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JPMorgan Chase Financial Company LLC
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May 2016
Pricing Supplement No. 207
Registration Statement Nos. 333-209682 and 333-209682-01
Dated May 26, 2016
Filed pursuant to Rule 424(b)(2)
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STRUCTURED INVESTMENTS
Opportunities in International Equities
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
The Trigger PLUS will pay no interest, do not guarantee any return of your principal at maturity and have the terms described in the accompanying product supplement,
underlying supplement, the prospectus supplement and prospectus, as supplemented or modified by this document. At maturity, if the underlying index has
appreciated
in value, investors will receive the stated principal amount of their
investment plus leveraged upside performance of the underlying index, subject to a maximum payment at maturity. If the underlying index has declined in value but the final index value is greater than or equal to the trigger level, investors will
receive the stated principal amount of the Trigger PLUS at maturity. However, if the underlying index has
declined
in value so that the final index value is less than the trigger level, at maturity investors will lose a significant portion or
all of their investment, resulting in a 1% loss for every 1% decline in the index value over the term of the Trigger PLUS. The Trigger PLUS are for investors who seek an equity-based return and who are willing to risk their principal and forgo
current income and upside above the maximum payment at maturity in exchange for the leverage feature that applies to a limited range of positive performance of the underlying index. At maturity, an investor will receive an amount in cash that may be
greater than, equal to, or less than the stated principal amount based upon the closing level of the underlying index on the valuation date. The Trigger PLUS are unsecured and unsubordinated obligations of JPMorgan Financial Company LLC, which we
refer to as JPMorgan Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co., issued as part of JPMorgan Financials Medium-Term Notes, Series A, program.
All payments on the Trigger PLUS are
subject to the credit risk of JPMorgan Financial, as issuer of the Trigger PLUS, and the credit risk of JPMorgan Chase & Co., as guarantor of the Trigger PLUS. The investor may lose some or all of the stated principal amount of the Trigger
PLUS.
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FINAL TERMS
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Underlying index:
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EURO STOXX 50
®
Index
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Aggregate principal amount:
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$10,575,000
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Payment at maturity:
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If the final index value is
greater than
the initial index value, for each $10 stated principal amount Trigger PLUS,
$10 + leveraged upside payment
In no event will the payment at maturity exceed
the maximum payment at maturity.
If the final index value is
less than or equal to
the initial index value but is
greater than or equal to
the
trigger level, for each $10 stated principal amount Trigger PLUS,
$10
If the
final index value is
less than
the trigger level, for each $10 stated principal amount Trigger PLUS,
$10 × index performance factor
This amount will be less than the stated principal amount of $10 per Trigger PLUS and will represent a loss of more than 30%, and possibly all, of your
investment.
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Leveraged upside payment:
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$10 × leverage factor × index percent increase
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Index percent increase:
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(final index value initial index value) / initial index value
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Initial index value:
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The closing level of the underlying index on the pricing date, which was 3,071.21
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Final index value:
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The closing level of the underlying index on the valuation date
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Trigger level:
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70% of the initial index value
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Leverage factor:
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150%
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Index performance factor:
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final index value / initial index value
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Maximum payment at maturity:
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$12.90 (129.00% of the stated principal amount) per Trigger PLUS.
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Stated principal amount:
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$10 per Trigger PLUS
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Issue price:
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$10 per Trigger PLUS (see Commissions and issue price below)
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Pricing date:
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May 26, 2016
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Original issue date (settlement date):
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June 1, 2016
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Valuation date:
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May 28, 2018, subject to postponement in the event of certain market disruption events 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) in the accompanying product supplement
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Maturity date:
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May 31, 2018, subject to postponement in the event of certain market disruption events and as described under General Terms of Notes Postponement of a Payment Date in the accompanying product
supplement
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CUSIP / ISIN:
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46646W672 / US46646W6729
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Listing:
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The Trigger PLUS will not be listed on any securities exchange.
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Agent:
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J.P. Morgan Securities LLC (JPMS)
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Commissions and issue price:
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Price to public
(1)
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Fees and commissions
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Proceeds to issuer
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Per Trigger PLUS
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$10.00
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$0.16
(2)
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$9.80
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$0.04
(3)
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Total
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$10,575,000
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$211,500
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$10,363,500
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(1)
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See Additional Information about the Trigger PLUS Supplemental use of proceeds and hedging in this document for information about the components of the price to public of the Trigger PLUS.
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(2)
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JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions of $0.16 per $10 stated principal amount security it receives from us to Morgan Stanley Smith Barney LLC (Morgan Stanley
Wealth Management). See Plan of Distribution (Conflicts of Interest) in the accompanying product supplement.
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(3)
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Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.04 for each $10 stated principal amount Trigger PLUS
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The estimated value of the Trigger PLUS on the pricing date was $9.795 per $10 stated principal amount Trigger PLUS. See
Additional Information about the Trigger PLUS JPMSs estimated value of the Trigger PLUS in this document for additional information.
Investing in the Trigger PLUS involves a number of risks. See Risk Factors beginning on page PS-10 of the accompanying product supplement, Risk
Factors beginning on page US-2 of the accompanying underlying supplement and Risk Factors beginning on page 6 of this document.
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Neither the Securities and Exchange Commission (the SEC) nor any state securities commission has approved or disapproved of the Trigger PLUS or passed upon
the accuracy or the adequacy of this document or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
The Trigger PLUS 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.
You should read this document together with the related product supplement, underlying supplement, prospectus supplement and
prospectus, each of which can be accessed via the hyperlinks below. Please also see Additional Information about the Trigger PLUS at the end of this document.
Product supplement no. 4-I dated April
15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
Underlying supplement no. 1-I dated April
15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
Prospectus supplement and prospectus, each dated April
15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Trigger
Performance Leveraged Upside Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018 (the Trigger
PLUS) can be used:
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As an alternative to direct exposure to the underlying index that enhances returns for a limited range of positive performance of the underlying index.
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To enhance returns and potentially outperform the underlying index in a moderately bullish scenario.
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To potentially achieve similar levels of upside exposure to the underlying index as a direct investment, subject to the maximum payment at maturity, while using fewer dollars by taking advantage of the leverage factor.
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To provide limited market downside protection against a loss of principal in the event of a decline of the underlying index but only if the final index value is
greater than or equal to
the trigger level.
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Maturity:
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Approximately 2 years
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Leverage factor:
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150% (applicable only if the final index value is greater than the initial index value)
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Trigger level:
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70% of the initial index value
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Maximum payment at maturity:
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$12.90 (129.00% of the stated principal amount) per Trigger PLUS
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Minimum payment at maturity:
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None. Investors may lose their entire initial investment in the Trigger PLUS.
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Supplemental Terms of the Trigger PLUS
For purposes of the accompanying product supplement, the underlying index is an Index.
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged
exposure to an underlying asset, which may be equities, commodities and/or currencies. In exchange for enhanced returns from a certain range of positive performance of the underlying asset, investors are exposed to the risk of loss of some or all of
their investment due to the trigger feature. At maturity, if the underlying asset has appreciated, investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying asset, subject to the
maximum payment at maturity. At maturity, if the underlying asset has depreciated but is at or above the trigger level, investors will receive the stated principal amount of their investment. At maturity, if the asset has depreciated below the
trigger level, investors are fully exposed to the negative performance of the asset and will lose 1% of the stated principal amount for every 1% of decline in the final index value less than the trigger level.
Investors may lose some or all of
the stated principal amount of the Trigger PLUS.
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Leveraged
Performance
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The Trigger PLUS offer investors an opportunity to capture enhanced returns for
a limited range of positive performance relative to a direct investment in the underlying index.
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Trigger
Feature
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At maturity, even if the underlying index has declined over the term of the
Trigger PLUS, investors will receive their stated principal amount but only if the final index value is
greater than or equal to
the trigger level.
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Upside
Scenario
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The final index value is greater than the initial index value. At maturity, the
Trigger PLUS pay the stated principal amount of $10
plus
a return equal to 150% of the index percent increase, subject to the maximum payment at maturity of $12.90 (129.00% of the stated principal amount) per Trigger PLUS.
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Par
Scenario
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The final index value is less than or equal to the initial index value but is
greater than or equal to the trigger level. In this case, the Trigger PLUS pay the stated principal amount of $10 per Trigger PLUS at maturity even when the underlying index has depreciated.
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Downside Scenario
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The final index value is less than the trigger level. In this case, the Trigger
PLUS pay an amount that is over 30% less than the stated principal amount and this decrease will be by an amount that is proportionate to the percentage decline of the final index value from the initial index value. (Example: if the underlying index
decreases in value by 50%, the Trigger PLUS will pay an amount that is less than the stated principal amount by 50%, or $5 per Trigger PLUS.)
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Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
How the Trigger PLUS Work
Payoff Diagram
The payoff diagram below
illustrates the payment at maturity on the Trigger PLUS based on the following terms:
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Stated principal amount:
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$10 per Trigger PLUS
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Leverage factor:
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150%
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Trigger level:
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70% of the initial index value
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Maximum payment at maturity:
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$12.90 (129.00% of the stated principal
amount) per Trigger
PLUS
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How it works
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Upside Scenario.
If the final index value is greater than the initial index value, for each $10 principal amount Trigger PLUS, investors will receive the $10 stated principal
amount
plus
a return equal to 150% of the appreciation of the underlying index over the term of the Trigger PLUS, subject to the maximum payment at maturity. Under the terms of the Trigger PLUS, an investor will realize the maximum payment at
maturity at a final index value of 112.90% of the initial index value.
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For example, if the underlying index appreciates 5%, investors will receive a 7.50% return, or $10.75 per Trigger PLUS.
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Par Scenario.
If the final index value is less than or equal to the initial index value but is greater than or equal to the trigger level, investors will receive the stated
principal amount of $10 per Trigger PLUS.
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For example, if the underlying index depreciates 5%, investors will receive the $10 stated principal amount.
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Downside Scenario.
If the final index value is less than the trigger level, investors will receive an amount that is significantly less than the stated principal amount by an amount
proportionate to the percentage decrease of the final index value from the initial index value.
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Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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For example, if the underlying index depreciates 50%, investors will lose 50% of their principal and receive only $5 per Trigger PLUS at maturity, or 50% of the stated principal amount.
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The hypothetical returns and hypothetical payments on the Trigger PLUS shown above apply
only if you hold the Trigger PLUS for their entire term
. These
hypotheticals do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list
of certain key risk factors for investors in the Trigger PLUS. For further discussion of these and other risks, you should read the sections entitled Risk Factors of the accompanying product supplement and the underlying supplement. We
also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the Trigger PLUS.
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The Trigger PLUS do not pay interest or guarantee the return of any principal and your investment in the Trigger PLUS may result in a loss
. The terms of the Trigger PLUS differ from those of ordinary debt
securities in that the Trigger PLUS do not pay interest or guarantee the payment of any principal amount at maturity. If the final index value is less than the trigger level (which is 70% of the initial index value), the payment at maturity will be
an amount in cash that is over 30% less than the stated principal amount of each Trigger PLUS and this decrease will be by an amount that is proportionate to the decrease in the value of the underlying index and may be zero. There is no minimum
payment at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
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The appreciation potential of the Trigger PLUS is limited by the maximum payment at maturity.
The appreciation potential of Trigger PLUS is limited by the maximum payment at maturity of $12.90 (129.00% of the
stated principal amount) per Trigger PLUS. Because the maximum payment at maturity will be limited to 129.00% of the stated principal amount for the Trigger PLUS, any increase in the final index value by more than 12.90% will not further increase
the return on the Trigger PLUS.
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The Trigger PLUS are subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co., and any actual or anticipated changes to our or JPMorgan Chase & Co.s credit ratings or credit
spreads may adversely affect the market value of the Trigger PLUS.
Investors are dependent on our and JPMorgan Chase & Co.s ability to pay all amounts due on the Trigger PLUS. Any actual or anticipated decline in our or JPMorgan
Chase & Co.s credit ratings or increase in our or JPMorgan Chase & Co.s credit spreads determined by the market for taking that credit risk is likely to adversely affect the market value of the Trigger PLUS
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If
we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you under the Trigger PLUS and you could lose your entire investment.
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As a finance subsidiary, JPMorgan Financial has no independent operations and has limited assets.
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance
and administration of our Trigger PLUS. 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 Trigger PLUS
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If these affiliates do not make payments to us and we fail to make payments on the Trigger PLUS, 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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Economic interests of the issuer, the guarantor, the calculation agent, the agent of the offering of the Trigger PLUS and other affiliates of the issuer may be different from those of investors.
We and our
affiliates play a variety of roles in connection with the issuance of the Trigger PLUS, including acting as calculation agent and as an agent of the offering of the Trigger PLUS, hedging our obligations under the Trigger PLUS and making the
assumptions used to determine the pricing of the Trigger PLUS and the estimated value of the Trigger PLUS, which we refer to as the estimated value of the Trigger PLUS. 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 Trigger PLUS. The calculation agent has determined the initial index value, will
determine the final index value and will calculate the amount of payment you will receive at maturity, if any. Determinations made by the calculation agent, including with respect to the occurrence or non-occurrence of market disruption events, the
selection of a successor to the underlying index or calculation of the final index value in the event of a discontinuation or material change in method of calculation of the underlying index, may affect the payment to you at maturity.
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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 Trigger PLUS and the value of the Trigger PLUS. It is possible that
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
hedging or trading activities of ours or our affiliates in connection with the Trigger PLUS could result in substantial returns for us or our affiliates
while the value of the Trigger PLUS 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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The benefit provided by the trigger level may terminate on the valuation date. If the final index value is less than the trigger level, the benefit provided by the trigger level will terminate and you will be
fully exposed to any depreciation of the underlying index.
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The estimated value of the Trigger PLUS is lower than the original issue price (price to public) of the Trigger PLUS.
The estimated value of the Trigger PLUS is only an estimate determined by reference to several
factors. The original issue price of the Trigger PLUS exceeds the estimated value of the Trigger PLUS because costs associated with selling, structuring and hedging the Trigger PLUS are included in the original issue price of the Trigger PLUS. These
costs include the selling commissions, the structuring fee, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated cost of hedging our
obligations under the Trigger PLUS. See Additional Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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The estimated value of the Trigger PLUS does not represent future values of the Trigger PLUS and may differ from others estimates.
The estimated value of the Trigger PLUS is determined by reference to
internal pricing models of our affiliates. This estimated value of the Trigger PLUS is based on market conditions and other relevant factors existing at the time of pricing 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 Trigger PLUS that are greater than or less than the estimated value of the Trigger PLUS. 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 Trigger PLUS 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 Trigger PLUS from you in secondary market transactions. See Additional
Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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The estimated value of the Trigger PLUS is derived by reference to an internal funding rate.
The internal funding rate used in the determination of the estimated value of the Trigger PLUS is based on, among other
things, our and our affiliates view of the funding value of the Trigger PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger PLUS 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 Trigger PLUS and any secondary market prices of the Trigger PLUS. See Additional
Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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The value of the Trigger PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the Trigger PLUS for a limited time period.
We
generally expect that some of the costs included in the original issue price of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger PLUS by JPMS in an amount that will decline to zero over an
initial predetermined period. These costs can include selling commissions, the structuring fee, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured
debt issuances. See Additional Information about the Trigger PLUS Secondary market prices of the Trigger PLUS in this document for additional information relating to this initial period. Accordingly, the estimated value of your
Trigger PLUS during this initial period may be lower than the value of the Trigger PLUS as published by JPMS (and which may be shown on your customer account statements).
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Secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS.
Any secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS 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 the structuring fee and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue
price of the Trigger PLUS. As a result, the price, if any, at which JPMS will be willing to buy Trigger PLUS from you in
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Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
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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 Trigger PLUS.
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The Trigger PLUS are not
designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Trigger PLUS to maturity. See Secondary trading may be limited below.
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Secondary market prices of the Trigger PLUS will be impacted by many economic and market factors.
The secondary market price of the Trigger PLUS 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, structuring fee, projected hedging profits, if any, estimated hedging costs and the closing level of the underlying index, including:
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¡
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any actual or potential change in our or JPMorgan Chase & Co.s creditworthiness or credit spreads;
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¡
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customary bid-ask spreads for similarly sized trades;
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¡
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our internal secondary funding rates spreads for structured debt issuances;
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¡
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the actual and expected volatility of the underlying index;
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¡
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the time to maturity of the Trigger PLUS;
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¡
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the dividend rates on the equity securities included in the underlying index;
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¡
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interest and yield rates in the market generally
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¡
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the equity securities included in the underlying index trade and the correlation among those rates
and the levels of the underlying index; and
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¡
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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 Trigger PLUS, which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the Trigger PLUS, if
any, at which JPMS may be willing to purchase your Trigger PLUS in the secondary market.
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Investing in the Trigger PLUS is not equivalent to investing in the underlying index.
Investing in the Trigger PLUS is not equivalent to investing in the underlying index or its component stocks. Investors in the
Trigger PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying index.
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Adjustments to the underlying index could adversely affect the value of the Trigger PLUS.
The underlying index publisher may discontinue or suspend calculation or publication of the underlying index at any time.
In these circumstances, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued underlying index and is not precluded from considering indices that are calculated and published by
the calculation agent or any of its affiliates.
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§
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The Trigger PLUS are subject to risks associated with securities issued by non-U.S. companies.
The equity securities included in the underlying index have been issued by non-U.S. companies. Investments in Trigger
PLUS linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental
intervention in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies that are subject
to the reporting requirements of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable to U.S. reporting
companies.
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§
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The Trigger PLUS are not directly exposed to fluctuations in foreign exchange rates.
The value of your Trigger PLUS
will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities included in the underlying index are based, although any currency fluctuations could affect the performance of the
underlying index. Therefore, if the applicable
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Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
currencies appreciate or depreciate relative to the U.S. dollar over the term of the Trigger PLUS, you will not receive any additional payment or incur any reduction in any payment on the Trigger PLUS.
|
§
|
|
Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the Trigger PLUS.
The hedging or trading activities of the issuers affiliates and of any other hedging
counterparty with respect to the Trigger PLUS on or prior to the pricing date and prior to maturity could have adversely affected, and may continue to adversely affect, the value of the underlying index and, as a result, could decrease the amount an
investor may receive on the Trigger PLUS at maturity, if any. Any of these hedging or trading activities on or prior to the pricing date could have affected the initial index value and the trigger level and, therefore, could potentially increase the
level that the final index value must reach before you receive a payment at maturity that exceeds the issue price of the Trigger PLUS or so that you do not suffer a loss on your initial investment in the Trigger PLUS. Additionally, these hedging or
trading activities during the term of the Trigger PLUS, including on the valuation date, could adversely affect the final index value and, accordingly, the amount of cash an investor will receive at maturity, if any. It is possible that these
hedging or trading activities could result in substantial returns for us or our affiliates while the value of the Trigger PLUS declines.
|
§
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|
Secondary trading may be limited.
The Trigger PLUS will not be listed on a securities exchange. There may be little or no secondary market for the Trigger PLUS. Even if there is a secondary market, it may not
provide enough liquidity to allow you to trade or sell the Trigger PLUS easily. JPMS may act as a market maker for the Trigger PLUS, but is not required to do so. Because we do not expect that other market makers will participate significantly in
the secondary market for the Trigger PLUS, the price at which you may be able to trade your Trigger PLUS is likely to depend on the price, if any, at which JPMS is willing to buy the Trigger PLUS. If at any time JPMS or another agent does not act as
a market maker, it is likely that there would be little or no secondary market for the Trigger PLUS.
|
§
|
|
The tax consequences of an investment in the Trigger PLUS are uncertain.
There is no direct legal authority as to the proper U.S. federal income tax characterization of the Trigger PLUS, and we do not
intend to request a ruling from the IRS. The IRS might not accept, and a court might not uphold, the treatment of the Trigger PLUS described in Additional Information about the Trigger PLUS Additional Provisions Tax
considerations in this document and in Material U.S. Federal Income Tax Consequences in the accompanying product supplement. If the IRS were successful in asserting an alternative treatment for the Trigger PLUS, the timing and
character of any income or loss on the Trigger PLUS could differ materially and adversely from our description herein. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of
prepaid forward contracts and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related
topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any
mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize
certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax consequences of an investment in the Trigger PLUS, possibly with retroactive effect. You should review carefully the section entitled Material U.S. Federal Income Tax
Consequences in the accompanying product supplement and consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS, including possible alternative treatments and the issues presented by
this notice.
|
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
EURO STOXX 50
®
Index Overview
The EURO STOXX 50
®
Index consists of 50 component stocks of market sector leaders from within the Eurozone. For
additional information on the EURO STOXX 50
®
Index, see the information set forth under Equity Index Descriptions The EURO STOXX
50
®
Index in the accompanying underlying supplement.
Information as of market close on May 26,
2016:
|
|
|
|
|
|
|
Bloomberg Ticker Symbol:
|
|
SX5E
|
|
52 Week High (on 7/20/2015):
|
|
3,686.58
|
|
|
|
|
Current Index Closing Level:
|
|
3,071.21
|
|
52 Week Low (on 2/11/2016):
|
|
2,680.35
|
|
|
|
|
52 Weeks Ago (on 5/26/2015):
|
|
3,619.30
|
|
|
|
|
The following table sets forth the published high and low closing levels, as well as end-of-quarter closing levels, of the underlying
index for each quarter in the period from January 3, 2011 through May 26, 2016. The graph following the table sets forth the daily closing levels of the underlying index during the same period. The closing level of the underlying index on
May 26, 2016 was 3,071.21. We obtained the closing level information above and the information in the table and graph below from the Bloomberg Professional
®
service
(Bloomberg), without independent verification. The historical levels of the underlying index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the underlying index on the
valuation date. The payment of dividends on the stocks that constitute the underlying index are not reflected in its closing level and, therefore, have no effect on the calculation of the payment at maturity.
|
|
|
|
|
|
|
EURO STOXX 50
®
Index
|
|
High
|
|
Low
|
|
Period End
|
2011
|
|
|
|
|
|
|
First Quarter
|
|
3,068.00
|
|
2,721.24
|
|
2,910.91
|
Second Quarter
|
|
3,011.25
|
|
2,715.88
|
|
2,848.53
|
Third Quarter
|
|
2,875.67
|
|
1,995.01
|
|
2,179.66
|
Fourth Quarter
|
|
2,476.92
|
|
2,090.25
|
|
2,316.55
|
2012
|
|
|
|
|
|
|
First Quarter
|
|
2,608.42
|
|
2,286.45
|
|
2,477.28
|
Second Quarter
|
|
2,501.18
|
|
2,068.66
|
|
2,264.72
|
Third Quarter
|
|
2,594.56
|
|
2,151.54
|
|
2,454.26
|
Fourth Quarter
|
|
2,659.95
|
|
2,427.32
|
|
2,635.93
|
2013
|
|
|
|
|
|
|
First Quarter
|
|
2,749.27
|
|
2,570.52
|
|
2,624.02
|
Second Quarter
|
|
2,835.87
|
|
2,511.83
|
|
2,602.59
|
Third Quarter
|
|
2,936.20
|
|
2,570.76
|
|
2,893.15
|
Fourth Quarter
|
|
3,111.37
|
|
2,902.12
|
|
3,109.00
|
2014
|
|
|
|
|
|
|
First Quarter
|
|
3,172.43
|
|
2,962.49
|
|
3,161.60
|
Second Quarter
|
|
3,314.80
|
|
3,091.52
|
|
3,228.24
|
Third Quarter
|
|
3,289.75
|
|
3,006.83
|
|
3,225.93
|
Fourth Quarter
|
|
3,277.38
|
|
2,874.65
|
|
3,146.43
|
2015
|
|
|
|
|
|
|
First Quarter
|
|
3,731.35
|
|
3,007.91
|
|
3,697.38
|
Second Quarter
|
|
3,828.78
|
|
3,424.30
|
|
3,424.30
|
Third Quarter
|
|
3,686.58
|
|
3,019.34
|
|
3,100.67
|
Fourth Quarter
|
|
3,506.45
|
|
3,069.05
|
|
3,267.52
|
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
|
|
|
|
EURO STOXX
50
®
Index
|
|
High
|
|
Low
|
|
Period End
|
2016
|
|
|
|
|
|
|
First
Quarter
|
|
3,178.01
|
|
2,680.35
|
|
3,004.93
|
Second Quarter
(through May 26, 2016)
|
|
3,151.69
|
|
2,871.57
|
|
3,071.21
|
License Agreement with STOXX Limited.
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
PLUS 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. See Equity Index Descriptions The EURO STOXX 50
®
Index License Agreement in the accompanying underlying supplement.
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Information about the Trigger PLUS
Please
read this information in conjunction with the summary terms on the front cover of this document.
|
|
|
Additional Provisions:
|
|
|
Postponement of maturity date:
|
|
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled valuation date is
not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the
third business day following the valuation date as postponed.
|
Minimum ticketing size:
|
|
$1,000 / 100 Trigger PLUS
|
Trustee:
|
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
|
JPMS
|
The estimated value of the Trigger PLUS:
|
|
The estimated value of the Trigger PLUS set forth on the cover of this document 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 Trigger PLUS, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the Trigger PLUS. The estimated
value of the Trigger PLUS does not represent a minimum price at which JPMS would be willing to buy your Trigger PLUS in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated value of
the Trigger PLUS is based on, among other things, our and our affiliates view of the funding value of the Trigger PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger PLUS in comparison to
those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see Risk Factors The estimated value of the Trigger PLUS is derived by reference to an internal funding rate in this
document. The value of the derivative or derivatives underlying the economic terms of the Trigger PLUS 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 Trigger PLUS on the pricing date is based on market conditions and other relevant factors and assumptions existing at that time. See Risk Factors The estimated value of the Trigger PLUS does not
represent future values of the Trigger PLUS and may differ from others estimates in this document.
The estimated value of the Trigger PLUS is lower than the original issue price of the Trigger PLUS because costs associated with selling, structuring and hedging the
Trigger PLUS are included in the original issue price of the Trigger PLUS. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates
expect to realize for assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated cost of hedging our obligations under the Trigger PLUS. 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 Trigger PLUS.
See Risk Factors The estimated value of the Trigger PLUS Is lower than the original issue price (price to public) of the Trigger PLUS in this document.
|
Secondary market prices of the Trigger PLUS:
|
|
For information about factors that will impact any secondary market prices of the Trigger PLUS, see Risk Factors Secondary market prices
of the Trigger PLUS will be impacted by many economic and market factors in this document. In addition, we generally expect that some of the costs included in the original issue price of the Trigger PLUS will be partially paid back to you in
connection with any repurchases of your Trigger PLUS by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the Trigger PLUS. The length
of any such initial period reflects the structure of the Trigger PLUS, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Trigger PLUS and when these costs are incurred, as
determined by our affiliates. See Risk Factors The value of the Trigger PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the Trigger PLUS for a
limited time period.
|
Tax
|
|
You should review carefully the section entitled Material U.S. Federal Income Tax
|
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
considerations:
|
|
Consequences in the accompanying product supplement no. 4-I. The following discussion, when read in combination with that section, constitutes
the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of the Trigger PLUS.
Based on current market conditions, in the opinion of our special tax counsel, your Trigger PLUS
should be treated as open transactions that are not debt instruments for U.S. federal income tax purposes, as more fully described in Material U.S. Federal Income Tax Consequences Tax Consequences to U.S. Holders
Notes Treated as Open Transactions That Are Not Debt Instruments in the accompanying product supplement no. Assuming this treatment is respected, the gain or loss on your Trigger PLUS should be treated as long-term capital gain or loss if you
hold your Trigger PLUS for more than a year, whether or not you are an initial purchaser of Trigger PLUS at the issue price. However, the IRS or a court may not respect this treatment of the Trigger PLUS, in which case the timing and character of
any income or loss on the Trigger PLUS could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and
similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income
or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S.
investors should be subject to withholding tax; and whether these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary
income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the Trigger PLUS, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS, including
possible alternative treatments and the issues presented by this notice.
Withholding under
legislation commonly referred to as FATCA may (if the Trigger PLUS are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the Trigger PLUS. Under a recent IRS notice, withholding under FATCA
will not apply to payments of gross proceeds (other than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the Trigger PLUS. You should consult your tax adviser regarding the potential application of
FATCA to the Trigger PLUS.
|
Supplemental use of proceeds and hedging:
|
|
The Trigger PLUS are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the Trigger
PLUS. See How the Trigger PLUS Work in this document for an illustration of the risk-return profile of the Trigger PLUS and EURO STOXX 50
®
Index Overview in this
document for a description of the market exposure provided by the Trigger PLUS.
The original
issue price of the Trigger PLUS is equal to the estimated value of the Trigger PLUS plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers and the structuring fee, plus (minus) the projected profits (losses) that our
affiliates expect to realize for assuming risks inherent in hedging our obligations under the Trigger PLUS, plus the estimated cost of hedging our obligations under the Trigger PLUS.
|
Benefit plan investor considerations:
|
|
See Benefit Plan Investor Considerations in the accompanying product supplement.
|
Supplemental plan of distribution:
|
|
Subject to regulatory constraints, JPMS intends to use its reasonable efforts to offer to purchase the Trigger PLUS in the secondary market, but is
not required to do so. JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management. In addition, Morgan Stanley Wealth Management will receive a structuring fee
as set forth on the cover of this document for each Trigger PLUS.
We or our affiliate 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 Trigger PLUS 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 and hedging above and Use of Proceeds and Hedging in the accompanying product supplement.
|
Trigger PLUS Based on the Value of the EURO STOXX 50
®
Index due May 31, 2018
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
Validity of the Trigger PLUS:
|
|
In the opinion of Davis Polk & Wardwell LLP, as our special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the Trigger
PLUS offered by this pricing supplement have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such Trigger PLUS will be valid and binding
obligations of JPMorgan Financial and the related guarantee will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel
expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the laws of the State of New
York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustees authorization, execution and delivery of the indenture
and its authentication of the Trigger PLUS and the validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated February 24, 2016, which was filed as an exhibit to
the Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan Chase & Co. on February 24, 2016.
|
Contact:
|
|
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanleys principal executive offices at
1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326).
|
Where you can find more information:
|
|
You should read this document together with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our
Series A medium-term notes of which these Trigger PLUS are a part, and the more detailed information contained in the accompanying product supplement and the accompanying underlying supplement.
This document, together with the documents listed below, contains the terms of the Trigger PLUS 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, stand-alone 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 and the accompanying underlying
supplement, as the Trigger PLUS 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 Trigger PLUS.
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):
Product supplement no. 4-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
Underlying supplement no. 1-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
Prospectus supplement and prospectus, each dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 1665650, and JPMorgan Chase &
Co.s CIK is 19617.
As used in this document, we, us, and
our refer to JPMorgan Financial.
|
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