FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION JPM Natural Resources Fund Monthly update | As at 31 May 2015 Fund update • The fund produced a negative return in May and performed in line with its comparator. • The fund’s negative absolute performance was primarily due to its high weighting in base metal producers, in particular copper producers such as Freeport McMoran, Capstone Mining and First Quantum Minerals, which fell along with the copper price on the back of a strengthening dollar. • Our energy stocks also contributed negatively to returns on an absolute basis. The biggest detractor within our energy holdings was DNO, the Kurdistan oil & gas producer, which fell due to lower-than-expected first-quarter domestic sales, putting pressure on short-term cash flows. • Our gold equities generated a positive return, although being underweight gold vs. our comparator was a drag on relative returns. Our top-performing gold stock was OceanaGold, whose recent acquisition of the Waihi gold mine and strategic stake in Gold Standard Ventures was well received by the market. • Staying within the precious theme, our holding in Petra Diamonds was up strongly on signs of stabilisation in the diamonds market and additional clarity on the use of the money raised in the USD 300 million bond issue in April. • Our largest holding in the mineral sands sector, Sierra Rutile, was a large contributor to fund returns after giving the low-capex, low-operating-cost Gangama project the green light. PERFORMANCE UPDATE 1M 3M YTD 1Y 3Y 5Y JPM Natural Resources Fund A – Net (acc) GBP % -2.94 -1.01 -0.87 -20.22 -12.97 -11.11 Euromoney Global Gold, Mining and Energy Index (Net) -3.75 -3.55 4.29 -9.30 -7.37 -5.87 Excess return (geometric) 0.84 2.63 -4.95 -12.03 -6.04 -5.57 Source: J.P. Morgan Asset Management. Fund performance is shown based on the NAV of the sub-fund which already includes Annual Management Fees, Operating and Administrative Expenses. Past performance is not an indication of future performance. Performance over 1 year is annualised. Share class inception date is 1 June 1965. Rayner Spencer Mills rating as at April 2015. Copyright - © 2014 Morningstar, Inc. All Rights Reserved. Morningstar Rating™ as at April 2015, in the Natural Resources Equity category™. The fund’s negative absolute performance was primarily due to its high weighting in base metal producers, in particular copper producers such as Freeport McMoran. RISK PROFILE • The value of Equity and Equity-Linked Securities may fluctuate in response to the performance of individual companies and general market conditions. • Emerging Markets may be subject to increased political, regulatory and economic instability, less developed custody and settlement practices, poor transparency and greater financial risks. Emerging Market currencies may be subject to volatile price movements. Emerging Market securities may also be subject to higher volatility and be more difficult to sell than nonEmerging Market securities. • The fund invests in securities of smaller companies which may be more difficult to sell, more volatile and tend to carry greater financial risk than securities of larger companies. • The fund will be concentrated in natural resources companies and may be concentrated in one or more countries. As a result, the fund may be more volatile than more broadly diversified funds. • The value of companies in which the fund invests may be influenced by movements in commodity prices which can be very volatile. • This fund is aggressively managed, which may result in higher volatility of the fund’s performance and bigger differences between the performance of the fund and its benchmark. INVESTMENT OBJECTIVE To invest, primarily in the shares of, companies throughout the world engaged in the production and marketing of commodities. The fund aims to provide capital growth over the long term. FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION JPM Natural Resources Fund Outlook and positioning review • We continue to believe that the sector is bottoming out and is poised for a recovery. The most compelling indication is the significant pick-up in M&A activity so far this year. • We retain a preference for base metals over bulk commodities, based on their more attractive supply fundamentals. The oil market remains oversupplied in the short-term as evidenced by the continued increase in OECD inventories. However, the route to a more balanced market has become a little clearer with the continued falls in the US rig count in response to lower prices and the upgrade to 2015 demand projections by both OPEC and the IEA. • We still believe in USD 90 oil over the long term, but remain invested in those companies that can weather lower prices in the short to medium term because of the quality of their asset base. • We remain cautious about the outlook for the gold price based on the trajectory of US monetary policy, and recent volatility has done nothing to dislodge this view. This subsector of the portfolio is skewed towards higher-quality, lower-cost producers that can weather any further declines in the gold price. NEXT STEPS For more information contact your usual J.P. Morgan Asset Management representative FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION This is a promotional document and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P.Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the product(s) or underlying overseas investments. Both past performance and yield may not be a reliable guide to future performance. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy. Investment is subject to documentation which is comprised of the Prospectus, Key Investor Information Document (KIID) and either the Supplementary Information Document (SID) or Key Features/Terms and Condition, copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. LV–JPM25498 | 06/15 4d03c02a80019c2e