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 23, 2010; Rule 433 |
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Structured
Investments
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JPMorgan
Chase & Co.
$
Callable
Fixed Rate Step-Up Notes due December
15, 2025 |
General
- Senior unsecured obligations of JPMorgan
Chase & Co. maturing December 15, 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 10, 2010 and are expected to settle on or about December 15,
2010.
Key
Terms
Maturity
Date: |
December
15, 2025, or if such day is not a business day, the next succeeding business
day. |
Payment
at Maturity: |
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. |
Payment
upon Redemption: |
At
our option, we may redeem the notes, in whole but not in part, on the
15th calendar day of June and December of each year (each such date, a
Redemption Date), commencing December 15, 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. |
Interest: |
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) |
Interest
Rate: |
From
(and including) |
To
(but excluding) |
Interest
Rate |
|
December
15, 2010 |
December
15, 2015 |
4.00%
per annum |
|
December
15, 2015 |
December
15, 2020 |
4.50%
per annum |
|
December
15, 2020 |
December
15, 2025 |
5.50%
per annum |
|
The
dates above refer to originally scheduled Interest Payment Dates and may
be postponed as described below.
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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 15th calendar
day of June and December of each year (each such date, an Interest Payment
Date), commencing June 15, 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: |
48124A3R6
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Investing in the Capped
Floored Floating Rate 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) |
Fees
and Commissions (2)(3) |
Proceeds
to Us |
|
Per
note |
At variable prices |
$ |
$ |
|
Total |
At variable prices |
$ |
$ |
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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 $31.00per
$1,000 principal amount note, or 3.10% 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 $31.00 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 $22.50 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
$45.00 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
$977.50 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 15, 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 23, 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 15th calendar day of June and December of each year (each
such date, an Interest Payment Date), commencing June 15, 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 15th calendar day of June and December of
each year (each such date, a Redemption Date), commencing December 15, 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 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 |
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
4.00% 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 |
TS-2 |