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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-177923
April 22, 2013
April 2013
J.P. Morgan Structured Investments
[GRAPHIC OMITTED]
The J.P. Morgan Efficiente EM 5 Index
Strategy Guide
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Important Information
JPMorgan Chase and Co. ("J.P. Morgan") has filed a registration statement
(including a prospectus) with the Securities and Exchange Commission (the "SEC")
for any offerings to which these materials relate. Before you invest in any
offering of securities by J.P. Morgan, you should read the prospectus in that
registration statement, the prospectus supplement, as well as the particular
product supplement, the relevant term sheet or pricing supplement, and any other
documents that J.P. Morgan will file with the SEC relating to such offering for
more complete information about J.P. Morgan and the offering of any securities.
You may get these documents without cost by visiting EDGAR on the SEC Website at
www.sec.gov. Alternatively, J.P. Morgan, any agent, or any dealer participating
in the particular offering will arrange to send you the prospectus and the
prospectus supplement, as well as any product supplement and term sheet or
pricing supplement, if you so request by calling toll-free (866) 535-9248.
To the extent there are any inconsistencies between this free writing prospectus
and the relevant term sheet or pricing supplement, the relevant term sheet or
pricing supplement, including any hyperlinked information, shall supersede this
free writing prospectus.
Securities linked to JPMorgan ETF Efficiente EM 5 Index (the "Strategy") are our
senior unsecured obligations and are not secured debt. Investing in these
securities is not equivalent to a direct investment in the Strategy or any index
fund that forms part of the Strategy.
Investments in securities linked to the Strategy require investors to assess
several characteristics and risk factors that may not be present in other types
of transactions. In reaching a determination as to the appropriateness of any
proposed transaction, clients should undertake a thorough independent review of
the legal, regulatory, credit, tax, accounting and economic consequences of such
transaction in relation to their particular circumstances. This free writing
prospectus contains market data from various sources other than us and our
affiliates, and, accordingly, we make no representation or warranty as to the
market data's accuracy or completeness. All information is subject to change
without notice. We or our affiliated companies may make a market or deal as
principal in the securities mentioned in this document or in options, futures or
other derivatives based thereon.
Any historical composite performance records included in this free writing
prospectus are hypothetical and it should be noted that the constituents have
not traded together in the manner shown in the composite historical replication
of the indices included in this free writing prospectus. No representation is
being made that the Strategy will achieve a composite performance record similar
to that shown. In fact, there are frequently sharp differences between a
hypothetical historical composite performance record and the actual record that
the combination of those underlying elements subsequently achieved.
Use of Simulated Returns
Back-testing and other statistical analysis material that is provided in
connection with the explanations of the potential returns of the securities
linked to the Strategy use simulated analysis and hypothetical circumstances to
estimate how it may have performed prior to its actual existence. For time
periods prior to the launch of an exchange-traded fund included in the Strategy
and such exchange-traded fund's initial satisfaction of a minimum liquidity
standard, back-testing uses alternative performance information derived from a
related index, after deducting hypothetical fund fees, rather than performance
information for such exchange-traded fund.
The results obtained from "back-testing" information should not be considered
indicative of the actual results that might be obtained from an investment or
participation in a financial instrument or transaction referencing the Index.
J.P. Morgan provides no assurance or guarantee that the securities linked to the
Index will operate or would have operated in the past in a manner consistent
with these materials. The hypothetical historical levels presented herein have
not been verified by an independent third party, and such hypothetical
historical levels have inherent limitations.
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Alternative simulations, techniques, modeling or assumptions might produce significantly different results and prove to be more appropriate. Actual results will vary, perhaps materially, from the simulated returns presented in this strategy guide. IRS Circular 230 Disclosure We and our affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with J.P. Morgan of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Investment suitability must be determined individually for each investor, and the financial instruments described herein may not be suitable for all investors. This information is not intended to provide and should not be relied upon as providing accounting, legal, regulatory or tax advice. Investors should consult with their own advisors as to these matters. This material is not a product of J.P. Morgan Research Departments. Structured Investments may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. J.P. Morgan and its affiliates may have positions (long or short), effect transactions or make markets in securities or financial instruments mentioned herein (or options with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. J.P. Morgan is the marketing name for the Issuer and its subsidiaries and affiliates worldwide. JPMS is a member of FINRA, NYSE, and SIPC. Clients should contact their salespersons at, and execute transactions through, a J.P. Morgan entity qualified in their home jurisdiction unless governing law permits otherwise. |
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Overview
The J.P. Morgan Efficiente EM 5 Index (the "Index," the "Strategy," or
"Efficiente EM") is a member of J.P. Morgan's family of Efficiente indices,
which generally seek to provide exposure to the relevant underlying assets based
on the modern portfolio theory approach to asset allocation. Efficiente EM
provides exposure to a diverse range of asset classes with focus on emerging
market investments. The Index selects from a basket of 15 assets (the "Basket
Constituents") including equities, government debt, alternatives and the
JPMorgan Cash Index USD 3 Month (the "Cash Index").
Key features of the Index include
[] Exposure to emerging markets equities, bonds (including emerging and
developed markets), and alternative investments (agriculture, gold and
energy);
[] The weights allocated to the Basket Constituents are dynamic and are
determined monthly based on a rules-based methodology that targets an
annualized volatility of 5% or less;
[] An algorithmic portfolio construction which utilizes momentum and
correlation across asset classes;
[] The Index is an excess return index and reflects the weighted performance
of the Basket Constituents (including reinvested dividends for the Basket
Constitients that are exchange traded funds) with the returns of certain
Basket Constituents tracked as the excess returns over the Cash Index; and
[] The Index level incorporates the daily deduction fee of 0.50% per annum and
is published on Bloomberg under the ticker EFJPEM5E.
The table and graph below illustrate the performance of the Index based on the
hypothetical back-tested closing levels from March 31, 2003 through March 28,
2013. Based on the hypothetical back-tested performance, the Index realized
annualized returns of 8.13% per annum over the period with a Sharpe Ratio of
1.37. The Index Sharpe Ratio outperformed the Dow Jones UBS Commodity Index, the
MSCI Daily TR Net World USD (Excess Return), and the MSCI Daily TR Net Emerging
Markets USD (Excess Return). There is no guarantee that Efficiente EM will
outperform these indices during the term of your investment in securities linked
to the Index.
Hypothetical comparison of the Efficiente EM (Mar 31, 2003 -- Mar 28, 2013)
MSCI Daily TR Net
MSCI Daily TR Net
Dow Jones-UBS Emerging Markets
Efficiente EM World USD (Excess
Commodity Index USD (Excess
Return)
Return)
--------------- ------------- --------------- ----------------- -----------------
12 Month Return -0.17% -3.12% 11.11% 1.06%
--------------- ------------- --------------- ----------------- -----------------
3 Year Return 4.58% 1.33% 7.84% 2.60%
(Annualized)
--------------- ------------- --------------- ----------------- -----------------
10 Year Return 8.13% 1.96% 6.33% 14.29%
(Annualized)
--------------- ------------- --------------- ----------------- -----------------
Annualized 5.93% 19.07% 18.04% 22.29%
volatility
--------------- ------------- --------------- ----------------- -----------------
Sharpe Ratio 1.37 0.10 0.35 0.64
Source: Bloomberg and J.P. Morgan. Please see notes immediately following the
graph below.
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Hypothetical performance of the Efficiente EM (Mar 31, 2003 -- Mar 28, 2013)
[GRAPHIC OMITTED]
Note: Because the Index did not exist prior to February 04, 2013, all
retrospective levels provided in the graph and table above are simulated and
must be considered illustrative only. The simulated data was constructed using
certain procedures that may vary from the procedures used to calculate the Index
going forward, and on the basis of certain assumptions that may not hold during
future periods. The variations in procedures used in producing simulated
historical data from those used to calculate the Index going forward could
produce differences in returns of indeterminate direction and amount. Past
hypothetical performance results are neither indicative of nor a guarantee of
future returns. Actual results will vary, potentially materially, from the
hypothetical historical performance described herein. Please see "Important
Information" at the front of this publication for a discussion of certain
assumptions used for the Index and additional limitations of back-testing and
simulated returns.
"Return" is the percentage return of the relevant index over the period
indicated, and where "Annualized" is indicated, is the annual compounded return
of the relevant index over the period.
"Annualized volatility" is the annualized standard deviation of the daily
returns of the relevant index for the full period from March 31, 2003 through
March 28, 2013.
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Strategy description
On a monthly basis, the Index employs an allocation strategy based on modern
portfolio theory. The modern portfolio theory approach to asset allocation
suggests how a rational investor should allocate capital across the available
universe of assets to maximize return for a given risk appetite. The Index uses
the concept of an "efficient frontier" to define the asset allocation of the
Index. An efficient frontier for a portfolio of assets defines the optimal
return of the portfolio for a given amount of risk, using the volatility of
returns of hypothetical portfolios as the measure of risk.
Illustration of the Efficient Frontier
[GRAPHIC OMITTED]
On a monthly basis, J.P. Morgan Securities plc, acting as the Index calculation
agent, will rebalance the Index to determine the allocations to the Basket
Constituents based on the mathematical rules that govern the Index. The weight
for each Basket Constituent will be determined subject to certain weighting
constraints, including constraints on the weight of each Basket Constituent as
well as constraints on the sum of the weights of Basket Constituents within a
sector. For more information on the weighting constraints related to the Basket
Constituents comprising the Index, see "What are the Basket Constituents?".
The Index seeks to identify the weight for each Basket Constituent that would
have resulted in the hypothetical portfolio with the highest return over
approximately the previous six months while realizing an annualized volatility
over the same period of 5% or less. Thus, the portfolio exhibiting the highest
return with an annualized volatility of 5% or less is selected, and the
weighting for such portfolio is applied to the Basket Constituents. This forms
the practical application of the modern portfolio theory and the efficient
frontier. No assurance can be given that the Efficiente EM Index will achieve
its target volatility of 5%. The actual realized volatility of the Index may be
greater or less than 5%.
On each selection date for the monthly rebalancing of the Index, the weighting
algorithm implements the following steps:
[] The Global Index calculation agent identifies all eligible portfolios as
described under "What are the Basket Constituents?" and calculates the
performance for each portfolio for an observation period over approximately
the previous six months.
[] For each eligible portfolio, the Global Index M calculation agent
calculates the annualized realized volatility over that same observation
period.
[] The performance and the volatilities of the eligible portfolios are used to
construct the "efficient frontier."
[] The Global Index calculation agent selects the eligible portfolio with the
strongest performance that has an annualized realized volatility equal to
or less than 5%. If no such portfolio exists, the target volatility is
increased in increments of 1%, and the selection procedure is repeated
until a portfolio is identified.
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The Index is an excess return index and reflects the weighted performance of the
Basket Constituents (including reinvested dividends for the Baskets Constituents
that are exchange traded funds) with the returns of certain Basket Constituents
tracked as the excess return over the Cash Index. The Index level also
incorporates a daily deduction of a fee of 0.50% per annum.
The Global Index calculation agent will publish the Index level on Bloomberg,
subject to the occurrence of a market disruption event. You can find the current
Index value on Bloomberg under the ticker EFJPEM5E.
There is no guarantee that the concept of an efficient frontier combined with
modern portfolio theory will generate positive returns for the Index or that
other theories applied to the portfolio of the Basket Constituents would not
produce a better result than an investment linked to the Index.
What are the Basket Constituents?
The following table sets forth the Basket Constituents that compose the Index
and the maximum weighting constraints assigned to each asset as well as specific
groups of assets ("sectors").
Table A: Basket Constituents
Sector /
-----------
Sector cap Asset class Assets Ticker Asset cap
----------- ------------ -------------------------------------------- -------------- ---------
iShares[R] MSCI Brazil Capped Index Fund EWZ UP 15%
-------------------------------------------- -------------- ---------
iShares[R] MSCI Mexico Capped Investable EWW UP 15%
EM America Market Index Fund
-------------------------------------------- -------------- ---------
J.P. Morgan Latin America Satellite Basket Not Applicable 10%
------------ -------------------------------------------- -------------- ---------
Emerging RDX Total Return in USD RDXTRU 15%
Markets -------------------------------------------- -------------- ---------
EM Europe
Equities J.P. Morgan EMEA Satellite Basket Not Applicable 10%
80% ------------ -------------------------------------------- -------------- ---------
iShares[R] FTSE China 25 Index Fund FXI UP 15%
-------------------------------------------- -------------- ---------
WisdomTree India Earnings Fund EPI UP 15%
EM Asia -------------------------------------------- -------------- ---------
J.P. Morgan Asian Satellite Basket Not Applicable 10%
----------- ------------ -------------------------------------------- -------------- ---------
SandP[R] GSCI[TM] Energy 3-Month Forward SPGSAGTR 15%
Index Total Return
-------------------------------------------- -------------- ---------
Alternative
Investments Alternatives SandP[R] GSCI[TM] Gold Sub Index Total ReturnSPGSGCTR 15%
-------------------------------------------- -------------- ---------
30% SandP[R] GSCI[TM] Agriculture Index Total Return SG3MENP 15%
----------- ------------ -------------------------------------------- -------------- ---------
EM Bonds iShares[R] J.P. Morgan USD Emerging EMB UP 20%
Markets Bond Fund
------------ -------------------------------------------- -------------- ---------
Bonds DM Bonds J.P. Morgan US Treasury Note Futures RFJPUSBE 20%
50% Tracker
------------ -------------------------------------------- -------------- ---------
DM Bonds J.P. Morgan 30-Year US Treasury bond FTJMUTBE 20%
Futures Tracker (net)
----------- ------------ -------------------------------------------- -------------- ---------
Cash Cash JPMorgan Cash Index USD 3 Month JPCAUS3M 50%
50%
----------- ------------ -------------------------------------------- -------------- ---------
Note: See the relevant underlying supplement for more information on the Index
and the Basket Constituents.
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Table B: Satellite Basket Components
Satellite Basket Asset Ticker Weighting
----------------- ------------------------------------------ -------- ---------
J.P. Morgan Latin iShares[R] MSCI Chile Investable Market ECH UP 1/3
America Satellite Index Fund
------------------------------------------ -------- ---------
Basket iShares[R] MSCI All Peru Index Fund EPU UP 1/3
------------------------------------------ -------- ---------
Global FTSE Colombia 20 ETF GXG UP 1/3
----------------- ------------------------------------------ -------- ---------
J.P. Morgan EMEA CECE Total Return USD CECETRU 1/3
Satellite Basket
------------------------------------------ -------- ---------
J.P. Morgan Turkish Equity Futures Tracker FTJMTREE 1/3
------------------------------------------ -------- ---------
iShares[R] MSCI South Africa Index Fund EZA UP 1/3
----------------- ------------------------------------------ -------- ---------
J.P. Morgan Asian iShares[R] MSCI South Korea Index Fund EWY UP 1/3
Satellite Basket
------------------------------------------ -------- ---------
SandP[R] SoEast Asia 40 NetTR SPSEA4UN 1/3
------------------------------------------ -------- ---------
iShares[R] MSCI Taiwan Index Fund EWT US 1/3
-----------------
An eligible portfolio is any hypothetical portfolio composed of the Basket
Constituents listed in "Table A: Basket Constituents" whose weights satisfy the
following weighting constraints:
[] The minimum possible weight assigned to any Basket Constituent is 0%.
[] The weight assigned to each Basket Constituent is an integral multiple of
5%.
[] The maximum possible weight assigned to a single Basket Constituent is 15%,
with the exception of (i) the J.P. Morgan Latin America Satellite Basket,
the J.P. Morgan EMEA Satellite Basket, the J.P. Morgan Asian Satellite
Basket each of which have a maximum possible weight of 10%; (ii) The
iShares([R]) J.P. Morgan USD Emerging Market Bond Fund, the JP Morgan US
Treasury Note Futures Tracker, JP Morgan 30 Year US Treasury Bond Futures
Tracker each of which have a maximum possible weight of 20%; and (iii) the
JPMorgan Cash Index USD 3 Month which has a maximum possible weight of 50%.
Under certain circumstances, the weighting of the JPMorgan Cash Index USD 3
Month may be greater than 50%. The weight of the JPMorgan Cash Index USD 3
Month at any given time represents the portion of the Index that is
uninvested at that time.
[] The maximum possible weight assigned to (i) the Emerging Markets Equities
sector is 80%; (ii) the Bonds sector is 50%; and (iii) the Alternative
Investments sector is 30%. In addition, the weights assigned to the
JPMorgan Cash Index USD 3 Month cannot exceed 50%.
[] The sum of the weights assigned to all Basket Constituents will be equal to
100%.
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Historical analysis
The Index aims to provide exposure across a diverse spectrum of asset classes
and geographic regions.
Diversified exposure
Correlation can be described as a measure of the degree to which two components
change relative to each other. A diversified approach to investing would
stipulate maintaining exposure to a variety of asset classes to attempt to
generate positive returns in a wide range of market environments.
Based on the rebalancing methodology and the constraints described in "What are
the Basket Constituents?", Efficiente EM is intended to dynamically allocate to
the Basket Constituents in response to changing market conditions, with the
potential to exploit any low historical correlations exhibited by the Basket
Constituents. The hypothetical correlations below illustrate that returns of
the Index have historically not been overly dependent on either bonds or
equities.
Summary of hypothetical correlations for Efficiente EM (Mar 31, 2003 -- Mar 28,
2013)
MSCI Daily TR Net MSCI Daily TR Net
Dow Jones-UBS
Efficiente EM World USD (Excess Emerging Markets
Commodity Index
Return) USD (Excess Return)
--------------------------- ------------- --------------- ----------------- -------------------
Efficiente EM 100.00% 46.26% 28.63% 37.41%
Dow Jones-UBS Commodity
--------------- ----------------- -------------------
100.00% 46.85% 46.19%
Index
MSCI Daily TR Net World
----------------- -------------------
100.00% 74.31%
USD (Excess Return)
MSCI Daily TR Net Emerging
-------------------
100.00%
Markets USD (Excess Return)
Source: Bloomberg and J.P. Morgan.
Note: Based on the daily hypothetical back-tested returns. The correlations
shown above are for informational purposes only. Future correlations may be
higher or lower than the hypothetical, historical correlations in the summary
above. The hypothetical allocations are obtained from back-testing and should
not be considered indicative of the actual weights that would be assigned to the
Sectors or the applicable Basket Constituents during the term of your investment
in securities linked to the Index. J.P. Morgan provides no assurance or
guarantee that the actual performance of the Index would result in allocations
among the Sectors or the applicable Basket Constituents consistent with the
hypothetical allocations displayed in the preceding graphs. Actual results will
vary, perhaps materially, from those arising from the hypothetical historical
allocations contained in this hypothetical backtest. Please see "Important
Information" at the front of this publication for a discussion of certain
additional limitations of back-testing and simulated returns.
Targeting volatility
As described in "Strategy description," the Index targets an annualized realized
volatility of 5%. The graph below illustrates the hypothetical six-month
realized volatility of the Index as well as that of the Dow Jones UBS Commodity
Index, the MSCI Daily TR Net World USD (Excess Return), and the MSCI Daily TR
Net Emerging Markets USD (Excess Return) between October 3, 2003 and March 28,
2013.
Volatility is a measurement of the variability of returns. The historical, or
"realized," volatility of a portfolio can be measured in a number of ways. For
the purposes of the graph below, volatility is calculated from the historical
daily returns of the indices over a six-month observation period. For any given
day, the "six-month annualized volatility" is the annualized standard deviation
of the daily returns of the relevant index using the closing levels of the index
during the 126 index-day period preceding that day. For example, for the day,
October 31, 2010, the data point on the
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graph for that day represents the annualized standard deviation of the daily
returns using closing levels of the relevant index during the 126 index-days up
to and including October 31, 2010.
Hypothetical six-month annualized volatility (Oct 3, 2003 -- Mar 28, 2013)
[GRAPHIC OMITTED]
Source: Bloomberg and J.P. Morgan
Note: The hypothetical, historical six-month annualized volatility levels of
Efficiente EM, the MSCI Daily Net TR World Index (Excess Return), the MSCI Daily
TR Net Emerging Markets USD (Excess Return), and the Dow Jones UBS Commodity
Index, are presented for informational purposes only. The back-tested,
hypothetical, historical six-month annualized volatility has inherent
limitations. These volatility levels reflect historical performance (and in the
case of the Index hypothetical historical performance). No representation is
made that in the future Efficiente EM, the MSCI Daily TR Net World USD Index
(Excess Return), the MSCI Daily TR Net Emerging Markets USD (Excess Return), and
the Dow Jones UBS Commodity Index will have the volatilities as shown above.
There is no guarantee that Efficiente EM will outperform any alternative
investment strategy, including the MSCI Daily TR Net World USD Index (Excess
Return), the MSCI Daily TR Net Emerging Markets USD (Excess Return), and the Dow
Jones UBS Commodity Index. Alternative modeling techniques or assumptions might
produce significantly different results and may prove to be more appropriate.
Actual six-month annualized volatilities will vary, perhaps materially, from
this analysis. Please see "Important Information" at the front of this
publication for a discussion of certain additional limitations of back-testing
and simulated returns.
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Hypothetical historical sector weightings
The following graph illustrates the hypothetical historical allocation to the
various sectors and the Cash Index (labeled as "Cash") based on the rebalancing
mechanics set forth under the "Strategy description." For a detailed description
of which Basket Constituents make up each sector displayed in this graph, please
see "What are the Basket Constituents?". Although Efficiente EM rebalances on a
monthly basis, for ease of display, average allocations are shown on a
semi-annual basis in the chart below.
Hypothetical semi-annual average allocations Apr 2003 to Mar 2013
[GRAPHIC OMITTED]
Source: J.P. Morgan
Note: The hypothetical allocations are obtained from hypothetical back-testing
of the Efficiente EM algorithm and should not be considered indicative of the
actual weights that would be assigned to the sectors or the applicable Basket
Constituents during your investment in securities linked to the Index. J.P.
Morgan provides no assurance or guarantee that the actual performance of the
Index would result in allocations among the sectors or the applicable Basket
Constituents consistent with the hypothetical allocations displayed in the
preceding graphs. Actual results will vary, perhaps materially, from those in
the hypothetical historical allocations contained in this hypothetical backtest.
Please see "Important Information" at the front of this publication for a
discussion of certain additional limitations of back-testing and simulated
returns.
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The charts below illustrate the average allocation over the period between March
31, 2003 and March 28, 2013 to the various sectors or to Cash and are intended
to demonstrate the average allocation of the Index. These hypothetical
allocations were calculated by averaging the monthly allocations during the
periods indicated.
Historic percentage of time the Efficiente EM Index has been invested into each
sub index
[GRAPHIC OMITTED]
Source: J.P. Morgan. Numbers have been rounded for convenience.
Note: The hypothetical allocations are obtained from back-testing and should not
be considered indicative of the actual weights that would be assigned to the
Sectors or the applicable Basket Constituents during the term of your investment
in securities linked to the Index. J.P. Morgan provides no assurance or
guarantee that the actual performance of the Index would result in allocations
among the Sectors or the applicable Basket Constituents consistent with the
hypothetical allocations displayed in the preceding graphs. Actual results will
vary, perhaps materially, from those arising from the hypothetical historical
allocations contained in this hypothetical backtest. Please see "Important
Information" at the front of this publication for a discussion of certain
additional limitations of back-testing and simulated returns.
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Risks associated with the Index
Our affiliate, JPMS plc, is the calculation agent and may adjust the strategy in
a way that affects its level
The policies and judgments for which JPMS plc is responsible could have an
impact, positive or negative, on the level of the Index and the value of your
investment. JPMS plc is under no obligation to consider your interest as an
investor in securities linked to the Index.
There are risks associated with a momentum-based investment strategy
The Index employs a mathematical model intended to implement what is generally
known as a momentum investment strategy, which seeks to capitalize on positive
market price trends based on the supposition that positive market price trends
may continue. This strategy is different from a strategy that seeks long-term
exposure to a portfolio consisting of constant components with fixed weights.
The Index may fail to realize gains that could occur as a result of holding
assets that have experienced price declines, but after which experience a sudden
price spike.
The index may be partially uninvested
The aggregate weight of the Cash Constituent at any given time represents the
portion of the synthetic portfolio that is uninvested. In addition, when the
exposure of the Index to the synthetic portfolio is less than 100%, a portion of
the synthetic portfolio will be uninvested. The Index will reflect no return for
any uninvested portion.
The commodity futures contracts underlying three of the basket constituents are
subject to uncertain legal and regulatory regimes
The commodity futures contracts that underlie three of the Basket Constituents
are subject to legal and regulatory regimes that may change in ways that could
adversely affect our ability to hedge our obligations under the Index or your
investment linked to the Index. You should review carefully the relevant
disclosure statement and underlying supplement and the relevant term sheet or
pricing supplement for information relating to the effect these circumstances
could have on any payment on your investment linked to the Index.
There are risks associated with an emerging market investment
The economies of emerging market countries face several concerns, including
relatively unstable governments that may present the risks of nationalization of
businesses, restrictions on foreign ownership and prohibitions on the
repatriation of assets, and which may have less protection of property rights
than more developed countries. These economies may also be based on only a few
industries, be highly vulnerable to changes in local and global trade conditions
and may suffer from extreme and volatile debt burdens or inflation rates.
Other key risks
[] The Index level incorporates the daily deduction of a fee of 0.50% per
annum, and the levels of three Basket Constituents (or their underlying
components) that track futures contracts reflect the deduction of fees in
connection with each roll from one futures contract to the next futures
contract.
[] The Index may not be successful, may not outperform any alternative
strategy related to the Basket Constituents and may not achieve its target
volatility of 5%.
[] The Index comprises notional assets and liabilities and therefore there is
no actual portfolio of assets to which any person is entitled or in which
any person has any ownership interest.
[] The investment strategy involves monthly rebalancing and maximum weighting
caps that are applied to the Basket Constituents individually and to
sectors composed of multiple Basket Constituents.
[] Changes in the values of the Basket Constituents may offset each other, and
correlation of performances among the Basket Constituents may reduce the
performance of the Index.
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[] An investment in securities linked to the Strategy is subject to risks
associated with non-U.S. markets, fixed-income securities, commodities and
futures contracts and to currency exchange risk.
[] The Index was established on February 4, 2013, and therefore has limited
operating history.
[] J.P. Morgan Securities LLC., one of our affiliates, is the sponsor of the
Cash Constituent, of several of the Basket Constituents and/or their
underlying components and of the index that underlies one of the Basket
Constituents.
The risks identified above are not exhaustive. You should also review carefully
the related "Risk Factors" section in the relevant disclosure statement and
underlying supplement and the "Selected Risk Considerations" in the relevant
term sheet or disclosure supplement.
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