1. Securitisation Symposium SAHL Case Study by Simon Stockley 27 th September 2002

2. Presentation Summary… Overview : SAHL What is SAHL? Activities since launch Securitisation Defined Global growth Structure Case Study Product Positioning Funding Securitisation Checklist What you need to know Pricing

3. “Banking establishments are more dangerous than standing armies” Thomas Jefferson “Except for con-men borrowing money they shouldn’t get, and widows who have to visit with handsome men in the trust department, no sane person ever enjoyed visiting a bank” Martin Mayer

4. What is SA Home Loans? The first South African company to discount home loans on a national basis. The first South African company to fund its loan book through the internationally recognised practice of “securitisation.” The first South African company to operate with a transparent pricing policy with regard to home loans.

5. What is SA Home Loans? It is a management organisation that links institutional investors with borrowers. The company is owned by Peregrine Holdings Limited, Chase JP Morgan, Standard Bank, International Finance Corporation (the commercial arm of the World Bank) and Management.

6. Number of loans processed : 20 000 Value of loans processed :R5billion Value of loans approved :R3billion Breakdown by region :Gauteng 30% KZN 35% W Cape 35% Securitised Portfolio Thekwini Fund :R1,25billion (December 2001) Unsecuritised : R1,75billion South African Home Loans Activities since launch: February 1999

8. Definition… Securitisation Defined “The packing of individual loans and other debt instruments, converting the package into a security, enhancing its credit for the further sale to a third party.” Kendall

9. Securitisation Defined The conversion of illiquid individual loans to marketable securities, which are generally asset backed. The effect then is …….

10. Securitisation Defined In practical terms … Securitisation pulls apart financial transactions and allocates the risk and rewards to those entities that are best able to accept and therefore price for them.

11. EXPORT RECEIVABLES STUDENT LOANS DELINQUENT TAXES ENTERTAINMENT RECEIVABLES HEALTH CARE RECEIVABLES SUB-PRIME AUTO LOANS SOCIAL HOUSING LOANS EMBEDDED VALUE UTILITY RECEIVABLES LOTTERY RECEIVABLES ROAD TOLLS BOAT LOANS EQUIPMENT LEASES INSURANCE PREMIA RV’s HOME EQUITY LOANS TRADE RECEIVABLES AUTO LOANS SMALL BUSINESS LOANS CREDIT CARDS COLLATERAL MORTGAGE OBLIGATIONS COMMERCIAL MORTGAGES RESIDENTIAL MORTGAGES 1970’s Early 1980’s Mid 1980’s Late 1980’s Early 1990’s Mid 1990’s USAUK Canada FRANCESPAIN NETHERLANDS VENEZUELA MEXICO GERMANY, ITALY, TURKEY, ARGENTINA, BRAZIL, INDONESIA, MALAYSIA, THAILAND, SOUTH KOREA, PHILLIPINES, CHINA ETC. Geographic Expansion & Product Innovation Securitisation

12. Structural Impediments Banks - cash rich. Big is best. Rating agencies. Exposure to international markets. Historically little incentive for banks to securitise.

13. Legal Impediments Banks Act. Government Notice 153 as published in Government Gazette No 13723 - 3 January 1990. Tacit approval / endorsement / co-operation. Government Notice 2172 as published in Government Gazette No 16167 – 14 December 1994. New Regulations/January 2002 Basle Accord.

14. Origination Impediments Need to originate. Time to originate. Registration process. Costs of transferring assets. Cost associated with origination.

15. Information Technology Impediments Lack of silver bullet applications. Costs. Integration.

16. SA Home Loans A case study The product. Its positioning. Funding.

17. The Product 20 year, variable rate, reducing term mortgage. No prepayment or redemption penalties. Discounted legal and administrative fees. No ongoing administrative charges. Re-advance facility twelve times a year. Fixed margin above cost of money.

18. Positioning

21. How much will I save monthly? Get a discount on your home loan – for life Monthly Savings R300 000R200 000R100 000 1.00%R235R158R79 1.50%R254R236R118 2.00%R471R314R157 2.50%R587R391R196 3.00%R703R464R234

23. Reserving Requirements Bank Deposits Loans To Public Margin : 4 - 5% Traditional Bank Funding

24. Control Public Special Purpose Vehicle Trust Loans To the Public Senior Securities Subordinated Securities Purchase Securities Independent Trustee External Auditor Origination & Management Fee : 0.5% JIBAR Rate Plus 2.1% 1.6% Yield pick up Securitisation Structure Institutional Investors

25. Public SPV Senior MBS Junior MBS Senior MBS Junior MBS Senior MBS Junior MBS Short Term Insurer Life Insurer SAHL Interim Funder External Directors Auditors MARKET MAKER INVESTORS SECURITIES AND AGREEMENTS THE PUBLICSA HOME LOANSSPECIAL PURPOSE VEHICLES MORTGAGE BACKED SECURITIES INSTITUTIONAL INVESTORS SAHL Legal Structure

26. Public Loans JIBAR + 2.1% Thekweni I Special Purpose Vehicle R1.25 Billion A Class 92 % AAA Rating JIBAR + 70 Points B Class 8 % BBB Rating JIBAR + 230 Points C Class 2.5 % Unrated Pay away 1.6% to investors SAHL 0.5% Management Fee Standard Bank Deloitte & Touche Standby Administrator Investment Structure

28. Securitisation A Practical Guide Size does count Quality of data System reporting ability Time, money, personnel Timing – Market conditions Ratings Pricing

34. Thank you. SimonStockley CEO - SAHome Loans (Pty) Ltd Phone : (031) 560 5392 Fax : (031) 562 4266 Cell no : 083 276 0068 e-mail :simons@sahomeloans.com