Title Placeholder. Insurance Perspective U.S. A look at key trends for insurer s using J.P. Morgan s Guide to the Markets

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1 J.P. Morgan Conference/Screen Show Template Title Placeholder Insurance Perspective U.S. A look at key trends for insurer s using J.P. Morgan s Guide to the Markets 2Q 2014 As of March 31, 2014

2 Introduction We are pleased to present you, our insurance clients, with select slides from the 2Q 2014 Guide to the Markets ( GUIDE ). We believe these slides will help you with your assessments of market fundamentals and valuations as you plan your investments. The Guide to the Markets the full version of which you should have received earlier this month is a component of MARKET INSIGHTS, J.P. Morgan s flagship, industry-leading program that is designed to deliver insights from the firm s strategists on markets, sectors and investment themes. While we have identified key points for the highlighted Guide slides, we recognize that your needs and goals are unique and many, and as a result, you will have different interpretations and views of the market trends. We would welcome your feedback and thoughts and look forward to discussing these pages with you. 1

3 Rates are near historic lows but eventual increases will present challenges Nominal and Real 10-year Treasury Yields 20% 15% 10% Nominal 10-year Treasury Yield Sep. 30, 1981: 15.84% Average ( ) 3/31/14 Nominal Yields 6.35% 2.72% Real Yields 2.52% 1.16% Inflation 3.82% 1.56% Page 31 Following a 30-year bull market in bonds, nominal yields on 10-year U.S. Treasuries remain near alltime lows 5% Mar. 31, 2014: 2.72% After adjusting for inflation, real yields are close to zero 0% Real 10-year Treasury Yield Rising Rate Corp. Bonds S&P 500 Falling Rate Corp. Bonds S&P 500 Mar. 31, 2014: 1.16% % 8.6% % 11.0% Ann. Inflation 5.0% 5.0% Ann. Inflation 3.1% 3.1% Ann. Real Return -2.0% 3.5% Ann. Real Return 6.8% 7.7% -5% '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 Source: Federal Reserve, BLS, J.P. Morgan Asset Management. Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for March 2014, where real yields are calculated by subtracting out February 2014 year-over-year core inflation. All returns above reflect annualized total returns, which include reinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance. Guide to the Markets U.S. Data are as of 3/31/14. Inflation, likewise, remains low by historical standards and all inflationary measures continue to point to a low inflation environment in the near term 2

4 Fixed income total return negatively impacted by rising rates in 2013 Treasury Base Rate Return 2013 A Spread to Treasury Return 2013 B Coupon Return 2013 C Total Return 2013 A + B + C 5-yr. 10-yr. -3.5% -9.9% 2014 YTD % 2.1% -7.8% -2.5% 5-yr. 10-yr. Page yr. 10-yr. Muni U.S. HY EM (USD) -18.4% -6.5% -9.3% -9.7% 9.4% -0.3% 3.3% 4.3% 7.3% 5.9% -15.0% -2.2% 7.4% -4.1% 30-yr. 10-yr. Muni U.S. HY EM (USD) As rates rose in 2013, fixed income sectors exposed to duration experienced large mark-to-market losses that in many cases entirely eroded coupon returns IG Corp. U.S. MBS U.S. Agg. FRN (BBB) -9.0% -6.3% -6.2% -1.4% 3.0% 1.0% 1.0% 2.4% 4.4% 3.8% 3.2% 1.4% -1.5% -1.4% -2.0% 2.4% IG Corp. U.S. MBS U.S. Agg. FRN (BBB) Spread narrowing offset duration losses for High Yield and Floating Rate Notes (BBB-rated), while coupons provided additional return. -20% -10% 0% 10% -20% -10% 0% 10% -20% -10% 0% 10% Source: Federal Reserve, Barclays, J.P. Morgan Asset Management. All returns reflect year to date returns. Treasury base, spread, and coupon returns based on Barclays and J.P. Morgan Asset Management estimates. The sum of charts A and B equate to price return for each sector. Indices used include Barclays US Treasury Bellwethers (10Y), Barclays US Aggregate, Barclays US Aggregate Credit Corporate Investment Grade, Barclays US Aggregate Credit Corporate High Yield, Barclays Muni 10-year Index, Barclays US MBS Index, Barclays Floating Rate Index, and Barclays Emerging Markets USD. Guide to the Markets U.S. Data are as of 3/31/ % -10% 0% 10% 3

5 Investing beyond traditional core fixed income into extended sectors may provide benefits in rising rate and inflationary environments US Treasuries # of issues Correlation to 10-year Avg. Maturity 3/31/ /31/2013 1Q Year years 0.44% 0.38% 0.19% 0.30% 5-Year % 1.75% 0.73% -2.47% 10-Year % 3.04% 3.38% -7.81% 30-Year % 3.96% 8.11% % TIPS % 0.80% 1.95% -8.61% Sector Broad Market 8, years 2.39% 2.48% 1.84% -2.02% MBS % 3.26% 1.59% -1.41% Municipals 9, % 3.03% 3.13% -2.17% Corporates 4, % 3.26% 2.94% -1.53% High Yield 2, % 5.64% 2.98% 7.44% Floating Rate % 1.07% 0.40% 2.42% Convertibles % 1.19% 4.38% 24.43% ABS 1, % 2.05% 1.13% 0.14% Yield Return Price Impact of a 1% Rise/Fall in Interest Rates* Source: U.S. Treasury, Barclays Capital, FactSet, J.P. Morgan Asset Management. Fixed income sectors shown above are provided by Barclays Capital and are represented by Broad Market: Barclays U.S. Aggregate; MBS: U.S. Aggregate Securitized - MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond 10-year Index; High Yield: Corporate High Yield Index; TIPS: Treasury Inflation Protection Securities (TIPS). Floating Rate: Barclays FRN (BBB); Convertibles: Barclays U.S. Convertibles Composite; ABS: Barclays ABS + CMBS. Treasury securities data for # of issues based on U.S. Treasury benchmarks from Barclays Capital. Yield and return information based on bellwethers for Treasury securities. Sector yields reflect yield to worst, while Treasury yields are yield to maturity. Correlations are based on 10-years of monthly returns for all sectors except Floating Rate which is based on monthly returns from May 2004, due to data availability. Change in bond price is calculated using both duration and convexity according to the following formula: New Price = (Price + (Price * -Duration * Change in Interest Rates))+(0.5 * Price * Convexity * (Change in Interest Rates)^2). *Calculation assumes 2-year Treasury interest rate falls 0.44% to 0.00%,as interest rates can only fall to 0.00%. Chart is for illustrative purposes only. Past performance is not indicative of future results. Guide to the Markets U.S. Data are as of 3/31/14. 2y UST 5y UST TIPS 10y UST 30y UST Floating Rate Convertibles ABS US HY US Aggregate MBS IG Corps Munis -16.4% -4.7% -6.2% -8.4% -3.0% -3.3% -4.1% -5.6% -6.2% -6.6% -6.6% -2.0% -0.1% 0.8% 0.1% 5.0% 3.4% 2.8% 7.3% 4.0% 5.7% 4.9% 7.5% 5.8% 9.3% +1% -1% 21.2% -30% -10% 10% 30% Page 32 Rising interest rates can generate mark-to-market losses equal to several years of coupon income across multiple fixed income sectors Core complements such as absolute return, high yield, floating rate bank loans, and CLOs can provide additional yield without substantial rate duration Interest rate derivatives may be utilized to temporarily reduce interest rate duration and the risk of losses during periods of rising rates, however, derivatives may be subject to adverse accounting treatment 4

6 Preparing for rising rates Fed s Balance Sheet: Assets $ trillions $4.5 $4.0 Other $3.5 $3.0 $2.5 U.S. Treasuries Agency MBS $2.0 $1.5 $1.0 $0.5 $0.0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Fed s Balance Sheet: Liabilities $ trillions $4.5 $4.0 $3.5 Excess Reserves Other Liabilities $3.0 Required Reserves $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Yield Curve Steepness 10-yr. U.S. Treasury minus effective Fed Funds rate '85 '90 '95 '00 '05 '10 Federal Reserve Summary of Economic Projections Fed's March 2014 Forecasts* Percent Long Run Change in real GDP, Q4 to Q Unemployment Rate, Q PCE Inflation, Q4 to Q Federal Funds Rate, end of year Source: Federal Reserve, FactSet, J.P. Morgan Asset Management. Monetary base is defined as the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held n the central bank's reserves. Other liabilities of the Federal Reserve primarily consist of currency outstanding. *Forecasts of 16 FOMC participants, midpoints of central tendency except for federal funds rate which is a median estimate. Guide to the Markets U.S. Data are as of 3/31/14. 4% 3% 2% 1% 0% -1% Average: 1.6% Mar. 2014: 2.7% Page 34 Supported by the continued U.S. expansion, the steepening yield curve may serve to reward insurers who add duration while also cushioning portfolios against low all-in yields Although interest rate hikes are not expected until 2015, the level of carry should be carefully balanced against the potential losses in rising rate environment As interest rates drift higher, market impacts will be unpredictable, though increasing rates and widening spreads on mortgage securities is plausible 5

7 Emerging markets debt is an important source of strategic long-term value GDP Growth, Gross Debt to GDP and Borrowing Costs Real GDP Growth ( F) 10% 8% 6% 4% 2% 0% -2% -4% -6% China Indonesia Malaysia India Australia Turkey Russia Mexico Korea Brazil U.K. South Africa Germany France EU Spain Emerging Markets Developed Markets Singapore U.S. Portugal Italy Bubble size = 10-year government bond yield 10% 5% Greece Japan Page 44 Despite strong growth and debt profiles, many emerging market yields remain substantially higher than that of developed markets Improved fundamentals including low leverage, flexible currencies and increased reserves have created strong defaultadjusted yields -8% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 245% 200% Gross Debt-to-GDP Ratios (2013F) Source: IMF, FactSet, Bloomberg, J.P. Morgan Economics, Barclays, J.P. Morgan Asset Management. Growth and debt data are based on the October2013 World EconomicOutlook. Borrowing costs based on local currency debt. EU overall borrowing cost based on Barclays Capital Euro -Aggregate 7-10 year treasury. South Africa s borrowing cost isbased on 7-year government bond yield due to data availability. Guide to the Markets U.S. Data as of 3/31/14. The EMD market has substantially matured: Insurers can access local currency and USDdenominated issues across sovereigns and investment grade corporates, which presents an array of income sources and diversification opportunities 6

8 Increases in corporate profits are the likely cause of further equity gains S&P 500 Earnings Per Share Operating basis, quarterly 4Q13*: $28.24 Profit Margins 12% 4Q13: 10.2% $27 $23 $19 $15 $11 $7 $3 2Q07: $ % 8% 6% 4% 2% S&P 500 Operating EPS % of SPS 0% '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 100% -$1 80% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Source: Standard & Poor s, Compustat, J.P. Morgan Asset Management. EPS levels are based on operating earnings per share. *Most recently available data is 3Q13 as 4Q13 are Standard & Poor s preliminary estimates. Past performance is not indicative of future returns. Guide to the Markets U.S. Data are as of 3/31/ % 220% 200% 180% 160% 140% 120% U.S. Corp. Profits % of GDP Total Leverage S&P 500, ratio of total debt to total equity, quarterly Average: 171% 4Q13: 9.8% 4Q13: 104% Page 8 Corporate borrowing has decreased substantially since 2008, which could lower prospective price volatility Continued increases in profit margins and low wage growth, could fuel further strong equity returns 7

9 Relative to other developed markets and its own history, U.S. equities look slightly expensive but still attractive relative to bonds Developed Market Countries Std Dev from Global Average +6 Std Dev +5 Std Dev +4 Std Dev +3 Std Dev +2 Std Dev +1 Std Dev Average -1 Std Dev -2 Std Dev -3 Std Dev -4 Std Dev -5 Std Dev World (ACWI) EAFE Index France U.K. Australia Germany Japan Canada Switzerland United States World (ACWI) % % EAFE Index % % France % % U.K % % Australia % % Germany % % Japan % % Canada % % Sw itzerland % % United States % % Source: MSCI, FactSet, J.P. Morgan Asset Management. Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), price to last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over the last 10 years. The grey bars represent valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page at the end for metric definitions. Guide to the Markets U.S. Data are as of 3/31/14. Current Composite Index Current Example Expensive relative to own history Cheap relative to own history 10-year avg. Expensive relative to world Current Average Cheap relative to world Fw d. P/E P/B P/CF Div. Yld. Fw d. P/E P/B P/CF Div. Yld. Page 56 Looking at a variety of valuation metrics, U.S. equities appear slightly expensive relative to their long-term averages Investors should be aware of the risks inherent in expensive markets, but recognize that U.S. equities may have room to push higher S&P dividend yields of ~190bps are attractive given current bond yields 8

10 Emerging market equities are cheap compared to their own history and developed markets Emerging Market Countries Std Dev from Global Average +6 Std Dev +5 Std Dev +4 Std Dev +3 Std Dev +2 Std Dev +1 Std Dev Average -1 Std Dev -2 Std Dev -3 Std Dev -4 Std Dev -5 Std Dev World (ACWI) EM Index Russia China Brazil Taiwan Korea South Thailand Africa Mexico India Indonesia Example Expensive relative to own history Cheap relative to own history Source: MSCI, FactSet, J.P. Morgan Asset Management. Note: Each valuation index shows an equally weighted composite of four metrics: price to forward earnings (Fwd. P/E), price to current book (P/B), price to last 12 months cash flow (P/CF) and price to last 12 months dividends. Results are then normalized using means and average variability over the last 10 years. The grey bars represent valuation index variability relative to that of the MSCI All Country World Index (ACWI). See disclosures page at the end for metric definitions. Guide to the Markets U.S. Data are as of 3/31/14. Expensive relative to world Current Average Cheap relative to world Current Composite Current 10-year avg. Index Fw d. P/E P/B P/CF Div. Yld. Fw d. P/E P/B P/CF Div. Yld. World (ACWI) % % EM Index % % Russia % % China % % Brazil % % Thailand % % Taiw an % % Korea % % South Africa % % Mexico % % Indonesia % % India % % Page 57 Despite recent cyclical headwinds, emerging markets (EM) should continue to grow more quickly than developed market economies Recent underperformance has created an attractive entry point for buy-and-hold investors as valuations continue to fall below longterm averages We expect that lingering worries over earnings and Fed tapering will leave EM cheap by historical standards Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. 9

11 Energy uncertainty is a source of downside economic risk Middle East Energy Production & Chokepoints Percent of global liquid fuel production, 2012* Suez Canal 2.2% Libya 1.8% Egypt 0.8% Sudan 0.1% Syria 0.2% Babel-Mandeb 3.4% Iraq 3.9% Saudi Arabia 12.9% Kuwait 3.4% Iran 3.9% Major Producers Major Consumers Percent of global total, 2012 Percent of global total, 2012 Strait of Hormuz 17.0% UAE 3.5% Saudi Arabia 13% China 5% United States 21% India 4% United States 12% Canada 4% China 11% Saudi Arabia 3% Russia 12% Iran 4% Japan 5% Brazil 3% U.S. Natural Gas Production Trillions of cubic meters, USD U.S. Sources of Oil and Liquid Fuels U.S. consumption, millions of barrels per day Source: (Left) EIA, J.P. Morgan Asset Management. (Top right) EIA, IMF, FactSet, J.P. Morgan Asset Management. (Bottom right) EIA, J.P. Morgan Asset Management. Forecasts are from EIA Annual Energy Outlook and start in *Production numbers as of 2012, while chokepoints are 2011 data. Natural gas prices are as of February Guide to the Markets U.S. Data as of 3/31/ Gbl. Natural Gas Prices Japan $18.00 Germany $10.83 U.S. $ Net Imports Other U.S. Production EIA forecast Shale Gas EIA Forecast Page 28 Global energy production is heavily tilted toward countries subject to economic and political instability A substantial portion of global energy supplies must be transported through potentially precarious waterways U.S. progress towards energy independence has lowered prices for industrial uses of electricity and could provide insulation from energy supply shocks 10

12 GFICC scenario probabilities and investment expectations: 2Q14 Expansion Base Case (60% - unchanged): Sub Trend Recovery continues into GDP 2-4%; Inflation 0-2% Above trend growth (35% - unchanged) GDP >4%; Inflation >2% Global economy is still recovering, not yet expanding Economic recovery in US is broadening (excluding weather impact); Europe is stable Optimism offset by deteriorating trade surplus in Japan and tighter credit conditions in China Sufficient labor market slack will likely keep inflation at low levels US unemployment could reasonably be 1.5% higher than the reported data* Inflation risks are to the downside, as deflation is still a very real threat in peripheral Europe, and Japan exporting disinflation to the US Central Banks will remain accommodative until deleveraging occurs or inflation is evident Foreign Direct Investment (FDI) inflows do not indicate pressures building Strategy Implications: Yield and carry remain attractive European bank hybrid securities US reperforming/non-performing residential mortgage market Bank leveraged loans Crisis (5% - unchanged): Disorderly movement in markets causes systemic impact and tail risk Contraction Accelerating US recovery leads to stronger EM as exports pickup Europe experiences real growth Increase in Japanese consumption is more than simply front running VAT hike Energy should recede with the Spring thaw, leading to stronger discretionary spending and less pressure on central banks to battle commodity price inflation Market volatility rises from abnormally low levels Market anticipates central banks normalizing rates Strategy Implications: Short duration Floating rate credit Convertible bonds Short positioning in securities with negative convexity (agency MBS) and short volatility will be good hedges Recession (0% - unchanged) GDP <2%; Inflation <0% Ukraine could destabilize both the emerging and developed markets as politics could escalate into global conflict Our expectation is that US and EU will work with Russia to avoid escalation and disorderly and collapsing markets The Fragile Five (Brazil, Indonesia, India, South Africa, Turkey) represent risk, if credit conditions tighten, as they need to import capital A hard landing in China is a distant threat PBOC is managing down credit fueled growth Strategy Implications: Long position in G4 government bonds Short position in EMD *Using the Yellen/Williams adjustment to the participation rate. Overall expansionary policy of Central Banks makes the risk of recession over the next 3-6 months unreasonable Japan is at greatest risk of recession, where fiscal drag could offset trend growth Source: GFICC Investment Strategy Team. As of March 13, 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. 11

13 2014 Asset Allocation considerations Above Trend: Inflation protection, shorter duration with floating rate credit and real / risk assets Sub Trend Growth: Longer duration credit strategies and real / risk assets; low correlation assets Recession: Longer duration moving up in credit quality; low correlation assets Crises: Flight to quality! Asset Class Fixed Income/Credit Equity/Alternatives Scenario Likelihood Gov Treas TE Muni Gov Bonds EM Corp Bonds IG Struct Products Corp Bonds EM Liquid Loans Direct Lending CML Infra Debt Corp Bonds HY Mezz HD Eq HF PE RE Infra Eq Above Trend Sub Trend Recovery Low High Recession Very Low Crisis Very Low Most Preferred Least Preferred For each strategy additional considerations are the marginal impact on portfolio diversification, implications for liquidity management and liability matching, regulatory and rating agency capital requirements, and incremental earnings volatility. Source: J.P. Morgan Asset Management. Opinions and statements of financial market trends that are based on current market conditions constitute our best judgment and are subject to change without notice. Allocations are for illustrative purposes only, actual account allocations may differ. The holdings/allocations listed above are not named as recommendations to buy or sell. 12

14 Investment themes 2Q2014 Generating desired returns and book yields on a risk adjusted basis Balance incremental yield from term premium with potential losses when rates increase Consider investing in credit, structured assets, and emerging markets to help enhance return and achieve desired book yield High Yield/Bank Loans Non-agency RMBS Select emerging market credits Use the structural advantage of your liabilities to earn liquidity premium Private debt vs. public debt to earn higher yield and exploit capital structure Private equity vs. public equity to reduce short term book yield volatility and help enhance long-term risk adjusted return Use risk budget efficiently and defend against rising rates and inflation Smart equity strategies Real assets Infrastructure 13

15 J.P. Morgan Asset Management 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. 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. 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. J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. Limitations of reliance It should be noted that a quantitative framework is only one input into the asset allocation process and cannot replace the professional skill and judgment necessary to arrive at an appropriate strategy. The importance of allowing for subjective and often qualitative factors in decision making remains. Further, there is always an explicit need to account for the investor s specific circumstances, including liabilities, when arriving at an appropriate portfolio allocation The model used here to calculate asset returns is a simplified statistical representation of the complex interaction of economic variables and asset returns. The model as well as its outputs are provided for illustration/discussion purposes only and are subject to significant limitations. While it produces specific return estimates for asset classes and portfolios of assets in each scenario, these estimates are subject to uncertainty and error. For example, changes in the structural specification of the model or the historical data from which it is estimated will result in different implications for asset class returns. The model provides expected returns for each asset class conditional on an economic scenario; actual returns in the event the scenario comes to pass could be higher or lower, as they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. References to future returns for either asset allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making a decision. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. The model assumptions are passive only they do not consider the impact of active management. A manager s ability to achieve similar outcomes is subject to risk factors over which the manager may have no or limited control. Prospective investors should review carefully the risk factors ASCd with any investment. No representation is made that a manager will achieve the results similar to those of the model output. Actual portfolio results could be higher or lower than the model outputs shown herein. Given the complex nature of investing in various market conditions, investor should rely on their own judgment and work with an investment professional when building long term strategic allocations. Please note that all information shown here in is based on proprietary analysis. This information is not intended as a recommendation to invest in any particular asset class or as a promise of future performance. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on for, accounting and legal or tax advice. Copyright 2014 JPMorgan Chase & Co. All rights reserved. 14