Professional Documents
Culture Documents
STRICTLY PRIVATE/CONFIDENTIAL
City of Fresno
Investment Review: JPMorgan U.S. Analyst Strategy
June 2016
Agenda
Organizational Update
Portfolio Review
Appendix
Equity
professionals Extensive, well-
resourced research
Over USD150 million
annual research budget
Local focus with
Office locations of the collaboration across a
equity professionals global network
Investment performance
Experience and stability
culture
Portfolio Managers and Research average
tenure: 17 years industry / 12 years J.P. Investment teams invest
Morgan alongside clients in their
portfolios
Source: J.P. Morgan Asset Management. All data as of December 31, 2015
Note: J.P. Morgan Asset Managements equity professionals includes portfolio managers, research, client portfolio managers, traders and investment directors
Past performance is not an indication of future performance.
European
Equities Behavioral
$39.0 $24.3
9.3% 10.9%
Global Equities
$76.0 Growth
18.1% Core
$42.6 $92.1
19.1% 41.3%
US Equities
$223.0
53.0%
Emerging
Markets & Asia
Pacific Equities
Value
$83.0
$64.0
19.7%
28.7%
Source: J.P. Morgan Asset Management. Data as of March 31, 2016. Data includes internal Fund of Funds and joint ventures.
Core Client
Research Team
Portfolio Managers Portfolio Managers
As of March 2016
There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management will continue to be employed by J.P. Morgan Asset Management or that the past performance or success of any such
professional serves as an indicator of such professionals future performance or success.
Lisa S. Sadioglu Tim Gamache Greg Fowlkes Amit Seth Robert Bowman Nitin Bhambhani, Laura Huang Kris Erickson Ryan Vineyard
Managing Director Executive Managing Director Executive Director Managing Director Managing Director Vice President Executive Director Executive Director
Consumer Staples Director Retail Retail Semis & Technology Software and Services IT Services Media Telecom & Cable
& Homebuilders Consumer Industry: 16 yrs. Industry: 7 yrs. Hardware Industry: 22 yrs. Industry: 11 yrs. Industry: 15 yrs. Industry: 11 yrs.
Industry: 16 yrs. Industry: 11 yrs. Firm: 10 yrs. Firm: <1 yr. Industry: 23 yrs. Firm: 20 yrs. Firm: 11 yrs. Firm: 3 yrs. Firm: 4 yrs.
Firm: 16 yrs. Firm: 11 yrs. Firm: 23 yrs.
Industrials
James Brown Lerone Vincent Nishesh Kumar Hunter Horgan David Maccarrone Leslie Rich David Pasquale Joanna Shatney Mike Leskinen Chris Ceraso
Managing Director Executive Director Managing Director Executive Director Executive Director Managing Director Managing Director Executive Director Executive Director Executive Director
Basic Materials Basic Materials Energy Energy Energy Infrastructure Utilities Industrial Cyclicals Industrial Cyclicals Aerospace & Defense Autos and Transport
Industry: 32 yrs. Industry: 18 yrs. Industry: 19 yrs. Industry: 19 yrs. Industry: 21 yrs. Industry: 23 yrs. Industry: 19 yrs. Industry: 20 yrs. Industry: 15 yrs. Industry: 15 yrs.
Firm: 29 yrs. Firm: 18 yrs. Firm: 18 yrs. Firm: 1 yr. Firm: 6 yrs. Firm: 6 yrs. Firm: 10 yrs. Firm: 2 yrs. Firm: 3 yrs. Firm: 3 yrs.
As of March 2016
Note: Research Analysts Include VPs and above.
There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management will continue to be employed by J.P. Morgan Asset Management or that the past performance or success of any such
professional serves as an indicator of such professionals future performance or success.
Fair value
Time
The manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met.
Our analysts long-term forecasts drive our ranking of stocks in each sector
In-depth fundamental research + long-term forecasting framework => Dividend discount ranking
ROBERT BOWMAN
Semiconductors/
Hardware/Network
23 years of experience RANKING
LAM RESEARCH
Current QUINTILE
QUINTILE 11
AVAGO TECHNOLOGIES
Price CHEAP
UNDERVALUED
Normalized earnings
growth
QUINTILE
QUINTILE 22
Short-term
earnings
Current
Earnings
QUINTILE 3
Earnings per share
Valuation
Discipline:
The DDM QUINTILE 4
QUINTILE 4
QUINTILE 5
Years Year Years
QUINTILE 5 NVIDIA
1&2 3 4-8 OVERVALUED
EXPENSIVE CISCO SYSTEMS
Note: Quintiles are 20% by number of names, not capitalization. The information on this page is for illustrative purposes only and does not necessarily reflect current estimates. The purpose of the slide is to
provide background on the types of analysis performed by JPMIM's research group. As an investment advisor, JPMIM does not give recommendations. The manager may or may not hold the companies
above in existing portfolios.
3.0%
2.0%
1.0%
0.0%
Percent
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5
Helge Skibeli,
Global Head of Developed Market Equity Research
Analyst Strategy Portfolio Manager
Construct portfolios
Coordinate
Challenge
Control risk
Super Sectors
Insight
Conviction
Long-term valuation signal
Portfolio Review
Large Cap Core 130/30 1.48% -2.35% 11.66% 12.50% 10.44% 06/30/04
S&P 500 Index 3.57% 1.72% 11.06% 11.67% 7.46%
Excess -2.09% -4.07% 0.60% 0.83% 2.98%
Large Cap Equity Income 5.32% 2.69% 10.67% 12.29% 10.41% 11/30/02
Russell 1000 Value 5.39% -0.06% 9.23% 10.70% 8.40%
Excess -0.07% 2.75% 1.44% 1.59% 2.01% Supplemental to annual performance report
Mid Cap Value 6.08% 0.34% 11.46% 12.93% 16.00% 11/30/88 Past performance is not a guarantee of comparable future results. Total
Russell Midcap Value Index 7.89% -0.31% 10.22% 10.92% 11.83% return assumes the reinvestment of income. Performance results are gross
Excess -1.81% 0.65% 1.24% 2.01% 4.17% of investment management fees. The deduction of an advisory fee reduces
an investors return. Actual account performance will vary depending on
Small Cap Active Core 7.42% 1.67% 11.08% 12.07% 12.76% 09/30/04 individual portfolio security selection and the applicable fee schedule. Fees
Russell 2000 Index 2.28% -5.97% 6.93% 7.86% 7.62% are described in Part II of the Advisors ADV which is available upon
Excess 5.14% 7.64% 4.15% 4.21% 5.14% request . Please see back page for additional disclosure
Our research teams measure of opportunity has risen sharply since late 2015
DDR Valuation Spread
Internet Credit Crisis
35% I. Lehman
Median Valuation Spread Bubble
Accounting Recession
30% Scandals Fears
S&L Crisis
87 Crash Credit Crisis
II. Europe
25%
20%
LT median
15%
10%
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
30% 2/10/16
25%
The DDR spread widened from the 49th percentile in
June 2015 to the 95th percentile on Feb. 10, 2016 20% 5/31/16
LT median
6/30/15
15%
2013 2014 2015
Source: J.P. Morgan Asset Management. Data are as of 5/31/16. A Dividend Discount Rate (DDR) is the discount rate that equates the present value of the estimated stream of future dividends to the current market price. The J.P. Morgan DDR is a
bottom-up, sector-neutral and equal-weighted average of DDRs on large-capitalization stocks in the coverage universe as estimated by JPMAM equity research analysts. The DDR spread is calculated by subtracting the average DDR of Quintile 5 stocks
from the average DDR of Quintile 1 stocks and then dividing the difference by the average DDR of all stocks (where stocks are grouped into quintiles based on DDR ranking). For illustrative purposes only.
Top Contributors Relative Weight (%) 1 Stock Return (%) Impact (%) Comments
Added value as oil prices rebounded; maintain overweight due to strong pipeline and superior
EQT 0.78 29.1 0.14 cost management relative to peers
UNH shares rose as medical costs continued to stabilize; remain positive due to strong Optum
UnitedHealth 1.09 10.0 0.10 platform
Contributed as key regulatory pressures were lifted; maintain overweight due to strong pipeline
Cabot Oil & Gas 0.44 28.5 0.09 and superior cost management relative to peers
CPGX rose after an announced bid from TransCanada; selling out of name due to the
Columbia Pipeline Group 0.13 26.4 0.09 acquisition
Facebook 0.38 9.0 0.08 FB beat on earnings driven by higher ad growth; remains a top pick in Internet space
Top Detractors Relative Weight (%) 1 Stock Return (%) Impact (%) Comments
Shares fell on the heels of a significant negative shock to earnings and the delay of its 10K
Valeant Pharmaceuticals 0.00 -73.5 -0.27 filing; we have exited our position given the many uncertainties surrounding VRX
VRTX shares have underperformed as a result of a perceived miss on reported numbers and
Vertex Pharmaceuticals 0.48 -36.8 -0.22 guidance; continue to like for the CF pipeline and strength of the CF R&D organization
JNJ shares rose in the volatile biopharma market given its relative perceived stability; believe
Johnson & Johnson * -1.66 6.1 -0.21 that temporary earnings growth is not sustainable
Dish Network 0.54 -19.1 -0.21 Declined amid selloff among highly leveraged stocks; continue to like for spectrum holdings
Overweight detracted due to concern over China exposure and the Zika virus; maintain
Royal Caribbean Cruises 0.65 -18.4 -0.14 overweight due to favorable consumer backdrop and RCLs relatively strong brand power
Note: stock attribution reflects relative vs. group. Stock return displayed as per portfolio may or may not reflect the whole period. Where stock is not held in the portfolio, stock return is displayed as per benchmark and may not reflect the whole period
SECTOR ATTRIBUTION
0.4%
0.2% 0.1% 0.1% 0.0% 0.0% 0.0%
-1.3%
Energy Media Semi Health Industrial Utilities Basic Software Auto REITs Insurance Financial Regionals Consumer Consumer Retail Telecommu Big Pharm/
& Services Cyclical Materials & & Services Stable Cyclical nications Banks MedTech
Hardware & Services Transpo &
System rtation Brokers
SECTOR ATTRIBUTION
0.9%
0.6%
0.4% 0.4% 0.3% 0.2% 0.1%
-1.9%
Semi Software Media Energy Utilities Financial Consumer REITs Health Insurance Regionals Retail Consumer Big Telecommu Auto Basic Industrial Pharm/
& & Services Cyclical Services Stable Banks nications & Materials Cyclical MedTech
Hardware Services & & Transpo
System Brokers rtation
2.8%
1.7%
0.7% 0.5% 0.5% 0.5% 0.3% 0.3% 0.2% 0.1% 0.1% 0.1%
0.0%
-0.2% -0.5% -0.5%
-1.4%
-2.4%
-2.9%
Semi Software Energy Utilities Health Retail Consumer Telecommu Financial REITs Regionals Insurance Auto Big Basic Media Consumer Pharm/ Industrial
& & Services Cyclical nications Services & Banks Materials Stable MedTech Cyclical
Hardware Services & Transpo &
System rtation Brokers
Consumer Big Financial Regionals Health Autos Software Basic Semis Energy Insurance Media Retail Telecom Utilities Pharma Industrial Consumer REITs
Cyclical Banks Services Services & & Materials & /MedTech Cyclical Stable
& & TransportationServices Hardware
Brokers Systems
Microsoft 3.44
P/E ratio1 14.4x 15.0x
Alphabet 2.90
EPS growth2 10.6% 8.3%
Lowes 2.75
Tracking error3 1.94 N/A
Apple 2.47
Turnover4 53% N/A
Broadcom Ltd 2.18
Market capitalization5 $104.1 bn $128.8 bn
Wells Fargo 2.06
Dividend Yield 1.76% 2.17%
Facebook 1.83
Amazon 1.63
Total 22.69
The information is taken from a representative account following this strategy. Actual information may differ for each individual account.
1 JPM 12 month forward 2 JPM 4 to 8 year forecast 3 Trailing three years 4 Trailing twelve months 5 Weighted average
VOLATILITY 0.14
TOP BUYS2 TOP SELLS2
EARNINGS VARIATION 0.13
Kimberly-Clark Procter & Gamble
GROWTH 0.10
Conoco Phillips Apple
VALUE 0.03
Eastman Chemical Exxon Mobil
SIZE -0.18
% OF PORTFOLIO BY QUINTILE
YIELD -0.20
40
Sector: +/- 4% +/- 2%
25% 26% 26%
Stock: +/- 4% +/- 2% 19%
20 15% 16%
14%
Expected 6%
9%
Tracking Error: 2% 3% 2% 3% 0% 0%
0
# of Holdings: 90 125 90 125 Q1 Q2 Q3 Q4 Q5 Other
Source: BARRA, J.P. Morgan Asset Management. For illustrative purposes only
The information is taken from a representative account following this strategy. Actual information may differ for each individual account.
1The manager seeks to meet its stated investment guidelines within the approximate range specified. 2Based on net dollar amounts of transactions in 1Q
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
Dividend Yield Earnings Yield Value Residual Market Cap Leverage Momentum Beta Growth
Volatility
Source: Factset, Standard & Poors, JPMorgan Asset Management, MSCI Barra. Data are as of 3/31/16. Bars represent factor equal-weighted returns for stocks in the S&P 500 Index based on each Barra
factor. Both constituents and factor rankings are constant as of 12/31/15. For illustrative purposes only.
14% 60 Services
12% 55
10%
50
8%
Manufacturing
45
6%
40
4%
2% 35
'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
1920 100
64
960 95
32
480 Apr. 2016:
90 94.2
16
240
85
8
120
80
60
4
2 75
30
15 1 70
'47 '51 '55 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Source: (Top Left) Bloomberg. Data as of 4/4/2016. (Bottom Left) FRED, NDR. Data as of 12/31/2015. (Top Right) Institute for Supply Management. Data as of March 2016. (Bottom
Right) Bloomberg. The U.S. Dollar Index indicates the general international value of the USD by averaging the exchange rates between the USD and major world currencies. Data as
of 4/12/16. For illustrative purposes only.
26 | FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
The oil price decline is a supply shock, not a demand shock and the energy sector
has driven the majority of spread widening
Crude Oil Demand
(yearly % change in 12-month average)
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
1997 2000 2003 2006 2009 2012 2015
Ex- Energy
16%
Energy
12%
8%
4%
0%
1997 2000 2003 2006 2009 2012 2015
Source: (Top) IEA. Bloomberg. Data as of 12/31/2015. For illustrative purposes only. (Bottom) Barclays Research. Data are as of 4/5/2016.
40%
34
31
30
30% 26 27 26 27 26
26
23
20 20
20% 17
15 15 14 YTD
12 13 13
11
9
10% 7
4 4
2 3
1
1
%
-2 0 -1
-7 -5 -5 -6
-10% -6 -7 -7
-7 -8 -8 -8 -8 -8
-10 -9 -9 -10 -10 -11
-11 -11 -12 -12 -12
-13 -13
-20% -17 -17 -16
-18 -17
-20 -19 -19
-23
-25
-30% -27
-30
-34 -34
-40%
-38
-41
-50%
-49
-60%
'80 '85 '90 '95 '00 '05 '10 '15
12x
-1 Std. dev.: 12.6x
10x
8x
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Equity risk premiums vs IG corporates S&P 500 earnings yield vs. Baa bond yield
8%
ERP (IG corporates) March 2016: 4.5% S&P 500 Earnings Yield
6% (Inverse of fwd. P/E): 6.2%
Average
4%
2%
0%
A DDR does not represent a stock's expected actual return in any given time period. Please see the disclosure page for index definitions. (Bottom right) S&P, JPMAM. U.S. Data are as of 12/31/15 .
Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Real Earnings Yield is defined as (trailing four quarters of reported earnings/price) - year
over year core CPI inflation. Shown for illustrative purposes only. Past performance does not guarantee future results.
China + oil + dollar reversal + low expectations should mean upside EPS surprises
Chinas manufacturing/services may have troughed while U.S. dollar may have peaked
Caixin/Markit indices, 3-month moving average Year-over-year % change*, quarterly, USD major currencies index
65 23%
Estimate
Services
60 19%
15%
55 Mar. 2016:
51.9
11%
50
7%
Manufacturing
Mar. 2016:
45
48.7 3%
40 -1%
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16
Oil may have troughed earlier this year too JPMorgan S&P 500 EPS estimates and contributions by sector
WTI, nominal prices, USD/barrel
$65 140
Source: (Top Charts and Bottom Left) Markit Economics, FactSet, Federal Reserve, J.P. Morgan Asset Management. Currencies in the Trade Weighted U.S. Dollar Major Currencies Index are: British
pound, euro, Swedish kroner, Australian dollar, Canadian dollar, Japanese yen and Swiss franc. 1Q16 dollar is a J.P. Morgan Asset Management estimate. *Year-over-year change is calculated using the
quarterly average for each period. 2016 year-over-year growth estimates assume the USD exchange rate remains stable at its 3/31/2016 value through 4Q 2016. Data are as of
April 10, 2016. (Bottom Right) J.P. Morgan Asset Management. JPM Estimates, IBES. Data as of 3/31/16. For illustrative purposes only.
31 | FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Recession fears have dissipated since mid-February but internals of the market are
still defensive
S&P 500 returns in 1Q 2016 Sector returns in 1Q 2016
Cumulative
20% 16%
returns (%)
15% 13%
4%
1.4% 10% 6% 5% 5% 5% 5%
2% 4% 4% 4% 3%
5% 2% 1%
0% 0%
-5% -1% -1% -2%
-2% -3%
-10% -6%
-4% -10%
-15% -13%
-6% -20%
Health Services
Media
Retail
Basic Materials
Insurance
Financial Services
Telecom
REITs
Energy
Software
Pharm/MedTech
Regional Banks
Industrial Cyclical
S&P 500
Consumer Cyclical
Banks / Brokers
Utilities
Consumer Stable
-8%
-10%
-12%
1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 11-Mar 25-Mar
Sector returns in first and second halves of 1Q 2016 Alpha in first and second halves of YTD 2016
Jan 1 - Feb 11 Feb 12 - Mar 31 U.S. Analyst Strategy
25% 3%
15% 2.5%
2%
5%
1%
-5%
0%
-15%
-25% -1%
Media
Financial Services
Insurance
Health Services
Basic Materials
Regional Banks
REITs
Energy
Retail
Telecom
Semis & Hardware
Pharm/MedTech
Software
S&P 500
Industrial Cyclical
Consumer Cyclical
Banks / Brokers
Consumer Stable
Utilities
-2%
-2.6%
-3%
Jan 1 - Feb 11 Feb 12 - May 31
Source: J.P. Morgan Asset Management, Bloomberg, Wilshire. Data as of 3/31/16. Sector classification is based on JPM sector model. (Bottom Right) Data as of May 31, 2016. Bars illustrate gross-of-fee
returns for the representative account of the U.S. Analyst Strategy. Past performance is not a guarantee of comparable future results. For illustrative purposes only.
The foundation work of our research platform drives our investment process
Normalized P/E relative to history using our proprietary Dividend Discount Model: Since 1986
Percentile ranking (%)
Cheap Expensive
Consumer Stable 98
Energy 97
Utilities 97
REITs 90
Retail 88
Software & Services 80
Telecommunications 62
Systems & Network Hardware 55
Semiconductors 54
Industrial Cyclical 53
Health Services & Systems 51
Basic Materials 50
Financial Services 48
Consumer Cyclical 41
Autos & Transportation 21
Banks & Brokers 9
Insurance 3
Pharm/MedTech 1
Media 1
0 20 40 60 80 100
Source: JPMorgan Asset Management. Based on JPM sector classification. Data as of April 4, 2016. For illustrative purposes only.
Indexed to 100
90
Source: (Top Right) Bloomberg. Data are as of March 31, 2016. (Bottom) J.P. Morgan Asset Management, as of 3/31/16. A Dividend Discount Rate (DDR) is the discount
rate that equates the present value of the estimated stream of future dividends to the current market price. The J.P. Morgan S&P 500 DDR is a bottom-up, sector-neutral and
equal-weighted average of DDRs on large-capitalization stocks as estimated by J.P. Morgan Asset Management equity research analysts. A DDR does not represent a stock's
expected actual return in any given time period. Please see the disclosure page for index definitions. For illustrative purposes only.
34 | FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
1.7x
1.1x
S&P 500 Dividend Payout Ratio by Sector Proforma Price to Tangible Book Value
180%
150% 134% 138% 1.73x
120%
90% 72% 78%
63% 0.99x
0.96x
60% 42% 48% 48% 0.83x
31% 34% 35% 0.69x
30%
0%
Industrials
Financials
Health Care
Staples
Tech
Discretionary
S&P 500
Telecom
Energy
Materials
Utilities
C MS BAC GS WFC
Source: (Top Right) Goldman Sachs Plot Tool, SNL Financial, Goldman Sachs Global Investment Research. Data are as of March 31, 2016. (Bottom Right) J.P. Morgan
Asset Management, SEC. Data are as of March 31, 2016. (Bottom Left) Compustat, FactSet/First Call, BofA Merrill Lynch US Equity & US Quant Strategy, JPMAM. Data
available as of March 31, 2016. For illustrative purposes only. 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.
35 | FOR INSTITUTIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Appendix
J.P. Morgan Investment Management Inc. has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS).
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 includes all discretionary accounts, including pooled funds, directly invested according to JPMIMs Analyst Large Cap Core Equity strategy. The strategy invests in a diversified portfolio of U.S. large-cap equities which is managed by a
team of career analysts and overseen by the Research Director. The overall investment objective of the Analyst Large Cap Core Equity strategy is to earn an annualized excess return of approximately 2.0% over the S&P 500 (gross of management
fees) over a full market cycle, which we define as three to five years. The strategys targeted tracking error relative to the benchmark is approximately 3.0%-4.0% per year. The composite was created in January 2001.
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. 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. Net returns are net of model investment advisory fees in effect for the respective time period. Model net returns are calculated by subtracting 1/4th of the highest
applicable fee from the gross composite return on a quarterly basis. As of December 31, 2013, the standard annual fee schedule is as follows: 0.50% on the first $25 million of assets managed; 0.40% on the balance. 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 firms list of composite descriptions and the policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.
The benchmark is the Standard & Poor's 500 Index. The index returns are provided to represent the investment environment existing during the time periods shown. For comparison purposes the index is fully invested, which includes the reinvestment of
income. The returns for the index do not include any transaction costs, management fees or other costs.
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.
The types of assets that may be held in large capitalization, domestic equity accounts are common stock, preferred stock, convertible securities, with the vast majority of
holdings in common stock. In distinction to small capitalization portfolios, which are described below, large capitalization domestic equity portfolios will primarily invest in
stocks with market capitalizations (current market price per share times the number of common shares outstanding) above $10 billion at the time of purchase. Large
capitalization domestic equity managers can invest in mid- (greater than $1.5 billion but less than $10 billion market capitalization stocks at the time of purchase) and large-
capitalization stocks (greater than $10 billion market capitalization stocks at the time of purchase). However, the vast majority of equity holdings will be in large capitalization
issues.
Firms that manage equity portfolios will continually monitor the risk associated with their equity investments. They will be expected to report on the active management bets
they have assumed relative to their respective benchmarks. As a result of this risk/reward analysis, active equity managers will statistically attribute actual performance
variance from their benchmarks in each regular quarterly report. Included in this report will be statistics attributing performance to sector weighting decisions versus the
benchmark and security selection decisions within each sector relative to the benchmark.
American Depository Receipts (ADR's) of foreign companies are authorized investments. ADR's should not exceed 10 percent of the portfolio. ADR securities that are 144A
securities are authorized investments and cannot exceed 5 percent of the portfolio.
Derivative securities may not be held in domestic equity portfolios except to mitigate risk, on a temporary basis, of underlying portfolio holdings. Compliance with the
previously stated derivatives guidelines must be met.
No single security can represent more than 5 percent of the market value of a portfolio at the time of purchase, and no single industry (based on Global Industry Classification
Stand (GICS) can represent more than 15 percent of the market value of the account.
Biographies
Eileen Cohen is currently Managing Director for JP Morgan Asset Management, a position she has held since 2001. At JP Morgan she is Chair of the North America Proxy
Committee and leads the firms initiatives in corporate governance. Eileen is also a Senior Client Portfolio Manager and a proven expert in investment consulting, portfolio
management and financial communications. Prior to her present position, Ms. Cohen worked for Invesco, formerly Chancellor Capital where she was a partner and held various
roles including Portfolio Manager, Head of Asset Allocation and Head of Client Services. In her earlier professional career, she was a partner at Buck Consulting, an actuarial and
investment consulting firm and held manufacturing and finance positions at International Paper Co. Additionally, Ms. Cohen serves as a mentor in the Executive On Campus
program at Baruch College, where she was received the Alumni Allegiance Award. She is a board member of The National Grid Foundation as well as a member of the advisory
council of SASB (Sustainability Accounting Standards Board). Ms. Cohen has authored numerous articles on investing and is an Adjunct Professor in corporate governance and
ethics at Baruch College. Ms. Cohen completed her BA in economics at Queens College and continued on to Baruch to earn an MBA in finance and economics.
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. Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic
risks.
RISKS ASSOCIATED WITH INVESTING. The price of equity securities may rise or fall because of changes in the broad market or changes in a companys financial condition, sometimes rapidly or
unpredictably. These price movements may result from factors affecting individual companies, sectors or industries selected for the portfolio or the securities market as a whole, such as changes in
economic or political conditions. Equity securities are subject to stock market risk meaning that stock prices in general (or in particular, the prices of the types of securities in which a portfolio invests) may
decline over short or extended periods of time. When the value of a portfolios securities goes down, an investment in a fund decreases in value. There is no guarantee that the use of long and short
positions will succeed in limiting the Fund's exposure to domestic stock market movements, capitalization, sector-swings or other risk factors. Investment in a portfolio involved in long and short selling may
have higher portfolio turnover rates. This will likely result in additional tax consequences. Short selling involves certain risks, including additional costs associated with covering short positions and a
possibility of unlimited loss on certain short sale positions.
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 professionals future performance or success.
The deduction of an advisory fee reduces an investors return. Actual account performance will vary 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 clients portfolio: A portfolio with a beginning value of $100 million, gaining an annual return of
10% per annum would grow to $259 million after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100 million, gaining an annual return of 10% per annum,
but paying a fee of 1% per annum, would only grow to $235 million 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 $253 million 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.
Total return assumes reinvestment of dividends and capital gains distributions and reflects the deduction of any sales charges or redemption fees. Performance may reflect the waiver of a portion of the
Fund's advisory or administrative fees for certain periods since the inception date. If fees had not been waived, performance would have been less favorable.
Any securities/portfolio holdings mentioned throughout the presentation are shown for illustrative purposes only and should not be interpreted as recommendations to buy or sell. A full list of firm
recommendations for the past year are available upon request.
The S&P 500 Index is an unmanaged index generally representative of the performance of large companies in the U.S. stock market. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as management fees. By contrast, the performance of the Fund reflects the deduction of the mutual fund expenses, including sales charges if applicable. An
individual cannot invest directly in an index.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, JPMorgan Chase Bank N.A., J.P.
Morgan Investment Management Inc., Security Capital Research & Management Incorporated , J.P. Morgan Alternative Asset Management, Inc., and J.P. Morgan Asset Management (Canada), Inc.