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 July 30, 2010; Rule 433
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Structured
Investments
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$
5.00%*-6.50%* (equivalent to 10.00%-13.00% per annum) Callable Yield Notes due February 28, 2011 Linked to the Lesser Performing of the S&P 500®
Index and the Market Vectors Gold Miners ETF |
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 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.
- The notes will pay between 5.00%* and
6.50%* (equivalent to between 10.00% and 13.00% 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.
- 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.
- Senior unsecured obligations of
JPMorgan Chase & Co. maturing February 28, 2011**
- 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 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 5.00%* and
6.50%* (equivalent to between 10.00% and 13.00% 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 5.00% or greater than 6.50% 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 August 26, 2010
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Settlement Date:
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On or about August 31, 2010
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Observation Date**:
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February 23, 2011
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Maturity Date**:
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February 28, 2011
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CUSIP:
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48124AXW2
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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 September 30, 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:
(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
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 $1,000 plus any accrued and unpaid
interest to but excluding the Optional Call Date. If we intend to call
your notes, we will deliver notice to DTC at least five business days before
the Optional Call Date.
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Optional Call Date**:
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November 30, 2010
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Additional Key Terms:
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See Additional Key Terms on the next page.
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**
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Subject to
postponement in the event of a market disruption event and as described under
Description of Notes Payment at Maturity and Description of Notes
Payment upon Optional Call, as applicable, in the accompanying product
supplement no. 192-A-II
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-10 of
the accompanying product supplement no. 192-A-II and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state
securities commission has approved or disapproved of the notes or passed upon
the accuracy or the adequacy of this term sheet or the accompanying prospectus
supplement and prospectus. Any representation to the contrary is a
criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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)
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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 Inc., which we refer to as
JPMSI, acting as agent for JPMorgan Chase & Co., would receive a
commission of approximately $20.00 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. The other dealers, in their sole discretion, may
forgo some or all of their selling concessions. 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 JPMSI may be more or less than $20.00 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.
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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.
July 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 5.00%
and 6.50% (equivalent to between 10.00% and 13.00% 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 5.00% and 6.50% (equivalent to between 10.00% and
13.00% 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.
- MONTHLY INTEREST PAYMENTS The notes
offer monthly interest payments at a rate of between 5.00% and 6.50% (equivalent to between 10.00% and 13.00% per
annum) over the term of the notes. Interest
will be payable
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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 in arrears on the last calendar day of
each month (each such date, an Interest Payment Date), commencing September
30, 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. For
example, the monthly interest payment due in October 2010 will be payable on November
1, 2010.
- 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 July 29, 2010, and
assuming an Interest Rate of 10.00% per annum, we would have treated 5.80% 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
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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 |
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.
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.
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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 |
- 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.
- 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.
|
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 |
- 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. 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.
|
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 July 23, 2010 and the Market Vectors Gold Miners ETF
from May 26, 2006 through July 23, 2010. The Index closing level of the
S&P 500® Index on July 29, 2010 was 1101.53. The closing price of
one share of the Market Vectors Gold Miners ETF on July 29, 2010 was $47.68.
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.
|
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 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 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 1100 and an
Interest Rate of 5.75% (the midpoint of
the range of 5.00% to 6.50% and equivalent to 11.50% per annum) over the term of the notes. If the actual
Interest Rate as determined on the Pricing Date is less than 5.75% (equivalent
to 11.50% 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 Notes
|
Note Total Return
|
Total Payments over the
Term of the Notes
|
|
1980.00
|
80.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1815.00
|
65.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1650.00
|
50.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1540.00
|
40.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1430.00
|
30.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1320.00
|
20.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1210.00
|
10.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1155.00
|
5.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1100.00
|
0.00%
|
5.75%
|
$1,057.50
|
5.75%
|
$1,057.50
|
1045.00
|
-5.00%
|
5.75%
|
$1,057.50
|
0.75%
|
$1,007.50
|
990.00
|
-10.00%
|
5.75%
|
$1,057.50
|
-4.25%
|
$957.50
|
880.00
|
-20.00%
|
5.75%
|
$1,057.50
|
-14.25%
|
$857.50
|
770.00
|
-30.00%
|
5.75%
|
$1,057.50
|
-24.25%
|
$757.50
|
660.00
|
-40.00%
|
N/A
|
N/A
|
-34.25%
|
$657.50
|
550.00
|
-50.00%
|
N/A
|
N/A
|
-44.25%
|
$557.50
|
440.00
|
-60.00%
|
N/A
|
N/A
|
-54.25%
|
$457.50
|
330.00
|
-70.00%
|
N/A
|
N/A
|
-64.25%
|
$357.50
|
220.00
|
-80.00%
|
N/A
|
N/A
|
-74.25%
|
$257.50
|
110.00
|
-90.00%
|
N/A
|
N/A
|
-84.25%
|
$157.50
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-94.25%
|
$57.50
|
|
(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 1100 to an Ending
Underlying Level of 1155. Because
the Ending Underlying Level of the Lesser Performing Underlying of 1155 is
greater than its Starting Underlying Level of 1100, regardless of whether a
Trigger Event has occurred, the investor receives total payments of $1,057.50
per $1,000 principal amount note over the term of the notes, consisting of
interest payments of $57.50 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 1100 to an Ending Underlying Level of 880. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 880 is less than its Starting Underlying Level of
1100, because a Trigger Event has not occurred, the investor receives total
payments of $1,057.50 per $1,000 principal amount note over the term of the
notes, consisting of interest payments of $57.50 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.
|
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 1100 to an Ending Underlying Level of 880. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 880 is less than its
Starting Underlying Level of 1100, the investor receives total payments of
$857.50 per $1,000 principal amount note over the term of the notes, consisting
of interest payments of $57.50 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%)] +
$57.50 = $857.50
Example 4: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying Level
of 1100 to an Ending Underlying Level of 660. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 660 is less than its
Starting Underlying Level of 1100, the investor receives total payments of
$657.50 per $1,000 principal amount note over the term of the notes, consisting
of interest payments of $57.50 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%)] +
$57.50 = $657.50
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1100 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 1100, the investor receives total payments of
$57.50 per $1,000 principal amount note over the term of the notes, consisting
solely of interest payments of $57.50 per $1,000 principal amount note over the
term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)]
+ $57.50= $57.50
|
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 |