The Housing Finance Practice Group KoMoCo Presentation By Jean-Marie Masse May 18, 2001

Points for Discussion KoMoCo in the contest of IFC’s investments in Korea financial sector July Chronological events on KoMoCo project Criteria of selection for Foreign Technical Partner (FTP) Some afterthoughts

Phase 1: Initial Stage July 1998: IFC prospective mission to Korea to study the housing finance market December 1998: MoCT (Ministry of Construction and Transportation) and Housing & Commercial Bank (H&CB) invite IFC to participate in competing new secondary mortgage market entities January 1999: IFC selects MoCT project, and subsequently H&CB joins IFC April 1999: MOU signed amongst 3 large banks, 1 insurance company, 1 investment trust management company, MoCT and IFC to establish KoMoCo

Phase 2: KoMoCo establishment and IFC TA May 1999: Japan/IFC TF grants US$300,000 to fund a TA program. Maureen Bolton, Michael Bevier, Korean lawyers are hired successively to craft/review KoMoCo business plan; legal, regulatory, & supervisory framework October 1999: KoMoCo incorporated with W100 billion K (US$85 million) and licensed as financial institution. KoMoCo owns 45% and warehouses 15% for IFC November 1999: Second MOU signed IFC/MoCT/Sponsors to launch search of FTP

Phase 3: FTP Search December 1999: Info memo circulated to 9 potential FTP & announced on REUTERS December 1999: MBS Law enacted by Korean Parliament March 1999: Macquarie Bank and Merrill Lynch Consortium submit final FTP proposal. On 3/30/00 IFC Board approves US$15 million equity investment and US$85 million credit enhancement facility to support MBS placement Switch of leading FTP candidate from Macquarie Bank to ML

Phase 4: ML Consortium selected August 2000: Pam Lamoreaux ex-COO of Hong Kong Mortgage Corp starts in Seoul as Senior Resident Advisor (SRA) posted by ML October 2000: Closing of equity investment. IFC and ML own 10% each of KoMoCo. Finalization of extensive TA package worth US$1.2 million. December 2000: KoMoCo ends the year with US$1.2 billion MBS issued in May, September, De3cember staff. January 2001: Jim France succeeds Pam as SRA.

Phase 5: KoMoCO On-going Business March 2001: Michael BeVier nominated by IFC as KoMoCO Board representative May 18, 01: IFC buys for W 54 billion (US$42 million) MBS Won-denominated, and swap all cash flows for US$ with UBS and JP Morgan Chase. Tranches purchased are 1; 1.5; 2; 2.5; 4.5 year maturity; placed through public offering; and listed on Korea Stock Exchange; indicative credit rating above BBB by FITCH. Long Term tranches are sold to life insurance, pension funds, semi- governmental organization IFC became first non-domestic institutional investor to purchase MBS in Korea.

After Thought Source of mortgage for KoMoCo comes from National housing Fund – needs to diversify => opportunity for IFC to establish a primary home mortgage origination company tailored to feed KoMoCo with home mortgages to securitize May be FTP search was overdone/IFC is well fitted to lead in emerging market Overall a good illustration of institution building/deepening and broadening of financial sector including long term fixed income securities IFC established very strong lings with various partners involved in the project – some could be leveraged globally