Term sheet
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011 and
product supplement no. 21-I dated January 12, 2012
underlying supplement no. 1-I dated November 14, 2011
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05-#22-2013-R
Term Sheet to
Product Supplement No. 21-I
Registration Statement No. 333-177923
Dated May 22, 2013; Rule 433
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Structured
Investments
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$
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the
Russell 2000® Index due September 4, 2014
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The notes are designed for investors who seek a fixed return that will not be less than 13.65%* if, on the Review Date, both the S&P 500® Index and the Russell 2000® Index are at or above their respective Call Levels. If the notes are not called and the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more than 14%, investors will lose more than 14% of their investment and may lose all of their principal amount at maturity. Investors in the notes should be willing to accept this risk of loss, and be willing to forgo interest and dividend payments, in exchange for the opportunity to receive a premium payment if the notes are automatically called. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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Unsecured and unsubordinated obligations of JPMorgan Chase & Co. maturing September 4, 2014†
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The notes are not linked to a basket composed of the Indices. The payment upon automatic call or at maturity is linked to the performance of each of the Indices individually, as described below.
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
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The notes are expected to price on or about May 22, 2013 and are expected to settle on or about May 28, 2013.
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Indices:
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The S&P 500® Index and the Russell 2000® Index (each, an “Index,” and collectively, the “Indices”)
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Automatic Call:
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On the Review Date, if the Index closing level of each Index is greater than or equal to its Call Level, the notes will be automatically called for a cash payment as described below.
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Call Level:
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For each Index, 96% of the Initial Index Level of that Index
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Payment if Called:
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If the notes are automatically called on the Review Date, for every $1,000 principal amount note, you will receive one payment of $1,000 plus a call premium amount that will not be less than 13.65%* × $1,000.
*The actual percentage will be provided in the pricing supplement and will not be less than 13.65%.
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Payment at Maturity:
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If the notes are not automatically called and the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by up to 14%, you will be entitled to the full repayment of your principal at maturity.
If the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more than 14%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing Index Return)
If the notes are not automatically called and the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more than 14%, you will lose more than 14% of your principal amount and may lose all of your principal amount at maturity.
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Contingent Buffer Amount:
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14%
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Index Return:
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Ending Index Level – Initial Index Level
Initial Index Level
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Initial Index Level:
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With respect to each Index, the Index closing level of that Index on the pricing date
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Ending Index Level:
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With respect to each Index, the Index closing level of that Index on the Review Date
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Lesser Performing Index:
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The Index with the Lesser Performing Index Return
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Lesser Performing Index Return:
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The lower of the Index Return of the S&P 500® Index and the Index Return of the Russell 2000® Index
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Review Date†:
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August 29, 2014
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Maturity Date†:
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September 4, 2014
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CUSIP:
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48126NBM8
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†
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Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Payment at Maturity” and “Description of Notes — Postponement of a Review Date” in the accompanying product supplement no. 21-II
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$
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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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See “Supplemental Use of Proceeds” in this term sheet for information about the components of the price to public of the notes.
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(2)
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J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to other affiliated or unaffiliated dealers. In no event will these selling commissions exceed $10.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-61 of the accompanying product supplement no. 21-II.
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May 22, 2013
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Product supplement no. 21-II dated April 2, 2013:
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Underlying supplement no. 1-I dated November 14, 2011:
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Prospectus supplement dated November 14, 2011:
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Prospectus dated November 14, 2011:
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JPMorgan Structured Investments —
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TS-1
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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Appreciation/
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Index
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Depreciation of
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Total
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Closing Level
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Lesser Performing
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Return
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at
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Index at
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at
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Review Date
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Review Date
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Review Date
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1,800.00
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80.00%
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13.65%
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1,700.00
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70.00%
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13.65%
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1,600.00
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60.00%
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13.65%
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1,500.00
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50.00%
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13.65%
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1,400.00
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40.00%
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13.65%
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1,300.00
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30.00%
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13.65%
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1,200.00
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20.00%
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13.65%
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1,100.00
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10.00%
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13.65%
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1,050.00
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5.00%
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13.65%
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1,010.00
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1.00%
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13.65%
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1,000.00
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0.00%
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13.65%
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990.00
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-1.00%
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13.65%
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960.00
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-4.00%
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13.65%
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959.90
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-4.01%
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0.00%
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950.00
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-5.00%
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0.00%
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900.00
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-10.00%
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0.00%
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860.00
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-14.00%
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0.00%
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859.90
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-14.01%
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-14.01%
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800.00
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-20.00%
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-20.00%
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700.00
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-30.00%
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-30.00%
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600.00
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-40.00%
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-40.00%
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500.00
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-50.00%
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-50.00%
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400.00
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-60.00%
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-60.00%
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300.00
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-70.00%
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-70.00%
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200.00
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-80.00%
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-80.00%
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100.00
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-90.00%
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-90.00%
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0.00
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-100.00%
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-100.00%
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JPMorgan Structured Investments —
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TS-2
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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JPMorgan Structured Investments —
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TS-3
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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FIXED APPRECIATION POTENTIAL — If the Index closing level of each Index is greater than or equal to its Call Level on the Review Date, your investment will yield a payment per $1,000 principal amount note of $1,000 plus a call premium amount that will not be less than $136.50 (or 13.65%* × $1,000). Because the notes are our unsecured and unsubordinated obligations, payment of any amount on the notes is subject to our ability to pay our obligations as they become due.
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POTENTIAL FOR A RETURN BASED ON THE CALL PREMIUM EVEN IF THE LEAST PERFORMING INDEX RETURN IS NEGATIVE — The Call Level for each Index is set at 96% of the applicable Initial Index Level. Accordingly, you will receive a payment that will not be less than $1,136.50 per $1,000 principal amount note even if the Index closing level of either or both Indices on the Review Date is less than the applicable Initial Index Level by up to 4%. Under these circumstances you will lose at least 14% of your principal and you could lose up to the entire principal amount of your notes.
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CONTINGENT PROTECTION AGAINST LOSS — If the notes are not automatically called and the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by up to 14%, you will be entitled to the full repayment of your principal at maturity. If the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more than 14%, for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level, you will lose an amount equal to 1% of the principal amount of your notes.
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EXPOSURE TO EACH OF THE INDICES — The return on the notes is linked to the Lesser Performing Index, which will be either the S&P 500® Index or the Russell 2000® Index.
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CAPITAL GAINS TAX TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 21-II. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
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JPMorgan Structured Investments —
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TS-4
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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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 and the Ending Index Level of either Index is less than its Initial Index Level by more than 14%, you will lose 1% of the principal amount of your notes at maturity for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level. Under these circumstances you will lose at least 14% of your principal and you could lose up to the entire principal amount of your notes.
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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. Any actual or potential change in our creditworthiness or credit spreads, as determined by the market for taking our credit risk, is likely to adversely affect 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.
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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 as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we refer to as JPMS’s estimated value. 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 in connection with the notes 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. 21-II for additional information about these risks.
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LIMITED RETURN ON THE NOTES — Your potential gain on the notes will be limited to the call premium that will not be less than 13.65%*, regardless of the appreciation of either or both Indices, which may be significant. Because the Index closing level of either or both Indices at various times during the term of the notes could be higher than on the Review Date, you may receive a lower payment at maturity than you would have if you had invested directly in either or both Indices.
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YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX — Your return on the notes and your payment upon automatic call or at maturity, if any, is not linked to a basket consisting of the Indices. If the notes are not automatically called, your payment at maturity is contingent upon the performance of each individual Index such that you will be equally exposed to the risks related to both of the Indices. Poor performance by either of the Indices over the term of the notes could result in the notes not being automatically called on the Review Date, may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the other Index. Accordingly, your investment is subject to the risk of decline in the Index closing level of each Index.
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YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING INDEX — If the notes are not automatically called and the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more than 14%, you will lose more than 14% of your principal and may lose all of your principal amount at maturity. This will be true even if the Ending Index Level of the other Index is greater than or equal to its Initial Index Level. The two Indices’ respective performances may not be correlated and, as a result, you may avoid a loss on 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.
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THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE REVIEW DATE — If the Ending Index Level of either Index is less than its Initial Index Level by more than the applicable Contingent Buffer Amount, you will be fully exposed to any depreciation in the Lesser Performing Index. Under these circumstances, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level. If these notes had a non-contingent buffer feature, under the same scenario, the amount you would have received at maturity would have been increased by the Contingent Buffer Amount. As a result, your investment in the notes may not perform as well as an investment in a security with a return that incorporates a non-contingent buffer.
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JPMS’S ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated value is only an estimate using several factors. The original issue price of the notes will
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JPMorgan Structured Investments —
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TS-5
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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exceed JPMS’s estimated value because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “JPMS’s Estimated Value of the Notes” in this term sheet.
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JPMS’S ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES — JPMS’s estimated value of the notes is determined by reference to JPMS’s internal pricing models when the terms of the notes are set. This estimated value is based on market conditions and other relevant factors existing at that time and JPMS’s assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for notes that are greater than or less than JPMS’s estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions. See “JPMS’s Estimated Value of the Notes” in this term sheet.
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JPMS’S ESTIMATED VALUE IS NOT DETERMINED BY REFERENCE TO CREDIT SPREADS FOR OUR CONVENTIONAL FIXED-RATE DEBT — The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for our conventional fixed-rate debt. If JPMS were to use the interest rate implied by our conventional fixed-rate credit spreads, we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate would have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “JPMS’s Estimated Value of the Notes” in this term sheet.
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN JPMS’S THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads for structured debt issuances. See “Secondary Market Prices of the Notes” in this term sheet for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES — Any secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our secondary market credit spreads for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial loss to you. See the immediately following risk consideration for information about additional factors that will impact any secondary market prices of the notes.
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The notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “— Lack of Liquidity” below.
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SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS — The secondary market price of the notes during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the levels of the Indices, including:
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any actual or potential change in our creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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secondary market credit spreads for structured debt issuances;
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the actual and expected volatility in the levels of the Indices;
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the time to maturity of the notes;
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the dividend rates on the equity securities included in the Indices;
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the expected positive or negative correlation between the Indices, or the expected absence of any such correlation;
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interest and yield rates in the market generally; and
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a variety of economic, financial, political, regulatory and judicial events.
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JPMorgan Structured Investments —
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TS-6
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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VOLATILITY RISK — Greater expected volatility with respect to an Index indicates a greater likelihood as of the pricing date that the Ending Index Level of that Index could be below its Call Level or below its Initial Index Level by more than the applicable Contingent Buffer Amount. An Index’s volatility, however, can change significantly over the term of the notes. The Index closing level of an Index could fall sharply between the pricing date and the Review Date, which could result in a significant loss of principal.
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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.
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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.
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of the equity securities included in the Indices would have.
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THE TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT — The final terms of the notes will be based on relevant market conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, each of JPMS’s estimated value and the call premium will be provided in the pricing supplement and each may be as low as the applicable minimum value set forth on the cover of this term sheet. Accordingly, you should consider your potential investment in the notes based on the minimum values for JPMS’s estimated value and the call premium.
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JPMorgan Structured Investments —
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TS-7
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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JPMorgan Structured Investments —
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TS-8
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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JPMorgan Structured Investments —
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TS-9
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Single Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index
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