JPMCB Special Situation Property Fund

Quarterly Report: March 31, 2011 JPMCB Special Situation Property Fund1 targets real estate investments that seek to provide a moderate level of current income and high residual property appreciation.

The Fund’s investment portfolio spans major markets and property types and includes a balanced mix of stabilized properties and value-added properties with appreciation potential.

ON THE COVER: INDEPENDENCE CENTER I, CHANTILLY, FAIRFAX COUNTY, VA

Independence Center I is a 275,000 square foot Class A office building located in Chantilly, Fairfax County, VA. The asset was acquired in September 2002 as a joint venture with Carr Properties. It is situated in proximity to various government and private sector office headquarters, fifteen minutes from Washington-Dulles International Airport and thirty minutes from Washington, DC.

1 Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. (“Special Situation Property Fund” or “SSPF”). First Quarter 2011

Special Situation Property Fund produced a total first quarter gross return of 3.98%, consisting of income of 1.18% and appreciation of 2.78%. The Fund’s trailing one year total gross return was 23.37%. Improved prospects for value-added real estate appear to be reflected in asset valuations as investors’ appetite for risk is strengthening along with market fundamentals. FINANCIAL HIGHLIGHTS AT MARCH 31, 2011 Investment Performance Net Assets: $1,508,664,770 AT MARCH 31, 2011

Income Appreciation Total Unit Value: $1,063.19 25 23.37

Fund’s share of 20

Investments at 15 17.81 Fair Value1: $2,935,973,517 10 3.67 5.63 3.98 0.02 Number of Direct 5 2.78 5.24 5.64 Real Property 1.18 4.73 4.13 4.49 Interests1: 66 -1.45 -5 -7.79 Number of Account -18.67

Holders: 93 Percent -10 -3.68

-15 1 Direct real property interests are reflected gross of debt and include land investments. -20 -15.35

-25

Current One Three Five Ten Since (%) Quarter Year Years Years Years Jan. 982 SSPF 3.98 23.37 -15.35 -3.68 3.67 5.63 NPI3 3.36 16.03 -3.63 3.46 7.49 8.81

2 Special Situation Property Fund’s inception date. 3 NCREIF Property Index 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 selection and the applicable fee schedule. Past performance is not a guarantee of comparable future results. Total returns net of fees were: Current Quarter: 3.50%; One Year: 21.11%; Three Years: -16.92%; Five Years: -5.42%; Ten Years: 1.84%; Since Inception: 3.87%. Net returns are estimated based on the highest applicable fee rate for this strategy.

J.P. Morgan Asset Management | 1 National Economic Overview

In fits and starts, U.S. economic growth is gradually settling into As fundamentals recover broadly across property types and a steady, sustained pace. While housing remains moribund and regions, investor confidence in assets with some leasing and state and local governments continue to pare spending and act market risk appears to be rising, though such properties are still as a drag on growth, most economic indicators are pointing trading at significant discounts to well-leased core real estate in solidly positive. Corporate profits continue to surprise to the primary markets. upside, the market is setting new records and business spending continues to surge ahead. Most importantly, since turning positive in March 2010, private sector job gains have Office Sector accelerated, averaging 180,000 in the first quarter of 2011. As concerns of an economic double dip recede, there is increasing The office market was seasonally subdued in the first quarter, apprehension about the possibility of broad inflation and higher but the overall trend was positive. A modest amount of net interest rates. While such an environment presents risks for real absorption, mostly in the Class A segment, pushed the national estate, the historical record indicates that rising interest rates vacancy rate down 10 basis points (bps) to 16.4%. At that level it have not generally coincided with rising commercial real estate is 40 bps lower than it was a year ago at the peak. While there cap rates and falling prices. The reason is that the inflationary was considerable variety in performance by metro area, several pressures that drove interest rates up have generally been markets that were among the worst afflicted by the housing associated with faster economic growth, a net benefit to real bust, including most major Florida and California metros, estate incomes and values. showed marked improvement. Little new supply came online

Direct Real Property Interests Diversification AT MARCH 31, 2011 DIVERSIFICATION IS BASED UPON FUND’S NET EQUITY VALUE, DOLLARS IN MILLIONS TOTAL $1,330.1 100.0% Office 505.4 38.0 Industrial 222.9 16.7 Residential 477.7 36.0 Retail 61.3 4.6 Hotel 62.8 4.7

WEST $379.5 28.5% EAST $616.2 46.4% Office – 0.0 Office 440.4 33.1 Industrial 72.1 5.4 Industrial 72.9 5.5 Residential 264.0 19.9 Residential 100.6 7.6 Retail – 0.0 Retail 2.3 0.2 Hotel 43.4 3.2 Hotel – 0.0

MIDWEST $83.7 6.3% SOUTH $250.7 18.8% Office – 0.0 Office 65.0 4.9 Industrial 44.5 3.3 Industrial 33.4 2.5 Residential 19.8 1.5 Residential 93.3 7.0 Retail – 0.0 Retail 59.0 4.4 Hotel 19.4 1.5 Hotel – 0.0

2 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 NATIONAL ECONOMIC OVERVIEW

during the quarter, and only a very modest amount is due later struggle to backfill the big boxes vacated by the likes of Circuit on in the year. While we look for a only a moderate demand City and Linens ‘n Things. Internet retail has proved to compete recovery—per the employment forecast we use as an input to effectively with price and selection oriented big boxes in many our office market forecasts, office employment doesn’t get back merchandise categories. While store openings are ramping to the 2007 peak until the second half of 2013—annual deliveries up, the new establishments tend to be relatively small. In fact, will continue to run well below historical norms for several years personal, medical and banking services and eating and drinking to come. The dearth of new supply may help to drive strong rent establishments are now leasing more stores than traditional spikes in most metro markets as the economy improves over the retailers. The trend of services occupying increasing amounts next 18 months. of store space is a boon to malls and necessity-oriented strip centers where shops typically are small, but it does not solve the big-box dilemma. Industrial/Warehouse Sector While warehouse has been the weakest of the four major sectors, there are signs that it is beginning to firm. Consistent Apartment Sector with the consumer spending recovery, retailers are now Last year’s strong affinity for renting persisted through the rebuilding inventories to fill stronger than expected current first quarter, driving US apartment occupancy to the highest it demand and in anticipation of further gains. Other indicators tell has been since 2007. Virtually every market in the nation saw a similar story. Containerized exports are surging, manufacturing rents rise, overtaking pre-recession peaks in several including activity is growing, and measures of truck tonnage and rail Washington, DC, Boston, Chicago and Denver. Development has intermodal container traffic are rebounding. All these indicators returned energetically in response to high demand and surging suggest that the amount of goods moving through the logistics rents. Apartment construction is ramping up even more rapidly chain is rising. Warehouse leasing has picked up sharply in the than permit issuance would suggest as developers dust off last six months, while additions to supply have been minimal. In stalled condo projects that had been permitted prior to the the first quarter, the national availability rate dropped 20 bps to recession and recast them as rentals. We think that the pace of 14.4%. That said, with so much empty space the amount of down rent growth will slow considerably over the next 18 months in time between leases should remain long and rents should not markets due for a new wave of supply. In some others, though, show appreciable growth any time soon. such as the laggard Southern California, Phoenix and Las Vegas markets, we expect to see rent growth strengthen as job creation gains momentum in the second half of 2011. Retail Sector As consumer spending revives, the segmentation of the retail sector is increasingly evident. Malls, which remained relatively Hospitality Sector well-occupied through the recession, and which have not The hospitality recovery now extends to every segment of the been as vulnerable as power centers to online shopping, are chain scale, every format and virtually all major markets across now benefiting from more robust department store anchor the country. In the first quarter, occupancy and room rates were performance and rapidly improving inline store sales. Mall respectively 5.7% and 3% higher than a year ago, resulting in a landlords are beginning to shift their focus from merely 9% increase in revenue per available room (RevPAR.) Established retaining tenants to raising rents in more productive locations, hotels are benefiting from a pause in new deliveries. New York City and winnowing out tenants that can’t support the rising is the only US market where the number of available rooms has occupancy costs. Power centers on the other hand continue to grown appreciably over the last year, but even there new supply has failed to dampen the rapid increase in room rates.

J.P. Morgan Asset Management | 3 Portfolio Returns

Special Situation Property Fund produced a total return of of 0.8% and appreciation of 7.2%. Multi-family rental properties 3.98% during the first quarter, with an income component are typically the first asset type to respond to a market recovery return of 1.18% and appreciation from activity and as leasing picks up and market rental rates adjust more quickly realized gains on asset sales of 2.78%. The trailing one year than other asset types due to the shorter duration of leases. The total gross return was 23.37%, comprised of income of 4.73% trailing one year total return for this sector was 59.5%. At the end and appreciation of 17.81%. of the period, the Fund’s residential portfolio occupancy increased 1.2% from the prior quarter to 95.2% overall. Direct real estate valuation activity resulted in appreciation of $41.9 million (292 bps), while the Fund completed the sale of a The office sector followed with total appreciation of $8.7 million retail property during the quarter, which contributed additional (61 bps). On an absolute basis, the sector generated a leveraged appreciation of $0.2 million (2 bps). The impact of marking the return of 2.3%, with an income return of 1.2% and appreciation Fund’s debt to market resulted in offsetting depreciation of $1.9 of 1.1%. The value-added strategies for many of the Fund’s office million (13 bps). The following section contains a closer look at assets have been completed, and the portfolio’s occupancy, performance by property type: excluding development, stands at 86.2%. We continue to review our stabilized assets as potential disposition candidates to realize For the fourth consecutive quarter, the Fund’s residential portfolio gains by selling into a market with significant investor appetite for experienced the largest amount of appreciation. An increase in core assets. Proceeds received from dispositions will be reinvested value of $23.9 million (167 bps) during the quarter translates to into attractive new value-add opportunities where pricing for risk an 8.0% leveraged total return consisting of an income return is still very conservative.

Diversification by Property Type Diversification by Property Location AT MARCH 31, 2011 AT MARCH 31, 2011 DIVERSIFICATION IS BASED UPON NET EQUITY VALUE DIVERSIFICATION IS BASED UPON NET EQUITY VALUE

Office Industrial Residential Retail Hotel East South West Midwest

100 100 4.7 2.8 6.3 10.4 4.6 23.5 80 80 28.5 36.0 33.4 60 25.6 60 18.8 Percent Percent 16.7 22.7 40 13.7 40

46.4 20 20 38.0 34.4 33.5

0 0 Special Situation Property Fund NPI Special Situation Property Fund NPI

4 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 PORTFOLIO RETURNS

The Fund’s industrial portfolio generated additional appreciation income return of 2.7% and depreciation of -4.2%. Occupancy of $8.0 million (56 bps). On an absolute basis, this translates to a remained stable at 73.5% compared to 73.9% the prior quarter, leveraged return of 5.1%, with income of 1.8% and appreciation of and showed a slight improvement over the same period last year 3.3%. At quarter end, the industrial portfolio was 80.9% leased. at 72.0%. While we expect the industrial sector’s recovery to lag behind The Fund’s retail portfolio remained flat with no real estate that of residential and office, as industrial market fundamentals valuation adjustments recognized for the quarter. On an absolute improve, we anticipate leasing conditions will follow suit and asset basis, the sector did experience a leveraged quarterly gross return valuations should continue to improve. of 2.4%. An income return of 1.9% continues to be consistent The broader hospitality industry continued to gain traction with with the other property types in the Fund, while the appreciation the improving economic environment. However, as with any return component was 0.5%. Net operating income, both before recovery, not all gains are consistent. The Fund’s hotel portfolio and after interest expense, tracked higher than budget forecast posted a negative write-down of $2.1 million (15 bps). The sector’s for the first quarter. At quarter end, the retail portfolio was 81.1% gross leveraged return for the quarter of -1.6% consists of an leased, excluding new development.

2175 K STREET, WASHINGTON, DC ALISO CREEK APARTMENTS, ALISO VIEJO, CA

J.P. Morgan Asset Management | 5 Portfolio Activity

Special Situation Property Fund completed several transactions The disposition of Coral Palm Plaza, a 135,936 square foot during the first quarter. On the acquisition front, the Fund made retail property located in Coral Springs, FL, yielded net an initial equity investment of $6.4 million to purchase 1255 proceeds of $18.0 million. The sale was timed to coincide with 23rd Street, located in the West End submarket of Washington, the property’s loan maturity in January 2011. Furthermore, DC. An addition to the Carr Properties portfolio, this asset with occupancy at 94% and steady signs of improvement in has 324,733 square feet of office space, on-site underground the South Florida market fundamentals, the property was parking, and is well located near numerous hotels, restaurants well positioned for sale. Over the past twelve months, the and transportation. The Fund also recently invested $66.3 Fund has generated total net proceeds from dispositions of million of additional equity to complete the purchase of the $222.4 million, with realized gains over market value of $35.1 senior loan obligation and joint venture partnership at million. Consistent with the Fund’s long-term objectives, we Solara, an existing condominium investment located in Lahaina, have focused on selling stabilized assets that are competitively Maui, HI. As of quarter end, the venture has closed on the sale positioned within their respective local markets and the of 344 of the 628 units, and another 22 units are currently property’s investment objective has been achieved. under contract. We anticipate that sales activity will gradually At the end of the quarter, stood at 50.8% of gross increase as the overall economy and local housing market asset value. Stabilizing asset values and recent disposition conditions improve. At quarter end, the Fund’s acquisition activity has brought the Fund’s loan-to-value ratio well below its pipeline remained strong with approximately $153.0 million guideline ratio of 60.0%, and the Fund’s debt service coverage in pending equity commitments which we expect to begin ratio (NOI/debt service) was 1.6x for the twelve months ended deploying over the next several quarters. March 31, 2011. Remaining annual debt maturities average

FOUNTAIN SQUARE, BOCA RATON, FL IDI INDUSTRIAL PORTFOLIO, FUJI BUILDING, CHICAGO, IL

6 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 PORTFOLIO ACTIVITY

17.9% of total debt outstanding through 2015. The composition contribution queue stood at $224.4 million. We anticipate of the Fund’s total outstanding debt is 66.8% fixed rate and calling additional investor capital from the existing contribution 33.2% floating rate, with a combined weighted average interest queue over the next several quarters as the Fund completes the rate of 5.3% and a remaining term of 2.5 years. We will continue acquisition of new investments in its pipeline. Special Situation to tactically manage the Fund’s future debt maturities and Property Fund is also open to new contributions from investors. make new acquisitions with a combination of debt and equity Our focus for the remainder of 2011 will be to follow the that will be accretive to the Fund’s long term performance and Fund’s long-term approach of identifying and investing in consistent with the leverage guidelines. attractive value-added properties with opportunities to realize At quarter end, the Fund’s cash position stood at $102.9 substantial appreciation through redevelopment, repositioning million, or approximately 6.8% of net asset value. Near and re-leasing strategies. A strong balance sheet and high term uses of cash include the pending equity commitments quality asset base, coupled with strengthening market mentioned earlier, various debt maturities and capital fundamentals, has the Fund ideally positioned to capitalize commitments associated with existing investments to complete on current market conditions. We will continue to keep you value-added initiatives. With a current annual income yield of apprised of the Fund’s accomplishments through our regular approximately 5%, a strong liquidity position and a growing monthly and quarterly reporting. Thank you for your continued investor contribution queue, the Fund is well positioned to support and confidence in the Fund as well as J.P. Morgan’s effectively execute its value-added strategy through new Global Real Assets team. investment opportunities.

On January 5th, the Fund distributed $5.4 million to investors to cover fourth quarter 2010 withdrawal requests for management fees and distributable cash flow. An additional $4.7 million was funded on April 5th to cover all first quarter 2011 distributions. Justin Murphy New contributions totaling $28.2 million were called from Portfolio Manager investors on March 3rd, and at quarter end the Fund’s

MARKETS AT TOWN CENTER, JACKSONVILLE, FL FAIRWAY PALMS—PALMER GOLF COURSE, RANCHO CUCAMONGA, CA

J.P. Morgan Asset Management | 7 8 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 Financial Statements and Notes

For the three-month and six-month periods ended March 31, 2011 (unaudited)

J.P. Morgan Asset Management | 9 Statement of Net Assets

AS OF MARCH 31, 2011 AMOUNTS IN THOUSANDS, EXCEPT UNITS AND UNIT VALUE

ASSETS Investments in real estate assets at fair value $1,400,926 Cash and cash equivalents 102,861 Accrued income and other assets 5,081 Total assets 1,508,868

LIABILITIES Other payables and deposits 203 Total liabilities 203

NET ASSETS At fair value $1,508,665 Outstanding units 1,419,004 Unit value $1,063.19

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

10 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 Statement of Operations and Changes in Net Assets

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2011 DOLLARS IN THOUSANDS

For the Three Months For the Six Months Ended March 31, 2011 Ended March 31, 2011

INVESTMENT ACTIVITY Investment income Income from investments in real estate $17,233 $23,192 Interest and other income 450 1,290 Total investment income 17,683 24,482

General fund expenses (709) (1,273) Net investment income 16,974 23,209

Realized and unrealized gain (loss) on investments Net proceeds from sales of investments 18,007 161,080 Less: Cost of investments sold 22,981 137,970 Realization of previously recorded unrealized loss on investments sold (5,230) (13,812) Net realized gain on investments 256 36,922 Unrealized gain on real estate assets, net 39,986 99,121 Net realized and unrealized gain on investments 40,242 136,043

Increase in net assets resulting from operations 57,216 159,252

PARTICIPANT ACTIVITY Contributions from participants 28,249 62,048 Withdrawals by participants (5,447) (68,671) Net participant activity 22,802 (6,623)

Increase in net assets 80,018 152,629

NET ASSETS Beginning of period $1,428,647 $1,356,036

End of period $1,508,665 $1,508,665

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

J.P. Morgan Asset Management | 11 Statement of Cash Flows

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2011 DOLLARS IN THOUSANDS

For the Three Months For the Six Months Ended March 31, 2011 Ended March 31, 2011

OPERATING ACTIVITIES Net investment income $16,974 $23,209 Adjustments to reconcile net investment income to net cash flow provided by operating activities Undistributed income from investments in real estate assets (7,616) (6,211) Decrease in accrued income and other assets 3,308 3,774 Decrease in other payables and deposits (179) (469) Net cash flow provided by operating activities 12,487 20,303

INVESTING ACTIVITIES Contributions to investments in real estate assets (155,582) (244,842) Proceeds from real estate investments 10,952 10,952 Net proceeds from dispositions of investments in real estate assets 17,065 165,506 Net deposits for pending transactions in investments in real estate assets (500) (500) Net cash flow used in investing activities (128,065) (68,884)

FINANCING ACTIVITIES Contributions from participants 28,249 62,048 Withdrawals by participants (5,448) (68,672) Net cash flow provided by/(used in) financing activities 22,801 (6,624)

Net decrease in cash and cash equivalents (92,777) (55,205)

Cash and cash equivalents, beginning of period 195,638 158,066

Cash and cash equivalents, end of period $102,861 $102,861

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION Cash paid during the period for line of credit fees and interest 96 320

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES Non-cash reclass of real estate investment to other assets $777 $2,056

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

12 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 Schedule of Investments

AS OF MARCH 31, 2011 DOLLARS IN THOUSANDS

Property Name Year Acquired1 Location Net Cost2 Net Fair Value

OFFICE 2175 K Street 2007 Washington, D.C. $45,074 $47,599 951 Yamato Road 2006 Boca Raton, FL 28,522 13,478 Bowie Corporate Center 2007 Bowie, MD 21,347 8,663 Carr Properties 2007 Washington, D.C. 546,118 339,376 Dugan Millenia 1999 Orlando, FL 29,796 23,676 Fountain Square 2007 Boca Raton, FL 32,677 3,571 One Court Square 2005 Long Island City, NY 30,748 15,629 One Franklin Street­—Office 2007 Boston, MA 31,296 19,267 One Jefferson Road 1999 Parsippany, NJ 7,086 9,877 The Arbors at Thousand Oaks 2006 Thousand Oaks, CA (3,572) – Westway Park II 2007 Houston, TX 28,440 24,267 Total Office $797,532 $505,403

INDUSTRIAL Cabrillo Business Center 1998 Santa Barbara, CA $12,085 $9,528 IDI—Industrial Portfolio 1999 Various Regions 48,033 47,590 IDI—IPF IV & V 2003 Various Regions 15,895 12,714 IDI—Value Add Venture 2003–2006 Various Regions 38,170 11,153 ITC Mt. Olive 1999, 2005 Mount Olive, NJ 96,626 68,722 Speedway Logistics Center 2008 Joliet, IL 19,542 10,626 West County Commerce I 1998 Huntington Beach, CA 22,223 45,334 West County Commerce II 1999 Huntington Beach, CA 10,097 17,215 Total Industrial $262,671 $222,882

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

J.P. Morgan Asset Management | 13 Schedule of Investments (cont.) AS OF MARCH 31, 2011 DOLLARS IN THOUSANDS

Property Name Year Acquired1 Location Net Cost2 Net Fair Value

RESIDENTIAL Aliso Creek Apartments 2007 Aliso Viejo, CA $17,702 $10,978 Cal Oaks 2005 Murrieta, CA 30,038 13,700 Camino Real Apartments 2005 Rancho Cucamonga, CA 12,478 7,197 Chateau Woods 2010 Woodinville, WA 7,024 7,690 Crown Point Apartments 2000 Denver, CO 26,480 33,012 Leisura III 2005 Mammoth, CA 15,484 – Metropolitan Apartments 1999–2005 Atlanta, GA 18,013 11,516 Metropolitan Apartments II 1999–2005 Atlanta, GA 12,612 6,538 Metropolitan Apartments III 1999–2005 Atlanta, GA 17,611 10,306 One Franklin Street—Residential 2007 Boston, MA 18,216 12,354 Palmer Golf Course 2001 Rancho Cucamonga, CA 22,189 38,134 Reflections at Summer Creek 2007 Beaverton, OR 38,252 28,234 Solara Portfolio 2006 Maui, HI 10,259 – Solara Portfolio—Construction Loan 2006 Maui, HI 66,281 66,281 Solara Portfolio—Mezz 2006 Maui, HI 51,844 45,657 Sunrise Senior Living 2004 Various Regions 27,310 39,225 The Arches 2006 Sunnyvale, CA 28,961 6,388 The Crossings at White Oak 2001 Houston, TX 6,720 9,136 The Edge 2007 Williamsburg, NY 82,626 16,778 Washington Heights Portfolio 2005 New York, NY 69,262 68,128 West Park Village I 2001 Tampa, FL 16,677 25,240 West Park Village II 2004 Tampa, FL 11,458 21,201 Total Residential $607,497 $477,693

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

14 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 Schedule of Investments (cont.) AS OF MARCH 31, 2011 DOLLARS IN THOUSANDS

Property Name Year Acquired1 Location Net Cost2 Net Fair Value

RETAIL Baybrook Gateway 2006 Houston, TX $14,888 $– Berkeley Square 2006 Plano, TX 10,722 10,595 Markets at Town Center 2007 Jacksonville, FL 15,948 20,392 One Franklin Street—Retail 2007 Boston, MA 13,558 2,299 Preston Park Gold 2006 Plano, TX 13,131 10,833 Preston Towne Center 2006 Plano, TX 18,845 8,667 Shoppes at Boynton 2005 Boynton Beach, FL 16,984 8,542 Total Retail $104,076 $61,328

HOTEL Chicago Blackstone Hotel—Equity 2005 Chicago, IL $14,309 $(359) Chicago Blackstone Hotel—Mezz 2005 Chicago, IL 24,536 14,344 Chicago Blackstone Hotel—TIF Lender 2005 Chicago, IL 5,893 5,893 Courtyard Denver 2004 Denver, CO 7,894 12,267 Courtyard San Diego 2005 San Diego, CA 3,669 – Renaissance O'Hare 2004 Chicago, IL 15,758 (506) Renaissance Providence—Equity 2007 Providence, RI 248 – Renaissance Providence—Mezz 2007 Providence, RI 16,478 – The Nines—Equity 2008 Portland, OR 4,715 1,865 The Nines—Mezz 2008 Portland, OR 26,733 29,284 Total Hotel $120,233 $62,788

LAND 500-600 Mountain View 1999 Bernards Township, NJ $11,684 $4,419 Arcadia North Business Park 2007 Coolbaugh Township, PA 11,887 4,309 Aqua Bella 2005 Moreno Valley, CA 71,156 2,361 Cabrillo Land Development 1998 Santa Barbara, CA 17,779 16,111 Castle 2008 Portchester, NY 6,926 2,460 Dugan Millenia 1999 Orlando, FL 2,707 1,886 Futura I 2005 Various Regions 3,033 – IDI Industrial Portfolio 1999 Various Regions 298 447 IDI Middlesex 2007 South Brunswick, NJ 19,434 9,641 Inhabit Dexter 2008 Seattle, WA 2,462 2,072 ITC Mount Olive 1999–2005 Mount Olive, NJ 7,954 3,000

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

J.P. Morgan Asset Management | 15 Schedule of Investments (cont.) AS OF MARCH 31, 2011 DOLLARS IN THOUSANDS

Property Name Year Acquired1 Location Net Cost2 Net Fair Value

LAND (CONT.) Mariner—Equity 2008 Portchester, NY 5,961 – Mariner—Mezz 2008 Portchester, NY 10,359 6,738 Miramar—Equity 2007 Miramar, FL 2,281 – Miramar—Mezz 2007 Miramar, FL 2,039 2,031 Ontario at Haven Industrial 2006 Ontario, CA 507 90 Park Joliet 2007 Joliet, IL 13,500 6,557 Park Morris 2007 Morris, IL 8,793 3,213 W LoDo Hotel—Equity 2007 Denver, CO 658 – W LoDo Hotel—Mezz 2007 Denver, CO 5,152 5,152 Total Land $204,570 $70,487

OTHER Bacardi Building 2007 Coral Gables, FL $345 $345 Total Other Investments $345 $345

Total Real Estate Investments $2,096,924 $1,400,926

CASH JPMorgan Chase Liquidity Fund $61,650 $61,650 Operating Cash 41,211 41,211 Total Cash $102,861 $102,861

Total Schedule of Investments $2,199,785 $1,503,787

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

16 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 Notes to Financial Statements

Description and Basis of Presentation Investment Valuation The Commingled Pension Trust Fund (Special Situation Estimated fair value of net equity investments in real estate Property Fund) of JPMorgan Chase Bank, N.A. (the “Fund”) assets, which includes working capital of the underlying is designed as a funding vehicle for tax-qualified pension, investments, are determined by the Trustee at each valuation profit-sharing and employee-benefit plans. Its investments date and the value of the Fund’s interest in these investments are composed primarily of real estate investments owned is based on its proportionate ownership. directly or through partnership interests and mortgage loans Fair value is defined as the price that would be received on income-producing real estate. JPMorgan Chase Bank, N.A. to sell an asset or paid to transfer a liability in an orderly (“JPMCB”) is the trustee of the Fund (the “Trustee”). transaction between market participants at the measurement The accompanying unaudited financial statements should date. There are three valuation techniques that can be used, be read in conjunction with the audited Annual Report as of the market, income or cost approach. The appropriateness September 30, 2010. Operating results for the six-month period of each valuation technique depends on the type of asset ended March 31, 2011 are not necessarily indicative of results or business being valued. As part of the Trustee’s valuation that may be expected for the year ending September 30, 2011. process, properties are externally appraised 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, Revenue Recognition the Trustee may cause additional appraisals to be performed The Fund’s income is recorded when earned and expenses as warranted by specific asset or market conditions. All are recorded when incurred. Unrealized gains and losses are external appraisals are performed in accordance with the computed using the cost of the investments and their fair Uniform Standards of Professional Appraisal Practices value. Since the Fund records its investments at fair value, (“USPAP”). Property valuations and the salient valuation- no depreciation or amortization expense on real property sensitive assumptions of each direct investment property are interests is recognized. Interest income from mortgage reviewed by the Trustee quarterly and values are adjusted loans receivable is recognized as revenue when earned in if there has been a significant change in circumstances accordance with the terms of the underlying loan agreement. related to the investment property since the last valuation. Loans in are placed on non-accrual status. While Value adjustments for interim capital expenditures are on non-accrual status, loans are either accounted for on a only recognized to the extent that the valuation process cash basis, in which interest income is recognized only upon acknowledges a corresponding increase in fair value. The actual receipt, or on a cost recovery basis, in which receipts Trustee’s valuation methodology utilized in determining fair reduce carrying value, based on the Trustee’s judgment as to value is consistent with GAAP and the practices prevailing collectability of principal. 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

J.P. Morgan Asset Management | 17 NOTES TO FINANCIAL STATEMENTS

and expense amounts and related revenue and expense Participant Withdrawal Policy growth rates, terminal capitalization rates and discount rates. In the opinion of the Trustee, these estimated values are Fund participants may withdraw from the Fund once per reasonable approximations of fair value as of March 31, 2011. quarter subject to available cash, as determined by the The estimate of fair value may vary significantly from the Trustee. A written withdrawal request is required 45 days price achieved in a sale and this difference may be material prior to quarter end. To the extent that withdrawal requests to the financial statements. exceed available cash, distributions are made on a pro rata basis. Available cash is defined as excess cash after provision Mortgage loans payable for investment level debt are reflected for outstanding future capital commitments and other at estimated fair values. Estimated fair values are derived operating reserves. During the six-month period ended March using original term borrowing rates in conjunction with market 31, 2011, $68.7 million was withdrawn by investors. After a oriented leveraged equity yields available at respective further withdrawal of $4.7 million made subsequent to March valuation dates, which are Level III inputs. The discounted cash 31, 2011, there are no outstanding requests. 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 Income Taxes estimated fair values of investment level debt are embedded The Fund is exempt from Federal income taxes under in the values of the investment properties, which are recorded provisions of section 501(a) of the Internal Revenue Code. in “Investment in real estate assets at fair value” on the The authoritative guidance on accounting for and disclosure statement of net assets. At times, the Fund may assume debt of uncertainty in tax positions requires the Advisor to in connection with the purchase of real estate. At the time of determine whether a tax position of the Fund is more the assumption, the Fund allocates a portion of the purchase price to the below or above market debt and amortize the likely than not to be sustained upon examination, including premium or discount over the remaining life of the debt. 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 Use of Estimates by the largest benefit that has a greater than fifty percent The preparation of financial statements in conformity with likelihood of being realized upon ultimate settlement with the accounting principles generally accepted in the United States of relevant taxing authority. As of March 31, 2011, there are no America requires the Trustee to make estimates and assumptions uncertain tax positions recorded in the financial statements. that affect the reported amounts of assets and liabilities at the The Fund files tax returns as prescribed by the tax laws of date of the financial statements and the reported amounts of the jurisdictions in which it operates. In the normal course of revenues and expenses during the reporting period. Actual business, the Fund is subject to examination by federal, state, results could differ from those estimates. 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 and six months ended March 31, 2011.

18 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 NOTES TO FINANCIAL STATEMENTS

Cash and Cash Equivalents Level II — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in Cash and cash equivalents held in the Fund include investments markets that are not active; and model-derived valuations in in the JPMorgan Chase Liquidity Fund and through other financial which all significant inputs and significant value drivers are institutions. These investments consist of -term marketable observable in active markets. securities such as Treasury bills and commercial paper. Level III — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Related Parties This hierarchy requires the use of observable market data, J.P. Morgan Investor Services Co., an affiliate of the Trustee, when available, and minimizes the use of unobservable inputs provides administrator services to the Fund. Administrator when determining fair value. service fees are not charged to the Fund and accordingly are not reflected within the Fund’s financial statements. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific The Fund enters into real estate partnerships with various to the investment. Investments with readily available active joint venture partners that provide management, leasing quoted prices or for which fair value can be measured from and construction-related services to the properties in which actively quoted prices generally will have a higher degree of the Fund has an ownership interest. Certain of the Fund’s market price observability and a lesser degree of judgment used investments may include equity or debt participation by other in measuring fair value. Funds advised by the Trustee. In certain cases, the inputs used to measure fair value may JPMCB pays for certain fund expenses on behalf of the Fund, fall into different levels of the fair value hierarchy. In such including custodial fees and transfer agent fees. 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 Fund Investments of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers The authoritative guidance for fair value measurements which factors specific to the investment. defines fair value, expands disclosure requirements and specifies a hierarchy of valuation techniques based on whether The following tables set forth the financial assets and liabilities the inputs to those valuation techniques are observable or that the Fund measured at fair value on a recurring basis by unobservable. Observable inputs reflect market data obtained level within the fair value hierarchy: from independent sources, while unobservable inputs reflect the Fund’s market assumptions. DOLLARS IN THOUSANDS

These two types of inputs create the following fair value Assets Level I Level II Level III March 31, 2011 hierarchy: Direct real estate properties $– $– $1,171,163 $1,171,163 Level I — Quoted prices for identical instruments in Mortgage receivables – – 192,158 192,158 Participating mortgage active markets. receivables – – 37,605 37,605 Total real estate investments at fair value $– $– $1,400,926 $1,400,926

J.P. Morgan Asset Management | 19 NOTES TO FINANCIAL STATEMENTS

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 and six months ended March 31, 2011.

FAIR VALUE MEASUREMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 DOLLARS IN THOUSANDS Participating Direct Real Estate Mortgage Mortgage Properties Receivables Receivables Total Beginning balance, January 1, 2011 $1,055,150 $128,717 $42,413 $1,226,280 Net gains (losses) realized/unrealized included in earnings 44,123 (5,866) 1,985 40,242 Net income (losses)/interest income 14,045 2,994 194 17,233 Acquisitions/Contributions 87,628 67,956 – 155,584 Dispositions/Distributions (29,783) (1,643) (6,987) (38,413) Ending balance, March 31, 2011 $1,171,163 $192,158 $37,605 $1,400,926 Unrealized gains/(losses) for the period relating to investments still held at March 31, 2011 $43,867 $(5,866) $1,985 $39,986

FAIR VALUE MEASUREMENTS FOR THE SIX MONTHS ENDED MARCH 31, 2011 DOLLARS IN THOUSANDS Participating Direct Real Estate Mortgage Mortgage Properties Receivables Receivables Total Beginning balance, October 1, 2010 $1,026,385 $127,202 $38,756 $1,192,343 Net gains (losses) realized/unrealized included in earnings 129,397 (4,939) 11,585 136,043 Income from investments in real estate assets 17,711 5,040 441 23,192 Acquisitions/Contributions 176,111 68,732 – 244,843 Dispositions/Distributions (178,441) (3,877) (13,177) (195,495) Ending balance, March 31, 2011 $1,171,163 $192,158 $37,605 $1,400,926 Unrealized gains/(losses) for the period relating to investments still held at March 31, 2011 $92,475 $(4,939) $11,585 $99,121

Real Estate Investments DOLLARS IN THOUSANDS The following is a combined summary of financial position and Real Estate Investments Assets and Liabilities results of operations of real estate investments as of and for the Real estate at fair value $4,343,776 Other assets 188,430 three and six months ended March 31, 2011. The Fund’s share Total assets 4,532,206 of net assets is presented within “Investments in real estate Mortgage loans payable at fair value 2,441,066 assets at fair value” on the Fund’s statement of net assets as of Other liabilities 244,362 March 31, 2011 and the related shared net investment income Total liabilities 2,685,428 is presented within “Income from investments in real estate Net assets $1,846,778 assets” on the Statement of Operations for the three and six Fund’s share of net assets $1,400,926 months ended March 31, 2011. For the Three For the Six Months Ended Months Ended Real Estate Investments Operations March 31, 2011 March 31, 2011 Total rental and other revenues $101,941 $204,748 Real estate expense and taxes 83,813 171,077 Net investment income $18,128 $33,671 Fund's share of net investment income $17,233 $23,192

20 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 NOTES TO FINANCIAL STATEMENTS

The Fund’s share of fixed and floating mortgage loans had types. The distribution based on the estimated market values a fair value of $1.5 billion, with an outstanding principal within the NCREIF regions and by property types are as follows: balance of $1.5 billion. Different assumptions or changes in future market conditions could significantly affect estimated AT MARCH 31, 2011 values. The total recourse on the Fund’s share of joint DOLLARS IN THOUSANDS as of March 31, 2011 was $44.8 million. At Fair Value Percent March 31, 2011, the weighted average interest rate based on REGION Northeast $220,530 16.6% outstanding principal was 5.3%. Midwest 395,639 29.7 The five-year principal repayment schedule is as follows: Southeast 171,387 12.9 Southwest 79,318 6.0 NE Central 69,393 5.2 NW Central 14,306 1.1 DOLLARS IN THOUSANDS Mountain 45,279 3.4 Pacific 334,242 25.1 For the fiscal year ending September 30, Fund’s Share ($) Percent (%) Total $1,330,094 100.0% 2011 $347,124 22.4% 2012 508,620 32.9 SECTOR Office $505,402 38.0% 2013 219,383 14.2 Industrial 222,882 16.7 2014 74,949 4.8 Residential 477,693 36.0 2015 234,493 15.2 Retail 61,328 4.6 Thereafter 163,133 10.5 Hotel 62,789 4.7 Total $1,547,702 100.0% Total $1,330,094 100.0%

Line of Credit Risk Management In August 2010, the Fund entered into a secured revolving credit facility (the “Facility”) from an unrelated financial Valuation and liquidity risk institution, with a borrowing capacity of $35.0 million. The The Fund may invest in real estate and related investments Facility has a three-year term, expiring in August 2013, and can, for which no liquid market exists. The market prices for such at the Fund’s option (with Lender’s approval), be increased to investments may be volatile and may not be readily available $100.0 million. The interest rate on borrowings is LIBOR plus as there continues to be significant disruptions in the global a spread of 350 basis points, with a LIBOR floor of 200 basis capital, credit and real estate markets. points. The Facility contains restrictive covenants that, among other matters, require the Fund to maintain certain financial The decline in liquidity and prices of real estate and related ratios. As of March 31, 2011, there was no outstanding balance. 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 Concentration of Risk on Real Estate values presented and the differences could be material. Investments At March 31, 2011 the Fund had real estate investments located Diversification risk throughout the United States and invested in five property The assets of the Fund are concentrated in the real estate sector which may expose the investment portfolio to more

J.P. Morgan Asset Management | 21 NOTES TO FINANCIAL STATEMENTS

rapid changes in value than would be the case if the Fund were Financial Highlights to maintain a wide diversification among investments. The following summarizes the Fund’s financial highlights for the three and six months ended March 31, 2011. They consist of per Financing risk unit operating performance and total return, as well as Fund- There is no guarantee that the Fund’s borrowing arrangements level operating expense and net investment income ratios. 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 For the Three For the Six conditions also could increase funding costs, limit access to the Months Ended Months Ended capital markets or result in a decision by lenders not to extend Fund per share operating performance March 31, 2011 March 31, 2011 Net asset value per unit at credit to the Fund. In addition, a decline in market value of beginning of period $1,022.51 $949.48 the Fund’s assets may have particular adverse consequences in instances where the Fund borrowed money based on the Income from investment operations fair value of those assets. A decrease in market value of those Net investment income 12.12 16.58 assets may result in the lender requiring the Fund to post Net realized and unrealized losses from investments 28.56 97.13 additional collateral or otherwise sell the assets at a time when Total from investment activity 40.68 113.71 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 Net asset value per unit at end of period $1,063.19 $1,063.19 quickly, the Fund may realize significantly less than the value at which it previously recorded those investments. Total return1 3.98% 11.92%

The Fund has taken significant effort to minimize all risks to Ratios to weighted average net assets the portfolio. Fund level operating expenses 0.05% 0.10% Net investment income 1.18% 1.66% 1 Total return is calculated based on a time-weighted rate of return methodology. Monthly rates of return are compounded to derive the total return reflected above. Commitments and Contingencies At March 31, 2011, the Fund had outstanding commitments on the existing portfolio of $283.1 million, providing for new Subsequent Event investments and additional expenditures on investments previously acquired. The following is a summary of the No material subsequent events have occurred through May significant components of the commitment balance by sector: 17, 2011, the date the financial statements were available to be issued.

DOLLARS IN THOUSANDS

Office $107,741 Industrial 22,769 Residential 70,305 Hotel 8,267 Retail 15,228 Other 58,832 Total $283,142

There are no material contingencies as of March 31, 2011.

22 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 NOTES TO FINANCIAL STATEMENTS

Report of Independent Accountants Report of Independent Accountants

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

We have reviewed the accompanying statement of net assets of the Commingled Pension Trust Fund (Special Situation Property) of J.P. Morgan Chase Bank (the “Fund”) as of March 31, 2011, and the related statements of operations, changes in net assets and of cash flows for the three-month and six-month periods ended March 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 May 17, 2011

J.P. Morgan Asset Management | 23 The Commingled Pension Trust Fund (Special Situation 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 . You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing. This brochure is intended to report solely on the investment strategies and opportunities of the JPMorgan Chase Bank, N.A. Special Situation Property Fund (the “Fund). Additional information is avail¬able upon request. Information herein is believed to be reliable, but J.P. Morgan Asset Management does not 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 op¬erating 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., 2011

24 | JPMCB Special Situation Property Fund | Quarterly Report: March 31, 2011 J.P. Morgan Asset Management—Global Real Assets 270 Park Avenue I New York, NY 10017 jpmorgan.com/assetmanagement

Justin Murphy Rebekah Brown Managing Director Executive Director Special Situation Property Fund Portfolio Manager Client Relations and Strategy Tel: +1-212-648-2013 Tel: +1-212-648-2041 Fax: +1-212-648-2263 Fax: +1-212-648-2261 [email protected] [email protected]

Michael F. O’Brien Ann Cole Managing Director Executive Director Global Head of Real Estate Client Relations and Strategy Client Relations and Strategy Tel: +1-212-648-2180 Tel: +1-212-648-2152 Fax: +1-212-648-2261 Fax: +1-212-648-2261 [email protected] [email protected]

George Ochs Amy Cummings Managing Director Executive Director Client Relations and Strategy Client Relations and Strategy Tel: +1-212-648-2119 Tel: +1-415-315-5177 Fax: +1-212-648-2261 Fax: +1-415-315-5195 [email protected] [email protected]

J.D. Sitton Michael Duignan Managing Director Executive Director Client Relations and Strategy Client Relations and Strategy Tel: +1-212-648-2163 Tel: +1-212-648-2122 Fax: +1-212-648-2261 Fax: +1-212-648-2262 [email protected] [email protected]

Edmond Lee Associate Client Relations and Strategy Tel: +1-212-648-1160 Fax: +1-212-648-2261 [email protected]

Michael Nelson Vice President Client Relations and Strategy Tel: +1-212-648-1561 Fax: +1-212-648-2261 [email protected]