Filed
Pursuant to Rule 424(b)(8)
Registration Statement No. 333-209682
Pricing Supplement to the
Prospectus
and Prospectus Supplement, each dated April 15, 2016
,
the
Underlying
Supplement No. 1-I dated April 15, 2016
and the
Product
Supplement No. 4-I dated April 15, 2016
— No. 156
Medium-Term Notes, Series
E
$2,489,000
Capped Buffered Enhanced
Participation Basket-Linked Notes due 2017
The notes do not bear interest.
The
amount that you will be paid on your notes on the stated maturity date (August 29, 2017, subject to adjustment) is based on
the performance of an unequally weighted basket (which we refer to as the basket) consisting of the EURO STOXX 50
®
Index
(37.00% initial weight), the FTSE
®
100 Index (23.00% initial weight), the TOPIX
®
Index
(23.00% initial weight), the Swiss Market Index (9.00% initial weight) and the S&P/ASX 200 Index (8.00% initial weight)
as measured from and including the trade date (May 25, 2016) to and including the determination date (August 24, 2017,
subject to adjustment). The initial basket level is 100 and the final basket level will equal the
sum
of the products,
as calculated for each basket underlier, of: (i) the final basket underlier level
divided
by the initial basket
underlier level
multiplied by
(ii) the applicable initial weighted value for such basket underlier. If the final
basket level on the determination date is greater than the initial basket level, the return on your notes will be positive,
subject to the maximum settlement amount of $1,183.40 for each $1,000 principal amount note. If the basket declines by up to
12.50% from the initial basket level to the final basket level, you will receive the principal amount of your notes. If the
basket declines by more than 12.50% from the initial basket level to the final basket level, the return on your notes will be
negative.
You could lose your entire investment in the notes. Any payment on the notes is subject to the credit risk
of JPMorgan Chase & Co.
To determine your payment at maturity, we will
calculate the basket return, which is the percentage increase or decrease in the final basket level from the initial basket level.
On the stated maturity date, for each $1,000 principal amount note, you will receive an amount in cash equal to:
|
·
|
if
the basket return is
positive
(the final basket level is
greater than
the initial basket level), the
sum
of
(i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) 1.40
times
(c) the basket return,
subject to the maximum settlement amount;
|
|
·
|
if
the basket return is
zero
or
negative
but
not below
-12.50% (the final basket level is
equal to
or
less than
the initial basket level but not by more than 12.50%), $1,000; or
|
|
·
|
if
the basket return is
negative
and is
below
-12.50% (the final basket level is
less than
the initial basket
level by more than 12.50%), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) approximately
1.14286
times
(c) the sum of the basket return
plus
12.50%. You will receive less than $1,000.
|
A decrease in the level of one or more basket underliers may
offset increases in the levels of the other basket underliers. Due to the unequal weightings of the basket underliers, the performances
of the EURO STOXX 50
®
Index, the FTSE
®
100 Index
and the TOPIX
®
Index will have a significantly larger impact on your return on the notes
than the performance of the Swiss Market Index or the S&P/ASX 200 Index.
Your investment in the notes involves
certain risks, including, among other things, our credit risk. See “Risk Factors” on page PS-10 of the accompanying
product supplement no. 4-I, “Risk Factors” on page US-2 of the accompanying underlying supplement no. 1-I and “Selected
Risk Factors” on page PS-16 of this pricing supplement.
The foregoing is only a brief summary of the
terms of your notes. You should read the additional disclosure provided herein so that you may better understand the terms and
risks of your investment.
The estimated value of the notes as determined
by J.P. Morgan Securities LLC, which we refer to as JPMS, when the terms of the notes were set, was $999.50 per $1,000 principal
amount note.
See “Summary Information — JPMS’s Estimated Value of the Notes” on page PS-8
of this pricing supplement for additional information about JPMS’s estimated value and “Summary Information —
Secondary Market Prices of the Notes” on page PS-8 of this pricing supplement for information
about secondary market prices of the notes.
Original
issue date (settlement date):
June 2, 2016
Original
issue price:
100.00% of the principal amount*
Underwriting
commission/discount:
0.00% of the principal amount*
Net proceeds to the issuer:
100.00% of the principal amount
See
“Summary Information — Supplemental Use of Proceeds” on page PS-9 of this pricing supplement for information
about the components of the original issue price of the notes.
*JPMS, acting as agent for JPMorgan Chase &
Co., will not receive selling commissions for these notes and will sell the notes to an unaffiliated dealer at 100.00% of the principal
amount. See “Plan of Distribution (Conflicts of Interest)” on page PS-88 of the accompanying product supplement no.
4-I.
Neither
the Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this pricing supplement, the accompanying product supplement, the accompanying
underlying supplement, the accompanying prospectus supplement or the accompanying prospectus. Any representation to the contrary
is a criminal offense.
The
notes are not bank deposits, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and
are not obligations of, or guaranteed by, a bank.
Pricing Supplement dated May 25,
2016
The original issue price, fees and commissions
and net proceeds listed above relate to the notes we sell initially. We may decide to sell additional notes after the date of this
pricing supplement, at issue prices and with fees and commission and net proceeds that differ from the amounts set forth above.
The return (whether positive or negative) on your investment in notes will depend in part on the price you pay for your notes.
We may use this pricing supplement in the initial
sale of the notes. In addition, JPMS or any other affiliate of ours may use this pricing supplement in a market-making transaction
in a note after its initial sale.
Unless JPMS or its agents inform the purchaser otherwise in the confirmation of sale, this
pricing supplement is being used in a market- making transaction.
SUMMARY INFORMATION
You should read this pricing supplement together
with the prospectus, as supplemented by the prospectus supplement, each dated April 15, 2016 relating to our Series E medium-term
notes of which these notes are a part, and the more detailed information contained in product supplement no. 4-I dated April 15,
2016 and underlying supplement no. 1-I dated April 15, 2016.
This pricing supplement, together with the documents listed below,
contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written
materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample
structures, fact sheets, brochures or other educational materials of ours.
You should carefully consider, among other things,
the matters set forth in “Risk Factors” in the accompanying product supplement no. 4-I and “Risk Factors”
in the accompanying underlying supplement no. 1-I, as the notes involve risks not associated with conventional debt securities.
We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You
may access these documents on the SEC website at www.sec.gov as follows (or if such address
has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website
is 19617. As used in this pricing supplement, “we,” “us” and “our” refer to JPMorgan Chase
& Co.
Key Terms
Issuer:
JPMorgan Chase & Co.
Basket underliers and initial weights:
Basket
Underlier
|
Basket
Underlier Sponsor
|
Bloomberg
Ticker Symbol
|
Initial
Weight
|
EURO
STOXX 50
®
Index
|
STOXX Limited
|
SX5E <Index>
|
37.00%
|
FTSE
®
100 Index
|
FTSE International Limited
|
UKX <Index>
|
23.00%
|
TOPIX
®
Index
|
Tokyo Stock Exchange, Inc.
|
TPX <Index>
|
23.00%
|
Swiss Market Index
|
SIX Swiss Exchange
|
SMI <Index>
|
9.00%
|
S&P/ASX 200 Index
|
S&P Dow Jones Indices LLC
|
AS51 <Index>
|
8.00%
|
The accompanying product supplement refers to each basket
underlier as an “Underlying.”
Principal amount:
each note will have a principal
amount of $1,000; $2,489,000 in the aggregate for all the offered notes; the aggregate principal amount of the offered notes may
be increased if the issuer, at its sole option, decides to sell an additional amount of the offered notes on a date subsequent
to the date of this pricing supplement
Purchase at amount other than principal amount:
the amount we will pay you at the stated maturity date for your notes will not be adjusted based on the price you pay for your
notes, so if you acquire notes at a premium (or discount) to the principal amount and hold them to the stated maturity date, it
could affect your investment in a number of ways. The return on your investment in the notes will be lower (or higher) than it
would have been had you purchased the notes at the principal amount. Also, the stated buffer level would not offer the same benefit
to your investment as would be the case if you had purchased the notes at the principal amount. Additionally, the cap level would
be triggered at a lower or higher percentage return than indicated below, relative to your initial investment. See “Selected
Risk Factors — If You Purchase Your Notes at a Premium to the Principal Amount, the Return on Your Investment Will Be Lower
Than the Return on Notes Purchased at the Principal Amount and the Impact of Certain Key Terms of the Notes Will Be Negatively
Affected” on page PS-18 of this pricing supplement.
Payment on the stated
maturity date:
for each $1,000 principal amount note, we will pay you on the stated maturity date an amount in cash equal to:
|
·
|
if
the final basket level is
greater than
or
equal to
the cap level, the maximum settlement amount;
|
|
·
|
if
the final basket level is
greater than
the initial basket level but
less than
the cap level, the
sum
of (i)
$1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate
times
(c) the basket
return;
|
|
·
|
if
the final basket level is
equal to
or
less than
the initial basket level but
greater than
or
equal to
the buffer level, $1,000; or
|
|
·
|
if the final basket level is
less than
the buffer
level, the
sum
of (i) $1,000
plus
(ii) the product of (a) $1,000
times
(b) the buffer rate
times
(c)
the sum of the basket return
plus
the buffer amount. You will receive less than $1,000.
|
Initial
basket level:
100
Initial
weighted value:
the initial weighted value for each of the basket underliers will equal the product of the initial weight
of that basket underlier
times
the initial basket level. The initial weight of each basket underlier is shown in the table
below:
Basket Underlier
|
Initial Weight in Basket
|
EURO STOXX 50
®
Index
|
37.00%
|
FTSE
®
100 Index
|
23.00%
|
TOPIX
®
Index
|
23.00%
|
Swiss Market Index
|
9.00%
|
S&P/ASX 200 Index
|
8.00%
|
Initial basket underlier level:
with
respect to each basket underlier, the closing level of the basket underlier on the trade date, which was 3,061.60 for the EURO
STOXX 50
®
Index, 6,262.85 for the FTSE
®
100 Index, 1,342.88 for the TOPIX
®
Index,
8,167.61 for the Swiss Market Index and 5,372.51 for the S&P/ASX 200 Index
Final basket level:
the basket closing
level of the basket on the determination date
Basket closing level:
the basket closing
level on any relevant day will be the sum of the products of (i) the closing level of each basket underlier on that day
divided
by
the initial basket underlier level of that basket underlier
and
(ii) the initial weighted value of that basket underlier
Basket return:
the
quotient
of
(i) the final basket level
minus
the initial basket level
divided
by (ii) the initial basket level, expressed as
a percentage.
Upside
participation rate:
1.40
Cap
level:
113.10% of the initial basket level
Maximum
settlement amount:
$1,183.40
Buffer
level:
87.50% of the initial basket level
Buffer
amount:
12.50%
Buffer
rate:
the
quotient
of the initial basket level
divided
by the buffer level, which equals approximately 1.14286
Trade
date:
May 25, 2016
Original
issue date (settlement date):
June 2, 2016
Determination
date:
August 24, 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 Multiple Underlyings” on page PS-47
of the accompanying product supplement
Stated
maturity date:
August 29, 2017, subject to postponement in the event of a market disruption event and as described under “General
Terms of Notes — Postponement of a Payment Date” on page PS-45 of the accompanying product supplement. The accompanying
product supplement refers to the stated maturity date as the “maturity date.”
No
interest:
The offered notes will not bear interest.
No
listing:
The offered notes will not be listed on any securities exchange or interdealer quotation system.
No
redemption:
The offered notes will not be subject to redemption right or price dependent redemption right.
Closing
level:
as described under “The Underlyings — Indices — Level of an Index” on page PS-66 of the accompanying
product supplement
Business
day:
as described under “General Terms of Notes — Postponement of a Payment Date” on page PS-45 of the accompanying
product supplement
Scheduled
trading day:
notwithstanding anything to the contrary under “General Terms of Notes — Postponement of a Determination
Date — Additional Defined Terms” on page PS-49 of the accompanying product supplement, for the purposes of the notes
offered by this pricing supplement, a “scheduled trading day” means, (a) with respect to the EURO STOXX 50
®
Index or any relevant successor index (as defined in the accompanying product supplement), a day, as determined by
the calculation agent, on which (i) the Index Sponsor (as defined in the accompanying product supplement) of the EURO STOXX 50
®
Index or that successor index, as applicable, is scheduled to publish the closing level of the EURO STOXX 50
®
Index or that successor index, as applicable, and (ii) each exchange or quotation system where trading has a material
effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to the EURO STOXX
50
®
Index or that successor index, as applicable, is scheduled to be open for
trading for its regular trading session; or (b) with respect
to each of the other basket underliers or any relevant
successor index, a day, as determined by the calculation agent, on which each of the following exchanges or quotation systems is
scheduled to be open for its regular trading session: (i) the relevant exchange (as defined in the accompanying product supplement)
for that basket underlier or successor index, as applicable, and (ii) each exchange or quotation system where trading has a material
effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to that basket
underlier or successor index, as applicable.
Disrupted day:
notwithstanding anything to the contrary
under “General Terms of Notes — Postponement of a Determination Date — Additional Defined Terms” on page
PS-49 of the accompanying product supplement, for the purposes of the notes offered by this pricing supplement, a “disrupted
day” means, (a) with respect to the EURO STOXX 50
®
Index or any relevant
successor index, a scheduled trading day on which (i) the closing level of the EURO STOXX 50
®
Index or that successor index, as applicable, is not calculated and published by the Index Sponsor of the EURO STOXX
50
®
Index or that successor index, as applicable, (ii) any exchange or quotation
system where trading has a material effect (as determined by the calculation agent) on the overall market for futures or options
contracts relating to the EURO STOXX 50
®
Index or that successor index, as
applicable, fails to open for trading during its regular trading session or (iii) a market disruption event has occurred, or (b)
with respect to each of the other basket underliers or any relevant successor index, a scheduled trading day on which (i) any
of the following exchanges or quotation systems fails to open for trading during its regular trading session: (1) the relevant
exchange for that basket underlier or successor index, as applicable, and (2) each exchange or quotation system where trading
has a material effect (as determined by the calculation agent) on the overall market for futures or options contracts relating
to that basket underlier or successor index, as applicable, or (ii) a market disruption event has occurred.
Use of proceeds and hedging:
as described
under “Use of Proceeds and Hedging” on page PS-44 of the accompanying product supplement no. 4-I, as supplemented by
“ — Supplemental Use of Proceeds” below
Tax
treatment:
You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in
the accompanying product supplement no. 4-I. The following discussion, when read in combination with that section, constitutes
the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences
of owning and disposing of notes.
Based
on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions”
that are not debt instruments for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income
Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments”
in the accompanying product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated
as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of
notes at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of
any income or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released
a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their
investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to
these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked;
the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding
tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally
can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the
notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes,
possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an
investment in the notes, including possible alternative treatments and the issues presented by this notice.
Withholding
under legislation commonly referred to as “FATCA” may (if the notes are recharacterized as debt instruments) apply
to amounts treated as interest paid with respect to the notes. Under a recent IRS notice, withholding under FATCA will not apply
to payments of gross proceeds (other than any amount treated as interest) of a taxable disposition, including redemption at maturity,
of the notes. You should consult your tax adviser regarding the potential application of FATCA to the notes.
ERISA:
as described under “Benefit Plan Investor Considerations” on page PS-100 of the accompanying product supplement
no. 4-I
Supplemental
plan of distribution:
as described under “Plan of Distribution (Conflicts of Interest)” on page PS-88 of the accompanying
product supplement no. 4-I; we estimate that our share of the total offering expenses will be approximately $10,000. We have agreed
to sell to JPMS, and JPMS has agreed to purchase from us, the aggregate principal amount of the notes specified on the front cover
of this pricing supplement. JPMS proposes initially to offer the notes to the public at the original issue price set forth on
the cover page of this pricing supplement.
We
will deliver the notes against payment therefor in New York, New York June 2, 2016, which is the fifth scheduled business day
following the date of this pricing supplement and of the pricing of the notes. Under Rule 15c6-1 of the Securities Exchange Act
of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties
to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business
days before delivery will be required, by virtue of the fact that the notes will initially settle in five business days (T + 5),
to specify alternative settlement arrangements to prevent a failed settlement.
Conflicts
of interest:
JPMS has a “conflict of interest” within the meaning of FINRA Rule 5121 in any offering of the notes
in which it participates because we own, directly or indirectly, all of the outstanding equity securities of JPMS and because
the net proceeds received from the sale of the notes will be used, in part, by JPMS or its affiliates in connection with hedging
our obligations under the notes. The offering of the notes will comply with the requirements of Rule 5121 of Financial Industry
Regulatory Authority, Inc. (“FINRA”) regarding a FINRA member firm’s underwriting of securities of an affiliate.
In accordance with FINRA Rule 5121, neither JPMS nor any other affiliated agent of ours may make sales in the offering of the
notes to any of its discretionary accounts without the specific written approval of the customer.
Calculation
agent:
JPMS
CUSIP no.:
48128GYB0
ISIN no.:
US48128GYB03
FDIC:
the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency, nor are they obligations of, or guaranteed by, a bank.
Supplemental Terms of the Notes
For
purposes of the notes offered by this pricing supplement:
(a) any
reference to “calculating the closing level of that Index prior to the commencement of the market disruption event (or prior
to the non-trading day)” under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to Multiple Underlyings” in the accompanying product supplement will be deemed to refer to “calculating the
closing level of that Index last in effect prior to the commencement of the initial Disrupted Day”; and
(b) all
references to each of the following terms used in the accompanying product supplement will be deemed to refer to the corresponding
term used in this pricing supplement, as set forth in the table below:
Product Supplement Term
|
Pricing Supplement Term
|
Underlying
|
basket underlier
|
pricing date
|
trade date
|
maturity date
|
stated maturity date
|
term sheet
|
preliminary pricing supplement
|
In
addition, the following terms used in this pricing supplement are not defined in the accompanying product supplement: basket return,
initial basket level, initial basket underlier level, final basket level, final basket underlier level, initial weight, upside
participation rate, maximum settlement amount, cap level, buffer level, buffer amount and buffer rate. Accordingly, please refer
to “Key Terms” on page PS-3 of this pricing supplement for the definitions of these terms.
JPMS’s Estimated Value of the Notes
The
estimated value of the notes when the terms of the notes are set, which we refer to as JPMS’s estimated value of the notes,
set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components:
(1) a fixed-income debt component with the same maturity as the notes, valued using our internal funding rate for structured debt
described below, and (2) the derivative or derivatives underlying the economic terms of the notes. JPMS’s estimated value
does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at
any time. The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount
from the credit spreads for our conventional fixed-rate debt. For additional information, see “Selected Risk Factors —
JPMS’s Estimated Value Is Not Determined by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt” on page
PS-17 of this pricing supplement. The value of the derivative or derivatives underlying the economic
terms of the notes is derived from JPMS’s internal pricing models. These models are dependent on inputs such as the traded
market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which
can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or
environments. Accordingly, JPMS’s estimated value of the notes is determined when the terms of the notes are set based on
market conditions and other relevant factors and assumptions existing at that time. See “Selected Risk Factors — JPMS’s
Estimated Value Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates” on page PS-17
of this pricing supplement.
JPMS’s
estimated value of the notes is lower than the original issue price of the notes because costs associated with structuring and
hedging the notes are included in the original issue price of the notes.
These
costs include the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our
obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations
entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less
than expected, or it may result in a loss. A portion of the profits realized in hedging our obligations under the notes, if any,
may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining
hedging profits. See “Selected Risk Factors — JPMS’s Estimated Value of the Notes Is Lower Than the Original
Issue Price of the Notes” on page PS-
17
of this pricing supplement.
Secondary Market Prices of the Notes
For
information about factors that will impact any secondary market prices of the notes, see “Selected Risk Factors —
Secondary Market Prices of the Notes Will Be Impacted by Many Economic and Market Factors” on page PS-18 of this pricing
supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be
partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over
the period from the date of this pricing supplement through August 24, 2016. The length of any such initial period reflects the
structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated
costs of hedging the notes and when these costs are incurred, as determined by JPMS. See “Selected Risk Factors —
The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMS’s
Then-Current Estimated Value of the Notes for a Limited Time Period” on page PS-
17
of this pricing
supplement.
Supplemental Use of Proceeds
The
notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the
notes. See “Hypothetical Examples” on page PS-10 of this pricing supplement for an illustration of the risk-return
profile of the notes and “The Basket and the Basket Underliers” on page PS-
21
of this pricing
supplement for a description of the market exposure provided by the notes.
The
original issue price of the notes is equal to JPMS’s estimated value of the notes, 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.
Validity of the Notes
In
the opinion of Davis Polk & Wardwell LLP, as our special products counsel, when the notes offered by this pricing supplement
have been executed and issued by us and authenticated by the trustee pursuant to the indenture, and delivered against payment
as contemplated herein, such notes will be our valid and binding obligations, 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 and the General Corporation Law of the State of Delaware. In addition, this opinion
is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and its authentication
of the notes 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
us on February 24, 2016.
HYPOTHETICAL EXAMPLES
The
following table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction
of future investment results and are intended merely to illustrate the impact that the various hypothetical basket closing levels
or hypothetical closing levels of the basket underliers, as applicable, on the determination date could have on the payment at
maturity assuming all other variables remain constant.
The
examples below are based on a range of final basket levels and closing levels of the basket underliers that are entirely hypothetical;
no one can predict what the basket closing level will be on any day throughout the term of your notes, and no one can predict
what the final basket level will be on the determination date. The basket underliers have been highly volatile in the past —
meaning that the levels of the basket underliers have changed considerably in relatively short periods — and their performances
cannot be predicted for any future period.
The
information in the following examples reflects hypothetical rates of return on the offered notes assuming that they are purchased
on the original issue date at the principal amount and held to the stated maturity date. If you sell your notes in a secondary
market prior to the stated maturity date, your return will depend upon the market value of your notes at the time of sale, which
may be affected by a number of factors that are not reflected in the table below, such as interest rates, the volatility of the
basket underliers and our creditworthiness. In addition, JPMS’s estimated value is less than the original issue price. For
more information on the JPMS’s estimated value, see “Summary Information — JPMS’s Estimated Value of the
Notes” on page PS
-8
of this pricing supplement. The information in the table also reflects the
key terms and assumptions in the box below.
Key Terms and Assumptions
|
Principal amount
|
$1,000
|
Upside participation rate
|
1.40
|
Cap level
|
113.10% of the initial basket level
|
Maximum settlement amount
|
$1,183.40
|
Buffer level
|
87.50% of the initial basket level
|
Buffer rate
|
approximately 1.14286
|
Buffer amount
|
12.50%
|
The originally scheduled determination date is not
a disrupted day with respect to any basket underlier
During the term of the notes, each basket underlier
is not discontinued, the method of calculating each basket underlier does not change in any material respect and each basket underlier
is not modified so that its level does not, in the opinion of the calculation agent, fairly represent the level of that basket
underlier had those modifications not been made
Notes purchased on original issue date at the principal
amount and held to the stated maturity date
|
For
these reasons, the actual performance of the basket over the term of your notes, as well as the amount payable at maturity, if
any, may bear little relation to the hypothetical examples shown below or to the historical level of each basket underlier shown
elsewhere in this pricing supplement. For information about the historical levels of each basket underlier during recent periods,
see “The Basket and the Basket Underliers — Historical Closing Levels of the Basket Underliers” below. Before
investing in the offered notes, you should consult publicly available information to determine the levels of the basket underliers
between the date of this pricing supplement and the date of your purchase of the offered notes.
Also,
the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax treatment
applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent
than the after-tax return on the basket underliers.
The
levels in the left column of the table below represent hypothetical final basket levels and are expressed as percentages of the
initial basket level. The amounts in the right column represent the hypothetical payments at maturity, based on the corresponding
hypothetical final basket level (expressed as a percentage of the initial basket level), and are expressed as percentages of the
principal amount of a note (rounded to the nearest one-thousandth of a percent). Thus, a hypothetical payment at maturity of 100.000%
means that the value of the cash payment that we would deliver for each $1,000 of the outstanding principal amount of the offered
notes on the stated maturity date would equal 100.000% of the principal amount of a note, based on the corresponding hypothetical
final basket level (expressed as a percentage of the initial basket level) and the assumptions noted above.
Hypothetical Final Basket Level (as Percentage of Initial Basket Level)
|
Hypothetical Payment at Maturity (as Percentage of Principal Amount)
|
150.000%
|
118.340%
|
140.000%
|
118.340%
|
130.000%
|
118.340%
|
120.000%
|
118.340%
|
113.100%
|
118.340%
|
110.000%
|
114.000%
|
105.000%
|
107.000%
|
102.500%
|
103.500%
|
100.000%
|
100.000%
|
95.000%
|
100.000%
|
87.500%
|
100.000%
|
80.000%
|
91.429%
|
75.000%
|
85.714%
|
50.000%
|
57.143%
|
25.000%
|
28.571%
|
0.000%
|
0.000%
|
If,
for example, the final basket level were determined to be 25.000% of the initial basket level, the payment that we would deliver
on your notes at maturity would be approximately 28.571% of the principal amount of your notes, as shown in the table above. As
a result, if you purchased your notes on the original issue date at the principal amount and held them to the stated maturity
date, you would lose approximately 71.429% of your investment (if you purchased your notes at a premium to principal amount you
would lose a correspondingly higher percentage of your investment). In addition, if the final basket level were determined to
be 150.000% of the initial basket level, the payment that we would deliver on your notes at maturity would be capped at the maximum
settlement amount (expressed as a percentage of the principal amount), or 118.340% of each $1,000 principal amount note, as shown
in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase in
the final basket level over 113.100% of the initial basket level.
The
following chart also shows a graphical illustration of the hypothetical payments at maturity (expressed as a percentage of the
principal amount of your notes) that we would pay on your notes on the stated maturity date, if the final basket level (expressed
as a percentage of the initial basket level) were any of the hypothetical levels shown on the horizontal axis. The chart shows
that any hypothetical final basket level (expressed as a percentage of the initial basket level) of less than 87.500% (the section
left of the 87.500% marker on the horizontal axis) would result in a hypothetical payment at maturity of less than 100.000% of
the principal amount of your notes (the section below the 100.000% marker on the vertical axis) and, accordingly, in a loss of
principal to the holder of the notes. The chart also shows that any hypothetical final basket level (expressed as a percentage
of the initial basket level) of greater than or equal to 113.100% (the section right of the 113.100% marker on the horizontal
axis) would result in a capped return on your investment.
The
following examples illustrate the hypothetical payment at maturity on each $1,000 principal amount note based on hypothetical
initial basket underlier levels, each of which we refer to as an “initial level,” and closing levels of the basket
underliers on the determination date, each of which we refer to as a “final level,” calculated based on the key terms
and assumptions above. The levels in Column A represent the hypothetical initial level for each basket underlier, and the levels
in Column B represent hypothetical final levels for each basket underlier. The percentages in Column C represent hypothetical
final levels for each basket underlier in Column B expressed as percentages of the corresponding hypothetical initial levels in
Column A. The amounts in Column D represent the initial weighted values of each basket underlier, and the amounts in Column E
represent the
products
of the percentages in Column C
times
the corresponding amounts in Column D. The final basket
level for each example is shown beneath each example, and will equal the
sum
of the five products shown in Column E. The
basket return for each example is shown beneath the final basket level for such example, and will equal the
quotient
of
(i) the final basket level for such example
minus
the initial basket level
divided
by (ii) the initial basket level,
expressed as a percentage. The values below have been rounded for ease of analysis.
Example
1: The final basket level is greater than the cap level. The payment at maturity will equal the maximum settlement amount.
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
|
|
|
|
|
|
Basket
Underlier
|
Hypothetical Initial Level
|
Hypothetical Final Level
|
Column B / Column A
|
Initial Weighted Value
|
Column C × Column
D
|
EURO STOXX 50
®
Index
|
3,000.00
|
4,500.00
|
150%
|
37.00
|
55.50
|
FTSE
®
100 Index
|
6,200.00
|
9,300.00
|
150%
|
23.00
|
34.50
|
TOPIX
®
Index
|
1,350.00
|
2,025.00
|
150%
|
23.00
|
34.50
|
Swiss Market Index
|
8,000.00
|
12,000.00
|
150%
|
9.00
|
13.50
|
S&P/ASX 200 Index
|
5,200.00
|
7,800.00
|
150%
|
8.00
|
12.00
|
|
|
|
|
Final Basket Level:
|
150.00
|
|
|
|
|
Basket Return:
|
50.00%
|
In
this example, all of the hypothetical final levels for the basket underliers are greater than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being greater than the initial
basket
level of 100.00. However, because the hypothetical final basket level of 150.00 is greater than the cap level, the hypothetical
payment at maturity will equal the maximum settlement amount of $1,183.40.
Example
2: The final basket level is greater than the initial basket level but less than the cap level. The payment at maturity exceeds
the $1,000 principal amount but is less than the maximum settlement amount.
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
|
|
|
|
|
|
Basket
Underlier
|
Hypothetical Initial
Level
|
Hypothetical Final Level
|
Column B / Column A
|
Initial Weighted Value
|
Column C × Column
D
|
EURO STOXX 50
®
Index
|
3,000.00
|
3,150.00
|
105%
|
37.00
|
38.85
|
FTSE
®
100 Index
|
6,200.00
|
6,510.00
|
105%
|
23.00
|
24.15
|
TOPIX
®
Index
|
1,350.00
|
1,417.50
|
105%
|
23.00
|
24.15
|
Swiss Market Index
|
8,000.00
|
8,400.00
|
105%
|
9.00
|
9.45
|
S&P/ASX 200 Index
|
5,200.00
|
5,460.00
|
105%
|
8.00
|
8.40
|
|
|
|
|
Final Basket Level:
|
105.00
|
|
|
|
|
Basket Return:
|
5.00%
|
In
this example, all of the hypothetical final levels for the basket underliers are greater than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being greater than the initial basket level of 100.00. Because the
hypothetical final basket level of 105.00 exceeds the initial basket level but is less than the cap level, the hypothetical payment
at maturity will equal:
Payment at maturity = $1,000 + ($1,000 × 1.40
× 5.00%) = $1,070.00
Example
3: The final basket level is less than the initial basket level but greater than the buffer level. The payment at maturity will
equal the $1,000 principal amount.
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
|
|
|
|
|
|
Basket Underlier
|
Hypothetical Initial Level
|
Hypothetical Final Level
|
Column B / Column A
|
Initial Weighted Value
|
Column C × Column D
|
EURO STOXX 50
®
Index
|
3,000.00
|
2,850.00
|
95%
|
37.00
|
35.15
|
FTSE
®
100 Index
|
6,200.00
|
5,890.00
|
95%
|
23.00
|
21.85
|
TOPIX
®
Index
|
1,350.00
|
1,282.50
|
95%
|
23.00
|
21.85
|
Swiss Market Index
|
8,000.00
|
7,600.00
|
95%
|
9.00
|
8.55
|
S&P/ASX 200 Index
|
5,200.00
|
4,940.00
|
95%
|
8.00
|
7.60
|
|
|
|
|
Final Basket Level:
|
95.00
|
|
|
|
|
Basket Return:
|
-5.00%
|
In
this example, all of the hypothetical final levels for the basket underliers are less than the applicable hypothetical initial
levels, which results in the hypothetical final basket level being less than the initial basket level of 100.00. However, because
the hypothetical final basket level of 95.00 is not less than the buffer level, the hypothetical payment at maturity will equal
the $1,000 principal amount.
Example
4: The final basket level is less than the buffer level. The payment at maturity is less than the $1,000 principal amount.
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
|
|
|
|
|
|
Basket
Underlier
|
Hypothetical Initial
Level
|
Hypothetical Final Level
|
Column B / Column A
|
Initial Weighted Value
|
Column C × Column
D
|
EURO STOXX 50
®
Index
|
3,000.00
|
1,500.00
|
50%
|
37.00
|
18.50
|
FTSE
®
100 Index
|
6,200.00
|
6,200.00
|
100%
|
23.00
|
23.00
|
TOPIX
®
Index
|
1,350.00
|
1,350.00
|
100%
|
23.00
|
23.00
|
Swiss Market Index
|
8,000.00
|
10,000.00
|
125%
|
9.00
|
11.25
|
S&P/ASX 200 Index
|
5,200.00
|
6,500.00
|
125%
|
8.00
|
10.00
|
|
|
|
|
Final Basket Level:
|
85.75
|
|
|
|
|
Basket Return:
|
-14.25%
|
In
this example, the hypothetical final level of the EURO STOXX 50
®
Index is less
than its hypothetical initial level, while the hypothetical final levels of the FTSE
®
100 Index and TOPIX
®
Index are equal to their applicable hypothetical
initial levels and the hypothetical final levels of the Swiss Market Index and S&P/ASX 200 Index are greater than their applicable
initial levels.
Because
the basket is unequally weighted, increases in the lower weighted basket underliers will be offset by decreases in the more heavily
weighted basket underliers. In this example, the large decline in the EURO STOXX 50
®
Index results in the hypothetical final basket level being less than the buffer level of 87.50% of the initial basket level,
even though the FTSE
®
100 Index and TOPIX
®
Index remained flat and the Swiss Market Index and the S&P/ASX 200 Index increased.
Because
the hypothetical final basket level of 85.75 is less than the buffer level of 87.50% of the initial basket level, the hypothetical
payment at maturity will equal:
Payment at maturity = $1,000 + [$1,000 × 1.14286
× (-14.25% + 12.50%)] = $980.00
Example
5: The final basket level is less than the buffer level. The payment at maturity is less than the $1,000 principal amount.
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
|
|
|
|
|
|
Basket
Underlier
|
Hypothetical Initial
Level
|
Hypothetical
Final Level
|
Column
B / Column A
|
Initial Weighted Value
|
Column
C × Column D
|
EURO STOXX 50
®
Index
|
3,000.00
|
4,500.00
|
150%
|
37.00
|
55.50
|
FTSE
®
100 Index
|
6,200.00
|
1,550.00
|
25%
|
23.00
|
5.75
|
TOPIX
®
Index
|
1,350.00
|
337.50
|
25%
|
23.00
|
5.75
|
Swiss Market Index
|
8,000.00
|
2,000.00
|
25%
|
9.00
|
2.25
|
S&P/ASX 200 Index
|
5,200.00
|
1,300.00
|
25%
|
8.00
|
2.00
|
|
|
|
|
Final Basket Level:
|
71.25
|
|
|
|
|
Basket Return:
|
-28.75%
|
In
this example, although the hypothetical final level for one of the basket underliers is greater than its applicable hypothetical
initial level, the hypothetical final levels of the other basket underliers decrease significantly from their hypothetical initial
levels, which results in the hypothetical final basket level being less than the buffer level. Because the hypothetical final
basket level of 71.25 is less than the buffer level, the hypothetical payment at maturity will equal:
Payment
at maturity = $1,000 + [$1,000 × 1.14286 × (-28.75% + 12.50%)] = $814.29
The
payments at maturity shown above are entirely hypothetical; they are based on closing levels for the basket underliers that may
not be achieved on the determination date and on assumptions that may prove to be erroneous. The actual market value of your notes
on the stated maturity date or at any other time, including any time you may wish to sell your notes, may bear little relation
to the hypothetical payments at maturity shown above, and these amounts should not be viewed as an indication of the financial
return on an investment in the offered notes. The hypothetical payments at maturity on notes held to the stated maturity date
in the examples above assume you purchased your notes at their principal amount and have not been adjusted to reflect the actual
price you pay for your notes. The return on your investment (whether positive or negative) in your notes will be affected by the
amount you pay for your notes. If you purchase your notes for a price other than the principal amount, the return on your investment
will differ from, and may be significantly lower than, the hypothetical returns suggested by the above examples. Please read “Selected
Risk Factors — Secondary Market Prices of the Notes Will Be Impacted by Many Economic and Market Factors” on page
PS-18 of this pricing supplement.
The
hypothetical returns on the notes shown above apply
only if you hold the notes for their entire term
. These hypotheticals
do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were
included, the hypothetical returns shown above would likely be lower.
We cannot predict the actual final basket
level or what the market value of your notes will be on any particular day, nor can we predict the relationship between the level
of each basket underlier and the market value of your notes at any time prior to the stated maturity date. The actual amount that
you will receive, if any, at maturity and the rate of return on the offered notes will depend on the actual final basket level
determined by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may
turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if any, on the stated maturity
date may be very different from the information reflected in the table and chart above.
SELECTED RISK FACTORS
An investment in your notes is subject to
the risks described below, as well as the risks described under “Risk Factors” in the accompanying product supplement
no. 4-I and “Risk Factors” in the accompanying underlying supplement no. 1-I. Your notes are a riskier investment than
ordinary debt securities. Also, your notes are not equivalent to investing directly in the underlier stocks, i.e., the stocks underlying
the basket underliers that compose the basket to which your notes are linked. You should carefully consider whether the offered
notes are suited to your particular circumstances.
You May Lose Some or All of Your
Investment in the Notes
The
notes do not guarantee any return of principal. The return on the notes at maturity is linked to the performance of the basket
and will depend on whether, and the extent to which, the basket return is positive or negative. Your investment will be exposed
to loss on a leveraged basis if the final basket level is less than the initial basket level by more than 12.50%. For every 1%
that the final basket level is less than the initial basket level by more than 12.50%, you will lose an amount equal to approximately
1.14286% of the principal amount of your notes. Accordingly, you could lose some or all of your initial investment at maturity.
Also, the market price of your notes prior to the stated maturity date may be significantly lower than the purchase price you
pay for your notes. Consequently, if you sell your notes before the stated maturity date, you may receive far less than the amount
of your investment in the notes.
Your Maximum Gain on
the Notes Is Limited to the Maximum Settlement Amount
If
the final basket level is greater than the initial basket level, for each $1,000 principal amount note, you will receive at maturity
a payment that will not exceed the maximum settlement amount, regardless of the appreciation in the basket, which may be significant.
Accordingly, the amount payable on your notes may be significantly less than it would have been had you invested directly in the
basket underliers. The maximum settlement amount is $1,183.40.
The Notes Are Subject
to the Credit Risk of JPMorgan Chase & Co.
The
notes are subject to the credit risk of JPMorgan Chase & Co., and our credit ratings and credit spreads may adversely affect
the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability to pay all amounts due on the
notes. Any actual or potential change in our creditworthiness or credit spreads, as determined by the market for taking our credit
risk, is likely to adversely affect the value of the notes. If we were to default on our payment obligations, you may not receive
any amounts owed to you under the notes and you could lose your entire investment.
Potential Conflicts
of Interest
We
and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent
and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine
the pricing of the notes and JPMS’s estimated value. Also, the distributor from which you purchase the notes may conduct
hedging activities for us in connection with the notes. In performing these duties, our economic interests, the economic interests
of any distributor performing such duties and the economic interests of the calculation agent and other affiliates of ours are
potentially adverse to your interests as an investor in the notes. In addition, our business activities, and the business activities
of any distributor from which you purchase the notes, including hedging and trading activities, could cause our economic interests
to be adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging
or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our
affiliates while the value of the notes declines. If the distributor from which you purchase notes is to conduct hedging activities
for us in connection with the notes, that distributor may profit in connection with such hedging activities and such profit, if
any, will be in addition to the compensation that the distributor receives for the sale of the notes to you. You should be aware
that the potential to earn fees in connection with hedging activities may create a further incentive for the distributor to sell
the notes to you in addition to the compensation they would receive for the sale of the notes. Please refer to “Risk Factors
— Risks Relating to Conflicts of Interest”
on page PS-16 of the accompanying product supplement no. 4-I for additional information about these risks.
JPMS’s Estimated
Value of the Notes Is Lower Than the Original Issue Price of the Notes
JPMS’s
estimated value is only an estimate using several factors. The original issue price of the notes exceeds JPMS’s estimated
value because costs associated with structuring and hedging the notes are included in the original issue price of the notes. These
costs include the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our
obligations under the notes and the estimated cost of hedging our obligations under the notes. See “Summary Information
— JPMS’s Estimated Value of the Notes” on page PS-8 of this pricing supplement.
JPMS’s Estimated
Value Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates
JPMS’s
estimated value of the notes is determined by reference to JPMS’s internal pricing models when the terms of the notes are
set. This estimated value is based on market conditions and other relevant factors existing at that time and JPMS’s assumptions
about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models
and assumptions could provide valuations for notes that are greater than or less than JPMS’s estimated value. In addition,
market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future
dates, the value of the notes could change significantly based on, among other things, changes in market conditions, our creditworthiness,
interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy
notes from you in secondary market transactions. See “Summary Information — JPMS’s Estimated Value of the Notes”
on page PS-8 of this pricing supplement.
JPMS’s Estimated
Value Is Not Determined by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt
The
internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit
spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the
notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs
for our conventional fixed- rate debt. If JPMS were to use the interest rate implied by our conventional fixed-rate credit spreads,
we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate
would have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “Summary Information
— JPMS’s Estimated Value of the Notes” on page PS
-8
of this pricing supplement.
The Value of the Notes
as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMS’s Then-Current Estimated
Value of the Notes for a Limited Time Period
We
generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in
connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period.
These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary
market credit spreads for structured debt issuances. See “Summary Information — Secondary Market Prices of the Notes”
on page PS-8 of this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
Secondary Market Prices
of the Notes Will Likely Be Lower Than the Original Issue Price of the Notes
Any
secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things,
secondary market prices take into account our secondary market credit spreads for structured debt issuances and, also, because
secondary market prices may exclude
projected
hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result,
the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is likely
to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial loss to you.
See the immediately following risk consideration for information about additional factors that will impact any secondary market
prices of the notes.
The notes are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “— Lack of Liquidity”
on page PS-19 of this pricing supplement.
Secondary Market Prices
of the Notes Will Be Impacted by Many Economic and Market Factors
The
secondary market price of the notes during their term will be impacted by a number of economic and market factors, which may either
offset or magnify each other, aside from the projected hedging profits, if any, estimated hedging costs and the levels of the
basket underliers, including:
|
·
|
any actual or potential change in our creditworthiness or credit spreads;
|
|
·
|
customary bid-ask spreads for similarly sized trades;
|
|
·
|
secondary market credit spreads for structured debt issuances;
|
|
·
|
the actual and expected volatility of the basket underliers;
|
|
·
|
the time to maturity of the notes;
|
|
·
|
the dividend rates on the underlier stocks;
|
|
·
|
the actual or expected positive or negative correlation between the basket underliers, or the
absence of any such correlation;
|
|
·
|
interest and yield rates in the market generally;
|
|
·
|
the exchange rates and the volatility of the exchange rates between the U.S. dollar and the
currencies in which the underlier stocks of the basket underliers are traded and the correlation between those rates and the closing
levels of the basket underliers; and
|
|
·
|
a variety of other economic, financial, political, regulatory and judicial events.
|
Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS
may be willing to purchase your notes in the secondary market.
We May Sell an Additional
Aggregate Principal Amount of the Notes at a Different Issue Price
At
our sole option, we may decide to sell an additional aggregate principal amount of the notes subsequent to the date of this pricing
supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue
price you paid as provided on the cover of this pricing supplement.
If You Purchase Your Notes
at a Premium to the Principal Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the Principal
Amount and the Impact of Certain Key Terms of the Notes Will Be Negatively Affected
The
amount you will be paid for your notes on the stated maturity date will not be adjusted based on the price you pay for the notes.
If you purchase notes at a price that differs from the principal amount of the notes, then the return on your investment in the
notes held to the stated maturity date will differ from, and may be substantially less than, the return on notes purchased at
the principal amount. If you purchase
your
notes at a premium to the principal amount and hold them to the stated maturity date the return on your investment in the notes
will be lower than it would have been had you purchased the notes at the principal amount or a discount to the principal amount.
In addition, the impact of the buffer level and the cap level on the return on your investment will depend upon the price you
pay for your notes relative to the principal amount. For example, if you purchase your notes at a premium to the principal amount,
the cap level will permit only a lower percentage increase in your investment in the notes than would have been the case for notes
purchased at the principal amount. Similarly, the buffer level, while still providing an increase in the return on the notes if
the final basket level is greater than or equal to the buffer level but less than the cap level, will allow a greater percentage
decrease in your investment in the notes than would have been the case for notes purchased at the principal amount or a discount
to the principal amount.
Correlation (or Lack
of Correlation) of the Basket Underliers
The
notes are linked to an unequally weighted basket. Performances of the basket underliers may or may not be correlated with each
other. At a time when the values of one or more of the basket underliers increases, the values of the other basket underliers
may not increase as much or may even decline.
Therefore,
in calculating the final basket level, increases in the value of one or more of the basket underliers may be moderated, or more
than offset, by the lesser increases or declines in the values of other basket underliers. Further, because the basket underliers
are unequally weighted, increases in the values of the lower-weighted basket underliers may be offset by even smaller decreases
in values of the more heavily weighted basket underliers. In addition, high correlation of movements in the basket underliers
during periods of negative returns among the basket underliers could have an adverse effect on the payment at maturity on the
notes. There can be no assurance that the final basket level will be higher than the initial basket level.
No Interest or Dividend
Payments or Voting Rights
As
a holder of the notes, you will not receive interest payments. As a result, even if the amount payable for your notes on the stated
maturity date exceeds the principal amount of your notes, the overall return you earn on your notes may be less than you would
have earned by investing in a non-basket-linked debt security of comparable maturity that bears interest at a prevailing market
rate. In addition, as a holder of the notes, you will not have voting rights or rights to receive cash dividends or other distributions
or other rights that holders of the underlier stocks would have.
The Notes Do Not Provide
Direct Exposure to Fluctuations in Foreign Exchange Rates
The
value of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which
the basket underlier stocks are based, although any currency fluctuations could affect the performance of the basket underlier.
Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the notes, you will
not receive any additional payment or incur any reduction in your payment at maturity.
The Notes Are Subject to
Risks Associated with Securities Issued by Non-U.S. Companies
The
underlier stocks that compose the basket underliers have been issued by non-U.S. companies. Investments in securities linked to
the value of such non-U.S. equity securities involve risks associated with the securities markets in the home countries of the
issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental intervention in those
markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information
about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting requirements
of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements
and securities trading rules different from those applicable to U.S. reporting companies. The prices of securities in foreign
markets may be affected by political, economic, financial and social factors in those countries, or global regions, including
changes in government, economic and fiscal policies and currency exchange laws.
Lack of Liquidity
The
notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is
not required to do so. Even if there is a secondary market, it may not provide
enough
liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for
the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing
to buy the notes.
The Tax Consequences of an Investment in the
Notes Are Uncertain
There
is no direct legal authority as to the proper U.S. federal income tax characterization of the notes, and we do not intend to request
a ruling from the IRS. The IRS might not accept, and a court might not uphold, the treatment of the notes described in “Key
Terms — Tax treatment” in this pricing supplement and in “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement. If the IRS were successful in asserting an alternative treatment for the notes, the timing
and character of any income or loss on the notes could differ materially and adversely from our description herein. In addition,
in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional
interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of
an investment in the notes, possibly with retroactive effect. You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement and consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented
by this notice.
THE BASKET AND THE
BASKET UNDERLIERS
The Basket
The basket is an unequally weighted basket composed
of five indices with the initial weights within the basket set forth in the table below:
Basket Underlier Information as of May 25, 2016
|
|
Basket Underlier
|
Bloomberg
Ticker Symbol
|
Initial Weight in
Basket
|
Basket Underlier
Closing Level
|
EURO STOXX 50
®
Index
|
SX5E
|
37.00%
|
3,061.60
|
FTSE
®
100 Index
|
UKX
|
23.00%
|
6,262.85
|
TOPIX
®
Index
|
TPX
|
23.00%
|
1,342.88
|
Swiss Market Index
|
SMI
|
9.00%
|
8,167.61
|
S&P/ASX 200 Index
|
AS51
|
8.00%
|
5,372.51
|
The EURO STOXX 50
®
Index
The
EURO STOXX 50
®
Index consists of 50 component stocks of market sector leaders
from within the Eurozone. The EURO STOXX 50
®
Index and STOXX
®
are the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its
licensors (the “Licensors”), which are used under license. The notes based on the EURO STOXX 50
®
Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors and neither STOXX Limited
nor any of its Licensors shall have any liability with respect thereto. For additional information about the EURO STOXX 50
®
Index, see the information set forth under “Equity Index Descriptions — The EURO STOXX 50
®
Index” on page US-23 of the accompanying underlying supplement no. 1-I.
FTSE
®
100 Index
The
FTSE
®
100 Index is an index calculated, published and disseminated by FTSE,
a company owned by the London Stock Exchange (“LSE”). The FTSE
®
100
Index measures the composite price performance of stocks of the largest 100 companies (determined on the basis of market capitalization)
traded on the LSE. For additional information about the FTSE
®
100 Index, see
the information set forth under “Equity Index Descriptions — The FTSE
®
100 Index” on page US-31 of the accompanying underlying supplement no. 1-I.
The TOPIX
®
Index
The
TOPIX
®
Index, also known as the Tokyo Stock Price Index, is a capitalization
weighted index of all the Japanese common stocks listed on the First Section of the Tokyo Stock Exchange, Inc., which we refer
to as the “TSE.” Japanese stocks admitted to the TSE are assigned either to the TSE First Section, the TSE Second
Section or the TSE Mothers. Stocks listed in the First Section, which number approximately 1,800, are among the most actively
traded stocks on the TSE. For additional information about the TOPIX
®
Index,
see the information set forth under “Equity Index Descriptions — The TOPIX
®
Index” on page US-97 of the accompanying underlying supplement no. 1-I.
The Swiss Market Index
The
Swiss Market Index (“SMI
®
”) is a free-float adjusted market capitalization-weighted
price return index of the Swiss equity market. The SMI
®
is sponsored, calculated,
maintained and published by SIX Swiss Exchange Ltd. The SMI
®
comprises the
20 most highly capitalized and liquid stocks of the Swiss Performance Index
®
.
For additional information about the Swiss Market Index, see the information set forth under “Equity Index Descriptions
– The Swiss Market Index” on page US-95 of the accompanying underlying supplement.
The S&P/ASX 200
Index
The
S&P/ASX 200 Index measures the performance of the 200 largest index-eligible stocks listed on the Australian Securities Exchange
by float-adjusted market capitalization, and is widely considered Australia’s benchmark index. For additional information
see the information about the S&P/ASX 200 Index, see the information set forth under “Equity Index Descriptions –
The S&P/ASX 200 Index” on page US-73 of the accompanying underlying supplement.
Historical Basket
Levels
You
should not take the historical levels of the basket or the basket underliers as an indication of the future performance of the
basket or the basket underliers, respectively.
We cannot give you any assurance that the future performance of the basket,
basket underliers or the underlier stocks will result in a return of any of your initial investment on the stated maturity date.
In light of the increased volatility currently being experienced by the financial services sector and U.S. and global securities
markets, and recent market declines, it may be substantially more likely that you could lose all or a substantial portion of your
investment in the notes.
Neither
we nor any of our affiliates make any representation to you as to the performance of the basket or the basket underliers. The
actual performance of the basket or the basket underliers over the term of the offered notes, as well as the amount payable at
maturity, may bear little relation to the historical levels shown below.
The
following graph is based on the basket closing levels for the period from January 4, 2011 (the first day in 2011 on which the
closing levels of all basket underliers were published) through May 25, 2016 (the latest day on which the closing levels of all
basket indices were published) assuming that the basket closing level was 100 on January 4, 2011. We derived the basket closing
levels based on the method of calculating the basket closing level as described in this pricing supplement and on the closing
levels of the relevant basket underliers on the relevant dates. We obtained the closing levels reflected in the graph below from
the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The basket closing level has been normalized such that its hypothetical level on January 4, 2011 was 100. As noted
in this pricing supplement, the initial basket level was set at 100 on the trade date. The basket closing level can increase or
decrease due to changes in the levels of the basket underliers. The graph below is for illustrative purposes only.
Historical Closing Levels of the Basket Underliers
The
respective closing levels of the basket underliers have fluctuated in the past and may, in the future, experience significant
fluctuations. Any historical upward or downward trend in the closing levels of the basket underliers during any period shown below
is not an indication that the basket underliers are more or less likely to increase or decrease at any time during the term of
your notes.
The
graphs below show the closing levels of the basket underliers (other than the TOPIX
®
Index, the FTSE
®
100 Index and the Swiss Market Index) on each day from
January 4, 2011 through May 20, 2016 and the closing levels of the TOPIX
®
Index
and the Swiss Market Index on each day from January 3, 2011 through May 25, 2016. The closing levels of the FTSE
®
100 Index, the TOPIX
®
Index and the S&P/ASX 200 Index on January
3, 2011 were not available due to local exchange holidays in the United Kingdom, Japan and Australia, respectively.
The
closing level of the EURO STOXX 50
®
Index on May 25, 2016 was 3,061.60. The
closing level of the FTSE
®
100 Index on May 25, 2016 was 6,262.85. The closing
level of the TOPIX
®
Index on May 25, 2016 was 1,342.88. The closing level of
the Swiss Market Index on May 25, 2016 was 8,167.61. The closing level of the S&P/ASX 200 Index on May 25, 2016 was 5,372.51.
We obtained the closing levels above and in the graphs below from Bloomberg, without independent verification.
We
have not authorized anyone to provide any information other than that contained or incorporated by reference in this pricing supplement,
the accompanying underlying supplement no. 1-I, the accompanying product supplement no. 4-I and the accompanying prospectus supplement
and prospectus with respect to the notes offered by this pricing supplement and with respect to JPMorgan Chase & Co. We take
no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
This pricing supplement, together with the accompanying underlying supplement no. 1-I, the accompanying product supplement no.
4-I and the accompanying prospectus supplement and prospectus, contains the terms of the notes and supersedes all other prior
or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence,
trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours.
The information in this pricing supplement, the accompanying underlying supplement no. 1-I, the accompanying product supplement
no. 4-I and the accompanying prospectus supplement and prospectus may be accurate only as of the dates of each of these documents,
respectively. This pricing supplement, the accompanying underlying supplement no. 1-I, the accompanying product supplement no.
4-I and the accompanying prospectus supplement and prospectus do not constitute an offer to sell or a solicitation of an offer
to buy the notes in any circumstances in which such offer or solicitation is unlawful.
TABLE OF CONTENTS
Pricing Supplement
Page
Summary Information
|
PS-3
|
Hypothetical Examples
|
PS-10
|
Selected Risk Factors
|
PS-16
|
The Basket and the Basket Underliers
|
PS-21
|
Product Supplement No. 4-I dated April 15, 2016
|
Description of Notes
|
PS-1
|
Estimated Value and Secondary Market Prices of the Notes
|
PS-8
|
Risk Factors
|
PS-10
|
Use of Proceeds and Hedging
|
PS-44
|
General Terms of Notes
|
PS-45
|
The Underlyings
|
PS-54
|
Material U.S. Federal Income Tax Consequences
|
PS-78
|
Plan of Distribution (Conflicts of Interest)
|
PS-88
|
Notice to Investors
|
PS-90
|
Benefit Plan Investor Considerations
|
PS-100
|
Underlying Supplement No. 1-I dated April 15, 2016
|
Supplemental Terms of Notes
|
US-1
|
Risk Factors
|
US-2
|
Equity Index Descriptions
|
US-21
|
The Dow Jones Industrial AverageTM
|
US-21
|
The EURO STOXX 50
®
Index
|
US-23
|
The EURO STOXX
®
Banks Index
|
US-27
|
The FTSE™
®
100 Index
|
US-31
|
The JPX-Nikkei Index 400
|
US-33
|
The MSCI Indices
|
US-36
|
The MSCI 25/50 Indices
|
US-48
|
The NASDAQ-100 Index
®
|
US-53
|
The Nikkei 225 Index
|
US-58
|
The Russell Indices
|
US-62
|
The S&P/ASX 200 Index
|
US-73
|
The S&P Select Industry Indices
|
US-78
|
The S&P Select Sector Indices
|
US-85
|
The S&P U.S. Indices
|
US-89
|
The Swiss Market Index
|
US-95
|
The TOPIX
®
Index
|
US-97
|
Commodity Index Descriptions
|
US-100
|
The Bloomberg Commodity Indices
|
US-100
|
The S&P GSCI
®
Indices
|
US-111
|
Fund Descriptions
|
US-120
|
The iShares
®
20+ Year Treasury Bond ETF
|
US-120
|
The iShares
®
ETFs
|
US-124
|
The Market Vectors Gold Miners ETF
|
US-128
|
The Select Sector SPDR
®
Funds
|
US-132
|
The SPDR
®
EURO STOXX 50
®
ETF
|
US-134
|
The SPDR
®
Gold Trust
|
US-135
|
The SPDR
®
S&P 500
®
ETF Trust
|
US-136
|
The SPDR
®
S&P
®
Industry ETFs
|
US-137
|
The United States Oil Fund, LP
|
US-139
|
The Vanguard FTSE Emerging Markets ETF
|
US-140
|
The Vanguard Total Stock Market ETF
|
US-151
|
The WisdomTree Japan Hedged Equity Fund
|
US-157
|
|
|
|
|
Prospectus Supplement dated April 15, 2016
|
About This Prospectus Supplement
|
S-1
|
Foreign Currency Risks
|
S-2
|
Description of Notes of JPMorgan Chase & Co.
|
S-4
|
Description of Warrants of JPMorgan Chase & Co.
|
S-10
|
Description of Units of JPMorgan Chase & Co.
|
S-13
|
Description of Notes of JPMorgan Chase Financial Company LLC
|
S-16
|
Description of Warrants of JPMorgan Chase Financial Company LLC
|
S-22
|
United States Federal Taxation
|
S-27
|
Plan of Distribution (Conflicts of Interest)
|
S-28
|
Prospectus dated April 15, 2016
|
Where You Can Find More Information
|
|
JPMorgan Chase & Co
|
2
|
JPMorgan Chase Financial Company LLC.
|
2
|
Consolidated Ratios of Earnings to Fixed Charges
|
3
|
Use of Proceeds
|
3
|
Important Factors That May Affect Future Results
|
4
|
Description of Debt Securities of JPMorgan Chase & Co.
|
6
|
Description of Warrants of JPMorgan Chase & Co.
|
12
|
Description of Units of JPMorgan Chase & Co.
|
15
|
Description of Purchase Contracts of JPMorgan Chase & Co.
|
17
|
Description of Debt Securities of JPMorgan Chase Financial Company LLC
|
19
|
Description of Warrants of JPMorgan Chase Financial Company LLC
|
27
|
Forms of Securities
|
33
|
Plan of Distribution (Conflicts of Interest)
|
37
|
Independent Registered Public Accounting Firm
|
40
|
Legal Matters
|
40
|
Benefit Plan Investor Considerations
|
40
|
$2,489,000
JPMorgan Chase & Co.
Capped Buffered Enhanced Participation
Basket-Linked Notes due 2017
Medium-Term Notes, Series E
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