JPMorgan Chase & Co.
J P MORGAN CHASE & CO (Form: FWP, Received: 05/25/2010 06:01:04)

Term sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 103-A-II dated May 24, 2010

  Term Sheet to
Product Supplement No. 103-A-II
Registration Statement No. 333-155535
Dated May 24, 2010; Rule 433

     

Structured 
Investments 

     

$
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI EAFE Index Fund and the iShares ® MSCI Emerging Markets Index Fund due June 15, 2011

General

Key Terms

Basket/Basket Components:

The notes are linked to a weighted basket consisting of three buffered return enhanced components (each a “Basket Component,” and together, the “Basket Components”): Russell 3000 ® Index (the “Component Index”), the iShares ® MSCI EAFE Index Fund and the iShares ® MSCI Emerging Markets Index Fund (each of the latter two, a “Component Fund” and collectively, as the “Component Funds”). We refer to each Component Index and Component Fund as a “Component Underlying” and collectively, as the “Component Underlyings.”

 

Component Underlying

Component
Weighting

Buffer
Amount

Upside
Leverage
Factor

Maximum
Return*

Downside
Leverage Factor


Russell 3000 ® Index

60%

10%

1.5

18.9075%

1.1111

iShares ® MSCI EAFE Index Fund

25%

10%

1.5

26.7075%

1.1111

iShares ® MSCI Emerging Markets Index Fund

15%

10%

1.5

29.8575%

1.1111

 

* The actual Maximum Return for each Basket Component will be set on the pricing date and will not be less than the applicable percentage set forth in the table above. The maximum payment at maturity, based on the percentages set forth above, is $1,225.00 per $1,000 principal amount note.

Payment at Maturity:

The amount you will receive at maturity is based on the Basket Return, which in turn is based on the performance of the Basket Components. At maturity, your payment per $1,000 principal amount note will be calculated as follows:

 

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

Basket Return:

The sum of the products of (a) the Component Return of each Basket Component and (b) the Component Weighting of such Basket Component.

Component Return:

With respect to each Basket Component, the Component Return will be calculated as follows:

 

Ending Underlying Level

Component Return


is greater than the Starting Underlying Level

Underlying Return × upside leverage factor, subject to the Maximum Return

is equal to the Starting Underlying Level or less than the Starting Underlying Level by not more than the buffer amount

0

is less than the Starting Underlying Level by more than the buffer amount

(Underlying Return + buffer amount) × downside leverage factor

 

For each Basket Component, if the Ending Underlying Level for the applicable Component Underlying is less than the Starting Underlying Level for such Component Underlying by more than 10%, your return on the notes at maturity may be adversely affected and you may lose some or all of your investment at maturity.

Maximum Return:

With respect to a Basket Component, a percentage that we will determine on the pricing date and that will not be less than the respective percentage set forth above under “Basket/Basket Components.” For example, if the Underlying Return for the Russell 3000 ® Index is more than 12.605%, the applicable Component Return will be equal to the applicable Maximum Return for the Russell 3000 ® Index of 18.9075%*.

Underlying Return:

With respect to each Component Underlying, the performance of the Component Underlying from the Starting Underlying Level to the Ending Underlying Level, calculated as follows:

Ending Underlying Level – Starting Underlying Level
Starting Underlying Level

Starting Underlying Level:

With respect to each Component Underlying, the Index closing level or closing price of such Component Underlying on the pricing date.

Ending Underlying Level:

With respect to each Component Underlying, the arithmetic average of the Index closing levels or closing prices of such Component Underlying on each of the Ending Averaging Dates (multipled, in the case of the Component Funds, by the applicable Share Adjustment Factor on such date)

Share Adjustment Factor:

1.0 on the pricing date and subject to adjustment under certain circumstances. See “Description of Notes — Payment at Maturity” and “General Terms of Notes — Anti-Dilution Adjustments” in the accompanying product supplement no. 103-A-II for further information about these adjustments.

Ending Averaging Dates :

June 6, 2011, June 7, 2011, June 8, 2011, June 9, 2011 and June 10, 2011

Maturity Date :

June 15, 2011

CUSIP:

48124ARZ2

Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Payment at Maturity” in the accompanying product supplement no. 103-A-II.

Investing in the Notes Linked to a Basket Consisting of Buffered Return Enhanced Components involves a number of risks. See “Risk Factors” beginning on page PS-9 of the accompanying product supplement no. 103-A-II and “Selected Risk Considerations” beginning on page TS-4 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

Fees and Commissions (1)

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-21 of the accompanying product supplement no. 103-A-II.

(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 or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.

May 24, 2010


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. 103-A-II 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. 103-A-II dated March 24, 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. 103-A-II, 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 Underlying Return for Each Component Underlying and the Corresponding Component Return for Each Basket Component Assuming a Range of Performance for Each Component Underlying?

The following table illustrates the hypothetical Underlying Return for each Component Underlying and the corresponding Component Return for each Basket Component. The hypothetical Underlying Returns and Component Returns set forth below assume a Starting Underlying Level of 650, $50 and $40 for the Russell 3000 ® Index, the iShares ® MSCI EAFE Index Fund and the iShares ® MSCI Emerging Markets Index Fund, respectively, and a Maximum Return of 18.9075%, 26.7075% and 29.8575% for the Basket Components linked to the Russell 3000 ® Index, the iShares ® MSCI EAFE Index Fund and the iShares ® MSCI Emerging Markets Index Fund, respectively. The hypothetical Underlying Returns and Component Returns set forth below are for illustrative purposes only and may not be the actual Underlying Returns and Component Returns applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.


Russell 3000 ® Index

iShares ® MSCI EAFE Index Fund

iShares ® MSCI Emerging Markets Index
Fund


Ending
Underlying
Level

Underlying
Return

Component
Return

Ending
Underlying
Level

Underlying
Return

Component
Return

Ending
Underlying
Level

Underlying
Return

Component
Return


1170.00

80.000%

18.9075%

$90.00

80.000%

26.7075%

$72.00

80.000%

29.8575%

1072.50

65.000%

18.9075%

$82.50

65.000%

26.7075%

$66.00

65.000%

29.8575%

975.00

50.000%

18.9075%

$75.00

50.000%

26.7075%

$60.00

50.000%

29.8575%

910.00

40.000%

18.9075%

$70.00

40.000%

26.7075%

$56.00

40.000%

29.8575%

845.00

30.000%

18.9075%

$65.00

30.000%

26.7075%

$52.00

30.000%

29.8575%

780.00

20.000%

18.9075%

$60.00

20.000%

26.7075%

$48.00

20.000%

29.8575%

731.90

12.605%

18.9075%

$58.90

17.805%

26.7075%

$47.96

19.905%

29.8575%

715.00

10.000%

15.0000%

$55.00

10.000%

15.0000%

$44.00

10.000%

15.0000%

682.50

5.000%

7.5000%

$52.50

5.000%

7.5000%

$42.00

5.000%

7.5000%

666.25

2.500%

3.7500%

$51.25

2.500%

3.7500%

$41.00

2.500%

3.7500%

656.50

1.000%

1.5000%

$50.50

1.000%

1.5000%

$40.40

1.000%

1.5000%

650.00

0.000%

0.0000%

$50.00

0.000%

0.0000%

$40.00

0.000%

0.0000%

617.50

-5.000%

0.0000%

$47.50

-5.000%

0.0000%

$38.00

-5.000%

0.0000%

585.00

-10.000%

0.0000%

$45.00

-10.000%

0.0000%

$36.00

-10.000%

0.0000%

520.00

-20.000%

-11.1111%

$40.00

-20.000%

-11.1111%

$32.00

-20.000%

-11.1111%

455.00

-30.000%

-22.2222%

$35.00

-30.000%

-22.2222%

$28.00

-30.000%

-22.2222%

390.00

-40.000%

-33.3333%

$30.00

-40.000%

-33.3333%

$24.00

-40.000%

-33.3333%

325.00

-50.000%

-44.4444%

$25.00

-50.000%

-44.4444%

$20.00

-50.000%

-44.4444%

260.00

-60.000%

-55.5556%

$20.00

-60.000%

-55.5556%

$16.00

-60.000%

-55.5556%

195.00

-70.000%

-66.6667%

$15.00

-70.000%

-66.6667%

$12.00

-70.000%

-66.6667%

130.00

-80.000%

-77.7778%

$10.00

-80.000%

-77.7778%

$8.00

-80.000%

-77.7778%

65.00

-90.000%

-88.8889%

$5.00

-90.000%

-88.8889%

$4.00

-90.000%

-88.8889%

0.00

-100.000%

-100.0000%

$0.00

-100.000%

-100.0000%

$0.00

-100.000%

-100.0000%




JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-1

Hypothetical Examples of Amounts Payable at Maturity

The following examples illustrate how the payment at maturity is calculated under various hypothetical circumstances. You should review the following examples in conjunction with the hypothetical table set forth on the previous page, including the underlying assumptions described on the previous page. The hypothetical payments at maturity set forth below are for illustrative purposes only and may not be the actual payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following examples have been rounded for ease of analysis.

Example 1: The level of the Russell 3000 ® Index increases from a Starting Underlying Level of 650 to an Ending Underlying Level of 682.50, the price of the iShares ® MSCI EAFE Index Fund increases from a Starting Underlying Level of $50 to an Ending Underlying Level of $51.25, and the price of the iShares ® MSCI Emerging Markets Index Fund increases from a Starting Underlying Level of $40 to an Ending Underlying Level of $40.40. Because the Ending Underlying Level of each Component Underlying is greater than its Starting Underlying Level, and each of the Underlying Returns of 5% for the Russell 3000 ® Index, 2.50% for the iShares ® MSCI EAFE Index Fund and 1% for the iShares ® MSCI Emerging Markets Index Fund, each multiplied by 1.5, does not exceed the applicable Maximum Return of 18.9075%, 26.7075% and 29.8575%, respectively, the Basket Return is calculated as follows:

[(5% x 1.5) x 60%] + [(2.50% x 1.5) x 25%] + [(1% x 1.5) x 15%] = 5.6625%

Accordingly, the investor receives a payment at maturity of $1,056.63 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 5.6625%) = $1,056.63

Example 2: The level of the Russell 3000 ® Index increases from a Starting Underlying Level of 650 to an Ending Underlying Level of 780, the price of the iShares ® MSCI EAFE Index Fund increases from a Starting Underlying Level of $50 to an Ending Underlying Level of $65, and the price of the iShares ® MSCI Emerging Markets Index Fund increases from a Starting Underlying Level of $40 to an Ending Underlying Level of $56. Because the Ending Underlying Level of each Component Underlying is greater than its Starting Underlying Level, and each of the Underlying Returns of 20.00% for the Russell 3000 ® Index, 30.00% for the iShares ® MSCI EAFE Index Fund and 40.00% for the iShares ® MSCI Emerging Markets Index Fund, each multiplied by 1.5, exceeds the applicable Maximum Return of 18.9075%, 26.7075% and 29.8575%, respectively, the Basket Return is calculated as follows:

(18.9075% x 60%) + (26.7075% x 25%) + (29.8575% x 15%) = 22.50%

Accordingly, the investor receives a payment at maturity of $1,225.00 per $1,000 principal amount note, which reflects the maximum payment at maturity, calculated as follows:

$1,000 + ($1,000 x 22.50%) = $1,225.00

Example 3: The level of the Russell 3000 ® Index increases from a Starting Underlying Level of 650 to an Ending Underlying Level of 780, the price of the iShares ® MSCI EAFE Index Fund increases from a Starting Underlying Level of $50 to an Ending Underlying Level of $51.25, and the price of the iShares ® MSCI Emerging Markets Index Fund increases from a Starting Underlying Level of $40 to an Ending Underlying Level of $40.40. Because the Ending Underlying Level of each Component Underlying is greater than its Starting Underlying Level, and the Underlying Return of 20.00% for the Russell 3000 ® Index multiplied by 1.5 exceeds the applicable Maximum Return of 18.9075%, while each of the Underlying Returns of 2.50% for the iShares ® MSCI EAFE Index Fund and 1% for the iShares ® MSCI Emerging Markets Index Fund, each multiplied by 1.5, does not exceed the applicable Maximum Return of 26.7075% and 29.8575%, respectively, the Basket Return is calculated as follows:

(18.9075% x 60%) + [(2.50% x 1.5) x 25%] + [(1% x 1.5) x 15%] = 12.507%

Accordingly, the investor receives a payment at maturity of $1,125.07 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x 12.507%) = $1,125.07

Example 4: The level of the Russell 3000 ® Index decreases from a Starting Underlying Level of 650 to an Ending Underlying Level of 585, the price of the iShares ® MSCI EAFE Index Fund decreases from a Starting Underlying Level of $50 to an Ending Underlying Level of $45, and the price of the iShares ® MSCI Emerging Markets Index Fund decreases from a Starting Underlying Level of $40 to an Ending Underlying Level of $36. Because the Ending Underlying Level of each Component Underlying is less than its Starting Underlying Level by not more than 10%, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note.

Example 5: The level of the Russell 3000 ® Index decreases from a Starting Underlying Level of 650 to an Ending Underlying Level of 455, the price of the iShares ® MSCI EAFE Index Fund decreases from a Starting Underlying Level of $50 to an Ending Underlying Level of $40, and the price of the iShares ® MSCI Emerging Markets Index Fund decreases from a Starting Underlying Level of $40 to an Ending Underlying Level of $24. Because the Ending Underlying Level of each Component Underlying is less than its Starting Underlying Level by more than 10%, the Basket Return is calculated as follows:

{[(-30% + 10%) x 1.1111] x 60%} + {[(-20% + 10%) x 1.1111] x 25%} + {[(-40% + 10%) x 1.1111] x 15%} = -21.1109%

Accordingly, the investor receives a payment at maturity of $788.89 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x -21.1109%) = $788.89


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-2

Example 6: The level of the Russell 3000 ® Index decreases from a Starting Underlying Level of 650 to an Ending Underlying Level of 455, the price of the iShares ® MSCI EAFE Index Fund decreases from a Starting Underlying Level of $50 to an Ending Underlying Level of $45, and the price of the iShares ® MSCI Emerging Markets Index Fund decreases from a Starting Underlying Level of $40 to an Ending Underlying Level of $24. Because the Ending Underlying Level of the iShares ® MSCI EAFE Index Fund is less than its Starting Underlying Level by not more than 10% and the Ending Underlying Level of each of the other Component Underlyings is less than its Starting Underlying Level by more than 10%, the Basket Return is calculated as follows:

{[(-30% + 10%) x 1.1111] x 60%} + 0% + {[(-40% + 10%) x 1.1111] x 15%} = -18.33315%

Accordingly, the investor receives a payment at maturity of $816.67 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x -18.33315%) = $816.67

Example 7: The level of the Russell 3000 ® Index increases from a Starting Underlying Level of 650 to an Ending Underlying Level of 682.50, the price of the iShares ® MSCI EAFE Index Fund decreases from a Starting Underlying Level of $50 to an Ending Underlying Level of $40, and the price of the iShares ® MSCI Emerging Markets Index Fund decreases from a Starting Underlying Level of $40 to an Ending Underlying Level of $24. Because the Ending Underlying Level of the Russell 3000 ® Index is greater than its Starting Underlying Level, and the Underlying Return of 5% multiplied by 1.5 does not exceed the applicable Maximum Return of 18.9075%, and the Ending Underlying Level of each of the other Component Underlyings is less than its Starting Underlying Level by more than 10%, the Basket Return is calculated as follows:

[(5% x 1.5) x 60%] + {[(-20% + 10%) x 1.1111] x 25%} + {[(-40% + 10%) x 1.1111] x 15%} = -3.2777%

Accordingly, the investor receives a payment at maturity of $967.22 per $1,000 principal amount note, calculated as follows:

$1,000 + ($1,000 x -3.2777%) = $967.22

Selected Purchase Considerations


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-3

Selected Risk Considerations

An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket, the Basket Components, the Component Underlyings or any of the equity securities included in the Component Underlyings. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 103-A-II dated May 24, 2010.


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-4


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-5


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-6

Historical Information

The following graphs show the historical weekly performance of the Russell 3000 ® Index, the iShares ® MSCI EAFE Index Fund and the iShares ® MSCI Emerging Markets Index Fund from January 7, 2005 through May 21, 2010. The Index closing level of the Russell 3000 ® Index on May 21, 2010 was 642.64. The closing price of one share of the iShares ® MSCI EAFE Index Fund on May 21, 2010 was $48.62. The closing price of one share of the iShares ® MSCI Emerging Markets Index Fund on May 21, 2010 was $37.36.

We obtained the various closing levels and prices of the Component Underlyings below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of information obtained from Bloomberg Financial Markets. The historical prices set forth in the graph below for the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund have been adjusted for 3-for-1 stock splits that went effective on June 9, 2005 and July 24, 2008. The historical levels and prices of each Component Underlying should not be taken as an indication of future performance, and no assurance can be given as to the closing level or price of any Component Underlying on the pricing date or any of the Ending Averaging Dates. We cannot give you assurance that the performance of the Component Underlyings will result in the return of any of your initial investment.

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 exceed $8.50 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-81 of the accompanying product supplement no. 103-A-II.

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 $8.50 per $1,000 principal amount note.


JPMorgan Structured Investments —
Notes Linked to a Weighted Basket of Three Buffered Return Enhanced Components, Consisting of the Russell 3000 ® Index, the iShares ® MSCI Emerging Markets Index Fund and the iShares ® MSCI EAFE Index Fund

 TS-7