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 December 1, 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:
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$1,000 × Interest Rate × (180 / 360) |
Interest Rate: |
From (and including) |
To (but excluding) |
Interest Rate |
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December 22,
2010 |
December 22,
2015 |
3.80% per
annum |
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December 22,
2015 |
December 22,
2020 |
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: |
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. |
Interest Payment Date: |
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. |
CUSIP: |
48124A4P9 |
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 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
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Fees and Commissions (1)
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Proceeds to Us
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Per note
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$1,000
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$
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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.
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(2)
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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 and would use a portion of that
commission to allow selling concessions to other affiliated or unaffiliated
arranging dealers of approximately $22.50 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 $22.50 and will depend on market conditions on the pricing date.
In no event will the commission received by JPMS, which includes concessions
to be allowed and 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-32 of the accompanying
product supplement no. 165-A-III.
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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.
December 1, 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. 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. You should review the discussion set forth in United States
Federal Taxation Tax Consequences to U.S. Holders 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 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.
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JPMorgan
Structured Investments
Callable Fixed Rate Step-Up Notes
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TS-1 |
- 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 3.80% 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.
- 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 |