Term sheet
To prospectus
dated November
21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 192-A-II dated June 4, 2010
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Term Sheet
Product Supplement No. 192-A-II
Registration Statement No. 333-155535
Dated June 30, 2010;
Rule 433
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Structured
Investments
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$
12.00%*-15.00%* per annum Callable Yield Notes due July 29, 2011 Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF |
General
- The notes are designed for investors
who seek a higher interest rate than the current yield on a conventional debt
security with the same maturity issued by us or an issuer with a comparable
credit rating. Investors should be willing to forgo the potential to
participate in the appreciation of either the S&P 500® Index or
the Market Vectors Gold Miners ETF and to forgo dividend payments. Investors
should be willing to assume the risk that the notes may be called and the
investors will receive less interest than if the notes were not called and the
risk that, if the notes are not called, the investors may lose some or all of
their principal at maturity.
- The notes will pay between 12.00%*
and 15.00%* per annum interest over the term of the notes. However, the
notes do not guarantee any return of principal at maturity. Instead, if
the notes are not called, the payment at maturity will be based on the
performance of the Lesser Performing Underlying and whether the closing price
or closing level, as applicable, of either Underlying falls below the Starting
Underlying Level of such Underlying by more than the Protection Amount during
the Monitoring Period, as described below. Any payment on the notes is subject
to the credit risk of JPMorgan Chase & Co.
- The notes may be called, in whole but
not in part, at our option (such an event, an Optional Call) on any of the
Optional Call Dates set forth below. If the notes are called pursuant to an
Optional Call, payment on the Optional Call Date for each $1,000 principal
amount note will be a cash payment of $1,000, plus any accrued and unpaid
interest, as described below.
- Senior unsecured obligations of
JPMorgan Chase & Co. maturing July 29, 2011**
- The payment at maturity is not
linked to a basket composed of the Underlyings. The payment at maturity is
linked to the performance of each of the Underlyings individually, as described
below.
- Minimum denominations of $1,000 and
integral multiples thereof
Key Terms
Underlyings:
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The S&P 500® Index (the Index) and the
Market Vectors Gold Miners ETF (the Fund) (each an Underlying, and collectively,
the Underlyings)
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Interest Rate:
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Between 12.00%* and 15.00%*
per annum, paid monthly and calculated on a 30/360 basis
*The actual interest rate will be determined on the Pricing Date and will not
be less than 12.00% or greater than 15.00% per annum.
The notes may be called, in whole
but not in part, at our option (such an event, an Optional Call) on any of
the Optional Call Dates set forth below.
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Protection Amount:
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With respect to each underlying, an amount that
represents at least 30.00% of the Starting Underlying Level of such
Underlying (in the case of the Market Vectors Gold Miners ETF, subject to
adjustments)
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Pricing Date:
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On or about July 27, 2010
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Settlement Date:
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On or about July 30, 2010
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Observation Date**:
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July 26, 2011
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Maturity Date**:
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July 29, 2011
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CUSIP:
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48124AVM6
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Monitoring Period:
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The period from the Pricing Date to and including the
Observation Date
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Interest Payment Dates:
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Interest on the notes will be
payable monthly in arrears on the last calendar day of each month, except for
the final interest payment date, which will be payable on the Maturity Date
(each such date, an Interest Payment Date), commencing August 31, 2010, to
and including the Maturity Date or, if the notes are called, to and including
the applicable Optional Call Date. See Selected Purchase Considerations
Monthly Interest Payments in this term sheet for more information.
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Payment at Maturity:
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If the notes are not called, the
payment at maturity, in excess of any accrued and unpaid interest, will be
based on whether a Trigger Event has occurred and the performance of the Lesser
Performing Underlying. If the notes are not called, for each $1,000
principal amount note, you will receive $1,000 plus any accrued and unpaid
interest at maturity, unless:
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(a) |
the Ending Underlying Level of any
Underlying is less than the Starting Underlying Level of such Underlying; |
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and |
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(b) |
a Trigger Event has occurred. |
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If the notes are not called and the
conditions described in (a) and (b) are satisfied, at maturity you will lose
1% of the principal amount of your notes for every 1% that the Ending
Underlying Level of the Lesser Performing Underlying is less than the Starting
Underlying Level of such Underlying. Under these circumstances, your payment
at maturity per $1,000 principal amount note, in addition to any accrued and
unpaid interest, will be calculated as follows:
$1,000 +
($1,000 x Lesser Performing Underlying Return)
You will lose some or all of your
principal at maturity if the notes are not called and the conditions
described in (a) and (b) are both satisfied.
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Trigger Event:
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A Trigger Event occurs if, on any
trading day during the Monitoring Period, the closing level or closing price,
as applicable, of any Underlying falls below the Starting Underlying Level of
such Underlying by more than the applicable Protection Amount.
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Underlying Return:
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With respect to each Underlying, the Underlying Return is
calculated as follows:
Ending Underlying Level Starting Underlying Level
Starting Underlying Level
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Optional Call:
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We, at our election, may call the notes, in whole but not
in part, on any of the Optional Call Dates prior to the Maturity Date at a
price for each $1,000 principal amount note equal to $1,000 plus any accrued
and unpaid interest to but excluding the applicable Optional Call Date. If
we intend to call your notes, we will deliver notice to DTC at least five business days before the applicable
Optional Call Date.
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Optional Call Dates**:
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November 1, 2010, January 31, 2011 and May
2, 2011
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Additional Key Terms:
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See Additional Key Terms on the next page.
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**
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Subject to
postponement in the event of a market disruption event and as described under
Description of Notes Payment at Maturity and Description of Notes Payment
upon Optional Call, as applicable, in the accompanying product supplement
no. 192-A-II
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-10 of the
accompanying product supplement no. 192-A-II and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state
securities commission has approved or disapproved of the notes or passed upon
the accuracy or the adequacy of this term sheet or the accompanying prospectus
supplement and prospectus. Any representation to the contrary is a criminal
offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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$
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$
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Total
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$
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$
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$
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(1)
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The price to the
public includes the estimated cost of hedging our obligations under the notes
through one or more of our affiliates.
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(2)
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If the notes
priced today, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent
for JPMorgan Chase & Co., would receive a commission of approximately $36.00
per $1,000 principal amount note and would use a portion of that commission
to allow selling concessions to other affiliated or unaffiliated dealers of
approximately $15.00 per $1,000 principal amount note. The concessions of
approximately $15.00 per $1,000 principal amount note include concessions to
be allowed to selling dealers and concessions to be allowed to any arranging
dealer. This commission includes the projected profits that our affiliates
expect to realize, some of which may be allowed to other unaffiliated
dealers, for assuming risks inherent in hedging our obligations under the
notes. The actual commission received by JPMSI may be more or less than $36.00
and will depend on market conditions on the Pricing Date. In no event will
the commission received by JPMSI, which includes concessions and other amounts
that may be allowed to other dealers, exceed $40.00 per $1,000 principal
amount note. See Plan of Distribution (Conflicts of Interest) beginning on
page PS-93 of the accompanying product supplement no. 192-A-II.
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The notes are not
bank deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency, nor are they
obligations of, or guaranteed by, a bank.
June 30, 2010
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has
filed a registration statement (including a prospectus) with the Securities and
Exchange Commission, or SEC, for the offering to which this term sheet
relates. Before you invest, you should read the prospectus in that
registration statement and the other documents relating to this offering that
JPMorgan Chase & Co. has filed with the SEC for more complete information
about JPMorgan Chase & Co. and this offering. You may get these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively,
JPMorgan Chase & Co., any agent or any dealer participating in this
offering will arrange to send you the prospectus, the prospectus supplement,
product supplement no. 192-A-II and this term sheet if you so request by
calling toll-free 866-535-9248.
You may revoke your offer to purchase the notes at
any time prior to the time at which we accept such offer by notifying the
applicable agent. We reserve the right to change the terms of, or reject any
offer to purchase, the notes prior to their issuance. In the event of any
changes to the terms of the notes, we will notify you and you will be asked to
accept such changes in connection with your purchase. You may also choose to
reject such changes in which case we may reject your offer to purchase.
You should read this term sheet together with the
prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008
relating to our Series E medium-term notes of which these notes are a part, and
the more detailed information contained in product supplement no. 192-A-II
dated June 4, 2010. This term sheet, together with the documents
listed below, contains the terms of the notes and supersedes all other prior or
contemporaneous oral statements as well as any other written materials
including preliminary or indicative pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, fact sheets, brochures or
other educational materials of ours. You should carefully consider, among
other things, the matters set forth in Risk Factors in the accompanying product
supplement no. 192-A-II, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the
relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is
19617. As used in this term sheet, the Company, we, us or our refers
to JPMorgan Chase & Co.
Additional Key Terms
Starting Underlying Level:
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With respect to the Index, the closing level of the Index on the
Pricing Date (the Initial Index Level). With respect to the Fund, the
closing price of the Fund on the Pricing Date divided by the Share
Adjustment Factor for the Fund (the Initial Share Price). We refer to each
of the Initial Index Level for the Index and the Initial Share Price for the
Fund as a Starting Underlying Level.
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Ending Underlying Level:
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With respect to the Index, the closing level of the Index on the
Observation Date (the Ending Index Level). With respect to the Fund, the
closing price of one share of the Fund on the Observation Date (the Final
Share Price). We refer to each of the Ending Index Level for the Index and
the Final Share Price for the Fund as an Ending Underlying Level.
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Share Adjustment Factor:
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With respect to the Fund, 1.0 on the Pricing Date and subject to
adjustment under certain circumstances. See Description of Notes Payment
at Maturity and General Terms of Notes Anti-Dilution Adjustments in the
accompanying product supplement no. 192-A-II for further information about
these adjustments.
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Lesser Performing Underlying:
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The Underlying with the Lesser Performing Underlying Return
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Lesser Performing Underlying Return:
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The lower of the Underlying Return of the S&P 500®
Index and the Underlying Return of the Market Vectors Gold Miners ETF
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Selected Purchase Considerations
- THE NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD
ON DEBT SECURITIES OF COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A
COMPARABLE CREDIT RATING
The notes will pay interest at a rate
of between 12.00% and 15.00% per annum over the term of the notes, which we
believe is higher than the yield received on debt securities of comparable
maturity issued by us or an issuer with a comparable credit rating. The actual
interest rate will be determined on the Pricing Date and will be between 12.00%
and 15.00% per annum. Because the notes are our senior unsecured obligations, any
interest payment or any payment at maturity is subject to our ability to pay
our obligations as they become due.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
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TS-1 |
- MONTHLY INTEREST PAYMENTS The notes offer
monthly interest payments at a rate of between 12.00% and 15.00% per annum over the term of the
notes. Interest will be payable monthly in arrears on the last calendar day of
each month, except for the final interest payment, which will be payable on the
Maturity Date (each such date, an Interest Payment Date), commencing August
31, 2010, to and including the Maturity Date or, if the notes are called, to
and including the applicable Optional Call Date. Interest will be payable to
the holders of record at the close of business on the date 15 calendar days
prior to the applicable Interest Payment Date or the applicable Optional Call
Date, as applicable. If an Interest Payment Date or Optional Call Date is not
a business day, payment will be made on the next business day immediately
following such day, but no additional interest will accrue as a result of the
delayed payment.
- POTENTIAL EARLY EXIT AS A RESULT OF THE OPTIONAL
CALL FEATURE If the notes are called pursuant to an Optional Call, on the applicable Optional Call Date, for each
$1,000 principal amount note, you will receive $1,000 plus accrued and unpaid
interest to but excluding the applicable Optional Call Date.
- THE NOTES DO NOT GUARANTEE THE RETURN
OF YOUR PRINCIPAL IF THE NOTES ARE NOT CALLED If the notes are not called,
we will pay you your
principal back at maturity so long as a Trigger Event has not occurred or the
Ending Underlying Level of each Underlying is not less than its Starting
Underlying Level. A Trigger Event occurs if, on any trading day during the
Monitoring Period, the closing level or closing price, as applicable, of any
Underlying falls below the Starting Underlying Level of such Underlying by more
than the applicable Protection Amount. However, if the notes are not called
and a Trigger Event has occurred, you could lose the entire principal amount of
your notes.
- DIVERSIFICATION OF THE UNDERLYINGS The return on the notes is linked
to the Lesser Performing Underlying, which will be either the S&P 500®
Index or the Market Vectors Gold Miners ETF.
The S&P 500® Index
consists of 500 component stocks selected to provide a performance benchmark
for the U.S. equity markets.
The Market Vectors Gold
Miners ETF is an exchange-traded fund managed by Van Eck Associates
Corporation, the investment adviser to the Market Vectors Gold Miners ETF. The
Market Vectors Gold Miners ETF trades on NYSE Arca, Inc. (the NYSE Arca)
under the ticker symbol GDX. The Market Vectors Gold Miners ETF seeks to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold Miners
Index is a modified market capitalization weighted index primarily comprised of
publicly traded companies involved in the mining of gold. The NYSE Arca Gold
Miners Index includes common stocks and ADRs of selected companies that are involved
in mining for gold and silver and that are listed for trading on the New York
Stock Exchange or the NYSE Amex, LLC or quoted on The NASDAQ Stock Market.
Only companies with market capitalization greater than $100 million that have a
daily average trading volume of at least 50,000 shares over the past six months
are eligible for inclusion in the NYSE Arca Gold Miners Index.
For additional information on each
Underlying, see the information set forth under The S&P 500®
Index and The Market Vectors Gold Miners ETF
in the accompanying product supplement no. 192-A-II.
- TAX TREATMENT AS A UNIT
COMPRISING A PUT OPTION AND A DEPOSIT You should review carefully the section entitled Certain
U.S. Federal Income Tax Consequences in the accompanying product supplement
no. 192-A-II. We and you agree (in the absence of an administrative
determination or judicial ruling to the contrary) to treat the notes for U.S.
federal income tax purposes as units comprising: (i) a Put Option written by
you that is terminated if an Optional Call occurs and that, if not terminated, in circumstances
where the payment at maturity is less than $1,000 (excluding accrued and unpaid
interest) requires you to pay us an amount equal to $1,000 multiplied by the
absolute value of the Lesser Performing Underlying Return and (ii) a Deposit of $1,000 per $1,000 principal amount
note to secure your potential obligation under the Put Option. We will
determine the portion of each coupon payment that we will allocate to interest
on the Deposit and to Put Premium, respectively, and will provide that
allocation in the pricing supplement for the notes. If the notes had priced on
June
29, 2010,
and assuming an Interest Rate of 13.50% per annum, we would have treated
approximately 9.41% of each coupon payment as interest on the Deposit and the
remainder as Put Premium. The actual allocation that we will determine for the
notes may differ from this hypothetical allocation, and will depend upon a
variety of factors, including actual market conditions and our borrowing costs
for debt instruments of comparable maturities on the Pricing Date. Assuming
this characterization is respected, amounts treated as interest on the Deposit
will be taxed as ordinary income, while the Put Premium will not be taken into
account prior to sale or settlement, including a settlement following an
Optional Call. However, there are other reasonable treatments that the
Internal Revenue Service (the IRS) or a court may adopt, in which case the
timing and character of any income or loss on the notes could be significantly
and adversely affected. In addition, in 2007 Treasury and the IRS released a
notice requesting comments on the U.S. federal income tax treatment of prepaid
forward contracts and similar instruments. While it is not clear whether the
notes would be viewed as similar to the typical prepaid forward contract
described in the notice, it is possible that any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the notes, possibly
with retroactive effect. The notice focuses on a number of issues, the most
relevant of which for holders of the notes are the character of income or loss
(including whether the Put Premium might be currently included as ordinary
income) and the degree, if any, to which income realized by Non-U.S. Holders
should be subject to withholding tax. Both U.S. and Non-U.S. Holders should consult their tax
advisers regarding all aspects of the U.S. federal income tax consequences of an
investment in the notes, including possible alternative treatments and the
issues presented by this notice. Non-U.S. Holders should also note that they
may be withheld upon at a rate of up to 30% unless they have submitted a
properly completed IRS Form W-8BEN or otherwise satisfied the applicable
documentation requirements. Purchasers who are not initial purchasers of notes
at the issue price should also consult their tax advisers with respect to the
tax consequences of an investment in the notes, including possible alternative
characterizations, as well as the allocation of the purchase price of the notes
between the Deposit and the Put Option.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
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TS-2 |
Selected Risk Considerations
An investment in the notes involves
significant risks. Investing in the notes is not equivalent to investing
directly in either or both of the Underlyings, or any equity securities
included in or held by the Underlyings. These risks are explained in more
detail in the Risk Factors section of the accompanying product supplement no.
192-A-II dated June 4,
2010.
- YOUR INVESTMENT IN THE NOTES MAY
RESULT IN A LOSS The
notes do not guarantee any return of principal if the notes are not called. If
the notes are not called, we will pay you your principal back at maturity only so
long as a Trigger Event has not occurred or the Ending Underlying Level of each
Underlying is greater than the Starting Underlying Level of such Underlying. If
the notes are not called, a Trigger Event has occurred and the Ending
Underlying Level of either Underlying is less than the Starting Underlying
Level of such Underlying, you will lose 1% of your principal amount at maturity
for every 1% that the Ending Underlying Level of the Lesser Performing Underlying
is less than the Starting Underlying Level of such Underlying. Accordingly,
you could lose up to the entire principal amount of your notes.
- CREDIT RISK OF JPMORGAN CHASE &
CO. The notes are subject to the credit
risk of JPMorgan Chase & Co. and our credit ratings and credit spreads may
adversely affect the market value of the notes. Investors are dependent on
JPMorgan Chase & Co.s ability to pay all amounts due on the notes at
maturity or on any Optional Call Date and on the Interest Payment Dates, and
therefore investors are subject to our credit risk and to changes in the
markets view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the value of the notes.
- POTENTIAL CONFLICTS We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as
calculation agent. In performing these duties, the economic interests of the
calculation agent and other affiliates of ours are potentially adverse to your
interests as an investor in the notes. In addition, we are currently one of
the companies that make up the S&P 500® Index. We will not have
any obligation to consider your interests as a holder of the notes in taking
any corporate action that might affect the value of the S&P 500®
Index and the notes.
- YOUR RETURN ON THE NOTES IS LIMITED
TO THE PRINCIPAL AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF ANY APPRECIATION IN
THE VALUE OF EITHER UNDERLYING If the notes are not called, unless a Trigger Event has occurred
and the Ending Underlying Level of either Underlying is less than the Starting
Underlying Level of such Underlying, for each $1,000 principal amount note, you
will receive $1,000 at maturity plus any accrued and unpaid interest,
regardless of any appreciation in the value of either Underlying, which may be
significant. If the notes are called, for each $1,000 principal amount note,
you will receive $1,000 on the applicable Optional Call Date plus any accrued
and unpaid interest, regardless of the appreciation in the value of the Underlying,
which may be significant. Accordingly, the return on the notes may be
significantly less than the return on a direct investment in either Underlying
during the term of the notes.
- YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE CLOSING
LEVEL OR CLOSING PRICE OF EACH UNDERLYING Your return on the notes and your payment at
maturity, if any, is not linked to a basket consisting of the Underlyings. If the
notes are not called, your payment at maturity is contingent upon the
performance of each individual Underlying such that you will be equally exposed
to the risks related to both of the Underlyings. Poor
performance by either of the Underlyings over the term of the notes may
negatively affect your payment at maturity and will not be offset or mitigated
by positive performance by the other Underlyings. Accordingly, your investment
is subject to the risk of decline in the closing level or closing price of each
Underlying.
- YOUR PROTECTION MAY TERMINATE ON ANY
TRADING DAY DURING THE TERM OF THE NOTES
If, on any trading day during the Monitoring Period, the closing level or
closing price, as applicable, of either Underlying falls below the Starting
Underlying Level of such Underlying by more than the applicable Protection
Amount, a Trigger Event will occur, and you will be fully exposed to any
depreciation in the Lesser Performing Underlying. We refer to this feature as
a contingent buffer. Under these circumstances, and if the Ending Underlying
Level of either Underlying is less than the Starting Underlying Level for such
Underlying, you will lose 1% of the principal amount of your investment for
every 1% that the Ending Underlying Level of the Lesser Performing Underlying is
less than the Starting Underlying Level. You will be subject to this potential
loss of principal even if the relevant Underlying subsequently recovers such
that the closing level or closing price, as applicable, is less than the Starting
Underlying Level of such Underlying by less than the Protection Amount. If
these notes had a non-contingent buffer feature, under the same scenario, you
would have received the full principal amount of your notes plus accrued and
unpaid interest at maturity. As a result, your investment in the notes may not
perform as well as an investment in a security with a return that includes a
non-contingent buffer.
- YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER
PERFORMING UNDERLYING If the notes
are not called and a Trigger Event occurs, you will lose some or all of your
investment in the notes if the Ending Underlying Level of either Underlying is
below its Starting Underlying Level. This will be true even if the Ending
Underlying Level of the other Underlying is greater than or equal to its
Starting Underlying Level. The two Underlyings respective performances may
not be correlated and, as a result, if the notes are not called, you may
receive the principal amount of your notes at maturity only if there is a broad
based rise in the performance of equities across diverse markets during the
term of the notes.
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JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
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TS-3 |
- THE OPTIONAL CALL FEATURE
MAY FORCE A POTENTIAL EARLY EXIT Upon an Optional Call, the amount of interest payable on the notes will be
less than the full amount of interest that would have been payable if the notes
were held to maturity, and, for each $1,000 principal amount note, you will
receive $1,000 plus accrued and unpaid interest to but excluding the applicable
Optional Call Date.
- REINVESTMENT RISK If your notes are called, the term of the notes may be reduced to as
short as three months and you will not receive interest payments after the
applicable Optional Call Date. There is no guarantee that you would be able to
reinvest the proceeds from an investment in the notes at a comparable return
and/or with a comparable interest rate for a similar level of risk in the event
the notes are called prior to the Maturity Date.
- CERTAIN BUILT-IN COSTS ARE
LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY While
the payment at maturity, if any, or upon a call described in this term sheet is
based on the full principal amount of your notes, the original issue price of
the notes includes the agents commission and the estimated cost of hedging our
obligations under the notes. As a result, and as a general matter, the price,
if any, at which JPMSI will be willing to purchase notes from you in secondary
market transactions, if at all, will likely be lower than the original issue price
and any sale prior to the maturity date could result in a substantial loss to
you. This secondary market price will also be affected by a number of factors
aside from the agents commission and hedging costs, including those referred
to under Many Economic and Market Factors Will Influence the Value of the
Notes below.
The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to
hold your notes to maturity.
- PROTECTION AMOUNT APPLIES ONLY IF YOU HOLD THE NOTES
TO MATURITY Assuming the
notes are not called, we will pay you your principal back at maturity only if
the closing level or closing price, as applicable, of each Underlying does not
fall below its Starting Underlying Level by more than the applicable Protection
Amount on any trading day during the Monitoring Period or the Ending Index
level of each Underlying is equal to or greater than the Starting Underlying
Level of such Underlying and the notes are held to maturity. If the notes are
not called and a Trigger Event has occurred, the protection provided by the
Protection Amount of each Underlying will be eliminated and you will be fully
exposed at maturity to any decline in the value of the Lesser Performing
Underlying.
- VOLATILITY RISK Greater expected volatility with respect to an Underlying indicates a
greater likelihood as of the Pricing Date that such Underlying could close
below its Starting Underlying Value by more than the applicable Protection
Amount on any trading day during the Monitoring Period. An Underlyings
volatility, however, can change significantly over the term of the notes. The closing
level or closing price, as applicable, of an Underlying could fall sharply on
any trading day during the Monitoring Period, which could result in a
significant loss of principal.
- THERE ARE RISKS ASSOCIATED WITH THE MARKET
VECTORS GOLD MINERS ETF
Although the Market Vectors Gold Miners ETFs shares are listed for trading
on the NYSE Arca and a number of similar products have been traded on NYSE Arca
and other securities exchanges for varying periods of time, there is no
assurance that an active trading market will continue for the shares of the Market
Vectors Gold Miners ETF or that there will be liquidity in the trading market.
The Market Vectors Gold Miners ETF is subject to management risk, which is the
risk that Van Ecks investment strategy, the implementation of which is subject
to a number of constraints, may not produce the intended results. These
constraints could adversely affect the market price of the shares of the Market
Vectors Gold Miners ETF, and consequently, the value of the notes.
- DIFFERENCES BETWEEN THE MARKET
VECTORS GOLD MINERS ETF AND THE NYSE ARCA GOLD MINERS INDEX The Market Vectors Gold Miners ETF does not fully
replicate the NYSE Arca Gold Miners Index and may hold securities not included
in the NYSE Arca Gold Miners Index, and its performance will reflect additional
transaction costs and fees that are not included in the calculation of the NYSE
Arca Gold Miners Index, all of which may lead to a lack of correlation between
the Market Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. In
addition, corporate actions with respect to the sample of equity securities
(such as mergers and spin-offs) may impact the variance between the Market
Vectors Gold Miners ETF and the NYSE Arca Gold Miners Index. Finally, because
the shares of the Market Vectors Gold Miners ETF are traded on the NYSE Arca
and are subject to market supply and investor demand, the market value of one
share of the Market Vectors Gold Miners ETF may differ from the net asset value
per share of the Market Vectors Gold Miners ETF. For all of the foregoing
reasons, the performance of the Market Vectors Gold Miners ETF may not
correlate with the performance of the NYSE Arca Gold Miners Index.
- RISKS ASSOCIATED WITH THE GOLD AND SILVER MINING
INDUSTRIES All or substantially
all of the equity securities held by the Market Vectors Gold Miners ETF are
issued by gold or silver mining companies. Because the value of the notes is
linked to the performance of the Market Vectors Gold Miners ETF, an investment
in these notes will be concentrated in the gold and silver mining industries.
Competitive pressures may have a significant effect on the financial condition
of companies in these industries. Also, these companies are highly dependent
on the price of gold or silver, as applicable. These prices fluctuate widely
and may be affected by numerous factors. Factors affecting gold prices include
economic factors,
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
|
TS-4 |
including, among other things, the structure of and
confidence in the global monetary system, expectations of the future rate of
inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is generally quoted), interest rates and
gold borrowing and lending rates, and global or regional economic, financial,
political, regulatory, judicial or other events. Factors affecting silver
prices include general economic trends, technical developments, substitution
issues and regulation, as well as specific factors including industrial and
jewelry demand, expectations with respect to the rate of inflation, the
relative strength of the U.S. dollar (the currency in which the price of silver
is generally quoted) and other currencies, interest rates, central bank sales,
forward sales by producers, global or regional political or economic events,
and production costs and disruptions in major silver producing countries such
as the United Mexican States and the Republic of Peru.
- LACK OF LIQUIDITY The
notes will not be listed on any securities exchange. JPMSI intends to offer to
purchase the notes in the secondary market but is not required to do so. Even
if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the notes easily. Because other dealers are not likely to
make a secondary market for the notes, the price at which you may be able to
trade your notes is likely to depend on the price, if any, at which JPMSI is willing
to buy the notes.
- NO DIVIDEND PAYMENTS OR VOTING
RIGHTS As a holder
of the notes, you will not have voting rights or rights to receive cash
dividends or other distributions or other rights that holders of the securities
included in or held by the Underlyings would have.
- HEDGING AND TRADING IN THE UNDERLYINGS While the
notes are outstanding, we or any of our affiliates may carry out hedging
activities related to the notes, including instruments related to the Fund or
the equity securities included in the Index or held by the Fund. We or our
affiliates may also trade in the Fund or instruments related to the Fund or the
equity securities included in the Index or held by the Fund from time to time.
Any of these hedging or trading activities as of the Pricing Date and during
the term of the notes could adversely affect the likelihood of a call or our
payment to you at maturity.
- THE ANTI-DILUTION PROTECTION FOR THE MARKET
VECTORS GOLD MINERS ETF IS LIMITED The calculation agent will make
adjustments to the Share Adjustment Factor for certain events affecting the
shares of the Market Vectors Gold Miners ETF. However, the calculation agent
will not make an adjustment in response to all events that could affect the
shares of the Market Vectors Gold Miners ETF. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may
be materially and adversely affected.
- MANY ECONOMIC AND
MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES In addition to the level
and price of the Underlyings on any trading day, the value of the notes will be
affected by a number of economic and market factors that may either offset or
magnify each other, including:
- whether a Trigger Event has occurred;
- the interest rate on the notes;
- the expected volatility of the Underlyings;
- the time to maturity of the notes;
- the Optional Call feature and whether we
are expected to call the notes, which are likely to limit the value of the
notes;
- the dividend rates on the equity
securities underlying the Underlyings;
- the expected positive or negative
correlation between the Index and the Fund, or the expected absence of any such
correlation;
- interest and yield rates in the market
generally as well as in the markets of the equity securities underlying the Underlyings;
- a variety of economic, financial,
political, regulatory and judicial events;
- the occurrence of certain events to the Market Vectors Gold Miners ETF that may or may not require an
adjustment to the applicable Share Adjustment Factor; and
- our creditworthiness, including actual or
anticipated downgrades in our credit ratings.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
|
TS-5 |
Historical Information
The following graphs show the historical weekly performance of the
S&P 500® Index from January 7, 2005 through June 25, 2010 and the Market Vectors Gold Miners ETF from May 26, 2006 through June
25, 2010. The Index
closing level of the S&P 500® Index on June 29, 2010 was 1041.24. The closing price of one share of the Market
Vectors Gold Miners ETF on June
29, 2010 was $51.98.
We obtained the
various closing levels and prices of the Underlyings below from Bloomberg
Financial Markets. We make no representation or warranty as to the accuracy or
completeness of information obtained from Bloomberg Financial Markets. The
historical levels and prices of each Underlying should not be taken as an
indication of future performance, and no assurance can be given as to the closing
level or closing price, as applicable, of any Underlying on any trading day
during the Monitoring Period or the Observation Date. We cannot give you
assurance that the performance of the Underlyings will result in the return of
any of your initial investment.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
|
TS-6 |
What is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Lesser Performing Underlying?
The following table and examples illustrate the hypothetical total
return at maturity on the notes. The note total return as used in this term
sheet is the number, expressed as a percentage, that results from comparing the
payment at maturity plus the interest payments received over the term of the
note per $1,000 principal amount note to $1,000. The table and examples
below assume that the notes are not called prior to maturity and that the Lesser
Performing Underlying is the S&P 500® Index. We make no
representation or warranty as to which of the Underlyings will be the Lesser Performing
Underlying for purposes of calculating your actual payment at maturity. In
addition, the following table and examples assume a Starting Underlying Level
for the Lesser Performing Underlying of 1050 and an Interest Rate of 13.50% per
annum (the midpoint of the range of 12.00% and 15.00% per annum). If the
actual Interest Rate as determined on the Pricing Date is less than 13.50% per
annum, your total return and total payment over the term of the notes will be
less than the amounts indicated below. In addition, if the notes are called
prior to maturity, your total return and total payment may be less than the
amounts indicated below. The hypothetical total returns and total payments
set forth below are for illustrative purposes only and may not be the actual
total returns or total payments applicable to a purchaser of the notes. The
numbers appearing in the following table and examples have been rounded for ease
of analysis.
|
|
Trigger Event Has Not Occurred (1)
|
Trigger Event Has Occurred (1)
|
|
Ending
Underlying
Level
|
Lesser
Performing
Underlying
Return
|
Note Total
Return
|
Total Payments over the
Term of the Note
|
Note Total Return
|
Total Payments over the
Term of the Note
|
|
1890.00
|
80.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1732.50
|
65.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1575.00
|
50.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1470.00
|
40.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1365.00
|
30.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1260.00
|
20.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1155.00
|
10.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1102.50
|
5.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1050.00
|
0.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
997.50
|
-5.00%
|
13.50%
|
$1,135.00
|
8.50%
|
$1,085.00
|
945.00
|
-10.00%
|
13.50%
|
$1,135.00
|
3.50%
|
$1,035.00
|
840.00
|
-20.00%
|
13.50%
|
$1,135.00
|
-6.50%
|
$935.00
|
735.00
|
-30.00%
|
13.50%
|
$1,135.00
|
-16.50%
|
$835.00
|
630.00
|
-40.00%
|
N/A
|
N/A
|
-26.50%
|
$735.00
|
525.00
|
-50.00%
|
N/A
|
N/A
|
-36.50%
|
$635.00
|
420.00
|
-60.00%
|
N/A
|
N/A
|
-46.50%
|
$535.00
|
315.00
|
-70.00%
|
N/A
|
N/A
|
-56.50%
|
$435.00
|
210.00
|
-80.00%
|
N/A
|
N/A
|
-66.50%
|
$335.00
|
105.00
|
-90.00%
|
N/A
|
N/A
|
-76.50%
|
$235.00
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-86.50%
|
$135.00
|
|
(1) A Trigger Event occurs if the closing level or
closing price, as applicable, of either Underlying is less than the Starting
Underlying Level of such Underlying by more than 30% on any trading day during
the Monitoring Period. |
The following examples illustrate how the note total returns
and total payments set forth in the table above are calculated.
Example 1: The level of the Lesser Performing
Underlying increases from the Starting Underlying Level of 1050 to an Ending
Underlying Level of 1102.50. Because
the Ending Underlying Level of the Lesser Performing Underlying of 1102.50 is
greater than its Starting Underlying Level of 1050, regardless of whether a
Trigger Event has occurred, the investor receives total payments of $1,135 per
$1,000 principal amount note over the term of the note, consisting of interest
payments of $135 per $1,000 principal amount note over the term of the notes
and a payment at maturity of $1,000 per $1,000 principal amount note. This
represents the maximum total payment an investor may receive over the term of
the notes.
Example 2: A Trigger Event has not occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 840. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 840 is less than its Starting Underlying Level of
1050, because a Trigger Event has not occurred, the investor receives total payments of $1,135 per $1,000 principal
amount note over the term of the note, consisting of interest payments of $135 per
$1,000 principal amount note over the term of the notes and a payment at
maturity of $1,000 per $1,000 principal amount note.
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
|
TS-7 |
Example 3: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 840. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 840 is less than its
Starting Underlying Level of 1050, the
investor receives total payments of $935 per $1,000 principal amount note over
the term of the note, consisting of interest payments of $135 per $1,000
principal amount note over the term of the notes and a payment at maturity of $800
per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -20%)]
+ $135 = $935
Example 4: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 630. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 630 is less than its
Starting Underlying Level of 1050, the
investor receives total payments of $735 per $1,000 principal amount note over
the term of the note, consisting of interest payments of $135 per $1,000
principal amount note over the term of the notes and a payment at maturity of $600
per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 x -40%)]
+ $135 = $735
Example 5: A Trigger Event has occurred and the level
of the Lesser Performing Underlying decreases from the Starting Underlying
Level of 1050 to an Ending Underlying Level of 0. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 0 is less than its
Starting Underlying Level of 1050, the
investor receives total payments of $135 per $1,000 principal amount note over
the term of the note, consisting solely of interest payments of $135 per $1,000
principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 x -100%)]
+ $135 = $135
|
JPMorgan
Structured Investments
Callable Yield Notes Linked to the Lesser
Performing of the S&P 500® Index and the Market Vectors Gold
Miners ETF
|
TS-8 |