Term sheet
To prospectus dated
November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 192-A-III dated March 10, 2011
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Term Sheet
Product Supplement No. 192-A-III
Registration Statement No. 333-155535
Dated April 1, 2011; Rule 433
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Structured
Investments
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$
10.00% per annum Callable Yield Notes due April 30, 2012 Linked to the Lesser
Performing of the Russell 2000® Index and the Market Vectors Gold
Miners ETF
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General
- 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 Russell 2000® 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.
- The notes will pay 10.00% 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 level or closing price, as
applicable, of either Underlying is less than the Starting Underlying Level of
such Underlying by more than the Protection Amount on any day during the
Monitoring Period, as described below. Any payment on the notes is subject to
the credit risk of JPMorgan Chase & Co.
- The notes may be called, in whole but
not in part, at our option on any of the Optional Call Dates 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.
- Senior unsecured obligations of
JPMorgan Chase & Co. maturing April 30, 2012*
- 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.
- Minimum denominations of $1,000 and
integral multiples thereof
Key Terms
Underlyings:
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The Russell 2000® 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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10.00% per annum over
the term of the notes, paid monthly and calculated on a 30/360 basis
The notes may be called, in whole but
not in part, at our option (such an event, an Optional Call) on any of the
Optional Call Dates set forth below.
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Protection Amount:
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With respect to each Underlying, an amount that represents 25.00%
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 April 26, 2011
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Settlement Date:
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On or about April 29, 2011
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Observation Date*:
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April 25, 2012
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Maturity Date*:
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April 30, 2012
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CUSIP:
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48125XLC8
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Monitoring Period:
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The period from and excluding 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, up to and including the
final monthly interest payment, which will be payable on the Maturity Date (each
such day, an Interest Payment Date), commencing May 31, 2011, to and
including the Maturity Date or, if the notes are called, to and including the
applicable 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:
(a) the Ending Underlying Level of any
Underlying is less than the Starting Underlying Level of such Underlying; and
(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.
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Trigger Event:
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A Trigger Event occurs if, on any day
during the Monitoring Period, the closing level or closing price, as applicable,
of any Underlying is less than 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 any of the Optional Call Dates prior to the Maturity Date at a price
for each $1,000 principal amount note equal to $1,000 plus any accrued and
unpaid interest to but excluding the applicable Optional Call Date. If we
intend to call your notes, we will deliver notice to DTC at least five
business days before the applicable Optional Call Date.
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Optional Call Dates*:
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July 31, 2011, October 31, 2011 and January 31, 2012
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Additional Key Terms:
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See Additional Key Terms on the next page.
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*
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Subject
to postponement as described under Description of Notes Payment at
Maturity, Description of Notes
Payment upon Optional Call and Description of Notes Postponement of a
Determination Date-Notes with a maturity of more than one year, as
applicable, in the accompanying product supplement no. 192-A-III
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-9 of the
accompanying product supplement no. 192-A-III and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state
securities commission has approved or disapproved of the notes or passed upon
the accuracy or the adequacy of this term sheet or the accompanying prospectus
supplement and prospectus. Any representation to the contrary is a criminal
offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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)
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The
price to the public includes the estimated cost of hedging our obligations
under the notes through one or more of our affiliates.
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(2)
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If the notes priced today, J.P.
Morgan Securities LLC, which we refer to as JPMS, acting as agent for
JPMorgan Chase & Co., would receive a commission of approximately $34.00
per $1,000 principal amount note and would use a portion of that commission
to allow selling concessions to other dealers of approximately $20.00 per
$1,000 principal amount note. The concessions
of approximately $20.00 per $1,000 principal amount note include
concessions to be allowed to selling dealers and concessions to be allowed to
any arranging dealer. This commission includes the projected
profits that our affiliates expect to realize, some of which may be allowed
to other unaffiliated dealers, for assuming risks inherent in hedging our
obligations under the notes. The actual commission received by JPMS may be
less than $20.00 and will depend on market conditions on the Pricing Date. In
no event will the commission received by JPMS, which includes concessions and
other amounts that may be allowed to other dealers, exceed $60.00 per $1,000
principal amount note. See Plan of Distribution (Conflicts of
Interest) beginning on page PS-95 of the accompanying product supplement no.
192-A-III.
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The notes
are not bank deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency, nor are they
obligations of, or guaranteed by, a bank.
April 1, 2011
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has filed a registration
statement (including a prospectus) with the Securities and Exchange Commission,
or SEC, for the offering to which this term sheet relates. Before you invest,
you should read the prospectus in that registration statement and the other
documents relating to this offering that JPMorgan Chase & Co. has filed
with the SEC for more complete information about JPMorgan Chase & Co. and
this offering. You may get these documents without cost by visiting EDGAR on
the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any
agent or any dealer participating in this offering will arrange to send you the
prospectus, the prospectus supplement, product supplement no. 192-A-III 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-III 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-III, 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 and our refer
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-III 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 Russell 2000® 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 10.00%
per annum over the term of the notes, which is higher than the yield currently
available on debt securities of comparable maturity issued by us or an issuer
with a comparable credit rating. 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.
- MONTHLY INTEREST PAYMENTS The notes offer monthly
interest payments at a rate of 10.00% per annum over the term of the notes.
Interest will be payable monthly in arrears on the last calendar day of each
month, up to and including the final monthly interest payment, which will be payable on the
Maturity Date (each such day, an Interest Payment Date), commencing May 31,
2011, to and including the Maturity Date or, if the notes are called, to and
including the applicable Optional Call Date. Interest will be payable to the
holders of record at the close of
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JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
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TS-1 |
business on the business
day immediately preceding the applicable Interest Payment Date or the applicable
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. For example, the monthly Interest Payment Date
for July 2011 is July 31, 2011, but because July 31, 2011 is a Sunday, payment of
interest with respect to that Interest Payment Date will be made on August 1,
2011, the next succeeding business day.
- POTENTIAL EARLY EXIT AS A RESULT OF THE OPTIONAL
CALL FEATURE
If the notes are called pursuant to an Optional Call, on the applicable Optional Call Date, for each $1,000
principal amount note, you will receive $1,000 plus accrued and unpaid interest
to but excluding the applicable
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 day during
the Monitoring Period, the closing level or closing price, as applicable, of
any Underlying is less than the Starting Underlying Level of such Underlying by
more than the applicable Protection Amount. However, 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
could lose the entire principal amount of your notes.
- EXPOSURE TO EACH OF THE UNDERLYINGS The return on the notes is linked to
the Lesser Performing Underlying, which will be either the Russell 2000®
Index or the Market Vectors Gold Miners ETF.
The Russell 2000® Index
consists of the middle 2,000 companies included in the Russell 3000 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.
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 Russell 2000®
Index and The Market Vectors Gold Miners ETF
in the accompanying product supplement no. 192-A-III.
- 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-III. 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
March 30, 2011, we would have treated 8.80% 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
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JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
|
TS-2 |
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.
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-III 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, 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 equal to or 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 any 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 Russell 2000® 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 Russell 2000®
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, a Trigger Event
has not occurred and the Ending Underlying Level of either Underlying is not
below 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 applicable 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, AS APPLICABLE, 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, as applicable, of each Underlying.
- YOUR PROTECTION MAY TERMINATE ON ANY
DAY DURING THE TERM OF THE NOTES If, on
any day during the Monitoring Period, the closing level or closing price, as
applicable, of either Underlying is less than 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.
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JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
|
TS-3 |
- 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 U.S. equities across diverse markets during
the term of the notes.
- 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 applicable 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
applicable 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 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 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 is not less than its Starting Underlying Level by more than the applicable
Protection Amount on any day during the Monitoring Period or the Ending Underlying
Level of each Underlying is equal to or greater than the Starting Underlying
Level of such Underlying. If the notes are not called and a Trigger Event has
occurred, 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 Level by more than the applicable Protection Amount on any
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 day during the
Monitoring Period, which could result in a significant loss of principal.
- 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.
- 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
|
JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
|
TS-4 |
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, 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. 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.
- 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 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
included in or held by 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 included in or
held by 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.
|
JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
|
TS-5 |
Historical Information
The following graphs show the historical weekly performance of the
Russell 2000® Index from January 6, 2006 through March 25, 2011 and
the Market Vectors Gold Miners ETF from May 26, 2006 through March 25, 2011.
The closing level of the Russell 2000® Index on March 31, 2011 was
843.55. The closing price of one share of the Market Vectors Gold Miners ETF
on March 31, 2011 was $60.06.
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 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.
|
JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
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
notes 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 Russell 2000® 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 800 and reflect the Interest Rate of 10.00%
per annum over the term of the notes and the Protection Amount of 25.00%. 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 Notes
|
Note Total Return
|
Total Payments over the
Term of the Notes
|
|
1440.00
|
80.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1320.00
|
65.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1200.00
|
50.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1120.00
|
40.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
1040.00
|
30.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
960.00
|
20.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
880.00
|
10.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
840.00
|
5.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
800.00
|
0.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
760.00
|
-5.00%
|
10.00%
|
$1,100.00
|
5.00%
|
$1,050.00
|
720.00
|
-10.00%
|
10.00%
|
$1,100.00
|
0.00%
|
$1,000.00
|
640.00
|
-20.00%
|
10.00%
|
$1,100.00
|
-10.00%
|
$900.00
|
600.00
|
-25.00%
|
10.00%
|
$1,100.00
|
-15.00%
|
$850.00
|
560.00
|
-30.00%
|
N/A
|
N/A
|
-20.00%
|
$800.00
|
480.00
|
-40.00%
|
N/A
|
N/A
|
-30.00%
|
$700.00
|
400.00
|
-50.00%
|
N/A
|
N/A
|
-40.00%
|
$600.00
|
320.00
|
-60.00%
|
N/A
|
N/A
|
-50.00%
|
$500.00
|
240.00
|
-70.00%
|
N/A
|
N/A
|
-60.00%
|
$400.00
|
160.00
|
-80.00%
|
N/A
|
N/A
|
-70.00%
|
$300.00
|
80.00
|
-90.00%
|
N/A
|
N/A
|
-80.00%
|
$200.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-90.00%
|
$100.00
|
|
(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 25% on any 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 800 to an Ending
Underlying Level of 840. Because the
Ending Underlying Level of the Lesser Performing Underlying of 840 is greater
than its Starting Underlying Level of 800, regardless of whether a Trigger
Event has occurred, the investor receives total payments of $1,100 per $1,000 principal
amount note over the term of the notes, consisting of interest payments of $100
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 800 to an Ending Underlying Level of 640. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 640 is less than its Starting Underlying Level of 800,
because a Trigger Event has not occurred, the
investor receives total payments of $1,100 per $1,000 principal amount note
over the term of the notes, consisting of interest payments of $100 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.
|
JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
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 800 to an Ending Underlying Level of 640. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 640 is less than its
Starting Underlying Level of 800, the
investor receives total payments of $900 per $1,000 principal amount note over
the term of the notes, consisting of interest payments of $100 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%)] +
$100 = $900
Example 4: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 800 to an Ending Underlying Level of 480. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 480 is less than its
Starting Underlying Level of 800, the
investor receives total payments of $700 per $1,000 principal amount note over
the term of the notes, consisting of interest payments of $100 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%)] +
$100 = $700
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 800 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 800, the
investor receives total payments of $100 per $1,000 principal amount note over
the term of the notes, consisting solely of interest payments of $100 per $1,000
principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)] +
$100 = $100
|
JPMorgan
Structured Investments
Callable
Yield Notes Linked to the Lesser Performing of the Russell 2000®
Index and the Market Vectors Gold Miners ETF
|
TS-8 |