Term sheet |
Term Sheet to
Product Supplement No. 90-A-I Registration Statement No. 333-155535 Dated July 8, 2009; Rule 433 |
Structured |
$ Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator Excess Return due July 26, 2010 |
General
Key Terms
Underlying: |
JPMorgan Commodity Investable Global Asset Rotator Excess Return (the Commodity-IGAR or the Underlying). |
Payment at Maturity: |
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 × (1 + Underlying Return) Deduction Amount |
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In no event, however, will the payment at maturity be less than $0. You may lose some or all of your investment at maturity if the Ending Underlying Value declines from the Initial Underlying Value, or does not appreciate from the Initial Underlying Value by at least 0.80%*. |
Deduction Amount: |
Not more than $8.00* for each $1,000 principal amount note. * The actual Deduction Amount will be set on the pricing date and will not be greater than $8.00 for each $1,000 principal amount note. |
Underlying Return: |
Ending Underlying Value Initial
Underlying Value |
Initial Underlying Value: |
The Underlying closing value on July 13, 2009, subject to postponement in the same manner as the Observation Date. The Initial Underlying Value is not the Underlying closing value on the pricing date and will not be determined until after the pricing date. |
Ending Underlying Value: |
The Underlying closing value on the Observation Date. |
Observation Date: |
July 16, 2010 |
Maturity Date: |
July 26, 2010 |
CUSIP: |
48123L3T9 |
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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. 90-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. 90-A-I and in Selected Risk Considerations Commodity Futures Contracts Are Subject to Uncertain Legal and Regulatory Regimes in this term sheet. |
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The pricing of the notes is subject to our special tax counsel delivering to us their opinion as described under Selected Purchase Considerations Capital Gains Tax Treatment. |
Investing in the Return Notes involves a number of risks. See Risk Factors beginning on page PS-5 of the accompanying product supplement no. 90-A-I and Selected Risk Considerations beginning on page TS-3 of this 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 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. 90-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.
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 estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
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(2) |
J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., will receive a commission that will depend on market conditions on the pricing date. This commission will include the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes. In no event will that commission, which will include structuring and development fees, exceed $22.50 per $1,000 principal amount note. See Plan of Distribution beginning on page PS-35 of the accompanying product supplement no. 90-A-I. |
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The notes are not guaranteed under the Federal Deposit Insurance Corporations Temporary Liquidity Guarantee Program.
July 8, 2009
Additional Terms Specific to the Notes
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, the more detailed information contained in product supplement no. 90-A-I dated July 7, 2009. 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. 90-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. 90-A-I dated July 7,
2009:
http://www.sec.gov/Archives/edgar/data/19617/000089109209002778/e35904_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.
What Is the Payment at Maturity on the Notes Assuming a Range of Performance for the Commodity-IGAR?
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 an Initial Underlying Value of 110 and a Deduction Amount of $8.00 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.
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Ending Underlying Value |
Underlying |
$1,000 x |
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Deduction |
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Payment at |
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198.000 |
80.00% |
$1,800.00 |
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$8.00 |
= |
$1,792.00 |
187.000 |
70.00% |
$1,700.00 |
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$8.00 |
= |
$1,692.00 |
176.000 |
60.00% |
$1,600.00 |
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$8.00 |
= |
$1,592.00 |
165.000 |
50.00% |
$1,500.00 |
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$8.00 |
= |
$1,492.00 |
154.000 |
40.00% |
$1,400.00 |
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$8.00 |
= |
$1,392.00 |
143.000 |
30.00% |
$1,300.00 |
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$8.00 |
= |
$1,292.00 |
132.000 |
20.00% |
$1,200.00 |
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$8.00 |
= |
$1,192.00 |
121.000 |
10.00% |
$1,100.00 |
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$8.00 |
= |
$1,092.00 |
115.500 |
5.00% |
$1,050.00 |
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$8.00 |
= |
$1,042.00 |
110.880 |
0.80% |
$1,008.00 |
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$8.00 |
= |
$1,000.00 |
110.275 |
0.25% |
$1,002.50 |
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$8.00 |
= |
$994.50 |
110.000 |
0.00% |
$1,000.00 |
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$8.00 |
= |
$992.00 |
99.000 |
-10.00% |
$900.00 |
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$8.00 |
= |
$892.00 |
88.000 |
-20.00% |
$800.00 |
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$8.00 |
= |
$792.00 |
77.000 |
-30.00% |
$700.00 |
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$8.00 |
= |
$692.00 |
66.000 |
-40.00% |
$600.00 |
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$8.00 |
= |
$592.00 |
55.000 |
-50.00% |
$500.00 |
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$8.00 |
= |
$492.00 |
44.000 |
-60.00% |
$400.00 |
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$8.00 |
= |
$392.00 |
33.000 |
-70.00% |
$300.00 |
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$8.00 |
= |
$292.00 |
22.000 |
-80.00% |
$200.00 |
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$8.00 |
= |
$192.00 |
11.000 |
-90.00% |
$100.00 |
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$8.00 |
= |
$92.00 |
0.000 |
-100.00% |
$0.00 |
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$8.00 |
= |
$0.00 |
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The payment at maturity will not be less than $0.
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JPMorgan
Structured Investments |
TS-1 |
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total returns set forth in the table on the previous page are calculated.
Example 1: The Ending Underlying Value increases from the Initial Underlying Value of 110 to an Ending Underlying Value of 115.50. Because the Ending Underlying Value of 115.50 is greater than the Initial Underlying Value of 110, the investor receives a payment at maturity of $1,042.00 per $1,000 principal amount note, calculated as follows:
$1,000 × (1 + 5%) $8.00 = $1,042.00
Example 2: The Ending Underlying Value increases from the Initial Underlying Value of 110 to an Ending Underlying Value of 110.275. Even though the Ending Underlying Value of 110.275 is greater than the Initial Underlying Value of 110, because the Underlying Return is less than 0.80%, the investor receives a payment at maturity of $994.50 per $1,000 principal amount note, calculated as follows:
$1,000 × (1 +0.25%) $8.00 = $994.50
Example 3: The Ending Underlying Value decreases from the Initial Underlying Value of 110 to an Ending Underlying Value of 88. Because the Ending Underlying Value of 88 is less than the Initial Underlying Value of 110, the investor receives a payment at maturity of $792.00 per $1,000 principal amount note, calculated as follows:
$1,000 × (1 + -20%) $8.00 = $792.00
Example 4: The Ending Underlying Value decreases from the Initial Underlying Value of 110 to an Ending Underlying Value of 0. Because the Ending Underlying Value of 0 is less than the Initial Underlying Value of 110, 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 Commodity Investable Global Asset Rotator Excess Return
The JPMorgan Commodity Investable Global Asset Rotator Excess Return (the Commodity-IGAR or the Underlying).
The Commodity-IGAR was developed and is maintained by J.P. Morgan Securities Ltd. to implement a momentum-based algorithmic strategy for commodity allocations. The Commodity-IGAR 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 GSCI Index (S&P GSCI) and is intended to serve as a benchmark value for a particular commodity.
Historical performance data for each sub-index is run through the Commodity-IGAR algorithms on a monthly basis. The algorithms test each sub-indexs performance and consistency. The performance test filters out sub-indices that have not demonstrated one-year appreciation, and the consistency test filters out sub-indices that have not demonstrated consistent positive monthly performance over a one-year period, attributing greater weight to more recent monthly periods.
Up to twelve sub-indices that pass both tests are selected for inclusion in the synthetic portfolio until the next monthly rebalancing. The selected sub-indices are each weighted one-twelfth. If more than twelve sub-indices pass both tests, the twelve best-performing sub-indices are included in the synthetic portfolio. If fewer than twelve sub-indices meet the selection criteria, the balance of the synthetic portfolio is deemed uninvested. The synthetic portfolio for July 2009 contains only one constituent (the S&P GSCI Sugar Index Excess Return), and therefore eleven-twelfths of the synthetic portfolio is currently deemed uninvested. The value of the Commodity-IGAR is the value of the synthetic portfolio, less a deemed calculation agency fee deducted daily at an annual rate of 0.96%.
The value of the Commodity-IGAR is published each trading day under the Bloomberg ticker symbol CMDTYER.
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-2 |
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 GSCI constituent sub-indices, in any of the commodities whose futures contracts determine the levels of the S&P GSCI constituent sub-indices or the constituent sub-indices of the Commodity-IGAR, 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. 90-A-I dated July 7, 2009.
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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 |
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 2, 2004 through September 8, 2006, and the historical performance of the Underlying based on the weekly Underlying closing values from September 15, 2006 through July 7, 2009. The Underlying closing value on July 7, 2009 was 111.6126. 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 July 13, 2009 or 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. The data for the hypothetical back-tested performance of the Commodity-IGAR set forth in the following graph was calculated on materially the same basis on which the performance of the Commodity-IGAR is now calculated, but the number of S&P GSCI 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 GSCI sub-indices. There are currently 24 sub-indices. Hypothetical daily performance data for the Commodity-IGAR is net of index calculation costs 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 Plan of Distribution
We expect that delivery of the notes will be made against payment for the notes on or about the settlement date set forth on the front cover of this term sheet, which will be the eighth business day following the expected pricing date of the notes (this settlement cycle being referred to as T+8). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the pricing date or the four succeeding business days will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisers.
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JPMorgan
Structured Investments |
TS-6 |