Term sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November
21, 2008 and
product supplement no. 192-A-II dated June 4, 2010
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Term Sheet
Product Supplement No. 192-A-II
Registration Statement
No. 333-155535
Dated June 30, 2010; Rule 433 |
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Structured
Investments
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$
6.00%*-7.50%* (equivalent to 12.00%-15.00% per annum) Callable Yield Notes due January 31, 2011 Linked
to the Lesser Performing of the S&P 500® Index and the Market
Vectors Gold Miners ETF
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General
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The notes are designed for investors
who seek a higher interest rate than the current yield on a conventional debt
security with the same maturity issued by us or an issuer with a comparable
credit rating. Investors should be willing to forgo the potential to
participate in the appreciation of either the S&P 500® Index or
the Market Vectors Gold Miners ETF and to forgo dividend payments. Investors
should be willing to assume the risk that the notes may be called and the
investors will receive less interest than if the notes were not called and the
risk that, if the notes are not called, the investors may lose some or all of
their principal at maturity.
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The notes will pay between 6.00%* and 7.50%*
(equivalent to between 12.00% and 15.00% per annum) interest over the term of
the notes. However, the notes do not guarantee any return of
principal at maturity. Instead, if the notes are not called, the
payment at maturity will be based on the performance of the Lesser Performing Underlying
and whether the closing price or closing level, as applicable, of either Underlying
falls below the Starting Underlying Level of such Underlying by more than the
Protection Amount during the Monitoring Period, as described below. Any
payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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The notes may be called, in whole but
not in part, at our option (such an event, an Optional Call) on the Optional
Call Date set forth below. If the notes are called pursuant to an Optional
Call, payment on the Optional Call Date for each $1,000 principal amount note
will be a cash payment of $1,000, plus any accrued and unpaid interest, as
described below.
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Senior unsecured obligations of JPMorgan
Chase & Co. maturing January
31, 2011**
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The payment at maturity is not
linked to a basket composed of the Underlyings. The payment at maturity is
linked to the performance of each of the Underlyings individually, as described
below.
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Minimum denominations of $1,000 and
integral multiples thereof
Key Terms
Underlyings:
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The S&P 500® Index (the Index) and the
Market Vectors Gold Miners ETF (the Fund) (each an Underlying, and collectively,
the Underlyings)
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Interest Rate:
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Between 6.00%* and 7.50%*
(equivalent to between 12.00% and 15.00% per annum) over the term of the
notes, paid monthly and calculated on a 30/360 basis
*The actual interest rate will be determined on the Pricing
Date and will not be less than 6.00% or greater than 7.50% over the term of
the notes.
The notes may be called, in whole but
not in part, at our option (such an event, an Optional Call) on the
Optional Call Date set forth below.
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Protection Amount:
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With respect to each underlying, an amount that represents
at least 30.00% of the Starting Underlying Level of such Underlying (in the
case of the Market Vectors Gold Miners ETF, subject to adjustments)
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Pricing Date:
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On or about July 27, 2010
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Settlement Date:
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On or about July 30, 2010
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Observation Date**:
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January 26, 2011
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Maturity Date**:
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January 31, 2011
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CUSIP:
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48124AVL8
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Monitoring Period:
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The period from the Pricing Date to and including the
Observation Date
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Interest Payment Dates:
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Interest on the notes will be payable
monthly in arrears on the last calendar day of each month (each such date, an
Interest Payment Date), commencing August 31, 2010, to and including the
Maturity Date or, if the notes are called, to and including the Optional Call
Date. See Selected Purchase Considerations Monthly Interest Payments in
this term sheet for more information.
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Payment at Maturity:
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If the notes are not called, the
payment at maturity, in excess of any accrued and unpaid interest, will be
based on whether a Trigger Event has occurred and the performance of the Lesser
Performing Underlying. If the notes are not called, for each $1,000
principal amount note, you will receive $1,000 plus any accrued and unpaid interest
at maturity, unless:
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(a) |
the Ending Underlying Level of any
Underlying is less than the Starting Underlying Level of such Underlying; |
and |
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(b) |
a Trigger Event has occurred. |
If the notes are not called and the conditions
described in (a) and (b) are satisfied, at maturity you will lose 1% of the
principal amount of your notes for every 1% that the Ending Underlying Level
of the Lesser Performing Underlying is less than the Starting Underlying
Level of such Underlying. Under these circumstances, your payment at
maturity per $1,000 principal amount note, in addition to any accrued and
unpaid interest, will be calculated as follows: |
$1,000 +
($1,000 x Lesser Performing Underlying Return) |
You will lose some or all of your
principal at maturity if the notes are not called and the conditions
described in (a) and (b) are both satisfied. |
Trigger Event:
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A Trigger Event occurs if, on any
trading day during the Monitoring Period, the closing level or closing price,
as applicable, of any Underlying falls below the Starting Underlying Level of
such Underlying by more than the applicable Protection Amount.
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Underlying Return:
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With respect to each Underlying, the Underlying Return is
calculated as follows:
Ending
Underlying Level Starting Underlying Level
Starting Underlying Level
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Optional Call:
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We, at our election, may call the notes, in whole but not in
part, on the Optional Call Date prior to the Maturity Date at a price for
each $1,000 principal amount note equal to $1,000 plus any accrued and unpaid
interest to but excluding the Optional Call Date. If we intend to call your
notes, we will deliver notice to DTC at least five business days before the
Optional Call Date.
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Optional Call Date**:
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November 1, 2010
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Additional Key Terms:
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See Additional Key Terms on the next page.
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** |
Subject to postponement in the
event of a market disruption event and as described under Description of Notes
Payment at Maturity and Description of Notes Payment upon Optional Call,
as applicable, in the accompanying product supplement no. 192-A-II |
Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-10 of the
accompanying product supplement no. 192-A-II and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state
securities commission has approved or disapproved of the notes or passed upon
the accuracy or the adequacy of this term sheet or the accompanying prospectus
supplement and prospectus. Any representation to the contrary is a criminal
offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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$
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$
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Total
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$
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$
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$
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(1) |
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 Inc., which we refer to as JPMSI, acting as agent for JPMorgan
Chase & Co., would receive a commission of approximately $24.00 per $1,000
principal amount note and may use a portion of that commission to allow selling
concessions to other affiliated or unaffiliated dealers of approximately $2.00
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 other dealers, in their sole discretion, may
forgo some or all of their selling concessions. The actual commission received
by JPMSI may be more or less than $24.00 and will depend on market conditions
on the Pricing Date. In no event will the commission received by JPMSI, which
includes concessions and other amounts that may be allowed to other dealers,
exceed $25.00 per $1,000 principal amount note. See Plan of Distribution
(Conflicts of Interest) beginning on page PS-93 of the accompanying product
supplement no. 192-A-II. |
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.
June 30, 2010
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. 192-A-II and this
term sheet if you so request by calling toll-free 866-535-9248.
You may revoke your offer to
purchase the notes at any time prior to the time at which we accept such offer
by notifying the applicable agent. We reserve the right to change the terms
of, or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will
be asked to accept such changes in connection with your purchase. You may also
choose to reject such changes in which case we may reject your offer to
purchase.
You should read this term sheet together with the
prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008
relating to our Series E medium-term notes of which these notes are a part, and
the more detailed information contained in product supplement no. 192-A-II
dated June 4, 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. 192-A-II, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the
relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is
19617. As used in this term sheet, the Company, we, us or our refers
to JPMorgan Chase & Co.
Additional Key Terms
Starting Underlying Level:
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With
respect to the Index, the closing level
of the Index on the Pricing Date (the Initial Index Level). With respect
to the Fund, the closing price of the Fund on the Pricing Date divided by
the Share Adjustment Factor for the Fund (the Initial Share Price). We
refer to each of the Initial Index Level for the Index and the Initial Share
Price for the Fund as a Starting Underlying Level.
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Ending Underlying Level:
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With
respect to the Index, the closing level
of the Index on the Observation Date (the Ending Index Level). With
respect to the Fund, the closing price of one share of the Fund on the
Observation Date (the Final Share Price). We refer to each of the Ending
Index Level for the Index and the Final Share Price for the Fund as an
Ending Underlying Level.
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Share Adjustment Factor:
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With
respect to the Fund, 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. 192-A-II for further information about these
adjustments.
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Lesser Performing Underlying:
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The
Underlying with the Lesser Performing Underlying Return
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Lesser Performing Underlying Return:
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The
lower of the Underlying Return of the S&P 500® Index and the Underlying
Return of the Market Vectors Gold Miners ETF
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Selected Purchase Considerations
- THE NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD
ON DEBT SECURITIES OF COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A
COMPARABLE CREDIT RATING
The notes will pay interest at a rate of between
6.00% and 7.50% (equivalent to between 12.00% and 15.00% per annum) over the
term of the notes, which we believe is higher than the yield received on debt
securities of comparable maturity issued by us or an issuer with a comparable
credit rating. The actual interest rate will be determined on the Pricing Date
and will be between 6.00% and 7.50% (equivalent to between 12.00% and 15.00%
per annum). Because the notes are our senior unsecured obligations, any
interest payment or any payment at maturity is subject to our ability to pay
our obligations as they become due.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
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TS-1 |
- MONTHLY INTEREST PAYMENTS The notes offer monthly
interest payments at a rate of between 6.00% and 7.50% (equivalent to between 12.00% and 15.00% per
annum) over
the term of the notes. Interest will be payable monthly in arrears on the last
calendar day of each month (each such date, an Interest Payment Date),
commencing August
31, 2010, to
and including the Maturity Date or, if the notes are called, to and including
the Optional Call Date. Interest will be payable to the holders of record at
the close of business on the date 15 calendar days prior to the applicable
Interest Payment Date or the Optional Call Date, as applicable. If an Interest
Payment Date or Optional Call Date is not a business day, payment will be made
on the next business day immediately following such day, but no additional
interest will accrue as a result of the delayed payment.
- POTENTIAL EARLY EXIT AS A RESULT OF THE OPTIONAL
CALL FEATURE
If the notes are called pursuant to an Optional Call, on the Optional Call Date, for each $1,000 principal amount
note, you will receive $1,000 plus accrued and unpaid interest to but excluding
the Optional Call Date.
- THE NOTES DO NOT GUARANTEE THE RETURN
OF YOUR PRINCIPAL IF THE NOTES ARE NOT CALLED If the notes are not called,
we will pay you your principal back at maturity so long as a Trigger Event has
not occurred or the Ending Underlying Level of each Underlying is not less than
its Starting Underlying Level. A Trigger Event occurs if, on any trading day during the Monitoring
Period, the closing level or closing price, as applicable, of any Underlying falls
below the Starting Underlying Level of such Underlying by more than the applicable
Protection Amount. However, if the notes are not called and a Trigger Event
has occurred, you could lose the entire principal amount of your notes.
- DIVERSIFICATION OF THE UNDERLYINGS The return on the notes is linked to
the Lesser Performing Underlying, which will be either the S&P 500®
Index or the Market Vectors Gold Miners ETF.
The S&P 500® Index consists of 500 component stocks selected to
provide a performance benchmark for the U.S.
equity markets.
The Market Vectors Gold
Miners ETF is an exchange-traded fund managed by Van Eck Associates
Corporation, the investment adviser to the Market Vectors Gold Miners ETF. The
Market Vectors Gold Miners ETF trades on NYSE Arca, Inc. (the NYSE Arca)
under the ticker symbol GDX. The Market Vectors Gold Miners ETF seeks to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold Miners
Index is a modified market capitalization weighted index primarily comprised of
publicly traded companies involved in the mining of gold. The NYSE Arca Gold
Miners Index includes common stocks and ADRs of selected companies that are
involved in mining for gold and silver and that are listed for trading on the
New York Stock Exchange or the NYSE Amex, LLC or quoted on The NASDAQ Stock
Market. Only companies with market capitalization greater than $100 million
that have a daily average trading volume of at least 50,000 shares over the
past six months are eligible for inclusion in the NYSE Arca Gold Miners Index.
For additional information
on each Underlying, see the information set forth under The S&P 500®
Index and The Market Vectors Gold Miners ETF
in the accompanying product supplement no. 192-A-II.
- TAX TREATMENT AS A UNIT
COMPRISING A PUT OPTION AND A DEPOSIT You should review carefully the section entitled Certain
U.S. Federal Income Tax Consequences in the accompanying product supplement
no. 192-A-II. We and you agree (in the absence of an administrative
determination or judicial ruling to the contrary) to treat the notes for U.S.
federal income tax purposes as units comprising: (i) a Put Option written by
you that is terminated if an Optional Call occurs and that, if not terminated, in circumstances
where the payment at maturity is less than $1,000 (excluding accrued and unpaid
interest) requires you to pay us an amount equal to $1,000 multiplied by the
absolute value of the Lesser Performing Underlying Return and (ii) a Deposit of $1,000 per $1,000 principal amount
note to secure your potential obligation under the Put Option. We will
determine the portion of each coupon payment that we will allocate to interest
on the Deposit and to Put Premium, respectively, and will provide that
allocation in the pricing supplement for the notes. If the notes had priced on
June 29,
2010, and
assuming an Interest Rate of 13.50% per annum, we would have treated
approximately 4.81% of each coupon payment as interest on the Deposit and the
remainder as Put Premium. The actual allocation that we will determine for the
notes may differ from this hypothetical allocation, and will depend upon a
variety of factors, including actual market conditions and our borrowing costs
for debt instruments of comparable maturities on the Pricing Date. Assuming
this characterization is respected, amounts treated as interest on the Deposit
will be taxed as ordinary income, while the Put Premium will not be taken into
account prior to sale or settlement, including a settlement following an Optional
Call. However, there are other reasonable treatments that the Internal Revenue
Service (the IRS) or a court may adopt, in which case the timing and character
of any income or loss on the notes could be significantly and adversely
affected. In addition, in 2007 Treasury and the IRS released a notice
requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and
similar instruments. While it is not clear whether the notes would be viewed
as similar to the typical prepaid forward contract described in the notice, it
is possible that any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect. The
notice focuses on a number of issues, the most relevant of which for holders of
the notes are the character of income or loss (including whether the Put
Premium might be currently included as ordinary income) and the degree, if any,
to which income realized by Non-U.S. Holders should be subject to withholding
tax. Both U.S. and Non-U.S. Holders
should consult their tax advisers regarding all aspects of the U.S. federal income tax
consequences of an investment in the notes, including possible alternative
treatments and the issues presented by this notice. Non-U.S. Holders should
also note that they may be withheld upon at a rate of up to 30% unless they
have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the
applicable documentation requirements. Purchasers who are not initial
purchasers of notes at the issue price should also consult their tax advisers
with respect to the tax consequences of an investment in the notes, including
possible alternative characterizations, as well as the allocation of the
purchase price of the notes between the Deposit and the Put Option.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
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TS-2 |
Selected Risk
Considerations
An investment in the notes involves significant risks.
Investing in the notes is not equivalent to investing directly in either or
both of the Underlyings, or any equity securities included in or held by the Underlyings. These risks are
explained in more detail in the Risk Factors section of the accompanying product
supplement no. 192-A-II dated June 4, 2010.
- YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS The
notes do not guarantee any return of principal if the notes are not called. If
the notes are not called, we will pay you your principal back at maturity only
so long as a Trigger Event has not occurred or the Ending Underlying Level of
each Underlying is greater than the Starting Underlying Level of such
Underlying. If the notes are not called, a Trigger Event has occurred and the
Ending Underlying Level of either Underlying is less than the Starting
Underlying Level of such Underlying, you will lose 1% of your principal amount
at maturity for every 1% that the Ending Underlying Level of the Lesser
Performing Underlying is less than the Starting Underlying Level of such
Underlying. Accordingly, you could lose up to the entire principal amount
of your notes.
- CREDIT RISK OF JPMORGAN CHASE & CO. The notes are
subject to the credit risk of JPMorgan Chase & Co. and our credit ratings
and credit spreads may adversely affect the market value of the notes.
Investors are dependent on JPMorgan Chase & Co.s ability to pay all
amounts due on the notes at maturity or on the Optional Call Date and on the
Interest Payment Dates, and therefore investors are subject to our credit risk
and to changes in the markets view of our creditworthiness. Any decline in
our credit ratings or increase in the credit spreads charged by the market for
taking our credit risk is likely to adversely affect the value of the notes.
- POTENTIAL CONFLICTS We and our
affiliates play a variety of roles in connection with the issuance of the
notes, including acting as calculation agent. In performing these duties, the
economic interests of the calculation agent and other affiliates of ours are
potentially adverse to your interests as an investor in the notes. 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.
- YOUR RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL
AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF EITHER
UNDERLYING If the notes
are not called, unless a Trigger Event has
occurred and the Ending Underlying Level of either Underlying is less than the Starting
Underlying Level of such Underlying, for each $1,000 principal amount note, you
will receive $1,000 at maturity plus any accrued and unpaid interest,
regardless of any appreciation in the value of either Underlying, which may be
significant. If the notes are called, for each $1,000 principal amount note,
you will receive $1,000 on the Optional Call Date plus any accrued and unpaid
interest, regardless of the appreciation in the value of the Underlyings, which
may be significant. Accordingly, the return on the notes may be significantly
less than the return on a direct investment in either Underlying during the
term of the notes.
- YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE CLOSING
LEVEL OR CLOSING PRICE OF EACH UNDERLYING Your return on the notes and your payment at maturity, if any, is not
linked to a basket consisting of the Underlyings. If the notes are not called,
your payment at maturity is contingent upon the performance of each individual
Underlying such that you will be equally exposed to the risks related to both
of the Underlyings. Poor performance by either of the Underlyings over the
term of the notes may negatively affect your payment at maturity and will not
be offset or mitigated by positive performance by the other Underlying.
Accordingly, your investment is subject to the risk of decline in the closing
level or closing price of each Underlying.
- YOUR PROTECTION MAY TERMINATE ON ANY TRADING DAY DURING
THE TERM OF THE NOTES If, on any trading day during the Monitoring Period,
the closing level or closing price, as applicable, of either Underlying falls
below the Starting Underlying Level of such Underlying by more than the
applicable Protection Amount, a Trigger Event will occur, and you will be fully
exposed to any depreciation in the Lesser Performing Underlying. We refer to
this feature as a contingent buffer. Under these circumstances, and if the
Ending Underlying Level of either Underlying is less than the Starting
Underlying Level for such Underlying, you will lose 1% of the principal amount
of your investment for every 1% that the Ending Underlying Level of the Lesser
Performing Underlying is less than the Starting Underlying Level. You will be
subject to this potential loss of principal even if the relevant Underlying
subsequently recovers such that the closing level or closing price, as
applicable, is less than the Starting Underlying Level of such Underlying by
less than the Protection Amount. If these notes had a non-contingent buffer feature,
under the same scenario, you would have received the full principal amount of
your notes plus accrued and unpaid interest at maturity. As a result, your
investment in the notes may not perform as well as an investment in a security
with a return that includes a non-contingent buffer.
- YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER
PERFORMING UNDERLYING If the notes
are not called and a Trigger Event occurs, you will lose some or all of your
investment in the notes if the Ending Underlying Level of either Underlying is
below its Starting Underlying Level. This will be true even if the Ending
Underlying Level of the other Underlying is greater than or equal to its
Starting Underlying Level. The two Underlyings respective performances may
not be correlated and, as a result, if the notes are not called, you may
receive the principal amount of your notes at maturity only if there is a broad
based rise in the performance of equities across diverse markets during the
term of the notes.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-3 |
- THE OPTIONAL CALL FEATURE MAY FORCE A POTENTIAL EARLY
EXIT Upon an Optional Call,
the amount of interest payable on the notes will be less than the full amount
of interest that would have been payable if the notes were held to maturity,
and, for each $1,000 principal amount note, you will receive $1,000 plus
accrued and unpaid interest to but excluding the Optional Call Date.
- REINVESTMENT RISK If your notes are called, the term of the notes may be reduced to as
short as three months and you will not receive interest payments after the Optional
Call Date. There is no guarantee that you would be able to reinvest the
proceeds from an investment in the notes at a comparable return and/or with a
comparable interest rate for a similar level of risk in the event the notes are
called prior to the Maturity Date.
- CERTAIN BUILT-IN COSTS ARE
LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY While
the payment at maturity, if any, or upon a call described in this term sheet is
based on the full principal amount of your notes, the original issue price of
the notes includes the agents commission and the estimated cost of hedging our
obligations under the notes. As a result, and as a general matter, the price,
if any, at which JPMSI will be willing to purchase notes from you in secondary
market transactions, if at all, will likely be lower than the original issue
price and any sale prior to the maturity date could result in a substantial
loss to you. This secondary market price will also be affected by a number of
factors aside from the agents commission and hedging costs, including those
referred to under Many Economic and Market Factors Will Influence the Value of
the Notes below.
The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to
hold your notes to maturity.
- PROTECTION AMOUNT APPLIES
ONLY IF YOU HOLD THE NOTES TO MATURITY Assuming the notes are not called, we will pay you your principal
back at maturity only if the closing level or closing price, as applicable, of
each Underlying does not fall below its Starting Underlying Level by more than
the applicable Protection Amount on any trading day during the Monitoring
Period or the Ending Index level of each Underlying is equal to or greater than
the Starting Underlying Level of such Underlying and the notes are held to
maturity. If the notes are not called and a Trigger Event has occurred, the
protection provided by the Protection Amount of each Underlying will be
eliminated and you will be fully exposed at maturity to any decline in the
value of the Lesser Performing Underlying.
- VOLATILITY RISK
Greater expected volatility with respect to an Underlying indicates a greater
likelihood as of the Pricing Date that such Underlying could close below its
Starting Underlying Value by more than the applicable Protection Amount on any
trading day during the Monitoring Period. An Underlyings volatility, however,
can change significantly over the term of the notes. The closing level or
closing price, as applicable, of an Underlying could fall sharply on any
trading day during the Monitoring Period, which could result in a significant
loss of principal.
- THERE ARE RISKS ASSOCIATED WITH THE MARKET
VECTORS GOLD MINERS ETF
Although the Market Vectors Gold Miners ETFs shares are listed for trading on
the NYSE Arca and a number of similar products have been traded on NYSE Arca
and other securities exchanges for varying periods of time, there is no
assurance that an active trading market will continue for the shares of the Market
Vectors Gold Miners ETF or that there will be liquidity in the trading market.
The Market Vectors Gold Miners ETF is subject to management risk, which is the
risk that Van Ecks investment strategy, the implementation of which is subject
to a number of constraints, may not produce the intended results. These
constraints could adversely affect the market price of the shares of the Market
Vectors Gold Miners ETF, and consequently, the value of the notes.
- DIFFERENCES BETWEEN THE MARKET
VECTORS GOLD MINERS ETF AND THE NYSE ARCA GOLD MINERS INDEX The Market Vectors Gold Miners ETF does not fully
replicate the NYSE Arca Gold Miners Index and may hold securities not included
in the NYSE Arca Gold Miners Index, and its performance will reflect additional
transaction costs and fees that are not included in the calculation of the NYSE
Arca Gold Miners Index, all of which may lead to a lack of correlation between
the Market Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. In
addition, corporate actions with respect to the sample of equity securities
(such as mergers and spin-offs) may impact the variance between the Market
Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. Finally, because
the shares of the Market Vectors Gold Miners ETF are traded on the NYSE Arca
and are subject to market supply and investor demand, the market value of one
share of the Market Vectors Gold Miners ETF may differ from the net asset value
per share of the Market Vectors Gold Miners ETF. For all of the foregoing
reasons, the performance of the Market Vectors Gold Miners ETF may not
correlate with the performance of the NYSE Arca Gold Miners Index.
- RISKS ASSOCIATED WITH THE GOLD AND SILVER MINING
INDUSTRIES All or substantially all
of the equity securities held by the Market Vectors Gold Miners ETF are issued
by gold or silver mining companies. Because the value of the notes is linked
to the performance of the Market Vectors Gold Miners ETF, an investment in
these notes will be concentrated in the gold and silver mining industries.
Competitive pressures may have a significant effect on the financial condition
of companies in these industries. Also, these companies are highly dependent
on the price of gold or silver, as applicable. These prices fluctuate widely
and may be affected by numerous factors. Factors affecting gold prices include
economic factors,
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-4 |
including, among other things, the structure of and
confidence in the global monetary system, expectations of the future rate of
inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is generally quoted), interest rates and
gold borrowing and lending rates, and global or regional economic, financial,
political, regulatory, judicial or other events. Factors affecting silver
prices include general economic trends, technical developments, substitution
issues and regulation, as well as specific factors including industrial and
jewelry demand, expectations with respect to the rate of inflation, the
relative strength of the U.S. dollar (the currency in which the price of silver
is generally quoted) and other currencies, interest rates, central bank sales,
forward sales by producers, global or regional political or economic events,
and production costs and disruptions in major silver producing countries such
as the United Mexican States and the Republic of Peru.
- LACK OF LIQUIDITY The notes will not
be listed on any securities exchange. JPMSI 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 JPMSI is willing
to buy the notes.
- NO DIVIDEND PAYMENTS OR VOTING RIGHTS As a holder of the notes, you will not have voting
rights or rights to receive cash dividends or other distributions or other
rights that holders of the securities included in or held by the Underlyings
would have.
- HEDGING AND TRADING IN THE UNDERLYINGS While
the notes are outstanding, we or any of our affiliates may carry out hedging
activities related to the notes, including instruments related to the Fund or
the equity securities included in the Index or held by the Fund. We or our
affiliates may also trade in the Fund or instruments related to the Fund or the
equity securities included in the Index or held by the Fund from time to time.
Any of these hedging or trading activities as of the Pricing Date and during
the term of the notes could adversely affect the likelihood of a call or our
payment to you at maturity.
- THE ANTI-DILUTION PROTECTION FOR THE MARKET
VECTORS GOLD MINERS ETF IS LIMITED The calculation agent will make adjustments to the Share
Adjustment Factor for certain events affecting the shares of the Market Vectors
Gold Miners ETF. However, the calculation agent will not make an adjustment in
response to all events that could affect the shares of the Market Vectors Gold
Miners ETF. If an event occurs that does not require the calculation agent to
make an adjustment, the value of the notes may be materially and adversely
affected.
- MANY ECONOMIC AND MARKET
FACTORS WILL INFLUENCE THE VALUE OF THE NOTES In addition to the level and price of the Underlyings
on any trading day, the value of the notes will be affected by a number of
economic and market factors that may either offset or magnify each other,
including:
- whether a Trigger Event has occurred;
- the interest rate on the notes;
- the expected volatility of the Underlyings;
- the time to maturity of the notes;
- the Optional Call feature and whether we
are expected to call the notes, which are likely to limit the value of the
notes;
- the dividend rates on the equity securities
underlying the Underlyings;
- the expected positive or negative
correlation between the Index and the Fund, or the expected absence of any such
correlation;
- interest and yield rates in the market
generally as well as in the markets of the equity securities underlying the Underlyings;
- a variety of economic, financial,
political, regulatory and judicial events;
- the occurrence of certain events to the Market Vectors Gold Miners ETF that may or may not require an adjustment
to the applicable Share Adjustment Factor; and
- our creditworthiness, including actual or
anticipated downgrades in our credit ratings.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-5 |
Historical Information
The following graphs show the historical weekly performance of the
S&P 500® Index from January 7, 2005 through June 25, 2010
and the Market Vectors Gold Miners ETF from May 26, 2006
through June 25, 2010. The Index closing level of the S&P
500® Index on June
29, 2010 was 1041.24. The
closing price of one share of the Market Vectors Gold Miners ETF on June 29, 2010 was $51.98.
We obtained the
various closing levels and prices of the Underlyings below from Bloomberg
Financial Markets. We make no representation or warranty as to the accuracy or
completeness of information obtained from Bloomberg Financial Markets. The
historical levels and prices of each Underlying should not be taken as an
indication of future performance, and no assurance can be given as to the closing
level or closing price, as applicable, of any Underlying on any trading day
during the Monitoring Period or the Observation Date. We cannot give you
assurance that the performance of the Underlyings will result in the return of
any of your initial investment.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-6 |
What is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Lesser Performing
Underlying?
The following table and examples illustrate the hypothetical total
return at maturity on the notes. The note total return as used in this term
sheet is the number, expressed as a percentage, that results from comparing the
payment at maturity plus the interest payments received over the term of the
note per $1,000 principal amount note to $1,000. The table and examples
below assume that the notes are not called prior to maturity and that the Lesser
Performing Underlying is the S&P 500® Index. We make no
representation or warranty as to which of the Underlyings will be the Lesser
Performing Underlying for purposes of calculating your actual payment at
maturity. In addition, the following table and examples assume a Starting
Underlying Level for the Lesser Performing Underlying of 1050 and an Interest
Rate of 6.75% (the midpoint of the range
of 6.00% and 7.50% and equivalent to 13.50% per annum) over the term of the notes. If the actual Interest Rate as
determined on the Pricing Date is less than 6.75% (equivalent to 13.50% per
annum), your total return and total payment over the term of the notes will be
less than the amounts indicated below. In addition, if the notes are called
prior to maturity, your total return and total payment may be less than the
amounts indicated below. The hypothetical total returns and total payments
set forth below are for illustrative purposes only and may not be the actual
total returns or total payments applicable to a purchaser of the notes. The
numbers appearing in the following table and examples have been rounded for
ease of analysis.
|
|
Trigger Event Has Not Occurred (1)
|
Trigger Event Has Occurred (1)
|
|
Ending
Underlying
Level
|
Lesser
Performing
Underlying
Return
|
Note Total
Return
|
Total Payments over the
Term of the Note
|
Note Total Return
|
Total Payments over the
Term of the Note
|
|
1890.00
|
80.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1732.50
|
65.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1575.00
|
50.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1470.00
|
40.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1365.00
|
30.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1260.00
|
20.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1155.00
|
10.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1102.50
|
5.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
1050.00
|
0.00%
|
6.75%
|
$1,067.50
|
6.75%
|
$1,067.50
|
997.50
|
-5.00%
|
6.75%
|
$1,067.50
|
1.75%
|
$1,017.50
|
945.00
|
-10.00%
|
6.75%
|
$1,067.50
|
-3.25%
|
$967.50
|
840.00
|
-20.00%
|
6.75%
|
$1,067.50
|
-13.25%
|
$867.50
|
735.00
|
-30.00%
|
6.75%
|
$1,067.50
|
-23.25%
|
$767.50
|
630.00
|
-40.00%
|
N/A
|
N/A
|
-33.25%
|
$667.50
|
525.00
|
-50.00%
|
N/A
|
N/A
|
-43.25%
|
$567.50
|
420.00
|
-60.00%
|
N/A
|
N/A
|
-53.25%
|
$467.50
|
315.00
|
-70.00%
|
N/A
|
N/A
|
-63.25%
|
$367.50
|
210.00
|
-80.00%
|
N/A
|
N/A
|
-73.25%
|
$267.50
|
105.00
|
-90.00%
|
N/A
|
N/A
|
-83.25%
|
$167.50
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-93.25%
|
$67.50
|
|
(1) A Trigger Event occurs if the closing level or
closing price, as applicable, of either Underlying is less than the Starting
Underlying Level of such Underlying by more than 30% on any trading day during
the Monitoring Period.
The following examples illustrate how the note total returns
and total payments set forth in the table above are calculated.
Example 1: The level of the Lesser Performing
Underlying increases from the Starting Underlying Level of 1050 to an Ending
Underlying Level of 1102.50. Because the
Ending Underlying Level of the Lesser Performing Underlying of 1102.50 is greater
than its Starting Underlying Level of 1050, regardless of whether a Trigger
Event has occurred, the investor receives total payments of $1,067.50 per
$1,000 principal amount note over the term of the note, consisting of interest
payments of $67.50 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $1,000 per $1,000 principal amount note. This
represents the maximum total payment an investor may receive over the term of
the notes.
Example 2: A Trigger Event has not occurred and the
level of the Lesser Performing Underlying decreases from the Starting
Underlying Level of 1050 to an Ending Underlying Level of 840. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 840 is less than its Starting Underlying Level of
1050, because a Trigger Event has not occurred, the investor receives total payments of $1,067.50 per $1,000 principal
amount note over the term of the note, consisting of interest payments of $67.50
per $1,000 principal amount note over the term of the notes and a payment at
maturity of $1,000 per $1,000 principal amount note.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-7 |
Example 3: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 840. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 840 is less than its
Starting Underlying Level of 1050, the
investor receives total payments of $867.50 per $1,000 principal amount note
over the term of the note, consisting of interest payments of $67.50 per $1,000
principal amount note over the term of the notes and a payment at maturity of $800
per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -20%)] +
$67.50 = $867.50
Example 4: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 630. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 630 is less than its
Starting Underlying Level of 1050, the investor
receives total payments of $667.50 per $1,000 principal amount note over the
term of the note, consisting of interest payments of $67.50 per $1,000 principal amount note over the term of
the notes and a payment at maturity of $600 per $1,000 principal amount note,
calculated as follows:
[$1,000 + ($1,000 x -40%)] +
$67.50 = $667.50
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 0. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 0 is less than its
Starting Underlying Level of 1050, the
investor receives total payments of $67.50 per $1,000 principal amount note
over the term of the note, consisting solely of interest payments of $67.50 per
$1,000 principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)] + $67.50= $67.50
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF
|
TS-8 |