CALCULATION OF REGISTRATION FEE
| Title
of Each Class of Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
| Notes
|
$2,000,000 |
$232.40 |
Pricing supplement no. 263
To prospectus dated November 7, 2014,
prospectus supplement dated November 7, 2014 and
product supplement no. 4a-I dated November 7, 2014 |
Product Supplement No. 4a-I
Registration Statement No. 333-199966
Dated January 29, 2015
Rule 424(b)(2) |
Structured
Investments |
|
$2,000,000
Capped Contingent Buffered Equity Notes
Linked to an Equally Weighted Basket of 6 Reference Stocks due February 18, 2016
|
General
| · | | The notes are designed for
investors who seek capped, unleveraged exposure to the appreciation of an equally weighted basket of 6 Reference Stocks, up to
a maximum return of 21.90% at maturity. |
| · | | Investors should be willing
to forgo interest and dividend payments and, if the Ending Basket Level is less than the Starting Basket Level by more than 21.90%,
be willing to lose some or all of their principal. |
| · | | The notes are unsecured and
unsubordinated obligations of JPMorgan Chase & Co. Any payment on the notes is subject to the credit risk of JPMorgan Chase
& Co. |
| · | | Minimum denominations of $10,000
and integral multiples of $1,000 in excess thereof |
Key Terms
| Basket: |
The Basket consists of 6 common shares, common stocks and ordinary shares (each, a “Reference Stock” and collectively, the “Reference Stocks”). The issuers of the Reference Stocks and the Bloomberg ticker symbol, the relevant exchange on which it is listed, the Stock Weight and the Initial Stock Price of each Reference Stock are set forth under “The Basket” on page PS-1 of this pricing supplement. |
| Payment at Maturity: |
If the Ending Basket Level is greater than the Starting Basket
Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the
Basket Return, subject to the Maximum Return. Accordingly, if the Ending Basket Level is greater than the Starting Basket Level,
your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Basket Return),
subject to the Maximum Return
If the Ending Basket Level is equal to the Starting Basket
Level or if the Ending Basket Level is less than the Starting Basket Level by up to 21.90%, you will be entitled to the full repayment
of your principal amount at maturity.
If the Ending Basket Level is less than the Starting Basket
Level by more than 21.90%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Basket Level is
less than the Starting Basket Level, and your payment at maturity per $1,000 principal amount note will be calculated as follows: |
| |
$1,000 + ($1,000 × Basket Return) |
| |
If the Ending Basket Level is less than the Starting Basket Level by more than 21.90%, you will lose more than 21.90% of your principal amount at maturity and may lose all of your principal amount at maturity. |
| Maximum Return: |
21.90%. For example, if the Basket Return is equal to or greater than 21.90%, you will receive the Maximum Return of 21.90%, which entitles you to the maximum payment at maturity of $1,219 per $1,000 principal amount note that you hold. |
| Contingent Buffer Amount: |
21.90% |
| Basket Return: |
(Ending Basket Level –
Starting Basket Level)
Starting Basket Level |
| Starting Basket Level: |
Set equal to 100 on the Pricing Date |
| Ending Basket Level: |
The arithmetic average of the Basket Closing Levels on the Ending Averaging Dates |
| Basket Closing Level: |
On each Ending Averaging Date, the
Basket Closing Level will be calculated as follows:
100 × [1 + sum of (Stock
Return of each Reference Stock on that Ending Averaging Date × 1/6)] |
| Stock Return: |
With respect to each Reference Stock,
on each Ending Averaging Date:
(Final Stock Price – Initial
Stock Price)
Initial Stock Price |
| Initial Stock Price: |
With respect to each Reference Stock, the closing price of one share of that Reference Stock on the Pricing Date, as specified in “The Basket” on page PS-1 of this pricing supplement. |
| Final Stock Price: |
With respect to each Reference Stock, on each Ending Averaging Date, the closing price of one share of that Reference Stock on that date |
| Stock Adjustment Factor: |
With respect to each Reference Stock, the Stock Adjustment Factor is referenced in determining the closing price of one share of that Reference Stock and is set initially at 1.0 on the Pricing Date. The Stock Adjustment Factor for each Reference Stock is subject to adjustment upon the occurrence of certain corporate events affecting that Reference Stock. See “The Underlyings — Reference Stocks — Anti-Dilution Adjustments” and “The Underlyings — Reference Stocks — Reorganization Events” in the accompanying product supplement no. 4a-I for further information. |
| Pricing Date: |
January 29, 2015 |
| Original Issue Date (Settlement Date): |
On or about January 30, 2015 |
| Ending Averaging Dates†: |
February 8, 2016, February 9, 2016, February 10, 2016, February 11, 2016 and February 12, 2016 (the “Final Ending Averaging Date”) |
| Maturity Date†: |
February 18, 2016 |
| CUSIP: |
48125UAF9 |
| † | | Subject to postponement in the event of certain market disruption events 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. 4a-I |
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-8 of the accompanying product supplement no. 4a-I and “Selected Risk Considerations”
beginning on page PS-3 of this pricing supplement.
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 product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
| |
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
| Per note |
$1,000 |
$10 |
$990 |
| Total |
$2,000,000 |
$20,000 |
$1,980,000 |
| (1) | | See “Supplemental Use of Proceeds” in this pricing supplement for information
about the components of the price to public of the notes. |
| (2) | | J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan
Chase & Co., will pay all of the selling commissions of $10.00 per $1,000 principal amount note it receives from us to other
affiliated or unaffiliated dealers. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-87 of
the accompanying product supplement no. 4a-I. |
The estimated value of the notes as determined by JPMS, when the
terms of the notes were set, was $961.60 per $1,000 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.
January 29, 2015
Additional
Terms Specific to the Notes
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. 4a-I dated November 7, 2014 This pricing supplement, together with the documents listed below, contains
the terms of the notes, supplements the term sheet related hereto 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. 4a-I,
as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax,
accounting and other advisers before you invest in the notes.
You may
access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
Our Central
Index Key, or CIK, on the SEC website is 19617. As used in this pricing supplement, “we,” “us” and “our”
refer to JPMorgan Chase & Co.
The
Basket
The Bloomberg
ticker symbol and the issuers of the Reference Stocks, the relevant exchange on which each Reference Stock is listed and the Stock
Weight of each Reference Stock are set forth below:
| Ticker Symbol |
Reference Stock Issuer |
Relevant Exchange |
Stock Weight |
Initial Stock Price |
| SU |
Suncor Energy Inc.
(common shares) |
New York Stock Exchange (NYSE) |
1/6 |
$28.91 |
| EOG |
EOG Resources, Inc. |
NYSE |
1/6 |
$88.91 |
| SLB |
Schlumberger N.V. (Schlumberger Limited) |
NYSE |
1/6 |
$81.90 |
| COG |
Cabot Oil & Gas Corporation |
NYSE |
1/6 |
$26.58 |
| WFT |
Weatherford International public limited company (ordinary shares) |
NYSE |
1/6 |
$10.14 |
| APC |
Anadarko Petroleum Corporation |
NYSE |
1/6 |
$80.14 |
| JPMorgan Structured Investments —
|
PS-1 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
What
Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Basket?
The following
table and examples illustrate the hypothetical total return or payment at maturity on the notes. The “total return”
as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity
per $1,000 principal amount note to $1,000. Each hypothetical total return or payment at maturity set forth below reflects the
Maximum Return of 21.90%, the Contingent Buffer Amount of 21.90% and the Starting Basket Level of 100. Each hypothetical total
return or payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment
at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded
for ease of analysis.
Ending Basket
Level |
Basket Return |
Total Return |
| 180.00 |
80.00% |
21.90% |
| 170.00 |
70.00% |
21.90% |
| 160.00 |
60.00% |
21.90% |
| 150.00 |
50.00% |
21.90% |
| 140.00 |
40.00% |
21.90% |
| 130.00 |
30.00% |
21.90% |
| 121.90 |
21.90% |
21.90% |
| 115.00 |
15.00% |
15.00% |
| 110.00 |
10.00% |
10.00% |
| 105.00 |
5.00% |
5.00% |
| 102.50 |
2.50% |
2.50% |
| 100.00 |
0.00% |
0.00% |
| 95.00 |
-5.00% |
0.00% |
| 90.00 |
-10.00% |
0.00% |
| 85.00 |
-15.00% |
0.00% |
| 80.00 |
-20.00% |
0.00% |
| 78.10 |
-21.90% |
0.00% |
| 78.09 |
-21.91% |
-21.91% |
| 70.00 |
-30.00% |
-30.00% |
| 60.00 |
-40.00% |
-40.00% |
| 50.00 |
-50.00% |
-50.00% |
| 40.00 |
-60.00% |
-60.00% |
| 30.00 |
-70.00% |
-70.00% |
| 20.00 |
-80.00% |
-80.00% |
| 10.00 |
-90.00% |
-90.00% |
| 0.00 |
-100.00% |
-100.00% |
Hypothetical
Examples of Amount Payable at Maturity
The following
examples illustrate how the payment at maturity in different hypothetical scenarios is calculated.
Example
1: The level of the Basket increases from the Starting Basket Level of 100 to an Ending Basket Level of 105. Because the
Ending Basket Level of 105 is greater than the Starting Basket Level of 100 and the Basket Return of 5% does not exceed the Maximum
Return of 21.90%, the investor receives a payment at maturity of $1,050 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 5%) = $1,050
Example 2: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 78.10. Although the Basket Return is negative, because the Ending Basket Level
of 78.10 is less than the Starting Basket Level of 100 by up to the Contingent Buffer Amount of 21.90%, the investor receives a
payment at maturity of $1,000 per $1,000 principal amount note.
Example 3: The level of the Basket increases from the Starting
Basket Level of 100 to an Ending Basket Level of 130. Because the Ending Basket Level of 130 is greater than the Starting Basket
Level of 100 and the Basket Return of 30% exceeds the Maximum Return of 21.90%, the investor receives a payment at maturity of
$1,219 per $1,000 principal amount note, the maximum payment on the notes.
Example 4: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 50. Because the Ending Basket Level of 50 is less than the Starting Basket
Level of 100 by more than the Contingent
| JPMorgan Structured Investments —
|
PS-2 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
Buffer Amount of 21.90% and the Basket Return is -50%, the
investor receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × -50%) = $500
The hypothetical returns and hypothetical
payments on the notes shown above apply only if you hold the notes 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.
| JPMorgan Structured Investments —
|
PS-3 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
Selected
Purchase Considerations
| · | | CAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to earn a capped, unleveraged return equal to a positive Basket Return, up
to the Maximum Return of 21.90%, for a maximum payment at maturity of $1,219 per $1,000 principal amount note.
Because the notes are our unsecured and unsubordinated obligations, payment of any amount on the notes is subject to
our ability to pay our obligations as they become due. |
| · | | LIMITED PROTECTION AGAINST
LOSS — We will pay you your principal back at maturity if the Ending Basket Level is equal to or less than the Starting
Basket Level by up to the Contingent Buffer Amount of 21.90%. If the Ending Basket Level is less than the Starting Basket Level
by more than the Contingent Buffer Amount, for every 1% that the Ending Basket Level is less than the Starting Basket Level, you
will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 21.90%
of your principal amount and may lose all of your principal amount at maturity. |
| · | | RETURN LINKED TO AN EQUALLY
WEIGHTED BASKET OF 6 REFERENCE STOCKS — The return on the notes is linked to the performance of an equally weighted
Basket that consists of 6 Reference Stocks as set forth under “The Basket” on page PS-1 of this pricing supplement. |
| · | | CAPITAL GAINS TAX TREATMENT
— You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the
accompanying product supplement no. 4a-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 notes. |
Based
on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes 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. 4a-I. Assuming this treatment is respected, the gain or loss on your notes should be
treated as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser
of notes 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 notes 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 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.
Withholding
under legislation commonly referred to as “FATCA” may apply to amounts treated as interest paid with respect to the
notes, if they are recharacterized as debt instruments. You should consult your tax adviser regarding the potential application
of FATCA to the notes.
Based
on certain factual assumptions and representations received from us, our special tax counsel is of the opinion that withholding
under Sections 897 and 1445 of the Code and the regulations thereunder should not be imposed on proceeds paid to non-U.S. investors
with respect to the notes, although it is possible that we may decide (or that the IRS could argue) that we are required to withhold.
Selected
Risk Considerations
An investment
in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket or any of
the Reference Stocks. These risks are explained in more detail in the “Risk Factors” section of the accompanying product
supplement no. 4a-I.
| · | | YOUR INVESTMENT IN THE
NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. The return on the notes at maturity
is linked to the performance of the Basket and will depend on whether, and the extent to which, the Basket Return is positive
or negative. If the Ending Basket Level is less than the Starting Basket Level by more than the Contingent Buffer Amount of 21.90%,
the benefit provided by the Contingent Buffer Amount will terminate and you will be exposed to a loss. Under these circumstances,
for every 1% that the Ending Basket Level is less than the Starting Basket Level, you will lose an amount equal to 1% of the principal
amount of your notes. Accordingly, you will lose more than 21.90% of your principal amount and may lose all of your principal
amount at maturity. |
| · | | YOUR MAXIMUM GAIN ON THE
NOTES IS LIMITED TO THE MAXIMUM RETURN — If the Ending Basket Level is greater than the Starting Basket Level,
for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional return that will not exceed
the Maximum Return of 21.90%, regardless of the appreciation in the Basket, which may be significant. |
| JPMorgan Structured Investments —
|
PS-4 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
| · | | CREDIT RISK OF JPMORGAN
CHASE & CO. — The notes are subject to the credit risk of JPMorgan Chase & Co., and our credit ratings and credit
spreads may adversely affect the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability
to pay all amounts due on the notes. Any actual or potential change in our creditworthiness or credit spreads, as determined by
the market for taking our credit risk, is likely to adversely affect the value of the notes. If we were to default on our payment
obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment. |
| · | | POTENTIAL CONFLICTS
— We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation
agent and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to
determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we refer to
as JPMS’s estimated value. In performing these duties, our economic interests and the economic interests of the calculation
agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our business
activities, including hedging and trading activities, could cause our economic interests to be adverse to yours and could adversely
affect any payment on the notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates
in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines.
Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement
no. 4a-I for additional information about these risks. |
We
and/or our affiliates may also currently or from time to time engage in business with the Reference Stock issuers, including extending
loans to, or making equity investments in, the Reference Stock issuers or providing advisory services to the Reference Stock issuers.
In addition, one or more of our affiliates may publish research reports or otherwise express opinions with respect to the Reference
Stock issuers, and these reports may or may not recommend that investors buy or hold the Reference Stocks. As a prospective purchaser
of the notes, you should undertake an independent investigation of the Reference Stock issuers that in your judgment is appropriate
to make an informed decision with respect to an investment in the notes.
| · | | THE BENEFIT PROVIDED BY
THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE — If the Ending Basket Level is less than
the Starting Basket Level by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer Amount will
terminate and you will be fully exposed to any depreciation of the Basket. |
| · | | JPMS’S ESTIMATED
VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated value
is only an estimate using several factors. The original issue price of the notes exceeds JPMS’s estimated value 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, 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. See “JPMS’s
Estimated Value of the Notes” in this pricing supplement. |
| · | | 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 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 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). |
| JPMorgan Structured Investments —
|
PS-5 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
| · | | 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 consideration 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 price of one share of each Reference Stock,
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 prices of the Reference Stocks; |
| · | | the time to maturity of the
notes; |
| · | | the dividend rates on the
Reference Stocks; |
| · | | the actual and expected positive
or negative correlation among the Reference Stocks, or the expected absence of any such correlation; |
| · | | the occurrence of certain
events affecting the issuer of a Reference Stock that may or may not require an adjustment to the applicable Stock Adjustment
Factor, including a merger or acquisition; |
| · | | 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 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.
| · | | CORRELATION (OR LACK OF
CORRELATION) OF THE REFERENCE STOCKS — The notes are linked to an equally weighted Basket consisting of 6 Reference
Stocks. Price movements of the Reference Stocks may or may not be correlated with each other. At a time when the value of one
or more of the Reference Stocks increases, the value of the other Reference Stocks may not increase as much or may even decline.
Therefore, in calculating the Ending Basket Level, increases in the value of one or more of the Reference Stocks may be moderated,
or more than offset, by the lesser increases or declines in the values of the other Reference Stocks. |
In
addition, high correlation of movements in the values of the Reference Stocks during periods of negative returns among the Reference
Stocks could have an adverse effect on the payment at maturity on the notes. There can be no assurance that the Ending Basket
Level will be higher than the Starting Basket Level.
| · | | THE REFERENCE STOCKS INCLUDED
IN THE BASKET ARE CONCENTRATED IN THE ENERGY INDUSTRY — Each of the stocks in the Basket has been issued by a company
whose business is associated with the energy industry. Because the value of the notes is determined by the performance of
the Basket, an investment in these notes will be concentrated in this industry. As a result, the value of the notes may
be subject to greater volatility and be more adversely affected by a single positive or negative economic, political or regulatory
occurrence affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers. |
| · | | NO OWNERSHIP OR DIVIDEND
RIGHTS IN THE REFERENCE STOCKS — As a holder of the notes, you will not have any ownership interest or rights in any
of the Reference Stocks, such as voting rights or dividend payments. In addition, the issuers of the Reference Stocks 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 relevant Reference Stocks and the notes. |
| · | | NO AFFILIATION WITH THE
REFERENCE STOCK ISSUERS — We are not affiliated with the issuers of the Reference Stocks. We have not independently
verified any of the information about the Reference Stock issuers contained in this pricing supplement. You should undertake your
own investigation into the Reference Stocks and their issuers. We are not responsible for the Reference Stock issuers’ public
disclosure of information, whether contained in SEC filings or otherwise. |
| · | | NO INTEREST PAYMENTS
— As a holder of the notes, you will not receive any interest payments. |
| · | | LACK OF LIQUIDITY
— The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary
market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to
trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which
you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes. |
| JPMorgan Structured Investments —
|
PS-6 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
| · | | THE ANTI-DILUTION PROTECTION
FOR THE REFERENCE STOCKS IS LIMITED AND MAY BE DISCRETIONARY — The calculation agent will make adjustments to the Stock
Adjustment Factor for each Reference Stock for certain corporate events affecting that Reference Stock. However, the calculation
agent will not make an adjustment in response to all events that could affect each Reference Stock. If an event occurs that does
not require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected. You
should also be aware that the calculation agent may make adjustments in response to events that are not described in the accompanying
product supplement to account for any diluting or concentrative effect, but the calculation agent is under no obligation to do
so or to consider your interests as a holder of the notes in making these determinations. |
| · | | RISKS ASSOCIATED WITH NON-U.S.
COMPANIES WITH RESPECT TO THE COMMON SHARES OF SUNCOR ENERGY INC., THE COMMON STOCK OF SCHLUMBERGER N.V. (SCHLUMBERGER LIMITED)
AND THE ORDINARY SHARES OF WEATHERFORD INTERNATIONAL LTD. — An investment in the notes, which are linked in part to
the common shares of Suncor Energy Inc. (which we refer to as “Suncor”), the common stock of Schlumberger N.V. (Schlumberger
Limited) (which we refer to as “Schlumberger”) and the ordinary shares of Weatherford International public limited
company (which we refer to as “Weatherford”), involves risks associated with the home countries of Suncor, Schlumberger
and Weatherford (which are Canada, Curaçao and Ireland, respectively). The prices of non-U.S. equity securities may
be affected by political, economic, financial and social factors in the home country of the issuer of the non-U.S. company (i.e.,
Canada, Curaçao or Ireland), including changes in that country’s government, economic and fiscal policies, currency
exchange laws or other laws or restrictions. |
| · | | THE NOTES ARE SUBJECT TO
CURRENCY EXCHANGE RATE RISK WITH RESPECT TO THE COMMON SHARES OF SUNCOR — Because the common shares of Suncor are quoted
and traded in U.S. dollars on the New York Stock Exchange and in Canadian dollars on the Toronto Stock Exchange, fluctuations
in the exchange rate between Canadian dollar and the U.S. dollar will likely affect the relative value of the common shares of
Suncor in the different currencies and, as a result, will likely affect the market price of the common shares of Suncor trading
on the New York Stock Exchange. These trading differences and currency exchange rates may affect the closing prices of the
common shares of Suncor and accordingly, the market value of the notes. The Canadian dollar has been subject to fluctuations
against the U.S. dollar in the past, and may be subject to significant fluctuations in the future. Previous fluctuations
or periods of relative stability in the exchange rates between the Canadian dollar and the U.S. dollar are not necessarily indicative
of fluctuations or periods of relative stability in those rates that may occur over the term of the notes. The exchange
rate between the Canadian dollar and the U.S. dollar is the result of the supply of, and the demand for, those currencies.
Changes in the exchange rate result over time from the interaction of many factors directly or indirectly affecting economic and
political conditions in Canada and the United States, including economic and political developments in other countries. Of
particular importance to potential currency exchange risk are: (i) existing and expected rates of inflation; (ii) existing and
expected interest rate levels; (iii) interest rate and exchange rate volatility levels which impact currency bid/offer spreads;
(iv) balance of payments; and (v) the extent of governmental surpluses or deficits in Canada and the United States. All of these
factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of Canada and the United States
and other countries important to international trade and finance. |
| JPMorgan Structured Investments —
|
PS-7 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
The Reference Stocks
Public Information
All information contained herein on the Reference Stocks and
on the Reference Stock issuers is derived from publicly available sources, without independent verification. Companies with securities
registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, are required to periodically
file certain financial and other information specified by the SEC. Information provided to or filed with the SEC by a Reference
Stock issuer pursuant to the Exchange Act can be located by reference to the SEC file number provided below and can be accessed
through www.sec.gov. We do not make any representation that these publicly available documents are accurate or complete.
Historical Information Regarding the Reference
Stocks and the Basket
The following graphs show the historical
weekly performance of the Basket as a whole as well as the Reference Stocks from January 8, 2010 through January 23, 2015. The
graph of the historical Basket performance assumes the Basket Closing Level on January 8, 2010 was 100 and the Stock Weights were
as specified under “The Basket” in this pricing supplement.
We obtained the various closing prices
below from the Bloomberg Professional® service (“Bloomberg”), without independent verification. The
closing prices may have been adjusted by Bloomberg for corporate actions such as stock splits, public offerings, mergers and acquisitions,
spin-offs, delistings and bankruptcy.
Since the commencement of trading of each Reference Stock,
the price of such Reference Stock has experienced significant fluctuations. The historical performance of each Reference Stock
and the historical performance of the Basket should not be taken as an indication of future performance, and no assurance can be
given as to the closing prices of each Reference Stock or the levels of the Basket on the Pricing Date or any Ending Averaging
Date. We cannot give you assurance that the performance of each Reference Stock will result in the return of any of your principal
amount.
Historical Information Regarding the Basket
The following graph sets forth the historical performance of
the Basket based on the weekly Basket Closing Level from January 8, 2010 through January 23, 2015. The following graph assumes
the Basket Closing Level on January 8, 2010 was 100 and the Stock Weights were as specified under “The Basket” in this
pricing supplement.
| JPMorgan Structured Investments —
|
PS-8 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
Suncor Energy Inc. (“Suncor”)
According to its publicly available filings with the SEC, Suncor,
a Canadian company, is an integrated energy company headquartered in Calgary, Alberta, Canada. The common shares, no par value,
of Suncor are listed on the New York Stock Exchange, which we refer to as the relevant exchange for purposes of Suncor in the accompanying
product supplement no. 4a-I. Suncor’s SEC file number is 001-12384.
Historical Information Regarding the Common
Shares of Suncor
The following graph sets forth the historical performance of
the common shares of Suncor based on the weekly closing price of one common share of Suncor from January 8, 2010 through January
23, 2015. The closing price of one common share of Suncor on January 29, 2015 was $28.91.
EOG Resources, Inc. (“EOG”)
According to its publicly available filings with the SEC, EOG
explores for, develops, produces and markets crude oil and natural gas primarily in major producing basins in the United States,
Canada, The Republic of Trinidad and Tobago, the United Kingdom, The People’s Republic of China, the Argentine Republic and,
from time to time, select other international areas. The common stock, par value $0.01 per share, of EOG is listed on the New York
Stock Exchange, which we refer to as the relevant exchange for purposes of EOG in the accompanying product supplement no. 4a-I.
EOG’s SEC file number is 001-09743.
Historical Information Regarding the Common
Stock of EOG
The following graph sets forth the historical performance of
the common stock of EOG based on the weekly closing price of one share of the common stock of EOG from January 8, 2010 through
January 23, 2015. The closing price of one share of the common stock of EOG on January 29, 2015 was $88.91.
| JPMorgan Structured Investments —
|
PS-9 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
Schlumberger N.V. (Schlumberger Limited)
(“Schlumberger”)
According to its publicly available filings with the SEC, Schlumberger,
a Curaçao company, is a supplier of technology, integrated project management and information solutions to the international
oil and gas exploration and production industry. The common stock, par value $0.01 per share, of Schlumberger is listed on the
New York Stock Exchange, which we refer to as the relevant exchange for purposes of Schlumberger in the accompanying product supplement
no. 4a-I. Schlumberger’ SEC file number is 001-04601.
Historical Information Regarding the Common
Stock of Schlumberger
The following graph sets forth the historical performance of
the common stock of Schlumberger based on the weekly closing price of one share of the common stock of Schlumberger from January
8, 2010 through January 23, 2015. The closing price of one share of the common stock of Schlumberger on January 29, 2015 was $81.90.
Cabot Oil & Gas Corporation (“Cabot”)
According to its publicly available filings with the SEC, Cabot
is an oil and gas company engaged in the development, exploitation and exploration of oil and gas properties. The common stock,
par value $0.10 per share, of Cabot is listed on the New York Stock Exchange, which we refer to as the relevant exchange for purposes
of Cabot in the accompanying product supplement no. 4a-I. Cabot’s SEC file number is 001-10447.
Historical Information Regarding the Common
Stock of Cabot
The following graph sets forth the historical performance of
the common stock of Cabot based on the weekly closing price of one share of the common stock of Cabot from January 8, 2010 through
January 23, 2015. The closing price of one share of the common stock of Cabot on January 29, 2015 was $26.58.
| JPMorgan Structured Investments —
|
PS-10 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
Weatherford International public limited
company (“Weatherford”)
According to its publicly available filings with the
SEC, Weatherford, an Irish company, is a provider of equipment and services used in the drilling, evaluation, completion,
production and intervention of oil and natural gas wells. Weatherford became the successor issuer to Weatherford
International Ltd., a Swiss company, on June 17, 2014 in connection with the consummation of a merger pursuant to which
Weatherford International Ltd. was merged into Weatherford International Limited, which was renamed “Weatherford
International public limited company,” to effect a change in the jurisdiction of incorporation from Switzerland to
Ireland. The ordinary shares of Weatherford, par value $0.001 per share, are listed on the New York Stock Exchange, which we
refer to as the relevant exchange for purposes of Weatherford in the accompanying product supplement no. 4a-I.
Weatherford’s SEC file number is 001-36504, and Weatherford International Ltd.’s SEC file number is
001-34258.
Historical Information Regarding the Registered
Shares of Weatherford International Ltd. and the Ordinary Shares of Weatherford
The following graph sets forth the historical
performance of the registered shares, par value 1.16 Swiss francs per share, of Weatherford International Ltd., which were
traded on the New York Stock Exchange, based on the weekly closing price of one registered share of Weatherford International
Ltd. from January 8, 2010 through June 14, 2014, and the historical performance of the ordinary shares of Weatherford based
on the weekly closing price of one ordinary share of Weatherford from June 21, 2014 through January 23, 2015. The ordinary
shares of Weatherford commenced trading on the New York Stock Exchange on June 18, 2014. The closing price of one ordinary
share of Weatherford on January 29, 2015 was $10.14.
†The vertical dotted line in the
graph indicates June 18, 2014, which was the first day of trading for the ordinary shares of Weatherford. In the graph,
the performance to the left of the vertical dotted line reflects the registered shares of Weatherford International Ltd. and
the performance to the right of the vertical dotted line reflects the ordinary shares of Weatherford.
Anadarko
Petroleum Corporation (“Anadarko”)
According
to its publicly available filings with the SEC, Anadarko is an independent oil and gas exploration and production company. The
common stock, par value $0.10 per share, of Anadarko is listed on the New York Stock Exchange, which we refer to as the relevant
exchange for purposes of Anadarko in the accompanying product supplement no. 4a-I. Anadarko’s SEC file number is 001-08968.
Historical
Information Regarding the Common Stock of Anadarko
The following graph sets forth the historical performance of
the common stock of Anadarko based on the weekly closing price of one share of the common stock of Anadarko from January 8, 2010
through January 23, 2015. The closing price of one share of the common stock of Anadarko on January 29, 2015 was $80.14.
| JPMorgan Structured Investments —
|
PS-11 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
| JPMorgan Structured Investments —
|
PS-12 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
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 “Selected
Risk Considerations — 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 “Selected Risk Considerations — 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 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 JPMS and other affiliated or unaffiliated dealers, 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 “Selected Risk Considerations — JPMS’s
Estimated Value of the Notes Is 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 “Selected Risk Considerations — 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 the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects 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 “Selected Risk Considerations
— 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 “What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Basket?” and “Hypothetical
Examples of Amount Payable at Maturity” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Reference Stocks” 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 JPMS and other
affiliated or unaffiliated dealers, 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.
Validity
of the Notes
In the opinion
of Davis Polk & Wardwell LLP, as our special products counsel, when the notes offered by this pricing supplement have been
executed and issued by us and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated
herein, such notes will be our valid and binding obligations, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable
principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar
provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to
the federal laws of the United States of America, the laws of the State of New York and the General Corporation Law of the State
of Delaware. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution
and delivery of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture
with respect to the trustee, all as stated in the letter of such counsel dated November 7, 2014, which was filed as an exhibit
to the Registration Statement on Form S-3 by us on November 7, 2014.
| JPMorgan Structured Investments —
|
PS-13 |
| Capped Contingent Buffered Equity Notes Linked to an Equally Weighted Basket of 6 Reference Stocks |
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