1. 1 15:30/16:45 - Panel 4 Asset Management: New Trends in Products and Management Techniques in India

2. 2 Peter KURIAN Chairman Association of Mutual Funds in India (AMFI) Peter KURIAN Chairman Association of Mutual Funds in India (AMFI) Alain LECLAIR Chairman French Asset Management Association (AFG) Alain LECLAIR Chairman French Asset Management Association (AFG) 14:00/15:30 - Panel 4

3. 3 The world growing role of French asset management Industry: The European Leader An attractive opportunity for cooperation with India Alain LECLAIR Chairman French Asset Management Association Mumbai, May 16th 2007

4. 4 1. The world growing role of asset management in financial industry and economy With total assets equivalent to the world GDP the asset management industry :  Plays a crucial role in the management of savings for individuals and institutions  Contributes strongly to the structuring of the markets and the financing of national economies Its total size reaches € 38 trillions (USD 50 trillions) world wide including € 13 trillions (USD 17 trillions) for Europe Its European fund component reaches € 8 trillions (x 4 in ten years) equivalent to US$ 11 trillions for the USA (x 3 in ten years)

5. 5 The world growing role of asset management in financial industry and economy The world growing role of asset management in financial industry and economy Global market for investment funds: Europe is catching up with the USA (16 550 bn euros at end 2005 -Source: EFAMA / ICI) Others 1% Brazil 3% Canada 3% Hong-Kong 2% Australia 4% Japan 2% Europe 40% United States 45%

6. 6 xxxxxxx The world growing role of asset management in financial industry and economy The world growing role of asset management in financial industry and economy

7. 7 European and Asian/Indian asset management would benefit from prospects for strong growth :  Large “reservoir“ of savings in contrast with the very low rate of the American households saving rate and the high level of their indebtedness  Securitisation of European and Asian/Indian households portfolios still substantially in liquid placements  Need to supplement the pay as you go retirement system (Social Security) with defined contribution schemes  Need to complement government financing (deficit problems) of infrastructure, energy, water, environment, education…developments  Increased cooperation of European/French with Asian/Indian actors (asset managers, banks, insurance companies, intermediaries) in the field of managing and distributing savings products The world growing role of asset management in financial industry and economy

8. 8 2. French asset Management : World leader of the investment fund and structured asset management  France ranks 1 st in the European investment funds management market  France ranks 2 nd in the world investment funds market after the USA

9. 9 French asset Management : World leader of the investment fund and structured asset management French asset Management : World leader of the investment fund and structured asset management Assets managed by the French industry have multiplied 5 folds in ten years :

10. 10 French asset Management : a world leader of the investment fund and structured asset management 5 leading actors rank among the 25 biggest in the world AXA IM BNP Paribas AM Crédit Agricole Asset Management CAAM IXIS AM Société Générale Asset Management SGAM …part of the 500 registered investment management companies including an increasing number of entrepreneurial specialised entities (quantitative, absolute return, structured, hedged, indexed, credit, private equity, real estate, private banking…)

11. 11 3. A leading role based on the right balance between Dynamic management of money market and fixed income funds Structured and guaranteed funds (either in capital or in performance) Profiled funds (life-cycle funds) Unit-linked life insurance contracts Multimanagement, via the use of funds of funds Regulated hedge funds and funds of hedge funds Use of derivatives, futures and swaps in funds (including : CDO’s, credit derivative, commodities, climate, CO 2 …) Strong e-commerce development for funds distribution … financial innovation and protection of the savers financial innovation and protection of the savers  The French innovation in finance is based on a long tradition in the fields of financial mathematics and engineering :  Asset management and distribution technics

12. 12 A leading role based on the right balance between A leading role based on the right balance between financial innovation and protection of the savers financial innovation and protection of the savers  The French innovation in finance is based on a long tradition in the fields of financial mathematics and engineering :  Investment purpose Employee retirement saving plans (PERCO and PERP) Institutional and retail private equity funds Open ended real estate funds Sustainable and socially responsible investments fund (SRIs) Charia compliant funds …

13. 13 A leading role based on the right balance between financial innovation and protection of the savers financial innovation and protection of the savers  Regulation for investor protection and industrial efficiency : French actors have traditionally given a priority to the protection of investors in partnership with the regulators : Autorité des Marchés Financiers AMF, European Commission, Committee of European Securities Regulators CESR, IOSCO The fantastic success of the European UCITS directive : which has created a global brand exported from South America to Asia (Hong Kong, Singapore, Taiwan…) with + 70% market penetration The very deep co-operation with banks, insurance companies and other financial intermediaries, which contributed to the commercial efficiency of the industry The constitution of industrial processes and the creation of very innovative saving products often distributed at large scale (up to millions of investors) The integration of administrative and post-market activities, clearing and settlement, with high level of data processing technologies The creation of a vast “ecosystem” of highly specialised businesses : depositaries, custodians, auditors, specialists of valuation, measurement and attribution of performance, etc

14. 14 4. Potential fields of co-operation between French and Indian financial industry in Asset management Similarities between Europe/France and Indian savings and financial fields : Similarities between Europe/France and Indian savings and financial fields : Increase of savings in a broad scale in the population Need to re-orientate efficiently these savings, to satisfy the needs of the savers as well as to consolidate the capital markets and to better contribute to the financing of the economy Urgency to mobilize households savings to contribute directly to the funding of their future retirements Need to reinforce the regulation tools to analyse their cost efficiency Improvement of the distribution channels of saving products thought the networks of banks, insurance companies and other financial intermediaries and need to develop the education of the investors

15. 15 Potential fields of co-operation between French and Indian financial industry in Asset management Co-operation fields : Co-operation fields : development of the mutual knowledge in the area of finance and savings. collaboration in research in mathematical finance for product innovation joint venture to develop a FrancoEuropean-Indian Institute for regulatory research and training co-operation for mass distribution technology and information reporting on savings products joint access to the most sophisticated fund management technics thanks to UCITS technology development of joint-ventures between French and Indian asset managers and distributors with the support of their financial authorities … *** As a conclusion, after presenting those ambitious goals, I would like, if I may, to quote Mahatma Gandhi : “What is faith worth if it is not translated into action?”

16. 16 15:30/16:45 - Panel 4 Asset Management: New Trends in Products and Management Techniques in India

17. 17 GROWTH AND DEVELOPMENT OF THE INDIAN MUTUAL FUND INDUSTRY 1996 – 2007 A P KURIAN Chairman ASSOCIATION OF MUTUAL FUNDS IN INDIA

18. 18 Evolution of the Indian MF Industry Unit Trust Of India set up under an Act of Parliament in 1963. Launched its first scheme in 1964 In 1987 the MF Industry was opened to other Public Sector Banks & Financial Institutions. 7 such Funds commenced In 1993 SEBI MF Regulations notified In 1993 Private Sector players were permitted to enter the MF Industry In 2003 the UTI Act was repealed, it marked the end of Assured Returns Schemes, UTI Mutual Fund came into being

19. 19 Growth of Assets Under Management (AUM) YEARNo. of AMCsNo. of SchemesAUM US $ (Mn) Mar - 962916821,635 Mar - 973519619,564 Mar - 983125217,451 Mar - 993427716,111 Mar - 003233725,889 Mar - 013539319,336 Mar - 023541720,601 Mar - 033338216,719 Mar - 043140332,170 Mar - 052942834,286 Mar - 062959252,127 Apr - 073274585,396

20. 20 Growth of Assets Under Management (AUM)

21. 21 Number of Asset Management Companies As on April 30, 2007 (US $ Mn) CategoryNoNo. of Schemes AUM% to Total ABank Sponsored 410113,72316.07 JV - Predominantly Indian – ( SBI MF ) 1254,469 5.23 Others ( UTI MF, Canbank MF & BOB MF) 3769,254 10.84 BInstitutions (LIC MF)133 2,202 2.58 CPrivate Sector2761169,47181.35 Indian1019120,80724.37 Foreign2465,9726.99 JV - Predominantly Indian517727,34532.02 JV - Predominantly Foreign1019715,34717.97 TOTAL3274585,396100.00

22. 22 TYPE OF FUNDS - ASSETS UNDER MANAGEMENT AS ON APRIL 30, 2007 (US $ Mn.) TYPENo.of Funds AUM% To TOTAL AEQUITY FUNDS26331,21436.55 BDEBT FUNDS 35630,72535.98 CBALANCED FUNDS 372,339 2.74 DLIQUID/MONEY MKT. FUNDS 5419,47822.81 EGILT FUNDS 285280.62 FETFs71,1121.30 TOTAL74585,396100.00 FFUND OF FUNDS 33537 N.A.

23. 23 STOCK EXCHANGES The Bombay Stock Exchange was established in 1875 One of the oldest Stock Exchanges in Asia World’s 5 th Largest Stock Exchange National Stock Exchange commenced operations in Wholesale Debt Market & Equity Shares in 1994 & Derivatives in June 2000 World’s 3 rd Largest Stock Exchange Paperless Screen based trading with the advent of Depositaries Real time quotes. More transparency in trades Took the Stock Markets to small towns Real time risk management systems and monitoring

24. 24 Comprehensive Regulatory Framework Favourable Tax Policies Introduction of New Products Role of Distrributors Investor Education Campaign Performance Record FACTORS CONTRIBUTING TO THE GROWTH OF THE INDUSTRY

25. 25 COMPREHENSIVE REGULATORY FRAMEWORK First Regulation 1993, revised in 1996 Over the years established world class standards in Accounting, Valuation, NAV computation and disclosure Full disclosure of portfolio twice a year Publication of Half Yearly unaudited results & Audited Annual Accounts Standardised Offer Documents & Simplified Key Information Memoranda Certification Test for Agent Distributors Code of conduct for AMCs & Distributors Uniform Cut-off Time for applicability of NAVs Benchmark indices for comparing performance of Mutual funds Comprehensive Risk Management System

26. 26 FAVOURABLE TAX POLICIES Mutual Fund as an entity is non-tax paying Investors in Mutual Fund schemes enjoy certain tax benefits Debt schemes – The fund pays upfront Dividend Distribution Tax (DDT) of 14.025% for Individuals and 22.44 % for others before distribution to investors.In case of Money Market / Liquid Funds DDT is increased to 28.325 %. Dividend so received by investors is Tax Free Investment in Equity oriented Tax saver schemes upto Rs.1 Lac (US $ 2,300 approx.) with lock in period of 3 years is eligible for deduction from taxable income On Equity oriented Mutual Fund Schemes - Short Term Capital Gains Tax is 10 % and for Long Term it is Nil

27. 27 ROLE OF DISTRIBUTORS Distributors play an active role in the growth of the Industry Different classes of Distributors – Large Corporate Distribution Companies, Banks, Private & Partnership Companies, Post Offices & Individual Agent Distributors Distribution Companies and Banks are emerging as major channels – together accounting for 70-75 % of total business Distributors have to pass AMFI Certification Test and register with AMFI AMFI Certification program creates a cadre of trained Agent Distributors across the country (around 57,000) Distribution is becoming more and more professionalised Financial Planning is becoming popular Code of Conduct promotes discipline in distribution business

28. 28 Introduction of New Products Industry started with traditional products equity, debt and balanced Launched Liquid / Money Market funds, Sector specific, Index funds, Gilt funds Special Category funds, Children funds, Education Funds, Insurance linked funds, Exchange traded funds Gold ETFs introduced in 2007..........and Real Estate Mutual Funds (REMFs) on the drawing board

29. 29 Investor Education Campaign Every Fund House carries out education campaigns through investor meets, seminars etc. Nation wide Advertisement Campaign through Print & Electronic media carried out by Fund Houses AMFI right from the beginning initiated investor awareness programmes. Funds specially set aside. AMFI, both directly and in association with various bodies conducts, participates in awareness programmes AMFI brought out a simple booklet on the concept and working of mutual funds Various Trade bodies, Stock Exchanges regularly conduct Investor Awareness Programmes across the country

30. 30 Performance Record By and large most funds have provided market related returns Many have out performed benchmark indices Investors started appreciating the performance record of Mutual Funds

31. 31 FACTORS INHIBITING GROWTH OF MUTUAL FUNDS Lack of awareness and knowledge about Mutual Funds Unwillingness to undertake even minimal risk Inadequate reach of Funds / Distributors Competition from assured return products from Government like Government Of India Bonds, Post Office Monthly Income Schemes, Senior Citizen Savings Schemes, National Savings Certificates etc.

32. 32 THANK YOU ASSOCIATION OF MUTUAL FUNDS IN INDIA

33. 33 15:30/16:45 - Panel 4 Asset Management: New Trends in Products and Management Techniques in India

34. 34 Mumbai, Wednesday, May 16, 2007 1 ST FRENCH-INDIAN FINANCIAL FORUM European Financial Markets: Opportunities for Growth and Value Creation