JPMorgan SmartRetirement: Q2 2014 Views Strategic Asset Allocation, Manager Selection, and Tactical Asset Allocation SmartRetirement Blend Mutual
Contents Strategic Allocation Changes: 2 (No changes for Q2 2014) Manager Selection Changes: (No changes for Q2 2014) Tactical Allocation Changes: 3-7 Mutual Attribution: 8-14 1
JPMorgan SmartRetirement Blend Mutual s: Current strategic normal asset allocation Asset Class/Strategy Benchmark Income 2015 2020 2025 2030 2035 2040-2055 Effective 1/1/2014 s highlighted in green denote passive strategies Over time the asset Vanguard S&P 500 ETF S&P 500 19.00% 21.90% 28.35% 33.60% 38.05% 41.30% 43.25% US Large Cap 19.00% 21.90% 28.35% 33.60% 38.05% 41.30% 43.25% ishares Russell 2000 (IWM) Russell 2000 1.60% 1.92% 2.60% 3.10% 3.52% 3.82% 4.00% ishares Russell Midcap ETF (IWR) Russell Midcap 2.40% 2.88% 3.90% 4.65% 5.28% 5.73% 6.00% US Small/Mid Cap 4.00% 4.80% 6.50% 7.75% 8.80% 9.55% 10.00% JPM Realty Income MS REIT 1.50% 1.90% 2.65% 3.03% 3.40% 3.78% 4.00% JPM International Realty FTSE EPRA NAREIT Dev ex US 1.00% 1.20% 1.55% 1.68% 1.80% 1.93% 2.00% REITs 2.50% 3.10% 4.20% 4.70% 5.20% 5.70% 6.00% allocation becomes more JPM International Realty FTSE EPRA NAREIT Dev ex US 1.00% 1.20% 1.55% 1.68% 1.80% 1.93% 2.00% conservative for the target retirement date funds (that is, excluding the Income ). Furthermore, the products shown are likely to change to ensure that optimal portfolio construction is maintained ishares MSCI EAFE ETF MSCI EAFE 7.00% 8.60% 11.80% 13.80% 15.70% 17.45% 18.50% JPM Emerging Markets Equity MSCI EM Free 0.15% 0.49% 1.24% 1.70% 1.93% 2.13% 2.25% JPM Emerging Economies MSCI EM Free 0.10% 0.40% 1.03% 1.38% 1.57% 1.75% 1.85% ishares MSCI Emerging Markets ETF MSCI EM Free 1.75% 2.01% 2.58% 3.07% 3.55% 3.93% 4.15% S&P Global Natural Resources ETF S&P Global Natural Resources 1.50% 1.10% 0.30% - - - - International Equity 10.50% 12.60% 16.95% 19.95% 22.75% 25.25% 26.75% Total Equities 36.00% 42.40% 56.00% 66.00% 74.80% 81.80% 86.00% JPMorgan Commodities Strategy Dow Jones-UBS Commodity Index Total Return 1.50% 1.10% 0.30% - - - - Commodities 1.50% 1.10% 0.30% - - - - ishares Barclays TIPS (TIP) Barclays Capital US TIPS 2.50% 1.90% 0.60% - - - - JPM Inflation Managed Bond Barclays Capital US TIPS 1-10 Year 5.00% 3.80% 1.20% - - - - ishares Barclays Capital Aggregate (AGG) Barclays Capital Aggregate 17.25% 17.65% 17.30% 14.03% 9.95% 6.70% 4.75% JPM Core Bond Barclays Capital Aggregate 15.18% 15.53% 15.22% 12.34% 8.76% 5.90% 4.18% JPM Corporate Bond Barclays US Aggregate Corporate Total Return Index 2.07% 2.12% 2.08% 1.68% 1.19% 0.80% 0.57% JPM Emerging Markets Debt JPM EMBI Global 2.00% 1.96% 1.82% 1.62% 1.42% 1.22% 1.10% JPMorgan Emerging Markets Local Currency Debt JPM GBI-EM Global Diversified 0.75% 0.69% 0.58% 0.53% 0.48% 0.43% 0.40% JPM Floating Rate Income Credit Suisse Leveraged Loan Index 2.50% 1.90% 0.60% - - - - JPM High Yield Bond Barclays Capital High Yield 2% Issuer Capped 5.25% 4.95% 4.30% 3.80% 3.40% 3.15% 3.00% Fixed Income 52.50% 50.50% 43.70% 34.00% 25.20% 18.20% 14.00% JPM Prime Money Market US T-Bills 10.00% 6.00% - - - - - Total Cash Alternatives 10.00% 6.00% - - - - - Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Total Passive Exposure 53.00% 57.96% 67.43% 72.25% 76.05% 78.93% 80.65% 2
Q2 2014 Tactical Asset Allocation Changes 3
Q2 Tactical Commentary Tactical asset allocation has historically been a strong uncorrelated source of alpha to our portfolios, allowing us to take short-term views on global markets in a risk-controlled framework. This quarter, tactical asset allocation detracted from performance, mainly due to the positions in Developed Equity both regionally and across the capital structure. We maintain confidence in our long-term investment process, with an emphasis on seeking to provide superior risk-adjusted returns for participants in a highly diversified portfolio. 4
Current asset allocation views Our asset allocation views are informed by our seasoned Global Strategy Team, our proprietary quantitative models, and our bottom-up manager insights. MACRO VIEW We retain our positive outlook for risk assets, but with a lower level of conviction than over the last year. Coming out of the weather-related slowdown, we continue to look for an acceleration in global growth, led by stronger activity in the US and Europe. At the same time reliance on extraordinary monetary accommodation will decline as we progressively move away from zero interest rates. As of June 30, 2014 Stocks vs. bonds Equity Bonds (includes cash) Large underweight Underweight Neutral Overweight Large overweight OVERWEIGHT EQUITY VS. FIXED INCOME We remain overweight risk assets but have reduced the level of our overweight position to equity Favored regions remain U.S., Europe, and Japan Continued preference for developed over emerging equities OVERWEIGHT HIGH YIELD VS. BARCLAYS AGGREGATE Limited value in Treasuries at these levels ahead of rate normalization. However, we do not expect a repeat of the 1994 sell-off Maintain preference for high yield over emerging market debt NEUTRAL EMERGING MARKETS EQUITY Global growth is improving but EM is yet to respond Headwinds remain as Fed tapering and tightening will be a drag on emerging markets dependent on foreign capital Worries remain about the trajectory of the Chinese economy NEUTRAL REITS Neutral REITs in favor of equity as we expect bond proxies to underperform in a rising rate environment Equity components U.S. Large Cap U.S. Small Cap Global REITs International developed equity Emerging markets Fixed income components Core fixed income High yield Emerging markets Fixed income duration Other Asset Classes Real Estate UNDERWEIGHT DURATION Expect bond yields likely to rise further in the near-to-medium term. Close to zero cash yields argue for an underweight Source: J.P. Morgan Asset Management Global Multi-Asset Group; as of 6/30/14. Shown for illustrative purposes only. The opinions expressed in this report are those held by the authors at the time of going to print. The views expressed herein are not to be taken as advice or recommendations to sell or buy shares. Our consensus estimates may differ from other publicly available sources due to our selection criteria. This material should not be relied on as including sufficient information to support an investment decision. 5
Economic and market outlook: expect earnings growth to pick up in 2014 and support equities Global: Favorable environment for risk assets but expect continued market volatility Our G-Map investment regime framework, which compares trends in growth and inflation, points to an inflationary regime where we expect moderate outperformance of risk assets but with a higher degree of volatility The drivers of risk asset outperformance such as improving global growth, low inflation, accommodative monetary policy and reasonable valuations remain in place but may begin to wind down during 2014 and 2015 US: Region with the most macro momentum Broad-based economic reacceleration in 2014 supports positive outlook for earnings Economic activity should re-accelerate post the weather related slowdown. Valuations are somewhat stretched relative to other regions, but are justified given higher profitability and potential for stronger EPS growth US Treasury yields are expected to rise in the intermediate term driven by an improving economy and ongoing normalization of FED policy. Europe: Outlook remains modest and uneven Looser ECB monetary policy and waning fiscal austerity should support growth and earnings while valuations are attractive, particularly in cyclically-adjusted terms Weak credit conditions remain a headwind to growth Japan: Encouraging progress towards spurring core wage inflation through Abenomics Monetary stimulus and currency depreciation through Abenomics encouragingly spurred headline inflation primarily through import costs but this trend passed through only minimally to core inflation and wages Expect another round of easing from the Bank of Japan to support growth following April 1st consumer tax hike Emerging Markets: Cyclical headwinds remain; valuations are low but not yet compelling Expect substantial deleveraging of debt over the next 2-3 years to be a major headwind to economic activity Opinions, estimates, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. 6
A more detailed view of our tactical allocations since inception 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% 12/1/2013 9/1/2013 6/1/2013 3/1/2013 12/1/2012 9/1/2012 6/1/2012 3/1/2012 12/1/2011 9/1/2011 6/1/2011 3/1/2011 12/1/2010 9/1/2010 6/1/2010 3/1/2010 12/1/2009 9/1/2009 6/1/2009 3/1/2009 12/1/2008 9/1/2008 6/1/2008 3/1/2008 12/1/2007 9/1/2007 6/1/2007 3/1/2007 12/1/2006 9/1/2006 6/1/2006 Total Large Cap Equity Total Small Cap Equity Total EAFE Total EM Equity Total REITs Total Equity 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% 12/1/2013 9/1/2013 6/1/2013 3/1/2013 12/1/2012 9/1/2012 6/1/2012 3/1/2012 12/1/2011 9/1/2011 6/1/2011 3/1/2011 12/1/2010 9/1/2010 6/1/2010 3/1/2010 12/1/2009 9/1/2009 6/1/2009 3/1/2009 12/1/2008 9/1/2008 6/1/2008 3/1/2008 12/1/2007 9/1/2007 6/1/2007 3/1/2007 12/1/2006 9/1/2006 6/1/2006 Total US Investment Grade Total High Yield Total Developed Int'l FI Total EMD Total Fixed Source: J.P. Morgan Asset Management. Data shown is the historical monthly over/underweights for the JPMorgan SmartRetirement 2040 Mutual since inception. Over/underweights represent tactical asset allocation vs. strategic allocation 7 Fixed Income Positions Equity Positions
JPMorgan SmartRetirement Blend Mutual Attribution 8
JPMorgan SmartRetirement Blend Mutual funds: Select shares Performance as of June 30, 2014 (at NAV) Jun-14 3 Month YTD 1 Year Since Inception* JPMorgan SmartRetirement Blend Income 0.87% 2.84% 4.36% 10.74% 7.87% S&P Target Date Retirement Income Index 0.67% 2.62% 4.16% 9.38% 7.09% Income Custom Benchmark 0.94% 3.21% 5.12% 10.91% 8.25% *Performance inception: May 15, 2006 for Income, 2010, 2015, 2020, 2030 and 2040 s. July 31, 2007 for 2025, 2035, 2045 and 2050 s. January 31, 2012 for the 2055. JPMorgan SmartRetirement Blend 2015 S&P Target Date 2015 Index 2015 Custom Benchmark 1.02% 1.12% 1.03% 3.17% 3.26% 3.45% 4.65% 4.96% 5.42% 12.55% 13.51% 12.65% 9.71% 11.60% 10.13% The performance quoted is past performance and is not a guarantee of future results. Mutual funds are principal value of an investment will fluctuate so that an JPMorgan SmartRetirement Blend 2020 1.26% 3.69% 5.17% 14.95% 12.02% investor's shares, when redeemed, may be worth more S&P Target Date 2020 Index 1.31% 3.52% 5.25% 15.29% 13.38% or less than their original cost. Current performance 2020 Custom Benchmark 1.25% 3.91% 5.95% 15.05% 12.51% may be higher or lower than the performance data shown. For up-to-date month end performance information please call 1-800-338-4345. JPMorgan SmartRetirement Blend 2025 1.41% 3.95% 5.50% 16.76% 13.74% S&P Target Date 2025 Index 1.48% 3.74% 5.49% 16.81% 14.95% 2025 Custom Benchmark 1.43% 4.17% 6.17% 16.79% 14.34% JPMorgan SmartRetirement Blend 2030 1.56% 4.26% 5.69% 18.47% 15.27% S&P Target Date 2030 Index 1.63% 3.94% 5.69% 18.18% 16.39% 2030 Custom Benchmark 1.60% 4.43% 6.40% 18.33% 15.88% JPMorgan SmartRetirement Blend 2035 1.76% 4.51% 5.91% 19.69% 16.54% S&P Target Date 2035 Index 1.76% 4.11% 5.86% 19.42% 17.53% 2035 Custom Benchmark 1.74% 4.63% 6.58% 19.66% 17.25% JPMorgan SmartRetirement Blend 2040 1.81% 4.58% 5.96% 20.66% 17.18% S&P Target Date 2040 Index 1.86% 4.24% 5.98% 20.31% 18.40% 2040 Custom Benchmark 1.82% 4.75% 6.69% 20.24% 17.79% JPMorgan SmartRetirement Blend 2045 1.76% 4.60% 5.98% 20.47% 17.10% S&P Target Date 2045 Index 1.94% 4.35% 6.06% 21.03% 19.10% 2045 Custom Benchmark 1.82% 4.75% 6.69% 20.24% 17.79% JPMorgan SmartRetirement Blend 2050 1.81% 4.60% 5.99% 20.51% 17.15% S&P Target Date 2050 Index 2.02% 4.46% 6.14% 21.82% 19.75% 2050 Custom Benchmark 1.82% 4.75% 6.69% 20.24% 17.79% JPMorgan SmartRetirement Blend 2055 1.78% 4.62% 6.03% 20.04% 16.86% S&P Target Date 2055 Index 2.06% 4.53% 6.18% 22.43% 20.28% 2055 Custom Benchmark 1.82% 4.75% 6.69% 20.24% 17.79% Note: Institutional Share Class returns are shown net of fees. Plan may not hold all of the funds shown. The S&P Target Date Index Series (each, an Index ) reflects exposure to various asset classes included in target date funds driven by a survey of such funds for each particular target date. The performance of the index does not reflect the deduction of expenses associated with a mutual fund or the ETFs included in the index, such as investment management fees. By contrast, the performance of the reflects the deduction of the mutual fund expenses, including sales charges if applicable. Investors cannot invest directly in an index. In addition to the returns for the S&P Target Date Index Series, Standard & Poor s has calculated, at J.P. Morgan Investment Management Inc. s request, a pro-forma return series (the Pro-Forma S&P Target Date Index Series ) from June 30, 2006 through December 31, 2009 for illustrative purposes only. For more details, please refer to the Appendix section. See Appendix for custom benchmark disclosures. 9
JPMorgan SmartRetirement Blend Mutual s : 3 Months Sources of Value Added as of June 30, 2014 (gross of fees) Total Returns Data shown in % 2.90 2.62 3.21 3.18 3.26 3.45 3.69 3.52 3.91 4.01 3.74 4.17 4.32 3.94 4.43 4.52 4.63 4.70 4.75 4.66 4.75 4.66 4.75 4.68 4.75 4.11 4.24 4.35 4.46 4.53 Income 2015 2020 2025 2030 2035 2040 2045 2050 2055 SmartRetirement S&P Target Date Index Custom Benchmark Decomposition of value added over the custom benchmark 0.63 0.00 0.08 0.18 0.33 0.20 0.22 0.38 0.33-0.31-0.31-0.27-0.04-0.23-0.22-0.16-0.30-0.34-0.11-0.11-0.43-0.05-0.09-0.09-0.07-0.31-0.27-0.47-0.42-0.71 Income 2015 2020 2025 2030 2035 2040 2045 2050 2055 Total Value Added Manager Selection Effect Tactical Asset Allocation Effect Source: J.P. Morgan Asset Management. Total Value Added: The combination of security selection and tactical asset allocation impacts within an overall SmartRetirement. Security Selection Effect: How the underlying strategies perform relative to their respective benchmarks. Tactical Asset Allocation Effect: Decisions made by the portfolio team to over/underweight given asset classes. Note: Past performance is no guarantee of future results. Performance includes the reinvestment of income. Performance is preliminary unaudited performance, shown gross of fees. If fees were included, returns would be lower. The commingled trust funds are collective investment funds maintained by J.P. Morgan Chase Bank, N.A. Only qualified employee benefit trusts and governmental plans that have appointed J.P. Morgan Chase Bank, N.A. as fiduciary are permitted to invest in the fund. J.P. Morgan Asset Management advises J.P. Morgan Chase Bank, N.A. regarding the management of the funds. 10
JPMorgan SmartRetirement Blend Mutual s : Contributors and Detractors for 3 Months As of June 30, 2014 relative to custom benchmark SR Income SR 2015 Manager Selection Effect Total 0 bps -4 bps 8 bps 18 bps 33 bps 20 bps 22 bps 38 bps 33 bps Vanguard S&P 500 ETF 13 bps 8 bps 11 bps 16 bps 27 bps 14 bps 15 bps 27 bps 23 bps ishares Russell Midcap ETF 2 bps 1 bps 2 bps 3 bps -8 bps 3 bps 3 bps 5 bps 4 bps ishares Russell 2000 2 bps 2 bps 2 bps 3 bps 13 bps 3 bps 4 bps 5 bps 5 bps ishares MSCI EAFE ETF 1 bps 1 bps 2 bps 2 bps 3 bps 3 bps 3 bps 3 bps 3 bps JPMorgan Realty Income 1 bps 1 bps 2 bps 2 bps 2 bps 2 bps 2 bps 2 bps 2 bps JPMorgan Corporate Bond 1 bps 1 bps 1 bps 1 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Emerging Economies 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Inflation Managed Bond -3 bps -3 bps -1 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps ishares Barclays TIPS Bond 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMCB Global Natural Resources 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Commodities Strategy 1 bps 1 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps S&P Global Natural Resources 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps Vanguard MSCI EAFE ETF 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan High Yield Bond 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Emerging Markets Local Currency Debt -1 bps -1 bps -1 bps -1 bps -1 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Emerging Markets Debt -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps JPMorgan Markets Equity 0 bps 0 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps JPMorgan International Realty -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps ishares MSCI EME ETF -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -1 bps -2 bps -2 bps ishares Lehman Aggregate Bond -8 bps -7 bps -4 bps -3 bps -1 bps -1 bps -1 bps -1 bps -1 bps JPM Core Bond -5 bps -5 bps -5 bps -4 bps -3 bps -2 bps -1 bps -1 bps -1 bps SR 2020 SR 2025 SR 2030 SR 2035 SR 2040 SR 2045 SR 2050 Tactical Asset Allocation Effect -31 bps -23 bps -30 bps -34 bps -43 bps -31 bps -27 bps -47 bps -42 bps Source: J.P. Morgan Asset Management Note: Security Selection Effect: How the underlying strategies perform relative to their respective benchmarks. Tactical Asset Allocation Effect: Decisions made by the portfolio team to over/underweight given asset classes. Past performance is no guarantee of future results. Performance utilized is net of fees. The sum of each component fund s security selection impact may be lesser or greater than the Total Security Selection Effect due to rounding and/or the inclusion of Interaction Effect. Contributors and detractors sorted using the SmartRetirement 2025. * GMAG Core Investment Grade includes JPMCB Mortgage Private Placement, JPMCB Intermediate Credit and JPMCB Long Credit. 11
JPMorgan SmartRetirement Blend Mutual s : 1 Year Sources of Value Added as of June 30, 2014 (gross of fees) Total Returns Data shown in % 10.97 9.38 10.91 12.73 13.51 12.65 15.19 15.29 15.05 17.02 16.81 16.79 18.77 18.18 18.33 20.97 19.96 20.81 20.82 20.38 19.42 20.31 21.03 21.82 22.43 19.66 20.24 20.24 20.24 20.24 Income 2015 2020 2025 2030 2035 2040 2045 2050 2055 SmartRetirement S&P Target Date Index Custom Benchmark Decomposition of value added over the custom benchmark 1.04 0.42 0.34 0.26 0.06 0.01 0.21 0.55 0.28 0.17 0.13 0.45 0.22 0.36 0.63-0.18-0.28-0.28-0.25-0.31-0.49 Income 2015 2020 2025 2030 2035 2040 2045 2050 2055 Total Value Added Manager Selection Effect Tactical Asset Allocation Effect Source: J.P. Morgan Asset Management. Total Value Added: The combination of security selection and tactical asset allocation impacts within an overall SmartRetirement. Security Selection Effect: How the underlying strategies perform relative to their respective benchmarks. Tactical Asset Allocation Effect: Decisions made by the portfolio team to over/underweight given asset classes. Note: Past performance is no guarantee of future results. Performance includes the reinvestment of income. Performance is preliminary unaudited performance, shown gross of fees. If fees were included, returns would be lower. The commingled trust funds are collective investment funds maintained by J.P. Morgan Chase Bank, N.A. Only qualified employee benefit trusts and governmental plans that have appointed J.P. Morgan Chase Bank, N.A. as fiduciary are permitted to invest in the fund. J.P. Morgan Asset Management advises J.P. Morgan Chase Bank, N.A. regarding the management of the funds. 12
JPMorgan SmartRetirement Blend Mutual s : Contributors and Detractors for 1 Year As of June 30, 2014 relative to custom benchmark SR Income SR 2015 Manager Selection Effect Total -28 bps -18 bps -28 bps 1 bps 17 bps -25 bps -31 bps 13 bps 22 bps Vanguard S&P 500 ETF 9 bps 19 bps 4 bps 30 bps 44 bps 7 bps 1 bps 36 bps 48 bps ishares Russell Midcap ETF 2 bps 2 bps 3 bps 4 bps -7 bps 4 bps 3 bps 6 bps 5 bps ishares Russell 2000 3 bps 2 bps 3 bps 4 bps 15 bps 3 bps 4 bps 7 bps 6 bps JPMorgan Corporate Bond 1 bps 1 bps 1 bps 1 bps 1 bps 1 bps 0 bps 0 bps 0 bps ishares MSCI EME ETF -2 bps -1 bps 0 bps 0 bps 0 bps -1 bps -1 bps -1 bps 0 bps JPMorgan Realty Income 0 bps 0 bps 0 bps 0 bps -1 bps -1 bps -1 bps -1 bps -1 bps ishares Lehman Aggregate Bond -6 bps -6 bps -1 bps -1 bps -1 bps 0 bps -1 bps -1 bps -1 bps JPMorgan Inflation Managed Bond 1 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps ishares Barclays TIPS Bond 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Commodities Strategy -1 bps -1 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps S&P Global Natural Resources -1 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps 0 bps JPMorgan Emerging Economies 0 bps -1 bps -2 bps -3 bps -3 bps -4 bps -4 bps -4 bps -4 bps JPMorgan International Realty -2 bps -2 bps -3 bps -3 bps -3 bps -4 bps -4 bps -4 bps -4 bps JPMorgan Emerging Markets Debt -4 bps -4 bps -4 bps -3 bps -3 bps -2 bps -2 bps -2 bps -2 bps JPMorgan High Yield Bond -7 bps -6 bps -5 bps -5 bps -4 bps -4 bps -4 bps -4 bps -4 bps JPMorgan Emerging Markets Equity -3 bps -4 bps -5 bps -6 bps -6 bps -7 bps -7 bps -7 bps -7 bps JPMorgan Emerging Markets Local Currency Debt -8 bps -8 bps -7 bps -6 bps -5 bps -4 bps -4 bps -4 bps -4 bps JPM Core Bond -8 bps -8 bps -8 bps -6 bps -5 bps -3 bps -2 bps -2 bps -2 bps ishares MSCI EAFE ETF -3 bps -4 bps -6 bps -7 bps -9 bps -11 bps -11 bps -10 bps -11 bps SR 2020 SR 2025 SR 2030 SR 2035 SR 2040 SR 2045 SR 2050 Tactical Asset Allocation Effect 34 bps 42 bps 21 bps 28 bps 55 bps 104 bps 45 bps 36 bps -49 bps Source: J.P. Morgan Asset Management Note: Security Selection Effect: How the underlying strategies perform relative to their respective benchmarks. Tactical Asset Allocation Effect: Decisions made by the portfolio team to over/underweight given asset classes. Past performance is no guarantee of future results. Performance utilized is net of fees. The sum of each component fund s security selection impact may be lesser or greater than the Total Security Selection Effect due to rounding and/or the inclusion of Interaction Effect. Contributors and detractors sorted using the SmartRetirement 2025. * GMAG Core Investment Grade includes JPMCB Mortgage Private Placement, JPMCB Intermediate Credit and JPMCB Long Credit. 13
J.P. Morgan Asset Management This document is intended solely to report on various investment views held by JPMorgan Asset Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Indices do not include fees or operating expenses and are not available for actual investment. The information contained herein employs proprietary projections of expected returns as well as estimates of their future volatility. The relative relationships and forecasts contained herein are based upon proprietary research and are developed through analysis of historical data and capital markets theory. These estimates have certain inherent limitations, and unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees or other costs. References to future net returns are not promises or even estimates of actual returns a client portfolio may achieve. The forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. Contact JPMorgan s Distribution Services at 1-800-338-4345 for a fund prospectus. You can also visit us at www.jpmorganfunds.com. Investors should carefully consider the investment objectives and risks as well as charges and expenses of the mutual fund before investing. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing. Total return assumes reinvestment of dividends and capital gains distributions and reflects the deduction of any sales charges or redemption fees. Performance may reflect the waiver of a portion of the 's advisory or administrative fees for certain periods since the inception date. If fees had not been waived, performance would have been less favorable. Any securities mentioned throughout the presentation are shown for illustrative purposes only and should not be interpreted as recommendations to buy or sell. A full list of firm recommendations for the past year are available upon request. The JPMorgan SmartRetirement s are target date funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears the target retirement date. The principal value of the fund(s) is not guaranteed at any time, including at the target date. The value of investments and the income from them may fluctuate and your investment is not guaranteed. Past performance is no guarantee of future results. Please note current performance may be higher or lower than the performance data shown. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Certain underlying s of the JPMorgan SmartRetirement s may have unique risks associated with investments in foreign/emerging market securities, and/or fixed income instruments. International investing involves increased risk and volatility due to currency exchange rate changes, political, social or economic instability, and accounting or other financial standards differences. Fixed income securities generally decline in price when interest rates rise. Real estate funds may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector, including but not limited to, declines in the value of real estate, risk related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by the borrower. The fund may invest in futures contracts and other derivatives. This may make the more volatile. The gross expense ratio of the fund includes the estimated fees and expenses of the underlying funds. A fund of funds is normally best suited for long-term investors. The JPMorgan SmartRetirement Custom Benchmarks are a weighted average reflecting the current strategic allocation of the underlying funds' benchmarks. The custom benchmark composition and allocations may change if: 1) the portfolio management team chooses to add or remove investments in any of the underlying funds; or 2) if there are adjustments to the allocations to the underlying funds. For a complete history of the composition of the custom benchmarks, please contact your JPMorgan representative. The performance of the Custom Benchmark does not reflect the deduction of expenses associated with a commingled fund, such as investment management fees. 14
J.P. Morgan Asset Management DISCLOSURES (Continued) The S&P Target Date Index Series (each, an Index ) reflects exposure to various asset classes included in target date funds driven by a survey of such funds for each particular target date. These asset class exposures include U.S. large cap, U.S. mid cap, U.S. small cap, international equities, emerging markets, U.S. REITs, core fixed income, short term treasuries, and Treasury Inflation Protected Securities and are represented by exchange traded funds (ETFs) in the index calculation. The original inception date for the Indexes was September 25, 2008 (the Original Inception Date ). Recently, Standard & Poor s (S&P) began providing return information for periods prior to the Original Inception Date. The benchmark returns are from the periods specified in the Average Annual Total Returns tables in the s prospectuses. Effective March 1, 2010, S&P modified the method used to calculate Index levels and returns for each Index. Prior to March 1, 2010, each Index was reconstituted once per year on the last trading day of May, with effect on the first trading day of June. Reconstitution is the process whereby asset class weights are established for the upcoming year. Effective March 1, 2010, each Index is reconstituted on the same schedule. However, the Indexes are now rebalanced on a monthly basis. Rebalancing is the process whereby the asset class weights that were determined at the previous reconstitution are reestablished. This process takes place after the close of business on the last trading day of each month, with effect on the first trading day of the following month. The Index returns are calculated on a daily basis and will continue to be calculated daily. The performance of the index does not reflect the deduction of expenses associated with a mutual fund or the ETFs included in the index, such as investment management fees. By contrast, the performance of the reflects the deduction of the mutual fund expenses, including sales charges if applicable. Investors cannot invest directly in an index. In addition to the returns for the S&P Target Date Index Series, Standard & Poor s has calculated, at J.P. Morgan Investment Management Inc. s request, a pro-forma return series (the Pro-Forma S&P Target Date Index Series ) from June 30, 2006 through December 31, 2009 for illustrative purposes only. The pro-forma performance calculation differs from the performance calculation of the S&P Target Date Index Series reported for the period. As described above, the S&P Target Date Index Series reflects annual rebalancing prior to March 1, 2010 (the Effective Date ) and monthly rebalancing beginning on the Effective Date. In contrast, the pro-forma series shows the hypothetical performance of the S&P Target Date Index Series as if it had utilized a monthly rebalance schedule prior to the Effective Date, with the composition of the index being rebalanced monthly (rather than annually) back to the applicable asset class weights, as determined during the annual reconstitution. Reconstitution is the process whereby asset class weights are established for the upcoming year. The pro-forma returns were calculated on a monthly basis (rather than the daily basis currently used to calculate the S&P Target Date Index Series) and using different software, which may have different data sources. Thus, it is possible that there may be differences in the source data and in the mathematical computations between the pro-forma returns and what the numbers would have been had they been calculated on a daily basis for this period. The performance of the index does not reflect the deduction of expenses associated with a mutual fund or the ETFs included in the index, such as investment management fees. By contrast, the performance of the reflects the deduction of the mutual fund expenses, including sales charges if applicable. Investors cannot invest directly in an index. JPMorgan s are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the s. Products and services are offered by JPMorgan Distribution Services, Inc. Mutual s may be offered through J.P. Morgan Institutional Investments Inc., member FINRA/SIPC. Mutual funds are subject to market risks. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. JPMorgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. IRS 230 Circular Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Copyright 2014 JPMorgan Chase & Co. All rights reserved. 15