KRX Listing (3.12.12)

Strictly Confidential and Internal Use Only

March 2012

Korea Exchange (KRX)

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Table of Contents

I. Motivations for an IPO

II. KRX Overview

III. Performance and Composition

IV. Liquidity

V. Foreign Listings

VI. Listing Process and Requirements

2

I. Motivations for an IPO

3

Why IPO?

4

Business expansion / growth

New market entry

Debt repayment / balance sheet management

Founder or investor partial or full exit

Compensation for employees

Attract talented people / resources

Prestige of a publicly listed company

Oversight of auditing firm and KRX exchange ensures transparency to investors

Capital Raising

Monetization

Reputation / Transparency

An initial public offering gives managers the opportunity to raise growth capital, build greater brand

awareness or cash out of an investment without the burden of restrictive debt covenants

II. KRX Overview

5

Korean Exchange (KRX) Overview

6

KRX Highlights

The Korea Exchange (KRX), launched in 1956, is Asias 4th largest stock exchange

It consists of two trading platforms, the KOSPI and KOSDAQ, as well as the Derivatives Market

Highly liquid trading platform

Nominal listing fees compared to other exchanges

Description Lists mid- to large cap, blue chip stocks

Lists small- and medium sized companies with growth potential

Listed Companies 791 1,031

Foreign Companies 3 12

Market Cap (As of 12/2011)

$927 bn $94 bn

LTM Trading Value (As of 12/2011)

$1,513 bn $496 bn

Turnover Ratio (Based on Market Cap)

152.3x 550.2x

KOSPI KOSDAQ

The KRX is an alternative financing solution for international companies seeking quick and cost-effective

access to capital via a best-in-class trading platform

Source: Korea Exchange: Listing Guide for International Companies Note : USD 1 = KRW 1,125

Benefits to Listing on the KRX

7

Advantages to Listing Considerations to Listing

Significant liquidity yields fair valuations: trading value to market cap exceeds other major Asian markets

Cost-effective capital raising solution: lower listing fees and regulatory costs than peer markets

Active market for IPOs: more companies IPOd on the KRX than on any other major Asian index in 2009

High percentage of foreign investors: yields better information flows and increased brand awareness

KRX listing eases ability to penetrate Asian markets: opportunity to expand business globally

KRX is still in a growth stage; as such, few U.S. companies have listed, though several foreign companies are in the pipeline

KRX listing does not carry the same prestige as listing on the NYSE or NASDAQ

Corporate organization and preparation, including audits from internationally recognized firms (e.g., Ernst & Young, Price Waterhouse, KMPG, Deloitte)

Language barrier; mitigated by the global nature of the exchange, whereby all information is also published in English

Listing Fee Comparison

8 Source: Korea Exchange: IPO Guide for Foreign Companies Note : USD 1 = KRW 1,130 0.7, Y85, HK$8, S$1.5

KRXs listing fees are significantly lower than the fees of other major exchanges

Foreign Listing Case Study

Foreign companies that list on the KRX pay listing fees that are only 6% - 20% of fees required to list on other global exchanges (excluding underwriters, auditors and legal fees)

IPO Listing fee Annual Fee Examination Fee Total in USD

KOSDAQ(KRX) KRW 1,286,000 KRW 229,000 KRW 5,000,000 KRW 6,515,000 $5,765

NASDAQ $75,000 $27,500 $102,500 $102,500

AIM (London) 36,020 5,463 41,483 $59,261

GEM(Hong Kong) H$200,000 H$200,000 H$400,000 $50,000

Mothers(Tokyo) 1,000,000 1,200,000 2,000,000 4,200,000 $49,412

Catallist(Singapore) S$31,200 $15,000 S$46,200 $30,800

III. Performance and Composition

9

Global Index Performance

10

KRX outperformed many leading global indices during the financial crisis and has rebounded at a faster rate,

returning more money to market participants than its competitors

Monthly Historical Performance of Global Indices

As of Dec 31, 2011, the KRX had the strongest returns among leading global indices; performance was +42% compared to an average decline of (9%) among the peer group

KRX had the strongest performance during the financial crisis, with the index value only hitting a low of 65; the average indexed low for the peer group was 52

0.00

50.00

100.00

150.00

200.00

KOSPI (Korea) SSEC (Shangai) STI (Singapore) HSI (Hong Kong) Nikkei 225 (Japan) FTSE 100 (London) DOW (US)

Market Activity

11 Source: Korea Exchange

$0

$200

$400

$600

$800

$1,000

$1,200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Market capitalization continues to grow exponentially while new share listings have moved at a slower, yet

steadier pace

KRX Market Capitalization ($mm)

KRX Number of Listed Companies

Historical Price to Earnings

12 Source: Bloomberg

Valuation levels for companies listed on the KRX are in line with those of other leading global indices

Historical P/E by Global Index

In 2011, KRX listed companies received more value for their business than those listed on the DOW and FTSE

KRX P/E valuations are stable, the absence of volatility ensures optimal pricing

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x

2009

2010

2011

20.3x

13.5x

10.0x

15.8x

13.4x

12.6x

25.2x

16.4x

19.9x

Korea: KRX 100 U.S.: Dow Jones London: FTSE

Index Composition


The KOSPI and KOSDAQ are comprised of a diverse cross-section of industries, providing listing firms and

investors with the data necessary to make important valuation and investment decisions

Index Composition by Industry

Broad industry diversification allows investors to fairly price securities, spawning greater interest and participation in the exchange given its reliability

Heavy industry companies account for a significant share of both the KOSPI and KOSDAQ, however, growth among other sectors, such as apparel and food and beverage, continue to add to each exchanges diverse composition profile

Auto manufacturer, Hyundai, steel-maker POSCO, electronics company Samsung and LG Chemical are the driving force behind heavy industrys dominant presence

Industry diversification makes the KRX more attractive than the Hong Kong and Singapore exchanges

KOSPI as of FY2011 KOSDAQ as of FY2011

Chemicals, 16%

Finance, 12%

Elec. Eqpmt., 11%

Distribution, 10%

Transport. Eqpmt., 9%

Iron/Metal Prod., 8%

Construction, 7%

Machinery, 7%

Food & Bevg., 7%

Medical

Supplies, 7% Apparel, 6%

IT Components,

11% Semiconduct., 9%

Machinery, 7%

Metal Products, 6%

Telecom & Broadcast, 6%

Vehicles & Components,

5% Chemicals, 5% Pharma, 4%

Computer Serv., 3%

Other, 44%

IV. Liquidity

14

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

Korea Shanghai Tokyo Hong Kong

Singapore

4.5x 4.3x

3.3x 3.0x

1.5x

Liquidity Ratio

(Daily Trading Value/Market Cap)

Liquidity

15

KRX provides a competitive liquidity proposition relative to other leading Asian capital market alternatives

Liquidity Overview

The KRX offers greater liquidity than many of the leading Asian exchanges, as measured by trading value to market capitalization

At YE11, the KRX had a liquidity ratio of 4.5x, the strongest of any major Asian index, including Tokyo and Shanghai, and significantly outpacing the 3.3x average for the peer group

How does the KRXs strong liquidity position benefit issuers?:

Diversified investor base: investors gravitate towards markets with high trading activity

Securities are priced at fair value: greater consensus on pricing between buyers and sellers given high trading turnover

Easy cash-out: issuers and investors can quickly withdraw equity

Brand recognition: liquid markets receive greater attention from the investment community

Liquidity Comparison at YE 2011 Market Trading Statistics at YE 2011

Comp Average

3.3x

Source: Korea Exchange, World Federation of Exchanges

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Korea Shanghai Tokyo Hong

Kong

Singapore

$906

$2,351 $3,125

$483 $345

$4,086

$10,199 $10,441

$1,428 $513

Market Cap Trading Value

Market Participants


Korean retail and institutional investors are allocating a greater share of their funds to the equity market and

becoming more active participants in the KRX, creating stable demand and prompting more foreign listings

Buyers: Investors KRX Participation:

Growth Among International Investors

Increased trading activity among foreign investors

Foreign investors account for approximately 30% of KRXs market cap

The uptick in foreign trading illustrates the KRXs growing importance among the global financial community

Korean retail investors are more actively engaged in the equity market given greater focus on long-term investing

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010

Government Corporations/Inst.

V. Foreign Listings

17

0

20

40

60

80

100

120

140

160

180

USA Korea Hong Kong

UK Japan Singapore

2008 2009 2010

Foreign Issuers


KRX IPO activity continues to outpace the activity on other Asian exchanges, and demand for international

listings remains strong

Sellers: Foreign Listings

Global IPO Issuance

s Foreign firms are showing increased interest in the

Korea Exchange

19 foreign firms are currently listed on the Korea Exchange and more than 60 firms from 10 countries are preparing to list

In 2010, more firms IPOd on the Korea Exchange than on any other major Asian exchange

Many of South Koreas leading companies list on the KRX, including Samsung, POSCO, SK Telecom, LG and Hyundai, illustrating the exchanges value and stability

The presence of multi-national Korean firms legitimizes the exchange and will draw continued interest among foreign issuers

Historical KRX Listing Activity

19 Note: USD 1 = KRW 1,200

Foreign Listing Date

Exchange Company Country Industry Public Offering

($mm)

Aug. 2007 KOSDAQ 3NOD China Technology: Multimedia Speaker $25.0

Nov. 2007 KOSPI HuaFeng China Manufacturing: Clothing $28.0

Jan. 2008 KOSDAQ Cowell E-Holdings China Electronics: Camera Devices $18.7

Dec. 2008 KOSPI United Technology China Manufacturing: Clothing $11.0

Mar. 2009 KOSDAQ China Food Packaging China Consumer Goods / Mfg: Cans $7.5

Apr. 2009 KOSDAQ Nepro IT Japan IT/Services: Online Databases $3.0

May 2009 KOSPI China Ocean Resource China Other: Fisheries $44.4

May 2009 KOSDAQ China Great Star China Retail: Shoes, Sportswear $42.5

Dec. 2009 KOSDAQ China Engine China Manufacturing: Engines $50.0

Dec. 2009 KOSDAQ Global SM Tech China Manufacturing: Machinery Products $15.4

Foreign companies are increasingly turning to the KRX to meet capital market financing needs, as

evidenced by the uptick in foreign listed companies

Foreign Listing Overview

International listings are increasing at a greater rate, compared to prior years, further diversifying the KRX

50 foreign firms are preparing to list on the KRX, 7 listed in 2010 compared with only 2 foreign firm listings in 2008; 65 companies are preparing to list

The favorable trend toward new foreign listings is expected to continue as investors look to place capital in markets with high return potential

Korea rebounded fastest from the global economic crisis relative to Tokyo, Hong Kong and Singapore

Historical KRX Listing Activity (Contd)

20

Foreign Listing Date

Exchange Company Country Industry Public Offering

($mm)

Feb. 2010 KOSDAQ China HaoRan Recycling China Other: Paper Recycling 39.2

Mar. 2010 KOSDAQ China King-Highway China Consumer Goods: Health Foods 74.0

Apr. 2010 KOSDAQ New Pride U.S. Autos: Renewable Tires 11.6

Apr. 2010 KOSDAQ East Asia Sports International China Retail: Shoes, Sportswear 24.9

Jul. 2010 KOSDAQ Wayport China Manufacturing: Machinery 17.1

Sep. 2010 KOSDAQ Shenglong PV-Tech China Technology: Solar System 42.0

Nov. 2010 KOSPI Kolao Holdings Laos Autos: Sales 49.0

Jan. 2011 KOSPI China Gaoxian China Manufacturing: Fabric 149.3

June. 2011 KOSDAQ Wanli International Hong Kong Manufacturing: External tile 41.7

US presence on the Korea Exchange is likely to increase as the tangible benefits of listing become more

apparent to US companies amidst targeted KRX outreach efforts, building broader awareness

Foreign Listing Overview

Foreign listings have been dominated by Chinese companies given the KRXs early marketing push into China; with the exchange now focusing on the U.S. and Japanese markets, further geographic diversification is anticipated

By 2012, the KRX expects foreign listings to have increased to 70; U.S. and Japanese companies are expected to account for a greater share of listings, as are companies based in Thailand, Britain, Vietnam and the Philippines

Foreign Listings (Contd)

Note: USD 1 = KRW 1,200

Case Study New Pride

21

New Pride was the first U.S. company to be publicly traded on the KOSDAQ

Provides secondary services to integrated logistics companies in the U.S. and produces trailer tires. New Pride also checks and tests related equipment and replaces components as containers are moved from ships to railroads

Integrated services include: shipping and transportation services between roads and railways

Founded in 1978 and based in California, the company has 32 branches in 11 states and 671 employees, only 8 of whom are Korean

Sales:

Operating Profit:

Net Profit:

$58.3 million

$4.3 million (7% margin)

$4.0 million (6% margin)

Chairman: Edward Kim (age 69); first graduate of the Reserve Officers Training Corps in Korea

Accidentally acquired a tire recycling company which prompted expansion into logistics

Growth: Management believes the logistics business has significant growth potential

Enter new markets: Targeted the Chinese market and viewed listing on the KOSDAQ as a point of entry

Succession planning: Saw an IPO listing as a way to create greater business transparency; succession planning as Mr. Kim does not intend to pass the business to his children

Capital Raised: $11.6 million

Shares Issued: 1.85 million

Price: $6.26 per share

Background

Company Description

KRX Listing Rationale

Management

Pricing

Operating Performance

New Pride Logistics

Note: USD 1 = KRW 1,200

Foreign Listing: Stock Price Performance

22

Foreign listings have performed well since their initial KRX IPO

Stock Price Performance

A majority of foreign issuers have realized an increase in equity value since listing on the KRX

The average stock price has increased 5% since the issuance date

US-based New Prides underperformance is driven by several internal operational factors:

(1) Sales underperformance, (2) lower operating margins given increased raw material costs (e.g., rubber); (3) weak outlook for the truck freight industry

Price History Issuance Price : %change Market Cap

Foreign Company IPO Date IPO

Issuance Next Day

Close 02/24/2012

Next Day Close

Current IPO Funds (US$ mm)

Shares (mm)

Current Market Cap (US$ mm)

Wanli International 2011-June

$3.40 $2.70 $3.90 -20% 13% $42 12 $192

Kalao Holdings 2011-Oct $4.0 0

$5.20 $8.30 29% 108% $47 12 $318

East Asia Sports 2009-May $4.20

$3.20 $2.20 -23% -48% $25 23 $179

New Pride 2010-Apr

$6.30

$7.70 $1.90 24% -70% $12 2 $13

China King-Highway 2010-Mar na

$2.90 $2.30 na na $74 80 $179

China Hao Ran 2010-Feb

$3.90

$3.80 $2.40 -4% -39% $39 40 $95

China Engine 2009-Dec na

$5.70 $3.50 na na $50 40 $134

China Ocean Resource 2009-May

$2.60

$6.80 $4.30 165% 65% $44 17 $320

Average: 28% 5% $42 28 $179

VI. Listing Process and Requirements

23

Listing Process

24 Source: Korea Exchange: IPO Guide for Foreign Companies

6 months to

1 year Prep.

Within 2 Months

Eligibility Review

1 to 1.5 Months

Public Offering

Within 7 Days Listing

Application for Listing Eligibility Review

Listing Committee deliberates

Notification of results

Select investment bank to manage process

Appoint auditing firm

Corporate organization and preparation

Due diligence

File securities registration statement

Investor Relations meetings

Determine demand and pricing

Remittance of funds to issuers account

Application for Initial listing

Listing approval notification

Listing ceremony followed by trading of shares on KRX

The KRX listing process can take 4 6 months following the preparation process

25

Positive income from ongoing business before tax in the latest fiscal year and $3 million (KRW 3 bn) in shareholders equity

$9 million (KRW 10 bn) in Sales and Market Capitalization of $27 million (KRW 30 bn), OR

$2 million (KRW 2 bn) in Net Income, OR

10% Return on Equity (Net Income / Equity Capital)

5 years of operating history

Globally recognized auditing firm

Largest shareholder must hold shares for one year after issuance; after 6 months can sell 5% of shares monthly

Financial

Operational

Summary Key Minimum KRX Listing Requirements

KOSDAQ: Minimum Requirements:

Note : USD 1 = KRW 1,125

Listing Requirements for IPO Candidates

26



Operating History

At least 3 years At least 3 years

Size (min. requirements)

Shareholders Equity: KRW 10 bn, OR

Market Capitalization: KRW 20 bn

Shareholders Equity: KRW 3 bn, OR

Market Capitalization: KRW 9 bn

Operating Performance (min. requirements)

Must satisfy 1 of 3 operating requirements

Sales & Income

1. Sales: KRW 30 bn in current year; 3-year average of KRW 20 bn, AND

Earnings : must have realized an operating profit, a profit before income tax from continuing operation and a current net income

Income must satisfy 1 of 3 income requirements:

a. Income: (i) KRW 2.5 bn current year and (ii) KRW 5.0 bn for sum of last 3-years

b. ROE: (i) 5% in current year and (ii) 10% for sum of last 3-years

c. If equity cap exceeds KRW 100 bn: (i) 3% ROE or KRW 5 bn of income for current year; (ii) positive operating cash flow

2. Sales & Market Cap

Sales: KRW 50 bn (current), KRW 100 bn in market cap

3. Sales, Market Cap, & Operating Cash Flow

Sales: KRW 70 bn (current); KRW 50 bn market cap; KRW 2 bn operating cash flow

Must satisfy 1 of 3 operating requirements

1. ROE: 10% (Net Income/Equity Capital)

2. Net income: KRW 2 bn

3. Sales: KRW 10 bn in current year and market cap of KRW 30 bn

Capital cant be impaired at end of fiscal year

Positive income from ongoing business before tax (current)

KOSPI KOSDAQ

Listing Requirements for IPO Candidates (contd)

27

KOSPI KOSDAQ



Share Distribution At least 1,000 individual shareholders

Share distribution to satisfy 1 of 4 requirements:

1. Minority shareholders must hold at least 20%

2. At least 25% offered publicly

3. Issue minimum of 1 mm shares with either KRW 50 bn equity capital or KRW 100 bn market capital; 10% offered to public

4. If offering in Korea and abroad: 10% must be offered publicly and 1 mm shares must be offered in Korea

At least 500 minority shareholders

Share distribution to satisfy 1 of 5 requirements:

1. Minority shareholders must hold at least 25%, or at least 10% must be offer publicly

2. Issue minimum of 1 mm shares with either KRW 50 bn equity capital or KRW 100 bn market capital; 10% offered to public

3. If listed on foreign securities, 300,000 shares must be publicly offered in Korea

4. At least 25% must be offered publicly

5. If offering in Korea and abroad: 20% must be offered publicly and 300,000 shares must be offered in Korea

Auditors Opinion Unqualified for current year Unqualified for current year

(Initial Listing) US or Korean GAAP or IFRS financial statements

Audit from world class (e.g., Big 4) accounting firm

If a Foreign Auditor: 5 yr operating history; 50 members of CPA; sales of KRW 10 bn; audit quality management contract (100 member country, 100,000 member CPA)

Share Transfer No restriction placed on transfer of shares No restriction placed on transfer of shares

Change of Largest Shareholder

No change of largest shareholder for one year period prior to application

No change of largest shareholder for one year period prior to application

Lock-up Period Largest shareholder: 6 months Largest shareholder: 1 year; after 6 months 5% of shares can be disposed monthly

28

Annual Report: within 120 days of fiscal year end

Quarterly Report: within 60 days of end of quarter

Material information: e.g., matters pertaining to business operation, credit and liability, investment, profit/loss, lawsuits, relationships between holding companies and subsidiaries

Disclosure of results that the KRX releases about rumor, news and sudden change in stock price or trading volume

Future business plans, earnings forecasts are disclosed publicly prior to disclosing to a selected person

Disclosure of events: merger, share swap, business takeover or transfer, buyback or disposal of treasury stock

Disclosure of any matters that could have significant influence on an investors investment decision, that the company makes voluntarily

Periodic Disclosure

Fair Disclosure

Notable Events

Disclosure

Timely Disclosure

Voluntary Disclosure

Special Disclosure

Ongoing Disclosure

KRX Listing (3.12.12)

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