Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-209682
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 May
3, 2016.
Pricing Supplement to the
Prospectus
and Prospectus Supplement, each dated April 15, 2016
, the
Underlying Supplement No. 1-I dated April
15, 2016
, and the
Product Supplement No. 4-I dated April 15, 2016
No.
Medium-Term Notes, Series E
$
Capped Buffered Enhanced Participation Basket-Linked
Notes due 2018
The notes will not bear interest.
The amount that you will be paid on your notes on the stated maturity date (May 10, 2018, subject to
adjustment) is based on the performance of an unequally weighted basket (which we refer to as the basket) consisting of the EURO STOXX 50
®
Index (37.00% initial weight), the FTSE
®
100 Index (23.00% initial weight), the TOPIX
®
Index (23.00% initial weight), the Swiss Market Index (9.00% initial weight) and the
S&P/ASX 200 Index (8.00% initial weight) as measured from and including the trade date (on or about May 6, 2016) to and including the determination date (May 7, 2018, subject to adjustment). The initial basket level is 100 and the final
basket level will equal the
sum
of the products, as calculated for each basket underlier, of: (i) the final basket underlier level
divided
by the initial basket underlier level (set on the trade date)
multiplied by
(ii) the applicable initial weighted value for such basket underlier. If the final basket level on the determination date is greater than the initial basket level (set on the trade date), the return on your
notes will be positive, subject to the maximum settlement amount (expected to be between $1,249.00 and $1,292.50 for each $1,000 principal amount note). If the basket declines by up to 10.00% from the initial basket level to the final basket level,
you will receive the principal amount of your notes. If the basket declines by more than 10.00% from the initial basket level to the final basket level, the return on your notes will be negative.
You could lose your entire investment in the
notes. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
To determine your payment at maturity, we will calculate the
basket return, which is the percentage increase or decrease in the final basket level from the initial basket level. On the stated maturity date, for each $1,000 principal amount note, you will receive an amount in cash equal to:
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if the basket return is
positive
(the final basket level is
greater than
the initial basket level), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) 1.50
times
(c) the basket return, subject to the maximum settlement amount;
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if the basket return is
zero
or
negative
but
not below
-10.00% (the final basket level is
equal to
or
less than
the initial basket level but not by more than 10.00%), $1,000; or
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if the basket return is
negative
and is
below
-10.00% (the final basket level is
less than
the initial basket level by more than 10.00%), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) approximately 1.1111
times
(c) the sum of the basket return
plus
10.00%. You will receive less than $1,000.
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A decrease in the level of one or more basket underliers may offset increases in the levels of the other basket underliers. Due to the unequal weightings of the
basket underliers, the performances of the EURO STOXX 50
®
Index, the FTSE
®
100 Index and the TOPIX
®
Index will have a significantly larger impact on your return on the notes than the performance of the Swiss Market Index or the S&P/ASX 200 Index.
Your investment in the notes involves certain risks, including, among other things, our credit risk. See Risk Factors on page PS-10 of the accompanying
product supplement no. 4-I, Risk Factors on page US-2 of the accompanying underlying supplement no. 1-I and Selected Risk Factors on page PS-16 of this pricing supplement.
The foregoing is only a brief summary of the terms of your notes. You should read the additional disclosure provided herein so that you may better understand the terms
and risks of your investment.
If the notes priced today and assuming a maximum settlement amount equal to the middle 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 $979.90 per $1,000 principal amount note. JPMSs estimated value of the notes, when the terms of the notes are set, will be
provided by JPMS in the final pricing supplement and will not be less than $969.90 per $1,000 principal amount note.
See Summary Information JPMSs Estimated Value of the Notes on page PS-8 of this pricing supplement
for additional information about JPMSs estimated value and Summary Information Secondary Market Prices of the Notes on page PS-8 of this pricing supplement for information about secondary market prices of the notes.
Original issue date (settlement date):
on or about May 13, 2016
Original issue price:
100.00% of the principal amount*
Underwriting
commission/discount:
up to 2.00% of the principal amount*
Net proceeds to the issuer:
% of the principal amount
See Summary Information Supplemental Use of Proceeds on page PS-8 of this pricing supplement for information about the components of the
original issue price of the notes.
*JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to an
unaffiliated dealer. In no event will these selling commissions exceed 2.00% of the principal amount. See Plan of Distribution (Conflicts of Interest) on page PS-88 of the accompanying product supplement no. 4-I. The original issue price
will be 98.00% of the principal amount for investors in certain fee-based advisory accounts; see Supplemental Plan of Distribution on page PS-6 of this pricing supplement.
Neither the Securities and Exchange Commission (the SEC) nor any other regulatory body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this pricing supplement, the accompanying product supplement, the accompanying underlying supplement, the accompanying prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal
offense.
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.
Pricing Supplement dated ,
2016
The original issue price, fees and commissions and net proceeds listed above relate to the notes we sell initially. We may
decide to sell additional notes after the date of this pricing supplement, at issue prices and with fees and commission and net proceeds that differ from the amounts set forth above. The return (whether positive or negative) on your investment in
notes will depend in part on the price you pay for your notes.
We may use this pricing supplement in the initial sale of the notes. In addition, JPMS
or any other affiliate of ours may use this pricing supplement in a market-making transaction in a note after its initial sale.
Unless JPMS or its agents inform the purchaser otherwise in the confirmation of sale, this pricing supplement is
being used in a market-making transaction.
SUMMARY INFORMATION
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
April 15, 2016 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. 4-I dated April 15, 2016 and underlying supplement no. 1-I dated
April 15, 2016.
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. 4-I and Risk Factors in the accompanying underlying supplement no. 1-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):
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Product supplement no. 4-I dated April
15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
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●
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Underlying supplement no. 1-I dated April
15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
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●
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Prospectus supplement and prospectus, each dated April
15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.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.
Key Terms
Issuer:
JPMorgan Chase & Co.
Basket underliers and
initial weights:
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Basket Underlier
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Basket Underlier
Sponsor
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Bloomberg Ticker
Symbol
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Initial Weight
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EURO STOXX
50
®
Index
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STOXX Limited
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SX5E <Index>
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37.00%
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FTSE
®
100
Index
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FTSE International
Limited
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UKX <Index>
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23.00%
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TOPIX
®
Index
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Tokyo Stock Exchange,
Inc.
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TPX <Index>
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23.00%
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Swiss Market Index
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SIX Swiss Exchange
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SMI <Index>
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9.00%
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S&P/ASX 200 Index
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S&P Dow Jones Indices
LLC
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AS51 <Index>
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8.00%
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The accompanying product supplement refers to each basket underlier as an Underlying.
PS-3
Principal amount:
each note will have a principal amount of $1,000;
$ in the aggregate for all the offered notes; the aggregate principal amount of the offered notes may be increased if the issuer, at its sole option, decides to sell an
additional amount of the offered notes on a date subsequent to the date of this pricing supplement
Purchase at amount other than principal amount:
the
amount we will pay you at the stated maturity date for your notes will not be adjusted based on the price you pay for your notes, so if you acquire notes at a premium (or discount) to the principal amount and hold them to the stated maturity date,
it could affect your investment in a number of ways. The return on your investment in the notes will be lower (or higher) than it would have been had you purchased the notes at the principal amount. Also, the stated buffer level would not offer the
same benefit to your investment as would be the case if you had purchased the notes at the principal amount. Additionally, the cap level would be triggered at a lower or higher percentage return than indicated below, relative to your initial
investment. See Selected Risk Factors If You Purchase Your Notes at a Premium to the Principal Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the Principal Amount and the Impact of Certain Key
Terms of the Notes Will Be Negatively Affected on page PS-18 of this pricing supplement.
Payment on the stated maturity date:
for each $1,000
principal amount note, we will pay you on the stated maturity date an amount in cash equal to:
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if the final basket level is
greater than
or
equal to
the cap level, the maximum settlement amount;
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if the final basket level is
greater than
the initial basket level but
less than
the cap level, the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate
times
(c) the basket return;
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if the final basket level is
equal to
or
less than
the initial basket level but
greater than
or
equal to
the buffer level, $1,000; or
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if the final basket level is
less than
the buffer level, the
sum
of (i) $1,000
plus
(ii) the product of (a) $1,000
times
(b) the buffer rate
times
(c) the sum
of the basket return
plus
the buffer amount. You will receive less than $1,000.
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Initial basket level:
Set equal to 100 on the trade
date
Initial weighted value:
the initial weighted value for each of the basket underliers will equal the product of the initial weight of that basket
underlier
times
the initial basket level. The initial weight of each basket underlier is shown in the table below:
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Basket Underlier
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Initial Weight in Basket
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EURO STOXX 50
®
Index
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37.00%
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FTSE
®
100 Index
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23.00%
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TOPIX
®
Index
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23.00%
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Swiss Market Index
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9.00%
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S&P/ASX 200 Index
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8.00%
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Initial basket underlier level (to be set on the trade date and will be the closing level of the applicable basket underlier on the
trade date):
with respect to each basket underlier, the closing level of the basket underlier on the trade date
Final basket level:
the basket
closing level of the basket on the determination date
PS-4
Basket closing level:
the basket closing level on any relevant day will be the sum of the products of (i) the
closing level of each basket underlier on that day
divided by
the initial basket underlier level of that basket underlier
and
(ii) the initial weighted value of that basket underlier
Basket return:
the
quotient
of (i) the final basket level
minus
the initial basket level
divided
by (ii) the initial basket level, expressed as a percentage.
Upside participation rate:
1.50
Cap level (to be provided in the final pricing supplement):
expected to be between 116.60% and 119.50% of the initial basket level
Maximum settlement amount (to be provided in the final pricing supplement):
expected to be between $1,249.00 and $1,292.50
Buffer level:
90.00% of the initial basket level
Buffer
amount:
10.00%
Buffer rate:
the
quotient
of the initial basket level
divided
by the buffer level, which
equals approximately 1.1111
Trade date:
on or about May 6, 2016
Original issue date (settlement date):
on or about May 13, 2016
Determination date:
May 7, 2018, 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 on page PS-47 of the accompanying product supplement
Stated
maturity date:
May 10, 2018, subject to postponement in the event of a market disruption event and as described under General Terms of Notes Postponement of a Payment Date on page PS-45 of the accompanying product
supplement. The accompanying product supplement refers to the stated maturity date as the maturity date.
No interest:
The offered notes
will not bear interest.
No listing:
The offered notes will not be listed on any securities exchange or interdealer quotation system.
No redemption:
The offered notes will not be subject to redemption right or price dependent redemption right.
Closing level:
as described under The Underlyings Indices Level of an Index on page PS-66 of the accompanying product
supplement
Business day:
as described under General Terms of Notes Postponement of a Payment Date on page PS-45 of the
accompanying product supplement
Scheduled trading day:
notwithstanding anything to the contrary under General Terms of Notes
Postponement of a Determination Date Additional Defined Terms on page PS-49 of the accompanying product supplement, for the purposes of the notes offered by this pricing supplement, a scheduled trading day means,
(a) with respect to the EURO STOXX 50
®
Index or any relevant successor index (as defined in the accompanying product supplement), a day, as determined by the calculation agent, on which
(i) the Index Sponsor (as defined in the accompanying product supplement) of the EURO STOXX 50
®
Index or that successor index, as applicable, is scheduled to publish the closing level of
the EURO STOXX 50
®
Index or that successor index, as applicable, and (ii) each exchange or quotation system where trading has a material effect (as determined by the calculation agent) on
the overall market for futures or options contracts relating to the EURO STOXX 50
®
Index or that successor index, as applicable, is scheduled to be open for trading for its regular trading
session; or (b) with respect
PS-5
to each of the other basket underliers or any relevant successor index, a day, as determined by the calculation agent, on which each of the following exchanges or quotation systems is scheduled
to be open for its regular trading session: (i) the relevant exchange (as defined in the accompanying product supplement) for that basket underlier or successor index, as applicable, and (ii) each exchange or quotation system where trading
has a material effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to that basket underlier or successor index, as applicable.
Disrupted day:
notwithstanding anything to the contrary under General Terms of Notes Postponement of a Determination Date Additional Defined
Terms on page PS-49 of the accompanying product supplement, for the purposes of the notes offered by this pricing supplement, a disrupted day means, (a) with respect to the EURO STOXX 50
®
Index or any relevant successor index, a scheduled trading day on which (i) the closing level of the EURO STOXX 50
®
Index or that
successor index, as applicable, is not calculated and published by the Index Sponsor of the EURO STOXX 50
®
Index or that successor index, as applicable, (ii) any exchange or quotation
system where trading has a material effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to the EURO STOXX 50
®
Index or that
successor index, as applicable, fails to open for trading during its regular trading session or (iii) a market disruption event has occurred, or (b) with respect to each of the other basket underliers or any relevant successor index, a
scheduled trading day on which (i) any of the following exchanges or quotation systems fails to open for trading during its regular trading session: (1) the relevant exchange for that basket underlier or successor index, as applicable, and
(2) each exchange or quotation system where trading has a material effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to that basket underlier or successor index, as applicable, or
(ii) a market disruption event has occurred.
Use of proceeds and hedging:
as described under Use of Proceeds and Hedging on page
PS-44 of the accompanying product supplement no. 4-I, as supplemented by Supplemental Use of Proceeds below
Tax treatment:
You
should review carefully the section entitled Material U.S. Federal Income Tax Consequences in the accompanying product supplement no. 4-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. 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.
PS-6
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, 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.
ERISA:
as described under Benefit Plan Investor Considerations on page PS-100 of the accompanying product supplement no. 4-I
Supplemental plan of distribution:
as described under Plan of Distribution (Conflicts of Interest) on page PS-88 of the accompanying product
supplement no. 4-I; we estimate that our share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $ . We expect to agree to
sell to JPMS, and JPMS expects to agree to purchase from us, the aggregate principal amount of the notes specified on the front cover of this pricing supplement. JPMS proposes initially to offer the notes to the public at the original issue price
set forth on the cover page of this pricing supplement, and to certain unaffiliated securities dealers at that price less a concession not in excess of 2.00% of the principal amount. The original issue price for notes purchased by certain fee-based
advisory accounts will be 98.00% of the principal amount of the notes, which will reduce the selling commissions specified on the cover of this pricing supplement with respect to those notes to 0.00%.
We expect to deliver the notes against payment therefor in New York, New York on or about May 13, 2016, which is the fifth scheduled business day following the
date of this pricing supplement and of the pricing of the notes. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to any
such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business days before delivery will be required, by virtue of the fact that the notes are initially expected to settle in five business
days (T + 5), to specify alternative settlement arrangements to prevent a failed settlement.
Conflicts of interest:
JPMS has a conflict of
interest within the meaning of FINRA Rule 5121 in any offering of the notes in which it participates because we own, directly or indirectly, all of the outstanding equity securities of JPMS and because the net proceeds received from the sale
of the notes will be used, in part, by JPMS or its affiliates in connection with hedging our obligations under the notes. The offering of the notes will comply with the requirements of Rule 5121 of Financial Industry Regulatory Authority, Inc.
(FINRA) regarding a FINRA member firms underwriting of securities of an affiliate. In accordance with FINRA Rule 5121, neither JPMS nor any other affiliated agent of ours may make sales in the offering of the notes to any of its
discretionary accounts without the specific written approval of the customer.
Calculation agent:
JPMS
CUSIP no.:
48128GWT3
ISIN no.:
US48128GWT39
FDIC:
the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations
of, or guaranteed by, a bank.
Supplemental Terms of the Notes
For purposes of the notes offered by this pricing supplement:
(a) any reference to
calculating the closing level of that Index prior to the commencement of the market disruption event (or prior to the non-trading day) under General Terms of Notes Postponement of a Determination Date Notes Linked to
Multiple Underlyings in the accompanying product supplement will be deemed to refer to calculating the closing level of that Index last in effect prior to the commencement of the initial Disrupted Day; and
PS-7
(b) all references to each of the following terms used in the accompanying product supplement will be deemed to refer to
the corresponding term used in this pricing supplement, as set forth in the table below:
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Product Supplement Term
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Pricing Supplement Term
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Underlying
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basket underlier
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pricing date
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trade date
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maturity date
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stated maturity date
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term sheet
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preliminary pricing supplement
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In addition, the following terms used in this pricing supplement are not defined in the accompanying product supplement: basket return,
initial basket level, initial basket underlier level, final basket level, final basket underlier level, initial weight, upside participation rate, maximum settlement amount, cap level, buffer level, buffer amount and buffer rate. Accordingly,
please refer to Key Terms on page PS-3 of this pricing supplement for the definitions of these terms.
JPMSs Estimated Value of
the Notes
The estimated value of the notes when the terms of the notes are set, which we refer to as JPMSs 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. JPMSs 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 JPMSs estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. For additional information, see Selected Risk
Factors JPMSs Estimated Value Is Not Determined by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt on page PS-17 of this pricing supplement. The value of the derivative or derivatives underlying the economic terms
of the notes is derived from JPMSs 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, JPMSs 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 Factors JPMSs Estimated Value Does Not Represent Future Values of the Notes and May Differ from Others
Estimates on page PS-17 of this pricing supplement.
JPMSs 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 the unaffiliated dealer, 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. A portion of the profits realized in hedging our obligations under the notes, if any, may be allowed to other affiliated
or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits. See Selected Risk Factors JPMSs Estimated Value of the Notes Will Be Lower Than the Original Issue Price of the
Notes on page PS-17 of 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 Factors Secondary Market Prices of the Notes
Will Be Impacted by Many Economic and Market Factors on page PS-18 of 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 the period from the date of this pricing supplement through August 8, 2016. 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
PS-8
activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by JPMS. See Selected Risk Factors The Value of the Notes as Published by JPMS
(and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMSs Then-Current Estimated Value of the Notes for a Limited Time Period on page PS-17 of this pricing supplement.
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 on page PS-10 of this pricing supplement for an illustration of the risk-return profile of the notes
and The Basket and the Basket Underliers on page PS-21 of this pricing supplement for a description of the market exposure provided by the notes.
The
original issue price of the notes is equal to JPMSs estimated value of the notes, plus the selling commissions paid to JPMS and the unaffiliated dealer, 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.
PS-9
HYPOTHETICAL EXAMPLES
The following table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results and
are intended merely to illustrate the impact that the various hypothetical basket closing levels or hypothetical closing levels of the basket underliers, as applicable, on the determination date could have on the payment at maturity assuming all
other variables remain constant.
The examples below are based on a range of final basket levels and closing levels of the basket underliers that are entirely
hypothetical; no one can predict what the basket closing level will be on any day throughout the term of your notes, and no one can predict what the final basket level will be on the determination date. The basket underliers have been highly
volatile in the past meaning that the levels of the basket underliers have changed considerably in relatively short periods and their performances cannot be predicted for any future period.
The information in the following examples reflects hypothetical rates of return on the offered notes assuming that they are purchased on the original issue date at the
principal amount and held to the stated maturity date. If you sell your notes in a secondary market prior to the stated maturity date, your return will depend upon the market value of your notes at the time of sale, which may be affected by a number
of factors that are not reflected in the table below, such as interest rates, the volatility of the basket underliers and our creditworthiness. In addition, JPMSs estimated value will be less than the original issue price. For more information
on the JPMSs estimated value, see Summary Information JPMSs Estimated Value of the Notes on page PS-8 of this pricing supplement. The information in the table also reflects the key terms and assumptions in the box
below.
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Key Terms and Assumptions
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Principal amount
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$1,000
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Upside participation rate
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1.50
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Cap level
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116.60% of the initial basket level
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Maximum settlement amount
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$1,249.00
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Buffer level
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90.00% of the initial basket level
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Buffer rate
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approximately 1.1111
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Buffer amount
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10.00%
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The originally scheduled determination date is not a disrupted day with respect to any basket underlier
During the term of the notes, each basket underlier is not discontinued, the method of calculating
each basket underlier does not change in any material respect and each basket underlier is not modified so that its level does not, in the opinion of the calculation agent, fairly represent the level of that basket underlier had those modifications
not been made
Notes purchased on original issue date at the principal amount and held to the
stated maturity date
|
Moreover, we have not yet set the initial basket underlier levels that will serve as the baselines for determining the basket return and
the amount that we will pay on your notes, if any, at maturity. We will not do so until the trade date. As a result, the actual initial basket underlier level of each basket underlier may differ substantially from that basket underlier level prior
to the trade date.
For these reasons, the actual performance of the basket over the term of your notes, as well as the amount payable at maturity, if any, may bear
little relation to the hypothetical examples shown below or to the historical level of each basket underlier shown elsewhere in this pricing supplement. For information about the historical levels of each basket underlier during recent periods, see
The Basket and the Basket Underliers Historical Closing Levels of the Basket Underliers below. Before investing in the offered notes, you should consult publicly available information to determine the levels of the basket
underliers between the date of this pricing supplement and the date of your purchase of the offered notes.
PS-10
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S.
tax treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the basket underliers.
The levels in the left column of the table below represent hypothetical final basket levels and are expressed as percentages of the initial basket level. The amounts in
the right column represent the hypothetical payments at maturity, based on the corresponding hypothetical final basket level (expressed as a percentage of the initial basket level), and are expressed as percentages of the principal amount of a note
(rounded to the nearest one-thousandth of a percent). Thus, a hypothetical payment at maturity of 100.000% means that the value of the cash payment that we would deliver for each $1,000 of the outstanding principal amount of the offered notes on the
stated maturity date would equal 100.000% of the principal amount of a note, based on the corresponding hypothetical final basket level (expressed as a percentage of the initial basket level) and the assumptions noted above.
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Hypothetical Final Basket Level
(as Percentage of Initial Basket Level)
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Hypothetical Payment at Maturity
(as Percentage of Principal Amount)
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150.000%
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124.900%
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140.000%
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124.900%
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130.000%
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124.900%
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120.000%
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124.900%
|
110.000%
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124.900%
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116.600%
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124.900%
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105.000%
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107.500%
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102.500%
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103.750%
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100.000%
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100.000%
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95.000%
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100.000%
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90.000%
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100.000%
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80.000%
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88.889%
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75.000%
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83.333%
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50.000%
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55.556%
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25.000%
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27.778%
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0.000%
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0.000%
|
If, for example, the final basket level were determined to be 25.000% of the initial basket level, the payment that we would deliver on
your notes at maturity would be approximately 27.778% of the principal amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the principal amount and held them to the stated
maturity date, you would lose approximately 72.222% of your investment (if you purchased your notes at a premium to principal amount you would lose a correspondingly higher percentage of your investment). In addition, if the final basket level were
determined to be 150.000% of the initial basket level, the payment that we would deliver on your notes at maturity would be capped at the maximum settlement amount (expressed as a percentage of the principal amount), or 124.900% of each $1,000
principal amount note, as shown in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase in the final basket level over 116.600% of the initial basket level.
The following chart also shows a graphical illustration of the hypothetical payments at maturity (expressed as a percentage of the principal amount of your notes) that
we would pay on your notes on the stated maturity date, if the final basket level (expressed as a percentage of the initial basket level) were any of the hypothetical levels shown on the horizontal axis. The chart shows that any hypothetical final
basket level (expressed as a percentage of the initial basket level) of less than 90.000% (the section left of the 90.000% marker on the horizontal axis) would result in a hypothetical payment at maturity of less than 100.000% of the principal
amount of your notes (the section below the 100.000% marker on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. The chart also shows that any hypothetical final basket level (expressed as a percentage of the
initial basket level) of greater than or equal to 116.600% (the section right of the 116.600% marker on the horizontal axis) would result in a capped return on your investment.
PS-11
The following examples illustrate the hypothetical payment at maturity on each $1,000 principal amount note based on hypothetical
initial basket underlier levels, each of which we refer to as an initial level, and closing levels of the basket underliers on the determination date, each of which we refer to as a final level, calculated based on the key
terms and assumptions above. The levels in Column A represent the hypothetical initial level for each basket underlier, and the levels in Column B represent hypothetical final levels for each basket underlier. The percentages in Column C represent
hypothetical final levels for each basket underlier in Column B expressed as percentages of the corresponding hypothetical initial levels in Column A. The amounts in Column D represent the initial weighted values of each basket underlier, and the
amounts in Column E represent the
products
of the percentages in Column C
times
the corresponding amounts in Column D. The final basket level for each example is shown beneath each example, and will equal the
sum
of the five
products shown in Column E. The basket return for each example is shown beneath the final basket level for such example, and will equal the
quotient
of (i) the final basket level for such example
minus
the initial basket level
divided
by (ii) the initial basket level, expressed as a percentage. The values below have been rounded for ease of analysis.
Example 1: The final
basket level is greater than the cap level. The payment at maturity will equal the maximum settlement amount.
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Column A
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Column B
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Column C
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Column D
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Column E
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Basket Underlier
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Hypothetical
Initial Level
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Hypothetical
Final Level
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Column B /
Column A
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Initial
Weighted
Value
|
|
Column C ×
Column D
|
EURO STOXX 50
®
Index
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3,000.00
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|
4,500.00
|
|
150%
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37.00
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55.50
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FTSE
®
100 Index
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6,200.00
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9,300.00
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150%
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23.00
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34.50
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TOPIX
®
Index
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1,350.00
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2,025.00
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150%
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23.00
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34.50
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Swiss Market Index
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8,000.00
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12,000.00
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150%
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9.00
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13.50
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S&P/ASX 200 Index
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5,200.00
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7,800.00
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150%
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8.00
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12.00
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Final Basket Level:
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150.00
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Basket Return:
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50.00%
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In this example, all of the hypothetical final levels for the basket underliers are greater than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being greater than the initial
PS-12
basket level of 100.00. However, because the hypothetical final basket level of 150.00 is greater than the cap level, the hypothetical payment at maturity will equal the maximum settlement amount
of $1,249.00.
Example 2: The final basket level is greater than the initial basket level but less than the cap level. The payment at maturity exceeds the $1,000
principal amount but is less than the maximum settlement amount.
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Column A
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Column B
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Column C
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Column D
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Column E
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Basket Underlier
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Hypothetical
Initial Level
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Hypothetical
Final Level
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Column B /
Column A
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Initial
Weighted
Value
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Column C ×
Column D
|
EURO STOXX 50
®
Index
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3,000.00
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3,150.00
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105%
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37.00
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38.85
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FTSE
®
100 Index
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6,200.00
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6,510.00
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105%
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23.00
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24.15
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TOPIX
®
Index
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1,350.00
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1,417.50
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105%
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23.00
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24.15
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Swiss Market Index
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8,000.00
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8,400.00
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105%
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9.00
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9.45
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S&P/ASX 200 Index
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5,200.00
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5,460.00
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105%
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8.00
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8.40
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Final Basket Level:
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105.00
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Basket Return:
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5.00%
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In this example, all of the hypothetical final levels for the basket underliers are greater than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being greater than the initial basket level of 100.00. Because the hypothetical final basket level of 105.00 exceeds the initial basket level but is less than the cap level, the
hypothetical payment at maturity will equal:
Payment at maturity = $1,000 + ($1,000 × 1.50 × 5.00%) = $1,075.00
Example 3: The final basket level is less than the initial basket level but greater than the buffer level. The payment at maturity will equal the $1,000 principal
amount.
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Basket Underlier
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Column A
Hypothetical
Initial Level
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Column B
Hypothetical
Final Level
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Column C
Column B /
Column A
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Column D
Initial Weighted
Value
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Column E
Column C ×
Column D
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EURO STOXX 50
®
Index
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3,000.00
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2,850.00
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95%
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37.00
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35.15
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FTSE
®
100 Index
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6,200.00
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5,890.00
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95%
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23.00
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21.85
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TOPIX
®
Index
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1,350.00
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1,282.50
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95%
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23.00
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21.85
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Swiss Market Index
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8,000.00
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7,600.00
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95%
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9.00
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8.55
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S&P/ASX 200 Index
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5,200.00
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4,940.00
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95%
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8.00
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7.60
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Final Basket Level:
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95.00
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Basket Return:
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-5.00%
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In this example, all of the hypothetical final levels for the basket underliers are less than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being less than the initial basket level of 100.00. However, because the hypothetical final basket level of 95.00 is not less than the buffer level, the hypothetical payment at maturity
will equal the $1,000 principal amount.
PS-13
Example 4: The final basket level is less than the buffer level. The payment at maturity is less than the $1,000
principal amount.
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Column A
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Column B
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Column C
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Column D
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Column E
|
Basket Underlier
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Hypothetical
Initial Level
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Hypothetical
Final Level
|
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Column B /
Column A
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Initial
Weighted
Value
|
|
Column C ×
Column D
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EURO STOXX 50
®
Index
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3,000.00
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|
1,500.00
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50%
|
|
37.00
|
|
18.50
|
FTSE
®
100 Index
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6,200.00
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6,200.00
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100%
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|
23.00
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23.00
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TOPIX
®
Index
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1,350.00
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1,350.00
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100%
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23.00
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23.00
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Swiss Market Index
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8,000.00
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10,800.00
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135%
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9.00
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12.15
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S&P/ASX 200 Index
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5,200.00
|
|
7,020.00
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135%
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8.00
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10.80
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Final Basket Level:
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87.45
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Basket Return:
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-12.55%
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In this example, the hypothetical final level of the EURO STOXX 50
®
Index is
less than its hypothetical initial level, while the hypothetical final levels of the FTSE
®
100 Index and TOPIX are equal to their applicable hypothetical initial levels and the hypothetical
final levels of the Swiss Market Index and S&P/ASX 200 Index are greater than their applicable initial levels.
Because the basket is unequally weighted,
increases in the lower weighted basket underliers will be offset by decreases in the more heavily weighted basket underliers. In this example, the large decline in the EURO STOXX 50
®
Index
results in the hypothetical final basket level being less than the buffer level of 90.00% of the initial basket level, even though the FTSE
®
100 Index and TOPIX remained flat and the Swiss
Market Index and the S&P/ASX 200 Index increased.
Because the hypothetical final basket level of 87.45 is less than the buffer level of 90.00% of the initial
basket level, the hypothetical payment at maturity will equal:
Payment at maturity = $1,000 + [$1,000 × 1.1111 × (-12.55% + 10.00%)] =
$971.67
Example 5: The final basket level is less than the buffer level. The payment at maturity is less than the $1,000 principal amount.
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Column A
|
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Column B
|
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Column C
|
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Column D
|
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Column E
|
Basket Underlier
|
|
Hypothetical
Initial Level
|
|
Hypothetical
Final Level
|
|
Column B /
Column A
|
|
Initial
Weighted
Value
|
|
Column C ×
Column D
|
EURO STOXX 50
®
Index
|
|
3,000.00
|
|
4,500.00
|
|
150%
|
|
37.00
|
|
55.50
|
FTSE
®
100 Index
|
|
6,200.00
|
|
1,550.00
|
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25%
|
|
23.00
|
|
5.75
|
TOPIX
®
Index
|
|
1,350.00
|
|
337.50
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25%
|
|
23.00
|
|
5.75
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Swiss Market Index
|
|
8,000.00
|
|
2,000.00
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25%
|
|
9.00
|
|
2.25
|
S&P/ASX 200 Index
|
|
5,200.00
|
|
1,300.00
|
|
25%
|
|
8.00
|
|
2.00
|
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Final Basket Level:
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71.25
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|
Basket Return:
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-28.75%
|
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In this example, although the hypothetical final level for one of the basket underliers is greater than its applicable hypothetical
initial level, the hypothetical final levels of the other basket underliers decrease significantly from their hypothetical initial levels, which results in the hypothetical final basket level being less than the buffer level. Because the
hypothetical final basket level of 71.25 is less than the buffer level, the hypothetical payment at maturity will equal:
Payment at maturity =
$1,000 + [$1,000 × 1.1111 × (-28.75% + 10.00%)] = $791.67
PS-14
The payments at maturity shown above are entirely hypothetical; they are based on closing levels for the basket underliers
that may not be achieved on the determination date and on assumptions that may prove to be erroneous. The actual market value of your notes on the stated maturity date or at any other time, including any time you may wish to sell your notes, may
bear little relation to the hypothetical payments at maturity shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical payments at maturity on notes held to
the stated maturity date in the examples above assume you purchased your notes at their principal amount and have not been adjusted to reflect the actual price you pay for your notes. The return on your investment (whether positive or negative) in
your notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the principal amount, the return on your investment will differ from, and may be significantly lower than, the hypothetical returns
suggested by the above examples. Please read Selected Risk Factors Secondary Market Prices of the Notes Will Be Impacted by Many Economic and Market Factors on page PS-18 of this pricing supplement.
The hypothetical returns 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 secondary market. If these fees and expenses were included, the hypothetical returns shown above would likely be lower.
We cannot predict the actual final basket level or what the market value of your notes will be on any particular
day, nor can we predict the relationship between the level of each basket underlier and the market value of your notes at any time prior to the stated maturity date. The actual amount that you will receive, if any, at maturity and the rate of return
on the offered notes will depend on the actual initial basket underlier level of each basket underlier, cap level and maximum settlement amount we will provide in the final pricing supplement and the actual final basket level determined by the
calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if any, on the stated maturity date may
be very different from the information reflected in the table and chart above.
PS-15
SELECTED RISK FACTORS
An investment in your notes is subject to the risks described below, as well as the risks described under Risk
Factors in the accompanying product supplement no. 4-I and Risk Factors in the accompanying underlying supplement no.
1-I. Your
notes are a riskier investment than ordinary debt
securities. Also, your notes are not equivalent to investing directly in the underlier stocks, i.e., the stocks underlying the basket underliers that compose the basket to which your notes are linked. You should carefully consider whether the
offered notes are suited to your particular circumstances.
You May Lose Some or All of Your Investment in the Notes
The notes do not guarantee any return of principal. The return on the notes at maturity is linked to the performance of the basket and will depend on whether, and the
extent to which, the basket return is positive or negative. Your investment will be exposed to loss on a leveraged basis if the final basket level is less than the initial basket level by more than 10%. For every 1% that the final basket level is
less than the initial basket level by more than 10%, you will lose an amount equal to approximately 1.1111% of the principal amount of your notes. Accordingly, you could lose some or all of your initial investment at maturity. Also, the market price
of your notes prior to the stated maturity date may be significantly lower than the purchase price you pay for your notes. Consequently, if you sell your notes before the stated maturity date, you may receive far less than the amount of your
investment in the notes.
Your Maximum Gain on the Notes Is Limited to the Maximum Settlement Amount
If the final basket level is greater than the initial basket level, for each $1,000 principal amount note, you will receive at maturity a payment that will not exceed
the maximum settlement amount, regardless of the appreciation in the basket, which may be significant. Accordingly, the amount payable on your notes may be significantly less than it would have been had you invested directly in the basket
underliers. The maximum settlement amount will be provided in the final pricing supplement and is expected to be between $1,249.00 and $1,292.50.
The Notes Are Subject to the 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 of Interest
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 JPMSs estimated value. Also, the distributor from which you purchase the notes may conduct hedging activities for us in connection with the notes. In performing these duties, our economic interests, the economic interests of any
distributor performing such duties 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, and the business
activities of any distributor from which you purchase the notes, 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. If the distributor from which you purchase
notes is to conduct hedging activities for us in connection with the notes, that distributor may profit in connection with such hedging activities and such profit, if any, will be in addition to the compensation that the distributor receives for the
sale of the notes to you. You should be aware that the potential to earn fees in connection with hedging activities may create a further incentive for the distributor to sell the notes to you in addition to the compensation they would receive for
the sale of the notes. Please refer to Risk Factors
PS-16
Risks Relating to Conflicts of Interest on page PS-16 of the accompanying product supplement no. 4-I for additional information about these risks.
JPMSs Estimated Value of the Notes Will Be Lower Than the Original Issue Price of the Notes
JPMSs estimated value is only an estimate using several factors. The original issue price of the notes will exceed JPMSs 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 Summary Information JPMSs Estimated Value of the Notes on page PS-8 of this pricing supplement.
JPMSs Estimated Value Does Not Represent Future Values of the Notes and May Differ from Others Estimates
JPMSs estimated value of the notes is determined by reference to JPMSs 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 JPMSs 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 JPMSs 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 Summary Information JPMSs Estimated Value of the Notes on page PS-8 of this pricing supplement.
JPMSs 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 JPMSs 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 Summary Information JPMSs Estimated Value of the Notes on page
PS-8 of 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 JPMSs 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 projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads
for structured debt issuances. See Summary Information Secondary Market Prices of the Notes on page PS-8 of 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
PS-17
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 on page PS-20 of this pricing supplement.
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 basket underliers, including:
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any actual or potential change in our creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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secondary market credit spreads for structured debt issuances;
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the actual and expected volatility of the basket underliers;
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the time to maturity of the notes;
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the dividend rates on the underlier stocks;
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the actual or expected positive or negative correlation between the basket underliers, or the absence of any such correlation;
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interest and yield rates in the market generally;
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and the currencies in which the underlier stocks of the basket underliers are traded and the correlation between those rates and the
closing levels of the basket underliers; and
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a variety of other economic, financial, political, regulatory and judicial events.
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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.
We May Sell an Additional Aggregate Principal Amount of the Notes at a Different Issue Price
At our sole option, we may decide to sell an additional aggregate principal amount of the notes subsequent to the date of this pricing supplement. The issue
price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing supplement.
If You Purchase Your Notes at a Premium to the Principal Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the
Principal Amount and the Impact of Certain Key Terms of the Notes Will Be Negatively Affected
The amount you will be paid for your notes on the stated maturity
date will not be adjusted based on the price you pay for the notes. If you purchase notes at a price that differs from the principal amount of the notes, then the return on your investment in the notes held to the stated maturity date will differ
from, and
PS-18
may be substantially less than, the return on notes purchased at the principal amount. If you purchase your notes at a premium to the principal amount and hold them to the stated maturity date
the return on your investment in the notes will be lower than it would have been had you purchased the notes at the principal amount or a discount to the principal amount. In addition, the impact of the buffer level and the cap level on the return
on your investment will depend upon the price you pay for your notes relative to the principal amount. For example, if you purchase your notes at a premium to the principal amount, the cap level will permit only a lower percentage increase in your
investment in the notes than would have been the case for notes purchased at the principal amount. Similarly, the buffer level, while still providing an increase in the return on the notes if the final basket level is greater than or equal to the
buffer level but less than the cap level, will allow a greater percentage decrease in your investment in the notes than would have been the case for notes purchased at the principal amount or a discount to the principal amount.
Correlation (or Lack of Correlation) of the Basket Underliers
The notes are linked to an unequally weighted basket. Performances of the basket underliers may or may not be correlated with each other. At a time when the values of
one or more of the basket underliers increases, the values of the other basket underliers may not increase as much or may even decline. Therefore, in calculating the final basket level, increases in the value of one or more of the basket underliers
may be moderated, or more than offset, by the lesser increases or declines in the values of other basket underliers. Further, because the basket underliers are unequally weighted, increases in the values of the lower-weighted basket underliers may
be offset by even smaller decreases in values of the more heavily weighted basket underliers. In addition, high correlation of movements in the basket underliers during periods of negative returns among the basket underliers could have an adverse
effect on the payment at maturity on the notes. There can be no assurance that the final basket level will be higher than the initial basket level.
No Interest or Dividend Payments or Voting Rights
As a
holder of the notes, you will not receive interest payments. As a result, even if the amount payable for your notes on the stated maturity date exceeds the principal amount of your notes, the overall return you earn on your notes may be less than
you would have earned by investing in a non-basket-linked debt security of comparable maturity that bears interest at a prevailing market rate. In addition, as a holder of the notes, you will not have voting rights or rights to receive cash
dividends or other distributions or other rights that holders of the underlier stocks would have.
The Notes Do Not Provide 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 basket underlier stocks are based, although any currency fluctuations could affect the performance of the basket underlier. 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.
The Notes Are Subject to Risks
Associated with Securities Issued by Non-U.S. Companies
The underlier stocks that compose the basket underliers 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 the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those
markets, governmental intervention in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S.
companies that are subject to the reporting requirements of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable
to U.S. reporting companies. The 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.
PS-19
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 Final 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 final pricing supplement. In particular, each of JPMSs estimated value, the cap level and the maximum settlement amount will be provided in the final 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 JPMSs estimated value, the cap level and the maximum settlement amount.
The Tax Consequences of an Investment in the Notes Are Uncertain
There is no direct legal authority as to the proper U.S. federal income tax characterization of the notes, and we do not intend to request a ruling from the IRS. The
IRS might not accept, and a court might not uphold, the treatment of the notes described in Key Terms Tax treatment in this pricing supplement and in Material U.S. Federal Income Tax Consequences in the accompanying
product supplement no. 4-I. If the IRS were successful in asserting an alternative treatment for the notes, the timing and character of any income or loss on the notes could differ materially and adversely from our description herein. In addition,
in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar instruments. The notice focuses in particular on whether to require investors in these
instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the
underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be
subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate
transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive
effect. You should review carefully the section entitled Material U.S. Federal Income Tax Consequences in the accompanying product supplement no. 4-I and 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.
PS-20
THE BASKET AND THE BASKET UNDERLIERS
The Basket
The basket is an unequally weighted basket
composed of five indices with the initial weights within the basket set forth in the table below:
Basket Underlier Information as of May 2,
2016
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Basket Underlier
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Bloomberg
Ticker Symbol
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Initial Weight in
Basket
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Basket Underlier
Closing Level
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EURO STOXX 50
®
Index
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SX5E
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37.00%
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3,032.60
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FTSE
®
100
Index
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UKX
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23.00%
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6,241.89*
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TOPIX
®
Index
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TPX
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23.00%
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1,299.96
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Swiss Market Index
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SMI
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9.00%
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7,977.77
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S&P/ASX 200 Index
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AS51
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8.00%
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5,242.969
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*
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The closing level of FTSE
®
100 Index reflects the close on April 29, 2016. The closing level of
FTSE
®
100 Index on May 2, 2016 was not available due to local exchange holidays in observance of International Labor Day.
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The EURO STOXX 50
®
Index
The EURO STOXX 50
®
Index consists of 50 component stocks of market sector leaders from within the Eurozone. The
EURO STOXX 50
®
Index and STOXX
®
are the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland
and/or its licensors (the Licensors), which are used under license. The notes based on the EURO STOXX 50
®
Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited
and its Licensors and neither STOXX Limited nor any of its Licensors shall have any liability with respect thereto. For additional information about the EURO STOXX 50
®
Index, see the
information set forth under Equity Index Descriptions The EURO STOXX 50
®
Index on page US-23 of the accompanying underlying supplement no. 1-I.
FTSE
®
100 Index
The FTSE
®
100 Index is an index calculated, published and disseminated by FTSE, a company owned by the London
Stock Exchange (LSE). The FTSE
®
100 Index measures the composite price performance of stocks of the largest 100 companies (determined on the basis of market capitalization) traded
on the LSE. For additional information about the FTSE
®
100 Index, see the information set forth under Equity Index Descriptions The FTSE
TM
100 Index on page US-31 of the accompanying underlying supplement no. 1-I.
The TOPIX
®
Index
The TOPIX
®
Index, also known as the Tokyo
Stock Price Index, is a capitalization weighted index of all the Japanese common stocks listed on the First Section of the Tokyo Stock Exchange, Inc., which we refer to as the TSE. Japanese stocks admitted to the TSE are assigned either
to the TSE First Section, the TSE Second Section or the TSE Mothers. Stocks listed in the First Section, which number approximately 1,800, are among the most actively traded stocks on the TSE. For additional information about the TOPIX
®
Index, see the information set forth under Equity Index Descriptions The TOPIX
®
Index on page US-97 of the accompanying
underlying supplement no. 1-I.
The Swiss Market Index
The Swiss Market Index (SMI
®
) is a free-float adjusted market capitalization-weighted price return
index of the Swiss equity market. The SMI
®
is sponsored, calculated, maintained and published by SIX Swiss
PS-21
Exchange Ltd. The SMI
®
comprises the 20 most highly capitalized and liquid stocks of the Swiss Performance Index
®
. For additional information about the Swiss Market Index, see the information set forth under Equity Index Descriptions The Swiss Market Index on page US-95 of the accompanying
underlying supplement.
The S&P/ASX 200 Index
The
S&P/ASX 200 Index measures the performance of the 200 largest index-eligible stocks listed on the Australian Securities Exchange by float-adjusted market capitalization, and is widely considered Australias benchmark index. For additional
information see the information about the S&P/ASX 200 Index, see the information set forth under Equity Index Descriptions The S&P/ASX 200 Index on page US-73 of the accompanying underlying supplement.
Historical Basket Levels
You should not take the
historical levels of the basket or the basket underliers as an indication of the future performance of the basket or the basket underliers, respectively.
We cannot give you any assurance that the future performance of the basket, basket
underliers or the underlier stocks will result in a return of any of your initi al investment on the stated maturity date. In light of the increased volatility currently being experienced by the financial services sector and U.S. and global
securities markets, and recent market declines, it may be substantially more likely that you could lose all or a substantial portion of your investment in the notes.
Neither we nor any of our affiliates make any representation to you as to the performance of the basket or the basket underliers. The actual performance of the basket
or the basket underliers over the term of the offered notes, as well as the amount payable at maturity, may bear little relation to the historical levels shown below.
The following graph is based on the basket closing levels for the period from January 4, 2011 (the first day in 2011 on which the closing levels of all basket
underliers were published) through April 28, 2016 assuming that the basket closing level was 100 on January 4, 2011. We derived the basket closing levels based on the method of calculating the basket closing level as described in this
pricing supplement and on the closing levels of the relevant basket underliers on the relevant dates. We obtained the closing levels reflected in the graph below from the Bloomberg
Professional
®
service (Bloomberg), without independent verification. The basket closing level has been normalized such that its hypothetical level on January 4, 2011 was 100.
As noted in this pricing supplement, the initial basket level will be set at 100 on the trade date. The basket closing level can increase or decrease due to changes in the levels of the basket underliers. The graph below is for illustrative purposes
only.
PS-22
Historical Closing Levels of the Basket Underliers
The respective closing levels of the basket underliers have fluctuated in the past and may, in the future, experience significant fluctuations. Any historical upward or
downward trend in the closing levels of the basket underliers during any period shown below is not an indication that the basket underliers are more or less likely to increase or decrease at any time during the term of your notes.
The graphs below show the closing levels of the basket underliers (other than the EURO STOXX 50
®
Index, the
FTSE
®
100 Index and the Swiss Market Index) on each day from January 4, 2011 through May 2, 2016, the closing levels of the
FTSE
®
100 Index from January 4, 2011 through April 29, 2016 and the closing levels of the EURO STOXX 50
®
Index and the Swiss
Market Index on each day from January 3, 2011 through May 2, 2016. The closing levels of the FTSE
®
100 Index, the TOPIX
®
Index and the S&P/ASX 200 Index on January 3, 2011 were not available due to local exchange holidays in the United Kingdom, Japan and Australia, respectively. The closing level of
FTSE
®
100 Index on May 2, 2016 was not available due to local exchange holidays in observance of International Labor Day. The closing level of the EURO STOXX 50
®
Index on May 2, 2016 was 3,032.60. The closing level of the FTSE
®
100 Index on April 29, 2016 was 6,241.89. The closing level of
the TOPIX
®
Index on May 2, 2016 was 1,299.96. The closing level of the Swiss Market Index on May 2, 2016 was 7,977.77. The closing level of the S&P/ASX 200 Index on May 2,
2016 was 5,242.969. We obtained the closing levels above and in the graphs below from Bloomberg, without independent verification.
PS-23
PS-24
We have not authorized anyone to provide any information other than that contained or incorporated by reference in this
pricing supplement, the accompanying underlying supplement no. 1-I, the accompanying product supplement no. 4-I and the accompanying prospectus supplement and prospectus with respect to the notes offered by this pricing supplement and with respect
to JPMorgan Chase & Co. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This pricing supplement, together with the accompanying underlying supplement no.
1-I, the accompanying product supplement no. 4-I and the accompanying prospectus supplement and prospectus, 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. The information in this pricing supplement, the
accompanying underlying supplement no. 1-I, the accompanying product supplement no. 4-I and the accompanying prospectus supplement and prospectus may be accurate only as of the dates of each of these documents, respectively. This pricing supplement,
the accompanying underlying supplement no. 1-I, the accompanying product supplement no. 4-I and the accompanying prospectus supplement and prospectus do not constitute an offer to sell or a solicitation of an offer to buy the notes in any
circumstances in which such offer or solicitation is unlawful.
TABLE OF CONTENTS
Pricing Supplement
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Page
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Summary Information
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PS-3
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Hypothetical Examples
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PS-10
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Selected Risk Factors
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PS-16
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The Basket and the Basket Underliers
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PS-21
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Product Supplement No. 4-I dated April 15, 2016
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Description of Notes
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PS-1
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Estimated Value and Secondary Market Prices of the Notes
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PS-8
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Risk Factors
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PS-10
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Use of Proceeds and Hedging
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PS-44
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General Terms of Notes
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PS-45
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The Underlyings
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PS-54
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Material U.S. Federal Income Tax Consequences
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PS-78
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Plan of Distribution (Conflicts of Interest)
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PS-88
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Notice to Investors
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PS-90
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Benefit Plan Investor Considerations
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PS-100
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Underlying Supplement No. 1-I dated April 15, 2016
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Supplemental Terms of Notes
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US-1
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Risk Factors
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US-2
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Equity Index Descriptions
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US-21
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The Dow Jones Industrial Average
TM
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US-21
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The EURO STOXX 50
®
Index
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US-23
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The EURO STOXX
®
Banks Index
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US-27
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The FTSE 100 Index
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US-31
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The JPX-Nikkei Index 400
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US-33
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The MSCI Indices
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US-36
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The MSCI 25/50 Indices
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US-48
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The NASDAQ-100 Index
®
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US-53
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The Nikkei 225 Index
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US-58
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The Russell Indices
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US-62
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The S&P/ASX 200 Index
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US-73
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The S&P Select Industry Indices
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US-78
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The S&P Select Sector Indices
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US-85
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The S&P U.S. Indices
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US-89
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The Swiss Market Index
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US-95
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The TOPIX
®
Index
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US-97
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Commodity Index Descriptions
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US-100
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The Bloomberg Commodity Indices
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US-100
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The S&P GSCI Indices
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US-111
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Fund Descriptions
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US-120
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The iShares
®
20+ Year Treasury Bond ETF
|
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US-120
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The iShares
®
ETFs
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US-124
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The Market Vectors Gold Miners ETF
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US-128
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The Select Sector SPDR
®
Funds
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US-132
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The SPDR
®
EURO STOXX
®
ETF
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US-134
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The SPDR
®
Gold Trust
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US-135
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The SPDR
®
S&P 500
®
ETF Trust
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US-136
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The SPDR
®
S&P
®
Industry ETFs
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US-137
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The United States Oil Fund, LP
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US-139
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The Vanguard FTSE Emerging Markets ETF
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US-140
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The Vanguard Total Stock Market ETF
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US-151
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The WisdomTree Japan Hedged Equity Fund
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US-157
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Prospectus Supplement dated April 15, 2016
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About This Prospectus Supplement
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S-1
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Foreign Currency Risks
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S-2
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Description of Notes of JPMorgan Chase & Co.
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S-4
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Description of Warrants of JPMorgan Chase & Co.
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S-10
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Description of Units of JPMorgan Chase & Co.
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S-13
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Description of Notes of JPMorgan Chase Financial Company LLC
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S-16
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Description of Warrants of JPMorgan Chase Financial Company LLC
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S-22
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United States Federal Taxation
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S-27
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Plan of Distribution (Conflicts of Interest)
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S-28
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Prospectus dated April 15, 2016
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Where You Can Find More Information
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1
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JPMorgan Chase & Co.
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2
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JPMorgan Chase Financial Company LLC.
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2
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Consolidated Ratios of Earnings to Fixed Charges
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3
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Use of Proceeds
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3
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Important Factors That May Affect Future Results
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4
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Description of Debt Securities of JPMorgan Chase & Co.
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6
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Description of Warrants of JPMorgan Chase & Co.
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12
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Description of Units of JPMorgan Chase & Co.
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15
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Description of Purchase Contracts of JPMorgan Chase & Co.
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17
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Description of Debt Securities of JPMorgan Chase Financial Company LLC
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19
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Description of Warrants of JPMorgan Chase Financial Company LLC
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27
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Forms of Securities
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33
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Plan of Distribution (Conflicts of Interest)
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37
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Independent Registered Public Accounting Firm
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40
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Legal Matters
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40
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Benefit Plan Investor Considerations
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40
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$
JPMorgan Chase & Co.
Capped Buffered
Enhanced Participation Basket-Linked Notes due 2018
Medium-Term Notes, Series E
JP Morgan Chase (NYSE:JPM)
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