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 26, 2016.
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May , 2016
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Registration Statement No. 333-209682; Rule 424(b)(2)
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JPMorgan Chase & Co.
Structured Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc. due June 16, 2017
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The notes are designed for investors who seek a higher interest rate than either the current dividend yield on the Reference Stock or the yield on a conventional debt security with the same maturity issued by us. The
notes will pay between 7.50% and 9.50% per annum interest over the term of the notes, assuming no early redemption by us, payable at a rate of between 0.625% and 0.7917% per month.
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The notes may be redeemed early, in whole but not in part, at our option on any Call Date.
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The earliest date on which the notes may be redeemed at our option is December 19, 2016.
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Investors in the notes should be willing to accept the risks of owning equities in general and the common stock of Gilead Sciences, Inc. in particular, and the risk of losing some or all of their principal.
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Investors should also be willing to forgo dividend payments, in exchange for Interest Payments.
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The notes are unsecured and unsubordinated obligations of JPMorgan Chase & Co.
Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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Minimum denominations of $1,000 and integral multiples thereof
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The notes are expected to price on or about June 10, 2016 and are expected to settle on or about June 15, 2016.
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Investing in the notes involves a number of risks. See Risk Factors beginning on page PS-10 of the accompanying product supplement and
Selected Risk Considerations beginning on page PS-3 of this pricing supplement.
Neither the Securities and Exchange Commission (the
SEC) nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any
representation to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$
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$
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Total
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$
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$
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$
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(1) See Supplemental Use of Proceeds in this pricing
supplement for information about the components of the price to public of the notes.
(2) J.P.
Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to other affiliated or unaffiliated dealers. If the notes priced today, the selling
commissions would be $15.00 per $1,000 principal amount note and in no event will these selling commissions exceed $17.50 per $1,000 principal amount note. See Plan of Distribution (Conflicts of Interest) in the accompanying product
supplement.
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If the notes priced today, the estimated value of the notes would be approximately $969.60 per $1,000 principal amount
note. The estimated value of the notes, when the terms of the notes are set, will be provided in the pricing supplement and will not be less than $950.00 per $1,000 principal amount note. See The Estimated Value of the Notes in this
pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal Deposit Insurance Corporation
or any other governmental agency and are not obligations of, or guaranteed by, a bank.
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Pricing supplement no. to product supplement no. 4-I dated April 15, 2016 and the prospectus and
prospectus supplement, each dated April 15, 2016
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Key Terms
Issuer:
JPMorgan Chase
& Co.
Reference Stock:
The common stock, par value $0.001
per share, of Gilead Sciences, Inc. (Bloomberg ticker: GILD). We refer to Gilead Sciences, Inc. as Gilead.
Interest Rate:
Between 7.50% and 9.50% per annum, payable at a rate of between 0.625% and 0.7917% per month (to be provided in the pricing supplement)
Interest Payments:
If the notes have not been redeemed early,
you will receive on each Interest Payment Date for each $1,000 principal amount note an Interest Payment between $6.25 and $7.9167 (equivalent to an Interest Rate of between 7.50% and 9.50% per annum, payable at a rate of between 0.625% and 0.7917%
per month).
Trigger Value:
65.00% of the Initial Value
Trigger Event:
A Trigger Event occurs if, on any day during the
Monitoring Period, the closing price of one share of the Reference Stock is less than the Trigger Value.
Pricing Date:
On or about June 10, 2016
Original Issue Date (Settlement Date):
On or about June 15, 2016
Review Date*:
June 13, 2017
Interest Payment Dates*:
July 18, 2016, August 17, 2016, September 19, 2016,
October 18, 2016, November 18, 2016, December 19, 2016, January 18, 2017, February 17, 2017, March 17, 2017, April 18, 2017, May 17, 2017 and the Maturity Date
Call Dates*:
the December 19, 2016 and March 17, 2017 Interest Payment Dates
Maturity Date*:
June 16, 2017
* 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 and General Terms of Notes Postponement of a Payment Date in the accompanying product supplement
Early Redemption:
We, at our election, may redeem the notes early, in whole but not in part, on any of the Call Dates at a price, for each $1,000 principal amount note, equal
to $1,000 plus any accrued and unpaid Interest Payment. If we intend to redeem your notes early, we will deliver notice to The Depository Trust Company, or DTC, at least five business days before the applicable Call Date on which the notes are to be
redeemed.
Payment at Maturity:
If the notes have not been redeemed
early and (i) the Final Value is greater than or equal to the Initial Value or (ii) a Trigger Event has not occurred, you will receive a cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Interest
Payment applicable to the Maturity Date.
If the notes have not been redeemed early and (i) the Final Value is less than the Initial Value and (ii) a Trigger
Event has occurred, you will receive at maturity per $1,000 principal amount note, in addition to the Interest Payment applicable to the Maturity Date, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our
election, the Cash Value). Fractional shares will be paid in cash.
The market value of the Physical Delivery Amount or the Cash Value will most likely be
substantially less than the principal amount of your notes, and may be zero.
Monitoring Period:
The period from but excluding the Pricing Date to and including the Review Date
Physical Delivery Amount:
The number of shares of the Reference Stock, per
$1,000 principal amount note, equal to $1,000
times
the Stock Adjustment Factor,
divided
by the Initial Value
Cash Value:
For each $1,000 principal amount note, $1,000 times the Final Value, divided by the Initial Value
Initial Value:
The closing price of one share of the Reference Stock on the
Pricing Date
Final Value:
The closing price of one share of the
Reference Stock on the Review Date
Stock Adjustment Factor:
The Stock Adjustment Factor is referenced in determining the closing price of one share of the Reference Stock and is set equal to 1.0 on the pricing date.
The Stock Adjustment Factor is subject to adjustment upon the occurrence of certain corporate events affecting the Reference Stock. See The Underlyings Reference Stocks Anti-Dilution Adjustments and The Underlyings
Reference Stocks Reorganization Events in the accompanying product supplement for further information.
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PS-1 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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How the Notes Work
Payment at Maturity If the Notes
Have Not Been Redeemed Early
Total Interest Payments
The table below illustrates the hypothetical total Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Interest Rate of
7.50% per annum, depending on how many Interest Payments are made prior to early redemption or maturity. If the notes have not been redeemed early, the hypothetical total Interest Payments per $1,000 principal amount note over the term of the
notes will be equal to the maximum amount shown in the table below. The actual Interest Rate will be provided in the pricing supplement and will be between 7.50% and 9.50% per annum.
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Number of Interest Payments
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Total Interest Payments
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12
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$75.00
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9
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$56.25
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6
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$37.50
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Hypothetical Payout Examples
The following examples illustrate payments on the notes,
assuming a range of performances linked to a hypothetical Reference Stock on the Review Date. The hypothetical payments set forth below assume the following:
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an Initial Value of $100;
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a Trigger Value of $65.00 (equal to 65.00% of the hypothetical Initial Value); and
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an Interest Rate of 7.50% per annum (payable at a rate of 0.625% per month).
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The hypothetical Initial Value of
$100.00 has been chosen for illustrative purposes only and may not represent the actual Initial Value. The actual Initial Value is the closing price of one share of the Reference Stock on the Pricing Date and will be provided in the pricing
supplement. For historical data regarding the actual closing prices of one share of the Reference Stock, please see the historical information set forth under The Reference Stock in this pricing supplement.
Each hypothetical payment set forth below is for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers
appearing in the following examples have been rounded for ease of analysis.
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PS-2 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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Example 1 Notes have NOT been redeemed early, the Final Value is greater than or equal to
its Initial Value and a Trigger Event has occurred
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Date
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Closing Price
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Review Date
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$105.00
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Final Value is greater than or equal to Initial Value
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Total Payment
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$1,075.00 (7.50% return)
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Because the notes have not been redeemed early and the Final Value is greater than or equal to its Initial Value, even though a Trigger
Event has occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,006.25 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the
prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,075.00.
Example 2 Notes have NOT
been redeemed early, the Final Value is less than its Initial Value and a Trigger Event has NOT occurred
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Date
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Closing Price
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Review Date
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$90.00
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Final Value is less than Initial Value
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Total Payment
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$1,075.00 (7.50% return)
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Because the notes have not been redeemed early and a Trigger Event has not occurred, even though the Final Value is less than its Initial
Value, the payment at maturity, for each $1,000 principal amount note, will be $1,006.25 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest
Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,075.00.
Example 3 Notes have NOT redeemed early,
the Final Value is less than its Initial Value and a Trigger Event has occurred
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Date
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Closing Price
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Review Date
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$60.00
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Final Value is less than Initial Value
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Total Payment
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$675.00 (-32.50% return)
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Because the notes have not been redeemed early, the Final Value is less than the Initial Value and a Trigger Event has occurred, you will
receive at maturity, in addition to the Interest Payment applicable to the Maturity Date, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value). Fractional shares will be paid in
cash. Assuming that the value of the Physical Delivery Amount on the Maturity Date is equal to the Cash Value, the value of the payment at maturity will be $606.25 per $1,000 principal amount note, calculated as follows.
[$1,000 × $60.00 / $100] + $6.25 = $606.25
When added to the Interest Payments
received with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $675.00. The actual value of the Physical Delivery Amount will be less than the Cash Value if the price of the Reference
Stock on the Maturity Date is less than the Final Value.
The hypothetical returns and hypothetical payments on the notes shown above apply
only if you hold the
notes for their entire term.
These hypotheticals do not reflect the 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.
Selected Risk Considerations
An investment in the notes involves significant risks. These
risks are explained in more detail in the Risk Factors section of the accompanying product supplement.
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
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The notes do not guarantee any return of
principal. If the notes have not been redeemed early and (i) the Final Value is less than the Initial Value and (ii) a Trigger Event has occurred, you will receive at maturity a predetermined number of shares of the Reference Stock (or, at
our election, the Cash Value), the market value of which will most likely be substantially less than the principal amount of your notes, and may be zero.
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CREDIT RISK OF JPMORGAN CHASE & CO.
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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.
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PS-3 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER THE TERM OF THE NOTES
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regardless of any appreciation in the price of the Reference Stock, which may be significant. You will not participate in any appreciation in the price of
the Reference Stock.
We and our affiliates play a variety of roles in connection with the
notes. In performing these duties, our economic interests are potentially adverse to your interests as an investor in 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.
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IF YOU RECEIVE THE PHYSICAL DELIVERY AMOUNT AT MATURITY, THE VALUE OF THE SHARES OF THE REFERENCE STOCK YOU RECEIVE MAY BE LESS ON THE MATURITY DATE THAN ON THE REVIEW DATE
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We will make no adjustments to the Physical Delivery Amount to account for any fluctuations in the value of the shares of the Reference Stock to be
delivered at maturity. You will bear the risk of any decrease in the value of those shares between the Review Date and the Maturity Date.
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THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD
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If, on any day during the Monitoring Period, the closing price of one share of the Reference Stock is less than the Trigger Value (
i.e.
, a Trigger
Event occurs) and the notes have not been redeemed early, the benefit provided by the Trigger Value will terminate and you will be fully exposed to any depreciation in the closing price of one share of the Reference Stock. You will be subject to
this potential loss of principal even if the Reference Stock subsequently recovers such that the closing price of one share of the Reference Stock is greater than or equal to the Trigger Value.
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THE OPTIONAL EARLY REDEMPTION FEATURE MAY FORCE A POTENTIAL EARLY EXIT
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If your notes are
redeemed early, the term of the notes may be reduced to as short as six months and you will not receive any Interest Payments after the applicable Call Date. 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. Even in cases where the notes are called before maturity, noteholders are not entitled to any fees and commissions described on the front cover of
this pricing supplement.
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YOU WILL NOT RECEIVE DIVIDENDS ON THE REFERENCE STOCK OR HAVE ANY RIGHTS WITH RESPECT TO THE REFERENCE STOCK.
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NO AFFILIATION WITH THE REFERENCE STOCK ISSUER
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We have not independently verified any of
the information about the Reference Stock issuer contained in this pricing supplement. You should undertake your own investigation into the Reference Stock and its issuer. We are not responsible for the Reference Stock issuers public
disclosure of information, whether contained in SEC filings or otherwise.
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THE ANTI-DILUTION PROTECTION FOR THE REFERENCE STOCK IS LIMITED AND MAY BE DISCRETIONARY
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The calculation agent will not make an adjustment in response to all events that could affect the Reference Stock. The calculation agent may make
adjustments in response to events that are not described in the accompanying product supplement to account for any diluting or concentrative effect, but the calculation agent is under no obligation to do so or to consider your interests as a holder
of the notes in making these determinations.
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THE RISK OF THE CLOSING PRICE OF THE REFERENCE STOCK FALLING BELOW THE TRIGGER VALUE IS GREATER IF THE PRICE OF THE REFERENCE STOCK IS VOLATILE.
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The notes will not be listed on any securities exchange. Accordingly, 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. You may not be able to sell your 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.
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THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
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You
should consider your potential investment in the notes based on the minimums for the estimated value of the notes and the Interest Rate.
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THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES
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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 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 The Estimated Value of the Notes in this pricing supplement.
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PS-4 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS ESTIMATES
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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
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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 our conventional fixed-rate debt. 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
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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. 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
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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 (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and
estimated hedging costs that are included in the original issue price of the notes. As a result, the price if any, at which JPMS will be willing to buy the 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.
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SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS
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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 price of the Reference Stock. 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. See Risk Factors
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes Secondary market prices of the notes will be impacted by many economic and market factors in the accompanying product supplement.
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PS-5 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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The Reference Stock
All information contained herein on the Reference Stock and on
Gilead is derived from publicly available sources, without independent verification. According to its publicly available filings with the SEC, Gilead is a research-based biopharmaceutical company that discovers, develops and commercializes medicines
in areas of unmet medical need. The common stock of Gilead, par value $0.001 per share, is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and is listed on The NASDAQ Stock Market, which we
refer to as the relevant exchange for purposes of Gilead in the accompanying product supplement. Information provided to or filed with the SEC by Gilead pursuant to the Exchange Act can be located by reference to SEC file number 000-19731, and can
be accessed through
www.sec.gov
. We do not make any representation that these publicly available documents are accurate or complete.
Historical Information
The following graph sets
forth the historical performance of the common stock of Gilead based on the weekly historical closing prices of one share of the Reference Stock from January 7, 2011 through May 20, 2016. The closing price of one share of the Reference
Stock on May 25, 2016 was $86.51. We obtained the closing prices below from the Bloomberg Professional
®
service (Bloomberg), without independent verification. The closing
prices below may have been adjusted by Bloomberg for corporate actions, such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
The historical closing prices of one share of the Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the
closing price of one share of the Reference Stock on the Pricing Date, the Review Date or any day during the Monitoring Period. There can be no assurance that the performance of the Reference Stock will result in the return of any of your principal
amount.
Tax Treatment
You should review carefully the section entitled
Material U.S. Federal Income Tax Consequences in the accompanying product supplement no. 4-I. Based on current market conditions, in determining our reporting responsibilities we intend to treat the notes for U.S. federal income tax
purposes as units each comprising: (x) a Put Option written by you that is terminated if an Early Redemption occurs and that, if not terminated, requires you to purchase the Reference Stock (or, at our option, receive the Cash Value thereof)
from us at maturity for an amount equal to the Deposit under circumstances where the payment due at maturity is the Physical Delivery Amount (or the Cash Value thereof) and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your
potential obligation under the Put Option, as more fully described in Material U.S. Federal Income Tax ConsequencesTax Consequences to U.S. HoldersNotes Treated as Units Each Comprising a Put Option and a Deposit in the
accompanying product supplement, and in particular in the subsection thereof entitled Notes with a Term of Not More than One Year. By purchasing the notes, you agree (in the absence of an administrative determination or judicial
ruling to the contrary) to follow this treatment and the allocation described in
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PS-6 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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the following paragraph. However, 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 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 on a
number of issues, the most relevant of which for investors in the notes are the character of income or loss (including whether the Put Premium might be currently included as ordinary income) and the degree, if any, to which income realized by
non-U.S. investors should be subject to withholding tax. While it is not clear whether the notes would be viewed as similar to the typical prepaid forward contract described in the notice, it is possible that 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.
We will determine the portion of each interest payment on the notes that we will allocate to interest on the Deposit and to Put Premium, respectively, and will provide
that allocation in the pricing supplement for the notes. If the notes had priced on May 25, 2016, we would have allocated 16.67% of each interest payment to interest on the Deposit and the remainder to Put Premium. The actual allocation that we
will determine for the notes may differ from this hypothetical allocation, and will depend upon a variety of factors, including actual market conditions and our borrowing costs for debt instruments of comparable maturities on the Pricing Date.
Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated as attributable to interest on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into
account prior to sale or settlement, including a settlement following an Early Redemption.
FATCA
. Withholding under legislation commonly referred to as
FATCA could apply to amounts paid with respect to the notes. You should consult your tax adviser regarding the potential application of FATCA to the notes.
Non-U.S. holders should also note that recently promulgated Treasury regulations imposing a withholding tax on certain dividend equivalents under certain
equity linked instruments will not apply to the notes.
You should consult your tax adviser regarding all aspects of the U.S. federal income tax
consequences of an investment in the notes, including possible alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue price should also consult their tax advisers with
respect to the tax consequences of an investment in the notes, including possible alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
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 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. For additional information, see Selected Risk Considerations 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.
The estimated value of the notes does not represent future values of the notes and may differ from
others estimates. Different pricing models and assumptions could provide valuations for the 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 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.
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 JPMS and
other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes.
Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that
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PS-7 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes 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 Considerations 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 Risk Factors Risks Relating to the Estimated Value and Secondary Market Prices of the Notes Secondary market prices of the notes will be impacted by many economic and market factors in the
accompanying product 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. 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 debt issuances.
This initial predetermined time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates expect to earn a
profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See Selected Risk Considerations The Value of the Notes as Published by JPMS
(and Which May Be Reflected on Customer Account Statements) May Be Higher Than 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 How the Notes Work and Hypothetical Payout Examples in this pricing supplement for an illustration of the risk-return profile of the notes
and The Reference Stock 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 JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in
hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional Terms Specific to
the Notes
You may revoke your offer to
purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any
changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series E
medium-term notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement. 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 the Risk Factors sections of the accompanying product supplement, 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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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.
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PS-8 | Structured
Investments
Callable Reverse Exchangeable Notes Linked to the Common Stock of Gilead Sciences, Inc.
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