Ajay Srinivasan

Thanks, Mark, and good-morning everyone. I think 4 years ago when a lot of you where here last when we presented the Asian business, the fund business was just beginning. It was a kind of blip on the chart. And we just had a glint in our eye, in terms of what the Asian fund management business could look like. Over the next hour or so, what my colleagues and I will try to do, is tell you what we've done over these 4 years and tell you why we are so excited and optimistic about the future of the business.

Let me start, though, by giving you some key messages. And these are the messages we are looking to deliver over the next 70 minutes or so. First, regional funds in Asia, growing very strongly over the last few years. But this pales in comparison to the future potential. Second, Prudential has demonstrated a solid track record of delivery and has built a really sizeable business in what is a reasonable short period of time. Third, we have added significant value to the Life companies and Kelvin showed you some of the numbers earlier through the fund management we provide to the Life companies. Four, just looking ahead – we want to be a significant and profitable force in every market we operate in. Quite simply: we are looking to build market leading businesses in each of the markets we operate in. And last: we believe we'll succeed in achieving this, because we have the strategy, the brand and the people required to do so.

This slide looks at the growth of the Asian mutual fund market between 2002-2003; it gives you a sense of size and the growth in the last year. A couple of points on this chart. First, if you look at Japan – Japan is clearly the biggest market for retail financial services and for Mutual Funds. Japan is bigger than all the other markets put together. They are a pretty big sized market for us. If you look at Japan and Korea, together they account for about three fourth ¾ of the total Mutual Funds, assets under management in Asia. So again, Japan and Korea are clearly dominate the landscape on the mutual fund scene. If you look at the growth at the bottom there, the market grew about 7%, 2002-2003, but this number is really influenced by the negative number you see there for Korea, and therefore hides a lot the attractive growth you see in some of the other markets that are set out over there.

This chart just shows you some of the Asian mutual funds markets and how they were place in terms of growth potential compared to some of the markets in the West. And we've used the measure here of... the size of the mutual fund market relative to GDP. If you measure the markets by the size of mutual fund as a percentage of GDP, I think what you'll see is a lot of the Asian markets are at the bottom of the chart there. Typically less than 10%. Compare that with the US and the UK at the top of the chart, and I think you'll understand why we keep talking about this growth potential that's here to come. I think this chart, really, to me, gives you a very clear message, which is: there is a long, long road ahead for the Mutual Fund markets in Asia in terms of growth.

Prudential clearly saw this opportunity and looked at building this Mutual Fund business, as I said, starting 4 years ago. Set out in this slide are the various factors Prudential considered in terms of the strategic fit of the Mutual Fund business with its existing Life business. For one, from a customer perspective, the funds business broadens our offering, deepens our relationship with our customers and clear increase a share of wallet; all of which leads to a much more loyal customer base for Prudential as a whole. Second, from a financial perspective the business creates shareholder value, leveraging off our core strengths, and really has an attractive return on capital profile, as I will show you later. And finally you heard Mark Toh and Keng Hooi in Malaysia demonstrating in their presentations, how the fund business can leverage off the existing market knowledge, infrastructure and brand presence we have as a result of our leading Life businesses across Asia. So, clearly, we look at this as an opportunity to extend the Prudential brand to cover investment products.

Okay. From markets and strategies, let me now move to talking about the business we've built to date. This chart just starts with the people, which I think is critical to delivering everything we talk about, and shows at a very high level the way the funds division is organised. At one level at the bottom over there, you see our country businesses are run by local CEO's and their teams. Everyone of our CEO's is local and therefore brings a greater understanding of the local market with them. You will have presentations from a few of them during the course of this session. Supporting them in that line, the line at the top, we have a reasonable team of (functional?) experts in various areas. When sure the two things are done. One, the best practise is transferred from region to region and that we adhere to uniform high level of standards across all our markets.

A little bit of history about the Mutual Funds business. As I've said, 4 years ago we were just about starting this regional business and I just wanted to give you a sense of what we've done in a very quick history lesson. The Mutual Funds business was launched in India back in 1998 as a JV with ICICI. At the time, and Rob reminded me (of) this yesterday, we managed about £20 million. Today, we manage close to £2 billion. Now, let me give you an idea of what this means in terms of value. I know you guys are analysts and like to put value to things, so let me give you some sense of transactions that have happened in India and what this might mean in value.
India is one market where we have seen a few transactions recently and there have been about 2 or 3 transactions in the last couple of years. The 3 transactions we've seen in the last couple of years are transactions where people have acquired between 5% and 7% of fund, and with PPP multiples of between 12 to (18? / 80? ) times. So you can see there is a fairly wide range out there in terms of multiple to profits. But let me just tell you that these are companies that are much smaller and much less profitable than we are. So, it just gives you a sense of what value this business has created over the last few years.
Moving on back to the rest of the history, I think, at the end of 2000, we entered Taiwan with the acquisition of a company managing about £800 million; today we manage twice that amount. In 2000 we also launched a Hong Kong JV with the Bank of China and that business manages both Mutual Funds as well as Provident Funds. Today our share of that business at 36% is about £600 million. In 2001 we also launched green field business in Malaysia, Singapore and Japan. You've heard about our business in Malaysia from Mark Toh and in a short while Felix will talk you through some of the details of our Japan business.
At the end of 2002 we entered Korea, and that company has grown 50% since we acquired it. So, as a result of all of this, we now have a Mutual Fund business that covers 7 countries, 8 if you add the license that Mark picked up today, and we're actively reviewing opportunities in China, which again, Thomas (transcriber: Tsao?) will cover for you. We hope to convert these 2 asterisks into darts and at a later chart we'll show you the darts into tick marks over a period of time.
You also heard about the Linked funds that we provide, and I think the chart on the right-hand side what we show is: we provide Linked funds in 10 of our Life business across Asia.

This, I think, is an interesting chart, because what it shows is the geographic spread for Prudential across Asia, relative to several other participants in the market. I think there are a few trends here that are worth mentioning; let me just walk you through them. For one, in most markets there are local incumbents who pretty much dominate the market. In Japan, Numurai is by far the biggest; in Korea Daehung Investment Trust dominates; in India it's UDI. In every market you have a local incumbent who you have to compete with as you get into the market. But second, in most markets the top-4 or 5 players account for a bulk of the market. So it's important to get into the top-4 or 5 to be in the scale game. But third, and that's what this chart shows, foreign owned fund management companies are increasing their share within country, and as this chart shows, looking to expand across markets. But what this chart really shows, and as I said we can convert Vietnam to a tick here, and as I said earlier, I hope to convert China to a tick, the chart here shows that our presence and our breath across Asia is clearly significant. In fact, I think it's safe to say that given our geographic footprint and our scale in each of these markets, we are in a very unique position in this business in Asia.

Okay, what does that geographic spread mean in terms of growth? The left hand chart shows our growth in funds under management, as you can see from the slope of that chart it's a fairly rapid growth over the last few years. Total funds under management are close to £19 billion and have grown at a (CGJR?) of about 50% per annum over the period shown in that chart there. There are two sources of those funds under management; one of the Life company funds from the UK, and our own Life company funds from Asia. They account for just over 50% of our total funds under management. The rest of the funds are accounted for by the Mutual Fund business. The chart on the right-hand side shows the source of the growth of the funds under management. And if you add up those numbers and look at the growth in funds under management, what you see that over 60% of our growth in funds under management has come through increased flows.

Okay, this slide looks at the source of our fund on the left-hand side and by type of client on the right-hand side. On the left-hand side you'll see the wagon wheelers, you know, many colours. That's not so much a eye test, as much to show you as we have a number of sources of fund that contribute to our total. The UK, as you see over there, accounts for about 30% of our money, now that's both the UK Life money, as well as some of the money we manage for MNG, Asian money. Our established Life businesses in Hong Kong and Singapore account for a good chunk of our fund, and you'll see those marked out there, and the growing Neutral funds businesses in India, Taiwan, Japan, Korea and elsewhere, make up the balance 30% of our assets. The right-hand side, again, shows you that in a slightly different way by client. I think what it says is: the largest source of funds under management for Prudential today, is the Mutual Fund business, and the rest is equally split between the UK Life and the Asian Life business.

To give you some idea of the mix of the total funds under management – this slide shows you the changing product mix over the last year, from a mix that contains about 45% equities in September 2003, we now have a mix that is more equity rich, that's good for profits. This has come both from our Life business as well as from our Mutual Fund business.

Now, this is a slide that addresses a question that I often get asked by people from the UK – and Rebecca haunts me about his every time she sees me – and this is really around the question of the inflows and outflows of our business and what people look at the persistency. I've already been asked this question a few times over the last days, over lunches and dinners. So, let me try and proactively answer the question to stop one more question in the Q&A.
For what I think drives revenues in our business, is the quantum of funds under management multiplied by the fees. Now, the quantum of funds under management is driven by net flows and market movements, and the fees is a function of product mix. So, I think, while you do see money coming in and out, what you need to understand is our net flows have grown year after year ever since we started this business and hence funds under management and revenues have grown consistently. Second, I think, the way commissions are structured – and somebody asked me this question earlier – the way we structure our commission, we have no new businesses strain, so the acquisition cost of this business is really negligible. And lastly, what this chart shows, if you strip out the money market funds from our flows – which is what you should do and you should look at net flows – our net flows as a percentage of gross flows are really no different to the US industry. So, the left-hand side shows you what the US industry would be, which is roughly 11% is net flows compared to gross flows for the year, and our numbers our just marginally behind that. It's just a question of how you look at the numbers, and what those numbers mean for our profitability. I still expect a question at Q&A, but I'll use the same numbers.

This slide goes to show a chart I've just made. Net revenues on the left-hand side have grown consistently from about £30 million in 2001 to the same amount at the half year of June 2004. So the arrow on the chart on the left-hand side is headed in the right way. So is the arrow on the right hand side, which shows the cost as a percentage of net revenues. As we've increased our scale of operations, we've benefited from the economies that accompany such scale. Our cost, therefore, as a percentage of net revenues, has decreased consistently across the period. Our largest cost is people, and I would say that's more an investment than a cost. And much of the rest about cost are really fixed in nature. Given this is a scale business, we expect further increases in revenue to lead to a further reduction in cost as a percentage of revenue. This is a scale business and the economies of scale come out from the right-hand chart, as you can see there.

This chart derives from the earlier slides and, as Mark referred earlier, this is the first time we've gone public with some of these numbers, and it shows the profitability of the Funds business over a period of time. Then again, happily the arrow is pointed in the right direction. Given the state of development of the business overall, and the fact that we still have green field businesses in different stages of growth, I believe this is really a strong slide and a testament to the huge progress made by our many teams across the countries, driving value from each of our business units. In a relatively short period of time, the Funds business is a material contributor to the cash profits of Prudential in Asia and repatriates capital to the parent.

As a result of our scale, our efficient use of capital and our profitability, our return on capital has been increasing and it's currently about 16%, if you annualise our half-year profit numbers. The only point on this chart is really to look at the trend and look at the direction of the arrow and where that arrow could go. Because take in mind the relative youth of the business, as we reap the economies of scale, we expect this number to keep improving, because increased profitability is not accompanied by increased capital, other than the new licenses that we may require along the way.

In addition to our external facing mutual Funds business, as I said at the outset, we manage the Life assets. This slide was shown by Kelvin earlier. It clearly shows the value we've added, so I won't talk about that point, but I think you've heard a lot in KL about our Unit Linked strategy and the success of our Unit Linked strategy. Again, I think it's safe to say that one of our key advantages of doing this as Prudential, has been the support of the fund management team, in terms of product, product design, product development, product support, as well as the fund performance we provide them. And again, Kelvin showed you some of the numbers on the Unit Linked side.

This slide shows the fund performance for our Mutual Funds, and therefore looks at our external facing business and simplifies it. So, what we are trying to give you is just a sense of what the overall aggregate fund performance could be. So what we've done here is look at funds with a reasonable size and ones which have easy (bear?) comparisons to compare against. These really form the universe that we monitor regularly at the regional office. As this shows over 1 year and 3 years, you know, 2 types of our funds are in the top half. You know, that's a good place to be.

As a result of that fund performance, we've won several awards around the region, and I've just shown you a few here. I don't want to go through each of these, but I just want to say that the fund awards are a critical part of what we want our fund managers to strive for, because it shows the recognition that our fund performance delivers in the market, and we want our fund managers to strive for this, of course within all the risk parameters that we've mentioned earlier.

So, I've spoken so far about our structure, our geographic spread, our growth in funds under management, profits and fund performance. The result of all of that, I think, is reflected in this chart, which shows our market leading positions in the various markets we operate in and the healthy market share we retain, as you see on the right-hand side. What I'd like to do now is just talk about the three countries that don't have a tick mark. In Japan we are today ranked 18 our of 33 foreign fund managers. We have a market share of close to 2% in that segment. This is huge achievement, given the scale of that market, the relative newness of our business over there and the competitive nature of the market.
In Korea we are ranked 3rd out of the 8 foreign fund managers in operation; and we have a market share there of 3%. Again, a huge achievement, given the age of that business. In Singapore, though, we have no ranking in market share because offshore funds make that comparison difficult. What we know, given the quantum of money we manage with the Life funds and the Linked funds, were are clearly amongst the top fund managers in that country.

Let me now just step back and look ahead and try to give you a sense of what we are looking to build over the next few years. What I'd like to do here is just set out some of the objectives we're setting our for the business as we look forward.
First, we want to increase our scale and materiality, as defined by profitability and funds under management. Highest scale drives higher profitability, so the scale is a key business. Size matters in this business.
Second, we want to build a material base of retail customers. We are a part of a retail financial services company and customers are a key asset.
Third, we believe that in this business the leaders both need and require to have strong brands and it's our intention to leverage our brand to create a salient and relative investment brand in the market.
And fourth, this is ultimately a people business. It's clear that talent is attracted to the best in the business, so a firm's ability to attract the appropriate talent and keep them, is a key measure of its position in the market. We want to build a business that attracts the best and one that shareholders value for reliable delivery.

Let me now tell you how we go about doing this. This slide looks at the four pillars of our strategy as we look to achieve our goals. We start with the customer, whose need obviously drive everything we do. We then move to products, and the products are really meant to meet the ever-changing needs of our customer base. We then look at the brand in its entirety, because the brand is really the glue we look at as being the link between the customers and ourselves. And last, we look at distribution as being the ability for the customer to reach us when, where and how he wants to.

Let me now, briefly, take you through our customer strategy. It's nice to say we are 'customer centric', sounds good, but also sounds a bit fuzzy. So, let me try and put some reality around it and tell you how we go about building our customer strategy. This is really about determining the appropriate segments for us, and then to understand their needs. In order to arrive at this appropriate customer segment, what we do is we look at current pools under management and the fees for every segment of the market. We then look at population demographics –and Pierre showed you some of these in Kuala Lumpur– and we look at all the regulatory changes we anticipate and where these pools could go over a period of time. Based on our own estimates of what Mutual Fund penetrations are, we then estimate what the likely share of wallet is, and the size of opportunity for Mutual Fund by the various life stage segments. This allows us, therefore, to focus on the large and profitable pools. This approach also allows us something very different, which is it allows us to look at (alternative?) savings and therefore what needs to be done in terms in propositions to be able to convert those famous bank deposits into Mutual Funds.

Once we hone in on our target segments, we use customer research to understand the mindset, behaviour and attitudes of customers to Mutual Funds. This allows us to test various propositions and gain insights. We then use the insights to develop propositions that meet the needs of the chosen target segments, and John will talk through through how this works in a little while. But what I'd like to say here is that we believe this customer focused approach is an advantage, and in fact it differentiates substantially from our many competitors in the market. Traditionally, financial services companies in this area tend to operate with a product that they go out to customers. Our approach turns that whole approach upside down and looks at the customer first, looks at their needs, and then finds a product to meet the need. We believe this puts us also in a very different space therefore, in terms of expanding the market, because we can then use our understanding of customers and what they use, to convert people's savings from bank deposits to Mutual Funds.

Moving on very quickly to our brand strategy – Mina shared with you some of the research we do around the region. We've done a lot of work in mutual funds in India, Korea, Taiwan and we are doing a fair amount of work in Malaysia this year to understand the mindset and attitudes of people towards mutual funds. What does our research tell us? Well, a very small number of consumers actually understand the category. The overwhelming majority of people find mutual funds both confusing and difficult to understand. Consumers therefore look to buy from well-known companies with names they can trust, so they can simplify this whole complex process of buying mutual funds. When we question them on the different attributes of a mutual fund company that they find appealing, again very interestingly, unanimously they said that the idea of a company that is committed to understanding their needs is both rare and therefore highly appealing.

The next thing we do, again, let's step back and look at all the red you saw on those charts with bank deposits and that's the core of our attraction. By targeting the savings pools in those... in lying in low interest earnings bank deposits, we needed a proposition that was attractive to our consumers. So the proposition we came up with was: "making working your money work as hard as you do." It has an implicit commitment from the company in terms of dedication and commitment to delivering returns, but it also implies that your money works harder than where it is lying today, which is in bank deposit.

Let me share with you what this is meant in terms of a recent TV commercial we launched in India. The proposition of the TV commercial is namely of someone not having to make a compromise in life, because when their money works as hard as they do, they can achieve what they want to. So let's just have a quick look at that.

(TV commercial)

That's the normal speed Indians speak at, so I'm going at a very different rate. What I'd like to now do is hand over to John Allen who'll talk you through our product and our approach to product. John heads up our regional product development team, which has been a big advantage for us in driving, as I said, this link between the consumer and the product. So, hand over to John.

Jonathan Allen

Good morning all. We see product as critical to growth, so I'd like to spend a few minutes today on what our regional product team does, how add value and competitive advantage in Asia, and demonstrate some successes that we actually had around the region. The regional product development team is a team of six product specialist, with fund management, distribution and project management skills. We focus solely on product development for our funds and Life businesses throughout Asia, covering single country built regional initiates and open architecture management. The team also sits between the businesses and the central regional functions, like risk compliance operations and approvals. This ensures speed to market is maximised and the businesses can go on with delivering custom solutions quickly. We believe committing six professionals to product creates a unique team in the mutual fund market in Asia and represents a real market advantage for us and our businesses around Asia.

We work to create competitive advantage in a number of ways. Firstly, we centralised product development. This ensures a consistent approach to products and avoids re-inventing the wheel, which we see as critical. It allows us to build scale using common pool funds where we can and help us manage fund proliferation, which has positive impact on each of our countries. It also allows us to centralise risk management where appropriate. We work with each business as a consultant. We help the local businesses to find what their customer proposition is, as Ajay referred to. We champion product concepts from each country from approval into launch. We also marry up our global fund management engines in the US and the UK with or local distribution power. And at all times, wherever we can, we seek to drive synergies between the Life businesses and the Funds businesses. We also add value by being an early adopter of what we see as global product trends. We try and apply a global view to local country issues, we position customer feedback against what we think are the best practise solutions in global product trends, ensure we are being a leader, not a follower in our markets across Asia.

Ajay mentioned earlier on that the customer is key our process. What we try and do is capture those customers in three product categories. We look at customers whom we describe as investment customers, they're financially savvy, they're seeking specific returns, or quite often they are seeking specific outcomes from their investments and their savings. We have needs customers, people who have specific goals, driven by their stage in their lives. An example would be savings school fees or retirement provision. And then we have advise customers, those who know they should be saving or investing, but need help in how and why; and I think quite a lot of us fall into that category, even though perhaps we wouldn't admit it. By separating our customers this way, we believe we can build products to meet each specific need that we identify and then we can apply these across relevant distribution channels in each of our countries.

We apply this customer segmentation across each of our businesses in Asia. I've used here the Indian market-... our Indian funds business to demonstrate, but I could apply this to any of our countries. In our mapping we capture the existing products that we have in the investment needs and advise categories I was just talking about. We then undertook some work based on customer research, based on distribution feedback and based on what we see as global trends. Coming out of that piece of work was a clear signal in the Indian market place that there was a need for a school fees based savings plan in the India market. School fees is absolutely sacrosanct in India. We launched the child care plan in response to this, we supported it with a market leading advertising campaign and this has become an important plank in our life cycle range in the India market. So for me, this is a clear validation that it actually makes sense to build products from the customer level up in each market across Asia. And as Ajay said, I think that's a real example, rather than a fuzzy catch phrase.

An obvious question to ask is does the approach work. And clearly we believe it does. I've tried to give you a few examples here to give you a flavour and I'll just spend a few moments on those, because I think they are worth understanding better.
In India, we launched an income driven equity and bond product, when-... this was in response to fallen interest rates in that market place. We launched this in late 2000 and it has been very successful in capturing continued sales, as interest rates have declined in India.
In Taiwan, we launched an active equity bond product, which has an absolute return focus. This was in response to growing customer risk aversion to pure equity exposure. This was launched in January of this year, and has been a tremendous success over the last 9 months, collecting in excess of £100 million.
In Malaysia, we launched a similar absolute return focused equity bond product, which is 'Sharia Compliant'. This was to meet a clear need from the Muslim population and we have a Sharia council that works in conjunction with us to deliver that product to the market. This was a market first in Malaysia and has grown strongly since its launch in Q1 of this year, raising over £40 million in only 9 months, in a relatively small market place.
In Singapore, we launched the region's first equity fund investing purely in China and in India. This plays to our obvious fund management strengths and has grown strongly since launch in late May of this year, raising nearly £40 million in just 6 months, again, in a reasonably small market place.
And finally in Korea, we launched the first product with exposure to the KLCI index. We've targeted the emerging wrap account market with this product and it's growing steadily since its launch in the first quarter of 2004.

An important point when looking at these numbers is to understand that we're building products scale quickly in environments where the cost base is much lower than in mature markets and the break-even point for these funds is correspondingly lower. I think that's an important point to take away.

So, if I could leave you with 4 points today, I'd leave you these: the regional product team is focussed clearly on building synergies across our Life and Funds businesses in Asia; we take a centralised approach to generate market leadership; customers are our driver and the approach is generating clear and measurable success. We believe the regional product team is a genuine competitive advantage for us in Asia. To continue the product theme, I'd now like to ask Felix Pang, who leads our Funds business in Japan, to share a specific product story with you in far more detail. Thank you.

Felix Pang

Thanks, John and good-morning all. After you have heard from John of the development of our product strategy, I would like to share our example of successful product launch for our operation in Japan. It is about developing a product that is based on customer needs and it has produced remarkable results in a very short period of time.

Before getting to the detailed product itself, please let me give you a brief history about Japan's funds operation. Our Mutual Fund operation was officially commenced in 2001 as Ajay pointed out earlier. Japan has the largest (supply?) of mutual fund market in Asia. Our Mutual Fund operations took a form of green field start. To give you a bird's eye view of the market it's roughly 70%... Sorry... It's roughly about 70 asset managers and more than 2,500 existing funds onshore alone. As with most players in the market, the attraction is its size, economic model and the changing regulation. However, we have also seen something more. We have realised the customer demographics such as population and the level of wealth accumulation making this market particularly attractive.

As you can see in the chart on the left-hand side, Japan has a large population who is ageing very quickly. The bar chart on the right-hand side shows that the savings pools of older generations is much larger than the younger generation will continue to grow over the next few years. Given Japan's financial sector still struggles and its pension funding crisis remains cloudy, these elderly people are the key group with retirement concerns and life planning issues (exurbated?) by current low returns from bank savings accounts.
Therefore, the focus is on the largest and richest segment of the market, of the older generation. Applying our product strategy, we have concluded to create a product that provides the answer to two biggest (of their?) needs. Firstly, the product should (falling to?) customers a feel of low to medium risk tolerance variable. Secondly, aimed regular dividend, so that the investors feel the product is providing an (transcriber: more) attractive return than bank deposits. About 2 years ago, when we zeroed in on this strategy, we believe the growth potential of regular dividend funds would be significant. Today, our belief has proven correct as dividends to the bar chart on the right. The mutual fund with a regular dividend paying feature has doubled over the last 2 years. Market of this fund is now more that 20%, or roughly £400 billion of the total mutual fund asset in Japan.

Having understanding of our customers' needs we came up with a product called 'US high yield open fund', that invests in US corporate bonds, high yield category, targeting to pay stable monthly dividends. To highlight some of the key product features: this is an open ended fund invested in US high yield, aimed to pay steady monthly dividend and leveraging our Group company PPMA in the US as a fund manager advisor to us. Currently we have 15 distributors signed up for this product distribution and it's coming strong.

Now, this chart shows a comparison of returns over our US High Yield Open fund. I guess the key investment products normally made available to our target segment. As you can see from the graph, our US High Yield Open has paid an estimated 7.2% of annual return on investment during the course of the investment period. Compared against the prevailing bank deposits and JJB returns, the funds pay-out record becomes highly attractive, even after accounting for the risk.

Since we launched the product in early 2003, which is almost less than 20 months, we have been seeing a very strong demand from the market. This product (was) initially preferred by brokers but today has successfully expanded to growing intermediaries, such as banks. As you can see from the chart, the assets of high yield open are building up to catch its momentum. In a simple mathematics the assets have grown 65 times over the last 20 months. The size to date is about £800 million and it is distributed by (15/50?) unique intermediaries with (multiple?) branches and sales outlets spreading all across the nation.

As a result of the popularity of this product, the company's position in the market is improving rapidly. We are now ranked 18th out of 33 foreign players in the market. As you can see in the table, PCA Assets fund growth has been outstanding as compared to some of the key competitors in the market, who are also foreign owned, but with proprietary distribution network.

Given its relatively short but promising history in Japan, the signal is strong and encouraging for us to take the necessary steps forward to continue to grow.

Pankaj Razdan

… for all our distribution channel, the first reflection on the chart if you look back at this, the Prudential license is adequately present across all multiple channel to capture a portion of the geography and social economic classes. We have ties with almost 2,000 security brokers who have got 8,000 branches across the country, which is probably one of the largest in the country. There are 16 banks as of now selling in the country and we have a relationship with all the 16 banks who have got more than twelve hundred branches across various geography selling our products. We have close to around 10,000 agency and we have 800 retail independent financial shops, which sell multi products including our financial products.

India, as I have said, being a geographically great and vast country, this presence of 20,000 point of sales, provide reach on convenience to the investor and tap their investments. Agents are the most cost effective way of reaching in smaller towns and tap their capital client base. Bank branches are also aggressively tapping the client base for a variety of reasons as discussed in my earlier slide, changes in deregulation and industrial trade is slowing down and traditional instruments getting away from the market, so banks have become very, very active in selling financial services products, and are likely to become dominant channel in the distribution of mutual funds in going forward.

Prudential ICIC actually supports individual channel as of the business model and helps them tap the investor market base. Typically if you look on the right all those details shops are like our own branches, and most part of the business comes from walk-in customer over there. So it is very important that we build a franchise of high visibility in such places, which resembles very much like our offices. And hence occupying a shelf space at these point of sales become critical and we should keep supporting them with this sort of activity of making the point of sales more visible.

As we look at another slide which is banks and brokers, they typically has to have very high outbound sales team. Since banking and broking branches provide multiple products which are linked to capital market, regular communication as an activity is important to allow them cross sale Mutual Fund products to their customers. Agent do a lot of door to door selling in India, hence empowerment through training and marketing literature are critical for getting a share of this business, and that’s what we’ve been doing continuously in the India market.

Let me briefly conclude the (proportion?) of the India market the last five that India’s mutual fund market is very attractive with huge potential savings, very low penetration, and growing very very fast as reflected by 55% CAGR in the last five years. Target customers are spread across geographies, across socio-economic classes such that we need a distribution strategy that caters to this wide spread of geography and social economic classes. Third, we have built a very successful business on the back of multiple channel distribution across all the potential cities in India to cater for all the opportunities in the Indian market. Now I would like to invite Mark Toh, CEO of Prudential Malaysia to talk you through on the distribution in Malaysia.

Mark Toh

Thank you very much, Pankaj. Good morning, ladies and gentlemen. You will already have seen, or heard of the Malaysian mutual fund story at my presentation in Kuala Lumpur and if I was to give you just one reason why our business has grown so fast in Malaysia it will have to be because of the successful implementation of our distribution strategy. Pankaj, who spoke just before me, talks about the distribution approach in his presentation where he needed penetration and geographic reach as India is in deed a huge country. Our approach in Malaysia was slightly different as we anticipated that the banking channels would be a more efficient and effective means of distribution in Malaysia as we have a huge customer base, huge deposit base that we wanted to reach out for. Let me first of all give you a quick snap shot of the channel mix in Malaysia when we first started our operations in the year, 2000. Up to that year unit trusts were mainly distributed by mainly tied agents. The two largest companies in Malaysia currently sell more than 90% of their funds through agents. Following liberalisation about five years a go, which allowed third party institutional distribution, i.e. the banks, they have become an increasingly prominent and important channel.

For us, ladies and gentlemen, from day one when we started three years ago, we had always employed a multi-channel distribution strategy. We believed then, and we still believe now, that different channels have different key target customer segments as their focus. For us a multi-channel strategy allows more effective reach to more customer segments. You can see clearly from this chart that we have all the channels tapping on their own niche target customers currently employed by us. In the next few slides I will explain these channels in more details.

Let me first talk about the institutional unit trust agents or the IUTAs, which comprise generally of large financial institutions and banks. So far in Malaysia the key institution distributors are the foreign banks accounting for at least 80% of all new mutual fund sells and I’m pleased to say we have now signed up with us four of the top five foreign banks selling our products. More recently the local banking industry, having under gone their own major bank restructuring exercises, have begun to sell mutual funds as well, and our key objective over this immediate period is to sign up as many of them as possible. In this direction I’m pleased to say we’ve recently announced the signing up another three major banks to distribute our funds. And because these banks have huge deposits, which are lower risk types of investments, the majority of products that we launch for them have similar type risk profiles like capital guaranteed fixed maturity and fixed income type of products.

Ladies and gentlemen, you should now be familiar with the face of the Prudential agency in Asia as you will have already heard me talking Kuala Lumpur, about how we leveraged on our life assurance agents in Malaysia when we first started out in business. I must admit ladies and gentlemen that it was not easy in the beginning to convince what was once pure life insurance agents to sell multiple products. I am, however, proud to say that the top 32% of Prudential life assurance agents are now licensed to sell mutual funds, and as you know this twenty eighty rule represents more than 90% of all sells from the life agency force. And finally ladies and gentlemen our direct sells team. They are salaried sells people and they located in major commercial cities and centres throughout the country targeting high net worth individuals and large corporations. This customer segment normally also requires a higher level of servicing and advise and therefore they go through a more stringent recruitment process and training.

Many of you must be familiar with the movie, MIB, or Men In Black. In Malaysia, as you can see form our photo here, we have our own MIBs and WIBs as you can see. Only that the women are in black, and the men are in blue. And so how does each channel contribute to the company now. This next chart shows the funds under management by channel since we launched our business in the year, 2001. As you can see it was natural that in our first year we initially relied on our tied insurance agents to bring in the sells. Over the last couple of years we have built strong strategic initiatives with institutional unit trusts agents. We increase the number of IUTAs from three to ten, and as I mentioned earlier in Kuala Lumpur two days a go, quite a fewer newer ones are in the pipeline. And because we were quick in spotting this opportunity I am proud to announce today more banks in Malaysia sell for us then any other unit trust company. And how did our own distribution pattern change the markets. In the year 2000 banks only contributed to 17% of the funds under management in Malaysia compared to today 2003, where the banks share is now almost equal to the agency force. With the advent of he banks muscling into the distribution game, with their huge deposit base we expect banks to be the dominant player in the industry. They have the financial resources, and the customer base to continue being significant players. This chart therefore re-enforces the fact we were absolutely correct in adopting the multi-distribution strategy when we first started out in Malaysia, as today we sell more mutual funds than any other mutual fund company in Malaysia.

Let me end my presentation by giving all of you a quick recap of the four pillars of strategy that is driving our Mutual fund business across the region. As you have seen RJ (Pankaj Razdan) first explained the process of what we do to understand our customer’s needs, and then use the customer’s insights to form the basis of all we do. Then we looked our brand and it’s underlying proposition has been the glue that builds the strong link between the customer and the ourselves. John and Felix then moved to the product section where we systematically build a range of products in response to our customers ever changing needs. And last but not least, Pankaj and I gave you a snap sot of the distribution strategy where we build reach so that the customers can access us where and when they want. These four pillars of our strategies have been driving Prudential’s mutual fund business for both our developed and new countries across the region, and talking of new countries I would now like to ask the head of greater China, Thomas Tsao, to introduce the opportunities he sees in the China market.

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