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

2. Asset Management: New Trends in Productsand Management Techniques in India 14:00/15:30 - Panel 4

Peter KURIANChairman Association of Mutual Funds in India (AMFI)

Alain LECLAIR Chairman French Asset Management Association (AFG)

3. The world growing role of French asset management Industry:The European Leader An attractive opportunity for cooperation withIndia Alain LECLAIRChairmanFrench Asset Management Association Mumbai, May 16th 2007 4. 1.The world growing role of asset management in financial industry and economy With total assets equivalent to the world GDPthe asset management industry : Plays a crucial role in the management of savings for individualsand institutions Contributes strongly to the structuring of the markets and the financingof national economies Its total size reaches 38 trillions(USD 50 trillions) world wideincluding 13 trillions(USD 17 trillions) for Europe Its European fund component reaches 8 trillions(x 4 in ten years)equivalent toUS$ 11 trillionsfor the USA (x 3 in ten years) 5. The world growing role of asset management in financialindustry 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. The world growing role of asset management in financialindustry and economy xxxxxxx 7. European and Asian/Indian asset management would benefit fromprospects for strong growth: Large reservoir of savingsin contrast with the very low rate of the American households saving rate and the high level of their indebtedness Securitisationof European and Asian/Indian households portfolios still substantially in liquid placements Need to supplement the pay as you goretirement system(Social Security) with defined contribution schemes Need tocomplement government financing(deficit problems) of infrastructure, energy, water, environment, educationdevelopments Increased cooperationof 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 financialindustry and economy 8. 2.French asset Management : World leader of the investment fund and structured asset management France ranks 1 stin theEuropeaninvestment funds management market France ranks 2 ndin theworldinvestment funds market after the USA 9. French asset Management : World leader of the investment fund and structured asset management Assets managed by the French industry have multiplied5 folds in ten years: 10. French asset Management : a world leader of the investment fund and structured asset management 5leading actors rank among the25biggest in the worldAXA IM BNP Paribas AM Crdit Agricole Asset Management CAAM IXIS AM Socit Gnrale Asset Management SGAM part of the 500 registered investment management companiesincluding an increasing number ofentrepreneurialspecialised entities (quantitative, absolute return, structured, hedged, indexed, credit, private equity, real estate, private banking) 11. 3.A leadingrole based on the right balancebetween Dynamic management of money market and fixed income fundsStructured and guaranteed funds (either in capital orin performance) Profiled funds (life-cycle funds) Unit-linked life insurance contracts Multimanagement, via the use of funds of fundsRegulated hedge funds and funds of hedge funds Use of derivatives, futures and swaps in funds (including : CDOs, credit derivative, commodities, climate, CO 2 ) Strong e-commerce development for funds distribution financial innovationandprotection of the savers The Frenchinnovation in financeis based on a long tradition in the fields of financial mathematics and engineering : Asset management and distribution technics 12. A leadingrole based on the right balancebetween financial innovationandprotection of the savers The Frenchinnovation in financeis based on a long tradition in the fields of financial mathematics and engineering : Investment purpose Employee retirement saving plans(PERCO and PERP) Institutional and retailprivate equityfunds Open endedreal estatefunds Sustainable and socially responsibleinvestments fund (SRIs) Charia compliant funds 13. A leadingrole based on the right balancebetween financial innovationandprotection of the savers Regulation forinvestor protectionandindustrial efficiency: French actors have traditionally given a priority to the protection of investors in partnership with theregulators : Autorit des Marchs Financiers AMF, European Commission, Committee of EuropeanSecurities Regulators CESR, IOSCOThe fantastic success of the EuropeanUCITSdirective : which has created a global brand exportedfrom 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 andthe 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. 4.Potential fields of co-operation between French and Indian financial industry in Asset management Similaritiesbetween 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 efficiencyImprovement 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. Potential fields of co-operation between French and Indian financial industry in Asset management 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 technologydevelopment of joint-ventures between French and Indian asset managers and distributors withthe support of their financial authorities *** As a conclusion, after presenting those ambitious goals, I would like, if I may,to quoteMahatma Gandhi: What is faith worth if it is not translated into action? 16. 15:30/16:45 - Panel 4 Asset Management: New Trends in Products and Management Techniquesin India 17. GROWTH AND DEVELOPMENTOF THE INDIAN MUTUAL FUND INDUSTRY 1996 2007 A P KURIANChairmanASSOCIATION OF MUTUAL FUNDS IN INDIA 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. Growth of Assets Under Management (AUM) 21,635 168 29 Mar - 96 19,564 196 35 Mar - 97 17,451 252 31 Mar - 98 16,111 277 34 Mar - 99 25,889 337 32 Mar - 00 19,336 393 35 Mar - 01 20,601 417 35 Mar - 02 16,719 382 33 Mar - 03 32,170 403 31 Mar - 04 34,286 428 29 Mar - 05 52,127 592 29 Mar - 06 85,396 745 32 Apr - 07 AUM US $ (Mn) No. of Schemes No. of AMCs YEAR 20. Growth of Assets Under Management (AUM) 21. Number of Asset Management CompaniesAs on April 30, 2007 (US $ Mn) 6.99 5,972 46 2 Foreign 100.00 85,396 745 32 TOTAL 17.97 15,347 197 10 JV - Predominantly Foreign 32.02 27,345 177 5 JV - Predominantly Indian24.37 20,807 191 10 Indian 81.35 69,471 611 27 Private Sector C2.58 2,202 33 1 Institutions (LIC MF) B 10.84 9,254 76 3 Others ( UTIMF, Canbank MF & BOB MF) 5.23 4,469 25 1 JV - Predominantly Indian ( SBI MF ) 16.07 13,723 101 4 Bank Sponsored A % toTotal AUMNo. ofSchemes No Category 22. TYPE OF FUNDS - ASSETS UNDER MANAGEMENTAS ON APRIL 30,2007(US $ Mn.) 1.30 1,112 7 ETFs F N.A. 537 33 FUND OF FUNDSF100.00 85,396 745 TOTAL0 .62 528 28 GILTFUNDS E22.81 19,478 54 LIQUID/MONEY MKT. FUNDS D2.74 2,33937 BALANCEDFUNDS C 35.98 30,725 356 DEBTFUNDSB 36.55 31,214 263 EQUITYFUNDS A % ToTOTAL AUM No.of Funds TYPE 23. STOCK EXCHANGES

The Bombay Stock Exchange was established in 1875

One of the oldest Stock Exchanges in Asia

Worlds 5 thLargest Stock Exchange

National Stock Exchange commenced operations in

Wholesale Debt Market & Equity Shares in 1994

& Derivatives in June 2000

Worlds 3 rdLargest 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. Comprehensive Regulatory Framework Favourable Tax Policies Introductionof New Products Role of Distrributors Investor Education Campaign Performance Record FACTORS CONTRIBUTING TOTHE GROWTH OF THE INDUSTRY 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. 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 ofMoney 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. 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. 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 Categoryfunds, 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. Investor Education Campaign

Every Fund House carries out education campaignsthrough 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 variousbodies conducts, participates in awareness programmes

AMFI brought out a simple booklet on the concept and workingof mutual funds

Various Trade bodies, Stock Exchanges regularly conduct Investor Awareness Programmes across the country

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. FACTORS INHIBITINGGROWTH 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. THANK YOU ASSOCIATION OFMUTUAL FUNDS IN INDIA 33. 15:30/16:45 - Panel 4 Asset Management: New Trends in Products and Management Techniquesin India 34. Mumbai, Wednesday, May 16, 2007 1 STFRENCH-INDIAN FINANCIAL FORUM European Financial Markets: Opportunities for Growthand Value Creation