14:00/15:15- Panel 3

1. Challenges of Pension Funds and Long Term Investments : What Liability Driven Investment can Bring ? 14:00/15:15- Panel 3

2. Challenges of Pension Funds and Long Term Investments: What Liability Driven Investment can Bring ? Jean-François BOULIER, Head of Euro Fixed Income and Credit, Crédit Agricole Asset Management Paris Thierry MEQUILLET, Chief Executive Officer Asia, Crédit Agricole Asset Management Mumbai, Wednesday, May 16, 2007

3. Summary I – What is CAAM ? II – What a new concept, LDI, can bring to an old problem, managing pension funds ?

4. What is CAAM ? Thierry MEQUILLET Chief Executive Officer, Crédit Agricole Asset Management Hong Kong Branch

5. Quick glance at Crédit Agricole Asset Management Group • In the Top 10 within Continental Europe (1) and N° 1 in France in mutual funds (2) with € 534.8 bn AUM as at 31 December 2006 • 8 investment centres worldwide • 2,137 employees including 546 investment professionals Breakdown by type of clients Data as at 31/12/2006 - Sources: (1) IPE - Top 400 European Asset Management Leaders, data as at December 2005, issued in June 2006 (2) Europerformance - Investment funds, December 2006

6. 450.1 A multi-specialist in asset management AUM in bn euro at 31 December 2006 €534.8bn AUM Fundamental Active Investments Crédit Agricole Asset Management * Specialised Investments CASAM Structuredmanagement CAAM AI AlternativeMulti-management Systeia Alternative management CPR-AM Quantitativemanagement 19.7 IDEAM SRI 1.4 CAAM Real Estate Real Estate 2.8 16 44 0.8 * 65% of CAAM SGR AUM in Italy Source CAAM

7. Breakdown by asset class EUR 534.8 bn AUM as at 31.12.2006 Breakdown by asset class: (in bn euros)

8. Multi-faceted expertise Quantitative funds (1) SRI (2) Alternative funds (3) Funds of hedge funds (4) Structured funds (5) Absolute Return Multi-management Specialised funds Euro money market Euro government and corporate bonds Global bonds Emerging countries bonds Balanced funds Indexed Mid & small caps Large caps Emerging countries Sector Thematic Core-Satellite Equity management Fixed Income Via CPR-AM (1), IDEAM (2), Systeia Capital Management (3), Crédit Agricole Asset Management Alternative Investments (4), Crédit Agricole Structured Asset management - a 50% CAAM-Calyon JV - (5)

9. A dynamic international development • € 534.8 bn AUM as at 31.12.2006 International breakdown by geographical areas (excluding France & Italy): Breakdown: International € 52.5 bn (excluding Italy) Breakdown : France/Italy/International • Europe: € 32.5 bn • Asia/Pacific: € 13.8 bn • Rest of the world: € 6.2bn Source: CAAM

10. A « multi-local » approach • 8 investment centres, in close contact with the markets Paris Hong Kong London Singapore Milan Tokyo Madrid Seoul • An extensive sales presence worldwide

11. Focus on CAAM’s development in Asia - Pacific NACF-CA Investment Trust Management Company Joint Venture in Seoul between NACF (60%) and CAAM (40%) Since January 2003 Number of staff: 50+ CAAM Japan Limited Since 1986 Number of staff: 100+ • more than 20 years history, • more than 200 staff in the region. Beijing representative office Since December 2006 CAAM Hong Kong Limited Since 1982 Number of staff: 60 CAAM Singapore Limited Since 1989 Number of staff: 30 Sydney representative office Since January 2007

12. CAAM : a pioneer in Indian investment • CAAM Asia has more than 15 years of India investment experience • CAAM Asia createdthird India fund in 1990, the Himalaya Fund • Launch of CA Funds India in January 2006, which aims to achieve long-term capital growth by investing in a concentrated selection of listed equity securities of Indian companies. This Luxembourg-domiciled sub-fund is managed by CAAM Hong Kong Ltd. with more than $ 400 mn AUM at the end of March 2007 • The investment team benefits from in-depth and long-standing knowledge of some of India’s most important companies

13. What a new concept, LDI, can bring to an old problem, managing pension funds ? Jean-François BOULIER Head of Euro Fixed Income & Credit, Crédit Agricole Asset Management Paris

14. Market overview – OECD pension scheme assets • Global pension asset size (US$bn) (Source: Watson Wyatt 2007)

15. Asset Allocation has been evolving recently • Pension funds allocation shows signs of becoming more defensive but at a slow pace (apart from the UK)

16. 1 New paradigm in asset allocation

17. A Challenging accounting and regulatory environment ! Pension funds and Insurers are facing two apparently contradictory issues Increase the return of their portfolio in a low return environment Control the sources of volatility of their balance sheet and statements resulting from the application of new accounting (IAS/IFRS) and regulatory rules (Solvency II) These requirements result in a need to manage Asset/Liability equilibrium & seek for more return on asset portfolio The answer: Liability-Driven Investment (LDI)

18. What is behind LDI : some stylised facts Typical Pension Fund Allocation Equities 30% Bonds 45% Absolute performance 10% Real estate 15% Volatility/Duration Interest Rate 0.8% Equities 15.0% Absolute performance 5.0% Real estate 10.0% Bond benchmark 6 y Liabilities 15 y Actuarial uncertainty 1 y Source: CAAM Where does your risk come from ?

19. Basically, LDI raises QUESTIONS & requires DECISIONS Addressing Risks Making Decisions Interest rate risk Inflation risk Mortality risk Asset risk Current Asset Liability Gap increases for a decrease in rates A rise in Inflation increases liabilities Increased life expectancy of 1 year for every 4 years extends the duration of liabilities Excess volatility of equity, concentration risk… Duration hedging protects fund solvency and sponsor equity Inflation linked bonds or swap overlays protects against inflation rise Adjusting the required duration hedge helps mitigating the gap New Asset Allocation with more downside protection

20. Strategic Allocation: old versus new paradigm Asset only efficient Frontier Typical asset allocation Expected return A/L Portfolio Envelope of risk around the Liability Matching Portfolio Absolute Risk Total ReturnLiability Driven Investing Model Efficient Frontier/ CAPM Asset Liability Management Objective High Long term returnsHigh and stable surplus value Risk Measure Volatility of returnsVolatility of funding ratio Risk Free Asset Cash Liability Matching PTF (fixed income) Correlation Maintain low correlation of assets Assets should be positively correlated with PV of plan liabilities Rationale On the run, assets will outperform Asset objectives should firstly be linked liabilities and minimise plan costs to pension liabilities

21. 2 LDI according CAAM

22. LDI means: “Strategic Asset Allocation decision” The high return block The matching block • Fixed income management • Hedging duration & inflation risks • High return asset classes: Equity, Private Equity, Hedge Funds • Active management on each asset class Liabilities Liabilities Optimising the asset return Matching liabilities Matching Matching Slice Slice HighReturn High Return Slice Slice Synthetic hedge of the liability benchmark liabilitybenchmark Meeting the fund’s objectives

23. ! Our convictions : Active management of liability matching Traditional approaches CAAM’s approach Cash-flow matching Duration matching Risk Matching alternative • Principle • Analysis of liabilities cash flows shape • Construction of a liability benchmark having the same risk profile as the liability's • The liability benchmark aims to minimise the A/L volatility Principle : define asset allocation which cash flows match exactly liabilities’ cash flows Principle : define asset allocation which duration best replicates the liabilities duration Not very flexible structures

24. Our convictions : Alpha as a plus Management under specific constraints Specific accounting budgets Regulatory guidelines Restricted investments Capital gains Tax issues… Asset Allocation Analysis Objectives’ assessment Strategic asset allocation Dynamic management (CPPI…) Structured products Structured credit (CDOs, CLOs..) Structured bonds … … Alternative investments Real estate Private Equity Hedge funds… Alphageneration Niche products Portable alpha High alpha expertises… Alternative Beta VolatilityCommodities CAT bonds… CAAM Group: a bundle of expertise for long term investors

25. A + B 3 Expected outperformance 1 2 Booster Definition of an Optimal LDI portfolio Liability matching Overall risk budget Liability matching risk budget Risk budget accepted by the investor Investor’s liabilities Definition of a Liability benchmark Definition of a Liability matching benchmark LDI according to CAAM : Our approach

26. LDI in CAAM = combining ALM and Asset Management Asset Allocation Expertise Fixed Income LDI: combining strength in fixed income, structuring and asset allocation Liability Driven Investment Platform • 8 open-ended funds • 4 euro bonds funds • 1 inflation linked bonds funds • 3 LDI leveraged funds • 6 LDI specialists • Fund managers • Product Specialists • Engineers in quantitative research • 3.8 billion euros under LDI management

27. 3 What perspectives?

28. Leading players in continental Europe have started to show the direction • Recently, ABP took important strategic decisions that are clearly consistent with LDI management • The bond risk premium is low at historical standard and should remain low for the next 3 years. • Idem for the credit • Therefore, it seems more rewarding to re-allocation a portion of the current fixed income portfolio to equity (emerging zones) and alternative investments (hedge funds, innovation…) • A contrario, inflation and duration risks on the liabilities must be mitigated • Increased weight of inflation-linked bonds: +3% • Higher duration of the bond portfolio: 4,8 to 8 years Source: ABP

29. LDI will drive changes for the fund industry future? • Implementation of LDI is at different stages across Europe • Regulators pressure is key for LDI development • LDI has started with a reshuffling of the fixed income portfolio • Higher fixed income allocation • Reduce the duration gap • Increase use of derivatives to hedge duration & inflation risk • Currently, one observes an increasing demand for Absolute Performance and Alternative Investment products (levered or not) • Asset managers and Investment banks have hired dedicated teams of specialists to provide actuarial, financial services and investment LDI solutions • Ranges of pooled funds (nominal & inflation linked) have been launched in the UK and Euro Zone as well as more customised investment solutions

30. Conclusion • Pension Funds all over the world face many challenges : demography, low rate environment, inflation pressures, funding status • Thanks to a proved experience of management of long term provisions and to dedication to innovation, CAAM offers LDI solutions to meet these challenges

31. Challenges of Pension Funds and Long Term Investments : What Liability Driven Investment can Bring ? 14:00/15:15- Panel 3

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