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
|
Term Sheet
Product Supplement No. 192-A-III
Registration Statement No. 333-155535
Dated April 29, 2011;
Rule 433
|
Structured
Investments
|
|
$
10.00% per annum Callable Yield Notes due May 31, 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 May 31, 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:
|
The Russell 2000® Index (the Index) and the
Market Vectors Gold Miners ETF (the Fund) (each an Underlying, and collectively,
the Underlyings)
|
Interest Rate:
|
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. |
Protection Amount:
|
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)
|
Pricing Date:
|
On or about May 25, 2011
|
Settlement Date:
|
On or about May 31, 2011
|
Observation Date:
|
May 25, 2012
|
Maturity Date*:
|
May 31, 2012
|
CUSIP:
|
48125XPB6
|
Monitoring Period:
|
The period from and excluding the Pricing Date to and
including the Observation Date
|
Interest Payment Dates:
|
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 June 30,
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.
|
Payment at Maturity:
|
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. |
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. |
Trigger Event:
|
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.
|
Underlying Return:
|
With respect to each Underlying, the Underlying Return is
calculated as follows:
|
Ending
Underlying Level Starting Underlying Level
Starting Underlying Level
|
Optional Call:
|
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.
|
Optional Call Dates*:
|
August 31, 2011, November 30, 2011 and February
29, 2012
|
Additional Key Terms:
|
See Additional Key Terms on the next page.
|
*
|
Subject
to postponement as described under Description of Notes Payment at
Maturity and Description of Notes Postponement of a Determination Date Notes
with a maturity of not more than one year, in the accompanying product
supplement no. 192-A-III
|
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.
|
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Us
|
|
Per note
|
$
|
$
|
$
|
|
Total
|
$
|
$
|
$
|
|
(1)
|
The
price to the public includes the estimated cost of hedging our obligations
under the notes through one or more of our affiliates.
|
(2)
|
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.
|
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 29, 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 March 10, 2011. 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:
|
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.
|
Ending Underlying Level**:
|
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.
|
Share Adjustment Factor:
|
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.
|
Lesser Performing Underlying:
|
The Underlying with the Lesser Performing Underlying Return
|
Lesser Performing Underlying
Return:
|
The lower of the Underlying Return of the Russell 2000®
Index and the Underlying Return of the Market Vectors Gold Miners ETF
|
**
|
Subject to adjustment in the event of a market disruption
event or non-trading day as described under Description of Notes Postponement
of a Determination Date Notes with a maturity of not more than one year
in the accompanying product supplement no. 192-A-III.
|
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 June 30, 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 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
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to
the Lesser Performing of the Russell 2000® Index and the Market
Vectors Gold Miners ETF
|
TS-1 |
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
April 28,
2011, we
would have treated 8.60% 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 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.
|
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 |
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 March 10, 2011.
- 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.
- 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
|
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 |
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 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
|
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 |
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 April 21, 2011 and the Market Vectors Gold Miners ETF from May 26, 2006 through April 21,
2011. The U.S. stock exchanges were closed on April 22, 2011 due to exchange holidays. The closing level of the Russell 2000®
Index on April 28, 2011 was 861.55. The closing price of one
share of the Market Vectors Gold Miners ETF on April 28, 2011 was $61.30.
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 850 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
|
|
1530.00
|
80.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1402.50
|
65.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1275.00
|
50.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1190.00
|
40.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1105.00
|
30.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1020.00
|
20.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
935.00
|
10.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
892.50
|
5.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
850.00
|
0.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
807.50
|
-5.00%
|
10.00%
|
$1,100.00
|
5.00%
|
$1,050.00
|
765.00
|
-10.00%
|
10.00%
|
$1,100.00
|
0.00%
|
$1,000.00
|
680.00
|
-20.00%
|
10.00%
|
$1,100.00
|
-10.00%
|
$900.00
|
595.00
|
-30.00%
|
10.00%
|
$1,100.00
|
-20.00%
|
$800.00
|
510.00
|
-40.00%
|
10.00%
|
$1,100.00
|
-30.00%
|
$700.00
|
425.00
|
-50.00%
|
N/A
|
N/A
|
-40.00%
|
$600.00
|
340.00
|
-60.00%
|
N/A
|
N/A
|
-50.00%
|
$500.00
|
255.00
|
-70.00%
|
N/A
|
N/A
|
-60.00%
|
$400.00
|
170.00
|
-80.00%
|
N/A
|
N/A
|
-70.00%
|
$300.00
|
85.00
|
-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 850 to an Ending
Underlying Level of 892.50. Because
the Ending Underlying Level of the Lesser Performing Underlying of 892.50 is
greater than its Starting Underlying Level of 850, 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 850 to an Ending Underlying Level of 680. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 680 is less than its Starting Underlying Level of 850,
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 850 to an Ending Underlying Level of 680. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 680 is less than its
Starting Underlying Level of 850, 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 850 to an Ending Underlying Level of 425. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 425 is less than its
Starting Underlying Level of 850, the
investor receives total payments of $600 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 $500
per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -50%)] +
$100 = $600
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 850 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 850, 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 |