STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management Global Real Assets JPMCB Strategic Property Fund1 JPMCB Special Situation Property Fund2 July 23, 2014 John F Faust, Managing Director (415) 315-5164, [email protected] James G Sakelaris, Managing Director (312) 732-6331, [email protected] FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION STRICTLY PRIVATE | CONFIDENTIAL Today’s presenters John F. Faust, Managing Director, is a member of the JPMorgan Asset Management - Real Estate Marketing and Client Relations Group based in San Francisco. John has over 25 years experience in designing, implementing and managing investment programs with various public pension funds, endowments and foundations, and was previously employed with Legacy Partners for almost ten years. He also worked at Lend Lease Real Estate Investments' Institutional Client Group based in San Francisco, where since 1998 he served as an account executive responsible for public investment funds in the western United States. John began with Equitable Real Estate in 1988 as regional appraiser, with responsibility for properties in Northern California and Hawaii. In 1990, he was transferred to Sacramento, where he was responsible for asset management of a portfolio of office and industrial assets. In 1991, he was promoted to Director of Asset Management. John holds a BS in Finance from Boston College and an MBA from Duke University, in addition to a Certified Property Manager designation. He holds Series 7 and Series 63 licenses. Jim Sakelaris, Managing Director, is a client advisor in Institutional Asset Management and is responsible for implementation of investment management strategies in institutional accounts. An employee since 1990, Jim has held various roles within the organization including credit analyst, commercial loan officer and manager of Fixed Income Credit Research. Prior to joining the firm, he was employed as a financial futures specialist for Kidder, Peabody & Co. and was responsible for the management of regional and national institutional financial futures investment portfolios. Jim obtained a B.G.S. in economics and political science from the University of Michigan and an M.B.A. in finance from the University of Chicago. He also holds Series 3, 7, 63, and 65 licenses. 1Commingled 2Commingled Pension Trust Fund Strategic Property of JPMorgan Chase Bank, N.A. (“Strategic Property Fund” or “SPF”) Pension Trust Fund Special Situation Property of JPMorgan Chase Bank, N.A. (“Special Situation Property Fund” or “SSPF”) FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 2 STRICTLY PRIVATE | CONFIDENTIAL Investment review Table of contents Page I. J.P. Morgan Asset Management – Global Real Assets Overview 4 II. Market Outlook 14 III. Investment Summary and Performance 24 IV. JPMCB Strategic Property Fund 28 V. JPMCB Special Situation Property Fund 48 VI. Appendix 70 – Supplemental exhibits – Biographies of key professionals FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 3 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Overview FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 4 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Terminus, Atlanta, GA Strategic Property Fund 1701 Duke Street, Alexandria, VA Special Situation Property Fund Royal Hawaiian Center, Honolulu, HI Strategic Property Fund Curling Club Apartments, Hoboken, NJ Special Situation Property Fund China Basin, San Francisco, CA Strategic Property Fund The District, Washington, D.C. Strategic Property Fund 7 Bryant Park, New York, NY Special Situation Property Fund FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION IDI Middlesex I, South Brunswick, NJ Special Situation Property Fund 5 STRICTLY PRIVATE | CONFIDENTIAL A dedicated team to serve Omaha School Employees’ Retirement System Provides consultative and problem solving solutions Serves as advocate to all products and services Initiates relationship to investment management organization Brings deep product knowledge and expertise Establishes and maintains the portfolio including: – – – – negotiates contracts communicates with custodians and other parties funds investment accounts defines and coordinates ongoing servicing requirements Manages the investment decisions for your portfolio inline with investment guidelines Monitors market environment Communicates with client portfolio manager and client Serves as the product expert Consults with you to determine your portfolio’s objectives and long-term asset allocation Oversees the investment decisions and guidelines Communicates market and strategy-specific information Kim Adams 312-732-6366 Jim Sakelaris 312-732-6331 Ann Cole 212-648-2152 Douglas Schwartz 212-648-2103 Jacqui Sopko 302-634-3906 John Faust 415-315-5164 The charts and/or graphs shown above and throughout the presentation are for illustration and discussion purposes only. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 6 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets We are one of the industry’s premier real asset investment managers $74.2bn in assets under management including $65.8bn in the private market and $8.4bn in the public market1 Over 40 years of real estate investment management experience Stable, experienced management team 398 investment professionals (376 focused on the private market and 22 on the public market) Diverse client base including nearly 600 institutional clients and over 1,000 high net worth clients Extensive, long-standing relationships with partners help generate $25 billion in annual privately negotiated deal flow Performance – consistent top performance versus targets Source: J.P. Morgan Investment Management Due to rounding, private market AUM and public market AUM may not total Global Real Assets AUM 1As of March 31, 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 7 STRICTLY PRIVATE | CONFIDENTIAL Our people: Experienced, focused professionals A team of experienced specialists are focused on supporting the portfolio manager to deliver performance and service to our clients Joe Azelby Group Head 28 years experience Ben Gifford Kevin Faxon Chief Investment Officer Acquisitions 41 years experience Head of Real Estate Americas 27 years experience Mike Kelly Director of Commingled Funds 25 years experience Dave Esrig Mark Bonapace Asset Management 21 years experience Research 22 years experience Portfolio Managers Strategic Property Fund Ann Cole (25 years of experience) Kimberly Adams (19 years of experience) James Kennedy Development & Engineering 24 years experience Steve Greenspan Product Development 29 years experience Portfolio Manager Doug Doughty Special Situation Property Fund Douglas Schwartz (21 years of experience) Business Development and Client Strategy 18 years experience Al Dort Financial Group 23 years experience Whit Wilcox Debt Financing 31 years experience Lawrence Fuchs Chief Operating Officer 22 years experience Ellie Kerr Valuations 31 years experience June 30, 2014 There can be no assurance that professionals currently employed by JPMAM will continue to be employed by JPMAM or that past performance or success of any professional serves as an indicator of professional’s future performance or success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 8 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Global Head – Global Real Assets Joseph Azelby 28 years experience Real Estate Americas Real Estate Europe Real Assets Asia Infrastructure Investments Asian Infrastructure Global Maritime Kevin Faxon Peter Reilly David Chen Paul Ryan Vijay Pattabhiraman Andrian Dacy 27 years experience 34 years experience 24 years experience 27 years experience 26 years experience 26 years experience Business Development & Client Strategy Global Product Development Steven Greenspan Doug Doughty 29 years experience 18 years experience Security Capital Research & Management Anthony Manno 40 years experience Global Chief Operating Officer Lawrence Fuchs 22 years experience Skilled and specialized leadership by team of industry authorities with an average of 27 years experience There can be no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success. June 30, 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 9 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets, Real Estate Americas Global Head Joseph Azelby, MD 28 years experience Global Chief Operating Officer Global Product Development Lawrence Fuchs, MD 22 years experience Steven Greenspan, MD 29 years experience Chief Operating Officer – US Head of Real Estate Americas Business Development and Client Strategy Security Capital Research & Management Kevin Faxon, MD 27 years experience Doug Doughty, MD 18 years experience Anthony Manno Jr., MD 40 years experience Director of U.S. Real Estate Commingled Funds and Head of Debt Capital Markets Mike Kelly, MD 25 years experience Chief Investment Officer Benjamin Gifford, MD 41 years experience William Schultz, ED 23 years experience Separate Account Portfolio Management Finance Wayne Comer, MD Eric Johnson, MD Lawrence Ostow, MD Daniel Volpano, MD Funds Portfolio Management JPMCB Strategic Property Fund Kim Adams, MD Ann Cole, MD 29 years average experience Al Dort, MD 23 years experience Acquisitions Appraisal Northeast Hilary Spann, ED Ellie Kerr, MD 31 years experience West South/Midwest Southwest Craig Theirl, ED Robert Curran, MD Chris Graham, ED 19 years average experience Asset Management Mark Bonapace US Income & Growth Fund Nancy Brown, MD Alternative Property Fund Mike Kelly, MD JPMCB Diversified Commercial Property Fund JPMCB Special Situation Dave Esrig, MD Property Fund Susan Kolasa, ED Doug Schwartz, MD 22 years average experience Head of Debt Financing Whit Wilcox, MD 31 years experience East/South Andrea Pierce, MD West David Sears, MD Residential Allina Boohoff, ED Central Scott MacDonald, MD Retail Joseph Dobronyi, ED Development & Engineering James Kennedy, MD 25 years average experience Director of Research Dave Esrig, MD 22 years experience There can be no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 10 STRICTLY PRIVATE | CONFIDENTIAL Global Real Assets, Real Estate Americas – Investment Committee Chief Investment Officer Benjamin Gifford Portfolio Manager Kim Adams Ann Cole Doug Schwartz Asset Management Region or Property Sector Head* Head of Real Estate Americas Kevin Faxon Financial Product Development Asset Management Mark Bonapace Steven Greenspan Real Estate Research Senior Member** Al Dort Engineering Services James Kennedy Director of Valuation Ellie Kerr A unanimous vote is required to approve acquisitions and dispositions * Asset Management Region and Sector Heads: East/South: Andrea Pierce Central: Scott MacDonald West: David Sears Residential: Allina Boohoff Retail: Joseph Dobronyi ** Real Estate Research Senior Members Dave Esrig Anne Hoagland Brian Nottage Luigi Cerreta Voting members Participating members There can be no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 11 STRICTLY PRIVATE | CONFIDENTIAL Range of opportunities for accessing real estate and other real assets Real Estate Infrastructure/Maritime Strategy Core Real Estate Core-plus Real Estate Real Estate Mezzanine Debt REITs Value-add Real Estate Opportunistic Real Estate Infrastructure Debt OECD Infrastructure Asian Infrastructure Maritime AUM $32.8bn $2.7bn $550mm $9.0bn $13.7bn $1.6bn $1.1bn $8.2bn $1.5bn $780mm US Strategy US REITs; International REITs; Global REITs US Special Situation Property Fund (US ERISA only); Europe strategy India strategy; Greater China strategy; Greater Europe strategy; Brazil strategy (Gávea) OECD infrastructure debt strategy OECD infrastructure core/core plus strategy Asian infrastructure opportunistic strategy Global maritime opportunistic strategy Publicly Mezzanine Equity or debt traded equity lending typically investments in securities with in the 60 – 80% properties with invested in of the capital significant core and core stack leasing, plus assets; capitalizing on development or correlated first mortgage repositioning with stock shortfall risk market Development; restructuring stressed capital structures; discounted note purchases; asset repositioning Investments in long dated floating bank loans secured by essential infrastructure assets Equity investments in regulated utilities, contracted power and transportation Equity or debt investments in infrastructure and infrastructure related resources Equity investment in bulkers, tankers and container ships Available GRA Vehicles US Strategic Property Fund (US ERISA only) US strategy Description Equity or debt investments in stabilized properties with high quality physical improvements Equity investments in leased leveraged core direct RE and mezzanine loans; focus on income Target Total Returns* 7 – 8% net 8 – 10% net 7 – 9% net 9 – 11% net 8 – 13% net 15 – 20% net USD Libor + 200-300 bps 10 – 12% net 18 – 20% net 18 – 20% net Target Yields* 5 – 6% net 5 – 7% net 7 – 9% net 3 – 4% net 2 – 4% net None or low USD Libor + 200-300 bps 6 – 8% net Often low 7 – 11% net Typical Leverage (Loan-to-Value) 25 – 30% 50 – 60% N/A 40 – 50% 50 – 65% 60 – 75% N/A 40 – 85% Not targeted at the fund level 50 – 60% 3 – 5 years 2 – 5 years (or longer for large scale developments) 25 years 10 – 25+ years 5 – 7 years 3 – 5 years Target Holding Period** 5 – 10 years 5 – 7 years 5 – 10 years N/A Lower Risk Higher Risk Lower Risk Higher Risk *The Target Return has been established by J.P. Morgan Investment Management Inc. “J.P. Morgan” based on its assumptions and calculations using data available to it and in light of current market conditions and available investment opportunities and is subject to the risks set forth herein and to be set forth more fully in the Memorandum. The target returns are for illustrative purposes only and are subject to significant limitations. An investor should not expect to achieve actual returns similar to the target returns shown above. Because of the inherent limitations of the target returns, potential investors should not rely on them when making a decision on whether or not to invest in the strategy. The target returns cannot account for the impact that economic, market, and other factors may have on the implementation of an actual investment program. Unlike actual performance, the target returns do not reflect actual trading, liquidity constraints, fees, expenses, and other factors that could impact the future returns of the strategy. The manager’s ability to achieve the target returns is subject to risk factors over which the manager may have no or limited control. There can be no assurance that the Fund will achieve its investment objective, the Target Return or any other objectives. The return achieved may be more or less than the Target Return. The data supporting the Target Return is on file with J.P. Morgan and is available for inspection upon request. **Applies to the individual fund assets. ERISA (Employee Retirement Income Security Act). Note: AUM for RE Mezz Debt and Maritime includes commitments. AUM is reflective of invested capital and is shown as of September 30, 2013. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 12 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 13 STRICTLY PRIVATE | CONFIDENTIAL Market Outlook FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 14 STRICTLY PRIVATE | CONFIDENTIAL We are still seeing unlevered core IRRs of 6.5% Leveraged & Unleveraged discount rates (IRRs) for newly underwritten core transactions, JPMAM 16.0% 15.0% Debt largely unavailable during this period 14.0% 13.0% Leveraged @ 65% 12.0% 11.0% 10.0% 9.0% 8.0% Unleveraged 7.0% Source: JPMAM. Data as of March 2014. The IRR shown above is calculated based upon internal JPMIM data. There can be no guarantee the IRR will be achieved. The charts and/or graphs shown above and throughout the presentation are for illustration and discussion purposes only. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 15 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Jun-08 Mar-08 Dec-07 6.0% STRICTLY PRIVATE | CONFIDENTIAL Similar appreciation and NOI growth suggest stable cap rates Year-over-year NCREIF ODCE unlevered property appreciation vs. NOI growth 12% Appreciation 10% NOI Growth 8% 6% 4% 2% 0% -2% -4% -6% -8% Source: NCREIF. Data as of March 2014. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 16 STRICTLY PRIVATE | CONFIDENTIAL Shadow space has impeded office recovery Growth in office-using employment versus office absorption Occupied square feet per office worker 200 6% 4% 195 2% 190 0% 185 -2% Office absorption -4% 180 Office employment FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 17 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2000 Source: CBRE-EA. Data as of March 2014 2001 175 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 -6% STRICTLY PRIVATE | CONFIDENTIAL Office development is even weaker than can be explained by slow tenant demand Development as a share of existing office stock 6% 2005 and 2014 began with similar vacancy rates 5% 4% 2006 and 2014 began with similar occupied stock vs. previous peak 3% 2% 1% 0% 1989 1994 1999 2004 Source: CBRE, JP Morgan Asset Management. Data as of December 2013 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 18 2009 2014 STRICTLY PRIVATE | CONFIDENTIAL Retail tenant credit has improved but low interest rates have been keeping some weak B mall tenants afloat Share of firms liquidating each quarter, 4Q moving average 6% Personal services 5% 4% Restaurants/Bars 3% Non-hospital based medical 2% 1% Stores selling goods 0% 1993Q2 2003Q2 2013Q2 Source: U.S. Bureau of Labor Statistics (BLS). Data as of June 2013 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 19 STRICTLY PRIVATE | CONFIDENTIAL As you were: Apartments continue to land softly and warehouse occupancy is still expanding Year-over-year apartment rent growth vs. CPI Year-over-year change in warehouse occupied stock 6% 4% 4% 3% 2% 2% 0% 1% -2% -4% Effective Rent Growth 0% Core CPI -1% -6% -2% -8% Mar-05 -3% Mar-05 Mar-08 Mar-11 Mar-14 Source: Axiometrics. CBRE. Data as of March 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 20 Mar-08 Mar-11 Mar-14 STRICTLY PRIVATE | CONFIDENTIAL We think select development makes sense today Value-add premium over core on J.P. Morgan underwritten transactions (median levered IRRs) Distressed transaction volume vs. construction spending, $Billions $12 20% 18% Value-add premium to levered core Apartments $10 Underwritten Value-add Levered IRR $8 16% $6 Construction 14% $4 Distress 12% $2 10% $0 8% 6% 4% $14 2% $12 0% $10 $8 Offices Construction $6 $4 $2 $0 Source: J.P. Morgan Asset Management. Data as of March 2014, RCA, Census Bureau FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 21 Distress STRICTLY PRIVATE | CONFIDENTIAL We remain optimistic that this will be a long cycle We hope for higher Treasury yields – We believe overall NOI growth will remain strong – Steady volume at higher discount rates We still see upside in office and high quality retail centers Supply cycle is still young outside of apartments and a few office and industrial markets – But construction financing is returning Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 22 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 23 STRICTLY PRIVATE | CONFIDENTIAL Investment Summary and Performance FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 24 STRICTLY PRIVATE | CONFIDENTIAL Omaha School Employees’ Retirement System Investment summary as of June 30, 2014 Invested capital Market value Strategic Property Fund $25,651,021 Income Appreciation Total ODCE Value2 Three months1 1.3 2.0 3.2 2.9 One year 5.1 8.5 14.1 12.8 Three years 5.2 7.9 13.5 12.4 Five years 5.7 4.5 10.4 10.0 Ten years 5.7 2.5 8.4 7.1 Fifteen years 6.6 2.3 8.9 7.9 Since inception (10/01/95) 7.0 2.7 9.9 8.9 Account Performance (%) 1non-annualized returns 2Preliminary as of 6/30/14. Past performance is not a guarantee of comparable future results. Total return assumes the reinvestment of income. Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are described in Part II of the Advisor’s ADV which is available upon request. See Appendix for additional information The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum would grow to $259mm after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235mm after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253mm after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 25 STRICTLY PRIVATE | CONFIDENTIAL Omaha School Employees’ Retirement System Investment summary as of June 30, 2014 Invested capital Market value Special Situation Property Fund $8,679,813 Income Appreciation Total ODCE Value2 Three months1 1.4 2.6 4.0 2.9 One year 3.6 14.5 18.6 12.8 Three years 4.4 12.7 17.5 12.4 Five years 4.6 7.7 12.7 10.0 Ten years 4.6 2.3 7.0 7.1 Fifteen years 5.2 2.0 7.3 7.9 Since inception (10/01/95) 5.8 2.7 8.6 8.9 Account Performance (%) 1non-annualized returns 2Preliminary as of 6/30/14. Past performance is not a guarantee of comparable future results. Total return assumes the reinvestment of income. Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are described in Part II of the Advisor’s ADV which is available upon request. See Appendix for additional information The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum would grow to $259mm after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235mm after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253mm after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 26 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 27 STRICTLY PRIVATE | CONFIDENTIAL JPMCB Strategic Property Fund FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 28 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Investment strategy Investment characteristics Focus on attractive stabilized investments with high quality physical improvements Excellent location factors, with dominant competitive market positions Stronger growth demographics Minimal new development (pure core) High quality income stream Aqua, Chicago, IL Risk and return expectations Total return target ODCE; income driven Holding period 5-10 years Portfolio leverage 25% to 30% total portfolio Operating cash target 3% of total net asset value Century Park, Los Angeles, CA * The Target Return has been established by J.P. Morgan Investment Management Inc. “J.P. Morgan” based on its assumptions and calculations using data available to it and in light of current market conditions and available investment opportunities and is subject to the risks set forth herein and to be set forth more fully in the Memorandum. The target returns are for illustrative purposes only and are subject to significant limitations. An investor should not expect to achieve actual returns similar to the target returns shown above. Because of the inherent limitations of the target returns, potential investors should not rely on them when making a decision on whether or not to invest in the strategy. The target returns cannot account for the impact that economic, market, and other factors may have on the implementation of an actual investment program. Unlike actual performance, the target returns do not reflect actual trading, liquidity constraints, fees, expenses, and other factors that could impact the future returns of the strategy. The manager’s ability to achieve the target returns is subject to risk factors over which the manager may have no or limited control. There can be no assurance that the Fund will achieve its investment objective, the Target Return or any other objectives. The return achieved may be more or less than the Target Return. The data supporting the Target Return is on file with J.P. Morgan and is available for inspection upon request. The manager seeks to achieve the stated objectives. There can be no guarantee those objectives will be met. These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 29 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund overview Investments as of June 30, 2014 103 office buildings 147 industrial buildings 26,792 apartment units in 68 complexes Bridgewater Commons Mall, Bridgewater, NJ 11 super regional and regional malls 200+ neighborhood and community retail centers 5 lifestyle and urban centers Fund profile as of June 30, 2014 Net Asset Value: Current leverage: Current cash position: $22.9bn 25.1% 2.8% 1501 K Street, Washington, D.C. Contribution queue: Capitol at Chelsea, New York, NY $1.6bn (7% of NAV) These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 30 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: A large, well-diversified investment portfolio As of June 30, 2014 (NAV $22,862.8mm) Property type diversification* Office Industrial Residential Retail SPF 4.1% NPI 9.4%1 Land SPF 40.0% NPI 35.2%1 $38.0 SPF 26.3% NPI 21.0%1 $5,628.8 $9,147.9 MSA $5,316.3 $1,859.5 Office Industrial Residential Retail Direct RE Cash Other** Total Fund % of NAV 40.0 8.1 23.3 24.6 96.0 2.8 1.2 100.0 Target range (%) 38 to 45 10 to 15 18 to 25 20 to 25 NPI (%)1 35.9 13.6 24.9 23.4 97.8 0.0 2.2 100.0 % of NAV 1 New York, NY 12.8 Los Angeles, CA 10.8 Dallas, TX 8.4 Washington, DC 7.1 Boston, MA 5.9 Houston, TX 5.8 San Jose, CA 5.0 Miami, FL 4.9 San Diego, CA 4.4 1As of 3/31/14 San Francisco, CA 4.2 *Direct real estate w/land (total of $21,990.6mm) ** SPF: Includes Land and Other Investments; NPI: Includes Hotels The above is shown for illustrative purposes only, and is subject to change without notice. Diversification does not guarantee investment returns and does not eliminate the risk of loss. These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 31 STRICTLY PRIVATE | CONFIDENTIAL Retail Sector weighting1 (% of NAV) Retail 26% - SPF: 26% - ODCE: 18% 2 2 - NPI: 24% 11 class A fortress malls in strong demographic markets with high barriers-to-entry After acquisition of Royal Hawaiian Center and NorthPark Center, SPF mall sales are over $790/sf vs. the national average of $400/sf (as of March 31, 2014) – NorthPark Center, Dallas, TX 2014 YTD retail acquisitions totaled $1.5 billion and contributed over $70/sf increase to SPF’s average mall sales Redevelopment: Approximately $775 million (at SPF’s share) planned for the next three to five years 1 Direct real estate 2As of 3/31/14 only. Pacific Place, San Francisco, CA These examples are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 32 STRICTLY PRIVATE | CONFIDENTIAL Office Sector weighting1 (% of NAV) - SPF: - ODCE: - NPI: 42% 2 36% 2 36% Office 42% Strong weighting to CBD/urban markets Office sector is still in early stages of recovery Strong year-over-year comparable NOI growth of 10.1% 1 Direct real estate 2As of 3/31/14 Century Park, Los Angeles, CA China Basin, San Francisco, CA only. These examples are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 33 STRICTLY PRIVATE | CONFIDENTIAL Multifamily Sector weighting1 (% of NAV) Multifamily 24% - SPF: 24% 2 - ODCE: 26% 2 - NPI: 25% Continued focus on changing the underlying composition of our residential portfolio Sold $671 million net and acquired $994 million net over the last two years Sell: Garden style, suburban assets in areas with development pipelines or strong investor interests Buy: Urban, highly amenitized buildings in affluent renterby-choice markets Pine Creek Ranch, The Woodlands, TX Apollo on H Street, Washington D.C. Computer Rendering 1 Direct Real Estate 2As of 3/31/14 only. These examples are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 34 STRICTLY PRIVATE | CONFIDENTIAL Industrial Sector Weighting1 (% of NAV) Industrial 8% - SPF: 8% 2 - ODCE: 15% 2 - NPI: 14% Leasing momentum across the portfolio – 97% leased as of March 31, 2014 Acquisitions focused on asset location and functionality PortSouth Bryla, Carteret, NJ (Rendering) – Major logistics locations across the country – Proximity to ports and population centers to cater to ecommerce 1 Direct Real Estate 2As of 3/31/14 Alliance Center North 1, Fort Worth, TX (Rendering) only. These examples are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success.. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 35 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Balance sheet, operations and valuations Cash and queues as of June 30, 2014 Leverage profile: 25.1% LTV as of June 30, 2014 Staggered debt maturities Cash: $645.7mm, 2.8% of NAV 1.4%, 3.6%, 4.2% of NAV maturing in 2014, 2015 and 2016 respectively $714+ million of operating cash flow Outgoing queue: $0mm Incoming queue: $1,641mm Average LTV is below 50% for expiring loans Weighted average interest rate is 4.5% Valuation metrics as of March 31, 2014 Leasing: 93.7% as of March 31, 2014 Office Retail Residential Industrial SPF Total Leased 93.8 92.1 93.6 97.1 93.7 Leasing Rollover (%) 2014 2015 5.4 6.3 8.5 8.0 N/A N/A 9.7 12.0 7.9 8.9 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 2016 8.0 8.4 N/A 13.3 10.1 Going-in Yield Stabilized Yield Discount Rate 36 Peak (%) 5.3 5.7 7.1 Current (%) 5.2 5.8 7.1 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund performance Supplemental to annual performance report Annualized returns as of June 30, 2014 (%) Three months1 YTD1 One year Three years Five years Since incep. Ten years Fifteen years 1/1/98 Income 1.3 2.5 5.1 5.2 5.7 5.7 6.6 6.8 Appreciation 2.0 3.1 8.5 7.9 4.5 2.5 2.3 2.5 SPF Total 3.2 5.7 14.1 13.5 10.4 8.4 8.9 9.5 NFI-ODCE Total - Value2 2.9 5.5 12.8 12.4 10.0 7.1 7.9 8.5 Yearly returns since inception 1998 (%) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Income 9.4 9.2 8.7 8.6 8.1 7.4 7.1 6.6 5.7 5.4 5.0 6.1 6.6 5.5 5.3 5.2 Appreciation 6.3 5.0 5.1 -0.9 -2.8 3.0 4.9 17.4 10.3 10.7 -12.5 -30.9 7.1 10.0 6.5 10.2 16.4 14.7 14.1 7.6 5.1 10.6 12.3 25.1 16.6 16.7 -8.1 -26.6 14.2 16.0 12.1 15.9 Total 1non-annualized returns 2As of June 30, 2014 (preliminary) Past performance is not a guarantee of comparable future results. Total return assumes the reinvestment of income. Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are described in Part II of the Advisor’s ADV which is available upon request. See Appendix for additional information. The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum would grow to $259mm after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235mm after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253mm after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding. SPF total return net of fees were: 2Q14: 3.0%; One year: 13.0%; Three years: 12.3%; Five years: 9.3%; Ten years: 7.3%; Fifteen Years: 7.9%; Since inception: 8.4%. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 37 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Second Quarter 2014 acquisition Royal Hawaiian Center, Honolulu, HI ■ Property Type: Class A Urban Shopping Center ■ Acquisition Date: June 2014 ■ SPF Equity: $697.7mm ■ Projected Unlevered IRR: 6.8% ■ Equity Interest: 100% SPF ■ Square Footage: 322,096 sq. ft. ■ Iconic asset with historical significance along the ocean-facing side of Kalākaua Avenue in Waikiki, a world famous tourist destination in Hawai’i and considered one of the best luxury retail shopping streets in the United States ■ Total sales of $1,817 per square foot1; exceeds the average total sales of SPF’s retail portfolio of $723 per square foot1 ■ Approximately 60% of the Property is leased to tenants with a national and international presence 1Sales reported are as of March 2014. The IRR shown above is calculated based upon internal JPMIM data and is gross of fees. There can be no guarantee the IRR will be achieved. This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 38 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Second Quarter 2014 acquisition NorthPark Center, Dallas, TX ■ Property Type: Class A+ Super-Regional Mall ■ Acquisition Date: May 2014 ■ SPF Equity: $448.9mm1 ■ Total Value at Acquisition: $1,262.5mm ■ Projected Levered IRR: 7.8% ■ Projected Unlevered IRR: 6.6% ■ Square Footage: 1,898,619 sq. ft.2 ■ One of the top performing malls in North America with total sales in excess of $1 billion annually ■ Rent roll includes a prominent mix of luxury retailers such as Cartier and Gucci as well as anchors ranked in the top 10 of their chain (#1 Neiman Marcus, #5 Dillard’s, #8 Nordstrom) ■ Major amenities include a private art collection that decorates the common areas and a landscaped 1.4 acre park that hosts community and retailer events year round 1Represents 60% SPF ownership 970,922 sq. ft. of non-owned anchor space The IRR shown above is calculated based upon internal JPMIM data and is gross of fees. There can be no guarantee the IRR will be achieved. This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. 2Includes FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 39 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Second Quarter 2014 acquisition Pacific Place, San Francisco, CA ■ Property Type: Retail/Office ■ Acquisition Date: June 2014 ■ SPF Equity: $395.8mm ■ Projected Unlevered IRR: 6.1% ■ Equity Interest: 100% SPF ■ Square Footage: 435,718 sq. ft. ■ Union Square is one of the most prestigious retail submarkets in the country and San Francisco has been one of the best performing office markets in the nation over the past few years ■ Pacific Place benefits from strong retail neighbors including Westfield’s San Francisco Shopping Center and the new City Target ■ Flagship stores for Levi’s, Old Navy and The Container Store stores at the property, given its high profile location, exceptional signage opportunities and prevalence of tourist shoppers The IRR shown above is calculated based upon internal JPMIM data and is gross of fees. There can be no guarantee the IRR will be achieved. This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 40 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Second Quarter 2014 acquisition Apollo on H Street, Washington, D.C. ■ Property Type: Residential/Retail ■ Acquisition Date: April 2014 ■ SPF Total Anticipated Equity: $64.6mm1 ■ Projected Levered IRR: 10.7% ■ Projected Unlevered IRR: 8.3% ■ Anticipated Project Cost: $186.6mm ■ Square Footage: 433 units/74,454 sq. ft. ■ Development is part of a master plan to reestablish the H Street Corridor as a popular destination to live and to visit for entertainment, dining and shopping ■ Whole Foods will anchor the retail and be an extraordinary amenity for the residential component ■ Residential units will feature high-end finishes and a premium amenity package including rooftop pool with panoramic views Computer Renderings ■ Project is designed to achieve LEED Silver certification 1The Fund committed initial net equity of $12.1mm. SPF is anticipated to fund 50% of total equity for the project. The IRR shown above is calculated based upon internal JPMIM data and is gross of fees. There can be no guarantee the IRR will be achieved. This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 41 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Second Quarter 2014 acquisition PortSouth Bryla, Carteret, NJ ■ Property Type: Industrial ■ Acquisition Date: June 2014 ■ SPF Equity: $22.0mm ■ Projected Levered IRR: 8.2% ■ Total Project Cost: $62.0mm ■ Square Footage: 460,000 sq. ft. ■ Located within the Exit 12 submarket of Northern New Jersey, less than 10 miles from Port Elizabeth, Port Newark and Newark Liberty International Airport ■ Cross-docked, with a 36’ clear height, ESFR sprinklers and T5 lighting, will be built to a LEED Certified standard and feature solar panels Newark Airport Port Newark Port Elizabeth ■ Will be one of a small number of state-of-the-art facilities in the submarket able to accommodate tenants with space requirements larger than 200,000 sq. ft. The IRR shown above is calculated based upon internal JPMIM data and is gross of fees. There can be no guarantee the IRR will be achieved. This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 42 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: Recent dispositions Deerfield Towne Center, Mason, OH Doral West, Doral, FL ■ ■ ■ ■ ■ ■ ■ Property type: Acquisition date: Disposition date: Net proceeds: Size: Realized IRR: Equity Multiple: Residential November 2006 July 2013 $60.2 million 388 units 2.28% 1.11x Irvine Oaks, Irvine, CA ■ ■ ■ ■ ■ ■ ■ Property type: Acquisition date: Disposition date: Net proceeds: Size: Realized IRR: Equity Multiple: ■ ■ ■ ■ ■ ■ ■ Property type: Acquisition date: Disposition date: Net proceeds: Size: Realized IRR: Equity Multiple: Retail December 2005 December 2013 $95.5 million 460,675 sq. ft. -4.52% 0.73x Pine Creek Ranch Apartments, Houston, TX Office July 1999 August 2013 $69.9 million 322,487 sq. ft. 6.81% 1.94x ■ ■ ■ ■ ■ ■ ■ Property type: Acquisition date: Disposition date: Net proceeds: Size: Realized IRR: Equity Multiple: Residential March 2007 September 2013 $32.6 million 240 units 11.29% 1.50x San Rafael Corporate Center, San Rafael, CA ■ ■ ■ ■ ■ ■ ■ Property type: Acquisition date: Disposition date: Net proceeds: Size: Realized IRR: Equity Multiple: Office August 2007 March 2014 $112.9 million 314,160 sq. ft. -3.72% 0.83x San Rafael Corporate Center, San Rafael, CA These example s are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 43 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: An active, selective buyer Significant new acquisition activity demonstrates our access to high quality deal flow and positions the portfolio for continued out performance New investments 100% $3,062 $2,868 Net Equity ($mm) $3,000 80% $2,500 $1,982 $1,853 60% $1,688 $2,000 $1,500 $1,000 $961 28% $1,530 $942 24% $1,321$1,176 $574 $544 $539 $605 12% 11% 11% $500 10% 18% 12% 40% 16% 19% 19% $506 4% $785 12% $113 4% 1% $0 8% 20% Acquisitions as % of NAV $3,500 0% The District, Washington, D.C. 425 Lexington Avenue, New York, NY These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future June 30, 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 44 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund: An active seller The Fund continues to show its commitment to active management and performance through its disposition strategy of pruning assets of lesser quality and / or growth prospects and where appropriate, trading up for asset quality in geographic location Disposition $1,400 100% $1,000 80% $978 $947 70% $748 $800 60% $713 $649 $638 50% $576 $600 $472 $506 40% $396 $400 $200 $0 $278 $23 7% 14% $270 6% $310 $228 $212 4% 7% 8% 3% 30% 20% 5% 7% 5% 5% 4% 6% 4% 5% Acquisitions as % of NAV Net Proceeds ($mm) 90% $1,179 $1,200 Pine Creek Ranch, The Woodlands, TX 10% 1% 0% As of 6/30/14 225 West Wacker, Chicago, IL This example represents some of the investment of the Fund. However, you should not assume that this types of investment will be available to or, if available, will be selected for investment by the Fund in the future FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 45 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund Snapshot: Valuation metrics As of March 31, 2014 Discount rate (%) Going-in yield (%) 1Q 2014 1Q 2010 3Q 2007 1Q 2014 1Q 2010 3Q 2007 Multi-family 6.9 8.6 6.9 4.7 6.3 5.0 Office – CBD 7.1 8.5 6.8 5.0 6.6 4.5 Office – Suburban 7.6 9.1 7.3 6.6 6.8 5.4 Retail 7.2 8.8 7.5 5.3 7.0 5.9 Industrial 7.3 9.2 7.2 6.2 6.5 5.9 Strategic Property Fund 7.1 8.8 7.2 5.2 6.7 5.3 Changes from peak to today (3Q07 to 1Q14) Changes from trough to today (1Q10 to 1Q14) 10 bps 10 bps -170 bps -150 bps FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 46 STRICTLY PRIVATE | CONFIDENTIAL Looking ahead Maintain strong balance sheet for reinvesting in portfolio in order to drive income return Acquire assets consistent with the Fund’s strategy for long-term growth Maintain leverage within the Fund’s target range of 25% to 30% Maintain cash position within 3% of net asset value No style drift, past, present or future The manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 47 STRICTLY PRIVATE | CONFIDENTIAL JPMCB Special Situation Property Fund FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 48 STRICTLY PRIVATE | CONFIDENTIAL JPMCB Special Situation Property Fund1 (“SSPF”) Creating value at the asset level West Co., Huntington Beach, CA Solara Portfolio, Lahaina, HI 1701 Duke Street, Alexandria, VA Hanover Rice Village, Houston, TX Groveton, Owings Mills, MD AmREIT Plano Portfolio, Plano, TX Mariner, Port Chester, NY The Plaza at Legacy, Plano, TX 901 K Street, Washington, DC 7 Bryant Park, New York, NY Madox, Jersey City, NJ One Jefferson, Parsippany, NJ These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future. 1 JPMorgan Chase Bank N.A. (“Special Situation Property Fund") Commingled Pension Trust Fund FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 49 STRICTLY PRIVATE | CONFIDENTIAL JPMCB Special Situation Property Fund1: Highlights from the quarter Continued to deliver positive performance ■ 2Q total return of 4.0% ■ One year trailing total return of 18.6% Continued to receive strong commitment from existing and new clients ■ $181.5mm contribution queue ■ $16mm of investor capital redeemed during the second quarter Conservative balance sheet at quarter end ■ Leverage ratio of 37.1% ■ No fund-level debt ■ Cash position of 10.8% Significant transaction activity ■ $171mm of new equity invested in acquisitions during the quarter ■ $136mm of net sales proceeds during the quarter ■ $161mm of pending initial equity investments in the Fund’s acquisition pipeline expected to close during the next few quarters Past performance is not indicative of future results. Total return assumes the reinvestment of income. 1 Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. (“JPMCB Special Situation Property Fund” or “SSPF”) FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 50 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: What is value-added investing? Develop to Core Buy Vacancy/Below Replacement Cost Onyx, Washington, DC 222 Second Street, San Francisco, CA Chateau Woods, Woodinville, WA Redevelop Distressed Investing West County, Huntington Beach, CA New City, Chicago, IL Before After These examples represent some of the investments of the Fund. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment by the Fund in the future FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 51 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Why invest today? Immediate access to a large, well-diversified portfolio across property type, geography and risk profile – $3.8 billion GAV; $2.4 billion NAV – Invested in all major property types across major U.S. markets – Balanced portfolio of stabilized and value-added assets Potential to earn a 400 to 500 bps spread over core real estate on value-added deals where that spread is normally closer to 300 bps – Expected income yield approximately 3.5-4.5% – Potential appreciation of new value-added assets in the low-teens Continuous access to value-added deal flow with a strong acquisition pipeline of new investment opportunities – Nearly $130 million in pending equity commitments to new assets in 3Q 2014 – Established relationships with local, regional and national developers across all property sectors – Repeat business with proven partners Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 52 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF Investment Risk Cycle, March 31, 2014 Targeted for sale 12% Predevelopment 4% Land 3% Value-Add Under construction 16% Leveraged Core Existing and not yet stabilized 13% Stabilized and sale ready 41% Stabilized with more to accomplish 11% Mid-Risk For illustrative purposes only. Based on current NAV FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 53 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Fund overview Investments* as of June 30, 2014 Fund profile as of June 30, 2014 49 office buildings Total investments (gross of debt) $3.8bn 35 industrial buildings Net asset value $2.4bn 29 apartment complexes (8,259 units) Fund leverage 37.1% 6 retail centers Cash position 10.8% 2 hotels Contribution queue *Includes some properties under development Years since inception (Jan. 1, 1998) $181.5mm 16 Diversification1 8.4% 27.0% Hotel 3.4% San Francisco 5.0%2 Retail 7.2% Land 3.1% New York 19.4%2 Chicago 6.1%2 Washington, DC 22.2%2 Industrial 11.7% Los Angeles 10.7%2 Tampa 5.5%2 Office 36.8% 12.9% Net of debt; values may not total 100% due to rounding Diversification as of 3/31/14 Past performance is not a guarantee of comparable future returns. Returns assume the reinvestment of income. Diversification does not guarantee investment returns and does not eliminate the risk of loss. 1 2MSA FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 54 Residential 37.9% STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Performance overview Annualized returns as of June 30, 2014 (%) Three months YTD One year Three years Five years Ten years Fifteen years Since inception 1/1/98 Income 1.4 2.2 3.6 4.4 4.6 4.6 5.2 5.4 Appreciation 2.6 5.2 14.5 12.7 7.7 2.3 2.0 2.5 SSPF Total1 4.0 7.6 18.6 17.5 12.7 7.0 7.3 8.0 NFI-ODCE Total – Value Weighted2 Excess over ODCE 2.9 1.1 5.5 2.1 12.8 5.8 12.4 5.1 10.0 2.7 7.1 (0.1) 7.9 (0.6) 8.5 (0.5) Note: Performance shown gross of fees. Had fees been applied, returns would have been lower. (Please see important disclosure information on the last page.) The manager seeks to achieve the stated objectives. There can be no guarantee those objectives will be met. If included, the NCREIF Property Index does not include “fund-like” fees or operating expenses, is not available for actual investment and is for illustrative purposes only. Past performance is not a guarantee of comparable future results. See Appendix for additional information. Returns less than one year are non-annualized. 1 Portfolio returns are calculated based upon the percentage change in the Portfolio’s net asset unit value. The Fund’s net asset value is computed using accrual accounting. Annual returns are calculated by geometrically linking individual quarterly returns. SSPF total return net of fees were: 2Q14: 3.6%; YTD: 6.7% One year: 16.8%; Three years: 15.7%; Five years: 10.8%; Ten years: 5.2%; Since inception: 6.2%. 2 As of 6/30/14 (preliminary) FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 55 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Leverage overview Fund debt exposure1 Strategy Maximum Flexibility: Property level mortgages to match individual asset strategies Swapped Floating 27% Minimum Guarantees: Fund-level guarantees represent only 1.9% of portfolio NAV 23% Capped Maturities (L) 200 77% fixed, capped or swapped1 100 146 117 20 0.2% 2% 2% 2 0 2018 DSCR of 2.2x1 9% 2017 ■ 198 2016 3.8 year weighted average maturity 11% 2014 ■ 16% 356 Floating 287 3.9% 300 25 26 1% 3% 14 41 5% 63 0 As of 3/31/14 Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. 1 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 56 10 Percent Average coupon of 3.4% (2.7% on floating & 4.4% on fixed) 30 23% 2015 ■ $ millions ■ 28% 400 Composition % of SSPF total debt (R) Beyond Traditional Approach: No fund-level debt other than a line of credit to manage cash 42% 2023 ■ Fixed 8% 2022 Moderate Leverage: Portfolio LTV of 37.1% is below the target of 40-50% and fund-guideline max of 60% 2021 ■ 2020 ■ 2019 ■ STRICTLY PRIVATE | CONFIDENTIAL Office Sector weight1 (% of NAV) Strong weighting to CBD/urban markets (64% of GAV as of 3/31/14) Current SSPF: ODCE: Office sector appears to be in early stages of recovery Total development costs 20-30% below core trades Projected returns on cost 200-300 bps over current cap rates Invest in leasing and repositioning strategies in differentiated assets located in the largest markets 38% 36% Office 38% Projected YE 14 SSPF: 44% Divest: Suburban office Invest: CBD office development The Plaza at Legacy, Plano, TX Washington Post, Washington, DC 1 Direct real estate only. ODCE as of March 31, 2014. These example are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 57 STRICTLY PRIVATE | CONFIDENTIAL Multifamily Sector weight1 (% of NAV) Current SSPF: ODCE: 39% 26% Projected YE 14 SSPF: 36% Multifamily 39% Continued focus on developing multifamily in infill, urban areas although pace of delivery slowed to half that of 2013 Target renters that are more cost-conscious than ultra-luxury renters Development spreads over core cap rates continue to be 150-200 bps Divest: Garden style, suburban assets that are difficult to differentiate Invest: Urban, highly amenitized buildings in affluent, walkable, renter-by-choice markets West Park Village, Tampa, FL Hanover Rice Village, Houston, TX 1 Direct real estate only. ODCE as of March 31, 2014. These example are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 58 STRICTLY PRIVATE | CONFIDENTIAL Industrial Sector Weight1 (% of NAV) Current SSPF: ODCE: Leasing momentum across the portfolio – Industrial 12% 12% 15% Projected YE 14 SSPF: 12% 93% leased as of March 31, 2014 Invest in value-add and developments in – Major logistics hubs – Proximity to ports and population centers Divest: Small markets Invest: Large markets IDI Value Add Venture, Savannah, GA Moreno Knox, Moreno Valley, CA 1 Direct real estate only. ODCE as of March 31, 2014. These example are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 59 STRICTLY PRIVATE | CONFIDENTIAL Retail Sector weight1 (% of NAV) Current SSPF: ODCE: Retail 7% 7% 18% Projected YE 14 SSPF: 7% Chestnut Street, Philadelphia, PA Value-add retail opportunities tend to arise infrequently in one-off circumstances Target up-and-coming neighborhoods with large multifamily development pipelines Calhoun Square, Minneapolis, MN Direct real estate only. ODCE as of March 31, 2014. These example are representative investments. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. 1 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 60 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Leasing Activity 222 2nd Street, San Francisco, CA Property type: Office Size (RSF): 452,000 Lessee: LinkedIn Leased: 99.5% Lease term: 10 years Projected development cost: $277mm ($613/RSF) Projected trended ROC: 8.2% SSPF equity: $221mm April 2014 write-up: $38.2mm Projected exit value: $400mm Property Profile: Located on the corner of 2nd and Howard, 2 blocks from the BART station; 1 block from the under construction Transbay Transit Center 26-story, target LEED Gold certified Class-A office Scheduled for delivery in July 2015 with lease commencement January 2016 This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 61 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Acquisition Curling Club Apartments, Hoboken, NJ Property Profile: ■ Property type: Urban Multifamily ■ Size: 240,385 SF / 240 Units ■ SSPF equity interest: 100% ■ Location: Hoboken, NJ Strategy: ■ Modernize a 95%-leased, 15-year old building that is structurally efficient (e.g. 9’ ceilings, 100% balconies) with new unit interiors and activated common areas to drive NOI growth. ■ Dynamic, high-barrier submarket with direct access to Manhattan via multiple modes of public transportation Economics: Gross purchase price: $125.5mm ($523,000 / Unit) Projected 5-year levered IRR to SSPF: 12.0% SSPF equity commitment: $57.0mm Projected profit to SSPF: $41.7mm Projected stabilized basis: $563,000 / Unit SSPF equity multiple: 1.7x Projected redevelopment ROC: 5.7% Projected exit cap: 5.25% Year 1 NOI yield (unlevered/levered): 4.3%/5.8% Projected exit price: $654,000 / Unit This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 62 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Acquisition Plaza Midwood, Charlotte, NC Property Profile: Property type: Urban multifamily development Size: 201,893 SF / 250 Units SSPF equity interest: 90% Location: Plaza Midwood Strategy: Deliver Class A apartment product with affordable rents in a desirable “hipster” neighborhood of Charlotte with a total cost basis 20% below comparable core pricing. Economics: $39.6mm ($196/SF; Projected 5-year levered IRR to SSPF: 13.1% $158,600/Unit) SSPF equity multiple: 1.8x SSPF equity commitment: $13.5mm Projected exit cap: 5.50% Stabilized ROC: 6.5% Projected exit price: $49.2mm ($244/SF; $197,000/Unit) Gross total project costs: This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 63 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Acquisition Levy Park Lofts, Houston, TX Property Profile: ■ Property type: Multi-Family ■ Size: 270 Units ■ SSPF equity interest: 80% ■ Location: Upper Kirby District Strategy: ■ Deliver Class A apartment product within a 10-acre mixed-use development adjacent to new $6mm park and immediate access to Upper Kirby District retail cluster Economics: ■ Total project cost: $51mm $191/SF $187,800/Unit ■ SSPF equity commitment: $14mm ■ LTV: $65% ■ Return on cost (un-trended/trended): 6.3% / 7.0% ■ Projected 5-year levered IRR to SSPF: 16.3% ■ SSPF equity multiple: 1.9x ■ Projected exit cap: 5.5% ■ Projected exit price: $64mm $242/SF $238,200/Unit This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 64 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Acquisition Calhoun Square, Minneapolis, MN Property Profile: ■ Property type: Urban Retail Center ■ Size: 170,521 SF (Retail) 729 spaces (Garage) ■ SSPF equity interest: 90% ■ Location: Uptown Minneapolis Strategy: ■ Core risk / value add return opportunity to “re-urbanize” iconic retail center that has stable income, the dominant parking garage in the submarket and upside potential from proposed tenancy upgrade Economics: ■ Gross purchase price: $69.5mm $408/SF ■ LTV: $65% ■ Projected 7-year levered IRR to SSPF: 14.5% ■ Year 1 NOI yield (unlevered/levered): 6.5%/11.3% ■ Projected profit to SSPF: $30.8mm ■ SSPF equity multiple: 2.3x This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 65 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF: Second Quarter 2014 Disposition West Park Village, Tampa, FL Property Profile: ■ Property type: Residential ■ Size: 617 Units ■ Percent leased at disposition: 96.1% ■ SSPF equity interest: 100% Strategy: ■ Developed a Class A garden-style apartment community with 40,000 SF of retail space ■ Sold to capitalize on Tampa’s seasonally strong first quarter leasing market, leverage the benefit of the National MultiHousing Conference in Florida and strategically exit suburban apartments after a successful 13-year hold Economics: ■ Acquisition year: 2001 ■ Trailing 12 cap rate on sale price: 4.8% ■ Total cost: $121,075/Unit ■ Equity multiple: 2.0x ■ Sales price: $122.5 million ■ Realized net IRR to SSPF: 14.1% $198,547/Unit This example is a representative investment. However, you should not assume that this type of investment will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 66 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF– Valuation Metrics – 1Q2014 Discount Rate Office – CBD Office - Suburban Office Industrial Retail Multifamily Lodging SSPF Terminal Going-In Yield Capitalization Rate SSPF - Summary Statistics Stabilized 5 Yr. NOI Yield 10 Yr. NOI Yield Yield Yr. 1 Cash-onCash Return 5 Yr. Rent Growth 10 Yr. Rent Growth 10 Yr. Expense Growth 7.04% 6.87% 6.97% 7.26% 7.10% 6.74% 1.90% 2.56% 2.78% 3.00% 7.40% 6.83% 6.02% 7.42% 7.16% 7.48% 5.02% 3.31% 3.16% 3.00% 7.39% 6.83% 6.06% 7.43% 7.16% 7.45% 4.89% 3.28% 3.14% 3.00% 7.28% 6.49% 4.49% 5.60% 5.68% 6.29% -3.60% 3.86% 3.43% 3.00% 8.36% 7.50% 6.37% 7.11% 7.06% 7.50% 3.95% 3.00% 3.00% 3.00% 7.18% 5.60% 4.45% 5.01% 5.26% 5.84% 3.97% 3.34% 3.32% 3.02% 9.55% 7.50% 7.02% 7.16% 7.60% 8.26% 6.82% 3.46% 3.41% 3.28% 7.39% 6.31% 5.22% 6.15% 6.18% 6.65% 3.41% 3.38% 3.26% 3.02% Appraisal Statistic Summary – Peak Value Discount Rate of 7.2% (estimated December 2007) – Values bottomed at Discount Rate of 9.1% (estimated December 2009) The manager seeks to achieve the stated objectives. There is no guarantee the objectives will be met. Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. (“JPMCB Special Situation Property Fund” or “SSPF”) This example of a specific investment is included solely to illustrate the investment process and strategies which have been utilized by the Fund. Please note that this investment is not necessarily representative of future investments that the Fund will make. There can be no guarantee of future success. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 67 STRICTLY PRIVATE | CONFIDENTIAL Looking ahead Normalized returns expected in 2014 and 2015 Execute lease-up strategies across the portfolio Deliver new construction projects on time and under budget Continue refinance initiative Plant seeds for 2016 and beyond Strong liquidity Wide spread premium over core Attractive borrowing opportunities Capitalize on continued improving fundamentals Active pipeline of new investments Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 68 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 69 STRICTLY PRIVATE | CONFIDENTIAL Appendix – Supplemental exhibits FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 70 STRICTLY PRIVATE | CONFIDENTIAL Fee schedule Strategic Property Fund (“SPF”) fee is: 1.00% of the participant's pro-rata share of the net asset value of SPF, except that the fee will only be 0.15% with respect to the market value of cash and cash equivalents in SPF in excess of a 7.5% reserve position for cash and cash equivalents No acquisition or disposition fees or fees charged on any debt existing on any asset of SPF Fees shall be computed and billed on a calendar quarter basis, in arrears Special Situation Property Fund (“SSPF”) fee is: 1.25% of the NAV, except that the fee will only be 0.15% with respect to the market value of cash in SSPF in excess of a 10% position plus 0.625% of the participant’s pro-rata share of debt of SSPF. Maximum annual fee of 1.60% No acquisition, disposition or incentive fees Fees shall be computed and billed on a calendar quarter basis, in arrears FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 71 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SPF client activity As of March 31, 2014 Client inflows Client outflows Total client inflows since inception of $16,186mm Total client outflows since inception of $10,196mm 2,800 2,400 2,000 $2,018 $1,886 $1,745 $1,768 1,600 $1,102 1,200 $853 $669 800 400 $374 $205 $310 $339 $757 $600 $450 $583 $822 $155 $150 $234 $361 $449 $509 $441 $257 $26 0 Participation policy Total net client activity since inception of $5,990mm Contributions to the Fund may be accepted on a monthly basis Withdrawals may occur once per quarter subject to available cash, as determined by the Trustee, with 45 days prior written notice To the extent that withdrawal requests exceed available cash, distributions are made on a pro rata basis. Available cash is defined as excess cash after provision for outstanding future capital commitments and other operating reserves 2,000 $1,502 $1,304 1,500 $1,036 $792 $946 1,000 $653 $596 $308 $55 $76 0 -1,000 $586 $463 400 Net client activity -500 $1,094 $999 $982 $1,019 800 0 500 $219 $1,437 1,200 $ mm $ mm 1,600 $2,501 $(124) $(136) $(483) $(262) $(363) $(837) FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 72 $238 STRICTLY PRIVATE | CONFIDENTIAL JPMCB SSPF client activity As of March 31, 2014 Client inflows Client outflows Total client inflows since inception of $2,194 mm Total client outflows since inception of $2,393 mm 800 800 $642 $ mm 600 400 $247 $213 200 $183 $139 $67 $42 $150 $148 $76 $69 $54 $9 $2 400 $26 $1 $314 $264$253 200 $116 $126 0 $82 $105 $238 $186 $177$165 $112 $104 $38 $28 $47 $94 $71 0 Participation policy Net client activity Total net client activity since inception of ($199) mm Contributions to the fund may be accepted on a monthly basis Withdrawals may occur once per quarter subject to available cash, as determined by the Trustee, with 45 days prior written notice To the extent that withdrawal requests exceed available cash, distributions are made on a pro rata basis. Available cash is defined as excess cash after provision for outstanding future capital commitments and other operating reserves 800 $538 600 400 $ mm $ mm 600 200 $136 $97 $27 $38 $41 $82 $55 0 -200 -400 $(15) $(63) $(93) $(123) $(166) $(87) $(160) $(262)$(244) FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 73 STRICTLY PRIVATE | CONFIDENTIAL Strategic Property Fund – Risk management strategy Systematic Financial/structural risk Control risk – low LTV – all JV investments have buy-sell features – no cross collateralization – all JV investments have favorable dissolution features – no recourse except short term completion guarantees on construction loans – professional financial reporting group – diligent audit and financial control management Liquidity risk – $22.9bn equity from 324 clients in open-ended vehicle – quarterly withdrawal policy Cash flow risk – stable diversified income stream – no significant tenant concentration Non-systematic Broadly diversified $30.8bn GAV in four major asset sectors June 30, 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 74 Manager risk – vital, growing real estate group – access to wide cast of investment professionals – integrated proprietary dedicated real estate research group with long-term commitment to asset class – most clients have other, larger holdings managed by J.P. Morgan Investment Management manager not totally dependent on real estate STRICTLY PRIVATE | CONFIDENTIAL Special Situation Property Fund – Risk management strategy Systematic Financial/structural risk Control risk – low LTV – all JV investments have buy-sell features – no cross collateralization – all JV investments have favorable dissolution features – no recourse except short term completion guarantees on construction loans – professional financial reporting group – diligent audit and financial control management Liquidity risk – $2.4bn equity from 90 clients in open-ended vehicle – quarterly withdrawal policy – no current queue Cash flow risk – stable diversified income stream – no significant tenant concentration Non-systematic Broadly diversified $3.8bn GAV June 30, 2014 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 75 Manager risk – vital, growing real estate group – access to wide cast of investment professionals – integrated proprietary dedicated real estate research group with long-term commitment to asset class – most clients have other, larger holdings managed by J.P. Morgan Investment Management, Inc. manager not totally dependent on real estate STRICTLY PRIVATE | CONFIDENTIAL Product design: Risk management elements Fund guidelines Strategic Property Fund (%) Special Situation Property Fund (%) Leverage Limit − Portfolio − Asset specific Single-asset concentration3 Asset type sector concentration +/– versus NCREIF1 Geographic sector concentration +/– versus NCREIF1 Joint venture single-partner concentration3 Development Property non-income producing maximum2 Annual portfolio turnover4 Cash minimum-maximum 35 65 5 15 15 10 15 5-20 1-7.5 Based on Fund's gross asset value (GAV) - direct real estate only, excluding Land Based on Fund's gross asset value (GAV) - direct real estate only, including Land. SPF: 5% for new development and up to a total 15% including re-development opportunities. 3 Based on the Fund's net asset value (NAV) 4 Represents, as a percentage of the Fund’s quarterly average gross asset value, the total gross acquisitions, gross sales proceeds and capital expenditures over a rolling 12 month period 1 2 FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 76 60 75 10 25 30 20 40 15-40 2-10 STRICTLY PRIVATE | CONFIDENTIAL Valuation process Independent third-party valuation review and approval – Every asset – Every quarter ■ Quarterly: Valuation of every asset – – – – Office, Industrial and Retail Assets Each quarter that a property is not valued by a third-party appraiser, the Altus Group completes an interim quarterly valuation The Altus valuations are reviewed by a member of the valuations group for reasonableness and by the responsible Asset Manager for accuracy of property information and reasonableness of assumptions Multifamily Assets Each quarter, the Altus Group monitors the multifamily assets for changes in rent, occupancy and appropriateness of previous capital market assumptions The Altus Group will recommend which assets should be reviewed further for a potential interim quarterly valuation. If JPM and the Altus Group agree that a change in value from the current carrying value is supported, JPM will produce an interim quarterly valuation which will be reviewed and approved by the Altus Group Internal Valuations In certain circumstances, for example development assets and land, JPM completes an internal valuation. The Altus Group will also review all JPM internal valuations in a manner similar to that of the external review process Director of Valuations reviews and signs off on each value Cushman & Wakefield CB Richard Ellis Integra Realty Resources National Valuation Consultants National Property Valuation Advisors Welsh Chester Galiney Matone ■ Quarterly: Independent third-party valuation review and approval for every asset – Third-party appraisal firms: All valuations reviewed and approved by the Altus Group every quarter New Market Real Estate Group ■ Quarterly: Audit review by PricewaterhouseCoopers KTR Real Estate Advisors ■ Annual: Third-party valuation – External valuation once per year for all assets occurring throughout the year Real Estate Research Corporation – Asset managers review external appraisals accuracy of factual information accuracy of leasing conditions and market data summarizes appraisal assumptions and valuation conclusion – Director of Valuations reviews reasonableness of assumptions and final value, as well as consistency of pricing parameters within geographic region and property type FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 77 STRICTLY PRIVATE | CONFIDENTIAL 100% third party valuation PricewaterhouseCoopers ex-post quarterly review Final property value Altus Group Continuous review of consistency of valuations across portfolios and versus peers and recent transaction activity Final approval Altus Group Review of models and conclusions JPMorgan GRA Director of Valuations Accuracy of inputs Valuation methods employed Asset’s highest and best use Altus Group Operating assumptions Capital markets environment Sales and leasing comparables Interim valuations: Altus or GRA Asset Management External appraisals: Third party appraisal firm Quarterly Annually FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 78 STRICTLY PRIVATE | CONFIDENTIAL A fair and transparent valuation process Annual external appraisals Appraisals in interim periods – Conducted by the Altus Group and GRA Asset Management – Cash flow models are updated for property specific and/or market changes Director of valuations (“DOV”) – In House MAI Designated member of the Appraisal Institute oversees the process – Hires/monitors third party appraisal firms – Ensures consistency in appraisal assumptions by property type and geography The Altus Group reviews and approves all third-party appraisals and internal valuations every quarter Client transactions are executed at a current, fair market value FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 79 STRICTLY PRIVATE | CONFIDENTIAL Role of Altus Group Effective July 1, 2013 Responsible for the initial set up of the work flow process and implementation of the technology platform, appraisal process administration and data coordination, and reviewing and approving third-party appraisals and internal valuations on a quarterly basis Create quarterly interim valuations for office, industrial, retail assets in quarters when external appraisals are not completed Deliver a concurrence letter at the end of every quarter opining on GRA’s quarterly and daily process Assist GRA’s DOV with various functions such as: benchmarking, standardizing reporting protocol, monitoring and coordinating appraisal procedures set forth in the Valuation Policy and Procedures (“Policies”), and advising of any changes to the Policies based on industry-best practices and experience with other ODCE1 funds 1 ODCE refers to the National Council of Real Estate Investment Fiduciaries’ Fund Index Open-End Diversified Core Equity benchmark. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 80 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 81 STRICTLY PRIVATE | CONFIDENTIAL Appendix – Biographies of key professionals FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 82 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Joseph K. Azelby, managing director, is head of J.P. Morgan Asset Management's Global Real Assets Group. An employee since 1986, he is responsible for the group's global business vision, strategy and execution. Azelby chairs the Real Assets Group's Global Management Committee. He is also a member of the Asset Management Investment Committee. Prior to joining the Global Real Assets Group, Azelby led the Mortgage Investment Strategy Group of the firm's Fixed Income Group. There, as a portfolio manager, he specialized in both public and private mortgages and other asset-backed securities. Azelby joined the firm after playing professional football for the Buffalo Bills. He has a B.A. in economics from Harvard University and an M.B.A. in finance from New York University. Lawrence Fuchs, Managing Director, is the Chief Operating Officer of J.P. Morgan Asset Management – Global Real Assets. An employee since 2000, he is responsible for strategic business development, execution of the global business plans and initiatives and operational management. Lawrence is a member of the J.P. Morgan Asset Management–RE Global and Americas Management Committees and also serves on the boards of directors of various GRA real estate funds. Prior to joining the group, he was the director of operations for the Emerging Markets U.S. division of J.P. Morgan Securities, Inc. From 1998 to 2000, he was a member of the Emerging Markets Trading Association, providing insight for emerging markets operational risk and business practices. Lawrence registered as a General Securities Principal of J.P. Morgan Institutional Investments, Inc. He holds a B.S. in finance from Hofstra University. Steven M. Greenspan, Managing Director, is the Global Director of Product Development for J.P. Morgan Asset Management - Global Real Assets. Steven plays an integral role in the design, marketing, launch, implementation and oversight of GRA's global products and strategies. A J.P. Morgan employee since 1996, Steven has broad experience in structuring open- and closed-end funds and separate accounts designed to meet the complex commercial, legal, regulatory, and tax needs of JPMAM's global client base. He is a member of JPMAM-GRA's Global and Americas Management Committees and serves on the investment committees and boards of directors of various GRA real estate, infrastructure and maritime funds. Steven has been recognized as a New York Super Lawyer. He previously served as a vice president/assistant general counsel in JPMAM's Legal Department, and as a practicing attorney in the real estate and corporate departments at Stroock & Stroock & Lavan LLP. Steven holds a B.P.S. from the University at Buffalo and a J.D. from Brooklyn Law School. Kevin Faxon, Managing Director, is head of Real Estate Americas at J.P. Morgan Asset Management – Global Real Assets. The 250 person group manages more than $30 billion of assets across a range of Core, Value-added and Opportunistic strategies on behalf of institutional, sovereign and high net worth investors. Kevin is a member of JPMAM Americas Executive Committee and sits on the J.P. Morgan Commercial Real Estate Council which coordinates the Real Estate activities of the broader Firm. An employee since 1988, Kevin was previously portfolio manager of the Special Situation Property and Income & Growth Funds. Prior to assuming these roles, Kevin was head of acquisitions for the western United States. Before joining the firm, he was employed by Landauer Associates, a national real estate consulting firm. Kevin holds a B.S. in real estate and finance from the University of Connecticut and an M.B.A. in finance from New York University. He is a member of the Urban Land Institute, NAREIM and PREA. Doug Doughty, Managing Director, is Head of Business Development and Client Strategy for J.P. Morgan Asset Management – Global Real Assets. Doug is a member of the Real Assets Group’s Global Management Committee and leads the team responsible for business development, capital raising and the forging of strong client relationships across a global platform of real estate, infrastructure and maritime strategies. Doug joined J.P. Morgan from The CIM Group, where he was managing director, member of the investment committee, and worked closely with global institutional investors to form and structure the equity financing of real estate and infrastructure investment products. Prior to CIM, Doug was the head of capital development for Rialto Capital Partners, a distressed loan workout organization and subsidiary of Lennar Corporation. Previously, Doug worked for M3 Capital Partners LLC (formerly Macquarie Capital Partners), where he was responsible for new business development and deal execution as well as raising private equity capital for public and private real estate operating companies and providing strategic financial advisory services. Earlier in his career, he was a Vice President in Real Estate Investment Banking at Banc of America Securities and a Supervisory Senior in the Real Estate Services Group of Arthur Andersen. Doug received a Bachelor’s Degree in Economics and Accounting from Pennsylvania State University and an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 83 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Mike Kelly, Managing Director, is Director of U.S. Real Estate Commingled Funds and head of Debt Capital Markets for J.P. Morgan Asset Management ̶ Global Real Assets. An employee since 2009, Mike is responsible for oversight of the portfolio managers for open-end funds and management of a team that procures debt for GRA’s properties and originates and manages mezzanine loans. Before joining the firm, he was a director and head of Real Estate Conduit and Workouts for Citigroup Global Markets. Previously, Michael was a vice president and originator in the Large Loan CMBS Group and assisted with management of Goldman Sachs Commercial Mortgage Capital. Prior to that, he was a managing director and co-head of Commercial Mortgage Origination at New York Life Investment Management. He started in the industry in 1989. Mike earned a B.S. in business management from Springfield College and an M.S. in real estate from New York University and holds Series 7 and 63 licenses. Kimberly A. Adams, Managing Director, is co-portfolio manager for J.P. Morgan’s flagship U.S. core real estate strategy, Strategic Property Fund. Kim joined the Strategic Property Fund portfolio management team in July 2012. Since joining J.P. Morgan Asset Management – Global Real Assets in 2003, Kim has served in various investment roles including Sector Head for office/industrial asset management in the Central region. In this role, Kim was responsible for leading the asset management efforts for the region’s office and industrial holdings, a $5.0 billion portfolio in gross value totaling approximately 66 million square feet. Previously, Kim served as a senior asset manager in the retail group as well as in the East/South region and as an acquisitions officer in the Midwest Region. Earlier in her career, Kim worked for Prudential Real Estate Investors and LaSalle Investment Management. Kim received a B.A. in economics from Northwestern University and an M.B.A. from the Kellogg Graduate School of Management. She serves as a board member of NAIOP Chicago, a council member for the Urban Land Institute, and a member of PREA. Ann E. Cole, Managing Director, is co-portfolio manager for J.P. Morgan’s flagship U.S. core real estate strategy, Strategic Property Fund. Ann joined the Strategic Property Fund portfolio management team in July 2012. Since joining J.P. Morgan Asset Management – Global Real Assets in 1989, Ann has held various positions in our Real Estate Asset Management team including Sector Head of our office/industrial East (more than $4 billion in assets) and West (more than $3 billion in assets) Regions. Ann has extensive real estate experience with the acquisition, asset management, development and disposition of institutional quality real estate and was responsible for overseeing the development of Strategic Property Fund’s 2000 Avenue of the Stars in Los Angeles. Ann also served as a Client Portfolio Manager on the Marketing and Client Strategy team, where she advised clients on real estate investment strategies. Ann has a B.B.A. in accounting from Pace University and passed the March 1987 CPA examination. Ann holds the NASD Series 7 and 63 licenses, is an active participant in NAREIM and a member of PREA. Douglas A. Schwartz, Managing Director, is portfolio manager of J.P. Morgan’s Special Situation Property Fund (SSPF), a $2.1 billion value added portfolio. Previously, Doug was head of real estate acquisitions for the West Coast for J.P. Morgan Asset Management – Global Real Assets with responsibility for sourcing, underwriting and closing transactions across property types for all of J.P. Morgan’s U.S. real estate funds. His 20 years in the industry have included roles in acquisitions, asset management, development management and research. Prior to joining the firm in 2004, he was an acquisitions officer for Lowe Enterprises as well as a project manager for Bristol Group. He first started in the industry in 1993 when he joined Sedway & Associates. Doug earned his B.A. in mathematics from the University of Pennsylvania and an M.B.A. from the University of California, Los Angeles. Doug is a volunteer mentor for American Corporate Partners, and a ULI IOPC vice chair. Mark Bonapace, Managing Director, is the head of Asset Management for the JPMorgan Real Estate Group, responsible for the management, leasing and ongoing development of the real estate assets. An employee since 1990, Mark has held several positions within the group. Prior to his role as head of Asset Management, Mark was the sector head for Office/Industrial East/South within the Real Estate Group. Mark has also been the Office/Industrial sector head for the Central region and was a Senior Asset Manager for our Retail portfolio. Mark previously worked at Deloitte & Touche for four years. He holds a B.S. in accounting from the University of Delaware and an M.B.A. in finance from New York University's Stern School of Business. Mark is also a Certified Public Accountant and an active member of the Urban Land Institute. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 84 STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets Benjamin G. Gifford, Managing Director, is the Real Estate Chief Investment Officer of J.P. Morgan Asset Management – Global Real Assets with 35 years of industry experience. An employee since 1998, Ben is responsible for the direct real estate investment activity of the commingled funds and all separate accounts. Previously, he was president of O’Connor Realty Advisors, where he was responsible for the separate account direct investment real estate advisory business. He was also employed at the Morgan Guaranty Trust Company, where he was responsible for real estate equity investments on behalf of its commingled trust fund and separate accounts. Prior to that, he was employed by the Teachers Insurance and Annuity Association (TIAA) as a Mortgage Officer. Ben has a B.A. from the University of Pennsylvania. His professional affiliations include the Urban Land Institute, the International Council of Shopping Centers and the Pension Real Estate Association. Dave Esrig, Managing Director, is J.P. Morgan Asset Management – Global Real Assets director of U.S. real estate and infrastructure research. An employee since 1997, Dave and his team forecast local economic and property performance in support of acquisitions, dispositions and portfolio strategy development. Prior to joining the firm, Dave was chief economist at an industry trade group. He also worked for a number of years at Economy.com, an economic consulting firm, where his duties included modeling local real estate supply and demand fundamentals. Dave holds a B.A. from the University of Virginia, an M.A. in economics from the University of Pennsylvania and is a CFA charterholder. James F. Kennedy, Managing Director, is the head of the firm’s Development & Engineering Group within J.P. Morgan Asset Management - Global Real Assets. An employee since 2004, he is responsible for engineering and environmental due diligence, development oversight and general engineering support for asset management. Jim is involved with the various real estate and infrastructure funds internationally, and also spearheads the group's sustainability initiatives. Jim has been in the industry since 1990, serving in various roles across the development, construction and business consulting fields, with such firms as PricewaterhouseCoopers and FRM (Aramark). His engineering and development experience ranges across asset types, including office, industrial, retail, multifamily, hospitality and large-scale civil infrastructure. Jim received a B.B.A. in finance from the University of Massachusetts at Amherst and an M.S. in civil and environmental engineering from the Massachusetts Institute of Technology. He is a member of the American Society of Civil Engineers, National Association of Real Estate Investment Managers, Urban Land Institute, International Council of Shopping Centers and US Green Building Council. Jim is a USGBC-LEED Accredited Professional. Ellie Kerr, Managing Director, is J.P. Morgan Asset Management – Global Real Assets director of valuations. An employee since 2001, Ellie is responsible for overseeing the appraisal process. She served as chairperson of the NCREIF Valuation Committee from 2004 to 2005 and continues to be actively involved. Ellie has also served two terms as a council member for Real Estate Information Standards (REIS). Prior to joining the firm, she was employed by SSR Realty Advisors, Inc. as director of valuations. Ellie earned a B.A. in economics from Williams College and holds an M.A.I. from the Appraisal Institute and the MRICS designation from the Royal Institution of Chartered Surveyors Alfred W. Dort, Managing Director, is the head of the Real Estate Financial Group of J.P. Morgan Asset Management – Global Real Assets. An employee since 1997, his responsibilities include the financial management, reporting and analysis for Real Estate Funds and Separate Accounts. Prior to joining J.P. Morgan Asset Management, Alfred spent several years with PricewaterhouseCoopers LLP, providing consulting and accounting services to real estate industry clients. He graduated with a B.S. in accountancy from Villanova University and is a CPA. He is currently a member of the American Institute of Certified Public Accountants. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 85 STRICTLY PRIVATE | CONFIDENTIAL Real Estate Investment Management Services JPMCB Strategic Property Fund Annual Performance Report Annual returns, U.S. $ Composite Year Income (%) Appreciation (%) Total Gross Return (%) 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 5.25 5.26 5.47 6.61 6.13 4.97 5.42 5.72 6.62 7.07 10.16 6.54 9.98 7.11 (30.92) (12.49) 10.73 10.34 17.45 4.92 15.90 12.12 15.96 14.15 (26.55) (8.09) 16.68 16.60 25.12 12.31 As of December 31 Total Net Return (%) NCREIF Property Index Return (%) 14.78 11.02 14.82 13.03 (27.30) (9.01) 15.54 15.45 23.90 11.23 10.99 10.54 14.26 13.11 (16.86) (6.46) 15.84 16.59 20.06 14.48 NCREIF ODCE Index Return (%) 13.94 10.94 15.99 16.36 -29.76 -10.01 15.97 16.32 21.39 13.06 Fees (as of 12/31/13) Composite 3yr St Dev (%) NCREIF Property Index 3yr St Dev (%) NCREIF ODCE Index 3yr St Dev (%) Internal Dispersion (%) Number of Accounts 1.44 2.05 9.18 9.35 9.46 5.24 3.33 3.36 3.49 1.90 0.51 1.08 4.63 4.89 5.05 4.07 0.81 0.96 1.39 1.03 0.74 1.45 7.47 7.49 7.39 4.98 0.96 0.95 1.36 0.97 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a <5 <5 <5 <5 <5 <5 <5 <5 <5 <5 J.P. Morgan Investment Management Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. J.P. Morgan Investment Management, Inc has been independently verified for the period from 2001-2010. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. J.P. Morgan Investment Management Inc. (JPMIM or the Firm) consists of the assets of institutional clients invested in US managed products including 1) the fixed income and cash assets formerly part of Chase Asset Management and MDSass&Chase Partners, 2) the New York institutional investment division of JPMorgan Chase Bank, N.A., formerly Morgan Guaranty Trust Company of New York, and 3) the institutional investment assets of JPMorgan Investment Advisors, Inc. (JPMIA), formerly known as Banc One Investment Advisors Corporation (BOIA), the advisor to institutional assets directly managed by JPMIA or sub-advised by an affiliate institution, and 4) the institutional assets of Bear Stearns Asset Management Inc. The Firm also includes Separately Managed Accounts over which JPMIM has full and sole discretion. JPMIM is marketed under JPMorgan Asset Management. The composite contains a single account which is the commingled fund that is directly invested according to JPMIM’s Strategic Property Fund strategy. The strategy is an actively managed diversified, core, open-end commingled pension trust fund. It seeks to generate an income-driven rate of return and outperform the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE) over a full market cycle (three-to-five-year horizon) through asset, geographic and sector selection and active asset management. The Fund invests in high-quality stabilized assets with dominant competitive characteristics in markets with attractive demographics throughout the United States. The composite was created in December 2000. Equity futures are occasionally used in accordance with client-authorized account objectives and guidelines in order to equitize large cash contributions and to minimize market impact while purchasing individual equity securities. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION Composite Assets ($millions) % of Real Estate Assets (%) Total Firm Assets ($billions) 27,665 24,450 21,322 17,868 14,821 18,741 20,357 16,322 13,204 10,850 38.28 37.79 35.60 36.24 33.54 37.12 36.00 38.00 48.00 50.10 771 692 653 621 617 575 442 374 348 281 1.00% per annum on the market value of the assets, except for cash holdings in excess of 7.5% of the fund’s total assets, which are charged a standard cash management fee of 15 basis points. Minimum investment: $10 million Both gross and net returns reflect the reinvestment of income, deduction of transaction costs, and are net of withholding taxes where applicable and include the effect of leverage, which averaged 23.79% of asset value in the year 2013. All returns are expressed in U.S. dollars. Gross returns do not reflect the deduction of investment advisory fees or any other expenses that may be incurred in the management of the account. The sum of the income and appreciation returns will not equal the total gross return due to the effect of compounding. Net returns have been calculated monthly using the actual fees charged to shareholders of the fund. As of December 31, 2013, the standard annual fee schedule is as follows: 1.00% per annum on the market value of the assets, except for cash holdings in excess of 7.5% of the fund’s total assets, which are charged a standard cash management fee of 0.15%. Actual advisory fees charged and actual account minimum size may vary by account due to various conditions described in Part II of Form ADV. The firm’s list of composite descriptions and the policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request. Effective July 1, 2013, the Fund will change its benchmark from the NCREIF Property Index (NPI) to the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE). As a capitalization-weighted index of U.S. open-end core direct real estate funds with returns based on changes in the published market value of net assets of its constituents, the NFI-ODCE provides a more meaningful peer-to-peer comparison than the NPI, a market-value weighted index of unleveraged property returns for the investment-grade U.S. real estate market. Released in 2005, the NFI-ODCE was not available for use as a benchmark at the Fund’s inception January 1, 1998. We have made the decision to switch the Fund’s benchmark to the NFI-ODCE as the index is now more widely used in the industry as a gauge of performance of the overall institutional-quality U.S. real estate marketplace. The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. The internal dispersion of annual returns is measured by the asset-weighted standard deviation of gross account returns included in the composite for the full year. For periods with 5 or fewer accounts included for the entire year, internal dispersion is not presented (n/a) as it is not considered meaningful. Past performance is no guarantee of future results. As with any investment vehicle, there is always the potential for gains as well as the possibility of losses. 86 STRICTLY PRIVATE | CONFIDENTIAL Real Estate Investment Management Services JPMCB Special Situation Property Fund Annual Performance Report Annual returns, U.S. $ Composite As of December 31 Fees (as of 12/31/13) Year Income (%) Appreciation (%) Total Gross Return (%) 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 3.05 4.43 5.75 4.98 3.29 3.96 5.11 5.21 5.70 5.83 16.22 7.71 16.89 12.90 (45.77) (15.90) 12.99 15.06 17.45 6.15 19.73 12.46 23.53 18.52 (44.07) (12.53) 18.71 20.99 24.05 12.31 Total Net Return (%) NCREIF Property Index Return (%) 18.30 10.67 21.40 16.35 (45.16) (14.05) 16.67 18.88 21.96 10.40 10.99 10.54 14.26 13.11 (16.86) (6.46) 15.84 16.59 20.06 14.48 NCREIF ODCE Index Return (%) 13.94 10.94 15.99 16.36 -29.76 -10.01 15.97 16.32 21.39 13.06 Composite 3yr St Dev (%) NCREIF Property Index 3yr St Dev (%) NCREIF ODCE Index 3yr St Dev (%) Internal Dispersion (%) Number of Accounts 4.04 5.3 17.37 16.86 16.55 6.88 4.21 3.64 3.94 2.45 0.51 1.08 4.63 4.89 5.05 4.07 0.81 0.96 1.39 1.03 0.74 1.45 7.47 7.49 7.39 4.98 0.96 0.95 1.36 0.97 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a <5 <5 <5 <5 <5 <5 <5 <5 <5 <5 J.P. Morgan Investment Management Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. J.P. Morgan Investment Management, Inc has been independently verified for the period from 2001-2010. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. J.P. Morgan Investment Management Inc. (JPMIM or the Firm) consists of the assets of institutional clients invested in US managed products including 1) the fixed income and cash assets formerly part of Chase Asset Management and MDSass&Chase Partners, 2) the New York institutional investment division of JPMorgan Chase Bank, N.A., formerly Morgan Guaranty Trust Company of New York, and 3) the institutional investment assets of JPMorgan Investment Advisors, Inc. (JPMIA), formerly known as Banc One Investment Advisors Corporation (BOIA), the advisor to institutional assets directly managed by JPMIA or sub-advised by an affiliate institution, and 4) the institutional assets of Bear Stearns Asset Management Inc. The Firm also includes Separately Managed Accounts over which JPMIM has full and sole discretion. JPMIM is marketed under JPMorgan Asset Management. The composite contains a single account which is the commingled fund that is directly invested according to JPMCB’s Special Situation Property Fund strategy. Special Situation Property Fund is an actively managed, value-added, open-ended commingled trust fund. It seeks an increased total return with a moderate-to-high risk level, as reflected in the potential volatility of both income and property values. It aims to outperform the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE) by at least 200 basis points over a full market cycle (three-to-five-year horizon) through individual asset selection and the application of value-added activities. The Fund does not attempt to match the geographic and property type diversification of the benchmark. The composite was created in December 2000. Equity futures are occasionally used in accordance with client-authorized account objectives and guidelines in order to equitize large cash contributions and to minimize market impact while purchasing individual equity securities. Both gross and net returns reflect the reinvestment of income, deduction of transaction costs, and are net of withholding taxes where applicable and include the effect of leverage, which averaged 38.78% of asset value in the year 2013. All returns are expressed in U.S. dollars. Gross returns do not reflect the deduction of investment advisory fees or any other expenses that may be incurred in the management of the account. The sum of the income and appreciation returns will not equal the total gross return due to the effect of compounding. Net returns have been calculated monthly using the actual fees charged to shareholders of the fund. The standard annual fee schedule is as follows: From Jan 1, 2013 – June 30, 2013: 125 basis points of the account’s pro-rata share of (i) the NAV and (ii) the FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 87 Composite Assets ($millions) % of Real Estate Assets (%) Total Firm Assets ($billions) 3349 3,029 3,125 3,035 3,370 4,574 5,161 3,736 2,927 2,103 4.63 4.67 5.20 6.16 7.63 9.06 9.20 8.10 10.60 9.70 771 692 653 621 617 575 442 374 348 281 1.25% per annum on the market value of the assets and the aggregate outstanding principal amount of all third party debt, except that such fee shall be reduced by 0.625% of the debt, and except for cash holdings in excess of 10.0% of the fund’s total assets, which are charged a standard cash management fee of 15 basis points. In no event will the annual fee exceed 1.60% of the NAV of the Fund Minimum investment: $10 million aggregate outstanding principal amount of all third-party debt, except that (a) such fee shall be reduced by 0.625% of the Debt and (b) the fee will be 0.15% with respect to the market value of cash/cash equivalents in excess of a 10% reserve position for cash/cash equivalents. In no event will the annual fee exceed 1.875% of the NAV of the Fund, which would be the fee in effect at such time as the Fund’s leverage is at a level of 50% of the gross asset value. From July 1, 2013 – December 31, 2013: 125 basis points of the account’s pro-rata share of (i) the NAV and (ii) the aggregate outstanding principal amount of all third-party debt, except that (a) such fee shall be reduced by 0.625% of the Debt and (b) the fee will be 0.15% with respect to the market value of cash/cash equivalents in excess of a 10% reserve position for cash/cash equivalents. In no event will the annual fee exceed 1.60% of the NAV of the Fund, which would be the fee in effect at such time as the Fund’s leverage is at a level of 36% of the gross asset value. Actual advisory fees charged and actual account minimum size may vary by account due to various conditions described in Part IIA of Form ADV. The firm’s list of composite descriptions and the policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request. Effective July 1, 2013, the Fund will change its benchmark from the NCREIF Property Index (NPI) to the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE). As a capitalization-weighted index of U.S. open-end core direct real estate funds with returns based on changes in the published market value of net assets of its constituents, the NFI-ODCE provides a more meaningful peer-topeer comparison than the NPI, a market-value weighted index of unleveraged property returns for the investment-grade U.S. real estate market. Released in 2005, the NFI-ODCE was not available for use as a benchmark at the Fund’s inception January 1, 1998. We have made the decision to switch the Fund’s benchmark to the NFI-ODCE as the index is now more widely used in the industry as a gauge of performance of the overall institutional-quality U.S. real estate marketplace. The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. The firm’s list of composite descriptions and the policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request. The internal dispersion of annual returns is measured by the asset-weighted standard deviation of gross account returns included in the composite for the full year. For periods with 5 or fewer accounts included for the entire year, internal dispersion is not presented (n/a) as it is not considered meaningful. Past performance is no guarantee of future results. As with any investment vehicle, there is always the potential for gains as well as the possibility of losses. STRICTLY PRIVATE | CONFIDENTIAL J.P. Morgan Asset Management – Global Real Assets The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and are not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the funds before investing. •Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. •Commingled Pension Trust Fund (Strategic Property) of JPMorgan Chase Bank, N.A. The commingled trust funds are collective investment funds maintained by JPMorgan Chase Bank, N.A. Only qualified employee benefit trusts and governmental plans that have appointed JPMorgan Chase Bank, N.A. as fiduciary are permitted to invest in the fund. JPMorgan Asset Management advises JPMorgan Chase Bank, N.A. regarding the management of the funds This document is intended solely to report on various investment views held by J.P. Morgan 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. Real estate investing may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investing may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower. Leverage. Certain of the Fund’s investments may be leveraged, which may adversely affect income earned by the Fund or may result in a loss of principal. The use of leverage creates an opportunity for increased net income, but at the same time involves a high degree of financial risk and may increase the exposure of the Fund or its investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the investment collateral. The Fund may be unable to secure attractive financing as market fluctuations may significantly decrease the availability and increase the cost of leverage. Principal and interest payments on any leverage will be payable regardless of whether the Fund has sufficient cash available. Senior lenders would be entitled to a preferred cash flow prior to the Fund’s entitlement to payment on its Investment. 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. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are available upon request. The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum would grow to $259mm after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100mm, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235mm after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253mm after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding. All case studies are shown for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation. They are based on current market conditions that constitute our judgment and are subject to change. Results shown are not meant to be representative of actual investment results. Past performance is not necessarily indicative of the likely future performance of an investment. 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 is available upon request. J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide. Those businesses include, but are not limited to, JPMorgan Chase Bank, N.A., J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated, and J.P. Morgan Alternative Asset Management, Inc. Copyright © 2014 JPMorgan Chase & Co. All rights reserved. FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 88 STRICTLY PRIVATE | CONFIDENTIAL Page intentionally left blank FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION 89
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