Term sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 211-A-II dated August 11, 2011
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Term
Sheet
Product Supplement No. 211-A-II
Registration Statement No. 333-155535
Dated August 11, 2011; Rule 433
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Structured
Investments
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$
High/Low Coupon Callable Yield Notes due August 24, 2012 Linked to the Least
Performing of the Russell 2000® Index, the Market Vectors Gold
Miners ETF and the iShares® MSCI Brazil Index Fund |
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 the
Russell 2000® Index, the Market Vectors Gold Miners ETF or the
iShares® MSCI Brazil Index Fund and to forgo dividend payments.
Investors should be willing to assume the risk that the notes may be called and
investors will receive less interest than if the notes were not called. If a
Knock-Out Event occurs, investors will receive a lower interest rate until
maturity or until the Notes are called. If the notes are not called, investors
may lose some or all of their principal at maturity.
- The notes will pay interest monthly at a rate that will depend on
whether a Knock-Out Event occurs. If a Knock-Out Event does not occur,
interest will be paid at an Interest Rate of between 19.00% and 20.00% per
annum, to be determined on the trade date. If a Knock-Out Event occurs, interest for that monthly
period and each subsequent period thereafter will be paid at an Interest Rate
of 4.00% per annum.
- The notes do not guarantee any return of principal at
maturity. Instead, if the notes
are not called and a Knock-Out Event occurs, the payment at maturity will be
based on the performance of the Least Performing Underlying. In no event,
however, will the payment at maturity be greater than the $1,000 principal
amount note, plus any accrued and unpaid interest. 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 August 24, 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 (RTY) (the Index), the Market Vectors Gold Miners ETF (GDX) (a
Fund) and the iShares® MSCI Brazil Index Fund (EWZ) (a Fund,
and together with GDX, the Funds) (each an Underlying, and collectively,
the Underlyings).
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Interest Rate:
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If a
Knock-Out Event does not occur, between 19.00% and 20.00% per
annum, paid monthly and calculated on a 30/360 basis. The actual Interest
Rate if a Knock-Out Event has not occurred will be determined on the Pricing
Date and will not be less than 19.00% per annum or greater than 20.00% per
annum.
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If a
Knock-Out Event occurs during any monthly Monitoring Period,
the Interest Rate for the corresponding monthly interest period and each
subsequent monthly interest period is 4.00% per annum, paid monthly and
calculated on a 30/360 basis. |
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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. |
Knock-Out Buffer
Amount:
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With
respect to each Underlying, an amount that represents 37.50%
of the Starting Underlying Level of such Underlying (in the case of the GDX
and EWZ, subject to adjustments).
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Monitoring Period:
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There are twelve
monthly Monitoring Periods. The first monthly Monitoring Period will be
from and including the Pricing Date to and including the First Interest
Determination Date. Each subsequent monthly Monitoring Period will be
from and excluding the previous Interest Determination Date to and including
the immediately succeeding Interest Determination Date.
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Interest
Determination Dates*:
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For
each Monitoring Period, two business days prior to the applicable Interest
Payment Date.
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Interest Payment
Dates*:
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Interest
on the notes will be payable monthly in arrears on the 24th
calendar day of each month, up to and including the final monthly interest
payment, which will be payable on the Maturity Date (each such day, an
Interest Payment Date), commencing September 24, 2011, to and including the
Maturity Date or, if the notes are called, to and including the applicable
Optional Call Date. 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 have
not been previously called, the payment at maturity, in excess of any accrued
and unpaid interest, will be based on whether a Knock-Out Event has occurred
and the performance of the Least Performing Underlying, and will be
determined as follows:
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(a)
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if a Knock-Out Event
has occurred and: |
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(i)
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the Least Performing Underlying Return is positive,
the Payment at Maturity will equal the $1,000 principal amount note; or
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(ii)
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the Least Performing Underlying Return is negative,
the Payment at Maturity will be calculated as follows: |
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$1,000 + ($1,000 × Least Performing Underlying Return); and
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(b)
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if a Knock-Out Event
has not occurred, the Payment at Maturity will equal the
$1,000 principal amount note. |
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Therefore,
if a Knock-Out Event has occurred, unless the Ending Underlying Level of each
of the Underlyings is greater than or equal to its Starting Underlying Level,
the Payment at Maturity will be less than the $1,000 principal amount note
and you could lose your entire investment. In no event, however, will the
Payment at Maturity be greater than the $1,000 principal amount note plus any
accrued and unpaid interest. |
Knock-Out Event:
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A
Knock-Out Event occurs if, on any day during any 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
Knock-Out Buffer Amount.
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Underlying Return:
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With respect to
each Underlying, the Underlying Return is calculated as follows:
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Ending Underlying Level Starting Underlying Level
Starting Underlying Level
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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, Description of Notes Payment upon Optional Call and Description of Notes
Postponement of a Determination Date Notes with a maturity of not more
than one year, as applicable, in the accompanying product supplement no.
211-A-II
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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. 211-A-II 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 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 $38.00 per $1,000 principal amount note and may
use a portion of that commission to allow selling concessions to other
dealers of approximately $22.50 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 more or
less than $38.00 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 $60.00 per
$1,000 principal amount note. See Plan of Distribution (Conflicts of
Interest) beginning on page PS-95 of the accompanying product supplement no.
211-A-II.
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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 11, 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. 211-A-II 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. 211-A-II dated August
11, 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. 211-A-II, 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
Pricing Date:
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On or about August
19, 2011
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Settlement Date:
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On or about August
24, 2011
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Observation Date*:
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August 21, 2012
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Maturity Date*:
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August 24, 2012
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CUSIP:
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48125XL53
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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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February 24, 2012
and May 24, 2012
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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 Funds, the closing price of the relevant Fund on the
Pricing Date divided by the
Share Adjustment Factor for such Fund (the Initial Share Price). We refer
to each of the Initial Index Level for the Index and the Initial Share Price
for each of the Funds 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 Funds, the closing price of one share of the
relevant 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
each of the Funds as an Ending Underlying Level.
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Share Adjustment Factor:
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With respect to the Funds, 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.
211-A-II for further information about these adjustments.
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Least Performing Underlying:
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The Underlying with the Least
Performing Underlying Return.
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Least Performing Underlying
Return:
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The lowest of the Underlying
Return of the Russell 2000® Index, the Market Vectors Gold Miners
ETF and the iShares® MSCI Brazil Index Fund.
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JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
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TS-1 |
Selected Purchase Considerations
- THE NOTES OFFER A HIGHER INTEREST RATE IF A KNOCK-OUT
EVENT DOES NOT OCCUR THAN THE YIELD ON DEBT SECURITIES OF COMPARABLE MATURITY
ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT RATING If a Knock-Out Event does not occur, the notes will pay interest
at a rate of between 19.00% and 20.00% per annum, to be determined on the
Pricing Date, 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 will pay interest monthly at a rate that will depend on
whether a Knock-Out Event occurs. If a Knock-Out Event does not occur, interest
will be paid at an Interest Rate of between 19.00% and 20.00% per annum, to be
determined on the Pricing Date. If a Knock-Out Event occurs, interest for that
monthly period and each subsequent period thereafter will be paid at an
Interest Rate of 4.00% per annum. Interest
will be payable monthly in arrears on the 24th calendar day of each month, up
to and including the final monthly interest payment, which will be payable on
the Maturity Date (each such day, an Interest Payment Date), commencing
September 24, 2011, to and including the Maturity Date or, if the notes are called,
to and including the applicable Optional Call Date.
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 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 September 2011 is September 24,
2011, but because September 24, 2011 is a Saturday, payment of interest with
respect to that Interest Payment Date will be made on September 26, 2011, the
next succeeding business day.
- POTENTIAL EARLY EXIT AS A RESULT OF THE OPTIONAL CALL FEATURE If the notes are called pursuant to an Optional Call, on the applicable Optional Call Date, for each $1,000 principal amount note, you will receive
$1,000 plus accrued and unpaid interest to but excluding the applicable Optional Call Date.
- THE NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL If the notes are not called, we will pay you your principal back
at maturity so long as a Knock-Out Event has not occurred and the Ending
Underlying Level of each Underlying is not less than its Starting Underlying
Level. A Knock-Out Event occurs if, on any day during any 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 Knock-Out Buffer Amount. However,
if the notes are not called, a Knock-Out Event has occurred and the Ending
Underlying Level of any 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 Least Performing Underlying, which will be either the
Russell 2000® Index, the Market
Vectors Gold Miners ETF or the iShares® MSCI Brazil
Index Fund.
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 Global 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.
The iShares® MSCI Brazil Index Fund
is an exchange-traded fund of iShares, Inc., which is a registered investment
company that consists of numerous separate investment portfolios. The iShares®
MSCI Brazil Index Fund seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of
publicly traded securities in Brazil as measured by the MSCI Brazil Index. The
MSCI Brazil Index is a free-float adjusted average of the U.S. dollar values of
all of the equity securities constituting the MSCI indices for selected
companies in Brazil.
For additional information on each Underlying, see the information set
forth under The Russell 2000® Index, The Market Vectors Gold Miners ETF and the iShares® MSCI Brazil Index
Fund in the accompanying product supplement no. 211-A-II.
- 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. 211-A-II. We and you
agree (in the absence of an administrative determination or judicial ruling to
the contrary) to treat the notes for U.S. federal income tax purposes as units
comprising: (i) 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
Least Performing Underlying Return
and (ii) a Deposit of $1,000 per $1,000 principal amount note to secure your
potential obligation under the Put Option. We will determine the portion of
each
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JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
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TS-2 |
coupon payment that we will allocate to Put
Premium and to interest on the Deposit, respectively, and will provide that
allocation in the pricing supplement for the notes. If the notes had priced on
August 9, 2011, we would have treated 5.16% of each coupon payment as Put
Premium and the remainder as interest on the Deposit. 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. 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.
Selected Risk Considerations
An
investment in the notes involves significant risks. Investing in the notes is
not equivalent to investing directly in 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. 211-A-II dated August 11, 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 so
long as a Knock-Out Event has not occurred or, if a Knock-Out Event occurs, 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
Knock-Out Event has occurred and the Ending Underlying Level of any 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 Least 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.
- IF A KNOCK-OUT EVENT OCCURS DURING ANY MONTHLY
MONITORING PERIOD, THE INTEREST RATE FOR THE CORRESPONDING MONTHLY INTEREST
PERIOD AND EACH SUBSEQUENT INTEREST PERIOD IS 4.00% PER ANNUM If a Knock-Out Event
occurs during any monthly Monitoring Period, the Interest Rate for the
corresponding monthly interest period and each subsequent interest period is
4.00% per annum. For example, if a Knock-Out Event occurs during the period
from the Pricing Date to the First Interest Determination Date, the Interest
Rate per annum for each interest period is 4.00% and the maximum amount of
interest you will be entitled to receive is $40.00 per $1,000 principal amount
note.
- 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. 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 decline.
- YOUR RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL
AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF THE
UNDERLYINGS If the notes are not called, a Knock-Out Event has not occurred
or a Knock-Out Event has occurred but the Ending Underlying Level of any
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 any
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 the Underlyings, which may be significant. Accordingly, the
return on the notes may be significantly less than the return on a direct
investment in any 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 THE UNDERLYINGS Your return on
the notes, if a Knock-Out Event occurs 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 each
of the Underlyings. Poor performance by any of the Underlyings over the term
of the notes may negatively affect your payment at maturity and your interest
payments, and will not be offset or mitigated by
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JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
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TS-3 |
positive performance by the other Underlyings. Accordingly, your
investment is subject to the risk of decline in the closing level or closing
price, as applicable, of each Underlying.
- THE INTEREST RATE MAY BE REDUCED AND THE RETURN OF
PRINCIPAL AT MATURITY MAY TERMINATE ON ANY DAY DURING A MONITORING PERIOD If, on any day
during a 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 Knock-Out Buffer Amount, a Knock-Out Event will
occur, you will be fully exposed to any depreciation in the Least Performing
Underlying and your interest rate will be reduced until maturity or call. We
refer to this feature as a contingent buffer. Under these circumstances, and
if the Ending Underlying Level of any 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 Least
Performing Underlying is less than the Starting Underlying Level. You will be
subject to this potential loss of principal and a lower interest payment 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 Knock-Out Buffer 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 a
higher interest rate 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 LEAST PERFORMING
UNDERLYING
If the notes are not called and a Knock-Out Event occurs, you will lose some or
all of your investment in the notes if the Ending Underlying Level of any
Underlying is below its Starting Underlying Level. This will be true even if
the Ending Underlying Level of any of the other Underlyings is greater than or
equal to its Starting Underlying Level. The three Underlyings respective
performances may not be correlated and, as a result, if the notes are not
called, 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. and Brazilian 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 six 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 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.
- KNOCK-OUT
BUFFER 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 Knock-Out Buffer Amount
on any day during a 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 Knock-Out Event has occurred,
you will be fully exposed at maturity to any decline in the value of the Least
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 Knock-Out
Buffer Amount on any day during a 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 a 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 FUNDS Although
the shares of each Fund 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 Funds or that there will be
liquidity in the trading market. The Funds are subject to
|
JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-4 |
management risk, which is the risk that the applicable 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 Funds, and consequently, the value of the
notes.
- DIFFERENCES BETWEEN EACH FUND AND THE APPLICABLE UNDERLYING INDEX Each Fund does not fully
replicate the applicable underlying index and may hold securities not included
in the applicable underlying index, and its performance will reflect additional
transaction costs and fees that are not included in the calculation of the
applicable underlying index, all of which may lead to a lack of correlation
between a Fund and the applicable underlying index. In addition, corporate
actions with respect to the sample of equity securities (such as mergers and
spin-offs) may impact the variance between a Fund and the applicable underlying
index. Finally, because the shares of each Fund are traded on the NYSE Arca
and are subject to market supply and investor demand, the market value of one
share of each Fund may differ from the net asset value per share of each Fund.
For all of the foregoing reasons, the performance of the Funds may not
correlate with the performance of the applicable underlying 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.
- THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK Because the prices of the equity securities held by the iShares®
MSCI Brazil Index Fund are
converted into U.S. dollars for purposes of calculating the net asset value of
the iShares® MSCI Brazil Index Fund, your notes will be exposed to
currency exchange rate risk with respect to each of the currencies in which the
equity securities held by the iShares® MSCI Brazil Index Fund trade,
which is primarily the Brazilian real. Your net exposure will depend on the
extent to which such currencies strengthen or weaken against the U.S. dollar.
If the U.S. dollar strengthens against the currencies in which securities
underlying the iShares® MSCI Brazil Index Fund are traded, the net
asset value of the iShares® MSCI Brazil Index Fund will be adversely
affected and the amount we pay you at maturity, if any, may be reduced. Of
particular importance to potential currency exchange risk are:
- existing and expected rates of inflation;
- existing and expected interest rate levels;
- the balance of payments; and
- the extent of government surpluses or deficits
in Brazil and the United States of America.
All of these factors are in turn sensitive to the monetary, fiscal
and trade policies pursued by the governments of Brazil and the United States
and other countries important to international trade and finance.
- NON-U.S. SECURITIES RISK The
equity securities underlying the iShares® MSCI Brazil Index Fund
have been issued by non-U.S. companies (primarily Brazilian companies).
Investments in securities linked to the value of such non-U.S. equity
securities involve risks associated with the securities markets in those countries
(including Brazil), including risks of volatility in those markets, government
intervention in those markets and cross shareholdings in companies in certain
countries. Also, there is generally less publicly available information
about companies in some of these jurisdictions than about U.S. companies that
are subject to the reporting requirements of the SEC, and generally non-U.S.
companies are subject to accounting, auditing and financial reporting standards
and requirements and securities trading rules different from those applicable
to U.S. reporting companies. The prices of securities in foreign markets
may be affected by political, economic, financial and social factors in those
countries, or global regions, including changes in government, economic and
fiscal policies and currency exchange laws.
- EMERGING MARKETS RISK The equity
securities underlying the iShares® MSCI Brazil Index Fund have been
issued by non-U.S. companies located primarily in Brazil, which is an emerging
markets country. Countries with emerging markets may have relatively
unstable governments, may present the risks of nationalization of businesses,
restrictions on foreign ownership and prohibitions on the repatriation of
assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be based
on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or
|
JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-5 |
inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of holdings difficult or
impossible at times. Moreover, the economies in such countries may differ
favorably or unfavorably from the economy in the United States in such respects
as growth of gross national product, rate of inflation, capital reinvestment,
resources and self-sufficiency. Any of the foregoing could adversely
affect the market value of shares of the iShares® MSCI Brazil Index
Fund and the notes.
- 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.
- 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 Funds. We or our affiliates may also trade in the Funds or
instruments related to the Fund or the equity securities included in the Index
or held by the Funds 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.
- THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS
LIMITED The calculation agent will make adjustments to the Share
Adjustment Factor for certain events affecting the shares of the Funds.
However, the calculation agent will not make an adjustment in response to all
events that could affect the shares of the Funds. 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 Knock-Out Event has occurred;
- the interest rate on the notes;
- the 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 Funds that may or
may not require an adjustment to the applicable Share Adjustment Factor;
- the exchange rate and the volatility of the
exchange rate between the U.S. dollar and the Brazilian real and the
correlation between that rate and the prices of shares of the iShares®
MSCI Brazil Index Fund; and
- our creditworthiness, including actual or anticipated downgrades
in our credit ratings.
|
JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-6 |
Historical Information
The
following graphs show the historical weekly performance of the Russell 2000®
Index from January 6, 2006 through August 5, 2011, the Market Vectors Gold
Miners ETF from May 26, 2006 through August 5, 2011 and the iShares®
MSCI Brazil Index Fund from January 6, 2006 through August 5, 2011. The
closing level of the Russell 2000® Index on August 10, 2011 was
660.21. The closing price of one share of the Market Vectors Gold Miners ETF
on August 10, 2011 was $59.30. The closing price of one share of the iShares®
MSCI Brazil Index Fund on August 10, 2011 was $57.84.
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 any Underlying on any day during a Monitoring Period or the
Observation Date. We cannot give you assurance that the performance of the
Underlyings will result in the return of any of your initial investment.
|
JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-7 |
What Is the Total Return on the Notes at Maturity, Assuming a
Range of Performances for the Least 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 Least
Performing Underlying is the Russell 2000® Index. We make no
representation or warranty as to which of the Underlyings will be the Least
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 Least Performing Underlying of 700 and the
Interest Rate of 19.00% per annum if a Knock-Out Event has not occurred and
reflect the Interest Rate of 4.00% per annum if a Knock-Out Event has occurred
and the Knock-Out Buffer Amount of 37.50%. 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.
|
|
Knock-Out
Event Has Not Occurred (1)
|
Knock-Out
Event Has Occurred During the First
Monitoring Period of the Notes (1)
|
|
Ending
Underlying
Level
|
Least
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
|
|
1,260.00
|
80.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
1,155.00
|
65.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
1,050.00
|
50.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
980.00
|
40.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
910.00
|
30.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
840.00
|
20.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
770.00
|
10.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
735.00
|
5.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
700.00
|
0.00%
|
19.00%
|
$1,190.00
|
4.00%
|
$1,040.00
|
665.00
|
-5.00%
|
19.00%
|
$1,190.00
|
-1.00%
|
$990.00
|
630.00
|
-10.00%
|
19.00%
|
$1,190.00
|
-6.00%
|
$940.00
|
560.00
|
-20.00%
|
19.00%
|
$1,190.00
|
-16.00%
|
$840.00
|
490.00
|
-30.00%
|
19.00%
|
$1,190.00
|
-26.00%
|
$740.00
|
437.50
|
-37.50%
|
19.00%
|
$1,190.00
|
-33.50%
|
$665.00
|
420.00
|
-40.00%
|
N/A
|
N/A
|
-36.00%
|
$640.00
|
350.00
|
-50.00%
|
N/A
|
N/A
|
-46.00%
|
$540.00
|
280.00
|
-60.00%
|
N/A
|
N/A
|
-56.00%
|
$440.00
|
210.00
|
-70.00%
|
N/A
|
N/A
|
-66.00%
|
$340.00
|
140.00
|
-80.00%
|
N/A
|
N/A
|
-76.00%
|
$240.00
|
70.00
|
-90.00%
|
N/A
|
N/A
|
-86.00%
|
$140.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-96.00%
|
$40.00
|
|
(1) A Knock-Out
Event occurs if the closing level or closing price, as applicable, of any
Underlying is less than the Starting Underlying Level of such Underlying by
more than 37.50% on any day during a Monitoring Period.
|
The following examples
illustrate how the note total returns and total payments set forth in the table
above are calculated.
Example 1: A Knock-Out Event has not occurred and the level of the Least
Performing Underlying increases from the Starting Underlying Level of 700 to an
Ending Underlying Level of 735. Because a Knock-Out Event has not occurred, the
investor receives total payments of $1,190 per $1,000 principal amount note
over the term of the notes, consisting of interest payments of $190 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 Knock-Out Event has not occurred and the level of the Least
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 Least
Performing Underlying of 560 is less than its Starting Underlying Level of 700,
because a Knock-Out Event has not occurred, the investor receives total payments of $1,190 per
$1,000 principal amount note over the term of the notes, consisting of interest
payments of $190 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.
|
JPMorgan
Structured Investments
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-8 |
Example 3: A Knock-Out Event has occurred during the first monthly
Monitoring Period and the level of the Least Performing Underlying decreases
from the Starting Underlying Level of 700 to an Ending Underlying Level of
420. Because
a Knock-Out Event has occurred and the Ending Underlying Level of the Least
Performing Underlying of 420 is less than its Starting Underlying Level of 700,
the investor
receives total payments of $640 per $1,000 principal amount note over the term
of the notes, consisting of interest payments of $40 per $1,000 principal
amount note over the term of the notes and a payment at maturity of $600 per
$1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -40%)] + $40 = $640
Example 4: A Knock-Out Event has occurred during the first monthly
Monitoring Period and the level of the Least Performing Underlying decreases
from the Starting Underlying Level of 700 to an Ending Underlying Level of 0. Because a Knock-Out Event has
occurred and the Ending Underlying Level of the Least Performing Underlying of
0 is less than its Starting Underlying Level of 700, the investor receives total payments
of $40 per $1,000 principal amount note over the term of the notes, consisting
solely of interest payments of $40 per $1,000 principal amount note over the
term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)] + $40 = $40
These 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
High/Low Coupon Callable Yield Notes Linked to
the Least Performing of the Russell 2000® Index, the Market Vectors
Gold Miners ETF and the iShares® MSCI Brazil Index Fund
|
TS-9 |