1Q09 As of December 31, 2008

Guide to the Markets

Table of contents EQUITIES

2

ECONOMY

12

FIXED INCOME

24

INTERNATIONAL

33

ASSET CLASS

41

U.S. Strategy Team Dr. David Kelly, CFA

[email protected]

Andrew D. Goldberg

[email protected]

Marlene DeLuca

[email protected]

Jerry W. Hsieh

[email protected]

Returns by Style Charts reflect index levels (price change only). All returns and annotations reflect total return, including dividends.

Large

-22.2

-21.9

-22.8

Mid

-27.2

-27.3

-27.4

Small

1,300

20 0

1,100 1,000

8: 37.0

4Q 2008: -21.9% %

-24.9

-26.1

-27.4

Blend

Growth

-36.8

-37.0

-38.4

-38.4

-41.5

-44.3

-28.9

-33.8

-38.5

900

Sep-08

Nov-08

Since Market Low (October 2002)

S&P 500 Index

Since 10/9/07 Peak: -40.6%

1,600

1,400

Value

Blend

Growth

47.5

31.0

20.4

65.9

58.6

47.3

72.1

65.2

56.9

Since Market Peak (October 2007) Value

Blend

Growth

Large

Jul-08

-42.0

-40.6

-40.5

Mid

May-08

Large

Mar-08

Mid

700 Jan-08

-43.8

-45.2

-47.0

Small

800

Small

Equities

1,400

Value Large

Growth

Mid

Blend

Small

Value

1,500

1,200

2008

4Q 2008

S&P 500 Index

-36.9

-39.8

-43.0

1,200

1,000

Since 10/9/02 Low: +31.0% 800 Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Source: Russell Investment Group, Standard & Poor’s, FactSet, JPMorgan Asset Management. All calculations are cumulative total return, including dividends reinvested for the stated period. Since Market Low represents period 10/9/02 – 12/31/08, illustrating market returns since the S&P 500 Index low on October 9, 2002. Since Market Peak represents period 10/9/07 – 12/31/08, illustrating market returns since the most recent S&P 500 Index high on October 9, 2007. Returns are cumulative returns, not annualized. For all time periods, total return is based on Russell-style indexes with the exception of the Large Blend category, which is reflected by the S&P 500 Index. Past performance is not indicative of future returns.

2

In de x 50 0

15.3% 28.2% 2.7%

14.8% 15.6% 13.3%

11.1% 13.5% 9.0%

13.3% 8.3% 17.2%

8.4% 9.7% 8.1%

12.9% 14.4% 9.6%

3.8% 0.7% 6.5%

4.2% 2.0% 6.9%

2.9% 3.7% 3.0%

100.0% 100.0% 100.0%

4Q 2008

-36.9

-25.7

-12.1

-23.9

-20.6

-22.9

-12.8

-1.4

-10.9

-30.8

-21.9

2008

-55.3

-43.1

-22.8

-39.9

-34.9

-33.5

-15.4

-30.5

-29.0

-45.7

-37.0

-20.1

39.3

15.1

39.5

154.9

9.0

37.3

69.8

140.8

55.4

31.0

-63.4

-44.8

-24.6

-43.9

-32.5

-42.0

-12.3

-34.5

-26.5

-47.2

-40.6

10.8x 12.6x 15.3x

12.5x 11.6x 27.7x

11.2x 14.0x 25.1x

11.3x 10.2x 20.5x

10.7x 6.8x 19.8x

12.6x 11.1x 19.2x

13.5x 14.2x 21.9x

11.2x 13.0x 18.8x

11.7x 12.0x 14.7x

13.5x 8.1x 20.3x

12.4x 17.1x 22.5x

Since Market Low (October 2002)

Since Market Peak (October 2007)

Forward P/E Ratio Trailing P/E Ratio Trailing 20-yr avg.

Return

13.3% 3.8% 23.8%

Weight

S& P

M at er ia ls

U til

iti es

es Te le co m

St ap l C on s.

D is cr . C on s.

En er gy

ls In du st ria

ar e C H ea lt h

Russell Growth Weight Russell Value Weight

P/E

Equities

S&P Weight

Te ch no lo g

Fi na nc i

al s

y

Returns by Sector

Source: Standard & Poor’s, Russell Investment Group, FactSet, JPMorgan Asset Management. All calculations are cumulative total return, including dividends for the stated period. Since Market Low represents period 10/9/02 – 12/31/08, illustrating market returns since the S&P 500 Index low on October 9, 2002. Since Market Peak represents period 10/9/07 – 12/31/08, illustrating market returns since the S&P 500 Index high on October 9, 2007. Returns are cumulative, not annualized. Forward P/E ratios are bottom-up values based on operating estimates from First Call on a next twelve-months’ basis, calculated using a harmonic weighted average. Trailing P/E ratios at the sector level are bottom-up values defined as month-end price divided by the last twelve months’ earnings (LTM) which is calculated by summing four quarters of available earnings. Trailing P/E ratios for the S&P 500 Index are top-down values which reflect the index month-end price divided by the last twelve months’ earnings, as provided by Compustat/Standard & Poor’s, which is calculated by summing four quarters of available earnings. There is an inherent lag in the reporting of this data by companies to S&P. As such, historical data can change as new information becomes available. All sector level P/E ratios exclude negatives. For all time periods, total return is based on S&P sectors and provided by FactSet. Russell weights are based on each sector’s respective representation in the Russell 1000 Growth Index and the Russell 1000 Value Index. Past performance is not indicative of future returns. Technology is a rapidly changing field and stocks of these companies, especially of smaller or unseasoned companies, may be more volatile than the stock market in general.

3

Equities

Mutual Fund Flows Fund Flows 2004 2003

Billions, USD

AUM

YTD 2008

2007

2006

2005

Fixed Income U.S. Equity* Int'l / Global Equity Allocation & Age-based

1,663 3,349 905 1,023

38 (54) (57) 6

128 44 156 139

75 53 159 103

21 27 126 104

(12) 172 88 110

Large Cap Multi Cap Mid Cap Small Cap

1,409 1,060 331 276

(23) (20) (19) (5)

(28) 76 5 (15)

(47) 89 3 7

(61) 55 24 3

Core Growth Value

1,530 897 650

0 (33) (34)

40 4 (7)

27 5 21

Money Market Funds Emerging Markets Real Estate Commodities

3,694 154 53 95

546 (7) 3 0

596 40 (4) 12

242 28 11 11

2002

2001

2000

1999

32 160 38 71

146 11 7 18

67 78 (16) 10

(54) 145 36 (43)

(14) 220 29 (16)

15 74 37 30

22 56 38 32

(23) 4 18 17

9 21 19 30

10 63 48 20

174 20 11 2

(6) (5) 34

82 (6) 81

60 33 55

24 (38) 30

47 (14) 46

21 165 (44)

81 152 (27)

62 23 2 21

(137) 5 9 12

(227) 8 7 4

(50) 1 5 1

329 (1) 1 (0)

101 1 1 0

185 2 (1) (0)

Source: Lipper, JPMorgan Asset Management. Data exclude closed-end funds. Allocation and Age-based funds may double count assets held in other mutual funds. International includes Emerging Markets. Emerging Markets includes China, Latin America, Pacific ex-Japan, and Pacific Region funds. U.S. Equity funds include sector funds and funds where style or market cap is not defined, including Equity Income funds, Equity Market Neutral funds and Long/Short Equity funds. Note: Historical data may change from one quarter to the next as Lipper re-classifies funds into different categories as appropriate. Data are as of 11/30/2008. *Flows shown include ETFs and fund of funds. This results in lower outflows from equity mutual funds than have been widely reported, as ETFs experienced net inflows during the YTD period. Excluding ETFs, the data would have shown YTD outflows of $97 bn from U.S. Equity mutual funds and of $60bn from International/Global Equity funds.

4

S&P 500 Index at Inflection Points S&P 500 Index

Equities

1,600

Oct. 9, 2007 P/E (tr) = 19.5

March 2000 Peak vs. Today:

Mar. 24, 2000 P/E (tr) = 30.9

1,527

1,400

Characteristic

3/2000

12/2008

Index Level P/E Ratio (tr) Dividend Yield 10-yr. Treasury

1,527 30.9x 1.2% 6.2%

903 17.1x 3.1% 2.3%

1,565

-42%

1,200

+101%

-49%

1,000

Dec. 31, 2008 P/E (tr) = 17.1 P/E (fw) = 12.4

903

800

600 '97

Dec. 31, 1996 P/E (tr) = 19.2 741

'98

Oct. 9, 2002 P/E (tr) = 25.3

777

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

Source: Standard & Poor’s, First Call, Compustat, FactSet, JPMorgan Asset Management. Trailing P/E ratios for the S&P 500 Index are top-down values which reflect the index month-end price divided by the last twelve months’ earnings, as provided by Compustat/Standard & Poor’s, which is calculated by summing four quarters of available earnings data. There is an inherent lag in the reporting of this data by companies to S&P. As such, historical data can change as new information becomes available. Forward P/E is based on a bottom-up calculation using analyst operating estimates from First Call on a next twelve months’ basis and are calculated using a harmonic weighted average. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future results. Data are as of 12/31/08.

5

Investment Style Valuations Russell 1000 Growth P/E divided by Russell 1000 Value P/E

250

Value

11.9 10.4 114*

Mid

200 150

11.1 16.6

12.2

Growth 11.9

20.2 11.8

17.1

26.3 11.4

20.4

29.4

Small '96

'98

'00

'02

'04

'06

Most recent: R2000 R1000 Small / Large

180 160 140

20-yr. average: 122

80

'94

'96

'98

'00

34.6

E.g.: Large Cap Blend stocks are 45.2% cheaper than their historical average.

16.2 11.1 147*

100

'92

24.3

'08

Current P/E as % of 20-year avg. P/E

120

'90

19.2

17.7

'02

'04

'06

Value

Blend

Growth

Large

'94

16.2

62.6%

54.8%

45.1%

Mid

'92

15.1

71.2%

57.9%

38.9%

Small

'90

Russell 2000 P/E divided by Russell 1000 P/E

60

10.4

Blend

20-yr. average: 155

100 50

Large

300

Equities

Current P/E vs. 20-year avg. P/E

Most recent: R1000 Growth R1000 Value Growth / Value

350

78.5%

67.0%

51.2%

'08

Source: Russell Investment Group, FactSet, JPMorgan Asset Management. P/E ratios are calculated and provided by Russell on a trailing basis for each index. *Represents the Russell 1000 Growth Index P/E ratio divided by the Russell 1000 Value Index P/E ratio, multiplied by 100 (top) and Russell 2000 Index P/E ratio divided by the Russell 1000 Index P/E ratio, multiplied by 100 (bottom). Data reflects P/E’s as provided by Russell as of 11/30/08.

6

Market Performance by Decile: Valuation vs. Momentum Price to Earnings

Prior 12-month Price Momentum

Excess return, annualized

Excess return, annualized

8%

Equities

8% 5.5%

6.2%

4.8%

4%

4.1%

4%

3.0%

3.2% 1.6%

1.3%

0%

0% -0.8% -0.9%

-0.2% -0.4%

-1.4% -2.7%

-4%

-0.9% -1.9%

-4%

-3.5%

-5.2%

-6.4%

-8%

-12%

-8%

-12%

1

2 Low P/E

3

4

5

6

7

8

9

High P/E

10

-11.5%

1

2

3

4

5

Strong Momentum

6

7

8

9

10

Weak Momentum

Source: Russell Investment Group, FactSet, JPMorgan Asset Management. Charts show relative performance of the Russell 3000 Index assigned to deciles on the basis of trailing price/earnings and 12-month price momentum. The time period is from December 31, 1987 through December 31, 2007. Deciles are rebalanced monthly and stocks are equally weighted. Decile performance results have certain inherent limitations. Unlike an actual performance record, decile results do not represent actual trading, liquidity constraints, fee schedules and transaction costs. Past performance is not indicative of future results.

7

Stock Valuation Measures: Earnings Yield and Q-Ratio S&P 500 Earnings Yield vs. 10-year Treasury Yield

Price to Net Asset Value

S&P 500 Earnings Yield (Inverse of P/E)

200 180

15%

160

Less Attractive

Equities

20%

Q-Ratio: Stock Price Relative to Company Assets

10-yr. Treasury Yield

140

10%

5.8%

5%

3.6%

100

2.3%

80

40-yr average = - 0.56%

0%

120

40-yr average = 78.8 Most recent: 76.1

60

Difference: Earnings Yield – 10 yr. Treasury

-10%

More Attractive

40

-5%

'70

'75

'80

'85

'90

'95

'00

'05

20 0

'70

'75

'80

'85

'90

'95

'00

'05

Source: Federal Reserve, JPMorgan Asset Management. Data reflects estimated levels as of the end of 3Q08 and represents the stock market value divided by net Earnings yield (E/P) is the reciprocal of Price to Earnings (P/E) and is based on trailing P/E as asset value of non-financial corporations, multiplied by 100. (Note that the Federal calculated on a top-down basis. Data are as of 12/31/08. Reserve does not calculate this ratio for financial firms). Source: Standard & Poor’s, Compustat, EcoWin, FactSet, JPMorgan Asset Management.

8

Equities

Market Leaders

4Q 2008

2008

Since 2002 Low

Since 2007 Peak

S&P 500 Index S&P 500 (average stock)

-22% -26%

-37% -40%

31% 56%

-41% -45%

High beta (>1.5) Non-high beta ( 10%

44

Equity Volatility Implied Volatility (CBOE VIX) Volatility Level CBOE VIX

90 80

’02 Peak 38.5

Latest 40.0

Chart shown in 10-day moving average

70 60 50 40 30

average: 20.3

20 10 0 '94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

Realized Volatility (Average Daily Absolute % Change in S&P 500) 4.5%

30-Day Moving Average Annual Average

4.0% 3.5% 3.0% 2.5%

Asset Class

2.0% 1.5%

average: 0.79%

1.0% 0.5% 0.0% '93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

Source: JPMorgan Asset Management, Merrill Lynch, CBOE, EcoWin, FactSet, Standard & Poors. Charts shown for illustrative purposes only. Data are as of 12/31/08.

45

Long-term Returns and Bear Market Cycles 20-Year Annualized Returns

Bear Market Cycles vs. Subsequent Bull Runs

10% 8.4% 8%

8.2% 7.4%

Market Peak

Market Low

Bear Return

Length of Decline

Bull Run

Bull Run Yrs to Reach Length Prev. Peak

5/29/46

5/19/47

-28.6%

12

257.6%

122

3.1 yrs

7/15/57

10/22/57

-20.7%

3

86.4%

50

0.9 yrs

12/12/61

6/26/62

-28.0%

6

79.8%

44

1.2 yrs

2/9/66

10/7/66

-22.2%

8

48.0%

26

0.6 yrs

11/29/68

5/26/70

-36.1%

18

74.2%

31

1.8 yrs

1/5/73

10/3/74

-48.4%

21

125.6%

74

5.8 yrs

11/28/80

8/12/82

-27.1%

20

228.8%

60

0.2 yrs

8/25/87

12/4/87

-33.5%

3

582.1%

148

1.6 yrs

3/24/00

10/9/02

-49.1%

31

101.5%

60**

4.6 yrs

-32.6%

14 mo's

176.0%

68 mo's

2.2 yrs

6%

4.2% 4%

4.5% * 3.9%

3.6% 3.2%

2%

0%

Asset Class

S&P 500 REITS B o nds

Oil

Go ld

Ho mes EA FE

A vg. Investo r

Average:

Source: Standard & Poor’s, FTSE, MSCI Inc., Nymex, Barclays Capital Inc., NAR, EcoWin, JPMorgan Asset Management. The above charts are shown for illustrative purposes only. Past returns are no guarantee of future results. The indexes used are as follows (left chart): S&P 500 Index: Standard & Poor’s 500 Index, REITS: NAREIT Equity Reits Index, EAFE: MSCI EAFE, Oil: West Texas Intermediate Index, Bonds: Barclays Capital U.S. Aggregate Index, Homes: Median Sales Price of Existing Single-family homes, Gold: USD/troy oz. All returns are annualized (and total return where applicable), and represent the 20-year period ending 12/31/07. Average equity investor return is based on an analysis by Dalbar, Inc. which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. *DALBAR returns are through 2007, next update due in 1Q09. In the table to the right, a bear market is defined as a peak-to-trough decline in the S&P 500 Index (price only) of 20% or more. The bull run data reflect the market expansion from the bear market low to the subsequent market peak. All returns are S&P 500 Index returns, and do not include dividends. **Most recent bull run is through market peak of 10/9/07.

46

Market Comebacks Source: JPMorgan Asset Management, Standard & Poor’s. Market returns represented by S&P 500 Index return (price only). Returns reflect calendar year returns and not peak to trough.

Market Returns After Consecutive Down Years (S&P 500 Index) 148%

160% 120%

100%

Past performance is not indicative of future returns.

-71%

80%

-42%

-34%

40%

29-32

0%

67%

57%

33-36

42-45

39-41

Great Depression

73-74

75-76

03-08

00-02

Internet Bubble War on Terrorism

Oil Crisis

World War II

Data are as of 12/31/08.

-40%

Source: JPMorgan Asset Management, Standard & Poor’s. Market returns represented by S&P 500 Index return and do not include dividends.

Market Corrections & Calendar Year Price Return (S&P 500 Index) Despite an average intra-year drop of 13.8%, the market’s return was positive in 22 of 29 years. 50% 35%

15 17 -10

Asset Class

10% 25% 40% 55%

27

26

26

20% 5%

Calendar year returns

34

-12

-8

20

12

-6

-8 -8

-9

4

-7

2

1

-7 -17 -17 -14

15

26

31

7

-6 -5

9

-10 -13 -23

-2

-9

-3

-8

-11

-12 -19

-14

-17 -26

Intra-year drops

Past performance is not indicative of future returns.

26 20

-20 -34

27

-8

14 3

4 -37

Intra-year drops refers to the largest market drops over periods of 6 months or less. Calendar year refers to the price return for the S&P 500 Index for each calendar year. Both charts are for illustrative purposes only.

-7 -8 -10

Data are as of 12/31/08.

-32 -47

'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

47

Risk-Return Trade-Off: 20 Year History

Actual Relationship

15.0

15.0

14.0

14.0

13.0

13.0

Total Return (%)

Total Return (%)

Conceptual Relationship (not actual data)

12.0 11.0 10.0 9.0

12.0

d e b

h

c g

11.0

f

10.0

8.0 7.0 13.0

a

9.0

i

8.0

15.0

17.0

19.0

21.0

23.0

Standard Deviation (Risk)

25.0

7.0 11.0

27.0

Source: JPMorgan Asset Management. Plotted points above represent conceptual indexes only and are not based on actual data. This graph is for illustrative purposes only.

13.0

15.0

17.0

19.0

21.0

Standard Deviation (Risk)

23.0

Source: Russell Investment Group, JPMorgan Asset Management. Plotted points above represent actual data points based on Russell Indexes. Returns are cumulative annualized total return for 20 years.

Asset Class

Data as of December 31, 2007. This graph is for illustrative purposes only. Legend: a. Russell Mid Cap Value Index c. Russell 1000 Index e. Russell 2000 Value Index g. Russell 2000 Index i. Russell 2000 Growth Index

b. Russell 1000 Value Index d. Russell Mid Cap Index f. Russell 1000 Growth Index h. Russell Mid Cap Growth Index

48

The Dow Jones Industrial Average since 1900 Dow Jones Industrial Index, Price Return (since 1900) Dow

2000 - present 10,000

3,000

1966 - 1982

1,000

400 1937 - 1949

Asset Class

100

1906 - 1924

'10

'20

'30

'40

'50

'60

'70

'80

'90

'00

Source: IDC, FactSet, JPMorgan Asset Management. Data shown in log scale to best illustrate long-term index patterns. Data are as of 12/31/08. Past performance is not indicative of future returns. Chart is for illustrative purposes only.

49

JPMorgan Asset Management – Index Definitions All indexes are unmanaged and an individual can not invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The S&P 400 Index is representative of 400 stocks in the mid-range sector of the domestic stock market, representing all major industries. The Russell 3000 Index® measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The Russell 1000 Index ® measures the performance of the 1,000 largest companies in the Russell 3000. The Russell 1000 Growth Index ® measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index ® measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index ® measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Growth Index ® measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index. The Russell Midcap Value Index ® measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value index. The Russell 2000 Index ® measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 2000 Growth Index ® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Value Index ® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. The MSCI Small Cap IndicesSM target 40% of the eligible Small Cap universe within each industry group, within each country. MSCI defines the Small Cap universe as all listed securities that have a market capitalization in the range of USD200-1,500 million. The MSCI Value and Growth IndicesSM cover the full range of developed, emerging and All Country MSCI Equity indexes. As of the close of May 30, 2003, MSCI implemented an enhanced methodology for the MSCI Global Value and Growth Indices, adopting a two dimensional framework for style segmentation in which value and growth securities are categorized using different attributes - three for value and five for growth including forward-looking variables. The objective of the index design is to divide constituents of an underlying MSCI Standard Country Index into a value index and a growth index, each targeting 50% of the free float adjusted market capitalization of the underlying country index. Country Value/Growth indices are then aggregated into regional Value/Growth indices. Prior to May 30, 2003, the indices used Price/Book Value (P/BV) ratios to divide the standard MSCI country indices into value and growth indices. All securities were classified as either "value" securities (low P/BV securities) or "growth" securities (high P/BV securities), relative to each MSCI country index. The following MSCI Total Return IndicesSM are calculated with gross dividends: This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits. The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore. Credit Suisse/Tremont Hedge Fund Index is compiled by Credit Suisse Tremont Index, LLC. It is an asset-weighted hedge fund index and includes only funds, as opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which tracks over 4500 funds, and consists only of funds with a minimum of US$50 million under management, a 12-month track record, and audited financial statements. It is calculated and rebalanced on a monthly basis, and shown net of all performance fees and expenses. It is the exclusive property of Credit Suisse Tremont Index, LLC. The NCREIF Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment.

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JPMorgan Asset Management – Index Definitions & Disclosures All indexes are unmanaged and an individual can not invest directly in an index. Index returns do not include fees or expenses. The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis. This U.S. Treasury Index is a component of the U.S. Government index. The Barclays Capital High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included. Municipal Bond Index: To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody's, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates, and derivatives are excluded from the benchmark. The Barclays Capital Emerging Markets Index includes USD-denominated debt from emerging markets in the following regions: Americas, Europe, Middle East, Africa, and Asia. As with other fixed income benchmarks provided by Barclays Capital, the index is rules-based, which allows for an unbiased view of the marketplace and easy replicability. The Barclays Capital Corporate Bond Index is the Corporate component of the U.S. Credit index. The Barclays Capital TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury. The NAREIT EQUITY REIT Index is designed to provide the most comprehensive assessment of overall industry performance, and includes all tax-qualified real estate investment trusts (REITs) that are listed on the NYSE, the American Stock Exchange or the NASDAQ National Market List. The JPMorgan EMBI Global Index includes US dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities. The JPMorgan Domestic High Yield Index is designed to mirror the investible universe of the US dollar domestic high yield corporate debt market. The CS/Tremont Equity Market Neutral Index takes both long and short positions in stocks with the aim of minimizing exposure to the systematic risk of the market (i.e., a beta of zero). Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The views expressed are those of JPMorgan Asset Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Contact JPMorgan Funds Distribution Services at 1-800-480-4111 for a fund prospectus. You can also visit us at www.jpmorganfunds.com. Investors should carefully consider the investment objectives and risks as well as charges and expenses of the mutual fund before investing. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing. JPMorgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., JPMorgan Investment Advisors Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. JPMorgan Distribution Services Inc. © JPMorgan Chase & Co., January 2009. Unless otherwise stated, all data are as of December 31, 2008 or most recently available. Prepared by: Andrew D. Goldberg, Jerry W. Hsieh, Marlene DeLuca, and David Kelly.

NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE JP-LITTLEBOOK

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