Term sheet
To
prospectus dated November 21, 2008,
prospectus supplement dated November
21, 2008 and
product supplement no. 165-A-III dated October 18,
2010
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Term sheet to
Product Supplement No. 165-A-III
Registration Statement No. 333-155535
Dated November 30, 2010; Rule 433
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Structured
Investments
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JPMorgan Chase &
Co.
$
Callable Fixed Rate Step-Up Notes due December 22, 2025 |
General
- Senior unsecured
obligations of JPMorgan Chase & Co. maturing December 22, 2025, subject to
postponement as described below.
- 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.
- Minimum
denominations of $1,000 and integral multiples thereof.
- At our option, we
may redeem the notes, in whole but not in part, on any of the Redemption Dates
specified below.
- The notes are
expected to price on or about December 17, 2010 and are expected to settle on or about December 22, 2010.
Key Terms
Maturity Date:
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December 22, 2025, 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 22nd calendar day of June and December of each year (each
such date, a Redemption Date), commencing December 22, 2011. 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 15th
calendar day prior to the Redemption Date. We will provide notice of
redemption at least 5 calendar 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:
$1,000 × Interest Rate × (180 / 360)
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Interest Rate: |
From (and including)
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To (but excluding)
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Interest Rate
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December 22,
2010
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December 22,
2015
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3.75% per annum
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December 22,
2015
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December 22,
2020
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5.00% per annum
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December 22,
2020 |
December 22,
2025 |
6.00% 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 22nd calendar day of June and December of each
year (each such date, an Interest Payment Date), commencing June 22, 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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48124A4D6
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Investing in the notes involves a number of risks. See
Risk Factors beginning on page PS-11 of the accompanying product supplement
no. 165-A-III and Selected Risk Considerations beginning on page PS-1 of this
pricing supplement.
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 pricing supplement or the accompanying prospectus supplement
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 (2)(3)
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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, will agree
to purchase the notes from us at 100% of the principal amount of the notes
minus a commission of $32.50 per $1,000 principal amount note, or 3.25% of the
principal amount. This commission includes the projected profits that our
affiliates expect to realize, some of which may be allowed to the unaffiliated
arranging dealer, for assuming risks inherent in hedging our obligations under
the notes. The actual commission realized by JPMS may be more or less than
$32.50 per $1,000 principal amount note and will depend on the prices at which
JPMS resells the notes. JPMS may allow selling concessions from the price of
the notes at the time of sale to the unaffiliated arranging dealer of up to
$20.00 per $1,000 principal amount note. In no event will the commission
received by JPMS, which includes concessions that may be allowed to the
unaffiliated arranging dealer, exceed $60.00 per $1,000 principal amount note
assuming a sale price of the note equal to $ 1,000 per principle amount note.
See Plan of Distribution (Conflicts of Interest) beginning on page PS-32 of
the accompanying product supplement no. 165-A-III.
(3) JPMS proposes to
offer the notes from time to time for resale in one or more negotiated
transactions, or otherwise, at varying prices to be determined at the time of
each sale, which may be at market prices prevailing at the time of sale, at
prices related to such prevailing prices or at negotiated prices; provided that
such price is not less than $980.00 per principal amount note and not more than
$1,000.00 per principal amount note, and provided that any notes offered from
time to time are part of a qualified reopening of the original notes offered
hereby and that are expected to be issued on or about December 22, 2010 for
U.S. federal income tax purposes. See Plan of Distribution (Conflicts of
Interest) beginning on page PS-32 of the accompanying product supplement no.
165-A-III.
The agent for this
offering, JPMS, is an affiliate of ours. See Supplemental Plan of Distribution
(Conflicts of Interest) on page TS-2 of this term sheet.
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.
November 30, 2010
Additional Terms Specific to the Notes
You should read this
term sheet together with the prospectus dated November 21, 2008, as supplemented by
the prospectus supplement dated November 21, 2008 relating to our
Series E medium-term notes of which these notes are a part, and the more
detailed information contained in product supplement no. 165-A-III dated October 18, 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. 165-A-III, 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 22nd calendar day of June and December of each year (each such
date, an Interest Payment Date), commencing June 22, 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 date 15 calendar days prior to 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 22nd calendar day of June and December of each
year (each such date, a Redemption Date), commencing December 22, 2011, 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 15th
calendar day 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.
- TAX TREATMENT You should review
carefully the section entitled Certain U.S. Federal Income Tax Consequences
in the accompanying product supplement no. 165-A-III. Depending on the issue price
of the notes, the notes may be issued with original issue discount. Except to
the extent of original issue discount, if any, during the first ten years of
the term of the notes, 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, during the first ten years of the term of the notes, 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. You should
review the discussion set forth in United States Federal Taxation Tax
Consequences to U.S. Holders Original Issue Discount in the accompanying
prospectus supplement. 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.
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-III dated October 18, 2010.
- 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
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JPMorgan
Structured Investments
Callable Fixed Rate Step-Up
Notes
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TS-1 |
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 3.75% per annum, but a debt security issued in the then current
market could yield an interest rate of 6.00% per annum, your note would be
less valuable if you tried to sell that note 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.
- 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.
- 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. 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.
- 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 NASD Rule 2720, 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 |