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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
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SandP 500[R] Dividend Aristocrats Risk Control 8% Excess Return Index
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Performance Update - August 2011
OVERVIEW
The SandP 500[R] Dividend Aristocrats Risk Control 8% Excess Return Index (the
"Index") provides investors with exposure to the "blue chip" names of the SandP
500[R] Dividend Aristocrats Total Return Index. It also adds a volatility
control mechanism that targets 8% volatility by adjusting its level of exposure
to the SandP 500[R] Dividend Aristocrats Total Return Index. This volatility
control mechanism seeks to create a more consistent risk-return profile for the
Dividend Aristocrats Risk Control 8% Index.
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Key Features of the Index
[] Exposure to the SandP 500[R] Dividend Aristocrats Total Return Index, a group
of 40 or more SandP 500[R] stocks with records of consistently increasing
dividends over the past 25 years. SandP can relax this criterion if less than 40
names qualify.
[] In an effort to maintain a constant annualized volatility of 8%, the Index
uses an algorithm to dynamically adjust exposure daily.
[] To adjust exposure, the Index has the ability to employ leverage of up to
150% during periods of low volatility.
[] Levels published daily by Standard and Poor's on Bloomberg. The SandP 500[R]
Dividend Aristocrats Risk Control 8% Excess Return Index targets 8% volatility
and is published to Bloomberg under the ticker SPXD8UE.
Hypothetical and Actual Historical Performance
(July 31, 2001 to July 29, 2011)
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Sources: Bloomberg and JPMorgan. Past hypothetical performance results are
neither indicative of nor a guarantee of future returns. Actual results will
vary, potentially materially, from the hypothetical historical performance
provided herein. There is no assurance the Index will outperform the SandP 500[R]
Index, the SandP 500[R] Dividend Aristocrats Risk Control Index, or any
alternative investment strategy.
Hypothetical Index Volatility and Leverage
(July 31, 2001 to July 29, 2011)
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Recent Performance of the SandP 500[R] Dividend Aristocrats Risk Control 8%
Excess Return Index and the SandP 500[R] Index (as of Jul 29, 2011)
Sources: Bloomberg and JPMorgan. Past hypothetical performance results are
neither indicative of nor a guarantee of future returns. Actual results will
vary, potentially materially, from the hypothetical historical performance
provided herein. There is no assurance the Index will outperform the SandP 500[R]
Index, the SandP 500[R] Dividend Aristocrats Risk Control Index, or any
alternative investment strategy.
July 2011 June 2011 May 2011
SandP 500(r) Dividend
Aristocrats Risk Control 8% -2.36% -1.22% 0.23%
Excess Return Index
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Aug 08, 2011
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Comparative Hypotheical and Historical Total Returns (%), Volatility (%) and
Correlation -- July 29, 2011
Three Year Five Year Ten Year Ten Year
Annualized Annualized Annualized Annualized Ten Year
One Year Return Return Return Return Volatility Sharpe Ratio
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SandP 500[R] Dividend
Aristocrats Risk
Control 8% Excess
Return Index 9.1% 6.3% 3.3% 3.2% 7.9% 0.40
SandP 500[R] Index (SPX) 17.3% 0.7% 0.2% 0.6% 21.4% 0.03
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SandP 500[R] Dividend Aristocrats Total
17.0% 9.5% 5.5% 6.8% 19.8% 0.35
Return Index
SandP 500[R] Total Return
Index (SPTR) 19.7% 2.9% 2.4% 2.6% 21.4% 0.12
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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 May 31, 2001 through
August 24, 2010, and the actual historical performance of the Index based on
the daily Index closing level from August 25, 2010 through July 29, 2011, as
well as the performance of the SandP 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 SandP
500[R] Total Return Index, the SandP 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 SandP 500[R] Total Return Index, the SandP
500[R] Dividend Aristocrats Total Return Index and the SandP 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 July 31, 2001. The index leverage is the hypothetical back-tested amount
of exposure of the Index to the SandP 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. SandP 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 SandP 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 SandP 500[R] Dividend Aristocrats Total Return
Index or any alternative strategy that might be employed to reduce the level of
risk of the SandP 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 SandP 500[R]
Dividend Aristocrats Risk Control 8% Excess Return Index calculates the return
on a leveraged or deleveraged investment in the SandP 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 SandP 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 SandP 500[R] Dividend
Aristocrats Total Return Index .
[] The Index represents portfolios consisting of the SandP 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
SandP 500[R] Dividend Aristocrats Total Return Index based on the SandP 500[R]
Dividend Aristocrats Total Return Index's historic volatility. The Index's'
exposure to the SandP 500[R] Dividend Aristocrats Total Return Index will
decrease when historical volatility causes the risk level of the SandP 500[R]
Dividend Aristocrats Total Return Index to reach a high threshold. If, at any
time, the Index exhibits low exposure to the SandP 500[R] Dividend Aristocrats
Total Return Index and the SandP 500[R] Dividend Aristocrats Total Return Index
subsequently appreciates significantly, the Index will not participate fully in
this appreciation.
Key Risks Continued
[] J. P. Morgan Securities LLC ("JPMS"), one of our affiliates, worked with
SandP 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.
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
"Standard and Poor's[R]," "SandP[R]," "SandP 500[R]," "SandP 500[R] Dividend
Aristocrats," and "SandP 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 SandP, and SandP makes no
representation regarding the advisability of purchasing securities generally or
financial instruments issued by JPMorgan Chase and Co. SandP has no obligation
or liability in connection with the administration, marketing, or trading of
products linked to the SandP 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/19617/0000950103110013 76/crt-dp22063_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
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J. P. Morgan Structured Investments | 800 576 3529 |
JPM_Structured_Investments@jpmorgan.com
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