ISSUER FREE WRITING PROSPECTUS |
JPMorgan Chase & Co. Trigger Return Optimization Securities
Linked to the Russell 2000® Index due on or about March 29, 2018
Investment Description |
Trigger 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 Russell 2000® Index (the "Index"). If the Index Return is positive, JPMorgan Chase will repay your principal amount at maturity and pay a return equal to the Index Return times the Multiplier of 1.50, up to the Maximum Gain of between 31.00% and 38.00%, which will be finalized on the Trade Date and provided in the pricing supplement. If the Index Return is zero or negative and the Final Index Level is greater than or equal to the Trigger Level, JPMorgan Chase will repay your principal amount at maturity. However, if the Index Return is negative and the Final Index Level is less than the Trigger Level, 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 Index 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 any stocks included in the Index, and the Securities will not pay interest. The contingent repayment of principal applies only if you hold the Securities to maturity. Any payment on the Securities, 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 Securities and you could lose your entire investment. |
Features | Key Dates | |||
❑Enhanced Growth Potential Subject to Maximum Gain At maturity, the Securities enhance any positive Index Return, up to the Maximum Gain of between 31.00% and 38.00%, which will be finalized on the Trade Date and provided in the pricing supplement. If the Index Return is negative, investors may be exposed to the negative Index Return at maturity. ❑Contingent Repayment of Principal at Maturity If the Index Return is zero or negative and the Final Index Level is greater than or equal to the Trigger Level, JPMorgan Chase will repay your principal amount at maturity. However, if the Index Return is negative and the Final Index Level is less than the Trigger Level, 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 Index Return. You may lose some or all of your principal. The contingent repayment of principal applies only if you hold the Securities to maturity. Any payment on the Securities, including any repayment of your principal amount, is subject to the creditworthiness of JPMorgan Chase. |
Trade Date1 | March 26, 2015 | ||
Original Issue Date (Settlement Date)1 | March 31, 2015 | |||
Final Valuation Date2 | March 23, 2018 | |||
Maturity Date2 | March 29, 2018 | |||
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 "General Terms of Notes Postponement of a Determination Date Notes Linked to a Single Underlying Notes Linked to a Single Underlying (Other Than a Commodity Index)" and "General Terms of Notes Postponement of a Payment Date" in the accompanying product supplement no. UBS-1a-I |
THE
SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. JPMORGAN CHASE IS NOT NECESSARILY
OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE SECURITIES AT MATURITY, AND THE SECURITIES MAY
HAVE DOWNSIDE MARKET RISK SIMILAR TO THE INDEX. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK
INHERENT IN PURCHASING A DEBT OBLIGATION OF JPMORGAN CHASE. YOU SHOULD NOT PURCHASE THE SECURITIES
IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN
THE SECURITIES. YOU
SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER "KEY RISKS" BEGINNING ON PAGE 5 AND UNDER "RISK
FACTORS" BEGINNING ON PAGE PS-9 OF THE ACCOMPANYING PRODUCT SUPPLEMENT NO. UBS-1A-I AND UNDER "RISK
FACTORS" BEGINNING ON PAGE US-2 OF THE ACCOMPANYING UNDERLYING SUPPLEMENT NO. 1A-I BEFORE PURCHASING
ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY
AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL
INVESTMENT IN THE SECURITIES. THE SECURITIES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE. |
Security Offering |
We are offering Trigger Return Optimization Securities linked to the Russell 2000® Index. 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 Index Level will be finalized on the Trade Date and provided in the pricing supplement. The actual Maximum Gain will not be less than the 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. |
Index | Multiplier | Maximum Gain | Initial Index Level | Trigger Level | CUSIP | ISIN |
Russell 2000® Index (Bloomberg ticker: RTY) | 1.50 | 31.00% to 38.00% | | 75% of the Initial Index Level |
48127T202 | US48127T2024 |
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 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 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-1a-I, will supersede the terms set forth in product supplement no. UBS-1a-I.
Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of the Securities or passed upon the accuracy or the adequacy of this free writing prospectus or the accompanying prospectus, prospectus supplement, product supplement no. UBS-1a-I and underlying supplement no. 1a-I. Any representation to the contrary is a criminal offense.
Price to Public1 | Fees and Commissions2 | Proceeds to Issuer | ||||
Offering of Securities | Total | Per Security | Total | Per Security | Total | Per Security |
Securities Linked to the Russell 2000® Index | $10.00 | $0.25 | $9.75 |
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 $0.25 per $10 principal amount Security. See "Plan of Distribution (Conflicts of Interest)" beginning on page PS-87 of the accompanying product supplement no. UBS-1a-I, as supplemented by "Supplemental Plan of Distribution" in this free writing prospectus. |
If the Securities priced today and assuming a Maximum Gain equal to the middle of the 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 $9.623 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, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Additional Information about JPMorgan Chase & Co. and the Securities
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-1a-I, underlying supplement no. 1a-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, as supplemented by the prospectus supplement, each dated November 7, 2014, relating to our Series E medium-term notes of which these Securities are a part, and the more detailed information contained in product supplement no. UBS-1a-I dated November 7, 2014 and underlying supplement no. 1a-I dated November 7, 2014. This 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-1a-I and "Risk Factors" in the accompanying underlying supplement no. 1a-I, as the Securities involve risks not associated with conventional debt securities.
You may access these on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filing for the relevant date on the SEC website):
♦ | Product supplement no. UBS-1a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008409/e61360_424b2.pdf |
♦ | Underlying supplement no. 1a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf |
♦ | Prospectus supplement and prospectus, each dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf |
As used in this free writing prospectus, the "Issuer," "JPMorgan Chase," "we," "us" and "our" refer to JPMorgan Chase & Co.
2
Investor Suitability
The suitability considerations identified above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisers have carefully considered the suitability of an investment in the Securities in light of your particular circumstances. You should also review carefully the "Key Risks" beginning on page 5 of this free writing prospectus, "Risk Factors" in the accompanying product supplement no. UBS-1a-I and "Risk Factors" in the accompanying underlying supplement no. 1a-I for risks related to an investment in the Securities.
3
Indicative Terms | ||
Issuer: | JPMorgan Chase & Co. | |
Issue Price: | $10.00 per Security (subject to a minimum purchase of 100 Securities or $1,000) | |
Principal Amount: | $10.00 per Security. The payment at maturity will be based on the principal amount. | |
Index: | Russell 2000® Index | |
Term1: | Approximately 3 years | |
Payment at Maturity (per $10 principal amount Security): |
If the Index Return is positive, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Index 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 Index Return is zero or negative and the Final Index Level is
greater than or equal to the Trigger Level, JPMorgan Chase will pay you a cash payment at maturity of $10.00 per
$10 principal amount Security.
If the Index Return is negative and the Final Index Level is less
than the Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Index Return) In this scenario, you will be exposed to the decline of the Index and
you will lose some or all of your principal amount in an amount
proportionate to the negative Index Return. |
|
Index Return: | (Final Index Level - Initial Index Level) Initial Index Level |
|
Multiplier: | 1.50 | |
Maximum Gain: | Between 31.00% and 38.00%. The actual Maximum Gain will be finalized on the Trade Date and provided in the pricing supplement and will not be less than 31.00% or greater than 38.00%. In no event will the return on the Principal Amount be greater than the Maximum Gain. | |
Initial Index Level: | The closing level of the Index on the Trade Date | |
Final Index Level: | The closing level of the Index on the Final Valuation Date | |
Trigger Level: | 75% of the Initial Index Level |
1 | See footnote 1 under "Key Dates" on the front cover |
Investment Timeline | |||
Trade Date | The Initial Index Level is observed. The Maximum Gain is determined. | ||
Maturity Date |
The Final Index Level and the Index Return are determined. If the Index Return is positive, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Index Return × Multiplier) provided, however, that in no event will you receive at maturity an amount greater than: $10.00 + ($10.00 × Maximum Gain) If the Index Return is zero or negative and the Final Index Level is
greater than or equal to the Trigger Level, JPMorgan Chase will pay you a cash payment at maturity of $10.00 per
$10 principal amount Security.
If the Index Return is negative and the Final Index Level is less
than the Trigger Level, JPMorgan Chase will pay you a cash payment at maturity per $10
principal amount Security equal to:
$10.00 + ($10.00 × Index Return) Under these circumstances, you will be exposed to the decline of the
Index and you will lose some or all of your principal amount.
|
||
INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES, 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 SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. |
4
What
Are the Tax Consequences of the Securities?
You should review carefully the section entitled "Material U.S. Federal Income Tax Consequences" in the accompanying product supplement no. UBS-1a-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of Securities.
Based on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the Securities as "open transactions" that are not debt instruments for U.S. federal income tax purposes, as more fully described in "Material U.S. Federal Income Tax Consequences Tax Consequences to U.S. Holders Notes Treated as Open Transactions That Are Not Debt Instruments" in the accompanying product supplement no. UBS-1a-I. Assuming this treatment is respected, the gain or loss on your Securities should be treated as long-term capital gain or loss if you hold your Securities for more than a year, whether or not you are an initial purchaser of Securities at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of any income or loss on the Securities could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of "prepaid forward contracts" and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the "constructive ownership" regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the Securities, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Securities, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as "FATCA" may (if the Securities are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the Securities, as well as to the payment of gross proceeds of a sale of a Security occurring after December 31, 2016 (including redemption at maturity). You should consult your tax adviser regarding the potential application of FATCA to the Securities.
Key
Risks
An investment in the Securities involves significant risks. Investing in the Securities is not equivalent to investing directly in the Index. These risks are explained in more detail in the "Risk Factors" section of the accompanying product supplement no. UBS-1a-I and the "Risk Factors" section of the accompanying underlying supplement no. 1a-I. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Securities.
Risks Relating to the Securities Generally
5
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. |
6
♦ | 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 level of the Index, 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 level of the Index; | |
♦ | the time to maturity of the Securities; | |
♦ | the dividend rates on the equity securities included in the Index; | |
♦ | 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. |
Risks Relating to the Index
7
Hypothetical
Examples and Return Table
The following table and hypothetical examples below illustrate the payment at maturity per $10 principal amount Security for a hypothetical range of Index Returns from -100.00% to +100.00%, reflect the Multiplier of 1.50 and assume an Initial Index Level of 100, a Trigger Level of 75 and a Maximum Gain of 34.50% (the midpoint of the range of 31.00% to 38.00%). The hypothetical Initial Index Level of 100 has been chosen for illustrative purposes only and may not represent a likely actual Initial Index Level. The actual Initial Index Level and resulting Trigger Level will be based on the closing level of the Index on the Trade Date and will be provided in the pricing supplement. For historical data regarding the actual closing levels of the Index, please see the historical information set forth under "The Index" in this free writing prospectus. The actual Maximum Gain will be finalized on the Trade Date and provided in the pricing supplement and will not be less than 31.00% or greater than 38.00%. If the actual Maximum Gain as finalized on the Trade Date is less than 34.50%, the actual maximum payment at maturity on the Securities will be lower than the hypothetical maximum payments at maturity displayed below. The hypothetical payment at maturity examples set forth below are for illustrative purposes only and may not be the actual returns applicable to a purchaser of the Securities. The actual payment at maturity will be determined based on the Initial Index Level, the Trigger Level and the Maximum Gain to be finalized on the Trade Date and provided in the pricing supplement and the Final Index Level on the Final Valuation Date. You should consider carefully whether the Securities are suitable to your investment goals. The numbers appearing in the table below have been rounded for ease of analysis.
Final
Index Level
Index
Return (%)
Payment
at Maturity ($)
Return
at Maturity per
$10.00 issue price (%)
200.000
100.000%
$13.450
34.50%
190.000
90.000%
$13.450
34.50%
180.000
80.000%
$13.450
34.50%
170.000
70.000%
$13.450
34.50%
160.000
60.000%
$13.450
34.50%
150.000
50.000%
$13.450
34.50%
140.000
40.000%
$13.450
34.50%
130.000
30.000%
$13.450
34.50%
123.000
23.000%
$13.450
34.50%
120.000
20.000%
$13.000
30.00%
115.000
15.000%
$12.250
22.50%
110.000
10.000%
$11.500
15.00%
105.000
5.000%
$10.750
7.50%
100.000
0.000%
$10.000
0.00%
95.000
-5.000%
$10.000
0.00%
90.000
-10.000%
$10.000
0.00%
80.000
-20.000%
$10.000
0.00%
75.000
-25.000%
$10.000
0.00%
74.999
-25.001%
$7.499
-25.01%
70.000
-30.000%
$7.000
-30.00%
60.000
-40.000%
$6.000
-40.00%
50.000
-50.000%
$5.000
-50.00%
40.000
-60.000%
$4.000
-60.00%
30.000
-70.000%
$3.000
-70.00%
20.000
-80.000%
$2.000
-80.00%
10.000
-90.000%
$1.000
-90.00%
0.000
-100.000%
$0.000
-100.00%
Example 1 The level of the Index increases by 5% from the Initial Index Level of 100 to the Final Index Level of 105.
Because the Multiplier of 1.50 times the Index Return of 5% is less than the Maximum Gain of 34.50%, JPMorgan Chase will pay you your principal amount plus a return equal to the Index Return times the Multiplier, resulting in a payment at maturity of $10.75 per $10 principal amount Security, calculated as follows:
$10.00
+ ($10.00 × Index Return × Multiplier)
$10.00 + ($10.00 × 5% × 1.50) = $10.75
8
Example 2 The level of the Index increases by 60% from the Initial Index Level of 100 to the Final Index Level of 160.
Because the Multiplier of 1.50 times the Index Return of 60% is greater than the Maximum Gain of 34.50%, JPMorgan Chase will pay you your principal amount plus a return equal to the Maximum Gain of 34.50%, resulting in a payment at maturity of $13.45 per $10 principal amount Security, calculated as follows:
$10.00
+ ($10.00 × Maximum Gain)
$10.00 + ($10.00 × 34.50%) = $13.45
Example 3 The level of the Index decreases by 10% from the Initial Index Level of 100 to the Final Index Level of 90.
Because the Index Return is negative and the Final Index Level is greater than the Trigger Level of 75, JPMorgan Chase will pay you your principal amount of $10.00 per $10 principal amount Security.
Example 4 The level of the Index decreases by 60% from the Initial Index Level of 100 to the Final Index Level of 40.
Because the Index Return is -60% and the Final Index Level is less than the Trigger Level of 75, JPMorgan Chase will pay you a payment at maturity of $4.00 per $10 principal amount Security, calculated as follows:
$10.00
+ ($10.00 × Index Return)
$10.00 + ($10.00 × -60.00%) = $4.00
If the Index Return is negative and the Final Index Level is less than the Trigger Level, investors will be exposed to the negative Index Return at maturity, resulting in a loss of principal that is proportionate to the Index'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.
9
The
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
The following table sets forth the quarterly high and low closing levels of the Index, based on daily closing levels of the Index as reported by the Bloomberg Professional® service ("Bloomberg"), without independent verification. The information given below is for the four calendar quarters in each of 2010, 2011, 2012, 2013 and 2014. Partial data is provided for the first calendar quarter of 2015. The closing level of the Index on March 2, 2015 was 1,242.619. The actual Initial Index Level will be the closing level of the Index on the Trade Date. We obtained the closing levels of the Index and other information below from Bloomberg, without independent verification. Although Russell Investments publishes the official closing levels of the Index to six decimal places, Bloomberg publishes the closing levels of the Index only to three decimal places. 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
1/1/2010
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
3/2/2015
*
1,242.619
1,154.709
1,242.619
10
The graph below illustrates the daily performance of the Index from January 3, 2005 through March 2, 2015, based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Trigger Level, equal to 75% of the closing level of the Index on March 2, 2015. The actual Trigger Level will be based on the Initial Index Level and will be finalized on the Trade Date and provided in the pricing supplement.
Past performance of the Index is not indicative of the future performance of the Index.
The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the Trade Date or the Final Valuation Date. We cannot give you assurance that the performance of the Index will result in the return of any of your principal amount.
Supplemental
Plan of Distribution
We have agreed to indemnify UBS and JPMS against liabilities under the Securities Act of 1933, as amended, or to contribute to payments that UBS may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS may sell all or a part of the Securities that it purchases from us to the public or its affiliates at the price to public indicated on the cover hereof.
Subject to regulatory constraints, JPMS intends to offer to purchase the Securities in the secondary market, but it is not required to do so.
We or our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Securities, and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See "Supplemental Use of Proceeds" in this free writing prospectus and "Use of Proceeds and Hedging" beginning on page PS-43 of the accompanying product supplement no. UBS-1a-I.
JPMS's
Estimated Value of the Securities
JPMS's estimated value of the Securities set forth on the cover of this 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."
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
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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 ten months. The length of any such initial period reflects secondary market volumes for the Securities, the structure of the Securities, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Securities and when these costs are incurred, as determined by JPMS. See "Key Risks Risks Relating to the Securities Generally The Value of the Securities as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMS's Then-Current Estimated Value of the Securities for a Limited Time Period."
Supplemental
Use of Proceeds
The Securities are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the Securities. See "Hypothetical Examples and Return Table" in this free writing prospectus for an illustration of the risk-return profile of the Securities and "The Index" 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.
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