CALCULATION OF REGISTRATION FEE |
Title
of Each Class of
Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
Notes |
$2,450,000 |
$284.69 |
Registration Statement No.
333-199966; Rule 424(b)(2)
April
16, 2015
JPMorgan Chase & Co.
Structured Investments
$2,450,000
Contingent Coupon Callable Yield Notes Linked
to the Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index due April 21, 2017
| · | The Notes are designed for investors who seek a Contingent Interest Payment with respect to each Observation Date for which
the closing level of each of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index, which we refer to as the Indices, is greater than or equal to 70.00% of its Initial Value, which we refer to as a Coupon
Barrier. |
| · | The Notes may be redeemed early, in whole but not in part, at our option on any of the Contingent Interest Payment Dates (other
than the final Contingent Interest Payment Date). |
| · | Investors in the Notes should be willing to accept the risk of losing some or all of their principal and the risk that no Contingent
Interest Payment may be made with respect to some or all Observation Dates. |
| · | Investors should also be willing to forgo fixed interest and dividend payments, in exchange for the opportunity to receive
Contingent Interest Payments. |
| · | 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. |
| · | Payments on the Notes are not linked to a basket composed of the Indices. Payments on the Notes are linked to the performance
of each of the Indices individually, as described below. |
| · | Minimum denominations of $1,000 and integral multiples thereof |
| · | The Notes priced on April 16, 2015 and are expected to settle on or about April 21, 2015. |
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, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement no. 1a-I and “Selected Risk Considerations” beginning on page
PS-4 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, underlying 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 |
$17.50 |
$982.50 |
Total |
$2,450,000 |
$42,875 |
$2,407,125 |
(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 $17.50 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 $972.90 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
Pricing supplement no. 598 to product supplement
no. 4a-I dated November 7, 2014, underlying supplement no. 1a-I dated November 7, 2014
and the prospectus and prospectus supplement, each dated November 7, 2014
Key
Terms
Indices: The
S&P 500® Index (Bloomberg ticker: SPX),
the Russell 2000® Index (Bloomberg ticker: RTY)
and the EURO STOXX 50® Index (Bloomberg ticker: SX5E) |
Contingent Interest Payments:
If the Notes have not been previously redeemed early and the
closing level of each Index on any Observation Date is greater than or equal to its Coupon Barrier, you will receive on the applicable
Contingent Interest Payment Date for each $1,000 principal amount Note a Contingent Interest Payment equal to $20.625 (equivalent
to a Contingent Interest Rate of 8.25% per annum, payable at a rate of 2.0625% per quarter).
If the closing level of any Index on any Observation Date
is less than its Coupon Barrier, no Contingent Interest Payment will be made with respect to that Observation Date. |
Contingent Interest Rate: 8.25% per annum, payable at a rate of 2.0625% per quarter |
Coupon Barrier / Trigger Value: With respect to each Index, 70% of its Initial Value, which was 1,473.493 for the S&P 500® Index, 891.0286 for the Russell 2000® Index and 2,626.204 for the EURO STOXX 50® Index |
Pricing Date: April 16, 2015 |
Original Issue Date (Settlement Date): On or about April 21, 2015 |
Observation Dates*: July 16, 2015, October 16, 2015, January 19, 2016, April 18, 2016, July 18, 2016, October 17, 2016, January 17, 2017 and April 18, 2017 (the “Valuation Date”) |
Contingent Interest Payment Dates*: July 23, 2015, October 23, 2015, January 26, 2016, April 25, 2016, July 25, 2016, October 24, 2016, January 24, 2017 and the Maturity Date |
Maturity Date*: April 21, 2017 |
Least Performing Index: The Index with the Least Performing Index Return |
Least Performing Index Return: The lowest of the Index Returns of the Indices |
* Subject to postponement in the event of a market disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I |
Index Return:
With respect to each Index,
(Final Value – Initial Value)
Initial Value |
Initial Value: With respect to each Index, the closing level of that Index on the Pricing Date, which was 2,104.99 for the S&P 500® Index, 1,272.898 for the Russell 2000® Index and 3,751.72 for the EURO STOXX 50® Index |
Final Value: With respect to each Index, the closing level of that Index on the Valuation Date |
Early Redemption:
We, at our election, may redeem the Notes early, in whole but
not in part, on any of the Contingent Interest Payment Dates (other than the final Contingent Interest Payment Date) at a price,
for each $1,000 principal amount Note, equal to $1,000 plus any accrued and unpaid Contingent Interest Payment. If we intend
to redeem your Notes early, we will deliver notice to The Depository Trust Company, or DTC, at least five business days before
the applicable Contingent Interest Payment Dates on which the Notes are redeemed early. |
Payment at Maturity:
If the Notes have not been redeemed early and the Final Value
of each Index is greater than or equal to its Trigger Value, you will receive a cash payment at maturity, for each $1,000 principal
amount Note, equal to (a) $1,000 plus (b) the Contingent Interest Payment applicable to the Valuation Date.
If the Notes
have not been redeemed early and the Final Value of any Index is less than its Trigger Value, your
payment at maturity per $1,000 principal amount Note will be calculated as follows:
$1,000 + ($1,000 × Least Performing
Index Return)
If the Notes have not been redeemed early and the Final Value
of any Index is less than its Trigger Value you will lose more than 30.00% of your principal amount at maturity and could lose
all of your principal amount at maturity. |
PS-1 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
How
the Notes Work
Payments in Connection with Observation
Dates Preceding the Valuation Date
Payment at Maturity If the Notes Have Not
Been Redeemed Early
PS-2 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
Total Contingent Interest Payments
The table below illustrates the hypothetical total
Contingent Interest Payments per $1,000 principal amount Note over the term of the Notes based on the Contingent Interest Rate
of 8.25% per annum, depending on how many Contingent Interest Payments are made prior to early redemption or maturity.
Number of Contingent Interest Payments |
Total Contingent Interest Payments |
8 |
$165.000 |
7 |
$144.375 |
6 |
$123.750 |
5 |
$103.125 |
4 |
$82.500 |
3 |
$61.875 |
2 |
$41.250 |
1 |
$20.625 |
0 |
$0.00 |
Hypothetical
Payout Examples
The following examples illustrate payments on
the Notes linked to three hypothetical indices, assuming a range of performances for the hypothetical Least Performing Index on
the Observation Dates. The hypothetical payments set forth below assume the following:
| · | the Notes have not been redeemed early; |
| · | an Initial Value for the Least Performing Index of 100.00; |
| · | a Coupon Barrier and a Trigger Value for the Least Performing Index of 70.00
(equal to 70% of its hypothetical Initial Value); and |
| · | a Contingent Interest Rate of 8.25% per annum (payable at a rate of 2.0625%
per quarter). |
The hypothetical Initial Value of the Least Performing
Index of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of any Index. The
actual Initial Value of each Index is the closing level of that Index on the Pricing Date and is specified under “Key Terms
– Initial Value” in this pricing supplement. For historical data regarding the actual closing levels of each Index,
please see the historical information set forth under “The Indices” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the Notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example 1 — Notes have NOT been redeemed
early and the Final Value of the Least Performing Index is greater than or equal to its Trigger Value.
Date |
Closing Level of Least Performing Index |
Payment (per $1,000 principal amount Note) |
First Observation Date |
95.00 |
$20.625 |
Second Observation Date |
85.00 |
$20.625 |
Third through Seventh Observation Dates |
Less than Coupon Barrier |
$0 |
Valuation Date |
90.00 |
$1,020.625 |
|
Total Payment |
$1,061.875 (6.1875% return) |
Because the Notes have not been redeemed early
and the Final Value of the Least Performing Index is greater than or equal to its Trigger Value and Coupon Barrier, the payment
at maturity, for each $1,000 principal amount note, will be $1,020.625 (or $1,000 plus the Contingent Interest Payment applicable
to the Valuation Date). When added to the Contingent Interest Payments received with respect to the prior Observation Dates, the
total amount paid, for each $1,000 principal amount note, is $1,061.875
PS-3 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
Example 2 — Notes have NOT been redeemed
early and the Final Value of the Least Performing Index is less than its Trigger Value.
Date |
Closing Level of Least Performing Index |
Payment (per $1,000 principal amount Note) |
First Observation Date |
60.00 |
$0 |
Second Observation Date |
55.00 |
$0 |
Third through Seventh Observation Dates |
Less than Coupon Barrier |
$0 |
Valuation Date |
50.00 |
$500.00 |
|
Total Payment |
$500.00 (-50.00% return) |
Because the Notes have not been redeemed early
and the Final Value of the Least Performing Index is less than its Trigger Value and Coupon Barrier and the Least Performing Index
Return is -50.00%, the payment at maturity will be $500 per $1,000 principal amount Note, calculated as follows.
$1,000 + [$1,000 × (-50.00%)] = $500.00
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 the
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.
Selected
Risk Considerations
An investment in the Notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
| · | YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — |
The Notes do not guarantee any return
of principal. If the Notes have not been redeemed early and the Final Value of any Index is less than its Trigger Value, you will
lose 1% of the principal amount of your Notes for every 1% that the Final Value of the Least Performing Index is less than its
Initial Value. Accordingly, under these circumstances, you will lose more than 30.00% of your principal amount and could lose all
of your principal amount at maturity.
| · | THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL — |
If the Notes have not been redeemed
early, we will make a Contingent Interest Payment with respect to an Observation Date only if the closing level of each Index on
that Observation Date is greater than or equal to its Coupon Barrier. If the closing level of either Index on that Observation
Date is less than its Coupon Barrier, no Contingent Interest Payment will be made with respect to that Observation Date. Accordingly,
if the closing level of any Index on each Observation Date is less than its Coupon Barrier, you will not receive any interest payments
over the term of the Notes.
| · | CREDIT RISK OF JPMORGAN CHASE & CO. — |
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.
| · | THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS
THAT MAY BE PAID OVER THE TERM OF THE NOTES, |
regardless of any appreciation in the
value of any Index, which may be significant. You will not participate in any appreciation in the value of any Index.
We and our affiliates play a variety
of roles in connection with the Notes. In performing these duties, our economic interests are potentially adverse to your interests
as an investor in the Notes. It is possible that hedging or trading activities of ours or our
PS-4 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
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.
| · | WE ARE CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P
500® INDEX, |
but we
will not have any obligation to consider your interests in taking any corporate action that might affect the level of the S&P
500® Index.
| · | YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX — |
Payments on the Notes are not linked
to a basket composed of the Indices and are contingent upon the performance of each individual Index. Poor performance by any of
the Indices over the term of the Notes may negatively affect whether you will receive a Contingent Interest Payment on any Contingent
Interest Payment Date and your payment at maturity and will not be offset or mitigated by positive performance by the other Indices.
| · | YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST PERFORMING INDEX. |
| · | THE BENEFIT PROVIDED BY THE TRIGGER LEVEL MAY TERMINATE ON THE VALUATION DATE — |
If the Final Value of any Index is
less than its Trigger Value and the Notes have not been redeemed early, the benefit provided by the Trigger Value will terminate
and you will be fully exposed to any depreciation in the closing level of the Least Performing Index.
| · | THE OPTIONAL EARLY REDEMPTION FEATURE MAY FORCE A POTENTIAL EARLY EXIT — |
If your Notes are redeemed early, the
term of the Notes may be reduced to as short as approximately three months and you will not receive any Contingent Interest Payments
after the applicable Contingent Interest Payment Date. There is no guarantee that you would be able to reinvest the proceeds from
an investment in the Notes at a comparable return and/or with a comparable interest rate for a similar level of risk.
| · | YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN ANY INDEX OR HAVE ANY RIGHTS WITH
RESPECT TO THOSE SECURITIES. |
·
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION
STOCKS WITH RESPECT TO THE RUSSELL 2000® INDEX —
Small capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions.
| · | NON-U.S. SECURITIES RISK WITH RESPECT TO THE EURO STOXX 50®
INDEX — |
The
equity securities included in the EURO STOXX 50®
Index have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities
involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities.
Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about
U.S. companies that are subject to the reporting requirements of the SEC.
| · | NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES — |
The value
of your Notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity
securities included in the EURO STOXX 50®
Index are based, although any currency fluctuations could affect the performance of the EURO STOXX 50®
Index.
| · | THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS COUPON BARRIER OR TRIGGER LEVEL IS
GREATER IF THE LEVEL OF THAT INDEX IS VOLATILE. |
The Notes will not be listed on any
securities exchange. Accordingly, 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. You may not be able to sell your 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.
PS-5 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
| · | 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 — |
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. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your Notes during this initial period may be lower than the value of the Notes as published by JPMS (and which may be
shown on your customer account statements).
| · | SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES — |
Any secondary market prices of the
Notes will likely be lower than the original issue price of the Notes because, among other things, secondary market prices take
into account our secondary market credit spreads for structured debt issuances and, also, because secondary market prices (a) exclude
selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the
original issue price of the Notes. As a result, the price if any, at which JPMS will be willing to buy the 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.
| · | 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 values of the Indices. 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. See “Risk Factors — Risks Relating to the Estimated Value
of Secondary Market Prices of the Notes — Secondary market prices of the Notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Indices
The S&P 500® Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500® Index, see “Equity Index Descriptions — The S&P 500® Index”
in the accompanying underlying supplement.
PS-6 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
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 “Equity Index Descriptions — The Russell 2000® Index”
in the accompanying underlying supplement.
The EURO STOXX 50® Index consists
of 50 component stocks of market sector leaders from within the Eurozone. The EURO STOXX 50® Index and STOXX®
are the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the
“Licensors”), which are used under license. The Notes based on the EURO STOXX 50® Index are in no way
sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors and neither STOXX Limited nor any of its Licensors shall
have any liability with respect thereto. For additional information about the EURO STOXX 50® Index, see “Equity
Index Descriptions — The EURO STOXX 50® Index” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 8, 2010 through April 10, 2015. The closing
level of the S&P 500® Index on April 16, 2015 was 2,104.99. The closing level of the Russell 2000®
Index on April 16, 2015 was 1,272.898. The closing level of the EURO STOXX 50® Index on April 16, 2015 was 3,751.72.
We obtained the closing levels below from the Bloomberg Professional® service (“Bloomberg”), without
independent verification. Although Russell Investments (“Russell”) publishes the official closing levels of the Russell
2000® Index to six decimal places, Bloomberg publishes the closing levels of the Russell 2000® Index
to only three decimal places.
The historical closing levels of each Index
should not be taken as an indication of future performance, and no assurance can be given as to the closing level of any Index
on any Observation Date. We cannot give you assurance that the performance of the Indices will result in the return of any of your
principal amount or the payment of any interest.
PS-7 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. In determining our
reporting responsibilities we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with
associated contingent coupons and (ii) any Contingent Interest Payments as ordinary income, as described in the section entitled
“Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid
Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement no. 4a-I. Based on the advice
of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other
reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes
could be materially affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal
income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether
to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number
of
PS-8 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
related topics, including the character of income or loss with respect to these instruments and the relevance of factors such
as the nature of the underlying property to which the instruments are linked. While the notice requests comments on appropriate
transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues
could materially affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult
your tax adviser regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative
treatments and the issues presented by this notice.
Non-U.S. Holders — Tax Considerations.
The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to
take a position that Contingent Interest Payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is
provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible
reduction of that rate under an applicable income tax treaty), unless income from your Notes is effectively connected with your
conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment
in the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Notes in light of your particular circumstances.
FATCA. Withholding under legislation
commonly referred to as “FATCA” could apply to payments on the Notes, and (if they are recharacterized, in whole or
in part, as debt instruments) could also apply to the payment of gross proceeds of a sale of a Note occurring after December 31,
2016 (including an early redemption or redemption at maturity). You should consult your tax adviser regarding the potential application
of FATCA to the Notes.
In the event of any withholding on the Notes,
we will not be required to pay any additional amounts with respect to amounts so withheld.
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.
JPMS’s estimated value does not represent
future values of the Notes and may differ from others’ estimates. 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.
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. A portion of the profits realized in hedging our obligations under the Notes may be
allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging
profits. 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.
PS-9 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the Notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the Notes will be impacted by many economic and market factors” in
the accompanying product 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. 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. This initial predetermined time
period 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 “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
Notes and “The Indices” in this pricing supplement for a description of the market exposure provided by the Notes.
The original issue price of the Notes is
equal to JPMS’s estimated value of the Notes plus the selling commissions paid to 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.
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 and underlying supplement no. 1a-I dated November 7, 2014. This pricing supplement, together with the documents listed
below, contains the terms of the Notes, 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 and “Risk Factors” in the accompanying underlying supplement no. 1a-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.
PS-10 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
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.
PS-11 | Structured Investments
Contingent Coupon Callable Yield Notes Linked to the
Least Performing of the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50®
Index. |
|
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