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Comparative Hypothetical and Historical Total Returns (%) and Volatility --
February 28, 2011
Three Year Five Year Ten Year Ten Year
One Year Annualized Annualized Annualized Annualized Ten Year
Return Return Return Return Volatility Sharpe Ratio
---------------------------------------------- -------- ---------- ---------- ---------- ----------- ------------
S and P 500([R]) Dividend Aristocrats Risk Control
8% Excess Return Index 9.23% 5.84% 3.45% 3.78% 7.85% 0.48
S and P 500([R]) Index (SPX) 13.37% 0.08% 0.47% 1.34% 21.01% 0.06
---------------------------------------------- -------- ---------- ---------- ---------- ----------- ------------
S and P 500([R]) Dividend Aristocrats Total Return
Index 15.86% 8.79% 6.11% 8.04% 19.95% 0.40
S and P 500([R]) Total Return Index (SPTR) 15.65% 2.35% 2.62% 3.29% 21.02% 0.16
---------------------------------------------- -------- ---------- ---------- ---------- ----------- ------------
Notes on performance, volatility, leverage and, Sharpe Ratio statistics
Hypothetical, historical performance measures: Represent the performance of the
Index based on, as applicable to the relevant measurement period, the
hypothetical backtested daily Index closing levels from December 31, 1998
through August 24, 2010, and the actual historical performance of the Index
based on the daily Index closing level from August 25, 2010 through March 31,
2011, as well as the performance of the S and 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 and returns are calculated
arithmetically (not compounded). There is no guarantee the relevant Index will
outperform the S and P 500([R]) Total Return Index, the S and P 500([R])
Dividend Aristocrats Total Return Index or any alternative investment strategy.
Sources: Bloomberg and JPMorgan.
Volatility is calculated from the historical returns, as applicable to the
relevant measurement period, of the S and P 500([R]) Total Return Index, the S
and P 500[R] Dividend Aristocrats Total Return Index and the S and P 500([R])
Dividend Aristocrats Risk Control 8% Excess Return Index. Volatility represents
the annualized standard deviation of the relevant index's arithmetic daily
returns since December 31, 1998. The index leverage is the hypothetical
back-tested amount of exposure of the Index to the S and P 500([R]) Dividend
Aristocrats Total Return Index and should not be considered indicative of the
actual leverage that would be assigned during an investment in the Index. 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.
The back-tested, hypothetical, historical annualized volatility and index
leverage have inherent limitations. These volatility and leverage 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 relevant indices will have the volatility as shown. Alternative
modeling techniques or assumptions might produce significantly different results
and may prove to be more appropriate. Actual annualized volatilities and
leverage may vary materially from this analysis. Source: Bloomberg and JPMorgan.
Key Risks
[] The Index has a limited operating history and may perform in unexpected
ways. The Index began publishing on August 25, 2010 and, therefore, has a
limited history. S and P has calculated the returns that hypothetically
might have been generated had the Index existed in the past, but those
calculations are subject to many limitations and do not reflect actual
trading, liquidity constraints, fees and other costs.
[] The Index may not be successful, may not outperform the S and P 500([R])
Dividend Aristocrats Total Return Index and may not achieve its target
volatility. No assurance can be given that the volatility strategy will be
successful or that the Index will outperform the S and P 500([R]) Dividend
Aristocrats Total Return Index or any alternative strategy that might be
employed to reduce the level of risk of the S and P 500([R]) Dividend
Aristocrats Total Return Index . We also can give no assurance that the
Index will achieve its target volatility of 8%.
[] The Index is not a total return index, and is subject to short-term money
market fund borrowing costs-- As an "excess return" index, the S and P
500([R]) Dividend Aristocrats Risk Control 8% Excess Return Index
calculates the return on a leveraged or deleveraged investment in the S and
P 500([R]) Dividend Aristocrats Total Return Index where the investment was
made through the use of borrowed funds. Investments linked to this "excess
return" index, which represents an unfunded position in the S and P
500([R]) Dividend Aristocrats Total Return Index , will be subject to
short-term money market fund borrowing costs and will not include the
"total return" feature or the cash component of the "total return" index,
which represents a funded position in the S and P 500([R]) Dividend
Aristocrats Total Return Index .
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.
Key Risks Continued
[] The Index represents portfolios consisting of the S and P 500([R]) Dividend
Aristocrats Total Return Index and a borrowing cost component accruing
interest based on a synthetically rolling 3-month bond with reference to
the 2-month and 3-month U. S. LIBOR rates. The Index dynamically adjusts
its exposures to the S and P 500([R]) Dividend Aristocrats Total Return
Index based on the S and P 500([R]) Dividend Aristocrats Total Return
Index's historic volatility. The Index's' exposure to the S and P 500([R])
Dividend Aristocrats Total Return Index will decrease when historical
volatility causes the risk level of the S and P 500([R]) Dividend
Aristocrats Total Return Index to reach a high threshold. If, at any time,
the Index exhibits low exposure to the S and P 500([R]) Dividend
Aristocrats Total Return Index and the S and P 500([R]) Dividend
Aristocrats Total Return Index subsequently appreciates significantly, the
Index will not participate fully in this appreciation.
[] J. P. Morgan Securities LLC ("JPMS"), one of our affiliates, worked with S
and P in developing the guidelines and policies governing the composition
and calculation of the Index. The policies and judgments for which JPMS was
responsible could have an impact, positive or negative, on the level of the
Indices. JPMS is under no obligation to consider your interests as an
investor.
Index Disclaimers
"Standard and Poor's[R]," "S and P[R]," "S and P 500[R]," "S and P 500[R]
Dividend Aristocrats," and "S and P 500[R] Dividend Aristocrats Risk Control 8%
Excess Return Index" are trademarks of the McGraw-Hill Companies, Inc. and have
been licensed for use by J.P. Morgan Securities LLC. This transaction is not
sponsored, endorsed, sold or promoted by S and P, and S and P makes no
representation regarding the advisability of purchasing securities generally or
financial instruments issued by JPMorgan Chase and Co. S and P has no obligation
or liability in connection with the administration, marketing, or trading of
products linked to the S and P 500[R] Dividend Aristocrats Risk Control 8%
Excess Return Index.
For more information on the Index and for additional key risk information see
Page 4 of the Strategy Guide at:
http://www.sec.gov/Archives/edgar/data/19617/000095010311001376/crt-dp22063_fwp
..pdf
DISCLAIMER
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(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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