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

2. Points for Discussion KoMoCo in the contest of IFC’s investments in Korea financial sector July 1998-2001 Chronological events on KoMoCo project Criteria of selection for Foreign Technical Partner (FTP) Some afterthoughts

3. 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

4. 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

5. 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

6. 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 2000. 40 staff. January 2001: Jim France succeeds Pam as SRA.

7. 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.

8. 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