Term sheet
To prospectus
dated November
21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 192-A-III dated March
10, 2011
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Term Sheet
Product Supplement No. 192-A-III
Registration Statement No. 333-155535
Dated April 1, 2011;
Rule 433
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Structured
Investments
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$
10.00% per annum Callable Yield Notes due April 30, 2012 Linked to the Lesser
Performing of the Russell 2000® Index and the Market Vectors Gold
Miners ETF |
General
- The notes are designed for investors
who seek a higher interest rate than the current yield on a conventional debt
security with the same maturity issued by us or an issuer with a comparable
credit rating. Investors should be willing to forgo the potential to
participate in the appreciation of either the Russell 2000® Index or
the Market Vectors Gold Miners ETF and to forgo dividend payments. Investors
should be willing to assume the risk that the notes may be called and the
investors will receive less interest than if the notes were not called and the
risk that, if the notes are not called, the investors may lose some or all of
their principal at maturity.
- The notes will pay 10.00% per annum
interest over the term of the notes. However, the notes do not
guarantee any return of principal at maturity. Instead, if the notes
are not called, the payment at maturity will be based on the performance of the
Lesser Performing Underlying and whether the closing level or closing price, as
applicable, of either Underlying is less than the Starting Underlying Level of
such Underlying by more than the Protection Amount on any day during the
Monitoring Period, as described below. Any payment on the notes is subject to
the credit risk of JPMorgan Chase & Co.
- The notes may be called, in whole but
not in part, at our option on any of the Optional Call Dates set forth below.
If the notes are called pursuant to an Optional Call, payment on the Optional
Call Date for each $1,000 principal amount note will be a cash payment of
$1,000, plus any accrued and unpaid interest, as described below.
- Senior unsecured obligations of JPMorgan
Chase & Co. maturing April
30, 2012*
- The payment at maturity is not
linked to a basket composed of the Underlyings. The payment at maturity is
linked to the performance of each of the Underlyings individually, as described
below.
- Minimum denominations of $1,000 and
integral multiples thereof
Key Terms
Underlyings:
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The Russell 2000® Index (the Index) and the
Market Vectors Gold Miners ETF (the Fund) (each an Underlying, and collectively,
the Underlyings)
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Interest Rate:
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10.00% per annum over
the term of the notes, paid monthly and calculated on a 30/360 basis
The notes may be called, in whole but
not in part, at our option (such an event, an Optional Call) on any of the
Optional Call Dates set forth below.
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Protection Amount:
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With respect to each Underlying, an amount that represents 40.00%
of the Starting Underlying Level of such Underlying (in the case of the
Market Vectors Gold Miners ETF, subject to adjustments)
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Pricing Date:
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On or about April 26, 2011
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Settlement Date:
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On or about April 29, 2011
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Observation Date*:
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April 25, 2012
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Maturity Date*:
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April 30, 2012
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CUSIP:
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48125XLBO
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Monitoring Period:
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The period from and excluding the Pricing Date to and
including the Observation Date
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Interest Payment Dates:
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Interest on the notes will be payable
monthly in arrears on the last calendar day of each month, up to and including the final
monthly interest payment, which will be payable on the Maturity Date (each
such day, an Interest Payment Date), commencing May 31, 2011, to and
including the Maturity Date or, if the notes are called, to and including the
applicable Optional Call Date. See Selected Purchase Considerations
Monthly Interest Payments in this term sheet for more information.
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Payment at Maturity:
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If the notes are not called, the
payment at maturity, in excess of any accrued and unpaid interest, will be
based on whether a Trigger Event has occurred and the performance of the Lesser
Performing Underlying. If the notes are not called, for each $1,000
principal amount note, you will receive $1,000 plus any accrued and unpaid
interest at maturity, unless:
(a) the Ending Underlying Level of any
Underlying is less than the Starting Underlying Level of such Underlying; and
(b) a Trigger Event has occurred.
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If the notes are not called and the conditions
described in (a) and (b) are satisfied, at maturity you will lose 1% of the
principal amount of your notes for every 1% that the Ending Underlying Level
of the Lesser Performing Underlying is less than the Starting Underlying
Level of such Underlying. Under these circumstances, your payment at
maturity per $1,000 principal amount note, in addition to any accrued and
unpaid interest, will be calculated as follows:
$1,000 +
($1,000 x Lesser Performing Underlying Return)
You will lose some or all of your
principal at maturity if the notes are not called and the conditions
described in (a) and (b) are both satisfied.
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Trigger Event:
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A Trigger Event occurs if, on any day
during the Monitoring Period, the closing level or closing price, as applicable,
of any Underlying is less than the Starting Underlying Level of such
Underlying by more than the applicable Protection Amount.
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Underlying Return:
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With respect to each Underlying, the Underlying Return is
calculated as follows:
Ending
Underlying Level Starting Underlying Level
Starting Underlying Level
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Optional Call:
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We, at our election, may call the notes, in whole but not in
part, on any of the Optional Call Dates prior to the Maturity Date at a price
for each $1,000 principal amount note equal to $1,000 plus any accrued and
unpaid interest to but excluding the applicable Optional Call Date. If we
intend to call your notes, we will deliver notice to DTC at least five business days before the applicable
Optional Call Date.
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Optional Call Dates*:
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July 31, 2011, October 31, 2011 and January
31, 2012
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Additional Key Terms:
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See Additional Key Terms on the next page.
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*
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Subject
to postponement as described under Description of Notes Payment at
Maturity, Description of Notes
Payment upon Optional Call and Description of Notes Postponement of a
Determination Date-Notes with a maturity of more than one year, as
applicable, in the accompanying product supplement no. 192-A-III
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-9 of the
accompanying product supplement no. 192-A-III and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state securities commission has approved or
disapproved of the notes or passed upon the accuracy or the adequacy of this
term sheet or the accompanying prospectus supplement and prospectus. Any
representation to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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$
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$
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Total
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$
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$
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$
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(1)
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The
price to the public includes the estimated cost of hedging our obligations
under the notes through one or more of our affiliates.
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(2)
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If the notes priced today, J.P. Morgan Securities LLC,
which we refer to as JPMS, acting as agent for JPMorgan Chase & Co.,
would receive a commission of approximately $14.50 per $1,000 principal
amount note and may use a portion of that commission to allow selling
concessions to other dealers of approximately $2.50 per $1,000 principal amount
note. This commission includes the projected profits that our
affiliates expect to realize, some of which
may be allowed to other unaffiliated dealers, for assuming risks
inherent in hedging our obligations under the notes. The other dealers, in their sole discretion, may
forgo some or all of their selling concessions. The actual
commission received by JPMS may be more or less than $14.50 and will depend
on market conditions on the Pricing Date. In no event will the
commission received by JPMS, which includes concessions and other amounts
that may be allowed to other dealers, exceed $40.00 per $1,000 principal
amount note. See Plan of Distribution (Conflicts of Interest)
beginning on page PS-95 of the accompanying product supplement no. 192-A-III.
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The notes
are not bank deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency, nor are they
obligations of, or guaranteed by, a bank.
April 1, 2011
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has
filed a registration statement (including a prospectus) with the Securities and
Exchange Commission, or SEC, for the offering to which this term sheet
relates. Before you invest, you should read the prospectus in that registration
statement and the other documents relating to this offering that JPMorgan Chase
& Co. has filed with the SEC for more complete information about JPMorgan
Chase & Co. and this offering. You may get these documents without cost by
visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan
Chase & Co., any agent or any dealer participating in this offering will
arrange to send you the prospectus, the prospectus supplement, product
supplement no. 192-A-III and this term sheet if you so request by calling
toll-free 866-535-9248.
You may revoke your offer to
purchase the notes at any time prior to the time at which we accept such offer
by notifying the applicable agent. We reserve the right to change the terms
of, or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will
be asked to accept such changes in connection with your purchase. You may also
choose to reject such changes in which case we may reject your offer to
purchase.
You should read this term sheet together with the
prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008
relating to our Series E medium-term notes of which these notes are a part, and
the more detailed information contained in product supplement no. 192-A-III dated June 4, 2010. This
term sheet, together with the documents listed below, contains the terms of the
notes and supersedes all other 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
Risk Factors in the accompanying product supplement no. 192-A-III, as the notes
involve risks not associated with conventional debt securities. We urge
you to consult your investment, legal, tax, accounting and other advisers
before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the
relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is
19617. As used in this term sheet, the Company, we, us and our refer
to JPMorgan Chase & Co.
Additional Key Terms
Starting Underlying Level:
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With
respect to the Index, the closing level
of the Index on the Pricing Date (the Initial Index Level). With respect
to the Fund, the closing price of the Fund on the Pricing Date divided by
the Share Adjustment Factor for the Fund (the Initial Share Price). We
refer to each of the Initial Index Level for the Index and the Initial Share
Price for the Fund as a Starting Underlying Level.
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Ending Underlying Level:
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With
respect to the Index, the closing level
of the Index on the Observation Date (the Ending Index Level). With
respect to the Fund, the closing price of one share of the Fund on the
Observation Date (the Final Share Price). We refer to each of the Ending
Index Level for the Index and the Final Share Price for the Fund as an
Ending Underlying Level.
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Share Adjustment Factor:
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With
respect to the Fund, 1.0 on the Pricing Date and subject to adjustment under
certain circumstances. See Description of Notes Payment at Maturity and
General Terms of Notes Anti-Dilution Adjustments in the accompanying
product supplement no. 192-A-III for further information about these adjustments.
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Lesser Performing Underlying:
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The
Underlying with the Lesser Performing Underlying Return
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Lesser Performing Underlying Return:
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The
lower of the Underlying Return of the Russell 2000® Index and the
Underlying Return of the Market Vectors Gold Miners ETF
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Selected Purchase Considerations
- THE NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD ON DEBT SECURITIES OF
COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT RATING The notes will pay
interest at a rate of 10.00% per annum over the term of the notes, which is
higher than the yield currently available on debt securities of comparable
maturity issued by us or an issuer with a comparable credit rating. Because
the notes are our senior unsecured obligations, any interest payment or any
payment at maturity is subject to our ability to pay our obligations as they
become due.
- MONTHLY INTEREST PAYMENTS The notes offer monthly
interest payments at a rate of 10.00% per annum over the term of the notes.
Interest will be payable monthly in arrears on the last calendar day of each
month, up to and including the final monthly interest payment, which will be payable on the
Maturity Date (each such day, an Interest Payment Date), commencing May 31,
2011, to and including the Maturity Date or, if the notes are called, to and
including the applicable Optional Call Date. Interest will be payable to the
holders of record at the close of
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
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TS-1 |
business on the business day immediately
preceding the applicable Interest Payment Date or the applicable Optional Call
Date, as applicable. If an Interest Payment Date or Optional Call Date is not
a business day, payment will be made on the next business day immediately
following such day, but no additional interest will accrue as a result of the
delayed payment. For example, the monthly Interest Payment Date for July 2011
is July 31,
2011, but because
July 31, 2011 is a Sunday, payment of
interest with respect to that Interest Payment Date will be made on August 1, 2011, the next succeeding
business day.
- POTENTIAL EARLY EXIT AS A RESULT OF THE OPTIONAL
CALL FEATURE
If the notes are called pursuant to an Optional Call, on the applicable Optional Call Date, for each $1,000
principal amount note, you will receive $1,000 plus accrued and unpaid interest
to but excluding the applicable
Optional Call
Date.
- THE NOTES DO NOT GUARANTEE THE RETURN
OF YOUR PRINCIPAL IF THE NOTES ARE NOT CALLED If the notes are not called, we will pay you
your principal back at maturity so long as a Trigger Event has not occurred or
the Ending Underlying Level of each Underlying is not less than its Starting Underlying
Level. A Trigger Event occurs if, on any day during the Monitoring Period, the
closing level or closing price, as applicable, of any Underlying is less than
the Starting Underlying Level of such Underlying by more than the applicable
Protection Amount. However, if the notes are not called, a Trigger Event
has occurred and the Ending Underlying Level of either Underlying is less than
the Starting Underlying Level of such Underlying, you could lose the entire
principal amount of your notes.
- EXPOSURE TO EACH OF THE UNDERLYINGS The return on the notes is linked to
the Lesser Performing Underlying, which will be either the Russell 2000®
Index or the Market Vectors Gold Miners ETF. The Russell 2000® Index
consists of the middle 2,000 companies included in the Russell 3000 Index and,
as a result of the index calculation methodology, consists of the smallest
2,000 companies included in the Russell 3000® Index. The Russell
2000® Index is designed to track the performance of the small
capitalization segment of the U.S. equity
market.
The Market Vectors Gold
Miners ETF is an exchange-traded fund managed by Van Eck Associates
Corporation, the investment adviser to the Market Vectors Gold Miners ETF. The
Market Vectors Gold Miners ETF trades on NYSE Arca, Inc. (the NYSE Arca)
under the ticker symbol GDX. The Market Vectors Gold Miners ETF seeks to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold Miners
Index is a modified market capitalization weighted index primarily comprised of
publicly traded companies involved in the mining of gold. The NYSE Arca Gold
Miners Index includes common stocks and ADRs of selected companies that are
involved in mining for gold and silver and that are listed for trading on the
New York Stock Exchange or the NYSE Amex, LLC or quoted on The NASDAQ Stock
Market. Only companies with market capitalization greater than $100 million
that have a daily average trading volume of at least 50,000 shares over the
past six months are eligible for inclusion in the NYSE Arca Gold Miners Index.
For additional information on each
Underlying, see the information set forth under The Russell 2000®
Index and The Market Vectors Gold Miners ETF
in the accompanying product supplement no. 192-A-III.
- TAX TREATMENT AS A UNIT COMPRISING A PUT OPTION AND A DEPOSIT You should review
carefully the section entitled Certain U.S. Federal Income Tax Consequences
in the accompanying product supplement no. 192-A-III. We and you agree (in the absence of an
administrative determination or judicial ruling to the contrary) to treat the
notes for U.S. federal income tax purposes as units comprising: (i) a Put
Option written by you that is terminated if an Optional Call occurs and that, if not terminated, in circumstances
where the payment at maturity is less than $1,000 (excluding accrued and unpaid
interest) requires you to pay us an amount equal to $1,000 multiplied by the
absolute value of the Lesser Performing Underlying Return and (ii) a Deposit of $1,000 per $1,000 principal amount
note to secure your potential obligation under the Put Option. We will
determine the portion of each coupon payment that we will allocate to interest
on the Deposit and to Put Premium, respectively, and will provide that
allocation in the pricing supplement for the notes. If the notes had priced on
March
30, 2011, we
would have treated 8.80% of each coupon payment as interest on the Deposit and
the remainder as Put Premium. The actual allocation that we will determine for
the notes may differ from this hypothetical allocation, and will depend upon a
variety of factors, including actual market conditions and our borrowing costs
for debt instruments of comparable maturities on the Pricing Date. Assuming
this characterization is respected, amounts treated as interest on the Deposit
will be taxed as ordinary income, while the Put Premium will not be taken into
account prior to sale or settlement, including a settlement following an Optional
Call. However, there are other reasonable treatments that the Internal Revenue
Service (the IRS) or a court may adopt, in
which case the timing and character of any income or loss on the notes could be
significantly and adversely affected. In addition, in 2007 Treasury and the IRS released a notice
requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and
similar instruments. While it is not clear whether the notes would be viewed
as similar to the typical prepaid forward contract described in the notice, it
is possible that any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect.
The notice focuses on a number of issues, the most relevant of which for
holders of the notes are the character of income or loss (including whether the
Put Premium might be currently included as ordinary income) and the degree, if
any, to which income realized by Non-U.S. Holders should be subject to
withholding tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding
all aspects of the U.S. federal income tax consequences of an investment in the notes,
including possible alternative treatments and the issues presented by this
notice. Non-U.S. Holders should also
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-2 |
note that they may be withheld upon at a
rate of up to 30% unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the
applicable documentation requirements. Purchasers who are not initial
purchasers of notes at the issue price should also consult their tax advisers
with respect to the tax consequences of an investment in the notes, including
possible alternative characterizations, as well as the allocation of the
purchase price of the notes between the Deposit and the Put Option.
Selected Risk
Considerations
An investment in the notes involves
significant risks. Investing in the notes is not equivalent to investing directly
in either or both of the Underlyings, or any equity securities included in or
held by the Underlyings. These risks are explained in more detail in the Risk
Factors section of the accompanying product supplement no. 192-A-III dated June
4, 2010.
- YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS The notes do not guarantee any return
of principal. If the notes are not called, we will pay you your principal back
at maturity only so long as a Trigger Event has not occurred or the Ending
Underlying Level of each Underlying is equal to or greater than the Starting
Underlying Level of such Underlying. If the notes are not called, a Trigger
Event has occurred and the Ending Underlying Level of either Underlying is less
than the Starting Underlying Level of such Underlying, you will lose 1% of your
principal amount at maturity for every 1% that the Ending Underlying Level of
the Lesser Performing Underlying is less than the Starting Underlying Level of
such Underlying. Accordingly, you could lose up to the entire principal
amount of your notes.
- CREDIT RISK OF JPMORGAN CHASE & CO. The notes are subject to the credit risk of JPMorgan Chase
& Co. and our credit ratings and credit spreads may adversely affect the
market value of the notes. Investors are dependent on JPMorgan Chase &
Co.s ability to pay all amounts due on the notes at maturity or on any Optional
Call Date and on the Interest Payment Dates, and therefore investors are
subject to our credit risk and to changes in the markets view of our 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.
- POTENTIAL CONFLICTS We and our affiliates play a variety of
roles in connection with the issuance of the notes, including acting as
calculation agent. In performing these duties, the economic interests of the
calculation agent and other affiliates of ours are potentially adverse to your
interests as an investor in the notes. In addition, we are currently one of
the companies that make up the Russell 2000® Index. We will not
have any obligation to consider your interests as a holder of the notes in
taking any corporate action that might affect the value of the Russell 2000®
Index and the notes.
- YOUR RETURN ON THE NOTES IS LIMITED TO
THE PRINCIPAL AMOUNT PLUS ACCRUED
INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF EITHER UNDERLYING If the notes are not
called, a Trigger Event has not occurred and the Ending Underlying Level of
either Underlying is not below the Starting Underlying Level of such
Underlying, for each $1,000 principal amount note, you will receive $1,000 at
maturity plus any accrued and unpaid interest, regardless of any appreciation
in the value of either Underlying, which may be significant. If the notes are
called, for each $1,000 principal amount note, you will receive $1,000 on the
applicable Optional Call Date plus any accrued and unpaid interest, regardless
of the appreciation in the value of the Underlyings, which may be significant.
Accordingly, the return on the notes may be significantly less than the return
on a direct investment in either Underlying during the term of the notes.
- YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE CLOSING
LEVEL OR CLOSING PRICE, AS APPLICABLE, OF EACH UNDERLYING Your return on the notes and your
payment at maturity, if any, is not linked to a basket consisting of the Underlyings.
If the notes are not called, your payment at maturity is contingent upon the
performance of each individual Underlying such that you will be equally exposed
to the risks related to both of the Underlyings. Poor
performance by either of the Underlyings over the term of the notes may
negatively affect your payment at maturity and will not be offset or mitigated
by positive performance by the other Underlying. Accordingly, your investment
is subject to the risk of decline in the closing level or closing price, as
applicable, of each Underlying.
- YOUR PROTECTION MAY TERMINATE ON ANY DAY DURING THE TERM OF THE NOTES If, on any day during the Monitoring Period, the closing
level or closing price, as applicable, of either Underlying is less than the Starting
Underlying Level of such Underlying by more than the applicable Protection
Amount, a Trigger Event will occur, and you will be fully exposed to any
depreciation in the Lesser Performing Underlying. We refer to this feature as
a contingent buffer. Under these circumstances, and if the Ending Underlying
Level of either Underlying is less than the Starting Underlying Level for such
Underlying, you will lose 1% of the principal amount of your investment for
every 1% that the Ending Underlying Level of the Lesser Performing Underlying is
less than the Starting Underlying Level. You will be subject to this potential
loss of principal even if the relevant Underlying subsequently recovers such
that the closing level or closing price, as applicable, is less than the
Starting Underlying Level of such Underlying by less than the Protection Amount.
If these notes had a non-contingent buffer feature, under the same scenario,
you would have received the full principal amount of your notes plus accrued
and unpaid interest at maturity. As a result, your investment in the notes may
not perform as well as an investment in a security with a return that includes
a non-contingent buffer.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-3 |
- YOUR PAYMENT AT MATURITY MAY BE
DETERMINED BY THE LESSER PERFORMING UNDERLYING If the notes are not called and a Trigger Event
occurs, you will lose some or all of your investment in the notes if the Ending
Underlying Level of either Underlying is below its Starting Underlying Level.
This will be true even if the Ending Underlying Level of the other Underlying
is greater than or equal to its Starting Underlying Level. The two Underlyings
respective performances may not be correlated and, as a result, if the notes
are not called, you may receive the principal amount of your notes at maturity
only if there is a broad based rise in the performance of U.S. equities
across diverse markets during the term of the notes.
- THE OPTIONAL CALL FEATURE MAY FORCE
A POTENTIAL EARLY EXIT Upon an Optional Call, the amount of interest payable on the notes will be
less than the full amount of interest that would have been payable if the notes
were held to maturity, and, for each $1,000 principal amount note, you will
receive $1,000 plus accrued and unpaid interest to but excluding the applicable
Optional Call Date.
- REINVESTMENT RISK If your notes are called, the term of the notes may be reduced to as
short as three months and you will not receive interest payments after the
applicable Optional Call Date. There is no guarantee that you would be able to
reinvest the proceeds from an investment in the notes at a comparable return
and/or with a comparable interest rate for a similar level of risk in the event
the notes are called prior to the Maturity Date.
- CERTAIN BUILT-IN COSTS ARE LIKELY
TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY While
the payment at maturity, if any, or upon a call described in this term sheet is
based on the full principal amount of your notes, the original issue price of
the notes includes the agents commission and the estimated cost of hedging our
obligations under the notes. As a result, and as a general matter, the price,
if any, at which JPMS will be willing to purchase 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. This secondary market price will also be affected by a number of
factors aside from the agents commission and hedging costs, including those
referred to under Many Economic and Market Factors Will Influence the Value of
the Notes below.
The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to
hold your notes to maturity.
- PROTECTION AMOUNT APPLIES
ONLY IF YOU HOLD THE NOTES TO MATURITY Assuming the notes are not called, we will pay you your principal back
at maturity only if the closing level or closing price, as applicable, of each
Underlying is not less than its Starting Underlying Level by more than the applicable
Protection Amount on any day during the Monitoring Period or the Ending Underlying
Level of each Underlying is equal to or greater than the Starting Underlying
Level of such Underlying. If the notes are not called and a Trigger Event has
occurred, you will be fully exposed at maturity to any decline in the value of
the Lesser Performing Underlying.
- VOLATILITY RISK
Greater expected volatility with respect to an Underlying indicates a greater
likelihood as of the Pricing Date that such Underlying could close below its
Starting Underlying Level by more than the applicable Protection Amount on any
day during the Monitoring Period. An Underlyings volatility, however, can
change significantly over the term of the notes. The closing level or closing
price, as applicable, of an Underlying could fall sharply on any day during the
Monitoring Period, which could result in a significant loss of principal.
- AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS
ASSOCIATED WITH SMALL CAPITALIZATION STOCKS The stocks that constitute the Russell 2000®
Index are issued by companies with relatively small market capitalization. The
stock prices of smaller companies may be more volatile than stock prices of
large capitalization companies. Small capitalization companies may be less
able to withstand adverse economic, market, trade and competitive conditions
relative to larger companies. Small capitalization companies are less likely
to pay dividends on their stocks, and the presence of a dividend payment could
be a factor that limits downward stock price pressure under adverse market
conditions.
- THERE ARE
RISKS ASSOCIATED WITH THE MARKET VECTORS GOLD
MINERS ETF Although the Market
Vectors Gold Miners ETFs shares are listed for trading on the NYSE Arca and a
number of similar products have been traded on NYSE Arca and other securities
exchanges for varying periods of time, there is no assurance that an active
trading market will continue for the shares of the Market Vectors Gold Miners
ETF or that there will be liquidity in the trading market. The Market Vectors
Gold Miners ETF is subject to management risk, which is the risk that Van Ecks
investment strategy, the implementation of which is subject to a number of
constraints, may not produce the intended results. These constraints could
adversely affect the market price of the shares of the Market Vectors Gold
Miners ETF, and consequently, the value of the notes.
- DIFFERENCES BETWEEN THE MARKET
VECTORS GOLD MINERS ETF AND THE NYSE ARCA GOLD MINERS INDEX The Market Vectors Gold Miners ETF does not fully
replicate the NYSE Arca Gold Miners Index and may hold securities not included
in the NYSE Arca Gold Miners Index, and its performance will reflect additional
transaction costs and fees that are not included in the calculation of the NYSE
Arca Gold Miners Index, all of which may lead to a lack of correlation between
the Market Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. In
addition, corporate actions with respect to the sample of equity securities
(such as mergers and spin-offs) may impact the variance between the Market
Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. Finally, because
the shares of the Market Vectors Gold Miners ETF are traded on the NYSE Arca
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-4 |
and are subject to market supply and investor demand, the market value of one
share of the Market Vectors Gold Miners ETF may differ from the net asset value
per share of the Market Vectors Gold Miners ETF. For all of the foregoing
reasons, the performance of the Market Vectors Gold Miners ETF may not
correlate with the performance of the NYSE Arca Gold Miners Index.
- RISKS ASSOCIATED WITH THE GOLD AND SILVER
MINING INDUSTRIES All or
substantially all of the equity securities held by the Market Vectors Gold
Miners ETF are issued by gold or silver mining companies. Because the value of
the notes is linked to the performance of the Market Vectors Gold Miners ETF,
an investment in these notes will be concentrated in the gold and silver mining
industries. Competitive pressures may have a significant effect on the
financial condition of companies in these industries. Also, these companies
are highly dependent on the price of gold or silver, as applicable. These
prices fluctuate widely and may be affected by numerous factors. Factors
affecting gold prices include economic factors, including, among other things,
the structure of and confidence in the global monetary system, expectations of
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 generally quoted),
interest rates and gold borrowing and lending rates, and global or regional
economic, financial, political, regulatory, judicial or other events. Factors
affecting silver prices include general economic trends, technical
developments, substitution issues and regulation, as well as specific factors
including industrial and jewelry demand, expectations with respect to the rate
of inflation, the relative strength of the U.S. dollar (the currency in which
the price of silver is generally quoted) and other currencies, interest rates, central
bank sales, forward sales by producers, global or regional political or
economic events, and production costs and disruptions in major silver producing
countries such as the United Mexican States and the Republic of Peru.
- LACK OF LIQUIDITY The notes 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.
- NO DIVIDEND PAYMENTS OR VOTING RIGHTS As a holder of the notes, you will not have voting
rights or rights to receive cash dividends or other distributions or other
rights that holders of the securities included in or held by the Underlyings
would have.
- HEDGING AND TRADING IN THE UNDERLYINGS While the notes
are outstanding, we or any of our affiliates may carry out hedging activities
related to the notes, including instruments related to the Fund or the equity securities
included in the Index or held by the Fund. We or our affiliates may also trade
in the Fund or instruments related to the Fund or the equity securities
included in the Index or held by the Fund from time to time. Any of these
hedging or trading activities as of the Pricing Date and during the term of the
notes could adversely affect the likelihood of a call or our payment to you at
maturity.
- THE ANTI-DILUTION PROTECTION FOR THE MARKET
VECTORS GOLD MINERS ETF IS LIMITED The calculation agent will make
adjustments to the Share Adjustment Factor for certain events affecting the
shares of the Market Vectors Gold Miners ETF. However, the calculation agent
will not make an adjustment in response to all events that could affect the
shares of the Market Vectors Gold Miners ETF. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may
be materially and adversely affected.
- MANY ECONOMIC AND MARKET
FACTORS WILL INFLUENCE THE VALUE OF THE NOTES In addition to the level and price of the Underlyings
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:
- whether a Trigger Event has occurred;
- the interest rate on the notes;
- the expected volatility of the Underlyings;
- the time to maturity of the notes;
- the Optional Call feature and whether we
are expected to call the notes, which are likely to limit the value of the
notes;
- the dividend rates on the equity securities
included in or held by the Underlyings;
- the expected positive or negative
correlation between the Index and the Fund, or the expected absence of any such
correlation;
- interest and yield rates in the market
generally as well as in the markets of the equity securities included in or
held by the Underlyings;
- a variety of economic, financial,
political, regulatory and judicial events;
- the occurrence of certain events to the Market Vectors Gold Miners ETF that may or may not require an adjustment
to the applicable Share Adjustment Factor; and
- our creditworthiness, including actual or
anticipated downgrades in our credit ratings.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-5 |
Historical Information
The following graphs show the historical weekly performance of the
Russell 2000® Index from January 6, 2006 through March 25, 2011 and the Market Vectors Gold Miners ETF from May 26, 2006 through March 25,
2011. The closing level of
the Russell 2000® Index on March 31, 2011 was 843.55. The closing price of one
share of the Market Vectors Gold Miners ETF on March 31, 2011 was $60.06.
We obtained the
various closing levels and prices of the Underlyings below from Bloomberg
Financial Markets. We make no representation or warranty as to the accuracy or
completeness of information obtained from Bloomberg Financial Markets. The
historical levels and prices of each Underlying should not be taken as an
indication of future performance, and no assurance can be given as to the closing
level or closing price, as applicable, of any Underlying on any day during the
Monitoring Period or the Observation Date. We cannot give you assurance that
the performance of the Underlyings will result in the return of any of your
initial investment.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-6 |
What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Lesser Performing
Underlying?
The following table and examples illustrate the hypothetical total
return at maturity on the notes. The note total return as used in this term
sheet is the number, expressed as a percentage, that results from comparing the
payment at maturity plus the interest payments received over the term of the
notes per $1,000 principal amount note to $1,000. The table and examples
below assume that the notes are not called prior to maturity and that the Lesser
Performing Underlying is the Russell 2000® Index. We make no
representation or warranty as to which of the Underlyings will be the Lesser Performing
Underlying for purposes of calculating your actual payment at maturity. In
addition, the following table and examples assume a Starting Underlying Level
for the Lesser Performing Underlying of 800 and reflect the Interest Rate of 10.00%
per annum over the term of the notes and the Protection Amount of 40.00%. If
the notes are called prior to maturity, your total return and total payment may
be less than the amounts indicated below. The hypothetical total returns and
total payments set forth below are for illustrative purposes only and may not
be the actual total returns or total payments applicable to a purchaser of the
notes. The numbers appearing in the following table and examples have been
rounded for ease of analysis.
|
|
Trigger Event Has Not Occurred (1)
|
Trigger Event Has Occurred (1)
|
|
Ending
Underlying
Level
|
Lesser
Performing
Underlying
Return
|
Note Total
Return
|
Total Payments over the
Term of the Notes
|
Note Total Return
|
Total Payments over the
Term of the Notes
|
|
1440.00
|
80.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1320.00
|
65.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1200.00
|
50.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1120.00
|
40.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1040.00
|
30.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
960.00
|
20.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
880.00
|
10.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
840.00
|
5.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
800.00
|
0.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
760.00
|
-5.00%
|
10.00%
|
$1,100.00
|
5.00%
|
$1,050.00
|
720.00
|
-10.00%
|
10.00%
|
$1,100.00
|
0.00%
|
$1,000.00
|
640.00
|
-20.00%
|
10.00%
|
$1,100.00
|
-10.00%
|
$900.00
|
560.00
|
-30.00%
|
10.00%
|
$1,100.00
|
-20.00%
|
$800.00
|
480.00
|
-40.00%
|
10.00%
|
$1,100.00
|
-30.00%
|
$700.00
|
400.00
|
-50.00%
|
N/A
|
N/A
|
-40.00%
|
$600.00
|
320.00
|
-60.00%
|
N/A
|
N/A
|
-50.00%
|
$500.00
|
240.00
|
-70.00%
|
N/A
|
N/A
|
-60.00%
|
$400.00
|
160.00
|
-80.00%
|
N/A
|
N/A
|
-70.00%
|
$300.00
|
80.00
|
-90.00%
|
N/A
|
N/A
|
-80.00%
|
$200.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-90.00%
|
$100.00
|
|
(1) A Trigger Event occurs if the closing level or
closing price, as applicable, of either Underlying is less than the Starting
Underlying Level of such Underlying by more than 40% on any day during the
Monitoring Period.
The following examples illustrate how the note total returns
and total payments set forth in the table above are calculated.
Example 1: The level of the Lesser Performing
Underlying increases from the Starting Underlying Level of 800 to an Ending
Underlying Level of 840. Because the
Ending Underlying Level of the Lesser Performing Underlying of 840 is greater
than its Starting Underlying Level of 800, regardless of whether a Trigger
Event has occurred, the investor receives total payments of $1,100 per $1,000
principal amount note over the term of the notes, consisting of interest
payments of $100 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $1,000 per $1,000 principal amount note. This
represents the maximum total payment an investor may receive over the term of
the notes.
Example 2: A Trigger Event has not occurred and the
level of the Lesser Performing Underlying decreases from the Starting
Underlying Level of 800 to an Ending Underlying Level of 640. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 640 is less than its Starting Underlying Level of 800,
because a Trigger Event has not occurred, the
investor receives total payments of $1,100 per $1,000 principal amount note
over the term of the notes, consisting of interest payments of $100 per $1,000
principal amount note over the term of the notes and a payment at maturity of
$1,000 per $1,000 principal amount note.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-7 |
Example 3: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 800 to an Ending Underlying Level of 640. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 640 is less than its
Starting Underlying Level of 800, the
investor receives total payments of $900 per $1,000 principal amount note over
the term of the notes, consisting of interest payments of $100 per $1,000
principal amount note over the term of the notes and a payment at maturity of $800
per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -20%)] +
$100 = $900
Example 4: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 800 to an Ending Underlying Level of 480. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 480 is less than its
Starting Underlying Level of 800, the
investor receives total payments of $700 per $1,000 principal amount note over
the term of the notes, consisting of interest payments of $100 per $1,000 principal
amount note over the term of the notes and a payment at maturity of $600 per
$1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -40%)] +
$100 = $700
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 800 to an Ending Underlying Level of 0. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 0 is less than its
Starting Underlying Level of 800, the
investor receives total payments of $100 per $1,000 principal amount note over
the term of the notes, consisting solely of interest payments of $100 per
$1,000 principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)] +
$100 = $100
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF
|
TS-8 |