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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$
13.00% 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 |
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 13.00% 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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13.00% 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 40.00%
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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48125XW28
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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;
and
(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:
$1,000 + ($1,000 x Lesser Performing Underlying Return)
You will lose some or all of your principal at maturity if the notes
are not called and the conditions described in (a) and (b) are both
satisfied.
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Trigger Event:
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A Trigger
Event occurs if, on any day during the Monitoring Period, the closing level or
closing price, as applicable, of any Underlying is less than the Starting
Underlying Level of such Underlying by more than the applicable Protection
Amount.
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Underlying Return:
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With
respect to each Underlying, the Underlying Return is calculated as follows:
Ending Underlying Level Starting Underlying
Level
Starting
Underlying Level
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Optional Call:
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We, at our
election, may call the notes, in whole but not in part, on any of the
Optional Call Dates prior to the Maturity Date at a price for each $1,000 principal
amount note equal to $1,000 plus any accrued and unpaid interest to but
excluding the applicable Optional Call Date. If we intend to call your
notes, we will deliver notice to DTC at least five business days before the
applicable Optional Call Date.
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Optional Call Dates*:
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December 31,
2011, March 31, 2012 and June 30, 2012
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Additional Key Terms:
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See
Additional Key Terms on the next page.
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*
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Subject
to postponement as described under Description of Notes Payment at
Maturity and Description of NotesPayment upon Optional Call, as
applicable, in the accompanying product supplement no. 192-A-III
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Investing in the
Callable Yield Notes involves a number of risks. See Risk Factors beginning
on page PS-9 of the accompanying product supplement no. 192-A-III and Selected
Risk Considerations beginning on page TS-3 of this term sheet.
Neither the SEC
nor any state securities commission has approved or disapproved of the notes or
passed upon the accuracy or the adequacy of this term sheet or the accompanying
product supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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 $37.50 per $1,000 principal amount note and may
use a portion of that commission to allow selling concessions to other affiliated
or unaffiliated dealers of approximately $2.50 per $1,000 principal amount
note. 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 other dealers, in their sole discretion, may forgo some or all of
their selling concessions. The actual commission received by JPMS may be less
than $37.50 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 $50.00 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 13.00%
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 13.00% 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 made on January 3, 2012, the next succeeding
business day.
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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 |
- 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 7.31% 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 purchase price of the notes between the Deposit and the Put Option.
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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 |
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 your notes, the original issue price of the notes
includes the agents commission and the estimated cost 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 |
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 purchase the notes in the secondary market
but is not required to do so. Even if there is a secondary market, it
|
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 |
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.
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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 13.00% per annum over the term of the notes (assuming no
Optional Call) and the Protection Amount of 40.00%. 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%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
1155.00
|
65.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
1050.00
|
50.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
980.00
|
40.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
910.00
|
30.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
840.00
|
20.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
770.00
|
10.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
735.00
|
5.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
700.00
|
0.00%
|
13.00%
|
$1,130.00
|
13.00%
|
$1,130.00
|
665.00
|
-5.00%
|
13.00%
|
$1,130.00
|
8.00%
|
$1,080.00
|
630.00
|
-10.00%
|
13.00%
|
$1,130.00
|
3.00%
|
$1,030.00
|
560.00
|
-20.00%
|
13.00%
|
$1,130.00
|
-17.00%
|
$930.00
|
490.00
|
-30.00%
|
13.00%
|
$1,130.00
|
-20.00%
|
$830.00
|
420.00
|
-40.00%
|
13.00%
|
$1,130.00
|
-27.00%
|
$730.00
|
419.93
|
-40.01%
|
N/A
|
N/A
|
-27.01%
|
$729.90
|
350.00
|
-50.00%
|
N/A
|
N/A
|
-37.00%
|
$630.00
|
280.00
|
-60.00%
|
N/A
|
N/A
|
-47.00%
|
$530.00
|
210.00
|
-70.00%
|
N/A
|
N/A
|
-57.00%
|
$430.00
|
140.00
|
-80.00%
|
N/A
|
N/A
|
-67.00%
|
$330.00
|
70.00
|
-90.00%
|
N/A
|
N/A
|
-77.00%
|
$230.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-87.00%
|
$130.00
|
|
(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 40% 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 $1,130 per $1,000 principal amount note over the
term of the notes, consisting of interest payments of $130 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 $1,130 per
$1,000 principal amount note over the term of the notes, consisting of interest
payments of $130 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 $930 per $1,000
principal amount note over the term of the notes, consisting of interest
payments of $130 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%)] + $130 = $930
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 $630 per $1,000
principal amount note over the term of the notes, consisting of interest
payments of $130 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%)] + $130 = $630
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 $130 per $1,000 principal amount note over
the term of the notes, consisting solely of interest payments of $130 per
$1,000 principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 × -100%)] + $130 = $130
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 |