Term sheet
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Term Sheet
Product Supplement No. 192-A-II Registration Statement No. 333-155535 Dated July 30, 2010; Rule 433 |
Structured |
$ 10.00%*-13.00%* per annum Callable Yield Notes due August 31, 2011 Linked to the Lesser Performing of the S&P 500® Index and the Market Vectors Gold Miners ETF |
General
Key Terms
Underlyings: |
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: |
Between 10.00%* and 13.00%*
per annum, 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: |
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: |
On or about August 26, 2010 |
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Settlement Date: |
On or about August 31, 2010 |
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Observation Date**: |
August 26, 2011 |
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Maturity Date**: |
August 31, 2011 |
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CUSIP: |
48124AXX0 |
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Monitoring Period: |
The period from the Pricing Date to and including the Observation Date |
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Interest Payment Dates: |
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 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: |
If the notes are not called, the payment at maturity, in excess of any accrued and unpaid interest, will be based on whether a Trigger Event has occurred and the performance of the Lesser Performing Underlying. If the notes are not called, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest at maturity, unless: |
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(a)
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the Ending Underlying Level of any Underlying is less than the Starting Underlying Level of such Underlying; and | |
(b)
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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: |
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: |
With respect to each Underlying, the Underlying Return is calculated as follows: Ending
Underlying Level Starting Underlying Level |
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Optional Call: |
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**: |
November 30, 2010, February 28, 2011 and May 31, 2011 |
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Additional Key Terms: |
See Additional Key Terms on the next page. |
** |
Subject to postponement in the event of a market disruption event and as described under Description of Notes Payment at Maturity and Description of Notes Payment upon Optional Call, as applicable, in the accompanying product supplement no. 192-A-II |
Investing in the Callable Yield Notes involves a number of risks. See Risk Factors beginning on page PS-10 of the accompanying product supplement no. 192-A-II and Selected Risk Considerations beginning on page TS-3 of this term sheet.
Neither the SEC nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(1) |
The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
(2) |
If the notes priced today, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $35.00 per $1,000 principal amount note and would use a portion of that commission to allow selling concessions to other affiliated or unaffiliated dealers of approximately $15.00 per $1,000 principal amount note. The concessions of approximately $15.00 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 JPMSI may be more or less than $35.00 and will depend on market conditions on the Pricing Date. In no event will the commission received by JPMSI, which includes concessions to be and other amounts that may be allowed to other dealers, exceed $40.00 per $1,000 principal amount note. See Plan of Distribution (Conflicts of Interest) beginning on page PS-93 of the accompanying product supplement no. 192-A-II. |
The notes are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
July 30, 2010
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. 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):
Product supplement no. 192-A-II dated June 4, 2010:
http://www.sec.gov/Archives/edgar/data/19617/000089109210002378/e39032_424b2.pdf
Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
Additional Key Terms
Starting Underlying Level: |
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. |
Ending Underlying Level: |
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. |
Share Adjustment Factor: |
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. |
Lesser Performing Underlying: |
The Underlying with the Lesser Performing Underlying Return |
Lesser Performing Underlying Return: |
The lower of the Underlying Return of the S&P 500® Index and the Underlying Return of the Market Vectors Gold Miners ETF |
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-1 |
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.
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JPMorgan
Structured Investments |
TS-2 |
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.
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JPMorgan
Structured Investments |
TS-3 |
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JPMorgan
Structured Investments |
TS-4 |
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JPMorgan
Structured Investments |
TS-5 |
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.
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JPMorgan
Structured Investments |
TS-6 |
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 11.50% per annum (the midpoint of the range of 10.00% to 13.00% per annum). If the actual Interest Rate as determined on the Pricing Date is less than 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.
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Trigger Event Has Not Occurred (1) |
Trigger Event Has Occurred (1) |
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Ending |
Lesser |
Note Total |
Total Payments over the |
Note Total Return |
Total Payments over the |
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1980.00 |
80.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1815.00 |
65.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1650.00 |
50.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1540.00 |
40.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1430.00 |
30.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1320.00 |
20.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1210.00 |
10.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1155.00 |
5.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1100.00 |
0.00% |
11.50% |
$1,115.00 |
11.50% |
$1,115.00 |
1045.00 |
-5.00% |
11.50% |
$1,115.00 |
6.50% |
$1,065.00 |
990.00 |
-10.00% |
11.50% |
$1,115.00 |
1.50% |
$1,015.00 |
880.00 |
-20.00% |
11.50% |
$1,115.00 |
-8.50% |
$915.00 |
770.00 |
-30.00% |
11.50% |
$1,115.00 |
-18.50% |
$815.00 |
660.00 |
-40.00% |
N/A |
N/A |
-28.50% |
$715.00 |
550.00 |
-50.00% |
N/A |
N/A |
-38.50% |
$615.00 |
440.00 |
-60.00% |
N/A |
N/A |
-48.50% |
$515.00 |
330.00 |
-70.00% |
N/A |
N/A |
-58.50% |
$415.00 |
220.00 |
-80.00% |
N/A |
N/A |
-68.50% |
$315.00 |
110.00 |
-90.00% |
N/A |
N/A |
-78.50% |
$215.00 |
0.00 |
-100.00% |
N/A |
N/A |
-88.50% |
$115.00 |
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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 $1,115 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $115 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 $1,115 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $115 per $1,000 principal amount note over the term of the notes and a payment at maturity of $1,000 per $1,000 principal amount note.
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JPMorgan
Structured Investments |
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 $915 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $115 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%)] + $115 = $915
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 $715 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $115 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%)] + $115 = $715
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 $115 per $1,000 principal amount note over the term of the notes, consisting solely of interest payments of $115 per $1,000 principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)] + $115 = $115
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JPMorgan
Structured Investments |
TS-8 |