Observation
Dates and Coupon Payment Dates
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Observation Dates
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Coupon Payment Dates
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August 24, 2016
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August 26, 2016
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November 25, 2016
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November 29, 2016
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February 24, 2017
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February 28, 2017
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May 24, 2017
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May 26, 2017
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August 24, 2017
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August 28, 2017
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November 24, 2017
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November 28, 2017
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February 26, 2018
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February 28, 2018
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May 24, 2018
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May 29, 2018
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August 24, 2018
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August 28, 2018
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November 26, 2018
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November 28, 2018
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February 25, 2019
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February 27, 2019
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May 24, 2019 (the Final Valuation Date)
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May 31, 2019 (the Maturity Date)
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The Notes are not callable
until the fourth Observation Date, May 24, 2017.
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Each of the Observation 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 a Single Underlying — Notes Linked to
a Single Underlying (Other Than a Commodity Index)” and “General Terms of Notes — Postponement of a Payment Date”
in the accompanying product supplement.
What
Are the Tax Consequences of the Notes?
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-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.
Sale, Exchange or Redemption of a Note.
Assuming
the treatment described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call or
at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange
and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly
treated as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain
or loss unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss,
whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to
limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is
likely that you will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible
that proceeds received from the sale or exchange of your Notes prior to an Observation Date but that can be attributed to an expected
Contingent Coupon payment could be treated as ordinary income. You should consult your tax adviser regarding this issue.
As described above, there are other reasonable treatments
that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially
affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment
of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require investors
in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics,
including the character of income or loss with respect to these instruments and the relevance of factors such as the nature of
the underlying property to which the instruments are linked. While the notice requests comments on appropriate transition rules
and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative treatments and
the issues presented by this notice.
Non-U.S. Holders — Tax
Considerations
. The U.S. federal income tax treatment of Contingent Coupons is uncertain, and although we believe it is reasonable
to take a position that Contingent Coupons are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided),
a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of
that rate under an applicable income tax treaty), unless income from your Notes is effectively connected with your conduct of a
trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment in
the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Notes in light of your particular circumstances.
Non-U.S. holders should also note
that recently promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain
“equity linked instruments” will not apply to the Notes.
FATCA.
Withholding under
legislation commonly referred to as “FATCA” could apply to payments with respect to the Notes that are treated as U.S.-source
“fixed or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes
(such as interest, if the Notes are recharacterized, in whole or in part, as debt instruments, or Contingent Coupons if they are
otherwise treated as FDAP Income). If the Notes are recharacterized, in whole or in part, as debt instruments, withholding could
also apply to payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However,
under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income)
with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the Notes.
In the event of any withholding
on the Notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
Key
Risks
An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing directly in the Underlying. 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.
Risks Relating to the Notes Generally
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Your Investment in the Notes May Result in a Loss
— The
Notes differ from ordinary debt securities in that JPMorgan Financial will not necessarily repay the full principal amount of the
Notes. If the Notes are not called and the closing level of the Underlying has declined below the Downside Threshold on the Final
Valuation Date, you will be fully exposed to any depreciation of the Underlying from the Initial Value to the Final Value. In this
case, JPMorgan Financial will repay less than the full principal amount at maturity, resulting in a loss of principal that is proportionate
to the negative Underlying Return. Under these circumstances, you will lose 1% of your principal for every 1% that the Final Value
is less than the Initial Value and could lose your entire principal amount. As a result, your investment in the Notes may not perform
as well as an investment in a security that does not have the potential for full downside exposure to the Underlying.
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Credit Risks of JPMorgan Financial and JPMorgan Chase & Co.
— The Notes are unsecured and unsubordinated debt obligations of the Issuer, JPMorgan Chase Financial Company LLC, the
payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co. The Notes will rank
pari passu
with
all of our other unsecured and unsubordinated obligations, and the related guarantee JPMorgan Chase & Co. will rank
pari
passu
with all of JPMorgan Chase & Co.’s other unsecured and unsubordinated obligations. The Notes and related guarantees
are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes, including any repayment
of principal, depends on the ability of JPMorgan Financial and JPMorgan Chase & Co. to satisfy their obligations as they come
due. As a result, the actual and perceived creditworthiness of JPMorgan Financial and JPMorgan Chase & Co. may affect the market
value of the Notes and, in the event JPMorgan Financial and JPMorgan Chase & Co. were to default on their obligations, you
may not receive any amounts owed to you under the terms of the Notes and you could lose your entire investment.
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As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations
and Limited Assets —
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the
issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially
all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany agreements.
As a result, we are dependent upon payments from our affiliates to meet our obligations under the Notes. If these affiliates do
not make payments to us and we fail to make payments on the Notes, you may have to seek payment under the related guarantee by
JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations
of JPMorgan Chase & Co.
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You Are Not Guaranteed Any Contingent Coupons
— We will
not necessarily make periodic coupon payments on the Notes. If the closing level of the Underlying on an Observation Date is less
than the Coupon Barrier, we will not pay you the Contingent Coupon for that Observation Date, and the Contingent Coupon that would
otherwise be payable will not be accrued and will be lost. If the closing level of the Underlying is less than the Coupon Barrier
on each of the Observation Dates, we will not pay you any Contingent Coupon during the term of, and you will not receive a positive
return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of principal
loss on your Notes.
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Return on the Notes Limited to the Sum of Any Contingent Coupons
and You Will Not Participate in Any Appreciation of the Underlying
— The return potential of the Notes is limited to
the specified Contingent Coupon Rate, regardless of the appreciation of the Underlying, which may be significant. In addition,
the total return on the Notes will vary based on the number of Observation Dates on which the requirements for a Contingent Coupon
have been met prior to maturity or an automatic call. Further, if the Notes are called, you will not receive any Contingent Coupons
or any other payments in respect of any Observation Dates after the Call Settlement Date. Because the Notes could be called as
early as the fourth Observation Date, the total return on the Notes could be minimal. If the Notes are not called, you may be subject
to the risk of decline of the Underlying even though you are not able to participate in any potential appreciation of the
Underlying. Generally, the longer the Notes remain outstanding, the less likely it is that they will be automatically called, due
to the decline in the level of the Underlying and the shorter time remaining for the level to recover to or above the Initial Value
on a subsequent Observation Date. As a result, the return on an investment in the Notes could be less than the return on
a hypothetical direct investment in the Underlying. In addition, if the Notes are not called and the Final Value is below the Downside
Threshold, you will have a loss on your principal amount and the overall return on the Notes may be less than the amount that would
be paid on a conventional debt security of JPMorgan Financial of comparable maturity.
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Contingent Repayment of Principal Applies Only If You Hold the Notes
to Maturity
— If you are able to sell your Notes in the secondary market prior to maturity, you may have to sell them
at a loss relative to your initial investment even if the closing level of the Underlying is above the Downside Threshold. If by
maturity the Notes have not been called, either JPMorgan Financial will repay you the full principal amount per Note, plus the
Contingent Coupon, or, if the Underlying closes below the Downside Threshold on the Final Valuation Date, JPMorgan Financial will
repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate
to the decline of the Underlying from the Initial Value to the Final Value. This contingent repayment of principal applies only
if you hold your Notes to maturity.
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A Higher Contingent Coupon Rate and/or a Lower Coupon Barrier and/or
Downside Threshold May Reflect Greater Expected Volatility of the Underlying, Which Is Generally Associated With a Greater Risk
of Loss
— Volatility is a measure of the degree of variation in the level of the Underlying over a period of time.
The greater the expected volatility of the Underlying at the time the terms of the Notes are set, the greater the expectation is
at that time that the level of the Underlying could close below the Coupon Barrier on any Observation Date, resulting in the loss
of one or more, or all, Contingent Coupon payments, or below the Downside Threshold on the Final Valuation Date, resulting in the
loss of a significant portion or all of your principal at maturity. In addition, the economic terms of the Notes, including
the Contingent Coupon Rate, the Coupon Barrier and the Downside Threshold, are based, in part, on the expected volatility of the
Underlying at the time the terms of the Notes are set, where a higher expected volatility will generally be reflected in a higher
Contingent Coupon Rate than the fixed rate we would pay on conventional debt securities of the same maturity and/or on otherwise
comparable securities and/or a lower Coupon Barrier and/or a lower Downside Threshold as compared to otherwise comparable securities.
Accordingly, a higher Contingent Coupon Rate will generally be indicative of a greater risk of loss while a lower Coupon Barrier
or Downside Threshold does not necessarily indicate that the Notes have a greater likelihood of paying Contingent Coupon payments
or returning your principal at maturity. You should be willing to accept the downside market risk of each Underlying and
the potential loss of some or all of your principal at maturity.
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Reinvestment Risk
— If your Notes are called early, the
holding period over which you would have the opportunity to receive any Contingent Coupons could be as short as approximately one
year. There is no guarantee that you would be able to reinvest the proceeds from an investment in the Notes at a comparable return
and/or with a comparable interest rate for a similar level of risk in the event the Notes are called prior to the maturity date.
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Potential Conflicts
— We and our affiliates play a variety
of roles in connection with the issuance of the Notes, including acting as calculation agent and hedging our obligations under
the Notes and making the assumptions used to determine the pricing of the Notes and the estimated value of the Notes when the terms
of the Notes are set, which we refer to as the estimated value of the Notes. In performing these duties, our and JPMorgan Chase
& Co.’s economic interests and the economic interests of the calculation agent and other affiliates of ours are potentially
adverse to your interests as an investor in the Notes. In addition, our and JPMorgan Chase & Co.’s business activities,
including hedging and trading activities, could cause our and JPMorgan Chase & Co.’s economic interests to be adverse
to yours and could adversely affect any payment on the Notes and the value of the Notes. It is possible that hedging or trading
activities of ours or our affiliates in connection with the Notes could result in substantial returns for us or our affiliates
while the value of the Notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest”
in the accompanying product supplement for additional information about these risks.
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Each Contingent Coupon Is Based Solely on the Closing Level of the
Underlying on the Applicable Observation Date
— Whether a Contingent Coupon will be payable with respect to an Observation
Date will be based solely on the closing level of the Underlying on that Observation Date. As a result, you will not know whether
you will receive a Contingent Coupon until the related Observation Date. Moreover, because each Contingent Coupon is based solely
on the closing level of the Underlying on the applicable Observation Date, if the closing level of the Underlying is less than
the Coupon Barrier, you will not receive any Contingent Coupon with respect to that Observation Date, even if the closing level
of the Underlying was higher on other days during the period before that Observation Date.
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The Estimated Value of the Notes Will Be Lower Than the Original
Issue Price (Price to Public) of the Notes
— The estimated value of the Notes is only an estimate determined by reference
to several factors. The original issue price of the Notes will exceed the estimated value of the Notes because costs associated
with structuring and hedging the Notes are included in the original issue price of the Notes. These costs include 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 “The Estimated Value of the Notes” in this pricing
supplement.
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The Estimated Value of the Notes Does Not Represent Future Values
of the Notes and May Differ from Others’ Estimates
— The estimated value of the Notes is determined by reference
to internal pricing models of our affiliates when the terms of the Notes are set. This estimated value of the Notes is based on
market conditions and other relevant factors existing at that time and 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 the estimated value of the Notes. 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 or JPMorgan Chase & Co.’s 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 “The Estimated Value of the Notes” in this pricing supplement.
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The Estimated Value of the Notes Is Derived by Reference to an Internal
Funding Rate
— 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 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 the conventional fixed-rate debt of JPMorgan
Chase & Co. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the Notes and any secondary market prices of the Notes. See “The Estimated Value of the Notes” in this pricing supplement.
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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
— 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
internal secondary market funding rates for structured
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debt issuances. See “Secondary
Market Prices of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly,
the estimated value of your Notes during this initial period may be lower than the value of the Notes as published by JPMS (and
which may be shown on your customer account statements).
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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 internal secondary market funding
rates for structured debt issuances and, also, because secondary market prices may exclude projected hedging profits, if any, and
estimated hedging costs that are included in the original issue price of the Notes. As a result, the price, if any, at which JPMS
will be willing to buy Notes from you in secondary market transactions, if at all, is likely to be lower than the original issue
price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk
factor for information about additional factors that will impact any secondary market prices of the Notes.
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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.
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Many Economic and Market Factors Will Impact the Value of the Notes
— As described under “The Estimated Value of the Notes” in this pricing supplement, the Notes can be thought
of as securities that combine a fixed-income debt component with one or more derivatives. As a result, the factors that influence
the values of fixed-income debt and derivative instruments will also influence the terms of the Notes at issuance and their value
in the secondary market. Accordingly, 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 projected hedging profits, if any, estimated
hedging costs and the level of the Underlying, including:
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any
actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured debt issuances;
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the actual and expected volatility in the level of the Underlying;
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the time to maturity of the Notes;
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the likelihood of an automatic call being triggered;
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whether the closing level of the Underlying has been, or is expected
to be, less than the Coupon Barrier on any Observation Date and whether the Final Value is expected to be less than the Downside
Threshold;
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the dividend rates on the equity securities included in the Underlying;
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interest and yield rates in the market generally; 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.
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Investing in the Notes Is Not Equivalent to Investing in the Stocks
Composing the Underlying
— Investing in the Notes is not equivalent to investing in the stocks included in the Underlying.
As an investor in the Notes, you will not have any ownership interest or rights in the stocks included in the Underlying, such
as voting rights, dividend payments or other distributions.
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We Cannot Control Actions by the Sponsor
of the Underlying and That Sponsor Has No Obligation to Consider Your Interests
— We and our affiliates are not affiliated
with the sponsor of the Underlying and have no ability to control or predict its actions, including any errors in or discontinuation
of public disclosure regarding methods or policies relating to the calculation of the Underlying. The sponsor of the Underlying
is not involved in this Note offering in any way and has no obligation to consider your interest as an owner of the Notes in taking
any actions that might affect the market value of your Notes.
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Your Return on the Notes Will Not Reflect Dividends on the Stocks
Composing the Underlying
— Your return on the Notes will not reflect the return you would realize if you actually owned
the stocks included in the Underlying and received the dividends on the stock included in the Underlying. This is because the calculation
agent will determine whether the Notes will be called and whether a Contingent Coupon is payable and will calculate the amount
payable to you at maturity of the Notes by reference to the closing level of the Underlying on the relevant Observation Date without
taking into consideration the value of dividends on the stock included in the Underlying.
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No Assurances That the Investment View Implicit in the Notes Will
Be Successful
— While the Notes are structured to provide for Contingent Coupons if the Underlying does not close below
the Coupon Barrier on the Observation Dates, we cannot assure you of the economic environment during the term or at maturity of
your Notes.
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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.
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Potentially Inconsistent Research, Opinions or Recommendations by
JPMS, UBS or Their Affiliates
— JPMS, UBS or their affiliates may publish research, express opinions or provide recommendations
that are inconsistent with investing in or holding the Notes, and that may be revised at any time. Any such research, opinions
or recommendations may or may not recommend that investors buy or hold the Underlying and could affect the level of the Underlying,
and therefore the market value of the Notes.
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Tax Treatment
— Significant aspects of the tax treatment
of the Notes are uncertain. You should consult your tax adviser about your tax situation.
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Potential JPMorgan Financial Impact on the Level of the Underlying
— Trading or transactions by JPMorgan Financial or its affiliates in the Underlying and/or over-the-counter options, futures
or other instruments with returns linked to the performance of the Underlying may adversely affect the level of the Underlying
and, therefore, the market value of the Notes.
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The Final Terms and Valuation of the Notes
Will Be Finalized on the Trade Date and Provided in the Pricing Supplement
— The final terms of the Notes will be based
on relevant market conditions when the terms of the Notes are set and will be finalized on the Trade Date and provided in the pricing
supplement. In particular, the estimated value of the Notes will be finalized on the Trade Date and provided in the pricing supplement
and may be as low as the minimum for the estimated value of the Notes set forth on the cover of this pricing supplement. Accordingly,
you should consider your potential investment in the Notes based on the minimum for the estimated value of the Notes.
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Risks Relating to the Underlying
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JPMorgan Chase & Co. Is Currently One of the Companies that
Makes Up the
Underlying
— JPMorgan Chase & Co. is currently one of the companies that makes up the Underlying.
JPMorgan Chase & Co. will not have any obligation to consider your interests as a holder of the Notes in taking any corporate
action that might affect the value of the Underlying and the Notes.
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Hypothetical
Examples
The examples below illustrate the hypothetical payments on a
Coupon Payment Date, upon an automatic call or at maturity under different hypothetical scenarios for a $10.00 Note on an offering
of the Notes linked to a hypothetical Underlying and assume an Initial Value of 100.00 and a Downside Threshold and Coupon Barrier
of 72.00 (which is 72.00% of the hypothetical Initial Value) and reflect the Contingent Coupon Rate of 7.00% per annum.* The hypothetical
Initial Value has been chosen for illustrative purposes only and does not represent the actual Initial Value. The actual Initial
Value, Downside Threshold and Coupon Barrier are based on the closing level of the Underlying on May 23, 2016 and are specified
on the cover of this pricing supplement. For historical data regarding the actual closing levels of the Underlying, please see
the historical information set forth under “The Underlying” in this pricing supplement.
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Principal Amount:
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$10.00
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Term:
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Approximately three years (unless earlier called)
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Hypothetical Initial Value:
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100.00
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Contingent Coupon Rate:
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7.00% per annum (or 1.75% per quarter)
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Observation Dates:
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Quarterly (callable after one year)
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Hypothetical Downside Threshold:
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72.00 (which is 72.00% of the hypothetical Initial Value)
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Hypothetical Coupon Barrier:
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72.00 (which is 72.00% of the hypothetical Initial Value)
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*
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The actual value of any Contingent Coupon payments you will receive over the term of the Notes and the actual value of the payment upon automatic call or at maturity applicable to your Notes may be more or less than the amounts displayed in these hypothetical scenarios. The actual Initial Value and resulting Downside Threshold and Coupon Barrier of the Underlying are based on the closing level of the Underlying on May 23, 2016 and are specified on the cover of this pricing supplement.
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The examples below are purely hypothetical and are not based
on any specific offering of Notes linked to any specific Underlying. These examples are intended to illustrate how the value of
any payment on the Notes will depend on the closing level on the Observation Dates.
Example 1 — Notes Are Automatically Called on the Fourth
Observation Date
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Date
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Closing Level
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Payment (per Note)
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First Observation Date
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110.00 (at or above Initial Value; Notes NOT called because Observation Date is prior to the fourth Observation Date)
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$0.175 (Contingent Coupon)
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Second Observation Date
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60.00 (below Coupon Barrier)
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$0.00
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Third Observation Date
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65.00 (below Coupon Barrier)
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$0.00
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Fourth Observation Date
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110.00 (at or above Initial Value)
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$10.175 (Payment Upon Automatic Call)
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Total Payment:
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$10.35 (3.50% return)
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|
Although the closing level is above the Initial Value on the
first Observation Date, the Notes are not called because the Notes cannot be called before the fourth Observation Date. Because
the Notes are automatically called on the fourth Observation Date, we will pay you on the applicable Call Settlement Date a total
of $10.175 per Note, reflecting your principal amount
plus
the applicable Contingent Coupon. When that amount is added to
the Contingent Coupon payment of $0.175 received in respect of prior Observation Dates, we will have paid you a total of $10.35
per Note for a 3.50% total return on the Notes. No further amounts will be owed on the Notes.
Example 2 — Notes Are Automatically Called on the Fifth
Observation Date
|
Date
|
Closing Level
|
Payment (per Note)
|
|
First Observation Date
|
110.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Second Observation Date
|
105.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Third Observation Date
|
110.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Fourth Observation Date
|
90.00 (at or above Coupon Barrier; below Initial Value)
|
$0.175 (Contingent Coupon)
|
|
Fifth Observation Date
|
110.00 (at or above Initial Value)
|
$10.175 (Payment upon Automatic Call)
|
|
|
|
Total Payment:
|
$10.875 (8.75% return)
|
|
|
|
|
|
Because the Notes are automatically called on the fifth Observation
Date, we will pay you on the applicable Call Settlement Date a total of $10.175 per Note, reflecting your principal amount
plus
the applicable Contingent Coupon. When that amount is added to the Contingent Coupon payments of $0.70 received in respect of prior
Observation Dates, we will have paid you a total of $10.875 per Note for a 8.75% total return on the Notes. No further amounts
will be owed on the Notes.
Example 3 — Notes Are NOT Automatically Called
and
the Final Value Is at or above the Downside Threshold
|
Date
|
Closing Level
|
Payment (per Note)
|
|
First Observation Date
|
110.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Second Observation Date
|
60.00 (below Coupon Barrier)
|
$0.00
|
|
Third Observation Date
|
55.00 (below Coupon Barrier)
|
$0.00
|
|
Fourth Observation Date
|
60.00 (below Coupon Barrier)
|
$0.00
|
|
Fifth to Eleventh Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
|
Final Valuation Date
|
85.00 (at or above Downside Threshold; below Initial Value)
|
$10.175 (Payment at Maturity)
|
|
|
|
Total Payment:
|
$10.35 (3.50% return)
|
|
|
|
|
|
At maturity, we will pay you a total of $10.175 per Note, reflecting
your principal amount
plus
the applicable Contingent Coupon. When that amount is added to the Contingent Coupon payment
of $0.175 received in respect of prior Observation Dates, we will have paid you a total of $10.35 per Note for a 3.50% total return
on the Notes.
Example 4 — Notes Are NOT Automatically Called
and
the Final Value Is below the Downside Threshold
|
Date
|
Closing Level
|
Payment (per Note)
|
|
First Observation Date
|
110.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Second Observation Date
|
95.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Third Observation Date
|
85.00 (at or above Coupon Barrier)
|
$0.175 (Contingent Coupon)
|
|
Fourth Observation Date
|
90.00 (at or above Coupon Barrier; below Initial Value)
|
$0.175 (Contingent Coupon)
|
|
Fifth to Eleventh Observation Dates
|
Various (all at or above Coupon Barrier; below Initial Value)
|
$1.225 (Contingent Coupon)
|
|
Final Valuation Date
|
55.00 (below Downside Threshold)
|
$10.00 × (1 + Underlying Return) =
$10.00 × (1 + -45%) =
$10.00 × 55% =
$5.50 (Payment at Maturity)
|
|
|
|
Total Payment:
|
$7.425 (-25.75% return)
|
|
|
|
|
|
Because the Notes are not automatically called, the Final Value
is below the Downside Threshold and the Underlying Return is -45%, at maturity we will pay you $5.50 per Note. When that amount
is added to the Contingent Coupon payments of $1.925 received in respect of prior Observation Dates, we will have paid you $7.425
per Note for a loss on the Notes of 25.75%.
Example 5 — Notes Are NOT Automatically Called
and
the Final Value is below the Downside Threshold
|
Date
|
Closing Level
|
Payment (per Note)
|
|
First Observation Date
|
60.00 (below Coupon Barrier)
|
$0.00
|
|
Second Observation Date
|
50.00 (below Coupon Barrier)
|
$0.00
|
|
Third Observation Date
|
55.00 (below Coupon Barrier)
|
$0.00
|
|
Fourth Observation Date
|
60.00 (below Coupon Barrier)
|
$0.00
|
|
Fifth to Eleventh Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
|
Final Valuation Date
|
50.00 (below Downside Threshold)
|
$10.00 × (1 + Underlying Return) =
$10.00 × (1 + -50%) =
$10.00 × 50% =
$5.00 (Payment at Maturity)
|
|
|
|
Total Payment:
|
$5.00 (-50.00% return)
|
|
|
|
|
|
Because the Notes are not automatically called, the Final Value
is below the Downside Threshold and the Underlying Return is -50%, at maturity we will pay you $5.00 per Note for a loss on the
Notes of 50.00%. Because there is no Contingent Coupon paid during the term of the Notes, that represents the total payment on
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 automatically 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.
The
Underlying
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 Underlying, based on daily closing levels of the Underlying as reported by the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. 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. The closing level of the Underlying on May 23, 2016 was 2,048.04. We obtained the closing levels of the Underlying
above and below from Bloomberg, without independent verification. You should not take the historical levels of the Underlying 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
|
3/31/2015
|
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
|
5/23/2016*
|
2,102.40
|
2,040.04
|
2,048.04
|
|
|
*
|
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 23, 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 Underlying
from January 3, 2006 through May 23, 2016, based on information from Bloomberg, without independent verification. The dotted line
represents the Downside Threshold and Coupon Barrier of 1,474.59, equal to 72% of the closing level of the Underlying on May 23,
2016.
Past performance of the Index is not indicative of the
future performance of the
Underlying.