Japanese Onshore Mutual Funds Universe Update

1. Japanese Onshore Mutual Funds Universe Update As previously stressed in the PowerPoint loaded on Japoninvestissements site in early 2006 institutionalisation of Japanese market has accelerated at tremendous fast pace..

2. Introduction • Japanese onshore equities investment trust universe net assets value has reached levels not seen for the past 20 years breaking the late eighties records. • The most striking feature is the fact that foreign asset (all asset classes) invested mutual funds NAV outpaced purely domestic assets class mutual funds first time ever in Japanese financial industry. This report aims at updating previously mentioned underlying trends. • Pascal Jeannenot : japoninvestissements CEO

3. Bullet points • In my previous report I mentioned that by September 05 end the net asset balance of public equity investment trusts had reached $ 302 billion 943 million (Y 34 trillion 838 billion) .Well, by may 07 end balance is $ 528 billion 398 million (Y 64 trillion 993 billion). Considering the Yen has gone down against US$ this is 100 % rise in real terms. • Japanese individual money continuous inflows (now we should say outflow) feed the constant increase of onshore investment trusts universe. This update aims at clarifying universe growth by asset class type. • This outflow of Japanese savings toward all range of foreign assets classes has created a Forex bubble !. • Needless to mention but the underlying trend in equities investment trusts investment has growing impact on both Japanese stock market and currency. The boom is now reaching full cruise speed.

4. Topic One • Net buying by domestic investors kept increasing during FY 06 . equities investment trusts (with a clear shift toward foreign equities) remain the core engine. • Considering overall Japanese saving pool there is still ample margin for money inflows to shift on pure equity side.

5. Topic Two • Above Left bar chart is the detailed breakdown of foreign asset (by zone and asset class type)held by public investment trust in September 05. • Down left bar chart is the same detailed breakdown of foreign asset (by zone and asset class type) held by public investment trust in may 07. There are substantial changes between September 05 and may 07. You shall notice a massive shift of individuals money from US$ denominated bonds toward Euro denominated bonds and Australian $ bonds too. • Also on the equity side newcomers like Hong Kong and Brazil make an appearance. The later is due to Japanese individuals heavy investments in BRICS.

6. Topic Three • Looking back to fiscal year 2006 unprecedented set of new records have been reached within Japanese investment trust universe. Japanese individual’s money continue to pour in equity investment trusts. Investment trusts universe net asset value has been registering new historic highs for 2 months in a row.Onshore investment trust universe has grown 5 times its level 10 years ago. By the end of April 07 investment in pure equity long only funds were already above pre bubble record level established in December 1989. • Foreign equity long only investment trusts NAV has outpaced Japanese equities long only investment trusts in April 07 (first time ever !).By April 07 end pure Japanese equities investment trusts NAV went below 10 Trillion Yen, on the other side foreign equities long only investment trusts rose above 10 trillion Yen for the first time. A massive outflow of Japanese capital toward all range of foreign asset classes is ongoing pushing the Yen downward against roughly all currencies. • In fact pure Japanese long only equities focused investment trust barely represent less than one third of total now. Japanese savers money has massively shifted to ‘balance type’ mutual funds investing in a whole range of foreign asset classes (equities, fixed income, property) . • In short Japanese asset management industry offers a wide range of golden opportunities for offshore asset managers willing to seriously get on the Japanese market, this is exactly the ‘raison d’être’ of Independent Investment Partners (IIP). This said there are numerous traps and serious failure risk when entering Japanese buy side universe. Long term commitment is a prerequisite.

7. What This Means • The ‘hard core’ equities investment trust universe has shown part of its huge growth potential. However the boom is still ahead. Potential has already expanded to a wide range of asset classes thanks to new key products popular among Japanese individual investors for whom the key word remain risk diversification and performances that meet Japanese individuals requirements. • In line with what I mentioned already one year ago onshore equity investment trusts universe has been expanding faster than anyone could forecast. However keep in mind this is only the first tail of a long term trend, inflow of Japanese individual savings is regular and massive since payoff termination in may 2005.

8. Next Steps • Independent Investment Partners (I.I.P)has been created to serve the needs of professional investors serious about entering the Japanese market . This needs time and commitment however our unique structure can help you achieve success in Japan. • According to worldwide mutual funds association Japan already jumped form 9th to 8th position in December 2006 (by NAV ranking).No doubt that by 2007 end Japan will rank 6th or 5th….