Term sheet |
Term Sheet |
Structured |
$ Contingent Buffered Return Enhanced Notes Linked to the iShares® MSCI Emerging Markets Index Fund due June 28, 2012 |
General
Key Terms
Index Fund: |
The iShares® MSCI Emerging Markets Index Fund (the Index Fund) |
Upside Leverage Factor: |
2 |
Payment at Maturity: |
If the Final Share Price is greater than the Initial Share Price, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Fund Return multiplied by 2, subject to a Maximum Total Return on the notes of at least 20.10%*. For example, assuming the Maximum Total Return is 20.10%*, if the Fund Return is equal to or greater than 10.05%, you will receive the Maximum Total Return on the notes of 20.10%*, which entitles you to a maximum payment at maturity of $1,201* for every $1,000 principal amount note that you hold. Accordingly, if the Fund Return is positive, your payment at maturity per $1,000 principal amount note will be calculated as follows, subject to the Maximum Total Return: |
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$1,000 +($1,000 x Fund Return x 2) |
*The actual Maximum Total Return on the notes and the actual maximum payment at maturity will be set on the pricing date and will not be less than 20.10% and $1,201 per $1,000 principal amount note, respectively. | |
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If the Final Share Price is equal to or less than the Initial Share Price by up to 30.00%, you will receive the principal amount of your notes at maturity. |
If the Final Share Price is less than the Initial Share Price by more than 30.00%, you will lose 1 % of the principal amount of your notes for every 1% that the Final Share Price is less than the Initial Share Price and your payment at maturity per $1,000 principal amount note will be calculated as follows: | |
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$1,000 + ($1,000 x Fund Return) |
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You will lose some or all of your investment at maturity if the Final Share Price is less than the Initial Share Price by more than 30.00%. |
Contingent Buffer Amount: |
30.00% |
Fund Return: |
Final Share Price Initial Share
Price |
Initial Share Price: |
The closing price of one share of the Index Fund on the pricing date, which is expected to be on or about December 23, 2010 |
Final Share Price: |
The closing price of one share of the Index Fund on the Observation Date times the Share Adjustment Factor on such date. |
Share Adjustment Factor: |
1.0 on the pricing date and subject to adjustment under certain circumstances. See Description of Notes Payment at Maturity and General Terms of Notes Anti-Dilution Adjustments in the accompanying product supplement no. 39-A-VI for further information about these adjustments. |
Observation Date: |
June 25, 2012 |
Maturity Date: |
June 28, 2012 |
CUSIP: |
48124A6B8 |
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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. 39-A-VI |
Investing in the Contingent Buffered Return Enhanced Notes involves a number of risks. See Risk Factors beginning on page PS-10 of the accompanying product supplement no. 39-A-VI 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 prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(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 and assuming a Maximum Total Return of 20.10%, J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $11.50 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 $1.00 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 $11.50 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 $12.0 0 per $1,000 principal amount note. See Plan of Distribution (Conflicts of Interest) beginning on page PS-184 of the accompanying product supplement no. 39-A-VI. |
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.
December 20, 2010
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. 39-A-VI 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. 39-A-VI dated February 22, 2010. 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. 39-A-VI, 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. 39-A-VI dated February
22, 2010:
http://www.sec.gov/Archives/edgar/data/19617/000089109210000670/e37841_424b2.pdf
Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf
Prospectus dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005658/e33655_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
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JPMorgan
Structured Investments |
TS-1 |
Accordingly, U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules. 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 described above. 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 the potential application of the constructive ownership rules, possible alternative treatments and the issues presented by this notice. Non-U.S. Holders should also note that they may be withheld upon unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the applicable documentation requirements.
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.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index Fund or any of the equity securities held by the Index Fund. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 39-A-VI dated February 22, 2010.
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JPMorgan
Structured Investments |
TS-2 |
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JPMorgan
Structured Investments |
TS-3 |
- the occurrence of certain events to the Index Fund that may or may not require an adjustment to the Share Adjustment Factor; and
- our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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JPMorgan
Structured Investments |
TS-4 |
What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index Fund?
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 an Initial Share Price of $46.00 and a Maximum Total Return on the notes of 20.10% and reflect the Contingent Buffer Amount of 30.00%. The actual Maximum Total Return will be set on the pricing date and will not be less than 20.10%. 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.
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Final Share Price |
Fund Return |
Total Return |
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$82.800 |
80.000% |
20.100% |
$78.200 |
70.000% |
20.100% |
$73.600 |
60.000% |
20.100% |
$69.000 |
50.000% |
20.100% |
$64.400 |
40.000% |
20.100% |
$59.800 |
30.000% |
20.100% |
$55.200 |
20.000% |
20.100% |
$52.900 |
15.000% |
20.100% |
$50.623 |
10.050% |
20.100% |
$50.600 |
10.000% |
20.100% |
$48.300 |
5.000% |
10.000% |
$47.150 |
2.500% |
5.000% |
$46.460 |
1.000% |
2.000% |
$46.000 |
0.000% |
0.000% |
$43.700 |
-5.000% |
0.000% |
$41.400 |
-10.000% |
0.000% |
$39.100 |
-15.000% |
0.000% |
$36.800 |
-20.000% |
0.000% |
$32.200 |
-30.000% |
0.000% |
$31.740 |
-31.000% |
-31.000% |
$27.600 |
-40.000% |
-40.000% |
$23.000 |
-50.000% |
-50.000% |
$18.400 |
-60.000% |
-60.000% |
$13.800 |
-70.000% |
-70.000% |
$9.200 |
-80.000% |
-80.000% |
$4.600 |
-90.000% |
-90.000% |
$0.000 |
-100.000% |
-100.000% |
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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 closing price of one share of the Index Fund increases from the Initial Share Price of $46 to a Final Share Price of $48.30. Because the Final Share Price of $48.30 is greater than the Initial Share Price of $46 and the Fund Return of 5% multiplied by 2 does not exceed the hypothetical Maximum Total Return of 20.10%, 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 closing price of one share of the Index Fund decreases from the Initial Share Price of $46 to a Final Share Price of $41.40. Although the Fund Return is negative, because the Final Share Price of $41.40 is less than the Initial Share Price of $46 by not more than the Contingent Buffer Amount of 30%, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note.
Example 3: The closing price of one share of the Index Fund increases from the Initial Share Price of $46 to a Final Share Price of $59.80. Because the Final Share Price of $59.80 is greater than the Initial Share Price of $46 and the Fund Return of 30% multiplied by 2 exceeds the hypothetical Maximum Total Return of 20.10%, the investor receives a payment at maturity of $1,201 per $1,000 principal amount note, the maximum payment on the notes.
Example 4: The closing price of one share of the Index Fund decreases from the Initial Share Price of $46 to a Final Share Price of $23. Because the Fund Return is negative and the Final Share Price of $23 is less than the Initial Share Price of $46 by more than the Contingent Buffer Amount of 30%, the investor receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × -50% ) = $500
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JPMorgan
Structured Investments |
TS-5 |
Historical Information
The following graph sets forth the historical performance of the iShares® MSCI Emerging Markets Index Fund based on the weekly closing price of one share of the Index Fund from January 7, 2005 through December 17, 2010. The closing price of one share of the Index Fund on December 17, 2010 was $46.41. We obtained the closing prices of one share of the Index Fund 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 prices set forth in the graph below have been adjusted for 3-for-1 stock splits that went effective on June 9, 2005 and July 24, 2008. The historical closing prices of one share of the Index Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing price of one share of the Index Fund on the pricing date or on the Observation Date. We cannot give you assurance that the performance of the Index Fund will result in the return of any of your initial investment.
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JPMorgan
Structured Investments |
TS-6 |