Term
Sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 182-A-I dated February 4, 2010
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Term
Sheet to
Product Supplement No. 182-A-I
Registration Statement No. 333-155535
Dated February 4, 2010; Rule 433 |
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Structured
Investments
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|
$
Index
Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund due August 11, 2011
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General
- The notes are designed for investors who seek
to participate in the appreciation of the closing price of one share of the
iShares® MSCI Brazil Index Fund, up to the Maximum Return of at
least 40%, at maturity and who anticipate that the closing price of one share
of the Index Fund will not decline, as compared to the Initial Share Price,
by more than 30% on any trading day during the Monitoring Period. Investors
should be willing to forgo interest and dividend payments and, if the closing
price of one share of the Index Fund declines, as compared to the Initial
Share Price, by more than 30% on any trading day during the Monitoring Period,
be willing to lose some or all of their principal. Any payment on the notes is subject to the credit
risk of JPMorgan Chase & Co.
- Senior unsecured obligations of JPMorgan Chase
& Co. maturing August 11, 2011.
- Minimum denominations of $20,000 and integral
multiples $1,000 in excess thereof.
- The notes are expected to price on or about
February 4, 2010 and are expected to settle on or about February 9, 2010.
Key
Terms
Index
Fund: |
The
iShares® MSCI Brazil Index Fund (the Index Fund) |
Knock-Out
Event: |
A
Knock-Out Event occurs if, on an trading day during the Monitoring Period,
the closing price of one share of the Index Fund has decreased,
as compared to the Initial Share Price, by more than the Knock-Out Buffer
Amount. |
Knock-Out
Buffer Amount: |
30% |
Payment
at Maturity:
|
If
a Knock-Out Event has occurred, you will receive a cash payment
at maturity that will reflect the performance of the Index Fund, subject
to the Maximum Return. Under these circumstances, your payment at maturity
per $1,000 principal amount note will be calculated as follows: |
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$1,000 + ($1,000 x Share Return), subject
to the Maximum Return |
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If
a Knock-Out Event has occurred, you will lose some or all of your investment
at maturity if the Final Share Price is less than the Initial Share
Price. |
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If
a Knock-Out Event has not occurred, you will receive
a cash payment at maturity that will reflect the performance of the
Index Fund, subject to the Contingent Minimum Return and the Maximum
Return. If a Knock-Out Event has not occurred, your payment at maturity
per $1,000 principal amount note will equal $1,000 plus
the product of (a) $1,000 and (b) the greater of (i) the Contingent
Minimum Return and (ii) the Share Return, subject to the Maximum Return.
For additional clarification, please see What Is the Total Return on
the Notes at Maturity Assuming a Range of Performance for the Index
Fund? in this term sheet. |
Maximum
Return: |
At
least 40%. The actual
Maximum Return and the actual maximum payment at maturity will be set
on the pricing date and will not be less than 40% and $1,400 per $1,000
principal amount note, respectively.
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Contingent
Minimum Return: |
At
least 21%. The actual Contingent Minimum Return will be determined
on the pricing date and will not be less than 21%. |
Monitoring
Period: |
The
period from and excluding the pricing date to and including the Observation
Date. |
Share
Return: |
Final
Share Price Initial Share Price
Initial Share Price |
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Initial
Share Price: |
The
closing price of one share of the Index Fund on the pricing date, divided
by the Share Adjustment Factor. |
Final
Share Price: |
The
closing price of one share of the Index Fund on the Observation Date. |
Share
Adjustment Factor: |
Set
initially at 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. 182-A-I for further information. |
Observation
Date: |
August
8, 2011 |
Maturity
Date: |
August
11, 2011 |
CUSIP: |
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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 in the accompanying
product supplement no. 182-A-I. |
Investing in the Index
Fund Knock-Out Notes involves a number of risks. See Risk Factors beginning
on page PS-6 of the accompanying product supplement no. 182-A-I and Selected
Risk Considerations beginning on page TS-3 of this term sheet.
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)
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The price to the public includes the cost
of hedging our obligations under the notes through one or more of our
affiliates, which includes our affiliates expected cost of providing
such hedge as well as the profit our affiliates expect to realize in consideration
for assuming the risks inherent in providing such hedge. For additional
related information, please see Use of Proceeds beginning on page PS-19
of the accompanying product supplement no. 182-A-I.
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(2)
|
Please see Supplemental Plan of Distribution
in this term sheet for information about fees and commissions. |
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.
February 4, 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. 182-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. 182-A-I dated February 4,
2010. This term sheet, together with the documents listed below, contains
the terms of the notes and supersedes all other prior or contemporaneous oral
statements as well as any other written materials including preliminary or
indicative pricing terms, correspondence, trade ideas, structures for implementation,
sample structures, fact sheets, brochures or other educational materials of
ours. You should carefully consider, among other things, the matters
set forth in Risk Factors in the accompanying product supplement no. 182-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.
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JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
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TS-1 |
What
Is the Total Return on the Notes at Maturity Assuming a Range of Performance
for the Index Fund?
The following table illustrates
the hypothetical total return at maturity on the notes. The total return
as used in this term sheet is the number, expressed as a percentage, that
results from comparing the payment at maturity per $1,000 principal amount
note to $1,000. The hypothetical total returns set forth below assume an
Initial Share Price of $70.00, a Contingent Minimum Return of 21% and a Maximum
Return of 40%. The hypothetical total returns set forth below are for illustrative
purposes only and may not be the actual total returns applicable to a purchaser
of the notes. The numbers appearing in the following table and examples have
been rounded for ease of analysis.
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Total
Return |
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Final
Share Price |
Share
Return |
Knock
Out Event
Has Not Occurred(1) |
Knock
Out Event
Has Occurred(2) |
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$126.00 |
80.00% |
40.00% |
40.00% |
$115.50 |
65.00% |
40.00% |
40.00% |
$105.00 |
50.00% |
40.00% |
40.00% |
$98.00 |
40.00% |
40.00% |
40.00% |
$91.00 |
30.00% |
30.00% |
30.00% |
$84.70 |
21.00% |
21.00% |
21.00% |
$84.00 |
20.00% |
21.00% |
20.00% |
$80.50 |
15.00% |
21.00% |
15.00% |
$77.00 |
10.00% |
21.00% |
10.00% |
$73.50 |
5.00% |
21.00% |
5.00% |
$71.75 |
2.50% |
21.00% |
2.50% |
$70.00 |
0.00% |
21.00% |
0.00% |
$66.50 |
-5.00% |
21.00% |
-5.00% |
$63.00 |
-10.00% |
21.00% |
-10.00% |
$59.50 |
-15.00% |
21.00% |
-15.00% |
$56.00 |
-20.00% |
21.00% |
-20.00% |
$52.50 |
-25.00% |
21.00% |
-25.00% |
$49.00 |
-30.00% |
21.00% |
-30.00% |
$42.00 |
-40.00% |
N/A |
-40.00% |
$35.00 |
-50.00% |
N/A |
-50.00% |
$28.00 |
-60.00% |
N/A |
-60.00% |
$21.00 |
-70.00% |
N/A |
-70.00% |
$14.00 |
-80.00% |
N/A |
-80.00% |
$7.00 |
-90.00% |
N/A |
-90.00% |
$0.00 |
-100.00% |
N/A |
-100.00% |
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(1) The closing price of one share of the Index
Fund has not declined, as compared to the Initial Share Price, by more than
30% on any trading day during the Monitoring Period.
(2) The closing price of one share of the Index
Fund has declined, as compared to the Initial Share Price, by more than 30%
on at least one trading day during the Monitoring Period.
Hypothetical
Examples of Amounts Payable at Maturity
The following examples illustrate
how the total returns set forth in the table on the previous page are calculated.
Example
1: A Knock-Out Event has not occurred, and the closing price of one share
of the Index Fund increases from the Initial Share Price of $70.00 to a Final
Share Price of $71.75. Because a Knock-Out Event has not occurred
and the Share Return of 2.50% is less than the Contingent Minimum Return of
21%, the investor receives a payment at maturity of $1,210 per $1,000 principal
amount note.
Example 2: A Knock-Out
Event has not occurred, and the closing price of one share of the Index Fund
decreases from the Initial Share Price of $70.00 to a Final Share Price of
$59.50. Because a Knock-Out Event has not occurred and the
Share Return of -15% is less than the Contingent Minimum Return of 21%, the
investor receives a payment at maturity of $1,210 per $1,000 principal amount
note.
Example 3: A Knock-Out
Event has not occurred, and the closing price of one share of the Index Fund
increases from the Initial Share Price of $70.00 to a Final Share Price of
$91.00. Because a Knock-Out Event has not occurred and the
Share Return of 30% is greater than the Contingent Minimum Return of 21% but
less than the Maximum Return of 40%, the investor receives a payment at maturity
of $1,300 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000
x 30%) = $1,300
Example 4: A Knock-Out
Event has occurred, and the closing price of one share of the Index Fund decreases
from the Initial Share Price of $70.00 to a Final Share Price of $63.00.
Because a Knock-Out Event has occurred and the Share Return is -10%,
the investor receives a payment at maturity of $900 per $1,000 principal amount
note, calculated as follows:
$1,000 + ($1,000
x -10%) = $900
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JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
|
TS-2 |
Example 5: A Knock-Out
Event has occurred, and the closing price of one share of the Index Fund increases
from the Initial Share Price of $70.00 to a Final Share Price of $80.50.
Because a Knock-Out Event has occurred and the Share Return is 15%,
the investor receives a payment at maturity of $1,150 per $1,000 principal amount
note, calculated as follows:
$1,000 + ($1,000 x 15%) = $1,150
Example 6: The closing
price of one share of the Index Fund increases from the Initial Share Price
of $70.00 to a Final Share Price of $105.00. Because the Share
Return of 50% is greater than the Maximum Return of 40%, regardless of whether
a Knock-Out Event has occurred, the investor receives a payment at maturity
of $1,400 per $1,000 principal amount note, the maximum payment on the notes.
Selected
Purchase Considerations
- APPRECIATION POTENTIAL
The notes provide the opportunity to participate in the appreciation
of the Index Fund, up to the Maximum Return of at least 40%, at maturity.
If a Knock-Out Event has not occurred, in addition to the principal
amount, you will receive at maturity at least the Contingent Minimum Return
of at least 21% on the notes, or a minimum payment at maturity of $1,210 for
every $1,000 principal amount note.
Even if a Knock-Out Event has occurred, if the Final Share Price is
greater than the Initial Share Price, in addition to the principal amount,
you will receive at maturity a return on the notes equal to the Share Return,
subject to the Maximum Return of at least 40.00%. The maximum payment at
maturity is at least $1,400 per $1,000 principal amount note, regardless of
whether a Knock-Out Event has occurred. The actual Contingent Minimum
Return and Maximum Return will be set on the pricing date and will not be
less than 21% and 40%, respectively. 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.
- RETURN
LINKED TO THE iSHARES® MSCI BRAZIL INDEX FUND
The return on the notes is linked to the iShares® MSCI
Brazil Index Fund. The iShares® MSCI Brazil
Index Fund is an exchange-traded fund of iShares, Inc., which is a registered
investment company that consists of numerous separate investment portfolios.
The iShares® MSCI Brazil 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 Brazilian market,
as measured by the MSCI Brazil Index, which we refer to as the Underlying
Index. The Underlying Index is an equity benchmark for Brazilian stock performance,
and is designed to measure equity market performance in Brazil. For
additional information about the iShares® MSCI
Brazil Index Fund, see the information set forth under The iShares®
MSCI Brazil Index Fund in the accompanying product supplement no. 182-A-I.
- TAX TREATMENT
You should review carefully the section entitled Certain
U.S. Federal Income Tax Consequences in the accompanying product supplement
no. 182-A-I. Subject to the limitations described therein, and based on certain
factual representations received from us, in the opinion of our special tax
counsel, Davis Polk & Wardwell LLP, it is reasonable to
treat the notes as open transactions for U.S. federal income tax purposes
that, subject to the discussion of the constructive ownership rules in the
following sentence, generate long-term capital gain or loss if held for more
than one year. The notes may be treated as subject to the constructive ownership
rules of Section 1260 of the Internal Revenue Code of 1986, as amended (the
Code), in which case any gain recognized in respect of the notes that would
otherwise be long-term capital gain and that is in excess of the net underlying
long-term capital gain (as defined in Section 1260) would be treated as ordinary
income, and an interest charge would apply as if that income had accrued for
tax purposes at a constant yield over the notes term. Our tax counsel has
not expressed an opinion with respect to whether the constructive ownership
rules apply to the notes. Accordingly, U.S. Holders should consult their
tax advisers regarding the potential application of the constructive ownership
rules. In addition, in December 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, such as the notes. The notice focuses
in particular on whether to require holders of these instruments to accrue
income over the term of their investment. It also asks for comments on a
number of related topics, including the character of income or loss with respect
to these instruments; the relevance of factors such as the nature of the underlying
property to which the instruments are linked; the degree, if any, to which
income (including any mandated accruals) realized by Non-U.S. Holders should
be subject to withholding tax; and whether these instruments are or should
be subject to the constructive ownership regime described above. While
the notice requests comments on appropriate transition rules and effective
dates, 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. Both U.S.
and Non-U.S. Holders should consult their tax advisers regarding the U.S.
federal income tax consequences of an investment in the notes, including the
potential application of the constructive ownership rules, 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.
Subject to certain assumptions and representations
received from us, the discussion in the preceding paragraph, 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 Davis
Polk & Wardwell LLP regarding the material U.S. federal income tax consequences
of owning and disposing of notes.
Selected
Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in
the Index Fund, the Underlying Index or any of the component securities of
the Index Fund or the Underlying Index. These risks are explained in more
detail in the Risk Factors section of the accompanying product supplement
no. 182-A-I dated February 4, 2010.
- YOUR INVESTMENT IN
THE NOTES MAY RESULT IN A LOSS The notes do not guarantee any return
of principal. The return on the notes at maturity is linked to the performance
of the Index Fund and will depend on whether a Knock-Out Event has occurred
and whether, and the extent to which, the Share Return is positive or negative.
If the closing price of one share of the Index Fund has declined, as compared
to the Initial Share Price, by more than the Knock-Out Buffer Amount of 30%
on any trading day during the Monitoring Period, a Knock-Out Event has occurred,
and the protection provided by the Knock-Out Buffer Amount of 30% will terminate.
Under these circumstances, you could lose some or all of your principal.
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JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
|
TS-3 |
- YOUR MAXIMUM GAIN
ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN If the Final Share Price
is greater than the Initial Share Price, for each $1,000 principal amount
note, you will receive at maturity $1,000 plus an additional amount that will
not exceed a predetermined percentage of the principal amount, regardless
of the appreciation in the Index, which may be significant. We refer to this
predetermined percentage as the Maximum Return, which will be set on the pricing
date and will not be less than 40%.
- YOUR ABILITY TO RECEIVE
THE CONTINGENT MINIMUM RETURN OF 21%* MAY TERMINATE ON ANY TRADING DAY DURING
THE MONITORING PERIOD If the closing price of one share of the Index
Fund on any trading day during the Monitoring Period declines from the Initial
Share Price by more than the Knock-Out Buffer Amount of 30%, you will not
be entitled to receive the Contingent Minimum Return of 21%* on the notes.
Under these circumstances, you may lose some or all of your investment at
maturity and will be fully exposed to any depreciation in the Index Fund.
* The actual Contingent Minimum Return on the notes will be set on the pricing
date and will not be less than 21%.
- YOUR PROTECTION MAY
TERMINATE ON ANY TRADING DAY DURING THE MONITORING PERIOD If the closing
price of one share of the Index Fund on any trading day during the Monitoring
Period declines from the Initial Share Price by more than the Knock-Out Buffer
Amount of 30%, you will at maturity be fully exposed to any depreciation in
the Index Fund. We refer to this feature as a contingent buffer. Under these
circumstances, if the Final Share Price is less than the Initial Share Price,
you will lose 1% of the principal amount of your investment for every 1% decrease
in the Final Share Price as compared to the Initial Share Price. You will
be subject to this potential loss of principal even if the Index Fund subsequently
increases such that the closing price of one share of the Index Fund is less
than the Initial Share Price by not more than the Knock-Out Buffer Amount
of 30%, or is equal to or greater than the Initial Share Price. 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 the Contingent
Minimum Return 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.
- 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, 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.
- CERTAIN BUILT-IN COSTS
ARE LIKELY TO AFFECT ADVERSELY 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, the price,
if any, at which J.P. Morgan Securities Inc., which we refer to as 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. The
notes are not designed to be short-term trading instruments. Accordingly,
you should be able and willing to hold your notes to maturity.
- 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 Index Fund or the Underlying Index would have.
- THERE
ARE RISKS ASSOCIATED WITH THE INDEX FUND Although the Index Funds shares are listed for trading on NYSE
Arca, Inc. (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 Index Fund or that there will be liquidity in the trading
market. The
Index Fund is subject to management risk, which is the risk that the investment
strategies of the investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. BlackRock
Fund Advisors (BFA) is currently the investment adviser for the Index Fund.
For example, BFA may invest up to 20% of the Index Funds assets in securities
not included in the Underlying Index, futures contracts, options on futures
contracts, other types of options and swaps related to the Underlying Index,
as well as cash and cash equivalents, including shares of money market funds
affiliated with BFA or its affiliates. Any
such action could adversely affect the market price of the shares of the Index
Fund, and consequently, the value of the notes.
- DIFFERENCES BETWEEN
THE INDEX FUND AND THE UNDERLYING INDEX The Index Fund does not fully
replicate the Underlying Index, may hold securities not included in the Underlying
Index and its performance will reflect additional transaction costs and fees
that are not included in the calculation of the Underlying Index, all of which
may lead to a lack of correlation between the Index Fund and the 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
the Index Fund and the Underlying Index. Finally, because the Index Fund
is traded on NYSE Arca, and is subject to market supply and investor demand,
the market value of the Index Fund may differ from the net asset value of
the Index Fund. For all of the foregoing reasons, the performance of the
Index Fund may not correlate with the performance of the Underlying Index.
- CURRENCY EXCHANGE
RISK Because the prices of the equity securities underlying the Index
Fund are converted into U.S. dollars for the purposes of calculating the net
asset value of the Index Fund, your notes will be exposed to currency exchange
rate risk with respect to the currencies in which securities underlying the
Index Fund are traded, which is primarily the Brazilian real. Your net exposure
will depend on the extent to which the currencies in which securities underlying
the Index Fund are traded strengthen or weaken against the U.S. dollar. If
the U.S. dollar
|
JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
|
TS-4 |
strengthens against the
currencies in which securities underlying the Index Fund are traded, the net
asset value of the Index Fund will be adversely affected and the amount we
pay you at maturity, if any, may be reduced. Of particular importance to
potential currency exchange risk are:
- existing and expected rates of inflation;
- existing and expected interest rate levels;
- the balance of payments; and
- the extent of government surpluses or
deficits in Brazil and the United States of America
All of these factors are in turn sensitive
to the monetary, fiscal and trade policies pursued by the governments of Brazil
and the United States and other countries important to international trade
and finance.
- NON-U.S. SECURITIES
RISK The equity securities underlying the Index Fund have been issued
by non-U.S. companies (primarily Brazilian companies). Investments in
securities linked to the value of such non-U.S. equity securities involve
risks associated with the securities markets in those countries (including
Brazil), including risks of volatility in those markets, government intervention
in those markets and cross shareholdings in companies in certain countries.
Also, there is generally less publicly available information about companies
in some of these jurisdictions than about U.S. companies that are subject
to the reporting requirements of the SEC, and generally non-U.S. companies
are subject to accounting, auditing and financial reporting standards and
requirements and securities trading rules different from those applicable
to U.S. reporting companies. The prices of securities in foreign markets
may be affected by political, economic, financial and social factors in those
countries, or global regions, including changes in government, economic and
fiscal policies and currency exchange laws.
- EMERGING MARKETS RISK
The equity securities underlying the Index Fund have been issued by non-U.S.
companies located primarily in Brazil, which is an emerging markets country.
Countries with emerging markets may have relatively unstable governments,
may present the risks of nationalization of businesses, restrictions on foreign
ownership and prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The economies
of countries with emerging markets may be based on only a few industries,
may be highly vulnerable to changes in local or global trade conditions, and
may suffer from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.
Moreover, the economies in such countries may differ favorably or unfavorably
from the economy in the United States in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
Any of the foregoing could adversely affect the market value of shares of
the Index Fund and the notes.
- 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.
- 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. In addition, we are currently
one of the companies that make up the Index Fund. 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 Index Fund and the notes.
- THE ANTI-DILUTION
PROTECTION FOR THE INDEX FUND IS LIMITED The calculation agent will
make adjustments to the adjustment factor for certain events affecting the
Index Fund. However, the calculation agent will not make an adjustment in
response to all events that could affect the Index Fund. 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
closing price of one share of the Index Fund 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 Index Fund;
- the time to maturity
of the notes;
- whether a Knock-Out Event
has occurred;
- the dividend rate on
the equity securities underlying the Index Fund;
- the occurrence of certain events to the Index Fund that may or may not require an adjustment to the Share Adjustment Factor;
- interest and yield rates
in the market generally;
- a variety of economic,
financial, political, regulatory or judicial events;
- the exchange
rate and the volatility of the exchange rate between the U.S. dollar and
the Brazilian real and the correlation between that rate and the prices
of shares of the Index Fund;
and
- our creditworthiness, including actual
or anticipated downgrades in our credit ratings.
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JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
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TS-5 |
Historical
Information
The following graph sets forth the historical
performance of the iShares® MSCI Brazil Index Fund based on the
weekly historical closing price of one share of the Index Fund from January
7, 2005 through January 29, 2010. The closing price of one share of the Index
Fund on February 3, 2010 was $67.76. We obtained the closing prices of one
share of the Index Fund below from Bloomberg Financial Markets. We make no
representation or warranty as to the accuracy or completeness of the information
obtained from Bloomberg Financial Markets.
The historical prices of one share of the Index
Fund should not be taken as an indication of future performance, and no assurance
can be given as to the closing price of one share of the Index Fund on any trading
day during the Monitoring Period or the closing price of one share of the Index
Fund on the Observation Date. We cannot give you assurance that the performance
of the Index Fund will result in the return of any of your initial investment.
Supplemental
Plan of Distribution
JPMSI, acting as agent for
JPMorgan Chase & Co., will receive a commission that will depend on market
conditions on the pricing date. In no event will that commission exceed $12.50 per
$1,000 principal amount note. See Plan of Distribution (Conflicts of Interest)
beginning on page PS-56 of the accompanying product supplement no. 182-A-I.
For a different portion of the notes
to be sold in this offering, an affiliated bank will receive a fee and another
affiliate of ours will receive a structuring and development fee. In no event
will the total amount of these fees exceed $12.50
per $1,000 principal amount note.
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JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares®
MSCI Brazil Index Fund
|
TS-6 |