Term sheet
To
prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011,
product supplement no. 20-I dated January 5, 2012 and
underlying supplement no. 1-I dated November 14, 2011 |
Term Sheet to
Product Supplement No. 20-I
Registration Statement No. 333-177923
Dated February 21, 2012; Rule 433 |
Structured
Investments |
|
$
Auto Callable Contingent Interest Notes
Linked to the iShares® Russell 2000 Index Fund due February 27, 2015 |
General
| · | | The notes are designed for investors
who seek a Contingent Interest Payment with respect to each Review Date for which the closing price of one share of the Fund is
greater than or equal to 55% of the Initial Share Price, which we refer to as the Interest Barrier. In addition, if the closing
price of one share of the Fund on any Review Date (other than the first, second, third and final Review Dates) is greater than
or equal to the Initial Share Price, the notes will be automatically called. Investors in the notes should be willing to accept
the risk of losing some or all of their principal and the risk that no Contingent Interest Payment may be made with respect to
some or all Review Dates. |
| · | | Investors should be willing
to forgo fixed interest and dividend payments, in exchange for the opportunity to receive a Contingent Interest Payment with respect
to each Review Date for which the closing price of one share of the Fund is greater than or equal to the Interest Barrier. Any
payment on the notes is subject to the credit risk of JPMorgan Chase & Co. |
| · | | The fourth Review Date, which
is the earliest date on which an automatic call may be initiated, is February 25, 2013. |
| · | | Senior unsecured obligations
of JPMorgan Chase & Co. maturing February 27, 2015† |
| · | | Minimum denominations of $1,000
and integral multiples thereof |
| · | | The notes are expected to price
on or about February 24, 2012 and are expected to settle on or about February 29, 2012. |
Key
Terms
| Fund: |
The
iShares® Russell 2000 Index Fund |
| Contingent
Interest Payments: |
If the notes have not been previously
called and the closing price of one share of the Fund on any Review Date is greater than or equal to the Interest Barrier, you
will receive on the applicable Interest Payment Date for each $1,000 principal amount note a Contingent Interest Payment equal
to $17.50 (equivalent to an interest rate of 7.00%, payable at a rate of 1.75% per quarter). |
| |
If the closing
price of one share of the Fund on any Review Date is less than the Interest Barrier, no Contingent Interest Payment will
be made with respect to that Review Date. |
| Interest Barrier
/ Trigger Level: |
55% of the Initial Share Price (subject
to adjustments) |
| Interest
Rate: |
7.00% per annum,
payable at a rate of 1.75% per quarter, if applicable |
| Automatic
Call: |
If the closing
price of one share of the Fund on any Review Date (other than the first, second, third and final Review Dates) is greater
than or equal to the Initial Share Price, the notes will be automatically called for a cash payment, for each $1,000 principal
amount note, equal to (a) $1,000 plus (b) the Contingent Interest Payment applicable to that Review Date, payable on
the applicable Call Settlement Date. |
Payment
at Maturity:
|
If the notes have
not been previously called and the Final Share Price is greater than or equal to the Trigger Level, you will receive a cash
payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Contingent Interest Payment
applicable to the final Review Date. |
| If the notes have
not been previously called and the Final Share Price is less than the Trigger Level, at maturity you will lose 1% of the principal
amount of your notes for every 1% that the Final Share Price is less than the Initial Share Price. Under these circumstances,
your payment at maturity per $1,000 principal amount note will be calculated as follows: |
| $1,000
+ ($1,000 × Fund Return) |
| If the notes have not been automatically
called and the Final Share Price is less than the Trigger Level, you will lose more than 45% of your initial investment and
may lose all of your initial investment at maturity. |
| Fund
Return: |
Final
Share Price – Initial Share Price
Initial Share Price |
| Initial Share
Price: |
The closing price
of one share of the Fund on the pricing date, divided by the Share Adjustment Factor |
| Final
Share Price: |
The closing price
of one share of the Fund on the final Review Date |
| Share
Adjustment Factor: |
Set initially
at 1.0 on the pricing date and subject to adjustment upon the occurrence of certain events affecting the Fund. See “General
Terms of Notes — Additional Fund Provisions — Anti-Dilution Adjustments” in the accompanying product supplement
no. 20-I for further information. |
| Review Dates†: |
May 24, 2012 (first
Review Date), August 24, 2012 (second Review Date), November 26, 2012 (third Review Date), February 25, 2013 (fourth Review
Date), May 24, 2013 (fifth Review Date), August 26, 2013 (sixth Review Date), November 25, 2013 (seventh Review Date), February
24, 2014 (eighth Review Date), May 27, 2014 (ninth Review Date), August 25, 2014 (tenth Review Date), November 24, 2014 (eleventh
Review Date) and February 24, 2015 (final Review Date) |
| Interest Payment
Dates†: |
With respect to
each Review Date other than the final Review Date, the third business day after the related Review Date. The Contingent
Interest Payment, if any, with respect to the final Review Date will be made on the maturity date. |
| Call Settlement
Date†: |
If the notes are
automatically called on any Review Date, the first Interest Payment Date immediately following that Review Date |
| Maturity Date†: |
February 27, 2015 |
| CUSIP: |
48125VNY2 |
| † | | Subject to postponement in the
event of certain market disruption events and as described under “Description of Notes — Postponement of a Review
Date — Notes Linked to a Single Component” and “Description of Notes — Postponement of a Payment Date”
in the accompanying product supplement no. 20-I |
Investing in the Auto
Callable Contingent Interest Notes involves a number of risks. See “Risk Factors” beginning on page PS-15 of the accompanying
product supplement no. 20-I, “Risk Factors” beginning on page US-1 of the accompanying underlying supplement 1-I and
“Selected Risk Considerations” beginning on page TS-4 of this term sheet.
Neither the Securities
and Exchange Commission 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 product supplement, underlying supplement, 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, which includes our
affiliates’ expected cost of providing such hedge as well as the profit our affiliates expect to realize in consideration
for assuming the risks inherent in providing such hedge. For additional related information, please see “Use of Proceeds
and Hedging” beginning on page PS-40 of the accompanying product supplement no. 20-I. |
| (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 $40.00 per $1,000 principal amount note and would use a portion of that commission to allow selling concessions
to other affiliated or unaffiliated dealers of approximately $25.00 per $1,000 principal amount note. The concessions of approximately
$25.00 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. In no event
will the commission received by JPM, which includes concessions and other amounts that may be allowed to other dealers, exceed
$50.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-67
of the accompanying product supplement no. 20-I. |
The notes are
not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they
obligations of, or guaranteed by, a bank.
February 21, 2012
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. 20-I, underlying supplement no. 1-I 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 14, 2011, as supplemented by the prospectus supplement dated November 14,
2011 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. 20-I dated January 5, 2012 and underlying supplement no. 1-I dated November 14, 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. 20-I and “Risk Factors” in the accompanying underlying supplement no. 1-I, 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.
JPMorgan Structured Investments —
|
TS-1 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
Selected
Purchase Considerations
| · | | QUARTERLY CONTINGENT INTEREST
PAYMENTS — The notes offer the potential to earn a Contingent Interest Payment in connection with each quarterly Review
Date of $17.50 per $1,000 principal amount note (equivalent to an interest rate of 7.00% per annum, payable at a rate of 1.75%
per quarter). If the notes have not been previously called and the closing price of one share of the Fund on any Review Date is
greater than or equal to the Interest Barrier, you will receive a Contingent Interest Payment on the applicable Interest Payment
Date. If the closing price of one share of the Fund on any Review Date is less than the Interest Barrier, no Contingent Interest
Payment will be made with respect to that Review Date. If payable, a Contingent Interest Payment will be made to the holders of
record at the close of business on the business day immediately preceding the applicable Interest Payment Date. Because the notes
are our senior unsecured obligations, payment of any amount on the notes is subject to our ability to pay our obligations as they
become due. |
| · | | POTENTIAL EARLY EXIT AS A
RESULT OF THE AUTOMATIC CALL FEATURE — If the closing price of one share of the Fund on any Review Date (other than
the first, second, third and final Review Dates) is greater than or equal to the Initial Share Price, your notes will be automatically
called prior to the maturity date. Under these circumstances, on the applicable Call Settlement Date, for each $1,000 principal
amount note, you will receive (a) $1,000 plus (b) the Contingent Interest Payment applicable to that Review Date, payable
on the applicable Call Settlement Date. |
| · | | THE NOTES DO NOT GUARANTEE
THE RETURN OF YOUR PRINCIPAL IF THE NOTES ARE NOT AUTOMATICALLY CALLED — If the notes are not automatically called,
we will pay you your principal back at maturity so long as the Final Share Price is greater than or equal to the Trigger Level.
However, if the notes are not automatically called and the Final Share Price is less than the Trigger Level, you will lose more
than 45% of your principal amount and could lose up to the entire principal amount of your notes. |
| · | | DIVERSIFICATION OF THE ISHARES®
RUSSELL 2000 INDEX FUND — The iShares® Russell 2000 Index Fund
is an exchange-traded fund of the iShares® Trust, a registered investment company that consists of separate investment
portfolios, and managed by BlackRock Fund Advisors, the investment adviser to the iShares® Russell 2000 Index Fund.
The iShares® Russell 2000 Index Fund trades on NYSE Arca, Inc. (the “NYSE Arca”) under the ticker symbol
“IWM.” The iShares® Russell 2000 Index Fund seeks investment results that, before expenses, generally
correspond to the price and yield performance of the Russell 2000® Index, which we refer to as the Underlying Index.
The Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S. equity
market. For additional information about the Fund, see the information set forth under “Fund Descriptions —
The iShares® Russell 2000 Index Fund” in the accompanying underlying
supplement no. 1-I. |
| · | | TAX TREATMENT —
You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying
product supplement no. 20-I. In determining our reporting responsibilities we intend to treat (i) the notes for U.S. federal income
tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Interest Payments as ordinary
income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to
U.S. Holders — Tax Treatment as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying
product supplement no 20-I. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this
is a reasonable treatment, but that 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, which might include the notes. The notice focuses in particular
on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments and the relevance of
factors such as the nature of the underlying property to which the instruments are linked. While the notice requests comments
on appropriate transition rules and effective dates, 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. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes,
including possible alternative treatments and the issues presented by this notice. |
| | | The U.S. federal income tax
treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to conclude that Contingent Interest
Payments are not subject to U.S. withholding tax, a withholding agent may nonetheless withhold on these payments (generally at
a rate of 30%, subject to the possible reduction or elimination of that rate under an applicable income tax treaty), unless income
from your notes is effectively connected with your conduct of a trade or business in the United States. If you are not a United
States person, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in
the notes in light of your particular circumstances. |
Selected
Risk Considerations
An investment in the
notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Fund, the Underlying Index
or any of the component securities of the Fund or the Underlying Index. These risks are explained in more detail in the “Risk
Factors” section of the accompanying product supplement no. 20-I dated January 5, 2012 and the “Risk Factors”
section of the accompanying underlying supplement no. 1-I dated November 14, 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 automatically called,
we will pay you your principal back at maturity only if the Final Share Price is greater than or equal to the Trigger Level. If
the notes are not automatically called and the Final Share Price is less than the Trigger Level, you will lose 1% of your principal
amount at maturity for every 1% that the Final Share Price is less than the Initial Share Price. Accordingly, under these circumstances,
you will lose more than 45% of your principal amount and could lose up to the entire principal amount of your notes. |
JPMorgan Structured Investments —
|
TS-2 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
| · | | THE
NOTES
DO
NOT
GUARANTEE
THE
PAYMENT
OF
INTEREST
AND
MAY
NOT
PAY
ANY
INTEREST
AT
ALL
—
The
terms
of
the
notes
differ
from
those
of
conventional
debt
securities
in
that,
among
other
things,
whether
we
pay
interest
is
linked
to
the
performance
of
the
Fund.
We
will
make
a
Contingent
Interest
Payment
with
respect
to
a
Review
Date
only
if
the
closing
price
of
one
share
of
the
Fund
on
that
Review
Date
is
greater
than
or
equal
to
the
Interest
Barrier.
If
the
closing
price
of
one
share
of
the
Fund
on
that
Review
Date
is
less
than
the
Interest
Barrier,
no
Contingent
Interest
Payment
will
be
made
with
respect
to
that
Review
Date,
and
the
Contingent
Interest
Payment
that
would
otherwise
have
been
payable
with
respect
to
that
Review
Date
will
not
be
accrued
and
subsequently
paid.
Accordingly,
if
the
closing
price
of
one
share
of
the
Fund
on
each
Review
Date
is
less
than
the
Interest
Barrier,
you
will
not
receive
any
interest
payments
over
the
term
of
the
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, and therefore investors are subject to our credit risk and to changes in the market’s 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 affect adversely the value of the notes. If we were to default on our payment obligations, you may
not receive any amounts owed to you under the notes and you could lose your entire investment. |
| · | | THE APPRECIATION POTENTIAL
OF THE NOTES IS LIMITED, AND YOU WILL NOT PARTICIPATE IN ANY APPRECIATION IN THE PRICE OF THE FUND — The appreciation
potential of the notes is limited to the sum of any Contingent Interest Payments that may be paid over the term of the notes,
regardless of any appreciation in the price of the Fund, which may be significant. You will not participate in any appreciation
in the price of the Fund. Accordingly, the return on the notes may be significantly less than the return on a direct investment
in the Fund during the term 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
and hedging our obligations under the notes. In performing these duties, our economic interests and 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, our business activities, including hedging and trading activities, could cause our economic interests to be adverse
to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging or trading
activities of ours or our affiliates could result in substantial returns for us or our affiliates while the value of the notes
declines. Please refer to “Risk Factors — Risks Relating to the Notes Generally” in the accompanying product
supplement no. 20-I for additional information about these risks. |
| · | | THE BENEFIT PROVIDED BY THE
TRIGGER LEVEL MAY TERMINATE ON THE FINAL REVIEW DATE— If the Final Share Price is less than the Trigger Level, the benefit
provided by the Trigger Level will terminate and you will be fully exposed to any depreciation in the closing price of one share
of the Fund. Because the Final Share Price will be determined based on the closing price on a single day near the end of the term
of the notes, the price of the Fund at the maturity date or at other times during the term of the notes could be greater than
or equal to the Trigger Level. This difference could be particularly large if there is a significant decrease in the price of
the Fund during the later portion of the term of the notes or if there is significant volatility in the price of the Fund during
the term of the notes, especially on dates near the final Review Date. |
| · | | THE AUTOMATIC CALL FEATURE
MAY FORCE A POTENTIAL EARLY EXIT — If the notes are automatically called, the amount of Contingent Interest Payments
made on the notes may be less than the amount of Contingent Interest Payments 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 the Contingent Interest Payment applicable
to the relevant Review Date. |
| · | | REINVESTMENT RISK —
If your notes are automatically called, the term of the notes may be reduced to as short as one year and you will not receive
any Contingent Interest Payments after the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the notes at a comparable return and/or with a comparable interest rate for a similar level
of risk in the event the notes are automatically called prior to the maturity date. |
| · | | CERTAIN BUILT-IN COSTS ARE
LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY — While any payment on the notes described in this
term sheet is based on the full principal amount of your notes, the original issue price of the notes includes the agent’s
commission and the estimated cost of hedging our obligations under the notes. As a result, 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. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. |
| · | | 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 shares of the Fund or the equity securities held by the Fund or included in the Underlying Index
would have. |
| · | | RISK OF THE CLOSING PRICE
OF THE FUND FALLING BELOW THE INTEREST BARRIER OR THE TRIGGER LEVEL IS GREATER IF THE CLOSING PRICE OF THE FUND IS VOLATILE
— The likelihood of the closing price of one share of the Fund falling below the Interest Barrier or the Trigger Level will
depend in large part on the volatility of the closing price of the Fund — the frequency and magnitude of changes in the
closing price of the Fund. |
| · | | THERE ARE RISKS ASSOCIATED
WITH THE FUND — Although the Fund’s shares are listed for trading on NYSE Arca and a number of similar products have been traded on NYSE Arca and other securities exchanges for varying periods of time, |
JPMorgan Structured Investments —
|
TS-3 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
| | | there is no assurance that an
active trading market will continue for the shares of the Fund or that there will be liquidity in the trading market. The Fund
is subject to management risk, which is the risk that the investment strategies of the Fund’s investment adviser, 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 Fund, and consequently, the value of the notes. |
| · | | DIFFERENCES BETWEEN THE FUND
AND THE UNDERLYING INDEX — The Fund does not fully replicate the Underlying Index and may hold securities not included
in the Underlying Index. In addition, its performance will reflect additional transaction costs and fees that are not included
in the calculation of the Underlying Index. All of these factors may lead to a lack of correlation between the Fund and the Underlying
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 Fund and the Underlying Index. Finally, because the shares of the Fund are traded on NYSE Arca and are
subject to market supply and investor demand, the market value of one share of the Fund may differ from the net asset value per
share of the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of the
Underlying Index. |
| · | | AN INVESTMENT IN THE NOTES
IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS — The equity
securities held by the Fund and included in the Underlying 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.
These companies tend to be less well-established than large market capitalization 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. |
| · | | 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. |
| · | | HEDGING AND TRADING IN THE
FUND — While the notes are outstanding, we or any of our affiliates may carry out hedging activities related to the
notes, including in the Fund or instruments related to the Fund. We or our affiliates may also trade in the Fund or instruments
related to 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 our payment to you at maturity. It is possible that these hedging or trading activities could
result in substantial returns for us or our affiliates while the value of the notes declines. |
| · | | THE ANTI-DILUTION PROTECTION
FOR THE FUND IS LIMITED — The calculation agent will make adjustments to the Share Adjustment Factor for certain events
affecting the shares of the Fund. However, the calculation agent will not make an adjustment in response to all events that could
affect the shares of the Fund. 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 IMPACT THE VALUE OF THE NOTES — In addition to the closing price of one share of the Fund on any day, the
value of the notes will be affected by a number of economic and market factors that may either offset or magnify each other, including: |
| · | | the actual and expected volatility
in the closing price of the Fund; |
| · | | the time to maturity of the
notes; |
| · | | whether the closing price of
one share of the Fund is less than the Interest Barrier and the Trigger Level on the relevant Review Date; |
| · | | the dividend rates on the Fund
and the equity securities underlying the Fund; |
| · | | the occurrence of certain events
to the Fund that may or may not require an adjustment to the Share Adjustment Factor; |
| · | | interest and yield rates in
the market generally as well as in the markets of the equity securities held by the Fund; |
| · | | a variety of economic, financial,
political, regulatory and judicial events; and |
| · | | our creditworthiness, including
actual or anticipated downgrades in our credit ratings. |
JPMorgan Structured Investments —
|
TS-4 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
Historical Information
The following graph sets
forth the historical performance of the iShares® Russell 2000 Index Fund based on the weekly historical closing
prices of one share of the Fund from January 5, 2007 through February 17, 2012. The closing price of one share of the Fund on
February 17, 2012 was $82.79. We obtained the closing prices of one share of the Fund below from Bloomberg Financial Markets,
without independent verification. We make no representation or warranty as to the accuracy or completeness of the information
obtained from Bloomberg Financial Markets.
The historical performance
of the Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing price
of one share of the Fund on the pricing date or any Review Date. We cannot give you assurance that the performance of the Fund
will result in the return of any of your initial investment or the payment of any interest.
JPMorgan Structured Investments —
|
TS-5 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
What Are the Payments
on the Notes, Assuming a Range of Performances for the Fund?
The following table illustrates
payments on the notes, assuming a range of performance for the Fund on a given Review Date. The hypothetical payments set forth
below assume an Initial Share Price of $80.00 and an Interest Barrier and Trigger Level of $44.00 (equal to 55% of the hypothetical
Initial Share Price) and reflect the Interest Rate of 7.00% per annum (payable at a rate of 1.75% per quarter). The hypothetical
total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser
of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
| |
First
through Third Review Dates |
Fourth
through Eleventh Review Dates |
Final
Review Date |
Closing
Price |
Fund
Appreciation /
Depreciation at
Review Date |
Payment
on Interest Payment Date(1) |
Fund
Appreciation / Depreciation at Review Date |
Payment
on
Interest Payment
Date or Call
Settlement Date
(1)(2) |
Fund
Return |
Payment
at Maturity (2) |
| $144.000 |
80.00% |
$17.50 |
80.00% |
$1,017.50 |
80.00% |
$1,017.50 |
| $136.000 |
70.00% |
$17.50 |
70.00% |
$1,017.50 |
70.00% |
$1,017.50 |
| $128.000 |
60.00% |
$17.50 |
60.00% |
$1,017.50 |
60.00% |
$1,017.50 |
| $120.000 |
50.00% |
$17.50 |
50.00% |
$1,017.50 |
50.00% |
$1,017.50 |
| $112.000 |
40.00% |
$17.50 |
40.00% |
$1,017.50 |
40.00% |
$1,017.50 |
| $104.000 |
30.00% |
$17.50 |
30.00% |
$1,017.50 |
30.00% |
$1,017.50 |
| $100.000 |
25.00% |
$17.50 |
25.00% |
$1,017.50 |
25.00% |
$1,017.50 |
| $96.000 |
20.00% |
$17.50 |
20.00% |
$1,017.50 |
20.00% |
$1,017.50 |
| $92.000 |
15.00% |
$17.50 |
15.00% |
$1,017.50 |
15.00% |
$1,017.50 |
| $88.000 |
10.00% |
$17.50 |
10.00% |
$1,017.50 |
10.00% |
$1,017.50 |
| $84.000 |
5.00% |
$17.50 |
5.00% |
$1,017.50 |
5.00% |
$1,017.50 |
| $80.000 |
0.00% |
$17.50 |
0.00% |
$1,017.50 |
0.00% |
$1,017.50 |
| $76.000 |
-5.00% |
$17.50 |
-5.00% |
$17.50 |
-5.00% |
$1,017.50 |
| $72.000 |
-10.00% |
$17.50 |
-10.00% |
$17.50 |
-10.00% |
$1,017.50 |
| $68.000 |
-15.00% |
$17.50 |
-15.00% |
$17.50 |
-15.00% |
$1,017.50 |
| $64.000 |
-20.00% |
$17.50 |
-20.00% |
$17.50 |
-20.00% |
$1,017.50 |
| $56.000 |
-30.00% |
$17.50 |
-30.00% |
$17.50 |
-30.00% |
$1,017.50 |
| $48.000 |
-40.00% |
$17.50 |
-40.00% |
$17.50 |
-40.00% |
$1,017.50 |
| $44.000 |
-45.00% |
$17.50 |
-50.00% |
$17.50 |
-50.00% |
$1,017.50 |
| $43.992 |
-45.01% |
$0.00 |
-55.01% |
$0.00 |
-55.01% |
$549.90 |
| $40.000 |
-50.00% |
$0.00 |
-50.00% |
$0.00 |
-50.00% |
$500.00 |
| $32.000 |
-60.00% |
$0.00 |
-60.00% |
$0.00 |
-60.00% |
$400.00 |
| $24.000 |
-70.00% |
$0.00 |
-70.00% |
$0.00 |
-70.00% |
$300.00 |
| $16.000 |
-80.00% |
$0.00 |
-80.00% |
$0.00 |
-80.00% |
$200.00 |
| $8.000 |
-90.00% |
$0.00 |
-90.00% |
$0.00 |
-90.00% |
$100.00 |
| $0.000 |
-100.00% |
$0.00 |
-100.00% |
$0.00 |
-100.00% |
$0.00 |
| (1) | | You will receive a Contingent
Interest Payment in connection with a Review Date if the closing price of one share of the Fund on that Review Date is greater
than or equal to the Interest Barrier. |
| (2) | | The notes will be automatically
called if the closing price of one share of the Fund on any Review Date (other than the first, second, third and final Review
Dates) is greater than or equal to the Initial Share Price. |
Hypothetical Examples
of Amounts Payable on the Notes
The following examples
illustrate the amounts payable on the notes.
Example 1: The closing
price of one share of the Fund increases from the Initial Share Price of $80.00 to a closing price of $84.00 on the first Review
Date, $88.00 on the second Review Date, $92.00 on the third Review Date and $96.00 on the fourth Review Date. Because the
closing price of one share of the Fund on each of the first four Review Dates is greater than the Interest Barrier, the investor
is entitled to receive a Contingent Interest Payment in connection with each of those Review Dates. However, although the closing
price of one share of the Fund on each of the first four Review Dates is greater than the Initial Share Price, the notes are not
automatically called before the fourth Review Date because the notes are not callable before the fourth Review Date. Accordingly,
the investor receives a Contingent Interest Payment of $17.50 per $1,000 principal amount note in connection with each of the
first, second and third Review Dates and a payment of $1,017.50 per $1,000 principal amount note on the relevant Call Settlement
Date, consisting of a Contingent Interest Payment of $17.50 per $1,000 principal amount note and repayment of principal equal
to $1,000 per $1,000 principal amount note, in connection with the fourth Review Date. Accordingly, the total amount paid on the
notes over the term of the notes is $1,070 per $1,000 principal amount note.
JPMorgan Structured Investments —
|
TS-6 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
Example 2: The closing
price of one share of the Fund decreases from the Initial Share Price of $80.00 to a closing price of $32.00 on the first Review
Date, $68.00 on the second Review Date and $76.00 on the third Review Date and increases from the Initial Share Price of $80.00
to a closing price of $88.00 on the fourth Review Date. Because the closing price of one share of the Fund on the first Review
Date is less than the Interest Barrier, no Contingent Interest Payment is made in connection with the first Review Date; however,
the closing price of one share of the Fund on each of the second, third and fourth Review Dates is greater than the Interest Barrier,
so the investor is entitled to receive a Contingent Interest Payment in connection with each of the second, third and fourth Review
Dates. In addition, because the closing price of one share of the Fund on the fourth Review Date is greater than the Initial Share
Price, the notes are automatically called. Accordingly, the investor receives a payment of $17.50 in connection with each of the
second and third Review Dates and a payment of $1,017.50 per $1,000 principal amount note on the relevant Call Settlement Date,
consisting of a Contingent Interest Payment of $17.50 per $1,000 principal amount note and repayment of principal equal to $1,000
per $1,000 principal amount note, in connection with the fourth Review Date. Accordingly, the total amount paid on the notes over
the term of the notes is $1,052.50 per $1,000 principal amount note.
Example 3: The notes
are not automatically called prior to maturity, Contingent Interest Payments are paid in connection with each of the Review Dates
preceding the final Review Date and the closing price of one share of the Fund increases from the Initial Share Price of $80.00
to a Final Share Price of $96.00. The investor receives a payment of $17.50 in connection with each of the Review Dates preceding
the final Review Date and, because the notes are not automatically called prior to maturity and the Final Share Price is greater
than the Trigger Level and the Interest Barrier, the investor receives at maturity a payment of $1,017.50 per $1,000 principal
amount note, consisting of a Contingent Interest Payment of $17.50 per $1,000 principal amount note and repayment of principal
equal to $1,000 per $1,000 principal amount note. The total amount paid on the notes over the term of the notes is $1,210 per
$1,000 principal amount note. This represents the maximum total payment an investor may receive over the term of the notes.
Example 4: The notes
are not automatically called prior to maturity, Contingent Interest Payments are paid in connection with two of the Review Dates
preceding the final Review Date and the closing price of one share of the Fund decreases from the Initial Share Price of $80.00
to a Final Share Price of $44.00. The investor receives two payments of $17.50 in connection with two of the Review Dates
preceding the final Review Date and, because the notes are not automatically called prior to maturity and the Final Share Price
is equal to the Trigger Level and the Interest Barrier, even though the Final Share Price is less than the Initial Share Price,
the investor receives at maturity a payment of $1,017.50 per $1,000 principal amount note, consisting of a Contingent Interest
Payment of $17.50 per $1,000 principal amount note and repayment of principal equal to $1,000 per $1,000 principal amount note.
The total amount paid on the notes over the term of the notes is $1,052.50 per $1,000 principal amount note.
Example 5: The notes
are not automatically called prior to maturity, Contingent Interest Payments are paid in connection with each of the Review Dates
preceding the final Review Date and the closing price of one share of the Fund decreases from the Initial Share Price of $80.00
to a Final Share Price of $32.00. The investor receives a payment of $17.50 in connection with each of the Review Dates preceding
the final Review Date and, because the notes are not automatically called prior to maturity and the Final Share Price is less
than the Trigger Level and the Interest Barrier, the investor receives at maturity a payment of $400 per $1,000 principal amount
note, calculated as follows:
$1,000
+ ($1,000 × -60%) = $400
The total amount paid
on the notes over the term of the notes is $592.50 per $1,000 principal amount note.
Example 6: The notes
are not automatically called prior to maturity, no Contingent Interest Payments are paid in connection with the Review Dates preceding
the final Review Date and the closing price of one share of the Fund decreases from the Initial Share Price of $80.00 to a Final
Share Price of $24.00. Because the notes are not automatically called prior to maturity, no Contingent Interest Payments are
paid in connection with the Review Dates preceding the final Review Date and the Final Share Price is less than the Trigger Level
and the Interest Barrier, the investor receives no payments over the term of the notes, other than a payment at maturity of $300
per $1,000 principal amount note, calculated as follows:
$1,000
+ ($1,000 × -70%) = $300
The hypothetical payments
on the notes shown above do not reflect fees or expenses that would be associated with any sale in the secondary market. If these
fees and expenses were included, the hypothetical payments shown above would likely be lower.
JPMorgan Structured Investments —
|
TS-7 |
| Auto Callable Contingent Interest
Notes Linked to the iShares® Russell 2000 Index Fund |
