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 have
agreed that UBS may sell all or a part of the Securities that it
purchases from us to the public or its affiliates at the price to
public indicated on the cover hereof.
Subject to regulatory constraints, JPMS intends to offer to purchase
the Securities in the secondary market, but it is not required to
do so.
We or our affiliates may enter into swap agreements or related hedge
transactions with one of our other affiliates or unaffiliated
counterparties in connection with the sale of the Securities, and
JPMS and/or an affiliate may earn additional income as a result of
payments pursuant to the swap or related hedge transactions. See
"Supplemental Use of Proceeds" in this pricing supplement and "Use of
Proceeds and Hedging" beginning on page PS-43 of the accompanying
product supplement no. UBS-1a-I.
JPMS's Estimated Value of the Securities
JPMS's estimated value of the Securities set forth on the cover of
this pricing supplement is equal to the sum of the values of the
following hypothetical components: (1) a fixed-income debt component
with the same maturity as the Securities, valued using our internal
funding rate for structured debt described below, and (2) the
derivative or derivatives underlying the economic terms of the
Securities. JPMS's estimated value does not represent a minimum price
at which JPMS would be willing to buy your Securities in any
secondary market (if any exists) at any time. The internal funding
rate used in the determination of JPMS's estimated value generally
represents a discount from the credit spreads for our conventional
fixed-rate debt. For additional information, see "Key Risks Risks
Relating to the Securities Generally JPMS's Estimated Value Is Not
Determined by Reference to Credit Spreads for Our Conventional
Fixed-Rate Debt." The value of the derivative or derivatives
underlying the economic terms of the Securities is derived from
JPMS's internal pricing models. These models are dependent on inputs
such as the traded market prices of comparable derivative instruments
and on various other inputs, some of which are market-observable, and
which can include volatility, dividend rates, interest rates and
other factors, as well as assumptions about future market events
and/or environments. Accordingly, JPMS's estimated value of the
Securities is determined when the terms of the Securities are set
based on market conditions and other relevant factors and assumptions
existing at that time. See "Key Risks Risks Relating to the
Securities Generally JPMS's Estimated Value Does Not Represent
Future Values of the Securities and May Differ from Others'
Estimates."
JPMS's estimated value of the Securities is 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
Is Lower Than the Original Issue Price (Price to Public) of the
Securities" in this pricing supplement.
Secondary Market Prices of the Securities
For information about factors that will impact any secondary market
prices of the Securities, see "Key Risks Risks Relating to the
Securities Generally Secondary Market Prices of the Securities Will
Be Impacted by Many Economic and Market Factors" in this pricing
supplement. In addition, we generally expect that some of the costs
included in the original issue price of the Securities will be
partially paid back to you in connection with any repurchases of your
Securities by JPMS in an amount that will decline to zero over an
initial predetermined period that is intended to be approximately
twelve 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" in this pricing supplement
for an illustration of the risk-return profile of the Securities and
"The Indices" in this pricing supplement for a description of the
market exposure provided by the Securities.
The original issue price of the Securities is equal to JPMS's
estimated value of the Securities plus the selling commissions paid
to UBS, plus (minus) the projected profits (losses) that our
affiliates expect to realize for assuming risks inherent in hedging
our obligations under the Securities, plus the estimated cost of
hedging our obligations under the Securities.