JPMorgan Chase & Co.
J P MORGAN CHASE & CO (Form: FWP, Received: 08/25/2009 06:00:52)

Term Sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 171-A-I dated July 29, 2009

  Term Sheet to
Product Supplement No. 171-A-I
Registration Statement No. 333-155535
Dated August 24, 2009; Rule 433

     

Structured 
Investments 

     

$
Autocallable Index Knock-Out Notes Linked to the Russell 2000 ® Index due June 2, 2010

General

Key Terms

Index:

The Russell 2000 ® Index (the “Index”)

Automatic Call:

If the closing level of the Index on any Review Date is greater than or equal to the Call Level, the notes will be automatically called for a cash payment, as described below.

Call Level:

110% of the Initial Index Level for each Review Date.

Payment if Called:

For every $1,000 principal amount note, you will receive one payment of $1,000 plus a Call Premium Amount equal to $1,000 x the Call Premium of 10.00%.

Payment at Maturity:

If the notes are not automatically called and a mandatory redemption is not triggered, the return on the notes at maturity is linked to the performance of the Index and will depend on whether a Knock-Out Event has occurred and whether, and the extent to which, the Index Return is positive or negative.

If the notes are not automatically called and a Knock-Out Event has occurred , you will receive a cash payment at maturity that will reflect the performance of the Index. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:

 

$1,000 + ($1,000 x Index Return)

 

 

If the notes are not automatically called and a Knock-Out Event has occurred, you will lose some or all of your investment at maturity if the Ending Index Level has declined from the Initial Index Level.

 

If the notes are not automatically called and a Knock-Out Event has not occurred , you will receive a cash payment at maturity that will reflect the performance of the Index, subject to the Contingent Minimum Return. Under these circumstances, your payment at maturity per $1,000 principal amount note will equal $1,000 plus the product of (a) $1,000 and (b) the greater of (i) the Contingent Minimum Return and (ii) the Index Return. For additional clarification, please see “What Is the Total Return on the Notes upon an Automatic Call or at Maturity Assuming a Range of Performance for the Index?” in this term sheet.

Because the Call Level is equal to 110% of the Initial Index Level, the maximum gain on the notes will be limited to the Call Premium of 10.00%. Accordingly, whether or not your notes are automatically called, the return on your investment will not exceed 10.00%.

Contingent Minimum Return:

2.00%, subject to the credit risk of JPMorgan Chase & Co.

Knock-Out Event:

A Knock-Out Event occurs if, on any trading day during the Monitoring Period, the Index closing level has declined, as compared to the Initial Index Level, by more than the Knock-Out Buffer Amount.

Knock-Out Buffer Amount:

15.10%

Monitoring Period:

The period from and including the pricing date to and including the Observation Date.

Index Return:

Ending Index Level – Initial Index Level
                Initial Index Level

Initial Index Level:

The closing level of the Index on the pricing date.

Ending Index Level:

The closing level of the Index on the Observation Date.

Review Dates:

The first business day of each calendar week , plus the Observation Date , commencing September 8, 2009 and ending on the Observation Date.

Observation Date:

May 27, 2010

Maturity Date:

June 2, 2010

CUSIP:

 

Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Automatic Call” and “Description of Notes — Payment at Maturity,” as applicable, in the accompanying product supplement no. 171-A-I.

Investing in the Index Knock-Out Notes involves a number of risks. See “Risk Factors” beginning on page PS-7 of the accompanying product supplement no. 171-A-I and “Selected Risk Considerations” beginning on page TS-3 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 or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.


 

Price to Public (1)

Fees and Commissions (2)

Proceeds to Us


Per note

$

$

$


Total

$

$

$


(1)

The price to the public includes the cost of hedging our obligations under the notes through one or more of our affiliates, which includes our affiliates’ expected cost of providing such hedge as well as the profit our affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge. For additional related information, please see “Use of Proceeds” beginning on page PS-18 of the accompanying product supplement no. 171-A-I.

(2)

Please see “Supplemental Plan of Distribution” in this term sheet for information about fees and commissions.

The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The notes are not guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.


August 24, 2009

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. 171-A-I 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. 171-A-I dated July 29, 2009. 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. 171-A-I, 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.

What Is the Total Return on the Notes upon an Automatic Call or at Maturity Assuming a Range of Performance for the Index?

The following table illustrates the hypothetical simple total return ( i.e. , not compounded) on the notes that could be realized upon an automatic call on any Review Date or at maturity for a range of movements in the Index from 80% to -100%. The “total return” as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment upon an automatic call or at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume an Initial Index Level of 580 and a Call Level of 638 (which is equal to 110% of the hypothetical Initial Index Level) and reflect the Knock-Out Buffer Amount of 15.10%, the Contingent Minimum Return of 2.00% and the Call Premium of 10.00%. The actual levels and percentages will be determined on the pricing date. There will be only one payment on the notes whether called or at maturity. The hypothetical returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the notes. The numbers appearing in the examples have been rounded for ease of analysis.


If Not Automatically Called If Automatically Called

Ending Index
Level

Index Return

Total Return if
Knock Out
Event Has Not
Occurred(1)

Total Return if
Knock Out Event
Has Occurred(2)

Closing Level of
the Index on any
Review Date

Percentage
Appreciation/Depreciation
on any Review Date

Total Return for
any Review Date


1044.00

80.00%

N/A

N/A

1044.00

80.00%

10.00%

957.00

65.00%

N/A

N/A

957.00

65.00%

10.00%

870.00

50.00%

N/A

N/A

870.00

50.00%

10.00%

812.00

40.00%

N/A

N/A

812.00

40.00%

10.00%

754.00

30.00%

N/A

N/A

754.00

30.00%

10.00%

696.00

20.00%

N/A

N/A

696.00

20.00%

10.00%

638.00

10.00%

N/A

N/A

638.00

10.00%

10.00%

632.20

9.00%

9.00%

9.00%

632.20

9.00%

N/A

609.00

5.00%

5.00%

5.00%

609.00

5.00%

N/A

591.60

2.00%

2.00%

2.00%

591.60

2.00%

N/A

585.80

1.00%

2.00%

1.00%

585.80

1.00%

N/A

580.00

0.00%

2.00%

0.00%

580.00

0.00%

N/A

551.00

-5.00%

2.00%

-5.00%

551.00

-5.00%

N/A

522.00

-10.00%

2.00%

-10.00%

522.00

-10.00%

N/A

493.00

-15.00%

2.00%

-15.00%

493.00

-15.00%

N/A

492.42

-15.10%

2.00%

-15.10%

492.42

-15.10%

N/A

487.20

-16.00%

N/A

-16.00%

487.20

-16.00%

N/A

464.00

-20.00%

N/A

-20.00%

464.00

-20.00%

N/A

406.00

-30.00%

N/A

-30.00%

406.00

-30.00%

N/A

348.00

-40.00%

N/A

-40.00%

348.00

-40.00%

N/A

290.00

-50.00%

N/A

-50.00%

290.00

-50.00%

N/A

232.00

-60.00%

N/A

-60.00%

232.00

-60.00%

N/A

174.00

-70.00%

N/A

-70.00%

174.00

-70.00%

N/A

116.00

-80.00%

N/A

-80.00%

116.00

-80.00%

N/A

58.00

-90.00%

N/A

-90.00%

58.00

-90.00%

N/A

0.00

-100.00%

N/A

-100.00%

0.00

-100.00%

N/A


(1)

The closing level of the Index has not declined, as compared to the Initial Index Level, by more than 15.10% on any trading day during the Monitoring Period.

(2)

The closing level of the Index has declined, as compared to the Initial Index Level, by more than 15.10% on any trading day during the Monitoring Period.



JPMorgan Structured Investments —
Autocallable Index Knock-Out Notes Linked to of the Russell 2000 ® Index

 TS-1

Hypothetical Examples of Amounts Payable at Maturity

The following examples illustrate how the total returns set forth in the table on the previous page are calculated.

Example 1: The level of the Index increases from the Initial Index Level of 580 to a closing level of 696 on a Review Date. Because the closing level of the Index on a Review Date of 696 is greater than the Call Level of 638, the notes are automatically called, and the investor receives a single payment of $1,100 per $1,000 principal amount note.

Example 2: The notes are not automatically called, a Knock-Out Event has not occurred, and the level of the Index increases from the Initial Index Level of 580 to an Ending Index Level of 585.80 . Because a Knock-Out Event has not occurred and the Index Return of 1% is less than the Contingent Minimum Return of 2.00%, the investor receives a payment at maturity of $1,020 per $1,000 principal amount note.

Example 3: The notes are not automatically called, a Knock-Out Event has not occurred, and the level of the Index decreases from the Initial Index Level of 580 to an Ending Index Level of 493 . Because a Knock-Out Event has not occurred, even though the Index Return of -15% is less than the Contingent Minimum Return of 2.00%, the investor receives a payment at maturity of $1,020 per $1,000 principal amount note.

Example 4: The notes are not automatically called, a Knock-Out Event has not occurred, and the level of the Index increases from the Initial Index Level of 580 to an Ending Index Level of 609 . Because a Knock-Out Event has not occurred and the Index Return of 5% is greater than the Contingent Minimum Return of 2.00%, the investor receives a payment at maturity of $1,050 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 5%) = $1,050

Example 5: The notes are not automatically called, a Knock-Out Event has occurred, and the level of the Index decreases from the Initial Index Level of 580 to an Ending Index Level of 522 . Because a Knock-Out Event has occurred and the Index Return is -10%, the investor receives a payment at maturity of $900 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x -10%) = $900

Example 6: The notes are not automatically called, a Knock-Out Event has occurred, and the level of the Index increases from the Initial Index Level of 580 to an Ending Index Level of 585.80 . Because a Knock-Out Event has occurred and the Index Return is 1%, the investor receives a payment at maturity of $1,010 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 1%) = $1,010

Selected Purchase Considerations


JPMorgan Structured Investments —
Autocallable Index Knock-Out Notes Linked to of the Russell 2000 ® Index

 TS-2

U.S. Holders should be subject to withholding tax. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice. Non-U.S. Holders should also note that they may be withheld upon at a rate of up to 30% unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the applicable documentation requirements.

Subject to certain assumptions and representations received from us, the discussion in the preceding paragraph, 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 Davis Polk & Wardwell LLP regarding the material U.S. federal income tax consequences of owning and disposing of notes.

Selected Risk Considerations

An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index or any of the component securities of the Index. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 171-A-I dated July 29, 2009.


JPMorgan Structured Investments —
Autocallable Index Knock-Out Notes Linked to of the Russell 2000 ® Index

 TS-3

Historical Information

The following graph sets forth the historical performance of the Russell 2000 ® Index based on the weekly historical closing level of the Index from January 2, 2004 through August 21, 2009. The closing level of the Index on August 21, 2009 was 581.51. We obtained the closing levels of the Index below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.

The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on any trading day during the Monitoring Period, any Review Date or the Observation Date. We cannot give you assurance that the performance of the Index will result in the return of any of your initial investment.


JPMorgan Structured Investments —
Autocallable Index Knock-Out Notes Linked to of the Russell 2000 ® Index

 TS-4

Supplemental Plan of Distribution

JPMSI, acting as agent for JPMorgan Chase & Co., will receive a commission that will depend on market conditions on the pricing date. In no event will that commission, which includes structuring and development fees, exceed $7.50 p er $1,000 principal amount note. See “Plan of Distribution” beginning on page PS-72 of the accompanying product supplement no. 171-A-I.

For a different portion of the notes to be sold in this offering, an affiliated bank will receive a fee and another affiliate of ours will receive a structuring and development fee. In no event will the total amount of these fees exceed $7.50 per $1,000 principal amount note.


JPMorgan Structured Investments —
Autocallable Index Knock-Out Notes Linked to of the Russell 2000 ® Index

 TS-5