Annual General Meeting 26 January 2015 Agenda Company objectives, - - PowerPoint PPT Presentation

JPMorgan Chinese Investment Trust plc Annual General Meeting

26 January 2015

1

Agenda

 Company objectives, performance and market performance  Portfolio update  Market outlook

2

JPMorgan Chinese Investment Trust plc

* As at 31 December 2014 Source: J.P. Morgan Asset Management

 Investment objectives

– To provide long term capital growth by investment in 'Greater China' companies i.e. companies which are quoted on the stock

exchanges of China, Hong Kong and Taiwan or which derive a substantial part of their revenues or profits from these territories

 Features

– Includes Hong Kong and Taiwan to broaden investment opportunity – The Company uses J.P. Morgan’s "on the ground" expertise and local presence to find the best companies in the "Greater China"

region (China, Taiwan, Hong Kong)

– Strong focus on first-hand company visits and research to discover attractively-valued stocks – +/- 25% active positions against the benchmark in China, Hong Kong and Taiwan

 Benchmark

– MSCI Golden Dragon Index in sterling terms

 Gearing

– To use gearing up to 15% when appropriate. Currently 7.5%

 Total Assets of £167.7m*

3

Results Highlights – 12 months to 30 September 2014

* MSCI Golden Dragon Index (NDR) (in sterling terms) Source: J.P. Morgan Asset Management, Morningstar, Thomson Reuters Datastream. As at 30 September 2014.

Return to ordinary shareholders: 12.0% Return on net assets: 7.8% Benchmark return*: 6.8% Proposed dividend: 1.6p

4

NAV and Benchmark Performance

As at 31 December 2014

* Undiluted returns ** MSCI Golden Dragon Index (NDR) (in sterling terms) Source: J.P. Morgan Asset Management, Fundamental Data, Thomson Reuters Datastream

NAV Performance* % Benchmark** % 4Q 2013 4.9% 1.5% 1Q 2014

• 4.9%
• 3.9%

2Q 2014 4.4% 4.9% 3Q 2014 3.8% 4.3% 4Q 2014 10.1% 8.8% 1 Year to 31 December 2014 13.1% 14.4% After a strong 2013, we underperformed in the growth sell-down in early 2014

5

Despite underperforming in 2014, our mid-long term track record remains strong

13.1 55.8 44.6 261.7 11.4 54.8 26.2 231.7 14.4 40.2 34.2 182.1 50 100 150 200 250 300 1 Year 3 Years 5 Years 10 Years Net Asset Value Share Price Benchmark*

Share Price, NAV and Benchmark Performance

Performance to 31 December 2014

* Undiluted return on net assets ** MSCI Golden Dragon Index (NDR) (in sterling terms) Source: J.P. Morgan Asset Management / Fundamental data / Thomson Reuters Datastream / Bloomberg / MSCI

Price Index

GBP

6

US Equities continued to be the top performing market

Performance of the world vs Greater China stock markets

Source: Thomson Reuters Datastream

12 months to 31 December 2014

% 20.0 16.2 14.7 14.4 11.6 11.3 1.2 5 10 15 20 25 S&P 500 MSCI Taiwan MSCI China MSCI Golden Dragon MSCI Hong Kong MSCI AC Asia ex Japan FTSE All Share

Total Return (GBP)

7

Agenda

 Company objectives, performance and market performance  Portfolio update  Market outlook

8

JPMorgan Chinese Investment Trust plc

As at 31 December 2014

% 58.7 24.4 16.9 48.9 28.3 22.8 10 20 30 40 50 60 70 China Taiwan Hong Kong Portfolio Benchmark*

We retain our large overweight in China given valuations and significant stock level opportunities

Asset Allocation vs. the Benchmark*

* MSCI Golden Dragon Index (NDR) (in sterling terms) Source: J.P. Morgan Asset Management, MSCI The Fund is an actively managed portfolio. Holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.

9

JPMorgan Chinese Investment Trust plc

As at 31 December 2014

%

17.2 11.5 9.6 6.4 16.6 10.0 9.5 3.5 Banks Insurance Real Estate Diversified Financials 44.7 27.9 7.4 6.6 6.3 4.3 4.1 3.2 2.6 0.5

• 7.5

39.6 22.5 6.3 1.1 6.3 6.9 4.9 5.4 3.0 3.9 0.0 Financials Information Technology Industrials Health Care Consumer Discretionary Telecom Services Utilities Energy Consumer Staples Materials Cash

Portfolio Benchmark* Financials

13.4 8.7 5.8 10.5 4.5 7.6 Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment

Information Technology

Key Positions:

• Secular growth – health care, internet, consumption, environment
• Exposure to monetary easing/domestic liquidity – mid-sized banks, insurance
• Niche technology stocks

* MSCI Golden Dragon Index (NDR) (in sterling terms) Source: J.P. Morgan Asset Management, MSCI The Fund is an actively managed portfolio. Holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.

Sector Allocation vs. the Benchmark*

10

JPMorgan Chinese Investment Trust plc Top 10 Holdings

Total number of holdings: 67

Concentration Percent of Total Market Cap (USD) Portfolio Benchmark* Top 10 Holdings 43.2 > 100 bn 21.2 18.5 Top 20 Holdings 63.1 50 bn <> 100 bn 5.8 8.5 Top 30 Holdings 77.5 10 bn <> 50 bn 36.1 40.6 5 bn <> 10 bn 20.0 15.9 3 bn <> 5 bn 12.0 8.7 1 bn <> 3 bn 9.9 7.6 < 1 bn 2.5 0.2 Portfolio Benchmark* Holdings# Country / (Classification) % % Taiwan Semiconductor Manufacturing Taiwan 8.2 6.6 Tencent Holdings China (Hong Kong P Chip) 6.9 4.8 AIA Group Hong Kong 5.0 4.1 China Construction Bank China (Hong Kong H Shares) 4.8 3.2 Cheung Kong (Holdings) Hong Kong 3.5 1.5 China Telecom China (Hong Kong H Shares) 2.9 0.5 China Minsheng Banking China (Hong Kong H Shares) 2.4 0.4 Agricultural Bank of China China (Hong Kong H Shares) 2.2 0.6 BOC Hong Kong (Holdings) Hong Kong 2.2 0.8 Fubon Financial Holding Taiwan 2.1 0.6 40.2 23.1

# As at 28 Nov 2014. * MSCI Golden Dragon Index (NDR) Source: J.P. Morgan Asset Management, as at 31 Dec 2014. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The holdings represent the current holdings of the fund. However, it cannot be assumed that these types of investments will be available to or will be selected by the fund in the future.

11

JPMorgan Chinese Investment Trust plc

* MSCI Golden Dragon Index (NDR) Source: J.P. Morgan Asset Management, as at 31 Dec 2014 The Fund is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.

MSCI Breakdown (%)

H Shares 30.9 27.1 Taiwan 26.2 28.3 Hong Kong 18.2 22.8 P Chip 13.5 9.6 Red Chip 8.1 11.8 China Others 7.0 0.1 A Shares 2.5

• B Shares

1.1 0.2 Cash

• 7.5
• 100.0

100.0 Portfolio Benchmark*

12

Agenda

 Company objectives, performance and market performance  Portfolio update  Market outlook

13

What will the year of the sheep bring?

Source: J. P. Morgan Asset Management. As at 31 Dec 2014. The targets and aims provided are the Investment Manager’s targets and aims only. There is no guarantee that these targets and aims will be achieved. The opinions and views expressed here are as at the date of this document, which are subject to change and are not to be taken as or construed as investment advice.

 China is entering a ‘new normal’ phase where debt/GDP is being stabilized and incremental reforms are being

rolled out using the anti-corruption campaign as the stick (and survival as the carrot)

 GDP growth is likely to continue a deceleration path towards a theoretical sustainable rate of 6.5% in the next 5

years

 There will be growth areas: organic (e-Commerce, SUV auto sales), policy-driven (environmental) or both

(healthcare)

 We also see opportunities in the financials sector given expected monetary easing

14

0% 10% 20% 30% 40% 1/11 5/11 9/11 1/12 5/12 9/12 1/13 5/13 0% 5% 10% 15% 1,000 1,100 1,200 1,300 1,400 1,500 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 National power generation (M MWh) y/y%

Industrial economy has been constrained by credit growth

Source: Ministry of transport in China. As at end Oct 2014

Global trade is no longer a key driver for China growth

Source: CCTD, Bloomberg, Digital Cement, Mysteel. As at end Oct 2014.

Commodity price was affected by demand slowdown Weak power generation signals deceleration in industrials

Source: China Electricity Council. As at end Oct 2014

• 40%
• 20%

0% 20% 40% 1/11 7/11 1/12 7/12 1/13 7/13 1/14 7/14 Coal (5500Kcal/kg QHD) Steel (Avg HRC) Copper (SHFE )

Source: Credit Suisse. As at 30 April 2014.

5 10 15 20 25 30 1996 1998 2000 2002 2004 2006 2008 2010 2012 SOEs Others %

Pre-tax ROE: Industrial SOEs & Others

15

China’s loosening initiatives

2 3 4 5 6 7 8 08 09 10 11 12 13 14 China 1 Year Benchmark Deposit Rate China Lending Rate Percentage

The PBoC surprised the market with an interest rate cut… … followed by an announcement to broaden the definition of deposits



PBoC will expand the base for calculating loan-to-deposit ratios by including savings geld by banks for non-deposit taking financial institutions into bank deposits



Under current rules, banks in China are allowed to lend up to 75% of their deposits held



The new definition should make an additional 5 – 5.5 trillion Yuan available, which is expected to ease liquidity conditions and lower financing costs for domestic companies

Source: FactSet. As at 31 Dec 2014. Source: Bloomberg, China Daily. As at 31 Dec 2014. PBoC = People’s Bank of China

16

Credit costs are normalizing as we enter a post 2009 stimulus era NPL digestion phase

0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 Big-four banks Top-four mid-sized banks Total listed banks

Banks’ NPL ratio is still on an upward trend

Source: Chinese banks’ financial report, DB Research, end Oct 2014

• 20

40 60 80 100 120 140 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 bps Big-four banks Top-four mid-sized banks Total listed banks

Banks’ credit cost: mid-sized banks are provisioning more than big banks

Source: Chinese banks’ financial report, DB Research, end Oct 2014

17

Who will benefit? Property market is inflecting, reducing economic tail-risk

Source: Soufun, Goldman Sachs Research, end Oct 2014

• 100%
• 80%
• 60%
• 40%
• 20%

0% 20% 40% 60% 2,500 7,500 12,500 17,500 22,500 27,500 1/11 7/11 1/12 7/12 1/13 7/13 1/14 7/14 Tier 1 vol (LHS) Tier 2 vol (LHS) Tier 3 vol (LHS) Tier 1 cities ASP yoy% Tier 2 cities ASP yoy% Tier 3 cities ASP yoy%

Property volume has rebounded alongside policy loosening and healthy price cuts in oversupply markets

20% 40% 60% 80% 100% 120% 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 9/12 3/13 9/13 3/14 Tier 1 Tier 2 Tier 3

Affordability (mortgage payment to household income): T1 cities are rising but T2/T3 cities are relatively stable Inventory months (3 months rolling): with sales volume picking up, inventory level should gradually trend down

Source: NBS, PBOC, Goldman Sachs Research, end Oct 2014 Source: Soufun, Goldman Sachs Research, end Oct 2014

10 20 30 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13 1/14 7/14 Mth Tier 1 average inventory months Tier 2 average inventory months Tier 3 average inventory months

18

70 90 110 130 150 170 190 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 MSCI China Consumer Discretionary Energy Financials Health Care Information Technology Telecommunication Services

China - wide divergence in earnings forecasts

MSCI China 12-Mth Forward EPS Trend (Rebased Dec 2012 = 100)

Source: IBES, 31 Dec 2014

Energy:

• Above market PE
• Earnings downgrades
• Poor execution

Telecoms:

• Double market PE
• <2% yield
• Negative earnings

growth seeing downgrades

Internet:

• Visible earnings

growing above market

• Constant upgrades

19

Investment themes in the ‘new normal’

Source: Company Information, Morgan Stanley Research, Bloomberg, 19 June 2014 CAGR = Compound Annual Growth Rate; E = Bloomberg Estimates Smartphone and tablet market growth = annual %change in units of devices shipped worldwide Portfolio stock growth = annual %change in aggregated revenue of mentioned portfolio stocks

Market share gain story in the hardware industry

Source: Company Information, Bloomberg. As at Oct 2014.

Leading internet traffic gateways show strong growth momentum China healthcare industry is in a secular bull market

0% 10% 20% 30% 40% 50% 60% 2012 2013 2014E 2015E Smartphone and Tablet Market AAC, Largan and Mediatek Aggregated Revenue

Annualized Growth Rate

CAGR

(2012 – 2015E)

0% 10% 20% 30% 40% 1,000 2,000 3,000 4,000 1978 1982 1986 1990 1994 1998 2002 2006 2010 Healthcare Spending (Rmb Bn) y/y growth 142.2 132.1 208.1 307.2 200 400 WWT (mt/d) WTE (kt/d) 2012 2015E CAGR 14%

(2012 – 2015E)

CAGR 32%

(2012 – 2015E) Source: Ministry of Environmental Protection, Ministry of Housing and Urban-Rural Development. As at Oct 2014. WWT = Waste Water Treatment WTE = Waste to Energy

47% 41% 28% 71% 27% 31% 0% 20% 40% 60% 80% Alibaba Baidu Tencent Revenue CAGR ( FY12-FY17E) Non-GAAP Net Profits CAGR ( FY12-FY17E)

Source: National Health and Family Planning Commission of PRC, end Oct 2014

Still a lot of work to be done to upgrade the environmental standard

Forecasts, projections and other forward looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecasts, projections and other forward statements, actual events, results or performance may differ materially from those reflected or contemplated. The companies/securities above are shown for illustrative purpose only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not hold positions on behalf of its clients in any or all of the aforementioned securities.

20

China Healthcare spend to rise

National Healthcare Spending target 20/20 Market Cap of Healthcare Companies

Source: Bloomberg, 5 May 2014 Source: National Health and Family Planning Commission, 5 May 2014 247 1,158 33 666 35 464 5 245 10 382 China US Pharmaceuticals Biotech / Biologics Medical Devices Distributors / Retailers Healthcare Services

$330Bn $2,915Bn

% of sector mkt cap 10% 12% 14% 16% 18% 20% 22%

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% Low-end: 13% High-end: 20.4% 2020E Health Spending as % of GDP 2020E Health Spending (RMb Bn) Health Spending 2012-2020E CAGR Rmb7,384bn 2.4x 2013E Rmb8,614bn 2.8x 2013E

21

Internet services – Social media a new form of communications

Tencent Earnings and Share Price – Growing Exponentially

Source: Bloomberg. As at 31 Dec 2014.

China’s e-Commerce share (as % of total retail sales) has already exceeded that of the US Singles day and Cyber Monday: Sales compared

Source: Alibaba, Bloomberg, ComScore, 9 Jan 2015 Source: iResearch, 9 Jan 2015

20 40 60 80 100 120 140 160 1,000 2,000 3,000 4,000 5,000 6,000 7,000 04 05 06 07 08 09 10 11 12 13 14 Net Profits Share Price (RHS) RMB Million HKD

The inclusion of the securities mentioned above is not to be interpreted as recommendations to buy or sell. Opinions, estimates, forecasts, and statements of financial market trends that are based

• n current market conditions constitute our judgment and are subject to change without notice.

7.9% 5.2% 0% 2% 4% 6% 8% 10% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 China US 5 10 2009 2010 2011 2012 2013 2014 Singles Day Cyber Monday Revenue (USD bn)

22

Niche technology exposure in Taiwan

Source: Cinet.com, Whathifi.com 9 Jan 2015

23

Greater China valuations near trough levels

MSCI Golden Dragon 12-Month Forward PE MSCI Golden Dragon Trailing PB

x x

Source: Thomson Reuters Datastream, 31 Dec 2014 Source: Thomson Reuters Datastream, 31 Dec 2014 PE = Price to Earnings Ratio PB = Price to Book Ratio Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not indicative of future performance.

11.0 Avg 12.8 +1sd 14.8

• 1sd 10.9

6 8 10 12 14 16 18 20 04 05 06 07 08 09 10 11 12 13 14 1.3 Avg 1.7 +1sd 2.0

• 1sd 1.3

0.5 1.0 1.5 2.0 2.5 3.0 04 05 06 07 08 09 10 11 12 13 14

24

J.P. Morgan Asset Management

This is a promotional document and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the product(s) or underlying overseas investments. Both past performance and yield may not be a reliable guide to future performance. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co and its affiliates worldwide. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy. Investment is subject to documentation which is comprised of the Investment Trust Profiles and Key Features and Terms and Conditions, copies of which can be

• btained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorised and

regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP.