download the PDF - JP Morgan Asset Management

MARKETINSIGHTSQuarterly Perspectives2 Developed market equities:It’s (not just) the economy, stupidTaking a stance on developed market equitiesWith 80% of MSCI AC World Index’s market capitalization in the U.S., Europe and Japan, itis important that investors take a position in these markets in order to achieve somediversification in their portfolios. In 2014, the U.S. came away as a clear winner even asinvestors worried about valuations throughout the year. Japanese equities were given anew lease on life by the surprise announcement of additional money printing by the Bankof Japan (BoJ) at the end of October. Europe was dragged down by weak economictrends, despite the European Central Bank’s (ECB) pledge to re-engage in quantitativeeasing. In this article, we look at these markets beyond the prevailing sentiment towardstheir domestic economies.U.S.: Sturdy economic growth with profitsOut of the three developed economies, the U.S. has the most robust macroeconomicbackdrop. After several years of de-leveraging by both the household and corporatesectors, the economy now has a stronger footing to expand. This boosts the FederalReserve’s (Fed) confidence in going ahead with monetary policy normalization, includingstarting to raise interest rates in 2015, albeit at a gradual pace.The corporate sector has also delivered steady earnings growth. S&P 500 earningsgrowth in Q3 2014 was around 10% year-on-year, with margin expansion contributingmore than revenue growth, as shown on page 34 of the Guide to the Markets – Asia.OVERVIEWU.S. equities led the developed market(DM) equities asset class in 2014. Thisreflected solid economic growth andconsistent corporate earnings growth.In 2015, the outlook for U.S. equitiesremains well supported, even thoughthis is a well-known story. Pessimism onEurope due to its economic downturnignores the fact that the region isgetting more help from low interestrates, a weakening euro and reducedfiscal austerity.Japanese yen depreciation is definitelyhelpful for Japanese equities, butcompetitive companies and a drive forbetter corporate governance should alsobenefit equity investors.United States: Sources of Earnings and Corporate ProfitsU.S. GDP and S&P 500 Year-over-Year EPS GrowthGrowth broken into revenue growth and margin expansion, quarterly50%25%0%Margin Share of EPS GrowthRevenue Share of EPS Growth34GTM - AsiaClickYear-over-year % changeGDP growth6%4%2%0%U.S. earnings growth is stilllargely derived from marginexpansion, rather than revenuegrowth.-25%-2%-4%Eq quities-50%-6%'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14S&P 500 Sector Forward EPS GrowthBuybacks and M&A ActivitiesEPS Growth (%) as of 12/2014USD BillionsUSD Billions, 4-quarter moving average1,60018030% 2014M&A Activities*Buybacks21% 20151,20012%1203%800-6%60-15%4000'00 '02 '04 '06 '08 '10 '12 '140Source: FactSet, Standard & Poor’s, BEA, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”(Top) EPS based on operating earnings per share. 2Q14 figures are Standard & Poor’s estimates and based on company filings as of 30/6/14. 1Q09, 1010 and 2Q10 reflect -101%, 92% and 51%growth, respectively, in operating earnings and are cut off to maintain a more reasonable scale.* M&A activity is the quarterly value of deals completed.Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 344 | Quarterly Perspectives: 1Q 2015

This consistent earnings momentum has helped to address concerns about highvaluation and continues to push S&P 500 to record highs. Given the U.S. growthperformance, especially in corporate capital expenditures, it is reasonable to expectearnings growth momentum to extend into 2015.What are the challenges to U.S. equities? Ongoing U.S. dollar (USD) strength could putsome pressure on companies’ overseas profits when translated back into USD. Thecurrent bout of weak oil prices could also hurt the material and energy sectors, althoughthis helps consumption by raising disposable income. The lack of revenue contribution tooverall earnings growth is also a disappointment, especially as company profit marginsare already at cyclical highs. Nonetheless, we believe the historical relationship betweeneconomic growth and revenue growth should start to play out more prominently in 2015.Europe: Downside protection to counter downbeat sentimentEuropean equities’ disappointing performance in 2014 was largely brought on byrenewed concerns over the region’s economy returning to contraction after a false dawnearlier in the year. This pessimism on poor economic performance continues to be one ofthe biggest challenges for European equities, but there are several factors that canprovide some support in the new year.The ECB’s pledge to push ahead with quantitative easing has yet to kick-start an upturnin the credit cycle. However, this has already started a push to weaken the euro, as wellas pushing interest rates lower, as illustrated on page 28 of the Guide to the Markets –Asia. A cheaper euro helps exporters to improve their competitiveness overseas or allowthem to enjoy bigger profits from overseas sales. Lower interest rates help to reducedebt servicing costs. Meanwhile, fiscal austerity measures, either via higher taxes orspending cuts, are being reduced and, hence will be less of a drag on economic growth.These favorable conditions may not bring a V-shape recovery to Europe, but they shouldprovide some support to corporate profitability in the medium term.conomyGlobal EcEurope: Monetary PolicyECB Balance Sheet and Euro REERReal broad effective exchange rate (REER)EUR Trillions115 ECB Balance Sheet 1.2(inverted scale)110 1.61052.0100Euro REER95 2.890'08 '09 '10 '11 '12 '13 '142.43.2ECB Bank Lending Survey ClickSupply and DemandNet % of banks reporting positive credit demand / supply28GTM - Asia80%StrongerHousehold Credit DemandDemand /Household Credit Standards60%TighteningCorporate Credit DemandCorporate Credit Standards40%Credit20%0%-20%WeakerDemand /-40%LooseningCredit-60%'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14The ECB’s actions have yet toturn the region’s credit cyclebut low interest rates and aweakening euro are helpful.Sovereign Funding Costs10-year benchmark bond yields (%)15%12%9%6%3%0'12 '13 '1431/12/14 31/12/14Greece 9.4% UK 1.8%Portugal 2.7% Spain 1.6%U.S. 2.2% France 0.8%Italy 1.9% Germany 0.5%Eurozone Bank LendingYear-over-year % change15% Corporates12%9%6%3%0%-3%TotalHouseholds-6%'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14Source: ECB, Bloomberg, FactSet, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”(Bottom Left) Greece’s 10-year benchmark bond yield reached a peak of 32% in Jan 2012 and is cut off to maintain a more reasonable scale.Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 28J.P. Morgan Asset Management | 5

MARKETINSIGHTSQuarterly PerspectivesJapan: Looking beyond the weak yenWhile the BoJ’s additional asset purchases have driven the Japanese yen lower andJapanese equities higher, this is not the only reason for investing in Japanese equities.Admittedly, there are many long-term structural issues troubling the Japaneseeconomy, including demographics, fiscal sustainability and structural competitiveness.Nonetheless, we still see some interesting opportunities in Japanese equities.Despite Japan’s struggle to regain growth momentum and shrug off disinflation,Japanese companies have experienced strong earnings growth. Earnings revisions havebeen favorable in the past 18 months, as shown in the top chart on page 32 of theGuide to the Markets – Asia. Return on equity (ROE) and profit margins have alsoimproved. While investors may attribute this to a weak yen, this neglects the fact thatthere are some globally competitive companies in technology and robotics, above andbeyond some of the household names in automobiles and consumer electronics.The change in the USD 1.2trn asset allocation of the Government Pension InvestmentFund (GPIF) in favor of local equities will also help, but this is a long-term adjustmentinstead of a near term boost. The push for better corporate governance, includingproviding shareholders with a better return on equity, could be more critical to thelong-term outlook for Japanese equities amid economic malaise.INVESTMENT IMPLICATIONSU.S. equities seem to be an obviouschoice for investors in the developedmarket equity asset class, given theeconomic outlook and good corporateearnings performance.We believe that European and Japaneseequities can also benefit from domesticfactors even though headline growth ismediocre. Pessimism on Europe neglectssome of the downside protection thatthe central bank is providing. For Japan,a weak yen is a great help to corporateprofits, but a drive to improve corporategovernance also deserves some credit.Global Earnings MomentumGlobal Equities Earnings MomentumEarnings Revision (Upward Revision – Downward Revision / Total Revision), 3-month moving average0.40.20.0-0.232GTM - AsiaClickEarnings Revision Since Jan 2013Latest 3 ObservationsJapanese companies have enjoyedpositive earnings revisions inthe past 18 months, withimprovement in ROE and netmargins.Eq quities-0.4S&P 500 TOPIX Europe Asia ex-JP EMForward Return on Equity (%)Global Net Margins (%)20%Net income / sales16%12%8%4%Asia ex-JapanJapanEuropeU.S.EM12%10%8%6%4%2%0%JapanEMEuropeU.S.Asia ex-Japan0%'07 '08 '09 '10 '11 '12 '13 '14 '15-2%'07 '08 '09 '10 '11 '12 '13 '14 '15Source: S&P, MSCI, FactSet, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”(Top) Earnings revision is calculated by taking the difference between the number of analyst upgrades and analyst downgrades, divided by the totalnumber of analyst revisions on a monthly basis. Earnings revision above 0 would mean that there were more upgrade revisions than downgraderevisions. Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 326 | Quarterly Perspectives: 1Q 2015

3 Emerging markets: Hard dollar, soft oilInvestment trends in emerging markets amid strong dollarand low oil pricesA strong U.S. dollar and weak oil prices were two important themes surrounding emergingmarkets at the end of 2014. Many investors fear that a strong U.S. dollar and the FederalReserve’s normalization could triggered financial crisis in emerging markets, similar tothose in the 1990s. Meanwhile, a sharp drop in oil prices could also undermine oilproducers, especially Russia and the Middle East, as well as hurt broader commodityproducers. We recognize that some emerging markets are vulnerable in this environment,but differentiation is going to be key to capturing investment opportunities.Page 60 of the Guide to the Markets-Asia shows the dollar index, USD movements againsta trade weighted basket of currencies. This shows that, despite the surge in the USDagainst the Japanese yen and euro in 2014, the current USD index is still only at the top ofthe range for the past 10 years, and potentially still has some way to go before beingconsidered overvalued. This USD strength is partly driven by favorable interest ratedifferentials, as well as improvement in the U.S. current account position.It is important to recognize that not all emerging markets are equal in a strong dollarenvironment. Many of the Asian economies have experienced less currency depreciationsince the dollar index hit bottom in 2011. Countries with strong current accounts that areless dependent on commodities should be more resilient in this environment.OVERVIEWEmerging markets (EM) will need toface the prospects of further U.S. dollar(USD) strengthening and possiblefurther downward pressure on oilprices. Since each emerging economy isunique in its external payment positionand exposure to oil, differentiation iskey.USD strength has been a headwindhistorically for emerging markets. Thosecountries with external imbalances arelikely to require more adjustments torestore balance, which could put shorttermpressure on market performance.While all emerging markets benefitfrom low inflation brought on by low oilprices, oil importers have an advantageover exporters.Other Assets andnvestor Beha viorIU.S. Dollar Exchange RateU.S. Dollar PerformanceIndex130120110U.S. DollarIndex (DXY)1009080Real Trade Weighted70Exchange Rate Index(REER)60'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14U.S. Current Account BalanceUSD billions50 Value % of GDP 2%00%-50-2%-100-4%-150-200-6%-250-8%'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14ChinaKoreaPhilippinesUKSingaporeThailandTaiwanMalaysiaCanadaEuropeMexicoAustraliaIndiaIndonesiaJapanClickCurrency Performance vs. USD% since the beginning of the USD uptrend in April 2011TurkeyBrazilSouth AfricaArgentinaRussiaAsian CountriesOther EM CountriesDM Countries-51.8%-54.4%-40.8%-43.1%-30.0%-30.9%-32.3%-35.0%-25.2%-6.5%-7.8%-9.3% 93%-9.4%-15.3%-18.1%-18.4%-21.8%-3.2%-4.3%60GTM - Asia46% 4.6%-70% -50% -30% -10% 10%There are significant differencesamongst the performance of EMcurrencies since the USD hitbottom in 2011.Source: Federal Reserve, U.S. Bureau of Economic Analysis, Reuters, FactSet, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”(Top Left) The Real Trade Weighted Exchange Rate Index is the weighted average of a country’s currency relative to a basket of other major currencies adjusted for theeffects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country’s currency, with other countries within the basket. TheDollar Index is a trade-weighted index calculated using six major world currencies. Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 60J.P. Morgan Asset Management | 7

MARKETINSIGHTSQuarterly PerspectivesCheaper oil: Friend or foe?We see a drop in oil prices to be a net positive for emerging markets, especially in Asia.Obviously oil-producing countries would experience lower oil receipts, which can be asignificant source of fiscal revenue either directly via state-owned companies or indirectlyvia taxes. Lower oil revenues could also undermine the ability to service debt by energycompanies, which could in turn seek financial support from the government or put stresson the domestic banking sector.However, for those emerging markets that are net oil importers, as shown on page 64 ofthe Guide to the Markets-Asia, cheaper oil prices can deliver a number of benefits. Theyhelp to reduce total import bills and hence reduce current account deficits, or boostsurpluses. This is crucial for countries like India and Indonesia, that suffer from currentaccount deficits and downward pressures on their currencies. On the fiscal account, lowercrude oil prices can also reduce government spending on fuel subsidies, for example, inIndonesia, Malaysia and Thailand. This allows these governments to divert more of theirresources to other productive uses, such as infrastructure or social programs. Somecountries can also use this as an opportunity to reform their fuel subsidy programs, suchas Indonesia.Cheaper oil prices also help to keep inflation low. This is particularly apparent in low-tomidincome emerging markets where a large proportion of household income is spent onfuel. Poor infrastructure logistics also magnifies the inflationary impact of higher energyprices. More benign inflation in turn gives emerging market central banks more flexibilityover monetary policy. Instead of being forced to raise interest rates in response to fuelprice-induced inflation, they can maintain an appropriate interest rate policy to supportgrowth. For consumption, cheaper energy prices also improve household disposableincome as less money is spent on fuel as a necessity. They can either save more or spendit on other discretionary items.Other Assets andnvestor Beha viorCommodities: Oil Price’s Impact on Emerging MarketsOil ImportsNet imports (imports minus exports) as % of GDP, 2014 IMF EstimatesThailandKoreaSingaporeTurkeyTaiwanHong KongHungaryPhilippinesIndiaSouth AfricaJapanIndonesiaNew ZealandChinaBrazilAustraliaMexicoMalaysiaVietnamIranRussiaUAEAsia PacificEmerging Markets-27.1%-11.0%-12.9%-4.4%-0.6%-0.9% 09%14.0%7.3%7.2%6.9%6.6%6.4%57% 5.7%5.2%5.0%4.7%4.2%3.3%2.2%2.2%1.6%0.6%Brent Crude Oil Price and ClickEM CPI InflationYear-over-year % change160%120%80%40%0%Brent CrudeOil PriceEM CPI InflationEM Asia CPI Inflation64GTM - AsiaSaudi Arabia -39.7%I0%-80%-50% -40% -30% -20% -10% 0% 10% 20%'04 '06 '08 '10 '12 '14-40%10%8%6%4%2%We see lower energy pricesto be a net positive for manyemerging markets.Source: IMF, FactSet, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 648 | Quarterly Perspectives: 1Q 2015

Differentiation among emerging marketsIn sum, we believe that investors should take sustained USD strength more seriously thanbefore, especially as the Federal Reserve embarks on its next phase of policynormalization. Currencies with strong external positions and ample foreign exchangereserves are likely to be more resilient in a strong USD investment landscape. Many Asianmarkets, such as China, Hong Kong and Taiwan, fit these criteria. We believe thatemerging markets as a whole are now in a better position to avoid currency and financialcrises as seen in the 1990s. However, this does not mean that emerging marketcurrencies won’t depreciate. Currency hedging and overlays when investing in emergingmarkets could become more important in the next five years than the last five years.Beyond a strong USD and weak oil price environment, we believe there are other factorsthat will continue to influence emerging markets and Asia. The recovery of the U.S.economy and consolidation of Chinese economic growth would create a change in theexport dynamics for emerging markets. Markets such as Taiwan, South Korea and Mexicoare in a good spot to benefit from a steady rebound of the U.S. This also implies thatmarkets that are strong in exporting manufactured goods should perform better thancommodity exporters. In referring to the right-hand chart on page 23 of the Guide to theMarkets-Asia, markets that are on the top left-hand quadrant of the chart (highmanufactured goods, low commodities) should enjoy a more positive outlook than thosein the bottom right-hand quadrant (low manufactured goods, high commodities).INVESTMENT IMPLICATIONSDecisions on investing in emergingmarkets is likely to be dominated bycurrency outlook and exposure tocommodities in the next 6-9 months.While we believe fundamentals arenow stronger than in the 1990s,some countries are still vulnerable topotential currency depreciation due tolarge current account deficits and highexternal debt.Differentiation amongst emergingmarkets to identify strengths andweaknesses in a strong USD and weakcommodity price environment will becrucial to generate returns.conomyGlobal EcU.S.DM Trade Connections to EMExports as a % of GDP - 2013Goods exportsJapan9.4%14.5%EU 19.8%BrazilIndiaChina10.9%16.8%24.0%U.S.EUJapanChinaOthersEM Exports Breakdown100%China% of merchandise ex xports - 2013Click23GTM - Asia90% CzechAsian countriesKoreaOther EM countriesTaiwanHungary80% Hong Kong PolandTurkey MexicoThailandPhilippines70%VietnamSingaporeMalaysia60%IndiaUkraine50%Exporters of manufactured goodsshould enjoy better performancethan commodity exporters in2015.Russia*AustraliaKoreaASEANTaiwan16.8%26.0%45.7%54.6%62.5%0% 10% 20% 30% 40% 50% 60% 70%Manu ufactured exports asSouth Africa40%IndonesiaBrazilArgentina30%Russia20%ColombiaSaudi ArabiaChilePeru10%VenezuelaNigeria0%0% 20% 40% 60% 80% 100%Commodity exports as % of merchandise exports – 2013Source: World Trade Organization (WTO), World Bank, IMF, CEIC, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”* 2012 figure due to data availability.(Left) EU exports as a % of GDP excludes intra EU-trade as the European Union is considered as one regional economy. (Right) EM exports breakdown based on WTO classifications, which arebroken down into 3 components including: 1. Manufactured goods, 2. Commodities (Agricultural) and 3. Commodities (Fuel and Mining). Total may not sum to 100% due to miscellaneous items notcovered by WTO. Data reflect most recently available as of 31/12/14.Source: Guide to the Markets - Asia, page 23J.P. Morgan Asset Management | 9

MARKETINSIGHTSQuarterly Perspectives4 The Search for Yield: Will the party go on?Strategic demand for incomeThe Fed tapering did not stop the robust demand for income. Contrary to the marketconsensus in early 2014 that yields and spreads would rise, long-end U.S. Treasury yieldsand the spreads of EMD declined throughout the year.As illustrated on page 47 of the Guide to the Markets - Asia, despite less G4 central bankbuying in 2014 vs. 2013, flows from retail bond funds were surprisingly strong. Also,demand for fixed income from foreign official institutions, i.e. Forex Reserve Managersand Sovereign Wealth Managers, as well as G4 pension funds and insurance companies,have remained very steady in recent years.Compared to 2014, J.P. Morgan Securities estimates a slightly bigger global bonddemand of USD 2.4 trillion for 2015, with more G4 central bank buying offsetting thesmaller retail bond fund demand. However, in spite of an estimated larger global bondsupply of USD 2 trillion for 2015, the total supply would still fall short by USD 400 billion.It appears the “search for yield” is set to continue, thanks in part to the agingdemographic trend. Surveys have shown that strategic asset allocation to higher yieldingfixed income investments to meet pension, insurance and retirement funding needs is onthe rise.The top right chart shows that the percentage of European pension plans havingexposure to EMD and high yield bonds has jumped from 2% in 2008 to 15-18% in 2014,while their average allocation has risen from 2% to 5% for EMD and is anchored at 5%for high yield bonds.Also, the bottom right chart shows that global survey respondents on average haveperceived 8 years of savings shortfall after their retirement. This could imply moreproactive retirement planning is needed to make up for the shortfalls and incomeinvesting can be one solution to bridge this gap.OVERVIEWDespite expectations that the FederalReserve (Fed) will raise interest ratesin 2015, the good performance of longtermU.S. Treasuries as well as highyielding investments, such as REITsand emerging market debt (EMD), hassurprised many investors in 2014.So the next question is “After a stellarrally in 2014, will the search for yieldparty go on in 2015?”Anecdotal evidence shows that therehas been strong strategic demandfor income to meet cash flow needsfrom pension funds and insurancecompanies as well as retirementplans, thanks to the ever-growingaging population.Therefore, we believe the “searchfor yield” is likely to be a long-terminvestment theme for many years tocome.ixed IncomeFGlobal Fixed Income: Supply and Demand DynamicsEstimated Annual Global Bond DemandUSD TrillionsPension and Insurance Foreign Officials5 Retail Bond Funds G4 Central Banks4.1 G4 Commercial Banks Total4 Forecast2.932.7 2.52.32.21.92.3 2.4210-1'07 '08 '09 '10 '11 '12 '13 '14 '15Estimated Annual Global Bond SupplyUSD TrillionsOther5 GovernmentTotal43.2Forecast2.83 2.52.1 2.5 2.31.821.320 2.010-1'07 '08 '09 '10 '11 '12 '13 '14 '15Pension Investors’ Allocation Clickin EMD and HY20%18%15% EMD HY47GTM - Asia% of Pension Plans with anAllocation to EMD or HYAverage Allocation (%)15%10%6%5% 5% 5% 5%5%4%4%2% 2%2%0%2008 2011 2014 2008 2011 2014Perceived Retirement Savings Shortfall# of Years Years of Savings Expected toLast After Retirement25Years of Perceived SavingsShortfall After Retirement2015 1710 10 9 9 9 9 8 5 5 510579 9 9 9 9 9 10 12 12 120Source: ICI, Bloomberg, J.P. Morgan Estimates, IMF, Mercer, HSBC Insurance, Cicero Consulting, J.P. Morgan Asset Management “Guide to the Markets – Asia 1Q 2015.”(Top Right) Based on Mercer’s 2008, 2011 and 2014 European Institutional Market Place Overview Asset Allocation Survey with more than 1,200 institutional respondentsacross 14 European countries. (Bottom Right) Based on HSBC’s “The Future of Retirement: A New Reality,” with respondents from Australia, Brazil, Canada, China, Egypt,France, Hong Kong, India, Malaysia, Mexico, Singapore, Taiwan, UAE, United Kingdom and United States. It is based on the number of years people expect their savings torun out after retirement and how many years of perceived savings shortfall is needed after their savings are all consumed. Data reflect most recently available as of 31/12/14.Global bond supply is estimatedto fall short by $400 billion in2015.Increasingly more pension planshave exposure to EMD and highyield bonds nowadays.Global survey respondents onaverage perceive 8 years ofsavings shortfall after theirretirement.Source: Guide to the Markets - Asia, page 4710 | Quarterly Perspectives: 1Q 2015

MARKETINSIGHTSQuarterly PerspectivesThe Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designedas a tool to help clients understand the markets and support investment decision-making, the program explores the implications ofcurrent economic data and changing market conditions.The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment in any jurisdiction, nor is it commitmentfrom J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinionsor investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions andare subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing, but no warranty ofaccuracy is given and no liability in respect of any error or omission is accepted. This material should not be relied upon by you in evaluating the meritsof investing in any securities or products. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, andaccounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personalgoals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value ofinvestments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get backthe full amount invested. Both past performance and yield may not be a reliable guide to future performance. Exchange rate variations may cause thevalue of investments to increase or decrease. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitiveto market movements. Investments in emerging markets may be more volatile and therefore the risk to your capital could be greater. Further, theeconomic and political situations in emerging markets may be more volatile than in established economies and these may adversely influence the valueof investments made.It shall be the recipient’s sole responsibility to verify his / her eligibility and to comply with all requirements under applicable legal and regulatoryregimes in receiving this communication and in making any investment. All case studies shown are for illustrative purposes only and should not be reliedupon as advice or interpreted as a recommendation. Results shown are not meant to be representative of actual investment results.J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communicationis issued by the following entities: in Brazil by Banco J.P. Morgan S.A. (Brazil) which is regulated by The Brazilian Securities and Exchange Commission(CVM) and Brazilian Central Bank (Bacen ); in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated bythe Financial Conduct Authority (FCA); 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, JPMorgan Funds(Asia) Limited or JPMorgan Asset Management Real Assets (Asia) Limited, all of which are regulated by the Securities and Futures Commission; in Indiaby JPMorgan Asset Management India Private Limited which is regulated by the Securities & Exchange Board of India; in Singapore by JPMorgan AssetManagement (Singapore) Limited or JPMorgan Asset Management Real Assets (Singapore) Pte. Ltd., both are regulated by the Monetary Authorityof Singapore; in Taiwan by JPMorgan Asset Management (Taiwan) Limited or JPMorgan Funds (Taiwan) Limited, both are regulated by the FinancialSupervisory Commission; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, theJapan Investment Advisers Association and the Japan Securities Dealers Association, and is regulated by the Financial Services Agency (registrationnumber “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited whichis regulated by the Financial Services Commission (without insurance by Korea Deposit Insurance Corporation) and in Australia to wholesale clients onlyas defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL376919) which is regulated by the Australian Securities and Investments Commission; in Canada by JPMorgan Asset Management (Canada) Inc.; and inthe United States by J.P. Morgan Investment Management Inc., or J.P. Morgan Distribution Services , Inc., member FINRA SIPC.EMEA Recipients: You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored forlegal, security and training purposes. You should also take note that information and data from communications with you will be collected, storedand processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following websitehttp://www.jpmorgan.com/pages/privacy.Past performance is no guarantee of comparable future results.Diversification does not guarantee investment returns and does not eliminate the risk of loss.© 2015 JPMorgan Chase & Co.Unless otherwise stated, all data are as of December 31, 2014.Prepared by: David Kelly, Tai Hui, Geoff Lewis, Yoshinori Shigemi, Grace Tam, Ian Hui and Ben Luk.MI-QPA-E Jan 2015Brazilian recipients: