The risk considerations identified below are not exhaustive. Please see the
accompanying term sheet and product supplement for a more detailed discussion of
risks, conflicts of interest and tax consequences associated with an investment
in the notes.
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS OF SOME OR ALL OF YOUR
PRINCIPAL - The notes do not guarantee any return of principal. The return on
the notes at maturity is linked to the performance of Gold and will depend on
whether, and the extent to which, the Commodity Return is positive or negative.
If the Ending Commodity Price is less than the Commodity Strike Price by more
than the Contingent Buffer Percentage, for every 1% that the Ending Commodity
Price is less than the Commodity Strike Price, you will lose an amount equal to
1% of the principal amount of your notes. Under these circumstances, you could
lose some or all of your initial investment at maturity.
YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN - If the Ending
Commodity Price is greater than the Initial Commodity Price, for each $1,000
principal amount note, you will receive at maturity $1,000 plus an additional
return that will not exceed the Maximum Return, regardless of the appreciation
in the Commodity Price, which may be significant.
CREDIT RISK OF JPMORGAN CHASE [AND] CO. - The notes are subject to the credit
risk of JPMorgan Chase [AND] Co. and our credit ratings and credit spreads may
adversely affect the market value of the notes. Investors are dependent on
JPMorgan Chase [AND] Co.'s ability to pay all amounts due on the notes, and
therefore investors are subject to JPMorgan Chase [AND] Co.'s credit risk and to
changes in the market's view of its creditworthiness. Any decline in our credit
ratings or increase in the credit spreads charged by the market for taking our
credit risk is likely to adversely affect the value of the notes. If we were to
default on its payment obligations, you may not receive any amounts owed to you
under the notes and you could lose your initial investment.
Recent events affecting us have led to heightened regulatory scrutiny, may lead
to additional regulatory or legal proceedings against us and may adversely
affect our credit ratings and credit spreads and, as a result, the market value
of the notes. See "Executive Overview - Recent Devleopments," "Liquidity Risk
Management - Credit Ratings," "Item 4. Controls and Procedures" and "Part II.
Other Information - Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q
for the quarter ending June 30, 2012
POTENTIAL CONFLICTS - JPMorgan Chase [AND] Co. and its affiliates may play a
variety of roles in connection with the issuance of the notes, including acting
as calculation agent and hedging JPMorgan Chase [AND] Co.'s obligations under
the notes. In performing these duties, the economic interests of JPMorgan Chase
[AND] Co. and the calculation agent and other affiliates of JPMorgan Chase [AND]
Co. are potentially adverse to your interests as an investor in the notes. It is
possible that these hedging activities or other trading activities of JPMorgan
Chase [AND] Co. or its affiliates could result in substantial returns for
JPMorgan Chase [AND] Co. or its affiliates while the value of the notes
THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER PERCENTAGE MAY TERMINATE ON THE
OBSERVATION DATE - If the Commodity Price on the Observation Date is less than
the Commodity Strike Price by more than the Contingent Buffer Percentage of
15.00%, the benefit provided by the Contingent Buffer Percentage will terminate
and you will be fully exposed to any depreciation in the Commodity Price.
CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE NOTES
PRIOR TO MATURITY - While the payment at maturity of the notes would be based on
the full principal amount of the notes, the original issue price of the notes
includes an agent's commission and the cost of hedging JPMorgan Chase [AND]
Co.'s obligations under the notes. As a result, and as a general matter, the
price, if any, at which J.P. Morgan Securities LLC, which we refer to as JPMS,
will be willing to purchase such notes from you in secondary market
transactions, if at all, will likely be lower than the original issue price and
any sale prior to the maturity date could result in a substantial loss to you.
The notes will not be designed to be short-term trading instruments. YOU SHOULD
BE WILLING TO HOLD ANY NOTES UNTIL MATURITY.
INVESTMENTS RELATED TO THE PRICE OF GOLD MAY BE MORE VOLATILE THAN TRADITIONAL
SECURITIES INVESTMENTS - The price of Gold is subject to variables that may be
less significant to the prices of traditional securities such as stocks and
bonds, and securities the return on which is not related to commodities or
commodities futures contracts. These variables may create additional investment
risks that may cause the price of Gold to move in unpredictable and
unanticipated directions and at unpredictable or unanticipated rates and cause
the value of the notes to be more volatile than the prices of traditional
OWNING THE NOTES IS NOT THE SAME AS OWNING GOLD OR GOLD-RELATED FUTURES
CONTRACTS DIRECTLY - The return on your notes will not reflect the return you
would realize if you actually purchased Gold or exchange-traded or
over-the-counter instruments based on Gold. You will not have any rights that
holders of such assets or instruments have.
THE MARKET PRICE OF GOLD WILL AFFECT THE VALUE OF THE NOTES - Because the notes
are linked to the performance of the price of Gold, we expect that generally the
market value of the notes will depend in large part on the market price of Gold.
The price of gold is primarily affected by the global demand for and supply of
gold. The market for gold bullion is global, and gold prices are subject to
volatile price movements over short periods of time and are affected by numerous
factors, including macroeconomic factors such as the structure of and confidence
in the global monetary system, expectations regarding the future rate of
inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is usually quoted), interest rates, gold
borrowing and lending rates, and global or regional economic, financial,
political, regulatory, judicial or other events. Gold prices may be affected by
industry factors such as industrial and jewelry demand as well as lending, sales
and purchases of gold by the official sector, including central banks and other
governmental agencies and multilateral institutions which hold gold.
Additionally, gold prices may be affected by levels of gold production,
production costs and short-term changes in supply and demand due to trading
activities in the gold market.
THE COMMODITY PRICE OF GOLD ON THE OBSERVATION DATE WILL BE DETERMINED BY
REFERENCE TO A FIXING LEVEL REPORTED BY THE LBMA, AND THERE ARE CERTAIN RISKS
RELATING TO THE FIXING LEVEL BEING DETERMINED BY THE LBMA - Your notes are
linked to the performance of Gold. On the Observation Date, your payment at
maturity will be based on the Commodity Price of Gold, which will be determined
by reference to a fixing level reported by the LBMA. The LBMA is a
self-regulatory association of bullion market participants. Although all
market-making members of the LBMA are supervised by the Bank of England and are
required to satisfy a capital adequacy test, the LBMA itself is not a regulated
entity. If the LBMA should cease operations, or if bullion trading should become
subject to a value added tax or other tax or any other form of regulation
currently not in place, the role of LBMA price fixings as a global benchmark for
the value of Gold may be adversely affected.
SINGLE COMMODITY PRICES TEND TO BE MORE VOLATILE THAN, AND MAY NOT CORRELATE
WITH, THE PRICES OF COMMODITIES GENERALLY - The notes are linked exclusively to
Gold and not to a diverse basket of commodities or a broad-based commodity
index. The price of Gold may not correlate to the prices of commodities
generally and may diverge significantly from the prices of commodities
generally. Because the notes are linked to the price of a single commodity, they
carry greater risk and may be more volatile than notes linked to the prices of
multiple commodities or a broad- based commodity index.
NO INTEREST PAYMENTS - As a holder of the notes, you will not receive interest
payments LACK OF LIQUIDITY - The notes described above will not be listed on any
securities exchange. JPMS intends to offer to purchase the notes in the
secondary market but is not required to do so. Even if there is a secondary
market, it may not provide enough liquidity to allow you to trade or sell the
notes easily. Because other dealers are not likely to make a secondary market
for the notes, the price at which you may be able to trade your notes is likely
to depend on the price, if any, at which JPMS is willing to buy the notes.
MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES - In
addition to the Contract Price on any day, the value of the notes will be
affected by a number of economic and market factors that may either offset or
magnify each other, including: the actual and expected volatility of the
Commodity Price; the time to maturity of the notes; whether the Commodity Price
is less than the Commodity Strike Price by more than the Contingent Buffer
Percentage; interest and yield rates in the market generally; a variety of
economic, financial, political, regulatory and judicial events; and the
creditworthiness of JPMorgan Chase [AND] Co.
The notes are not bank deposits and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency, nor are they obligations
of, or guaranteed by, a bank. Calculations and determinations will be made in
the sole discretion of JPMS, as calculation agent, and may be potentially
adverse to your interests as an investor in the notes.