Term sheet
To prospectus
dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 32-A-II dated May 17, 2010
|
Term sheet to
Product Supplement No. 32-A-II
Registration Statement No. 333-155535
Dated May 17, 2010; Rule 433
|
Structured
Investments
|
|
JPMorgan Chase & Co.
$
Principal Protected Notes Linked to a Weighted Basket Consisting of the S&P
500® Index, the
iShares® Barclays TIPS Bond Fund, the SPDR® Gold Trust,
the iShares® MSCI EAFE Index Fund and the iShares® MSCI
Emerging Markets Index Fund due June 9, 2015 |
General
- Senior unsecured obligations of
JPMorgan Chase & Co. maturing June 9, 2015.*
- Cash payment at maturity of principal
plus the Additional Amount, as described below.
- The notes are designed for investors
who seek exposure to 125% to 140% of any appreciation of a weighted basket
consisting of an equity index, a bond fund, two equity funds and a commodity
fund over the term of the notes. The actual participation rate will be
determined on the pricing date and will not be less than 125% or greater than
140%. Investors should be willing to forgo interest and dividend payments
while seeking full principal protection at maturity. Any payment on the
notes is subject to the credit risk of JPMorgan Chase & Co.
- Minimum denominations of $1,000 and
integral multiples thereof.
- The notes are expected to price on or
about June 4, 2010 and are expected to settle on or about June 9, 2010.
Key Terms
Basket:
|
The notes are linked to a weighted basket consisting of
the S&P 500® Index (SPX) (the Basket Index), the iShares®
Barclays TIPS Bond Fund (TIP) (the Bond Fund), the SPDR® Gold
Trust (GLD) (the Commodity Fund), the iShares® MSCI EAFE Index
Fund (EFA) (an Equity Fund) and the iShares® MSCI Emerging
Markets Index Fund (EEM) (an Equity Fund, and together with the EFA, the
Equity Funds). The Bond Fund, Commodity Fund and Equity Funds are each
referred to as a Basket Fund, and collectively, the Basket Funds. The
Basket Index and the Basket Funds are each referred to as a Basket Component,
and collectively, the Basket Components.
|
Component Weightings:
|
The SPX Weighting is 50%, the TIP Weighting is 25%, the
GLD Weighting is 10%, the EFA Weighting is 10% and the EEM Weighting is 5%
(each a Component Weighting, and collectively, the Component
Weightings).
|
Payment at Maturity:
|
At maturity, you will receive a cash payment, for each
$1,000 principal amount note, of $1,000 plus the Additional Amount, which may
be zero.
|
Additional Amount:
|
The Additional Amount per $1,000 principal amount note
paid at maturity will equal $1,000 × the Basket Return × the Participation
Rate; provided that the Additional Amount will not be less than zero.
|
Participation Rate:
|
125% to 140%. The actual Participation Rate will be
determined on the pricing date and will not be less than 125% or greater than
140%.
|
Basket Return:
|
Ending Basket Level Starting Basket Level
Starting Basket Level
|
Starting Basket Level:
|
Set equal to 100 on the pricing date, which is expected to
be on or about June 4, 2010.
|
Ending Basket Level:
|
The arithmetic average of the Basket Closing Levels on the
five Averaging Dates.
|
Basket Closing Level:
|
The Basket Closing Level on any trading day will be
calculated as follows:
|
100 × [1 + (SPX Return × SPX
Weighting) + (TIP Return × TIP Weighting) + (GLD Return × GLD Weighting) +
(EFA Return × EFA Weighting) + (EEM Return × EEM Weighting)]
|
Each of the SPX Return, the TIP Return, the GLD Return,
the EFA Return and the EEM Return reflects the performance of the relevant
Basket Component, expressed as a percentage, from the relevant Basket
Component closing level or closing price, on the pricing date, divided by the
applicable Share Adjustment Factor, to its closing level or closing price on
such trading day. For additional information, see Description of Notes
Payment at Maturity in the accompanying product supplement no. 32-A-II.
|
Share Adjustment Factor:
|
With respect to the Basket Funds, 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. 32-A-II for further
information about these adjustments.
|
Averaging Dates:
|
June 6, 2011,* June 4, 2012,* June 4, 2013,* June 4, 2014*
and June 4, 2015* (the final Averaging Date)
|
Maturity Date:
|
June 9, 2015*
|
CUSIP:
|
48124ARD1
|
*
|
Subject to
postponement in the event of a market disruption event as described under
Description of Notes Payment at Maturity in the accompanying product
supplement no. 32-A-II.
|
Investing in the Principal Protected Notes involves a
number of risks. See Risk Factors beginning on page PS-11 of the
accompanying product supplement no. 32-A-II 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 SECs 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, prospectus supplement, product supplement no. 32-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.
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, the
accompanying product supplement no. 32-A-II or the accompanying prospectus
supplement and prospectus. Any representation to the contrary is a criminal
offense.
|
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Us
|
|
Per note
|
$
|
$
|
$
|
|
Total
|
$
|
$
|
$
|
|
(1)
|
The price to the
public includes the estimated cost of hedging our obligations under the notes
through one or more of our affiliates.
|
(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 $30.00 per $1,000 principal amount note. 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 $30.00 and will depend
on market conditions on the pricing date. In no event will the commission
received by JPMSI exceed $40.00 per $1,000 principal amount note. See Plan
of Distribution (Conflicts of Interest) beginning on page PS-128 of the
accompanying product supplement no. 32-A-II.
|
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.
May 17, 2010
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.
32-A-II dated May 17, 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. 32-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
SECs website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the
relevant date on the SECs website):
Our Central Index Key, or CIK, on the SECs website is
19617. As used in this term sheet, the Company, we, us or our refers
to JPMorgan Chase & Co.
Selected Purchase Considerations
- PRESERVATION OF CAPITAL AT MATURITY You will receive at least 100% of
the principal amount of your notes if you hold the notes to maturity,
regardless of the performance of the Basket. Because the notes are our senior
unsecured obligations, payment of any amount at maturity is subject to our
ability to pay our obligations as they become due.
- APPRECIATION POTENTIAL At maturity, in addition to your
principal, for each $1,000 principal amount note you will receive a payment
equal to $1,000 × the Basket Return × the Participation Rate, provided that this payment (the
Additional Amount) will not be less than zero.
The Participation Rate will be determined on the pricing date and
will not be less than 125% or greater than 140%.
- DIVERSIFICATION OF THE BASKET
COMPONENTS Because
the S&P 500® Index makes up 50% of the Basket, we expect that
generally the market value of your notes and your payment at maturity will
depend significantly on the performance of the S&P 500® Index.
The return on the notes is linked to
a weighted basket consisting of the S&P 500® Index, the iShares®
Barclays TIPS Bond Fund, the SPDR® Gold Trust, the iShares®
MSCI EAFE Index Fund and the iShares® MSCI Emerging Markets Index
Fund. The S&P 500® Index consists of 500 component stocks
selected to provide a performance benchmark for the U.S. equity markets. The iShares®
Barclays TIPS Bond Fund seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of The
Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), which we refer to as the iShares® Barclays TIPS Bond
Fund Underlying Index. Inflation-protected public obligations of the U.S.
Treasury, commonly known as TIPS, are securities issued by the U.S. Treasury
that are designed to provide inflation protection to investors. The SPDR®
Gold Trust seeks to reflect the performance of the price of gold bullion
before expenses. The iShares® MSCI EAFE Index Fund seeks to provide
investment results that correspond generally to the price and yield
performance, before fees and expenses, of publicly traded securities in the
European, Australasian (Australian and Asian), and Far Eastern markets, as
measured by the MSCI EAFE® Index, which we refer to as the iShares®
MSCI EAFE Index Fund Underlying Index. The iShares® MSCI Emerging
Markets Index Fund seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of
publicly traded securities in emerging markets as measured by the MSCI Emerging
Markets Index, which we refer to as the iShares® MSCI Emerging
Markets Index Fund Underlying Index. We refer to each of the iShares®
MSCI EAFE Index Fund Underlying Index, the iShares® MSCI Emerging
Markets Index Fund Underlying Index and the iShares® Barclays TIPS
Bond Fund Underlying Index as the Underlying Indices. For additional
information about each Basket Component, see the information set forth under
The S&P 500® Index, The iShares® Barclays TIPS
Bond Fund, The SPDR® Gold Trust, The iShares® MSCI
EAFE Index Fund and The iShares® MSCI Emerging Markets Index
Fund in the accompanying product supplement no. 32-A-II.
- TAXED AS CONTINGENT PAYMENT DEBT
INSTRUMENTS You should review carefully the
section entitled Certain U.S. Federal Income Tax Consequences in the
accompanying product supplement no. 32-A-II. Subject to the limitations
described therein, in the opinion of our special tax counsel, Sidley Austin LLP,
the notes will be treated for U.S. federal income tax purposes as contingent
payment debt instruments. You will generally be required to recognize
interest income in each year at the comparable yield, as determined by us,
although we will not make any payments with respect to the notes until maturity.
Interest included in income will increase your basis in the notes. Generally,
amounts received at maturity or earlier sale or disposition in excess of your
basis will be treated as additional interest income while any loss will be
treated as an ordinary loss to the extent of all previous interest inclusions
with respect to the notes, which will be deductible against other income (e.g.,
employment and interest income), with the balance treated as capital loss, the
deductibility of which may be subject to limitations. Purchasers who are not
initial purchasers of notes at the issue price should consult their tax
advisers with respect to the tax consequences of an investment in the notes,
including the treatment of the difference, if any, between their basis in the
notes and the notes adjusted issue price.
Subject to certain assumptions and
representations received from us, the discussion in this section entitled
Taxed as Contingent Payment Debt Instruments, when read in combination with
the section entitled Certain U.S. Federal Income Tax Consequences in the
accompanying product supplement, constitutes the full opinion of Sidley Austin LLP regarding the material U.S. federal
income tax treatment of owning and disposing of the notes.
- COMPARABLE YIELD AND PROJECTED
PAYMENT SCHEDULE We will determine the comparable yield for the notes and will provide that
comparable yield, and the related projected payment schedule, in the pricing
supplement for
|
JPMorgan
Structured Investments
Principal Protected Notes Linked to a Weighted
Basket Consisting of the S&P 500® Index, the iShares® Barclays
TIPS Bond Fund, the SPDR® Gold Trust, the iShares® MSCI
EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund
|
TS-1 |
the notes, which we will file with the SEC. If the notes had
priced on May 14, 2010 and we had determined the comparable yield on that date,
it would have been an annual rate of 3.72%, compounded semi-annually. The
actual comparable yield that we will determine for the notes may be more or
less than 3.72% and will depend upon a variety of factors, including actual
market conditions and our borrowing costs for debt instruments of comparable
maturities. Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual amount that we will pay
on the notes.
Selected Risk Considerations
An investment in the notes involves significant risks.
Investing in the notes is not equivalent to investing directly in any of the
Basket Funds or any of the
component equity securities of the Basket Index or the securities held by
the Basket Funds. These risks are explained in more detail in the Risk
Factors section of the accompanying product supplement no. 32-A-II dated May
17, 2010.
- MARKET RISK The return on the notes at
maturity is linked to the performance of the Basket, and will depend on
whether, and the extent to which, the Basket Return is positive. YOU WILL
RECEIVE NO MORE THAN THE FULL PRINCIPAL AMOUNT OF YOUR NOTES AT MATURITY IF THE
BASKET RETURN IS ZERO OR NEGATIVE.
- THE NOTES MIGHT NOT PAY MORE THAN THE
PRINCIPAL AMOUNT
You may receive a lower payment at maturity than you would have received if you
had invested directly in any of the Basket Funds or any of the component equity
securities of the Basket Index or the securities held by the Basket Funds or in
the securities composing the Basket Components or contracts related to the
Basket Components. If the Ending Basket Level does not exceed the Starting
Basket Level, the Additional Amount will be zero. This will be true even if
the value of the Basket was higher than the Starting Basket Level at some time
during the term of the notes but later falls below the Starting Basket Level on
an Averaging Date.
- 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. Payment on the notes is
dependent on JPMorgan Chase & Co.s ability to pay the amount due on the
notes at maturity, and therefore your payment on the notes is 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 and hedging our obligations under the notes. 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.
- NO INTEREST OR DIVIDEND PAYMENTS OR
VOTING RIGHTS As a
holder of the notes, you will not receive interest payments, and you will not
have voting rights or rights to receive cash dividends or other distributions
or other rights that holders of securities composing the Basket Components.
- CERTAIN
BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE NOTES PRIOR TO
MATURITY While the payment at maturity
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 through one
or more of our affiliates. 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 set
forth under Many Economic and Market Factors Will Impact 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.
- THE ANNUAL AVERAGING CONVENTION USED
TO CALCULATE THE ENDING BASKET LEVEL COULD LIMIT RETURNS Your investment in the notes may
not perform as well as an investment in an instrument whose return is based
solely on the performance of the Basket. Your ability to participate in the
appreciation of the Basket may be limited by reference to the annual averaging
used to calculate the Ending Basket Level, especially if there is a significant
increase in the level of the Basket during the latter portion of the term of
the notes or if there is significant volatility in the Basket closing level
during the term of the notes. Accordingly, you may not receive the benefit of
the full appreciation of the Basket between each of the Averaging Dates or
between the pricing date and the final Averaging Date.
- CHANGES IN THE LEVELS OR PRICES, AS
APPLICABLE, OF THE BASKET COMPONENTS MAY OFFSET EACH OTHER Movements in the level or price,
as applicable, of the Basket Components may not correlate with each other. At a
time when the level or price, as applicable, of one or more of the Basket
Components increases, the level or price, as applicable, of the other Basket
Components may not increase as much or may even decline. Therefore, in
calculating the Basket Return, increases in the level or price, as applicable,
of one or more of the Basket Components may be moderated, or more than offset,
by lesser increases or declines in the level of the other Basket Components.
- WE ARE CURRENTLY ONE OF THE COMPANIES
THAT MAKE UP THE S&P 500® INDEX We are currently one of the
companies that make up the S&P 500® Index. To our knowledge, we
are not currently affiliated with any other issuers the equity securities of
which are included in 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 or the notes.
- SOME OF THE BASKET COMPONENTS, AND
THUS THE NOTES THEMSELVES, ARE SUBJECT TO CURRENCY EXCHANGE RISK Because the prices of most of the
equity securities held by the Equity Funds are converted into U.S. dollars for
purposes of calculating the net asset value of such Equity Funds, your notes
will be exposed to currency exchange rate risk with respect to each of the
currencies in which the equity securities held by such Equity Funds trade.
Your net exposure will depend on the extent to which such currencies strengthen
or weaken against the U.S. dollar and the relative weight of the equity
securities held by the relevant Equity Fund denominated in each such currency.
If, taking into account such weighting, the U.S. dollar strengthens against
such currencies, the value of the relevant Equity Fund or Equity Funds will be
adversely affected and the payment at maturity of the notes may be reduced.
- DIFFERENCES BETWEEN BASKET FUNDS AND
THEIR UNDERLYING INDICES iShares® MSCI EAFE Index Fund, iShares® MSCI
Emerging Markets Index Fund and iShares® Barclays TIPS Bond Fund do
not fully replicate their respective Underlying Index. iShares®
MSCI EAFE Index Fund, iShares® MSCI Emerging Markets Index Fund and iShares®
Barclays TIPS Bond Fund may hold securities not included in their respective
Underlying Index and will reflect additional transaction costs and fees that
are not included in the calculation of their respective Underlying Index. In
addition, corporate actions with respect to the sample of equity securities
(such as mergers and spin-offs) may impact the variance between iShares®
MSCI EAFE Index
|
JPMorgan
Structured Investments
Principal Protected Notes Linked to a Weighted
Basket Consisting of the S&P 500® Index, the iShares® Barclays
TIPS Bond Fund, the SPDR® Gold Trust, the iShares® MSCI
EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund
|
TS-2 |
Fund and iShares® MSCI Emerging Markets Index Fund
and their respective Underlying Index. For these reasons, the performance of
the iShares® MSCI EAFE Index Fund, iShares® MSCI Emerging
Markets Index Fund and iShares® Barclays TIPS Bond Fund may not
correlate with the performance of their respective Underlying Index.
- THERE ARE
RISKS ASSOCIATED WITH EACH BASKET FUND Although
shares of the Basket Funds are listed for trading on the NYSE Arca, Inc. and a
number of similar products have been traded on various national securities
exchanges for varying periods of time, there is no assurance that an active
trading market will continue for the shares of each Basket Fund or that there
will be liquidity in the trading market. Each Basket Fund is subject to
management risk, which is the risk that the Basket Fund's investment strategy,
the implementation of which is subject to a number of constraints, may not
produce the intended results. Pursuant to a Basket Fund's investment strategy
or otherwise, the investment advisor for a Basket Fund may add, delete or substitute
the components held by the Basket Fund it advises. Any of these actions could
affect the price of the shares of each Basket Fund and consequently the value
of the notes.
- INFLATION-PROTECTED
BONDS TYPICALLY HAVE LOWER YIELDS THAN CONVENTIONAL FIXED-RATE BONDS Because of their inflation adjustment feature,
inflation-protected bonds typically have lower yields than conventional
fixed-rate bonds. For iShares® Barclays TIPS Bond Fund, if
inflation is low, the benefit received from the inflation-protected feature of
the underlying bonds may not sufficiently compensate you for this reduced
yield.
- THE CORRELATION BETWEEN THE
PERFORMANCE OF THE SPDR® GOLD TRUST AND THE PRICE OF GOLD MAY BE IMPERFECT A discrepancy may exist between the
performance of the SPDR® Gold Trust and the price of gold. In
addition, because the shares of the SPDR® Gold Trust are traded on
an exchange and are subject to market supply and investor demand, the market
value of one share of the SPDR® Gold Trust may differ from the net
asset value per share of the SPDR® Gold Trust. Because of the
potential discrepancies identified above, the SPDR® Gold Trust
return may not correlate with the return on gold over the same period.
- THE PRICE OF ONE SHARE OF THE SPDR®
GOLD TRUST IS LINKED CLOSELY TO THE PRICE OF GOLD, WHICH MAY CHANGE
UNPREDICTABLY AND AFFECT THE VALUE OF THE NOTES IN UNFORESEEABLE WAYS Investments in notes linked, in
part, to the SPDR® Gold Trust, which tracks the price of a single
commodity, are considered speculative. The SPDR® Gold Trust attempts
to mirror as closely as possible, before fees and expenses, the performance of
the price of gold bullion and the value of the underlying shares relate
directly to the value of the gold held by the SPDR® Gold Trust. The
gold market is generally subject to temporary distortions or other disruptions
due to various factors, including the lack of liquidity in the markets, the
participation of speculators and government regulation and intervention. Gold
prices may also be affected by industry factors such as industrial and jewelry
demand as well as lending, sales and purchases of gold by the official sector,
including central banks and other governmental agencies and multilateral
institutions which hold gold. Additionally, gold prices may be affected by
levels of gold production, production costs and short-term changes in supply
and demand due to trading activities in the gold market. It is not possible to
predict the aggregate effect of all or any combination of these factors. It is
not possible to predict the aggregate effect of all or any combination of these
factors.
- 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.
- THE ANTI-DILUTION PROTECTION FOR THE
BASKET FUNDS IS LIMITED The calculation agent will make adjustments to the Share Adjustment
Factor for certain events affecting the shares of the Basket Funds. However,
the calculation agent will not make an adjustment in response to all events
that could affect the shares of the Basket Funds. 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 of the Basket on any 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:
- the expected volatility of the Basket
Components;
- the time to maturity of the notes;
- the dividend rate on the equity
securities underlying the Basket Index or held by the Equity Funds;
- interest and yield rates in the
market generally as well as in each of the markets of the equity securities
held by the Equity Funds;
- the level of inflation;
- the occurrence of certain events to
any of the Basket Funds that may or may not require an adjustment to the Share
Adjustment Factor;
- a variety of economic, financial,
political, geographical, agricultural, meteorological, regulatory or judicial
events that affect the equity securities underlying the Basket Index or held by
the Equity Funds, the commodity underlying the Commodity Fund, the bonds
underlying the bond fund, or stock markets or commodities markets generally;
- the exchange rate and volatility of
the exchange rate between the U.S. Dollar and each of the currencies in which
the equity securities held by the Equity Funds trade and the correlation
between those rates and the prices of shares of the Equity Funds;
- the credit worthiness of the
governments issuing the bonds held by the Bond Fund, including any actual or
anticipated downgrading of credit rating; and
- our credit worthiness, including
actual or anticipated downgrades in our credit ratings.
|
JPMorgan
Structured Investments
Principal Protected Notes Linked to a Weighted
Basket Consisting of the S&P 500® Index, the iShares® Barclays
TIPS Bond Fund, the SPDR® Gold Trust, the iShares® MSCI
EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund
|
TS-3 |
Sensitivity Analysis Hypothetical Payment at
Maturity for Each $1,000 Principal Amount Note
The following table illustrates the payment at maturity (including,
where relevant, the payment of the Additional Amount) for a $1,000 principal
amount note for a hypothetical range of performance for the Basket Return from -80%
to +80% and assumes a Participation Rate of 125%. The actual Participation
Rate will be determined on the pricing date and will not be less than 125% or
greater than 140%. The following results are based solely on the
hypothetical example cited. You should consider carefully whether the notes
are suitable to your investment goals. The numbers appearing in the table
below have been rounded for ease of analysis.
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total
returns set forth in the table above are calculated.
Example 1: The level of the Basket increases from the
Starting Basket Level of 100 to an Ending Basket Level of 120. Because the Ending Basket Level of 120 is greater
than the Starting Basket Level of 100, the Additional Amount is equal to $250
and the final payment at maturity is equal to $1,250 per $1,000 principal
amount note, calculated as follows:
$1,000 + ($1,000 ×
[(120-100)/100] × 125%) = $1,250
Example 2: The level of the Basket decreases from the
Starting Basket Level of 100 to an Ending Basket Level of 60. Because the Ending Basket Level of 60 is lower than
the Starting Basket Level of 100, the final payment per $1,000 principal amount
note at maturity is the principal amount of $1,000.
|
JPMorgan
Structured Investments
Principal Protected Notes Linked to a Weighted
Basket Consisting of the S&P 500® Index, the iShares® Barclays
TIPS Bond Fund, the SPDR® Gold Trust, the iShares® MSCI
EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund
|
TS-4 |
Historical Information
The following graphs show the historical weekly performance
of each Basket Component from January 7, 2005 through May 14, 2010 (except the
SPDR® Gold Trust graph, which begins with the week ending March 4,
2005). The last graph below shows the weekly performance of the Basket as a
whole from March 4, 2005 through May 14, 2010 and assumes the Basket level on
March 4, 2005 was 100 and that each Basket Component had the component
weightings specified in this term sheet on that date. The closing level of the
S&P 500® Index on May 14, 2010 was 1,135.68. The closing price
of the iShares® Barclays TIPS Bond Fund on May 14, 2010 was
$106.60. The closing price of the iShares® MSCI EAFE Index Fund on
May 14, 2010 was $49.99. The closing price of the SPDR® Gold Trust
on May 14, 2010 was $120.40. The closing price of the iShares® MSCI
Emerging Markets Index Fund on May 14, 2010 was $39.49. We obtained the
various index closing level, index fund closing prices and other information
below from Bloomberg Financial Markets, and accordingly, make no representation
or warranty as to their accuracy or completeness.
The historical prices set forth in the iShares®
MSCI EAFE Index Fund and iShares® MSCI Emerging Markets Index Fund graphs
and the Basket performance graph below have been adjusted for iShares®
EAFE Index Fund and iShares® MSCI Emerging Markets Index Fund 3-for-1
stock splits that went effective on June 9, 2005 and July 24, 2008. The
historical levels and prices of each Basket Component and the Basket should not
be taken as an indication of future performance, and no assurance can be given
as to the closing level or closing price of any Basket Component on the
Observation Date. We cannot give you assurance that the performance of the
Basket Components will result in the return of more than the principal amount
of your notes.
|
JPMorgan
Structured Investments
Principal Protected Notes Linked to a Weighted
Basket Consisting of the S&P 500® Index, the iShares® Barclays
TIPS Bond Fund, the SPDR® Gold Trust, the iShares® MSCI
EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund
|
TS-5 |