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CHARACTERISTICS OF THE S&P CHINA 500

 The S&P China 500 is designed to measure the performance of the top 500 companies in China. The index includes companies regardless of their place of listing, thereby reflecting a more complete China story than other segmented China equity indices.


 As the majority of leading information technology companies are only listed offshore and the S&P China 500 is designed to approximate the sector weights of the broad market, the S&P China 500 is less concentrated in the financials sector and more tilted to the information technology sector than the onshore China indices.


 Benefitting from more diversified sector, exchange, and currency exposures, performance of the S&P China 500 was less volatile than the onshore China indices while recording almost the same performance after adjusting for risks in the past decade.

Composition on Sector, Exchange, and Trading Currency

Compared with other domestic China A share and offshore China benchmark indices, the S&P China 500 stands out, as it captures both onshore- and offshore-listed Chinese companies in a single index, which is a better representation of the real and complete Chinese economy.

Additionally, by approximating a broad market sector weight during stock selection, the S&P China 500 is much more diversified in sector exposure.

The information technology sector, which represents 16% of the S&P China 500, only comprises less than 8% in all the onshore China indices. On the other hand, the industrials and materials sectors, which weigh 15.7% and 8.6%, respectively, are under-represented in the offshore China indices, as most companies from these two sectors are only listed onshore.

It is also clear that the S&P China 500 has much lower concentration risk to the financials sector than other onshore and offshore China indices, as the S&P China 500 mimics the broad market sector weights in its stock selection process. The financials sector dominates 37%-73% in the onshore and offshore China indices but only weighs 27% in the S&P China 500.

Exhibit: Sector Breakdown of the S&P China 500 and Other China Indices

SECTOR WEIGHT (%)

ONSHORE

OFFSHORE

TOTAL

S&P CHINA A

300 INDEX

CSI 300

FTSE A50

HSCEI

FTSE
5

MSCI CHINA

S&P CHINA

Energy

2.2

2.7

3.0

10.8

11.6

6.5

3.2

Materials

6.5

5.9

0.8

1.4

0.7

1.3

8.6

Industrials

17.5

16.2

13.4

4.3

7.4

7.5

15.7

Consumer

Discretionary

11.3

10.9

6.1

3.2

2.1

6.3

12.3

Consumer Staples

5.3

5.1

2.7

0.5

1.5

3.1

5.1

Health Care

6.7

5.5

0.5

1.4

0.0

2.2

5.5

Financials

37.2

40.6

69.1

73.4

54.5

37.5

27.4

Information Technology

7.5

7.8

1.0

0.0

9.0

22.6

15.7

Telecomunication
Services

0.9

0.8

1.4

2.0

11.5

9.4

2.7

Utilities

4.8

4.5

2.0

3.0

1.6

3.8

3.8

Source: S&P Dow Jones Indices LLC, Bloomberg, MSCI. Data as of Dec. 31, 2015. Chart is provided for illustrative purposes.

Sector exposure of the S&P China 500 is almost as broad and diverse as that of the S&P 500. While the S&P 500 is heaviest in the information technology, financials, and health care sectors, the S&P China 500 has its highest weights in the financials, industrials, and information technology sectors.

Exhibit: Sector Breakdown of the S&P China 500 and S&P 500

SECTOR WEIGHT (%)

S&P CHINA 500

S&P 500

Energy

3.2

6.5

Materials

8.6

2.8

Industrials

15.7

10.0

Consumer Discretionary

12.3

12.9

Consumer Staples

5.1

10.1

Health Care

5.5

15.2

Financials

27.4

16.5

Information Technology

15.7

20.7

Telecommunication Services

2.7

2.4

Utilities

3.8

3.0

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2015. Table is provided for illustrative purposes.

Apart from diverse sector exposure, the S&P China 500 also distinguishes itself from other well-known onshore and offshore China indices by seeking to track diverse listed exchanges and trading currencies. As of December 2015, stocks traded in mainland China, Hong Kong, and U.S. exchanges accounted for 58.6%, 31.8%, and 9.5% of the index, respectively. On the other hand, the index has 58.2% and 41.7% currency exposure to the Chinese yuan and the U.S. dollar (and the Hong Kong dollar, which is pegged to the U.S. dollar), respectively.

Exhibit: Listed Exchange and Trading Currency Breakdown of the S&P China 500

Source: S&P Dow Jones Indices LLC. Data as of Dec.31, 2015. Charts are provided for illustrative purposes.

Market Representation

The S&P China 500 and the S&P 500 are the primary indicators of the overall equity market performance of the two biggest economies in the world. As of Dec. 31, 2015, the S&P China 500 represented approximately 57% of the S&P Total China BMI, while the S&P 500 represented around 81% of the market cap of the S&P United States BMI.

According to the sector breakdowns of these indices, information technology has proven to become more important and is a key growth sector for both Chinese and the U.S. markets. As of year-end 2015, Tencent and Alibaba are the top two weighted members in the S&P China 500, while Apple, Alphabet, and Microsoft are the top three weighted members in the S&P 500. In contrast, due to the apparent preference of listing offshore by the large Chinese information technology companies, that sector is clearly underrepresented in the onshore market. None of the top 10 companies in the S&P China A 300 Index are from the information technology sector, showing a different landscape from the S&P China 500.

Exhibit: Top 10 Companies in the S&P China 500, S&P 500, and S&P China A 300 Index

S&P CHINA 500

S&P 500

S&P CHINA A 300 INDEX

COMPANY NAME

WEIGHT (%)

COMPANY NAME

WEIGHT (%)

COMPANY NAME

WEIGHT (%)

Tencent Holdings

4.60

Apple

3.28

Ping An Insurance

4.10

Alibaba Group

3.98

Alphabet

2.53

China Merchants Bank

3.30

Ping An Insurance

3.61

Microsoft

2.48

China Minsheng Banking

3.29

China Construction Bank

3.29

Exxon Mobil

1.81

Industrial Bank Co Ltd

2.52

China Mobile

2.72

General Electric

1.64

Shanghai Pudong

Development Bank

2.28

ICBC

2.53

Johnson & Johnson

1.59

China Vanke Co Ltd.

2.28

China Merchants Bank

2.39

Amazon.com

1.45

CITIC Securities

1.76

Baidu.com

2.23

Wells Fargo

1.41

Bank of Communications

1.49

China Minsheng Banking

2.21

Berkshire Hathaway B

1.38

Haitong Securities

1.40

Bank of China Ltd.

2.05

JPMorgan Chase

1.36

Kweichow Moutai

1.20

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2015. Table is provided for illustrative purposes.

Historical Performance

Over the period from June 30, 2006, to Dec. 31, 2015, the S&P China 500 gained an annualized USD return of 12.5%, underperforming the domestic China indices by small margins while significantly outperforming the offshore China indices. Due to the more diversified sector, exchange, and currency exposure, the S&P China 500 had lower volatility and maximum drawdown than the onshore China indices. Nevertheless, the S&P China 500 practically mirrored the onshore China indices, with a return correlation of 0.9, and they recorded almost the same return after adjusting for risk over the long term.

Exhibit: Risk/Return of the S&P China 500 and Other Onshore and Offshore China Indices

MARKET

ONSHORE

OFFSHORE

TOTAL

S&P CHINA A 300 INDEX

CSI 300

FTSE A50

HSCEI

FTSE
5

MSCI CHINA

S&P CHINA

500

ANNUALIZED RETURN (%)

3 Years

15.2

14.9

10.9

-1.8

0.2

1.3

10.6

5 Years

6.0

6.0

6.4

-1.8

-0.2

0.9

4.1

Since June 06

15.6

15.1

N/A

6.9

6.6

8.4

12.5

SINCE JUNE 2006

Annualized volatility(%)

33.7

34.4

N/A

31.6

28.9

28.0

27.8

Risk-Adjusted Return

0.46

0.44

N/A

0.22

0.23

0.30

0.45

Maximum Drawdown (%)

-65.4

-66.4

N/A

-60.6

-58.3

-59.3

-61.7

Source: S&P Dow Jones Indices LLC. Index performance is based on total return in USD. Back-tested data from June 30, 2006, to Dec. 31, 2015. The S&P Total China BMI was launched on Nov. 27, 2013. The S&P China 500 was launched on August 28, 2015. The S&P China A 300 Index was launched on March 1, 2004. All data prior to those dates are back-tested. Past performance is no guarantee of future results. Table is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance. Maximum drawdown is calculated as rolling 12-month maximum drawdown.

ICBC Credit Suisse Asset Management (International) Company Limited.,Beijing ICP preparation 05063708