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 12, 2016
| PRICING SUPPLEMENT NO.
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-199966
Dated February , 2016
|
 |
JPMorgan Chase &
Co. Trigger Callable Contingent Yield Notes (daily coupon observation)
Linked to the lesser
performing of the S&P 500® Index and the Russell 2000® Index due on or about February 15, 2018
Investment
Description |
| Trigger
Callable Contingent Yield Notes are unsecured and unsubordinated notes issued by JPMorgan Chase & Co. (“JPMorgan
Chase”) (each, a “Note” and collectively, the “Notes”) linked to the lesser performing of the
S&P 500® Index and the Russell 2000® Index (each, an “Index” and together
the “Indices”). If the closing level of each Index is equal to or greater than its Coupon Barrier on
each day during a Quarterly Observation Period, JPMorgan Chase will make a Contingent Coupon payment with respect to that
Quarterly Observation Period. If the closing level of either Index is less than its Coupon Barrier on any day during
a Quarterly Observation Period, no Contingent Coupon payment will be made. JPMorgan Chase may, at its election,
call the Notes early on any Quarterly Observation End Date (other than the Final Valuation Date) regardless of the closing
level of either Index on that Quarterly Observation End Date. If JPMorgan Chase elects to call the Notes prior
to maturity, JPMorgan Chase will pay the principal amount plus any Contingent Coupon for the Quarterly Observation Period
ending on the applicable Quarterly Observation End Date and no further amounts will be owed to you. If JPMorgan
Chase does not elect to call the Notes prior to maturity and the Final Index Level of each Index is equal to or greater than
its Trigger Level (which is the same level as its Coupon Barrier), JPMorgan Chase will make a cash payment at maturity equal
to the principal amount of your Notes, in addition to any Contingent Coupon with respect to the final Quarterly Observation
Period. If JPMorgan Chase does not elect to call the Notes prior to maturity and the Final Index Level of either
Index is less than its Trigger Level, JPMorgan Chase will pay you less than the full principal amount, if anything, at maturity,
resulting in a loss of your principal amount that is proportionate to the decline in the closing level of the Index with the
lower Index Return (the “Lesser Performing Index”) from its Initial Index Level to its Final Index Level. Investing
in the Notes involves significant risks. You may lose some or all of your principal amount at maturity. You
may receive few or no quarterly Contingent Coupons during the term of the Notes. You will be exposed to the market risk of
each Index on each day of the Quarterly Observation Periods and on the Final Valuation Date and any decline in the level of
one Index may negatively affect your return and will not be offset or mitigated by a lesser decline or any potential increase
in the level of the other Index. Generally, a higher Contingent Coupon Rate is associated with a greater risk of
loss. The contingent repayment of principal applies only if you hold the Notes to maturity. Any payment
on the Notes, including any repayment of principal, is subject to the creditworthiness of JPMorgan Chase. If JPMorgan
Chase were to default on its payment obligations, you may not receive any amounts owed to you under the Notes and you could
lose your entire investment. |
Features |
|
Key
Dates |
|
  Contingent
Coupon: If the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation
Period, JPMorgan Chase will make a Contingent Coupon payment with respect to that Quarterly Observation Period. JPMorgan Chase
will not pay you the Contingent Coupon for any Quarterly Observation Period in which the closing level of either Index on any
day during that Quarterly Observation Period is less than its Coupon Barrier.
Issuer
Callable: JPMorgan Chase may, at its election, call the Notes on any Quarterly Observation End Date (other than the Final
Valuation Date), regardless of the closing level of either Index on that Quarterly Observation End Date, and pay you the principal
amount plus any Contingent Coupon otherwise due for the Quarterly Observation Period ending on that Quarterly Observation End
Date. If the Notes are called, no further payments will be made after the Call Settlement Date.
Contingent
Repayment of Principal Amount at Maturity: If by maturity the Notes have not been called and each Index closes at or above
its Trigger Level on the Final Valuation Date, JPMorgan Chase will pay you the principal amount per Note at maturity, in addition
to any Contingent Coupon with respect to the final Quarterly Observation Period. If either Index closes below its Trigger Level
on the Final Valuation Date, JPMorgan Chase will repay less than the principal amount, if anything, at maturity, resulting in
a loss on your principal amount that is proportionate to the decline in the closing level of the Lesser Performing Index from
its Initial Index Value to its Final Index Value. The contingent repayment of principal applies only if you hold the Notes until
maturity. Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of JPMorgan Chase. |
|
Trade
Date1 |
February
12, 2016 |
| Original Issue Date
(Settlement Date)1 |
February 18,
2016 |
| Quarterly Observation
End Dates2 |
Quarterly
(see page 4) |
| Final Valuation Date2 |
February 12,
2018 |
| Maturity
Date2 |
February
15, 2018 |
| 1 |
Expected. In
the event that we make any change to the expected Trade Date and Settlement Date, the Quarterly Observation End Dates, the
Final Valuation Date and/or the Maturity Date will be changed so that the stated term of the Notes remains the same. |
| 2 |
Subject to postponement
in the event of a market disruption event and as described under “General Terms of Notes — Postponement of a Payment
Date” and “General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple
Underlyings” in the accompanying product supplement no. UBS-1a-I |
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
THE
NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. JPMORGAN CHASE IS NOT NECESSARILY OBLIGATED TO REPAY
THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE LESSER
PERFORMING INDEX. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION OF JPMORGAN
CHASE. YOU SHOULD NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS
INVOLVED IN INVESTING IN THE NOTES.
YOU
SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 6 AND UNDER “RISK
FACTORS” BEGINNING ON PAGE PS-6 OF THE ACCOMPANYING PRODUCT SUPPLEMENT NO. UBS-1A-I BEFORE PURCHASING ANY NOTES.
EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND
THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES. THE NOTES WILL NOT BE LISTED
ON ANY SECURITIES EXCHANGE. |
Note
Offering |
| We
are offering Trigger Callable Contingent Yield Notes linked to the lesser performing of the S&P 500® Index
and the Russell 2000® Index. The Notes are offered at a minimum investment of $1,000 in denominations
of $10 and integral multiples thereof. The Contingent Coupon Rate and the Initial Index Level, Trigger Level and
Coupon Barrier for each Index will be finalized on the Trade Date
and provided in the pricing supplement. The actual Contingent Coupon Rate will not
be less than the bottom of the range listed below, but you should be willing to invest in the Notes if the Contingent Coupon
Rate were set equal to the bottom of that range. |
| Index |
Contingent
Coupon Rate |
Initial
Index Level |
Trigger
Level* |
Coupon
Barrier* |
CUSIP
/ ISIN |
| S&P
500® Index (Bloomberg Ticker: SPX) |
10.00%
to 11.00% per annum |
• |
65%
of the Initial Index Level |
65%
of the Initial Index Level |
48128A178
/ US48128A1786 |
| Russell
2000® Index
(Bloomberg Ticker: RTY) |
• |
65%
of the Initial Index Level |
65%
of the Initial Index Level |
*Rounded to two decimal
places for the S&P 500® Index and rounded to three decimal places for the Russell 2000® Index.
See “Additional
Information about JPMorgan Chase & Co. and the Notes” in this pricing supplement. The Notes will have the terms specified
in the prospectus and the prospectus supplement, each dated November 7, 2014, product supplement no. UBS-1a-I dated November 7,
2014, underlying supplement no. 1a-I dated November 7, 2014 and this pricing supplement. The terms of the Notes as set forth
in this pricing supplement, to the extent they differ or conflict with those set forth in product supplement no. UBS-1a-I, will
supersede the terms set forth in product supplement no. UBS-1a-I.
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 prospectus, prospectus supplement,
product supplement no. UBS-1a-I and underlying supplement no. 1a-I. Any representation to the contrary is a criminal offense.
| |
Price to Public(1) |
Fees and Commissions(2) |
Proceeds to Issuer |
| Offering
of Notes |
Total |
Per
Note |
Total |
Per
Note |
Total |
Per
Note |
| Notes linked
to the lesser performing of the S&P 500® Index and the Russell 2000® Index |
|
$10 |
|
$0.15 |
|
$9.85 |
| (1) |
See “Supplemental Use
of Proceeds” in this pricing supplement for information about the components of the price to public of the Notes. |
| (2) |
UBS Financial Services Inc., which we
refer to as UBS, will receive selling commissions from us that will not exceed $0.15 per $10 principal amount Note. See
“Plan of Distribution (Conflicts of Interest)” beginning on page PS-87 of the accompanying product supplement
no. UBS-1a-I, as supplemented by “Supplemental Plan of Distribution” in this pricing supplement. |
If the Notes
priced today and assuming a Contingent Coupon Rate equal to the bottom of the range listed above, the estimated value of the Notes
as determined by J.P. Morgan Securities LLC, which we refer to as JPMS, would be approximately $9.711 per $10 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 $9.60 per $10 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.
Additional
Information about JPMorgan Chase & Co. and 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 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. UBS-1a-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. UBS-1a-I and “Risk Factors” in the accompanying underlying supplement no. 1a-I, as the Notes involve
risks not associated with conventional debt securities.
You may
access these on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filing for the relevant
date on the SEC website):
As used
in this pricing supplement, the “Issuer,” “JPMorgan Chase,” “we,” “us” and “our”
refer to JPMorgan Chase & Co.
Investor
Suitability
The
Notes may be suitable for you if, among other considerations:
♦You
fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
♦You
can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the
same downside market risk as an investment in the Lesser Performing Index.
♦You
are willing to accept the individual market risk of each Index on each day of the Quarterly Observation Periods and on the Final
Valuation Date and understand that any decline in the level of one Index will not be offset or mitigated by a lesser decline or
any potential increase in the level of the other Index.
♦You
accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
♦You
understand and accept that you will not participate in any appreciation in the level of either Index and that your potential return
is limited to the Contingent Coupons.
♦You
can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the levels of the Indices.
♦You
would be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the bottom of the range indicated on the
cover hereof (the actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement and
will not be less than the bottom of the range listed on the cover).
♦You
do not seek guaranteed current income from this investment and are willing to forgo dividends paid on the stocks included in the
Indices.
♦You
are willing to invest in notes that may be called early at JPMorgan Chase’s election or you are otherwise willing to hold
such notes to maturity.
♦You
accept that there may be little or no secondary market for the Notes and that any secondary market will depend in large part on
the price, if any, at which JPMS, is willing to trade the Notes.
♦You
understand and accept the risks associated with the Indices.
♦You
are willing to assume the credit risk of JPMorgan Chase for all payments under the Notes, and understand that if JPMorgan Chase
defaults on its obligations you may not receive any amounts due to you including any repayment of principal. |
|
The
Notes may not be suitable for you if, among other considerations:
♦You
do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
♦You
cannot tolerate a loss of all or a substantial portion of your investment and are unwilling to make an investment that may have
the same downside market risk as an investment in the Lesser Performing Index.
♦You
are unwilling to accept the individual market risk of each Index on each day of the Quarterly Observation Periods and on the Final
Valuation Date or do not understand that any decline in the level of one Index will not be offset or mitigated by a lesser decline
or any potential increase in the level of the other Index.
♦You
require an investment designed to provide a full return of principal at maturity.
♦You
do not accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
♦You
seek an investment that participates in the full appreciation in the level of either Index or both Indices or that has unlimited
return potential.
♦You
cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the levels of the Indices.
♦You
would not be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the bottom of the range indicated
on the cover hereof (the actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement
and will not be less than the bottom of the range listed on the cover).
♦You
prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities
and credit ratings.
♦You
seek guaranteed current income from this investment or prefer to receive the dividends paid on the stocks included in the Indices.
♦You
are unable or unwilling to hold notes that may be called early at JPMorgan Chase’s election, or you are otherwise unable
or unwilling to hold such notes to maturity or you seek an investment for which there will be an active secondary market.
♦You
do not understand or accept the risks associated with the Indices.
♦You
are not willing to assume the credit risk of JPMorgan Chase for all payments under the Notes, including any repayment of principal. |
The suitability
considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on
your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting
and other advisers have carefully considered the suitability of an investment in the Notes in light of your particular circumstances.
You should also review carefully the “Key Risks” beginning on page 6 of this pricing supplement, “Risk Factors”
in the accompanying product supplement no. UBS-1a-I and “Risk Factors” in the accompanying underlying supplement no.
1a-I for risks related to an investment in the Notes. For more information on the Indices, please see the sections titled “The
S&P 500® Index” and “The Russell 2000® Index” below.
Indicative Terms
|
| Issuer: |
|
JPMorgan
Chase & Co. |
| Issue
Price: |
|
$10
per Note |
| Indices: |
|
S&P
500® Index
Russell
2000® Index |
| Principal
Amount: |
|
$10
per Note (subject to a minimum purchase of 100 Notes or $1,000) |
| Term1: |
|
Approximately
2 years, unless called earlier at the election of JPMorgan Chase |
| Issuer
Call Feature: |
|
JPMorgan
Chase may elect to call the Notes on any Quarterly Observation End Date (other than the Final Valuation Date), regardless
of the closing level of either Index on that Quarterly Observation End Date. If the Notes are called, JPMorgan
Chase will pay you on the applicable Call Settlement Date a cash payment per Note equal to the principal amount plus any Contingent
Coupon otherwise due for the Quarterly Observation Period ending on the applicable Quarterly Observation End Date, and no
further payments will be made on the Notes. Before JPMorgan Chase elects to call the Notes on a Quarterly Observation
End Date, JPMorgan Chase will deliver written notice to The Depository Trust Company (“DTC”) on or before that
Quarterly Observation End Date. |
| Contingent
Coupon: |
|
If
the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation
Period, we will pay you the Contingent Coupon for that Quarterly Observation Period on the relevant Coupon Payment Date.
If
the closing level of either Index is less than its Coupon Barrier on any day during a Quarterly Observation Period, the
Contingent Coupon for that Quarterly Observation Period will not accrue or be payable, and we will not make any payment
to you on the relevant Coupon Payment Date.
Each
Contingent Coupon will be a fixed amount based on equal quarterly installments at the Contingent Coupon Rate, which is
a per annum rate. You should be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the
bottom of the range set forth in “Contingent Coupon Rate” below.
Contingent
Coupon payments on the Notes are not guaranteed. We will not pay you the Contingent Coupon for any Quarterly Observation
Period in which the closing level of either Index on any day during that Quarterly Observation Period is less than its
Coupon Barrier. |
| Quarterly
Observation Period: |
|
With
respect to each Coupon Payment Date, the period from but excluding the second immediately preceding Quarterly Observation
End Date (or, in the case of the first Coupon Payment Date, from but excluding the Pricing Date) to and including the immediately
preceding Quarterly Observation End Date. |
| Contingent
Coupon Rate: |
|
Expected
to be between 10.00% and 11.00% per annum. The actual Contingent Coupon Rate will be finalized on the Trade Date
and provided in the pricing supplement and will not be less than 10.00% per annum or greater than 11.00% per annum. |
| Contingent
Coupon payments: |
|
Between
$0.25 and $0.275 per $10 principal amount Note. The actual Contingent Coupon payments will be based on the Contingent
Coupon Rate and finalized on the Trade Date and provided in the pricing supplement. |
| Coupon
Payment Dates2: |
|
5th
business day following the Quarterly Observation End Date on which the applicable Quarterly Observation Period ends, except
that the Coupon Payment Date for the final Quarterly Observation Period is the Maturity Date |
| Call
Settlement Dates2: |
|
First
Coupon Payment Date following the applicable Quarterly Observation End Date |
|
Payment at Maturity (per $10 Note): |
|
If
JPMorgan Chase does not elect to call the Notes and the Final Index Level of each Index is equal to or greater than its
Trigger Level , we will pay you a cash payment at maturity per $10 principal amount Note equal to $10 plus any Contingent
Coupon otherwise due on the Maturity Date.
If
JPMorgan Chase does not elect to call the Notes and the Final Index Level of either Index is less than its Trigger Level,
we will pay you a cash payment at maturity that is less than $10 per $10 principal amount Note resulting in a loss
on your principal amount proportionate to the negative Index Return of the Lesser Performing Index, equal to:
$10
× (1 + Lesser Performing Index Return) |
|
Index Return: |
|
With
respect to each Index:
Final
Index Level – Initial Index Level
Initial
Index Level |
| Lesser
Performing Index: |
|
The
Index with the lower Index Return |
| Lesser
Performing Index Return: |
|
The
lower of the Index Returns of the Indices |
| Initial
Index Level: |
|
With
respect to each Index, the closing level of that Index on on the Trade Date |
| Final
Index Level: |
|
With
respect to each Index, the closing level of that Index on the Final Valuation Date |
| Trigger
Level3: |
|
With
respect to each Index, 65% of its Initial Index Level |
| Coupon
Barrier3: |
|
With
respect to each Index, 65% of its Initial Index Level |
| 1 |
See footnote 1 under “Key Dates” on the front cover |
| 2 |
See footnote 2 under “Key Dates” on the front cover |
| 3 |
Rounded to two decimal places for the S&P 500® Index and rounded to three decimal places for the Russell 2000® Index |
| Investment
Timeline |
| |
|
|
| Trade
Date |
|
The
closing level of each Index (Initial Index Level) is observed, and the Trigger Level and the Coupon Barrier of each Index
and the Contingent Coupon Rate are determined. |
 |
|
|
| |
|
|
| |
|
|
Quarterly
(callable by JPMorgan Chase
at its election): |
|
If
the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation
Period, JPMorgan Chase will pay you a Contingent Coupon on the related Coupon Payment Date.
JPMorgan
Chase may, at its election and upon written notice to DTC, call the Notes on any Quarterly Observation End Date (other
than the Final Valuation Date), regardless of the closing level of either Index on that Quarterly Observation End Date.
If JPMorgan Chase elects to call the Notes, JPMorgan Chase will pay you a cash payment per Note equal to the principal
amount plus any Contingent Coupon otherwise due for the applicable Quarterly Observation Period, and no further payments
will be made on the Notes. |
| |
|
| |
|
| |
|
| Maturity
Date |
|
The
Final Index Level of each Index is determined as of the Final Valuation Date.
If
JPMorgan Chase does not elect to call the Notes, the Final Index Level of each Index is equal to or greater than its Trigger
Level, at maturity JPMorgan Chase will repay the principal amount equal to $10.00 per Note plus any Contingent Coupon
otherwise due on the Maturity Date.
If
JPMorgan Chase does not elect to call the Notes and the Final Index Level of either Index is less than its Trigger Level,
JPMorgan Chase will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal
amount proportionate to the decline of the Lesser Performing Index, equal to a return of:
$10
× (1 + Lesser Performing Index Return) per Note |
| |
|
|
| INVESTING IN THE NOTES
INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT AT MATURITY. YOU MAY RECEIVE FEW OR NO
QUARTERLY CONTINGENT COUPONS DURING THE TERM OF THE NOTES. YOU WILL BE EXPOSED TO THE MARKET RISK OF EACH INDEX ON EACH
DAY OF THE QUARTERLY OBSERVATION PERIODS AND ON THE FINAL VALUATION DATE AND ANY DECLINE IN THE LEVEL OF ONE INDEX MAY NEGATIVELY
AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE LEVEL OF THE OTHER
INDEX. ANY PAYMENT ON THE NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF JPMORGAN
CHASE. IF JPMORGAN CHASE WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU
UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. |
Quarterly
Observation Periods, Quarterly Observation End Dates and Coupon Payment Dates
Quarterly
Observation Periods Ending on the
Following Quarterly Observation End Dates |
Coupon
Payment Dates /
Call Settlement Dates (if called) |
| May
12, 2016 |
May
19, 2016 |
| August
12, 2016 |
August
19, 2016 |
| November
14, 2016 |
November
21, 2016 |
| February
13, 2017 |
February
21, 2017 |
| May
12, 2017 |
May
19, 2017 |
| August
14, 2017 |
August
21, 2017 |
| November
13, 2017 |
November
20, 2017 |
| February
12, 2018* (the Final Valuation Date) |
February
15, 2018* (the Maturity Date) |
*The Notes are
not callable at JPMorgan Chase’s election on the Final Valuation Date. Thus, the Maturity Date is not a Call Settlement
Date.
Each of the
Quarterly Observation End Dates, and therefore the Coupon Payment Dates, is subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to
Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement no. UBS-1a-I.
What
Are the Tax Consequences of the Notes?
You should
review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. UBS-1a-I. In determining our reporting responsibilities we intend to treat (i) the Notes for U.S. federal income
tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Coupons as ordinary income,
as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders
— Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement
no. UBS-1a-I. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable
treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
Sale,
Exchange or Redemption of a Note. Assuming the treatment described above is respected, upon a sale or exchange of the Notes
(including upon early redemption or redemption at maturity), you should recognize capital gain or loss equal to the difference
between the amount realized on the sale or exchange and your tax basis in the Notes, which should equal the amount you paid to
acquire the Notes (assuming Contingent Coupons are properly treated as ordinary income, consistent with the position referred
to above). This gain or loss should be short-term capital gain or loss unless you hold the Notes for more than one year, in which
case the gain or loss should be long-term capital gain or loss, whether or not you are an initial purchaser of the Notes at the
issue price. The deductibility of capital losses is subject to limitations. If you sell your Notes between the time your right
to a Contingent Coupon is fixed and the time it is paid, it is likely that you will be treated as receiving ordinary income equal
to the Contingent Coupon. Although uncertain, it is possible that proceeds received from the sale or exchange of your Notes prior
to a Quarterly Observation End Date but that can be attributed to an expected Contingent Coupon payment could be treated as ordinary
income. You should consult your tax adviser regarding this issue.
As described
above, there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any
income or loss on the Notes could be materially 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
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. 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 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.
Non-U.S.
Holders — Tax Considerations. The U.S. federal income tax treatment of Contingent Coupons is uncertain, and although
we believe it is reasonable to take a position that Contingent Coupons are not subject to U.S. withholding tax (at least if an
applicable Form W-8 is provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%,
subject to the possible reduction of that rate under an applicable income tax treaty), unless income from your Notes is effectively
connected with your conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable
to a permanent establishment in the United States). If you are not a United States person, you are urged to consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the Notes in light of your particular circumstances.
Non-U.S.
holders should also note that, notwithstanding anything to the contrary in the accompanying product supplement no. UBS-1a-I, recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the Notes.
FATCA.
Withholding under legislation commonly referred to as “FATCA” could apply to payments with respect to the Notes
that are treated as U.S.-source “fixed or determinable annual or periodical” income (“FDAP Income”) for
U.S. federal income tax purposes (such as interest, if the Notes are recharacterized, in whole or in part, as debt instruments,
or Contingent Coupons if they are otherwise treated as FDAP Income). Notwithstanding anything to the contrary in the accompanying
product supplement no. UBS-1a-I, under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds
(other than any amount treated as FDAP Income) of a taxable disposition, including an early redemption or redemption at maturity,
of the Notes. You should consult your tax adviser regarding the potential application of FATCA to the Notes.
In the event
of any withholding on the Notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
Key
Risks
An investment
in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in either or both of the
Indices. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement
no. UBS-1a-I and the “Risk Factors” section of the accompanying underlying supplement no. 1a-I. We also urge you to
consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
Risks
Relating to the Notes Generally
| ♦ | Your
Investment in the Notes May Result in a Loss — The Notes differ from ordinary
debt securities in that JPMorgan Chase will not necessarily repay the full principal
amount of the Notes. If JPMorgan Chase does not elect to call the Notes and the closing
level of either Index has declined below its Trigger Level on the Final Valuation Date,
you will be fully exposed to any depreciation of the Lesser Performing Index from its
Initial Index Level to its Final Index Level. In this case, JPMorgan Chase will repay
less than the full principal amount at maturity, resulting in a loss of principal that
is proportionate to the negative Index Return of the Lesser Performing Index. Under these
circumstances, you will lose 1% of your principal for every 1% that the Final Index Level
of the Lesser Performing Index is less than its Initial Index Level and could lose your
entire principal amount. As a result, your investment in the Notes may not perform as
well as an investment in a security that does not have the potential for full downside
exposure to either Index. |
| ♦ | Credit
Risk of JPMorgan Chase & Co. — The Notes are unsecured and unsubordinated
debt obligations of the Issuer, JPMorgan Chase & Co., and will rank pari passu
with all of our other unsecured and unsubordinated obligations. The Notes are not,
either directly or indirectly, an obligation of any third party. Any payment to be made
on the Notes, including any repayment of principal, depends on the ability of JPMorgan
Chase & Co. to satisfy its obligations as they come due. As a result, the actual
and perceived creditworthiness of JPMorgan Chase & Co. may affect the market value
of the Notes and, in the event JPMorgan Chase & Co. were to default on its obligations,
you may not receive any amounts owed to you under the terms of the Notes and you could
lose your entire investment. |
| ♦ | You
Are Not Guaranteed Any Contingent Coupons — We will not necessarily make periodic
coupon payments on the Notes. If the closing level of either Index is less than its Coupon
Barrier on any day during a Quarterly Observation Period, we will not pay you the Contingent
Coupon for that Quarterly Observation Period and the Contingent Coupon that would otherwise
be payable will not be accrued and will be lost. This will be the case even if the closing
level of the other Index is greater than or equal to its Coupon Barrier on each day during
that Quarterly Observation Period, and even if the closing level of that Index was higher
than its Coupon Barrier on every other day during the Quarterly Observation Period. If
the closing level of either Index is less than its Coupon Barrier on any day during each
Quarterly Observation Period, we will not pay you any Contingent Coupon during the term
of, and you will not receive a positive return on, your Notes. Generally, this non-payment
of the Contingent Coupon coincides with a period of greater risk of principal loss on
your Notes. |
| ♦ | Each
Quarterly Contingent Coupon Is Based on the Closing Levels of the Indices on Each Day
During the Applicable Quarterly Observation Period — Whether a Contingent Coupon
will be payable with respect to a Quarterly Observation Period will be based solely on
the closing levels of the Indices on each day during that Quarterly Observation Period.
If the closing level of either Index on any day during a Quarterly Observation Period
is less than its Coupon Barrier, you will not receive any Contingent Coupon with respect
to that Quarterly Observation Period. As a result, a Contingent Coupon for a Quarterly
Observation Period may be lost after the first day of such period, but you will not know
whether you will receive a Contingent Coupon for a Quarterly Observation Period until
the end of the related period. |
| ♦ | Return
on the Notes Limited to the Sum of Any Contingent Coupons and You Will Not Participate
in Any Appreciation of Either Index — The return potential of the Notes is
limited to the specified Contingent Coupon Rate, regardless of the appreciation of either
Index, which may be significant. In addition, the total return on the Notes will vary
based on the number of Quarterly Observation Periods during which the requirements for
a Contingent Coupon have been met prior to maturity or JPMorgan Chase electing to call
the Notes. Further, if JPMorgan Chase elects to call the Notes, you will not receive
any Contingent Coupons or any other payments in respect of any Quarterly Observation
Periods after the Call Settlement Date. If JPMorgan Chase does not elect to call the
Notes, you may be subject to the risk of decline in the level of each Index, even though
you are not able to participate in any potential appreciation of either Index. As
a result, the return on an investment in the Notes could be less than the return on a
hypothetical direct investment in either Index. In addition, if JPMorgan Chase does not
elect to call the Notes and the Final Index Level of either Index is below its Trigger
Level, you will lose some or all of your principal amount and the overall return on the
Notes may be less than the amount that would be paid on a conventional debt security
of JPMorgan Chase of comparable maturity. |
| ♦ | Because
the Notes Are Linked to the Lesser Performing Index, You Are Exposed to Greater Risks
of No Contingent Coupons and Sustaining a Significant Loss on Your Investment at Maturity
Than If the Notes Were Linked to a Single Index — The risk that you will not
receive any Contingent Coupons and lose some or all of your initial investment in the
Notes at maturity is greater if you invest in the Notes as opposed to substantially similar
securities that are linked to the performance of a single Index. With two Indices, it
is more likely that the closing level of either Index will be less than its Coupon Barrier
on any day during the Quarterly Observation Periods or less than its Trigger Level on
the Final Valuation Date. Therefore it is more likely that you will not receive any Contingent
Coupons and that you will suffer a significant loss on your investment at maturity. In
addition, the performance of the Indices may not be correlated or may be negatively correlated. |
The
lower the correlation between two Indices, the greater the potential for one of those Indices to close below its Coupon Barrier
or Trigger Level on any day during a Quarterly Observation Period or the Final Valuation Date, respectively. See “Correlation
of the Indices” below. Although the correlation of the Indices’ performance may change over the term of the Notes,
the Contingent Coupon Rate is determined, in part, based on the correlation of the Indices’ performance, as calculated using
JPMS’s internal models at the time when the terms of the
Notes are
finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Indices, which reflects
a greater potential for loss on your investment at maturity.
| ♦ | You
Are Exposed to the Risk of Decline in the Level of Each Index — Your return
on the Notes and your payment at maturity, if any, is not linked to a basket consisting
of the Indices. If JPMorgan Chase does not elect to call the Notes, your payment at maturity
is contingent upon the performance of each individual Index such that you will be fully
exposed to the risks related to each of the Indices. In addition, the performance of
the Indices may not be correlated. Poor performance by either of the Indices over the
term of the Notes may negatively affect whether you will receive a Contingent Coupon
on any Coupon Payment Date and your payment at maturity and will not be offset or mitigated
by positive performance by the other Index. Accordingly, your investment is subject to
the risk of decline in the value of each Index. |
| ♦ | Your
Payment at Maturity May Be Determined By the Lesser Performing Index — Because
the payment at maturity will be determined based on the performance of the Lesser Performing
Index, you will not benefit from the performance of the other Index. Accordingly,
if JPMorgan chase does not elect to call the Notes and the Final Index Level of either
Index is less than its Trigger Level, you will lose some or all of your principal amount
at maturity, even if the Final Index Level of the other Index is greater than or equal
to its Initial Index Level. |
| ♦ | Contingent
Repayment of Principal Applies Only If You Hold the Notes to Maturity — If
you are able to sell your Notes in the secondary market prior to maturity, you may have
to sell them at a loss relative to your initial investment even if the closing levels
of both of the Indices are above their respective Trigger Levels. If by maturity the
Notes have not been called, either JPMorgan Chase will repay you the full principal amount
per Note, with or without the Contingent Coupon, or, if either Index closes below its
Trigger Level on the Final Valuation Date, JPMorgan Chase will repay less than the principal
amount, if anything, at maturity, resulting in a loss on your principal amount that is
proportionate to the decline in the closing level of the Lesser Performing Index from
the Trade Date to the Final Valuation Date. This contingent repayment of principal applies
only if you hold your Notes to maturity. |
| ♦ | The
Probability That the Closing Level of Either Index Will Fall Below Its Coupon Barrier
on Any Day During Any Quarterly Observation Period or Its Trigger Level on the Final
Valuation Date Will Depend on the Volatility of That Index — “Volatility”
refers to the frequency and magnitude of changes in level of an Index. Greater expected
volatility with respect to an Index reflects a higher expectation as of the Trade Date
that the level of that Index could close below its Coupon Barrier on any day during any
Quarterly Observation Period, resulting in the loss of one or more Contingent Coupons,
or below its Trigger Level on the Final Valuation Date of the Notes, resulting in the
loss of some or all of your principal amount. In addition, the Contingent Coupon Rate
is a fixed rate and depends in part on this expected volatility. A higher Contingent
Coupon Rate is generally associated with greater expected volatility. However, each Index’s
volatility can change significantly over the term of the Notes. The level of either Index
could fall sharply, which could result in a loss of one or more Contingent Coupons and
a significant loss of principal. |
| ♦ | Call
and Reinvestment Risk — JPMorgan Chase may, in its sole discretion, elect to
call the Notes on any Quarterly Observation End Date (other than the Final Valuation
Date), regardless of the closing level of either Index on that Quarterly Observation
End Date. If JPMorgan Chase elects to call your Notes early, you will no longer have
the opportunity to receive any Contingent Coupons after the applicable Call Settlement
Date. The first Quarterly Observation End Date, and the first potential date on which
JPMorgan Chase may elect to call the Notes, occurs after approximately three months and
therefore you may not have the opportunity to receive any Contingent Coupons after approximately
three months. In the event JPMorgan Chase elects to call the Notes, there is no guarantee
that you would be able to reinvest the proceeds at a comparable return and/or with a
comparable Contingent Coupon Rate for a similar level of risk. |
It
is more likely that JPMorgan Chase will elect to call the Notes prior to maturity when the expected interest payable on the Notes
is greater than the interest that would be payable on other instruments issued by JPMorgan Chase of comparable maturity, terms
and credit rating trading in the market. The greater likelihood of JPMorgan Chase calling the Notes in that environment increases
the risk that you will not be able to reinvest the proceeds from the called Notes in an equivalent investment with a similar Contingent
Coupon Rate. JPMorgan Chase is less likely to call the Notes prior to maturity when the expected interest payable on the Notes
is less than the interest that would be payable on other comparable instruments issued by JPMorgan Chase, which includes when
the level of either of the Indices is less than its Coupon Barrier. Therefore, the Notes are more likely to remain outstanding
when the expected interest payable on the Notes is less than what would be payable on other comparable instruments and when your
risk of not receiving a Contingent Coupon is relatively higher.
| ♦ | 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 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. UBS-1a-I
for additional information about these risks. |
| ♦ | 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
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, 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 of the Notes 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 repurchases of your Notes by JPMS in an amount that will decline to zero over
an initial predetermined period. These costs can include selling commissions, 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 factor
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 levels of the Indices, 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 in the levels of the Indices; |
| ♦ | the
time to maturity of the Notes; |
| ♦ | whether
the closing level of either Index has been, or is expected to be, less than its Coupon Barrier on any day during any Quarterly
Observation Period and whether the Final Index Level of either Index is expected to be less than its Trigger Level; |
| ♦ | the
dividend rates on the equity securities underlying the Indices; |
| ♦ | the
actual and expected positive or negative correlation between the Indices, or the actual or expected absence of any such correlation; |
| ♦ | interest
and yield rates in the market generally; 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.
| ♦ | Investing
in the Notes Is Not Equivalent to Investing in the Stocks Composing the Indices —
Investing in the Notes is not equivalent to investing in the stocks included in the Indices.
As an investor in the Notes, you will not have any ownership interest or rights in the
stocks included in the Indices, such as voting rights, dividend payments or other distributions. |
| ♦ | We
Cannot Control Actions by the Sponsors of the Indices and the Sponsors Have No Obligation
to Consider Your Interests — We and our affiliates are not affiliated with
the sponsors of the Indices and have no ability to control or predict their actions,
including any errors in or discontinuation of public disclosure regarding methods or
policies relating to the calculation of the Indices. The index sponsors of the Indices
are not involved in these Note offerings in any way and have no obligation to consider
your interest as an owner of the Notes in taking any actions that might affect the market
value of your Notes. |
| ♦ | Your
Return on the Notes Will Not Reflect Dividends on the Stocks Composing the Indices
— Your return on the Notes will not reflect the return you would realize if you
actually owned the stock included in the Indices and received the dividends on the stock
included in the Indices. This is because the calculation agent will determine whether
the Notes will be called and whether a Contingent Coupon is payable. The calculation
agent will calculate the amount payable to you at maturity of the Notes by reference
to the closing level of each Index on the Final Valuation Date, without taking into consideration
the value of dividends on the stock included in that Index. |
| ♦ | No
Assurances That the Investment View Implicit in the Notes Will Be Successful —
While the Notes are structured to provide for Contingent Coupons if each Index does not
close below its Coupon Barrier on any day during the Quarterly Observation Periods, we
cannot assure you of the economic environment during the term or at maturity of your
Notes. |
| ♦ | 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. |
| ♦ | Potentially
Inconsistent Research, Opinions or Recommendations by JPMS, UBS or Their Affiliates
— JPMS, UBS or their affiliates may publish research, express opinions or provide
recommendations that are inconsistent with investing in or holding the Notes, and that
may be revised at any time. Any such research, opinions or recommendations may or may
not recommend that investors buy or hold the Indices and could affect the level of an
Index, and therefore the market value of the Notes. |
| ♦ | Tax
Treatment — Significant aspects of the tax treatment of the Notes are uncertain.
You should consult your tax adviser about your tax situation. |
| ♦ | Potential
JPMorgan Chase & Co. Impact on the Level of an Index — Trading or transactions
by JPMorgan Chase & Co. or its affiliates in an Index and/or over-the-counter options,
futures or other instruments with returns linked to the performance of an Index may adversely
affect the level of that Index and, therefore, the market value of the Notes. |
| ♦ | The
Final Terms and Valuation of the Notes Will Be Finalized on the Trade Date and 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 finalized on the Trade
Date and provided in the pricing supplement. In particular, each of JPMS’s estimated
value and the Contingent Coupon Rate will be finalized on the Trade Date and provided
in the pricing supplement, and each may be as low as the applicable minimum set forth
on the cover of this pricing supplement. Accordingly, you should consider your potential
investment in the Notes based on the minimums for JPMS’s estimated value and the
Contingent Coupon Rate. |
Risks
Relating to the Indices
| ♦ | We
Are Currently One of the Companies that Make Up the S&P 500® Index
— We are 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. |
| ♦ | An
Investment in the Notes is Subject to Risks Associated with Small Capitalization Stocks
with Respect to the Russell 2000®
Index — The equity securities included in the Russell
2000® Index are issued by companies with relatively small market
capitalization. The stock prices of smaller companies may be more volatile than stock
prices of large capitalization companies. Small capitalization companies may be less
able to withstand adverse economic, market, trade and competitive conditions relative
to larger companies. These companies tend to be less well-established than large market
capitalization companies. Small capitalization companies are less likely to pay dividends
on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions. |
Hypothetical
Examples
The examples
below illustrate the hypothetical payments on a Coupon Payment Date, upon an issuer-elected call or at maturity under different
hypothetical scenarios for a $10.00 Note on an offering of the Notes, with the assumptions set forth below.* We cannot predict
the closing level of either Index on any day during the term of the Notes, including on any day during any Quarterly Observation
Period or on the Final Valuation Date. You should not take these examples as an indication or assurance of the expected performance
of the Notes. Numbers in the examples below have been rounded for ease of analysis. In these examples, we refer to the S&P
500® Index and the Russell 2000® Index
as the “SPX Index” and the “RTY Index,” respectively.
| Principal
Amount: |
$10.00 |
| Term: |
Approximately 2 years (unless earlier called) |
| Hypothetical Initial
Index Level: |
100.00 for the SPX Index and 100.000 for
the RTY Index |
| Hypothetical Contingent
Coupon Rate: |
10.00% per annum (or 2.50% per quarter) |
Quarterly Observation
Periods/Quarterly
Observation End Dates: |
Quarterly |
| Hypothetical Trigger
Level: |
65.00 for the SPX Index and 65.000 for
the RTY Index (which, with respect to each Index, is 65% of the hypothetical Initial Index Level of that Index) |
| Hypothetical Coupon
Barrier: |
65.00 for the SPX Index and 65.000 for
the RTY Index (which, with respect to each Index, is 65% of the hypothetical Initial Index Level of that Index) |
| * |
Terms used for
purposes of these hypothetical examples may not represent the actual Contingent Coupon Rate, Initial Index Levels, Coupon
Barriers or Trigger Levels. The actual Contingent Coupon Rate will be finalized on the Trade Date and provided
in the pricing supplement. The hypothetical Initial Index Levels of 100.00 for the SPX Index and 100.000 for the
RTY Index have been chosen for illustrative purposes only and do not represent the actual Initial Index Level for either Index. The
actual Initial Index Level and resulting Trigger Level and Coupon Barrier of each Index will be based on the closing level
of that Index on the Trade Date. For historical data regarding the actual closing levels of the Indices, please
see the historical information set forth under the sections titled “The S&P 500®Index” and
“The Russell 2000® Index” below. |
The
examples below are hypothetical. These examples are intended to illustrate (a) the effect of an issuer-elected call, (b) how the
payment of a Contingent Coupon with respect to any Quarterly Observation Period will depend on whether the closing level of either
Index is less than its Coupon Barrier on any day during that Quarterly Observation Period, (c) how the value of the payment at
maturity on the Notes will depend on whether the Final Index Level of either Index is less than its Trigger Level and (d) how
the total return on the Notes may be less than the total return on a direct investment in any Index or both Indices in certain
scenarios. The “total return” as used in this pricing supplement is the number, expressed as a percentage, that results
from comparing the total payments per $10.00 principal amount Note over the term of the Notes to the $10.00 initial issue price.
Example 1 —
JPMorgan Chase Elects to Call the Notes on the First Quarterly Observation End Date
| Quarterly
Observation Period |
|
Lowest
Closing Level During Applicable Quarterly Observation Period |
|
Payment
(per Note) |
| First
Quarterly Observation Period |
|
SPX
Index: 105.00
RTY
Index: 90.000 |
|
Issuer
elects to call the Notes. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period;
Issuer pays Contingent Coupon of $0.25 on Call Settlement Date. |
| Total
Payments (per $10.00 Note): |
|
Payment
on Call Settlement Date: |
$10.25
($10.00 + $0.25) |
| |
|
Total: |
$10.25 |
| |
|
Total
Return: |
2.50% |
On
the first Quarterly Observation End Date, JPMorgan Chase elects to call the Notes. Because the closing level of each Index is
above its applicable Coupon Barrier on each day during the first Quarterly Observation Period, JPMorgan Chase will pay you on
the Call Settlement Date $10.25 per $10.00 principal amount Note, which is equal to your principal amount plus the Contingent
Coupon due on the Coupon Payment Date that is also the Call Settlement Date. No further amounts will be owed to you under the
Notes.
Example 2
— Notes Are NOT Called and the Final Index Level of Each Index Is Above Its Trigger Level
| Quarterly
Observation Period |
|
Lowest
Closing Level During Applicable Quarterly Observation Period |
|
Final
Index Level |
|
Payment
(per Note) |
| First
Quarterly Observation Period |
|
SPX
Index: 115.00
RTY
Index: 105.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly
Observation Period; Issuer pays Contingent Coupon of $0.25 on first Coupon Payment Date. |
| Second
Quarterly Observation Period |
|
SPX
Index: 80.00
RTY
Index: 90.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly
Observation Period; Issuer pays Contingent Coupon of $0.25 on second Coupon Payment Date. |
| Third
Quarterly Observation Period |
|
SPX
Index: 85.00
RTY
Index: 45.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly
Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. |
| Fourth
to Seventh Quarterly Observation Periods |
|
Various
(at least one Index below Coupon Barrier) |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least
one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon
Payment Dates. |
| Eighth
Quarterly Observation Period (the final Quarterly Observation Period) |
|
SPX
Index:
110.00
RTY
Index: 80.000 |
|
SPX
Index: 110.00
RTY
Index: 85.000 |
|
Notes
NOT callable. Final Index Level of each Index above its Trigger Level and closing level of each Index above its Coupon Barrier
on each day during Quarterly Observation Period; Issuer repays principal plus pays Contingent Coupon of $0.25 on Maturity
Date. |
| Total
Payments (per $10.00 Note): |
|
Payment
at Maturity: |
$10.25
($10.00 + $0.25) |
| |
|
Prior
Contingent Coupons: |
$0.50
($0.25 × 2) |
| |
|
Total: |
$10.75 |
| |
|
Total
Return: |
7.50% |
In
this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index
Level of each Index is greater than or equal to its Trigger Level and the closing level of each Index is greater than or equal
to its Coupon Barrier on each day during the final Quarterly Observation Period, JPMorgan Chase will pay you on the Maturity Date
$10.25 per $10.00 principal amount Note, which is equal to your principal amount plus the Contingent Coupon due on the
Coupon Payment Date that is also the Maturity Date.
In
addition, because the closing level of each Index was greater than or equal to its Coupon Barrier on each day during the first
and second Quarterly Observation Periods, JPMorgan Chase will pay the Contingent Coupon of $0.25 on the first and second Coupon
Payment Dates. However, because the closing level of at least one Index was less than its Coupon Barrier on at least one day during
each of the third through seventh Quarterly Observation Periods, JPMorgan Chase will not pay any Contingent Coupon on the Coupon
Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Chase will have paid a total of $10.75
per $10.00 principal amount Note for a 7.50% total return over the approximately two (2) year term of the Notes.
Example 3
— Notes Are NOT Called and the Final Index Level of Each Index Is Above Its Trigger Level
| Quarterly
Observation Period |
|
Lowest
Closing Level During Applicable Quarterly Observation Period |
|
Final
Index Level |
|
Payment
(per Note) |
| First
Quarterly Observation Period |
|
SPX
Index: 115.00
RTY
Index: 105.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly
Observation Period; Issuer pays Contingent Coupon of $0.25 on first Coupon Payment Date. |
| Second Quarterly
Observation Period |
|
SPX
Index: 80.00
RTY
Index: 90.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly
Observation Period; Issuer pays Contingent Coupon of $0.25 on second Coupon Payment Date. |
| Third Quarterly
Observation Period |
|
SPX
Index: 85.00
RTY
Index: 60.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly
Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. |
| Fourth to Seventh
Quarterly Observation Periods |
|
Various
(at least one Index below Coupon Barrier) |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least
one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon
Payment Dates. |
| Eighth Quarterly
Observation Period (the final Quarterly Observation Period) |
|
SPX
Index: 90.00
RTY
Index: 60.000 |
|
SPX
Index: 110.00
RTY
Index: 80.000 |
|
Notes
NOT callable. Final Index Level of each Index above its Trigger Level but closing level of RTY Index below its Coupon Barrier
on at least one day during Quarterly Observation Period; Issuer repays principal but does not pay Contingent Coupon. |
| Total
Payments (per $10.00 Note): |
|
Payment
at Maturity: |
$10.00 |
| |
|
Prior
Contingent Coupons: |
$0.50
($0.25 × 2) |
| |
|
Total: |
$10.50 |
| |
|
Total Return: |
5.00% |
In
this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index
Level of each Index is greater than or equal to its Trigger Level but the closing level of at least one Index is less than its
Coupon Barrier on at least one day during the final Quarterly Observation Period, JPMorgan Chase will pay you on the Maturity
Date $10.00 per $10.00 principal amount Note, which is equal to your principal amount, but JPMorgan Chase will not pay any Contingent
Coupon on the Maturity Date.
In addition,
because the closing level of each Index was greater than or equal to its Coupon Barrier on each day during the first and second
Quarterly Observation Periods, JPMorgan Chase will pay the Contingent Coupon of $0.25 on the first and second Coupon Payment Dates.
However, because the closing level of at least one Index was less than its Coupon Barrier on at least one day during each of the
third through seventh Quarterly Observation Periods, JPMorgan Chase will not pay any Contingent Coupon on the Coupon Payment Dates
following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Chase will have paid a total of $10.50 per $10.00
principal amount Note for a 5.00% total return over the approximately two (2) year term of the Notes.
Example
4 — Notes Are NOT Called and the Final Index Level of Either Index Is Below Its Trigger Level
| Quarterly
Observation Period |
|
Lowest
Closing Level During Applicable Quarterly Observation Period |
|
Final
Index Level |
|
Payment
(per Note) |
| First
Quarterly Observation Period |
|
SPX
Index: 40.00
RTY
Index: 30.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of each Index below its Coupon Barrier on at least one day during
Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date. |
| Second Quarterly
Observation Period |
|
SPX
Index: 45.00
RTY
Index: 80.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of SPX Index below its Coupon Barrier on at least one day during Quarterly
Observation Period; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date. |
| Third Quarterly
Observation Period |
|
SPX
Index: 45.00
RTY
Index: 80.000 |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of SPX Index below its Coupon Barrier on at least one day during Quarterly
Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. |
| Fourth to Seventh
Quarterly Observation Periods |
|
Various
(at least one Index below Coupon Barrier) |
|
N/A |
|
Notes
NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least one day
during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon Payment
Dates. |
| Eighth
Quarterly Observation Period (the final Quarterly Observation Period) |
|
SPX
Index: 45.00
RTY
Index: 80.000 |
|
SPX
Index: 45.00
RTY
Index: 80.000 |
|
Notes
NOT callable. Closing level of SPX Index below its Trigger Level; Issuer DOES NOT pay Contingent Coupon on Maturity Date,
and Issuer will repay less than the principal amount resulting in a loss proportionate to the decline of the Lesser Performing
Index. |
| Total
Payments (per $10.00 Note): |
|
Payment
at Maturity: |
$4.50 |
| |
|
Prior
Contingent Coupons: |
$0.00 |
| |
|
Total: |
$4.50 |
| |
|
Total
Return: |
-55.00% |
| |
|
|
|
|
|
|
|
|
In this example,
the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index Level of
at least one Index is less than its Trigger Level on the Final Valuation Date, at maturity, JPMorgan Chase will pay you a total
of $4.50 per $10.00 principal amount, for a -55.00% total return on the Notes, calculated as follows:
$10.00
× (1 + Lesser Performing Index Return)
Step 1: Determine
the Index Return of each Index:
Index
Return of the SPX Index:
| Final
Index Level – Initial Index Level |
= |
45.00
– 100.00 |
=
-55.00% |
| Initial
Index Level |
100.00 |
Index
Return of the RTY Index:
| Final
Index Level – Initial Index Level |
= |
80.000
– 100.000 |
=
-20.00% |
| Initial
Index Level |
100.000 |
Step 2: Determine
the Lesser Performing Index. The SPX Index is the Index with the lower Index Return.
Step 3: Calculate
the Payment at Maturity:
$10.00
× (1 + Lesser Performing Index Return) = $10.00 × (1 + -55.00%) = $4.50
In addition, because
the closing level of at least one Index is less than its Coupon Barrier on at least one day during each Quarterly Observation
Period, JPMorgan Chase will not pay any Contingent Coupons over the term of the Notes. Accordingly,
JPMorgan Chase will have paid a total of $4.50 per $10.00 principal amount Note for a -55.00% total return over the approximately
two (2) year term of the Notes.
The
Indices
Included
on the following pages is a brief description of the Indices. This information has been obtained from publicly available sources,
without independent verification. Set forth below is a table that provides the quarterly high and low closing levels of each Index.
This information given below is for the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015. Partial data is provided
for the first calendar quarter of 2016. We obtained the closing levels information set forth below from the Bloomberg Professional®
service (“Bloomberg”), without independent verification. You should not take the historical levels of
either Index as an indication of future performance.
The
S&P 500® Index
The
S&P 500® Index consists of stocks of 500 companies selected to provide a performance benchmark for the
U.S. equity markets. For additional information about the S&P 500® Index, see the information set forth
under “Equity Index Descriptions — The S&P 500® Index” in the accompanying underlying
supplement no. 1a-I.
Historical
Information
The following
table sets forth the quarterly high and low closing levels of the S&P 500® Index,
based on daily closing levels of the Index as reported by Bloomberg, without independent verification. The closing level of the
S&P 500® Index on February 11, 2016 was 1,829.08. The actual Initial Index Level of
the S&P 500® Index will be the closing level of the Index on the Trade Date. We obtained
the closing levels of the S&P 500® Index above and below from Bloomberg, without independent
verification. You should not take the historical levels of the Index as an indication of future performance.
| Quarter
Begin |
Quarter
End |
Quarterly
Closing High |
Quarterly
Closing Low |
Close |
| 1/1/2011 |
3/31/2011 |
1,343.01 |
1,256.88 |
1,325.83 |
| 4/1/2011 |
6/30/2011 |
1,363.61 |
1,265.42 |
1,320.64 |
| 7/1/2011 |
9/30/2011 |
1,353.22 |
1,119.46 |
1,131.42 |
| 10/1/2011 |
12/31/2011 |
1,285.09 |
1,099.23 |
1,257.60 |
| 1/1/2012 |
3/31/2012 |
1,416.51 |
1,277.06 |
1,408.47 |
| 4/1/2012 |
6/30/2012 |
1,419.04 |
1,278.04 |
1,362.16 |
| 7/1/2012 |
9/30/2012 |
1,465.77 |
1,334.76 |
1,440.67 |
| 10/1/2012 |
12/31/2012 |
1,461.40 |
1,353.33 |
1,426.19 |
| 1/1/2013 |
3/31/2013 |
1,569.19 |
1,457.15 |
1,569.19 |
| 4/1/2013 |
6/30/2013 |
1,669.16 |
1,541.61 |
1,606.28 |
| 7/1/2013 |
9/30/2013 |
1,725.52 |
1,614.08 |
1,681.55 |
| 10/1/2013 |
12/31/2013 |
1,848.36 |
1,655.45 |
1,848.36 |
| 1/1/2014 |
3/31/2014 |
1,878.04 |
1,741.89 |
1,872.34 |
| 4/1/2014 |
6/30/2014 |
1,962.87 |
1,815.69 |
1,960.23 |
| 7/1/2014 |
9/30/2014 |
2,011.36 |
1,909.57 |
1,972.29 |
| 10/1/2014 |
12/31/2014 |
2,090.57 |
1,862.49 |
2,058.90 |
| 1/1/2015 |
3/31/3015 |
2,117.39 |
1,992.67 |
2,067.89 |
| 4/1/2015 |
6/30/2015 |
2,130.82 |
2,057.64 |
2,063.11 |
| 7/1/2015 |
9/30/2015 |
2,128.28 |
1,867.61 |
1,920.03 |
| 10/1/2015 |
12/31/2015 |
2,109.79 |
1,923.82 |
2,043.94 |
| 1/1/2016 |
2/11/2016* |
2,016.71 |
1,829.08 |
1,829.08 |
| * |
As of the date of this pricing
supplement, available information for the first calendar quarter of 2016 includes data for the period from January 1, 2016
through February 11, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and
“Close” data indicated are for this shortened period only and do not reflect complete data for the first
calendar quarter of 2016. |
The graph
below illustrates the daily performance of the S&P 500® Index from January 3, 2006 through February 11, 2016,
based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Trigger Level
and Coupon Barrier of 1,188.90, equal to 65% of the closing level of the S&P 500® Index on February 11, 2016.
The actual Trigger Level and Coupon Barrier will be based on the closing level of the Index on the Trade Date (the Initial Index
Level) and will each equal 65% of the Initial Index Level of the S&P 500® Index.
Past
performance of the Index is not indicative of the future performance of the S&P 500® Index.
The
Russell 2000® Index
The Russell
2000® Index consists of the middle 2,000 companies included in the Russell 3000E™
Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell
3000® Index. The Russell 2000® Index is designed
to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell
2000® Index, see the information set forth under “Equity Index Descriptions —
The Russell Indices” in the accompanying underlying supplement no. 1a-I.
Historical
Information Regarding the Russell 2000® Index
The following table
sets forth the quarterly high and low closing levels of the Russell 2000® Index, based on daily closing levels
of the Index as reported by Bloomberg, without independent verification. The closing level of the Russell 2000®
Index on February 11, 2016 was 953.715. The actual Initial Index Level of the Russell 2000® Index will be the closing
level of the Index on the Trade Date. We obtained the closing levels of the Russell 2000® Index above and below
from Bloomberg, without independent verification. Although Russell Investments publishes the closing levels of the Russell 2000®
Index to six decimal places, Bloomberg publishes the closing levels of the Russell 2000® Index to only three
decimal places. You should not take the historical levels of the Russell 2000® Index as an indication of
future performance.
| Quarter
Begin |
Quarter
End |
Quarterly
High |
Quarterly
Low |
Close |
| 1/1/2011 |
3/31/2011 |
843.549 |
773.184 |
843.549 |
| 4/1/2011 |
6/30/2011 |
865.291 |
777.197 |
827.429 |
| 7/1/2011 |
9/30/2011 |
858.113 |
643.421 |
644.156 |
| 10/1/2011 |
12/31/2011 |
765.432 |
609.490 |
740.916 |
| 1/1/2012 |
3/31/2012 |
846.129 |
747.275 |
830.301 |
| 4/1/2012 |
6/30/2012 |
840.626 |
737.241 |
798.487 |
| 7/1/2012 |
9/30/2012 |
864.697 |
767.751 |
837.450 |
| 10/1/2012 |
12/31/2012 |
852.495 |
769.483 |
849.350 |
| 1/1/2013 |
3/31/2013 |
953.068 |
872.605 |
951.542 |
| 4/1/2013 |
6/30/2013 |
999.985 |
901.513 |
977.475 |
| 7/1/2013 |
9/30/2013 |
1,078.409 |
989.535 |
1,073.786 |
| 10/1/2013 |
12/31/2013 |
1,163.637 |
1,043.459 |
1,163.637 |
| 1/1/2014 |
3/31/2014 |
1,208.651 |
1,093.594 |
1,173.038 |
| 4/1/2014 |
6/30/2014 |
1,192.964 |
1,095.986 |
1,192.964 |
| 7/1/2014 |
9/30/2014 |
1,208.150 |
1,101.676 |
1,101.676 |
| 10/1/2014 |
12/31/2014 |
1,219.109 |
1,049.303 |
1,204.696 |
| 1/1/2015 |
3/31/3015 |
1,266.373 |
1,154.709 |
1,252.772 |
| 4/1/2015 |
6/30/2015 |
1,295.799 |
1,215.417 |
1,253.947 |
| 7/1/2015 |
9/30/2015 |
1,273.328 |
1,083.907 |
1,100.688 |
| 10/1/2015 |
12/31/2015 |
1,204.159 |
1,097.552 |
1,135.889 |
| 1/1/2016 |
2/11/2016* |
1,110.439 |
953.715 |
953.715 |
| * | As
of the date of this pricing supplement, available information for the first calendar
quarter of 2016 includes data for the period from January 1, 2016 through February 11,
2016. Accordingly, the “Quarterly High,” “Quarterly Low” and
“Close” data indicated are for this shortened period only and do not reflect
complete data for the first calendar quarter of 2016. |
The graph
below illustrates the daily performance of the Russell 2000® Index from January 3, 2006 through February 11, 2016,
based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Trigger Level
and Coupon Barrier of 619.915, equal to 65% of the closing level of the Russell 2000® Index on February 11, 2016.
The actual Trigger Level and Coupon Barrier will be based on the closing level of the Index on the Trade Date (the Initial Index
Level) and will each equal 65% of the Initial Index Level of the Russell 2000® Index.
Past performance
of the Index is not indicative of the future performance of the Russell 2000® Index.
Correlation
of the Indices
The graph
below illustrates the daily performance of the S&P 500® Index and the Russell 2000® Index
from January 3, 2006 through February 11, 2016. For comparison purposes, each Index has been normalized to have a closing level
of 100.00 on January 3, 2006 by dividing the closing level of that Index on each day by the closing level of that Index on January
3, 2006 and multiplying by 100.00. We obtained the closing levels used to determine the normalized closing levels set forth below
from Bloomberg, without independent verification.
Past
performance of the Indices is not indicative of the future performance of the Indices.
The correlation
of a pair of Indices represents a statistical measurement of the degree to which the returns of those Indices were similar to
each other over a given period in terms of timing and direction (i.e., positive or negative). Set forth below is a table
that provides the correlation of the Indices, calculated based on the daily returns of the Indices from January 3, 2006 through
February 11, 2016, based on information from Bloomberg, without independent verification. You should not take the historical correlations
of the Indices as an indication of future correlation.
| |
S&P
500® Index |
Russell
2000® Index |
| S&P
500® Index |
— |
0.925 |
| Russell
2000® Index |
0.925 |
— |
A correlation
of 1.000 for a pair of Indices represents a perfect positive correlation. This means that the closing levels of that pair of Indices
have moved in the same direction and the ratio of their daily returns has been constant. A correlation of -1.000 for a pair of
Indices represents a perfect negative correlation. This means that the closing levels of that pair of Indices have moved in the
opposite direction and the ratio of their daily returns has been constant. A correlation of 0.000 for a pair of Indices means
that the Indices are uncorrelated. This means that there is no statistical relationship between the daily returns of that pair
of Indices. The closer the correlation of a pair of Indices is to 1.000, the more positively correlated those Indices are. The
closer the correlation of a pair of Indices is to -1.000, the more negatively correlated those Indices. The closer the correlation
of a pair of Indices is to 0.000, the less correlated those Indices are. The lower the correlation between two Indices, the greater
the potential for one of those Indices to close below its Coupon Barrier or Trigger Level on any day during a Quarterly Observation
Period or the Final Valuation Date, respectively.
The correlations set forth above are based on the historical performance
of the Indices, and you should not take those historical correlations as an indication of future correlation. In addition, the
correlations set forth above are not the same as the correlations referenced in setting the terms of the Notes. The correlations
referenced in setting the terms of the notes are calculated using JPMS’ internal models and are not derived from the daily
returns of the Indices over the period set forth above. Although the correlation of the Indices’ performance may change over
the term of the Notes, the Contingent Coupon Rate is determined, in part, based on the correlations of the Indices’ performance
calculated using JPMS’ internal models at the time when the terms of the Notes are finalized. A higher Contingent Coupon
Rate is generally associated with lower correlation of the Indices, which reflects a greater potential for missed Contingent Coupons
and for a loss on your investment at maturity.
Supplemental
Plan of Distribution
We have
agreed to indemnify UBS and JPMS against liabilities under the Securities Act of 1933, as amended, or to contribute to payments
that UBS may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. We
will agree that UBS may sell all or a part of the Notes that it purchases from us to the public or its affiliates at the price
to public indicated on the cover hereof.
Subject
to regulatory constraints, JPMS intends to offer to purchase the Notes in the secondary market, but it is not required to do so.
We or our
affiliates 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 Notes, 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” in this pricing supplement and “Use
of Proceeds and Hedging” beginning on page PS-43 of the accompanying product supplement no. UBS-1a-I.
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 “Key Risks —
Risks Relating to the Notes Generally — 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 “Key Risks — Risks Relating to the Notes Generally —
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 UBS, 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 “Key Risks — Risks Relating to the Notes Generally — 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 “Key Risks — Risks Relating to the Notes
Generally — 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 up to five months. The length of any such initial period reflects secondary
market volumes for the Notes, 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 “Key
Risks — Risks Relating to the Notes Generally — 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 “Hypothetical Examples” in this pricing supplement for an illustration of the risk-return profile of the Notes
and “The Indices” 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 UBS, 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.
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