Term Sheet
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011 and
product supplement no. 4-I dated November 14, 2011
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Term Sheet to
Product Supplement No. 4-I
Registration Statement No. 333-177923
Dated February 17, 2012; Rule 433
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Structured
Investments
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$
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General
Electric Company due March 6, 2013
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The notes are designed for investors who seek to participate in the appreciation of the closing price of one share of the Reference Stock, up to the Maximum Return of at least 20.00% at maturity, and who anticipate that the Final Stock Price will not be less than the Initial Stock Price by more than 20.00%. Investors should be willing to forgo interest and dividend payments and, if the Final Stock Price is less than the Initial Stock Price by more than 20.00%, be willing to lose some or all of their principal. If the Final Stock Price is not less than the Initial Stock Price by more than 20.00%, investors have the opportunity to receive the greater of (a) the Stock Return and (b) the Contingent Minimum Return of at least 5.25% at maturity, subject to the Maximum Return of at least 20.00%. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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Senior unsecured obligations of JPMorgan Chase & Co. maturing March 6, 2013†
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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 February 17, 2012 and are expected to settle on or about February 23, 2012.
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Reference Stock:
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The common stock, par value $0.06 per share, of General Electric Company (New York Stock Exchange symbol “GE”). We refer to General Electric Company as “General Electric.”
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Knock-Out Event:
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A Knock-Out Event occurs if the Final Stock Price is less than the Initial Stock Price by more than the Knock-Out Buffer Amount.
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Knock-Out Buffer Amount:
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20.00%
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Payment at Maturity:
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If a Knock-Out Event has occurred, you will receive a cash payment at maturity that will reflect the performance of the Reference Stock, subject to the Maximum Return. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Stock Return), subject to the Maximum Return
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If a Knock-Out Event has occurred, you will lose more than 20.00% of your initial investment and may lose all of your initial investment at maturity.
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If a Knock-Out Event has not occurred, you will receive a cash payment at maturity that will reflect the performance of the Reference Stock, subject to the Contingent Minimum Return and the Maximum Return. If a Knock-Out Event has not occurred, your payment at maturity per $1,000 principal amount note will equal $1,000 plus the product of (a) $1,000 and (b) the greater of (i) the Contingent Minimum Return and (ii) the Stock Return, subject to the Maximum Return. For additional clarification, please see “What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Reference Stock?” in this term sheet.
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Maximum Return:
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At least 20.00%. The actual Maximum Return and the actual maximum payment at maturity will be determined on the pricing date and will not be less than 20.00% and $1,200 per $1,000 principal amount note, respectively.
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Contingent Minimum Return:
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At least 5.25%. The actual Contingent Minimum Return will be determined on the pricing date and will not be less than 5.25%.
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Stock Return:
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Final Stock Price – Initial Stock Price
Initial Stock Price
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Initial Stock Price:
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The closing price of one share of the Reference Stock on the pricing date, divided by the Stock Adjustment Factor
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Final Stock Price:
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The closing price of one share of the Reference Stock on the Observation Date
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Stock Adjustment Factor:
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Set initially at 1.0 on the pricing date and subject to adjustment under certain circumstances. See “General Terms of Notes — Additional Reference Stock Provisions — A. Anti-Dilution Adjustments” in the accompanying product supplement no. 4-I for further information.
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Observation Date†:
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March 1, 2013
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Maturity Date†:
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March 6, 2013
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CUSIP:
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48125VNX4
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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 “Payment at Maturity — Postponement of a Determination Date — A. Notes Linked to a Single Component” in the accompanying product supplement no. 4-I
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Price to Public (1)
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Fees and Commissions (2) |
Proceeds to Us
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Per note
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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, 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-48 of the accompanying product supplement no. 4-I.
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(2)
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Please see “Supplemental Plan of Distribution” in this term sheet for information about fees and commissions.
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Product supplement no. 4-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 —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-2
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Total Return
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Final Stock Price
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Stock Return
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Knock-Out Event
Has Not Occurred(1)
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Knock-Out Event
Has Occurred(2)
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$34.2000
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80.00%
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20.00%
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N/A
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$32.3000
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70.00%
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20.00%
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N/A
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$30.4000
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60.00%
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20.00%
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N/A
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$28.5000
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50.00%
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20.00%
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N/A
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$26.6000
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40.00%
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20.00%
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N/A
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$24.7000
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30.00%
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20.00%
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N/A
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$23.7500
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25.00%
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20.00%
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N/A
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$22.8000
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20.00%
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20.00%
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N/A
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$21.8500
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15.00%
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15.00%
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N/A
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$20.9000
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10.00%
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10.00%
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N/A
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$19.9975
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5.25%
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5.25%
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N/A
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$19.9500
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5.00%
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5.25%
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N/A
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$19.4750
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2.50%
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5.25%
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N/A
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$19.1900
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1.00%
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5.25%
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N/A
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$19.0000
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0.00%
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5.25%
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N/A
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$18.0500
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-5.00%
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5.25%
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N/A
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$17.1000
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-10.00%
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5.25%
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N/A
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$16.1500
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-15.00%
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5.25%
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N/A
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$15.2000
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-20.00%
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5.25%
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N/A
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$15.1981
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-20.01%
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N/A
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-20.01%
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$13.3000
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-30.00%
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N/A
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-30.00%
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$11.4000
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-40.00%
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N/A
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-40.00%
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$9.5000
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-50.00%
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N/A
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-50.00%
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$7.6000
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-60.00%
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N/A
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-60.00%
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$5.7000
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-70.00%
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N/A
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-70.00%
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$3.8000
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-80.00%
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N/A
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-80.00%
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$1.9000
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-90.00%
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N/A
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-90.00%
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$0.0000
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-100.00%
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N/A
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-100.00%
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(1) The Final Stock Price is greater than or equal to $15.20 (80.00% of the hypothetical Initial Stock Price).
(2) The Final Stock Price is less than $15.20 (80.00% of the hypothetical Initial Stock Price).
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JPMorgan Structured Investments —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-3
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CAPPED APPRECIATION POTENTIAL — The notes provide the opportunity to participate in the appreciation of the Reference Stock, up to the Maximum Return of at least 20.00% at maturity. If a Knock-Out Event has not occurred, in addition to the principal amount, you will receive at maturity at least the Contingent Minimum Return of 5.25% on the notes, for a minimum payment at maturity of at least $1,052.50 for every $1,000 principal amount note, subject to the Maximum Return of at least 20.00%. The maximum payment at maturity will be at least $1,200 per $1,000 principal amount note. The actual Contingent Minimum Return and Maximum Return will be set on the pricing date and will not be less than 5.25% and 20.00%, respectively. 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.
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RETURN LINKED TO A SINGLE REFERENCE STOCK — The return on the notes is linked to the performance of a single Reference Stock, which is the common stock of General Electric. For additional information see “The Reference Stock” in this term sheet.
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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. 4-I. 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 —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-4
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. The return on the notes at maturity is linked to the performance of the Reference Stock and will depend on whether a Knock-Out Event has occurred and whether, and the extent to which, the Stock Return is positive or negative. If the Final Stock Price is less than the Initial Stock Price by more than the Knock-Out Buffer Amount of 20.00%, a Knock-Out Event has occurred, and the benefit provided by the Knock-Out Buffer Amount of 20.00% will terminate. If a Knock-Out Event has occurred, for every 1% that the Final Stock Price is less than the Initial Stock Price, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 20.00% of your initial investment and may lose all of your initial investment at maturity.
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN — If the Final Stock Price is greater than the Initial Stock Price, for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional return that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the Reference Stock, which may be significant. We refer to this predetermined percentage as the Maximum Return, which will be set on the pricing date and will not be less than 20.00%.
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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, 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.
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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 hedging our obligations under the notes. 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.
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THE BENEFIT PROVIDED BY THE KNOCK-OUT BUFFER MAY TERMINATE ON THE OBSERVATION DATE— If the Final Stock Price is less than the Initial Stock Price by more than the Knock-Out Buffer Amount of 20.00%, the benefit provided by the Knock-Out Buffer Amount will terminate and you will be fully exposed to any depreciation in the closing price of one share of the Reference Stock. Because the Final Stock 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 Reference Stock at the maturity date or at other times during the term of the notes could be at a level not less than the Initial Stock Price by more than the Knock-Out Buffer Amount. This difference could be particularly large if there is a significant decrease in the price of the Reference Stock during the later portion of the term of the notes or if there is significant volatility in the price of the Reference Stock during the term of the notes, especially on dates near the Observation Date.
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CERTAIN BUILT-IN COSTS ARE LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY — While the payment at maturity, if any, 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 J.P. Morgan Securities LLC, which we refer to as 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.
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NO OWNERSHIP OR DIVIDEND RIGHTS IN THE REFERENCE STOCK — As a holder of the notes, you will not have any ownership interest or rights in the Reference Stock, such as voting rights or dividend payments. In addition, the issuer of the Reference Stock 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 Reference Stock and the notes.
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NO AFFILIATION WITH THE REFERENCE STOCK ISSUER — We are not affiliated with the issuer of the Reference Stock. We assume no responsibility for the adequacy of the information about the Reference Stock issuer contained in this term sheet. You should undertake your own investigation into the Reference Stock and its issuer. We are not responsible for the Reference Stock issuer’s public disclosure of information, whether contained in SEC filings or otherwise.
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SINGLE STOCK RISK — The price of the Reference Stock can fall sharply due to factors specific to the Reference Stock and its issuer, such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors, such as general stock market volatility and levels, interest rates and economic and political conditions.
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JPMorgan Structured Investments —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-5
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NO INTEREST PAYMENTS — As a holder of the notes, you will not receive any interest payments.
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THE RISK OF A KNOCK-OUT EVENT OCCURRING IS GREATER IF THE CLOSING PRICE OF THE REFERENCE STOCK IS VOLATILE — The likelihood that the Final Stock Price will be less than the Initial Stock Price by more than the Knock-Out Buffer Amount of 20.00%, thereby triggering a Knock-Out Event, will depend in large part on the volatility of the closing price of the Reference Stock. Volatility generally refers to the frequency and magnitude of changes in the closing price of the Reference Stock.
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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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HEDGING AND TRADING IN THE REFERENCE STOCK — While the notes are outstanding, we or any of our affiliates may carry out hedging activities related to the notes, including in the Reference Stock or instruments related to the Reference Stock. We or our affiliates may also trade in the Reference Stock or instruments related to the Reference Stock 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 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.
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THE ANTI-DILUTION PROTECTION FOR THE REFERENCE STOCK IS LIMITED AND MAY BE DISCRETIONARY — The calculation agent will make adjustments to the Stock Adjustment Factor for certain corporate events affecting the Reference Stock. However, the calculation agent will not make an adjustment in response to all events that could affect the Reference Stock. 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. You should also be aware that the calculation agent may make adjustments in response to events that are not described in the accompanying product supplement to account for any diluting or concentrative effect, but the calculation agent is under no obligation to do so or to consider your interests as a holder of the notes in making these determinations.
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MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES — In addition to the closing price of one share of the Reference Stock 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:
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the actual and expected volatility in the closing price of the Reference Stock;
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the time to maturity of the notes;
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whether a Knock-Out Event is expected to occur;
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the dividend rate on the Reference Stock;
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the occurrence of certain events affecting the issuer of the Reference Stock that may or may not require an adjustment to the Stock Adjustment Factor, including a merger or acquisition;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory and judicial events; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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JPMorgan Structured Investments —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-6
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JPMorgan Structured Investments —
Capped Single Observation Knock-Out Notes Linked to the Common Stock of General Electric Company
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TS-7
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