Term sheet
To
prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 192-A-III dated March 10, 2011
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Term Sheet
Product Supplement
No. 192-A-III
Registration
Statement No. 333-155535
Dated August 31,
2011; Rule 433
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Structured
Investments
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$
11.00% per annum Callable Yield Notes due September 28, 2012 Linked to the
Lesser Performing of the Russell 2000® Index and the Market Vectors
Gold Miners ETF
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General
- The notes are designed
for investors who seek a higher interest rate than the current yield on a
conventional debt security with the same maturity issued by us or an issuer
with a comparable credit rating. Investors should be willing to forgo the
potential to participate in the appreciation of either the Russell 2000®
Index or the Market Vectors Gold Miners ETF and to forgo dividend payments. Investors
should be willing to assume the risk that the notes may be called and the
investors will receive less interest than if the notes were not called and the
risk that, if the notes are not called, the investors may lose some or all of
their principal at maturity.
- The notes will pay 11.00%
per annum interest over the term of the notes, assuming no Optional Call. However,
the notes do not guarantee any return of principal at maturity. Instead,
if the notes are not called, the payment at maturity will be based on the
performance of the Lesser Performing Underlying and whether the closing level
or closing price, as applicable, of either Underlying is less than the Starting
Underlying Level of such Underlying by more than the Protection Amount on any
day during the Monitoring Period, as described below. Any payment on the notes
is subject to the credit risk of JPMorgan Chase & Co.
- The notes may be
called, in whole but not in part, at our option on any of the Optional Call
Dates set forth below. If the notes are called pursuant to an Optional Call,
payment on the Optional Call Date for each $1,000 principal amount note will be
a cash payment of $1,000, plus any accrued and unpaid interest, as described
below.
- Senior unsecured
obligations of JPMorgan Chase & Co. maturing September 28, 2012*
- The payment at
maturity is not linked to a basket composed of the Underlyings.
The payment at maturity is linked to the performance of each of the Underlyings
individually, as described below.
- Minimum denominations
of $1,000 and integral multiples thereof
Key Terms
Underlyings:
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The Russell 2000® Index (the
Index) and the Market Vectors Gold Miners ETF (the Fund) (each an
Underlying, and collectively, the Underlyings)
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Interest Rate:
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11.00%
per annum over the term of the notes, assuming no Optional Call, paid monthly
and calculated on a 30/360 basis
The notes may be
called, in whole but not in part, at our option (such an event, an Optional
Call) on any of the Optional Call Dates set forth below.
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Protection Amount:
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With respect to each Underlying, an
amount that represents 25.00% of the Starting Underlying Level of such
Underlying (in the case of the Market Vectors Gold Miners ETF, subject to
adjustments)
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Pricing Date:
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On or about September 27, 2011
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Settlement Date:
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On or about September 30, 2011
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Observation Date:
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September 25, 2012
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Maturity Date*:
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September 28, 2012
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CUSIP:
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48125XW36
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Monitoring Period:
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The period from but excluding the Pricing
Date to and including the Observation Date
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Interest Payment Dates:
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Interest on the
notes will be payable monthly in arrears on the last calendar day of each
month, except for the final monthly interest payment, which will be payable
on the Maturity Date or the
relevant Optional Call Date, as applicable (each such day, an Interest
Payment Date), commencing October 31, 2011. See Selected Purchase
Considerations Monthly Interest Payments in this term sheet for more
information.
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Payment at Maturity:
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If the notes are not
called, the payment at maturity, in excess of any accrued and unpaid
interest, will be based on whether a Trigger Event has occurred and the
performance of the Lesser Performing Underlying. If the notes are not
called, for each $1,000 principal amount note, you will receive $1,000 plus
any accrued and unpaid interest at maturity, unless:
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(a) |
the Ending
Underlying Level of any Underlying is less than the Starting Underlying Level
of such Underlying; |
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and |
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(b) |
a Trigger Event
has occurred. |
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If the notes are not
called and the conditions described in (a) and (b) are satisfied, at maturity
you will lose 1% of the principal amount of your notes for every 1% that the
Ending Underlying Level of the Lesser Performing Underlying is less than the
Starting Underlying Level of such Underlying. Under these circumstances,
your payment at maturity per $1,000 principal amount note, in addition to any
accrued and unpaid interest, will be calculated as follows: |
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$1,000
+ ($1,000 x Lesser Performing Underlying Return) |
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You will lose some
or all of your principal at maturity if the notes are not called and the
conditions described in (a) and (b) are both satisfied. |
Trigger Event:
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A Trigger Event
occurs if, on any day during the Monitoring Period, the closing level or
closing price, as applicable, of any Underlying is less than the Starting
Underlying Level of such Underlying by more than the applicable Protection
Amount.
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Underlying Return:
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With respect to each Underlying, the
Underlying Return is calculated as follows:
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Ending Underlying Level Starting
Underlying Level
Starting Underlying
Level |
Optional Call:
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We, at our election, may call the notes, in
whole but not in part, on any of the Optional Call Dates prior to the
Maturity Date at a price for each $1,000 principal amount note equal to
$1,000 plus any accrued and unpaid interest to but excluding the applicable
Optional Call Date. If we intend to call your notes, we will deliver notice
to DTC at least five business days before the applicable Optional Call Date.
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Optional Call Dates*:
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December 31, 2011, March 31, 2012 and June
30, 2012
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Additional Key Terms:
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See Additional Key Terms on the next
page.
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*
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Subject
to postponement as described under Description of Notes Payment at
Maturity and Description of NotesPayment upon Optional Call, as
applicable, in the accompanying product supplement no. 192-A-III
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-9 of the
accompanying product supplement no. 192-A-III and Selected Risk
Considerations beginning on page TS-3 of this term sheet.
Neither the SEC nor
any state securities commission has approved or disapproved of the notes or
passed upon the accuracy or the adequacy of this term sheet or the accompanying
product supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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$
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$
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Total
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$
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$
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$
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(1)
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The
price to the public includes the estimated cost of hedging our obligations
under the notes through one or more of our affiliates.
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(2)
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If
the notes priced today, J.P. Morgan Securities LLC, which we refer to as
JPMS, acting as agent for JPMorgan Chase & Co., would receive a
commission of approximately $67.10 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 $20.00 per $1,000 principal amount
note. The concessions of approximately $20.00 per $1,000 principal amount
note include concessions to be allowed to selling dealers and concessions to
be allowed to any arranging dealer. This commission includes the projected
profits that our affiliates expect to realize, some of which may be allowed to
other unaffiliated dealers, for assuming risks inherent in hedging our
obligations under the notes. The actual commission received by JPMS may be
more or less than $67.10 and will depend on market conditions on the Pricing
Date. In no event will the commission received by JPMS, which includes
concessions and other amounts that may be allowed to other dealers, exceed
$70.00 per $1,000 principal amount note. See Plan of Distribution
(Conflicts of Interest) beginning on page PS-95 of the accompanying product
supplement no. 192-A-III.
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The
notes are not bank deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency, nor are they
obligations of, or guaranteed by, a bank.
August 31, 2011
Additional
Terms Specific to the Notes
JPMorgan Chase & Co. has
filed a registration statement (including a prospectus) with the Securities and
Exchange Commission, or SEC, for the offering to which this term sheet
relates. Before you invest, you should read the prospectus in that
registration statement and the other documents relating to this offering that
JPMorgan Chase & Co. has filed with the SEC for more complete information
about JPMorgan Chase & Co. and this offering. You may get these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, JPMorgan Chase & Co., any agent or any dealer participating
in this offering will arrange to send you the prospectus, the prospectus
supplement, product supplement no. 192-A-III and this term sheet if you so
request by calling toll-free 866-535-9248.
You may revoke your
offer to purchase the notes at any time prior to the time at which we accept
such offer by notifying the applicable agent. We reserve the right to change
the terms of, or reject any offer to purchase, the notes prior to their
issuance. In the event of any changes to the terms of the notes, we will
notify you and you will be asked to accept such changes in connection with your
purchase. You may also choose to reject such changes in which case we may
reject your offer to purchase.
You should read this
term sheet together with the prospectus dated November 21, 2008, as
supplemented by the prospectus supplement dated November 21, 2008 relating to
our Series E medium-term notes of which these notes are a part, and the more
detailed information contained in product supplement no. 192-A-III dated March
10, 2011. This term sheet, together with the documents listed below,
contains the terms of the notes and supersedes all other prior or
contemporaneous oral statements as well as any other written materials
including preliminary or indicative pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, fact sheets, brochures or
other educational materials of ours. You should carefully consider, among
other things, the matters set forth in Risk Factors in the accompanying
product supplement no. 192-A-III, as the notes involve risks not associated
with conventional debt securities. We urge you to consult your
investment, legal, tax, accounting and other advisers before you invest in the
notes.
You may access these
documents on the SEC website at www.sec.gov as follows (or if such address has
changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key,
or CIK, on the SEC website is 19617. As used in this term sheet, the
Company, we, us and our refer to JPMorgan Chase & Co.
Additional
Key Terms
Starting Underlying Level:
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With respect to the Index, the closing
level of the Index on the Pricing Date (the Initial Index Level). With
respect to the Fund, the closing price of one share of the Fund on the
Pricing Date divided by the Share Adjustment Factor for the Fund (the
Initial Share Price). We refer to each of the Initial Index Level for the
Index and the Initial Share Price for the Fund as a Starting Underlying
Level.
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Ending Underlying Level**:
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With respect to the Index, the closing
level of the Index on the Observation Date (the Ending Index Level). With
respect to the Fund, the closing price of one share of the Fund on the Observation
Date (the Final Share Price). We refer to each of the Ending Index Level
for the Index and the Final Share Price for the Fund as an Ending Underlying
Level.
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Share Adjustment Factor:
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With respect to the Fund, 1.0 on the
Pricing Date and subject to adjustment under certain circumstances. See
Description of Notes Payment at Maturity and General Terms of Notes
Anti-Dilution Adjustments in the accompanying product supplement no. 192-A-III
for further information about these adjustments.
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Lesser Performing Underlying:
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The Underlying with the Lesser Performing
Underlying Return
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Lesser Performing Underlying Return:
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The lower of the Underlying Return of the Russell
2000® Index and the Underlying Return of the Market Vectors Gold
Miners ETF
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**
Subject to adjustment in the event of a market disruption event or non-trading
day on the Observation Date as described under Description of Notes
Postponement of a Determination Date Notes with a maturity of not more than
one year in the accompanying product supplement no. 192-A-III
Selected
Purchase Considerations
- THE NOTES OFFER A
HIGHER INTEREST RATE THAN THE YIELD ON DEBT SECURITIES OF COMPARABLE MATURITY
ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT RATING The
notes will pay interest at a rate of 11.00% per annum over the term of the
notes, assuming no Optional Call, which is higher than the yield currently
available on debt securities of comparable maturity issued by us or an issuer
with a comparable credit rating. Because the notes are our senior unsecured
obligations, any interest payment or any payment at maturity is subject to our
ability to pay our obligations as they become due.
- MONTHLY
INTEREST PAYMENTS The notes offer
monthly interest payments at a rate of 11.00% per annum over the term of the
notes, assuming no Optional Call. Interest will be payable monthly in arrears
on the last calendar day of each month, except for the final monthly interest
payment, which will be payable on the Maturity Date or the relevant Optional
Call Date, as applicable (each such day, an Interest Payment Date), commencing
October 31, 2011. Interest will be payable to the holders of record at the
close of business on the business day immediately preceding the applicable
Interest Payment Date or the applicable Optional Call Date, as applicable. If
an Interest Payment Date or the applicable Optional Call Date is not a business
day, payment will be made on the next business day immediately following such
day, but no additional interest will accrue as a result of the delayed
payment. For example, the monthly Interest Payment Date for December 2011 is December
31, 2011, but because December 31, 2011 is a Saturday, payment of interest with
respect to that Interest Payment Date will be
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JPMorgan
Structured Investments |
TS-1 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
made on January 3, 2012, the next
succeeding business day.
- POTENTIAL
EARLY EXIT AS A RESULT OF THE OPTIONAL CALL FEATURE If the notes
are called pursuant to an Optional Call, on the applicable Optional Call Date,
for each $1,000 principal amount note, you will receive $1,000 plus accrued and
unpaid interest to but excluding the applicable Optional Call Date.
- THE NOTES DO NOT
GUARANTEE THE RETURN OF YOUR PRINCIPAL IF THE NOTES ARE NOT CALLED
If the notes are not called, we will pay you your principal back at maturity only
if a Trigger Event has not occurred or the Ending Underlying Level of each
Underlying is not less than its Starting Underlying Level. A Trigger Event
occurs if, on any day during the Monitoring Period, the closing level or
closing price, as applicable, of any Underlying is less than the Starting
Underlying Level of such Underlying by more than the applicable Protection
Amount. However, if the notes are not called, a Trigger Event has occurred
and the Ending Underlying Level of either Underlying is less than the Starting
Underlying Level of such Underlying, you could lose the entire principal amount
of your notes.
- EXPOSURE TO EACH OF
THE UNDERLYINGS
The return on the notes is linked to the Lesser Performing Underlying, which
will be either the Russell 2000® Index or the Market Vectors Gold Miners ETF.
The Russell 2000® Index consists of the middle 2,000 companies
included in the Russell 3000 Index and, as a result of the index calculation
methodology, consists of the smallest 2,000 companies included in the Russell
3000® Index. The Russell 2000® Index is designed to
track the performance of the small capitalization segment of the U.S. equity
market.
The Market
Vectors Gold Miners ETF is an exchange-traded fund managed by Van Eck
Associates Corporation, the investment adviser to the Market Vectors Gold
Miners ETF. The Market Vectors Gold Miners ETF trades on NYSE Arca, Inc. (the
NYSE Arca) under the ticker symbol GDX. The Market Vectors Gold Miners ETF
seeks to replicate as closely as possible, before fees and expenses, the price
and yield performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold
Miners Index is a modified market capitalization weighted index primarily
comprised of publicly traded companies involved in the mining of gold. The
NYSE Arca Gold Miners Index includes common stocks and ADRs of selected
companies that are involved in mining for gold and silver and that are listed
for trading on the New York Stock Exchange or the NYSE Amex LLC or quoted on
The NASDAQ Stock Market. Only companies with market capitalization greater
than $100 million that have a daily average trading volume of at least 50,000
shares over the past six months are eligible for inclusion in the NYSE Arca
Gold Miners Index.
For
additional information on each Underlying, see the information set forth under
The Russell 2000® Index and The Market
Vectors Gold Miners ETF in the accompanying product supplement no. 192-A-III.
- TAX
TREATMENT AS A UNIT COMPRISING A PUT OPTION AND A DEPOSIT You
should review carefully the section entitled Certain U.S. Federal Income Tax
Consequences in the accompanying product supplement no. 192-A-III. By
purchasing the notes, you agree (in the absence of an administrative
determination or judicial ruling to the contrary) to treat (i) the notes for
U.S. federal income tax purposes as units comprising: (x) a Put Option written
by you that is terminated if an Optional Call occurs and that, if not
terminated, in circumstances where the payment at maturity is less than $1,000
(excluding accrued and unpaid interest) requires you to pay us an amount equal
to $1,000 multiplied by the absolute value of the Lesser Performing Underlying
Return and (y) a Deposit of $1,000 per $1,000 principal amount note to secure
your potential obligation under the Put Option and (ii) each interest payment
consistently with the allocation described below. We will follow this approach
in determining our reporting responsibilities, if any. We will determine the
portion of each interest payment that we will allocate to interest on the
Deposit and to Put Premium, respectively, and will provide that allocation in
the pricing supplement for the notes. If the notes had priced on August 30, 2011,
we would have allocated approximately 8.64% of each interest payment to
interest on the Deposit and the remainder to Put Premium. The actual
allocation that we will determine for the notes may differ from this
hypothetical allocation, and will depend upon a variety of factors, including
actual market conditions and our borrowing costs for debt instruments of
comparable maturities on the Pricing Date. Assuming this characterization is
respected, amounts treated as interest on the Deposit will be taxed as ordinary
income, while the Put Premium will not be taken into account prior to sale or
settlement, including a settlement following an Optional Call. However, there
are other reasonable treatments that the Internal Revenue Service (the IRS)
or a court may adopt, in which case the timing and character of any income or loss
on the notes could be significantly and adversely affected. In addition, in
2007 Treasury and the IRS released a notice requesting comments on the U.S.
federal income tax treatment of prepaid forward contracts and similar
instruments. While it is not clear whether the notes would be viewed as
similar to the typical prepaid forward contract described in the notice, it is
possible that any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect.
The notice focuses on a number of issues, the most relevant of which for
holders of the notes are the character of income or loss (including whether the
Put Premium might be currently included as ordinary income) and the degree, if
any, to which income realized by Non-U.S. Holders should be subject to
withholding tax. Both U.S. and Non-U.S. Holders should consult their tax
advisers regarding all aspects of the U.S. federal income tax consequences of
an investment in the notes, including possible alternative treatments and the
issues presented by this notice. Non-U.S. Holders should also note that they
may be withheld upon at a rate of up to 30% unless they have submitted a
properly completed IRS Form W-8BEN or otherwise satisfied the applicable
documentation requirements. Purchasers who are not initial purchasers of notes
at the issue price should also consult their tax advisers with respect to the
tax consequences of an investment in the notes, including possible alternative
characterizations, as well as the allocation of the
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JPMorgan
Structured Investments |
TS-2 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
purchase price of the notes
between the Deposit and the Put Option.
Selected Risk
Considerations
An investment in the
notes involves significant risks. Investing in the notes is not equivalent to
investing directly in either or both of the Underlyings, or any equity
securities included in or held by the Underlyings. These risks are explained
in more detail in the Risk Factors section of the accompanying product
supplement no. 192-A-III dated March 10, 2011.
- YOUR INVESTMENT IN THE
NOTES MAY RESULT IN A LOSS The notes do not guarantee any return of
principal. If the notes are not called, we will pay you your principal back at
maturity only if a Trigger Event has not occurred or the Ending Underlying
Level of each Underlying is equal to or greater than the Starting Underlying
Level of such Underlying. If the notes are not called, a Trigger Event has
occurred and the Ending Underlying Level of either Underlying is less than the
Starting Underlying Level of such Underlying, you will lose 1% of your
principal amount at maturity for every 1% that the Ending Underlying Level of
the Lesser Performing Underlying is less than the Starting Underlying Level of
such Underlying. Accordingly, you could lose up to the entire principal
amount of your notes.
- CREDIT RISK OF
JPMORGAN CHASE & CO. The
notes are subject to the credit risk of JPMorgan Chase & Co. and our credit
ratings and credit spreads may adversely affect the market value of the notes.
Investors are dependent on JPMorgan Chase & Co.s ability to pay all
amounts due on the notes at maturity or on any Optional Call Date and on the
Interest Payment Dates, and therefore investors are subject to our credit risk
and to changes in the markets view of our creditworthiness. Any decline in
our credit ratings or increase in the credit spreads charged by the market for
taking our credit risk is likely to adversely affect the value of the notes.
- POTENTIAL CONFLICTS We and our affiliates
play a variety of roles in connection with the issuance of the notes, including
acting as calculation agent. In performing these duties, the economic
interests of the calculation agent and other affiliates of ours are potentially
adverse to your interests as an investor in the notes.
- YOUR RETURN ON THE
NOTES IS LIMITED TO THE PRINCIPAL AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF
ANY APPRECIATION IN THE VALUE OF EITHER UNDERLYING If the
notes are not called, a Trigger Event has not occurred and the Ending
Underlying Level of either Underlying is not below the Starting Underlying
Level of such Underlying, for each $1,000 principal amount note, you will
receive $1,000 at maturity plus any accrued and unpaid interest, regardless of
any appreciation in the value of either Underlying, which may be significant.
If the notes are called, for each $1,000 principal amount note, you will
receive $1,000 on the applicable Optional Call Date plus any accrued and unpaid
interest, regardless of the appreciation in the value of either Underlying,
which may be significant. Accordingly, the return on the notes may be
significantly less than the return on a direct investment in either Underlying
during the term of the notes.
- YOU ARE EXPOSED TO THE
RISK OF DECLINE IN THE CLOSING LEVEL OR CLOSING PRICE, AS APPLICABLE, OF EACH
UNDERLYING
Your return on the notes and your payment at maturity, if any, is not linked
to a basket consisting of the Underlyings. If the notes are not called, your
payment at maturity is contingent upon the performance of each individual
Underlying such that you will be equally exposed to the risks related to both
of the Underlyings. Poor performance by either of the Underlyings over the
term of the notes may negatively affect your payment at maturity and will not
be offset or mitigated by positive performance by the other Underlying.
Accordingly, your investment is subject to the risk of decline in the closing
level or closing price, as applicable, of each Underlying.
- THE BENEFIT PROVIDED
BY THE PROTECTION AMOUNT MAY TERMINATE ON ANY DAY DURING THE TERM OF THE NOTES If, on any day during
the Monitoring Period, the closing level or closing price, as applicable, of
either Underlying is less than the Starting Underlying Level of such Underlying
by more than the applicable Protection Amount, a Trigger Event will occur, and you
will be fully exposed to any depreciation in the Lesser Performing Underlying.
We refer to this feature as a contingent buffer. Under these circumstances,
and if the Ending Underlying Level of either Underlying is less than the
Starting Underlying Level for such Underlying, you will lose 1% of the
principal amount of your investment for every 1% that the Ending Underlying
Level of the Lesser Performing Underlying is less than the Starting Underlying
Level. You will be subject to this potential loss of principal even if the
relevant Underlying subsequently recovers such that the closing level or closing
price, as applicable, is less than the Starting Underlying Level of such
Underlying by less than the Protection Amount. If these notes had a
non-contingent buffer feature, under the same scenario, you would have received
the full principal amount of your notes plus accrued and unpaid interest at
maturity. As a result, your investment in the notes may not perform as well as
an investment in a security with a return that includes a non-contingent
buffer.
- YOUR PAYMENT AT
MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING If the notes are
not called and a Trigger Event occurs, you will lose some or all of your
investment in the notes if the Ending Underlying Level of either Underlying is
below its Starting Underlying Level. This will be true even if the Ending
Underlying Level of the other Underlying is greater than or equal to its
Starting Underlying Level. The two Underlyings respective performances may
not be correlated and, as a result, if the notes are not called and a Trigger
Event occurs, you may receive the principal amount of your notes at maturity
only if there is a broad based rise in the performance of U.S. equities across
diverse markets during the term of the notes.
- THE OPTIONAL CALL
FEATURE MAY FORCE A POTENTIAL EARLY EXIT Upon an Optional Call, the amount of
interest payable on the notes will be less than the full amount of interest
that would have been payable if the notes were held to maturity, and, for each
$1,000 principal amount note, you will receive $1,000 plus accrued and unpaid
interest to but excluding the applicable Optional Call Date.
- REINVESTMENT RISK If your notes are
called, the term of the notes may be reduced to as short as three months and
you will not receive interest payments after the applicable Optional Call
Date. There is no guarantee that you would be able to reinvest the proceeds
from an investment in the notes at a comparable return and/or with a comparable
interest rate for a similar level of risk in the event the notes are called
prior to the Maturity Date.
- CERTAIN BUILT-IN COSTS
ARE LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY While the payment at
maturity, if any, or upon a call described in this term sheet is based on the
full principal amount of
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JPMorgan
Structured Investments |
TS-3 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
your notes, the original issue price of the notes
includes the agents commission and the estimated cost of hedging our
obligations under the notes. As a result, and as a general matter, the price,
if any, at which JPMS will be willing to purchase notes from you in secondary
market transactions, if at all, will likely be lower than the original issue
price and any sale prior to the maturity date could result in a substantial
loss to you. This secondary market price will also be affected by a number of
factors aside from the agents commission and hedging costs, including those
referred to under Many Economic and Market Factors Will Influence the Value of
the Notes below.
The notes
are not designed to be short-term trading instruments. Accordingly, you should
be able and willing to hold your notes to maturity.
- PROTECTION AMOUNT
APPLIES ONLY IF YOU HOLD THE NOTES TO MATURITY Assuming the notes
are not called, we will pay you your principal back at maturity only if the closing
level or closing price, as applicable, of each Underlying is not less than its
Starting Underlying Level by more than the applicable Protection Amount on any
day during the Monitoring Period or the Ending Underlying Level of each
Underlying is equal to or greater than the Starting Underlying Level of such
Underlying. If the notes are not called and a Trigger Event has occurred, you
will be fully exposed at maturity to any decline in the value of the Lesser
Performing Underlying.
- VOLATILITY RISK Greater expected
volatility with respect to an Underlying indicates a greater likelihood as of
the Pricing Date that such Underlying could close below its Starting Underlying
Level by more than the applicable Protection Amount on any day during the
Monitoring Period. An Underlyings volatility, however, can change
significantly over the term of the notes. The closing level or closing price,
as applicable, of an Underlying could fall sharply on any day during the
Monitoring Period, which could result in a significant loss of principal.
- AN INVESTMENT IN THE
NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS The stocks that
constitute the Russell 2000® Index are issued by companies with
relatively small market capitalization. The stock prices of smaller companies
may be more volatile than stock prices of large capitalization companies. Small
capitalization companies may be less able to withstand adverse economic,
market, trade and competitive conditions relative to larger companies. Small
capitalization companies are less likely to pay dividends on their stocks, and
the presence of a dividend payment could be a factor that limits downward stock
price pressure under adverse market conditions.
- THERE ARE
RISKS ASSOCIATED WITH THE MARKET VECTORS GOLD MINERS ETF
Although the Market Vectors Gold Miners ETFs shares are listed for trading on
the NYSE Arca and a number of similar products have been traded on NYSE Arca
and other securities exchanges for varying periods of time, there is no
assurance that an active trading market will continue for the shares of the Market
Vectors Gold Miners ETF or that there will be liquidity in the trading market.
The Market Vectors Gold Miners ETF is subject to management risk, which is the
risk that Van Ecks investment strategy, the implementation of which is subject
to a number of constraints, may not produce the intended results. These
constraints could adversely affect the market price of the shares of the Market
Vectors Gold Miners ETF, and consequently, the value of the notes.
- DIFFERENCES BETWEEN
THE MARKET VECTORS GOLD MINERS ETF AND THE NYSE
ARCA GOLD MINERS INDEX
The Market Vectors Gold Miners ETF does not fully replicate the NYSE Arca
Gold Miners Index and may hold securities not included in the NYSE Arca Gold
Miners Index, and its performance will reflect additional transaction costs and
fees that are not included in the calculation of the NYSE Arca Gold Miners
Index, all of which may lead to a lack of correlation between the Market
Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. In addition,
corporate actions with respect to the sample of equity securities (such as
mergers and spin-offs) may impact the variance between the Market Vectors Gold
Miners ETF and the NYSE Arca Gold Miners Index. Finally, because the shares of
the Market Vectors Gold Miners ETF are traded on the NYSE Arca and are subject
to market supply and investor demand, the market value of one share of the Market
Vectors Gold Miners ETF may differ from the net asset value per share of the Market
Vectors Gold Miners ETF. For all of the foregoing reasons, the performance of
the Market Vectors Gold Miners ETF may not correlate with the performance of
the NYSE Arca Gold Miners Index.
- RISKS ASSOCIATED WITH
THE GOLD AND SILVER MINING INDUSTRIES All or substantially all of the equity
securities held by the Market Vectors Gold Miners ETF are issued by gold or
silver mining companies. Because the value of the notes is linked to the
performance of the Market Vectors Gold Miners ETF, an investment in these notes
will be concentrated in the gold and silver mining industries. Competitive
pressures may have a significant effect on the financial condition of companies
in these industries. Also, these companies are highly dependent on the price
of gold or silver, as applicable. These prices fluctuate widely and may be
affected by numerous factors. Factors affecting gold prices include economic
factors, including, among other things, the structure of and confidence in the
global monetary system, expectations of the future rate of inflation, the
relative strength of, and confidence in, the U.S. dollar (the currency in which
the price of gold is generally quoted), interest rates and gold borrowing and
lending rates, and global or regional economic, financial, political,
regulatory, judicial or other events. Factors affecting silver prices include
general economic trends, technical developments, substitution issues and
regulation, as well as specific factors including industrial and jewelry
demand, expectations with respect to the rate of inflation, the relative
strength of the U.S. dollar (the currency in which the price of silver is
generally quoted) and other currencies, interest rates, central bank sales,
forward sales by producers, global or regional political or economic events,
and production costs and disruptions in major silver producing countries such
as the United Mexican States and the Republic of Peru.
- LACK OF LIQUIDITY The notes will not be listed on any
securities exchange. JPMS intends to offer to
|
JPMorgan
Structured Investments |
TS-4 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
purchase the notes in the
secondary market but is not required to do so. Even if there is a secondary
market, it may not provide enough liquidity to allow you to trade or sell the
notes easily. Because other dealers are not likely to make a secondary market
for the notes, the price at which you may be able to trade your notes is likely
to depend on the price, if any, at which JPMS is willing to buy the notes.
- NO DIVIDEND
PAYMENTS OR VOTING RIGHTS
As a holder of the notes, you will not have voting rights or rights to
receive cash dividends or other distributions or other rights that holders of
the securities included in or held by the Underlyings would have.
- HEDGING AND TRADING IN THE UNDERLYINGS While the notes are outstanding, we or any of our
affiliates may carry out hedging activities related to the notes, including
instruments related to the Fund or the equity securities included in the Index
or held by the Fund. We or our affiliates may also trade in the Fund or instruments
related to the Fund or the equity securities included in the Index or held by
the Fund from time to time. Any of these hedging or trading activities as of
the Pricing Date and during the term of the notes could adversely affect the
likelihood of a call or our payment to you at maturity. It is possible that
such 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 MARKET VECTORS GOLD MINERS ETF IS LIMITED The calculation agent
will make adjustments to the Share Adjustment Factor for certain events
affecting the shares of the Market Vectors Gold Miners ETF. However, the
calculation agent will not make an adjustment in response to all events that
could affect the shares of the Market Vectors Gold Miners ETF. If an event
occurs that does not require the calculation agent to make an adjustment, the
value of the notes may be materially and adversely affected.
- MANY
ECONOMIC AND MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES In
addition to the level and price of the Underlyings on any day, the value of the
notes will be affected by a number of economic and market factors that may
either offset or magnify each other, including:
- whether a Trigger Event
has occurred;
- the interest rate on the
notes;
- the actual and expected
volatility of the Underlyings;
- the time to maturity of
the notes;
- the Optional Call feature
and whether we are expected to call the notes, which are likely to limit the
value of the notes;
- the dividend rates on the
equity securities included in or held by the Underlyings;
- the expected positive or
negative correlation between the Index and the Fund, or the expected absence of
any such correlation;
- interest and yield rates
in the market generally as well as in the markets of the equity securities included
in or held by the Underlyings;
- a variety of economic,
financial, political, regulatory and judicial events;
- the occurrence of certain
events to the Market
Vectors Gold Miners ETF that may or may not require an adjustment to the Share Adjustment
Factor; and
- our creditworthiness,
including actual or anticipated downgrades in our credit ratings.
|
JPMorgan
Structured Investments |
TS-5 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
Historical Information
The following graphs show the historical weekly performance of the
Russell 2000® Index from January 6, 2006 through August 26, 2011 and
the Market Vectors Gold Miners ETF from May 26, 2006 through August 26, 2011. The
closing level of the Russell 2000® Index on August 30, 2011 was 728.08.
The closing price of one share of the Market Vectors Gold Miners ETF on August 30,
2011 was $63.00.
We
obtained the various closing levels and prices of the Underlyings below from
Bloomberg Financial Markets. We make no representation or warranty as to the
accuracy or completeness of information obtained from Bloomberg Financial
Markets. The historical levels and prices of each Underlying should not be
taken as an indication of future performance, and no assurance can be given as
to the closing level or closing price, as applicable, of either Underlying on
the Pricing Date, the Observation Date or any day during the Monitoring Period.
We cannot give you assurance that the performance of the Underlyings will
result in the return of any of your initial investment.
|
JPMorgan
Structured Investments |
TS-6 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
What Is the Total Return on the Notes at Maturity, Assuming a
Range of Performances for the Lesser Performing Underlying?
The following table and examples illustrate the hypothetical total
return at maturity on the notes. The note total return as used in this term
sheet is the number, expressed as a percentage, that results from comparing the
payment at maturity plus the interest payments received over the term of the
notes per $1,000 principal amount note to $1,000. The table and examples
below assume that the notes are not called prior to maturity and that the Lesser
Performing Underlying is the Russell 2000® Index. We make no
representation or warranty as to which of the Underlyings will be the Lesser Performing
Underlying for purposes of calculating your actual payment at maturity. In
addition, the following table and examples assume a Starting Underlying Level
for the Lesser Performing Underlying of 700 and reflect the Interest Rate of 11.00%
per annum over the term of the notes (assuming no Optional Call) and the
Protection Amount of 25.00%. If the notes are called prior to maturity,
your total return and total payment may be less than the amounts indicated
below. The hypothetical total returns and total payments set forth below
are for illustrative purposes only and may not be the actual total returns or
total payments applicable to a purchaser of the notes. The numbers appearing
in the following table and examples have been rounded for ease of analysis.
|
|
Trigger Event Has Not Occurred (1)
|
Trigger Event Has Occurred (1)
|
|
Ending
Underlying
Level
|
Lesser
Performing
Underlying
Return
|
Note Total
Return
|
Total Payments over the
Term of the
Notes
|
Note Total Return
|
Total Payments over the
Term of the
Notes
|
|
1260.00
|
80.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
1155.00
|
65.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
1050.00
|
50.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
980.00
|
40.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
910.00
|
30.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
840.00
|
20.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
770.00
|
10.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
735.00
|
5.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
700.00
|
0.00%
|
11.00%
|
$1,110.00
|
11.00%
|
$1,110.00
|
665.00
|
-5.00%
|
11.00%
|
$1,110.00
|
6.00%
|
$1,060.00
|
630.00
|
-10.00%
|
11.00%
|
$1,110.00
|
1.00%
|
$1,010.00
|
560.00
|
-20.00%
|
11.00%
|
$1,110.00
|
-9.00%
|
$910.00
|
525.00
|
-25.00%
|
11.00%
|
$1,110.00
|
-14.00%
|
$860.00
|
524.93
|
-25.01%
|
N/A
|
N/A
|
-14.01%
|
$859.90
|
490.00
|
-30.00%
|
N/A
|
N/A
|
-19.00%
|
$810.00
|
420.00
|
-40.00%
|
N/A
|
N/A
|
-29.00%
|
$710.00
|
350.00
|
-50.00%
|
N/A
|
N/A
|
-39.00%
|
$610.00
|
280.00
|
-60.00%
|
N/A
|
N/A
|
-49.00%
|
$510.00
|
210.00
|
-70.00%
|
N/A
|
N/A
|
-59.00%
|
$410.00
|
140.00
|
-80.00%
|
N/A
|
N/A
|
-69.00%
|
$310.00
|
70.00
|
-90.00%
|
N/A
|
N/A
|
-79.00%
|
$210.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-89.00%
|
$110.00
|
|
(1) A Trigger Event occurs if the
closing level or closing price, as applicable, of either Underlying is less
than the Starting Underlying Level of such Underlying by more than 25% on any
day during the Monitoring Period.
The following examples illustrate how
the note total returns and total payments set forth in the table above are
calculated.
Example 1: The level of the Lesser
Performing Underlying increases from the Starting Underlying Level of 700 to an
Ending Underlying Level of 770. Because
the Ending Underlying Level of the Lesser Performing Underlying of 770 is
greater than its Starting Underlying Level of 700, regardless of whether a
Trigger Event has occurred, the investor receives total payments of $1,110 per
$1,000 principal amount note over the term of the notes, consisting of interest
payments of $110 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $1,000 per $1,000 principal amount note. This
represents the maximum total payment an investor may receive over the term of
the notes.
Example 2: A Trigger Event has not
occurred and the level of the Lesser Performing Underlying decreases from the
Starting Underlying Level of 700 to an Ending Underlying Level of 560. Even though the Ending Underlying
Level of the Lesser Performing Underlying of 560 is less than its Starting
Underlying Level of 700, because a Trigger Event has not occurred, the investor receives total payments
of $1,110 per $1,000 principal amount note over the term of the notes,
consisting of interest payments of $110 per $1,000 principal amount note over
the term of the notes and a payment at maturity of $1,000 per $1,000 principal
amount note. This represents the maximum total payment an investor may
receive over the term of the notes.
|
JPMorgan
Structured Investments |
TS-7 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |
Example 3: A Trigger Event has
occurred and the level of the Lesser Performing Underlying decreases from the
Starting Underlying Level of 700 to an Ending Underlying Level of 560. Because a Trigger Event has occurred
and the Ending Underlying Level of the Lesser Performing Underlying of 560 is
less than its Starting Underlying Level of 700, the investor receives total payments of $910 per $1,000
principal amount note over the term of the notes, consisting of interest
payments of $110 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $800 per $1,000 principal amount note, calculated
as follows:
[$1,000 +
($1,000 × -20%)] + $110 =
$910
Example 4: A Trigger Event has
occurred and the level of the Lesser Performing Underlying decreases from the
Starting Underlying Level of 700 to an Ending Underlying Level of 350. Because a Trigger Event has occurred
and the Ending Underlying Level of the Lesser Performing Underlying of 350 is
less than its Starting Underlying Level of 700, the investor receives total payments of $610 per $1,000
principal amount note over the term of the notes, consisting of interest
payments of $110 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $500 per $1,000 principal amount note, calculated
as follows:
[$1,000 +
($1,000 × -50%)] + $110 =
$610
Example 5: A Trigger Event has
occurred and the level of the Lesser Performing Underlying decreases from the Starting
Underlying Level of 700 to an Ending Underlying Level of 0. Because a Trigger Event has occurred
and the Ending Underlying Level of the Lesser Performing Underlying of 0 is
less than its Starting Underlying Level of 700, the investor receives total payments of $110 per $1,000
principal amount note over the term of the notes, consisting solely of interest
payments of $110 per $1,000 principal amount note over the term of the notes,
calculated as follows:
[$1,000 +
($1,000 × -100%)] + $110
= $110
The hypothetical
returns and hypothetical payouts 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 total returns and
payouts shown above would likely be lower.
|
JPMorgan
Structured Investments |
TS-8 |
Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the Market Vectors Gold Miners ETF |