View:
Download DOC
Download PDF
Download XLS

April 2009
Preliminary Terms No. 9
Registration Statement No. 333-155535
Dated March 30, 2009
Filed pursuant to Rule 433

STRUCTURED INVESTMENTS
Opportunities in Equities

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Auto-Callable Securities offer the opportunity for investors to earn a relatively high annualized fixed redemption amount if the closing price of one ETF Share is at all above the initial share price on any one of the specified determination dates. Investors must be comfortable with the risk of losing up to 90% of their principal and be willing to forgo interest payments and potential returns greater than the specified fixed returns. The securities are senior unsecured obligations of JPMorgan Chase & Co. and all payments on the securities are subject to the credit risk of JPMorgan Chase & Co.

SUMMARY TERMS

 

Issuer:

JPMorgan Chase & Co.

ETF Shares:

Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Underlying Index:

The FTSE/Xinhua China 25 Index

Aggregate principal amount:

$

Stated principal amount:

$10 per security

Maturity date:

April 29, 2011

Determination dates:

#1: May 4, 2010

#2: October 26, 2010

Final: April 26, 2011

Early redemption payment:

If, on either of the first two determination dates, the closing price of one ETF Share is greater than the initial share price, the securities will be automatically redeemed on the sixth business day following the related determination date for the respective cash payment, which we refer to as the early redemption amount, as follows:

 

•  1st determination date:

$12.00 to $12.20

 

•  2nd determination date:

$13.00 to $13.30

 

The actual early redemption amount will be determined on the pricing date.

Payment at maturity
(per security):

If the securities have not previously been redeemed, you will receive at maturity a cash payment as follows:
If the final share price is:

 

•  Greater than the initial share price:

$14.00 to $14.40 (as determined on the pricing date)

 

•  Less than or equal to the initial share price but greater than or equal to the
   downside protection price of 90% of the initial share price:

$10 stated principal amount, or

 

•  Less than the downside protection price of 90% of the initial share price:

$10 times the share performance factor, plus $1.00
This payment may result in a loss of up to 90% of your investment.

Downside protection price:

90% of the initial share price

Share performance factor

final share price / initial share price

Initial share price:

The closing price of one ETF Share on the pricing date, divided by the adjustment factor

Final share price:

The closing price of one ETF Share on the final determination date

Adjustment Factor:

Set equal to 1.0 on the pricing date, subject to adjustment under certain circumstances. See “General Terms of Securities — Anti-Dilution Adjustments” in the accompanying product supplement no. MS-3-A-I.

Issue price:

$10 per security (see “Commissions and Issue Price” below)

Pricing date:

April   , 2009 (expected to price on or about April 23, 2009)

Original issue date:

April   , 2009 (5 business days after the pricing date)

CUSIP:

46625H340

ISIN:

US46625H3407

Listing:

The securities will not be listed on any securities exchange.

Agent:

J.P. Morgan Securities Inc. (“JPMSI”)

Commissions and Issue Price:

Price to Public(1)(2)

Fees and Commissions(1)(2)(3)

Proceeds to Company

Per security

$10

$0.25

$9.75

Total

$

$

$

(1)

The price to the public includes the estimated cost of hedging our obligations under the securities, which includes the expected cost of providing such hedge as well as any profit our affiliates expect to realize in providing such hedge. For additional related information, please see “Use of Proceeds” beginning on PS-19 of the accompanying product supplement no. MS-3-A-I.

(2)

The actual price to public and commissions for a particular investor may be reduced for volume purchase discounts depending on the aggregate amount of securities purchased by that investor. The lowest price payable by an investor is $9.95 per security. Please see “Syndicate Information” on page 6 for further details.

(3)

JPMSI, acting as agent for JPMorgan Chase & Co., will receive a commission and will use all of that commission to allow selling concessions to Morgan Stanley & Co. Incorporated (“MS & Co.”) that will depend on market conditions on the pricing date. In no event will the commission received by JPMSI and the selling concessions to be allowed to MS & Co., exceed $0.25 per $10 stated principal amount. See “Underwriting” beginning on page PS-56 of the accompanying product supplement no. MS-3-A-I.

Investing in the securities involves a number of risks. See “Risk Factors” on page PS-6 of the accompanying product supplement no. MS-3-A-I and “Risk Factors” beginning on page 8 of these preliminary terms.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this document or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.

The securities 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. The securities are not guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

YOU SHOULD READ THIS DOCUMENT TOGETHER WITH THE RELATED PRODUCT SUPPLEMENT NO MS-3-A-I. PROSPECTUS SUPPLEMENT AND PROSPECTUS, EACH OF WHICH CAN BE ACCESSED VIA THE HYPERLINKS BELOW, BEFORE YOU DECIDE TO INVEST.

Product supplement no. MS-3-A-I dated March 27, 2009:
http://www.sec.gov/Archives/edgar/data/19617/000089109209001274/e34939-424b2.pdf

Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf

Prospectus dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005658/e33655_424b2.pdf

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in this offering will arrange to send you the prospectus if you request it by calling toll-free (866) 477-4776.

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

How the Securities Work

The following diagrams illustrate the potential outcomes for the securities depending on whether the closing price of one ETF share (including the final share price) is above or below the initial share price on any of the determination dates (including the final determination date).

Diagram #1 – First Two Determination Dates

Diagram #2 – Payout at Maturity if No Early Redemption Occurs

For more information about the payout upon early redemption or at maturity in different hypothetical scenarios, see “Hypothetical Examples” below.


April 2009

Page 2

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Investment Overview

The Auto-Callable Securities due April 29, 2011, based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund, which we refer to as the securities, are designed for investors who seek relatively high fixed positive returns if the closing price of one ETF Share is at all above the initial share price on any one of the three determination dates (including the final determination date). An early redemption will occur if the closing price of one ETF Share is above the initial share price on either of the first two determination dates. If an early redemption does not occur, the securities will be redeemed at maturity.

If, on the final determination date, the closing price of one ETF Share is greater than the initial share price, the securities will redeem for $14.00 to $14.40 per security (as determined on the pricing date). If the closing price of one ETF Share on the final determination date, which we refer to as the final share price, is less than or equal to the initial share price but greater than or equal to 90% of the initial share price, which we refer to as the downside protection price, the securities will redeem for the stated principal amount. If the final share price is less than the downside protection price, the securities will redeem for less than the stated principal amount by an amount proportionate to the decrease in the final share price below 90% of the initial share price, which means investors may lose up to 90% of their investment. Investors in the securities must be willing to accept the risk of loss of principal, and be willing to forgo interest payments and potential returns greater than the specified fixed returns.

iShares® FTSE/Xinhua China 25 Index Fund Overview

The iShares® FTSE/Xinhua China 25 Index Fund is an exchange-traded fund managed by iShares® Trust, a registered investment company, that seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 Index. The FTSE/Xinhua China 25 Index is quoted in Hong Kong dollars and is currently based on the 25 largest and most liquid Chinese stocks listed and trading on the Hong Kong Stock Exchange.

Information as of close on March 27, 2009:

        

Bloomberg Ticker Symbol:

FXI
 

Current Final Share Price:

$29.70
 

52 Weeks Ago:

$45.69
 

52 Week High (on 5/2/08):

$54.58
 

52 Week Low (on 10/27/08):

$19.36

The following graph illustrates the historical daily closing prices of one share of the iShares® FTSE/Xinhua China 25 Index Fund from October 8, 2004 through March 27, 2009. We obtained the information below from Bloomberg Financial Markets, without independent verification. The historical performance of the ETF Shares cannot be taken as an indication of their future performance.

ETF Shares Historical Performance — Daily Closing Price
October 8, 2004 through March 27, 2009

April 2009

Page 3

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Key Investment Rationale

The securities offer investors an opportunity to capture fixed positive returns if the closing price of one ETF Share has increased from its initial share price on any of the three determination dates, regardless of the extent of the appreciation.

Scenario 1

On either of the first two determination dates, the closing price of one ETF Share is greater than the initial share price. In this scenario, each security redeems for the early redemption amount associated with the specific determination date on which the securities automatically redeem.
The positive return will be approximately a 20% to 22% annualized return.

Scenario 2

The securities are not automatically redeemed prior to maturity and the final share price on the final determination date is greater than the initial share price. In this scenario, the payment at maturity for each security provides investors with a fixed positive return of 40.00% to 44.00% of the stated principal amount (approximately 20% to 22% annualized return). The securities may yield a greater return than would a direct investment in the iShares® FTSE/Xinhua China 25 Index Fund, but only if the iShares® FTSE/Xinhua China 25 Index Fund were to appreciate by less than 40.00% to 44.00% by the final determination date.

Scenario 3

(i) The securities are not automatically redeemed prior to maturity and (ii) the final share price is less than or equal to the initial share price but greater than or equal to 90% of the initial share price. In this scenario, the payment at maturity for each security will be the $10 stated principal amount.

Scenario 4

(i) The securities are not automatically redeemed prior to maturity and (ii) the final share price is less than 90% of the initial share price. In this scenario, the payment at maturity for each security will be $10 times the share performance factor, plus $1.00, which will result in a loss on your investment and could result in a loss of up to 90% of your investment.

Summary of Selected Key Risks (see page 8)

April 2009

Page 4

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Fact Sheet

The securities offered are senior unsecured obligations of JPMorgan Chase & Co., will pay no interest and guarantee the return of only 10% of principal at maturity. The securities have the terms described in the product supplement no. MS-3-A-I, the prospectus supplement and the prospectus, as supplemented or modified by these preliminary terms. At maturity, an investor will receive for each stated principal amount of securities that the investor holds, an amount in cash that may be more or less than the stated principal amount based upon the closing price of one ETF Share on the final determination date, subject to the automatic early redemption of the securities for a specified cash amount prior to maturity. The securities are senior unsecured notes issued as part of JPMorgan Chase & Co.’s Series E Global Medium-Term Notes program. All payments on the securities are subject to the credit risk of JPMorgan Chase & Co.

Expected Key Dates

 

 

Pricing date:

Original issue date (settlement date):

Maturity date:

April , 2009 (expected to price on or about April 23, 2009)

April , 2009 (5 business days after the pricing date)

April 29, 2011, subject to postponement due to certain market disruption events

Key Terms

 

Issuer:

JPMorgan Chase & Co.

ETF Shares:

Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Underlying Index

The FTSE/Xinhua China 25 Index.

Aggregate principal amount:

$

Issue price:

$10 per security (see “Syndicate Information” on page 7)

Stated principal amount:

$10 per security

Denominations:

$10 and integral multiples thereof

Interest:

None

Determination dates:

#1: May 4, 2010

#2: October 26, 2010

Final: April 26, 2011

Early redemption payment:

If, on either of the first two determination dates, the closing price of one ETF Share is greater than the initial share price, the securities will be automatically redeemed on the sixth business day following the related determination date for the respective cash payment, which we refer to as the early redemption amount, as follows:

 

•  1st determination date:

$12.00 to $12.20

 

•  2nd determination date:

$13.00 to $13.30

 

The actual early redemption amount will be determined on the pricing date.

Payment at maturity:

If the securities have not previously been redeemed, you will receive at maturity a cash payment as follows:
If the final share price is:

 

•  Greater than the initial share price:

$14.00 to $14.40 (as determined on the pricing date)

 

•  Less than or equal to the initial share price but greater than or equal to the
   downside protection price of 90% of the initial share price:

$10 stated principal amount, or

 

•  Less than the downside protection price of 90% of the initial share price:

$10 times the share performance factor, plus $1.00
This payment may result in a loss of up to 90% of your investment.

Downside protection price:

90% of the initial share price

Share performance factor:

final share price / initial share price

Initial share price:

The closing price of one ETF Share on the pricing date, divided by the adjustment factor

Final share price:

The closing price of one ETF Share on the final determination date

Adjustment factor:

Set equal to 1.0 on the pricing date, subject to adjustment under certain circumstances. See “General Terms of Securities — Anti-Dilution Adjustments” in the accompanying product supplement no. MS-3-A-I.

Risk factors:

Please see “Risk Factors” on page 8.

April 2009

Page 5

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

General Information

Listing:

The securities will not be listed on any securities exchange.

CUSIP:

46625H340

ISIN:

US46625H3407

Minimum ticketing size:

100 securities

Tax considerations:

You should review carefully the section entitled “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-3-A-I. Subject to the limitations described therein, and based on certain factual representations received from us, in the opinion of our special tax counsel, Davis Polk & Wardwell, your securities should be treated as “open transactions” for U.S. federal income tax purposes. Assuming this characterization is respected, the gain or loss on your securities should be treated as long-term capital gain or loss if you hold your securities for more than a year, whether or not you are an initial purchaser of securities at the issue price. However, the Internal Revenue Service (the “IRS”) or a court may not respect this characterization or treatment of the securities, in which case the timing and character of any income or loss on the securities could be significantly and adversely affected. In addition, on December 7, 2007, Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments, which might include the securities. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by Non-U.S. Holders should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge. 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 securities, 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 securities, including possible alternative treatments and the issues presented by this notice.

Subject to certain assumptions and representations received from us, the discussion in the preceding paragraph, when read in combination with the discussion in “Risk Factors — Structure Specific Risk Factors — The tax consequences of an investment in the securities are unclear” in this document and the section entitled “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement, constitutes the full opinion of Davis Polk & Wardwell regarding the material U.S. federal income tax consequences of owning and disposing of securities.

Trustee:

Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)

Calculation agent:

J.P. Morgan Securities Inc. ("JPMSI”)

Use of proceeds and hedging:

The net proceeds we receive from the sale of the securities will be used for general corporate purposes and, in part, by us in connection with hedging our obligations under the securities.

For further information on our use of proceeds and hedging, see “Use of Proceeds” in the accompanying product supplement no. MS-3-A-I.

ERISA:

See “Benefit Plan Investor Considerations” in the accompanying product supplement no. MS-3-A-I.

Contact:

Morgan Stanley clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).

Syndicate Information

 

 

Issue price of the securities

Selling commissions

Aggregate price
of the securities for any single investor

$10.0000

$0.2500

<$999K

$9.9750

$0.2250

$1MM-$2.99MM

$9.9625

$0.2125

$3MM-$4.99MM

$9.9500

$0.2000

≥$5MM

This offering summary represents a summary of the terms and conditions of the securities. We encourage you to read the accompanying product supplement no. MS-3-A-I, prospectus supplement and prospectus related to this offering, which can be accessed via the hyperlinks on the front page of this document.

April 2009

Page 6

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Hypothetical Examples

The following tables illustrate the payout on the securities for a range of hypothetical closing prices of one ETF Share on each of the three determination dates.

The below examples are based on the following hypothetical terms:

Initial Share Price:

$30.00

Downside Protection Price:

$27.00, which is 90% of the initial share price

Early Redemption Amount for May 2010 Determination Date:

$12.00 per security

Early Redemption Amount for October 2010 Determination Date:

$13.00 per security

Payment at Maturity (if the Final Share Price is above the Initial Share Price):

$14.00 per security

Stated Principal Amount:

$10 per security

In Examples 1 and 2, the closing price of one ETF Share fluctuates over the term of the securities and the closing price of one ETF Share is above the initial share price of $30.00 on one of the first two determination dates. However, each example produces a different early redemption amount because the closing prices of one ETF Share are greater than the initial share price on different determination dates. Because the closing price of one ETF Share is greater than the initial share price on one of the first two determination dates, the securities are automatically redeemed on the sixth business day following the corresponding determination date. In each of Examples 3, 4 and 5, the closing price of one ETF Share on the first two determination dates is less than or equal to the initial share price, and, consequently, the securities are not automatically redeemed prior to, and remain outstanding until, maturity.

Determination Date

Example 1

Example 2

 

Hypothetical
Closing Price
of One ETF
Share

Payout

Hypothetical Closing
Price of One ETF
Share

Payout

#1

$33.00

$12.00

$29.00

—

#2

—

—

$33.00

$13.00

Total Payout

$12.00 for May 2010 Determination
Date

$13.00 for October 2010 Determination
Date

Determination Date

Example 3

Example 4

Example 5

 

Hypothetical
Closing Price
of One ETF
Share

Payout

Hypothetical
Closing Price of
One ETF Share

Payout

Hypothetical
Closing Price of
One ETF Share

Payout

#1

$29.00

—

$29.00

—

$29.00

—

#2

$22.00

—

$22.00

—

$22.00

—

Final determination date

$45.00

$14.00

$28.50

$10.00

$21.00

$8.00
Total Payout $14.00 at maturity $10.00 at maturity $8.00 at maturity

April 2009

Page 7

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Risk Factors

The following is a non-exhaustive list of certain key risk factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk Factors” beginning on page PS-6 of the accompanying product supplement no. MS-3-A-I. We also urge you to consult with your investment, legal, tax, accounting and other advisers before you invest in the securities.

Structure Specific Risk Factors

April 2009

Page 8

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments, which might include the securities. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by Non-U.S. Holders should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge. 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 securities, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should also consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, 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 30% unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the applicable documentation requirements. You should review carefully the section entitled “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-3-A-I and consult your tax adviser regarding your particular circumstances.

Risks Relating to the ETF Shares

April 2009

Page 9

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

The Hong Kong dollar is freely convertible into other currencies (including the U.S. dollar). From October 1983 to May 2005, Hong Kong maintained a fixed rate system which fixed the rate of exchange to HK$7.80 per US$1.00. The central element in the arrangements that gave effect to this link was an agreement between the Hong Kong Government (through the Hong Kong Monetary Authority, or HKMA) and the three Hong Kong banks that were authorized to issue Hong Kong currency in the form of banknotes. In May 2005, the HKMA broadened the link from the original rate of HK$7.80 per US$1.00 to a rate range of HK$7.75 to K$7.85 per US$1.00. Pursuant to two convertibility undertakings, the HKMA undertakes to buy U.S. dollars from licensed banks at the rate of HK$7.75 per US$1.00 if the market exchange rate for Hong Kong dollars is higher than such rate and to sell U.S. dollars at HK$7.85 per US$1.00 if the market exchange rate for Hong Kong dollars is lower than such rate. If the market exchange rate is between HK$7.75 and HK$7.85 per US$1.00, the HKMA may choose to conduct market operations with the aim of promoting the smooth functioning of the money market and the foreign exchange market. Although the market exchange rate of the Hong Kong dollar against the U.S. dollar continues to be influenced by the forces of supply and demand in the foreign exchange market, the rate has not deviated significantly from the level of HK$7.80 per US$1.00. No assurance can be given that the Hong Kong government will maintain the link at HK$7.75 to HK$7.85 per US$1.00 or at all.

Other Risk Factors

April 2009

Page 10

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Information about the iShares® FTSE/Xinhua China 25 Index Fund

The iShares® FTSE/Xinhua China 25 Index Fund. The iShares® FTSE/Xinhua China 25 Index Fund is an exchange-traded fund managed by iShares® Trust (“iShares®”), a registered investment company. iShares® consists of numerous separate investment portfolios including the iShares® FTSE/Xinhua China 25 Index Fund. This fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses of the FTSE/Xinhua China 25 Index. Information provided to or filed with the SEC by iShares® pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 033-92935 and 811-09729, respectively, through the SEC’s website at http://www.sec.gov, and may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information.

These preliminary terms relate only to the securities offered hereby and do not relate to the shares held by the ETF Shares. We have derived all disclosures contained in these preliminary terms regarding iShares from the publicly available documents described in the preceding paragraph. In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the agent makes any representation that such publicly available documents or any other publicly available information regarding iShares is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described in the preceding paragraph) that would affect the trading price of the shares held by the ETF Shares (and therefore the price of the shares held by the ETF Shares at the time we priced the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning iShares could affect whether the securities are automatically redeemed, or the value received at maturity with respect to the securities and therefore the trading prices of the securities.

We and/or our affiliates may presently or from time to time engage in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more of our affiliates may publish research reports with respect to the ETF Shares. The statements in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As a prospective purchaser of the securities, you should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with respect to an investment in securities linked to the ETF Shares.

iShares® is a registered trademark of Barclays Global Investors, N.A. (“BGI”). The securities are not sponsored, endorsed, sold, or promoted by BGI. BGI makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities. BGI has no obligation or liability in connection with the operation, marketing, trading or sale of the securities.

The FTSE/Xinhua China 25 Index. The FTSE/Xinhua China 25 Index is quoted in Hong Kong dollars and is currently based on the 25 largest and most liquid Chinese stocks listed and trading on the Hong Kong Stock Exchange. The FTSE/Xinhua China 25 Index is described under the heading “The iShares® FTSE/Xinhua China 25 Index Fund — The FTSE/Xinhua China 25 Index” in the accompanying product supplement no. MS-3-A-I.

April 2009

Page 11

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Historical Information

The following table sets forth the published high and low closing prices, as well as end-of-quarter closing prices, of the ETF Shares for each quarter in the period from October 8, 2004 through March 27, 2009. The ETF Shares commenced trading on October 8, 2004. The closing price of one ETF Share on March 27, 2009 was $29.70. We obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The ETF Shares experience periods of high volatility, and you should not take the historical closing prices of the ETF Shares as an indication of future performance. No assurance can be given as to the closing price of one ETF Share on any determination date.

iShares® FTSE/Xinhua China 25 Index Fund

High

Low

Period End

2004

 

 

 

Fourth Quarter (from October 8, 2004)

$18.83

$16.87

$18.49

2005

 

 

 

First Quarter

$19.27

$17.33

$18.20

Second Quarter

$19.17

$17.58

$19.04

Third Quarter

$21.93

$18.94

$21.41

Fourth Quarter

$21.53

$18.88

$20.54

2006

 

 

 

First Quarter

$24.85

$21.00

$24.76

Second Quarter

$27.91

$22.00

$25.60

Third Quarter

$27.35

$24.48

$27.12

Fourth Quarter

$37.47

$27.13

$37.15

2007

 

 

 

First Quarter

$38.80

$30.55

$34.14

Second Quarter

$43.31

$34.83

$42.95

Third Quarter

$60.70

$39.91

$60.00

Fourth Quarter

$72.84

$53.75

$56.82

2008

 

 

 

First Quarter

$59.25

$41.23

$45.05

Second Quarter

$54.58

$43.13

$43.61

Third Quarter

$47.20

$30.88

$34.47

Fourth Quarter

$34.35

$19.36

$29.18

2009

 

 

 

First Quarter (through March 27, 2009)

$31.58

$22.80

$29.70

April 2009

Page 12

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Supplemental Plan of Distribution

We expect that delivery of the securities will be made against payment for the securities on or about the issue date set forth on the front cover of these preliminary terms, which will be the fifth business day following the pricing date of the securities (this settlement cycle being referred to as T+5). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade securities on the pricing date or the succeeding business day will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisors.

Subject to regulatory constraints, JPMSI intends to use its reasonable efforts to offer to purchase the securities in the secondary market, but is not required to do so.

We or our affiliate may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the securities and JPMSI and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See “Use of Proceeds” beginning on page PS-19 of the accompanying product supplement no. MS-3-A-I.

April 2009

Page 13

Auto-Callable Securities due April 29, 2011
Based on the Price of Shares of the iShares® FTSE/Xinhua China 25 Index Fund

Where You Can Find More Information?

You may revoke your offer to purchase the securities 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 securities prior to their issuance. In the event of any changes to the terms of the securities, 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 document 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 securities are a part, and the more detailed information contained in product supplement no. MS-3-A-I dated March 27, 2009.

This document, together with the documents listed below, contains the terms of the securities 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, stand-alone 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. MS-3-A-I, as the securities 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 securities.

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):

• Product supplement no. MS-3-A-I dated March 27, 2009:
  http://www.sec.gov/Archives/edgar/data/19617/000089109209001274/e34939-424b2.pdf

• Prospectus supplement dated November 21, 2008:
  http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf

• Prospectus dated November 21, 2008:
  http://www.sec.gov/Archives/edgar/data/19617/000089109208005658/e33655_424b2.pdf

Our Central Index Key, or CIK, on the SEC website is 19617.

As used in this document, the “Company,” “we,” “us,” or “our” refers to JPMorgan Chase & Co.

April 2009

Page 14