Housing Finance SummitAmelia Island, Florida

Annual discussion of Housing Market : Investing, Origination and

Public Policy

04 – 06 April 2005

South African Mortgage Market

Overview

Sophisticated mature – R300billionDichotomous Dominated by Big 4 BanksSound legal structure – title & foreclosureWide margins – no real competitionNo non bank lendingBanks “cash rich” – no shortage of capitalCredit data good

0

50

100

150

200

250

300

May

-93

Aug-

94

Aug-

95

Aug-

96

Aug-

97

Aug-

98

Aug-

99

Aug-

00

Aug-

01

Aug-

02

Jul-0

3

Nedcor25%

ABSA30%

SBSA20%

Investec4 %

SAHL3 %Other

2 %

First Rand Bank 16%

Total = R 307 bn Source: SARB DI900

Residential SA mortgage loans by lenders South African Mortgage Market Outstanding balance, R bns

The SA Mortgage Market

Source: SARB

Source: SAHLR millions per month

The rate of growth of the SA Home Loans book has been exponential

On a monthly basis SA Home Loans now originates up to R1billion in new mortgages

This represents approximately 15% of monthly originations

Source: Standard Bank

SAHL REGISTRATIONS

R0m

R200m

R400m

R600m

R800m

R1,000m

R1,200m

SAHL

BB

Total

Number of clients : 75 000Monthly increase in clients : 3 000Value of loans approved : R20billionSecuritised Portfolio :Thekwini Fund 1 - R1.25billion (December 2001)Thekwini Fund 2 - R1.1billion (December 2002)Thekwini Fund 3 - R2billion (December 2003)Thekwini Fund 4 - R2.5billion (July 2004)Thekwini Fund 5 - R3billion (February 2005)Single Seller Conduit programme - R15billion (launch July 2005)

SA Home LoansActivities since launch:

February 1999

Why No Securitisation prior to December 2001?

Big is bestRating agenciesExposure to international marketsLegal framework not securitisation friendlyLittle incentive for banks to securitiseNo ability to reinsure first loss position

S A Home Loans

The productIts positioningFunding

20 year, variable rate, reducing term mortgageNo prepayment or redemption penaltiesDiscounted legal and administrative switch feesNo ongoing administrative chargesRe-advance facility/access bondFixed margin above cost of moneySwitch re-finance proposition

The Product

Positioning

Control

Public

SpecialPurposeVehicleTrust

LoansTo thePublic

SeniorSecurities

SubordinatedSecurities

PurchaseSecurities

Independent Trustee

ExternalAuditor

Origination & ManagementFee : 0.5%

J IBAR Rate

Plus 2.1%

1.6% Yield pick up

SA Home Loans Securitisation Structure

InstitutionalInvestors

Public

Loans

J IBAR + 2.1%

Thekweni I

Special

Purpose

Vehicle

R1.25 Billion

A Class

92 %

AAA Rating

J IBAR + 70 Points

B Class

8 %

BBB Rating

J IBAR + 230 Points

C Class

2.5 %

Unrated

Pay away1.6% to investors

SAHL

0.5% Management Fee

Standard Bank

Deloitte & Touche

Standby Administrator

Investment Structure

Public

Public

Public

Public

Public

SPV

SPV

SPV

Senior MBS

Junior MBS

Senior MBS

Junior MBS

Senior MBS

Junior MBS

Short Term

Insurer

Life Insurer SAHL

Interim Funder

External Directors

AuditorsMARKET MAKER

INVESTORS

INVESTORS

SECURITIES AND AGREEMENTSTHE PUBLIC SA HOME LOANS SPECIAL

PURPOSE VEHICLES

MORTGAGE BACKED SECURITIES

INSTITUTIONAL INVESTORS

SAHL Legal Structure

Thekwini 4 Summary

Size of Issue : R2,500,000,000

Originator and Servicer : SA Home Loans (Pty) Ltd

Standby Servicer : Standard Bank of SA (Home Loan Division)

Arranger & Bookrunner : Standard Bank of SA (Corporate & Investment

Banking)

Substitution Period : 2.5 years

Final Legal Maturity : 21 Nov 2029

Call Date : 21 Nov 2009

Listing : BESA

Class A1

R 1,585 m

JIBAR + 0.39 %

Class B – R 115 m

JIBAR + 1.00 %

Additional Capital [0.5]%

Class A2 - R 643 m

JIBAR + 0.39 %

Class A3 – R 107 m

10.34% %

Class C – R 50 m

JIBAR + 2.10 %

Tranching

Capital [0.6]%

BBB

Rating

AAA

A

Not rated

WAL

5 yrs

5 yrs

4.18 to 5 yrs

In brief

Growth in SA Securitisation Market

0

2

4

6

8

10

12

14

16

18

Pre-2000

2000 2001 2002 2003 2004

R b

illi

on

2000 2001 2002 2003Kiwane (CDO) - R 450 m Thekwini 1 (RMBS) - R 1 350 m FRESCO (CLO) - R 900 m Cars 1 (Auto) - R 3 000 m

On the Cards (In-store) - R 2 000 m BMW 1 (Auto) - R 1 000 mPROCUL (Auto) - R 1 300 m BMW 2 (Auto) - R 1 000 mPrivate Mortgages (RMBS) - R 1 000 m Private Mortgages - R 1 000 mFintech Receivables (Equipment Lease) - R 700 m Thekwini 3 - R 2 000 mThekwini 2 (RMBS) - R 1 000 m InDWA (Conduit) - R 3 000Blue Titanium (Conduit) - R 500 m Grayson 1 (Conduit)ABCUS (Conduit) - R 250 m Blue Titanium (Conduit) - R 1 500 m

ABCUS (Conduit) - R 1 500 m

Public Issuance Deal List

• SA Home Loans launched the securitisation market in 2001

• Since then issuance volumes have grow to R 14 billion in 2003

Source: Standard Bank

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

T1 T2 T3 T4

Investor support to date…

Relative ValueRelative Value - Corporate and ABS Spreads

THE3A

THE3B

THE1BTHE2C

THE3C

0

50

100

150

200

250

2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

AAA AA A BBB

OMO1

DC02DC01

AUTO04

THE1APROA21

PROA11

NED2

IPB1

THE2A

bps

FRE1C AB02

THE2B

0

50

100

150

200

250

THE

1A

THE

1B

THE

2A

THE

2B

THE

2C

PR

V1A

PR

IV1B

OM

O1

AG

01

EG

L01

AU

TO3

AU

TO4

THE

3A1

THE

3A2

THE

3A3

THE

3B

THE

3C

CA

R1A

2

CA

R1B

CA

R1C

PR

IV2A

1

PR

IV2A

2

PR

IV2B

bps

AA

BBB

AA/A

AAA

2001-2002 RMBS 2003 RMBS and Selected Deals

• South Africa has seen dramatic growth the capital market since the 1st bond issue by Telkom in 1999

• Spreads on each subsequent transaction have improved

• SA Home Loans transactions are the benchmark in the securitisation market

Source: Standard Bank

Securitisation – Cost of Funds History

0.000%0.100%0.200%0.300%0.400%0.500%0.600%0.700%0.800%0.900%

Thekwini 1 Thekwini 2 Thekwini 3 Thekwini 4

Thekwini

Blended Cost of Funds

Securitisation - A Practical Guide Some Lessons Learned

Size does countQuality of dataSystem reporting abilityTime, money, personnelTiming – Market conditionsRatingsPricing“Build it they will come …….”

Thank You

Simon Stockley

+27 83 2760068e-mail : simonst@iafrica.com