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Comparative Hypothetical and Historical Total Returns (%), Volatility (%) and
Correlation -- February 26, 2010
Three Year Five Year Annualized Ten Year
Ten Year Ten Year
Correlation(6)
Annualized Return(1) Return(1) Annualized
Return(1) Annualized Volatility(4) Sharpe Ratio(5)
Efficiente Index 0.69% 6.34% 6.16%
8.47% 0.728 100.00%
MSCI World Index -9.75% -0.75% -1.59%
17.67% -0.090 61.57%
Dow Jones -- UBS
-8.29% -3.13% 3.24%
18.37% 0.176 42.53%
Commodity Index
JPMorgan Global Bond
5.46% 4.99% 5.63%
2.80% 2.009 -1.45%
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 February 26, 2010, as well as the performance of the MSCI World
Index ("MSCI World"), the Dow Jones -- UBS Commodity Index(SM) ("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 February 26, 2010.
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
[] 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.
[] 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.
[] 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.
[] 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%.
[] 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.
[] 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.
[] The Index was established on July 2, 2007 and has a limited operating
history
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/19617/000095010310000064/ crt_fwp.pdf
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.
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 |
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