Term sheet |
Term Sheet to |
Structured |
JPMorgan
Chase & Co. $ 11.40% per annum Reverse Exchangeable Notes due June 30, 2010 Linked to the Class B Common Stock of United Parcel Service, Inc. |
General
Key Terms
Reference Stock: |
The class B common stock, par value $0.01 per share (which we refer to as the common stock of UPS), of United Parcel Service, Inc. (New York Stock Exchange symbol UPS). We refer to United Parcel Service, Inc. as UPS. |
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Interest Rate: |
11.40% per annum, paid monthly and calculated on a 30/360 basis. |
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Protection Amount: |
An amount that represents at least 20.00% of the Initial Share Price, subject to adjustments. |
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Pricing Date: |
On or about June 25, 2009 |
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Settlement Date: |
On or about June 30, 2009 |
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Observation Date: |
June 25, 2010* |
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Maturity Date: |
June 30, 2010* |
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CUSIP: |
48123LZ72 |
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Interest Payment Dates: |
Interest on the notes will be payable monthly in arrears on the last calendar day of each month (each such date, an Interest Payment Date), commencing July 31, 2009, to and including the Maturity Date. See Selected Purchase Considerations Monthly Interest Payments in this term sheet for more information. |
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Payment at Maturity: |
The payment at maturity, in excess of any accrued and unpaid interest, is based on the performance of the Reference Stock. You will receive $1,000 for each $1,000 principal amount note, plus any accrued and unpaid interest at maturity, unless: |
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(1) | the Final Share Price is less than the Initial Share Price; and | |
(2) | on any day during the Monitoring Period, the closing price of the Reference Stock has declined, as compared to the Initial Share Price, by more than the Protection Amount. | |
If the conditions described in both (1) and (2) are satisfied, at maturity you will receive, in addition to any accrued and unpaid interest, instead of the principal amount of your notes, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof). Fractional shares will be paid in cash. The market value of the Physical Delivery Amount or the Cash Value thereof will most likely be substantially less than the principal amount of your notes, and may be zero. | ||
Monitoring Period: |
The period from the Pricing Date to and including the Observation Date. |
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Physical Delivery Amount: |
The number of shares of the Reference Stock, per $1,000 principal amount note, equal to $1,000 divided by the Initial Share Price, subject to adjustments. |
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Cash Value: |
The amount in cash equal to the product of (1) $1,000 divided by the Initial Share Price and (2) the Final Share Price, subject to adjustments. |
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Initial Share Price: |
The closing price of the Reference Stock on the New York Stock Exchange on the Pricing Date. The Initial Share Price is subject to adjustments in certain circumstances. See Description of Notes Payment at Maturity and General Terms of Notes Anti-Dilution Adjustments in the accompanying product supplement no. 34-A-I for further information about these adjustments. |
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Final Share Price: |
The closing price of the Reference Stock on the New York Stock Exchange on the Observation Date. |
* |
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. 34-A-I. |
Investing in the Reverse Exchangeable Notes involves a number of risks. See Risk Factors beginning on page PS-6 of the accompanying product supplement no. 34-A-I and Selected Risk Considerations beginning on page TS-2 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. 34-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) |
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 $38.50 per $1,000 principal amount note and would use a portion of that commission to allow selling concessions to other dealers of approximately $33.00 per $1,000 principal amount note. 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. The concessions of approximately $33.00 include concessions to be allowed to selling dealers and concessions to be allowed to any arranging dealer. The actual commission received by JPMSI may be more or less than $38.50 and will depend on market conditions on the Pricing Date. In no event will the commission received by JPMSI, which includes concessions to be paid to other dealers, exceed $60.00 per $1,000 principal amount note. See Plan of Distribution beginning on page PS-35 of the accompanying product supplement no. 34-A-I. |
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The total aggregate principal amount of notes being offered by this term sheet may not be purchased by investors in the offering. Under these circumstances, JPMSI will retain the unsold portion of the offering and has agreed to hold such notes for investment for a period of at least 30 days. The unsold portion of notes will not exceed 15% of the aggregate principal amount of notes. Any unsold portion may affect the supply of the notes available for secondary trading and, therefore, could adversely affect the price of the notes in the secondary market. Circumstances may occur in which our interests or those of our affiliates could be in conflict with your interests. |
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.
June 19, 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, and the more detailed information contained in product supplement no. 34-A-I dated November 21, 2008. 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. 34-A-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us, or our refers to JPMorgan Chase & Co.
Selected Purchase Considerations
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Reference Stock. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 34-A-I dated November 21, 2008.
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JPMorgan
Structured Investments |
TS-1 |
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JPMorgan
Structured Investments |
TS-2 |
The Reference Stock
Public Information
All information contained herein on the Reference Stock and on UPS is derived from publicly available sources and is provided for informational purposes only. According to its publicly available filings with the SEC, UPS is one of the worlds largest package delivery companies, a leader in the U.S. less-than-truckload industry, and a global leader in supply chain management. The class B common stock of UPS, par value $0.01 per share, is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of UPS in the accompanying product supplement no. 34-A-I. Information provided to or filed with the SEC by UPS, pursuant to the Exchange Act, can be located by reference to SEC file number 001-15451, and can be accessed through www.sec.gov. We do not make any representation that these publicly available documents are accurate or complete.
Historical Information of the Reference Stock
The following graph sets forth the historical performance of the Reference Stock based on the weekly closing price (in U.S. dollars) of the Reference Stock from January 2, 2004 through June 12, 2009. The closing price of the Reference Stock on June 18, 2009 was $48.30. We obtained the closing prices and other information below from Bloomberg Financial Markets, without independent verification. The closing prices and this other information may be adjusted by Bloomberg Financial Markets for corporate actions such as public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.
Since its inception, the Reference Stock has experienced significant fluctuations. The historical performance of the Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of the Reference Stock during the term of the notes. We cannot give you assurance that the performance of the Reference Stock will result in the return of any of your initial investment. We make no representation as to the amount of dividends, if any, that UPS will pay in the future. In any event, as an investor in the notes, you will not be entitled to receive dividends, if any, that may be payable on the Reference Stock.
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JPMorgan
Structured Investments |
TS-3 |
Examples of Hypothetical Payment at Maturity for Each $1,000 Principal Amount Note
The following table illustrates hypothetical payments at maturity on a $1,000 investment in the notes, based on a range of hypothetical Final Share Prices and assuming that the closing price of the Reference Stock declines in the manner set forth in the columns titled Hypothetical lowest closing price during the Monitoring Period and Hypothetical lowest closing price expressed as a percentage of Initial Share Price during the Monitoring Period. The numbers appearing in the following table and examples have been rounded for ease of analysis. For this table of hypothetical payments at maturity, we have also assumed the following:
the Initial Share Price: |
$50.00 |
the Protection Amount (in U.S. dollars): |
$10.00 |
the Interest Rate: |
11.40% per annum |
the Protection Amount: |
20.00% |
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Hypothetical |
Hypothetical lowest |
Hypothetical |
Hypothetical |
Payment at Maturity |
Total Value of |
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$50.00 |
100% |
$100.00 |
200% |
$1,000.00 |
$1,000.00 |
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$25.00 |
50.00% |
$52.50 |
105% |
$1,000.00 |
$1,000.00 |
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$50.00 |
100% |
$50.00 |
100% |
$1,000.00 |
$1,000.00 |
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$40.00 |
80% |
$40.00 |
80% |
$1,000.00 |
$1,000.00 |
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$25.00 |
50.00% |
$47.50 |
95% |
20 shares of the |
$950.00 |
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$25.00 |
50.00% |
$25.00 |
50.00% |
20 shares of the |
$500.00 |
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$12.50 |
25% |
$12.50 |
25% |
20 shares of the |
$250.00 |
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$0.00 |
0% |
$0.00 |
0% |
20 shares of the |
$0.00 |
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** |
Note that you will receive at maturity any accrued and unpaid interest in cash, in addition to either shares of the Reference Stock (or, at our election, the Cash Value thereof) or the principal amount of your note in cash. Also note that if you receive the Physical Delivery Amount, the total value of payment received at maturity shown in the table above includes the value of any fractional shares, which will be paid in cash. |
The following examples illustrate how the total value of payments received at maturity set forth in the table above are calculated.
Example 1: The lowest closing price of the Reference Stock during the Monitoring Period was $25.00 but the Final Share Price is $52.50. Because the Final Share Price of $52.50 is greater than the Initial Share Price of $50.00, you will receive a payment at maturity of $1,000 per $1,000 principal amount note.
Example 2: The lowest closing price of the Reference Stock during the Monitoring Period was $25.00 and the Final Share Price is $47.50. Because the Final Share Price of $47.50 is less than the Initial Share Price of $50.00 and the closing price of the Reference Stock declined by more than the Protection Amount on at least one day during the Monitoring Period, you will receive the Physical Delivery Amount, or at our election, the Cash Value thereof, at maturity. Because the Final Share Price of the Reference Stock is $47.50, the total value of your final payment at maturity, whether in cash or shares of the Reference Stock, is $950.00.
Example 3: The closing price of the Reference Stock does not decline, as compared with the Initial Share Price, by more than the Protection Amount on any day during the Monitoring Period prior to the Observation Date. However, the closing price of the Reference Stock on the Observation Date is $25.00, a decline of more than the Protection Amount. Because the Final Share Price of $25.00 is less than the Initial Share Price of $50.00 and the Final Share Price has declined by more than the Protection Amount, you will receive the Physical Delivery Amount, or at our election, the Cash Value thereof, at maturity. Because the Final Share Price of the Reference Stock is $25.00, the total value of your final payment at maturity, whether in cash or shares of the Reference Stock, is $500.00.
Example 4: The Final Share Price of $40.00 is less than the Initial Share Price of $50.00 but does not decline by more than the Protection Amount and the closing price of the Reference Stock does not decline by more than the Protection Amount on any day during the Monitoring Period. Because the closing price of the Reference Stock has not declined by more than the Protection Amount, you will receive a payment at maturity of $1,000 per $1,000 principal amount note, even though the Final Share Price of $40.00 is less than the Initial Share Price of $50.00.
Regardless of the performance of the Reference Stock or the payment you receive at maturity, you will receive interest payments, for each $1,000 principal amount note, in the aggregate amount of approximately $114.00 over the term of the notes. If we had priced the notes on June 18, 2009, you would have received 20 shares of the Reference Stock, or at our election, the Cash Value thereof, at maturity, provided the Final Share Price declined from the Initial Share Price and the closing price of the Reference Stock declined by more than the Protection Amount from the Initial Share Price on at least one day during the Monitoring Period. The actual number of shares of the Reference Stock, or the Cash Value thereof, you may receive at maturity and the actual Protection Amount applicable to your notes may be more or less than the amounts displayed in this hypothetical and will depend in part on the closing price of the Reference Stock on the Pricing Date.
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JPMorgan
Structured Investments |
TS-4 |