confidential investment products: not fdic insured no bank guarantee may lose value please see...
TRANSCRIPT
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Investment products: Not FDIC insured • No bank guarantee • May lose value
Please see important information at the end of this presentation.
J.P. Morgan Private Bank
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LAgenda
• Overview of J.P. Morgan Private Bank
• Investment Management
• Banking and Lending Credit
• Trust and Estate
• Appendix
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Size and
Ratings
Fortress Balance
Sheet
Diversification
of
Earnings
• One of the largest U.S. banks by market capitalization: $185 billion (as of 2/1/2013)
• JPMorgan Chase Bank, N.A., is rated Aa3 by Moody’s and A+ by S&P, among the strongest in the industry¹
• About $2.4 trillion in total assets
• Stable and consistent source of funding through $1.2 trillion in total deposits
• Basel I Tier 1 Common Ratio is 11.0%; Basel III Tier 1 Common Ratio is 8.7%
• Four separate lines of business, as well as a corporate unit catering to clients across the globe
• Operations in more than 60 countries, with half of earnings coming from outside the United States
Leadership
• Extended more than $1.8 trillion in new credit in 2012 alone to consumers, businesses, municipalities, and non-profit organizations
• Originated more than 920,000 mortgages, provided credit cards to over 6.7 million people in 2012. Since 2009 offered more than 1.4 million mortgage modifications; through modifications and short-sales effectively $10 billion in total principal forgiven and interest payments reduced by approximately $2 billion
• Acquired Bear Stearns; established lending facility to AIG; advanced $138 billion to ensure investors would be able to access cash following Lehman insolvency; contributed to the $70 billion liquidity fund to backstop the broker-dealer community; acquired WaMu; created Special Purpose Vehicle to provide liquidity to the money market fund industry
• Repaid in full $25 billion TARP funds, with interest, in June 2009 and $88.4 million in warrants were auctioned to the public in December 2009, eliminating the government’s stake in the firm
J.P. Morgan is a leading global financial services firm*
Lines
of
Business
• Corporate & Investment Bank: Premier global investment bank, with complete, integrated product offerings
• Asset Management: Leading global asset management firm, with $1.4 trillion in assets under management
• Commercial Bank: Serves over 24,000 clients in the U.S., including corporations, municipalities, financial institutions, and not-for-profit entities
• Consumer & Community Banking: Serves 30 million consumers and businesses in the U.S. through personal services at 5,500 branches and 17,000 ATMs, as well as online, mobile and telephone banking
* All data as of 1/1/2013 unless otherwise noted
¹ Long-term debt for JPMorgan Chase Bank, N.A. as of 2/1/13
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• We’re a client-first business, focused on creating better outcomes
• Over 160 year track record of providing investment discretion and oversight
• Act as your “chief investment officer” overseeing all areas of your wealth and advising on your complete balance sheet — from liquidity needs to investments to liabilities — as well as on ways to preserve and pass on your wealth
• Risk management is not only a department at J.P. Morgan; it is deeply embedded into every aspect of our business
• We employ proprietary risk management tools and models to build more efficient portfolios
• Oversight committees assess risk at all phases of portfolio development and management
• Fortress balance sheet and capital strength position us to meet your long-term safety needs
Brokerage Firm
• Big when it matters, small when it counts: Boutique within a large organization with access to best-in-class managers and innovative solutions tailored to private client needs
• Dedicated team (banker, investment specialist, capital advisors and client service professionals) brings to you J.P. Morgan’s intellectual capital and global network
• We are a client of J.P. Morgan Investment Bank and Institutional Management — not a distribution arm
• In the markets every day as an investment manager
• Unique vantage point gained from operating an investment management business strengthens our ability to pick best-in-class managers
• Developed exceptional breadth of client-focused, innovative solutions
• Work with you across the investment spectrum, from managed to non-discretionary
J.P. Morgan Private BankA client-first business, focused on creating better outcomes
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• Investment process is designed to result in portfolios with the highest return relative to risk taken and that adhere to an absolute return orientation
• Access to a select group of high quality third-party and J.P. Morgan asset managers that have been extensively screened and are carefully chosen and monitored
• Investment specialists work with clients to construct and oversee portfolios of complementary investment offerings designed around short and long-term investment objectives
• Private Bank Capital Advisors provide access to a full range of borrowing alternatives, and have particular expertise in large and/or complex loan transactions
• Ability to leverage:– Restricted stock– Concentrated stock– Options– Art – Real estate
• Access to broad lending capabilities of J.P. Morgan
• Highly-qualified and experienced Wealth Advisor works with clients and their advisors to develop and implement tax-efficient wealth transfer techniques
• U.S. Wealth Advisors are former partner-level estate planning attorneys with significant big firm experience; cutting-edge and frequent “idea flow” among Wealth Advisors brings clients the best ideas and strategies from around the world
• Advice Lab supports the firm as a tax and wealth transfer “R&D” group:
– Sophisticated modeling of estate planning and investment structures– Proprietary wealth transfer structures– Source of intellectual capital for professional advisors
J.P. Morgan offers clients a broad range of services
Investing Lending Wealth AdvisoryServices for Trusts and
Estates
Note: Total client assets include both discretionary and non-discretionary assets, excluding loans
• 160 years’ experience managing estates and trusts and estates for ultra-high-net-worth families
• Operating in over 30 jurisdictions
• Senior Trust Officers: an average of 20 years of experience; many having spent the majority of their careers at J.P. Morgan
• In-house income tax group focused on income tax planning and compliance for estate and trust accounts; deep understanding of state fiduciary income tax issues
• Best-in-class expertise administering complex, illiquid assets
– Operating businesses– Real estate– Farm and ranch– Aircraft and yachts– Art– Intellectual property
The Private Bank at J.P. Morgan
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Risk tolerance & suitability Balance sheetYou and your family
• Family background
• Goals, expectations and constraints
• Total wealth, including assets, liabilities and anticipated cash in/outflows
• Investment preferences
• Income / liquidity needs
• Investment time horizon
• Investment experience, comfort level with markets
• Risk appetite
• Loss sensitivity
• Opportunistic vs. risk averse
• Concentrated positions
• Financial assets (with J.P. Morgan and other financial institutions)
• Ownership structures
• Liabilities
• Current investment portfolio
• Non-financial assets
• Base currency
Your J.P. Morgan Integrated Team takes the time to thoroughly understand your situation and helps to identify and articulate your needs every step of the way
Wealth Advisor Develops strategies for
acquiring, managing and transferring wealth
Client Family
Global Investor Provides advice and implementation
for all investment needs
BankerOversees relationship providing
strategic advice and access to specialists
Trust OfficerAs trustee or executor,
helps to efficiently managetrusts and estates
Credit SpecialistCustomizes loans, typically
on a secured basis
Client Service TeamManages day-to-day
administrative services
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Our Integrated Team of specialists focuses on helping you achieve your goals
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LAgenda
• Overview of J.P. Morgan Private Bank
• Investment Management
• Banking and Lending Credit
• Trust and Estate
• Appendix
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LWe are organized around serving and meeting your needs
Your Portfolio
Who They Are• Global Chief Investment Officer• Portfolio Construction Team• Asset Allocation Team• Investment Strategists• Risk Management Team• Investment R&D Lab
What They Do• Leverage global market and
economic insights to formulate powerful investment strategies for high-net-worth investors
• Formulate strategic and tactical positioning around the financial markets
• Create proprietary tools to build efficient portfolios
• Synthesize best thinking across all asset classes
Advantage• Every decision made through
private client lens• Constant review and analysis of
market and economic conditions
Strategy Team Solutions Team
Who They Are• Asset class specialists in Fixed
Income, Foreign Exchange, Commodities, Equities, Alternatives
• Deep experience with manager research, selection and monitoring
What They Do• Continuously search for, monitor
and re-evaluate asset managers (internal and external) through rigorous due diligence process
• Devise innovative solutions to take advantage of Strategy Team’s insights and enable implementation of portfolio strategy
• Develop first-to-market financial instruments receiving industry recognition
Advantage• Access to innovative market
solutions (internally and externally)• Access to mix of leading asset
managers, many exclusive, that best match your risk/return profile
Who They Are• Your dedicated relationship professionals--
members of your J.P. Morgan team
What They Do• Help you identify and articulate your risk
tolerance• Orchestrate investment process―strategic
and tactical• Link investment activities to your overall
wealth plan• Synthesize and present Strategy and
Solutions Teams’ output• Buy solutions--not sell products• Review portfolio regularly
Advantage• What’s right for you?• Make it personal for you
Global Investment Specialists
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• Starts with Capital Market Assumptions1
• Defines a portfolio’s market exposures over the long term (10 to 15 years)
• Typically employs diverse asset classes, managers, alternative strategies and structured solutions to help maximize returns for a given risk level
• Provides a foundation to make tactical and implementation decisions in the context of your investment strategy
Source of Return Process
Performance adjustment resulting from a manager's outperformance relative to the asset class benchmark
Adjustment to strategic allocation for purposes of return enhancement or risk reduction
ManagerAlpha
Strategic asset allocation
Tactical asset allocation
Historical Performance ofStrategic Asset Allocation
Jan 1994 – Dec 2012
Historical StatisticsAnnualized Return 6.7% 7.5%Allocation Volatility 9.4% 7.5%Sharpe Ratio 0.42 0.59
Allocation Characteristics% Negative months 37.3% 32.9%Maximum drawdown -34.6% -28.7%Worst 3 month return -20.5% -19.9%
Market ParticipationBeta 0.60 0.47 Up capture 62.1% 52.7%Down capture 59.8% 43.4%
Balanced Strategic
Asset Allocation
Traditional 60/40
Source: J.P. Morgan, Ibbotson, Bloomberg, Venture Economics.The presented information does not represent actual investments, actual transactions or historical returns in the accounts of J.P. Morgan clients. Because the asset allocations were selected after the testing period and with the benefit of hindsight, the hypothetical returns shown may be higher or lower than the returns of a portfolio that would have actually been recommended during the time period shown. Indices are not investment products and may not be considered for investment. Past performance is no guarantee of future results. It is not possible to invest directly in an index. See slide “Important information regarding the simulated historical performance.” 60/40 = 60% Developed World Equity / 40% Global Aggregate Bonds. Balanced Strategic Asset Allocation as represented by the J.P. Morgan Private Bank Balanced with Alternatives model as of December 2012. Private Equity is proxied with US Large Cap from Sep – Dec 2012. Investment strategies shown may not be suitable for all investors. Speak with your J.P. Morgan representative concerning your personal investment needs and allocation requirements.
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Strategic asset allocation is the primary generator of your portfolio return and risk
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1 Asset allocation, consisting of both traditional and alternative asset classes, is for illustrative purposes only, and represents a longer-term strategic allocation for J.P. Morgan private clients with a “balanced orientation” (that is, a portfolio designed to balance the upside return potential of risk assets while moderating the downside potential of broad market declines through a meaningful exposure to low volatility and stable return assets) as of January 2013. See risks on page 20.
As markets evolve and become more complex, we position portfolios to achieve an appropriate degree of diversification, managed dynamically based on our view and where we are in a market cycle.
Our diversified asset allocation approach1
Core Fixed Income seeks to provide stability and balance over cycles of inflation, growth and monetary policy, through the use of active and passive strategies and structured solutions
Core Fixed Income seeks to provide stability and balance over cycles of inflation, growth and monetary policy, through the use of active and passive strategies and structured solutions
Private Investments (equity and debt) enable us to tap the outperformance potential offered by non-public companies otherwise unavailable through public markets or mutual funds
Private Investments (equity and debt) enable us to tap the outperformance potential offered by non-public companies otherwise unavailable through public markets or mutual funds
Currencies (including term debt and other non-USD currency exposure) help achieve broad USD diversificationCash serves as a source of liquidity to implement tactical shifts rapidly
Currencies (including term debt and other non-USD currency exposure) help achieve broad USD diversificationCash serves as a source of liquidity to implement tactical shifts rapidly
Developed Markets Equity combines fundamental, quantitative and passive investment strategies, as well as structured investments, in an effort to capture the greatest risk-adjusted reward available in the public markets
Developed Markets Equity combines fundamental, quantitative and passive investment strategies, as well as structured investments, in an effort to capture the greatest risk-adjusted reward available in the public markets
Emerging market equities provide exposure to rapid economic growth, while diversifying equity risk
Emerging market equities provide exposure to rapid economic growth, while diversifying equity risk
Extended credit (such as leveraged loans, high yield) looks to capture income, particularly in slower growth environments
Extended credit (such as leveraged loans, high yield) looks to capture income, particularly in slower growth environments
Diversified hedge funds utilized in an effort to help boost returns, protect from market downside, and diversify away from broad stock and bond market risks
Diversified hedge funds utilized in an effort to help boost returns, protect from market downside, and diversify away from broad stock and bond market risks
Single-strategy hedge funds (including macro, event-driven, distressed debt) provide access to unique managers and styles with dynamic flexibility to rotate among them
Single-strategy hedge funds (including macro, event-driven, distressed debt) provide access to unique managers and styles with dynamic flexibility to rotate among them
Our strategic asset allocation considers all opportunities — public and private
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Tactical shifts seek to capitalize on market dislocations, complementing our strategic asset allocation
• Tactical Asset Allocation attempts to capitalize on cross-market dislocations (6 to 18 months)
– Enhances our potential to improve the risk-adjusted returns of the overall portfolio
– Acts as a form of valuation-based rebalancing
– Accomplished by over / underweighting asset classes, sectors, geographies, currencies and manager styles
– Includes active / passive, traditional / alternative,more / less liquid, local / global and J.P. Morgan / third-party managers
• Tactical considerations
– Implement within the context of strategic asset allocation
– Size tactical allocations according to portfolio risk parameters
– May include taxes and transaction costs in decision process
Overweight
Underweight
Source: J.P. Morgan. *Strategic and tactical allocations represent those of the J.P. Morgan Balanced Model Portfolio as of April 2012. These are subject to change and may not be suitable for all clients. A tactical tilt is any deviation from our long-term strategic allocation. The model portfolio can be implemented across brokerage or managed accounts , based on the unique objectives of each client and is serviced through distinct legal entities licensed for specific activities.
From Strategic to Tactical Asset Allocation*
TacticalStrategic
Fixed Income and Cash30%
AlternativeInvestments34%
AlternativeInvestments30%
Equities31%Equities
40%
Fixed Income and Cash35%
Tactical Overweights and Underweights*
We make timely short-term allocation shifts to bridge the gap between long-term market assumptions and current market conditions
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LAgenda
• J.P. Morgan Private Bank Overview
• Investment Management Overview
• Capital Advisory and Banking Capabilities
• Wealth Advisory and Trust & Estates
• Appendix
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Effective cash management begins with evaluating liquidity needs and developing an approach that addresses short- and long-term cash objectives
RESERVE• Investment horizon of 6-9 months or longer• Fairly static, same-day access not needed• Cash set aside for possible investments, large
purchases
DAY-TO-DAY• Cash typically used for daily needs, may be
subject to unforeseen expenses• Requires preservation of principal• Same-day liquidity
Characteristics
STRATEGIC• No short-term forecasted use• Investment horizon of one year or longer
Segment Balances by Liquidity Needs and Risk Profile
Day-to-Day Balances(Horizon < 6 months)Solution: Checking account*
Strategic Balances (Horizon > 1 year)Solution: Titanium CDs*, short-term governments, agencies and corporate
Reserve Balances(Horizon 6 month – 1 year)Solution: Savings* and money market funds
*Deposit products and services offered by JPMorgan Chase Bank, N.A. Member FDIC
For illustrative purposes only. The views and strategies described herein may not be suitable for all investors. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument and is being provided merely to illustrate a particular investment strategy.
Securities are offered by J.P. Morgan Securities, Inc., member FINRA, NYSE and SIPC
4th Quarter3rd Quarter2nd Quarter1st Quarter
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LCredit Solutions
Address cash-flow timing issues
Provide liquidity
Create flexibility and capacity in your capital structures
Expand investment opportunities
Maintain current exposure to the market rather than liquidate assets
Fund large purchases
Make tax payments
Preserve cash for emergency expenses or other needs
Leverage capabilities enable
you to:
Taking advantage of both sides of your balance sheet can provide financial flexibility to respond to time-sensitive opportunities or enhance wealth planning strategies.
Lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Any extension of credit is subject to credit approval by the lender in accordance with the terms contained in definitive loan documents. 14
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JPMorgan Chase Bank, N.A. Member FDIC.
We offer a full set of credit solutions customized to your specific needs
SECURITIES-BASED LENDING
• Lines of credit secured by marketable securities
• Revolving & term facilities• Concentrated stock lending• Restricted/insider stock lending• Margin lending
HOME FINANCING
• Mortgageso Fixed-rate mortgageso Adjustable-rate mortgages
(ARMs)o Interest-only adjustable-
rate mortgages (ARMs)• Refinancing• Home Equity Lines of Credit
(HELOC)• Home Equity Loans• Construction Lending
CUSTOMIZED FINANCING
• Secured & unsecured lines of credit
• Interest rate hedging• Cross-border financing• Loans for wealth transfer
strategies• Art-secured financing• Aircraft financing• Financing acquisitions of sports
teams and other illiquid corporate assets
• Foreign currency loans• Specialized lending, including
medical practices and law firms• Letters of credit
LEVERED INVESTING
• Recommended for higher quality investments with lower price volatility & higher liquidity levels
• Suitable investments for leverage may include:
o Equity strategieso Fixed income strategies
Lending at J.P. Morgan
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All lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Any extension of credit is subject to credit approval by the lender in accordance with the terms contained in definitive loan documents. Loans collateralized by securities involve certain risks and may not be suitable for all investors. Market conditions can magnify any potential for loss. If the market declines, you may be required to deposit additional securities and/or cash into your account. The securities in your account may be sold to meet a collateral/ maintenance call, and J.P. Morgan may sell your securities without contacting you. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have. Some or all of the securities sold to meet a margin/maintenance call may be sold at prices higher than their initial cost, which may result in adverse tax consequences. You should consult your tax advisor in order to fully understand the tax implications associated with pledging securities in connection with a margin loan. Please read your client agreement carefully so that you understand your obligations. The views and strategies described herein may not be suitable for all investors. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument. JPMorgan Chase & Co. and its subsidiaries do not render accounting, legal or tax advice. Estate planning requires legal assistance. You should consult with your independent advisors concerning such matters.
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Purchase of Precious Metals
$1.2 million
1 year revolving line of credit secured by unallocated silver
used to purchase silver and other precious metals utilizing J.P.
Morgan’s commodities platform
Owner Occupied Commercial Real Estate
$10 million
7 year term loan secured by commercial real estate used to
fund the purchase of the commercial building for
operations of a privately held business. Combined with interest rate swap to take advantage of
current low rates
Recent and noteworthy transactions
One-Stop Residential Construction Loan
$2.6 million
2 year non-revolving line of credit secured by residential real estate with commitment for permanent
30 year mortgage financing at the completion of a personal
residence
Implementation of Gifting Strategy
$5 million
1 year revolving line of credit secured by marketable securities used to fund Delaware Dynasty
Managed Trust to take advantage of $5 million gift tax exemption
Purchase of Private Company
Shares
$1.8 million
1 year non-revolving line of credit secured by single stock
business to purchase additional shares of stock to increase
company ownership position
General Liquidity Line
$3.5 million
1 year revolving line of credit secured by marketable securities used for general liquidity needs. Line also used to finance portion
of a significant tax obligation
Concentrated Stock Line of Credit
$1.5 million
12 month line of credit secured by client’s holdings in a publicly
traded, single stock position used to liquefy concentrated balance sheet and enable diversification
into other investible assets without selling out of single stock
position
Unsecured Line of Credit
$1.0 million
12 month line of credit to owner of successful Middle Market company. Proceeds used for
improvements to primary residence and general
liquidity needs
Working Capital Line of Credit
$3.0 million
12 month line of credit secured by all business assets to a professional services firm.
Proceeds used for working capital and business liquidity purposes
JPMorgan Chase Bank, N.A. Member FDIC.Not a commitment to lend. 16
We can provide lending solutions to help you achieve a variety of objectives
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LAgenda
• Overview of J.P. Morgan Private Bank
• Investment Management
• Banking and Lending Credit
• Trust and Estate
• Appendix
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Wealth can pass to one of four places - an effective plan can help get it to the “right” place
Ensuring sufficient income
and liquidity to achieve desired
lifestyle
Giving and selling assets to children, grandchildren and
other family members
Achieving philanthropic goals
while maximizing benefits to one’s
family
Minimizing taxes so that
more assets get to the other
three destinations
You
Charity Taxes
Heirs
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Our approach• Client focus and customized approach – Establishing prompt, continuing and responsive
communication with beneficiaries and co-trustees regarding needs in relation to the trust• Bringing creative and effective solutions – Creating innovative client solutions, which
have become industry standards; e.g. bringing absolute return investing to portfolios, and
developing new approaches to distributions• Investment advisory with the goal of maximizing risk-adjusted returns – Access to
insights drawn from firm-wide global investment experts and the Private Bank investment
strategy team, as well as proprietary analytical modeling and portfolio construction,
incorporating taxes and cash flows• Staying ahead of change – Quickly responding to changes in markets, monitoring tax
laws and regulations and addressing changes to legislation and legal precedent• Stability, continuity, permanence
– We have the honor of serving some families for four generations, spanning over 100
years– We are a recognized national industry leader, often selected by courts to manage difficult
fiduciary situations
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J.P. Morgan: The preeminent name in trusts and estates
Source: JPMorgan Chase & Co. Neither JPMorgan Chase & Co. nor any of its affiliates offer tax or legal advice. Such advice should be obtained from your professional, legal or tax advisorsNote: Data as of 1Q13 unless noted otherwise
Our insights• Research centers focusing on family wealth, foundations, executive compensation, legislation, and tax-efficient planning• Global network of 65 wealth advisors creates innovative planning solutions• Philanthropic Services distributes over $300 million annually on behalf of clients and their charitable foundations• Deep resources available for specialized assets, e.g., direct real estate, oil and gas, ranch properties
Our experience• Over 160 years advising the world’s wealthiest families• Global footprint with offices in 9 countries and 21 U.S. states• Over $130 billion of assets under supervision and over $60 billion of assets under
managementOur resources• Over 700 team members worldwide• Trust Officers average over 20 years of industry experience• Leading Delaware capabilities through the J.P. Morgan Trust Company of Delaware
– 20-year history in Delaware with a team of 40 professionals administering more than $40
billion in trust assets
United Kingdom Switzerland
France The Bahamas
Italy Singapore
Hong Kong United States
Spain
Arizona Indiana Pennsylvania
California Kentucky Texas
Colorado Louisiana Washington DC
Connecticut Michigan West Virginia
Delaware New Jersey Wisconsin
Florida New York
Georgia Ohio
Illinois Oklahoma
U.S. fiduciary offices
Global fiduciary offices
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J.P. Morgan’s Wealth Advisors guide you in the planning of your legacy
• Assets• Wealth transfer and philanthropic objectives• Need for income or liquidity• Tax jurisdiction
• Transfer ownership• Meet liquidity needs• Minimize taxes• Diversify assets
• Structuring legacies for families• Structuring charitable legacies• Insurance solutions for liquidity (estate taxes) and
succession planning for closely held businesses• An explanation of advantages available in states with
favorable trust laws (i.e. Delaware)– perpetual trusts
– progressive laws for investment and administration
– confidentiality
Wealth Advisors integrate the advice of your personal tax and legal advisors into your overall wealth transfer framework
• Wealth Advisors understand your situation and what you wish to accomplish based upon your:
• Wealth Advisors understand your situation and what you wish to accomplish based upon your:
• Wealth Advisors assist in developing strategies that:• Wealth Advisors assist in developing strategies that:
• The range of advice includes:• The range of advice includes:
Though Delaware has a rule against perpetuities, the rule permits assets other than real estate to be held in perpetuity. Real Estate may be held in perpetuity if it is held indirectly through another entity (e.g., LLC, corporation, partnership, etc.)
Tax Advisor
Legal Advisor
J.P. Morgan Wealth Advisor
ClientWealth
Transfer
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Leverage as a return-enhancement strategy: As a tactical investment strategy, leverage may be dialed up or down over time, according to market conditions. A leveraged investment strategy is relatively attractive in a low interest rate environment when the cost of borrowing is modest, though using leverage in a rising-rate environment may also be effective at an appropriate level. However, even in a low-rate environment, not all investments are suitable leverage candidates. Generally, we recommend you consider adding leverage to those investments with lower price volatility and higher liquidity levels.
Leverage may add risk to a portfolio. Adding leverage to an investment can magnify gains as well as losses. Please consider the following: Margin calls J.P. Morgan establishes a maximum loan-to-value ratio for investments (i.e., the maximum amount of a loan collateralized by that financial investment). If the market declines, and the value of the underlying asset moves lower than the lending value required to support the loan, J.P. Morgan will request additional funds to maintain the required lending value amount. A “margin call” requirement can be met either with cash or additional securities. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have.Increased collateral requirements At any time, and without prior written notice, J.P. Morgan can decrease the advance rate for an investment securing a loan, thereby triggering a margin call. Loans collateralized by securities involve certain risks and may not be suitable for all investors. If the market declines, you may be required to deposit additional securities and/or cash into your account. Sale of securities In the event that a margin call is not met, J.P. Morgan has the right to sell securities held in the accounts to satisfy the obligation, as well as the right to decide which assets to sell. J.P. Morgan will attempt to notify a client before a collateral sale is made. However, we are not required to do so. Some or all of the securities sold to meet a margin/maintenance call may be sold at prices higher than their initial cost, which may result in adverse tax consequences. You should consult your tax advisor in order to fully understand the tax implications associated with pledging securities in connection with a margin loan. Please read your Customer Agreement carefully so that you understand your obligations. Higher borrowing costs Borrowing costs may increase over time if short-term interest rates move higher.
Equities: Changes in economic and market conditions, interest rate risk, and lack of liquidity may affect equity performance. Investments in equity structures entail certain risk factors. Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of the Issuer and is not guaranteed by any third party and an Investor can lose some or all of their investment. Structured notes should be considered a "hold until maturity" product. Owning the Notes is not the same as owning the constituent Currency/Equity/Commodity position. For additional risk factors, please see the Pricing Supplement.
Fixed Income: Continued deterioration in macroeconomic conditions could lead to poor liquidity in the name, lower price and/or credit downgrades. All securities mentioned below are potentially subject to significant mark to market volatility based on movements in either the interest rate or credit markets at any time. Note: All pricing and yields are subject to change at any time based on market conditions. Please call the desk to confirm final pricing on all bonds. U.S. Onshore - BLUE SKYs – Please confirm Blue Sky eligibility before soliciting to a U.S. Onshore client.
FX & Commodities: Risks include and are not limited to political, economic, and market conditions.
Alternatives: Economy, currency, tax and market conditions, including market liquidity may increase the risks of these investments and may impact performance of the funds.The views and strategies described herein may not be suitable for all investors and more complete information is available which discusses risks, liquidity, and other matters of interest. Any investment associated with leverage will include additional risks such as implied volatility, exposure to rising interest rates (borrowing costs) and margin calls, which may occur if the underlying investment declines below its minimum lending values. Leverage will have the effect of magnifying losses or gains. Please note that lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Margin calls may include sale of the asset serving as collateral if the collateral value declines below the amount required to secure the line of credit. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have.An investment in structured products involves substantial risks, and potential investors should clearly understand the risks involved. Investing in structured products is not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include lack of liquidity in that there may be no secondary market and none expected to develop; restrictions on transferring interests in the investment; absence of information regarding valuations and pricing; and potentially higher fees than other investment strategies. Client does not receive dividends from the underlying security or securities. The investment should be considered a “hold until maturity” product and subject to issuer credit risk. Early unwinds could result in lower than expected returns relative to expected return at maturity and are subject to the sole discretion of the Issuer.
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Risk considerations
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In discussion of options and other strategies, results and risks are based solely on hypothetical examples cited; actual results and risks will vary depending on specific circumstances. Investors are urged to consider carefully whether option or option-related products in general, as well as the products or strategies discussed herein are suitable to their needs. In actual transactions, the client’s counterparty for OTC derivatives applications is J.P. Morgan Chase Bank, N.A., London branch. For a copy of the “Characteristics and Risks of Standardized Options” booklet, please contact your J.P. Morgan Advisor.
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