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 to
Product Supplement 202-A-I
Registration Statement No. 333-155535
Dated October 3, 2011; Rule 433
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Structured
Investments
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|
$
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.
You are entitled to
repayment of principal in full at maturity, subject to the credit risk of
JPMorgan Chase & Co.
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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 225% and
250%. The actual Participation Rate will be determined on the pricing date
and will not be less than 225% or greater than 250%.
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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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48125X4L7
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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.
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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 $60.00 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 $35.00 per $1,000
principal amount note. The concessions of approximately $35.00 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 $60.00 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.govas 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 225% or greater than 250%.
- 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
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JPMorgan Structured Investments
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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-5 |
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 225% 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 225% or greater than 250%.
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 (225%)
|
Additional
Amount
|
|
Principal
|
|
Payment at Maturity
|
|
198.00
|
80.00%
|
180.00%
|
$1,800.00
|
+
|
$1,000.00
|
=
|
$2,800.00
|
187.00
|
70.00%
|
157.50%
|
$1,575.00
|
+
|
$1,000.00
|
=
|
$2,575.00
|
176.00
|
60.00%
|
135.00%
|
$1,350.00
|
+
|
$1,000.00
|
=
|
$2,350.00
|
165.00
|
50.00%
|
112.50%
|
$1,125.00
|
+
|
$1,000.00
|
=
|
$2,125.00
|
154.00
|
40.00%
|
90.00%
|
$900.00
|
+
|
$1,000.00
|
=
|
$1,900.00
|
143.00
|
30.00%
|
67.50%
|
$675.00
|
+
|
$1,000.00
|
=
|
$1,675.00
|
132.00
|
20.00%
|
45.00%
|
$450.00
|
+
|
$1,000.00
|
=
|
$1,450.00
|
126.50
|
15.00%
|
33.75%
|
$337.50
|
+
|
$1,000.00
|
=
|
$1,337.50
|
121.00
|
10.00%
|
22.50%
|
$225.00
|
+
|
$1,000.00
|
=
|
$1,225.00
|
115.50
|
5.00%
|
11.25%
|
$112.50
|
+
|
$1,000.00
|
=
|
$1,112.50
|
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 $450 and the payment at maturity is equal to $1,450 per $1,000 principal
amount note, calculated as follows:
$1,000 + ($1,000 × [(132-100)/100] × 225%)
= $1,450
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 100, 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 |