China's Investment Funds

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Presentation for Presentation for National Press Foundation National Press Foundation Teh-Hsiu Fu Teh-Hsiu Fu CEO CEO Everbright Pramerica Fund Management Company Everbright Pramerica Fund Management Company Shanghai China Shanghai China June 8, 2007 June 8, 2007

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Transcript of China's Investment Funds

Page 1: China's Investment Funds

Presentation for Presentation for National Press FoundationNational Press Foundation

Teh-Hsiu FuTeh-Hsiu FuCEOCEO

Everbright Pramerica Fund Management Everbright Pramerica Fund Management CompanyCompany

Shanghai ChinaShanghai ChinaJune 8, 2007June 8, 2007

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Established in April 2004;

A joint venture between Everbright Securities Company, Ltd., a

subsidiary of China Everbright Group and the investment

management business of Prudential Financial, Inc. ;

Everbright Pramerica has a registered capital of RMB 160 million with

67% by Everbright Securities and 33% by Pramerica.

Current staff number at 59.

Introduction of Everbright Pramerica

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As of June 2007, the company manages four investment funds in Ch

ina, i.e., Quantitative Core Equity Fund, Dividend Equity Fund, New

Growth Equity Fund and Money Market Fund;

The fund assets were invested in the Chinese equity and bond mark

ets;

Denominated in RMB, the funds were distributed primarily by banks

and brokerage firms to Chinese investors;

The total AuM of the four funds were RMB 6.63 billion as of May 31,

2007.

EPF Fund Family

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Market Background

EconomyEconomy

The Chinese economy grew at a rate of around 10% in the last few years,

mostly driven by infrastructure investment and domestic consumption

needs;

Real EstateReal Estate

The government launched several austerity measures in 2005-2006 to

curb the overheating real estate market especially in Beijing and Shanghai;

CurrencyCurrency

The government adopted a more flexible foreign exchange mechanism in

July 2005 which prompted the RMB to appreciate from the previous level

of 8.27 to the current level of 7.65 to 1 US$.

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Recent Market Development

The most significant transformation of the Chinese stock market

was the reform program of state-owned shares which began in

mid 2005;

Record number of retail investors flocked to open security

trading accounts, providing fresh capital which lifted the Chinese

equity market to record high;

Fear of market bubble led many institutional investors to reduce

equity exposure in recent weeks.

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QFII Update

The Chinese government introduced the QFII (Qualified Foreign

Institutional Investors) program in 2003 in order to allow foreign

capital to invest in the Chinese market in an orderly and controlled

manner;

So far, there were 52 approved foreign institutions to use the QFII

quota to invest in China with an approved amount of USD 10

billion;

The government recently indicated that the total QFII quota will be

increased to USD 30 billion.

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QDII Update

QDII (Qualified Domestic Institutional Investors) program was

launched by selected banks, insurance companies and fund

management companies with government approval;

The program allows Chinese investors to invest in offshore

markets, with Hong Kong as the current focus;

Investor interest to invest in US or other international markets is

modest at this stage due to the hot local equity market and the

concern about the appreciating RMB;

Overtime, we expect that Chinese investors will be more

interested in QDII products as experience in Hong Kong and

Taiwan will demonstrate.

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The Investment Grid

Local funds

Local bank products

Local insurance products

Local brokerage products

QDII approval needed

(RMB to foreign currencies)

QFII approval needed

(Foreign currencies to RMB)

Open

Chinese

Investors

International

Investors

Chinese

Market

International

Market

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Fund Market Overview

China’s fund Industry has been developed since 1997, and the first open-e

nd fund was launched in 2001;

Number of fund companies in existence: 58;

There are 34 local companies and 24 joint venture companies, of which 4 a

re linked with domestic big banks;

Foreign partners of the fund companies include: Prudential (US), ING, J.P.

Morgan, Fortis, Invesco, Allianz, Paribas, Prudential (UK), UBS, Principal,

Franklin Templeton, BMO, CSFB, SG, Deutsche, ABN AMRO, AIG, Merrill

Lynch, Schroders, HSBC, etc.

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As of March 31, 2007, there were 332 funds in the Chinese fu

nd industry, with total assets under management of RMB 1,17

5 billion;

Total AuM of 41 close-end funds were RMB 185 billion, accou

nting for 16% of total AuM;

Total AuM of 291 open-end funds were RMB 990 billion, acco

unting for 84% of total AuM.

Fund Market Overview

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Fund Market Overview

No. of FundsTotal assets under

management (RMB billion)

Dec 2005 Dec 2006 Mar 2007 Dec 2005 Dec 2006 Mar 2007

Close-endFunds

54 53 41 82 1622 185

Open-endFunds

169 268 291 394 694 990

Total 223 321 332 476 856 1175

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Fund AuM 2002-March 2007

150239

469

856

1175

325

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 Mar.2007

RMB Billion

476

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Open-end Fund Asset Breakdown

As of

March 2007Equity Funds

Guarantee Funds

Hybrid Funds

Bonds Funds

Money Market Funds

Total

Size

(RMB billion)582 13 269 37 89 990

Fund Assets (RMB billion)

59%

1%

27%

4%

9%

Equity Funds

Guarantee Funds

Hybrid Funds

Bonds Funds

Money Market Funds

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Discussion Points –What global areas might China’s new investment fund be looking at?

RegionsRegions SectorsSectors

US

Europe

Japan

Emerging Markets

Equities

Bonds

Money Market

Real Estate

Commodities

Hedge Funds

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Everbright Pramerica Fund Management Co.

Address: 46/F Bund Center, No. 222 Yan An Road (E), Shanghai, ChinaPostcode: 200002Tel: (86) 21 3307 4700 Fax: (86) 21 6335 1152Website : www.epf.com.cn