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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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J.P. Morgan
J.P. Morgan Efficiente (USD) Index
Performance Update - October 2009
OVERVIEW
The JPMorgan Efficiente (USD) Index (the "Index") is a proprietary J.P. Morgan strategy that seeks
to generate returns through the selection of up to nine indices based on the modern portfolio theory
approach to asset allocation.
Hypothetical and Actual Historical Performance - January 2, 1995 to September 30, 2009(1)
Efficiente MSCI World
JPMorgan GBI DJ-UBS Index
450
400
350
300
250
200
150
100
50
0
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09
Key Features of the Index
o Synthetic investment in developed equity, emerging markets, alternative investments and global
debt;
o Dynamic exposure to a synthetic portfolio that is rebalanced quarterly pursuant to a
rules-based methodology with a targeted annualized volatility of 8% or less;
o Algorithmic portfolio construction intended to address momentum and correlation across markets;
o Levels published on Bloomberg under the ticker EFJPUS8E.
Hypothetical and Actual Historical Volatility - July 5, 1995 to September 30, 2009(2)
Efficiente MSCI World
Dow Jones - UBS JPM organ GBI
Target Volatility
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Jul-95 Jul-97 Jul-99 Jul-01 Jul-03 Jul-05 Jul-07 Jul-09
Recent Index Performance
July 2009 August 2009 September 2009 Year to Date
- ----------------------------------------------------------------------------------------
Historical Return(1) 2.54% 0.17% 3.04% 10.15%
- ----------------------------------------------------------------------------------------
Recent Index Composition ("Basket Constituents")(3)
MSCI MSCI GPR/JPM
MSCI North Europe MSCI Pacific Emerging Global JPMorgan DJ-UBS JPMorgan JPMorgan
America Gross TR Gross TR Markets TR Property EMBI Plus Commodity GBI Global Cash Index
Index Index Index Index Index Composite Index Bond Index USD 3M
- ---------------------------------------------------------------------------------------------------------------------------------
July -
October 0.0% 0.0% 5.0% 15.0% 0.0% 25.0% 5.0% 10.0% 40.0%
2009
- ---------------------------------------------------------------------------------------------------------------------------------
April - July 5.0% 0.0% 10.0% 0.0% 0.0% 25.0% 10.0% 25.0% 25.0%
2009
- ---------------------------------------------------------------------------------------------------------------------------------
October 7, 2009
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Comparative Hypothetical and Historical Total Returns (%), Volatility (%) and Correlation - September 30, 2009
Three Year Five Year Ten Year Ten Year
Annualized Annualized Annualized Annualized Ten Year Correlation(6)
Return(1) Return(1) Return(1) Volatility(4) Sharpe Ratio(5)
- ----------------------------------------------------------------------------------------------------------------------------
Efficiente Index 3.39% 7.31% 6.65% 8.35% 0.796 100%
- ----------------------------------------------------------------------------------------------------------------------------
MSCI World Index -6.38% 1.47% -0.78% 16.10% -0.048 61.14%
- ----------------------------------------------------------------------------------------------------------------------------
Dow Jones - UBS -7.24% -3.58% 5.49% 16.29% 0.337 42.28%
Commodity Index
- ----------------------------------------------------------------------------------------------------------------------------
JPMorgan Global Bond 5.59% 5.20% 5.68% 2.81% 2.021 -1.14%
Index (USD Hedged)
- ----------------------------------------------------------------------------------------------------------------------------
Notes
1 Represents the performance of the Index based on, as applicable to the relevant measurement
period, the hypothetical backtested weekly Index closing levels from January 2, 1995 through
June 29, 2007, and the actual historical performance of the Index based on the weekly Index
closing level from July 6, 2007 through September 30, 2009, as well as the performance of the
MSCI World Index ("MSCI World"), the Dow Jones - UBS Commodity IndexSM ("DJ-UBS") and the
JPMorgan GBI (USD Hedged) Global Bond Index ("JPM GBI") over the same period. For purposes of
these examples, each index was set equal to 100 at the beginning of the relevant measurement
period and returns calculated arithmetically (not compounded). There is no guarantee of any
future performance for these three indices based on this information. Source: Bloomberg and
JPMorgan.
2 Calculated from the historical returns, as applicable to the relevant measurement period, of the
indices over a six-month observation period. For any given day, represents the annualized
standard deviation of each index's arithmetic daily returns for the 126-index day period
preceding that day. The back-tested, hypothetical, historical six-month annualized volatility
has inherent limitations. These volatility results were achieved by means of a retroactive
application of a back-tested volatility model designed with the benefit of hindsight. No
representation is made that in the future the Index, the MSCI World, DJ-UBS and JPM GBI will
have the volatilities as shown above or that the Index will outperform any alternative
investment strategy. Alternative modeling techniques or assumptions might produce significantly
different results and may prove to be more appropriate. Actual six-month annualized volatilities
may vary materially from this analysis. Source: Bloomberg and JPMorgan.
3 On a quarterly basis (each January, April, July, and October), J.P. Morgan Securities Ltd., or
JPMSL, 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 individual sectors.
4 Calculated based on the annualized standard deviation for the ten year period prior to September
30, 2009.
5 For the above analysis, the Sharpe Ratio, which is a measure of risk-adjusted performance, is
computed as the ten year annualized historical return divided by the ten year annualized
volatility.
6 Correlation refers to the degree the applicable index has changed relative to daily changes in
the JPMorgan Efficiente (USD) Index.
Key Risks
o There are risks associated with a momentum-based investment strategy--Efficiente is different
from a strategy that seeks long-term exposure to a portfolio consisting of constant components
with fixed weights. The Index may fail to realize gains that could occur from holding assets
that have experienced price declines, but experience a sudden price spike thereafter.
o Correlation of performances among the Basket Constituents may reduce the performance of the
Index amongst the Basket Constituents--High correlation during periods of negative returns among
Basket Constituents representing any one sector or asset type which have a substantial weighting
in the Index could have a material adverse effect on the performance of the Strategy.
o Our affiliate, JPMSL, is the Calculation Agent and may adjust the Index in a way that affects
its level--The policies and judgments for which JPMSL is responsible could have an impact,
positive or negative, on the level of the Index and the value of your investment. JPMSL is under
no obligation to consider your interest as an investor in securities linked to the Index.
o The Index may not be successful, may not outperform any alternative strategy related to the
Basket Constituents, or may not achieve its target volatility of 8%.
o The investment strategy involves quarterly rebalancing and maximum weighting caps applied to the
Basket Constituents by asset type and geographical region. Changes in the value of the Basket
Constituents may offset each other.
o An investment linked to the Index is subject to risks associated with non-U.S. securities
markets, such as emerging markets and currency exchange risk.
o The Index was established on July 2, 2007 and 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 product supplement and the "Selected Risk Considerations" in the
relevant term sheet or pricing supplement.
Index Disclaimers
"Dow Jones(SM)," "UBS", "Dow Jones-UBS Commodity Index Excess Return(SM)," "Dow Jones-UBS Commodity
Index(SM)," and "DJ-UBSCI(SM)" are service marks of Dow Jones & Company, Inc. and UBS Securities LLC
("UBS"), as the case may be, and have been licensed for use for certain purposes by JPMorgan Chase &
Co. JPMorgan Chase & Co's securities based on the Dow Jones- UBS Commodity Index Total Return(SM), are
not sponsored, endorsed, sold or promoted by Dow Jones, UBS, or any of their respective subsidiaries
or affiliates, and none of Dow Jones, UBS, or any of their respective subsidiaries or affiliates,
makes any representation regarding the advisability of investing in such product(s). The MSCI
indices are the exclusive property of MSCI Inc. ("MSCI"). "MSCI" and the MSCI index names are
service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by
J.P. Morgan Chase & Co. (the "Licensee"). The financial securities referred to herein are not
sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such
financial securities. No purchaser, seller or holder of this product, or any other person or entity,
should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or
promote this product without first contacting MSCI to determine whether MSCI's permission is
required. Under no circumstances may any person or entity claim any affiliation with MSCI without
the prior written permission of MSCI.
For more information on the Index and for additional key risk information see Page 9 the Strategy
Guide at http://www.sec.gov/Archives/edgar/data/19617/000095010309002500/usd_strategyguide09.pdf
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
J.P. Morgan Structured Investments | 800 576 3529 | JPM_Structured_Investments@jpmorgan.com
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