The information in this preliminary
pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated
February 11, 2016
Pricing supplement no. |
|
To prospectus dated November 7, 2014,
prospectus supplement dated November 7, 2014,
product supplement no. 4a-I dated November 7, 2014 and
underlying supplement no. 1a-I dated November 7, 2014
|
Registration Statement No. 333-199966
Dated February , 2016
Rule 424(b)(2) |
|
|
Structured
Investments |
$
Digital Dual Directional Contingent Buffered
Notes Linked to the S&P 500® Index due March 1, 2017
|
General
| · | The
notes are designed for investors who seek a fixed return of 7.02% if the Ending Index Level is greater than or equal to the Initial
Index Level or is less than the Initial Index Level by up to 25%. |
| · | Investors should be willing to forgo interest and dividend payments
and, if the Ending Index Level is less than the Initial Index Level by more than 25%, be willing to lose some or all of their principal
amount at maturity. |
| · | The notes are unsecured and unsubordinated obligations of JPMorgan
Chase & Co. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co. |
| · | Minimum denominations of $10,000 and integral multiples of $1,000 in
excess thereof |
Key Terms
Index: |
The S&P 500® Index (Bloomberg ticker: SPX). |
Payment at Maturity:
|
If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Contingent Digital Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
|
$1,000 + ($1,000 × Contingent Digital Return) |
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
|
$1,000 + ($1,000 × Index Return) |
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 25%, you will lose more than 25% of your principal amount at maturity and may lose all of your principal amount at maturity. |
Contingent Digital Return: |
7.02%, which reflects the maximum return on the notes. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,070.20. |
Contingent Buffer Amount |
25% |
Index Return: |
(Ending Index Level –
Initial Index Level)
Initial Index Level
|
|
Initial Index Level: |
The closing level of the Index on the Pricing Date |
Ending Index Level: |
The arithmetic average of the closing levels of the Index on the Ending Averaging Dates |
Pricing Date |
On or about February 12, 2016 |
Original Issue Date (Settlement Date): |
On or about February 18, 2016 |
Ending Averaging Dates*: |
February 17, 2017, February 21, 2017, February 22, 2017, February 23, 2017 and February 24, 2017 |
Maturity Date*: |
March 1, 2017 |
CUSIP: |
48128GNL0 |
| * | 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)” and “General
Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I |
Investing in the notes 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 “Selected Risk Considerations” beginning on page PS-3
of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
Per note |
$1,000 |
$ |
$ |
Total |
$ |
$ |
$ |
| (1) | See “Supplemental Use of Proceeds” in this
pricing supplement for information about the components of the price to public of the notes. |
| (2) | J.P. Morgan Securities LLC, which we refer to as JPMS,
acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. In no event will these selling commissions exceed $10.00 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” beginning on page PS-87 of the accompanying product supplement no. 4a-I. |
If the notes priced today, the estimated value of the notes
as determined by JPMS would be approximately $983.50 per $1,000 principal amount note. JPMS’s estimated value of the notes,
when the terms of the notes are set, will be provided by JPMS in the pricing supplement and will not be less than $968.50 per $1,000
principal amount note. See “JPMS’s Estimated Value of the Notes” in this pricing supplement for additional
information.
The notes 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.
February , 2016
Additional Terms Specific to the
Notes
You may revoke your offer to purchase the notes
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 notes prior to their issuance. In the event of any changes to the terms of the notes,
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 pricing supplement 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
notes 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 pricing supplement, together with the documents listed below, contains the
terms of the notes 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, 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 notes 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 notes.
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):
| · | 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 pricing supplement, “we,” “us” and “our” refer to JPMorgan Chase & Co.
JPMorgan Structured Investments — | PS- 1 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Index?
The following table and examples illustrate
the hypothetical total return and the hypothetical payment at maturity on the notes. The “total return” as used in
this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000
principal amount note to $1,000. Each hypothetical total return or payment at maturity set forth below assumes an Initial Index
Level of 2,000 and reflects the Contingent Digital Return of 7.02% and the Contingent Buffer Amount of 25%. Each hypothetical total
return or payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment
at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and in the examples below have
been rounded for ease of analysis.
Ending Index
Level
|
Index Return |
Total Return |
3,600.00 |
80.00% |
7.02% |
3,300.00 |
65.00% |
7.02% |
3,000.00 |
50.00% |
7.02% |
2,800.00 |
40.00% |
7.02% |
2,600.00 |
30.00% |
7.02% |
2,300.00 |
15.00% |
7.02% |
2,200.00 |
10.00% |
7.02% |
2,140.40 |
7.02% |
7.02% |
2,100.00 |
5.00% |
7.02% |
2,050.00 |
2.50% |
7.02% |
2,000.00 |
0.00% |
7.02% |
1,950.00 |
-2.50% |
7.02% |
1,900.00 |
-5.00% |
7.02% |
1,800.00 |
-10.00% |
7.02% |
1,700.00 |
-15.00% |
7.02% |
1,600.00 |
-20.00% |
7.02% |
1,500.00 |
-25.00% |
7.02% |
1,499.80 |
-25.01% |
-25.01% |
1,400.00 |
-30.00% |
-30.00% |
1,200.00 |
-40.00% |
-40.00% |
1,000.00 |
-50.00% |
-50.00% |
800.00 |
-60.00% |
-60.00% |
600.00 |
-70.00% |
-70.00% |
400.00 |
-80.00% |
-80.00% |
200.00 |
-90.00% |
-90.00% |
0.00 |
-100.00% |
-100.00% |
Hypothetical Examples of
Amount Payable at Maturity
The following examples illustrate how the total
payment at maturity in different hypothetical scenarios is calculated.
Example 1: The level of the Index increases
from the Initial Index Level of 2,000 to an Ending Index Level of 2,100.
Because the Ending Index Level of 2,100 is greater
than the Initial Index Level of 2,000, regardless of the Index Return, the investor receives a payment at maturity of $1,070.20
per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
7.02%) = $1,070.20
Example 2: The level of the Index decreases
from the Initial Index Level of 2,000 to an Ending Index Level of 1,500.
Although the Index Return is negative, because
the Ending Index Level of 1,500 is less than the Initial Index Level of 2,000 by up to the Contingent Buffer Amount of 25%, the
investor receives a payment at maturity of $1,070.20 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
7.02%) = $1,070.20
Example 3: The level of the Index increases
from the Initial Index Level of 2,000 to an Ending Index Level of 2,800.
Because the Ending Index Level of 2,800 is greater
than the Initial Index Level of 2,000 and although the Index Return of 40% exceeds the Contingent Digital Return of 7.02%, the
investor is entitled to only the Contingent Digital Return and receives a payment at maturity of $1,070.20 per $1,000 principal
amount note, calculated as follows:
$1,000 + ($1,000 ×
7.02%) = $1,070.20
Example 4: The level of the Index decreases
from the Initial Index Level of 2,000 to an Ending Index Level of 1,000.
Because the Ending Index Level of 1,000 is less
than the Initial Index Level of 2,000 by more than the Contingent Buffer Amount of 25% and the Index Return is -50%, the investor
receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-50%) = $500
The hypothetical returns and hypothetical payments
on the notes shown above apply only if you hold the notes for their entire term. These hypotheticals do not reflect fees
or expenses that would be associated with any sale in the
JPMorgan Structured Investments — | PS- 2 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected Purchase Considerations
| · | FIXED APPRECIATION POTENTIAL
— If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by
up to the Contingent Buffer Amount, you will receive a fixed return equal to the Contingent Digital Return of 7.02% at maturity,
which also reflects the maximum return on the notes at maturity. Because the notes are our unsecured and unsubordinated obligations,
payment of any amount on the notes is subject to our ability to pay our obligations as they become due. |
| · | LIMITED PROTECTION AGAINST LOSS
— We will pay you your principal back at maturity if the Ending Index Level is equal to the Initial Index Level or is less
than the Initial Index Level by up to the Contingent Buffer Amount of 25%. If the Ending Index Level is less than the Initial Index
Level by more than the Contingent Buffer Amount, for every 1% that the Ending Index Level is less than the Initial Index Level,
you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 25%
of your principal amount at maturity and may lose all of your principal amount at maturity. |
| · | RETURN LINKED TO THE S&P 500® INDEX — The
return on the notes is linked to the S&P 500® Index. The S&P 500® Index consists of 500 component
stocks selected to provide a performance benchmark for the U.S. equity markets. See “Equity Index Descriptions — The
S&P 500® Index” in the accompanying underlying supplement no. 1a-I. |
| · | TAX TREATMENT — 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 notes. |
Based on current market conditions,
in the opinion of our special tax counsel it is reasonable to treat the notes 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 notes should be treated
as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes
at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of any income
or loss on the notes 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 notes, possibly with retroactive
effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including
possible alternative treatments and the issues presented by this notice.
Withholding under legislation
commonly referred to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated
as interest paid with respect to the notes. Notwithstanding anything to the contrary in the accompanying product supplement no.
4a-I, under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than any amount treated
as interest) of a taxable disposition, including redemption at maturity, of the notes. You should consult your tax adviser regarding
the potential application of FATCA to the notes.
Non-U.S. holders should also
note that, notwithstanding anything to the contrary in the accompanying product supplement no. 4a-I, recently promulgated Treasury
regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity linked instruments”
will not apply to the notes.
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Index or any of the equity securities underlying the
Index. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement
no. 4a-I dated November 7, 2014 and “Risk Factors” in the accompanying underlying supplement no. 1a-I dated November
7, 2014.
| · | YOUR INVESTMENT IN THE NOTES MAY
RESULT IN A LOSS — The notes do not guarantee any return of principal. The return on the notes at maturity is linked
to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative.
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 25%, you will lose
1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Accordingly,
|
JPMorgan Structured Investments — | PS- 3 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
under these circumstances,
you will lose more than 25% of your principal amount at maturity and may lose all of your principal amount at maturity.
| · | YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE CONTINGENT DIGITAL
RETURN — If the Ending Index Level is greater than or
equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, for each $1,000
principal amount note, you will receive at maturity $1,000 plus an additional return equal to the Contingent Digital Return
of 7.02%, regardless of the appreciation in the Index, which may be significant. |
| · | YOUR ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN MAY TERMINATE
ON THE FINAL ENDING AVERAGING DATE — If the Ending Index Level is less than the Initial Index Level by more than the
Contingent Buffer Amount, you will not be entitled to receive the Contingent Digital Return at maturity. Under these circumstances,
you will lose more than 25% of your principal amount at maturity and may lose all of your principal amount at maturity. |
| · | CREDIT RISK OF JPMORGAN CHASE &
CO. — The notes are subject to the credit risk of JPMorgan Chase & Co., and our credit ratings and credit spreads
may adversely affect the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability to pay
all amounts due on the notes. Any actual or potential change in our creditworthiness or credit spreads, as determined by the market
for taking our credit risk, is likely to adversely affect the value of the notes. If we were to default on our payment obligations,
you may not receive any amounts owed to you under the notes and you could lose your entire investment. |
| · | POTENTIAL CONFLICTS — We
and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent
and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine
the pricing of the notes and the estimated value of the notes when the terms of the notes are set, 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 notes. 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 notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates
in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes 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. |
We are also currently one
of the companies that make up the S&P 500® Index. We will not have any obligation to consider your interests
as a holder of the notes in taking any corporate action that might affect the value of the S&P 500® Index and
the notes.
| · | THE BENEFIT
PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE — If the Ending Index Level
is less than the Initial Index Level by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer Amount
will terminate and you will be fully exposed to any depreciation in the Index. |
| · | JPMS’S ESTIMATED VALUE OF THE
NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated value is only
an estimate using several factors. The original issue price of the notes will exceed JPMS’s estimated value because costs
associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include
the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “JPMS’s Estimated
Value of the Notes” in this pricing supplement. |
| · | JPMS’S ESTIMATED VALUE DOES
NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES — JPMS’s estimated value of
the notes is determined by reference to JPMS’s internal pricing models when the terms of the notes are set. This estimated
value is based on market conditions and other relevant factors existing at that time and JPMS’s assumptions about market
parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions
could provide valuations for notes 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 notes 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 notes from
you in secondary market transactions. See “JPMS’s Estimated Value of the Notes” in this pricing supplement. |
| · | 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 notes as well as the higher issuance,
operational and ongoing liability management costs of the notes 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 notes to be more favorable to you. Consequently, our use of an internal funding rate would have an adverse effect on the
terms of the notes and any secondary market prices of the notes. See “JPMS’s Estimated Value of the Notes” in
this pricing supplement. |
| · | THE VALUE OF THE NOTES 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 NOTES FOR A LIMITED TIME PERIOD — We generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any |
JPMorgan Structured Investments — | PS- 4 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
repurchases of your notes
by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging
profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads for structured debt
issuances. See “Secondary Market Prices of the Notes” in this pricing supplement for additional information relating
to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of
the notes as published by JPMS (and which may be shown on your customer account statements).
| · | SECONDARY MARKET PRICES OF THE NOTES
WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES — Any secondary market prices of the notes will likely
be lower than the original issue price of the notes 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 (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price
of the notes. As a result, the price, if any, at which JPMS will be willing to buy notes 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 consideration for information about additional factors that will impact any secondary
market prices of the notes. |
The notes are not designed
to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “—
Lack of Liquidity” below.
| · | SECONDARY MARKET PRICES OF THE NOTES
WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS — The secondary market price of the notes 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,
projected hedging profits, if any, estimated hedging costs and the level of the Index, including: |
| · | any actual or potential change in our
creditworthiness or credit spreads; |
| · | customary bid-ask spreads for similarly
sized trades; |
| · | secondary market credit spreads for
structured debt issuances; |
| · | the actual and expected volatility of
the Index; |
| · | the time to maturity of the notes; |
| · | the dividend rates on the equity securities
included in the Index; |
| · | interest and yield rates in the market
generally; |
| · | the exchange rates and the volatility
of the exchange rates between the U.S. dollar and the European Union euro; and |
| · | 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 notes, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to
purchase your notes in the secondary market.
| · | NO INTEREST OR DIVIDEND PAYMENTS
OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments, and you will not have voting rights
or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Index would
have. |
| · | NON-U.S. SECURITIES RISK — The equity securities that
compose the Index have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity
securities involve risks associated with the securities markets in those countries, 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 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 prices
of securities in foreign markets may be affected by political, economic, financial and social factors in those countries, or global
regions, including changes in government, economic and fiscal policies and currency exchange laws. Moreover, the economies in such
countries may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resources and self-sufficiency. |
| · | NO DIRECT
EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES — The
value of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the
equity securities underlying the Index are based, although any currency fluctuations could affect the performance of the Index.
Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the notes, you will
not receive any additional payment or incur any reduction in your payment at maturity. |
| · | LACK OF LIQUIDITY — The
notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is
not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the
notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able
to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes. |
| · | THE FINAL TERMS AND VALUATION OF
THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT — The final terms of the notes will be based on relevant market
conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, JPMS’s estimated
value will be provided in the pricing supplement and may be as low as the minimum for JPMS’s estimated value set forth on
|
JPMorgan Structured Investments — | PS- 5 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
the cover of this pricing
supplement. Accordingly, you should consider your potential investment in the notes based on the minimum for JPMS’s estimated
value.
JPMorgan Structured Investments — | PS- 6 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
Historical Information
The following graph sets forth the historical
performance of the Index based on the weekly historical closing levels of the Index from January 7, 2011 through February 5, 2016.
The closing level of the Index on February 10, 2016 was 1,851.86. We obtained the closing levels of the Index above and below from
the Bloomberg Professional® service (“Bloomberg”), without independent verification.
The historical closing levels of the Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the
Pricing Date or any Ending Averaging Date. We cannot give you assurance that the performance of the Index will result in the return
of any of your principal amount.
JPMS’s Estimated Value
of the Notes
JPMS’s estimated value of the notes set
forth on the cover of this pricing supplement 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 notes, valued using our internal funding rate for structured debt described
below, and (2) the derivative or derivatives underlying the economic terms of the notes. JPMS’s estimated value does not
represent a minimum price at which JPMS would be willing to buy your notes 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 “Selected Risk Considerations — 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 notes 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 notes is determined
when the terms of the notes are set based on market conditions and other relevant factors and assumptions existing at that time.
See “Selected Risk Considerations — JPMS’s Estimated Value Does Not Represent Future Values of the Notes and
May Differ from Others’ Estimates.”
JPMS’s estimated value of the notes will
be lower than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are
included in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated
or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. 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 notes. See “Selected Risk Considerations — JPMS’s Estimated Value of the Notes Will Be
Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of
the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes
Will Be Impacted by Many Economic and Market Factors” in this pricing supplement. In addition, we generally expect that some
of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases
of your notes 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
JPMorgan Structured Investments — | PS- 7 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
stated term of the notes. The length of any
such initial period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our
hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by JPMS. See “Selected
Risk Considerations — The Value of the Notes 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 Notes for a Limited Time Period.”
Supplemental Use of Proceeds
The notes are offered to meet investor demand for
products that reflect the risk-return profile and market exposure provided by the notes. See “What Is the Total Return on
the Notes at Maturity, Assuming a Range of Performances for the Index?” and “Hypothetical Examples of Amount Payable
at Maturity” in this pricing supplement for an illustration of the risk-return profile of the notes and “Selected Purchase
Considerations — Return Linked to the S&P 500® Index” in this pricing supplement for a description
of the market exposure provided by the notes.
The original issue price of the notes is equal to
JPMS’s estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
JPMorgan Structured Investments — | PS- 8 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index | |
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