Opportunities in Korea

for Foreign Financial Investors

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Sung Il Park, Director, Invest KOREA

AGENDA

Key Drivers: Growth Potential

Korea’s ability to rebound from a crisis was proven once again as the country

bounced back stronger than ever in 2010….

#1 Semiconductor (43.8%)

#1 Display (52.2%)

#5Automobiles (14.7%)

#2 Mobile (29.2%)

#6 Steel (4.9%)

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GDP Growth6.1%

Stock Exchange Growth 21.5%

Export Growth28.6%

…further increasing market shares in a range of industries.

#2 Shipbuilding (37.9%)

“In addition to BRICs, we have to see the rise of Mexico, Indonesia, Korea

and Turkey („MIKT‟). Even among MIKT economies, Korea looks outstanding

in terms of growth potential ahead.”

- Jim O’Neill, Chairman of Goldman Sachs Asset Management and creator of the term BRICs -

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Korea ranks the top in 2010 Goldman Sachs Growth Environment Scores,

a measurement of the long-term sustainability of growth.

Korea: 7.5

Mexico: 5.2

Indonesia: 4.7

Turkey: 5.1

Average of BRICs: 4.9

Key Drivers: Strengthening Deal Flow

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Growth capital and influential minority- Sale of minority stake to finance globalization

Forced Restructuring- Divestment of distressed companies or assets

- Banking sector restructuring

Unforced Restructuring- Divestment of non-core businesses by

domestic and foreign business conglomerates

Owner’s Cash-out- Sale of companies for owners’ cash-out

or family succession

Secondary Buyouts- Sale of portfolio companies held by PE

Privatizations & Post Restructuring- Privatization of state owned companies

- Government sale of once-distressed companies

Diversified deal sources are spurring the market.

While the general perception and awareness of private equity is improving.

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Key Drivers: Emerging Industries Looking for Growth Capital

Industry PE Investment Driving Force

CleantechGoldman Sachs invested U$117 mil. in

wind power companies CS Wind and

PyeongSan (2008-9)

• Strong government support as part of

Green Growth 5-year Plan

HealthcareTemasek acquired a 10% stake in

biopharm firm Celltrion for U$257 mil.(2010)

• Aging population – fertility rate lowest

in OECD

• Convergence of ICT and medicine

EducationRiverside acquired Wiz Korea a pre-

school education franchise (2008)

• Highest per capita spending on

private education in OECD

Equipment,

Parts &

Materials

Partners Group invested in tire mold and

drum manufacturer Saehwa IM (2011)

• Globally competitive companies in

supply chains of Samsung, Hyundai

& LG

Contents &

Media

Macquarie & MBK Partners jointly

acquired a 49% stake in cable TV

operator C&M for U$2 bil. (2008)

• Extremely high broadband & mobile

penetration

• Consolidation expected in

broadcasting industry

Financial /

Services

Carlyle Group acquired a stake in HKucar

Global a nationwide used car dealership

network (2010)

• Productivity only 60% of developed

nations

• KORUS FTA

Deal Flow Forecasts for the Year Ahead

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• Large-cap buyouts becoming more scarce

• Expect more small to mid-market deals and minority stake investments

• Deal sourcing capability will be more important

• Portfolio value creation will tell the ultimate winners

(Market Observation)

Key Drivers: Exit - M&A

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Target Company Seller Buyer Invested Exit Exit Multiple

Korean First Bank New Bridge Standard Chartered 1999 2005 3.3

Landmark Morgan Stanley ING Group 2002 2007 3.5

C&M Communications Goldman Sachs Macquarie 2004 2007 5.5

KSNet H&Q Net 1 2007 2010 3.5

The Faceshop Affinity LG H&H 2005 2010 5.3

Unlike other Asian markets, Korea has provided real exit returns for foreign PE investors,

Average Holding Period:4.1 Years

Average Exit Multiple:2.46

…however competition from foreign private equity firms is still dramatically less

compared to both developed and developing markets in Asia.

Korea boasts an active M&A market, with 288 deals (+51%) worth US$ 39 bn (+36%)

completed in 2010.

(Source: Mergermarket)

(Based on the available multiples of 19 of the foreign PE exits since 2005)

Key Drivers: Exits - IPO

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IPO Volume in Korea (U$mil)

This year 11 companies with sales exceeding U$1 billion will go public

• The National Pension Service recently amended its internal policy to participate in IPOs

• First SPAC listed in March 2010, total IPO value: U$510 million.

Key Drivers: Open Business Environment

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Under the Foreign Investment Promotion Act -

• Foreign investment for ownership control can be made into 97.4% of industries

(1,055 out of 1,083)

※ Protected categories include food crop, fishing, power supply, broadcasting, telecommunication, etc

• Foreign investors can repatriate their money even in case of force majeure

• Korea’s top financial regulator the FSC is seeking to relax rules related to the

setting up and operation of private equity funds in order to bring existing

regulations closer to the international norm.

Amendments to the Financial Investment Services and Capital Markets Act -

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■ Introduction of IFRS by all listed companies in 2011

- Even before IFRS, Korea had a highly transparent accounting system with the financial

information of private and public companies readily available

“Within seconds, I can get Korean stock exchange information, annual and

even quarterly information” – Warren Buffett

■ Fair Judicial Environment

- Independent, fair judges, reliable legal framework

- Contracts enforceable

Korea boasts a highly transparent financial and legal system, and common

acceptance of Western shareholder agreements.

Key Drivers: Transparency

‘On the Ground’ Support for Foreign Investors

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Invest KOREA has the government mandate to facilitate investment from

overseas financial investors

Services Details Example

Facilitating

Co-Investment

- Providing access to government matching

funds

- Facilitating co-investment with GP/LP

KoFC New Growth Engine Fund

Deal Sourcing- Access to high growth companies through

relationship with industry associations

Excelsior Capital invested in

Galaxia Electronics

Conferences- Regular roadshows and investment

forums providing 1-1 meeting opportunitiesKorea PE & VC Forum

Consulting &

Aftercare

- Advising on FDI, tax and legal issues by

officials dispatched to Invest KOREA from

government organizations

Mahindra & Mahindra’s

acquisition of Ssangyong Motor

Co-Investment Opportunity: 2011 New Growth Engine Fund

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■ Korea Finance Corp. invested in 35 funds as a major LP (61.5% stake on

average) in 2010

■ Opportunity to network & co-invest with local partners in Korea

IndustryNumber of GP

sought

Fund size

Total

Funds provided

by KoFC

New Growth

Engine Industries15 3,165 2,074

SMEs 20 3,766 2,191

Total 35 6,931 4,265

(Unit: USD Mil.)

2010 Investment by KoFC

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Deal Sourcing: Growth Capital Global Korea Project 2011

Matchmaking

Investment Roadshows Teleconferences Meeting arrangement

Select Eligible Candidates:

Companies with Growth Potential and Good Corporate Governance

Target Company Sourcing (Nine Industry Associations)

- Renewable Energy- Shipbuilding Equipment

- Software

- Biotechnology

- Pharmaceutical- Fine Chemicals

- Industrial Machinery- Electronics

- KOSDAQ

Conference: Korea Private Equity & Venture Capital Forum

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Insight

Presentations & discussions on the

most important topics facing

investors in Korea and the region.

Networking

The largest gathering of

institutional and private equity

investors held in Korea.

Deal Sourcing

• 1:1 meetings with Korean

companies & investors

• Closed door IR Presentations

Korea Private Equity & Venture Capital Forum 2011June 1-2, 2011 Grand InterContinental Hotel, Seoul

Information, contacts and deal opportunities all in one place…

For all the latest news, opportunities and upcoming events,

regarding M&A, private equity, and venture capital in Korea visit

www.InvestKoreaSMEs.com.

Finance Industry Investment Promotion Team,

Invest KOREA

Tel: (+82) 2 3460 7559