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Free Writing
Prospectus
Filed Pursuant to
Rule 433
Registration
Statement No. 333-155535
Dated October 7,
2009
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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
Dated October 7, 2009
J.P.Morgan
J.P. Morgan U.S. Sector Efficiente Index
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Performance Update - October 2009
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OVERVIEW
The J.P. Morgan U.S. Sector Efficiente Index (the "Index", or the "Strategy")
is a J.P. Morgan strategy that seeks to generate returns through the dynamic
selection of up to ten equity sector indices (the "Sector Constituents") based
on a modern portfolio theory approach to portfolio allocation.
Hypothetical and Actual Historical
Performance - Aug 2, 2001 to Sept 30, 2009(1)
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Key Features of the Index
[] Dynamic exposure to a portfolio of U.S. equity sectors that is rebalanced
monthly based on a rules-based methodology with a target annualized
volatility of 8% or less;
[] Algorithmic portfolio construction intended to utilize momentum across
global equity sectors to inform portfolio allocation across U.S. equity
sectors;
[] Provides an alternative approach to investing in U.S. equities;
[] Levels published on Bloomberg under the ticker SXJPUS8E.
Recent Index Performance(1)
July Aug Sep
2009 2009 2009
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Hypothetical and Actual 1.78% 0.87% 2.55%
Historical Performance
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Hypothetical and Actual Historical Volatility -
November 1, 2001 to September 30, 2009(3)
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Recent Index Composition(2)
Sector Constituents: August 2009 September 2009
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S&P 500 Energy TR Index 0.00% 0.00%
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S&P 500 Materials TR Index 0.00% 0.00%
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S&P 500 Industrials TR Index 0.00% 0.00%
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S&P 500 Consumer Discretionary TR Index 0.00% 0.00%
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S&P 500 Consumer Staples TR Index 25.00% 25.00%
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S&P 500 Health Care TR Index 25.00% 20.71%
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S&P 500 Financials Total Return Index 0.00% 0.00%
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S&P 500 Information Technology
Total Return Index 7.81% 14.64%
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S&P 500 Telecommunications
Total Return Index 4.41% 0.00%
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S&P 500 Utilities Total Return Index 0.00% 0.00%
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October 7, 2009
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Comparative Hypothetical and Actual Performance(%), Standard Deviations(%),
Correlations, and Sharpe Ratio
Year to Three Year Five Year Five Year
Date Annualized Annualized Annualized Sharpe
Performance(1) Performance(1) Performance(1) Volatility(4) Correlation(5) Ratio(6)
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U.S Sector
Efficiente Index 3.81% 0.80% 3.63% 9.08% 1.0 0.40
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S&P 500(R) Index 12.61% -7.51% -1.05% 20.65% .54 -0.05
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Notes
1 Represents the continuously compounded positive or negative weekly
performance of the Index based on, as applicable to the relevant
measurement period, the hypothetical back-tested Index closing levels from
August 2, 2001 through September 1, 2009, and the actual historical
performance of the Index based on the Index closing levels from September
2, 2009 through September 30, 2009, as well as the performance of the S&P
500(R) Index over the same period. For purposes of these examples, each
index was set equal to 100 at the beginning of the relevant measurement
period. There is no guarantee that the Strategy will outperform the
S&P500(R) Index or any alternative strategy. In addition, there is no
assurance that the continuously compounded Strategy performance will
reflect the return calculated for any security linked to the Strategy.
Source: Bloomberg and JPMorgan.
2 On a monthly basis, J.P. Morgan Securities Inc., or JPMSI, acting as the
Index calculation agent, will rebalance the Index to take synthetic long
positions in the Basket Constituents based on mathematical rules that
govern the Index and track the returns of the synthetic portfolio above
cash. The weights for each Basket Constituent will be adjusted to comply
with certain allocation constraints, including constraints on individual
Basket Constituents, as well as the entire portfolio.
3 Volatility is a measurement of the variability of returns based on
historical performance. The historical, or "realized," volatility of a
portfolio can be measured in a number of ways. For the purposes of the
graph, volatility is calculated based on 60 historical weekly returns. For
any given day, the "annualized volatility" for each index is the
annualized standard deviation of the previous 60 overlapping weekly
returns preceding that day. For example, the first data point on the
graph, representing November 7, 2001 displays the annualized standard
deviation of the weekly returns during the 60 index days up to and
including November 7, 2001. The second point on the graph displays the
annualized standard deviation of the weekly returns for the 60 index days
up to and including November 8, 2001. No representation is made that in
the future the strategy or the S&P500(R) Index will have the volatilities
shown above. Sources: J.P. Morgan, Bloomberg.
4 Calculated based on the annualized standard deviation of weekly returns
over the past 5 years.
5 Correlation is based on weekly returns over the past 5 years. Correlation
refers to the degree the applicable index has changed relative to change
in the JPMorgan U.S. Sector Efficiente Index.
6 For the purpose of the analysis above, the Sharpe Ratio, which is a
measure of risk adjusted performance, is computed as the annualized five
year return divided by the annualized five year standard deviation.
Key Risks
[] There are risks associated with a momentum-based investment strategy. This
Strategy is different from a strategy that seeks long- term exposure to a
portfolio consisting of constant components with fixed weights. The Strategy
may fail to realize gains that could occur from holding assets that have
experienced price declines, but experience a sudden price spike thereafter.
[] Correlation of performances among the sector constituents may reduce the
performance of the strategy-- High correlation during periods of negative
returns among Sector Constituents representing any one sector or asset type
which have a substantial weighting in the Strategy could have a material
adverse effect on the performance of the Strategy.
[] Our affiliate, J.P. Morgan Securities Inc., or JPMSI, is the calculation
agent and may adjust the strategy in a way that affects its level--The
policies and judgments for which JPMSI is responsible could have an impact,
positive or negative, on the level of the Strategy and the value of your
investment.
[] The Strategy may not be successful, may not outperform any alternative
strategy, or may not achieve its target volatility of 8% or less.
[] The reported level of the Index will include a deduction of an index
adjustment factor, a fee, of 0.50% per annum, which is deducted daily.
[] The investment strategy involves monthly rebalancing and maximum weighting
caps that are applied to the Sector Constituents. Some or substantially all
of the Sector Constituents may be deemed uninvested for any given month,
which diminishes any potential diversification offered by the Index.
[] Changes in the value of the Sector Constituents may offset each other.
[] An investment in securities linked to the Strategy is subject to risks
associated with the use of leverage.
[] The weights for each Sector Constituent
are determined, in part, by referencing the historical performance of the
Signal Sector Indices rather than the historical returns of the Sector
Constituents.
Key Risks (continued):
[] The Index is an excess return index that tracks the return of the
synthetic portfolio of each Sector Constituent minus the return from a
short term cash investment. Accordingly the Index will underperform
another index that tracks the same synthetic portfolio but does not deduct
the return of a short term cash investment.
[] The Index was established on September 2, 2009, and therefore has a
limited operating history.
The risks identified above are not exhaustive. You should also review
carefully the related "Risk Factors" section in the relevant disclosure
statement and the "Selected Risk Considerations" in the relevant term
sheet or pricing supplement.
Index Disclaimers
"Standard & Poor's(R)", "S&P(R)", "S&P 500 Energy Total Return Index", "S&P 500
Materials Total Return Index", "S&P 500 Industrials Total Return Index", "S&P
500 Consumer Discretionary Total Return Index", "S&P 500 Consumer Staples Total
Return Index", "S&P 500 Health Care Total Return Index", "S&P 500 Financials
Total Return Index", "S&P 500 Information Technology Total Return Index", "S&P
500 Telecommunication Services Total Return Index", "S&P 500 Utilities Total
Return Index", "Standard & Poor's 500" are trademarks of Standard & Poor's
Financial Services, LLC and have been licensed for use by J.P. Morgan
Securities Inc.
The J.P. Morgan U.S. Sector Efficiente Index is not sponsored, endorsed, sold
or promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in any products linked to the J.P.
Morgan U.S. Sector Efficiente Index.
For more information on the Index and for additional key risk information see
Page 10 of the Strategy Guide at
http://www.sec.gov/Archives/edgar/data/19617/00009501030900250
3/dp15076_fwp-sector.htm
DISCLAIMER
JPMorgan Chase & Co. ("J.P. Morgan") has filed a registration statement
(including a prospectus) with the Securities and Exchange Commission (the
"SEC") for any offerings to which these materials relate. Before you invest in
any offering of securities by J.P. Morgan, you should read the prospectus in
that registration statement, the prospectus supplement, as well as the
particular product supplement, the relevant term sheet or pricing supplement,
and any other documents that J.P. Morgan will file with the SEC relating to
such offering for more complete information about J.P. Morgan and the offering
of any securities. You may get these documents without cost by visiting EDGAR
on the SEC Website at www.sec.gov. Alternatively, J.P. Morgan, any agent, or
any dealer participating in the particular offering will arrange to send you
the prospectus and the prospectus supplement, as well as any product supplement
and term sheet or pricing supplement, if you so request by calling toll-free
(866) 535-9248.
Free Writing Prospectus filed pursuant to Rule 433; Registration Statement No.
333-155535
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J.P. Morgan Structured Investments | 800 576 3529 |
JPM_Structured_Investments@jpmorgan.com
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