GLOBAL DISTRIBUTION: THE CHANGING LANDSCAPE JAPAN

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GLOBAL DISTRIBUTION THE CHANGING LANDSCAPE -
JAPAN
NICSA OPERATIONS
THOMAS J. KAROL US COORDINATOR, GLOBAL
INVESTMENT MANAGEMENT SERVICES
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NICSA OPERATIONS

• TRENDS
• FUND ASSETS
• PERSONAL ASSETS
• OBSTACLES
• CULTURAL
• REGULATORY

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JAPANESE FUND ASSETS
NICSA OPERATIONS
TRENDS
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JAPANESE FUND PRODUCTS
NICSA OPERATIONS
TRENDS
In 100 million Source JITA
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JAPANESE FUND PRODUCTS
NICSA OPERATIONS
TRENDS
In 100 million Source JITA
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LARGEST FUND GROUPS IN JAPAN - OVERALL (11/99 -
100 million yen)
NICSA OPERATIONS
TRENDS

• Nomura 132,585
• Daiwa 141,887
• Nikko 83,566
• Kokusai 18,666
• DKA 16,614

• Taiyo 16,502
• Partners 16,322
• Shin-Wako 10,482
• Goldman Sachs 9,532
• Fidelity 6,965

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LARGEST FOREIGN FUND GROUPS (11/99 - 100 million
yen)
NICSA OPERATIONS
TRENDS

• Goldman Sachs 9,532
• Fidelity 6,965
• Jardine Flemings 5,733
• Merrill Lynch 5,048

• Alliance 3,875
• Credit Suisse 2,646
• Deutsche 2,536
• Invesco 2,445

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LARGEST WINNERS AND LOSERS (11/99 - 100 million
yen)
NICSA OPERATIONS
TRENDS

• Nomura 1,503
• Jardine Flemings 1,393
• Daiwa 1,229
• Fidelity 833
• DKA 496

• Nikko -2,669
• Credit Suisse - 405
• Kokusai - 310
• SSBCiti - 271
• Cosmo - 255

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LARGEST FOREIGN WINNERS AND LOSERS (11/99 - 100
million yen)
NICSA OPERATIONS
TRENDS

• Jardine Flemings 1,393
• Fidelity 833
• Merrill Lynch 444
• Invesco 317
• Warburg Pincus 48

• Credit Suisse - 405
• SSBCiti - 271
• Goldman Sachs - 248
• Alliance - 134
• Rothschild - 88

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DISTRIBUTION - STOCK FUNDS ( millions)
NICSA OPERATIONS
TRENDS

• Rank Company Sales of Total Total
  Net Assets
• 1 Daiwa 106,713 20.38
  1,356,397
• 2 Goldman Sachs 67,998 12.99
  1,325,674
• 3 Norinchukin 65,012 12.42
  322,744
• 4 Nomura 54,116 10.34
  2,064,190
• 5 Deutsche Morgan 34,390 6.57
  108,625
• 6 Nikko 27,322 5.22
  1,184,328
• 7 Japan 21,640 4.13
  139,936
• 8 Universal 15,891 3.03
  134,865
• 9 Kokusai 14,115 2.70
  671,576
• 10 Merrill Lynch, MAM 12,363 2.36
  307,191
• 11 Morgan Stanley 10,345 1.98
  151,990
• 12 Rothschild 8,368 1.60
  211,900
• 13 Partners 7,273 1.39
  475,485
• 14 Alliance 6,765 1.29
  501,239
• 15 IBJ 5,904 1.13
  141,476
• 16 Fidelity 5,038 0.96
  168,302
• March 1999 - Market Total 523,613 100.00
  11,827,197

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JAPANESE FUNDS DENOMINATED IN FOREIGN CURRENCY
NICSA OPERATIONS
TRENDS

• 1997 - 8 of Total Fund Assets
• 1998 - 12 of Total Fund Assets
• 1999 - 6 of Total Fund Assets
• Slightly more than 50 of these funds are
  denominated in US Dollars and 25 are
  denominated in Euro

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WHERE ARE THOSE ESTIMATED 10-12 TRILLION IN
JAPANESE PERSONAL ASSETS ? By Percentage
NICSA OPERATIONS
TRENDS
Source Bank of Japan
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NICSA OPERATIONS
TRENDS
JAPANESE PERSONAL ASSETS IN INVESTMENT TRUST
FUNDS - 2.4 in Japan vs. 10.2 in the U.S.
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POSTAL SAVINGS DEPOSITS CONTINUE TO ATTRACT
ASSETS (trillion yen)
NICSA OPERATIONS
TRENDS
Source Ministry of Posts and Telecommunications,
1998
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NICSA OPERATIONS
TRENDS
WHO HAS THE JAPANESE PERSONAL ASSETS ? .

• 75 of ALL Savings are held by Japanese over
  50.
• (60 50, 50-60 25, Under 50 25)
• A Greater Percentage of Japanese is Over 65

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US -JAPAN COMPARISON OF AVERAGE SAVINGS RATE - BY
AGE
NICSA OPERATIONS
TRENDS
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PURPOSES OF JAPANESE ELDERLY SAVINGS
NICSA OPERATIONS
TRENDS

• 82 PREPARE FOR ILLNESS OR EMERGENCIES
• 74 FUNDS FOR RETIREMENT LIVING
• 15 PROVIDE FOR CHILDRENS EDUCATION
• ONLY 6 WILL LEAVE ASSETS FOR DECENDENTS
• (inheritance)
• Most of the Japanese elderly do not think they
  can live comfortably on pension benefits and do
  not think that their children will provide
  assistance

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OBSTACLES AND OPPORTUNTIES
NICSA OPERATIONS

• INSTITUTIONAL VS. RETAIL DISTRIBUTION
• ALLIANCES
• REGULATORY ISSUES

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NICSA OPERATIONS
OBSTACLES
JAPANESE INVESTORS TEND TO BE INSTITUTIONAL
INVESTORS
Other 2
Foreign Investors
13
Individuals
Financial Institutions
41
19
25
Corporations
Source Kochevar Research Associates, Nihon
Keizai Shimbun, 6/99.
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NICSA OPERATIONS
OBSTACLES
WHAT IS IMPORTANT TO THE JAPANESE INSTITUTIONAL
INVESTOR?

• HIGH GROWTH BUSINESS 62
  
• INCREASING PROFITS 61
• FINANCIAL SECURITY 38
• INNOVATIVE PRODUCTS 36
• INCREASE OF SALES 35
• OPEN TO PUBLIC SCRUTINY 33
• COMPARATIVELY LOW STOCK PRICES 32
• HIGH RETURN ON EQUITY 28
• GOOD INTERNATIONAL IMAGE 27
• LOW PRICE/EARNINGS RATIO 26

Source Kochevar Research Associates, Nikkei
Kokoku Techo, 1997
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NICSA OPERATIONS
OBSTACLES
WHY JAPANESE INVESTORS SAY THEY DONT BUY FUNDS
HIGH RISK IMAGE KNOW ONLY THE NAME DISTRUST
SECURITIES COMPANIES NO CAPITALGUARANTEE NO
PRODUCT EXPERIENCE
DONT KNOW DAILY VALUE WANT INDEPENDENCE DONT
WANT TO GO TO THE SECURITIES WINDOW INTEREST
RATES LOW
Source Dentsu Inc., 1999. Kocheavar Research
Associates
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NICSA OPERATIONS
OBSTACLES
PROSPECTUS INFORMATION JAPANESE FUND
INVESTORS

• 38 - READ THE INFORMATION, BUT DID NOT
  UNDERSTAND WHAT THEY READ
• 28 - DID NOT READ THE INFORMATION
• 19 - READ AND UNDERSTOOD THE FUND INFORMATION
• 15 - DID NOT KNOW THE INFORMATION EXISTED

Source Dentsu Inc., 1999. Kocheavar Research
Associates
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ALLIANCES
NICSA OPERATIONS
OBSTACLES
Brokerage
Trust Bank
Asset Management
Investment Trust
Capital Group
Taiheiyo Investment Trust
IBJFujiDKB Merger
T Rowe Price
Tokyo Invest- ment Trust
Sumitomo Sakura Merger
Merger
Acquisition or equity participation
Business tie-up on products or JV for ITM
company
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JAPANESE/FOREIGN ASSET MANAGEMENT JOINT VENTURES
NICSA OPERATIONS
OBSTACLES
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REGULATORY ISSUES
NICSA OPERATIONS
OBSTACLES

• BIG BANG
• DEFINED CONTRIBUTION DEVELOPMENTS