View:
Free Writing
Prospectus
Filed Pursuant
to Rule 433
Registration
Statement No. 333-155535
Dated September
2, 2009
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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
Dated September 2, 2009
Index Overview
The JPMorgan Core Commodity Investable Global Asset Rotator Sigma Long-Short
Index ("C-IGAR Sigma") is part of the JPMorgan C- IGAR Index family. The C-IGAR
Sigma combines momentum investing with constrained volatility and applies a
stop loss methodology.
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Source: Bloomberg, monthly data from 6/30/1999--6/30/2009 Returns gross of
t-bills, Sharpe net of t-bills, Circle size reflects Sharpe Ratio
Daily Stats
IRR 16.43%
Annualized Daily
Volatility 18.36%
Sharpe Ratio 0.72
Maximum Drawdown (21.49)%
Monthly Stats
Median 1-mo Return 0.84%
Avg 1-mo return 1.40%
Annualized Monthly
Volatility 17.76%
# of Monthly Profits 72
# of Monthly Losses 48
% Positive Months 60.00%
Avg 1-mo loss (3.10)%
Worst 1-mo loss (12.75)%
Rolling 12-month stats
Median 12-mo Return 19.93%
Avg 12-mo Return 17.56%
# of 12-mo Profits 89
# of 12-mo Losses 20
% Positive 12-mo Returns 81.65%
Avg 12-mo Loss (7.47)%
Worst 12-mo Period (16.90)%
Annual Total Returns
1999 13.92%
2000 35.16%
2001 2.19%
2002 (16.90)%
2003 27.82%
2004 37.89%
2005 (7.88)%
2006 33.13%
2007 25.10%
2008 32.66%
*Data through June 30, 2009 Sharpe Ratio calculated net of t-bills
Source: Bloomberg, daily and monthly data as indicated
Contact Information
To learn more about C-IGAR Sigma, please contact Commodity Investment Group on
+44 (0) 20 7777 3050 or commodity.investments@jpmorgan.com
Highlights
[] Provides exposure to the global commodities markets
[] Formulated to capitalize on historic momentum of commodity markets.
[] Designed to replicate a monthly rebalanced synthetic basket that is long
single commodity sub-indices that feature consistent positive momentum
over the previous 12 months and short consistently poor performing
sub-indices over the same time frame.
[] Attempts to control volatility by reducing index exposure in response to
periods of high historical volatility in commodities markets.
[] Long/short strategies aim to capitalize on both bull and bear markets
[] Hypothetical historical returns have exhibited relatively low correlation
to other asset classes, which has made this index a good asset for
portfolio diversification.
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- -------------------------------------------------- -----------------------------------------------------
Annualized 33.07% 17.89% 20.46% Annualized 13.63% (69.26)% (81.77)%
Returns Returns
- -------------------------------------------------- -----------------------------------------------------
Annualized Volatility 15.16% 15.96% 20.90% Annualized Volatility 26.21% 19.72% 23.94%
- -------------------------------------------------- -----------------------------------------------------
Sharpe ratio 1.86 0.82 0.75 Sharpe ratio 0.51 (3.52) (3.42)
- -------------------------------------------------- -----------------------------------------------------
Correlation with S&P 0.47 0.83 1.00 Correlation with S&P (0.74) 0.85 1.00
GSCI(TM) GSCI(TM)
- -------------------------------------------------- -----------------------------------------------------
Source: Bloomberg, monthly data from 12/31/2005-2/27/2009 GSCI refers to
S&P GSCI TR(TM), DJUBS refers to DJUBS TRSM
Past performance is not a guide to future results. Sharpe Ratio net of t-bills.
Product Description
C-IGAR Sigma is a JPMorgan commodity index that compiles and rebalances a
synthetic portfolio of commodity indices in a dynamic basket. The main feature
of C-IGAR Sigma is monthly rotation of assets governed by an algorithmic
allocation strategy based on momentum investing. The rebalancing methodology
seeks to capitalize on positive relative commodity market price trends based on
two underlying assumptions:
[] Commodities that have performed well in the past will likely continue to
do so in the future
[] A limit on the volatility of underlying constituents helps produce
consistent index results.
C-IGAR Sigma is a total return index, which assumes that each dollar invested
in commodities is backed by an equal investment in three month treasury bills.
- --------------------------------------------------------------------------------
SandP GSCI(TM) excess Bloomberg SandP GSCI(TM) excess Bloomberg
return sub-indices Ticker return sub-indices Ticker
- --------------------------------------------------------------------------------
Potential Constituents Bloomberg Ticker CMDSLSTR
[] Natural gas index SPGCNGP [] heat index SPGCWHP
[] Gasoline index SPGCHUP [] Soybean index SPGCSOP
[] Heating oil index SPGCHOP [] Corn index SPGCCNP
[] Brent crude index SPGCBRP
[] WTI crude index SPGCCLP
- --------------------------------------------------------------------------------
SSeeccttoorr: Precious Metal Sector: Industrial metals
- --------------------------------------------------------------------------------
[] Silver index SPGCSIP [] Nickel index SPGCIKP
[] Gold index SPGCGCP [] Lead index SPGCILP
[] Copper index SPGCICP
[] Aluminium index SPGCIAP
- ------------------------------------------- ------------------------------------
J.P.Morgan
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Core Commodity-IGAR Sigma Long-Short Index
SEC Legend: JPMorgan Chase & Co. has filed a registration statement (including
a prospectus) with the SEC for any offerings to which these materials relate.
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 Web site at www.sec.gov. Alternatively, JPMorgan Chase & Co.,
any agent or any dealer participating in the this offering will arrange to send
you the prospectus and each prospectus supplement as well as any product
supplement and term sheet if you so request by calling toll-free 866-535-9248.
The purchase of any financial product linked to the Index involves certain
risks. You should carefully read the prospectus related to such financial
product prior to making any investment decision.
The Index was first published on June 15, 2009. All levels prior to such date
are hypothetical, historical back-tested levels.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not
provide tax advice. Accordingly, any discussion of U.S. tax matters contained
herein (including any attachments) is not intended or written to be used, and
cannot be used, in connection with the promotion, marketing or recommendation
by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters address
herein or for the purpose of avoiding U.S. tax-related penalties.
Investment suitability must be determined individually for each investor, and
the financial instruments linked to the index may not be suitable for all
investors. This information is not intended to provide and should not be relied
upon as providing accounting, legal, regulatory or tax advice. Investors should
consult with their own advisors as to these matters.
This material is not a product of JPMorgan Research Departments. Structured
Investments may involve a high degree of risk, and may be appropriate
investments only for sophisticated investors who are capable of understanding
and assuming the risks involved. JPMorgan and its affiliates may have positions
(long or short), effect transactions or make markets in securities or financial
instruments mentioned herein (or options with respect thereto), or provide
advice or loans to, or participate in the underwriting or restructuring of the
obligations of, issuers mentioned herein. JPMorgan is the marketing name for
JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide. J.P. Morgan
Securities Inc. is a member of NASD, NYSE and SIPC. Clients should contact
their salespersons at, and execute transactions through, a JPMorgan entity
qualified in their home jurisdiction unless governing law permits otherwise.
J.P. Morgan Sigma Disclaimer
The JPMorgan Core Commodity-Investable Global Asset Rotator Long-Short Sigma
Index ("Index") was developed, compiled, prepared and arranged by J.P. Morgan
Securities Ltd. ("JPMorgan") through the expenditure of substantial time,
effort and money and constitutes valuable intellectual property and a trade
secret of JPMorgan and all proprietary and intellectual property rights of any
nature, including patents, copyrights, trademarks and trade secrets regarding
the Index, and any and all copies, modifications, enhancements and derivative
works thereof are owned by and will remain the property of JPMorgan. Copyright
to this document may belong to unaffiliated third parties.
THE INDEX IS PROVIDED "AS IS" WITH ANY AND ALL FAULTS. JPMORGAN DOES NOT
GUARANTEE THE AVAILABILITY, SEQUENCE, TIMELINESS, QUALITY, ACCURACY AND/OR THE
COMPLETENESS OF THE INDEX AND/OR ANY DATA INCLUDED THEREIN. JPMORGAN MAKES NO
EXPRESS OR IMPLIED WARRANTIESWITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN. The Index represents a synthetic portfolio of various sub- indices,
with each sub-index providing exposure to exchange traded futures contracts
related to a specific commodity. There is no actual portfolio of assets to
which any person is entitled or in which any person has an ownership interest.
The Index merely identifies certain hypothetical trading positions, the
performance of which will be used as a reference point for the purposes of
calculating the performance of the Index. If you invest in a financial product
linked to the Index, you will not be entitled to any of the underlying futures
contracts. Any "back-testing" information provided herein is illustrative only
and derived from proprietary models based on certain data (which may not
correspond with the data that a third party would use to back-test the Index)
and on certain assumptions and estimates (not all of which may be specified
herein and which are subject to change without notice). The results obtained
from different models, assumptions, estimates and/or data may be materially
different from the results presented herein, and such "back-testing"
information should not be considered indicative of the actual results that
might be obtained from an investment or participation in a financial instrument
or transaction referencing the Index described herein. The hypothetical
historical levels presented herein have not been verified by an independent
third party, and such hypothetical historical levels have inherent limitations.
Past hypothetical performance results are neither indicative of nor a guarantee
of future returns. Actual results will vary, potentially materially, from the
hypothetical levels provided herein. JPMorgan expressly disclaim any
responsibility for (i) the accuracy or completeness of the models, assumptions,
estimates and data used in deriving the "back-testing" information, (ii) any
errors or omissions in computing or disseminating the "back-testing"
information, and (iii) any uses to which the "back-testing" information may be
put by any recipient of such information.
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Methodology
The Commodity-IGAR Sigma selects its constituents from a diverse universe of
GSCI single commodity sub-indices (as listed under the "potential
constituents" section). The allocation among the constituents is rebalanced
monthly. The strategy synthetically invests in up to 14 sub-indices (seven
long and seven short) based upon:
[] Absolute historic performance (momentum)
[] Consistent historic momentum (consistency)
[] Risk of trend reversals (reversal)
If a sub-index features positive performance for the past 12 months, it faces
a "consistency test" that checks for steady past performance (weighted more
heavily on recent months) and a "reversal test" that looks for rapid swings in
the previous month's returns from past momentum. Those sub-indices that
exhibit the strongest consistent positive or negative performance and pass the
two tests are selected for the synthetic long and short components of the
index. All components selected for the index receive one seventh positive or
negative weighting in the synthetic investment. Any remaining sub-indices
receive no weight. Finally, a volatility control factor is applied when
calculating the index to reduce exposure during periods following high
volatility.
The consistency test observes positive/negative signals on monthly returns of
the constituent, More recent months having higher weightings. A score of 6/12
is required for an investment. The Reversal test acts to filter out
investments in constituents that moved more than 10% against the momentum
signal (10% loss would prevent a long investment and vice versa).
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1 For illustration only - For a more detailed description of the algorithm,
please refer to the Synthetic Strategy Rules
The C-IGAR Sigma displays low correlation to other asset classes
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Source: Bloomberg, data from January 1994 to June 2009
Equity global is represented by the MSCI Daily TR Gross World USD(R)
Equity US is represented by Standard & Poor's 500 Total Return Index(R)
Corporate bonds are represented by the JPMorgan Global Aggregate Bond Index -TR
Unhedged USD(R)
Government bonds are represented by JPMorgan Hedged USD GBI Global Index(R)
Commodities are represented by Standard and Poor's Goldman Sachs
Total Return Commodity Index(R)
Source: Bloomberg. Information is calculated for the period December 1993 to
June 2009
J.P.Morgan
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