Term sheet
To prospectus
dated November
21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 202-A-I dated January 25, 2011
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Term Sheet
Product Supplement No. 202-A-I
Registration Statement No. 333-155535
Dated October
3, 2011; Rule
433
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Structured
Investments
|
|
$
Notes Linked to the JPMorgan ETF
Efficiente 5 Index
due October 22, 2018 |
General
- Senior unsecured obligations of
JPMorgan Chase & Co. maturing October 22, 2018*
- Cash payment at maturity of principal
plus the Additional Amount†, as described below
- The notes are designed for investors
who seek exposure to any appreciation of the JPMorgan ETF Efficiente 5 Index over
the term of the notes and may be appropriate for investors requiring asset and
investment strategy diversification. Investors should be willing to forgo
interest and dividend payments, while seeking payment of your principal in full
at maturity. Any payment on the notes is subject to the credit risk of
JPMorgan Chase & Co.
- Investing in the notes is not
equivalent to investing in the JPMorgan ETF Efficiente 5 Index, any of the Basket
Constituents or any of the assets underlying the Basket Constituents.
- Minimum denominations of $10,000 and
integral multiples of $1,000 thereof
- The notes are expected to price on or about October 14, 2011 and are expected to settle on or
about October 21, 2011.
Key Terms
Index:
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JPMorgan ETF Efficiente 5 Index (the
“Index”)
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Payment at Maturity:
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At maturity, you will receive a
cash payment, for each $1,000 principal amount note, of $1,000 plus the
Additional Amount†, which may be zero.
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You are entitled to repayment of
principal in full at maturity, subject to the credit risk of JPMorgan Chase
& Co. |
Additional Amount†:
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The Additional Amount†
per $1,000 principal amount note paid at maturity will equal $1,000 × the
Index Return × the Participation Rate, provided that the Additional
Amount† will not be less than zero.
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Participation Rate:
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Between 250% and 275%. The actual
Participation Rate will be determined on the pricing date and will not be
less than 250% or greater than 275%.
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Index Return:
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Ending Index Level – Initial Index Level
Initial Index Level
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Initial Index Level:
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The Index closing level on the
pricing date
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Ending Index Level:
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The Index closing level on the
Observation Date
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Observation Date:
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October 15, 2018*
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Maturity Date:
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October
22, 2018*
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CUSIP:
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48125X4M5
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*
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Subject to
postponement in the event of a market disruption event and as described under
“Description of Notes — Payment at Maturity” in the accompanying product
supplement no. 202-A-I
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†
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Subject to the impact
of a commodity hedging disruption event as described under “General Terms of
Notes — Consequences of a Commodity Hedging Disruption Event” in the
accompanying product supplement no. 202-A-I. In the event of a commodity
hedging disruption event, we have the right, but not the obligation, to cause
the note calculation agent to determine on the commodity hedging disruption
date the value of the Additional Amount payable at maturity. Under these
circumstances, the value of the Additional Amount payable at maturity will be
determined prior to, and without regard to the level of the Index on, the
Observation Date.
|
Investing in the notes involves a
number of risks. See “Risk Factors” beginning on page PS-8 of the accompanying
product supplement no. 202-A-I and “Selected Risk Considerations” beginning on
page TS-3 of this term sheet.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or passed upon the accuracy
or the adequacy of this term sheet or the accompanying product supplement,
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 $36.00 per $1,000 principal amount note and would use a portion
of that commission to allow selling concessions to other affiliated or
unaffiliated dealers of approximately $11.00 per $1,000 principal amount note.
The concessions of approximately $11.00 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 $36.00 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
$80.00 per $1,000 principal amount note. See “Plan of Distribution
(Conflicts of Interest)” beginning on page PS-132 of the accompanying product
supplement no. 202-A-I.
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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.
October 3, 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.
202-A-I and this term sheet if you so request by calling toll-free
866-535-9248.
You may revoke your offer to purchase
the notes at any time prior to the time at which we accept such offer by
notifying the applicable agent. We reserve the right to change the terms of,
or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will
be asked to accept such changes in connection with your purchase. You may also
choose to reject such changes in which case we may reject your offer to
purchase.
You should read this term sheet
together with the prospectus dated November 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. 202-A-I dated January 25, 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. 202-A-I, as the notes involve risks
not associated with conventional debt securities. We urge you to consult your
investment, legal, tax, accounting and other advisers before you invest in the
notes.
You may access these documents on the
SEC website at www.sec.gov as follows (or if such address has
changed, by reviewing our filings for the relevant date on the SEC website):
You may access additional information
regarding The JPMorgan ETF Efficiente 5 Index in the Strategy Guide at the
following URL: http://www.sec.gov/Archives/edgar/data/19617/000095010311000060/crt-dp20603_fwp.pdf
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.
We may create and issue additional notes
with the same terms as these notes, so that any additional notes will be
considered part of the same tranche as these notes.
The JPMorgan ETF Efficiente 5 Index
The JPMorgan ETF
Efficiente 5 Index (the “Index”) was developed and is maintained and calculated
by J.P. Morgan Securities Ltd. (“JPMSL”), one of our affiliates. JPMSL acts as
the calculation agent for the Index (the “index calculation agent”). The Index
is a notional dynamic basket that tracks the excess return of a portfolio of 12
exchange-traded funds (“ETFs”) (each an “ETF Constituent,” and collectively the
“ETF Constituents”), with dividends reinvested, and the JPMorgan Cash Index USD
3 Month (the “Cash Constituent”) (each a “Basket Constituent,” and collectively
the “Basket Constituents”) above the return of the Cash Constituent, less a fee
of 0.50% per annum that accrues daily. The Basket Constituents represent a
diverse range of asset classes and geographic regions.
The Index rebalances
monthly a synthetic portfolio composed of the Basket Constituents. The Index is
based on the “modern portfolio theory” approach to asset allocation, which
suggests how a rational investor should allocate his capital across the
available universe of assets to maximize return for a given risk appetite. The
Index uses the concept of an “efficient frontier” to define the asset
allocation of the Index. An efficient frontier for a portfolio of assets
defines the optimum return of the portfolio for a given amount of risk. The
Index uses the volatility of returns of hypothetical portfolios as the measure
of risk. This strategy is based on the assumption that the most efficient
allocation of assets is one that maximizes returns per unit of risk. The index
level of the ETF Efficiente Index is determined by tracking the return of the
synthetic portfolio above the return of the Cash Constituent. The weights assigned
to the Basket Constituents within the synthetic portfolio are rebalanced
monthly. The strategy assigns the weights to the Basket Constituents based upon
the returns and volatilities of multiple hypothetical portfolios comprising the
Basket Constituents measured over the previous six months. The re-weighting
methodology seeks to identify the weight for each Basket Constituent that would
have resulted in the hypothetical portfolio with the highest return over the
relevant measurement period, subject to an annualized volatility over the same
period of 5% or less. Thus, the portfolio exhibiting the highest return with
an annualized volatility of 5% or less is then selected, with the weightings
for such portfolio applied to the Basket Constituents. In the event that none
of the portfolios has an annualized volatility equal to or less than 5%, this
volatility threshold is increased by 1% and this analysis performed again until
a portfolio is selected.
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JPMorgan Structured Investments
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TS-1 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
The Index is
described as a “notional” or synthetic portfolio or basket of assets because
there is no actual portfolio of assets to which any person is entitled or in
which any person has any ownership interest. The Index merely references
certain assets, the performance of which will be used as a reference point for
calculating the level of the Index.
The following are the Basket Constituents composing the
Index and the maximum weighting constraints assigned to the relevant sector and
asset type to which each belongs:
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Sector Cap
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Basket Constituent
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Asset Cap
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1
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Developed Equities
50%
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SPDR® S&P 500® ETF Trust
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20%
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2
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iShares® Russell 2000 Index Fund
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10%
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3
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iShares® MSCI EAFE Index Fund
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20%
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4
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Bonds
50%
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iShares® Barclays 20+ Year Treasury Bond Fund
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20%
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5
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iShares® iBOXX $ Investment Grade Corporate
Bond Fund
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20%
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6
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iShares® iBOXX $ High Yield Corporate Bond Fund
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20%
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7
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Emerging Markets
25%
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iShares® MSCI Emerging Markets Index Fund
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20%
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8
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iShares® Emerging Markets Bond Fund
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20%
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9
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Alternative Investments
25%
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iShares® Dow Jones Real Estate Index Fund
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20%
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10
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iShares® S&P GSCI™ Commodity-Indexed Trust
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10%
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11
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SPDR® Gold Trust
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10%
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12
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Inflation Protected Bonds and Cash
50%
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iShares® Barclays TIPS Bond Fund
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50%
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13
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JPMorgan Cash Index USD 3 Month
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50%
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See “The JPMorgan ETF Efficiente 5 Index ” in the
accompanying product supplement no. 202-A-I for more information on the Index
and the Basket Constituents.
The level of the Index is published
each trading day under the Bloomberg ticker symbol “EEJPUS5E.”
Selected Purchase Considerations
- POTENTIAL PRESERVATION OF CAPITAL AT
MATURITY — Subject
to the credit risk of JPMorgan Chase & Co., the payout formula allows you
to receive at least your initial investment in the notes if you hold the notes
to maturity, regardless of the performance of the Index. Because the notes are
our senior unsecured obligations, payment of any amount at maturity is subject
to our ability to pay our obligations as they become due.
- APPRECIATION POTENTIAL — At maturity, in addition to your
principal, for each $1,000 principal amount note you will receive a payment
equal to $1,000 × the Index Return × the Participation Rate**, provided
that this payment (the Additional Amount) will not be less than zero.
** The Participation Rate will be determined on the pricing date and will not
be less than 250% or greater than 275%.
- RETURN LINKED TO A NOTIONAL DYNAMIC
BASKET THAT TRACKS THE EXCESS RETURN OF A PORTFOLIO OF TWELVE ETFs AND ONE INDEX, REPRESENTING A DIVERSE RANGE
OF ASSETS AND GEOGRAPHIC REGIONS — The return on the notes is linked
to the performance of the JPMorgan ETF Efficiente 5 Index. The Index tracks
the excess return of a portfolio of twelve ETFs and the Cash Constituent using
an investment strategy that is based on the modern portfolio theory of asset
allocation, which suggests how a rational investor should allocate his capital
across the available universe of assets to maximize return for a given risk
appetite. The Index uses the concept of an “efficient frontier” to define the
asset allocation of the Index. An efficient frontier for a portfolio of assets
defines the optimum return of the portfolio for a given amount of risk. The
Index uses the volatility of returns of hypothetical portfolios as the measure
of risk. This strategy is based on the assumption that the most efficient
allocation of assets is one that maximizes returns per unit of risk. See “The JPMorgan
ETF Efficiente 5 Index ” in the accompanying product supplement no. 202-A-I.
- TAXED AS CONTINGENT PAYMENT DEBT
INSTRUMENTS — You should review carefully the
section entitled “Certain U.S. Federal Income Tax Consequences” in the
accompanying product supplement no. 202-A-I. Subject to the limitations described
therein, in the opinion of our special tax counsel, Davis Polk & Wardwell
|
JPMorgan Structured Investments
|
TS-2 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- LLP,
the notes will be treated for U.S. federal
income tax purposes as “contingent payment debt instruments.” You generally
will be required to accrue taxable interest income in each year at a rate equal
to our comparable yield, although we will not make any payments with respect to
the notes until maturity. Interest included in income will increase your basis
in your notes. Generally, any amount received at maturity or earlier sale or
exchange in excess of your adjusted basis will be treated as additional
interest income, while any loss will be treated as an ordinary loss to the
extent of all previous inclusions with respect to your notes, which to that
extent will be deductible against other income (e.g., employment and
interest income), with the balance treated as capital loss, which may be
subject to limitations. Special rules may apply if the Additional Amount is
determined prior to the Observation Date as a result of a commodity hedging
disruption event. You should consult your tax adviser concerning the
application of these rules. Purchasers who are not initial purchasers of notes
at their issue price should consult their tax advisers with respect to the tax
consequences of an investment in notes, including the treatment of the
difference, if any, between the basis in their notes and the notes’ adjusted
issue price.
- The discussion in the preceding paragraph, when read in
combination with the section entitled “Certain U.S. Federal Income Tax
Consequences” in the accompanying product supplement, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal income tax consequences of owning and disposing
of notes.
- COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE — We will determine the comparable
yield for the notes and will provide that comparable yield, and the related
projected payment schedule, in the pricing supplement for the notes, which we
will file with the SEC. If the notes had priced on October 3, 2011 and we had determined the comparable
yield on that date, it would have been an annual rate of 4.01%, compounded semiannually.
The actual comparable yield that we will determine for the notes may be more or
less than 4.01%, and will depend upon a variety of factors, including actual
market conditions and our borrowing costs for debt instruments of comparable
maturities. Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual Additional Amount, if
any, that we will pay on the notes.
Selected Risk Considerations
An investment in the notes involves significant risks.
Investing in the notes is not equivalent to investing directly in the Index,
any of its Basket Constituents or any of the securities, commodities, commodity
futures contracts or other assets underlying the Basket Constituents. These
risks are explained in more detail in the “Risk Factors” section of the
accompanying product supplement no. 202-A-I dated January 25, 2011.
- MARKET RISK — The return on the notes at
maturity is linked to the performance of the Index, and will depend on whether,
and the extent to which, the Index Return is positive. YOU WILL RECEIVE NO
MORE THAN THE PRINCIPAL AMOUNT OF YOUR NOTES AT MATURITY IF THE INDEX RETURN IS
ZERO OR NEGATIVE.
- THE NOTES MIGHT NOT PAY MORE THAN THE
PRINCIPAL AMOUNT AT MATURITY — You may receive a lower payment at maturity than you would have received if you had invested directly in the Index, any
of its Basket Constituents or any of the securities, commodities, commodity futures
contracts or other assets underlying the Basket Constituents or contracts
relating to the Index or any of the Basket Constituents for which there is an
active secondary market. If the Ending Index Level does not exceed the Initial
Index Level, the Additional Amount will be zero. This will be true even if the
level of the Index was higher than the Initial Index Level at some time during
the term of the notes but falls below the Initial Index Level on the
Observation Date.
- 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, and therefore investors are subject to our credit risk and to changes
in the market’s view of our creditworthiness. Any decline in our credit
ratings or increase in the credit spreads charged by the market for taking our
credit risk is likely to affect adversely the value of the notes.
- POTENTIAL CONFLICTS — We and our affiliates play a
variety of roles in connection with the issuance of the notes, including acting
as note calculation agent — the entity that, among other things, determines the
Index closing levels to be used to determine your payment at maturity — and
acting as index calculation agent and sponsor of the Index and hedging our
obligations under the notes. In performing these duties, the economic
interests of the note calculation agent, index calculation agent, sponsor of
the Index, and other affiliates of ours are potentially adverse to your
interests as an investor in the notes. It is possible that such hedging
activities or other trading activities of ours or other affiliates could result
in substantial returns for us or our affiliates while the value of the notes
declines.
- In addition, one of our affiliates, JPMS, is the sponsor
of one of the Basket Constituents of the Index (the Cash Constituent). JPMS is
also the sponsor of the JPMorgan EMBI Global Core Index, which is the index
underlying the iShares® JPMorgan USD Emerging Markets Bond Fund.
JPMS may, as a last resort, if there are no valid prices available for
composite instruments included in the JPMorgan EMBI Global Core Index, price
such composite instruments by asking JPMS traders to provide a market bid and
ask. We will not have any obligation to consider your interests as a holder of
the notes in taking any corporate action that might affect
|
JPMorgan Structured Investments
|
TS-3 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- the values of the
Cash Constituents, the JPMorgan EMBI Core Index and the notes.
- OUR AFFILIATE, J.P. MORGAN SECURITIES
LTD., OR JPMSL, IS THE INDEX CALCULATION
AGENT AND MAY ADJUST THE INDEX IN A WAY THAT AFFECTS
ITS LEVEL — JPMSL,
one of our affiliates, acts as the index calculation agent and is responsible
for calculating and maintaining the Index and developing the guidelines and
policies governing its composition and calculation. The rules governing the
Index may be amended at any time by JPMSL, in its sole discretion, and the
rules also permit the use of discretion by JPMSL in specific instances, such as
the right to substitute a Basket Constituent. Unlike other indices, the
maintenance of the Index is not governed by an independent committee. Although
judgments, policies and determinations concerning the Index are made by JPMSL,
JPMorgan Chase & Co., as the parent company of JPMSL, ultimately controls
JPMSL.
- In addition, the policies and judgments for which JPMSL
is responsible could have an impact, positive or negative, on the level of the
Index and the value of your notes. JPMSL is under no obligation to consider
your interests as an investor in the notes. Furthermore, the inclusion of the Basket
Constituents in the Index is not an investment recommendation by us or JPMSL of
the Basket Constituents or any of the securities, commodities, commodity futures
contracts or other assets underlying the Basket Constituents.
- JPMS AND ITS AFFILIATES MAY HAVE PUBLISHED RESEARCH,
EXPRESSED OPINIONS OR PROVIDED RECOMMENDATIONS THAT ARE INCONSISTENT WITH
INVESTING IN OR HOLDING THE NOTES. ANY SUCH RESEARCH, OPINIONS, OR
RECOMMENDATIONS COULD AFFECT THE MARKET VALUE OF THE NOTES — JPMS and its affiliates publish
research from time to time on financial markets and other matters that may
influence the value of the notes, or express opinions or provide
recommendations that are inconsistent with purchasing or holding the notes. JPMS
and its affiliates may have published research or other opinions that call into
question the investment view implicit in an investment in the notes. Any
research, opinions or recommendations expressed by JPMS or its affiliates may
not be consistent with each other and may be modified from time to time without
notice. Investors should make their own independent investigation of the merits
of investing in the notes and the Basket Constituents and the securities, commodities,
commodity futures contracts and currencies underlying the Basket Constituents
to which the notes are linked.
- CERTAIN BUILT-IN COSTS ARE LIKELY TO AFFECT ADVERSELY THE VALUE
OF THE NOTES PRIOR TO MATURITY – While
the payment at maturity described in this term sheet is based on the full
principal amount of your notes, the original issue price of the notes includes
the agent’s commission and the estimated cost of hedging our obligations under
the notes. As a result, 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 agent’s
commission and hedging costs, including those set forth under “Many Economic
and Market Factors Will Affect 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.
- WE MAY DETERMINE THE ADDITIONAL AMOUNT FOR
YOUR NOTES EARLY IF A COMMODITY HEDGING DISRUPTION EVENT OCCURS — If we or our affiliates are unable
to effect transactions necessary to hedge our obligations under the notes due
to a commodity hedging disruption event, we may, in our sole and absolute
discretion, cause the note calculation agent to determine the Additional Amount
for your notes early, on the date on which the note calculation agent
determines that a commodity hedging disruption event has occurred, which may be
significantly earlier than the Observation Date. If the Additional Amount for
your notes is determined early as the result of a commodity hedging disruption
event, the amount due and payable on your notes will be due and payable only at
maturity and the amount you receive at maturity will not reflect any further
appreciation of the Basket after such early determination. Please see “General
Terms of Notes — Consequences of a Commodity Hedging Disruption Event” in the
accompanying product supplement for more information.
- THE COMMODITY FUTURES CONTRACTS
UNDERLYING SOME OF THE BASKET CONSTITUENTS ARE SUBJECT TO LEGAL AND REGULATORY REGIMES — The commodity futures contracts
and commodities that underlie two of the Basket Constituents, the iShares®
S&P GSCI™ Commodity-Indexed Trust and the SPDR® Gold Trust are
subject to legal and regulatory regimes in the United States and, in some
cases, in other countries that may change in ways that could adversely affect
our ability to hedge our obligations under the notes and affect the level of
the Index. Such regimes may result in the index calculation agent exercising
its discretionary right to exclude or substitute Basket Constituents, which
may, in turn, have a negative effect on the level of the Index and your payment
at maturity. In addition, we or our affiliates may be unable as a result of
such restrictions to effect transactions necessary to hedge our obligations
under the notes, in which case we may, in our sole and absolute discretion,
cause the note calculation agent to determine the value of the Additional
Amount for your notes early. Please see —“We May Determine the Additional Amount
for your Notes Early if a Commodity Hedging Disruption Event Occurs” above and “General
Terms of Notes — Consequences of a Commodity Hedging Disruption Event” in the
accompanying product supplement for more information.
- NO INTEREST OR DIVIDEND PAYMENTS OR
VOTING RIGHTS — As a
holder of the notes, you will not receive any interest payments, and you will
not have voting rights or rights to receive cash dividends or other
distributions
|
JPMorgan Structured Investments
|
TS-4 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- or other rights that holders of securities, commodities, commodity
futures contracts or other assets underlying the Basket Constituents would
have.
- THE INDEX MAY NOT BE SUCCESSFUL, OUTPERFORM ANY ALTERNATIVE STRATEGY THAT MIGHT BE
EMPLOYED IN RESPECT OF THE BASKET CONSTITUENTS OR ACHIEVE ITS TARGET VOLATILITY — The Index follows a notional
rules-based proprietary strategy that operates on the basis of pre-determined
rules. No assurance can be given that the investment strategy on which the
Index is based will be successful or that the Index will outperform any
alternative strategy that might be employed in respect of the Basket
Constituents. Furthermore, no assurance can be given that the JPMorgan ETF
Efficiente 5 Index will achieve its target volatility of 5%. The actual
realized volatility of the JPMorgan ETF Efficiente 5 Index may be greater or
less than 5%.
- THE INDEX COMPRISES NOTIONAL ASSETS AND LIABILITIES — The exposures to the Basket
Constituents are purely notional and will exist solely in the records
maintained by or on behalf of the index calculation agent. There is no actual
portfolio of assets to which any person is entitled or in which any person has
any ownership interest. Consequently, you will not have any claim against any
of the reference assets that compose the Index. The Index tracks the excess
return of a notional dynamic basket of assets over the Cash Constituent and, as
such, any allocation to the Cash Constituent will result in this portion of the
portfolio not being invested. Unless an extraordinary event occurs, the Cash
Constituent will be subject to a maximum weight of 50% in the Index. See the
risk factor in this term sheet entitled “The Basket Constituents Composing the
Index May Be Replaced by a Substitute ETF or Index” for more information about
the consequences of an extraordinary event.
- THE LEVEL OF THE INDEX WILL INCLUDE THE DEDUCTION OF A
FEE — One way in
which the Index may differ from a typical index is that its level will include
a deduction from the performance of the Basket Constituents over the Cash
Constituent of a fee of 0.50% per annum. This fee will be deducted daily. As
a result of the deduction of this fee, the level of the Index will trail the
value of a hypothetical identically constituted synthetic portfolio from which
no such fee is deducted.
- OWNING THE NOTES INVOLVES THE RISKS ASSOCIATED WITH THE INDEX’S MOMENTUM
INVESTMENT STRATEGY —
The Index employs a mathematical model intended to implement what is generally
known as a momentum investment strategy, which seeks to capitalize on positive
market price trends based on the supposition that positive market price trends
may continue. This strategy is different from a strategy that seeks long-term
exposure to a portfolio consisting of constant components with fixed weights.
The Index may fail to realize gains that could occur as a result of holding
assets that have experienced price declines, but after which experience a
sudden price spike.
- THE INVESTMENT STRATEGY USED TO CONSTRUCT THE INDEX INVOLVES MONTHLY
REBALANCING AND WEIGHTING CAPS THAT ARE APPLIED TO THE BASKET CONSTITUENTS — The Basket Constituents are
subject to monthly rebalancing and maximum weighting caps by asset type and on subsets
of assets. By contrast, a synthetic portfolio that does not rebalance monthly
and is not subject to any weighting caps in this manner could see greater
compounded gains over time through exposure to a consistently and rapidly
appreciating portfolio consisting of the Basket Constituents. Therefore, your
return on the notes may be less than the return you could realize on an
alternative investment that was not subject to rebalancing and weighting caps.
- CHANGES IN THE VALUES OF THE BASKET CONSTITUENTS MAY OFFSET EACH OTHER — Because the notes are linked to
the Index, which is linked to the performance of the Basket Constituents, which
collectively represent a diverse range of asset classes and geographic regions,
price movements between the Basket Constituents representing different asset
classes or geographic regions may not correlate with each other. At a time when
the value of a Basket Constituent representing a particular asset class or
geographic region increases, the value of other Basket Constituents
representing a different asset class or geographic region may not increase as
much or may decline. Therefore, in calculating the level of the Index,
increases in the values of some of the Basket Constituents may be moderated, or
more than offset, by lesser increases or declines in the values of other Basket
Constituents.
- CORRELATION OF PERFORMANCES AMONG THE BASKET CONSTITUENTS MAY REDUCE PERFORMANCE OF THE NOTES — Performances of the Basket
Constituents may become highly correlated from time to time during the term of
the notes, including, but not limited to, a period in which there is a
substantial decline in a particular sector or asset type represented by the
Basket Constituents and that has a higher weighting in the Index relative to
any of the other sectors or asset types, as determined by the Index’s strategy.
High correlation during periods of negative returns among Basket Constituents
representing any one sector or asset type and which Basket Constituents have a
substantial percentage weighting in the Index could cause you to only receive a
return of your principal amount at maturity.
- THE INDEX HAS A LIMITED OPERATING HISTORY AND MAY PERFORM IN UNANTICIPATED WAYS — The Index was established on October 29, 2010, and therefore has a limited operating
history. Any back-testing or similar analysis in respect of the Index must be
considered illustrative only and may be based on estimates or assumptions not
used by the index calculation agent when determining the level of the Index.
Past performance should not be considered indicative of future performance.
- AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH NON-U.S.
SECURITIES MARKETS, INCLUDING EMERGING MARKETS — Some or all of the equity
securities that are held by two of the Basket Constituents, the iShares®
MSCI EAFE Index Fund and the iShares® MSCI Emerging Markets Index
Fund, have been issued by non-U.S. companies. In addition, the iShares®
iBOXX $ Investment Grade Corporate Bond Fund and the iShares® iBOXX
$ High Yield Corporate Bond Fund, which are also Basket Constituents, may
include U.S. dollar-denominated bonds of foreign corporations. Moreover, the
bonds held by the iShares® JPMorgan USD Emerging Markets Bond
|
JPMorgan Structured Investments
|
TS-6 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- Fund
have been issued by 33 countries. Investments in the notes, which are linked in
part to the economic stability and development of such countries, involve risks
associated with investments in, or the securities markets in, those countries.
The impact of any of these risks may enhance or offset some or all of any change
resulting from another factor or factors. See “Risk Factors” in the
accompanying product supplement for more information on these risks.
- THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK — Because the prices of some or all
of the securities composing two of the thirteen Basket Constituents (the
iShares® MSCI EAFE Index Fund and the iShares® MSCI
Emerging Markets Index Fund) (the “Component Securities”) are converted into
U.S. dollars for purposes of calculating the value of the relevant Basket
Constituent, your notes will be exposed to currency exchange rate risk with
respect to each of the relevant currencies. Your net exposure will depend on
the extent to which such currencies strengthen or weaken against the U.S.
dollar and the weight of the Component Securities denominated in each such
currency. If, taking into account such weighting, the U.S. dollar strengthens
against such currencies, the value of the relevant Basket Constituents will be
adversely affected and the payment at maturity may be reduced.
- THERE ARE RISKS ASSOCIATED WITH THE ETF CONSTITUENTS — Although shares of the
ETF Constituents are listed for trading on NYSE Arca, Inc. (the “NYSE Arca”)
and a number of similar products have been traded on various national
securities exchanges for varying periods of time, there is no assurance that an
active trading market will continue for the shares of the ETF Constituents or
that there will be liquidity in the trading market. The ETF Constituents are
subject to management risk, which is the risk that the investment strategies of
their investment advisers, the implementation of which is subject to a number
of constraints, may not produce the intended results. These constraints could
adversely affect the market prices of the shares of the ETF Constituents, and
consequently, the value of the notes.
- THERE ARE DIFFERENCES BETWEEN THE ETF CONSTITUENTS
AND THEIR UNDERLYING INDICES — The ETF Constituents do not fully
replicate their respective underlying indices and may hold securities not
included in their respective underlying indices, and their performances will
reflect additional transaction costs and fees that are not included in the calculation
of their underlying indices, all of which may lead to a lack of correlation
between the ETF Constituents and their respective underlying indices. In
addition, corporate actions with respect to the sample of securities (such as
mergers and spin-offs) may impact the variance between the ETF Constituents and
their respective underlying indices. Finally, because the shares of the ETF
Constituents are traded on the NYSE Arca and are subject to market supply and
investor demand, the market value of one share of any of the ETF Constituents
may differ from the net asset value per share of such ETF Constituent.
- THE NOTES ARE SUBJECT TO SIGNIFICANT
RISKS ASSOCIATED WITH FIXED-INCOME SECURITIES, INCLUDING INTEREST RATE-RELATED AND CREDIT-RELATED RISKS — Five of the Basket
Constituents (the iShares®
Barclays 20+ Year Treasury Bond Fund, the iShares® iBOXX $
Investment Grade Corporate Bond Fund, the iShares® iBOXX $ High
Yield Corporate Bond Fund, the iShares® Emerging Markets Bond Fund
and the iShares® Barclays TIPS Bond Fund, which we collectively
refer to as the Bond ETFs) are bond ETFs that attempt to track the performance
of indices composed of fixed income securities. Investing in the notes linked indirectly
to these Basket Constituents differs significantly from investing directly in
bonds to be held to maturity as the values of the Bond ETFs change, at times
significantly, during each trading day based upon the current market prices of
their underlying bonds. The market prices of these bonds are volatile and
significantly influenced by a number of factors, particularly the yields on
these bonds as compared to current market interest rates and the actual or
perceived credit quality of the issuer of these bonds. The market prices of
the bonds underlying each of the iShares® iBOXX $ Investment Grade Corporate Bond Fund and
the iShares® iBOXX $ High Yield Corporate Bond Fund are determined by
reference to the bid and ask quotations provided by 9 contributing banks, one
of which is us. JPMS is
also the sponsor of the JPMorgan EMBI Global Core Index, which is the index
underlying the iShares® JPMorgan USD Emerging Markets Bond Fund.
JPMS may, as a last resort, if there are no valid prices available for
instruments included in the JPMorgan EMBI Global Core Index, price such
instruments by asking JPMS traders to provide a market bid and ask.
- Interest rates are subject to volatility due to a variety of
factors, including:
- sentiment regarding underlying strength in the U.S. economy and global economies;
- expectations regarding the level of price inflation;
- sentiment regarding credit quality in the U.S. and global credit markets;
- central bank policies regarding interest rates; and
- the performance of U.S.
and foreign capital markets.
- Recently, U.S.
treasury notes have been trading near their historic high trading price. If
the price of the U.S. treasury notes reverts to its historic mean or otherwise
falls, as a result of a general increase in interest rates or perceptions of
reduced credit quality of the U.S. government or otherwise, the value of the
bonds underlying the iShares® Barclays 20+ Year Treasury Bond Fund
will decline, which could have a negative impact on the performance of the ETF
Efficiente Index and the return on your notes.
- In addition, the prices of the underlying bonds are
significantly influenced by the creditworthiness of the issuers of the bonds.
The bonds underlying the Bond ETFs may have their credit ratings downgraded, including
in the case of the bonds included in the iShares® iBOXX $ Investment
Grade Corporate Bond Fund, a downgrade from investment grade to non-investment
grade status, or have their credit spreads widen significantly. Following a
ratings downgrade or the widening of credit spreads, some or all of the
underlying bonds may suffer significant and rapid
|
JPMorgan Structured Investments
|
TS-6 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- price declines. These events
may affect only a few or a large number of the underlying bonds.
- The iShares® Emerging Markets Bond Fund is
composed of U.S. dollar-denominated bonds of sovereign and quasi-sovereign
entities of emerging market countries and the iShares® iBOXX $
Investment Grade Corporate Bond Fund, the iShares® iBOXX $ High
Yield Corporate Bond Fund may include U.S. dollar-denominated bonds of foreign
corporations. See “Risk Considerations — An Investment in the Notes Is Subject
to Risks Associated with Non-U.S. Securities Markets, Including Emerging
Markets” in this term sheet.
- Further, the iShares® iBOXX $ High Yield
Corporate Bond Fund is designed to provide a representation of the U.S. dollar
high yield corporate market and is therefore subject to high yield securities
risk, being the risk that securities that are rated below investment grade
(commonly known as “junk bonds,” including those bonds rated at BB+ or lower by
S&P or Fitch or Ba1 by Moody’s) may be more volatile than higher-rated
securities of similar maturity. High yield securities may also be subject to
greater levels of credit or default risk than higher-rated securities.
- Finally, for the iShares® Barclays
TIPS Bond Fund,
if inflation is low, the benefit received from the inflation-protected feature
of the underlying bonds may not sufficiently compensate you for their reduced
yield.
- INVESTMENTS RELATED TO THE VALUE OF COMMODITIES TEND TO
BE MORE VOLATILE THAN TRADITIONAL NOTE INVESTMENTS — The market values of commodities
tend to be highly volatile. Commodity market values are not related to the
value of a future income or earnings stream, as tends to be the case with
fixed-income and equity investments, but are subject to variables that are
specific to commodities markets. These factors may have a larger impact on
commodity prices and commodity-linked instruments than on traditional notes. These
variables may create additional investment risks that cause the value of the
notes to be more volatile than the values of traditional notes. These and
other factors may affect the values of the constituents included from time to
time in the Index, and thus the value of your notes, in unpredictable or
unanticipated ways. The high volatility and cyclical nature of commodity
markets may render these investments inappropriate as the focus of an
investment portfolio.
- HIGHER FUTURE PRICES OF THE COMMODITY FUTURES CONTRACTS
CONSTITUTING THE iSHARES® S&P GSCI™ COMMODITY-INDEXED TRUST
RELATIVE TO THEIR CURRENT PRICES MAY DECREASE THE AMOUNT PAYABLE AT MATURITY — As the exchange-traded futures
contracts that compose the iShares® S&P GSCI™ Commodity-Indexed
Trust approach expiration, they are replaced by contracts that have a later
expiration. If the market for these contracts is (putting aside other
considerations) in “backwardation,” where the prices are lower in the distant
delivery months than in the nearer delivery months, the sale of the October
contract would take place at a price that is higher than the price of the
November contract, thereby creating a “roll yield.” There can be no assurance
that backwardation will exist at times that are advantageous, with respect to
your interests as a holder of the notes, to the valuation of the iShares®
S&P GSCI™ Commodity-Indexed Trust. Moreover, certain commodities, such as
gold, have historically traded in “contango” markets. Contango markets are
those in which the prices of contracts are higher in the distant delivery
months than in the nearer delivery months. The presence of contango in the
commodity markets could result in negative “roll yields,” which could adversely
affect the price of shares of the iShares® S&P GSCI™ Commodity-Indexed
Trust and, therefore, the level of the Index and the value of your notes.
- RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY WILL AFFECT THE
VALUE OF YOUR NOTES —
The iShares® Dow Jones Real Estate Index Fund, one of the Basket
Constituents composing the Index, holds a variety of real estate-related
securities. The following are some of the conditions that might impact the
value of the securities held by the iShares® Dow Jones Real Estate
Index Fund and the value of the iShares® Dow Jones Real Estate Index
Fund, and accordingly, the level of the Index and the value of your notes:
- a decline in the value of real estate properties;
- increases in property and operating taxes;
- increased competition or overbuilding;
- a lack of available mortgage funds or other limits on
accessing capital;
- tenant bankruptcies and other credit problems;
- changes in zoning laws and governmental regulations;
- changes in interest rates; and
- uninsured damages from floods, earthquakes or other
natural disasters.
- The difficulties described above could cause an upturn
or a downturn in the real estate industry generally or regionally and could
cause the value of the securities held by the iShares® Dow Jones
Real Estate Index Fund and thus the value of the iShares® Dow Jones
Real Estate Index Fund to decline or remain flat during the term of the notes,
which may adversely affect the level of the Index and the value of your notes.
- AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS
ASSOCIATED WITH SMALL CAPITALIZATION STOCKS — The equity securities held by the iShares®
Russell 2000 Index Fund and included in the Russell 2000® Index have
been 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. The stocks of small capitalization companies may be thinly traded
and thus may be difficult for the iShares® Russell 2000 Index Fund
to buy and sell.
- THE MARKET PRICE OF GOLD WILL AFFECT THE VALUE OF THE NOTES — Because the Index is linked in
part to the performance of the price of gold, we expect that generally the
market value of the notes will depend in part on the
|
JPMorgan Structured Investments
|
TS-7 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
- market price of gold. The
price of gold is primarily affected by the global demand for and supply of
gold. The market for gold bullion is global, and gold prices are subject to
volatile price movements over short periods of time and are affected by
numerous factors, including macroeconomic factors such as the structure of and
confidence in the global monetary system, expectations regarding 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 usually quoted), interest rates,
gold borrowing and lending rates, and global or regional economic, financial,
political, regulatory, judicial or other events. Gold prices may be affected
by industry factors such as industrial and jewelry demand as well as lending,
sales and purchases of gold by the official sector, including central banks and
other governmental agencies and multilateral institutions which hold gold.
Additionally, gold prices may be affected by levels of gold production,
production costs and short-term changes in supply and demand due to trading activities
in the gold market.
- THE BASKET CONSTITUENTS COMPOSING THE INDEX MAY BE REPLACED BY A SUBSTITUTE ETF OR
INDEX — Following
the occurrence of certain extraordinary events with respect to a Basket
Constituent, the affected Basket Constituent may be replaced by a substitute
ETF or index. If the index calculation agent determines in its discretion that
no suitable substitute ETF or index is available for an affected Basket
Constituent (other than the Cash Constituent), then the index calculation agent
will replace such Basket Constituent with the Cash Constituent as its
substitute. Under such circumstances, the aggregate weight of the Cash
Constituent in the Index may be greater than the maximum 50% weight limit
allocated to the Cash Constituent because a portion of such aggregate weight
would be subject to the separate maximum weight limit specific to the affected
Basket Constituent. The substitution of a Basket Constituent may affect the
performance of the Index, and therefore, the return on the notes, as the
replacement Basket Constituent may perform significantly better or worse than
the affected Basket Constituent.
- LACK OF LIQUIDITY — The notes will not be listed on any securities
exchange. JPMS intends to offer to purchase the notes in the secondary market
but is not required to do so. Even if there is a secondary market, it may not
provide enough liquidity to allow you to trade or sell the notes easily.
Because other dealers are not likely to make a secondary market for the notes,
the price at which you may be able to trade your notes is likely to depend on
the price, if any, at which JPMS is willing to buy the notes.
- MANY ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE OF THE NOTES — In addition to the Index closing
level on any day, the value of the notes will be affected by a number of
economic and market factors that may either offset or magnify each other,
including:
- the volatility in the Index and the Basket Constituents;
- the time to maturity of the notes;
- the dividend rate on the equity securities underlying
some of the Basket Constituents;
- the market price of gold and the market price of the
physical commodities upon which the commodity futures contracts that compose
some of the Basket Constituents are based;
- interest and yield rates in the market generally;
- foreign currency exchange rates;
- economic, financial, political, regulatory,
geographical, agricultural, meteorological and judicial events that affect the
commodities underlying the Basket Constituents or markets generally and which
may affect the value of the commodity futures contracts, and thus the closing
levels of the Basket Constituents; and
- our creditworthiness, including actual or anticipated
downgrades in our credit ratings.
- STANDARD & POOR’S RECENT DOWNGRADE OF THE U.S.
GOVERNMENT’S CREDIT RATING, AND ANY FUTURE DOWNGRADES BY CREDIT RATING AGENCIES, MAY ADVERSELY AFFECT THE PERFORMANCE OF
THE INDEX AND THE NOTES — On August 6, 2011, Standard &
Poor’s Ratings Services (“Standard & Poor’s”), downgraded the U.S.
government’s credit rating from AAA to AA+. Additionally, Standard &
Poor’s and Moody’s Investor Services, Inc. have assigned a negative outlook on
the U.S. government’s credit rating, meaning that the agencies may downgrade
the U.S. government’s credit rating in the next year or two. Credit rating
downgrades may adversely affect the price of the Treasury futures contracts
underlying the Bond Constituent. This downgrade has increased and may continue
to increase volatility in the global equity and credit markets, including the
Asia-Pacific equity markets, which may adversely affect the levels of the
Non-Cash Constituents. Future downgrades by credit ratings agencies may also
increase this volatility. These events may also increase short-term borrowing
costs, including the 3-month LIBOR rate underlying the Cash Constituent, which
will adversely affect the level of the Index. All of the above may adversely
affect the performance of the Index and the notes.
|
JPMorgan Structured Investments
|
TS-8 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
What Is the Total Return on the Notes at Maturity,
Assuming a Range of Performances for the Index?
The following table and examples illustrate the
payment at maturity (including, where relevant, the payment of the Additional
Amount) for a $1,000 principal amount note for a hypothetical range of
performances for the Index Return from -80% to +80% and assume a Participation
Rate of 250% and an Initial Index Level of 110. The
actual Participation Rate will be determined on the pricing date and will be not
be less than 250% or greater than 275%.
The following results are based solely on the
hypothetical examples cited and assume that a commodity hedging disruption
event has not occurred during the term of the notes. The hypothetical payments
at maturity set forth below are for illustrative purposes only and may not be
the actual payments at maturity applicable to a purchaser of the notes. The
numbers appearing in the following table and examples have been rounded for
ease of analysis.
|
Ending Index
Level
|
Index
Return
|
Index Return ×
Participation Rate (250%)
|
Additional
Amount
|
|
Principal
|
|
Payment at Maturity
|
|
198.00
|
80.00%
|
200.00%
|
$2,000.00
|
+
|
$1,000.00
|
=
|
$3,000.00
|
187.00
|
70.00%
|
175.00%
|
$1,750.00
|
+
|
$1,000.00
|
=
|
$2,750.00
|
176.00
|
60.00%
|
150.00%
|
$1,500.00
|
+
|
$1,000.00
|
=
|
$2,500.00
|
165.00
|
50.00%
|
125.00%
|
$1,250.00
|
+
|
$1,000.00
|
=
|
$2,250.00
|
154.00
|
40.00%
|
100.00%
|
$1,000.00
|
+
|
$1,000.00
|
=
|
$2,000.00
|
143.00
|
30.00%
|
75.00%
|
$750.00
|
+
|
$1,000.00
|
=
|
$1,750.00
|
132.00
|
20.00%
|
50.00%
|
$500.00
|
+
|
$1,000.00
|
=
|
$1,500.00
|
126.50
|
15.00%
|
37.50%
|
$375.00
|
+
|
$1,000.00
|
=
|
$1,375.00
|
121.00
|
10.00%
|
25.00%
|
$250.00
|
+
|
$1,000.00
|
=
|
$1,250.00
|
115.50
|
5.00%
|
12.50%
|
$125.00
|
+
|
$1,000.00
|
=
|
$1,125.00
|
110.00
|
0.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
104.50
|
-5.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
99.00
|
-10.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
93.50
|
-15.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
88.00
|
-20.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
77.00
|
-30.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
66.00
|
-40.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
55.00
|
-50.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
44.00
|
-60.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
33.00
|
-70.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
22.00
|
-80.00%
|
N/A
|
$0.00
|
+
|
$1,000.00
|
=
|
$1,000.00
|
|
Hypothetical
Examples of Amounts Payable at Maturity
The following examples illustrate how the total
returns set forth in the table above are calculated.
Example 1: The level of the Index increases from the Initial
Index Level of 110 to an Ending Index Level of 132. Because the Ending Index Level of 132 is greater
than the Initial Index Level of 110, the Additional Amount is equal to $500 and
the payment at maturity is equal to $1,500 per $1,000 principal amount note,
calculated as follows:
$1,000 + ($1,000 × [(132-110)/110] × 250%) = $1,500
Example 2: The level of the Index decreases from the Initial
Index Level of 110 to an Ending Index Level of 93.50. Because the Ending Index Level of 93.50 is lower
than the Initial Index Level of 110, the payment at maturity per $1,000
principal amount note is the principal amount of $1,000.
Example 3: The level of the Index neither increases nor
decreases from the Initial Index Level of 110. Because the Ending Index Level of 110 is equal to
the Initial Index Level of 110, the payment at maturity is equal to $1,000 per
$1,000 principal amount note.
|
JPMorgan Structured Investments
|
TS-9 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |
The following
graph demonstrates the hypothetical total return on the notes at maturity for a
subset of the Index Returns detailed in the table on the previous page (-30% to
40%). The numbers appearing in the graph have been rounded for ease of
analysis.
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 returns and hypothetical payouts
shown above would likely be lower.
Hypothetical Back-tested Data and Historical Information
The following graph sets forth the hypothetical
back-tested performance of the Index based on the hypothetical back-tested weekly
Index closing levels from January 6, 2006 through October 22, 2010 and the
historical performance of the Index based on the Index closing levels from October
29, 2010 through September 30, 2011. The Index was established on October 29,
2010. The Index closing level on September 30, 2011 was 107.95. We obtained
the Index closing levels below from Bloomberg Financial Markets. We make no
representation or warranty as to the accuracy or completeness of the
information obtained from Bloomberg Financial Markets.
The hypothetical back-tested and historical values of
the Index should not be taken as an indication of future performance, and no
assurance can be given as to the Index closing levels on the pricing date or
the Observation Date. The data for the hypothetical back-tested performance of
the Index set forth in the following graph were calculated on materially the
same basis on which the performance of the Index is now calculated but does not
represent the actual historical performance of the Index.
The hypothetical historical values above have not been
verified by an independent third party. The back-tested, hypothetical
historical results above have inherent limitations. These back-tested results
are achieved by means of a retroactive application of a back-tested model
designed with the benefit of hindsight. No representation is made that an
investment in the notes will or is likely to achieve returns similar to those
shown.
Alternative modeling techniques or assumptions would
produce different hypothetical historical information that might prove to be
more appropriate and that might differ significantly from the hypothetical
historical information set forth above. Hypothetical back-tested results are
neither an indicator nor a guarantee of future returns. Actual results will
vary, perhaps materially, from the analysis implied in the hypothetical
historical information that forms part of the information contained in the
chart above.
|
JPMorgan Structured Investments
|
TS-10 |
Notes Linked to the JPMorgan ETF
Efficiente 5 Index |