Disclosure Supplement To disclosure statement dated November 23, 2011

Transcription

1 Disclosure Supplement To disclosure statement dated November 23, 2011 JPMorgan Chase Bank, National Association Certificates of Deposit Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. Dollar due December 31, 2019 $583,000 General Certificates of deposit (the CDs ) issued by JPMorgan Chase Bank, National Association ( JPMorgan Chase Bank ) maturing December 31, 2019* The CDs are designed for investors who seek exposure to any appreciation of an equally weighted basket of four currencies relative to the U.S. dollar from and including the Pricing Date to and including the Observation Date. Investors should be willing to forgo interest payments, while seeking payment of principal in full at maturity. The CDs are insured only within the limits and to the extent described in this disclosure supplement.and in the accompanying disclosure statement. See Selected Risk Considerations Limitations on FDIC Insurance in this disclosure supplement. Any payment on the CDs in excess of FDIC insurance limits is subject to the credit risk of JPMorgan Chase Bank. Investing in the CDs is not equivalent to investing in a conventional CD or directly in the Basket or any of the Currencies relative to the U.S. dollar. Minimum denominations of $10,000 (and then in additional increments of $1,000). The CDs priced on December 19, 2014 (the Pricing Date ) and are expected to settle on or about December 29, Key Terms Basket: An equally weighted basket of four currencies (each, a and together, the Currencies ) that measures the performance of the Currencies relative to the U.S. dollar (the Base ) Currencies: Currencies Component Weight Starting Spot Rate Brazilian real (BRL)** 25% Russian ruble (RUB)** 25% Indian rupee (INR)** 25% Chinese renminbi (CNY)** 25% The Starting Spot Rate of each was the Spot Rate of that on the Pricing Date, determined as specified under Additional Key Terms Spot Rate in this disclosure supplement. ** With respect to each, the Spot Rate is expressed as a number of units of the applicable per U.S. dollar. Payment at Maturity: At maturity, you will receive a cash payment, for each $1,000 CD, of your principal amount ($1,000 per CD) plus the Additional Amount. You will receive no interest payments during the term of the CDs. Additional Amount: The Additional Amount payable at maturity per $1,000 CD will equal $1,000 the Basket Return the Participation Rate, provided that the Additional Amount will not be less than the Minimum Amount. Minimum Amount: $25.00 Participation Rate: 130% Basket Return: Ending Basket Level Starting Basket Level Starting Basket Level Starting Basket Level: Ending Basket Level: Basket Closing Level: Set equal to 100 on the Pricing Date The Basket Closing Level on the Observation Date On the Observation Date, the Basket Closing Level will be calculated as follows: 100 [1 + (BRL Return 25%) + (RUB Return 25%) + (INR Return 25%) + (CNY Return 25%)] The BRL Return, RUB Return, INR Return and CNY Return are the Returns of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, respectively. Each Return is effectively capped at 100%, with no limit on the downside. Please see Additional Key Terms Return, How Do Exchange Rates Work?, Selected Risk Considerations Each Return Is Subject to an Embedded Maximum Return, Selected Risk Considerations The Methods of Calculating the Returns Will Diminish any Appreciation of the Currencies and Magnify any Depreciation of the Currencies Relative to the U.S. Dollar and Sensitivity Analysis Hypothetical Ending Basket Levels in this disclosure supplement for more information. Observation Date*: December 26, 2019 Maturity Date*: December 31, 2019 CD Calculation Agent: J.P. Morgan Securities LLC ( JPMS ) Fees and Discounts: JPMS, and its affiliates, will pay all of the selling commissions of $30.00 per $1,000 CD it receives from us to other affiliated or unaffiliated dealers. Early Withdrawals: At par upon death or adjudication of incompetence of a beneficial holder of the CDs. For information about early withdrawals and the limitations on such early withdrawals, see General Terms of the CDs Additions and Withdrawals in the accompanying disclosure statement. CUSIP: 48125TK20 * Subject to postponement in the event of a market disruption event and as described under Description of the CDs Payment at Maturity and Description of the CDs Postponement of a Valuation Date in the accompanying disclosure statement. Investing in the CDs involves a number of risks. See Risk Factors beginning on page 7 of the accompanying disclosure statement and Selected Risk Considerations beginning on page DS-4 of this disclosure supplement. The estimated value of the CDs as determined by when the terms of the CDs are set, was $ per $1,000 CD. See JPMS s Estimated Value of the CDs in this disclosure supplement for additional information. Our affiliate, JPMS, certain of its affiliates and other broker-dealers may use this disclosure supplement and the accompanying disclosure statement in connection with offers and sales of the CDs after the date hereof. December 19, 2014

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3 Additional Terms Specific to the CDs You should read this disclosure supplement together with the disclosure statement dated November 23, This disclosure supplement, together with the disclosure statement that accompanies it, contains the terms of the CDs and supersedes all prior or contemporaneous oral statements as well as any other written materials, including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the Risk Factors section in the accompanying disclosure statement, as the CDs involve risks not associated with conventional certificates of deposit. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the CDs. You may access the disclosure statement on our website at the following URL: Disclosure statement dated November 23, 2011: You may access information related to the unaudited Consolidated Financial Statements of JPMorgan Chase Bank, National Association for the six months ended June 30, 2014 and 2013 and the audited annual Consolidated Financial Statements of JPMorgan Chase Bank, National Association for the three years ended December 31, 2013, 2012 and 2011 at the following URL: As used in this disclosure supplement, we, us, our and "JPMorgan Chase Bank" or the "Bank refer to JPMorgan Chase Bank, National Association. Additional Key Terms REFERENCE CURRENCY RETURN The Return with respect to each reflects the performance of that relative to the U.S. dollar. With respect to each, the Return is calculated as follows: Starting Spot Rate Ending Spot Rate Starting Spot Rate Each Return is effectively capped at 100%, with no limit on the downside. Please see How Do Exchange Rates Work?, Selected Risk Considerations Each Return Is Subject to an Embedded Maximum Return, Selected Risk Considerations The Methods of Calculating the Returns Will Diminish any Appreciation of the Currencies and Magnify any Depreciation of the Currencies Relative to the U.S. Dollar and Sensitivity Analysis Hypothetical Ending Basket Levels in this disclosure supplement for more information. ENDING SPOT RATE The Ending Spot Rate with respect to a is the Spot Rate of that on the Observation Date. SPOT RATE With respect to each, the Spot Rate on any relevant day is expressed as a number of units of the applicable per U.S. dollar and is equal to the per one U.S. dollar exchange rate as reported by Reuters Group PLC ( Reuters ) on the page set forth in the table below at the applicable time set forth in the table below on that day. Brazilian real (BRL) Russian ruble (RUB) Indian rupee (INR) Chinese renminbi (CNY) Reuters Page and Applicable Time BRFR (offer rate) at approximately 1:15 p.m., São Paulo time EMTA between 12:00 p.m. and 12:30 p.m., Moscow time RBIB at approximately 12:30 p.m., Mumbai time SAEC at approximately 9:15 a.m., Beijing time CURRENCY BUSINESS DAY A currency business day, with respect to each, means a day on which (a) dealings in foreign currency in accordance with the practice of the foreign exchange market occur in The City of New York and the principal financial center for the applicable (with respect to the Brazilian real, São Paulo, Brazil; with respect to the Russian ruble, Moscow, Russia; with respect to the Indian rupee, Mumbai, India; and with respect to the Chinese renminbi, Beijing, China) and (b) banking institutions in The City of New York and that principal financial center for that are not otherwise authorized or required by law, regulation or executive order to close. JPMorgan Structured Investments DS- 1

4 How Do Exchange Rates Work? Exchange rates reflect the amount of one currency that can be exchanged for a unit of another currency. The Basket Closing Level on any relevant day reflects the returns of the Currencies from the Pricing Date to that day, calculated using the formula set forth above under Additional Key Terms Return. While the Returns for purposes of the CDs are determined using the formula set forth above under Additional Key Terms Return, there are other reasonable ways to determine the return of a that would provide different results. For example, another way to calculate the returns of the Currencies would be to calculate the return that would be achieved by converting U.S. dollars into the relevant at its Starting Spot Rate on the Pricing Date and then, on the relevant day, converting back into U.S. dollars at the Spot Rate on that day. In this disclosure supplement, we refer to the return on the Currencies calculated using that method, which is not used for purposes of the CDs, as a conversion return. As demonstrated by the examples below, under the Return formula, any appreciation of a relative to the U.S. dollar will be diminished, as compared to a conversion return, while any depreciation of a relative to the U.S. dollar will be magnified, as compared to a conversion return. In addition, the diminishing effect on any appreciation of a relative to the U.S. dollar increases as the applicable Return increases, and the magnifying effect on any depreciation of a relative to the U.S. dollar increases as the applicable Return decreases. Accordingly, your return on the CDs may be less than if you had invested in similar CDs that reflected conversion returns. With respect to each, the Spot Rate is expressed as the number of units of the applicable per U.S. dollar. As a result, a decrease in a Spot Rate from the Pricing Date to the Observation Date means that the relevant has appreciated / strengthened relative to the U.S. dollar from the Pricing Date to the Observation Date. This means that one unit of the relevant could purchase more U.S. dollars on the Observation Date than it could on the Pricing Date. Viewed another way, it would take fewer units of the relevant to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date. The following examples assume a Starting Spot Rate of 2.00 for the Brazilian real relative to the U.S. dollar. Example 1: The Brazilian real strengthens from the Starting Spot Rate of 2.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 1.80 Brazilian reais per U.S. dollar. The Return is equal to 10.00%, calculated as follows: ( ) / 2.00 = 10.00% By contrast, if the return on the Brazilian real were determined using a conversion return, the return would be 11.11%. Example 2: The Brazilian real strengthens from the Starting Spot Rate of 2.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 0.02 Brazilian reais per U.S. dollar. The Return is equal to 99.00%, which demonstrates the effective cap of 100% on the Return, calculated as follows: ( ) / 2.00 = 99.00% By contrast, if the return on the Brazilian real were determined using a conversion return, which would not be subject to the effective cap of 100%, the return would be 99.00%. As Examples 1 and 2 above demonstrated, the diminishing effect on any appreciation of a relative to the U.S. dollar increases as the applicable Return increases. Conversely, with respect to each, an increase in the Spot Rate from the Pricing Date to the Observation Date means that the relevant has depreciated / weakened relative to the U.S. dollar from the Pricing Date to the Observation Date. This means that it would take more units of the relevant to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date. Viewed another way, one unit of the relevant could purchase fewer U.S. dollars on the Observation Date than it could on the Pricing Date. Example 3: The Brazilian real weakens from the Starting Spot Rate of 2.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 2.20 Brazilian reais per U.S. dollar. The Return is equal to %, calculated as follows: ( ) / 2.00 = % By contrast, if the return on the Brazilian real were determined using a conversion return, the return would be -9.09%. Example 4: The Brazilian real weakens from the Starting Spot Rate of 2.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 8.00 Brazilian reais per U.S. dollar. The Return is equal to %, which demonstrates that there is no limit on the downside for the Return, calculated as follows: ( ) / 2.00 = % By contrast, if the return on the Brazilian real were determined using a conversion return, the return would be %. As Examples 3 and 4 above demonstrated, the magnifying effect on any depreciation of a relative to the U.S. dollar increases as the applicable Return decreases. JPMorgan Structured Investments DS- 2

5 Selected Purchase Considerations POTENTIAL PRESERVATION OF CAPITAL AT MATURITY You will receive at least the principal amount of your CDs plus the Minimum Amount if you hold the CDs to maturity, regardless of the performance of the Basket, subject to our creditworthiness for any amount in excess of FDIC-insured limits. APPRECIATION POTENTIAL At maturity, in addition to your principal, for each $1,000 CD, you will receive a payment equal to $1,000 the Basket Return the Participation Rate, provided that this payment (the Additional Amount ) will not be less than the Minimum Amount. EXPOSURE TO THE REFERENCE CURRENCIES VERSUS THE U.S. DOLLAR The return on the CDs is linked to the performance of a basket of currencies, which we refer to as the Currencies, relative to the U.S. dollar, and will enable you to participate in potential increases in the value of the Currencies, relative to the U.S. dollar, from the Pricing Date to the Observation Date. The Basket derives its value from an equally weighted group of currencies consisting of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, each measured relative to the U.S. dollar. FDIC INSURED The CDs are deposit obligations of JPMorgan Chase Bank and are insured by the FDIC up to applicable limits set by federal law and regulation, currently $250,000 for all deposits held by you in the same ownership capacity at JPMorgan Chase Bank. The principal amount of any CDs owned in excess of this limit is not insured by the FDIC. Under federal legislation adopted in 1993, claims of depositors are entitled to a preference in right of payment over claims of general unsecured creditors in the event of a liquidation or other resolution of any FDIC-insured depository institution. However, there can be no assurance that a depositor would receive the entire uninsured amount of the CDs in any such liquidation or other resolution. Additionally, because the Additional Amount is calculated using the Ending Basket Level, the Additional Amount will not accrue to a holder of a CD until the Observation Date. Accordingly, the Additional Amount will not be eligible for federal deposit insurance prior to the Observation Date and is subject to the credit risk of JPMorgan Chase Bank. TAXED AS CONTINGENT PAYMENT DEBT INSTRUMENTS You should review carefully the section entitled Certain U.S. Federal Income Tax Consequences in the accompanying disclosure statement. Subject to the limitations described therein, the CDs will be treated for U.S. federal income tax purposes as contingent payment debt instruments. You will generally be required to accrue and recognize original issue discount ( OID ) as interest income in each year at the comparable yield, as determined by us, even though you will not receive any payments from us until the maturity date. In addition, solely for purposes of determining the amount of OID that you will be required to accrue, we are also required to construct a projected payment schedule in respect of the CDs that produces the comparable yield. In particular, solely for purposes of determining the amount of OID that you will be required to accrue with respect to the CDs, we have determined that the projected payment schedule for the CDs will consist of a payment on the maturity date of the principal amount thereof and a projected Additional Amount (the Projected Additional Amount ). To obtain the comparable yield and the projected payment schedule (including the Projected Additional Amount) in respect of the CDs, contact a certified financial analyst at the Global Securities Group desk at (800) At maturity of a CD, in the event that the actual Additional Amount exceeds the Projected Additional Amount, you will be required to include the excess of the actual Additional Amount over the Projected Additional Amount in income as ordinary interest on the stated maturity date. Alternatively, in the event that the actual Additional Amount is less than the Projected Additional Amount, the amount by which the Projected Additional Amount exceeds the actual Additional amount will be treated first as an offset to any interest otherwise includible in income by you with respect to the CDs for the taxable year in which the stated maturity date occurs to the extent of the amount of that includible interest. Further, you will be permitted to recognize and deduct, as an ordinary loss that is not subject to the limitations applicable to miscellaneous itemized deductions, any remaining portion of the Projected Additional Amount in excess of the actual Additional Amount that is not treated as an interest offset pursuant to the foregoing rules. In addition, any amounts received upon an earlier sale or disposition in excess of your tax basis, if any, will be treated as additional interest income while any loss will be treated as an ordinary loss to the extent of all previous interest inclusions with respect to the CDs, which will be deductible against other income (e.g., employment and interest income), with the balance treated as capital loss, the deductibility of which may be subject to limitations. Purchasers who are not initial purchasers of CDs at the issue price should consult their tax advisers with respect to the tax consequences of an investment in the CDs, including the treatment of the difference, if any, between their basis in the CDs and the CDs adjusted issue price. Non-U.S. Holders should note that final Treasury regulations were released on legislation (FATCA) that imposes a withholding tax of 30% on payments to certain foreign entities unless information reporting and diligence requirements are met, as described in Certain U.S. Federal Income Tax Consequences-Tax Consequences to Non-U.S. Holders in the accompanying disclosure statement. Pursuant to the final regulations, such withholding tax will generally apply to obligations that are issued on or after July 1, 2014; therefore, the CDs will generally be subject to this withholding tax. The withholding tax described above will not apply to payments of gross proceeds from the sale, exchange or other disposition of the CDs made before January 1, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE We have determined that the comparable yield is an annual rate of 1.71%, compounded semi-annually. Based on our determination of the comparable yield, the projected payment schedule, per $1,000 principal amount CD, consists of a single payment at maturity equal to $1, Assuming a semi-annual accrual period, the following table states the amount of OID that will accrue with respect to a CD during each calendar period, based upon our determination of the comparable yield and the projected payment schedule. JPMorgan Structured Investments DS- 3

6 Neither the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual amount that we will pay on the CDs. Calendar Period Accrued OID During Calendar Period (per $1,000 CD) Total Accrued OID from Original Issue Date (per $1,000 CD) as of End of Calendar Period December 29, 2014 through December 31, 2014 $0.10 $0.10 January 1, 2015 through December 31, 2015 $17.17 $17.27 January 1, 2016 through December 31, 2016 $17.47 $34.74 January 1, 2017 through December 31, 2017 $17.77 $52.51 January 1, 2018 through December 31, 2018 $18.08 $70.59 January 1, 2019 through December 31, 2019 $18.38 $88.97 Selected Risk Considerations An investment in the CDs involves significant risks. Investing in the CDs is not equivalent to investing directly in the Currencies, the U.S. dollar or the respective exchange rates between the Currencies and the U.S. dollar or any contracts related to the Currencies, the U.S. dollar or the respective exchange rates between the Currencies and the U.S. dollar. These risks are explained in more detail in the Risk Factors section of the accompanying disclosure statement. MARKET RISK The return on the CDs at maturity is linked to the performance of the Basket, and will depend on whether, and the extent to which, the Basket Return is positive. Any positive Basket Return will depend on the aggregate performance of the Currencies relative to the U.S. dollar. YOU WILL RECEIVE NO MORE THAN THE FULL PRINCIPAL AMOUNT OF YOUR CDs PLUS THE MINIMUM AMOUNT AT MATURITY IF THE BASKET RETURN IS ZERO OR NEGATIVE. THE CDs MAY NOT PAY MORE THAN THE PRINCIPAL AMOUNT PLUS THE MINIMUM AMOUNT AT MATURITY You may receive a lower payment at maturity than you would have received if you had invested directly in the Currencies, the U.S. dollar or any contracts related to the Currencies, the U.S. dollar or the respective exchange rates between the Currencies and the U.S. dollar. If the Ending Basket Level does not exceed the Starting Basket Level, the Additional Amount will be equal to the Minimum Amount. This will be true even if the level of the Basket was higher than the Starting Basket Level at some time during the term of the CDs but falls below the Starting Basket Level on the Observation Date. THE CDs MAY BE SUBJECT TO THE CREDIT RISK OF JPMORGAN CHASE BANK A depositor purchasing a principal amount of CDs in excess of FDIC insurance limits, when aggregated with all other deposits held by the depositor in the same right and capacity at JPMorgan Chase Bank, will be subject to the credit risk of JPMorgan Chase Bank. Investors are dependent on JPMorgan Chase Bank s ability to pay any amounts due on the CDs in excess of FDIC insurance limits. Any actual or potential change in the creditworthiness, credit ratings or credit spreads related to us or our affiliates, as determined by the market for taking that credit risk, is likely to adversely affect the value of the CDs. POTENTIAL CONFLICTS We and our affiliates play a variety of roles in connection with the issuance of the CDs, including acting as CD Calculation Agent, a broker for the offering of the CDs, hedging our obligations under the CDs and making assumption used to determine the pricing of the CDs and the estimated value of the CDs when the terms of the CDs are set, which we refer to as JPMS s estimated value. In performing these duties, our economic interests and the economic interests of the CD Calculation Agent and other affiliates of ours are potentially adverse to your interests as an investor in the CDs. In addition, our business activities, including hedging and trading activities, could cause our economic interests to be adverse to yours and could adversely affect any payment on the CDs and the value of the CDs. It is possible that hedging or trading activities of ours or our affiliates in connection with the CDs could result in substantial returns for us or our affiliates while the value of the CDs declines. Please refer to Risk Factors Risks Relating to the CDs Generally in the accompanying disclosure supplement for additional information about these risks. For example, one of the duties of JPMS, as CD Calculation Agent, involves determining the Starting Spot Rates in the manner set forth on the cover page of this disclosure supplement. Although the CD Calculation Agent will make all determinations and will take all actions in relation to the establishment of the Starting Spot Rates in good faith, it should be noted that such discretion could have an impact (positive or negative), on the value of your CDs. The CD Calculation Agent is under no obligation to consider your interests as a holder of the CDs in taking any actions, including the determination of the Starting Spot Rates, that might affect the value of your CDs. The Starting Spot Rates may vary, and may vary significantly, from the rates displayed in publicly available sources at any time on the Pricing Date. If the Starting Spot Rate for any as determined by the CD Calculation Agent is different from that reflected in the publicly available information, such may need to appreciate by a greater degree for you to receive a payment at maturity of more than the principal amount of your CDs. JPMS will not have any obligation to consider your interests as a holder of the CDs in making this determination. JPMS AND ITS AFFILIATES MAY HAVE PUBLISHED RESEARCH, EXPRESSED OPINIONS OR PROVIDED RECOMMENDATIONS THAT ARE INCONSISTENT WITH INVESTING IN OR HOLDING THE CDs, AND MAY DO SO IN THE FUTURE. ANY SUCH RESEARCH, OPINIONS OR RECOMMENDATIONS COULD AFFECT THE JPMorgan Structured Investments DS- 4

7 MARKET VALUE OF THE CDS JPMS and its affiliates publish research from time to time on financial markets and other matters that may influence the value of the CDs, or express opinions or provide recommendations that are inconsistent with purchasing or holding the CDs. JPMS and its affiliates may have published or may publish research or other opinions that call into question the investment view implicit in an investment in the CDs. Any research, opinions or recommendations expressed by JPMS or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should undertake their own independent investigation of the merits of investing in the CDs, the Basket or any of the Currencies relative to the U.S. dollar. JPMS S ESTIMATED VALUE OF THE CDs IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE CDs JPMS s estimated value is only an estimate using several factors. The original issue price of the CDs exceeds JPMS s estimated value because costs associated with selling, structuring and hedging the CDs are included in the original issue price of the CDs. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the CDs and the estimated cost of hedging our obligations under the CDs. See JPMS s Estimated Value of the CDs in this disclosure supplement. JPMS S ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE CDs AND MAY DIFFER FROM OTHERS ESTIMATES JPMS s estimated value of the CDs is determined by reference to JPMS s internal pricing models when the terms of the CDs are set. This estimated value is based on market conditions and other relevant factors existing at that time and JPMS s assumptions about market parameters, which can include volatility, interest rates and other factors. Different pricing models and assumptions could provide valuations for the CDs that are greater than or less than JPMS s estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the CDs could change significantly based on, among other things, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy CDs from you in secondary market transactions. See JPMS s Estimated Value of the CDs in this disclosure supplement. JPMS S ESTIMATED VALUE IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE The internal funding rate used in the determination of JPMS s estimated value is based on, among other things, our view of the funding value of the CDs as well as the issuance, operational and ongoing liability management costs of the CDs. Our use of an internal funding rate and any potential changes to these rates may have an adverse effect on the terms of the CDs and any secondary market prices of the CDs. See JPMS s Estimated Value of the CDs in this disclosure supplement. THE VALUE OF THE CDs AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN JPMS S THEN-CURRENT ESTIMATED VALUE OF THE CDs FOR A LIMITED TIME PERIOD We generally expect that some of the costs included in the original issue price of the CDs will be partially paid back to you in connection with any repurchases of your CDs by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured issuances. See Secondary Market Prices of the CDs in this disclosure supplement for additional information relating to this initial period. Accordingly, the estimated value of your CDs during this initial period may be lower than the value of the CDs as published by JPMS (and which may be shown on your customer account statements). SECONDARY MARKET PRICES OF THE CDs WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE CDs Any secondary market prices of the CDs will likely be lower than the original issue price of the CDs because, among other things, secondary market prices take into account our internal secondary market funding rates for structured issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the CDs. As a result, the price, if any, at which JPMS will be willing to buy CDs from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial loss to you. See Secondary Market Prices of the CDs Will Be Impacted By Many Economic and Market Factors below for information about additional factors that will impact any secondary market prices of the CDs In addition, if JPMS purchases your CDs in the secondary market within six days after their initial issuance, you will be subject to early withdrawal penalties we are required to impose pursuant to Regulation D of the Federal Reserve Board. Under these circumstances, the repurchase price will be less than the original issue price of the CDs. The CDs are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your CDs to maturity. See Lack of Liquidity below. SECONDARY MARKET PRICES OF THE CDs WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS The secondary market price of the CDs during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the Currencies, including: any actual or potential change in our or our affiliates creditworthiness or credit spreads; customary bid-ask spreads for similarly sized trades; our internal secondary market funding rates for structured issuances; JPMorgan Structured Investments DS- 5

8 the actual and expected volatility of the values of the Currencies and the U.S. dollar; the time to maturity of the CDs; interest and yield rates in the market generally as well as in the Countries and the United States; correlation (or lack thereof) between the exchange rates; suspension or disruption of market trading in any or all of the Currencies or the U.S. dollar; foreign currency exchange rates; and a variety of other economic, financial, political, regulatory, geographical, agricultural, meteorological and judicial events. Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the CDs, which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the CDs, if any, at which JPMS may be willing to purchase your CDs in the secondary market. EACH REFERENCE CURRENCY RETURN IS SUBJECT TO AN EMBEDDED MAXIMUM RETURN Because the Returns are expressed as the Starting Spot Rate minus the Ending Spot Rate, divided by the Starting Spot Rate, or as Ending Spot Rate minus the Starting Spot Rate, divided by the Ending Spot Rate, the Return for each is subject to an embedded maximum return. In no event will any Return equal or exceed 100%. MOVEMENTS IN THE VALUES OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR MAY BE HIGHLY CORRELATED Because the performance of the Basket is determined by the performances of the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, each measured relative to the U.S. dollar, your CDs will be exposed to currency value risk with respect to Brazil, Russia, India and China (each, a Country ) and the United States. High correlation of movements in the values of the Currencies relative to the U.S. dollar during periods of negative returns could have an adverse effect on your return on your investment at maturity. However, the movements in the values of the Currencies relative to the U.S. dollar may not be correlated. See the immediately following risk factor for more information. CHANGES IN THE VALUES OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR MAY OFFSET EACH OTHER Movements in the values of the Currencies relative to the U.S. dollar may not correlate with each other. At a time when the value of one of the Currencies relative to the U.S. dollar increases, the value of one or more of the other Currencies relative to the U.S. dollar may not increase as much or may decline. Therefore, in calculating the Ending Basket Level, increases in the value of one of the Currencies relative to the U.S. dollar may be moderated, or more than offset, by lesser increases or decreases in the value of the other relative to the U.S. dollar. Because each Return is subject to an embedded maximum return of 100%, with no limit on the downside, depreciation by one relative to the U.S. dollar can result in a payment at maturity of no more than your initial investment plus the Minimum Amount, even when the other Currencies appreciate significantly relative to the U.S. dollar. See Sensitivity Analysis Hypothetical Ending Basket Levels in this disclosure supplement for more information. THE METHODS OF CALCULATING THE REFERENCE CURRENCY RETURNS WILL DIMINISH ANY APPRECIATION OF THE REFERENCE CURRENCIES AND MAGNIFY ANY DEPRECIATION OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR The Basket Closing Level on the Observation Date reflects the returns of the Currencies from the Pricing Date to the Observation Date, calculated using the formula set forth above under Additional Key Terms Return. While the Returns for purposes of the CDs are determined using the formula set forth above under Additional Key Terms Return, there are other reasonable ways to determine the return of a that would provide different results. For example, another way to calculate the returns of the Currencies would be to calculate the return that would be achieved by converting U.S. dollars into the relevant at its Starting Spot Rate on the Pricing Date and then, on the Observation Date, converting back into U.S. dollars at the Spot Rate on that day. In this disclosure supplement, we refer to the return on the Currencies calculated using that method, which is not used for purposes of the CDs, as a conversion return. JPMorgan Structured Investments DS- 6

9 Under the Return formula, any appreciation of a relative to the U.S. dollar will be diminished, as compared to a conversion return, while any depreciation of a relative to the U.S. dollar will be magnified, as compared to a conversion return. The diminishing effect on any appreciation of a relative to the U.S. dollar, which we refer to as an embedded variable decelerating upside leverage, increases as the Return increases. The magnifying effect on any depreciation of a relative to the U.S. dollar, which we refer to as an embedded variable downside leverage, increases as the Return decreases. As a result of the embedded maximum return for each and because of the embedded variable decelerating upside leverage and the embedded variable downside leverage, depreciation in one or more Currencies may not be offset by appreciation in the other Currencies, even significant appreciation. Accordingly, your return on the CDs may be less than if you had invested in similar CDs that reflected conversion returns. See "How Do Exchange Rates Work?" in this disclosure supplement for more information. THE CDs MIGHT NOT PAY AS MUCH AS A DIRECT INVESTMENT IN THE REFERENCE CURRENCIES You may receive a lower return on the CDs than you would have received if you had invested directly in the Currencies individually, a combination of Currencies or contracts related to the Currencies for which there is an active secondary market. THE CDs ARE SUBJECT TO CURRENCY EXCHANGE RISK Foreign currency exchange rates vary over time, and may vary considerably during the term of the CDs. The value of a or the U.S. dollar is at any moment a result of the supply and demand for that currency. Changes in foreign currency exchange rates result over time from the interaction of many factors directly or indirectly affecting economic and political conditions in the Countries, the United States and other relevant countries or regions. Of particular importance to potential currency exchange risk are: existing and expected rates of inflation; existing and expected interest rate levels; the balance of payments in the Countries and the United States, and between each country and its major trading partners; political, civil or military unrest in the Countries and the United States; and the extent of governmental surplus or deficit in the Countries and the United States. All of these factors are, in turn, sensitive to the monetary, fiscal and trade policies pursued by the Countries and the United States, and those of other countries important to international trade and finance. THE VALUE OF TWO OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR MAY BE CORRELATED TO THE DEMAND FOR CERTAIN COMMODITIES Brazil and India depend heavily on the export of commodities, such as agricultural and energy commodities, and the values of the corresponding Currencies relative to the U.S. dollar have historically exhibited high correlation to the demand for those commodities. As a result, a decrease in the demand for those commodities may negatively affect the value of the Currencies relative to the U.S. dollar and, therefore, the value of the CDs. GOVERNMENTAL INTERVENTION COULD MATERIALLY AND ADVERSELY AFFECT THE VALUE OF THE CDs Foreign exchange rates can be fixed by the sovereign government, allowed to float within a range of exchange rates set by the government or left to float freely. Governments, including those issuing the Currencies and the U.S. dollar, use a variety of techniques, such as intervention by their central bank or imposition of regulatory controls or taxes, to affect the exchange rates of their respective currencies. They may also issue a new currency to replace an existing currency, fix the exchange rate or alter the exchange rate or relative exchange characteristics by devaluation or revaluation of a currency. Thus, a special risk in purchasing the CDs is that their trading value and amount payable could be affected by the actions of sovereign governments, fluctuations in response to other market forces and the movement of currencies across borders. BECAUSE THE REFERENCE CURRENCIES ARE EMERGING MARKETS CURRENCIES, THE BASKET IS SUBJECT TO AN INCREASED RISK OF SIGNIFICANT ADVERSE FLUCTUATIONS The CDs are linked to the performance of an equally weighted Basket of four currencies, which are emerging markets currencies. There is an increased risk of significant adverse fluctuations in the performances of the emerging markets currencies as they are currencies of less developed and less stable economies without a stabilizing component that could be provided by one of the major currencies. With respect to any emerging or developing nation, there is the possibility of nationalization, expropriation or confiscation, political changes, government regulation and social instability. Currencies of emerging economies are often subject to more frequent and larger central bank interventions than the currencies of developed countries and are also more likely to be affected by drastic changes in monetary or exchange rate policies of the relevant countries, which may negatively affect the value of the CDs. EVEN THOUGH THE REFERENCE CURRENCIES AND THE U.S. DOLLAR TRADE AROUND-THE-CLOCK, THE CDs WILL NOT Because the inter-bank market in foreign currencies is a global, around-the-clock market, the hours of trading for the CDs, if any, will not conform to the hours during which the Currencies and the U.S. dollar are traded. Consequently, significant price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the price of the CDs. Additionally, there is no systematic reporting of last-sale information for foreign currencies which, combined with the limited availability of quotations to JPMorgan Structured Investments DS- 7

10 individual investors, may make it difficult for many investors to obtain timely and accurate data regarding the state of the underlying foreign exchange markets. CURRENCY EXCHANGE RISKS CAN BE EXPECTED TO HEIGHTEN IN PERIODS OF FINANCIAL TURMOIL In periods of financial turmoil, capital can move quickly out of regions that are perceived to be more vulnerable to the effects of the crisis than others with sudden and severely adverse consequences to the currencies of those regions. In addition, governments around the world, including the United States government and governments of other major world currencies, have recently made, and may be expected to continue to make, very significant interventions in their economies, and sometimes directly in their currencies. Such interventions affect currency exchange rates globally and, in particular, the value of the Currencies relative to the U.S. dollar. Further interventions, other government actions or suspensions of actions, as well as other changes in government economic policy or other financial or economic events affecting the currency markets, may cause currency exchange rates to fluctuate sharply in the future, which could have a material adverse effect on the value of the CDs and your return on your investment in the CDs at maturity. CURRENCY MARKET DISRUPTIONS MAY ADVERSELY AFFECT YOUR RETURN The CD Calculation Agent may, in its sole discretion, determine that the currency markets have been affected in a manner that prevents it from properly determining, among other things, the Spot Rates and the Returns. These events may include disruptions or suspensions of trading in the currency markets as a whole, and could be a Convertibility Event, a Deliverability Event, a Liquidity Event, a Taxation Event, a Discontinuity Event or a Price Source Disruption Event. See General Terms of the CDs Market Disruption Events in the accompanying disclosure statement for further information on what constitutes a market disruption event. NO INTEREST PAYMENTS As a holder of the CDs, you will not receive interest payments. LACK OF LIQUIDITY The CDs will not be listed on an organized securities exchange. JPMS and its affiliates may offer to purchase the CDs upon terms and conditions acceptable to them, but are not required to do so. For more information, see General Terms of the CDs Additions and Withdrawals and Discounts and Secondary Market in the accompanying disclosure statement. LIMITATIONS ON FDIC INSURANCE As a general matter, holders who purchase CDs in a principal amount greater than the applicable limits set by federal law and regulation will not be insured by the FDIC for the principal amount exceeding such limit. In addition, under FDIC interpretations, the return on the CDs, which is reflected in the form of the Additional Amount, is not insured by the FDIC until the Observation Date. Any amounts due on the CDs in excess of the applicable FDIC insurance limits will be subject to the credit risk of JPMorgan Chase Bank. For more information, see Deposit Insurance in the accompanying disclosure statement. JPMorgan Structured Investments DS- 8

11 Sensitivity Analysis Hypothetical Payment at Maturity for Each $1,000 CD The table below illustrates the payment at maturity (including, where relevant, the payment of the Additional Amount) for a $1,000 CD for a hypothetical range of performances for the Basket Return from -80% to +80%, reflects the Minimum Amount of $25.00 and assumes a Participation Rate of 130%. The following results are based solely on the hypothetical example cited. You should consider carefully whether the CDs are suitable to your investment goals. The numbers appearing in the table below have been rounded for ease of analysis. Ending Index Level Index Return Index Return x Participation Rate (130%) Additional Amount Principal Payment at Maturity Annual Percentage Yield % % $1, $1, = $2, % % 91.00% $ $1, = $1, % % 78.00% $ $1, = $1, % % 65.00% $ $1, = $1, % % 52.00% $ $1, = $1, % % 39.00% $ $1, = $1, % % 26.00% $ $1, = $1, % % 19.50% $ $1, = $1, % % 13.00% $ $1, = $1, % % 6.50% $ $1, = $1, % % 0.00% $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % % N/A $ $1, = $1, % Hypothetical Examples of Amount Payable at Maturity The following examples illustrate how a payment at maturity set forth in the table above is calculated. Example 1: The level of the Basket increases from the Starting Basket Level of 100 to an Ending Basket Level of 120. Because the Ending Basket Level of 120 is greater than the Starting Basket Level of 100, the Additional Amount is equal to $260, and the payment at maturity is equal to $1,260 per $1,000 principal amount of CDs, calculated as follows: $1,000 + ($1,000 [( ) / 100] 130%) = $1,260 Example 2: The level of the Basket decreases from the Starting Basket Level of 100 to an Ending Basket Level of 80. Because the Ending Basket Level of 80 is lower than the Starting Basket Level of 100, the Additional Amount is equal to the Minimum Amount, and the payment at maturity is equal to $1,025 per $1,000 principal amount of CDs. Example 3: The level of the Basket neither increases nor decreases from the Starting Basket Level of 100, so the Ending Basket Level is 100. Because the Ending Basket Level of 100 is equal to the Starting Basket Level of 100, the Additional Amount is equal to the Minimum Amount, and the payment at maturity is equal to $1,025 per $1,000 principal amount of CDs. The hypothetical returns and hypothetical payments on the CDs shown above apply only at maturity. These hypotheticals do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower. JPMorgan Structured Investments DS- 9

12 Sensitivity Analysis Hypothetical Ending Basket Levels The examples below illustrate hypothetical Basket Returns, assuming a range of performances for the Currencies. The hypothetical Basket Returns set forth below assume Starting Spot Rates of 2.00, 33.00, and 6.00 for the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, respectively, relative to the U.S. dollar. With respect to each, the Spot Rate is expressed as a number of units of the applicable per U.S. dollar. The Basket Returns set forth below are for illustrative purposes only and may not be the actual Basket Returns applicable to the CDs. You should consider carefully whether the CDs are suitable to your investment goals. The numbers appearing in the examples below have been rounded for ease of analysis. Example 1 Weight Hypothetical Starting Spot Rate Hypothetical Ending Spot Rate Return Brazilian real 25% % Russian ruble 25% % Indian rupee 25% % Chinese renminbi 25% % Basket Return: 15.00% In this example, the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi appreciated in value relative to the U.S. dollar, resulting in Returns for each relative to the U.S. dollar of 20%, 10%, 20% and 10%, respectively. Accordingly, the Basket Return is 15%. Example 2 Weight Hypothetical Starting Spot Rate Hypothetical Ending Spot Rate Return Brazilian real 25% % Russian ruble 25% % Indian rupee 25% % Chinese renminbi 25% % Basket Return: % In this example, the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi depreciated in value relative to the U.S. dollar, resulting in Returns for each to the U.S. dollar of - 20%, -10%, -20% and -10%, respectively. Accordingly, the Basket Return is -15%. Example 3 Weight Hypothetical Starting Spot Rate Hypothetical Ending Spot Rate Return Brazilian real 25% % Russian ruble 25% % Indian rupee 25% % Chinese renminbi 25% % Basket Return: -0.75% In this example, the Brazilian real, the Russian ruble and the Chinese renminbi each appreciated in value relative to the U.S. dollar, resulting in Returns for each of 99%, and the Indian rupee depreciated in value relative to the U.S. dollar, resulting in a Return of -300%. Accordingly, the Basket Return is -0.75%, and the Additional Amount will equal the Minimum Amount of $40. This example demonstrates that (a) no Return will be equal to greater than 100% and (b) depreciation by one relative to the U.S. dollar can result in a payment at maturity that is no greater than your initial investment plus the Minimum Amount, even when the other Currencies appreciate significantly relative to the U.S. dollar. JPMorgan Structured Investments DS- 10