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Notes
(1) Represents the performance of the Index based on, as applicable to the
relevant measurement period, the hypothetical backtested daily Index closing
levels from December 31, 2001 through June 2, 2011, and the actual historical
performance of the Index based on the daily Index closing level from June 3,
2011 through December 30, 2011, as well as the performance of the S and P 500[R]
Index over the same period. For purposes of these examples, each index was set
equal to 100 at the beginning of the relevant measurement period and returns
calculated arithmetically (not compounded). There is no guarantee the Index
will outperform the S and P 500[R] Index or any alternative investment strategy.
Source: Bloomberg and JPMorgan.
[] Calculated based on the annualized standard deviation for the ten year
period prior to December 30, 2011. Past performance is not indicative of
future returns.
(3)
The historical volatility levels of the S and P 500[R] Index are presented for
informational purposes only and have inherent limitations. For the purpose of
this graph, volatility is calculated
in accordance with Standard and Poor's official methodology used in the
calculation of the S and P 500[R] RC2 Index. No representation is made that in the
future the S and P 500[R] Index will have the volatility shown above. Alternative
modeling techniques or assumptions might produce significantly different
results and may prove to be more appropriate. The hypothetical equity exposure
obtained from such back-testing should not be considered indicative of the
actual exposure that would be assigned during your investment in the Index. No
representation is made that the actual performance of the Index would result in
exposure consistent with the hypothetical exposure displayed in the preceding
graph. Actual annualized volatilities and exposures will vary, perhaps
materially, from this analysis. Source: Bloomberg and JPMorgan.
(4) Correlation is calculated from the historical returns, as applicable to the
relevant measurement period, of the S and P 500[R] Index (the "Underlying Index")
over a six-month observation period. Correlation refers to the degree that the
S and P 500 RC2 8% Excess Return Index has changed relative to daily changes in the
S and P 500 Index Index for the ten year period prior to December 30, 2011.
(5) For the above analysis, the Sharpe Ratio, which is a measure of
risk-adjusted performance, is computed as the ten year annualized historical
return divided by the ten year annualized volatility.
Key Risks
The Index has a limited operating history and may perform in unexpected ways
-- the Index began publishing on June 3, 2011 and, therefore, has a limited
history. S and P has calculated the returns that hypothetically might have been
generated had the Index existed in the past, but those calculations are subject
to many limitations and do not reflect actual trading, liquidity constraints,
fees and other costs.
The Index may not be successful, may not outperform either underlying index
and may not achieve its target volatility --no assurance can be given that the
volatility strategy will be successful or that the Index will outperform the
Underlying Equity Index or the Underlying Bond Index or any alternative
strategy that might be employed to reduce the level of risk of the Underlying
Equity Index. We also can give you no assurance that the Index will achieve its
target volatility of 8%.
The Index may significantly underperform the Underlying Equity Index --the
Index is designed to allocate its exposure between the Underlying Equity Index
and the Underlying Bond Index in a manner that results in the Index targeting a
volatility of 8%.It is not possible to predict the level of exposure that the
Index will have to either the Underlying Equity Index or Underlying Bond Index
over a given period of time. However the Index will likely have less, and
possibly significantly less, than 100% exposure to the Underlying Equity Index
over a period of time. Consequently, if the Underlying Equity Index increases
in value over the applicable period, the Index will likely underperform the
Underlying Equity Index, possibly significantly, over the same period if the
Underlying Bond Index declines or does not increase in value to the same extent
over that period. If the Underlying Equity Index and the Underlying Bond Index
are negatively correlated and the Index has relatively high exposure to the
Underlying Bond Index and relatively low exposure to the Underlying Equity
Index, the Index may experience a significant negative performance even as the
Underlying Equity Index rises.
In certain circumstances, the Index will be notionally invested, in part, in
cash, on which no interest or other return will accrue --in certain
circumstances the Index will be solely allocated to the Underlying Equity Index
with a weight less than 100% and with the balance notionally allocated to cash.
No net return or interest will accrue on any such portion of the Index exposure
that is notionally allocated to cash, and such portion may be significant. Such
portion is effectively uninvested.
The Index is subject to the negative impact of an interest deduction--because
the Index is an excess return index, the level of the Index reflects the
weighted returns of the Underlying Indices less an interest deduction, which is
generally based on the return from a synthetic daily roling 3-month bond, with
reference to the 2-month and 3-month U.S. LIBOR rates. As a result, the
performance of the Index will be subject to the negative impact of those
interest rates.
Key Risks Continued
The returns of the Underlying Indicies may offset each other or may become
correlated in decline --at a time when the value of one Underlying Index
increases, the value of the other Underlying Index may not increase as much or
may even decline, offsetting the potentially positive effect of the performance
of the former Underlying Index on the performance of the Index. Historically,
the performance of the Underlying Equity Index has often been negatively
correlated with the performance of the futures contracts underlying the
Underlying Bond Index. It is also possible that the returns of the Underlying
Indices may be positively correlated with each other. In this case, a decline
in one Underlying Index would not moderate the effect of a decline in the other
Underlying Index on the performance of the Index, but would rather exacerbate
it. As a result, the Index may not perform as well as an alternative index that
tracks only one Underlying Index.
Our affiliate, J.P. Morgan Securities LLC ("JPMS") helped develop the S and P
500[R] Daily RC2 8% Excess Return Index. JPMS worked with S and P in developing the
guidelines and policies governing the composition and calculation of the S and P
500[R] Daily RC2 8% Excess Return Index. Although judgments, policies and
determinations concerning the S and P 500[R] Daily RC2 8% Excess Return Index were
made by JPMS, JPMorgan Chase & Co., as the parent company of JPMS, ultimately
controls JPMS. In addition, the policies and judgments for which JPMS was
responsible could have an impact, positive or negative, on the level of the S and P
500[R] Daily RC2 8% Excess Return Index. JPMS is under no obligation to
consider your interests as an investor.
The risks identified above are not exhaustive. You should also review carefully
the related "Risk Factors" section in the relevant product supplement and the
"Selected Risk Considerations" in the relevant term sheet or pricing
supplement.
Index Disclaimers
"Standard & Poor's[R]," "S and P[R]," "S and P 500[R]" and "S and P 500[R] Daily RC2 8%
Excess Return" are trademarks of the McGraw-Hill Companies, Inc. and have been
licensed for use by J.P. Morgan Securities LLC. This transaction is not
sponsored, endorsed, sold or promoted by S and P, and S and P makes no representation
regarding the advisability of purchasing CDs issued by JPMorgan Chase Bank,
N.A. S and P has no obligation or liability in connection with the administration,
marketing, or trading of products linked to the S and P 500[R] Daily RC2 8% Excess
Return Index.
For more information on the Index and for additional key risk information see
Page 4 of the Strategy Guide at
http://www.sec.gov/Archives/edgar/data/19617/000095010312000350/crt_dp28332-fwp
..pdf
DISCLAIMER
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.
Free Writing Prospectus filed pursuant to Rule 433; Registration Statement No.
333-177923
J. P. Morgan Structured Investments | 800 576 3529 |
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