The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated January 6, 2016
|
PRICING SUPPLEMENT NO. |
|
JPMorgan Chase & Co. Trigger Digital Optimization Securities
Linked to the lesser performing of the S&P 500® Index and the Russell 2000® Index due on or about January 10, 2019
| Investment Description |
| Trigger Digital Optimization Securities, which we refer to as the "Securities," are unsecured and unsubordinated debt securities issued by JPMorgan Chase & Co. ("JPMorgan Chase"), with a return linked to the lesser performing of the S&P 500® Index and the Russell 2000® Index (each an "Index" and together the "Indices"). If the Final Index Level of each Index is greater than or equal to its Trigger Level, JPMorgan Chase will repay your principal amount at maturity plus pay a return equal to the Digital Return of at least 15.00%, regardless of any appreciation of either Index. If the Final Index Level of either Index is less than its Trigger Level, you will not receive a Digital Return and JPMorgan Chase will repay less than your principal amount at maturity, if anything, resulting in a loss of principal that is proportionate to the decline in the closing level of the Index with the lower Index Return (the "Lesser Performing Index") from the Trade Date to the Final Valuation Date. You will be exposed to the market risk of each Index and any decline in the level of one Index may negatively affect your return and will not be offset or mitigated by a lesser decline or any potential increase in the level of the other Index. Investing in the Securities involves significant risks. You may lose some or all of your principal amount. You will not receive dividends or other distributions paid on any stocks included in the Indices, and the Securities will not pay interest. Generally, a higher Digital Return is associated with a greater risk of loss. The Digital Return, including any contingent repayment of principal, applies only if you hold the Securities to maturity. Any payment on the Securities, including any Digital Return or repayment of principal, is subject to the creditworthiness of JPMorgan Chase. If JPMorgan Chase were to default on its payment obligations, you may not receive any amounts owed to you under the Securities and you could lose your entire investment. |
| Features | Key Dates | |||
|
|
Trade Date1 | January 6, 2016 | ||
| Original Issue Date (Settlement Date)1 | January 11, 2016 | |||
| Final Valuation Date2 | January 4, 2019 | |||
| Maturity Date2 | January 10, 2019 | |||
| 1 | Expected. In the event that we make any change to the expected Trade Date and Settlement Date, the Final Valuation Date and/or the Maturity Date will be changed so that the stated term of the Securities remains the same. The Initial Index Level of each Index is the closing level of that Index on January 4, 2016 and is not the closing level of that Index on the Trade Date. | |||
| 2 | Subject to postponement in the event of a market disruption event and as described under "General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings" and "General Terms of Notes — Postponement of a Payment Date" in the accompanying product supplement no. UBS-1a-I | |||
Digital Return Feature — If the Final Index Level of each Index is greater than or equal to
its Trigger Level, JPMorgan Chase will repay the principal amount at
maturity plus pay a return equal to the Digital Return, regardless of any
appreciation of either Index.
|
THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT
INSTRUMENTS. JPMORGAN CHASE IS NOT NECESSARILY OBLIGATED TO REPAY THE
FULL PRINCIPAL AMOUNT OF THE SECURITIES AT MATURITY, AND THE
SECURITIES MAY HAVE DOWNSIDE MARKET RISK SIMILAR TO THE LESSER
PERFORMING INDEX. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK
INHERENT IN PURCHASING A DEBT OBLIGATION OF JPMORGAN CHASE. YOU
SHOULD NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE
NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN
THE SECURITIES. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER "KEY RISKS"
BEGINNING ON PAGE 5 AND UNDER "RISK FACTORS" BEGINNING ON PAGE PS-9
OF THE ACCOMPANYING PRODUCT SUPPLEMENT NO. UBS-1A-I AND UNDER "RISK
FACTORS" BEGINNING ON PAGE US-2 OF THE ACCOMPANYING UNDERLYING
SUPPLEMENT NO. 1A-I BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING
TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD
ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR
SECURITIES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN
THE SECURITIES. THE SECURITIES WILL NOT BE LISTED ON ANY SECURITIES
EXCHANGE. |
| Security Offering |
| We are offering Trigger Digital Optimization Securities linked to the lesser performing of the S&P 500® Index and the Russell 2000® Index. The Securities are offered for a minimum investment of 100 Securities at the price to public described below. The Digital Return will be finalized on the Trade Date and provided in the pricing supplement. The actual Digital Return is expected to be, but will not be less than, the minimum Digital Return listed below, but you should be willing to invest in the Securities if the Digital Return were set equal to the minimum Digital Return. |
| Index | Digital Return | Initial Index Level* | Trigger Level** | CUSIP / ISIN |
| S&P 500® Index (Bloomberg ticker: SPX) | At least 15.00% | 2,012.66 | 1,172.37, which is 58.25% of the Initial Index Level | 48128A517 / US48128A5175 |
| Russell 2000® Index (Bloomberg ticker: RTY) | 1,108.624 | 645.773, which is 58.25% of the Initial Index Level |
*The Initial Index Level of each Index is the closing level of that Index on January 4, 2016 and is not the closing level of that Index on the Trade Date.
** Rounded to two decimal places for the S&P 500® Index and rounded to three decimal places for the Russell 2000® Index
See "Additional Information about JPMorgan Chase & Co. and the Securities" in this pricing supplement. The Securities will have the terms specified in the prospectus and the prospectus supplement, each dated November 7, 2014, product supplement no. UBS-1a-I dated November 7, 2014, underlying supplement no. 1a-I dated November 7, 2014 and this pricing supplement. The terms of the Securities as set forth in this pricing supplement, to the extent they differ or conflict with those set forth in product supplement no. UBS-1a-I, will supersede the terms set forth in product supplement no. UBS-1a-I.
Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of the Securities or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying prospectus, prospectus supplement, product supplement no. UBS-1a-I and underlying supplement no. 1a-I. Any representation to the contrary is a criminal offense.
| Price to Public1 | Fees and Commissions2 | Proceeds to Issuer | ||||
| Offering of Securities | Total | Per Security | Total | Per Security | Total | Per Security |
| Securities Linked to the lesser performing of the S&P 500® Index and the Russell 2000® Index | $10.00 | $0.25 | $9.75 | |||
| 1 | See "Supplemental Use of Proceeds" in this pricing supplement for information about the components of the price to public of the Securities. |
| 2 | UBS Financial Services Inc., which we refer to as UBS, will receive selling commissions from us that will not exceed $0.25 per $10 principal amount Security. See "Plan of Distribution (Conflicts of Interest)" beginning on page PS-87 of the accompanying product supplement no. UBS-1a-I, as supplemented by "Supplemental Plan of Distribution" in this pricing supplement. |
If the Securities priced today and assuming a Digital Return equal to the minimum Digital Return listed above and a Trigger Level equal to the maximum Trigger Level listed above, the estimated value of the Securities as determined by J.P. Morgan Securities LLC, which we refer to as JPMS, would be approximately $9.572 per $10 principal amount Security. JPMS's estimated value of the Securities, when the terms of the Securities are set, will be provided by JPMS in the pricing supplement and will not be less than $9.472 per $10 principal amount Security. See "JPMS's Estimated Value of the Securities" in this pricing supplement for additional information.
The Securities 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.
Additional Information about JPMorgan Chase & Co. and the Securities
You may revoke your offer to purchase the Securities at any time prior to the time at which we accept such offer by notifying the agent. We reserve the right to change the terms of, or reject any offer to purchase, the Securities prior to their issuance. In the event of any changes to the terms of the Securities, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together with the prospectus, as supplemented by the prospectus supplement, each dated November 7, 2014, relating to our Series E medium-term notes of which these Securities are a part, and the more detailed information contained in product supplement no. UBS-1a-I dated November 7, 2014 and underlying supplement no. 1a-I dated November 7, 2014. This pricing supplement, together with the documents listed below, contains the terms of the Securities 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. UBS-1a-I and "Risk Factors" in the accompanying underlying supplement no. 1a-I, as the Securities involve risks not associated with conventional debt securities.
You may access these on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filing for the relevant date on the SEC website):
| ♦ | Product supplement no. UBS-1a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008409/e61360_424b2.pdf |
| ♦ | Underlying supplement no. 1a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf |
| ♦ | Prospectus supplement and prospectus, each dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf |
As used in this pricing supplement, the "Issuer," "JPMorgan Chase," "we," "us" and "our" refer to JPMorgan Chase & Co.
2
Investor Suitability
The suitability considerations identified above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisers have carefully considered the suitability of an investment in the Securities in light of your particular circumstances. You should also review carefully the "Key Risks" beginning on page 5 of this pricing supplement, "Risk Factors" in the accompanying product supplement no. UBS-1a-I and "Risk Factors" in the accompanying underlying supplement no. 1a-I for risks related to an investment in the Securities. For more information on the Indices, please see the sections titled "The S&P 500® Index" and "The Russell 2000® Index" below.
3
| Indicative Terms | ||
| Issuer: | JPMorgan Chase & Co. | |
| Issue Price: | $10.00 per Security (subject to a minimum purchase of 100 Securities or $1,000) | |
| Principal Amount: | $10.00 per Security. The payment at maturity will be based on the principal amount. | |
| Indices: |
S&P 500® Index Russell 2000® Index |
|
| Term1: | Approximately 3 years | |
| Payment at Maturity (per $10 principal amount Security): |
If the Final Index Level of each Index is greater than or equal to
its Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Digital Return) If the Final Index Level of either Index is less than its Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Lesser Performing Index Return) In this scenario, you will not receive any Digital Return, you will
be exposed to the decline of the Lesser Performing Index and you will
lose some or all of your principal amount in an amount proportionate
to the negative Lesser Performing Index Return. |
|
| Index Return: |
With respect to each Index: (Final Index Level - Initial Index Level) |
|
| Lesser Performing Index: | The Index with the lower Index Return | |
| Lesser Performing Index Return: | The lower of the Index Returns of the Indices | |
| Digital Return: | At least 15.00%. The actual Digital Return will be finalized on the Trade Date and provided in the pricing supplement and is expected to be, but will not be less than, 15.00%. | |
| Initial Index Level: | With respect to each Index, the closing level of that Index on January 4, 2016, which was 2,012.66 for the S&P 500® Index and 1,108.624 for the Russell 2000® Index. The Initial Index Level of each Index is not the closing level of that Index on the Trade Date. | |
| Final Index Level: | The closing level of the Index on the Final Valuation Date | |
| Trigger Level2: | With respect to each Index, 58.25% of its Initial Index Level, which was 1,172.37 with respect to the S&P 500® Index and 645.773 with respect to the Russell® 2000 Index | |
1 See footnote 1 under "Key Dates" on the front cover
2 Rounded to two decimal places for the S&P 500® Index and rounded to three decimal places for the Russell 2000® Index
| Investment Timeline | ||||
| January 4, 2016 | The Initial Index Level of each Index is observed and the Trigger Level of each Index is determined. | |||
|
||||
| Trade Date | The Digital Return is finalized. | |||
|
|
||||
| Maturity Date |
The Final Index Level and the Index Return of each Index is determined. If the Final Index Level of each Index is greater than or equal to
its Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 ×Digital Return) If Final Index Level of either Index is less than its Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Lesser Performing Index Return) Under these circumstances, you will be exposed to the decline of the
Lesser Performing Index and you will lose some or all of your
principal amount.
|
|||
| INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. YOU WILL BE EXPOSED TO THE MARKET RISK OF EACH INDEX AND ANY DECLINE IN THE LEVEL OF ONE INDEX MAY NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE LEVEL OF THE OTHER INDEX. ANY PAYMENT ON THE SECURITIES, INCLUDING ANY DIGITAL RETURN OR REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF JPMORGAN CHASE. IF JPMORGAN CHASE WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. | ||||
4
What Are the Tax Consequences of the Securities?
You should review carefully the section entitled "Material U.S. Federal Income Tax Consequences" in the accompanying product supplement no. UBS-1a-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 Securities.
Based on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the Securities 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. UBS-1a-I. Assuming this treatment is respected, the gain or loss on your Securities should be treated as long-term capital gain or loss if you hold your Securities for more than a year, whether or not you are an initial purchaser of Securities 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 Securities 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 Securities, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Securities, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as "FATCA" may (if the Securities are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the Securities, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity, of a Security. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application of FATCA to the Securities.
Non-U.S. holders should also note that, notwithstanding anything to the contrary in the accompanying product supplement no. UBS-1a-I, recently promulgated Treasury regulations imposing a withholding tax on certain "dividend equivalents" under certain "equity linked instruments" will not apply to the Securities.
Key Risks
An investment in the Securities involves significant risks. Investing in the Securities is not equivalent to investing directly in either or both of the Indices. These risks are explained in more detail in the "Risk Factors" section of the accompanying product supplement no. UBS-1a-I and the "Risk Factors" section of the accompanying underlying supplement no. 1a-I. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Securities.
Risks Relating to the Securities Generally
5
6
| The Securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Securities to maturity. See "— Lack of Liquidity" below. |
| ♦ | Secondary Market Prices of the Securities Will Be Impacted by Many Economic and Market Factors — The secondary market price of the Securities during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the levels of the Indices, 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 in the levels of the Indices; | |
| ♦ | the time to maturity of the Securities; | |
| ♦ | the dividend rates on the equity securities included in the Indices; | |
| ♦ | interest and yield rates in the market generally; 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 Securities, which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the Securities, if any, at which JPMS may be willing to purchase your Securities in the secondary market. |
7
| ♦ | Potentially Inconsistent Research, Opinions or Recommendations by JPMS, UBS or Their Affiliates — JPMS, UBS or their affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Securities, and that may be revised at any time. Any such research, opinions or recommendations may or may not recommend that investors buy or hold the Indices and could affect the level of an Index, and therefore the market value of the Securities. |
| ♦ | Tax Treatment — Significant aspects of the tax treatment of the Securities are uncertain. You should consult your tax adviser about your tax situation. |
| ♦ | Potential JPMorgan Chase & Co. Impact on the Market Price of the Indices — Trading or transactions by JPMorgan Chase & Co. or its affiliates in the Indices or in futures, options or other derivative products on the Indices may adversely affect the market value of the Indices and, therefore, the market value of the Securities. |
| ♦ | The Final Terms and Valuation of the Securities Will Be Finalized on the Trade Date and Provided in the Pricing Supplement — The final terms of the Securities will be based on relevant market conditions when the terms of the Securities are set and will be finalized on the Trade Date and provided in the pricing supplement. In particular, each of JPMS's estimated value and the Digital Return will be finalized on the Trade Date and provided in the pricing supplement and each may be as low as the applicable minimum set forth on the cover of this pricing supplement. Accordingly, you should consider your potential investment in the Securities based on the minimums for JPMS's estimated value and the Digital Return. |
Risks Relating to the Index
8
Hypothetical Examples and Return Table
The following table and hypothetical examples below illustrate the payment at maturity per $10 principal amount Security for a hypothetical range of Lesser Performing Index Returns from -100.00% to +100.00% and assume an Initial Index Level for the Lesser Performing Index of 100, a Trigger Level for the Lesser Performing Index of 58.25 and a Digital Return of 15.00%. The hypothetical Initial Index Level for the Lesser Performing Index of 100 and the resulting Trigger Level for the Lesser Performing Index of 58.25 have been chosen for illustrative purposes only and do not represent the actual Initial Index Level or Trigger Level of either Index. The actual Initial Index Level and the resulting Trigger Level of each Index are based on the closing level of that Index on January 4, 2016 and are specified on the cover of this pricing supplement. For historical data regarding the actual closing levels of the Indices, please see the historical information set forth under "The Indices" in this pricing supplement. The actual Digital Return will be finalized on the Trade Date and provided in the pricing supplement and will not be less than 15.00%. The hypothetical payment at maturity examples set forth below are for illustrative purposes only and may not be the actual returns applicable to a purchaser of the Securities. The actual payment at maturity will be determined based on the Initial Index Levels, the Trigger Levels and the Digital Return to be finalized on the Trade Date and provided in the pricing supplement and the Final Index Levels which will be determined on the Final Valuation Date. You should consider carefully whether the Securities are suitable to your investment goals. The numbers appearing in the table below have been rounded for ease of analysis.
| Final Index Level of the Lesser Performing Index | Lesser Performing Index Return (%) |
Payment at Maturity ($) | Return at Maturity per $10.00 issue price (%) |
| 200.000 | 100.000% | $11.5000 | 15.000% |
| 190.000 | 90.000% | $11.5000 | 15.000% |
| 180.000 | 80.000% | $11.5000 | 15.000% |
| 170.000 | 70.000% | $11.5000 | 15.000% |
| 160.000 | 60.000% | $11.5000 | 15.000% |
| 150.000 | 50.000% | $11.5000 | 15.000% |
| 140.000 | 40.000% | $11.5000 | 15.000% |
| 130.000 | 30.000% | $11.5000 | 15.000% |
| 120.000 | 20.000% | $11.5000 | 15.000% |
| 115.000 | 15.000% | $11.5000 | 15.000% |
| 110.000 | 10.000% | $11.5000 | 15.000% |
| 105.000 | 5.000% | $11.5000 | 15.000% |
| 100.000 | 0.000% | $11.5000 | 15.000% |
| 95.000 | -5.000% | $11.5000 | 15.000% |
| 90.000 | -10.000% | $11.5000 | 15.000% |
| 80.000 | -20.000% | $11.5000 | 15.000% |
| 70.000 | -30.000% | $11.5000 | 15.000% |
| 60.000 | -40.000% | $11.5000 | 15.000% |
| 58.250 | -41.750% | $11.5000 | 15.000% |
| 58.249 | -41.751% | $5.8249 | -41.751% |
| 50.000 | -50.000% | $5.0000 | -50.000% |
| 40.000 | -60.000% | $4.0000 | -60.000% |
| 30.000 | -70.000% | $3.0000 | -70.000% |
| 20.000 | -80.000% | $2.0000 | -80.000% |
| 10.000 | -90.000% | $1.0000 | -90.000% |
| 0.000 | -100.000% | $0.0000 | -100.000% |
Example 1 — The level of the Lesser Performing Index increases by 5% from the Initial Index Level of 100 to the Final Index Level of 105.
Because the Final Index Level of the Lesser Performing Index is greater than its Trigger Level, JPMorgan Chase will pay you your principal amount plus a return equal to the Digital Return of 15.00%, resulting in a payment at maturity of $11.50 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 × Digital Return)
$10.00 + ($10.00 × 15.00%) = $11.50
9
Example 2 — The level of the Lesser Performing Index increases by 60% from the Initial Index Level of 100 to the Final Index Level of 160.
Because the Final Index Level of the Lesser Performing Index is greater than its Trigger Level and even though the Lesser Performing Index Return is 60%, JPMorgan Chase will pay you your principal amount plus a return equal to only the Digital Return of 15.00%, resulting in a payment at maturity of $11.50 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 × Digital Return)
$10.00 + ($10.00 × 15.00%) = $11.50
Example 3 — The level of the Lesser Performing Index decreases by 10% from the Initial Index Level of 100 to the Final Index Level of 90.
Even though the Lesser Performing Index Return is negative, because the Final Index Level of the Lesser Performing Index is greater than its Trigger Level, JPMorgan Chase will pay you your principal amount plus a return equal to the Digital Return of 15.00%, resulting in a payment at maturity of $11.50 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 × Digital Return)
$10.00 + ($10.00 × 15.00%) = $11.50
Example 4 — The level of the Lesser Performing Index decreases by 60% from the Initial Index Level of 100 to the Final Index Level of 40.
Because the Final Index Level of the Lesser Performing Index is less than its Trigger Level and the Lesser Performing Index Return is -60%, JPMorgan Chase will pay you a payment at maturity of $4.00 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 ×Lesser Performing Index Return)
$10.00 + ($10.00 × -60.00%) = $4.00
If the Final Index Level of either Index is less than its Trigger Level, investors will not receive any Digital Return and instead will be exposed to the negative Lesser Performing Index Return at maturity, resulting in a loss of principal that is proportionate to the Lesser Performing Index's decline from the Trade Date to the Final Valuation Date. Investors could lose some or all of their principal amount. You will be exposed to the market risk of each Index and any decline in the level of one Index may negatively affect your return and will not be offset or mitigated by a lesser decline or any potential increase in the level of the other Index.
The hypothetical returns and hypothetical payments on the Securities shown above apply only if you hold the Securities 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.
10
The Indices
Included on the following pages is a brief description of the Indices. This information has been obtained from publicly available sources, without independent verification. Set forth below is a table that provides the quarterly high and low closing levels of each Index. This information given below is for the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015. Partial data is provided for the first calendar quarter of 2016. We obtained the closing levels information set forth below from the Bloomberg Professional® service ("Bloomberg"), without independent verification. You should not take the historical levels of either Index as an indication of future performance.
The S&P 500® Index
The S&P 500® Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information about the S&P 500® Index, see the information set forth under "Equity Index Descriptions — The S&P 500® Index" in the accompanying underlying supplement no. 1a-I.
Historical Information Regarding the S&P 500® Index
The following table sets forth the quarterly high and low closing levels of the S&P 500® Index, based on daily closing levels of the Index as reported by Bloomberg, without independent verification. The closing level of the S&P 500® Index on January 5, 2016 was 2,016.71. We obtained the closing levels of the S&P 500® Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the S&P 500® Index as an indication of future performance.
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Close | ||||||||||
| 1/1/2011 | 3/31/2011 | 1,343.01 | 1,256.88 | 1,325.83 | ||||||||||
| 4/1/2011 | 6/30/2011 | 1,363.61 | 1,265.42 | 1,320.64 | ||||||||||
| 7/1/2011 | 9/30/2011 | 1,353.22 | 1,119.46 | 1,131.42 | ||||||||||
| 10/1/2011 | 12/31/2011 | 1,285.09 | 1,099.23 | 1,257.60 | ||||||||||
| 1/1/2012 | 3/31/2012 | 1,416.51 | 1,277.06 | 1,408.47 | ||||||||||
| 4/1/2012 | 6/30/2012 | 1,419.04 | 1,278.04 | 1,362.16 | ||||||||||
| 7/1/2012 | 9/30/2012 | 1,465.77 | 1,334.76 | 1,440.67 | ||||||||||
| 10/1/2012 | 12/31/2012 | 1,461.40 | 1,353.33 | 1,426.19 | ||||||||||
| 1/1/2013 | 3/31/2013 | 1,569.19 | 1,457.15 | 1,569.19 | ||||||||||
| 4/1/2013 | 6/30/2013 | 1,669.16 | 1,541.61 | 1,606.28 | ||||||||||
| 7/1/2013 | 9/30/2013 | 1,725.52 | 1,614.08 | 1,681.55 | ||||||||||
| 10/1/2013 | 12/31/2013 | 1,848.36 | 1,655.45 | 1,848.36 | ||||||||||
| 1/1/2014 | 3/31/2014 | 1,878.04 | 1,741.89 | 1,872.34 | ||||||||||
| 4/1/2014 | 6/30/2014 | 1,962.87 | 1,815.69 | 1,960.23 | ||||||||||
| 7/1/2014 | 9/30/2014 | 2,011.36 | 1,909.57 | 1,972.29 | ||||||||||
| 10/1/2014 | 12/31/2014 | 2,090.57 | 1,862.49 | 2,058.90 | ||||||||||
| 1/1/2015 | 3/31/2015 | 2,117.39 | 1,992.67 | 2,067.89 | ||||||||||
| 4/1/2015 | 6/30/2015 | 2,130.82 | 2,057.64 | 2,063.11 | ||||||||||
| 7/1/2015 | 9/30/2015 | 2,128.28 | 1,867.61 | 1,920.03 | ||||||||||
| 10/1/2015 | 12/31/2015 | 2,109.79 | 1,923.82 | 2,043.94 | ||||||||||
| 1/1/2016 | 1/5/2016 | * | 2,016.71 | 2,012.66 | 2,016.71 |
*As of the date of this pricing supplement, available information for the first calendar quarter of 2016 includes data for the period from January 1, 2016 through January 5, 2016. Accordingly, the "Quarterly High," "Quarterly Low" and "Close" data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2016.
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The graph below illustrates the daily performance of the S&P 500® Index from January 3, 2006 through January 5, 2016, based on information from Bloomberg, without independent verification. The dotted line represents the Trigger Level of 1,172.37, equal to 58.25% of the closing level of the S&P 500® Index on January 4, 2016.
Past performance of the Index is not indicative of the future performance of the S&P 500® Index.
The historical performance of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the Final Valuation Date. We cannot give you assurance that the performance of the Index will result in the return of any of your principal amount.
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The Russell 2000® Index
The Russell 2000® Index consists of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell 2000® Index, see the information set forth under "Equity Index Descriptions — The Russell Indices" in the accompanying underlying supplement no. 1a-I.
Historical Information Regarding the Russell 2000® Index
The following table sets forth the quarterly high and low closing levels of the Russell 2000® Index, based on daily closing levels of the Index as reported by Bloomberg, without independent verification. The closing level of the Russell 2000® Index on January 5, 2016 was 1,110.439. We obtained the closing levels of the Russell® Index above and below from Bloomberg, without independent verification. Although Russell Investments publishes the closing levels of the Russell 2000® Index to six decimal places, Bloomberg publishes the closing levels of the Russell 2000® Index to only three decimal places. You should not take the historical levels of the Russell 2000® Index as an indication of future performance.
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Close | ||||||||||
| 1/1/2011 | 3/31/2011 | 843.549 | 773.184 | 843.549 | ||||||||||
| 4/1/2011 | 6/30/2011 | 865.291 | 777.197 | 827.429 | ||||||||||
| 7/1/2011 | 9/30/2011 | 858.113 | 643.421 | 644.156 | ||||||||||
| 10/1/2011 | 12/31/2011 | 765.432 | 609.490 | 740.916 | ||||||||||
| 1/1/2012 | 3/31/2012 | 846.129 | 747.275 | 830.301 | ||||||||||
| 4/1/2012 | 6/30/2012 | 840.626 | 737.241 | 798.487 | ||||||||||
| 7/1/2012 | 9/30/2012 | 864.697 | 767.751 | 837.450 | ||||||||||
| 10/1/2012 | 12/31/2012 | 852.495 | 769.483 | 849.350 | ||||||||||
| 1/1/2013 | 3/31/2013 | 953.068 | 872.605 | 951.542 | ||||||||||
| 4/1/2013 | 6/30/2013 | 999.985 | 901.513 | 977.475 | ||||||||||
| 7/1/2013 | 9/30/2013 | 1,078.409 | 989.535 | 1,073.786 | ||||||||||
| 10/1/2013 | 12/31/2013 | 1,163.637 | 1,043.459 | 1,163.637 | ||||||||||
| 1/1/2014 | 3/31/2014 | 1,208.651 | 1,093.594 | 1,173.038 | ||||||||||
| 4/1/2014 | 6/30/2014 | 1,192.964 | 1,095.986 | 1,192.964 | ||||||||||
| 7/1/2014 | 9/30/2014 | 1,208.150 | 1,101.676 | 1,101.676 | ||||||||||
| 10/1/2014 | 12/31/2014 | 1,219.109 | 1,049.303 | 1,204.696 | ||||||||||
| 1/1/2015 | 3/31/2015 | 1,266.373 | 1,154.709 | 1,252.772 | ||||||||||
| 4/1/2015 | 6/30/2015 | 1,295.799 | 1,215.417 | 1,253.947 | ||||||||||
| 7/1/2015 | 9/30/2015 | 1,273.328 | 1,083.907 | 1,100.688 | ||||||||||
| 10/1/2015 | 12/31/2015 | 1,204.159 | 1,097.552 | 1,135.889 | ||||||||||
| 1/1/2016 | 1/5/2016 | * | 1,110.439 | 1,108.624 | 1,110.439 |
*As of the date of this pricing supplement, available information for the first calendar quarter of 2016 includes data for the period from January 1, 2016 through January 5, 2016. Accordingly, the "Quarterly High," "Quarterly Low" and "Close" data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2016.
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The graph below illustrates the daily performance of the Russell 2000® Index from January 3, 2006 through January 5, 2016, based on information from Bloomberg, without independent verification. The dotted line represents the Trigger Level of 645.773, equal to 58.25% of the closing level of the Russell 2000® Index on January 4, 2016.
Past performance of the Index is not indicative of the future performance of the Russell 2000® Index.
The historical performance of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the Final Valuation Date. We cannot give you assurance that the performance of the Index will result in the return of any of your principal amount.
Supplemental Plan of Distribution
We have agreed to indemnify UBS and JPMS against liabilities under the Securities Act of 1933, as amended, or to contribute to payments that UBS may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS may sell all or a part of the Securities that it purchases from us to the public or its affiliates at the price to public indicated on the cover hereof.
Subject to regulatory constraints, JPMS intends to offer to purchase the Securities in the secondary market, but it is not required to do so.
We or our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Securities, and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See "Supplemental Use of Proceeds" in this pricing supplement and "Use of Proceeds and Hedging" beginning on page PS-43 of the accompanying product supplement no. UBS-1a-I.
JPMS's Estimated Value of the Securities
JPMS's estimated value of the Securities 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 Securities, valued using our internal funding rate for structured debt described below, and (2) the derivative or derivatives underlying the economic terms of the Securities. JPMS's estimated value does not represent a minimum price at which JPMS would be willing to buy your Securities 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 "Key Risks — Risks Relating to the Securities Generally — JPMS's Estimated Value Is Not Determined by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt." The value of the derivative or derivatives underlying the economic terms of the Securities 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 Securities is determined when the terms of the Securities are set based on market conditions and other relevant factors and assumptions existing at that time. See "Key Risks — Risks Relating to the Securities Generally — JPMS's Estimated Value Does Not Represent Future Values of the Securities and May Differ from Others' Estimates."
JPMS's estimated value of the Securities will be lower than the original issue price of the Securities because costs associated with selling, structuring and hedging the Securities are included in the original issue price of the Securities. These costs include the selling commissions paid to UBS, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Securities and the estimated cost of hedging our obligations under the Securities. Because hedging our obligations entails risk and may
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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 Securities. See "Key Risks — Risks Relating to the Securities Generally — JPMS's Estimated Value of the Securities Will Be Lower Than the Original Issue Price (Price to Public) of the Securities" in this pricing supplement.
Secondary Market Prices of the Securities
For information about factors that will impact any secondary market prices of the Securities, see "Key Risks — Risks Relating to the Securities Generally — Secondary Market Prices of the Securities Will Be Impacted by Many Economic and Market Factors" in this pricing supplement. In addition, we generally expect that some of the costs included in the original issue price of the Securities will be partially paid back to you in connection with any repurchases of your Securities by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be up to nine months. The length of any such initial period reflects secondary market volumes for the Securities, the structure of the Securities, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Securities and when these costs are incurred, as determined by JPMS. See "Key Risks — Risks Relating to the Securities Generally — The Value of the Securities 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 Securities for a Limited Time Period."
Supplemental Use of Proceeds
The Securities are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the Securities. See "Hypothetical Examples and Return Table" in this pricing supplement for an illustration of the risk-return profile of the Securities and "The Indices" in this pricing supplement for a description of the market exposure provided by the Securities.
The original issue price of the Securities is equal to JPMS's estimated value of the Securities plus the selling commissions paid to UBS, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Securities, plus the estimated cost of hedging our obligations under the Securities.
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