Term Sheet |
Term Sheet to
Product Supplement No. 182-A-I Registration Statement No. 333-155535 Dated April 23, 2010; Rule 433 |
Structured |
$ Capped Index Fund Knock-Out Notes Linked to the iShares® MSCI Mexico Investable Market Index Fund due May 13, 2011 |
General
Key Terms
Index Fund: |
The iShares® MSCI Mexico Investable Market Index Fund (the Index Fund). For additional information about the iShares® MSCI Mexico Investable Market Index Fund, see Appendix A to this term sheet. |
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Knock-Out Event: |
A Knock-Out Event occurs if, on any trading day during the Monitoring Period, the closing price of one share of the Index Fund has decreased, as compared to the Initial Share Price, by more than the Knock-Out Buffer Amount. |
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Knock-Out Buffer Amount: |
20.00% |
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Payment at Maturity: |
If a Knock-Out Event has occurred, you will receive a cash payment at maturity that will reflect the performance of the Index Fund, subject to the Maximum Return. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
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$1,000 + ($1,000 x Share Return), subject to the Maximum Return |
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If a Knock-Out Event has occurred, you will lose some or all of your investment at maturity if the Final Share Price is less than the Initial Share Price. |
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If a Knock-Out Event has not occurred, you will receive a cash payment at maturity that will reflect the performance of the Index Fund, subject to the Contingent Minimum Return and the Maximum Return. If a Knock-Out Event has not occurred, your payment at maturity per $1,000 principal amount note will equal $1,000 plus the product of (a) $1,000 and (b) the greater of (i) the Contingent Minimum Return and (ii) the Share Return, subject to the Maximum Return. For additional clarification, please see What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index Fund? in this term sheet. |
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Maximum Return: |
At least 20%. The actual Maximum Return and the actual maximum payment at maturity will be set on the pricing date and will not be less than 20% and $1,200 per $1,000 principal amount note, respectively. |
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Contingent Minimum Return: |
At least 14.10%. The actual Contingent Minimum Return will be determined on the pricing date and will not be less than 14.10%. |
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Monitoring Period: |
The period from and excluding the pricing date to and including the Observation Date |
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Share Return: |
Final Share Price Initial
Share Price |
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Initial Share Price: |
The closing price of one share of the Index Fund on the pricing date, divided by the Share Adjustment Factor |
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Final Share Price: |
The closing price of one share of the Index Fund on the Observation Date |
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Share Adjustment Factor: |
Set initially at 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. 182-A-I for further information. |
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Observation Date: |
May 10, 2011 |
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Maturity Date: |
May 13, 2011 |
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CUSIP: |
48124ANJ2 |
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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 in the accompanying product supplement no. 182-A-I. |
Investing in the Capped Index Fund Knock-Out Notes involves a number of risks. See Risk Factors beginning on page PS-6 of the accompanying product supplement no. 182-A-I and Selected Risk Considerations beginning on page TS-3 of this term sheet.
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 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 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-19 of the accompanying product supplement no. 182-A-I. |
(2) |
Please see Supplemental Plan of Distribution in this term sheet for information about fees and commissions. |
The notes are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
April 23, 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. 182-A-I 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. 182-A-I dated February 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. 182-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):
Product
supplement no. 182-A-I dated February 4, 2010:
http://www.sec.gov/Archives/edgar/data/19617/000089109210000426/e37702_424b2.pdf
Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf
Prospectus dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005658/e33655_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.
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JPMorgan
Structured Investments |
TS-1 |
What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index Fund?
The following table illustrates the hypothetical total return at maturity on the notes. The total return as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume an Initial Share Price of $55.00, a Contingent Minimum Return of 14.10% and a Maximum Return of 20% and reflect the Knock-Out Buffer Amount of 20%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns 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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Final Share |
Share Return |
Total Return |
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Knock Out Event |
Knock Out Event |
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$99.0000 |
80.00% |
20.00% |
20.00% |
$90.7500 |
65.00% |
20.00% |
20.00% |
$82.5000 |
50.00% |
20.00% |
20.00% |
$77.0000 |
40.00% |
20.00% |
20.00% |
$71.5000 |
30.00% |
20.00% |
20.00% |
$68.7500 |
25.00% |
20.00% |
20.00% |
$66.0000 |
20.00% |
20.00% |
20.00% |
$63.2500 |
15.00% |
15.00% |
15.00% |
$62.7550 |
14.10% |
14.10% |
14.10% |
$60.5000 |
10.00% |
14.10% |
10.00% |
$57.7500 |
5.00% |
14.10% |
5.00% |
$56.3750 |
2.50% |
14.10% |
2.50% |
$55.5500 |
1.00% |
14.10% |
1.00% |
$55.0000 |
0.00% |
14.10% |
0.00% |
$52.2500 |
-5.00% |
14.10% |
-5.00% |
$49.5000 |
-10.00% |
14.10% |
-10.00% |
$46.7500 |
-15.00% |
14.10% |
-15.00% |
$44.0000 |
-20.00% |
14.10% |
-20.00% |
$41.2500 |
-25.00% |
N/A |
-25.00% |
$38.5000 |
-30.00% |
N/A |
-30.00% |
$33.0000 |
-40.00% |
N/A |
-40.00% |
$27.5000 |
-50.00% |
N/A |
-50.00% |
$22.0000 |
-60.00% |
N/A |
-60.00% |
$16.5000 |
-70.00% |
N/A |
-70.00% |
$11.0000 |
-80.00% |
N/A |
-80.00% |
$5.5000 |
-90.00% |
N/A |
-90.00% |
$0.0000 |
-100.00% |
N/A |
-100.00% |
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(1) |
The closing price of one share of the Index Fund has not declined, as compared to the Initial Share Price, by more than 20.00% on any trading day during the Monitoring Period. |
(2) |
The closing price of one share of the Index Fund has declined, as compared to the Initial Share Price, by more than 20.00% on at least one trading day during the Monitoring Period. |
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: A Knock-Out Event has not occurred, and the closing price of one share of the Index Fund increases from the Initial Share Price of $55.00 to a Final Share Price of $55.55. Because a Knock-Out Event has not occurred and the Share Return of 1.00% is less than the Contingent Minimum Return of 14.10%, the investor receives a payment at maturity of $1,141 per $1,000 principal amount note.
Example 2: A Knock-Out Event has not occurred, and the closing price of one share of the Index Fund decreases from the Initial Share Price of $55.00 to a Final Share Price of $52.25. Because a Knock-Out Event has not occurred and the Share Return of -5% is less than the Contingent Minimum Return of 14.10%, the investor receives a payment at maturity of $1,141 per $1,000 principal amount note.
Example 3: A Knock-Out Event has not occurred, and the closing price of one share of the Index Fund increases from the Initial Share Price of $55.00 to a Final Share Price of $63.25. Because a Knock-Out Event has not occurred and the Share Return of 15% is greater than the Contingent Minimum Return of 14.10% but less than the Maximum Return of 20%, the investor receives a payment at maturity of $1,150 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 x 15%) = $1,150
Example 4: A Knock-Out Event has occurred, and the closing price of one share of the Index Fund decreases from the Initial Share Price of $55.00 to a Final Share Price of $49.50. Because a Knock-Out Event has occurred and the Share Return is -10%, the investor receives a payment at maturity of $900 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 x -10%) = $900
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JPMorgan
Structured Investments |
TS-2 |
Example 5: A Knock-Out Event has occurred, and the closing price of one share of the Index Fund increases from the Initial Share Price of $55.00 to a Final Share Price of $57.75. Because a Knock-Out Event has occurred and the Share Return is 5%, the investor receives a payment at maturity of $1,050 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 x 5%) = $1,050
Example 6: The closing price of one share of the Index Fund increases from the Initial Share Price of $55.00 to a Final Share Price of $82.50. Because the Share Return of 50% is greater than the Maximum Return of 20%, regardless of whether a Knock-Out Event has occurred, the investor receives a payment at maturity of $1,200 per $1,000 principal amount note, the maximum payment on the notes.
Selected Purchase Considerations
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 Index Fund, the Underlying Index or any of the component securities of the Index Fund or the Underlying Index. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 182-A-I dated February 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 |
Historical Information
The following graph sets forth the historical performance of the iShares® MSCI Mexico Investable Market Index Fund based on the weekly historical closing price of one share of the Index Fund from January 7, 2005 through April 16, 2010. The closing price of one share of the Index Fund on April 22, 2010 was $54.60. We obtained the closing prices of one share of the Index Fund 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 historical prices of one share of the Index Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing price of one share of the Index Fund on any trading day during the Monitoring Period or the closing price of one share of the Index Fund on the Observation Date. We cannot give you assurance that the performance of the Index Fund will result in the return of any of your initial investment.
Supplemental Plan of Distribution
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 $10.00 per $1,000 principal amount note. See Plan of Distribution (Conflicts of Interest) beginning on page PS-56 of the accompanying product supplement no. 182-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 $10.00 per $1,000 principal amount note.
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JPMorgan
Structured Investments |
TS-6 |
APPENDIX A
The iShares® MSCI Mexico Investable Market Index Fund
We have derived all information contained in this term sheet regarding the iShares® MSCI Mexico Investable Market Index Fund, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. Such information reflects the policies of, and is subject to change by, iShares, Inc., BlackRock Institutional Trust Company, N.A. (BTC) and BlackRock Fund Advisors (BFA). The iShares® MSCI Mexico Investable Market Index Fund is an investment portfolio maintained and managed by iShares, Inc. BFA is currently the investment adviser to the iShares® MSCI Mexico Investable Market Index Fund. The iShares® MSCI Mexico Investable Market Index Fund is an exchange-traded fund (ETF) that trades on the NYSE Arca under the ticker symbol EWW. We make no representations or warranty as to the accuracy or completeness of the information derived from these public sources.
iShares, Inc. is a registered investment company that consists of numerous separate investment portfolios, including the iShares® MSCI Mexico Investable Market Index Fund. Information provided to or filed with the SEC by iShares, Inc. pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to SEC file numbers 033-97598 and 811-09102, respectively, through the SECs website at http://www.sec.gov. For additional information regarding iShares, Inc., BFA and the iShares® MSCI Mexico Investable Market Index Fund, please see the Prospectus, dated January 1, 2010 (as supplemented on February 2, 2010). In addition, information about iShares® and the iShares® MSCI Mexico Investable Market Index Fund may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents and the iShares® website at www.ishares.com. We make no representation or warranty as to the accuracy or completeness of such information. Information contained in the iShares® website is not incorporated by reference in, and should not be considered a part of, this term sheet.
Investment Objective and Strategy
The iShares® MSCI Mexico Investable Market Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Mexican market, as measured by the MSCI Mexico Investable Market Index. The iShares® MSCI Mexico Investable Market Index Fund holds equity securities traded primarily in Mexico. The MSCI Mexico Investable Market Index was developed by MSCI Inc. (MSCI) as an equity benchmark for Mexican stock performance, and is designed to measure equity market performance in Mexico. Prior to December 1, 2007, the iShares® MSCI Mexico Investable Market Index Fund sought to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Mexican market, as measured by the MSCI Mexico Index.
As of March 31, 2010, the iShares® MSCI Mexico Investable Market Index Funds three largest equity securities were América Móvil, S.A.B. de C.V. (Series L), Wal-Mart de México, S.A.B. de C.V. (Series V) and CEMEX, S.A.B. de C.V. (CPOs). Its three largest sectors were telecommunication services, consumer staples and materials.
The iShares® MSCI Mexico Investable Market Index Fund uses a representative sampling strategy (as described below under Representative Sampling) to try to track the MSCI Mexico Investable Market Index. The iShares® MSCI Mexico Investable Market Index Fund will generally invest at least 90% of its assets in the securities of the MSCI Mexico Investable Market Index and depositary receipts representing securities included in the MSCI Mexico Investable Market Index, and will invest at least 80% of its assets in the securities of the MSCI Mexico Investable Market Index or in depositary receipts representing securities included in the MSCI Mexico Investable Market Index. The iShares® MSCI Mexico Investable Market Index Fund may invest the remainder of its other assets in securities not included in the MSCI Mexico Investable Market Index, futures contracts, options on futures contracts, other types of options and swaps related to the MSCI Mexico Investable Market Index, as well as cash and cash equivalents, including share of money market funds affiliated with BFA or its affiliates.
Representative Sampling
The iShares® MSCI Mexico Investable Market Index Fund pursues a representative sampling strategy in attempting to track the performance of the MSCI Mexico Investable Market Index, and generally does not hold all of the equity securities included in the MSCI Mexico Investable Market Index. The iShares® MSCI Mexico Investable Market Index Fund invests in a representative sample of securities in the MSCI Mexico Investable Market Index, which have a similar investment profile as the MSCI Mexico Investable Market Index. Securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and liquidity measures similar to those of the MSCI Mexico Investable Market Index.
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JPMorgan
Structured Investments |
TS-7 |
Correlation
The MSCI Mexico Investable Market Index is a theoretical financial calculation, while the iShares® MSCI Mexico Investable Market Index Fund is an actual investment portfolio. The performance of the iShares® MSCI Mexico Investable Market Index Fund and the MSCI Mexico Investable Market Index will vary due to transaction costs, foreign currency valuation, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the iShares® MSCI Mexico Investable Market Index Funds portfolio and the MSCI Mexico Investable Market Index resulting from legal restrictions (such as diversification requirements) that apply to the iShares® MSCI Mexico Investable Market Index Fund but not to the MSCI Mexico Investable Market Index or the use of representative sampling. A figure of 100% would indicate perfect correlation. Any correlation of less than 100% is called tracking error. BFA expects that, over time, the iShares® MSCI Mexico Investable Market Index Funds tracking error will not exceed 5%. The iShares® MSCI Mexico Investable Market Index Fund, using a representative sampling strategy, can be expected to have a greater tracking error than a fund using a replication strategy. Replication is a strategy in which a fund invests in substantially all of the securities in its underlying index in approximately the same proportions as in such underlying index.
Industry Concentration Policy
The iShares® MSCI Mexico Investable Market Index Fund will concentrate its investments (i.e., hold 25% or more of its total assets) in a particular industry or group of industries to approximately the same extent that the MSCI Mexico Investable Market Index is concentrated.
Holdings Information
As of March 31, 2010, 99.84% of the iShares® MSCI Mexico Investable Market Index Funds holdings consisted of equity securities, 0.02% consisted of cash and 0.13% was in other assets, including dividends booked but not yet received. The following tables summarize the iShares® MSCI Mexico Investable Market Index Funds top holdings in individual companies and by sector as of such date.
Top holdings in individual securities as of March 31, 2010
Company |
Percentage of |
América Móvil, S.A.B. de C.V. (Series L) |
23.85% |
Wal-Mart de México, S.A.B. de C.V. (Series V) |
9.21% |
CEMEX, S.A.B. de C.V. (CPOs) |
5.74% |
Grupo México, S.A.B. de C.V. (Series B) |
4.91% |
Fomento Económico Mexicano, S.A.B. de C.V. (UBDs) |
4.55% |
Grupo Televisa, S.A.B. (CPOs) |
4.45% |
Grupo Financiero Banorte, S.A.B. de C.V. (Series O) |
3.79% |
Telmex Internacional, S.A.B. de C.V. (Series L) |
3.70% |
Teléfonos de México, S.A.B. de C.V. (Series L) |
3.38% |
Grupo Bimbo, S.A.B. de C.V. (Series A) |
3.19% |
Top holdings by sector as of March 31, 2010
Sector |
Percentage of |
Telecommunication Services |
34.62% |
Consumer Staples |
23.43% |
Materials |
14.49% |
Consumer Discretionary |
11.73% |
Industrials |
8.29% |
Financials |
7.07% |
Health Care |
0.21% |
S-T Securities |
0.02% |
The information above was compiled from the iShares® website. We make no representation or warranty as to the accuracy or completeness of such information. Information contained in the iShares® website is not incorporated by reference in, and should not be considered a part of, this term sheet.
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JPMorgan
Structured Investments |
TS-8 |
Disclaimer
The notes are not sponsored, endorsed, sold or promoted by BFA. BFA makes no representations or warranties to the owners of the notes or any member of the public regarding the advisability of investing in the notes. BFA has no obligation or liability in connection with the operation, marketing, trading or sale of the notes.
The MSCI Mexico Investable Market Index
We have derived all information contained in this term sheet regarding the MSCI Mexico Investable Market Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. Such information reflects the policies of, and is subject to change by, MSCI Inc. (MSCI). We make no representation or warranty as to the accuracy or completeness of such information. The MSCI Mexico Investable Market Index is calculated, maintained and published by MSCI. MSCI has no obligation to continue to publish, and may discontinue publication of, the MSCI Mexico Investable Market Index.
The MSCI Mexico Investable Market Index is a free float-adjusted, capitalization-weighted index that aims to capture 99% of the (publicly available) total market capitalization in Mexico. Component companies must meet objective criteria for inclusion in the MSCI Mexico Investable Market Index, taking into consideration unavailable strategic shareholdings and limitations to foreign ownership. The MSCI Mexico Investable Market Index has a base date of December 31, 1987 and is reported by Bloomberg under the ticker symbol MXMX.
For more information on the index calculation methodology used to formulate the MSCI Mexico Investable Market Index (and which is also used to formulate the indices included in the MSCI Global Index Series), see the section entitled The MSCI Indices beginning on page PS-29 of the accompanying product supplement no. 182-A-I. For the avoidance of doubt, references to the MSCI Indices contained in the above-referenced section include the MSCI Mexico Investable Market Index for purposes of this Appendix A.
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JPMorgan
Structured Investments |
TS-9 |