FWP 1 e46904_fwp.htm TERM SHEET

Term sheet
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011,
product supplement no. 4-I dated November 14, 2011 and
underlying supplement no. 1-I dated November 14, 2011

 Term Sheet to
Product Supplement No. 4-I
Registration Statement No. 333-177923
Dated January 12, 2012; Rule 433
 
Structured 
 Investments 		      

$
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index due July 19, 2013

General

· The notes are designed for investors who seek a return of 2 times the appreciation of a weighted basket of two domestic indices, up to a maximum return that will not be less than 20.00% at maturity. Investors should be willing to forgo interest and dividend payments and, if the Ending Basket Level is less than the Starting Basket Level by more than 10%, be willing to lose up to 90% of their principal. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co. 
· Senior unsecured obligations of JPMorgan Chase & Co. maturing July 19, 2013* 
· Minimum denominations of $1,000 and integral multiples thereof 
· The notes are expected to price on or about January 13, 2012 and are expected to settle on or about January 19, 2012. 

Key Terms

Basket: The notes are linked to a weighted basket consisting of the S&P 500® Index (“SPX”) and the Russell 2000® Index (“RTY”) (each an “Index” and together, the “Indices”).
Component Weights: The SPX Weight is 50.00% and the RTY Weight is 50.00% (each a “Component Weight” and collectively, the “Component Weights”).
Upside Leverage Factor:   2
Payment at Maturity:

 If the Ending Basket Level is greater than the Starting Basket Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Basket Return multiplied by 2, subject to the Maximum Return.  Accordingly, if the Ending Basket Level is greater than the Starting Basket Level, your payment at maturity per $1,000 principal amount note will be calculated as follows:
  $1,000 + ($1,000 × Basket Return × 2), subject to the Maximum Return
  If the Ending Basket Level is equal to or less than the Starting Basket Level by up to 10%, you will receive the principal amount of your notes at maturity. 
  If the Ending Basket Level is less than the Starting Basket Level by more than 10%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Basket Level is less than the Starting Basket Level by more than 10%, and your payment at maturity per $1,000 principal amount note will be calculated as follows:
  $1,000 + [$1,000 × (Basket Return + 10%)]
  If the Ending Basket Level is less than the Starting Basket Level by more than 10%, you could lose up to $900 per $1,000 principal amount note.
Maximum Return: At least 20.00%.  Assuming the Maximum Return is 20.00%, if the Basket Return is equal to or greater than 10.00%, you will receive the Maximum Return of 20.00%, which entitles you to a maximum payment at maturity of $1,200 per $1,000 principal amount note that you hold.  The actual Maximum Return will be determined on the pricing date and will not be less than 20.00%.  Accordingly, the actual maximum payment at maturity per $1,000 principal amount note will not be less than $1,200.
Buffer Amount: 10%
Basket Return:

Ending Basket Level – Starting Basket Level
               Starting Basket Level

Starting Basket Level: Set equal to 100 on the pricing date
Ending Basket Level: The Basket Closing Level on the Observation Date
Basket Closing Level: On the Observation Date, the Basket Closing Level will be calculated as follows:
  100 × [1 + (SPX Return × SPX Weight) +  (RTY Return × RTY Weight)]
  Each of the returns set forth in the formula above refers to the Index Return for the relevant Index, which reflects the performance of the relevant Index, expressed as a percentage, from the Index closing level of that Index on the pricing date to the closing level of that Index on the Observation Date. 
Observation Date*: July 16, 2013
Maturity Date*: July 19, 2013
CUSIP: 48125VJR2
* Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Payment at Maturity” and “Description of Notes — Postponement of a Determination Date — B. Notes Linked to a Basket” in the accompanying product supplement no. 4-I 

Investing in the Buffered Return Enhanced Notes involves a number of risks. See “Risk Factors” beginning on page PS-21 of the accompanying product supplement no. 4-I, “Risk Factors” beginning on page US-1 of the accompanying underlying supplement no. 1-I and “Selected Risk Considerations” beginning on page TS-2 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, underlying supplement, prospectus supplement and prospectus. Any representation to the contrary is a criminal offense. 

  Price to Public (1) Fees and Commissions (2) Proceeds to Us
Per note $ $          $         
Total $ $          $         
(1) The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. 
(2) 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 $13.50 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 $2.50 per $1,000 principal amount note. This commission includes the projected profits that our affiliates expect to realize, some of which may be allowed to other unaffiliated dealers, for assuming risks inherent in hedging our obligations under the notes. The actual commission received by JPMS may be more or less than $13.50 per $1,000 principal amount note and will depend on market conditions on the pricing date. In no event will the commission received by JPMS, which includes concessions to and other amounts that may be allowed to other dealers, exceed $20.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-77 of the accompanying product supplement no. 4-I. 

The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. 

 

January 12, 2012

 
 

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. 4-I, underlying supplement no. 1-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 14, 2011, as supplemented by the prospectus supplement dated November 14, 2011 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. 4-I dated November 14, 2011 and underlying supplement no. 1-I dated November 14, 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. 4-I and “Risk Factors” in the accompanying underlying supplement no. 1-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes. 

You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website): 

· Product supplement no. 4-I dated November 14, 2011:
http://www.sec.gov/Archives/edgar/data/19617/000089109211007593/e46160_424b2.pdf  
· Underlying supplement no. 1-I dated November 14, 2011:
http://www.sec.gov/Archives/edgar/data/19617/000089109211007615/e46154_424b2.pdf  
· Prospectus supplement dated November 14, 2011:
http://www.sec.gov/Archives/edgar/data/19617/000089109211007578/e46180_424b2.pdf  
· Prospectus dated November 14, 2011:
http://www.sec.gov/Archives/edgar/data/19617/000089109211007568/e46179_424b2.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. 

Selected Purchase Considerations

· CAPPED APPRECIATION POTENTIAL — The notes provide the opportunity to enhance equity returns by multiplying a positive Basket Return by 2, up to the Maximum Return. The actual Maximum Return will be set on the pricing date and will not be less than 20.00%. Accordingly, the actual maximum payment at maturity will not be less than $1,200 per $1,000 principal amount note. Because the notes are our senior unsecured obligations, payment of any amount on the notes is subject to our ability to pay our obligations as they become due. 
· LIMITED PROTECTION AGAINST LOSS — We will pay you your principal back at maturity if the Ending Basket Level is not less than the Starting Basket Level by more than 10%. If the Ending Basket Level is less than the Starting Basket Level by more than 10%, for every 1% that the Ending Basket Level is less than the Starting Basket Level by more than 10%, you will lose an amount equal to 1% of the principal amount of your notes. 
· RETURN LINKED TO THE INDICES — The return on the notes is linked to an equally weighted basket consisting of the S&P 500® Index and the Russell 2000® Index. The S&P 500® Index consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets. The Russell 2000® Index consists of the middle 2,000 companies included in the Russell 3000ETM 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. For additional information about both Indices, see “Equity Index Descriptions — The S&P 500® Index” and “Equity Index Descriptions — The Russell Indices” in the accompanying underlying supplement no. 1-I. 
JPMorgan Structured Investments —
 TS-1
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index
 
  
· CAPITAL GAINS TAX TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes. 

Based on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt instruments for U.S. federal income tax purposes. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price. However, the Internal Revenue Service (the “IRS”) or a court may not respect this treatment of the notes, 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, such as the notes. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by Non-U.S. Holders should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, 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. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice.  

Selected Risk Considerations

An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket, the Indices or any of the equity securities included in the Indices. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 4-I dated November 14, 2011 and “Risk Factors” in the accompanying underlying supplement no. 1-I dated November 14, 2011.     

· YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. The return on the notes at maturity is linked to the performance of the Basket and will depend on whether, and the extent to which, the Basket Return is positive or negative. Your investment will be exposed to loss if the Ending Basket Level is less than the Starting Basket Level by more than 10%. For every 1% that the Ending Basket Level is less than the Starting Basket Level by more than 10%, you will lose an amount equal to 1% of the principal amount of your notes. Accordingly, you could lose up to 90% of your initial investment at maturity. 
· YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN — If the Ending Basket Level is greater than the Starting Basket Level, for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional amount that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the Basket, which may be significant. We refer to this predetermined percentage as the Maximum Return, which will be set on the pricing date and will not be less than 20.00%. 
· 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, 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. If we were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment. 
· POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent and hedging our obligations under the notes. 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 these hedging activities or other trading activities of ours or our affiliates could result in substantial returns for us or our affiliates while the value of the notes declines. In addition, we are currently one of the companies that make up the S&P 500® Index. We will not have any obligation to consider your interests as a holder of the notes in taking any corporate action that might affect the value of the S&P 500® Index and the notes.
· 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. 
JPMorgan Structured Investments —
 TS-2
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index
 
 
· 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 Impact 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. 

· NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of the equity securities included in the Indices would have. 
· CHANGES IN THE VALUE OF THE BASKET INDICES MAY OFFSET EACH OTHER — The return on the notes is linked to an equally weighted Basket composed of Indices. Changes in the value of the Indices may not correlate with each other. At a time when the level of one of the Indices increases, the level of the other Index may not increase as much or may even decline. Therefore, in calculating the Ending Basket Level, an increase in the level of one of the Indices may be moderated, or more than offset, by a lesser increase or decline in the level of the other Index. 
· 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 IMPACT THE VALUE OF THE NOTES — In addition to the levels of the Indices 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 actual and expected volatility of the Indices; 
· the time to maturity of the notes; 
· the dividend rates on the equity securities included in the Indices; 
· interest and yield rates in the market generally, as well as in the markets of the equity securities included in the Indices; 
· a variety of economic, financial, political, regulatory and judicial events; and 
· our creditworthiness, including actual or anticipated downgrades in our credit ratings. 
JPMorgan Structured Investments —
 TS-3
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index
 
  

What Is the Total Return on the Notes at Maturity Assuming a Range of Performances for the Basket?

The following table and examples illustrate the hypothetical total return at maturity on the notes. The “total return” as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume a Maximum Return of 20.00%. The actual Maximum Return will be determined on the pricing date and will not be less than 20.00%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.     

Ending
Basket Level

 Basket Return Total Return
180.00 80.00% 20.00%
165.00 65.00% 20.00%
150.00 50.00% 20.00%
140.00 40.00% 20.00%
130.00 30.00% 20.00%
120.00 20.00% 20.00%
116.00 16.00% 20.00%
110.00 10.00% 20.00%
105.00 5.00% 10.00%
102.50 2.50% 5.00%
100.00 0.00% 0.00%
95.00 -5.00% 0.00%
90.00 -10.00% 0.00%
85.00 -15.00% -5.00%
80.00 -20.00% -10.00%
70.00 -30.00% -20.00%
60.00 -40.00% -30.00%
50.00 -50.00% -40.00%
40.00 -60.00% -50.00%
30.00 -70.00% -60.00%
20.00 -80.00% -70.00%
10.00 -90.00% -80.00%
0.00 -100.00% -90.00%

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 Basket increases from a Starting Basket Level of 100 to an Ending Basket Level of 105. 

Because the Ending Basket Level of 105 is greater than the Starting Basket Level of 100 and the Basket Return of 5% multiplied by 2 does not exceed the hypothetical Maximum Return of 20.00%, the investor receives a payment at maturity of $1,100 per $1,000 principal amount note, calculated as follows: 

$1,000 + ($1,000 × 5% × 2) = $1,100

Example 2: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 90. 

Although the Basket Return is negative, because the Ending Basket Level of 90 is less than the Starting Basket Level of 100 by not more than the Buffer Amount of 10%, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note. 

Example 3: The level of the Basket increases from a Starting Basket Level of 100 to an Ending Basket Level of 130. 

Because the Ending Basket Level of 130 is greater than the Starting Basket Level of 100 and the Basket Return of 30% multiplied by 2 exceeds the hypothetical Maximum Return of 20.00%, the investor receives a payment at maturity of $1,200 per $1,000 principal amount note, the hypothetical maximum payment on the notes. 

Example 4: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 70. 

Because the Basket Return is negative and the Ending Basket Level of 70 is less than the Starting Basket Level of 100 by more than the Buffer Amount of 10%, the investor receives a payment at maturity of $800 per $1,000 principal amount note, calculated as follows: 

$1,000 + [$1,000 × (-30% + 10%)] = $800

Example 5: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 0. 

Because the Basket Return is negative and the Ending Basket Level of 0 is less than the Starting Basket Level of 100 by more than the Buffer Amount of 10%, the investor receives a payment at maturity of $100 per $1,000 principal amount note, calculated as follows: 

$1,000 + [$1,000 × (-100% + 10%)] = $100

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. 

JPMorgan Structured Investments —
 TS-4
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index
 
  

Historical Information

The following graphs show the historical weekly performance of each Index from, as well as the Basket as a whole, from January 5, 2007 through January 6, 2012. The graph of the historical Basket performance assumes the Basket level on January 5, 2007 was 100 and the Component Weights were as specified on the cover of this term sheet on that date. The Index closing level of the S&P 500® Index on January 11, 2012 was 1,292.48. The Index closing level of the Russell 2000® Index on January 11, 2012 was 767.24. 

We obtained the various 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 historical levels of each Index and the historical levels of the Basket should not be taken as an indication of future performance, and no assurance can be given as to the Index closing level of either Index on the pricing date or the Observation Date. We cannot give you assurance that the performance of the Indices will result in the return of any of your initial investment in excess of $100 per $1,000 principal amount note, subject to the credit risk of JPMorgan Chase & Co. 

 

 

 

 

JPMorgan Structured Investments —
 TS-5
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index
 
  

 

 

 

JPMorgan Structured Investments —
 TS-6
Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index and the Russell 2000® Index