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JPMorgan Indian Investment Trust plc January 2010

JPMorgan Indian Investment Trust plc January 2010. Rukhshad Shroff, CFA Rajendra Nair, CFA. Two consecutive, outlier years. Source: MOSL, 11/1/10. JPMorgan Indian Investment Trust Cumulative performance to 30 th September 2009. 1 Year 3 Years 5 Years 10 Years % % % % .

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JPMorgan Indian Investment Trust plc January 2010

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  1. JPMorgan Indian Investment Trust plcJanuary 2010 Rukhshad Shroff, CFA Rajendra Nair, CFA

  2. Two consecutive, outlier years Source: MOSL, 11/1/10

  3. JPMorgan Indian Investment TrustCumulative performance to 30th September 2009 1 Year 3 Years 5 Years 10 Years % % % % JPM Indian – Diluted NAV28.7 35.5 205.7 350.0 JPM Indian – Undiluted NAV 37.5 44.8 226.6 380.8 JPM Indian – Return to Shareholders 45.1* 34.5 198.0 490.1 MSCI India Index# 47.1 56.6 238.7 255.6 * Includes the return from the bonus of subscription shares in November 2008 Source: Morningstar, JPMAM. Total returns in £.

  4. JPMorgan Indian Investment TrustPerformance update As at 31st December 2009 Since Inception^ 6 months 1 Year 3 Years 5 Years 10 Years Annualised % % % % % % JPM Indian – NAV*25.2 59.2 36.0 186.5 260.9 9.9 MSCI India Index#31.4 80.6 50.5 206.7 235.7 7.6 Relative performance -6.2 -21.4 -14.5 -20.2 25.2 2.3 ^ Inception: 1/7/94 * Undiluted. Excludes the impact of any subscription share dilution Source: Morningstar, JPMAM. Total returns in £. Fund Size £462.3m

  5. JPMorgan Indian Investment TrustCumulative performance since launch As at 31st December 2009 Source: Bloomberg, JPMAM, Thomson Reuters Datastream

  6. JPMorgan Indian Investment TrustTop ten holdings As at 31st December 2009 Stock Name Sector Market Cap £m% of Fund 1 Reliance Industries Energy 47,691 12.0 2 Infosys Technologies Information Technology 19,836 10.8 3 HDFC Bank Financials 9,666 6.7 4 Housing Development Finance Corp. Financials 10,136 6.7 5 ICICI Bank Financials 12,993 6.0 6 Bharat Heavy Electricals Industrials 15,655 4.9 7 Tata Consultancy Services Information Technology 19,540 3.5 8 Tata Motors Industrials 2,660 2.8 9 Maruti Suzuki India Consumer Discretionary 5,998 2.7 10 Infrastructure Development Finance Financials 12,603 2.7 58.82 Source: JPMAM

  7. 2.6% 1.0% Financials 3.9% 4.6% Energy 30.1% 5.6% Information Technology Industrials Materials 9.8% Consumer Discretionary Utilities Health Care 12.4% 15.8% Consumer Staples Cash 14.2% JPMorgan Indian Investment TrustSector weighting As at 31st December 2009 Source: JPMAM

  8. Big picture view • We think the Indian economy can double in 5-6 years time to ~US$2 trillion. • The share of investment, historically neglected, will increase as India finally takes infrastructure seriously. • Consumption will continue to grow and remain dominant, driven by favourable demographics. • Corporate earnings could double in ~4-5 years • Foreign investment + re-allocation of domestic savings pool = positive for equities

  9. India remains a compelling early stage growth opportunity Source: IMF, Morgan Stanley Research, 7/1/10

  10. Reaping the demographic ‘dividend’ Growing Middle Class (% Share of Households) F2002 F2006E F2010E Source: NCAER; E= NCAER estimates, 7/1/10 India the Largest Contributor to Growth in the Working Population Over the Next 10 Years Addition to working age population by 2019 StockPosition 2009E 4457 568 765 388 379 963 145 210 82 500 534 159 138 54 51 33 32 12 -8 In Millions -18 * Note: Africa includes a group of 56 countries.Source: UN, Morgan Stanley Research, 7/1/10

  11. Positive demographics = growing savings pool = sustainable growth Savings as % of GDP, 2008 Source: CEIC, IMF, Morgan Stanley Research, 20/1/10 Source: CEIC, CSO, Morgan Stanley Research, 20/1/10

  12. Low penetration will drive consumption Domestic Two Wheeler Volumes % of Population Owning Two Wheelers Source: IIFL,15/1/10 Source: IIFL,15/1/10 Auto Penetration (vehicles per thousand) versus GDP per Capita (PPP adjusted) Source: Bloomberg, CEIC, Government Statistics Departments, 7/1/10

  13. ...while rising infrastructure spending will be another pillar of growth India: Infrastructure Investment India: Infrastructure Investment E = Morgan Stanley Research estimates; Source: Morgan Stanley Research, 14/1/10 E = Morgan Stanley Research estimates; Source: Morgan Stanley Research, 14/1/10

  14. Infrastructure: Where is the money going? Infrastructure Spending Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 20/1/10

  15. Chindia: Comparisons are at least indicative India & China: Infrastructure Investment India & China: Infrastructure Investment (US$ bn) E = Morgan Stanley Research estimatesSource: Morgan Stanley Research, 15/1/10 E = Morgan Stanley Research estimatesSource: Morgan Stanley Research, 15/1/10

  16. C + I = higher and more resilient growth Quarterly GDP Growth Trend (% YoY) Source: CSO, CEIC, Morgan Stanley Research, 1/12/09

  17. A near ‘V’ shaped recovery Industrial Production Export Decline Narrows Source: CSO, Morgan Stanley Research, 7/1/10 Source: Ministry of Commerce, Morgan Stanley Research, 7/1/10

  18. Ultimately feeding through into corporate earnings Sensex PAT Growth (YoY) Source: MOSL, 11/1/10 Sensex Sales Growth Sensex EBITDA Growth Source: MOSL, 11/1/10 Source: MOSL, 11/1/10

  19. Earnings could double in less than 5 years Source: MOSL, 11/1/10

  20. Valuations: Not cheap, but…. MSCI India PE MSCI India PB Source: FactSet, MSCI, Morgan Stanley Research, 14/1/10 Source: FactSet, MSCI, Morgan Stanley Research, 14/1/10

  21. Institutional activity is getting more balanced Source: SEBI, BSE, Morgan Stanley Research, 19/1/10 Source: SEBI, BSE, Morgan Stanley Research, 19/1/10

  22. Risks • Inflation and interest rates • Global risk appetite • Oil price • Twin deficits • Geopolitics • The unexpected

  23. Summary • India remains a compelling early stage growth opportunity • Infrastructure spending and consumption will drive GDP growth • Which in turn will drive earnings growth and profitability • The opportunity will be punctuated by risks and volatility… • …yet, the market could potentially double in 3-4 years

  24. Appendix

  25. Edward PullingManaging Director, 15 years of India-related experience Rukhshad ShroffManaging Director, 18 years of India-related experience Rajendra NairVice President, 10 years of India-related experience Nandkumar SurtiVice President, 18 years of India-related experience Harshad PatwardhanVice President, 16 years of India-related experience Amit Gadgil 6 years of India-related experience Johnny Wong Dealer, 12 years of India-related experience Ravi Ratanpal 4 years of India-related experience Rohit Agarwal 4 years of India-related experience Karan Sikka 4 years of India-related experience The JF and JPMorgan India team The Hong Kong team The India team

  26. 2009: An extraordinary turnaround Source: FactSet, MSCI, Bloomberg, 14/1/10 Please note : China A Share : SHCOMP, for H-Share : HSCEI ACWI : All countries world index (Developed world + Emerging markets) World Index : Developed markets

  27. ..as BRIC economies lived up to the hype GDP growth % Source: IMF, 11/1/10

  28. Relative performance (on a FY basis) Source: JPMorgan Chase & Co., 31/12/09 Benchmark: MSCI India Net

  29. Performance review: 2009 = the worst of all worlds Our Strategy The Market • Bottom up, stock specific • Medium/long term time frame, with an average of 3 years holding period • Overweight domestic growth plays • Quality & blue chips penalised • ~9% cash in 1Q • Macro, factor driven • Extreme volatility in the last 12 months, with strong rotational tendencies • Driven by global commodities, beta and leverage • Leverage and beta rewarded • ~100% move up in 3 months

  30. Investment Process The basic premise of our process is that there are three sources of investment return: • Growth: a bigger and more profitable company adds to investment value and returns. Company contact is key to our process. We conduct hundreds of meetings per annum across countries: we analyse industries in which companies operate, the competitive landscape, management strategy to enhance competitive advantage and returns. As part of our process we not only meet companies but we meet with their competitors, distributors, suppliers and other stake holders. • Valuations: how a company is valued impacts our returns. Our valuation analysis encompasses both absolute methodologies as well as relative (to history, to regional and global comparables). We also use DCF/DDM valuation frameworks, where appropriate. • Sustainable yield: In addition to capital appreciation, dividend yield is an important source of long term returns. Analysing returns involves an analysis of the growth cycle of the business, its capital intensity and financial management.

  31. Infrastructure Infrastructure Spending XIth Five Year Plan Infrastructure Spending Estimates Source: Planning Commission, Morgan Stanley Research, 15/1/10 Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 15/1/10 Assumed USD/INR = 40 for F2008-F2012

  32. But who will fund it? Sources of Funding: Debt & Non-Debt Source of Funding Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 15/1/10 Source: Planning Commission, 15/1/10

  33. Infrastructure: Where is the money going? Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 20/1/10

  34. Infrastructure financing Debt Sources Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 15/1/10 Assumed USD/INR = 40 for F2008-F2012 Source: Planning Commission, Morgan Stanley Research, 15/1/10

  35. Urbanisation will be a structural growth driver Source: UN population division, World Urbanisation prospects, 7/1/10

  36. Investment themes – Power: A crucial ingredient for growth India’s Power Shortage Growth in Power Generation Capacity Source: CEA, Morgan Stanley Research, 7/1/10 Source: Morgan Stanley Utilities Team; E = Morgan Stanley Research estimates, 7/1/10

  37. Investment themes – Roads: Ambitious plans Source: NHAI, Morgan Stanley Research, 7/1/10

  38. Investment themes – Insurance World Life Insurance Premium Growth – 5 Year (CAGR) Source: IIFL, 11/1/10 World Non-Life Insurance Premium Growth – 5 Year (CAGR) World Insurance Penetration Rate(Premium as % of GDP) in 2008 Source: IIFL, 11/1/10 Source: Swiss Re, CEIC, IIFL Research, 11/1/10

  39. China leads India by a wide margin.. Source: CEIC, Morgan Stanley Research,15/1/10 Source: CEIC, Morgan Stanley Research,15/1/10

  40. …but does she offer a glimpse into India’s future? Source: FactSet, 15/1/10

  41. Relative valuations MSCI PB: India relative to EM MSCI PE: India relative to EM Source: FactSet, MSCI, Morgan Stanley Research, 14/1/10 Source: FactSet, MSCI, Morgan Stanley Research, 14/1/10

  42. The valuation premium is well deserved ROE trends Source: Worldscope, FactSet, Morgan Stanley Research, 14/1/10

  43. Risks: Inflation is a concern in the short term.. Source: CEIC, Morgan Stanley Research, 19/1/10

  44. …but monetary tightening is not bad for equities in the long term Source: Bloomberg, RBI & CLSA 15/1/10

  45. Risks: Fiscal deficit is a concern but is improving incrementally Note: *Here the off-budget items include expenditure on food, fertilizer and oil. E = Morgan Stanley Research estimates.Source: RBI, Economic Survey, Ministry of Finance, Morgan Stanley Research, 7/1/10

  46. Risks: Global risk appetite Source: Bloomberg, 14/1/10

  47. Risks – Oil! Source: CEIC, Morgan Stanley Research, 14/1/10 Source: FactSet, MSCI, Morgan Stanley Research, 14/1/10

  48. Risks: Geopolitics has been a perennial concern Source: Anand Rathi Securities, 14/1/10

  49. Macro economic forecasts *Total of Central and State Government deficit does not tally due to inter-governmental transactions. E = Morgan Stanley Research Estimates; Source: RBI, CSO, Budget Documents, and Morgan Stanley Research. Source: RBI, CSO, CEIC, Bloomberg, SEBI, Morgan Stanley Research, 14/1/10

  50. Macro indicators Source: RBI, CSO, CEIC, Bloomberg, SEBI, Morgan Stanley Research, 14/1/10

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