ISSUER
FREE WRITING PROSPECTUS |
JPMorgan Chase & Co. Return Optimization Securities
Linked to the iShares® MSCI Mexico Capped ETF due on or about April 29, 2016
Investment Description |
Return 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 performance of the iShares® MSCI Mexico Capped ETF (the “Fund”). If the Fund Return is positive, JPMorgan Chase will repay your principal amount at maturity plus pay a return equal to the Fund Return times the Multiplier of 2.00, up to the Maximum Gain of between 16.50% and 19.50%, which will be finalized on the Trade Date and provided in the pricing supplement. If the Fund Return is zero, JPMorgan Chase will repay your principal amount at maturity. However, if the Fund Return is negative, JPMorgan Chase will repay less than your principal amount at maturity, if anything, resulting in a loss of principal that is proportionate to the negative Fund Return. 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 the Fund or any stocks held by the Fund, and the Securities will not pay interest. Any payment on the Securities 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 | |||
❑Enhanced Growth Potential At maturity, the Securities enhance any positive Fund Return, up to the Maximum Gain of between 16.50% and 19.50%, which will be finalized on the Trade Date and provided in the pricing supplement. If the Fund Return is negative, investors will be exposed to the negative Fund Return at maturity. ❑Full Downside Market Exposure If the Fund Return is negative, investors will be exposed to the negative Fund Return at maturity and JPMorgan Chase will pay less than your principal amount, if anything, resulting in a loss of principal that is proportionate to the Fund’s decline from the Trade Date to the Final Valuation Date. You may lose some or all of your principal. Any payment on the Securities is subject to the creditworthiness of JPMorgan Chase. |
Trade Date1 | October 28, 2014 | ||
Original Issue Date (Settlement Date)1 | October 31, 2014 | |||
Final Valuation Date2 | April 25, 2016 | |||
Maturity Date2 | April 29, 2016 | |||
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. | |||
2 | Subject to postponement in the event of a market disruption event and as described under “Description of Securities Payment at Maturity” and “Description of Securities Postponement of the Final Valuation Date” in the accompanying product supplement no. UBS-4-II |
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 HAVE DOWNSIDE MARKET RISK SIMILAR TO THE FUND. 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-11 OF THE ACCOMPANYING PRODUCT SUPPLEMENT NO. UBS-4-II AND UNDER “RISK FACTORS” BEGINNING ON PAGE US-1 OF THE ACCOMPANYING UNDERLYING SUPPLEMENT NO. 1 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 Return Optimization Securities linked to the iShares® MSCI Mexico Capped ETF. The Securities are offered for a minimum investment of 100 Securities at the price to public described below. The return on the Securities is subject to, and will not exceed, the Maximum Gain. The Maximum Gain and Initial Share Price will be finalized on the Trade Date and provided in the pricing supplement. The actual Maximum Gain will not be less than bottom of the range listed below, but you should be willing to invest in the Securities if the Maximum Gain were set equal to the bottom of that range. |
Fund | Multiplier | Maximum Gain | Initial Share Price | CUSIP | ISIN |
IShares® MSCI Mexico Capped ETF (EWW) | 2.00 | 16.50% to 19.50% | | 48127H521 | US48127H5211 |
See “Additional Information about JPMorgan Chase & Co. and the Securities” in this free writing prospectus. The Securities will have the terms specified in the prospectus dated November 14, 2011, the prospectus supplement dated November 14, 2011, product supplement no. UBS-4-II dated March 6, 2013, underlying supplement no. 13-I dated March 1, 2013 and this free writing prospectus. The terms of the Securities as set forth in this free writing prospectus, to the extent they differ or conflict with those set forth in product supplement no. UBS-4-II, will supersede the terms set forth in product supplement no. UBS-4-II.
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 free writing prospectus or the accompanying prospectus, prospectus supplement, product supplement no. UBS-4-II and underlying supplement no. 13-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 iShares® MSCI Mexico Capped ETF | $10.00 | $0.20 | $9.80 |
1 | See “Supplemental Use of Proceeds” in this free writing prospectus 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 $0.20 per $10 principal amount Security. See “Underwriting (Conflicts of Interest)” beginning on page PS-45 of the accompanying product supplement no. UBS-4-II, as supplemented by “Supplemental Underwriting Information” in this free writing prospectus.. |
If the Securities priced today and assuming a Maximum Gain equal to the middle of the applicable range 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 $9.679 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 $9.50 per $10 principal amount Security. See “JPMS’s Estimated Value of the Securities” in this free writing prospectus for additional information.
The Securities are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
Additional Information about JPMorgan Chase & Co. and the Securities
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the SEC for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov and searching company filings for the term “JPMorgan Chase & Co.” Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. UBS-4-II, underlying supplement no. 13-I and this free writing prospectus if you so request by calling toll-free 866-535-9248.
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 free writing prospectus together with the prospectus dated November 14, 2011, as supplemented by the prospectus supplement dated November 14, 2011, 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-4-II dated March 6, 2013 and underlying supplement no. 13-I dated March 1, 2013. This free writing prospectus, 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-4-II and “Risk Factors” in the accompanying underlying supplement no. 13-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-4-II dated March 6, 2013: http://www.sec.gov/Archives/edgar/data/19617/000095010313001568/crt_dp36767-424b2.pdf |
♦ | Underlying supplement no. 13-I dated March 1, 2013: http://www.sec.gov/Archives/edgar/data/19617/000089109213001814/e52363_424b2.pdf |
♦ | Prospectus supplement dated November 14, 2011: http://www.sec.gov/Archives/edgar/data/19617/000089109211007578/e46180_424b2.pdf |
♦ | Prospectus dated November 14, 2011: http://www.sec.gov/Archives/edgar/data/19617/000089109211007568/e46179_424b2.pdf |
As used in this free writing prospectus, the “Issuer,” “JPMorgan Chase,” “we,” “us” and “our” refer to JPMorgan Chase & Co.
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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 free writing prospectus, “Risk Factors” in the accompanying product supplement no. UBS-4-II and “Risk Factors” in the accompanying underlying supplement no. 13-I for risks related to an investment in the Securities.
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Indicative Terms | ||
Issuer: | JPMorgan Chase & Co. | |
Issue Price: | $10.00 per Security, subject to a minimum purchase of 100 Securities | |
Principal Amount: | $10.00 per Security. The payment at maturity will be based on the principal amount. | |
Fund: | iShares® MSCI Mexico Capped ETF | |
Term1: | Approximately 18 months | |
Payment at Maturity (per $10): |
If the Fund Return is positive, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Fund Return × Multiplier) provided, however, that in no event will JPMorgan Chase pay you at maturity an amount
greater than:
$10.00 + ($10.00 × Maximum Gain) If the Fund Return is zero, JPMorgan Chase will pay you a cash payment at maturity of $10.00 per
$10 principal amount Security.
If the Fund Return is negative, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Fund Return) In this scenario, you will be exposed to the decline of the Fund and
you will lose some or all of your principal amount in an amount
proportionate to the negative Fund Return. |
|
Fund Return: |
(Final Share Price – Initial Share Price) |
|
Multiplier: | 2.00 | |
Maximum Gain: | Between 16.50% and 19.50%. The actual Maximum Gain will be finalized on the Trade Date and provided in the pricing supplement and will not be less than 16.50% or greater than 19.50%. In no event will the return on the Principal Amount be greater than the Maximum Gain. | |
Initial Share Price2: | The closing price of one share of the Fund on the Trade Date | |
Final Share Price: | The closing price of one share of the Fund on the Final Valuation Date |
1 See footnote 1 under “Key Dates” on the front cover
2 Subject to adjustment upon the occurrence of certain events affecting the Fund as described under “General Terms of Securities Anti-Dilution Adjustments” in the accompanying product supplement no. UBS-4-II
Investment Timeline | |||
Trade Date | The Initial Share Price is determined. The Maximum Gain is finalized. | ||
Maturity Date |
The Final Share Price and the Fund Return are determined. If the Fund Return is positive, JPMorgan Chase will pay you a cash payment per $10 principal amount
Security equal to:
$10.00 + ($10.00 × Fund Return × Multiplier) provided, however, that in no event will you receive at maturity an amount greater than: $10 + ($10 × Maximum Gain) If the Fund Return is zero, JPMorgan Chase will pay you a cash payment of $10.00 per $10
principal amount Security.
If the Fund Return is negative, JPMorgan Chase will pay you a cash payment per $10 principal amount
Security equal to:
$10 + ($10 × Fund Return) Under these circumstances, you will be exposed to the decline of the
Fund 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. ANY PAYMENT ON THE SECURITIES 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. |
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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-4-II. 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. Assuming this treatment is respected, subject to the possible application of the “constructive ownership” rules, 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. The Securities could be treated as “constructive ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended, in which case any gain recognized in respect of the Securities that would otherwise be long-term capital gain and that was in excess of the “net underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest charge would apply as if that income had accrued for tax purposes at a constant yield over the Securities’ term. Our special tax counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the Securities. Accordingly, U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
The Internal Revenue Service (the “IRS”) or a court may not respect the treatment of the Securities described above, in which case the timing and character of any income or loss on your 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 described above. 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 the potential application of the constructive ownership rules, possible alternative treatments and the issues presented by this notice.
Notwithstanding the discussion under “Material U.S. Federal Income Tax Consequences Tax Consequences to Non-U.S. Holders Tax Consequences if Treated as Debt Instruments” in the accompanying product supplement, withholding under legislation commonly referred to as “FATCA” may apply to amounts treated as interest paid with respect to the Securities, if they are recharacterized as debt instruments. You should consult your tax adviser regarding the potential application of FATCA to the Securities.
Non-U.S. Holders should also note that recently proposed Treasury regulations could impose a 30% (or lower treaty rate) withholding tax on amounts paid or deemed paid after December 31, 2015 that are treated as attributable to U.S.-source dividends on equities underlying financial instruments such as the Securities. While it is not clear whether or in what form these regulations will be finalized, under recent Treasury guidance, these regulations would not apply to the Securities. Non-U.S. Holders should consult their tax advisers regarding the potential application of these proposed regulations.
Key Risks
An investment in the Securities involves significant risks. Investing in the Securities is not equivalent to investing directly in the Fund. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. UBS-4-II and the “Risk Factors” section of the accompanying underlying supplement no. 13-I. We also urge you to consult your investment, legal, tax, accounting and other advisers before investing in the Securities.
Risks Relating to the Securities Generally
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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. |
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♦ | 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 price of one share of the Fund, 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 price of one share of the Fund; | |
♦ | the time to maturity of the Securities; | |
♦ | the dividend rates on the equity securities underlying the Fund; | |
♦ | 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. |
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or suspensions of trading in the markets as a whole. If the calculation agent, in its sole discretion, determines that any of these events prevents us or any of our affiliates from properly hedging our obligations under the Securities, it is possible that the Final Valuation Date will be postponed and your return will be adversely affected. See “General Terms of Securities Market Disruption Events” in the accompanying product supplement no. UBS-4-II. | |
♦ | Anti-Dilution Protection Is Limited Although the calculation agent will adjust the Initial Share Price for certain events affecting the Fund, the calculation agent is not required to make an adjustment for every event that can affect the Fund. If an event occurs that does not require the calculation agent to adjust the Initial Share Price, the market value of your Securities and the payment at maturity if not previously called may be materially and adversely affected. |
♦ | 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 Maximum Gain 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 free writing prospectus. Accordingly, you should consider your potential investment in the Securities based on the minimums for JPMS’s estimated value and the Maximum Gain. |
Risks Relating to the Fund
♦ | existing and expected rates of inflation; | |
♦ | existing and expected interest rate levels; | |
♦ | the balance of payments in the countries issuing those currencies and the United States and between each country and its major trading partners; | |
♦ | political, civil or military unrest in the countries issuing those currencies and the United States; and | |
♦ | the extent of government surpluses or deficits in the countries issuing those currencies and the United States. |
All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the countries issuing those currencies and the United States and other countries important to international trade and finance. |
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Hypothetical Examples and Return Table
The following table and hypothetical examples below illustrate the payment at maturity per $10.00 Security for a hypothetical range of Fund Returns from -100.00% to +100.00%, reflect the Multiplier of 2 and assume an Initial Share Price of $100 and a Maximum Gain of 18.00% (the midpoint of the range of 16.50% to 19.50%). The hypothetical Initial Share Price of $100 has been chosen for illustrative purposes only and may not represent a likely actual Initial Share Price. The actual Initial Share Price will be based on the closing price of one share of the Fund on the Trade Date and will be provided in the pricing supplement. For historical data regarding the actual closing prices, please see the historical information set forth under “The Fund” in this free writing prospectus. The actual Maximum Gain will be finalized on the Trade Date and provided in the pricing supplement and will not be less than 16.50% or greater than 19.50%. If the actual Maximum Gain as finalized on the Trade Date is lower than 18.00%, the actual maximum payment at maturity on the Securities will be lower than the hypothetical maximum payments at maturity displayed below. The hypothetical payment at maturity examples set forth below are for illustrative purposes only and may not be the actual returns applicable to a purchaser of the Securities. The actual payment at maturity will be determined based on the Initial Share Price and Maximum Gain to be finalized on the Trade Date and provided in the pricing supplement and the Final Share Price on the Final Valuation Date. You should consider carefully whether the Securities are suitable to your investment goals. The numbers appearing in the table below have been rounded for ease of analysis.
Final Share Price | Fund Return (%) | Payment at Maturity ($) | Return at Maturity per $10.00 issue price (%) |
$200.000 | 100.000% | $11.80 | 18.00% |
$190.000 | 90.000% | $11.80 | 18.00% |
$180.000 | 80.000% | $11.80 | 18.00% |
$170.000 | 70.000% | $11.80 | 18.00% |
$160.000 | 60.000% | $11.80 | 18.00% |
$150.000 | 50.000% | $11.80 | 18.00% |
$140.000 | 40.000% | $11.80 | 18.00% |
$130.000 | 30.000% | $11.80 | 18.00% |
$120.000 | 20.000% | $11.80 | 18.00% |
$110.000 | 10.000% | $11.80 | 18.00% |
$109.000 | 9.000% | $11.80 | 18.00% |
$105.000 | 5.000% | $11.00 | 10.00% |
$102.500 | 2.500% | $10.50 | 5.00% |
$101.000 | 1.000% | $10.20 | 2.00% |
$100.000 | 0.000% | $10.00 | 0.00% |
$95.000 | -5.000% | $9.50 | -5.00% |
$90.000 | -10.000% | $9.00 | -10.00% |
$80.000 | -20.000% | $8.00 | -20.00% |
$70.000 | -30.000% | $7.00 | -30.00% |
$60.000 | -40.000% | $6.00 | -40.00% |
$50.000 | -50.000% | $5.00 | -50.00% |
$40.000 | -60.000% | $4.00 | -60.00% |
$30.000 | -70.000% | $3.00 | -70.00% |
$20.000 | -80.000% | $2.00 | -80.00% |
$10.000 | -90.000% | $1.00 | -90.00% |
$0.000 | -100.000% | $0.00 | -100.00% |
Example 1 The closing price of one share of the Fund increases by 2.50% from the Initial Share Price of $100 to the Final Share Price of $102.50.
Because two times the Fund Return of 2.50% is less than the Maximum Gain of 18.00%, JPMorgan Chase will pay you your principal amount plus a return equal to the Fund Return times the Multiplier, resulting in a payment at maturity of $10.50 per $10.00 Security, calculated as follows:
$10.00 + ($10.00 × Fund Return × Multiplier)
$10.00 + ($10.00 × 2.50% × 2) = $10.50
Example 2 The closing price of one share of the Fund increases by 40% from the Initial Share Price of $100 to the Final Share Price of $140.
Because two times the Fund Return of 40% is greater than the Maximum Gain of 18.00%, JPMorgan Chase will pay you your principal amount plus a return equal to the Maximum Gain of 18.00%, resulting in a payment at maturity of $11.80 per $10 Security, calculated as follows:
$10.00 + ($10.00 × Maximum Gain)
$10.00 + ($10.00 × 18.00%) = $11.80
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Example 3 The closing price of one share of the Fund decreases by 40% from the Initial Share Price of $100 to the Final Share Price of $60.
Because the Fund Return is -40%, JPMorgan Chase will pay you a payment at maturity of $6.00 per $10.00 Security, calculated as follows:
$10.00 + ($10.00 × Fund Return)
$10.00 + ($10.00 × -40.00%) = $6.00
If the Fund Return is negative, investors will be exposed to the negative Fund Return at maturity, resulting in a loss of principal that is proportionate to the Fund’s decline from the Trade Date to the Final Valuation Date. Investors could lose some or all of their principal amount.
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.
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The Fund
The iShares® MSCI Mexico Capped ETF is an exchange-traded fund of iShares®, Inc., a registered investment company that consists of separate investment portfolios, and managed by BlackRock Fund Advisors, the investment adviser to the iShares® MSCI Mexico Capped ETF. The iShares® MSCI Mexico Capped ETF seeks to track the investment results of a broad-based index composed of Mexican equities, which is currently the MSCI Mexico IMI 25/50 Index. The MSCI Mexico IMI 25/50 Index is designed to track the performance of the Mexican equity market. On July 1, 2013, the name of the Fund was changed from the iShares® MSCI Mexico Capped Investable Market Index Fund to the current name. Information provided to or filed with the SEC by the Fund pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 033-97598 and 811-09102, respectively, through the SEC’s website at http://www.sec.gov. In addition, information about the iShares® MSCI Mexico Capped ETF may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. For additional information about the iShares® MSCI Mexico Capped ETF, see the information set forth under “Fund Descriptions The iShares® MSCI Mexico Capped Investable Market Index Fund” in the accompanying underlying supplement no. 13-I.
Historical Information
The following table sets forth the quarterly high and low closing prices of one share of the iShares® MSCI Mexico Capped ETF, based on daily closing prices as reported by Bloomberg Professional® Service (“Bloomberg”), without independent verification. The information given below is for the four calendar quarters in each of 2009, 2010, 2011, 2012 and 2013 and the first, second and third calendar quarters of 2014. Partial data is provided for the fourth calendar quarter of 2014. The closing price of one share of the Fund on October 2, 2014 was $67.87. The actual Initial Share Price will be the closing price of one share of the Fund on the Trade Date. We obtained the closing prices and other information below from Bloomberg, without independent verification. The closing prices and this other information may be adjusted by Bloomberg for certain actions such as stock splits.
Since its inception, the price of the Fund has experienced significant fluctuations. The historical performance of the Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of one share of the Fund during the term of the Securities. We cannot give you assurance that the performance of the Fund will result in the return of any of your initial investment. We make no representation as to the amount of dividends, if any, that the Fund will pay in the future. In any event, as an investor in the Securities, you will not be entitled to receive dividends, if any, that may be payable on the Fund.
Quarter Begin | Quarter End | Quarterly Closing High | Quarterly Closing Low | Close | ||||||||||
1/1/2009 | 3/31/2009 | $34.53 | $21.74 | $27.04 | ||||||||||
4/1/2009 | 6/30/2009 | $37.77 | $27.85 | $36.77 | ||||||||||
7/1/2009 | 9/30/2009 | $45.60 | $34.37 | $43.58 | ||||||||||
10/1/2009 | 12/31/2009 | $50.53 | $42.15 | $48.76 | ||||||||||
1/1/2010 | 3/31/2010 | $53.25 | $45.74 | $53.25 | ||||||||||
4/1/2010 | 6/30/2010 | $55.36 | $45.97 | $47.78 | ||||||||||
7/1/2010 | 9/30/2010 | $53.19 | $47.45 | $52.87 | ||||||||||
10/1/2010 | 12/31/2010 | $61.79 | $53.77 | $61.79 | ||||||||||
1/1/2011 | 3/31/2011 | $62.91 | $58.37 | $62.72 | ||||||||||
4/1/2011 | 6/30/2011 | $64.18 | $59.10 | $62.43 | ||||||||||
7/1/2011 | 9/30/2011 | $63.29 | $47.14 | $48.86 | ||||||||||
10/1/2011 | 12/31/2011 | $57.40 | $47.94 | $53.65 | ||||||||||
1/1/2012 | 3/31/2012 | $62.39 | $54.19 | $62.39 | ||||||||||
4/1/2012 | 6/30/2012 | $63.51 | $53.54 | $61.33 | ||||||||||
7/1/2012 | 9/30/2012 | $65.61 | $60.28 | $65.26 | ||||||||||
10/1/2012 | 12/31/2012 | $71.10 | $63.30 | $70.39 | ||||||||||
1/1/2013 | 3/31/2013 | $74.81 | $69.91 | $74.44 | ||||||||||
4/1/2013 | 6/30/2013 | $76.55 | $58.60 | $65.07 | ||||||||||
7/1/2013 | 9/30/2013 | $70.14 | $61.04 | $63.76 | ||||||||||
10/1/2013 | 12/2/2013 | $68.52 | $62.28 | $68.00 | ||||||||||
1/1/2014 | 3/31/2014 | $67.08 | $59.14 | $63.95 | ||||||||||
4/1/2014 | 6/30/2014 | $68.14 | $62.92 | $67.81 | ||||||||||
7/1/2014 | 9/30/2014 | $73.00 | $68.13 | $68.73 | ||||||||||
10/1/2014 | 10/2/2014 | * | $67.87 | $67.63 | $67.87 |
* | As of the date of this free writing prospectus, available information for the fourth calendar quarter of 2014 includes data for the period from October 1, 2014 through October 2, 2014. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the fourth calendar quarter of 2014. |
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The graph below illustrates the daily performance of the Fund from January 2, 2004 through October 2, 2014, based on information from Bloomberg, without independent verification.
Past performance of the Fund is not indicative of the future performance of the Fund.
Supplemental Underwriting Information
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 free writing prospectus and “Use of Proceeds and Hedging” beginning on page PS-30 of the accompanying product supplement no. UBS-4-II.
JPMS’s Estimated Value of the Securities
JPMS’s estimated value of the Securities set forth on the cover of this free writing prospectus 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.”
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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 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 free writing prospectus.
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 free writing prospectus. 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 expected to be up to seven 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 net proceeds we receive from the sale of the Securities will be used for general corporate purposes and, in part, by us or one or more of our affiliates in connection with hedging our obligations under the Securities.
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 free writing prospectus for an illustration of the risk-return profile of the Securities and “The Fund” in this free writing prospectus 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.
For purposes of the Securities offered by this free writing prospectus, the first and second paragraphs of the section entitled “Use of Proceeds and Hedging” on page PS-30 of the accompanying product supplement no. UBS-4-II are deemed deleted in their entirety. Please refer instead to the discussion set forth above.
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