Term sheet
To prospectus
dated November
21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 192-A-I dated June 1, 2010
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Term Sheet
Product Supplement No. 192-A-I
Registration Statement No. 333-155535
Dated June 1, 2010;
Rule 433
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Structured
Investments
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$
12.00%*-15.00%* per annum Callable Yield Notes due June
30, 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 is less than 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 June
30, 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 June 25, 2010
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Settlement Date:
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On or about June 30, 2010
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Observation Date**:
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June 27, 2011
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Maturity Date**:
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June 30, 2011
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CUSIP:
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48124ASV0
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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 (each such
date, an Interest Payment Date), commencing June 30, 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 $1,000 plus any accrued
and unpaid interest to but excluding the applicable Optional Call Date. If
we intend to call your notes, we will deliver notice to DTC at least five business days before the applicable
Optional Call Date.
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Optional Call Dates**:
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September 30, 2010, December 31, 2010 and March
31, 2011
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Additional Key Terms:
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See Additional Key Terms on the next page.
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**
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Subject to
postponement in the event of a market disruption event and as described under
Description of Notes Payment at Maturity and Description of Notes Payment
upon Optional Call, as applicable, in the accompanying product supplement
no. 192-A-I
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Investing in the Callable Yield Notes
involves a number of risks. See Risk Factors beginning on page PS-9 of the
accompanying product supplement no. 192-A-I and Selected Risk Considerations
beginning on page TS-3 of this term sheet.
Neither the SEC nor any state securities commission has approved or
disapproved of the notes or passed upon the accuracy or the adequacy of this
term sheet or the accompanying prospectus supplement and prospectus. Any
representation to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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 $32.50 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 $32.50 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-88 of the accompanying product supplement no.
192-A-I.
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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 1, 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-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. 192-A-I dated
June 1, 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-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.
Additional Key Terms
Starting Underlying Level:
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With respect to the Index, the closing level of such Index on the
Pricing Date (the Initial Index Level). With respect to the Fund, the
closing price of such Fund on the Pricing Date divided by the Share
Adjustment Factor for such 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 such Index on the
Observation Date (the Ending Index Level). With respect to the Fund, the
closing price of one share of such 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-I 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 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 (each such date, an Interest Payment Date), commencing June 30,
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 WITH
FULL PRINCIPAL PROTECTION 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, your return of principal at maturity is
protected so long as a Trigger Event has not occurred or if 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 if 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-I.
- 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-I. 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
May 28, 2010, and assuming an Interest Rate of 12% per annum, we would have
treated approximately 10.83% 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
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 the 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-I dated June 1,
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, your
return of principal at maturity is protected 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 or Interest Payment Date, 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.
- 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 Underlyings, 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.
- 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 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
|
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, your principal will be protected 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 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, including, among other things,
the structure of and confidence in the global monetary system, expectations
|
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 |
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 IMPACT 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 May 28, 2010 and the Market Vectors Gold Miners ETF from May 26, 2006 through May
28, 2010. The Index
closing level of the S&P 500® Index on May 28, 2010 was 1089.41. The closing price of one share of the Market
Vectors Gold Miners ETF on May
28, 2010 was $49.86.
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 1100 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
|
|
1980.00
|
80.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1815.00
|
65.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1650.00
|
50.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1540.00
|
40.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1430.00
|
30.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1320.00
|
20.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1210.00
|
10.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1155.00
|
5.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1100.00
|
0.00%
|
13.50%
|
$1,135.00
|
13.50%
|
$1,135.00
|
1045.00
|
-5.00%
|
13.50%
|
$1,135.00
|
8.50%
|
$1,085.00
|
990.00
|
-10.00%
|
13.50%
|
$1,135.00
|
3.50%
|
$1,035.00
|
880.00
|
-20.00%
|
13.50%
|
$1,135.00
|
-6.50%
|
$935.00
|
770.00
|
-30.00%
|
13.50%
|
$1,135.00
|
-16.50%
|
$835.00
|
660.00
|
-40.00%
|
N/A
|
N/A
|
-26.50%
|
$735.00
|
550.00
|
-50.00%
|
N/A
|
N/A
|
-36.50%
|
$635.00
|
440.00
|
-60.00%
|
N/A
|
N/A
|
-46.50%
|
$535.00
|
330.00
|
-70.00%
|
N/A
|
N/A
|
-56.50%
|
$435.00
|
220.00
|
-80.00%
|
N/A
|
N/A
|
-66.50%
|
$335.00
|
110.00
|
-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 1100 to an Ending
Underlying Level of 1155. Because the
Ending Underlying Level of the Lesser Performing Underlying of 1155 is greater
than its Starting Underlying Level of 1100, 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 1100 to an Ending Underlying Level of 880. Even though the Ending Underlying Level of the Lesser
Performing Underlying of 880 is less than its Starting Underlying Level of
1100, 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 1100 to an Ending Underlying Level of 880. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 880 is less than its
Starting Underlying Level of 1100, 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 1100 to an Ending Underlying Level of 660. Because a Trigger Event has occurred and the Ending
Underlying Level of the Lesser Performing Underlying of 660 is less than its
Starting Underlying Level of 1100, 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 1100 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 1100, 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 |