Quarterly Observation Periods, Quarterly Observation End Dates and Coupon Payment Dates
*The Notes are not callable at JPMorgan Financial’s election until the fourth Quarterly Observation End Date, May 22, 2017.
**The Notes are not callable at JPMorgan Financial’s election on the Final Valuation Date. Thus, the Maturity Date is not a Call Settlement Date.
Each of the Quarterly Observation End Dates, and therefore the Coupon Payment Dates, is subject to postponement in the event of a market disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement.
You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. In determining our reporting responsibilities we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Coupons as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
As described above, there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S. holders should also note that recently promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity linked instruments” will not apply to the Notes.
In the event of any withholding on the Notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in any or all of the Underlyings. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying supplement. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
The lower the correlation between two Underlyings, the greater the potential for one of those Underlyings to close below its Coupon Barrier or Downside Threshold on any day during a Quarterly Observation Period or the Final Valuation Date, respectively, and with three Underlyings there is a greater potential that one pair of Underlyings will have low or negative correlation. See “Correlation of the Underlyings” below. Although the correlation of the Underlyings’ performance may change over the term of the Notes, the Contingent Coupon Rate is determined, in part, based on the correlation of the Underlyings’ performance, as calculated using internal models of our affiliates at the time when the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Underlyings, which reflects a greater potential for loss on your investment at maturity.
It is more likely that JPMorgan Financial will elect to call the Notes prior to maturity when the expected interest payable on the Notes is greater than the interest that would be payable on other instruments issued by JPMorgan Financial of comparable maturity, terms and credit rating trading in the market. The greater likelihood of JPMorgan Financial calling the Notes in that environment increases the risk that you will not be able to reinvest the proceeds from the called Notes in an equivalent investment with a similar Contingent Coupon Rate. JPMorgan Financial is less likely to call the Notes prior to maturity when the expected interest payable on the Notes is less than the interest that would be payable on other comparable instruments issued by JPMorgan Financial, which
includes when the level of any of the Underlyings is less than its Coupon Barrier. Therefore, the Notes are more likely to remain outstanding when the expected interest payable on the Notes is less than what would be payable on other comparable instruments and when your risk of not receiving a Contingent Coupon is relatively higher.
The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity. See “— Lack of Liquidity” below.
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.
The examples below illustrate the hypothetical payments on a Coupon Payment Date, upon an issuer-elected call or at maturity under different hypothetical scenarios for a $10.00 Note on an offering of the Notes, with the assumptions set forth below.* We cannot predict the closing level of any Underlying on any day during the term of the Notes, including on any day during any Quarterly Observation Period or on the Final Valuation Date. You should not take these examples as an indication or assurance of the expected performance of the Notes. Numbers in the examples below have been rounded for ease of analysis. In these examples, we refer to the S&P 500
®
Index, the EURO STOXX 50
®
Index and the Russell 2000
®
Index as the “SPX Index,” the “SX5E Index” and the “RTY Index,” respectively.
The examples below are hypothetical. These examples are intended to illustrate (a) the effect of an issuer-elected call, (b) how the payment of a Contingent Coupon with respect to any Quarterly Observation Period will depend on whether the closing level of any Underlying is less than its Coupon Barrier on any day during that Quarterly Observation Period, (c) how the value of the payment at maturity on the Notes will depend on whether the Final Value of any Underlying is less than its Downside Threshold and (d) how the total return on the Notes may be less than the total return on a direct investment in any or all Underlyings in certain scenarios. The “total return” as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the total payments per $10.00 principal amount Note over the term of the Notes to the $10.00 initial issue price.
Example 1 — JPMorgan Financial Elects to Call the Notes on the Fourth Quarterly Observation End Date
On the fourth Quarterly Observation End Date, JPMorgan Financial elects to call the Notes. Because the closing level of each Underlying is above its applicable Coupon Barrier on each day during the fourth Quarterly Observation Period (the Quarterly Observation End Date of which is approximately one year after the Trade Date and is the first Quarterly Observation End Date on which the Notes are callable), JPMorgan Financial will pay you on the Call Settlement Date $10.2125 per $10.00 principal amount Note, which is equal to your principal amount
plus
the Contingent Coupon due on the Coupon Payment Date that is also the Call Settlement Date. No further amounts will be owed to you under the Notes.
In addition, because the closing level of each Underlying was greater than or equal to its Coupon Barrier on each day during the first Quarterly Observation Period, JPMorgan Financial will pay the Contingent Coupon of $0.2125 on the first Coupon Payment Date. However, because the closing level of at least one Index was less than its Coupon Barrier on at least one day during each of the second and third Quarterly Observation Periods, JPMorgan Financial will not pay any Contingent Coupon on the Coupon Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Financial will have paid a total of $10.425 per $10.00 principal amount Note for a 4.25% total return over the approximately thirty (30) month term of the Notes.
Example 2 — Notes Are NOT Called and the Final Value of Each Underlying Is Above Its Downside Threshold
Quarterly
Observation
Period
|
|
Lowest Closing
Level During
Applicable
Quarterly
Observation
Period
|
|
Final Value
|
|
Payment (per Note)
|
First Quarterly
Observation
Period
|
|
SPX Index: 115.00
SX5E Index: 110.00
RTY Index: 105.000
|
|
N/A
|
|
Notes NOT callable. Closing level of each Underlying above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.2125 on first Coupon Payment Date.
|
Second
Quarterly
Observation
Period
|
|
SPX Index: 80.00
SX5E Index: 80.00
RTY Index: 90.000
|
|
N/A
|
|
Notes NOT callable. Closing level of each Underlying above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.2125 on second Coupon Payment Date.
|
Third Quarterly
Observation
Period
|
|
SPX Index: 85.00
SX5E Index: 80.00
RTY Index: 45.000
|
|
N/A
|
|
Notes NOT callable. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to
Ninth
Quarterly
Observation
Periods
|
|
Various (at least
one Underlying
below Coupon
Barrier)
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing level of at least one Underlying below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to ninth Coupon Payment Dates.
|
Tenth
Quarterly
Observation
Period (the
final Quarterly
Observation
Period)
|
|
SPX Index: 110.00
SX5E Index: 85.00
RTY Index: 80.000
|
|
SPX Index: 110.00
SX5E Index: 90.00
RTY Index: 85.000
|
|
Notes NOT callable. Final Value of each Underlying above its Downside Threshold and closing level of each Underlying above its Coupon Barrier on each day during Quarterly Observation Period; Issuer repays principal
plus
pays Contingent Coupon of $0.2125 on Maturity Date.
|
|
Total Payments (per $10.00 Note):
|
Payment at Maturity:
|
$10.2125 ($10.00 + $0.2125)
|
|
|
Prior Contingent Coupons:
|
$0.425 ($0.2125 × 2)
|
|
|
Total:
|
$10.6375
|
|
|
Total Return:
|
6.375%
|
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Value of each Underlying is greater than or equal to its Downside Threshold and the closing level of each Underlying is greater than or equal to its Coupon Barrier on each day during the final Quarterly Observation Period, JPMorgan Financial will pay you on the Maturity Date $10.2125 per $10.00 principal amount Note, which is equal to your principal amount
plus
the Contingent Coupon due on the Coupon Payment Date that is also the Maturity Date.
In addition, because the closing level of each Underlying was greater than or equal to its Coupon Barrier on each day during the first and second Quarterly Observation Periods, JPMorgan Financial will pay the Contingent Coupon of $0.2125 on the first and second Coupon Payment Dates. However, because the closing level of at least one Underlying was less than its Coupon Barrier on at least one day during each of the third through ninth Quarterly Observation Periods, JPMorgan Financial will not pay any Contingent Coupon on the Coupon Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Financial will have paid a total of $10.6375 per $10.00 principal amount Note for a 6.375% total return over the approximately thirty (30) month term of the Notes.
Example 3 — Notes Are NOT Called and the Final Value of Each Underlying Is Above Its Downside Threshold
Quarterly
Observation
Period
|
|
Lowest Closing
Level During
Applicable
Quarterly
Observation
Period
|
|
Final Value
|
|
Payment (per Note)
|
First Quarterly
Observation
Period
|
|
SPX Index: 115.00
SX5E Index: 110.00
RTY Index: 105.000
|
|
N/A
|
|
Notes NOT callable. Closing level of each Underlying above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.2125 on first Coupon Payment Date.
|
Second
Quarterly
Observation
Period
|
|
SPX Index: 80.00
SX5E Index: 80.00
RTY Index: 90.000
|
|
N/A
|
|
Notes NOT callable. Closing level of each Underlying above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.2125 on second Coupon Payment Date.
|
Third Quarterly
Observation
Period
|
|
SPX Index: 85.00
SX5E Index: 80.00
RTY Index: 60.000
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Ninth
Quarterly
Observation
Periods
|
|
Various (at least
one Underlying
below Coupon
Barrier)
|
|
N/A
|
|
Notes NOT callable. Closing level of at least one Underlying below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to ninth Coupon Payment Dates.
|
Tenth Quarterly
Observation
Period (the
final Quarterly
Observation
Period)
|
|
SPX Index: 90.00
SX5E Index: 80.00
RTY Index: 60.000
|
|
SPX Index: 110.00
SX5E Index: 90.00
RTY Index: 80.000
|
|
Notes NOT callable. Final Value of each Underlying above its Downside Threshold but closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer repays principal but does not pay Contingent Coupon.
|
|
Total Payments (per $10.00 Note):
|
Payment at Maturity:
|
$10.00
|
|
|
Prior Contingent Coupons:
|
$0.425 ($0.2125 × 2)
|
|
|
Total:
|
$10.425
|
|
|
Total Return:
|
4.25%
|
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Value of each Underlying is greater than or equal to its Downside Threshold but the closing level of at least one Underlying is less than its Coupon Barrier on at least one day during the final Quarterly Observation Period, JPMorgan Financial will pay you on the Maturity Date $10.00 per $10.00 principal amount Note, which is equal to your principal amount, but JPMorgan Financial will not pay any Contingent Coupon on the Maturity Date.
In addition, because the closing level of each Underlying was greater than or equal to its Coupon Barrier on each day during the first and second Quarterly Observation Periods, JPMorgan Financial will pay the Contingent Coupon of $0.2125 on the first and second Coupon Payment Dates. However, because the closing level of at least one Underlying was less than its Coupon Barrier on at least one day during each of the third through ninth Quarterly Observation Periods, JPMorgan Financial will not pay any Contingent Coupon on the Coupon Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Financial will have paid a total of $10.425 per $10.00 principal amount Note for a 4.25% total return over the approximately thirty (30) month term of the Notes.
Example 4 — Notes Are NOT Called and the Final Value of Any Underlying Is Below Its Downside Threshold
Quarterly
Observation
Period
|
|
Lowest Closing
Level During
Applicable
Quarterly
Observation
Period
|
|
Final Value
|
|
Payment (per Note)
|
First Quarterly
Observation Period
|
|
SPX Index: 40.00
SX5E Index: 45.00
RTY Index: 30.000
|
|
N/A
|
|
Notes NOT callable. Closing level of each Underlying below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date.
|
Second Quarterly
Observation Period
|
|
SPX Index: 105.00
SX5E Index: 45.00
RTY Index: 80.000
|
|
N/A
|
|
Notes NOT callable. Closing level of SX5E Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date.
|
Third Quarterly
Observation Period
|
|
SPX Index: 90.00
SX5E Index: 45.00
RTY Index: 80.000
|
|
N/A
|
|
Notes NOT callable. Closing level of SX5E Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Ninth
Quarterly
Observation
Periods
|
|
Various (at least
one Underlying
below Coupon
Barrier)
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing level of at least one Underlying below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to ninth Coupon Payment Dates.
|
Tenth Quarterly
Observation Period
(the final Quarterly
Observation
Period)
|
|
SPX Index: 45.00
SX5E Index: 100.00
RTY Index: 80.000
|
|
SPX Index: 45.00
SX5E Index: 110.00
RTY Index: 80.000
|
|
Notes NOT callable. Closing level of SPX Index below its Downside Threshold; Issuer DOES NOT pay Contingent Coupon on Maturity Date, and Issuer will repay less than the principal amount resulting in a loss proportionate to the decline of the Least Performing Underlying.
|
|
Total Payments (per $10.00 Note):
|
Payment at Maturity:
|
$4.50
|
|
|
Prior Contingent Coupons:
|
$0.00
|
|
|
Total:
|
$4.50
|
|
|
Total Return:
|
-55.00%
|
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Value of at least one Underlying is less than its Downside Threshold on the Final Valuation Date, at maturity, JPMorgan Financial will pay you a total of $4.50 per $10.00 principal amount, for a -55.00% total return on the Notes, calculated as follows:
$10.00 × (1 + Least Performing Underlying Return)
Step 1: Determine the Underlying Return of each Underlying:
Underlying Return of the SPX Index:
|
Final Value – Initial Value
|
=
|
45.00 – 100.00
|
= -55.00%
|
|
|
Initial Value
|
100.00
|
Underlying Return of the SX5E Index:
|
Final Value – Initial Value
|
=
|
110.00 – 100.00
|
= 10.00%
|
|
|
Initial Value
|
100.00
|
Underlying Return of the RTY Index:
|
Final Value – Initial Value
|
=
|
80.000 – 100.000
|
= -20.00%
|
|
|
Initial Value
|
100.000
|
Step 2: Determine the Least Performing Underlying
. The SPX Index is the Underlying with the Lowest Underlying Return.
Step 3: Calculate the Payment at Maturity:
$10.00 × (1 + Least Performing Underlying Return) = $10.00 × (1 + -55.00%) = $4.50
In addition, because the closing level of at least one Underlying is less than its Coupon Barrier on at least one day during each Quarterly Observation Period, JPMorgan Financial will not pay any Contingent Coupons over the term of the Notes.
Accordingly, JPMorgan Financial will have paid a total of $4.50 per $10.00 principal amount Note for a -55.00% total return over the approximately thirty (30) month term of the Notes.
The hypothetical returns and hypothetical payments on the Notes shown above apply
only if you hold the Notes for their entire term or until called
. These hypotheticals do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Included on the following pages is a brief description of the Underlyings. This information has been obtained from publicly available sources, without independent verification. Set forth below is a table that provides the quarterly high and low closing levels of each Underlying. This information given below is for the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015 and the first calendar quarter of 2016. Partial data is provided for the second calendar quarter of 2016. We obtained the closing levels information set forth below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. You should not take the historical levels of any Underlying as an indication of future performance.
The S&P 500
®
Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information about the S&P 500
®
Index, see the information set forth under “Equity Index Descriptions — The S&P U.S. Indices” in the accompanying underlying supplement.
Historical Information
The following table sets forth the quarterly high and low closing levels of the S&P 500
®
Index, based on daily closing levels of the S&P 500
®
Index as reported by Bloomberg, without independent verification. The closing level of the S&P 500
®
Index on May 20, 2016 was 2,052.32. We obtained the closing levels of the S&P 500
®
Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the S&P 500
®
Index as an indication of future performance.
|
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
|
1/1/2011
|
|
3/31/2011
|
|
1,343.01
|
|
1,256.88
|
|
1,325.83
|
|
|
4/1/2011
|
|
6/30/2011
|
|
1,363.61
|
|
1,265.42
|
|
1,320.64
|
|
|
7/1/2011
|
|
9/30/2011
|
|
1,353.22
|
|
1,119.46
|
|
1,131.42
|
|
|
10/1/2011
|
|
12/31/2011
|
|
1,285.09
|
|
1,099.23
|
|
1,257.60
|
|
|
1/1/2012
|
|
3/31/2012
|
|
1,416.51
|
|
1,277.06
|
|
1,408.47
|
|
|
4/1/2012
|
|
6/30/2012
|
|
1,419.04
|
|
1,278.04
|
|
1,362.16
|
|
|
7/1/2012
|
|
9/30/2012
|
|
1,465.77
|
|
1,334.76
|
|
1,440.67
|
|
|
10/1/2012
|
|
12/31/2012
|
|
1,461.40
|
|
1,353.33
|
|
1,426.19
|
|
|
1/1/2013
|
|
3/31/2013
|
|
1,569.19
|
|
1,457.15
|
|
1,569.19
|
|
|
4/1/2013
|
|
6/30/2013
|
|
1,669.16
|
|
1,541.61
|
|
1,606.28
|
|
|
7/1/2013
|
|
9/30/2013
|
|
1,725.52
|
|
1,614.08
|
|
1,681.55
|
|
|
10/1/2013
|
|
12/31/2013
|
|
1,848.36
|
|
1,655.45
|
|
1,848.36
|
|
|
1/1/2014
|
|
3/31/2014
|
|
1,878.04
|
|
1,741.89
|
|
1,872.34
|
|
|
4/1/2014
|
|
6/30/2014
|
|
1,962.87
|
|
1,815.69
|
|
1,960.23
|
|
|
7/1/2014
|
|
9/30/2014
|
|
2,011.36
|
|
1,909.57
|
|
1,972.29
|
|
|
10/1/2014
|
|
12/31/2014
|
|
2,090.57
|
|
1,862.49
|
|
2,058.90
|
|
|
1/1/2015
|
|
3/31/3015
|
|
2,117.39
|
|
1,992.67
|
|
2,067.89
|
|
|
4/1/2015
|
|
6/30/2015
|
|
2,130.82
|
|
2,057.64
|
|
2,063.11
|
|
|
7/1/2015
|
|
9/30/2015
|
|
2,128.28
|
|
1,867.61
|
|
1,920.03
|
|
|
10/1/2015
|
|
12/31/2015
|
|
2,109.79
|
|
1,923.82
|
|
2,043.94
|
|
|
1/1/2016
|
|
3/31/2016
|
|
2,063.95
|
|
1,829.08
|
|
2,059.74
|
|
|
4/1/2016
|
|
5/20/2016*
|
|
2,102.40
|
|
2,040.04
|
|
2,052.32
|
|
|
*
|
As of the date of this pricing supplement, available information for the second calendar quarter of 2016 includes data for the period from April 1, 2016 through May 20, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2016.
|
The graph below illustrates the daily performance of the S&P 500
®
Index from January 3, 2006 through May 20, 2016, based on information from Bloomberg, without independent verification. The dotted lines represent the Downside Threshold of 1,128.78 and the Coupon Barrier of 1,334.01, equal to 55% and 65%, respectively, of the Initial Value of the S&P 500
®
Index.
Past performance of the S&P 500
®
Index is not indicative of the future performance of the
S&P 500
®
Index.
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 Securities 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” in the accompanying underlying supplement.
Historical Information Regarding the EURO STOXX 50
®
Index
The following table sets forth the quarterly high and low closing levels of the EURO STOXX 50
®
Index, based on daily closing levels of the EURO STOXX 50
®
Index as reported by Bloomberg, without independent verification. The closing level of the EURO STOXX 50
®
Index on May 20, 2016 was 2,962.16. We obtained the closing levels of the EURO STOXX 50
®
Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the EURO STOXX 50
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
|
3/31/2011
|
|
3,068.00
|
|
2,721.24
|
|
2,910.91
|
|
4/1/2011
|
|
6/30/2011
|
|
3,011.25
|
|
2,715.88
|
|
2,848.53
|
|
7/1/2011
|
|
9/30/2011
|
|
2,875.67
|
|
1,995.01
|
|
2,179.66
|
|
10/1/2011
|
|
12/31/2011
|
|
2,476.92
|
|
2,090.25
|
|
2,316.55
|
|
1/1/2012
|
|
3/31/2012
|
|
2,608.42
|
|
2,286.45
|
|
2,477.28
|
|
4/1/2012
|
|
6/30/2012
|
|
2,501.18
|
|
2,068.66
|
|
2,264.72
|
|
7/1/2012
|
|
9/30/2012
|
|
2,594.56
|
|
2,151.54
|
|
2,454.26
|
|
10/1/2012
|
|
12/31/2012
|
|
2,659.95
|
|
2,427.32
|
|
2,635.93
|
|
1/1/2013
|
|
3/31/2013
|
|
2,749.27
|
|
2,570.52
|
|
2,624.02
|
|
4/1/2013
|
|
6/30/2013
|
|
2,835.87
|
|
2,511.83
|
|
2,602.59
|
|
7/1/2013
|
|
9/30/2013
|
|
2,936.20
|
|
2,570.76
|
|
2,893.15
|
|
10/1/2013
|
|
12/31/2013
|
|
3,111.37
|
|
2,902.12
|
|
3,109.00
|
|
1/1/2014
|
|
3/31/2014
|
|
3,172.43
|
|
2,962.49
|
|
3,161.60
|
|
4/1/2014
|
|
6/30/2014
|
|
3,314.80
|
|
3,091.52
|
|
3,228.24
|
|
7/1/2014
|
|
9/30/2014
|
|
3,289.75
|
|
3,006.83
|
|
3,225.93
|
|
10/1/2014
|
|
12/31/2014
|
|
3,277.38
|
|
2,874.65
|
|
3,146.43
|
|
1/1/2015
|
|
3/31/3015
|
|
3,731.35
|
|
3,007.91
|
|
3,697.38
|
|
4/1/2015
|
|
6/30/2015
|
|
3,828.78
|
|
3,424.30
|
|
3,424.30
|
|
7/1/2015
|
|
9/30/2015
|
|
3,686.58
|
|
3,019.34
|
|
3,100.67
|
|
10/1/2015
|
|
12/31/2015
|
|
3,506.45
|
|
3,069.05
|
|
3,267.52
|
|
1/1/2016
|
|
3/31/2016
|
|
3,178.01
|
|
2,680.35
|
|
3,004.93
|
|
4/1/2016
|
|
5/20/2016*
|
|
3,151.69
|
|
2,871.57
|
|
2,962.16
|
|
* As of the date of this pricing supplement, available information for the second calendar quarter of 2016 includes data for the period from April 1, 2016 through May 20, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2016.
The graph below illustrates the daily performance of the EURO STOXX 50
®
Index from January 3, 2006 through May 20, 2016, based on information from Bloomberg, without independent verification. The dotted lines represent the Downside Threshold of 1,629.19 and the Coupon Barrier of 1,925.40, equal to 55% and 65%, respectively, of the Initial Value of the EURO STOXX 50
®
Index.
Past performance of the EURO STOXX 50
®
Index is not indicative of the future performance of the EURO STOXX 50
®
Index.
The Russell 2000
®
Index consists of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell 2000
®
Index, see the information set forth under “Equity Index Descriptions — The Russell Indices” in the accompanying underlying supplement.
Historical Information Regarding the Russell 2000
®
Index
The following table sets forth the quarterly high and low closing levels of the Russell 2000
®
Index, based on daily closing levels of the Russell 2000
®
Index as reported by Bloomberg, without independent verification. The closing level of the Russell 2000
®
Index on May 20, 2016 was 1,112.276. We obtained the closing levels of the Russell 2000
®
Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the Russell 2000
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
|
3/31/2011
|
|
843.549
|
|
773.184
|
|
843.549
|
|
4/1/2011
|
|
6/30/2011
|
|
865.291
|
|
777.197
|
|
827.429
|
|
7/1/2011
|
|
9/30/2011
|
|
858.113
|
|
643.421
|
|
644.156
|
|
10/1/2011
|
|
12/31/2011
|
|
765.432
|
|
609.490
|
|
740.916
|
|
1/1/2012
|
|
3/31/2012
|
|
846.129
|
|
747.275
|
|
830.301
|
|
4/1/2012
|
|
6/30/2012
|
|
840.626
|
|
737.241
|
|
798.487
|
|
7/1/2012
|
|
9/30/2012
|
|
864.697
|
|
767.751
|
|
837.450
|
|
10/1/2012
|
|
12/31/2012
|
|
852.495
|
|
769.483
|
|
849.350
|
|
1/1/2013
|
|
3/31/2013
|
|
953.068
|
|
872.605
|
|
951.542
|
|
4/1/2013
|
|
6/30/2013
|
|
999.985
|
|
901.513
|
|
977.475
|
|
7/1/2013
|
|
9/30/2013
|
|
1,078.409
|
|
989.535
|
|
1,073.786
|
|
10/1/2013
|
|
12/31/2013
|
|
1,163.637
|
|
1,043.459
|
|
1,163.637
|
|
1/1/2014
|
|
3/31/2014
|
|
1,208.651
|
|
1,093.594
|
|
1,173.038
|
|
4/1/2014
|
|
6/30/2014
|
|
1,192.964
|
|
1,095.986
|
|
1,192.964
|
|
7/1/2014
|
|
9/30/2014
|
|
1,208.150
|
|
1,101.676
|
|
1,101.676
|
|
10/1/2014
|
|
12/31/2014
|
|
1,219.109
|
|
1,049.303
|
|
1,204.696
|
|
1/1/2015
|
|
3/31/3015
|
|
1,266.373
|
|
1,154.709
|
|
1,252.772
|
|
4/1/2015
|
|
6/30/2015
|
|
1,295.799
|
|
1,215.417
|
|
1,253.947
|
|
7/1/2015
|
|
9/30/2015
|
|
1,273.328
|
|
1,083.907
|
|
1,100.688
|
|
10/1/2015
|
|
12/31/2015
|
|
1,204.159
|
|
1,097.552
|
|
1,135.889
|
|
1/1/2016
|
|
3/31/2016
|
|
1,114.028
|
|
953.715
|
|
1,114.028
|
|
4/1/2016
|
|
5/20/2016*
|
|
1,154.149
|
|
1,092.785
|
|
1,112.276
|
|
* As of the date of this pricing supplement, available information for the second calendar quarter of 2016 includes data for the period from April 1, 2016 through May 20, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2016.
The graph below illustrates the daily performance of the Russell 2000
®
Index from January 3, 2006 through May 20, 2016, based on information from Bloomberg, without independent verification. The dotted lines represent the Downside Threshold of 611.752 and the Coupon Barrier of 722.979, equal to 55% and 65%, respectively, of the Initial Value of the Russell 2000
®
Index.
Past performance of the Russell 2000
®
Index is not indicative of the future performance of the
Russell 2000
®
Index.
Correlation of the Underlyings
|
The graph below illustrates the daily performance of the S&P 500
®
Index, the EURO STOXX 50
®
Index and the Russell 2000
®
Index from January 3, 2006 through May 20, 2016. For comparison purposes, each Underlying has been normalized to have a closing level of 100.00 on January 3, 2006 by dividing the closing level of that Underlying on each day by the closing level of that Underlying on January 3, 2006 and multiplying by 100.00. We obtained the closing levels used to determine the normalized closing levels set forth below from Bloomberg, without independent verification.
Past performance of the Underlyings is not indicative of the future performance of the Underlyings.
The correlation of a pair of Underlyings represents a statistical measurement of the degree to which the returns of those Underlyings were similar to each other over a given period in terms of timing and direction (
i.e.
, positive or negative). Set forth below is a table that provides the correlation of each pair of Underlyings, calculated based on the daily returns of the Underlyings from May 20, 2006 through May 20, 2016, based on information from Bloomberg, without independent verification. You should not take the historical correlations of the Underlyings as an indication of future correlation.
|
S&P 500
®
Index
|
EURO STOXX 50
®
Index
|
Russell 2000
®
Index
|
S&P 500
®
Index
|
—
|
0.613
|
0.925
|
EURO STOXX 50
®
Index
|
0.613
|
—
|
0.544
|
Russell 2000
®
Index
|
0.925
|
0.544
|
—
|
A correlation of 1.000 for a pair of Underlyings represents a perfect positive correlation. This means that the closing levels of that pair of Underlyings have moved in the same direction and the ratio of their daily returns has been constant. A correlation of -1.000 for a pair of Underlyings represents a perfect negative correlation. This means that the closing levels of that pair of Underlyings have moved in the opposite direction and the ratio of their daily returns has been constant. A correlation of 0.000 for a pair of Underlyings means that the Underlyings are uncorrelated. This means that there is no statistical relationship between the daily returns of that pair of Underlyings. The closer the correlation of a pair of Underlyings is to 1.000, the more positively correlated those Underlyings are. The closer the correlation of a pair of Underlyings is to -1.000, the more negatively correlated those Underlyings. The closer the correlation of a pair of Underlyings is to 0.000, the less correlated those Underlyings are. The lower the correlation between two Underlyings, the greater the potential for one of those Underlyings to close below its Coupon Barrier or Downside Threshold on any day during a Quarterly Observation Period or the Final Valuation Date, respectively.
The correlations set forth above are based on the historical performance of the Underlyings, and you should not take those historical correlations as an indication of future correlation. In addition, the correlations set forth above are not the same as the correlations referenced in setting the terms of the Notes. The correlations referenced in setting the terms of the Notes are calculated using internal models of our affiliates and are not derived from the daily returns of the Underlyings over the period set forth above. Although the correlation of the Underlyings’ performance may change over the term of the Notes, the Contingent Coupon Rate is determined, in part, based on the correlations of the Underlyings’ performance calculated using internal models of our affiliates at the time when the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Underlyings, which reflects a greater potential for missed Contingent Coupons and for a loss on your investment at maturity.
Supplemental Plan of Distribution
|
We and JPMorgan Chase & Co. have agreed to indemnify UBS and JPMS against liabilities under the Securities Act of 1933, as amended, or to contribute to payments that UBS may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS may sell all or a part of the Notes that it purchases from us to the public or its affiliates at the price to public indicated on the cover hereof.
Subject to regulatory constraints, JPMS intends to offer to purchase the Notes in the secondary market, but it is not required to do so.
We or our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Notes, and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See “Supplemental Use of Proceeds” in this pricing supplement and “Use of Proceeds and Hedging” in the accompanying product supplement.
We expect that delivery of the Notes will be made against payment for the Notes on or about the Original Issue Date set forth on the front cover of this pricing supplement, which will be the fourth business day following the Trade Date of the Notes (this settlement cycle being referred to as T+4). Under Rule 15c6-1 under 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 that trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes on the Trade Date will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisors.
The Estimated Value of the Notes
|
The 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 the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the Notes. The estimated value of the Notes 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 the estimated value of the Notes is based on, among other things, our and our affiliates’ view of the funding values of the Notes as well as the higher issuance, operational and ongoing liability management costs of the Notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Key Risks — Risks Relating to the Notes Generally — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this pricing supplement. The value of the derivative or derivatives underlying the economic terms of the Notes is derived from internal pricing models of our affiliates. 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, the estimated value of the Notes is determined when the terms of the Notes are set based on market conditions and other relevant factors and assumptions existing at that time. See “Key Risks — Risks Relating to the Notes Generally — The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates” in this pricing supplement.
The estimated value of the Notes will be lower than the original issue price of the Notes because costs associated with selling, structuring and hedging the Notes are included in the original issue price of the Notes. These costs include the selling commissions paid to UBS, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Notes and the estimated cost of hedging our obligations under the Notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates will retain any profits realized in hedging our obligations under the Notes. See “Key Risks — Risks Relating to the Notes Generally — The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of the Notes
|
For information about factors that will impact any secondary market prices of the Notes, see “Key Risks — Risks Relating to the Notes Generally — Secondary Market Prices of the Notes Will Be Impacted by Many Economic and Market Factors” in this pricing supplement. In addition, we generally expect that some of the costs included in the original issue price of the Notes will be partially paid back to you in connection with any repurchases of your Notes by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be up to four months. The length of any such initial period reflects secondary market volumes for the Notes, the structure of the Notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Notes and when these costs are incurred, as determined by our affiliates. See “Key Risks — Risks Relating to the Notes Generally — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in 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” in this pricing supplement for an illustration of the risk-return profile of the Notes and “The Underlyings” in this pricing supplement for a description of the market exposure provided by the Notes.
The original issue price of the Notes is equal to the estimated value of the Notes plus the selling commissions paid to UBS, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Notes, plus the estimated cost of hedging our obligations under the Notes.