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 May 19, 2011;
Rule 433
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Structured
Investments
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JPMorgan Chase & Co.
$
Callable
Fixed Rate Step-Up Notes due June 10, 2031
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General
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Senior unsecured obligations of JPMorgan
Chase & Co. maturing June
10, 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 June 7, 2011 and are expected to settle on or about
June 10, 2011.
Key Terms
Maturity Date:
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June 10,
2031,
or if such day is not a business day, the business day immediately preceding
the Maturity Date.
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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 10th
calendar day of June and December of each year (each such date, a Redemption
Date), commencing June
10, 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 business day immediately preceding the Redemption Date. 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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June 10, 2011
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June 10, 2016
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5.00% per annum
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June 10, 2016
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June 10, 2021
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5.25% per annum
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June 10, 2021
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June 10, 2026
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5.50% per annum
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June 10, 2026
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June 10, 2031
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6.25% 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 semi-annually in arrears on the 10th calendar day of June and
December of each
year (each such date, an Interest Payment Date), commencing December 10,
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 business day immediately preceding the Interest Payment Date. No
additional interest will be paid with respect to a postponement of the
Interest Payment Date. See Selected Purchase Considerations Semi-annual
Interest Payments in this term sheet for more information.
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CUSIP:
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48125XSN7
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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 $30.00 per $1,000 principal amount
note. This commission includes the projected profits that our affiliates
expect to realize for assuming risks inherent in hedging our obligations under
the notes. The actual commission received by JPMS may be more or less than
$30.00 and will depend on market conditions on the Pricing Date. In no event
will the commission received by JPMS exceed $45.00 per $1,000 principal amount
note. See Plan of Distribution (Conflicts of Interest) beginning on page
PS-45 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.
May 19, 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.
- SEMI-ANNUAL INTEREST PAYMENTS The notes offer semi-annual
interest payments which will accrue at a rate equal to the applicable Interest
Rate and will be payable semi-annually in arrears on the 10th calendar day of
June and December of each year (each such date, an Interest Payment Date),
commencing December 10, 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 business day immediately preceding the
Interest Payment Date.. No additional interest will be paid with respect to a
postponement of the Interest Payment Date.
- POTENTIAL SEMI-ANNUAL REDEMPTION BY US AT OUR OPTION At our option, we may redeem the
notes, in whole but not in part, on the 10th calendar day of June and December
of each year (each such date, a Redemption Date), commencing on June 10, 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 business day immediately
preceding the Redemption Date.. 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, during 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, 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 Income
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.
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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 6.25% 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.
- 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, 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.
- 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.
- TAX DISCLOSURE The information under Tax Treatment in this term
sheet remains subject to confirmation by our tax counsel. We will notify you
of any revisions to the information under Tax Treatment in a supplement
to this term sheet on or before the business day immediately preceding the
issue date, or if the information cannot be confirmed by our tax counsel, we
may terminate this offering of Notes.
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 |