Term Sheet
To prospectus
dated November
21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 203-A-I dated January 26, 2011
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Term Sheet to
Product Supplement No. 203-A-I
Registration Statement No. 333-155535
Dated January
26, 2011;
Rule 433
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Structured
Investments
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$
Return Notes Linked to
the S&P GSCI Agriculture Index Excess Return due March 2, 2012
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General
- The notes are designed for investors who seek
uncapped and unleveraged exposure to the S&P GSCI Agriculture
Index Excess Return as described below. Investors should be willing to forgo
interest payments and, if the Ending Index Level is not greater than the Strike
Level by at least 1.15%*, be willing to lose some or all of their initial
investment. Any payment on the
notes is subject to the credit risk of JPMorgan Chase & Co.
- Senior unsecured obligations of JPMorgan Chase &
Co. maturing March 2, 2012
- Minimum denominations of $[20,000] and integral
multiples of $1,000 in excess thereof
- The notes are expected to price on or about January 28, 2011and are expected to settle on or
about February 2, 2011.
Key
Terms
Index:
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S&P GSCI
Agriculture Index Excess Return (the Index). The value of the S&P GSCI
Agriculture Excess Return is published each trading day under the Bloomberg
ticker symbol SPGCAGP. For more information on the Index, please see
Selected Purchase Considerations Return Linked to the S&P GSCI
Agriculture Index Excess Return in this term sheet.
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Payment at Maturity:
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Payment
at maturity will reflect the performance of the Index minus the
Deduction Amount. Your payment at maturity per $1,000 principal amount note
will be calculated as follows:
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$1,000 × (1 + Index Return) Deduction Amount
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In
no event, however, will the payment at maturity be less than $0. |
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You will lose
some or all of your initial
investment at maturity if the Ending Index Level is not greater than the Strike Level by at least
1.15%*.
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Deduction Amount:
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Not
more than $11.50* for each $1,000 principal amount note.
*
The actual Deduction Amount will be set on the pricing date and will not be
greater than $11.50 for each $1,000 principal amount note.
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Index Return:
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Ending Index Level Strike Level
Strike Level
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Strike Level:
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An Index level to be determined on the pricing date in the sole
discretion of the calculation agent. The Strike Level may or may not be the regular official
weekday closing level of the Index on the pricing date. Although the calculation agent will make all
determinations and will take all actions in relation to the establishment of
the Strike Level in good faith, it should be noted that such discretion could
have an impact (positive or negative), on the value of your notes. The
calculation agent is under no obligation to consider your interests as a holder
of the notes in taking any actions, including the determination of the Strike
Level, that might affect the value of your notes.
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Ending Index Level:
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The Index closing level
on the Observation Date.
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Observation Date:
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February 28, 2012
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Maturity Date:
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March 2, 2012
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CUSIP:
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48125XCP9
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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
Postponement of a Determination Date in the accompanying product
supplement no. 203-A-I or early acceleration in the event of a commodity hedging
disruption event as described under General Terms of Notes Consequences of
a Commodity Hedging Disruption Event in the accompanying product supplement
no. 203-A-I and in Selected Risk Considerations Commodity Futures
Contracts Are Subject to Uncertain Legal and Regulatory Regimes in this term
sheet.
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Investing in the Return Notes involves a number of risks.
See Risk Factors beginning on page PS-9 of the accompanying product
supplement no. 203-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)
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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, 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-23 of the accompanying product
supplement no. 203-A-I.
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(2)
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Please
see Supplemental Plan of Distribution in this term sheet for information
about fees and commissions.
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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.
January 26, 2011
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. 203-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. 203-A-I dated January 26, 2011. 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. 203-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 and our refer
to JPMorgan Chase & Co.
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JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
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TS-1 |
What Is the Payment at Maturity on
the Notes, Assuming a Range of
Performances for the Index?
The following table illustrates the hypothetical payments at
maturity for each $1,000 principal amount note. The hypothetical payments at
maturity set forth below assume a Strike Level of 80 and a Deduction Amount of $11.50 for each $1,000
principal amount note. The hypothetical payments at maturity set forth below
are for illustrative purposes only and may not be the actual payment at
maturity 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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Ending Index Level
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Index Return
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$1,000 x
(1 + Index Return)
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Deduction
Amount
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Payment at Maturity
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144.00
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80.00%
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$1,800.00
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$11.50
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=
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$1,788.50
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136.00
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70.00%
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$1,700.00
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$11.50
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=
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$1,688.50
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128.00
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60.00%
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$1,600.00
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$11.50
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=
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$1,588.50
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120.00
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50.00%
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$1,500.00
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$11.50
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=
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$1,488.50
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112.00
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40.00%
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$1,400.00
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$11.50
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=
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$1,388.50
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104.00
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30.00%
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$1,300.00
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$11.50
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=
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$1,288.50
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96.00
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20.00%
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$1,200.00
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$11.50
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=
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$1,188.50
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88.00
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10.00%
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$1,100.00
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$11.50
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=
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$1,088.50
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84.00
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5.00%
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$1,050.00
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$11.50
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=
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$1,038.50
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80.92
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1.15%
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$1,011.50
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$11.50
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=
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$1,000.00
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80.80
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1.00%
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$1010.00
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$11.50
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=
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$998.50
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80.40
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0.50%
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$1,005.00
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$11.50
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=
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$993.50
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80.00
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0.00%
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$1,000.00
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$11.50
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=
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$988.50
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72.00
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-10.00%
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$900.00
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$11.50
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=
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$888.50
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64.00
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-20.00%
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$800.00
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$11.50
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=
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$788.50
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56.00
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-30.00%
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$700.00
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$11.50
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=
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$688.50
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48.00
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-40.00%
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$600.00
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$11.50
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=
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$588.50
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40.00
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-50.00%
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$500.00
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$11.50
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=
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$488.50
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32.00
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-60.00%
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$400.00
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$11.50
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=
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$388.50
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24.00
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-70.00%
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$300.00
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$11.50
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=
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$288.50
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16.00
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-80.00%
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$200.00
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$11.50
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=
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$188.50
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8.00
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-90.00%
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$100.00
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$11.50
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=
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$88.50
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0.00
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-100.00%
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$0.00
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$11.50
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=
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$0.00
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The payment at
maturity will not be less than $0. |
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the payments at
maturity set forth in the table above are calculated.
Example 1: The Ending Index Level increases from the Strike Level
of 80.00 to an Ending Index Level of 84.00. Because the Ending Index Level of 84.00 is greater than
the Strike Level of 80.00, the investor receives a payment at maturity of $1,038.50
per $1,000 principal amount note, calculated as follows:
$1,000 x (1 + 5%) $11.50 = $1,038.50
Example 2: The Ending Index Level increases from the Strike
Level of 80.00 to an Ending Index Level of 80.40. Even though the Ending Index Level of
80.40 is greater than the Strike Level of 80.00, because the Index Return is
less than 1.15%, the investor receives a payment at maturity of $993.50 per
$1,000 principal amount note, calculated as follows:
$1,000 x (1 +0.50%) $11.50 = $993.50
Example 3: The Ending Index Level decreases from the Strike
Level of 80.00 to an Ending Index Level of 64.00. Because the Ending Index Level of 64.00
is less than the Strike Level of 80.00, the investor receives a payment at
maturity of $788.50 per $1,000 principal amount note, calculated as follows:
$1,000 x (1 + -20%) $11.50 = $788.50
Example 4: The Ending Index Level decreases from the Strike
Level of 80.00 to an Ending Index Level of 0. Because the Ending Index Level of 0
is less than the Strike Level of 80.00, and because the payment at maturity per
$1,000 principal amount note may not be less than $0, the investor receives a
payment at maturity of $0 per $1,000 principal amount note.
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JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
|
TS-2 |
Selected Purchase Considerations
- UNCAPPED AND UNLEVERAGED EXPOSURE TO THE INDEX The notes provide uncapped and unleveraged
exposure to the Index minus a Deduction Amount of up to $11.50* per
$1,000 principal amount note. 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.
* The actual Deduction Amount will be
set on the pricing date and will not be greater than $11.50 for each $1,000
principal amount note.
- RETURN LINKED TO THE
S&P GSCI AGRICULTURE INDEX EXCESS RETURN The return on
the notes is linked solely to the S&P GSCI Agriculture Index Excess
Return, a sub-index of the S&P GSCI, a composite index of commodity
sector returns, calculated, maintained and published daily by Standard &
Poors, a division of the McGraw-Hill Companies. The S&P GSCI
is a world production-weighted index that is designed to reflect the relative
significance of principal non-financial commodities (i.e., physical
commodities) in the world economy. The S&P GSCI represents the return
of a portfolio of the futures contracts for the underlying commodities. The
S&P GSCI Agriculture Index Excess Return represents the agriculture
commodity components of the S&P GSCI, which are Wheat, Kansas Wheat,
Corn, Soybeans, Cotton, Sugar, Coffee and Cocoa. The S&P GSCI Agriculture
Index Excess Return is an excess return index and not a total return index.
An excess return index reflects the returns that are potentially available
through an unleveraged investment in the contracts composing the index. By
contrast, a total return index, in addition to reflecting those
returns, also reflects interest that could be earned on funds committed to
the trading of the underlying futures contracts. See The GSCI Indices
in the accompanying product supplement no. 203-A-I.
- CAPITAL GAINS TAX TREATMENT You should review carefully the
section entitled Certain U.S. Federal Income Tax Consequences in the
accompanying product supplement no. 203-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. Assuming this
characterization is respected, the gain or loss on your notes should be treated
as long-term capital gain or loss if you hold your notes for more than a year,
whether or not you are an initial purchaser of notes at the issue price. However,
the Internal Revenue Service (the IRS)
or a court may not respect this characterization or treatment of the notes, in
which case the timing and character of any income or loss on the notes could be
significantly and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward
contracts and similar instruments, 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, which very generally can
operate to recharacterize certain long-term capital gain as ordinary income and
impose an interest charge. 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 possible alternative treatments and the issues presented by
this notice. Non-U.S. Holders should also note that they may be withheld upon
unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the
applicable documentation requirements.
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 or in any futures contracts or exchange-traded or
over-the-counter instruments based on, or other instruments linked to, the
Index. These risks are explained in more detail in the Risk Factors section
of the accompanying product supplement no. 203-A-I dated January 26, 2011.
- YOUR INVESTMENT IN
THE NOTES MAY RESULT IN A LOSS The notes do not guarantee any return
of principal at maturity. The return on the notes at maturity is linked to
the performance of the Index, and will depend on whether, and the extent to
which, the Index Return is positive or negative. Your investment will be exposed
to loss if the Ending Index Level is less than the Strike Level. In addition,
you may lose some of your initial investment at maturity even if the Ending
Index Level is greater than the Strike Level as described in the following
risk consideration.
- THE DEDUCTION AMOUNT WILL REDUCE YOUR
FINAL PAYMENT The
notes are subject to a Deduction Amount of up to $11.50* per $1,000 principal
amount note, which will be subtracted from your payment at maturity. Because
the Deduction Amount will reduce your payment at maturity, assuming the
Deduction Amount is $11.50* per $1,000 principal amount note, even if the Index
has appreciated, you will lose up to $11.50* per $1,000 principal amount note
if the Ending Index Level is not greater than the Strike Level by at least 1.15%*.
* The actual Deduction Amount will be set on the pricing date and will not
be greater than $11.50 for each $1,000 principal amount note.
- 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 affect adversely the value of
the notes.
|
JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
|
TS-3 |
- 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. The Strike Level will be an Index level determined on
the pricing date in the sole discretion of the calculation agent. Although the
calculation agent will make all determinations and will take all actions in
relation to the establishment of the Strike Level in good faith, it should be
noted that such discretion could have an impact (positive or negative), on the
value of your notes. The calculation agent is under no obligation to consider
your interests as a holder of the notes in taking any actions, including the
determination of the Strike Level, that might affect the value of your notes.
- CERTAIN BUILT-IN COSTS ARE LIKELY TO AFFECT ADVERSELY THE VALUE
OF THE NOTES PRIOR TO MATURITY While the payment at maturity, if any, 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 JPMS 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 Affect
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.
- AGRICULTURAL COMMODITY PRICES ARE CHARACTERIZED BY HIGH AND UNPREDICTABLE VOLATILITY, WHICH
COULD LEAD TO A HIGH AND
UNPREDICTABLE VOLATILITY IN THE INDEX Market prices of the commodity futures contracts
underlying the Index tend to be highly volatile and may fluctuate rapidly based
on numerous factors. A decrease in the price of any of the commodities upon
which the futures contracts that compose the Index are based may have a
material adverse effect on the value of the notes and your return on an
investment in the notes. Global prices of agricultural commodities, including
cocoa, coffee, corn, cotton, soybeans, sugar and wheat, are primarily affected
by the global demand for and supply of those commodities, but are also
significantly influenced by speculative actions and by currency exchange
rates. In addition, prices for agricultural commodities are affected by
governmental programs and policies regarding agriculture, as well as general
trade, fiscal and exchange control policies. Extrinsic factors such as
drought, floods, general weather conditions, disease and natural disasters may
also affect agricultural commodity prices. Demand for agricultural commodities
such as wheat, corn and soybeans, both for human consumption and as cattle
feed, has generally increased with worldwide growth and prosperity. These
factors may cause the value of the different commodities upon which the futures
contracts that compose the Index are based, as well as the futures contracts
themselves, to move in inconsistent directions at inconsistent rates. This, in
turn, will affect the value of the notes linked to the Index. The high
volatility and cyclical nature of commodity markets may render such an
investment inappropriate as the focus of an investment portfolio.
- COMMODITY FUTURES CONTRACTS ARE SUBJECT TO UNCERTAIN LEGAL AND REGULATORY REGIMES The commodity futures contracts that
underlie the Index are subject to legal and regulatory
regimes in the United States and, in some cases, in other countries that may
change in ways that could adversely affect our ability to hedge our obligations under the
notes and
affect the value of the Index. Any future
regulatory changes, including but not limited to changes resulting from the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank
Act), which was enacted on July 21, 2010, may have a substantial adverse
effect on the value of your notes. Additionally, in accordance with the
Dodd-Frank Act, the U.S. Commodity Futures Trading Commission is drafting
regulations that will affect market participants position limits in certain
commodity-based futures contracts, such as futures contracts on certain energy
and agricultural based commodities. These proposed regulations, when final and
implemented, may reduce liquidity in the exchange-traded market for such
commodity-based futures contracts.
Furthermore, we or our affiliates may
be unable as a result of such restrictions to effect transactions necessary to
hedge our obligations under the notes, in which case we may, in our sole and
absolute discretion, accelerate the payment on your notes. If the payment on your notes is accelerated, your
investment may result in a loss and you may not be able to reinvest your money
in a comparable investment. Please see General Terms of Notes
Consequences of a Commodity Hedging Disruption Event in the accompanying
product supplement no. 203-A-I and Supplemental Terms of the
Notes in this term sheet for more information.
- THE NOTES DO NOT OFFER DIRECT
EXPOSURE TO COMMODITY SPOT
PRICES The notes
are linked the Index, which includes commodity futures contracts, not physical
commodities (or their spot prices). The price of a futures contract reflects
the expected value of the commodity upon delivery in the future, whereas the
spot price of a commodity reflects the immediate delivery value of the
commodity. A variety of factors can lead to a disparity between the expected
future price of a commodity and the spot price at a given point in time, such
as the cost of storing the commodity for the term of the futures contract,
interest charges incurred to finance the purchase of the commodity and expectations
concerning supply and demand for the commodity. The price movements of a
futures contract are typically correlated with the movements of the spot price
of the referenced commodity, but the correlation is generally imperfect and
price movements in the spot market may not be reflected in the futures market
(and vice versa). Accordingly, the notes may underperform a similar investment
that is linked to commodity spot prices.
- OWNING THE NOTES IS NOT THE SAME AS
OWNING ANY COMMODITIES OR COMMODITY FUTURES CONTRACTS The return on your notes will not
reflect the return you would realize if you actually purchased the futures
contracts composing the Index, the commodities upon which the futures contracts
that compose the Index are based or other exchange-traded or over-the-counter
instruments based on the Index. You will not have any rights that holders of
such assets or instruments have.
- SUSPENSION OR DISRUPTIONS OF MARKET
TRADING IN THE COMMODITY AND
RELATED FUTURES MARKETS MAY
AFFECT ADVERSELY THE LEVEL OF THE INDEX, AND THEREFORE THE VALUE OF THE NOTES The commodity markets are 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. In addition, U.S. futures exchanges and some foreign exchanges have
regulations that limit the amount of fluctuation in futures contract prices
that may occur during a trading day. These limits are generally referred to as
daily price fluctuation limits and the maximum or minimum price of a contract
on any given day as a result of these limits is referred to as a limit
price. Once the limit price has been reached in a particular contract, no
trades may be made at a different price. Limit prices have the effect of
precluding trading in a particular contract
|
JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
|
TS-4 |
or forcing the liquidation of
contracts at disadvantageous times or prices. These circumstances could
adversely affect the level of the Index and, therefore, the value of your
notes.
- HIGHER FUTURES PRICES OF THE
COMMODITY FUTURES CONTRACTS UNDERLYING THE INDEX RELATIVE TO THE CURRENT PRICES
OF SUCH CONTRACTS MAY AFFECT THE VALUE OF THE INDEX AND THE VALUE OF THE NOTES The Index is composed of futures
contracts on physical commodities. Unlike equities, which typically entitle
the holder to a continuing stake in a corporation, commodity futures contracts
normally specify a certain date for delivery of the underlying physical
commodity. As the exchange-traded futures contracts that compose the Index approach expiration, they are
replaced by contracts that have a later expiration. Thus, for example, a
contract purchased and held in August may specify an October expiration. As
time passes, the contract expiring in October is replaced with a contract for
delivery in November. This process is referred to as rolling. If the market
for these contracts is (putting aside other considerations) in contango,
where the prices are higher in the distant delivery months than in the nearer
delivery months, the purchase of the November contract would take place at a
price that is lower than the price of the October contract, thereby creating a negative
roll yield. Contango could adversely affect the value of the Index and thus
the value of notes linked to the Index. The future contracts underlying the
Index have historically been in contango.
- INVESTMENTS RELATED TO THE VALUE OF
THE INDEX MAY BE MORE VOLATILE THAN TRADITIONAL
SECURITIES INVESTMENTS
The value of the Index is subject to variables that may be less significant
to the values of traditional securities such as stocks and bonds, and where the
return on the securities is not related to commodities or commodities futures
contracts. Variables such as those described above under Agricultural
Commodity Prices Are Characterized by High and Unpredictable Volatility, Which
Could Lead to a High and Unpredictable Volatility in the Index may have a
larger impact on commodity futures contract prices and commodity-linked indices
than on traditional securities. These additional variables may create
additional investment risks that cause the value of the notes to be more
volatile than the values of traditional securities and may cause the levels of
the Index to move in unpredictable and unanticipated directions and at
unpredictable or unanticipated rates.
- THE INDEX MAY BE MORE VOLATILE AND SUSCEPTIBLE TO PRICE FLUCTUATIONS OF
COMMODITY FUTURES CONTRACTS THAN A BROADER COMMODITIES INDEX The Index may be more volatile and
susceptible to price fluctuations than a broader commodity index, such as the
S&P GSCI. In contrast to the S&P GSCI, which includes contracts on agricultural and
non-agricultural commodities, the Index comprises contracts on only agricultural
commodities. As a result, price volatility in the contracts included in the
Index will likely have a greater impact on the Index than it would on the
broader S&P GSCI. In
addition, because the Index omits principal market sectors composing the
S&P GSCI, it will be less representative
of the economy and commodity markets as a whole and will therefore not serve as
a reliable benchmark for commodity market performance generally.
- THE NOTES ARE LINKED TO AN EXCESS RETURN INDEX AND NOT A TOTAL RETURN INDEX The notes are linked to an excess
return index and not a total return index. An excess return index, such as the
Index, reflects the returns that are potentially available through an unleveraged
investment in the contracts composing such index. By contrast, a total
return index, in addition to reflecting those returns, also reflects interest
that could be earned on funds committed to the trading of the underlying
futures contracts.
- NO INTEREST PAYMENTS As a holder of the notes, you will
not receive any interest payments.
- LACK OF LIQUIDITY The notes will not be listed on any securities
exchange. JPMS 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 JPMS is willing to buy the notes.
- MANY ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE
OF THE NOTES In addition to the level of the
Index 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
and the underlying futures contracts;
- the time to maturity of the notes;
- the market price of the physical
commodities upon which the futures contracts underlying the Index are based;
- interest and yield rates in the
market generally;
- a variety of economic, financial,
political, regulatory, geographical, agricultural, meteorological and judicial
events; and
- our creditworthiness, including
actual or anticipated downgrades in our credit ratings.
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JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
|
TS-5 |
Historical Information
The following graph sets forth the
historical performance of the S&P GSCI Agriculture Index Excess Return based
on the weekly historical Index closing levels from January 6, 2006 through January 21, 2011.
The Index closing level on January 25, 2011
was 82.49598. We obtained the Index closing levels 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 levels of the Index should not be taken as an
indication of future performance, and no assurance can be given as to the Index
closing level on the Observation Date. We cannot give you assurance that the
performance of the Index will result in the return of any of your initial
investment.
Supplemental Plan of Distribution
JPMS,
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 $10.00 per $1,000 principal amount note. See Plan of
Distribution beginning on page PS-52 of the accompanying product supplement
no. 203-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 $10.00 per $1,000 principal
amount note.
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JPMorgan
Structured Investments
Return Notes Linked to of the S&P GSCI Agriculture Index Excess Return
|
TS-6 |