Securitisation 2011 Quo Vadis? Presentation to Housing Finance Workshop April 2011

1. Securitisation 2011 Quo Vadis?Presentation to Housing Finance WorkshopApril 2011

2. Presentation Overview • Historical overview/recap • 2008 – a watershed year! • 2009 – tentative recovery • Way forward/lessons learned • Discussion and close

3. Securitisation Defined Definition… “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

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

5. 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.

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

7. Securitisation was • Stable and reliable source of funding for banks • Primary source of funding for non deposit taking institutions • Relatively cheap and easy mechanism for raising long term funding • Cornerstone of diversified funding strategy • But events of 2008 changed all of that

8. Securitisation Issuance based on Originating Country or Region

9. ABS Sectors in the US

10. European Securitisation by Type of Collateral

11. US Issuance of Asset-Backed Securities

12. Gross Securitisation Issuance

13. US Issuance of MBS & ABS

14. Securitisation Issuance in Europe

15. Global Net Securitisation Issuance

16. Spreads on AAA-Rate European ABS

17. 2009 • Some signs of recovery • Majority of issuances refinance/liquidity initiatives by central banks • Some return to normality in credit spreads • Majority of activity at short end of credit curve • Tentative and greenshoot recovery. Dubai default likely to undermine

18. Credit Spreads on US AAA Securitisation Instruments (in basis points)

19. Global Private-Label Securitisation Issuance by Type (in billions of US dollars)

20. US Private Label Securitisation Issuance by Type (in billions of US dollars)

21. European Private Label Securitisation Issuance by Type (in billions of US dollars)

22. Non-European Private-Label Securitisation Issuance (in billions of US dollars)

23. Lessons Learned • Keep it simple/avoid the exotics • Reliance on relationships • Access to balance sheet funding/equity key • Cannot view as only source of funding – not a business model in itself • Must be underlying commercial rationale for any transaction • “Originate and sell” no longer viable business model • Originators/promoters have to have “skin in the game” (CF covered bonds) • Greater recourse lending • Property (particularly residential) viewed with deep suspicion by investors • Long term funding difficult. Focus on early amortising/recycling assets

24. Global Covered Bond Issuance (in billions of Euros)

25. Selected Covered Bond Spreads (in basis points)

26. Lessons for Meena • Region is not immune – will take lead from established markets • Sentiment in emerging markets more exaggerated and investor appetite transient • Lack of liquidity and depth limits investor appetite but market may recover more quickly if investors chase yield • Dubai resolution key • Greater focus on underlying collateral and strength of issuer, arranger and servicer • Property related transactions likely to be difficult

27. Lessons for Rasameel • Investors suspicious of “cut and run” schemes • View as part of integrated business model and not business model in itself • Relationship with investors key • Greater reliance on independent due diligence process. Rating agencies no longer viewed as reliable • Batten down the hatches - ride out the storm. Consolidate and focus on internal systems and controls • Use as recruitment opportunity. Significant human capital freed up as a result of global market conditions • 2010 likely to be a tough year – manage stakeholder expectations

28. How should Rasameel respond to these changes? • Diversify – cannot rely exclusively on securitisation as funding or business model • Develop ancillary business lines • Limited scope for pure advisory work – will have to take equity position • Servicing and collections ability a new differentiation • May need to bolster balance sheet – “flight to quality syndrome” • Establish a presence in diversified geographic markets as a risk mitigant • Establish diversified liquidity facilities and funding lines • Position Company strategically for when upturn comes late 2010

29. Thank YouSimon Stockley • Mobile +27 (0)83 2760068 • Fax 0866 728133 • E-mail stockley@catalis.co.za