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 March 1, 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 September 1, 2011 |
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 30%, 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.
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Senior unsecured obligations of
JPMorgan Chase & Co. maturing September 1, 2011
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Minimum denominations of $10,000 and
integral multiples $1,000 in excess thereof
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The notes are expected to price on or
about March
5, 2010
and are expected to settle on or about March 10, 2010.
Key Terms
Index Fund:
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The iShares® MSCI Brazil Index
Fund (the Index Fund)
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Knock-Out Event:
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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.
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Knock-Out Buffer Amount:
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30%
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Payment at Maturity:
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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.
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Maximum Return:
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At least 30%. The actual Maximum Return
and the actual maximum payment at maturity will be set on the pricing date
and will not be less than 30% and $1,300 per $1,000 principal amount note,
respectively.
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Contingent Minimum Return:
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At least 24.22%. The actual Contingent Minimum Return
will be determined on the pricing date and will not be less than 24.22%.
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Monitoring Period:
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The period from and excluding the pricing date to and including
the Observation Date
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Share Return:
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Final Share Price
Initial Share Price
Initial Share Price
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Initial Share Price:
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The closing price of one share of the
Index Fund on the pricing date, divided by the Share Adjustment Factor
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Final Share Price:
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The closing price of one share of the
Index Fund on the Observation Date
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Share Adjustment Factor:
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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.
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Observation Date:
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August 29, 2011
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Maturity Date:
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September 1, 2011
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CUSIP:
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48124AJD0
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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.
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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)
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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 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)
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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.
March 1, 2010
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has filed a registration statement
(including a prospectus) with the Securities and Exchange Commission, or SEC,
for the offering to which this term sheet relates. Before you invest, you
should read the prospectus in that registration statement and the other
documents relating to this offering that JPMorgan Chase & Co. has filed
with the SEC for more complete information about JPMorgan Chase & Co. and
this offering. You may get these documents without cost by visiting EDGAR on
the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any
agent or any dealer participating in this offering will arrange to send you the
prospectus, the prospectus supplement, product supplement no. 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 24.22%
and a Maximum Return of 30%. 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
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Share Return
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Knock Out Event
Has Not Occurred(1)
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Knock Out Event
Has Occurred(2)
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$126.000
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80.00%
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30.00%
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30.00%
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$115.500
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65.00%
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30.00%
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30.00%
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$105.000
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50.00%
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30.00%
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30.00%
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$98.000
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40.00%
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30.00%
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30.00%
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$91.000
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30.00%
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30.00%
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30.00%
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$87.500
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25.00%
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25.00%
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25.00%
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$86.954
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24.22%
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24.22%
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24.22%
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$84.000
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20.00%
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24.22%
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20.00%
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$80.500
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15.00%
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24.22%
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15.00%
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$77.000
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10.00%
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24.22%
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10.00%
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$73.500
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5.00%
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24.22%
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5.00%
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$71.750
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2.50%
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24.22%
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2.50%
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$70.000
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0.00%
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24.22%
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0.00%
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$66.500
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-5.00%
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24.22%
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-5.00%
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$63.000
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-10.00%
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24.22%
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-10.00%
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$59.500
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-15.00%
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24.22%
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-15.00%
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$56.000
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-20.00%
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24.22%
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-20.00%
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$52.500
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-25.00%
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24.22%
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-25.00%
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$49.000
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-30.00%
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24.22%
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-30.00%
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$42.000
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-40.00%
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N/A
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-40.00%
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$35.000
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-50.00%
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N/A
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-50.00%
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$28.000
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-60.00%
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N/A
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-60.00%
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$21.000
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-70.00%
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N/A
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-70.00%
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$14.000
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-80.00%
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N/A
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-80.00%
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$7.000
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-90.00%
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N/A
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-90.00%
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$0.000
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-100.00%
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N/A
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-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 above
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 24.22%, the investor receives a payment at maturity of $1,242.20 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 24.22%, the investor receives a payment
at maturity of $1,242.20 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 $87.50. Because a Knock-Out Event has not occurred and the Share
Return of 25% is greater than the Contingent Minimum Return of 24.22% but less
than the Maximum Return of 30%, the investor receives a payment at maturity of
$1,250 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 x 25%) = $1,250
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 30%, regardless of whether
a Knock-Out Event has occurred, the investor receives a payment at maturity of
$1,300 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 30%, 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 24.22% on the notes, or a minimum payment at
maturity of $1,242.20 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 30.00%. The maximum payment at maturity is at least
$1,300 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 24.22% and 30%,
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.
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.
|
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 30%.
- YOUR ABILITY TO RECEIVE THE
CONTINGENT MINIMUM RETURN OF 24.22%* 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 24.22%* 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 24.22%.
- 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 affect adversely
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.
|
JPMorgan
Structured Investments
Index Fund Knock-Out Notes Linked to the iShares® MSCI Brazil Index Fund
|
TS-4 |
- 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 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.
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 there is 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 February 26, 2010.
The closing price of one share of the Index Fund on February 26, 2010 was $68.37.
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 |