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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
Dated March 4, 2011
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J. P. Morgan Efficiente (USD) Index
Performance Update -- March 2011
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 --February 28, 2001 to February
28, 2011(1)
Key Features of the Index
[] Synthetic investment in developed equity, emerging markets, alternative
investments and global debt;
[] 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;
[] Algorithmic portfolio construction intended to address momentum and
correlation across markets;
[] Levels published on Bloomberg under the ticker EFJPUS8E.
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Hypothetical and Actual Historical Volatility --February 28, 2001 to February
28, 2011(2)
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Recent Index Performance
February 2011 January 2011 December 2010
------------------------ ------------- ------------ -------------
Historical Return[] 0.62% -0.08% 2.61%
------------------------ ------------- ------------ -------------
Recent Index Composition ("Basket Constituents")(3)
MSCI GPR/JPM
MSCI North MSCI Europe MSCI Pacific JPMorgan DJ-UBS JPMorgan JPMorgan
Emerging Global
America Gross TR Gross TR EMBI Plus Commodity GBI Global Cash Index
Markets TR Property
Index Index Index Composite Index Bond Index USD 3M
Index Index
---------- --------- -------- ---------------- ---------- -------- --------- --------- ---------- ----------
January -- 0.0% 0.00% 15.0% 25.0% 0.0% 5.0% 25.0% 5.0% 25.0%
March 2011
---------- --------- -------- ---------------- ---------- -------- --------- --------- ---------- ----------
October --
December 0.0% 0.00% 0.0% 5.0% 20.0% 25.0% 15.0% 25.0% 10.0%
2010
---------- --------- -------- ---------------- ---------- -------- --------- --------- ---------- ----------
March 4, 2011
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Comparative Hypothetical and Historical Total Returns (%), Volatility (%) and
Correlation -- February 28, 2011
Three Year Five Year Annualized Ten Year Ten Year Ten Year Ten
Year
Annualized Return(1) Return(1) Annualized Return(1) Annualized Volatility(4) Sharpe Ratio(5)
Correlation
-------------------- -------------------- -------------------- ----------------------------- ---------------
-----------
Efficiente Index 1.32% 3.94% 6.58% 8.55% 0.769
100.00%
-------------------- -------------------- -------------------- ------------- --------------- ---------------
-----------
MSCI World Index -2.44% 0.64% 1.74% 17.75% 0.098
62.21%
-------------------- -------------------- -------------------- ------------- --------------- ---------------
-----------
Dow Jones -- UBS
-8.31% 0.48% 4.16% 18.45% 0.226
53.09%
Commodity Index
-------------------- -------------------- -------------------- ------------- --------------- ---------------
-----------
JPMorgan Global Bond
3.68% 4.55% 4.70% 2.84% 1.655
-13.62%
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 February 28, 2011 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 28, 2011, 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 28, 2011.
(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
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 and Company, Inc. and UBS Securities LLC ("UBS"), as the case may be, and
have been licensed for use for certain purposes by JPMorgan Chase and Co.
JPMorgan Chase and 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 and 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/19617/000095010311000061/
crt_dp20602-fwp.pdf
DISCLAIMER
JPMorgan Chase and 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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