Term sheet
To
prospectus dated November 21, 2008,
prospectus supplement dated November
21, 2008 and
product supplement no. 165-A-IV dated February 16, 2011
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Term sheet to
Product Supplement No. 165-A-IV
Registration Statement No. 333-155535
Dated April 13, 2011;
Rule 433
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Structured
Investments
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JPMorgan Chase & Co.
$
Callable
Fixed Rate Step-Up Notes due May 5, 2031
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General
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Senior unsecured obligations of JPMorgan
Chase & Co. maturing May
5, 2031, subject to
postponement as described below.
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The notes are designed for investors
who seek semi-annual interest payments at a fixed rate that will increase over
the term of the notes and return of their principal at maturity or upon early
redemption at our option, as applicable. Any payment on the notes is
subject to the credit risk of JPMorgan Chase & Co.
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These notes, which have a longer tenor,
may be more risky than notes with a shorter term. See Selected Risk
Considerations in this term sheet.
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Minimum denominations of $1,000 and
integral multiples thereof.
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At our option, we may redeem the notes,
in whole but not in part, on any of the Redemption Dates specified below.
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The notes are expected to price on or
about May 2, 2011 and are expected to settle on or about
May 5, 2011.
Key Terms
Maturity Date:
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May 5, 2031, or if
such day is not a business day, the next succeeding business day.
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Payment at Maturity:
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If we
have not elected to redeem the notes prior to maturity, at maturity you will
receive a cash payment for each $1,000 principal amount note of $1,000 plus
any accrued and unpaid Interest.
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Payment upon Redemption:
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At our
option, we may redeem the notes, in whole but not in part, on the 5th
calendar day of May and November of each year (each such date, a Redemption
Date), commencing May
5, 2021. If the notes
are redeemed, you will receive on the applicable Redemption Date a cash
payment equal to $1,000 for each $1,000 principal amount note redeemed. Any
accrued and unpaid interest on notes redeemed will be paid to the person who
is the holder of record of such notes at the close of business on the
business day immediately preceding the Redemption Date. We will provide
notice of redemption at least 5 business days prior to the applicable
Redemption Date. If a Redemption Date is not a business day, payment will be
made on the next business day immediately following such day. No additional
interest will be paid with respect to a postponement of the Redemption Date.
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Interest:
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With
respect to each Interest Period, for each $1,000 principal amount note, the
interest payment will be calculated as follows:
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$1,000 × Interest Rate × (180 / 360) |
Notwithstanding
anything to the contrary in the product supplement, any accrued and unpaid
interest will be paid to the person who is the holder of record of such notes
at the close of business on the business day immediately preceding the
applicable Interest Payment Date. |
Interest Rate: |
From (and including)
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To (but excluding)
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Interest Rate
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May 5, 2011
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May 5, 2016
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5.00% per annum
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May 5, 2016
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May 5, 2023
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5.50% per annum
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May 5, 2023
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May 5, 2027
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6.00% per annum
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May 5, 2027
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May 5, 2031
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6.50% per annum
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The dates above refer to originally scheduled Interest
Payment Dates and may be postponed as described below. |
Interest Period:
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The period beginning on and
including the issue date and ending on but excluding the first Interest
Payment Date, and each successive period beginning on and including an
Interest Payment Date and ending on but excluding the next succeeding
Interest Payment Date or, if the notes have been redeemed prior to such next
succeeding Interest Payment Date, ending on but excluding the applicable
Redemption Date.
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Interest Payment Date:
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Interest on the notes will be
payable semiannually in arrears on the 5th calendar day of May and November of each year (each such date, an
Interest Payment Date), commencing November 5, 2011, to and including the
Interest Payment Date corresponding to the Maturity Date, or, if the notes
have been redeemed, the applicable Redemption Date. If an Interest Payment
Date is not a business day, payment will be made on the next business day
immediately following such day. No additional interest will be paid with
respect to a postponement of the Interest Payment Date. See Selected
Purchase Considerations Semiannual Interest Payments in this term sheet
for more information.
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CUSIP:
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48125XNA0
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Investing in the Fixed to Floating Rate Notes
involves a number of risks. See Risk Factors beginning on page PS-15 of the
accompanying product supplement no. 165-A-IV and Selected Risk Considerations
beginning on page TS-2 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, the accompanying
product supplement no. 165-A-IV or the accompanying prospectus supplements and
prospectus. Any representation to the contrary is a criminal offense.
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Price to Public (1)(2)(3)
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Fees and Commissions (1)(2)
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Proceeds to Us
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Per note
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At
variable prices
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$
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$
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Total
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At
variable prices
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$
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$
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(1) The price to the public
includes the estimated cost of hedging our obligations under the notes through
one or more of our affiliates.
(2) If the notes priced today, J.P. Morgan
Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase
& Co., would receive a commission of approximately $37.50 per $1,000
principal amount note. This commission includes the projected profits that our
affiliates expect to realize, some of which may be allowed to other
unaffiliated dealers, for assuming risks inherent in hedging our obligations
under the notes. The actual commission received by JPMS may be more or less
than $37.50 and will depend on market conditions on the Pricing Date. In no
event will the commission received by JPMS, which includes other amounts that
may be allowed to other dealers, exceed $60.00 per $1,000 principal amount
note. See Plan of Distribution (Conflicts of Interest) beginning on page
PS-46 of the accompanying product supplement no. 165-A-IV.
(3) JPMS proposes to offer the notes from time to
time in one or more negotiated transactions at varying prices to be determined
at the time of each sale, which may be at market prices prevailing, at prices
related to such prevailing prices or at negotiated prices; provided, however, that
such price will not less than $980.00 per principal amount note and will not be
more than $1,000.00 per principal amount note. See Plan of Distribution
(Conflicts of Interest) beginning on page PS-46 of the accompanying product
supplement no. 165-A-IV.
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.
April 13, 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. 165-A-IV 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. 165-A-IV dated February 16,
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. 165-A-IV, 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.
Selected Purchase Considerations
- PRESERVATION OF CAPITAL You will receive at least 100% of
the principal amount of your notes if you hold the notes to maturity or to the
Redemption Date, if any, on which we elect to call the notes. Because the
notes are our senior unsecured obligations, payment of any amount at maturity
or upon early redemption is subject to our ability to pay our obligations as
they become due.
- SEMIANNUAL INTEREST PAYMENTS The notes offer semiannual interest
payments which will accrue at a rate equal to the applicable Interest Rate and
will be payable semiannually in arrears on the 5th calendar day of May and
November of each year (each such date, an Interest Payment Date), commencing
November 5, 2011, to and including the Interest Payment Date corresponding to
the Maturity Date, or, if the notes have been redeemed, the applicable
Redemption Date, to the holders of record at the close of business on the
business day immediately preceding the
applicable Interest Payment Date. If an Interest Payment Date is not a business
day, payment will be made on the next business day immediately following such
day. No additional interest will be paid with respect to a postponement of the
Interest Payment Date.
- POTENTIAL SEMIANNUAL REDEMPTION BY US
AT OUR OPTION At
our option, we may redeem the notes, in whole but not in part, on the 5th
calendar day of May and November of each year (each such date, a Redemption Date), commencing on May
5, 2021, for a cash payment equal to $1,000 for each $1,000 principal amount
note redeemed. Any accrued and unpaid interest on notes redeemed will be paid
to the person who is the holder of record of such notes at the close of
business on the business day immediately preceding the applicable Redemption
Date. If a Redemption Date is not a business day, payment will be made on the
next business day immediately following such day. No additional interest will
be paid with respect to a postponement of the Redemption Date.
- TAX TREATMENT You should review carefully the
section entitled Certain U.S. Federal Income Tax Consequences in the
accompanying product supplement no. 165-A-IV. Except to the extent of original
issue discount, if any, interest paid on the notes will generally be taxable to
you as ordinary interest income at the time it accrues or is received in
accordance with your method of accounting for U.S. federal income tax purposes. In addition, a U.S. Holder (as defined in
the accompanying prospectus supplement) must include original issue discount,
if any, in income as ordinary interest as it accrues, generally in advance of
receipt of cash attributable to such income. In general, gain or loss realized
on the sale, exchange or other disposition of the notes will be capital gain or
loss. Prospective purchasers
are urged to consult their own tax advisers regarding the U.S. federal income tax consequences of an investment in
the notes. Purchasers who are not initial purchasers of notes at their
issue price on the issue date should consult their tax advisers with respect to
the tax consequences of an investment in the notes, and the potential
application of special rules.
Subject to certain assumptions and representations received from us, the
discussion in this section entitled Tax Treatment, when read in combination
with the section entitled Certain U.S. Federal Income Tax Consequences in the accompanying
product supplement, constitutes the full opinion of Sidley Austin LLP regarding the material U.S. federal
income tax treatment of owning and disposing of the notes.
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JPMorgan
Structured Investments
Callable Fixed Rate Step-Up Notes
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TS-1 |
Selected Risk Considerations
An
investment in the notes involves significant risks. These risks are explained
in more detail in the Risk Factors section of the accompanying product
supplement no. 165-A-IV dated February 16, 2011.
- THE NOTES ARE SUBJECT TO EARLY REDEMPTION PRIOR TO
MATURITY The notes are subject to redemption
at the sole discretion of the Issuer on the specified Redemption Dates
indicated above. If the notes are redeemed prior to maturity, you will receive
the principal amount of your notes plus accrued and unpaid interest to, but not
including the applicable Redemption Date. This amount will be less than you
would have received had the notes not been called early and continued to pay
interest over the full term of the notes. We may choose to redeem the notes
early or choose not to redeem the notes early on any Redemption Date, in our
sole discretion. If we elect to redeem the notes early, your return may be less
than the return you would have earned on your investment had the notes been
held to maturity, and you may not be able to reinvest your funds at the same
rate as the notes. We may choose to redeem the notes early, for example, if U.S. interest rates decrease significantly or if volatility
of U.S. interest rates decreases
significantly.
- THE NOTES ARE NOT ORDINARY DEBT SECURITIES; THE
STEP-UP FEATURE PRESENTS DIFFERENT INVESTMENT CONSIDERATIONS THAN FIXED RATE NOTES Unless general interest rates rise significantly, you should
not expect to earn the highest scheduled Interest Rates described on the cover
because the notes are likely to be redeemed on a Redemption Date if interest
rates remain the same or fall during the term of the notes. When determining whether
to invest in the Callable Fixed Rate Step-Up Notes, you should not focus on the
highest stated Interest Rate, which is only applicable to the last five years
of the term of your notes. You should instead focus on, among other things,
the overall annual percentage rate of interest to maturity or early redemption
as compared to other equivalent investment alternatives.
- CREDIT
RISK OF JPMORGAN CHASE & CO. The
notes are subject to the credit risk of JPMorgan Chase & Co. and our credit
ratings and credit spreads may adversely affect the market value of the notes.
Payment on the notes is dependent on JPMorgan Chase & Co.s ability to pay
the amount due on the notes at maturity or upon early redemption, as
applicable, and therefore your payment on the notes is subject to our credit
risk and to changes in the markets view of our creditworthiness. Any
decline in our credit ratings or increase in the credit spreads charged by the
market for taking our credit risk is likely to adversely affect the value of
the notes.
- POTENTIAL CONFLICTS We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as
calculation agent and hedging our obligations under the notes. In performing
these duties, the economic interests of the calculation agent and other
affiliates of ours are potentially adverse to your interests as an investor in
the notes.
- THESE
NOTES MAY BE MORE RISKY THAN NOTES WITH A
SHORTER TERM By purchasing a note with a longer
term, you are more exposed to fluctuations in interest rates than if you
purchased a note with a shorter term. Specifically, you may be negatively
affected if certain interest rate scenarios occur. For example, if interest
rates begin to rise, the market value of your notes will decline because the
likelihood of us calling your notes will decline and the Interest Rate
applicable to that specific Interest Period may be less than a note issued at
such time. For example, if the Interest Rate applicable to your notes at such
time was 5.00% per annum, but a debt security issued in the then current market
could yield an interest rate of 6.50% per annum, your note would be less
valuable if you tried to sell it in the secondary market.
- CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE
OF THE NOTES PRIOR TO MATURITY While
the payment at maturity or upon early redemption, as applicable, described in
this term sheet is based on the full principal amount of your notes, the
original issue price of the notes includes the estimated cost of hedging our
obligations under the notes. As a result, 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. The notes are
not designed to be short-term trading instruments. Accordingly, you should be
able and willing to hold your notes to maturity.
- VARIABLE PRICE REOFFERING RISKS JPMS proposes to offer the notes
from time to time for sale at market prices prevailing at the time of sale, at
prices related to then-prevailing prices or at negotiated prices, provided that
such prices will not be less than $980.00 per $1,000 principal amount note or more
than $1,000 per $1,000 principal amount note. Accordingly, there is a risk
that the price you pay for the notes will be higher than the prices paid by
other investors based on the date and time you make your purchase, from whom
you purchase the notes (e.g., directly from JPMS or through a broker or
dealer), any related transaction cost (e.g., any brokerage commission), whether
you hold your notes in a brokerage account, a fiduciary or fee-based account or
another type of account and other market factors beyond our control.
- 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 IMPACT THE VALUE
OF THE NOTES The notes will be affected by a
number of economic and market factors that may either offset or magnify each
other, including but not limited to:
- the time to maturity of the notes;
- interest and yield rates in the market
generally, as well as the volatility of those rates;
- the likelihood, or expectation, that
the notes will be redeemed by us, based on prevailing market interest rates
or otherwise; and
- our creditworthiness, including actual
or anticipated downgrades in our credit ratings.
Supplemental Plan of Distribution
(Conflicts of Interest)
We own,
directly or indirectly, all of the outstanding equity securities of JPMS, the
agent for this offering. The net proceeds received from the sale of notes will
be used, in part, by JPMS or one of its affiliates in connection with hedging
our obligations under the notes. In accordance with FINRA Rule
5121,
JPMS may not make sales in this offering to any of its discretionary accounts
without the prior written approval of the customer.
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JPMorgan
Structured Investments
Callable Fixed Rate Step-Up Notes
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TS-2 |