demand, via widening the scope of RP counterparties and eligible collateral, such as financial and non-financial corporate bonds. (Units: trillion won) trillion won in Jun trillion won in Mar trillion won in Jul trillion won in Dec Jul. 16 Aug. 16 Sep. 16 Oct. 16 Nov. 16 Dec. 16 Jan, 17 Feb. 17 Mar. 17 Apr. 17 May. 17 Jun. 17

5 Issue # 13_ SUMMER, CSR Activities Donations to child welfare facility for educational and character-building programs KSFC delivered donations to a regional child welfare center located in Goyang city of Gyeonggi Province in May of 217. The donation of 2 million won was politely offered with hopes of supporting children of low-incomebracket families grow into core members of society. Systematic and professionally organized programs, including educational and characterbuilding programs, bibliotherapy and reading programs for kids from multi-cultural families, will go a long way in helping children create and maintain a healthy mind and body. KSFC will search for more ways to care and share so that children, regardless of their background, can unleash their full potential. Sponsorship for empowerment of the developmentally disabled On the Day of Persons with Disabilities, April 2, KSFC offered donations to the Daniel Social Welfare Corp. located in Seoul city. A home for the mentally challenged, the Daniel Social Welfare Corp. is a facility that greatly helps persons with disabilities fit into society as its rightful members. KSFC s donations will be spent on medical needs, counselling and vocational training, with an aim of empowering the disabled, while helping them stand on their own feet. Through efforts still yet more to come, KSFC ultimately aims to create an inclusive society that transcends all boundaries.

6 6 KSFC Newsletter III. KOREAN FINANCIAL MARKET TRENDS Stock Market Trends The Korean stock market in the 2 nd quarter of 217 climbed 1.72% from the 1 st quarter (as of the end of March), owing to improved corporate performance and a boost in global investor confidence. April saw KOSPI hover above 2,2 points, after rising for five consecutive months thanks to a net buy from foreign investors and an upward adjustment of economic growth forecasts. The rally continued on into May with strong performances in overseas stock markets, while KOSPI reached a new high, breaking the May 2, 211 record of 2, points. The upward trend was evident in June as well. Strong real economy indices and prospects of improved performances of the semiconductor sector lifted KOSPI to close just below 2,4 points. The KOSPI Index (Units: points) 2,45 2,4 2,35 2,3 2,25 2,2 2,15 2,1 2,5 2, 1,95 1,9 Apr Apr May May Jun Jun Trading Value (Units: billion won) 1,5 9,5 8,5 7,5 6,5 5,5 4,5 3,5 2,5 Apr Apr May May Jun Jun

7 Issue # 13_ SUMMER, Bond Market Trends Korean T-bond yields fluctuated in April with looming geopolitical risk spurred by North Korea s missile launches, but closed slightly higher month over month, due to heightened preference for risky assets and strong local business indices. Yields stayed at the previous month level in May, with the new government hinting at a possible expansionary fiscal policy direction, and a continued net buy of T-bond futures from foreign investors. A possible shift in the global monetary policy direction, demonstrated by the U.S. Fed s key interest rate hike of 25bps on June 15, led to Korean 5-year and 1-year treasury yields closing higher month over month. Major Bonds Yields (Units: %) 1-year treasury bond 3-year treasury bond 5-year treasury bond 1-year treasury bond Apr Apr May May Jun Jun OTC Trading Value (Units: billion won) 35, 3, 25, 2, 15, 1, 5, Apr Apr May May Jun Jun

8 8 KSFC Newsletter IV. KSFC STATISTICS Investor s Deposits (Based on average balances; Units: billion won) Deposit Account Trust Account 35, 3, 25, 2, 15, 1, 5, 216. Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun. Loans (Based on average balances, Units: billion won) Loans to Financial Institutions Loans to Retail & Corporate Customers 16, 14, 12, 1, 8, 6, 4, 2, 216. Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun. SBL Intermediation - Stock Borrowing and Lending Intermediation (Based on average balances, Units: million shares) 1, 8, 6, 4, 2, 216. Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun. - Bond Borrowing and Lending Intermediation (Based on average balances, Units: billion won) 45, 37,5 3, 22,5 15, 7, Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun.

9 Issue # 13_ SUMMER, 217S 9 Inter-Dealer Repo Intermediation (Based on average balances, Units: billion won) 16,5 15, 13,5 12, 1,5 9, 7,5 6, 4,5 3, 1, Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun. ESOP (Based on end-of-month balances, Units: ESOAs, million shares) Depositing ESOAs Deposited Shares 1,16 1,14 1,12 1, ,6 1,4 15 1, Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun. Custody (Based on average balances, Units: billion won) 12, 15, 9, 75, 6, 45, 3, 15, 216. Jul. Aug. Sep. Otc. Nov. Dec Jan. Feb. Mar. Apr. May. Jun.

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