MARKET

INSIGHTS
Headlines
The European debt crisis remains unresolved. Militants attacked U.S. soldiers in Afghanistan.

Weekly Market Recap

October 10, 2011
Index Levels Dow Jones 30 S&P 500 Nasdaq Russell 2000 Bond Rates Fed Funds Target 2 Year Treasury 10 Year Treasury 10 Year Municipal High Yield Friday Close 9/30/11 10,913 1,131 2,415 644 0.25 0.25 1.93 2.84 9.51 1 week Market Returns S&P 500 MSCI - EAFE United Kingdom Europe ex-UK Japan Asia ex-Japan Local -0.41 3.26 1.23 5.48 2.77 1.93 USD -0.41 2.84 2.14 4.77 1.68 1.64 Local -8.68 -15.23 -10.21 -17.49 -15.18 -16.24 Prior Week 9/23/11 10,771 1,136 2,483 652 0.25 0.22 1.81 2.62 9.01 Year End 12/31/10 11,578 1,258 2,653 784 0.25 0.60 3.30 3.75 7.51 YTD USD -8.68 -14.62 -10.66 -17.37 -10.75 -18.92 Year Ago 9/30/10 10,788 1,141 2,369 676 0.25 0.43 2.52 2.86 7.80 Consumer Rates 6 Month CD Prime Rate 30 Year Mortgage Commodities Gold Crude Oil Gasoline Currency $ per $ per per $ Index Characteristics S&P 500 Russell 1000 Value Russell 1000 Growth Russell 2000 Friday Close 9/30/11 0.50 3.25 N/A 1620.00 79.20 3.51 1.34 1.56 77.08 P/E Forward 10.85 9.78 12.49 14.94 Prior Week 9/23/11 0.48 3.25 N/A 1689.00 79.85 3.60 1.35 1.54 76.26 P/E Trailing 13.72 12.59 16.25 22.66 Year End 12/31/10 0.41 3.25 4.82 1405.50 89.84 3.05 1.34 1.57 81.11 Dividend Yield 2.39 2.62 1.56 1.45 Year Ago 9/30/10 0.38 3.25 4.40 1307.00 79.97 2.69 1.37 1.58 83.54 Wtd Avg Mkt Cap (billions) 86.92 65.97 88.17 1.05

Economic News
The unemployment rate was unchanged at 9.1% Both ISM indices were better than expected. Vehicle and chain store sales beat estimates. Next Week: Intl Trade, Retail Sales, Sentiment.

Thought of the Week

The money supply increased by 10.3% year-over-year in August 2011. While this volatility is a little unsettling, we believe that much of this increase was driven by fear, rather than an increase in bank lending, as investors moved cash into more liquid assets. Part of this trend can be seen in outflows from institutional money market funds. These funds lost $80bn of assets in August, and we believe this money was moved into the components of M2. As shown in this weeks chart, a Modified M2 suggests that year-over-year money supply growth would have been 9.3% if this redistribution of assets had not occurred, and perhaps even lower if we could properly estimate the movement of cash looking for a more liquid home. It does not appear that the economy is on the brink of stronger growth or rampant inflation, but rather than investors were simply looking for a safer place to store their cash.

S&P 500 Sector Returns

Technology 4 Industrials 1.8 0.7 0.7 0.5 0.5 2 0 -2 -4 40 Consumer Discr. Telecom 10.8 20 0 -20 -40 1.1

Style Returns
V
Consumer Discr. Materials

Chart of the Week

G -1.5 -2.4 -1.9 1 week

B -0.4 -1.6 -1.2

M2 Growth has Been Fueled by Money Market Redemptions

14% 12% 10% 8%
Year-over-year growth in M2

L
S&P 500

0.3 -0.7 -0.5

1 week

M S

The extra 1% increase was due to money market outflows

Health Care

Consumer Staples

Financials

Telecom

Utilities

Energy

-0.3

The economy lost approximately 8.8bn jobs during the most recent recession; as of September, how many jobs had we added back?

-2.3

-2.4

-3.1

-0.4

Question of the week:

Technology

Industrials

Prior week's question:

Last Thursday, Freddie Mac reported that the average conventional 30-year fixed rate mortgage hit an all-time low; what was this all-time low?

V
Financials Materials S&P 500 Energy

B -8.7 -12.3 -17.0

G -7.2 -11.6 -15.6 YTD

L YTD

-11.2

6% 4%

3.4

2.5

-5.7

-5.8

-25.2

The conventional 30-year fixed averaged an all-time record low at 4.01%.

-11.4

-14.7

-8.7

Answer to prior week's question:

Health Care

Consumer Staples

Utilities

M -13.0 S -18.5

-1.5

2% 0%

-21.8

'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09

Please see important disclosure on next page.

Note: All returns represent total return including dividends.

MARKET
INSIGHTS

Weekly Market Recap | October 10, 2011

reinvestment of dividends. The Index used from L to R, top to bottom are: S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell 2000 companies with higher price-tobook ratios and higher forecasted growth values). Contact JPMorgan Distribution Services, Inc. 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. Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss. 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 price of equity securities may rise, or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. JPMorgan Distribution Services, Inc., member FINRA/SIPC JPMorgan Chase & Co., October 2011. Unless otherwise stated, all data is as of October 7, 2011 or as of most recently available.

Chart of the Week: Source: Federal Reserve, J.P. Morgan Asset Management. Thought of the Week: Source: Federal Reserve, J.P. Morgan Asset Management. Question of the Week: Source: Federal Reserve, J.P. Morgan Asset Management. Market Returns: All data represents total return including the reinvestment of dividends for stated period. Index: MSCI EAFE; provided by: MSCI gross official pricing. Index: UK; provided by: MSCI gross official pricing. Index: Europe ex-UK; provided by: MSCI gross official pricing. Index: Japan; provided by: MSCI gross official pricing. Index: Asia ex-Japan; provided by: MSCI gross official pricing. Index: S&P 500 Index; provided by: IDC. (MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australia, and the Far East). Dow Jones-UBS Commodity Index (DJ-UBSCI) is a broadly diversified index composed of futures contracts on physical commodities. The index is designed to minimize concentration in any one commodity or sector. It includes 19 commodity futures in five groups. Bond Rates: Fed Funds Target, EcoWin; 2 Year Treasury, IDC; 10 Year Treasury, IDC; 10 Year Muni, Barclays Capital; High Yield, Barclays Capital High-yield Index. Consumer Rates: 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve. Commodities: Gold, EcoWin; Crude Oil (WTI), EcoWin; Gasoline, EcoWin. Currency: Dollar per Pound, IDC; Dollar per Euro, IDC; Yen per Dollar, IDC. Index Price Levels: Reflects closing price level for each index as of stated date. Dow Jones Industrial 30 (The Dow Jones is a price-weighted index composing of 30 widely-traded blue chip stocks.): IDC, S&P 500 Index (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 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.): IDC, NASDAQ Composite Index (The NASDAQ Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange.): IDC, Russell 2000 Index: IDC. Indexes are not available for direct investment. S&P Index Characteristics: Trailing P/E price is provided by Factset Pricing database while trailing earnings is provided by Compustat. Dividend Yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted Harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Marketcap is a bottom-up weighted average based on share information from Compustat and Price information from FactSet's Pricing database as provided by Standard & Poor's. Russell 1000 Value Index, Russell 1000 Growth Index, and Russell 2000 Index Characteristics: Trailing P/E is provided directly by Russell. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Marketcap is a bottom-up weighted average based on share information from Compustat and Price information from FactSet's Pricing database as provided by Russell. Sector Returns: Sectors are based on the GICS Classification model. Return data are calculated by FactSet using constituents and weights as provided by Standard & Poors. Returns are cumulative total return for stated period, including reinvestment of dividends. Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE