Amended and Restated Term
Sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 172-A-I dated July 31, 2009
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Amended and restated term
sheet to
Product Supplement No. 172-A-I
Registration Statement No. 333-155535
Dated January 13, 2010; Rule 433 |
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Structured
Investments
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$
Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator
9 Conditional Long-Short Index due February 4, 2011 |
General
- The notes are designed for investors
who seek unleveraged exposure to the JPMorgan Commodity Investable Global
Asset Rotator 9 Conditional Long-Short Index as described below. Investors
should be willing to forgo interest payments and, if the Ending Underlying
Value declines or does not appreciate from the Strike Value by at least 1.45%,
be willing to lose some or all of their principal. Any payment on the
notes is subject to the credit risk of JPMorgan Chase & Co.
- Senior unsecured obligations of JPMorgan
Chase & Co. maturing February 4, 2011*.
- Minimum denominations of $20,000 and
integral multiples of $1,000 in excess thereof
- The notes are expected to price on or
about January 20, 2010 and are expected to settle on or about January 25,
2010.
Key
Terms
Underlying:
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JPMorgan
Commodity Investable Global Asset Rotator 9 Conditional Long-Short Index
(the Commodity-IGAR 9 Conditional Long-Short or the Underlying)
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Payment
at Maturity:
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Payment at maturity will reflect
the performance of the Underlying, minus the Deduction
Amount. Your payment at maturity per $1,000 principal
amount note will be calculated as follows:
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$1,000
x (1 + Underlying Return) Deduction Amount
In no event, however, will the payment at
maturity be less than $0.
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You
may lose some or all of your investment at
maturity if the Ending Underlying Value declines
from the Strike Value, or does not appreciate from the Strike Value
by at least 1.45%.
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Deduction
Amount:
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$14.50 for each $1,000 principal
amount note
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Underlying
Return:
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Ending
Underlying Value Strike Value
Strike Value |
Strike
Value:
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An
Underlying value to be determined on the pricing date in the sole discretion
of the calculation agent. The Strike Value may or may not be the
regular official Underlying closing value on the pricing date. Although
the calculation agent will make all determinations and will take all
actions in relation to the establishment of the Strike Value in good
faith, it should be noted that such discretion could have an impact
(positive or negative), on the value of your notes. The calculation
agent is under no obligation to consider your interests as a holder
of the notes in taking any actions, including the determination of the
Strike Value, that might affect the value of your notes.
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Ending Underlying Value:
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The Underlying closing value on the Observation
Date
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Observation
Date:
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February 1, 2011*
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Maturity Date:
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February 4, 2011*
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CUSIP:
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48124AFG7
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This amended and restated term
sheet amends and restates the term sheet related hereto dated January 11, 2010 to product
supplement no. 172-A-I in its entirety (the term sheet is available on
the SEC website at
http://www.sec.gov/Archives/edgar/data/19617/000089109210000092/e37500fwp.pdf).
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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
Postponement of a Determination Date in the accompanying product supplement
no. 172-A-I or early acceleration in the event of a hedging disruption event
as described under "General Terms of Notes Consequences of a Commodity
Hedging Disruption Event" in the accompanying product supplement no.
172-A-I and in "Selected Risk Considerations Commodity Futures Contracts
Are Subject to Uncertain Legal and Regulatory Regimes" in this amended and restated term
sheet. |
Investing in the Return
Notes involves a number of risks. See Risk Factors beginning on page PS-5
of the accompanying product supplement no. 172-A-I and Selected Risk Considerations
beginning on page TS-2 of this amended and restated term sheet.
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 amended and restated 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. 172-A-I and this amended and restated 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.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the notes
or passed upon the accuracy or the adequacy of this amended and restated 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)
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The price
to the public includes the cost of hedging our obligations under the notes
through one or more of our affiliates, which includes our affiliates
expected cost of providing such hedge as well as the profit our affiliates
expect to realize in consideration for assuming the risks inherent in
providing such hedge. For additional related information, please see
Use of Proceeds beginning on page PS-16 of the accompanying product
supplement no. 172-A-I, as supplemented by Supplemental Use of Proceeds
in this amended and restated term sheet.
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(2)
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Please see Supplemental
Plan of Distribution (Conflicts of Interest) in this amended and restated term sheet for information
about fees and commissions. |
The agent for this offering, J.P.
Morgan Securities Inc., which we refer to as JPMSI, is an affiliate of ours.
See Supplemental Plan of Distribution (Conflicts of Interest) in this amended and restated term
sheet.
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.
January 13, 2010
Additional
Terms Specific to the Notes
You should read this amended and restated 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. 172-A-I dated July 31, 2009. This amended and restated 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.
This amended and restated term sheet
amends and restates and supersedes the term sheet related hereto dated January 11, 2010
in its entirety. You should rely only on the information contained in this amended and
restated term sheet and in the documents listed below in making your decision to invest
in the notes. You should carefully consider, among other things, the matters set forth in
Risk Factors in the accompanying product supplement no. 172-A-I, 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 amended and restated term sheet, the Company, we, us or our
refers to JPMorgan Chase & Co.
JPMorgan
Commodity Investable Global Asset Rotator 9 Conditional Long-Short Index
The Commodity Investable Global Asset Rotator
9 Conditional Long-Short Index (the Commodity-IGAR
9 Conditional Long-Short or the Underlying).
The Commodity-IGAR 9 Conditional Long-Short
was developed and is maintained by J.P. Morgan Securities Ltd. to implement
a momentum-based algorithmic strategy for commodity allocations. The Commodity-IGAR
9 Conditional Long-Short references the value of a synthetic portfolio selected
from a limited universe of commodity sub-indices, each of which is a component of the S&P GSCITM
Index (S&P GSCITM) and is intended to serve as a benchmark
value for a particular commodity. The Commodity-IGAR 9 Conditional Long-Short
is an excess return index intended to track the performance of a synthetic
portfolio of commodity excess return sub-indices. An excess return index
reflects the returns that are potentially available through an uncollateralized
investment in the contracts underlying such index, including any profit or
loss realized when rolling such contracts.
Historical performance data for each sub-index
is run through the Commodity-IGAR 9 Conditional Long-Short algorithms on a
monthly basis. The algorithms test each sub-indexs performance and consistency.
The performance algorithm tests the year-over-year performance for each sub-index,
and the consistency tests filter out sub-indices that have not demonstrated
consistent positive monthly performance over a one-year period, attributing greater weight to more
recent monthly periods.
If on any monthly rebalancing date, the year-over-year
performance of an equally weighted basket of the referenced universe of GSCI
sub-indices is (a) positive and (b) consistently positive, the short leg of the Commodity-IGAR 9
Conditional Long-Short will be de-activated.
Up to twelve sub-indices that are ranked with
the strongest positive performance and successfully pass the consistency test
are assigned a conditional long-short target weight of one-twelfth (1/12)
in the synthetic portfolio until the next monthly rebalancing. The weighting
of one-twelfth will apply to each of the strongest sub-indices even if their
number is less than twelve. If the short leg of the Commodity-IGAR 9 Conditional
Long-Short is not de-activated, up to twelve sub-indices that are ranked with
the weakest negative performance and successfully pass the conditional short
consistency test are assigned a conditional long-short target weight of minus
one-twelfth (1/12) in the synthetic portfolio until the next monthly
rebalancing. The remaining constituents are assigned a weight of zero percent
(0%).
The value of the Commodity-IGAR 9 Conditional
Long-Short is the value of the synthetic portfolio, minus an adjustment factor deducted
daily at an annual rate of 0.96%.
As of January 13, 2010, the Commodity-IGAR 9
Conditional Long-Short synthetic portfolio contains twelve long positions
in the S&P GSCI sub-indices referencing the following commodities: Aluminum,
Brent Crude, Copper, Cotton, Gas Oil, Gasoline, Heating Oil, Nickel, Lead,
Silver, Sugar and Zinc. As of the date of this amended and restated term sheet, the synthetic
portfolio contains no short positions.
The value of the Commodity-IGAR 9 Conditional
Long-Short is published each trading day under the Bloomberg ticker symbol
CMDT9CER.
Selected
Purchase Considerations
- INVESTMENT EXPOSURE
TO THE COMMODITY-IGAR 9 CONDITIONAL LONG-SHORT The notes provide unleveraged
exposure to the Commodity-IGAR 9 Conditional Long-Short, minus a Deduction
Amount of $14.50 per $1,000 principal amount note. Because the notes are
our senior unsecured obligations, payment of any amount at maturity is subject
to our ability to pay our obligations as they become due.
- RETURN LINKED TO DYNAMIC
BASKET OF SUB-INDICES REPRESENTING SUB-ASSET CLASSES OF THE GLOBAL COMMODITY
MARKET The return on the notes is linked to the performance of the JPMorgan
Commodity Investable Global Asset Rotator 9 Conditional Long-Short Index.
The Commodity-IGAR 9 Conditional Long-Short references the value of a synthetic
portfolio drawn from the constituent sub-indices of the S&P GSCITM
using an investment strategy that is generally known as momentum investing.
The rebalancing method therefore seeks to capitalize on positive or negative
trends in the U.S. dollar level of the constituents on the assumption that
if certain constituents performed well in the past,
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JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-1 |
they will continue to
perform well in the future. See The JPMorgan Commodity Investable Global
Asset Rotator 9 Conditional Long-Short Index in the accompanying product
supplement no. 172-A-I.
- CAPITAL GAINS TAX TREATMENT You should review carefully
the section entitled Certain U.S. Federal Income Tax Consequences in the
accompanying product supplement no. 172-A-I. Subject to the limitations described
therein, and based on certain factual representations received from us, in
the opinion of our special tax counsel, Davis Polk & Wardwell LLP, it
is reasonable to treat the notes as open transactions for U.S. federal income
tax purposes. Assuming this characterization is respected, the gain
or loss on your notes should be treated as long-term capital gain or
loss if you hold your notes for more than a year, whether or not you are an
initial purchaser of notes at the issue price. However, the Internal Revenue
Service (the IRS) or a court may not respect this characterization or treatment
of the notes, in which case the timing and character of any income or loss
on the notes could be significantly and adversely affected. In addition,
in December 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, which might include the notes. The notice focuses
in particular on whether to require holders of these instruments to accrue
income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with
respect to these instruments; the relevance of factors such as the nature
of the underlying property to which the instruments are linked; the degree,
if any, to which income (including any mandated accruals) realized by Non-U.S.
Holders should be subject to withholding tax; and whether these instruments
are or should be subject to the constructive ownership regime, which very
generally can operate to recharacterize certain long-term capital gain as
ordinary income that is subject to an interest charge. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury
regulations or other guidance promulgated after consideration of these issues
could materially and adversely affect the tax consequences of an investment
in the notes, possibly with retroactive effect. Both U.S. and Non-U.S. Holders
should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the notes, including 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.
Subject to certain assumptions and
representations received from us, the discussion in the preceding paragraph, when
read in combination with the section entitled Certain U.S. Federal Income
Tax Consequences in the accompanying product supplement, constitutes the
full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal
income tax consequences of owning and disposing of notes.
Selected
Risk Considerations
An investment in the notes
involves significant risks. Investing in the notes is not equivalent to investing
directly in the S&P GSCITM constituent
sub-indices, in any of the commodities whose futures contracts determine the
levels of the S&P GSCITM constituent
sub-indices or the constituent sub-indices of the Commodity-IGAR 9 Conditional
Long-Short, or in any contracts relating to such commodities for which there
is an active secondary market. These risks are explained in more detail in
the Risk Factors section of the accompanying product supplement no. 172-A-I
dated July 31, 2009.
- YOUR INVESTMENT IN
THE NOTES MAY RESULT IN A LOSS The notes do not guarantee any return
of principal at maturity. The return on the notes is linked to the performance
of the Underlying minus the Deduction Amount of $14.50 per $1,000 principal
amount note and will depend on whether, and the extent to which, the Underlying
Return is positive or negative. Your investment will be fully exposed to
any decline in the Ending Underlying Value, as compared to the Strike Value,
provided that the payment at maturity will not be less than zero.
In addition, you may lose some of your investment at maturity even if the
Ending Underlying Value has increased as compared to the Strike Level as described
below in the next risk consideration.
- THE DEDUCTION AMOUNT
WILL REDUCE YOUR FINAL PAYMENT The notes are subject to a Deduction
Amount of up to $14.50 per $1,000 principal amount note, which will be subtracted
from your payment at maturity. Because the Deduction Amount will reduce your
payment at maturity, even if the Underlying has appreciated, you will lose
up to $14.50 per $1,000 principal amount note even if the Ending Underlying
Value is greater than the Strike Level by less than 1.45%.
- 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, 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.
- CERTAIN BUILT-IN COSTS
ARE LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY
While the payment at maturity, if any, described in this amended and restated 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 set forth under Many Economic and Market Factors Will Impact 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.
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JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-2 |
- INVESTMENTS RELATED
TO THE VALUE OF COMMODITIES TEND TO BE MORE VOLATILE THAN TRADITIONAL SECURITIES
INVESTMENTS The market values of commodities tend to be highly volatile.
Commodity market values are not related to the value of a future income or
earnings stream, as tends to be the case with fixed-income and equity investments,
but are subject to variables of specific application to commodities markets.
These variables include changes in supply and demand relationships, governmental
programs and policies, national and international monetary, trade, political
and economic events, changes in interest and exchange rates, speculation and
trading activities in commodities and related contracts, weather, and agricultural,
trade, fiscal and exchange control policies. These factors may have a larger
impact on commodity prices and commodity-linked instruments than on traditional
fixed-income and equity securities. These variables may create additional
investment risks that cause the value of the notes to be more volatile than
the values of traditional securities. These and other factors may affect
the levels of the sub-indices included from time to time in the Commodity-IGAR
9 Conditional Long-Short, and thus the value of your notes, in unpredictable
or unanticipated ways. The Commodity-IGAR 9 Conditional Long-Short provides
one avenue for exposure to commodities. The high volatility and cyclical
nature of commodity markets may render these investments inappropriate as
the focus of an investment portfolio.
- COMMODITY FUTURES
CONTRACTS ARE SUBJECT TO UNCERTAIN LEGAL AND REGULATORY REGIMES The
commodity futures contracts that underlie the constituents of the Commodity-IGAR
are subject to legal and regulatory regimes in the United States and, in some
cases, in other countries that may change in ways that could adversely affect
our ability to hedge our obligations under the notes and affect the value
of the Commodity-IGAR 9 Conditional Long-Short. The Commodity Futures Trading
Commission has recently announced that it is considering imposing position
limits on certain commodities (such as energy commodities) and the manner
in which current exemptions for bona fide hedging transactions or positions
are implemented in order to protect against excessive speculation. Such restrictions
may result in the COMIGAR Calculation Agent exercising its discretionary right
under the rules governing the Commodity-IGAR 9 Conditional Long-Short to exclude
or substitute constituents of the Commodity-IGAR 9 Conditional Long-Short
or modify the rules governing the Commodity-IGAR 9 Conditional Long-Short,
which may, in turn, have a negative effect on the level of the Commodity-IGAR
9 Conditional Long-Short and your payment at maturity. Please see The JPMorgan
Core Commodity Investable Global Asset Rotator Excess Return Extraordinary
Events Affecting Commodity-IGAR 9 Conditional Long-Short and Constituent Sub-Indices
in the accompanying product supplement no. 172-A-I for more information.
In addition, we or our affiliates may be unable as a result of such restrictions
to effect transactions necessary to hedge our obligations under the notes,
in which case we may, in our sole and absolute discretion, accelerate the
payment on your notes early and pay you an amount determined in good faith
and in a commercially reasonable manner by the calculation agent. If the payment
on your notes is accelerated, your investment may result in a loss and you
may not be able to reinvest your money in a comparable investment. Please
see General Terms of Notes Consequences of a Commodity Hedging Disruption
Event in the accompanying product supplement no. 172-A-I for more information.
- OWNING THE NOTES INVOLVES
THE RISKS ASSOCIATED WITH COMMODITY-IGAR 9 CONDITIONAL LONG-SHORTS MOMENTUM
INVESTMENT STRATEGY The Commodity-IGAR 9 Conditional Long-Short employs
a mathematical model intended to implement what is generally known as a momentum
investment strategy, which seeks to capitalize on consistent positive and
negative market price trends based on the supposition that consistent positive
and negative market price trends may continue. This strategy is different
from a strategy that seeks long-term exposure to a portfolio consisting of
constant components. The Commodity-IGAR 9 Conditional Long-Short strategy
may fail to realize gains that could occur as a result of holding a commodity
that has experienced price declines, but after which experiences a sudden
price spike, or has experienced price increases, but after which experiences
a sudden price decline. Further, the rules of the Commodity-IGAR 9 Conditional
Long-Short limit exposure to rapidly appreciating or depreciating sub-indices.
This is because the Commodity-IGAR 9 Conditional Long-Short rebalances its
exposure to sub-indices each month so that the exposure to any one sub-index
does not exceed one-twelfth of the total long or short synthetic portfolio
as of the time of a monthly rebalancing. By contrast, a synthetic portfolio
that does not rebalance monthly in this manner could see greater compounded
gains over time through exposure to a consistently and rapidly appreciating
or depreciating sub-index.
- THE COMMODITY-IGAR
9 CONDITIONAL LONG-SHORT SYNTHETIC PORTFOLIO MAY HOLD FEW OR NO SUB-INDICES
AND WILL NOT REPLICATE THE COMPONENTS OR WEIGHTINGS OF THE S&P GSCITM
COMMODITY INDEX Because the rules of the Commodity-IGAR 9 Conditional
Long-Short limit the synthetic portfolio to holding only constituent sub-indices
that have shown consistent positive or negative price appreciation, the synthetic
portfolio may experience periods where it holds few or no constituent sub-indices,
and therefore is unlikely during such periods to achieve returns that exceed
the returns realized by other investment strategies, or be able to capture
gains from other appreciating or depreciating assets in the market that are
not included in the universe of constituent sub-indices. By contrast, the
S&P GSCITM seeks to allocate weights based on the relative
importance of component commodities within the overall economy. As a result,
the Commodity-IGAR 9 Conditional Long-Short will not track an econometric-weighted
commodity portfolio or assume constant exposure to commodity positions.
- OWNING THE NOTES IS
NOT THE SAME AS OWNING THE CONSTITUENT SUB-INDICES OR COMMODITIES CONTRACTS
The return on your notes will not reflect the return you would realize if
you actually held or sold short the commodity contracts replicating the constituent
sub-indices of the Commodity-IGAR 9 Conditional Long-Short. The Commodity-IGAR
9 Conditional Long-Short synthetic portfolio is a hypothetical construct that
does not hold any underlying assets of any kind. As a result, a holder of
the notes will not have any direct or indirect rights to any commodity contracts
or interests in the constituent sub-indices. Furthermore, the Commodity-IGAR
9 Conditional Long-Short synthetic portfolio is subject to monthly rebalancing
and the assessment of a monthly index calculation fee that will reduce its
value relative to the value of the constituent sub-indices.
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JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-3 |
- THE NOTES MAY BE SUBJECT
TO INCREASED VOLATILITY DUE TO THE USE OF LEVERAGE The Commodity-IGAR
9 Conditional Long-Short employs a technique generally known as long-short
strategy. As part of this strategy, if the short leg of the Commodity-IGAR
9 Conditional Long-Short is not de-activated, the sum of the absolute values
of the conditional long-short target weights may be greater than 1 and, consequently,
the Commodity-IGAR 9 Conditional Long-Short may include leverage. Where the
synthetic portfolio is leveraged, any price movements in the commodity contracts
replicating the constituent sub-indices may result in greater changes in the
value of the Commodity-IGAR 9 Conditional Long-Short than if leverage was
not used, which in turn could cause you to receive a lower payment at maturity
than you would otherwise receive.
- SUSPENSION OR DISRUPTIONS
OF MARKET TRADING IN THE COMMODITY AND RELATED OPTIONS FUTURES MARKETS MAY
ADVERSELY AFFECT THE LEVEL OF THE COMMODITY-IGAR 9 CONDITIONAL LONG-SHORT,
AND THEREFORE THE VALUE OF THE NOTES The commodity markets are subject
to temporary distortions or other disruptions due to various factors, including
the lack of liquidity in the markets, the participation of speculators and
government regulation and intervention. In addition, U.S. futures exchanges
and some foreign exchanges have regulations that limit the amount of fluctuation
in options futures contract prices that may occur during a single business
day. These limits are generally referred to as daily price fluctuation limits
and the maximum or minimum price of a contract on any given day as a result
of these limits is referred to as a limit price. Once the limit price has
been reached in a particular contract, no trades may be made at a different
price. Limit prices have the effect of precluding trading in a particular
contract or forcing the liquidation of contracts at disadvantageous times
or prices. These circumstances could adversely affect the level of the Commodity-IGAR
9 Conditional Long-Short and, therefore, the value of your notes.
- BECAUSE THE COMMODITY-IGAR
9 CONDITIONAL LONG-SHORT INDEX MAY INCLUDE NOTIONAL SHORT POSITIONS, THE COMMODITY-IGAR
9 CONDITIONAL LONG-SHORT INDEX MAY BE SUBJECT TO ADDITIONAL RISKS The
Commodity-IGAR 9 Conditional Long-Short Index employs a technique generally
known as long-short strategy. This means the Commodity-IGAR 9 Conditional
Long-Short Index could include a number of notional long positions and a number
of notional short positions. Unlike long positions, short positions are subject
to unlimited risk of loss because there is no limit on the amount by which
the price that the relevant asset may appreciate before the short position
is closed. Although the minimum payment at maturity is $0, it is possible
that any notional short position included in the Commodity-IGAR 9 Conditional
Long-Short may appreciate substantially with an adverse impact on the Commodity-IGAR
9 Conditional Long-Short value and your notes.
- HIGHER FUTURES PRICES
OF THE COMMODITY FUTURES CONTRACTS UNDERLYING THE CONSTITUENT SUB-INDICES
OF THE COMMODITY-IGAR 9 CONDITIONAL LONG-SHORT RELATIVE TO THE CURRENT PRICES
OF SUCH CONTRACTS MAY AFFECT THE VALUE OF THE COMMODITY-IGAR 9 CONDITIONAL
LONG-SHORT AND THE VALUE OF THE NOTES The constituent sub-indices of
the Commodity-IGAR 9 Conditional Long-Short are composed of futures contracts
on physical commodities. Unlike equities, which typically entitle the holder
to a continuing stake in a corporation, commodity futures contracts normally
specify a certain date for delivery of the underlying physical commodity.
As the exchange-traded futures contracts that compose the constituent sub-indices
of the Commodity-IGAR 9 Conditional Long-Short approach expiration, they are
replaced by contracts that have a later expiration. Thus, for example, a
contract purchased and held in August may specify an October expiration.
As time passes, the contract expiring in October is replaced with a contract
for delivery in November. This process is referred to as rolling. If the
market for these contracts is (putting aside other considerations) in backwardation,
where the prices are lower in the distant delivery months than in the nearer
delivery months, the sale of the October contract would take place at a price
that is higher than the price of the November contract, thereby creating a
positive roll yield. While many of the contracts included in the constituent
sub-indices of the Commodity-IGAR 9 Conditional Long-Short have historically
exhibited consistent periods of backwardation, backwardation will most likely
not exist at all times and there can be no assurance that backwardation will
exist at times that are advantageous, with respect to your interests as a
holder of the notes, to the valuation of the Commodity-IGAR 9 Conditional
Long-Short. The presence of contango in the commodity markets, (i.e.,
where the prices for the relevant futures contract are higher in the distant
delivery months than in nearby delivery months) could result in negative roll
yields, which could adversely affect the value of the Commodity-IGAR 9 Conditional
Long-Short and thus the value of notes linked to the Commodity-IGAR 9 Conditional
Long-Short.
- THE COMMODITY-IGAR
9 CONDITIONAL LONG-SHORT HAS A LIMITED OPERATING HISTORY The Commodity-IGAR
9 Conditional Long-Short was established on February 13, 2009 (and its governing
rules were amended on July 31, 2009 and effective as of August 24, 2009).
Therefore, the Strategy has limited historical performance. Back-testing
or similar analysis in respect of the Commodity-IGAR 9 Conditional Long-Short
must be considered illustrative only and may be based on estimates or assumptions
not used by the calculation agent when determining the Commodity-IGAR 9 Conditional
Long-Short values.
- THE NOTES ARE
LINKED TO AN EXCESS RETURN INDEX AND NOT A TOTAL RETURN INDEX
The notes are linked to an excess return index and not a total return
index. The Underlying is an excess return index intended to track the performance
of a synthetic portfolio of commodity excess return sub-indices. An excess
return index, such as the Underlying, reflects the returns that are potentially
available through an uncollateralized investment in the contracts underlying
such index, including any profit or loss realized when rolling such contracts.
By contrast, a total return index, in addition to reflecting those returns,
also reflects interest that could be earned on funds committed to the trading
of the underlying futures contracts. Investing in the notes will therefore
not generate the same return as one would obtain from investing directly in
the relevant futures contracts or in a total return index related to such
future contracts.
- NO INTEREST PAYMENTS
As a holder of the notes, you will not receive any interest payments.
- 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.
- THE REPORTED
LEVEL OF THE COMMODITY-IGAR 9 CONDITIONAL LONG-SHORT WILL INCLUDE THE DEDUCTION
OF AN ADJUSTMENT FACTOR One way in which the Commodity-IGAR
9 Conditional Long-Short differs from a typical index is that its daily reported
level includes a deduction from the aggregate values of its constituents of
an adjustment factor assessed at an annual rate of 0.96%. This adjustment
factor is deducted daily and calculated based on an actual/360 accrual basis.
As a result of the deduction of this amount, the value of the Commodity-IGAR
9 Conditional Long-Short will trail the value of a hypothetical identically
constituted synthetic portfolio from which no such amount is deducted.
|
JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-4 |
- POTENTIAL CONFLICTS
We and our affiliates play a variety of roles in connection with the
issuance of the notes, including acting as COMIGAR Calculation Agent the
entity that calculates the Commodity-IGAR 9 Conditional Long-Short values,
and acting as calculation agent and hedging our obligations under the notes.
In performing these duties, the economic interests of the COMIGAR Calculation
Agent, the calculation agent and other affiliates of ours are potentially
adverse to your interests as an investor in the notes. Although
the calculation agent will make all determinations and will take all actions
in relation to the establishment of the Strike Value in good faith, it should
be noted that such discretion could have an impact (positive or negative),
on the value of your notes. The calculation agent is under no obligation
to consider your interests as a holder of the notes in taking any actions,
including the determination of the Strike Value, that might affect the value
of your notes.
- MANY ECONOMIC AND
MARKET FACTORS WILL AFFECT THE VALUE OF THE NOTES In addition to the
Underlying closing value 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:
- the volatility in the Underlying and the constituent
sub-indices;
- the time to maturity of such notes;
- the market price of the physical commodities
upon which the futures contracts that compose the constituent sub-indices
are based;
- interest and yield rates in the market generally;
- economic, financial, political, regulatory,
geographical, agricultural, meteorological or judicial events that affect
the commodities underlying the constituent sub-indices or markets generally
and which may affect the value of the commodity futures contracts, and
thus the closing levels of the constituent sub-indices; and
- our creditworthiness, including actual or anticipated
downgrades in our credit ratings.
|
JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-5 |
What
Is the Payment at Maturity on the Notes Assuming a Range of Performance for
the Commodity Investable Global Asset Rotator 9 Conditional Long-Short?
The following table illustrates
the hypothetical payments at maturity for each $1,000 principal amount note.
The hypothetical payments at maturity set forth below assume a Strike Value
of 130 and reflect the Deduction Amount of $14.50 for each $1,000 principal
amount note. The hypothetical payments at maturity set forth below are for
illustrative purposes only and may not be the actual payment at maturity applicable
to a purchaser of the notes. The numbers appearing in the following table
and examples have been rounded for ease of analysis.
|
Ending
Underlying
Value |
Underlying
Return |
$1,000
x
(1 + Index Return) |
|
Deduction
Amount |
|
Payment
at
Maturity |
|
234.00 |
80.000% |
$1,800.00 |
- |
$14.50 |
= |
$1,785.50 |
221.00 |
70.000% |
$1,700.00 |
- |
$14.50 |
= |
$1,685.50 |
208.00 |
60.000% |
$1,600.00 |
- |
$14.50 |
= |
$1,585.50 |
195.00 |
50.000% |
$1,500.00 |
- |
$14.50 |
= |
$1,485.50 |
182.00 |
40.000% |
$1,400.00 |
- |
$14.50 |
= |
$1,385.50 |
169.00 |
30.000% |
$1,300.00 |
- |
$14.50 |
= |
$1,285.50 |
156.00 |
20.000% |
$1,200.00 |
- |
$14.50 |
= |
$1,185.50 |
143.00 |
10.000% |
$1,100.00 |
- |
$14.50 |
= |
$1,085.50 |
136.50 |
5.000% |
$1,050.00 |
- |
$14.50 |
= |
$1,035.50 |
130.65 |
0.500% |
$1,005.00 |
- |
$14.50 |
= |
$990.50 |
130.00 |
0.000% |
$1,000.00 |
- |
$14.50 |
= |
$985.50 |
117.00 |
-10.000% |
$900.00 |
- |
$14.50 |
= |
$885.50 |
104.00 |
-20.000% |
$800.00 |
- |
$14.50 |
= |
$785.50 |
91.00 |
-30.000% |
$700.00 |
- |
$14.50 |
= |
$685.50 |
78.00 |
-40.000% |
$600.00 |
- |
$14.50 |
= |
$585.50 |
65.00 |
-50.000% |
$500.00 |
- |
$14.50 |
= |
$485.50 |
52.00 |
-60.000% |
$400.00 |
- |
$14.50 |
= |
$385.50 |
39.00 |
-70.000% |
$300.00 |
- |
$14.50 |
= |
$285.50 |
26.00 |
-80.000% |
$200.00 |
- |
$14.50 |
= |
$185.50 |
13.00 |
-90.000% |
$100.00 |
- |
$14.50 |
= |
$85.50 |
0.00 |
-100.000% |
$0.00 |
- |
$14.50 |
= |
$0.00 |
|
|
The payment at maturity
will not be less than $0. |
Hypothetical
Examples of Amounts Payable at Maturity
The following examples illustrate how the total
returns set forth in the table above are calculated.
Example 1: The value of the Underlying increases
from the Strike Value of 130 to an Ending Underlying Value of 136.50. Because the
Ending Underlying Value of 136.50 is greater than the Strike Value of 130,
the investor receives a payment at maturity of $1,035.50 per $1,000 principal
amount note, calculated as follows:
$1,000 x (1 + 5%) $14.50 = $1,035.50
Example 2: The value
of the Underlying increases from the Strike Value of 130 to an Ending Underlying
Value of 130.65. Even though the Ending Underlying Value of 130.65
is greater than the Strike Value of 130, because the Index Return is less
than 1.45%, the investor receives a payment at maturity of $990.50 per $1,000
principal amount note, calculated as follows:
$1,000 x (1 +
0.50%) $14.50
= $990.50
Example 3: The value
of the Underlying decreases from the Strike Value of 130 to an Ending Underlying
Value of 104. Because the Ending Underlying Value of 104 is less
than the Strike Value of 130, the investor receives a payment at maturity
of $785.50 per $1,000 principal amount note, calculated as follows:
$1,000
x (1 + -20%) $14.50 = $785.50
Example 4: The value
of the Underlying decreases from the Strike Value of 130 to an Ending Underlying
Value of 0. Because the Ending Underlying Value of 0 is less than
the Strike Value of 130, and because the payment at maturity per $1,000 principal
amount note may not be less than $0, the investor receives a payment at maturity
of $0 per $1,000 principal amount note.
|
JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-6 |
Hypothetical
Back-tested Data and Historical Information
The following
graph sets forth the hypothetical back-tested performance of the Underlying
based on the hypothetical back-tested weekly Underlying closing values from
January 7, 2005 through February 12, 2009, and the historical performance
of the Underlying based on the weekly Underlying closing values from February
13, 2009 through January 8, 2010.
The Underlying was established on February 13, 2009. The Underlying closing
value on January 12, 2010 was 129.5281. We obtained the Underlying
closing values below from Bloomberg Financial Markets. We make no representation
or warranty as to the accuracy or completeness of the information obtained
from Bloomberg Financial Markets.
The hypothetical back-tested
and historical values of the Underlying should not be taken as an indication
of future performance, and no assurance can be given as to the Underlying
closing value on the Observation Date. We cannot give you assurance that
the performance of the Underlying will result in the return of any of your
initial investment at maturity.
The data for the hypothetical back-tested
performance of Commodity-IGAR 9 Conditional Long-Short set forth in the following
graph was calculated on materially the same basis on which the performance
of Commodity-IGAR 9 Conditional Long-Short is now calculated, but the number
of S&P GSCITM sub-indices, and thus the universe of potential
constituent sub-indices, has changed over time. For example, in January 1991,
there were only 17 S&P GSCITM sub-indices. There are currently
24 sub-indices. Hypothetical daily performance data for Commodity-IGAR 9
Conditional Long-Short is net of an adjustment factor of 0.96% per annum.
The hypothetical historical
values above have not been verified by an independent third party. The back-tested,
hypothetical historical results above have inherent limitations. These back-tested
results are achieved by means of a retroactive application of a back-tested
model designed with the benefit of hindsight.
Alternative modeling techniques
or assumptions would produce different hypothetical historical information
that might prove to be more appropriate and that might differ significantly
from the hypothetical historical information set forth above. Hypothetical
back-tested results are neither an indicator nor guarantee of future returns.
Actual results will vary, perhaps materially, from the analysis implied in
the hypothetical historical information that forms part of the information
contained in the chart above.
Supplemental
Use of Proceeds
For purposes of the notes offered
by this amended and restated term sheet, the second paragraph under Use of Proceeds in the accompanying
product supplement no. 172-A-I is deemed to be replaced by the following paragraph:
The original issue price
of the notes will include the reimbursement of certain issuance costs and
the estimated cost of hedging our obligations under the notes. The estimated
cost of hedging includes the projected profit, which in no event will exceed
$35.00 per $1,000 principal amount note, that our affiliates expect to realize
in consideration for assuming the risks inherent in hedging our obligations
under the notes. Because hedging our obligations entails risk and may be
influenced by market forces beyond our control, the actual cost of such hedging
may result in a profit that is more or less than expected, or could result
in a loss. See also Use of Proceeds in the accompanying prospectus.
Supplemental
Plan of Distribution (Conflicts of Interest)
We
own, directly or indirectly, all of the outstanding equity securities of JPMSI,
the agent for this offering. The net proceeds received from the sale of
the notes will be used, in part, by JPMSI or one of its affiliates in
connection with hedging our obligation under the notes. In accordance
with NASD Rule 2720, JPMSI may not make sales in this offering to any of its
discretionary accounts without the prior written approval of the customer.
JPMSI, acting as agent for JPMorgan
Chase & Co., will receive a commission that will depend on market conditions
on the pricing date. In no event will that commission exceed $18.50 per
$1,000 principal amount note. See Plan of Distribution beginning on
page PS-42 of the accompanying product supplement no. 172-A-I.
For
a different portion of the notes to be sold in this offering, an affiliated
bank will receive a fee and another affiliate of ours will receive a structuring
and development fee. In no event will the total amount of these fees exceed
$18.50 per $1,000 principal amount note.
|
JPMorgan
Structured Investments
Return Notes Linked to the JPMorgan Commodity Investable Global Asset
Rotator 9 Conditional Long-Short Index |
TS-7 |