CALCULATION OF REGISTRATION FEE |
Title
of Each Class of
Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
Notes |
$1,200,000 |
$139.44 |
Registration Statement No.
333-199966; Rule 424(b)(2)
April
17, 2015
JPMorgan Chase & Co.
Structured Investments
$1,200,000
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index due October 24, 2016
| · | The notes are designed for investors who seek a higher interest rate than the yield on a conventional debt security with the
same maturity issued by us. The notes will pay 5.60% per annum interest over the term of the notes, assuming no early
redemption, payable at a rate of 1.40% per quarter. |
| · | The notes may be redeemed early, in whole but not in part, at our option on any of the Interest Payment Dates (other than the
final Interest Payment Date). |
| · | Investors in the notes should be willing to accept the risk of losing some or all of their principal. |
| · | Investors should also be willing to forgo dividend payments, in exchange for 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 $10,000 and integral multiples of $1,000 in excess thereof |
| · | The notes priced on April 17, 2015 and are expected to settle on or about April 24, 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-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, 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 |
$15 |
$985 |
Total |
$1,200,000 |
$18,000 |
$1,182,000 |
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2)
JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions of $15.00 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. |
The estimated value of the notes as determined by JPMS,
when the terms of the notes were set, was $969.50 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. 607 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 Russell 2000® Index (Bloomberg ticker: RTY) and the EURO STOXX 50® Index (Bloomberg ticker: SX5E) |
Interest Payments:
If the notes have not been previously redeemed early, you will
receive on the applicable Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to $14.00 (equivalent
to an Interest Rate of 5.60% per annum, payable at a rate of 1.40% per quarter). |
Interest Rate: 5.60% per annum, payable at a rate of 1.40% per quarter |
Trigger Value: With respect to each Index, 70.00% of its Initial Value, which is 876.3006 for the Russell 2000® Index and 2,571.835 for the EURO STOXX 50® Index |
Pricing Date: April 17, 2015 |
Original Issue Date (Settlement Date): On or about April 24, 2015 |
Review Dates*: July 17, 2015, October 19, 2015, January 19, 2016, April 18, 2016, July 18, 2016 and October 17, 2016 (final Review Date) |
Interest Payment Dates*: July 24, 2015, October 26, 2015, January 26, 2016, April 25, 2016, July 25, 2016 and the Maturity Date |
Maturity Date*: October 24, 2016 |
* 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 |
Lesser Performing Index: The Index with the Lesser Performing Index Return |
Lesser Performing Index Return: The lower of the Index Returns of the Indices |
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 1,251.858 for the Russell 2000® Index and 3,674.05 for the EURO STOXX 50® Index |
Final Value: With respect to each Index, the closing level of that Index on the final Review Date |
Early Redemption:
We, at our election, may redeem the notes early, in whole but
not in part, on any of the Interest Payment Dates (other than the final Interest Payment Date) at a price, for each $1,000 principal
amount note, equal to $1,000 plus any accrued and unpaid 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 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 Interest Payment applicable to the Maturity Date.
If the notes
have not been redeemed early and the final Value of either Index is less than its Trigger Value, you
will receive a cash payment at maturity, for each $1,000 principal amount note, equal to the Interest Payment applicable to the
Maturity Date plus:
$1,000 + ($1,000 × Lesser Performing
Index Return)
If the notes have not been redeemed early and the Final Value
of either 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
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
How
the Notes Work
Total
Interest Payments
The table below illustrates the hypothetical total
Interest Payments per $1,000 principal amount note over the term of the notes based on the Interest Rate of 5.60% per annum, depending
on how many Interest Payments are made prior to early redemption or maturity.
Number of Interest Payments |
Total Interest Payments |
6 |
$84.00 |
5 |
$70.00 |
4 |
$56.00 |
3 |
$42.00 |
2 |
$28.00 |
1 |
$14.00 |
0 |
$0.00 |
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical indices, assuming a range of performances for the hypothetical Lesser Performing Index on
the Review Dates. The hypothetical payments set forth below assume the following:
| · | the notes have not been redeemed early; |
| · | an Initial Value for the Lesser Performing Index of 100.00; |
| · | a Trigger Value for the Lesser Performing Index of 70.00 (equal to 70.00%
of its hypothetical Initial Value); and |
| · | an Interest Rate of 5.60% per annum (payable at a rate of 1.40% per quarter). |
The hypothetical Initial Value of the Lesser Performing
Index of 100.00 has been chosen for illustrative purposes only and may not represent the actual Initial Value of either 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.
PS-2 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
Example 1 — Notes have NOT been redeemed
early and the Final Value of the Lesser Performing Index is greater than or equal to its Trigger Value.
Date |
Closing Level of Lesser Performing Index |
Payment (per $1,000 principal amount note) |
First Review Date |
95.00 |
$14.00 |
Second Review Date |
85.00 |
$14.00 |
Third Review Date |
30.00 |
$14.00 |
Fourth Review Date |
50.00 |
$14.00 |
Fifth Review Date |
65.00 |
$14.00 |
Final Review Date |
90.00 |
$1,014.00 |
|
Total Payment |
$1,084.00 (8.40% return) |
Because the notes have not been redeemed early
and the Final Value of the Lesser Performing Index is greater than or equal to its Trigger Value, the payment at maturity, for
each $1,000 principal amount note, will be $1,014.00 (or $1,000 plus the Interest Payment applicable to the final Review
Date). When added to the Interest Payments received with respect to the prior Review Dates, the total amount paid, for each $1,000
principal amount note, is $1,084.00.
Example 2 — Notes have NOT been redeemed
early and the Final Value of the Lesser Performing Index is less than its Trigger Value.
Date |
Closing Level of Lesser Performing Index |
Payment (per $1,000 principal amount note) |
First Review Date |
55.00 |
$14.00 |
Second Review Date |
50.00 |
$14.00 |
Third Review Date |
40.00 |
$14.00 |
Fourth Review Date |
50.00 |
$14.00 |
Fifth Review Date |
60.00 |
$14.00 |
Final Review Date |
50.00 |
$514.00 |
|
Total Payment |
$584.00 (-41.60% return) |
Because the notes have not been redeemed early
and the Final Value of the Lesser Performing Index is less than its Trigger Value and the Lesser Performing Index Return is -50.00%,
the payment at maturity will be $514.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] + $14.00=
$514.00
When added to the Interest Payments received with
respect to the prior Review Dates, the total amount paid, for each $1,000 principal amount note, is $584.00.
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 either 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 Lesser
PS-3 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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.
| · | 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 THE INTEREST PAYMENTS PAID OVER
THE TERM OF THE NOTES, |
regardless of any appreciation in the
value of either Index, which may be significant. You will not participate in any appreciation in the value of either 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 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.
| · | YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX — |
Your payment at maturity is not linked
to a basket composed of the Indices and is contingent upon the performance of each individual Index. Poor performance by either
of the Indices may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the
other Index.
| · | YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING INDEX. |
| · | THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE — |
If the Final Value of either 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 Lesser 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 Interest Payments after
the applicable 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 EITHER 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 — |
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 — |
PS-4 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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 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 TRIGGER VALUE 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.
| · | 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
PS-5 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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 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. For additional information about the EURO STOXX 50®
Index, see “Equity Index Descriptions — The EURO STOXX 50® Index” in the accompanying underlying
supplement.
PS-6 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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 17, 2015. The closing
level of the Russell 2000® Index on April 17, 2015 was 1,251.858. The closing level of the EURO STOXX 50®
Index on April 17, 2015 was 3,674.05. We obtained the closing levels below from the Bloomberg Professional® service
(“Bloomberg”), without independent verification. Although Russell Investments 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 either Index
on the final Review 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.
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. Based on the advice
of Sidley Austin LLP, our special tax counsel, and on current market conditions, in determining our reporting responsibilities
we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x) a Put Option written by you that
is terminated if an Early Redemption occurs and that, if not terminated, in circumstances where the
PS-7 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
payment due at maturity is
less than $1,000 (excluding accrued and unpaid interest), requires you to pay us an amount equal to $1,000 multiplied by the absolute
value of the Lesser Performing Index Return and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential
obligation under the Put Option. By purchasing the notes, you agree (in the absence of an administrative determination or judicial
ruling to the contrary) to follow this treatment and the allocation described in the following paragraph. However, there are other
reasonable treatments that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing
and character of any income or loss on the notes could be significantly and adversely affected. In addition, in 2007, the Treasury
Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward
contracts” and similar instruments. While it is not clear whether the notes would be viewed as similar to the typical prepaid
forward contract described in the notice, it is possible that 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. The notice focuses on a number of issues, the most relevant of which for holders of the notes are the character of income
or loss (including whether the Put Premium might be currently included as ordinary income) and the degree, if any, to which income
realized by Non-U.S. Holders should be subject to withholding tax.
In determining our reporting responsibilities,
we intend to treat 18.57% of each interest payment as interest on the Deposit and 81.43% of each interest payment as Put Premium.
Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated as interest
on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale or settlement,
including a settlement following an Early Redemption.
Non-U.S. Holders — Additional Tax
Considerations. Non-U.S. Holders should also note that final Treasury regulations were released on legislation that imposes
a withholding tax of 30% on payments to certain foreign entities unless information reporting and diligence requirements are met,
as described in “Material U.S. Federal Income Tax Consequences-FATCA” in the accompanying product supplement no. 4a-I.
Pursuant to the final regulations, such withholding tax will generally apply to obligations that are issued on or after July 1,
2014; therefore, the notes will generally be subject to this withholding tax. However, the withholding tax described above will
not apply to payments of gross proceeds from the sale, exchange or other disposition (including upon maturity) of the notes made
before January 1, 2017.
Both U.S. and Non-U.S. Holders should consult
their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue
price should also consult their tax advisers with respect to the tax consequences of an investment in the notes, including possible
alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
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, if any, paid to
PS-8 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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 sold to brokerage accounts 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.
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.
Supplemental
Plan of Distribution
We expect that delivery of the notes will be made
against payment for the notes on or about the settlement date set forth on the front cover of this pricing supplement, which will
be the fifth business day following the expected pricing date of the notes (this settlement cycle being referred to as T+5). Under
Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle
in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade
notes on the pricing date or the succeeding business day will be required to specify an alternate settlement cycle at the time
of any such trade to prevent a failed settlement and should consult their own advisors.
Validity
of the Notes
In the opinion of Sidley Austin LLP,
as counsel to the Company, when the notes offered by this pricing supplement have been executed and issued by the Company and authenticated
by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding
obligations of the Company, 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, the laws
of the State of New York and the General Corporation Law of the State of Delaware as in effect on the date hereof. In addition,
this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture
and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel dated November 7, 2014,
which has been filed as Exhibit 5.3 to the Company’s registration statement on Form S-3 filed with the Securities and Exchange
Commission on November 7, 2014.
PS-9 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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.
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-10 | Structured Investments
Callable Yield Notes Linked to the Lesser Performing
of the Russell 2000® Index and the EURO STOXX 50® Index |
|
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