j.p. morgan asset management global real assets · 10/29/2014 · yield is derived from cbre eu-15...

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STRICTLY PRIVATE | CONFIDENTIAL

October 29, 2014

J.P. Morgan Asset Management Global Real Assets

Presentation to CFA Montréal

Bernie McNamara, Executive Director – Global Real Assets +1-212-648-2099, [email protected]

https://www.cfamontreal.org/en/home



2.4% 2.7%

5.1% 5.1% 5.4% 6.0%

8.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Canada Fixed Income

Canada Equities Europe Core RE U.S. Core RE Canada Core RE U.S. Core+ RE U.S. RE Mezzanine Debt

Higher Current Income Potential than Traditional Assets1

Link to Emerging Market Growth3

Lower Volatility than Equities2

Inflation Protection When It Matters4

1Barclays Capital US Agg Yield-to-Worst, S&P 500 Dividend Yield, FTSE/EPRA NAREIT Global REITs Dividend Yield, J.P. Morgan US Value-add RE strategy trailing 12-month income return, J.P. Morgan US Core RE strategy trailing 12-month income return, Europe core real estate yield is derived from CBRE EU-15 prime yield data, Canada real estate is derived from the trailing 12-month income return on the IPD Canada All Property Index (denominated in local currency), J.P. Morgan US Core-plus RE strategy trailing 12-month income return, J.P. Morgan US RE Mezzanine Debt strategy average portfolio yield. As of June 2014. 2MSCI World Index, Global Real Assets Portfolio is representative of an equally-weighted portfolio of: US Core RE (NCREIF – ODCE), Europe Non-core RE (CBRE/IPD), and Asia Core RE (JLL and JPMAM-GRA Modeled). As of December 31, 2013. All returns are in local currency. 3Bloomberg, IMF, JP Morgan. Data as of 2Q2014. 4Bloomberg, Barclays Capital, Standard & Poors, S&P GSCI (Standard & Poor’s Goldman Sachs Commodity Index), NCREIF, Global Financial Data, and J.P. Morgan Asset Management GRA Research. Past performance is no guarantee of future results.

Real GDP growth rates Nominal return and inflation indices, 1971 to 1985

Setting context: solutions from private real estate to investor challenges

1

Traditional Assets

Corporate Debt

S&P 500

Infrastructure

US CPI

Commodities

Real Estate

0.5

1.5

4.5

13.5

Log

Scal

e

-30%

-20%

-10%

0%

10%

20%

30%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Qua

rterly

Tot

al R

etur

ns

MSCI Global Equities Equally Weighted Real Estate

0

2

4

6

8

10

12

1990-99 2000-09 2010-11 2012 2013-2019E

Canada United States Europe Developing Asia India China



2

Why consider going global within a private real estate allocation?

Source: Bloomberg, S&P TSX (Canada Equities – local currency), DEX Bond Universe Index (Canada Fixed Income – local currency – given the lack of historical data, the Barclays US Agg Index was used to represent Canada Fixed Income returns for the years 1994-1997), NCREIF, IPD, CBRE, Wilshire, UBS, Jones Lang LaSalle, Clarkson Research, and JPMAM GRA Research estimates. For the following blended portfolios, the portfolio constituents are representative of their respective passive weights: Developed Markets Value Added RE (US Value Added RE and Europe Value Added RE), and Developed Markets Opportunistic RE (US Opportunistic RE and Europe Opportunistic RE). Europe and Asia data is in local currency. Annual data as of December 2013. Note: Unlevered series were levered to reflect how institutional investors typically access the representative asset classes. Past performance is not indicative of future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss. The above table is for illustrative and discussion purposes only.

High (+1.0) Low (Negative)

Low correlations vs. financial assets and between real estate and other real asset categories and geographies

1994 – 2013 Canada Equities

Canada Fixed Income

Canada Real Estate

U.S. Core Real Estate

Europe Core Real Estate

OECD Core/ Core+

Infra

Dev Mkts Opp RE

Timber Farmland Asia Infra Emerging Asia RE

Canada Equities 1.0

Canada Fixed Income -0.3 1.0

Canada Real Estate 0.1 -0.4 1.0

U.S. Core Real Estate 0.1 -0.1 0.8 1.0

Europe Core RE 0.4 -0.1 0.7 0.7 1.0

OECD Core/Core+ Infra 0.0 -0.2 0.2 0.2 0.1 1.0

Dev Mrkt Opp RE 0.5 -0.1 0.7 0.8 0.9 0.1 1.0

Timber 0.0 0.3 -0.1 -0.1 0.0 -0.2 0.1 1.0

Farmland 0.1 -0.3 0.3 0.0 0.3 -0.4 0.3 0.5 1.0

Asia Infrastructure 0.1 -0.3 0.3 0.2 0.1 0.5 0.2 -0.3 0.0 1.0

Emerging Asia RE 0.2 0.2 0.1 0.1 0.3 -0.4 0.4 -0.1 0.2 0.2 1.0



0%

1%

2%

3%

4%

5%

6%

Source: J.P.Morgan, CBRE, IPD; data as of June 2014.

Yield spreads in Greater London

Yield spreads have already started to compress in the

best markets

European Real Estate: extreme risk aversion has created broad mispricing of asset-level risk

3

Spread between prime and secondary property yields in the UK



European Real Estate: is there too much capital chasing too few opportunistic deals?

Source: Preqin, JPMorgan; data as of June 2014

Capital raised by European close-ended property funds

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014

€ bi

llion Opportunistic

Value Added

Core

Debt

4



Borrower has lost most or all of its equity

Bank has not injected any capital over the last 5 years

Occupiers have lost confidence in their landlord

The asset can be turned around by active asset management

There is a clear institutional exit once asset is de-risked

European Real Estate: over €250 billion of distressed assets, but not all distressed assets are the same

€250bn of distressed assets

Overleveraged Core Assets in suspended animation Obsolete

Place Vendome Illustrative Opportunity – UK Industrial Spanish residential

These examples are included solely to illustrate the investment process and strategies which have been utilized by the manager. Please note that all of these properties have not been selected for investment and do not necessarily represent future investments that the manager will make. There can be no guarantee of future success.

5



Then and Now: 2007 showed that too much credit can lead to asset bubbles / financial stress

+12%

(+) (–)

+7%

+7%

+3%

-10% -14%

Source: J.P. Morgan Asset Management, Institute of International Finance, BIS. As of December 31, 2013, but 2007 data is from 4Q 2007. The Credit/GDP gap estimates changes in the ratio of credit as a percentage of GDP relative to trend. This measure was identified by the Bank for International Settlements as a reliable warning signal of possible financial stress and/o asset bubbles.

Lower risk

Higher risk of financial stress and/or asset bubbles

West looked risky on this measure

Asia looked less at risk…

-1%

+18%

*The Credit/GDP gap estimates changes in the ratio of credit as a percentage of GDP relative to a long-term trend. This measure was identified by the Bank for International Settlements as a reliable warning signal of possible financial stress and/or asset bubbles.

6



Then and Now: 2013 – a different story particularly for China

(+) (–)

-9%

-22%

+0%

+24% +4% -13%

Lower risk

Higher risk of financial stress and/or asset bubbles

2007

Source: J.P. Morgan Asset Management, Institute of International Finance, BIS. As of December 31, 2013, but 2007 data is from 4Q 2007. The Credit/GDP gap estimates changes in the ratio of credit as a percentage of GDP relative to trend. This measure was identified by the Bank for International Settlements as a reliable warning signal of possible financial stress and/o asset bubbles.

+3%

Among major Asia economies, only China

looks at risk

The West now looks less at risk

-7%

7



Asia Real Estate: cap rate spreads for prime/core office properties versus spreads at the peak reflect a mixed environment in Asia

Source: J.P. Morgan Asset Management, JLL-REIS, CBRE, NCREIF, Bloomberg. Use capitalization rate data for prime / core office properties. Use 5yr forward estimate for the 10-year sovereign bond yield for each country as implied by the 5-year forward of the 10-year sovereign bond. Japan is the Tokyo 5-Ku market; Core Europe are 5 cities in Paris and Germany; Australia is Sydney CBD; Korea is Seoul CBD; the U.S are the 5 Gateway cities of Boston, DC, SF, NY and LA; UK is London-Central; China is Beijing CBD and Shanghai CBD; Singapore is Raffles, and HK is the entire market. Markets are weighted by capital values if required. The peak is determined for each country as the trough capitalization rates in 2007/08.

Spreads in basis points of Office capitalization rates to the 10-year sovereign bond rate in five years (as implied by the 5-year forward of the 10-year sovereign bond)

Wider spreads versus peak Tighter spreads versus peak

92

(7) (45)

22

(99) (125)

381

163

65

209 168 161

114

53

(14)

145

16 10

(200)

(100)

-

100

200

300

400

500

Japan Core Europe Australia Korea US UK China Singapore HK

Bas

is P

oint

s (b

ps)

2007/08 Peak 2014

8


Real Assets Investment Trends and Investment Opportunities



What if interest rates rise? Low historical correlation to interest rate movements and still healthy comparative spreads bode well for private RE

Real estate cap rates have exhibited low correlation to interest rates due to the offsetting effect of cash flow growth

10

Chart on the left: U.S. Federal Reserve, NCREIF (NPI), Barclay’s Capital, J.P. Morgan Asset Management. Quarterly data for the period from 1q1981 through 1q2014. Chart on the right: J.P. Morgan, Bloomberg; data as of July 2014.

R² = 0.02

-3%

-2%

-1%

0%

1%

2%

3%

-6% -4% -2% 0% 2% 4% 6%

YoY Change in 10 yr Treasury (X axis) vs. NPI Cap Rates (Y axis) 1q 1981 to 1q 2014

J.P. Morgan’s core unlevered IRRs still exhibit a relatively wide spread (in bps) to comparable fixed income assets

184

84

-185

329 324

100

-200

-100

0

100

200

300

400

5 year forward of 10 yr Treasury

BBB bonds High-yield bonds

Sep-2007

Jul-2014



What if inflation rises? Real assets provided inflation protection the last time it really mattered

Corporate Debt

S&P 500

Infrastructure (Regulated utilities)

US CPI

Commodities

US Direct Real Estate

0.5

1.5

4.5

13.5 Nominal return and inflation indices, 1971 to 1985

Log Scale

Sources: Bloomberg and J.P. Morgan Asset Management GRA Research

Real assets outperformed CPI and both bonds and equities, proving the inflation-hedging capabilities

11


Risk Factors

The following summarises certain key risk factors, as will be set out, along with other risk factors that pertain to the various real assets strategies detailed/mentioned in this presentation. Prospective investors should carefully consider the summaries below in conjunction with the risk factors sections of each of the Fund’s Memorandum and relevant Feeder Memorandum and should consult with their own financial, legal and tax advisers before deciding whether to invest in the Funds or any Feeder Vehicle with respect thereto. Some of the risk factors outlined below may not be applicable to all of the Funds in this presentation. For complete information on the risks associated with a particular Fund or Feeder Entity, please refer to the Offering Memorandum for that respective Fund. General: There can be no assurance that any Fund or the GRA – Omni Program will succeed in meeting its investment objective or target return or that there will be any return on capital or of the original capital invested. Investors will only have recourse for any losses suffered to the assets of the particular Sub-fund in which they invest. Risks Relating to the Fund’s Investment Objective and Investment Strategy. An Investment in the GRA – Omni Program or any underlying Fund is not a bank deposit, is not insured by the U.S. Federal Deposit Insurance Corporation, and is not the obligation of, or guaranteed by, JPMIM, JPMorgan Chase Bank, N.A. or any of their affiliates. An Investment in the Fund involves investment risks, including the possible loss of the principal amount invested. There can be no assurance that a Fund will achieve this Investment Objective. Although the Investment Adviser will endeavor to recommend Investments that are consistent with the Investment Objective, investments in real estate and real estate-related assets involve an inherently greater risk of loss of capital than various other types of investments, due in large part to the risk factors set forth in this Booklet and in Section V of the Memorandum. Therefore, prospective investors must recognize that, notwithstanding the Investment Objective, the Fund may be unable to preserve an Investor’s capital through its program of investments in real estate.

Lack of liquidity: Interests in the GRA – Omni Program or any Fund and each Feeder Entity will not be transferable except with the consent of the Management Company, which consent may be withheld in its absolute discretion. Investors may not withdraw capital from the Fund or any Feeder Entity once they have invested, except by submitting a repurchase request. Repurchase requests will, however, only be met at the absolute discretion of the Management Company. Accordingly, investors in the Fund or a Feeder Entity will have no right to have their interests repurchased. Investor’s may be required to bear the financial risk of their investment in the Fund or a Feeder Entity for an indefinite period of time. If an investors interest is repurchased or transferred within the first three years following the acceptance of the investor into the Fund or any Feeder Entity, a Repurchase Fee will be payable. The repurchase feature differs for each Fund.

Leverage: The use of borrowing by a Fund and/or the Feeder Entities may create greater potential for loss as the available assets of the Fund and Feeder Entities may be insufficient to meet repayments and a Fund and Feeder Entities may not be able to refinance existing borrowing on equal terms or at all.

Distributions: An investor will only receive cash distributions from a Fund or Feeder Entity in which it is invested if it elects to do so. If an investor does not so elect, distributions will be reinvested on its behalf in the Fund or Feeder Entity, as the case may be. However, tax may still be payable by the investor on such re-invested distributions. Distributable cash flow will be accumulated in relation to any accumulation units issued.

Risks associated with real estate and infrastructure investments: An investment in the GRA – Omni Program or any Fund or a Feeder Entity will be subject to certain risks associated with the ownership of real estate and infrastructure related investments. These risks include, among others, adverse changes to national or international economic conditions; increase in competition; changes in interest rates, property taxes and other operating expenses; legal fees and expenses incurred to protect the Fund’s investments; changes in planning laws and other governmental rules and fiscal policies; casualty or condemnation losses; uninsured damages from natural disasters and acts of terrorism and limitations on and variations in rents. These factors could give rise to fluctuations in occupancy rates, rent schedules or operating expenses. In addition, investments in real estate and infrastructure tend to be long-term and illiquid. The Fund may also invest in real estate and infrastructure related securities and other real estate-related investments, which will involve risks in addition to those set out above.

Risks to Returns from Real Estate Investments Other than Properties. A Fund may invest in investments other than direct real estate investments. The performance of those investments will be inherently linked to the value of the real estate from which they derive their inherent value. Accordingly, all of the risks which apply in respect of direct real estate described above and are further be described in that Fund’s Memorandum will, to varying degrees, impact on the value of any other investments the Fund makes.

Environmental risks: The Funds may become liable for substantial costs arising from remedying environmental problems associated with the properties it holds. The costs of any such remediation may exceed the value of the relevant property and/or the aggregate assets of the Fund. Environmental problems may also affect the use and operation of such properties.

Currency risk and hedging: The base currency may vary for select Funds; refer to the respective Fund’s Memorandum. Investors may be subject to fluctuations in currency exchange rates. Some Funds may enter into transactions to hedge currency risk. However, there can be no assurance that such hedging techniques will be successful.

Diversification: A possible limited degree of diversification means the performance of a Fund may be more susceptible to a single economic, political or social event. The GRA – Omni Program does not guarantee diversification protection.

Changes in Tax Regimes: Changes in tax legislation, administrative practices or understandings in any of the countries in which a Fund invests or in which the investor resides, or changes in tax treaties negotiated by those countries, could adversely affect the returns from that Fund.

12


Risk Factors continued Lack of operating history: A Fund and Feeder Entities, when formed, will have no operating history. The past performance of other investments made by J.P. Morgan Asset Management or its affiliates are not an indication of the future results of an investment in that Fund or Feeder Entities.

Conflicts of interest: JPMorgan Chase & Co. engages in activities in the normal course of its investment banking, asset management and other businesses that may conflict with the interests of any Fund, the Feeder Entities and/or their respective investors.

Highly Volatile Markets: The prices of securities and commodities contracts and all derivative instruments, including futures and options, can be highly volatile. Price movements of forward, futures and other derivative contracts in which an Underlying Investment’s assets may be invested are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. An Underlying Investment also is subject to the risk of the failure of any exchanges on which its positions trade or of their clearinghouses.

Risks Associated with Investments in Maritime Assets Generally: An investment in the Strategy is subject to certain risks associated with the ownership of maritime assets and the maritime industry in general, including: the burdens of ownership of maritime-related assets; local, national and international economic conditions; the supply and demand for assets; the financial condition of operators, buyers and sellers of assets; changes in interest rates and the availability of credit which may render the sale or refinancing of assets difficult or impracticable; changes in environmental laws and regulations, planning laws and other governmental rules and fiscal and monetary policies; environmental claims arising in respect of assets acquired with undisclosed or unknown defects or problems resulting in environmental liabilities or as to which inadequate reserves have been established; changes in tax rates; changes in energy prices; negative developments in the economy that depress commercial transportation activity; uninsured casualties; force majeure acts, terrorist and piracy events, under-insured or uninsurable losses; and other factors which are beyond the reasonable control of the Strategy and the Investment Adviser. In addition, as recent experience has demonstrated, maritime assets are subject to long-term cyclical trends that give rise to significant volatility in values.

Risks of Fund of Funds Structure: Although J.P. Morgan Investment Management will receive information from each Underlying Investment regarding its investment performance and investment strategy, J.P. Morgan Investment Management may have little or no means of independently verifying this information. An Underlying Investment may use proprietary investment strategies that are not fully disclosed to JPMIM, which may involve risks under some market conditions that are not anticipated by J.P. Morgan Investment Management . The performance of the Fund and the Master Fund depends on the success of J.P. Morgan Investment Management in selecting Underlying Investments for investment by the Fund and the Master Fund and the allocation and reallocation of Fund’s and the Master Fund’s assets among those Underlying Investments. Past results of portfolio managers selected by JPMIM are not necessarily indicative of future performance. No assurance can be made that profits will be achieved or that substantial losses will not be incurred. Investment decisions of the Underlying Investment are made by the portfolio managers independently of each other so that, at any particular time, one Underlying Investment may be purchasing shares of an issuer whose shares are being sold at the same time by another Underlying Investment.

A Fund or a Master Fund may not be able to withdraw from an investment fund except at certain designated times, limiting the ability of J.P. Morgan Investment Management to withdraw assets from an investment fund that may have poor performance or for other reasons. Although a Fund and a Master Fund may invest in investment funds managed by affiliated portfolio managers, such managers owe a duty to their respective investment funds, not the Fund and the Master Fund. An affiliated portfolio manager may not allow the Fund or the Master Fund to withdraw from an Investment Fund if it determines that a withdrawal would not be in the best interests of the investment fund. Certain investment vehicles will have the right to automatically redeem part of the Fund’s or the Master Fund’s interest in such investment vehicles in the event that the Fund’s or the Master Fund’s interest exceeds a specified percentage. Such redemptions may occur without notice.

Absence of Regulatory Oversight: A Fund is not registered as an investment company under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”), in reliance upon an exemption available to privately offered investment companies and, accordingly, the provisions of the Investment Company Act (which, among other things, require investment companies to have a majority of disinterested directors, provide limitations on leverage, limit transactions between investment companies and their affiliates and regulate the relationship between the Adviser and the investment company) are not applicable.

Legal, Tax and Regulatory Risks: Legal, tax and regulatory changes could occur during the term of a Fund and the Master Fund which may adversely affect a Fund or Master Fund. For example, the regulatory and tax environment for derivative instruments is evolving, and changes in the regulation or taxation of derivative instruments may adversely affect the value of derivative instruments held by the Master Fund and the ability of the Master Fund to pursue its trading strategies. Similarly, the regulatory environment for highly leveraged investors is evolving, and changes in the direct or indirect regulation of highly leveraged investors may adversely affect the ability of a Fund or the Master Fund to pursue its trading strategies. During any period in which the assets of the Master Fund are considered “plan assets” subject to the fiduciary provisions of ERISA, the Adviser will be considered to be an ERISA fiduciary with respect to those assets. These fiduciary requirements may cause the Adviser to take actions, or to decline to take actions, consistent with its fiduciary duties under ERISA which may not be in the equal best interest of all the Investors. In particular, the Adviser may be required to take actions that are not in the interest of non-Benefit Plan investors or to refrain from actions that are in the interest of non-Benefit Plan Investors. During any period in which the assets of the Master Fund do not include “plan assets” subject to the fiduciary provisions of ERISA, the Adviser will not be considered an ERISA fiduciary with respect to such assets or be obliged to observe the fiduciary requirements of ERISA or the prohibited transaction rules of ERISA or the Code.

No offer: This presentation is being communicated solely for the purposes of ascertaining levels of interest for the GRA – Omni Program or a particular Fund and Feeder Entities. Accordingly, this presentation is not, and should not be construed as an offer to accept investment in the Fund or Feeder Entities. The GRA – Omni Program is not a fund or investment strategy, but an investment and administrative platform that can provide diversified access to multiple Global Real Assets strategies in a one stop portfolio solution.

13


Important Disclaimers

This document is confidential and intended only for the person or entity to which it has been provided. Any reproduction, retransmission, dissemination or other unauthorised use of this document or the information contained herein by any person or entity without the express prior written consent of J.P. Morgan Asset Management is strictly prohibited. It is being provided solely for information and discussion purposes and is subject to any updating, completion, modification and amendment without reference or notification to you.

This document is intended to report solely on investment strategies and opportunities identified by J.P. Morgan Asset Management. Additional information is available upon request. Information herein is believed to be reliable but J.P. Morgan Asset Management does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment and are subject to change without notice. It is not intended and should not to be taken as an offer or solicitation to buy or sell any security or interest to anyone in any jurisdiction or to acquire any security or interest. Furthermore, nothing in this document constitutes or should be taken as an advice or recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. Any investment decision should be based solely upon the information contained in the product’s offering materials. J.P. Morgan Asset Management and/or its affiliates and employees may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as underwriter, placement agent, advisor or lender to such issuer. The investments and strategies discussed herein may not be suitable for all investors; if you have any doubts you should consult your J.P. Morgan Asset Management Client Adviser, Broker or Portfolio Manager. You should consult your tax or legal adviser about the issues discussed herein. The investments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. Any forecasts, figures, opinions, views and investment techniques, unless otherwise stated, are those of the investment manager/adviser at the time of this document. They are considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. They may be subject to change.

Any investment in the Fund will be accepted solely on the basis of the Memorandum and any applicable Charter Documents for the Fund. Accordingly, this presentation, in whole or in part, will not form the basis of, and should not be relied upon in connection with, any subsequent investment in the Fund (when established and offered). To the extent that any statements are made in this presentation, they are qualified in their entirety by the terms of the Memorandum and other Fund documents. A copy of the Memorandum and any Charter Documents must be reviewed prior to making a decision to invest in the Fund. You are urged to read all of the offering materials prior to any application to subscribe into the product. Furthermore you should note that the Fund may not be authorised or its offering may be restricted in your jurisdiction; it is the responsibility of every person reading this document to satisfy himself as to the full observance of the laws of the relevant jurisdiction. You are also advised to take all necessary legal, regulatory and tax advice on the consequences of an investment in the Fund.

Investments in alternative investments, such as those described herein, may not be suitable for certain investors and should not constitute a complete investment programme. Any investments should only be made by those who fully understand and are willing to accept and assume the risks involved with alternative investments. Alternative investments often engage in leverage and other investment practices that can be extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested. Moreover, there can be no assurance that the investment strategy of the product will be achieved.

The Portfolio Target Return is based on current available investment opportunities and predictions of the real asset market and economic conditions generally. Because the Fund has an indefinite term and current estimates of market conditions are likely to change over time, prospective investors should note that the actual realized return over the term of the Fund may vary materially from the Portfolio Target Return. The Investment Adviser reserves the right to amend the Portfolio Target Return without the consent of Investors in the event the Investment Adviser determines, in its absolute discretion, that such amendment is warranted by a material change in circumstances. While under no obligation to do so, the Fund may enter into transactions or investments in relation to any or all of currency exchange, interest rate, inflation rate, commodity or other risks in connection with investments. There can be no assurance, in such cases, that (a) such hedges will (i) be available, (ii) be available at a reasonable cost, (iii) be sufficient to mitigate the relevant risk or (iv) actually eliminate the risk of fluctuation in rates being hedged or (b) counterparties to any hedging transaction would perform as expected. There is also no certainty that any hedging transaction will prove beneficial to the Fund. The Fund may become liable for substantial costs from remedying environmental problems associated with the properties it holds. The costs of any such remediation may exceed the value of the relevant property and/or the aggregate assets of the Fund. Environmental problems may also affect the use and operation of such properties.

The statements herein containing words such as "may," "will," "should," "expect," "anticipate," "estimate," "intend," "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology are forward-looking statements and not historical facts. For example, the Portfolio Target Return noted herein is a forward-looking statement. Due to various risks, uncertainties and assumptions, including, without limitation, those set forth herein and in the Memorandum, actual events or results or the actual performance of the Fund may differ materially from those reflected in or contemplated by such forward-looking statements. Among the factors that could cause actual results to differ materially are: the general economic climate, inflationary trends, competition and the supply of, and demand for, property investments in the target markets, interest rate levels, the availability of financing, potential environmental liability and other risks associated with the ownership, development and acquisition of real assets, changes in the legal or regulatory environment, and greater than anticipated construction or management costs.

14

For Institutional/Professional Clients only – not for Retail use or distribution


Important Disclaimers continued

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J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is regulated by the Financial Conduct Authority; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Switzerland by J.P. Morgan (Suisse) SA, which is regulated by the Swiss Financial Market Supervisory Authority FINMA; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, all of which are regulated by the Securities and Futures Commission; in India by JPMorgan Asset Management India Private Limited which is regulated by the Securities & Exchange Board of India; in Singapore by JPMorgan Asset Management (Singapore) Limited, which is regulated by the Monetary Authority of Singapore; in Japan by JPMorgan Securities Japan Limited, which is regulated by the Financial Services Agency; in Australia by JPMorgan Asset Management (Australia) Limited, which is regulated by the Australian Securities and Investments Commission; in Brazil by Banco J.P. Morgan S.A., which is regulated by The Brazilian Securities and Exchange Commission (CVM) and Brazilian Central Bank (Bacen); and in Canada by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia and Ontario. This communication is issued in the United States by J.P. Morgan Investment Management Inc., which is regulated by the Securities and Exchange Commission. Accordingly this document should not be circulated or presented to persons other than to professional, institutional or wholesale investors as defined in the relevant local regulations. The value of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Copyright © 2014 JPMorgan Chase & Co. All rights reserved.

15

For Institutional/Professional Clients only – not for retail use or distribution