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 8, 2016
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PRICING SUPPLEMENT NO. |
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JPMorgan Chase & Co. Trigger Callable Contingent Yield Notes (daily coupon observation)
Linked to the least performing of the S&P 500® Index, the EURO STOXX 50® Index and the Russell 2000® Index due on or about January 12, 2018
| Investment Description |
| Trigger Callable Contingent Yield Notes are unsecured and unsubordinated notes issued by JPMorgan Chase & Co. ("JPMorgan Chase") (each, a "Note" and collectively, the "Notes") linked to the least performing of the S&P 500® Index, the EURO STOXX 50® Index and the Russell 2000® Index (each, an "Index" and together the "Indices"). If the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation Period, JPMorgan Chase will make a Contingent Coupon payment with respect to that Quarterly Observation Period. If the closing level of any Index is less than its Coupon Barrier on any day during a Quarterly Observation Period, no Contingent Coupon payment will be made. JPMorgan Chase may, at its election, call the Notes early on any Quarterly Observation End Date (other than the Final Valuation Date) regardless of the closing level of any Index on that Quarterly Observation End Date. If JPMorgan Chase elects to call the Notes prior to maturity, JPMorgan Chase will pay the principal amount plus any Contingent Coupon for the Quarterly Observation Period ending on the applicable Quarterly Observation End Date and no further amounts will be owed to you. If JPMorgan Chase does not elect to call the Notes prior to maturity and the Final Index Level of each Index is equal to or greater than its Trigger Level (which is the same level as its Coupon Barrier), JPMorgan Chase will make a cash payment at maturity equal to the principal amount of your Notes, in addition to any Contingent Coupon with respect to the final Quarterly Observation Period. If JPMorgan Chase does not elect to call the Notes prior to maturity and the Final Index Level of any Index is less than its Trigger Level, JPMorgan Chase will pay you less than the full principal amount, if anything, at maturity, resulting in a loss of your principal amount that is proportionate to the decline in the closing level of the Index with the Lowest Index Return (the "Least Performing Index") from its Initial Index Level to its Final Index Level. Investing in the Notes involves significant risks. You may lose some or all of your principal amount at maturity. You may receive few or no quarterly Contingent Coupons during the term of the Notes. You will be exposed to the market risk of each Index on each day of the Quarterly Observation Periods and on the Final Valuation Date 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 levels of the other Indices. Generally, a higher Contingent Coupon Rate is associated with a greater risk of loss. The contingent repayment of principal applies only if you hold the Notes to maturity. Any payment on the Notes, including any 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 Notes and you could lose your entire investment. |
| Features | Key Dates | |||
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Trade Date1 | January 8, 2016 | ||
| Original Issue Date (Settlement Date)1 | January 13, 2016 | |||
| Quarterly Observation End Dates2 | Quarterly (see page 4) | |||
| Final Valuation Date2 | January 8, 2018 | |||
| Maturity Date2 | January 12, 2018 | |||
| 1 | Expected. In the event that we make any change to the expected Trade Date and Settlement Date, the Quarterly Observation End Dates, the Final Valuation Date and/or the Maturity Date will be changed so that the stated term of the Notes remains the same. The Initial Index Level of each of the S&P 500® Index and the Russell 2000® Index is the closing level of that Index on January 7, 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 Payment Date" and "General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings" in the accompanying product supplement no. UBS-1a-I | |||
Contingent Coupon: If the closing level of each Index is equal to or greater than its
Coupon Barrier on each day during a Quarterly Observation Period,
JPMorgan Chase will make a Contingent Coupon payment with respect to
that Quarterly Observation Period. JPMorgan Chase will not pay you
the Contingent Coupon for any Quarterly Observation Period in which
the closing level of any Index on any day during that Quarterly
Observation Period is less than its Coupon Barrier.
| Index | Contingent Coupon Rate |
Initial Index Level* | Trigger Level** | Coupon Barrier** | CUSIP / ISIN |
| S&P 500® Index (Bloomberg Ticker: SPX) | At least 16.65% per annum | 1,943.09 | 1,457.32, which is 75% of the Initial Index Level | 1,457.32, which is 75% of the Initial Index Level | 48128A434 / US48128A4343 |
| EURO STOXX 50® Index (Bloomberg Ticker: SX5E) | • | 75% of the Initial Index Level | 75% of the Initial Index Level | ||
| Russell 2000® Index (Bloomberg Ticker: RTY) | 1,064.566 | 798.425, which is 75% of the Initial Index Level | 798.425, which is 75% of the Initial Index Level |
*The Initial Index Level of each of the S&P 500® Index and the Russell 2000® Index is the closing level of that Index on January 7, 2016 and is not the closing level of that Index on the Trade Date. The Initial Index Level of the EURO STOXX 50® Index will be the closing level of that Index on the Trade Date and will be provided in the pricing supplement.
**Rounded to two decimal places for the S&P 500® Index and the EURO STOXX 50® Index and rounded to three decimal places for the Russell 2000® Index. The Trigger Level for the EURO STOXX 50® Index will be determined on the Trade Date and provided in the pricing supplement.
See "Additional Information about JPMorgan Chase & Co. and the Notes" in this pricing supplement. The Notes 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 Notes 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 Notes 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 Public(1) | Fees and Commissions(2) | Proceeds to Issuer | ||||
| Offering of Notes | Total | Per Note | Total | Per Note | Total | Per Note |
| Notes linked to the least performing of the S&P 500® Index, the EURO STOXX 50® Index and the Russell 2000® Index | $10 | $0.15 | $9.85 | |||
| (1) | See "Supplemental Use of Proceeds" in this pricing supplement for information about the components of the price to public of the Notes. |
| (2) | UBS Financial Services Inc., which we refer to as UBS, will receive selling commissions from us that will not exceed $0.15 per $10 principal amount Note. 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 Notes priced today and assuming a Contingent Coupon Rate equal to the minimum Contingent Coupon Rate listed above, the estimated value of the Notes as determined by J.P. Morgan Securities LLC, which we refer to as JPMS, would be approximately $9.695 per $10 principal amount Note. JPMS's estimated value of the Notes, when the terms of the Notes are set, will be provided by JPMS in the pricing supplement and will not be less than $9.595 per $10 principal amount Note. See "JPMS's Estimated Value of the Notes" in this pricing supplement for additional information.
The Notes are not bank deposits, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Additional Information about JPMorgan Chase & Co. and the Notes
You may revoke your offer to purchase the Notes at any time prior to the time at which we accept such offer by notifying the agent. We reserve the right to change the terms of, or reject any offer to purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
You should read this pricing supplement together with the prospectus, as supplemented by the prospectus supplement, each dated November 7, 2014, 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. 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 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. UBS-1a-I and "Risk Factors" in the accompanying underlying supplement no. 1a-I, as the Notes 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
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The Notes may be suitable for you if, among other considerations: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ |
The Notes may not be suitable for you if, among other considerations: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ |
The suitability considerations identified above are not exhaustive. Whether or not the Notes 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 Notes in light of your particular circumstances. You should also review carefully the "Key Risks" beginning on page 6 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 Notes. For more information on the Indices, please see the sections titled "The S&P 500® Index," "The EURO STOXX 50® Index" and "The Russell 2000® Index" below.
3
| Indicative Terms | ||||
| Issuer: | JPMorgan Chase & Co. | |||
| Issue Price: | $10 per Note | |||
| Indices: |
S&P
500® Index |
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| Principal Amount: | $10 per Note (subject to a minimum purchase of 100 Notes or $1,000) | |||
| Term1: | Approximately 2 years, unless called earlier at the election of JPMorgan Chase | |||
| Issuer Call Feature: | JPMorgan Chase may elect to call the Notes on any Quarterly Observation End Date (other than the Final Valuation Date), regardless of the closing level of any Index on that Quarterly Observation End Date. If the Notes are called, JPMorgan Chase will pay you on the applicable Call Settlement Date a cash payment per Note equal to the principal amount plus any Contingent Coupon otherwise due for the Quarterly Observation Period ending on the applicable Quarterly Observation End Date, and no further payments will be made on the Notes. Before JPMorgan Chase elects to call the Notes on a Quarterly Observation End Date, JPMorgan Chase will deliver written notice to The Depository Trust Company ("DTC") on or before that Quarterly Observation End Date. | |||
| Contingent Coupon: |
If the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation Period, we will pay you the Contingent Coupon for that Quarterly Observation Period on the relevant Coupon Payment Date. If the closing level of any Index is less than its Coupon Barrier on any day during a Quarterly Observation Period, the Contingent Coupon for that Quarterly Observation Period will not accrue or be payable, and we will not make any payment to you on the relevant Coupon Payment Date. Each Contingent Coupon will be a fixed amount based on equal quarterly installments at the Contingent Coupon Rate, which is a per annum rate. You should be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the minimum Contingent Coupon Rate set forth in "Contingent Coupon Rate" below. Contingent Coupon payments on the Notes are not guaranteed. We will not pay you the Contingent Coupon for any Quarterly Observation Period in which the closing level of any Index on any day during that Quarterly Observation Period is less than its Coupon Barrier. |
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| Quarterly Observation Period: | With respect to each Coupon Payment Date, the period from but excluding the second immediately preceding Quarterly Observation End Date (or, in the case of the first Coupon Payment Date, from but excluding the Pricing Date) to and including the immediately preceding Quarterly Observation End Date. | |||
| Contingent Coupon Rate: | At least 16.65% per annum. The actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement and is expected to be, but will not be less than, 16.65% per annum. | |||
| Contingent Coupon payments: | At least $0.4163 per $10 principal amount Note. The actual Contingent Coupon payments will be based on the Contingent Coupon Rate and finalized on the Trade Date and provided in the pricing supplement. | |||
| Coupon Payment Dates2: | 5th business day following the Quarterly Observation End Date on which the applicable Quarterly Observation Period ends, except that the Coupon Payment Date for the final Quarterly Observation Period is the Maturity Date | |||
| Call Settlement Dates2: | First Coupon Payment Date following the applicable Quarterly Observation End Date | |||
| Payment at Maturity (per $10 Note): |
If JPMorgan Chase does not elect to call the Notes and the Final Index Level of each Index is equal to or greater than its Trigger Level, we will pay you a cash payment at maturity per $10 principal amount Note equal to $10 plus any Contingent Coupon otherwise due on the Maturity Date. If JPMorgan Chase does not elect to call the Notes and the Final Index Level of any Index is less than its Trigger Level, we will pay you a cash payment at maturity that is less than $10 per $10 principal amount Note resulting in a loss on your principal amount proportionate to the negative Index Return of the Least Performing Index, equal to: $10 × (1 + Least Performing Index Return) |
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| Index Return: |
With respect to each Index: Final
Index Level - Initial Index Level |
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| Least Performing Index: | The Index with the lowest Index Return | |||
| Least Performing Index Return: | The lowest of the Index Returns of the Indices | |||
| Initial Index Level: | With respect to the EURO STOXX 50® Index, the closing level of that Index on the Trade Date. With respect to each of the S&P 500® Index and the Russell 2000® Index, the closing level of that Index on January 7, 2016, which was 1,943.09 for the S&P 500® Index and 1,064.566 for the Russell 2000® Index. The Initial Index Level of each of the S&P 500® Index and the Russell 2000® Index is not the closing level of that Index on the Trade Date. | |||
| Final Index Level: | With respect to each Index, the closing level of that Index on the Final Valuation Date | |||
| Trigger Level3: | With respect to each Index, 75% of its Initial Index Level, which is 1,457.32 for the S&P 500® Index and 798.425 for the Russell 2000® Index. The Trigger Level for the EURO STOXX 50® Index will be determined on the Trade Date and provided in the pricing supplement. | |||
| Coupon Barrier3: | With respect to each Index, 75% of its Initial Index Level, which is 1,457.32 for the S&P 500® Index and 798.425 for the Russell 2000® Index. The Coupon Barrier for the EURO STOXX 50® Index will be determined on the Trade Date and provided in the pricing supplement. | |||
| 1 | See footnote 1 under "Key Dates" on the front cover | |||
| 2 | See footnote 2 under "Key Dates" on the front cover | |||
| 3 | Rounded to two decimal places for the S&P 500® Index and the EURO STOXX 50® Index and rounded to three decimal places for the Russell 2000® Index | |||
| Investment Timeline | ||
| January 7, 2016 | The Initial Index Level of each of the S&P 500® Index and the Russell 2000® Index is observed, and the Trigger Level and the Coupon Barrier of each of the S&P 500® Index and the Russell 2000® Index are determined. | |
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| Trade Date | The Initial Index Level of the EURO STOXX 50® Index is observed, and the Trigger Level and the Coupon Barrier of the EURO STOXX 50® Index and the Contingent Coupon Rate are determined. | |
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| Quarterly (callable by JPMorgan Chase at its election): |
If the closing level of each Index is equal to or greater than its Coupon Barrier on each day during a Quarterly Observation Period, JPMorgan Chase will pay you a Contingent Coupon on the related Coupon Payment Date. JPMorgan Chase may, at its election and upon written notice to DTC, call the Notes on any Quarterly Observation End Date (other than the Final Valuation Date), regardless of the closing level of any Index on that Quarterly Observation End Date. If JPMorgan Chase elects to call the Notes, JPMorgan Chase will pay you a cash payment per Note equal to the principal amount plus any Contingent Coupon otherwise due for the applicable Quarterly Observation Period, and no further payments will be made on the Notes. |
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| Maturity Date |
The Final Index Level of each Index is determined as of the Final Valuation Date. If JPMorgan Chase does not elect to call the Notes, the Final Index Level of each Index is equal to or greater than its Trigger Level, at maturity JPMorgan Chase will repay the principal amount equal to $10.00 per Note plus any Contingent Coupon otherwise due on the Maturity Date. If JPMorgan Chase does not elect to call the Notes and the Final Index Level of any Index is less than its Trigger Level, JPMorgan Chase will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount proportionate to the decline of the Least Performing Index, equal to a return of: $10 × (1 + Least Performing Index Return) per Note |
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| INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT AT MATURITY. YOU MAY RECEIVE FEW OR NO QUARTERLY CONTINGENT COUPONS DURING THE TERM OF THE NOTES. YOU WILL BE EXPOSED TO THE MARKET RISK OF EACH INDEX ON EACH DAY OF THE QUARTERLY OBSERVATION PERIODS AND ON THE FINAL VALUATION DATE 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 LEVELS OF THE OTHER INDICES. ANY PAYMENT ON THE NOTES, INCLUDING ANY 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 NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. | ||
4
Quarterly Observation Periods, Quarterly Observation End Dates and Coupon Payment Dates
| Quarterly Observation Periods Ending on the Following Quarterly Observation End Dates |
Coupon Payment Dates / Call Settlement Dates (if called) |
| April 8, 2016 | April 15, 2016 |
| July 8, 2016 | July 15, 2016 |
| October 11, 2016 | October 18, 2016 |
| January 9, 2017 | January 17, 2017 |
| April 10, 2017 | April 18, 2017 |
| July 10, 2017 | July 17, 2017 |
| October 10, 2017 | October 17, 2017 |
| January 8, 2018* (the Final Valuation Date) | January 12, 2018* (the Maturity Date) |
*The Notes are not callable at JPMorgan Chase's election on the Final Valuation Date. Thus, the Maturity Date is not a Call Settlement Date.
Each of the Quarterly Observation End Dates, and therefore the Coupon Payment Dates, is subject to postponement in the event of a market disruption event and as described under "General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings" and "General Terms of Notes — Postponement of a Payment Date" in the accompanying product supplement no. UBS-1a-I.
5
What Are the Tax Consequences of the Notes?
You should review carefully the section entitled "Material U.S. Federal Income Tax Consequences" in the accompanying product supplement no. UBS-1a-I. In determining our reporting responsibilities we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Coupons as ordinary income, as described in the section entitled "Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons" in the accompanying product supplement no. UBS-1a-I. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
Sale, Exchange or Redemption of a Note. Assuming the treatment described above is respected, upon a sale or exchange of the Notes (including upon early redemption or redemption at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly treated as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain or loss unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss, whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is likely that you will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible that proceeds received from the sale or exchange of your Notes prior to a Quarterly Observation End Date but that can be attributed to an expected Contingent Coupon payment could be treated as ordinary income. You should consult your tax adviser regarding this issue.
As described above, there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of "prepaid forward contracts" and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S. Holders — Tax Considerations. The U.S. federal income tax treatment of Contingent Coupons is uncertain, and although we believe it is reasonable to take a position that Contingent Coupons are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of that rate under an applicable income tax treaty), unless income from your Notes is effectively connected with your conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment in the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Notes in light of your particular circumstances.
Non-U.S. holders should also note that, 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 Notes.
FATCA. Withholding under legislation commonly referred to as "FATCA" could apply to payments with respect to the Notes that are treated as U.S.-source "fixed or determinable annual or periodical" income ("FDAP Income") for U.S. federal income tax purposes (such as interest, if the Notes are recharacterized, in whole or in part, as debt instruments, or Contingent Coupons if they are otherwise treated as FDAP Income). Notwithstanding anything to the contrary in the accompanying product supplement no. UBS-1a-I, under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) of a taxable disposition, including an early redemption or redemption at maturity, of the Notes. You should consult your tax adviser regarding the potential application of FATCA to the Notes.
In the event of any withholding on the Notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
6
Key Risks
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in any or all 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 Notes.
Risks Relating to the Notes Generally
7
| finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Indices, which reflects a greater potential for loss on your investment at maturity. |
| ♦ | You Are Exposed to the Risk of Decline in the Level of Each Index — Your return on the Notes and your payment at maturity, if any, is not linked to a basket consisting of the Indices. If JPMorgan Chase does not elect to call the Notes, your payment at maturity is contingent upon the performance of each individual Index such that you will be fully exposed to the risks related to each of the Indices. In addition, the performance of the Indices may not be correlated. Poor performance by any of the Indices over the term of the Notes may negatively affect whether you will receive a Contingent Coupon on any Coupon Payment Date and your payment at maturity and will not be offset or mitigated by positive performance by the other Indices. Accordingly, your investment is subject to the risk of decline in the value of each Index. |
| ♦ | Your Payment at Maturity May Be Determined By the Least Performing Index — Because the payment at maturity will be determined based on the performance of the Least Performing Index, you will not benefit from the performance of the other Indices. Accordingly, if JPMorgan chase does not elect to call the Notes and the Final Index Level of any Index is less than its Trigger Level, you will lose some or all of your principal amount at maturity, even if the Final Index Level of the other Indices is greater than or equal to its Initial Index Level. |
| ♦ | Contingent Repayment of Principal Applies Only If You Hold the Notes to Maturity — If you are able to sell your Notes in the secondary market prior to maturity, you may have to sell them at a loss relative to your initial investment even if the closing levels of all of the Indices are above their respective Trigger Levels. If by maturity the Notes have not been called, either JPMorgan Chase will repay you the full principal amount per Note, with or without the Contingent Coupon, or, if any Index closes below its Trigger Level on the Final Valuation Date, JPMorgan Chase will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate to the decline in the closing level of the Least Performing Index from the Trade Date to the Final Valuation Date. This contingent repayment of principal applies only if you hold your Notes to maturity. |
| ♦ | The Probability That the Closing Level of Any Index Will Fall Below Its Coupon Barrier on Any Day During Any Quarterly Observation Period or Its Trigger Level on the Final Valuation Date Will Depend on the Volatility of That Index — "Volatility" refers to the frequency and magnitude of changes in level of an Index. Greater expected volatility with respect to an Index reflects a higher expectation as of the Trade Date that the level of that Index could close below its Coupon Barrier on any day during any Quarterly Observation Period, resulting in the loss of one or more Contingent Coupons, or below its Trigger Level on the Final Valuation Date of the Notes, resulting in the loss of some or all of your principal amount. In addition, the Contingent Coupon Rate is a fixed rate and depends in part on this expected volatility. A higher Contingent Coupon Rate is generally associated with greater expected volatility. However, each Index's volatility can change significantly over the term of the Notes. The level of any Index could fall sharply, which could result in a loss of one or more Contingent Coupons and a significant loss of principal. |
| ♦ | Call and Reinvestment Risk — JPMorgan Chase may, in its sole discretion, elect to call the Notes on any Quarterly Observation End Date (other than the Final Valuation date), regardless of the closing level of any Index on that Quarterly Observation End Date. If JPMorgan Chase elects to call your Notes early, you will no longer have the opportunity to receive any Contingent Coupons after the applicable Call Settlement Date. The first Quarterly Observation End Date, and the first potential date on which JPMorgan Chase may elect to call the Notes, occurs after approximately three months and therefore you may not have the opportunity to receive any Contingent Coupons after approximately three months. In the event JPMorgan Chase elects to call the Notes, there is no guarantee that you would be able to reinvest the proceeds at a comparable return and/or with a comparable Contingent Coupon Rate for a similar level of risk. |
| It is more likely that JPMorgan Chase will elect to call the Notes prior to maturity when the expected interest payable on the Notes is greater than the interest that would be payable on other instruments issued by JPMorgan Chase of comparable maturity, terms and credit rating trading in the market. The greater likelihood of JPMorgan Chase calling the Notes in that environment increases the risk that you will not be able to reinvest the proceeds from the called Notes in an equivalent investment with a similar Contingent Coupon Rate. JPMorgan Chase is less likely to call the Notes prior to maturity when the expected interest payable on the Notes is less than the interest that would be payable on other comparable instruments issued by JPMorgan Chase, which includes when the level of any of the Indices is less than its Coupon Barrier. Therefore, the Notes are more likely to remain outstanding when the expected interest payable on the Notes is less than what would be payable on other comparable instruments and when your risk of not receiving a Contingent Coupon is relatively higher. |
8
| ♦ | 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 "JPMS's Estimated Value of the Notes" in 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 of the Notes 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 "JPMS's Estimated Value of the Notes" in 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 selling commissions, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads for structured debt issuances. See "Secondary Market Prices of the Notes" in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your Notes during this initial period may be lower than the value of the Notes as published by JPMS (and which may be shown on your customer account statements). |
| ♦ | 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 (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the Notes. As a result, the price, if any, at which JPMS will be willing to buy Notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk factor for information about additional factors that will impact any secondary market prices of the Notes. |
| The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity. See "— Lack of Liquidity" below. |
| ♦ | 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 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 Notes; | |
| ♦ | whether the closing level of any Index has been, or is expected to be, less than its Coupon Barrier on any day during any Quarterly Observation Period and whether the Final Index Level of any Index is expected to be less than its Trigger Level; | |
| ♦ | the dividend rates on the equity securities underlying the Indices; | |
| ♦ | the actual and expected positive or negative correlation between the Indices, or the actual or expected 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 each of the currencies in which the equity securities included in the EURO STOXX 50® Index trade and the correlation among those rates and the levels of the EURO STOXX 50® Index; 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. |
9
Risks Relating to the Indices
| ♦ | We Are Currently One of the Companies that Make Up the S&P 500® Index — We are currently one of the companies that make up the S&P 500® Index. We will not have any obligation to consider your interests as a holder of the Notes in taking any corporate action that might affect the value of the S&P 500® Index and the Notes. |
| ♦ | Non-U.S. Securities Risk with Respect to the EURO STOXX 50® Index — The equity securities included in the EURO STOXX 50® Index 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 about U.S. companies that are subject to the reporting requirements of the SEC. |
| ♦ | No Direct Exposure to Fluctuations in Foreign Exchange Rates with Respect to the EURO STOXX 50® Index — The value of the Notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities included in the EURO STOXX 50® Index are based, although any currency fluctuations could affect the performance of the EURO STOXX 50® Index. 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 any payment on the Notes. |
| ♦ | An Investment in the Notes is Subject to Risks Associated with Small Capitalization Stocks with Respect to the Russell 2000® Index — The equity securities included in the Russell 2000® Index are issued by companies with relatively small market capitalization. The stock prices of smaller companies may be more volatile than stock prices of large capitalization companies. Small capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. These companies tend to be less well-established than large market capitalization companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits downward stock price pressure under adverse market conditions. |
10
Hypothetical Examples
The examples below illustrate the hypothetical payments on a Coupon Payment Date, upon an issuer-elected call or at maturity under different hypothetical scenarios for a $10.00 Note on an offering of the Notes, with the assumptions set forth below.* We cannot predict the closing level of any Index on any day during the term of the Notes, including on any day during any Quarterly Observation Period or on the Final Valuation Date. You should not take these examples as an indication or assurance of the expected performance of the Notes. Numbers in the examples below have been rounded for ease of analysis. In these examples, we refer to the S&P 500® Index, the EURO STOXX 50® Index and the Russell 2000® Index as the "SPX Index," the "SX5E Index" and the "RTY Index," respectively.
The examples below are hypothetical. These examples are intended to illustrate (a) the effect of an issuer-elected call, (b) how the payment of a Contingent Coupon with respect to any Quarterly Observation Period will depend on whether the closing level of any Index is less than its Coupon Barrier on any day during that Quarterly Observation Period, (c) how the value of the payment at maturity on the Notes will depend on whether the Final Index Level of any Index is less than its Trigger Level and (d) how the total return on the Notes may be less than the total return on a direct investment in any or all Indices in certain scenarios. The "total return" as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the total payments per $10.00 principal amount Note over the term of the Notes to the $10.00 initial issue price.
Example 1 — JPMorgan Chase Elects to Call the Notes on the First Quarterly Observation End Date
| Quarterly Observation Period | Lowest Closing Level During Applicable Quarterly Observation Period | Payment (per Note) | |||
| First Quarterly Observation Period | SPX Index: 105.00 SX5E Index: 110.00 RTY Index: 90.000 |
Issuer elects to call the Notes. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.4163 on Call Settlement Date. | |||
| Total Payments (per $10.00 Note): | Payment on Call Settlement Date: | $10.4163 ($10.00 + $0.4163) | |||
| Total: | $10.4163 | ||||
| Total Return: | 4.163% | ||||
On the first Quarterly Observation End Date, JPMorgan Chase elects to call the Notes. Because the closing level of each Index is above its applicable Coupon Barrier on each day during the first Quarterly Observation Period, JPMorgan Chase will pay you on the Call Settlement Date $10.4163 per $10.00 principal amount Note, which is equal to your principal amount plus the Contingent Coupon due on the Coupon Payment Date that is also the Call Settlement Date. No further amounts will be owed to you under the Notes.
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Example 2 — Notes Are NOT Called and the Final Index Level of Each Index Is Above Its Trigger Level
| Quarterly Observation Period | Lowest Closing Level During Applicable Quarterly Observation Period | Final Index Level | Payment (per Note) | ||||
| First Quarterly Observation Period | SPX Index: 115.00 SX5E Index: 110.00 RTY Index: 105.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.4163 on first Coupon Payment Date. | ||||
| Second Quarterly Observation Period | SPX Index: 80.00 SX5E Index: 80.00 RTY Index: 90.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.4163 on second Coupon Payment Date. | ||||
| Third Quarterly Observation Period | SPX Index: 85.00 SX5E Index: 80.00 RTY Index: 45.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. | ||||
| Fourth to Seventh Quarterly Observation Periods | Various (at least one Index below Coupon Barrier) | N/A | Notes NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon Payment Dates. | ||||
| Eighth Quarterly Observation Period (the final Quarterly Observation Period) | SPX Index: 110.00 SX5E Index: 85.00 RTY Index: 80.000 |
SPX Index: 110.00 SX5E Index: 90.00 RTY Index: 85.000 |
Notes NOT callable. Final Index Level of each Index above its Trigger Level and closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer repays principal plus pays Contingent Coupon of $0.4163 on Maturity Date. | ||||
| Total Payments (per $10.00 Note): | Payment at Maturity: | $10.4163 ($10.00 + $0.4163) | |||||
| Prior Contingent Coupons: | $0.8326 ($0.4163 × 2) | ||||||
| Total: | $11.2489 | ||||||
| Total Return: | 12.489% | ||||||
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index Level of each Index is greater than or equal to its Trigger Level and the closing level of each Index is greater than or equal to its Coupon Barrier on each day during the final Quarterly Observation Period, JPMorgan Chase will pay you on the Maturity Date $10.4163 per $10.00 principal amount Note, which is equal to your principal amount plus the Contingent Coupon due on the Coupon Payment Date that is also the Maturity Date.
In addition, because the closing level of each Index was greater than or equal to its Coupon Barrier on each day during the first and second Quarterly Observation Periods, JPMorgan Chase will pay the Contingent Coupon of $0.4163 on the first and second Coupon Payment Dates. However, because the closing level of at least one Index was less than its Coupon Barrier on at least one day during each of the third through seventh Quarterly Observation Periods, JPMorgan Chase will not pay any Contingent Coupon on the Coupon Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Chase will have paid a total of $11.2489 per $10.00 principal amount Note for a 12.489% total return over the approximately two (2) year term of the Notes.
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Example 3 — Notes Are NOT Called and the Final Index Level of Each Index Is Above Its Trigger Level
| Quarterly Observation Period | Lowest Closing Level During Applicable Quarterly Observation Period | Final Index Level | Payment (per Note) | ||||
| First Quarterly Observation Period | SPX Index: 115.00 SX5E Index: 110.00 RTY Index: 105.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.4163 on first Coupon Payment Date. | ||||
| Second Quarterly Observation Period | SPX Index: 80.00 SX5E Index: 80.00 RTY Index: 90.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of each Index above its Coupon Barrier on each day during Quarterly Observation Period; Issuer pays Contingent Coupon of $0.4163 on second Coupon Payment Date. | ||||
| Third Quarterly Observation Period | SPX Index: 85.00 SX5E Index: 80.00 RTY Index: 60.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. | ||||
| Fourth to Seventh Quarterly Observation Periods | Various (at least one Index below Coupon Barrier) | N/A | Notes NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon Payment Dates. | ||||
| Eighth Quarterly Observation Period (the final Quarterly Observation Period) | SPX Index: 90.00 SX5E Index: 80.00 RTY Index: 60.000 |
SPX Index: 110.00 SX5E Index: 90.00 RTY Index: 80.000 |
Notes NOT callable. Final Index Level of each Index above its Trigger Level but closing level of RTY Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer repays principal but does not pay Contingent Coupon. | ||||
| Total Payments (per $10.00 Note): | Payment at Maturity: | $10.00 | |||||
| Prior Contingent Coupons: | $0.8326 ($0.4163 × 2) | ||||||
| Total: | $10.8326 | ||||||
| Total Return: | 8.326 | ||||||
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index Level of each Index is greater than or equal to its Trigger Level but the closing level of at least one Index is less than its Coupon Barrier on at least one day during the final Quarterly Observation Period, JPMorgan Chase will pay you on the Maturity Date $10.00 per $10.00 principal amount Note, which is equal to your principal amount, but JPMorgan Chase will not pay any Contingent Coupon on the Maturity Date.
In addition, because the closing level of each Index was greater than or equal to its Coupon Barrier on each day during the first and second Quarterly Observation Periods, JPMorgan Chase will pay the Contingent Coupon of $0.4163 on the first and second Coupon Payment Dates. However, because the closing level of at least one Index was less than its Coupon Barrier on at least one day during each of the third through seventh Quarterly Observation Periods, JPMorgan Chase will not pay any Contingent Coupon on the Coupon Payment Dates following the applicable Quarterly Observation Periods. Accordingly, JPMorgan Chase will have paid a total of $10.8326 per $10.00 principal amount Note for a 8.326% total return over the approximately two (2) year term of the Notes.
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Example 4 — Notes Are NOT Called and the Final Index Level of Any Index Is Below Its Trigger Level
| Quarterly Observation Period | Lowest Closing Level During Applicable Quarterly Observation Period | Final Index Level | Payment (per Note) | |||||
| First Quarterly Observation Period | SPX Index: 40.00 SX5E Index: 45.00 RTY Index: 30.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of each Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date. | |||||
| Second Quarterly Observation Period | SPX Index: 105.00 SX5E Index: 45.00 RTY Index: 80.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of SX5E Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date. | |||||
| Third Quarterly Observation Period | SPX Index: 90.00 SX5E Index: 45.00 RTY Index: 80.000 |
N/A | Notes NOT called at the election of the Issuer. Closing level of SX5E Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date. | |||||
| Fourth to Seventh Quarterly Observation Periods |
Various (at least one Index below Coupon Barrier) | N/A | Notes NOT called at the election of the Issuer. Closing level of at least one Index below its Coupon Barrier on at least one day during Quarterly Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to seventh Coupon Payment Dates. | |||||
| Eighth Quarterly Observation Period (the final Quarterly Observation Period) | SPX Index: 45.00 SX5E Index: 100.00 RTY Index: 80.000 |
SPX Index: 45.00 SX5E Index: 110.00 RTY Index: 80.000 |
Notes NOT callable. Closing level of SPX Index below its Trigger Level; Issuer DOES NOT pay Contingent Coupon on Maturity Date, and Issuer will repay less than the principal amount resulting in a loss proportionate to the decline of the Least Performing Index. | |||||
| Total Payments (per $10.00 Note): | Payment at Maturity: | $4.50 | ||||||
| Prior Contingent Coupons: | $0.00 | |||||||
| Total: | $4.50 | |||||||
| Total Return: | -55.00% | |||||||
In this example, the Issuer does not elect to call the Notes and the Notes remain outstanding until maturity. Because the Final Index Level of at least one Index is less than its Trigger Level on the Final Valuation Date, at maturity, JPMorgan Chase will pay you a total of $4.50 per $10.00 principal amount, for a -55.00% total return on the Notes, calculated as follows:
$10.00 × (1 + Least Performing Index Return)
| Step 1: | Determine the Index Return of each Index: |
| Index Return of the SPX Index: | |
| Final Index Level - Initial Index Level | = | 45.00 - 100.00 | = -55.00% | |
| Initial Index Level | 100.00 |
| Index Return of the SX5E Index: | |
| Final Index Level - Initial Index Level | = | 110.00 - 100.00 | = 10.00% | |
| Initial Index Level | 100.00 |
| Index Return of the RTY Index: | |
| Final Index Level - Initial Index Level | = | 80.000 - 100.000 | = -20.00% | |
| Initial Index Level | 100.000 |
| Step 2: | Determine the Least Performing Index. The SPX Index is the Index with the lowest Index Return. |
| Step 3: | Calculate the Payment at Maturity: |
$10.00 × (1 + Least Performing Index Return) = $10.00 × (1 + -55.00%) = $4.50
In addition, because the closing level of at least one Index is less than its Coupon Barrier on at least one day during each Quarterly Observation Period, JPMorgan Chase will not pay any Contingent Coupons over the term of the Notes. Accordingly, JPMorgan Chase will have paid a total of $4.50 per $10.00 principal amount Note for a -55.00% total return over the approximately two (2) year term of the Notes.
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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 any 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
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 7, 2016 was 1,943.09. 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 Index as an indication of future performance.
| Quarter Begin | Quarter End | Quarterly Closing High | Quarterly Closing 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 | 3/31/3015 | 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 | 1/7/2016 | * | 2,016.71 | 1,943.09 | 1,943.09 |
15
The graph below illustrates the daily performance of the S&P 500® Index from January 3, 2006 through January 7, 2016, based on information from Bloomberg, without independent verification. The dotted line represents the Trigger Level and Coupon Barrier of 1,457.32, equal to 75% of the closing level of the S&P 500® Index on January 7, 2016.
Past performance of the Index is not indicative of the future performance of the S&P 500® Index.
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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 Securities 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" in the accompanying underlying supplement no. 1a-I.
Historical Information Regarding the EURO STOXX 50® Index
The following table sets forth the quarterly high and low closing levels of the EURO STOXX 50® Index, based on daily closing levels of the Index as reported by Bloomberg, without independent verification. The closing level of the EURO STOXX 50® Index on January 7, 2016 was 3,084.68. The actual Initial Index Level of the EURO STOXX 50® Index will be the closing level of the Index on the Trade Date. We obtained the closing levels of the EURO STOXX 50® Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the EURO STOXX 50® Index as an indication of future performance.
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Close | ||||||||||
| 1/1/2010 | 3/31/2010 | 3,017.85 | 2,631.64 | 2,931.16 | ||||||||||
| 4/1/2010 | 6/30/2010 | 3,012.65 | 2,488.50 | 2,573.32 | ||||||||||
| 7/1/2010 | 9/30/2010 | 2,827.27 | 2,507.83 | 2,747.90 | ||||||||||
| 10/1/2010 | 12/31/2010 | 2,890.64 | 2,650.99 | 2,792.82 | ||||||||||
| 1/1/2011 | 3/31/2011 | 3,068.00 | 2,721.24 | 2,910.91 | ||||||||||
| 4/1/2011 | 6/30/2011 | 3,011.25 | 2,715.88 | 2,848.53 | ||||||||||
| 7/1/2011 | 9/30/2011 | 2,875.67 | 1,995.01 | 2,179.66 | ||||||||||
| 10/1/2011 | 12/31/2011 | 2,476.92 | 2,090.25 | 2,316.55 | ||||||||||
| 1/1/2012 | 3/31/2012 | 2,608.42 | 2,286.45 | 2,477.28 | ||||||||||
| 4/1/2012 | 6/30/2012 | 2,501.18 | 2,068.66 | 2,264.72 | ||||||||||
| 7/1/2012 | 9/30/2012 | 2,594.56 | 2,151.54 | 2,454.26 | ||||||||||
| 10/1/2012 | 12/31/2012 | 2,659.95 | 2,427.32 | 2,635.93 | ||||||||||
| 1/1/2013 | 3/31/2013 | 2,749.27 | 2,570.52 | 2,624.02 | ||||||||||
| 4/1/2013 | 6/30/2013 | 2,835.87 | 2,511.83 | 2,602.59 | ||||||||||
| 7/1/2013 | 9/30/2013 | 2,936.20 | 2,570.76 | 2,893.15 | ||||||||||
| 10/1/2013 | 12/31/2013 | 3,111.37 | 2,902.12 | 3,109.00 | ||||||||||
| 1/1/2014 | 3/31/2014 | 3,172.43 | 2,962.49 | 3,161.60 | ||||||||||
| 4/1/2014 | 6/30/2014 | 3,314.80 | 3,091.52 | 3,228.24 | ||||||||||
| 7/1/2014 | 9/30/2014 | 3,289.75 | 3,006.83 | 3,225.93 | ||||||||||
| 10/1/2014 | 12/31/2014 | 3,277.38 | 2,874.65 | 3,146.43 | ||||||||||
| 1/1/2015 | 3/31/3015 | 3,731.35 | 3,007.91 | 3,697.38 | ||||||||||
| 4/1/2015 | 6/30/2015 | 3,828.78 | 3,424.30 | 3,424.30 | ||||||||||
| 7/1/2015 | 9/30/2015 | 3,686.58 | 3,019.34 | 3,100.67 | ||||||||||
| 10/1/2015 | 12/31/2015 | 3,506.45 | 3,069.05 | 3,267.52 | ||||||||||
| 1/1/2016 | 1/7/2016 | * | 3,178.01 | 3,084.68 | 3,084.68 |
| * | 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 7, 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 EURO STOXX 50® Index from January 3, 2006 through January 7, 2016, based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Trigger Level and Coupon Barrier of 2,313.51, equal to 75% of the closing level of the EURO STOXX 50® Index on January 7, 2016. The actual Trigger Level and Coupon Barrier will be based on the closing level of the Index on the Trade Date (the Initial Index Level) and will each equal 75% of the Initial Index Level of the EURO STOXX 50® Index.
Past performance of the Index is not indicative of the future performance of the EURO STOXX 50® Index.
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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 7, 2016 was 1,064.566. We obtained the closing levels of the Russell 2000® 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 | ||||||||||
| 1/1/2010 | 3/31/2010 | 690.303 | 586.491 | 678.643 | ||||||||||
| 4/1/2010 | 6/30/2010 | 741.922 | 609.486 | 609.486 | ||||||||||
| 7/1/2010 | 9/30/2010 | 677.642 | 590.034 | 676.139 | ||||||||||
| 10/1/2010 | 12/31/2010 | 792.347 | 669.450 | 783.647 | ||||||||||
| 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 | 3/31/3015 | 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 | 1/7/2016 | * | 1,110.439 | 1,064.566 | 1,064.566 |
| * | 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 7, 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 7, 2016, based on information from Bloomberg, without independent verification. The dotted line represents the Trigger Level and Coupon Barrier of 798.425, equal to 75% of the closing level of the Russell 2000® Index on January 7, 2016.
Past performance of the Index is not indicative of the future performance of the Russell 2000® Index.
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Correlation of the Indices
The graph below illustrates the daily performance of the S&P 500® Index, the EURO STOXX 50® Index and the Russell 2000® Index from January 3, 2006 through January 7, 2016. For comparison purposes, each Index has been normalized to have a closing level of 100.00 on January 3, 2006 by dividing the closing level of that Index on each day by the closing level of that Index on January 3, 2006 and multiplying by 100.00. We obtained the closing levels used to determine the normalized closing levels set forth below from Bloomberg, without independent verification.
Past performance of the Indices is not indicative of the future performance of the Indices.
The correlation of a pair of Indices represents a statistical measurement of the degree to which the returns of those Indices were similar to each other over a given period in terms of timing and direction (i.e., positive or negative). Set forth below is a table that provides the correlation of each pair of Indices, calculated based on the daily returns of the Indices from January 3, 2006 through January 7, 2016, based on information from Bloomberg, without independent verification. You should not take the historical correlations of the Indices as an indication of future correlation.
| S&P 500® Index | Russell 2000® Index | EURO STOXX 50® Index | |
| S&P 500® Index | — | 0.925 | 0.614 |
| Russell 2000® Index | 0.925 | — | 0.545 |
| EURO STOXX 50® Index | 0.614 | 0.545 | — |
A correlation of 1.000 for a pair of Indices represents a perfect positive correlation. This means that the closing levels of that pair of Indices have moved in the same direction and the ratio of their daily returns has been constant. A correlation of -1.000 for a pair of Indices represents a perfect negative correlation. This means that the closing levels of that pair of Indices have moved in the opposite direction and the ratio of their daily returns has been constant. A correlation of 0.000 for a pair of Indices means that the Indices are uncorrelated. This means that there is no statistical relationship between the daily returns of that pair of Indices. The closer the correlation of a pair of Indices is to 1.000, the more positively correlated those Indices are. The closer the correlation of a pair of Indices is to -1.000, the more negatively correlated those Indices. The closer the correlation of a pair of Indices is to 0.000, the less correlated those Indices are. The lower the correlation between two Indices, the greater the potential for one of those Indices to close below its Coupon Barrier or Trigger Level on any day during a Quarterly Observation Period or the Final Valuation Date, respectively.
The correlations set forth above are based on the historical performance of the Index, and you should not take those historical correlations as an indication of future correlation. In addition, the correlations set forth above are not the same as the correlations referenced in setting the terms of the notes. The correlations referenced in setting the terms of the notes are calculated using JPMS' internal models and are not derived from the daily returns of the Indices over the period set forth above. Although the correlation of the Indices' performance may change over the term of the Notes, the Contingent Coupon Rate is determined, in part, based on the correlations of the Indices' performance calculated using JPMS' internal models at the time when the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Indices, which reflects a greater potential for missed Contingent Coupons and for a loss on your investment at maturity.
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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 Notes 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 Notes 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 Notes, 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 Notes
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 "Key Risks — Risks Relating to the Notes 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 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 "Key Risks — Risks Relating to the Notes Generally — 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 will be lower than the original issue price of the Notes because costs associated with selling, structuring and hedging the Notes are included in the original issue price of the Notes. These costs include the selling commissions paid to UBS, 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. We or one or more of our affiliates will retain any profits realized in hedging our obligations under the Notes. See "Key Risks — Risks Relating to the Notes Generally — JPMS's Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes" in this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market prices of the Notes, see "Key Risks — Risks Relating to the Notes Generally — Secondary Market Prices of the Notes 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 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 that is intended to be up to five months. The length of any such initial period reflects secondary market volumes for the Notes, 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 "Key Risks — Risks Relating to the Notes Generally — 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."
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" in this pricing supplement for an illustration of the risk-return profile of the Notes and "The Indices" in this pricing supplement for a description of the market exposure provided by the Notes.
The original issue price of the Notes is equal to JPMS's estimated value of the Notes 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 Notes, plus the estimated cost of hedging our obligations under the Notes.
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