JPMCB Strategic Property Fund - OkMRF SPF Q411.pdf · Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return

JPMCB Strategic Property Fund Quarterly Report: December 31, 2011

JPMCB Strategic Property Fund1 owns and seeks improved real estate projects with stabilized occupancies, that produce a relatively high level of current income combined with moderate appreciation potential.

The Fund’s investment portfolio focuses on attractive office, retail, residential and industrial investments with high-quality physical improvements, excellent locations and competitive positions within their markets.

On the COver and abOve: China basin, san FranCisCO, Ca

The Property is comprised of two mid-rise office buildings totaling 915,840 square feet situated on a 5.2-acre parcel along

Mission Creek Channel in San Francisco’s South of Market Area. The two buildings are separated by a landscaped outdoor

courtyard that runs the full length of the Property with an outdoor promenade that flanks the Wharfside structure, providing

additional outdoor seating areas and waterway views.

1 Commingled Pension Trust Fund (Strategic Property) of JPMorgan Chase Bank, N.A. (“Strategic Property Fund” or “SPF”).

J.P. Morgan Asset Management | 1

Strategic Property Fund (“the Fund”) delivered a fourth quarter total gross return of 3.05%, comprised of income of 1.28% and appreciation of 1.75%. The one-year total gross return was 15.96%.

Strategic Property Fund is the largest core fund in the ODCE Benchmark (peer group of open-end commingled funds) and outperformed its peer group over the three-month, one-, three-, five-, and ten-year time periods. The fund’s size, quality, consistent pure core strategy, high occupancy, low lease rollover, solid income, conservative leverage and staggered debt maturities position the Fund to perform well over the long-term.

FinanCial highlights at deCember 31, 2011

Net Assets: $15,494,890,106

Unit Value: $1,674.32

Gross Asset Value1: $21,322,026,197

Number of Direct Real Property Interests2: 161

Number of Account Holders: 316

1 Net Asset Value reflected gross of Fund’s share of debt at fair value ($5.8 billion).

2 Direct real property interests and land investments. (%)Current Quarter

One Year

Three Years

Five Years

Ten Years

Since Jan. 983

SPF 3.05 15.96 -0.93 0.84 7.10 8.79

NPI4 2.96 14.26 2.43 3.09 8.06 9.10

NFI-ODCE5 2.97 15.99 -1.76 -0.21 6.18 7.89

0

5

10

-10

-5

Perc

ent

TotalIncome Appreciation

1.28

9.98

6.07 5.72 6.34 7.095.47

-6.64-4.64

1.75

1.593.05

15.96

-0.93

0.847.10 8.79

15

20

0.71

Investment Performanceat deCember 31, 2011

Fourth Quarter 2011

3 Strategic Property Fund’s inception date.4 NCREIF Property Index.5 The NFI-ODCE (NCREIF Fund Index-Open End Diversified Core Equity) is a fund-level capitalization weighted, time weighted

return index and includes property investments at ownership share, cash balances and leverage (i.e., returns reflect the fund’s actual asset ownership positions and financing strategy).

Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Past performance is not a guarantee of comparable future results.

Total returns net of fees were: Current Quarter: 2.79%; One Year: 14.82%; Three Years: -1.92%; Five Years: -0.16%; Ten Years: 6.04%; Since inception: 7.72%. Net returns are based on the highest applicable fee rate for this strategy.

2 | JPMCB Strategic Property Fund | Quarterly Report: December 31, 2011

• Delivered Consistent Strong Performance: The Fund delivered a total gross one-year return of 15.96% in calendar year 2011—a solid income return of 5.47% and appreciation of 9.98%. The Fund outperformed the ODCE benchmark (peer group of open-end commingled funds) over the three-month, one-, three-, five- and ten-year time periods. The Fund remains one of the industry’s top open-end core commingled portfolios.

• Continued Active Management: Acquisition activities totaled $3.0 billion of equity across the office, residential and retail sectors. The Fund enhanced its office portfolio with high quality well-leased assets in the urban and gateway cities. Strategic Property Fund also continued its goal to increase its residential investments by investing $449 million of equity in attractive multifamily assets. On the disposition front, the Fund continued to prune assets of lesser quality and/or growth prospects and where appropriate, trade up for asset quality and geographic location. As a result, the Fund delivered net sales proceeds of $947 million.

• Maintained Healthy Balance Sheet: The balance sheet remained strong throughout the calendar year. The cash position was 2.4% of the Fund’s net asset value at the end of 2011. Portfolio leverage decreased to 26.8% of the gross asset value at December 31, 2011 as compared to 28.8% of the gross asset value at December 31, 2010.

• Received Strong Client Commitment: The Fund accepted $1.9 billion of new client capital in 2011. Investor demand for high quality real estate is strong and the Fund continues to attract capital interest. Subsequent to the calendar year end, on January 5, 2012, the Fund accepted $655 million of client capital which decreased the contribution queue to $1.4 billion, about 9.2% of the net asset value. The Fund remains open to new investor capital. The Fund honored $1.1 billion in redemption requests during the calendar year.

• Maintained Strong Fundamentals: The Fund’s diversified portfolio of dominant, high-quality assets continues to perform well at the operating level and, on the whole, is well-leased with the total weighted portfolio leasing at 91.7% at the end of 2011, an improvement from 90.5% at the end of 2010. The residential sector stands strong at 94.8% with the retail and office sectors at 92.7% and 91.3%, respectively. A major focus in 2011 was to improve leasing in the industrial sector, and although there is still more work to do, leasing in the industrial sector improved to 83.7% at year-end 2011 from 78.6% at the end of 2010. The Fund will continue to work aggressively to improve leasing in the industrial sector with a goal of a high 80’s percentile by the end of 2012.

Highlights from Calendar Year 2011


Prospects for the US economy brightened considerably in the fourth quarter of 2011 following the equity market volatility and real economy softness of August and September. With fears of a European financial contagion and a China hard landing receding, JPMorgan Securities (JPMS) economists revised August’s 2012 GDP forecast of 1.5% to just under 2.5%. While the overall forecast has improved, the even bigger improvement is in the reduced tail risk, that is, the threat of a very bad recession outcome. Even so, a sub-2.5% GDP forecast is still not very robust, implying only moderate job growth through the coming year. In such an environment where there is not necessarily a strongly rising tide lifting all boats, differences in market performance matter more. Current payroll statistics point to significant divergence among metros, with those with high educational attainment and global, tech and energy exposures accounting for a disproportionate share of job creation this cycle.

National Economic Overview

direct real Property interests diversificationat deCember 31, 2011diversiFiCatiOn is based UPOn FUnd’s net eqUity valUe1

dOllars in milliOns

West $6,077.6 40.3%Office 2,975.5 19.7Industrial 410.7 2.7Residential 1,245.9 8.3Retail 1,445.5 9.6

midWest $807.3 5.4%Office 140.0 1.0Industrial 302.3 2.0Residential 162.1 1.1Retail 202.9 1.3

east $3,969.6 26.3%Office 1,716.6 11.4Industrial 109.4 0.7Residential 1,442.2 9.6Retail 701.4 4.6

sOUth $4,230.1 28.0%Office 2,328.3 15.4Industrial 646.3 4.3Residential 717.9 4.7Retail 537.6 3.6

Real Estate Capital MarketsCommercial real estate transaction volume slowed quite a bit in the fourth quarter following August’s market swoon. The bid-ask spread widened dramatically as buyers became exceptionally sensitive to the risk of potentially paying too much for deals under consideration. That said, given that the disruption came at the worst possible time for the typical push to close deals by year-end, the outcome might have been much worse. Private market pricing evinced a relatively subdued reaction. Helping values were appraisal discount rates of about 7.8% midyear that ticked down to about 7.6% by year-end. In the transaction market, cap rates for real estate (all types and quality) continued to drift down through the year to just under 7%, but the spread between transaction cap rates and whole loan mortgage rates remained very wide—in excess of 240 bps, compared with an

tOtal $15,084.6 100.0%Office 7,160.4 47.5Industrial 1,468.7 9.7Residential 3,568.1 23.7Retail 2,887.4 19.1

1 Direct real property interests only, excluding land investments.


average of 140 bps since 2001. This offers a nice tail wind for capital values and transaction volume going into 2012. Debt markets have demonstrated surprising resilience, not only in the whole loan market, but even in CMBS and in the availability of financing for real estate with some leasing risk. There continues to be a divergence in transaction pricing for core properties versus buildings with leasing risk. Value-add situations always command a premium, but current pricing data suggest it is very large. The wide risk premium is based in part on pessimism about fundamentals: outside of the multifamily sector, the recovery has been slow and grinding on the demand side, and aided by a lack of new supply.

2011 was the second consecutive year of total core private market returns in the 16% range. We expect returns to be lower in 2012 because most of the good news on cap rate declines is past. With continued modest economic growth, accelerating net operating income growth outside of the multifamily sector and some CBD office markets may be sufficient to drive a 10% total return this year.

Real Estate Sector Review

Office sector

The office recovery continues to trudge along. Demand for space remained sluggish through the year, but with deliveries holding at record low levels, vacancy dropped 50 bps, ending 2011 at 16.5%. Throughout the recovery of the last two years, there have been three key themes for the office sector: CBDs over suburbs, Class A over Class B, and high-wage knowledge industries on the coasts as leaders of demand. For perspective on the first two themes, it is striking that while Class A CBD space makes up roughly one-quarter of the office stock tracked nationally by CBRE Econometric Advisors, it accounted for nearly 40% of total net absorption in 2011. On the theme of knowledge industries, consider the San Francisco Bay Area with its high concentration of jobs in technology and new media: that market accounted for nearly 20% of all office space absorbed nationally. Other tech markets like Seattle and Austin also did well, as did energy dependent Houston.

N A T I O N A l E C O N O M I C O V E R V I E w

Overall, our expectations for the office sector in 2012 are moderately positive. Offices should deliver stronger NOI growth than any other property type except apartments, malls and lifestyle retail. The outlook is not entirely unclouded, however, as three of the largest metro markets—New York, Chicago and Washington D.C.—are likely to see more moderate vacancy declines in 2012 as they deal with headwinds from Wall Street layoffs and more muted federal spending growth.

industrial/Warehouse sector

Most US warehouse markets, especially the port-driven West Coast markets, saw leasing pick up in 2011. Total net absorption was four times that of 2010. The availability rate fell a full percentage point in the course of the year, to 13.8%, a level still extremely high in the context of history. There were concerns in the latter half of the year that the warehouse recovery might be stymied by a decline in shipments through the ports. The drop in container traffic followed a plunge in consumer confidence through the spring and summer that prompted retailers to pare back holiday orders from foreign suppliers. Somewhat reassuringly, consumer confidence has strengthened since then, and holiday retail sales were not disastrous. In a more robust recovery we would expect to see inventory restocking in 2012 that would fortify the warehouse rebound. However, it is unlikely with wage growth as weak as it is that the retail sales resurgence of late 2011 is sustainable. Overall, we expect continued incremental improvement in warehouse vacancies, with new construction remaining very subdued. The outperformance of the West Coast markets is likely to be less pronounced.

Of the 53 metro markets we follow, the five largest account for 28% of total square footage. These gateway markets have drawn an outsized share of demand over time, and following the last two recessions they as a group began to recover before the other 48 did. In the last cycle, the secondary and tertiary markets rode the tailwinds of housing-related demand and benefited from trade re-routed from the backed-up Southern California ports. These drivers are absent, however, in the current cycle as single-family homebuilding remains largely dormant and LA/Long Beach port capacity is a non-issue. It is not clear that even a broad pick-up in retail sales would benefit the smaller warehouse markets to any great degree.


N A T I O N A l E C O N O M I C O V E R V I E w

retail sector

Holiday 2011 retail sales started strong on Black Friday but ended the year with a bit of a whimper. The performance of individual retail segments continues to be very diverse. In general, high end retailers and discounters did well, middle-market department stores continued to struggle, and online sales stole share from all the other segments to some degree. This shift to online presents a structural problem for bricks-and-mortar retail that threatens to get larger for commodity retail formats.

The net operating income gap between high quality regional and superregional malls and the outdoor retail formats is yawning, and the outdoor formats have made virtually no progress towards closing it. Internet sales are likely having a much larger negative impact on these non-enclosed formats; even stronger big box retailers such as Best Buy and Barnes and Noble that survived the housing bust must now struggle to avoid becoming merely showrooms for online sellers.

residential sector

The breadth of the apartment market upturn is remarkable. Macro factors in the multifamily market have helped even mediocre quality properties to perform well. In the third quarter of 2011, the vast majority of apartment properties were posting positive rent growth and nearly 40% experienced greater than 6% rent growth. This rent spurt is not unprecedented: it happened in 2005-2006, but that was a much stronger environment for job growth and household creation than we are in today, and the condo conversion boom, which reduced the supply of rental apartments in many cities, was in progress then. This cycle’s unique tailwind is the falling homeownership rate, something that will taper off over time as the conversion boom did.

For now, however, we remain bullish on apartments, and look for multifamily easily to surpass all other property types in NOI growth in 2012. That said, with rents past their previous peaks and rising at a decelerating pace, and with the confluence of near-record single-family housing affordability and rising deliveries, we are likely passing from the recovery phase to a period of growth closer to inflation.

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Portfolio Returns

Additionally, continued strength in occupancy and rents in New York, Boston and San Francisco drove net operating incomes and values higher. In 2012, rent growth is expected to moderate for most apartment assets, as prior years’ rent growth had been strong.

The retail sector followed with a gain of $54.4 million (37 bps) and delivered a leveraged total return of 3.32%, comprised of an income return of 1.40% and appreciation of 1.90%. In the fourth quarter of 2011, malls and neighborhood and community shopping centers enjoyed modest increases in occupancy and rents. Nationally, this was the first quarter of increase for strip centers after remaining flat or declining over the past 13 quarters. Values for Class A malls and strong grocery and community centers in more affluent markets have increased due to strong performance from a bifurcation of consumer behavior. Employed affluent shoppers exhibited greater consumer confidence and spent their dollars at high-end or credit tenant formats which were disproportionately represented in A-quality locations. Consumers in weaker markets, where unemployment is higher, pulled back on

Strategic Property Fund delivered a fourth quarter total gross return of 3.05%, comprised of income of 1.28% and appreciation of 1.75%. The Fund’s one year total gross return was 15.96%, comprised of income of 5.47% and appreciation of 9.98%. In 2012, we anticipate the income return to be in the range of 5.25% to 5.75% and expect to deliver a high single digit total return.

Quarterly valuation of direct real estate resulted in total appreciation of $253.4 million (170 bps). A positive debt mark to market adjustment of $140,527 resulted in no impact for the quarter ended December 31, 2011. The residential sector delivered the largest increase with $150.6 million (101 bps) of appreciation, which translated into a leveraged total return of 5.87%, comprised of income of 1.38% and appreciation of 4.44%. Value increases in the residential sector were largely due to the Fund’s Denver suburban multi-family properties and assets in the urban metro area markets of New York, Boston and San Francisco. In the second half of 2011, several transactions in Denver showed that buyers were confidently underwriting increased rents in their year one projections.

Industrial

Strategic Property Fund NPI

Perc

ent

HotelRetailResidentialOffice

0

20

40

60

80

100 2.6

47.535.3

14.3

25.8

22.0

9.7

23.7

19.1

diversification by Property typeat deCember 31, 2011 diversiFiCatiOn is based UPOn FUnd’s net eqUity valUe

South

Strategic Property Fund NPI

Perc

ent

MidwestWestEast

0

20

40

60

80

100

26.3 34.2

21.9

33.9

10.0

28.0

40.3

5.4

diversification by Property locationat deCember 31, 2011 diversiFiCatiOn is based UPOn FUnd’s net eqUity valUe


spending and traded down to lower price and smaller purchases. The spending pattern has negatively impacted small businesses and retail values in second- and third-tier markets.

The industrial sector generated an increase of $31.1 million (21 bps) with a leveraged total return of 3.87%, comprised of an income return of 1.37% and appreciation of 2.48%. In general, there were minimal changes to industrial asset values. However, well leased assets in the major industrial markets such as Chicago, Dallas, metro-Los Angeles and central New Jersey are still experiencing investor demand, which contributed to the value increases this quarter. Looking forward, the slow growth of the economy will continue to restrain growth in net operating income and occupancy overall.

The office sector produced a modest gain of $17.3 million (12 bps) and a leveraged total return of 1.56%, comprised of an income return of 1.28% and appreciation of 0.28%. Growth in technology and energy sectors contributed to increased occupancy in both Texas and Northern California cities. Slower growth in the financial sector and federal government kept performance flat in New York and Washington, DC. Activity will likely be flat in these cities in the coming year due to muted performance of financial companies and cuts in government spending. Pricing remains strong for A-quality transactions. However, B-quality assets struggled to trade as lending pulled back during the European debt crisis. Continued scarcity in construction activity has helped to keep vacancy rates from moving higher on a national level. Capital market assumptions have stabilized in the office sector.

P O R T F O l I O R E T U R N S

rialtO COmmerCe Center, rialtO, Ca CentUry ParK, lOs angeles, Ca


Strategic Property Fund invested $496.1 million of net equity to acquire four California investments in the office and residential sectors. In San Francisco, China Basin, a 915,840-square-foot office complex in the SOMA submarket was acquired for $277.4 million of net equity. China Basin is situated at the convergence of Mission Bay and SOMA, along Mission Creek Channel and adjacent to CalTrain’s San Francisco terminus and AT&T Park. The property consists of two mid-rise buildings and is currently 94.1% leased to a diverse mix of tenants in the fields of technology, life science, telecommunications and professional services. The China Basin location is one of the most vibrant in the City throughout the day and night. In La Jolla, the Fund entered into a joint venture to acquire 88.5% of La Jolla Commons for $164.2 million of net equity. La Jolla Commons is located in an area known as University Towne Center (“UTC”) in the greater San Diego market. The property is currently 90.7% leased and in San Diego’s famed “Golden Triangle” area, one of the most sought-after business locations in Southern California. The Class A office campus consists of over 300,000 square feet of office space, additional land for a 417,000-square-foot build-

to-suit office building for LPL Financial (one of the largest U.S. financial advisory firms with a total capitalization of $3.0 billion) and a 1.4 acre development parcel. The 15-year LPL Financial lease is one of the largest in San Diego’s history. Ground breaking for the new building will be in mid 2012, and opening will be in 2014. In the Sunny Hills area of Fullerton, Jacaranda, a 131-unit residential property was acquired for $32.0 million of net equity. The property is approximately three miles from Downtown Fullerton which offers residents a multitude of dining options and retail services. Major economic drivers in Fullerton include the health care, education and defense industries. In Murrieta, a family-oriented community in southwest Riverside County, the Fund entered into a joint venture to acquire 50% of Grand Isle, a 453-unit, 96.9% occupied Class A residential asset for $22.6 million of net equity. Murrieta offers residents access to outdoor activities, an abundance of retail amenities and an affordable lifestyle. Major economic drivers in southwest Riverside County include the high-tech, manufacturing, biotech, healthcare and telecommunications industries.

Portfolio Activity

grand isle, mUrrieta, Ca JaCaranda, FUllertOn, Ca


the industrial leasing to the higher end of 80% by the end of 2012. Overall, Strategic Property Fund continues to work aggressively on its leasing activity across all sectors to further enhance the value of the portfolio.

Additionally, the quality and location of our new office assets has helped the asset management team secure additional leasing soon after their acquisition. For example, at 200 Fifth Avenue in New York City, Tiffany & Co expanded to the 9th floor, taking an additional 57,691 square feet effective December 1, 2011. This space runs coterminous with their existing premises and expires March 31, 2026. Tiffany & Co. now occupy 40% of the building. Within three months of acquiring 200 Fifth Avenue, leasing improved from 81.1% to 88.0%.

During the quarter, the Fund decreased its leverage to 26.8%. Property debt coming due over the 12-, 24- and 36-months are staggered and very manageable at 2.9%, 7.4% and 2.9% of net asset value, respectively. The weighted average cost of capital further decreased to 4.7% with 83.3% of our loans at fixed rates and secured by real estate assets.

The Fund’s cash position decreased to 2.4% of the Fund’s net asset value. The Fund accepted a total of $684.3 million of new client capital and honored $456.7 million in redemption requests in the fourth quarter. Investor demand for high quality real estate is strong and the Fund continues to

sanCtUary ParK, alPharetta, ga

Disposition activity yielded total net proceeds of $114.8 million. Of note, the sale of Pinnacle at Hunter’s Glen, a 264-unit garden style residential property in the Thornton submarket of Denver, CO, yielded net proceeds of $24.7 million for an IRR of 8.8% over the five-year hold period. Strategic Property Fund took advantage of the strong capital market and the lack of quality product in Denver to dispose of this asset with high capital needs in a submarket with below-average long-term growth potential. In addition, consistent with the Fund’s focus on pruning assets of lower growth prospects from the portfolio, the Fund disposed of three industrial assets in weaker markets that no longer fit the profile of the Fund—Walnut Fork, an 810,000-square-foot industrial asset in Pendergrass, GA yielded net proceeds of $20.0 million; CentrePointe, a 422,400-square-foot asset in Nashville, TN, yielded net proceeds of $13.0 million; and Commerce Farms III, a 456,600-square-foot asset in Lebanon, TN yielded net proceeds of $9.5 million. Further, the Fund closed on three partial sales that yielded total net proceeds of $47.6 million.

The portfolio was 91.7% leased at quarter end. The residential sector remains strong at 94.8%, followed by the retail sector at 92.7% and the office sector at 91.3%. The industrial sector which has been a major focus of our asset management team throughout 2011 improved to 83.7% this year-end; up from 78.6% at the end of last year. The objective is to increase

P O R T F O l I O A C T I V I T Y

la JOlla COmmOns, la JOlla, Ca


attract capital interest. On January 5th, the Fund accepted an additional $655.2 million of client capital bringing the contribution queue to $1.4 billion. The current estimated timeframe for calling capital for new commitments is six to nine months. The Fund remains open to new investor capital. The Fund will continue to balance its success in capital raised to date with a disciplined approach to acquiring and pruning assets that meet our criteria for quality and market position.

Looking ahead, the focus remains to maintain a strong balance sheet for reinvesting in the portfolio in order to drive income return, acquire assets consistent with the Fund’s strategy for long-term growth (i.e., income oriented investments, high quality core assets in major markets), hold the cash position to 1% to 3% of net asset value and keep leverage within the Fund’s target range of 25% to 30%. Thank you for your continued confidence and support.

Anne S. Pfeiffer Portfolio Manager

breWery blOCKs, POrtland, Or Winners CirCle, ParKland, Fl


Financial Statements and NotesFor the three months ended December 31, 2011

(unaudited)


The accompanying notes are an integral part of these financial statements.

Statement of Net Assets

as OF deCember 31, 2011 dOllars in thOUsands, eXCePt Units and Unit valUe

assets

Investments in real estate assets at fair value $15,257,536

Cash and cash equivalents 375,384

Other assets and accrued income 12,334

Total assets 15,645,254

liabilities

Line of Credit 150,000

Other liabilities 364

Total liabilities 150,364

net assets

At fair value $15,494,890

Outstanding units 9,254,419

Unit value $1,674.32


FOr the three mOnths ended deCember 31, 2011 dOllars in thOUsands


Statement of Operations and Changes in Net Assets

investment aCtivity

Investment income

Income from investments in real estate assets $192,265

Interest and other income 484

Total investment income 192,749

General fund expenses (1,297)

Line of credit fees and interest expense (227)

Net investment income 191,225

Realized and unrealized gain (loss) on investments

Realized gain (loss) on investments sold (34,596)

Less: previously recorded unrealized gain (loss) on investments sold (43,111)

Net gain (loss) recognized on investments sold 8,515

Unrealized gain (loss) on investments held at end of period 254,960

Net realized and unrealized gain (loss) on investments 263,475

Increase in net assets resulting from operations 454,700

PartiCiPant aCtivity

Contributions from participants 684,330

Withdrawals by participants (456,704)

Net participant activity 227,626

Increase in net assets 682,326

net assets

Beginning of period $14,812,564

End of period $15,494,890


FOr the three mOnths ended deCember 31, 2011 dOllars in thOUsands


Statement of Cash Flows

OPerating aCtivities

Net investment income $191,225

Adjustments to reconcile investment income to net cash flow provided by operating activities

Undistributed income from investments in real estate assets (75,534)

Decrease in accrued income and other assets 3,971

Increase in other liabilities 57

Net cash flow provided by operating activities 119,719

investing aCtivities

Contributions to investments in real estate assets (982,202)

Distributions from investments in real estate assets 181,093

Proceeds from dispositions of investments in real estate assets 113,392

Deposits for pending transactions in real estate assets (13)

Net cash flow used in investing activities (687,730)

FinanCing aCtivities

Line of credit proceeds 150,000

Contributions from participants 684,330

Withdrawals by participants (456,704)

Net cash flow provided by financing activities 377,626

Net decrease in cash and cash equivalents (190,385)

Cash and cash equivalents, beginning of period 565,769

Cash and cash equivalents, end of period $375,384

sUPPlemental disClOsUre OF Cash FlOW and nOn-Cash inFOrmatiOn

Cash paid during the period for line of credit fees $227


as OF deCember 31, 2011 dOllars in thOUsands

Schedule of Investments

1 Year acquired is reported in calendar years.2 Cost amounts include undistributed income.


Property Name Year Acquired1 location Net Cost2 Net Fair Value

OFFiCe101 Constitution 2007 Washington, DC $203,026 $228,459 1285 Avenue of the Americas 2001 New York, NY 158,621 402,304 1501 K St. 2006 Washington, DC 277,184 282,270 171 Seventeenth Street 2006 Atlanta, GA 175,056 121,258 1918 Eighth Avenue 2011 Seattle, WA 311,494 311,266 200 Fifth Avenue 2011 New York, NY 316,416 318,787 2000 Avenue of the Stars 2004 Los Angeles, CA 20,082 98,962 225 West Wacker 2003 Chicago, IL 194,016 139,928 3801 PGA Boulevard 2006 Palm Beach Gardens, FL 57,627 7,171 700-900 Concar Drive 2007 San Mateo, CA 99,336 86,439 7950 Professional Center 2010 Doral, FL 6,502 3,861 818 Stewart Street 2011 Seattle, WA 128,092 127,978 888 Walnut Street 2007 Pasadena, CA 128,479 98,674 Advanta Office Commons 2010 Bellevue, WA 240,375 247,215 Alliance Texas 2010 Fort Worth, TX 26,127 32,399 Brewery Blocks 2007 Portland, OR 133,498 121,257 Carothers Office 2006 Franklin, TN 82,915 75,982 Century Plaza Towers 1997 Los Angeles, CA 97,004 241,968 China Basin 2011 San Francisco, CA 277,600 277,246 CM Doral—City Hall 2010 Doral, FL 1,397 1,397 Corporate Center Office Park 1998-99, 2007 Franklin, TN 189,962 181,923 Crescent Big Tex 2004 Various, TX 719,804 716,933 Crescent Little Tex 2004 Dallas, TX 330,618 256,299 Downtown Doral Office Portfolio 1995, 2010 Doral, FL 40,404 26,355 Fairway Office Center 2006 Palm Beach Gardens, FL 63,423 23,316 Irvine Oaks 1999 Irvine, CA 72,184 55,211 La Jolla Commons 2011 La Jolla, CA 164,256 164,111 Landmark Center 2011 Boston, MA 311,157 304,250 Las Olas City Centre 2011 Fort Lauderdale, FL 75,494 74,910 Legacy Office Portfolio 2004 Plano, TX 64,345 62,156 Legacy Town Centre III 2006 Plano, TX 19,477 26,160 Minuteman Park 2006 Andover, MA 226,259 180,590 Park Place at Bay Meadows 2007 San Mateo, CA 154,719 100,743 San Rafael Corporate Center 2007 San Rafael, CA 147,089 74,242 Sanctuary Park 1997 Alpharetta, GA 289,739 241,732 Southeast Financial Center 2007 Miami, FL 512,095 337,712 Sunnyvale City Center 2007 Sunnyvale, CA 284,465 241,092 The Bluffs at Playa Vista 2011 Los Angeles, CA 295,338 295,279 The Water Garden 1995 Santa Monica, CA 659 82,081 Three Houston Center 2005 Houston, TX 105,332 138,687 Water Garden II 2001 Santa Monica, CA 263,459 351,812

Total Office $7,265,125 $7,160,415


Schedule of Investments (cont.)as OF deCember 31, 2011 dOllars in thOUsands




indUstrial

Alliance Texas 2010 Fort Worth, TX $412,502 $410,040

Andrew Corporation Building 2007 Chicago Metro Area, IL 64,972 59,285

Best Buy Distribution Center 2007 Chicago Metro Area, IL 21,066 13,384

Big 5 Distribution Center 2006 Riverside, CA 47,129 46,779

DCT Industrial Portfolio 2007 Various 233,171 164,445

Dugan Texas 2000 Dallas Metro Area, TX 150,254 121,419

Greater Los Angeles Industrials 1994-95, 1999 Various, CA 164,004 214,257

Kraft Industrial Portfolio 2006 Aurora, IL 127,102 113,494

Lakemont Industrial Portfolio 2000 Charlotte, NC 78,447 80,801

Metro Chicago Industrial Portfolio 2007 Chicago Metro Area, IL 105,195 63,003

Metro Chicago Industrial Portfolio II 2007 Various, IL 28,539 18,620

Pompano Business Center 2007 Pompano Beach, FL 29,856 20,135

Rialto Commerce Center II & III 2007 Rialto, CA 96,099 53,524

South Bay Industrials 1996 Los Angeles, CA 39,941 61,820

Southpark Distribution Center 2004, 2006 Nashville, TN 36,825 27,665

Total Industrial $1,635,102 $1,468,671






residential

1330 Boylston 2008 Boston, MA $41,062 $32,652

425 North Boylan 2011 Raleigh, NC 5,921 5,740

712 Tucker 2010 Raleigh, NC 30,513 32,435

Addington Farms 2006 Durham, NC 19,368 17,732

Amalfi at Hermann Park 2011 Houston, TX 82,454 82,325

Anaheim Hills 2006 Anaheim, CA 22,964 17,747

Andante Acquisitions Corporation 2005 Phoenix, AZ 35,084 25,067

Aqua 2010 Chicago, IL 78,388 76,035

Arcadia Cove 2007 Phoenix, AZ 45,876 34,288

Avenel at Montgomery Square 2006 North Wales, PA 39,513 22,014

Bluffs at Highlands Ranch 2007 Denver, CO 45,489 45,664

Brewery Blocks 2007 Portland, OR 77,646 72,165

Brownstones at Englewood South 2008 Englewood, NJ 136,993 71,715

Calavera Point 2007 Denver, CO 31,129 30,051

Cape May at Temecula 2004 Temecula, CA 23,483 27,340

Capitol At Chelsea 2002 New York, NY 102,308 155,549

Coast Apartments 2011 Chicago, IL 28,961 28,961

Cordoba 2010 Doral, FL 22,118 22,830

Cordoba Phase II 2011 Doral, FL 12,452 9,580

Domain at City Centre 2010 Houston, TX 71,434 79,576

Doral West 2006 Doral, FL 64,732 46,813

Elizabeth Square 2010 Charlotte, NC 17,858 19,462

Equinox Apartments 2010 Seattle, WA 66,559 71,820

Esplanade Apartments 2006 Houston, TX 20,513 25,382

Fairways at Raccoon Creek 2007 Denver, CO 46,900 48,073

Gaslight Commons 2003 South Orange, NJ 18,352 36,772

Glenmuir 2007 Naperville, IL 37,474 32,801

Grand Isle 2011 Murrieta, CA 22,818 22,776

Jacaranda 2011 Fullerton, CA 32,385 32,286

Laguna Niguel Apartments 2006 Laguna Niguel, CA 17,776 18,898

Liberty Towers 2011 Jersey City, NJ 141,813 153,802

Lincoln at LaVillita 2006 Irving, TX 29,489 31,473

Lincoln Lakeside 2009 Irving, TX 16,706 24,058

Lindbergh Vista 2010 Atlanta, GA 53,137 49,952

Mission at La Villita 2006 Irving, TX 20,163 22,231

Mission Bay Block 3W 2010 San Francisco, CA 14,687 15,828

Mosaic South End 2011 Charlotte, NC 43,540 43,399






residential (COnt.)

Nalle Woods 2010 Austin, TX 40,077 42,536

One City Place 2004 White Plains, NY 122,326 134,763

Palazzo Park La Brea Portfolio 2007 Los Angeles, CA 215,296 137,223

Park at Research Forest 2003 Houston, TX 10,014 21,226

Park Lane Seaport Residential 2010 Boston, MA 171,677 198,845

Pasadena Apartments 2006 Pasadena, CA 11,074 10,968

Pine Creek Ranch Apartments 2006 Houston, TX 11,405 11,471

Pinnacle at DTC 2006 Denver, CO 44,723 55,659

Pinnacle at Mountain Gate 2006 Denver, CO 47,900 59,755

Pinnacle at the Creek 2006 Denver, CO 20,439 24,324

Pinnacle at Union Hills 2006 Phoenix, AZ 27,279 24,572

Pinnacle Terrace 2006 Phoenix, AZ 28,957 30,544

Polo Lakes Apartments 2002 Wellington, FL 26,153 30,978

Promenade Rio Vista 2003-2004 San Diego, CA 158,582 212,363

Rancho Santa Margarita 2006 Rancho Santa Margarita, CA 12,768 10,940

Riverview Landing 2006 Philadelphia, PA 56,040 25,951

Riverwalk at Millennium 2006 Conshohocken, PA 89,705 69,813

Robertson Hill 2008 Austin, TX 31,231 27,236

Seacliff 2006 Huntington Beach, CA 23,775 23,319

Somerset at Deerfield 2006 Mason, OH 24,852 24,285

Springfield Station Apartments 1999 Springfield, VA 109,242 159,913

St. Johns Wood Apartments 1998 Fairfax, VA 33,451 57,302

Stevenson Ranch 2006 Stevenson Ranch, CA 21,176 22,456

Strata 2010 San Francisco, CA 80,141 92,800

Temecula Phase I & II Apartments 2006 Temecula, CA 21,945 17,789

Terra Vista 2006 Rancho Cucamonga, CA 15,875 13,608

Triangle Block F 2010 Austin, TX 43,517 47,457

Triangle Residences 2006 Austin, TX 39,299 35,792

Triangle Residences Phase II 2006-2007 Austin, TX 11,861 9,031

Trillium 2007 Phoenix, AZ 59,036 28,791

Trilogy (The Residences at Fenway) 2006 Boston, MA 40,601 62,657

Trinity Bluff 2011 Fort Worth, TX 40,910 40,735

Tuscan Villas 2006 Irving, TX 28,733 28,737

Valencia 2006 Valencia, CA 17,052 18,771

Vista Sands Apartments 2006 Charleston, SC 18,069 10,887

Windsor at Tryon Village 2008 Cary, NC 41,310 48,266

Winners Circle 1997 Parkland, FL 14,094 28,458

Woodfield Columbia Pike 2010 Arlington, VA 86,501 82,553

Total Residential $3,515,144 $3,568,066






retail

Alliance Texas 2010 Fort Worth, TX $12,956 $14,852

Brewery Blocks 2007 Portland, OR 49,692 43,156

Bridgewater Commons 1999 Bridgewater, NJ 80,471 132,720

Deerfield Towne Center 2006 Mason, OH 89,002 41,423

Del Amo Fashion Center 2004 Torrance, CA 157,212 93,269

Donahue Schriber Realty Group 2002 Various 434,668 400,142

Edens & Avant 2000 Various 467,776 528,331

Harbour Pointe 2006 Richmond, VA 25,290 21,034

Lakeside Village 2006 Lakeland, FL 21,610 7,427

NorthPark Center 2011 Dallas, TX 142,332 141,455

Ontario Mills 2004 Ontario, CA 170,282 224,902

Park Meadows Mall 1999 Littleton, CO (2,710) 97,115

Perimeter Mall 2002 Atlanta, GA 147,964 209,313

Randhurst Village 1981 Mt. Prospect, IL 139,116 95,559

Rookwood Portfolio 2007 Cincinnati, OH 108,560 43,034

Shadow Creek Ranch Town Center 2008 Pearland, TX 41,864 23,185

Shadow Lake Towne Center 2007 Papillion, NE 43,871 5,752

Stony Point Shopping Center 2006 Richmond, VA 17,503 12,943

Towson Town Mall 1999 Towson, MD 69,453 112,664

University Towne Center 1999 La Jolla, CA 146,451 207,079

Valley Fair Mall 1999 San Jose Metro Area, CA 114,263 379,816

Village of Merrick Park 2000 Coral Gables, FL 45,562 29,668

Winter Park Village 2006 Winter Park, FL 41,531 22,624

Total Retail $2,564,719 $2,887,463






land investments

Domain at City Centre—Phase II 2010 Houston, TX $1,776 $3,176

Koala FDD Office 2007 Doral, FL 56,567 35,162

Minuteman Park 2005 Andover, MA 4,999 2,290

Parkmerced 1999 San Francisco, CA 8,589 12,813

Sanctuary 2000 Alpharetta, GA 1,281 528

Woodfield Preserve 1999 Schaumburg, IL 1,417 1,405

Total land Investments $74,629 $55,374

Other investments

Brewery Blocks 2007 Portland, OR $48,611 $34,208

CM Doral Development Portfolio 2006-2010 Doral, FL 23,311 12,114

Park Lane Seaport Garage 2010 Boston, MA 27,160 30,146

Total Other Investments $99,082 $76,468

mOrtgage reCeivables

Lakeshore East Land Loan 2011 Chicago, IL $36,913 $36,904

Morrisville Funding 2006 Morrisville, NC 4,175 4,175

Total Mortgage Receivables $41,088 $41,079

Total Real Estate Investments $15,194,889 $15,257,536

Cash

JPMorgan Chase Liquidity Fund $150,787 $150,787

Operating Cash 224,597 224,597

Total Cash Portfolio $375,384 $375,384

Total Schedule of Investments $15,570,273 $15,632,920


Notes to Financial Statements

Description and Basis of Presentation The Commingled Pension Trust Fund (Strategic Property) of JPMorgan Chase Bank, N.A. (the “Fund”) is designed as a funding vehicle for tax-qualified pension, profit-sharing and employee-benefit plans. Its investments are composed primarily of real estate investments owned directly or through partnership interests and mortgage loans on income-producing real estate. JPMorgan Chase Bank, N.A. (“JPMCB”) is the trustee of the Fund (the “Trustee”).

Revenue RecognitionThe Fund’s income is recorded when earned and expenses are recorded when incurred. Unrealized gains and losses are computed using the cost of the investments and their fair value. Since the Fund records its investments at fair value, no depreciation or amortization expense on real property interests is recognized. Interest income from mortgage loans receivable is recognized as revenue when earned in accordance with the terms of the underlying loan agreement. Loans in default are placed on non-accrual status. While on non-accrual status, loans are either accounted for on a cash basis, in which interest income is recognized only upon actual receipt, or on a cost recovery basis, in which receipts reduce carrying value, based on the Trustee’s judgment as to collectability of principal.

Investment ValuationEstimated fair value of net equity investments in real estate assets, which includes working capital of the underlying investments, are determined by the Trustee at each valuation date and the value of the Fund’s interest in these investments is based on its proportionate ownership.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There

are three valuation techniques that can be used, to value the investments in real estate assets, the market, income or cost approach. The appropriateness of each valuation technique depends on the type of asset or business being valued. As part of the Trustee’s valuation process, properties are externally appraised generally on an annual basis, conducted by reputable, independent appraisal firms, and signed by appraisers that are members of the Appraisal Institute, with the professional designation MAI. In addition, the Trustee may cause additional appraisals to be performed as warranted by specific asset or market conditions unless in limited asset specific circumstances would not warrant the asset to be externally appraised. All external appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices (“USPAP”). Property valuations and the salient valuation-sensitive assumptions of each direct investment property are reviewed by the Trustee quarterly and values are adjusted if there has been a significant change in circumstances related to the investment property since the last valuation. Value adjustments for interim capital expenditures are only recognized to the extent that the valuation process acknowledges a corresponding increase in fair value. The Trustee’s valuation methodology utilized in determining fair value is consistent with GAAP and the practices prevailing within the real estate appraisal and real estate investment management industries. Key inputs and assumptions used to determine fair value include among others, rental revenue and expense amounts and related revenue and expense growth rates, terminal capitalization rates and discount rates. In the opinion of the Trustee, these estimated values are reasonable approximations of fair value as of December 31, 2011. The estimate of fair value may vary significantly from the price achieved in a sale and this difference may be material to the financial statements.

Mortgage loans payable for investment level debt are reflected at estimated fair values. Estimated fair values are derived using original term borrowing rates in conjunction with market oriented leveraged equity yields available at respective valuation dates, which are Level III inputs. The discounted cash


N O T E S T O F I N A N C I A l S T A T E M E N T S

flow method is used, which applies certain key assumptions including market interest rates, interest spreads, credit risk and liquidity and other factors. As investment properties are accounted for under the equity method of accounting, the estimated fair values of investment level debt are embedded in the values of the investment properties, which are recorded in “Investment in real estate assets at fair value” on the statement of net assets. At times, the Fund may assume debt in connection with the purchase of real estate. At the time of the assumption, the Fund allocates a portion of the purchase price to the below or above market debt and amortizes the premium or discount over the remaining life of the debt.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Trustee to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Participant withdrawal PolicyFund participants may withdraw from the Fund once per quarter subject to available cash, as determined by the Trustee. A written withdrawal request is required 45 days prior to quarter end. To the extent that withdrawal requests exceed available cash, distributions are made on a pro rata basis. Available cash is defined as excess cash after provision for outstanding future capital commitments and other operating reserves. During the three months ended December 31, 2011, $456.7 billion was withdrawn by investors. Subsequent to December 31, 2011, a further withdrawal of $301.7 million was made in January 2012. There are no outstanding requests.

Income TaxesThe Fund is exempt from Federal income taxes under provisions of section 501(a) of the Internal Revenue Code.

Uncertain tax positions are assessed by the Trustee to determine whether a tax position of the Fund is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. As of December 31, 2011, there are no uncertain tax positions recorded in the financial statements.

The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Fund is subject to examination by federal, state, local, and foreign jurisdictions, where applicable.

The Fund classifies interest and penalties relating to uncertain tax positions in “General Fund Expenses” on the Statement of Operations. There were no interest or penalties related to uncertain tax positions for the three months ended December 31, 2011.

Cash and Cash EquivalentsCash and cash equivalents held in the Fund include investments in the JPMorgan Chase Liquidity Fund and through other financial institutions. These investments consist of short-term marketable securities such as Treasury bills and commercial paper.

Related PartiesJ.P. Morgan Investor Services Co., an affiliate of the Trustee, provides administrator services to the Fund. Administrator service fees are not charged to the Fund and accordingly are not reflected within the Fund’s financial statements.

Investment management fees are charged directly to investors in the Fund and accordingly are not reflected within the Fund’s net asset value.

The Fund enters into real estate partnerships with various joint venture partners that provide management, leasing and construction-related services to the properties in which


Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

The following tables set forth the financial assets and liabilities that the Fund measured at fair value on a recurring basis by level within the fair value hierarchy:

See below for a reconciliation of the assets and liabilities measured at fair value on a recurring basis using Level III inputs during the three months ended December 31, 2011.

the Fund has an ownership interest. Certain of the Fund’s investments may include equity or debt participation by other Funds advised by the Trustee.

Fund Investments The authoritative guidance for fair value measurements which defines fair value, expands disclosure requirements and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Fund’s market assumptions.

These two types of inputs create the following fair value hierarchy:

level I — Quoted prices for identical instruments in active markets.

level II — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

level III — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the use of observable market data, when available, and minimizes the use of unobservable inputs when determining fair value.


dOllars in thOUsands

Assets level I level II level IIIDecember 31,

2011

Investments in real estate assets $– $– $15,216,457 $15,216,457

Mortgage receivables – – 41,079 41,079

Investments in real estate assets at fair value $– $– $15,257,536 $15,257,536

Fair valUe measUrements FOr the three mOnths ended deCember 31, 2011 dOllars in thOUsands

Investments in

Real Estate Mortgage

Receivables Total

Beginning balance, October 1, 2011 $14,183,415 $47,394 $14,230,809

Net realized and unrealized gain (loss) 263,484 (9) 263,475

Income from investments in real estate assets 191,252 1,013 192,265

Acquisitions/Contributions 982,055 147 982,202

Dispositions/Distributions (403,749) (7,466) (411,215)

Ending balance, December 31, 2011 $15,216,457 $41,079 $15,257,536

Unrealized gain/(loss) for the period relating to investments still held at December 31, 2011 $254,969 $(9) $254,960


Real Estate InvestmentsThe following is a combined summary of financial position and results of operations of real estate investments as of and for the three months ended December 31, 2011. The Fund’s share of net assets is presented within “Investments in real estate assets at fair value” on the Fund’s statement of net assets as of December 31, 2011 and the related shared net investment income is presented within “Income from investments in real estate assets” on the Statement of Operations for the three months ended December 31, 2011.

Investment level Debt The Fund’s share of fixed and floating mortgage loans had a fair value of $5.8 billion, with an outstanding principal balance of $5.7 billion. Different assumptions or changes in future market conditions could significantly affect estimated values.

The total recourse on the Fund’s share of joint venture debt as of December 31, 2011 was $93.9million. At December 31, 2011, the weighted average interest rate based on outstanding principal was 4.7%.

The five-year principal repayment schedule is as follows:

line of CreditIn August 2011, the Fund entered into an unsecured revolving credit facility (the “Facility”) from an unrelated financial institution, with a borrowing capacity of $400 million. The Facility is for a two year term, with a one year extension option. The Facility contains restrictive covenants that, among other matters, require the Fund to maintain certain financial ratios. As of December 31, 2011, $150 million was outstanding under the line of credit and $250 million was available including outstanding letters of credit. The Fund was in compliance with all restrictive covenants. The outstanding balance of $150 million was subsequently paid off in February 2012.

Concentration of Risk on Direct Real Estate InvestmentsAt December 31, 2011 the Fund had real estate investments located throughout the United States and invested in four property types. The distribution based on the estimated


dOllars in thOUsands

Real Estate Investments Assets and liabilities

Real estate at fair value $30,154,606

Other assets 588,955

Total assets 30,743,561

Mortgage loans payable at fair value 9,426,405

Other liabilities 469,604

Total liabilities 9,896,009

Net assets $20,847,552

Fund’s share of net assets $15,257,536

Real Estate Investments Operations For the Three Months Ended

December 31, 2011

Total rental and other revenues $642,769

Real estate expense and taxes 379,835

Net investment income $262,934

Fund’s share of net investments income $192,265

as OF deCember 31, 2011 dOllars in milliOns

For the fiscal years ending September 30, Funds’ Share Percent

2012 $296 5.2%

2013 1,156 20.2

2014 509 8.9

2015 704 12.3

2016 514 9.0

Thereafter 2,537 44.4

Total $5,716 100.0%


market values within the NCREIF regions and by property types are as follows:

Risk Management

valuation and liquidity risk

The Fund may invest in real estate and related investments for which no liquid market exists. The market prices for such investments may be volatile and may not be readily available as there continues to be significant disruptions in the global capital, credit and real estate markets.

The decline in liquidity and prices of real estate and related investments, as well as the availability of observable transaction data and inputs, has made it more difficult to determine the fair value of investments. As a result, amounts ultimately realized from the Fund from investments sold may differ from the fair values presented and the differences could be material.

diversification risk

The assets of the Fund are concentrated in the real estate sector which may expose the investment portfolio to more rapid changes in value than would be the case if the Fund were to maintain a wide diversification among investments.

Financing risk

There is no guarantee that the Fund’s borrowing arrangements or other arrangements for obtaining leverage will continue to be available, or if available, will be available on terms and conditions acceptable to the Fund. Unfavorable economic conditions also could increase funding costs, limit access to the capital markets or result in a decision by lenders not to extend credit to the Fund. In addition, a decline in market value of the Fund’s assets may have particular adverse consequences in instances where the Fund borrowed money based on the fair value of those assets. A decrease in market value of those assets may result in the lender requiring the Fund to post additional collateral or otherwise sell the assets at a time when it may not be in the Fund’s best interest to do so. In the event the Fund is required to liquidate all or a portion of its portfolio quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

The Fund has taken significant effort to minimize all risks to the portfolio.

Financial HighlightsThe following summarizes the Fund’s financial highlights for the three months ended December 31, 2011. They consist of per unit operating performance and total return, as well as Fund-level operating expense and net investment income ratios.


as OF deCember 31, 2011 dOllars in milliOns

Fair Value Percent regiOn Northeast $2,465.4 16.3%

Mideast 1,504.2 10.0Southeast 1,741.6 11.5Southwest 2,488.5 16.5NE Central 801.5 5.3NW Central 5.8 –Mountain 618.9 4.1Pacific 5,458.7 36.3

Total $15,084.6 100.0 %

seCtOr Office 7,160.4 47.5Industrial 1,468.7 9.7Residential 3,568.1 23.7Retail 2,887.4 19.1

Total $15,084.6 100.0%

Fund per share operating performanceFor the Three Months Ended

December 31, 2011

Net asset value per unit at beginning of period $1,624.82

Income from investment operations

Net investment income 20.88

Net realized and unrealized gain 28.62

Total from investment activity 49.50

Net asset value per unit at end of period $1,674.32

Total return1 3.05%

Ratios to weighted average net assets

Fund level operating expenses2 0.01%

Net investment income2 1.28%

1 Total return is calculated based on a time-weighted rate of return methodology. Monthly rates of return are geometrically linked to derive the total return reflected above.

2 Investment Management fees are charged directly to investors in the Fund and accordingly are not reflected within the Fund’s income and expense ratios.


disagreed with the put holder’s assessment of the fair value of the shares at such time and defended its determination of fair value under the Put Agreement. The approximate principal amount of the disputed value was $18 million. By order dated February 3, 2012, the United States District Court for the Southern District of New York ruled in favor of the holder, and while SPF disagrees with the Court’s reasoning, SPF has determined to pay the judgment rather than pursue an appeal. In February 2012, SPF recorded the impact of $23.4 million arising from the judgment (inclusive of interest).

Subsequent EventOn September 10, 2009, SPF purchased additional shares in Donahue Schreiber Realty Group (“DSRG”) pursuant to a Put Agreement which had been entered into on December 30, 2002 with an unrelated investor in DSRG. The additional shares of DSRG were purchased at a share price of $34.77 and the aggregate amount of additional investment in DSRG was $123,079,646.

The holder of the put option contested the September 10, 2009 purchase price, asserting that the fair value of the price of the shares pursuant to the Put Agreement was higher. SPF



Report of Independent Accountants

PricewaterhouseCoopers LLP, 300 Madison Avenue, New York, NY 10017 T: (646) 471 3000, F: (646) 471 8320, www.pwc.com/us

Report of Independent Accountants

To the Participants of the Commingled Pension Trust Fund (Strategic Property) of JPMorgan Chase Bank, N.A.

We have reviewed the accompanying statement of net assets of the Commingled Pension Trust Fund (Strategic Property) of J.P. Morgan Chase Bank (the “Fund”) as of December 31, 2011, and the related statements of operations, changes in net assets and of cash flows for the three-month period ended December 31, 2011. This interim financial information is the responsibility of the J.P. Morgan Chase Bank, as Trustee.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial information taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

New York, New York February 14, 2012


The Commingled Pension Trust Fund (Stratgeic Property) of JPMorgan Chase Bank N.A. is a collective trust fund established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The fund is not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The fund is available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the fund are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.

This quarterly report is intended to report solely on the investment strategies and opportunities of the JPMorgan Chase Bank, N.A. Strategic Property Fund (“the Fund”). Additional information is available upon request. Information herein is believed to be reliable, but J.P. Morgan Asset Management does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results. Total return assumes the reinvestment of income. Indices are not available for actual investment and are provided for illustrative purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all investors; if you have any doubts you should consult your J.P. Morgan Asset Management Client Adviser or Portfolio Manager. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. You should consult your tax or legal adviser about the issues discussed herein. Indices do not include fees or operating expenses and are not available for actual investment. The investments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value, price or income of investments.

Real estate investing may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate Investing may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide. Those businesses include, but are not limited to, JPMorgan Chase Bank, N.A., J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated, and J.P. Morgan Alternative Asset Management, Inc.

© JPMorgan Chase & Co., 2012

anne Pfeiffer Managing Director Strategic Property Fund Portfolio Manager Tel: +1-212-648-2176 Fax: +1-212-648-2263 [email protected]

michael F. O’brien Managing Director Global Head of Real Estate Client Relations and Strategy Tel: +1-212-648-2180 Fax: +1-212-648-2261 [email protected]

rebekah brown Executive Director Client Relations and Strategy Tel: +1-212-648-2041 Fax: +1-212-648-2261 [email protected]

ann Cole Executive Director Client Relations and Strategy Tel: +1-212-648-2152 Fax: +1-917-464-7449 [email protected]

amy Cummings Executive Director Client Relations and Strategy Tel: +1-415-315-5177 Fax: +1-415-315-5195 [email protected]

michael duignan Executive Director Client Relations and Strategy Tel: +1-212-648-2122 Fax: +1-212-648-2261 [email protected]

J.d. sitton Managing Director Client Relations and Strategy Tel: +1-212-648-2163 Fax: +1-212-648-2261 [email protected]

Julia Wong Executive Director Fund Relations Tel: +1-212-648-2173 Fax: +1-917-464-8734 [email protected]

J.P. morgan asset management—global real assets 270 Park Avenue l New York, NY 10017jpmorgan.com/assetmanagement

Documents

JPMCB Strategic Property Fund - OkMRF SPF Q411.pdf · Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return