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 29, 2011; Rule 433
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Structured
Investments
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$
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:
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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 25.00% 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 May 25, 2011
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Settlement Date:
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On or about May 31, 2011
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Observation Date:
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May 25, 2012
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Maturity Date*:
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May 31, 2012
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CUSIP:
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48125XPC4
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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 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.
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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.
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 $1,000 plus any accrued
and unpaid interest to but excluding the applicable Optional Call Date. If
we intend to call your notes, we will deliver notice to DTC at least five business days before the applicable
Optional Call Date.
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Optional Call Dates*:
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August 31, 2011, November 30, 2011 and February
29, 2012
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Additional Key Terms:
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See Additional Key Terms on the next page.
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*
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Subject to
postponement as described under Description of Notes Payment at Maturity and
Description of Notes Postponement of a Determination Date Notes with a
maturity of not more than one year, as applicable, in the accompanying product
supplement no. 192-A-III
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Investing in the Callable
Yield Notes involves a number of risks. See Risk Factors beginning on page
PS-9 of the accompanying product supplement no. 192-A-III and Selected Risk
Considerations beginning on page TS-3 of this term sheet.
Neither the SEC nor any state securities commission has approved or
disapproved of the notes or passed upon the accuracy or the adequacy of this
term sheet or the accompanying prospectus supplement and prospectus. Any
representation to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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 $34.00 per $1,000 principal amount note and would use a portion
of that commission to allow selling concessions to other dealers of
approximately $20.00 per $1,000 principal amount note. The concessions of
approximately $20.00 per $1,000 principal amount note include concessions to
be allowed to selling dealers and concessions to be allowed to any arranging
dealer. 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 actual commission received by JPMS may be more or less than $20.00
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 $60.00 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 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:
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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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**
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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.
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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 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
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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 |
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
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.
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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 |
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
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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 |
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 25.00%. 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
|
637.50
|
-25.00%
|
10.00%
|
$1,100.00
|
-15.00%
|
$850.00
|
595.00
|
-30.00%
|
N/A
|
N/A
|
-20.00%
|
$800.00
|
510.00
|
-40.00%
|
N/A
|
N/A
|
-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 25% 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 |