July
2015
Preliminary Terms No. 428
Registration Statement No. 333-199966
Dated July 27, 2015
Filed pursuant to Rule 433
Structured
Investments
Opportunities in International
Equities
Trigger PLUS Based on the Value
of the TOPIX® Index due August 3, 2017
Trigger Performance Leveraged
Upside SecuritiesSM
Principal at Risk Securities
The Trigger PLUS offered are unsecured and unsubordinated obligations
of JPMorgan Chase & Co., will pay no interest, do not guarantee any return of your principal at maturity and have the terms
described in the accompanying product supplement no. 4a-I, underlying supplement no. 1a-I, the prospectus supplement and the prospectus,
as supplemented or modified by this document. At maturity, if the underlying index has appreciated in value, investors will
receive the stated principal amount of their investment plus leveraged upside performance of the underlying index, subject to a
maximum payment at maturity. If the underlying index has declined in value but the final index value is greater than or equal to
the trigger level, investors will receive the stated principal amount of the Trigger PLUS at maturity. However, if the underlying
index has declined in value so that the final index value is less than the trigger level, at maturity investors will lose
a significant portion or all of their investment, resulting in a 1% loss for every 1% decline in the index value over the term
of the Trigger PLUS. The Trigger PLUS are for investors who seek an equity-based return and who are willing to risk their principal
and forgo current income and upside above the maximum payment at maturity in exchange for the leverage feature that applies to
a limited range of positive performance of the underlying index. At maturity, an investor will receive an amount in cash that may
be greater than, equal to, or less than the stated principal amount based upon the closing level of the underlying index on the
valuation date. All payments on the Trigger PLUS are subject to the credit risk of JPMorgan Chase & Co. The
investor may lose some or all of the stated principal amount of the Trigger PLUS.
SUMMARY TERMS |
Issuer: |
JPMorgan Chase & Co. |
Underlying index: |
TOPIX® Index |
Aggregate principal amount: |
$ |
Payment at maturity: |
If the final index value is greater than the initial index value, for each $10 stated principal amount Trigger PLUS, |
|
$10 + leveraged upside payment |
|
In no event will the payment at maturity exceed the maximum
payment at maturity.
If the final index value is less than or equal to the
initial index value but is greater than or equal to the trigger level, for each $10 stated principal amount Trigger PLUS, |
|
$10 |
|
If the final index value is less than the trigger level, for each $10 stated principal amount Trigger PLUS, |
|
$10 × index performance factor |
|
This amount will be less than the stated principal amount of $10 per Trigger PLUS and will represent a loss of more than 10%, and possibly all, of your investment. |
Leveraged upside payment: |
$10 × leverage factor × index percent increase |
Index percent increase: |
(final index value – initial index value) / initial index value |
Initial index value: |
The closing level of the underlying index on the pricing date |
Final index value: |
The closing level of the underlying index on the valuation date |
Trigger level: |
90% of the initial index value |
Leverage factor: |
150% |
Index performance factor: |
final index value / initial index value |
Maximum payment at maturity: |
At least $12.70 (at least 127.00% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement and will not be less than $12.70 per Trigger PLUS. |
Stated principal amount: |
$10 per Trigger PLUS |
Issue price: |
$10 per Trigger PLUS (see “Commissions and issue price” below) |
Pricing date: |
July , 2015 (expected to price on or about July 31, 2015) |
Original issue date (settlement date): |
August , 2015 (3 business days after the pricing date) |
Valuation date: |
July 31, 2017, subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” in the accompanying product supplement no. 4a-I |
Maturity date: |
August 3, 2017, subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I |
CUSIP / ISIN: |
48127V785 / US48127V7854 |
Listing: |
The Trigger PLUS will not be listed on any securities exchange. |
Agent: |
J.P. Morgan Securities LLC (“JPMS”) |
Commissions and issue price: |
Price to public(1) |
Fees and commissions |
Proceeds to issuer |
Per Trigger PLUS |
$10.00 |
$0.20(2) |
$9.75 |
|
|
$0.05(3) |
|
Total |
$ |
$ |
$ |
| (1) | See “Additional Information about the Trigger PLUS — Supplemental use of proceeds and hedging” in this
document for information about the components of the price to public of the Trigger PLUS. |
| (2) | JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to Morgan
Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”). In no event will these selling commissions exceed $0.20
per $10 stated principal amount Trigger PLUS. See “Plan of Distribution (Conflicts of Interest)” beginning on page
PS-87 of the accompanying product supplement no. 4a-I. |
| (3) | Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each
$10 stated principal amount Trigger PLUS |
If the Trigger PLUS priced today and assuming a maximum payment
at maturity equal to the minimum listed above, the estimated value of the Trigger PLUS as determined by JPMS would be approximately
$9.689 per $10 stated principal amount Trigger PLUS. JPMS’s estimated value of the Trigger PLUS on the pricing date will
be provided by JPMS in the pricing supplement and will not be less than $9.50 per $10 stated principal amount Trigger PLUS. See
“Additional Information about the Trigger PLUS — JPMS’s estimated value of the Trigger PLUS” in this document
for additional information.
Investing in the Trigger PLUS involves a number of risks.
See “Risk Factors” beginning on page PS-8 of the accompanying product supplement no. 4a-I, “Risk Factors”
beginning on page US-2 of the accompanying underlying supplement no. 1a-I and “Risk Factors” beginning on page 5 of
this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the Trigger PLUS or passed upon the accuracy or the adequacy
of this document or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
The Trigger PLUS are not bank deposits, are not insured by
the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
You should read this document together
with the related product supplement no. 4a-I, underlying supplement no. 1a-I, prospectus
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Information
about the Trigger PLUS” at the end of this document.
Product supplement no. 4a-I dated November 7,
2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf
Underlying
supplement no. 1a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf
Prospectus
supplement and prospectus, each dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Investment Summary
Trigger Performance Leveraged Upside
Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the TOPIX®
Index due August 3, 2017 (the “Trigger PLUS”) can be used:
| § | As an alternative to direct exposure to the underlying index that enhances returns for a limited range of positive performance
of the underlying index. |
| § | To enhance returns and potentially outperform the underlying index in a moderately bullish scenario. |
| § | To potentially achieve similar levels of upside exposure to the underlying index as a direct investment, subject to the maximum
payment at maturity, while using fewer dollars by taking advantage of the leverage factor. |
| § | To provide limited market downside protection against a loss of principal in the event of a decline of the underlying index
but only if the final index value is greater than or equal to the trigger level. |
Maturity: |
Approximately 2 years |
Leverage factor: |
150% |
Trigger level: |
90% of the initial index value |
Maximum payment at maturity: |
At least $12.70 (at least 127.00% of the stated principal amount) per Trigger PLUS (to be provided in the pricing supplement) |
Minimum payment at maturity: |
None. Investors may lose their entire initial investment in the Trigger PLUS. |
Supplemental Terms of the Trigger PLUS
For purposes of the accompanying
product supplement, the underlying index is an “Index.”
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged exposure to an underlying asset,
which may be equities, commodities and/or currencies. In exchange for enhanced returns from a certain
range of positive performance of the asset, investors are exposed to the risk of loss of some or all of their investment due to
the trigger feature. At maturity, if the asset has appreciated, investors will receive the stated principal amount of their investment
plus leveraged upside performance of the underlying asset, subject to the maximum payment at maturity. At maturity, if the asset
has depreciated but is at or above the trigger level, investors will receive the stated principal amount of their investment. At
maturity, if the asset has depreciated below the trigger level, investors are fully exposed to the negative performance of the
asset. Investors may lose some or all of the stated principal amount of the Trigger PLUS.
Leveraged Performance |
The Trigger PLUS offer investors an opportunity to capture enhanced returns for a limited range of positive performance relative to a direct investment in the underlying index. |
Trigger Feature |
At maturity, even if the underlying index has declined over the term of the Trigger PLUS, investors will receive their stated principal amount but only if the final index value is greater than or equal to the trigger level. |
Upside Scenario |
The final index value is greater than the initial index value. At maturity, the Trigger PLUS pay the stated principal amount of $10 plus a return equal to 150% of the index percent increase, subject to the maximum payment at maturity of at least $12.70 (at least 127.00% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement. |
Par Scenario |
The final index value is less than or equal to the initial index value but is greater than or equal to the trigger level. In this case, the Trigger PLUS pay the stated principal amount of $10 per Trigger PLUS at maturity even when the underlying index has depreciated. |
Downside Scenario |
The final index value is less than the trigger level. In this case, the Trigger PLUS pay an amount that is over 10% less than the stated principal amount and this decrease will be by an amount that is proportionate to the percentage decline of the final index value from the initial index value. (Example: if the underlying index decreases in value by 30%, the Trigger PLUS will pay an amount that is less than the stated principal amount by 30%, or $7 per Trigger PLUS.) |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
How the Trigger PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Trigger PLUS based on the following terms:
Stated principal amount: |
$10 per Trigger PLUS |
Leverage factor: |
150% |
Trigger level: |
90% of the initial index value |
Hypothetical maximum payment at maturity: |
$12.70 (127.00% of the stated principal amount) per Trigger PLUS (which represents the lowest hypothetical maximum payment at maturity)* |
*The actual maximum payment at maturity will be provided
in the pricing supplement and will not be less than $12.70 per Trigger PLUS.
Trigger
PLUS Payoff Diagram |
|
How it works
| § | Upside
Scenario. If the final index value is greater than the initial index value, for each $10 principal amount Trigger PLUS,
investors will receive the $10 stated principal amount plus a return equal to 150% of the appreciation of the underlying
index over the term of the Trigger PLUS, subject to the maximum payment at maturity. Under the hypothetical terms of the Trigger
PLUS, an investor will realize the hypothetical maximum payment at maturity at a final index value of 118.00% of the initial index
value. |
| § | For example, if the underlying index appreciates 5%,
investors will receive a 7.50% return, or $10.75 per Trigger PLUS. |
| § | Par
Scenario. If the final index value is less than or equal to the initial index value but is greater than or equal to
the trigger level, investors will receive the stated principal amount of $10 per Trigger PLUS. |
| § | For example, if the
underlying index depreciates 5%, investors will receive the $10 stated principal amount. |
| § | Downside
Scenario. If the final index value is less than the trigger level, investors will receive
an amount that is significantly less than the stated principal amount by an amount proportionate to the percentage decrease of
the final index value from the initial index value. |
| § | For example, if the underlying index depreciates 50%,
investors will lose 50% of their principal and receive only $5 per Trigger PLUS at maturity, or 50% of the stated principal amount. |
The hypothetical returns and hypothetical
payments on the Trigger PLUS shown above apply only if you hold the Trigger PLUS for their entire term. These hypotheticals
do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were
included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Risk Factors
The following
is a non-exhaustive list of certain key risk factors for investors in the Trigger PLUS. For further discussion of
these and other risks, you should read the sections entitled “Risk Factors” beginning on page PS-8 of the accompanying
product supplement no. 4a-I and “Risk Factors” beginning on page US-2 of the accompanying underlying supplement no.
1a-I. We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment
in the Trigger PLUS.
| § | The
Trigger PLUS do not pay interest or guarantee the return of any principal and your investment in the Trigger PLUS may result in
a loss. The terms of the Trigger PLUS differ from those of ordinary debt securities in that the Trigger PLUS do not
pay interest or guarantee the payment of any principal amount at maturity. If the final index value is less than the trigger level
(which is 90% of the initial index value), the payment at maturity will be an amount in cash that is over 10% less than the stated
principal amount of each Trigger PLUS and this decrease will be by an amount that is proportionate to the decrease in the value
of the underlying index and may be zero. There is no minimum payment at maturity on the Trigger PLUS, and, accordingly, you could
lose your entire initial investment in the Trigger PLUS. |
| § | The appreciation potential of the Trigger PLUS is limited by the maximum payment at
maturity. The appreciation potential of Trigger PLUS is limited by the maximum payment at maturity of at least $12.70 (at least
127.00% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing
supplement. Because the maximum payment at maturity will be limited to at least 127.00% of the stated principal amount for the
Trigger PLUS, any increase in the final index value by more than 18.00% (if the maximum payment at maturity is set at 127.00% of
the stated principal amount) will not further increase the return on the Trigger PLUS. |
| § | The Trigger PLUS are subject to the credit risk of JPMorgan Chase
& Co., and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value
of the Trigger PLUS. Investors are dependent on JPMorgan Chase & Co.’s ability
to pay all amounts due on the Trigger PLUS. Any actual or anticipated decline in our credit ratings or increase in the credit spreads
determined by the market for taking our credit risk is likely to adversely affect the market value of the Trigger PLUS. If we were
to default on our payment obligations, you may not receive any amounts owed to you under the Trigger PLUS and you could lose your
entire investment. |
| § | Economic interests of the issuer, the calculation agent, the agent of the offering of the Trigger PLUS and other affiliates
of the issuer may be different from those of investors. We
and our affiliates play a variety of roles in connection with the issuance of the Trigger PLUS, including acting as calculation
agent and as an agent of the offering of the Trigger PLUS, hedging our obligations under the Trigger PLUS and making the assumptions
used to determine the pricing of the Trigger PLUS and the estimated value of the Trigger PLUS, which we refer to as JPMS’s
estimated value. In performing these duties, our economic interests and the economic interests of the calculation agent and other
affiliates of ours are potentially adverse to your interests as an investor in the Trigger PLUS. The calculation agent will
determine the initial index value and the final index value and will calculate the amount of payment you will receive at maturity,
if any. Determinations made by the calculation agent, including with respect to the occurrence or non-occurrence of market disruption
events, the selection of a successor to the underlying index or calculation of the final index value in the event of a discontinuation
or material change in method of calculation of the underlying index, may affect the payment to you at maturity. |
In
addition, our business activities, including hedging and trading activities, could cause our economic interests to be adverse to
yours and could adversely affect any payment on the Trigger PLUS and the value of the Trigger PLUS. It is possible that hedging
or trading activities of ours or our affiliates in connection with the Trigger PLUS could result in substantial returns for us
or our affiliates while the value of the Trigger PLUS declines. Please refer to “Risk Factors — Risks Relating to Conflicts
of Interest” in the accompanying product supplement no. 4a-I for additional information about these risks.
| § | JPMS’s estimated value of the Trigger PLUS will be lower than the original issue price (price to public) of the Trigger
PLUS. JPMS’s estimated value is only an estimate using
several factors. The original issue price of the Trigger PLUS will exceed JPMS’s estimated value because costs associated
with selling, structuring and hedging the Trigger PLUS are included in the original issue price of the Trigger PLUS. These costs
include the selling commissions, the structuring fee, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated cost of hedging our obligations under
the Trigger PLUS. See “Additional Information about the Trigger PLUS — JPMS’s estimated value of the Trigger
PLUS” in this document. |
| § | JPMS’s estimated value does not represent future values of the Trigger PLUS and may differ from others’
estimates. JPMS’s estimated value of the Trigger PLUS
is determined by reference to JPMS’s internal pricing models. This estimated value is based on market conditions and other
relevant factors existing at the time of pricing and JPMS’s assumptions about market parameters, which can include |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
volatility, dividend rates, interest rates and other
factors. Different pricing models and assumptions could provide valuations for Trigger PLUS that are greater than or less than
JPMS’s estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions
may prove to be incorrect. On future dates, the value of the Trigger PLUS could change significantly based on, among other things,
changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price,
if any, at which JPMS would be willing to buy Trigger PLUS from you in secondary market transactions. See “Additional Information
about the Trigger PLUS — JPMS’s estimated value of the Trigger PLUS” in this document.
| § | JPMS’s estimated value is not determined by reference to credit spreads for our conventional fixed-rate debt.
The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount
from the credit spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding
value of the Trigger PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger PLUS
in comparison to those costs for our conventional fixed-rate debt. If JPMS were to use the interest rate implied by our conventional
fixed-rate credit spreads, we would expect the economic terms of the Trigger PLUS to be more favorable to you. In addition, JPMS’s
estimated value might be lower if it were based on the interest rate implied by our conventional fixed-rate credit spreads. Consequently,
our use of an internal funding rate would have an adverse effect on the terms of the Trigger PLUS and any secondary market prices
of the Trigger PLUS. See “Additional Information about the Trigger PLUS — JPMS’s estimated value of the Trigger
PLUS” in this document. |
| § | The value of the Trigger PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher
than JPMS’s then-current estimated value of the Trigger PLUS for a limited time period.
We generally expect that some of the costs included in the original issue price
of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger PLUS by JPMS in an amount
that will decline to zero over an initial predetermined period. These costs can include selling commissions, the structuring fee,
projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads
for structured debt issuances. See “Additional Information about the Trigger PLUS — Secondary market prices of the
Trigger PLUS” in this document for additional information relating to this initial period. Accordingly, the estimated value
of your Trigger PLUS during this initial period may be lower than the value of the Trigger PLUS as published by JPMS (and which
may be shown on your customer account statements). |
| § | Secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS.
Any secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS
because, among other things, secondary market prices take into account our secondary market credit spreads for structured debt
issuances and, also, because secondary market prices (a) exclude selling commissions and the structuring fee and (b) may exclude
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the Trigger PLUS.
As a result, the price, if any, at which JPMS will be willing to buy Trigger PLUS from you in secondary market transactions, if
at all, is likely to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial
loss to you. See the immediately following risk factor for information about additional factors that will impact any secondary
market prices of the Trigger PLUS. |
The Trigger PLUS are not designed
to be short-term trading instruments. Accordingly, you should be able and willing to hold your Trigger PLUS to maturity. See “—
Secondary trading may be limited” below.
| § | Secondary market prices of the Trigger PLUS will be impacted by
many economic and market factors. The secondary market price of the Trigger PLUS during their term will be impacted
by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions,
structuring fee, projected hedging profits, if any, estimated hedging costs and the closing level of the underlying index, including: |
| o | any actual or potential change in our creditworthiness or credit spreads; |
| o | customary bid-ask spreads for similarly sized trades; |
| o | secondary market credit spreads for structured debt issuances; |
| o | the actual and expected volatility of the underlying index; |
| o | the time to maturity of the Trigger PLUS; |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
| o | the dividend rates on the equity securities included in the underlying index; |
| o | interest and yield rates in the market generally |
| o | the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the
equity securities included in the underlying index trade and the correlation among those rates and the levels of the underlying
index; and |
| o | a variety of other economic, financial, political, regulatory and judicial events. |
Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the Trigger PLUS, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the Trigger PLUS, if any, at which JPMS may be willing
to purchase your Trigger PLUS in the secondary market.
| § | Investing in the Trigger PLUS is not equivalent to investing in
the underlying index. Investing in the Trigger PLUS is not equivalent to investing in the
underlying index or its component stocks. Investors in the Trigger PLUS will not have voting rights or rights to receive dividends
or other distributions or any other rights with respect to stocks that constitute the underlying index. |
| § | Adjustments to the underlying index could adversely affect the value
of the Trigger PLUS. The underlying index publisher may discontinue or suspend calculation
or publication of the underlying index at any time. In these circumstances, the calculation agent will have the sole discretion
to substitute a successor index that is comparable to the discontinued underlying index and is not precluded from considering indices
that are calculated and published by the calculation agent or any of its affiliates. |
| § | The Trigger PLUS are subject to risks associated with securities issued by non-U.S. companies. The equity securities
included in the underlying index have been issued by non-U.S. companies. Investments in Trigger PLUS linked to the value of such
non-U.S. equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S.
equity securities, including risks of volatility in those markets, governmental intervention in those markets and cross shareholdings
in companies in certain countries. Also, there is generally less publicly available information about companies in some of these
jurisdictions than there is about U.S. companies that are subject to the reporting requirements of the SEC,
and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities
trading rules different from those applicable to U.S. reporting companies. |
| § | The Trigger PLUS are not directly exposed to fluctuations in foreign exchange rates. The value of your Trigger PLUS
will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities
included in the underlying index are based, although any currency fluctuations could affect the performance of the underlying index.
Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the Trigger PLUS,
you will not receive any additional payment or incur any reduction in any payment on the Trigger PLUS. |
| § | Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the Trigger
PLUS. The hedging or trading activities of the issuer’s affiliates and of any other hedging counterparty with
respect to the Trigger PLUS on
or prior to the pricing date and prior to maturity could adversely affect the value of the underlying index and, as a result, could
decrease the amount an investor may receive on the Trigger PLUS at maturity, if any. Any of these hedging or trading activities
on or prior to the pricing date could potentially affect the initial index value and the trigger level and, therefore, could potentially
increase the level that the final index value must reach before you receive a payment at maturity that exceeds the issue price
of the Trigger PLUS or so that you do not suffer a loss on your initial investment in the Trigger PLUS. Additionally, these hedging
or trading activities during the term of the Trigger
PLUS, including on the valuation date, could adversely affect the final index value and, accordingly, the amount of cash
an investor will receive at maturity. It is possible that these hedging or trading activities could result in substantial returns
for us or our affiliates while the value of the Trigger PLUS declines. |
| § | Secondary trading may be limited.
The Trigger PLUS will not be listed on a securities exchange. There may be little or no secondary market for the
Trigger PLUS. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Trigger
PLUS easily. JPMS may act as a market maker
for the Trigger PLUS, but is not required to do so. Because we do not expect that other market makers will participate significantly
in the secondary market for the Trigger PLUS, the price at which you may be able to trade your Trigger PLUS is likely to depend
on the price, if any, at which JPMS is willing
to buy the Trigger PLUS. If at any time JPMS
or another agent does not act as a market maker, it is likely that there would be little or no secondary market for the Trigger
PLUS. |
| § | The final terms and valuation of the Trigger PLUS will be provided in the pricing
supplement. The final terms of the Trigger PLUS will be provided in the pricing supplement. In particular, each
of JPMS’s estimated value and the maximum payment at maturity will be provided in the pricing supplement and each |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
may be as low as the applicable minimum set forth on
the cover of this document. Accordingly, you should consider your potential investment in the Trigger PLUS based on the minimums
for JPMS’s estimated value and the maximum payment at maturity.
| § | The tax consequences of an investment in the Trigger PLUS are uncertain. There is no direct legal authority as to the
proper U.S. federal income tax characterization of the Trigger PLUS, and we do not intend to request a ruling from the IRS. The
IRS might not accept, and a court might not uphold, the treatment of the Trigger PLUS described in “Additional Information
about the Trigger PLUS ― Additional Provisions ― Tax considerations” in this document and in “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. If the IRS were successful in asserting
an alternative treatment for the Trigger PLUS, the timing and character of any income or loss on the Trigger PLUS could differ
materially and adversely from our description herein. In addition, in 2007 Treasury and the IRS released a notice requesting comments
on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses
in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also
asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the
relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to
which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the Trigger PLUS, possibly with
retroactive effect. You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement no. 4a-I and consult your tax adviser regarding the U.S. federal income tax consequences
of an investment in the Trigger PLUS, including possible alternative treatments and the issues presented by this notice. |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
TOPIX® Index
Overview
The TOPIX® Index, also known as the Tokyo Stock
Price Index, is a capitalization weighted index of all the Japanese common stocks listed on the First Section of the Tokyo Stock
Exchange, Inc., which we refer to as the “TSE.” Japanese stocks admitted to the TSE are assigned either to the TSE
First Section, the TSE Second Section or the TSE Mothers. Stocks listed in the First Section, which number approximately 1,800,
are among the most actively traded stocks on the TSE. For additional information about the TOPIX® Index, see “Equity
Index Descriptions — The TOPIX® Index” in the accompanying underlying supplement no 1a-I.
Information as of market close on July 24, 2015:
Bloomberg Ticker Symbol: |
TPX |
Current Index Closing Level: |
1,655.86 |
52 Weeks Ago (on 7/24/2014): |
1,269.86 |
52 Week High (on 6/24/2015): |
1,679.89 |
52 Week Low (on 10/17/2014): |
1,177.22 |
The following table sets forth
the published high and low closing levels, as well as end-of-quarter closing levels, of the underlying index for each quarter in
the period from January 1, 2010 through July 24, 2015. The graph following the table sets forth the daily closing levels of the
underlying index during the same period. The closing level of the underlying index on July 24, 2015 was 1,655.86.
We obtained the closing level information above and the information in the table and graph below from the Bloomberg Professional®
service (“Bloomberg”), without independent verification. The historical levels of the underlying index should not be
taken as an indication of future performance, and no assurance can be given as to the closing level of the underlying index on
the valuation date. The payment of dividends on the stocks that constitute the underlying index are not reflected in its closing
level and, therefore, have no effect on the calculation of the payment at maturity.
TOPIX®
Index |
High |
Low |
Period
End |
2010 |
|
|
|
First Quarter |
979.58 |
881.57 |
978.81 |
Second Quarter |
998.90 |
841.42 |
841.42 |
Third Quarter |
870.73 |
804.67 |
829.51 |
Fourth Quarter |
908.01 |
803.12 |
898.80 |
2011 |
|
|
|
First Quarter |
974.63 |
766.73 |
869.38 |
Second Quarter |
865.55 |
805.34 |
849.22 |
Third Quarter |
874.34 |
728.85 |
761.17 |
Fourth Quarter |
771.43 |
706.08 |
728.61 |
2012 |
|
|
|
First Quarter |
872.42 |
725.24 |
854.35 |
Second Quarter |
856.05 |
695.51 |
770.08 |
Third Quarter |
778.70 |
706.46 |
737.42 |
Fourth Quarter |
859.80 |
713.95 |
859.80 |
2013 |
|
|
|
First Quarter |
1,058.10 |
871.88 |
1,034.71 |
Second Quarter |
1,276.03 |
991.34 |
1,133.84 |
Third Quarter |
1,222.72 |
1,106.05 |
1,194.10 |
Fourth Quarter |
1,302.29 |
1,147.58 |
1,302.29 |
2014 |
|
|
|
First Quarter |
1,306.23 |
1,139.27 |
1,202.89 |
Second Quarter |
1,269.04 |
1,132.76 |
1,262.56 |
Third Quarter |
1,346.43 |
1,228.26 |
1,326.29 |
Fourth Quarter |
1,447.58 |
1,177.22 |
1,407.51 |
2015 |
|
|
|
First Quarter |
1,592.25 |
1,357.98 |
1,543.11 |
Second Quarter |
1,679.89 |
1,528.99 |
1,630.40 |
Third Quarter (through July 24, 2015) |
1,673.88 |
1,579.89 |
1,655.86 |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
TOPIX®
Index Historical Performance – Daily Closing Levels
January 4, 2010 to
July 24, 2015 |
|
Additional Information about the Trigger
PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions: |
Postponement of maturity date: |
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the third business day following the valuation date as postponed. |
Minimum ticketing size: |
$1,000 / 100 Trigger PLUS |
Trustee: |
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company) |
Calculation agent: |
JPMS |
JPMS’s estimated value of the Trigger PLUS: |
JPMS’s estimated value of the Trigger
PLUS set forth on the cover of this document is equal to the sum of the values of the following hypothetical components: (1) a
fixed-income debt component with the same maturity as the Trigger PLUS, valued using our internal funding rate for structured debt
described below, and (2) the derivative or derivatives underlying the economic terms of the Trigger PLUS. JPMS’s estimated
value does not represent a minimum price at which JPMS would be willing to buy your Trigger PLUS in any secondary market (if any
exists) at any time. The internal funding rate used in the determination of JPMS’s estimated value generally represents a
discount from the credit spreads for our conventional fixed-rate debt. For additional information, see “Risk Factors —
JPMS’s estimated value is not determined by reference to credit spreads for our conventional fixed-rate debt.” The
value of the derivative or derivatives underlying the economic terms of the Trigger PLUS is derived from JPMS’s internal
pricing models. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and
on various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates
and other factors, as well as assumptions about future market events and/or environments. Accordingly, JPMS’s estimated value
of the Trigger PLUS on the pricing date is based on market conditions and other relevant factors and assumptions existing at that
time. See “Risk Factors — JPMS’s estimated value does not represent future values of the Trigger PLUS and may
differ from others’ estimates.”
JPMS’s estimated value of the Trigger PLUS will
be lower than the original issue price of the Trigger PLUS because costs associated with selling, structuring and hedging the Trigger
PLUS are included in the original issue price of the Trigger PLUS. These costs include the selling commissions paid to JPMS and
other affiliated or unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated cost of hedging our obligations
under the Trigger PLUS. Because hedging our obligations entails risk and may be influenced by market forces beyond our control,
this hedging may result in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates
will retain any profits realized in hedging our obligations under the Trigger PLUS. |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
See “Risk Factors — JPMS’s
estimated value of the Trigger PLUS will be lower than the original issue price (price to public) of the Trigger PLUS” in
this document. |
Secondary market prices of the Trigger PLUS: |
For information about factors that will impact any secondary market prices of the Trigger PLUS, see “Risk Factors — Secondary market prices of the Trigger PLUS will be impacted by many economic and market factors” in this document. In addition, we generally expect that some of the costs included in the original issue price of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger PLUS by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the Trigger PLUS. The length of any such initial period reflects the structure of the Trigger PLUS, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Trigger PLUS and when these costs are incurred, as determined by JPMS. See “Risk Factors — The value of the Trigger PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than JPMS’s then-current estimated value of the Trigger PLUS for a limited time period.” |
Tax considerations: |
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. The following discussion, when read
in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding
the material U.S. federal income tax consequences of owning and disposing of the Trigger PLUS.
Based on current market conditions, in the opinion
of our special tax counsel, your Trigger PLUS should be treated as “open transactions” that are not debt instruments
for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences — Tax
Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement no. 4a-I. Assuming this treatment is respected, the gain or loss on your Trigger PLUS should be treated as long-term
capital gain or loss if you hold your Trigger PLUS for more than a year, whether or not you are an initial purchaser of Trigger
PLUS at the issue price. However, the IRS or a court may not respect this treatment of the Trigger PLUS, in which case the timing
and character of any income or loss on the Trigger PLUS could be materially and adversely affected. In addition, in 2007 Treasury
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income
over the term of their investment. It also asks for comments on a number of related topics, including the character of income or
loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime,
which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest
charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the Trigger PLUS, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the Trigger PLUS, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to
as “FATCA” may (if the Trigger PLUS are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the Trigger PLUS, as well as to the payment of gross proceeds of a sale of a Trigger PLUS occurring after December
31, 2016 (including redemption at maturity). You should consult your tax adviser regarding the potential application of FATCA to
the Trigger PLUS. |
Supplemental use of proceeds and hedging: |
The Trigger PLUS are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the Trigger PLUS. See “How the Trigger
PLUS Work” in this document for an illustration of the risk-return profile of the Trigger PLUS and “TOPIX®
Index Overview” in this document for a description of the market exposure provided by the Trigger PLUS.
The original issue price of the Trigger PLUS is equal
to JPMS’s estimated value of the Trigger PLUS plus the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers and the structuring fee, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the Trigger PLUS, plus the estimated cost of hedging our obligations under the
Trigger PLUS. |
Benefit plan investor considerations: |
See “Benefit Plan Investor Considerations” in the accompanying product supplement no. 4a-I. |
Supplemental plan of distribution: |
Subject to regulatory constraints, JPMS intends
to use its reasonable efforts to offer to purchase the Trigger PLUS in the secondary market, but is not required to do so. JPMS, |
Trigger
PLUS Based on the Value of the TOPIX® Index due August 3, 2017
Trigger Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
acting as agent for JPMorgan Chase & Co.,
will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management. In addition, Morgan Stanley Wealth
Management will receive a structuring fee as set forth on the cover of this document for each Trigger PLUS.
We or our affiliate may
enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection
with the sale of the Trigger PLUS and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the
swap or related hedge transactions. See “— Supplemental use of proceeds and hedging”
above and “Use of Proceeds and Hedging” on page PS-42 of the accompanying product supplement no. 4a-I. |
Contact: |
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326). |
Where you can find more information: |
JPMorgan Chase & Co. has filed a registration statement
(including a prospectus) with the SEC for the offering to which this communication relates. 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 website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer
participating in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. 4a-I,
underlying supplement no. 1a-I and this communication if you so request by calling toll-free (800)-869-3326.
You may revoke your offer to purchase the Trigger PLUS at
any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase the Trigger PLUS prior to their issuance. In the event of any changes to the terms of
the Trigger PLUS, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also
choose to reject such changes in which case we may reject your offer to purchase.
You should read this document together with the prospectus,
as supplemented by the prospectus supplement, each dated November 7, 2014 relating to our Series E medium-term notes of which these
Trigger PLUS are a part, and the more detailed information contained in product supplement no. 4a-I dated November 7, 2014 and
underlying supplement no. 1a-I dated November 7, 2014.
This document, together with the documents listed below,
contains the terms of the Trigger PLUS and supersedes all other prior or contemporaneous oral statements as well as any other written
materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample
structures, stand-alone fact sheets, brochures or other educational materials of ours. You should carefully consider, among other
things, the matters set forth in “Risk Factors” in the accompanying product supplement no. 4a-I and “Risk Factors”
in the accompanying underlying supplement no. 1a-I, as the Trigger PLUS involve risks not associated with conventional debt securities.
We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Trigger PLUS.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
• Product supplement no. 4a-I dated November
7, 2014:
http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf
• Underlying supplement no. 1a-I dated November
7, 2014:
http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf
• Prospectus supplement and prospectus, each
dated November 7, 2014:
http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf
Our Central Index Key, or CIK, on the SEC website is
19617.
As used in this document, “we,” “us,”
and “our” refer to JPMorgan Chase & Co.
“Performance Leveraged Upside SecuritiesSM”
and “PLUSSM” are service marks of Morgan Stanley. |
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Mar 2024 to Apr 2024
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Apr 2023 to Apr 2024