Term sheet |
Term sheet to |
Structured |
JPMorgan
Chase & Co. $ Monthly Review Notes Linked to the S&P GSCITM Excess Return Index due March 10, 2011 |
General
Key Terms
Index: |
S&P GSCITM Excess Return Index |
Automatic Call: |
If the Index closing level on any Review Date is greater than or equal to the Call Level, the notes will be automatically called for a cash payment per note that will vary depending on the applicable Review Date and call premium. |
Call Level: |
100% of the Initial Index Level for each Review Date. |
Payment if Called: |
For every $1,000 principal amount note, you will receive one payment of $1,000 plus a call premium that will not be less than 13.00% per annum. If the notes are automatically called on a Review Date other than the final Review Date, we will redeem each note and pay the applicable call premium on the third business day after the applicable Review Date. If the notes are called on the final Review Date, we will redeem each note and pay the applicable call premium on the Maturity Date. |
Payment at Maturity: |
Notwithstanding anything to the contrary in the accompanying product supplement no. 169-A-I, for purposes of these notes, if the notes are not called and a mandatory redemption is not triggered and the Ending Index Level declines from the Initial Index Level by less than 5%, you will receive the principal amount of your notes at maturity. If the notes are not called and a mandatory redemption is not triggered and the Ending Index Level declines from the Initial Index Level by more than 5%, you will lose 1.05263% of the principal amount of your notes for every 1% decline in the Ending Index Level beyond 5%, as compared to the Initial Index Level and your payment at maturity per $1,000 principal amount note will be calculated as follows: $1,000 + [$1,000 × (Final Index Return + 5.00%) × 1.05263] Assuming the notes are not called, you will lose some or all of your initial principal amount note at maturity if the Ending Index Level has declined by more than 5% from the Initial Index Level. |
Buffer Amount: |
5% |
Downside Leverage Factor: |
Notwithstanding anything to the contrary in the accompanying product supplement no. 169-A-I, for purposes of these notes, the downside leverage factor is 1.05263. |
Final Index Return: |
Ending Index
Level Initial Index Level |
Initial Index Level: |
The Index closing level on the pricing date, which is expected to be on or about September 3, 2010. |
Ending Index Level: |
The Index closing level on the final Review Date. |
Review Dates: |
The third calendar day of each month commencing October 3, 2010 to and including March 3, 2011 (the final Review Date), or if any such day is not a business day, the applicable Review Date will be the following business day. |
Maturity Date: |
March 10, 2011 |
CUSIP: |
48124AD38 |
Subject to postponement in the event of a market disruption event and as described under Description of Notes Payment at Maturity or Description of Notes Postponement of a Review Date, as applicable, in the accompanying product supplement no. 169-A-I or early acceleration in the event 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. 169-A-I and in Selected Risk Considerations Commodity Futures Contracts Are Subject to Uncertain Legal and Regulatory Regimes herein.
Investing in the Monthly Review Notes involves a number of risks. See Risk Factors beginning on page PS-6 of the accompanying product supplement no. 169-A-I and Selected Risk Considerations beginning on page TS-3 of this term sheet.
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. 169-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.
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, the accompanying product supplement no. 169-A-I or the accompanying 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, which includes our affiliates expected cost of providing such hedge as well as the profit our affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge. The estimated cost of hedging includes the projected profits, which in no event will exceed $5.00 per $1,000 principal amount note, that our affiliates expect to realize in consideration for assuming the risk inherent in hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, the actual cost of such hedging may result in a profit that is more or less than expected, or could result in a loss. For additional related information, please see Use of Proceeds beginning on page PS-19 of the accompanying product supplement no. 169-A-I. |
(2) |
Please see Supplemental Plan of Distribution (Conflicts of Interest) on page TS-5 of this term sheet for information about fees and commissions. |
The agent for this offering, J.P. Morgan Securities LLC, which we refer to as JPMS, is an affiliate of ours. See Supplemental Plan of Distribution (Conflicts of Interest) on page TS-5 of this term sheet.
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.
September 1, 2010
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. 169-A-I dated July 29, 2009. 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. 169-A-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement no.
169-A-I dated July 29, 2009:
http://www.sec.gov/Archives/edgar/data/19617/000089109209002972/e36072_424b2.pdf
Prospectus supplement
dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
Supplemental Terms of the Notes
Notwithstanding anything to the contrary in the accompanying product supplement no. 169-A-I, for purposes of these notes, the Index shall be included as one of the indices described under The GSCI Indices.
The following additional terms shall apply to the notes:
Commodity Hedging Disruption Event
Notwithstanding anything to the contrary in the accompanying product supplement no. 169-A-I, for purposes of these notes, commodity hedging disruption event means:
(a) due to (i) the adoption of, or any change in, any applicable law, regulation, rule or order (including, without limitation, any tax law); or (ii) the promulgation of, or any change in, the interpretation, application, exercise or operation by any court, tribunal, regulatory authority, exchange or trading facility or any other relevant entity with competent jurisdiction of any applicable law, rule, regulation, order, decision or determination (including, without limitation, as implemented by the U.S. Commodities Futures Trading Commission or any exchange or trading facility), in each case occurring on or after the pricing date, the calculation agent determines in good faith that it is contrary (or upon adoption, it will be contrary) to such law, rule, regulation, order, decision or determination for us to purchase, sell, enter into, maintain, hold, acquire or dispose of our or our affiliates (A) positions or contracts in securities, options, futures, derivatives or foreign exchange or (B) other instruments or arrangements, in each case, in order to hedge our obligations under the notes (in the aggregate on a portfolio basis or incrementally on a trade by trade basis) (hedge positions), including (without limitation) if such hedge positions (in whole or in part) are (or, but for the consequent disposal thereof, would otherwise be) in excess of any allowable position limit(s) in relation to any commodity traded on any exchange(s) or other trading facility (it being within the sole and absolute discretion of the calculation agent to determine which of the hedge positions are counted towards such limit); or
(b) for any reason, we or our affiliates are unable, after using commercially reasonable efforts, to (i) acquire, establish, reestablish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) the calculation agent deems necessary to hedge the risk of entering into and performing our commodity-related obligations with respect to the notes, or (ii) realize, recover or remit the proceeds of any such transaction(s) or asset(s).
|
|
JPMorgan
Structured Investments |
TS-1 |
The following table illustrates the hypothetical simple total return (i.e., not compounded) on the notes that could be realized on the applicable Review Date for a range of movements in the Index as shown under the column Final Index Return. The following table assumes a Initial Index Level of 400 and a hypothetical Call Level of 400 on each Review Date (which is not the actual Initial Index Level or Call Level applicable to these notes). The table reflects the Buffer Amount of 5%, the Downside Leverage Factor of 1.05263 and that the percentages used to calculate the call premium amount of 13% per annum, regardless of the appreciation of the Index, which may be significant. There will be only one payment on the notes whether called or at maturity. An entry of n/a indicates that the notes would not be called on the applicable Review Date and no payment would be made for such date. The hypothetical 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 following examples illustrate how the total returns set forth in the table above are calculated.
Example 1: The Index closing level increases from the Initial Index Level of 400 to a Index closing level of 440 on the first Review Date. Because the Index closing level on the first Review Date of 440 is greater than the hypothetical Call Level of 400, the notes are automatically called, and the investor receives a single payment of $1,010.83 per $1,000 principal amount note.
Example 2: The Index closing level decreases from the Initial Index Level of 400 to a Index closing level of 380 on the first Review Date and is 400 on the second Review Date. Because (a) the Index closing level on the first Review Date of 380 is less than the hypothetical Call Level of 400, and (b) the Index closing level on the second Review Date of 400 is equal to the hypothetical Call Level of 400, the notes are automatically called on the second Review Date and the investor receives a single payment of $1,021.67 per $1,000 principal amount note.
Example 3: The Index closing level on each of the first five Review Dates is below the Initial Index Level of 400 and is 390 on the final Review Date. Because (a) the Index closing level on each of the first five Review Dates and the final Review Date is less than the hypothetical Call Level on each of the five Review Dates of 400, and (b) the Ending Index Level has not declined by more than 5% from the Initial Index Level, the notes are not called and the payment at maturity is the principal amount of $1,000 per $1,000 principal amount note.
Example 4: The Index closing level on each of the first five Review Dates is below the Initial Index Level of 400 and is 240 on the final Review Date. Because (a) the Index closing level on each of the first five Review Dates and the final Review Date is less than the hypothetical Call Level on each of the five Review Dates of 400, and (b) the Ending Index Level has declined by more than 5% from the Initial Index Level, the notes are not called and the investor receives a payment at maturity that is less than the principal amount for each $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-40% + 5.00%) × 1.05263] = $631.58
Selected Purchase Considerations
|
|
JPMorgan
Structured Investments |
TS-2 |
Moreover, on December 7, 2007, the Treasury Department 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 gains as ordinary income that is subject to 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.
Subject to certain assumptions and representations received from us, the discussion in this section entitled Capital Gains Tax Treatment, 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 Sidley Austin LLP regarding the material U.S. federal income tax treatment of owning and disposing of the notes.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in platinum. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 169-A-I dated July 29, 2009.
|
|
JPMorgan
Structured Investments |
TS-3 |
|
|
JPMorgan
Structured Investments |
TS-4 |
Historical Information
The following graph sets forth the historical performance of the Index based on the weekly Index closing level from January 7, 2005 through August 27, 2010. The Index closing level on August 31, 2010 was 390.3656. 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.
Supplemental Plan of Distribution (Conflicts of Interest)
We own, directly or indirectly, all of the outstanding equity securities of JPMS, the agent for this offering. The net proceeds received from the sale of notes will be used, in part, by JPMS or one of its affiliates in connection with hedging our obligations under the notes. In accordance with NASD Rule 2720, JPMS may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer.
JPMS, acting as agent for JPMorgan Chase & Co., will receive a commission that will depend on market conditions on the pricing date. In no event will that commission exceed $5.00 per $1,000 principal amount note. See Plan of Distribution beginning on page PS-48 of the accompanying product supplement no. 169-A-I.
For a different portion of the notes to be sold in this offering, an affiliated bank will receive a fee and another affiliate of ours will receive a structuring and development fee. In no event will the total amount of these fees exceed $5.00 per $1,000 principal amount note.
|
|
JPMorgan
Structured Investments |
TS-5 |