CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities Offered |
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Maximum Aggregate Offering Price |
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Amount of Registration Fee |
Notes |
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$1,840,000 |
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$213.81 |
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May 26, 2015 |
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Registration Statement No. 333-199966; Rule 424(b)(2) |
JPMorgan Chase & Co.
Structured Investments
$1,840,000
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the S&P 500® Index, the Russell 2000® Index and the EURO STOXX 50® Index
due November 29, 2018
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The notes are designed for investors who seek a Contingent Interest Payment with respect to each Quarterly Monitoring Period during which, on each day, 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 65.00% of its Initial Value, which we refer to as an Interest Barrier. |
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The notes will be automatically called if the closing level of each Index on any Review Date (other than the first and final Review Dates) is greater than or equal to its Initial Value. |
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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 Quarterly Monitoring Periods.
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Investors should also be willing to forgo fixed interest and dividend payments, in exchange for the opportunity to receive Contingent Interest Payments. |
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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. |
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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. |
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Minimum denominations of $1,000 and integral multiples thereof |
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The notes priced on May 26, 2015 and are expected to settle on or about May 29, 2015. |
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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-7 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.
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Price to Public (1) |
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Fees and Commissions (2) |
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Proceeds to Issuer |
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Per note |
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$1,000 |
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$20 |
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$980 |
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Total |
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$1,840,000 |
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$36,800 |
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$1,803,200 |
(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 $20.00 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 $962.30 per $1,000
principal amount note. See JPMSs 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.
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Pricing supplement no. 787 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 |
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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 automatically called and the closing level of each Index on each day during a Quarterly Monitoring Period is greater
than or equal to its Interest Barrier, you will receive on the applicable Interest Payment Date for each $1,000 principal amount note a Contingent Interest Payment equal to $20.50 (equivalent to a Contingent Interest Rate of 8.20% per annum,
payable at a rate of 2.05% per quarter).
If the closing level of any Index on any day during a Quarterly Monitoring Period is less than its Interest Barrier,
no Contingent Interest Payment will be made with respect to that Quarterly Monitoring Period.
Contingent
Interest Rate: 8.20% per annum, payable at a rate of 2.05% per quarter
Interest Barrier /
Trigger Value: With respect to each Index, 65.00% of its Initial Value, which was 1,367.73 for the S&P 500® Index, 805.1914 for the Russell 2000® Index and 2,352.545 for the EURO STOXX 50® Index
Pricing Date: May 26, 2015
Original Issue Date
(Settlement Date): On or about May 29, 2015
Quarterly Monitoring Periods: The period
from but excluding the Pricing Date to and including the first Review Date, and each successive period from but excluding a Review Date to and including the next succeeding Review Date.
Review Dates*: August 26, 2015, November 27, 2015, February 26,
2016, May 26, 2016, August 26, 2016, November 28, 2016, February 27, 2017, May 25, 2017, August 28, 2017, November 27, 2017, February 26, 2018, May 29,
2018, August 27, 2018 and November 26, 2018 (final Review Date)
Interest Payment Dates*:
August 31, 2015, December 2, 2015, March 2, 2016, June 1, 2016, August 31, 2016, December 1, 2016, March 2, 2017, May 31, 2017, August 31,
2017, November 30, 2017, March 1, 2018, June 1, 2018, August 30, 2018 and the Maturity Date
Maturity Date*: November 29, 2018
Call Settlement
Date*: If the notes are automatically called on any Review Date (other than the first and final Review Dates), the first Interest Payment Date immediately following that Review Date
* 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
Automatic Call:
If the closing level of each Index on any Review Date (other than the first and final Review Dates) is greater than or equal to its Initial Value, the notes will be
automatically called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Contingent Interest Payment, if any, applicable to the Quarterly Monitoring Period ending on that Review Date, payable
on the applicable Call Settlement Date. No further payments will be made on the notes.
Payment at
Maturity:
If the notes have not been automatically called 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, if any, applicable to the final Quarterly Monitoring Period.
If the notes have not been automatically called 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 automatically called and the Final Value of any Index is less than its Trigger Value, you will lose more than 35.00% of your principal
amount at maturity and could lose all of your principal amount at maturity.
Least Performing Index:
The Index with the Least Performing Index Return
Least Performing Index Return: The lowest 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 2,104.20 for the S&P 500® Index, 1,238.756 for the Russell 2000® Index and 3,619.30 for the EURO STOXX 50® Index
Final Value: With respect to each Index,
the closing level of that Index on the final Review Date
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PS-1 | Structured Investments Auto Callable Contingent Interest 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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How the Notes Work
Payment in Connection with the First
Quarterly Monitoring Period
Payments in Connection with Quarterly Monitoring Periods (Other Than the First and Final Quarterly
Monitoring Periods)
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PS-2 | Structured Investments Auto Callable Contingent Interest 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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Payment at Maturity If the Notes Have Not Been Automatically Called
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 8.20% per annum, depending on how many Contingent Interest Payments are made prior to automatic call or maturity.
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Number of Contingent Interest
Payments |
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Total Contingent Interest
Payments |
14 |
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$287.00 |
13 |
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$266.50 |
12 |
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$246.00 |
11 |
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$225.50 |
10 |
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$205.00 |
9 |
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$184.50 |
8 |
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$164.00 |
7 |
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$143.50 |
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$123.00 |
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$102.50 |
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$82.00 |
3 |
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$61.50 |
2 |
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$41.00 |
1 |
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$20.50 |
0 |
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$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 Review Dates and during the Quarterly Monitoring Periods. Each hypothetical payment set forth below assumes that the closing
level of each Index that is not the Least Performing Index (i) on each Review Date is greater than or equal to its Initial Value (and therefore its Interest Barrier and Trigger Value) and (ii) on each day during each Quarterly Monitoring
Period is greater than or equal to its Interest Barrier.
In addition, the hypothetical payments set forth below assume the following:
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PS-3 | Structured Investments Auto Callable Contingent Interest 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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An Initial Value for the Least Performing Index of 100.00; |
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An Interest Barrier and a Trigger Value for the Least Performing Index of 65.00 (equal to 65.00% of its hypothetical Initial Value); and |
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A Contingent Interest Rate of 8.20% per annum (payable at a rate of 2.05% 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 are automatically called on the second Review Date.
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Date |
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Closing Level of Least
Performing Index on Review Date |
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Lowest Closing Level of Least
Performing Index During Quarterly Monitoring Period |
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Payment (per $1,000 principal amount note) |
First Review Date |
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105.00 |
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95.00 |
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$20.50 |
Second review Date |
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105.00 |
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95.00 |
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$1,020.50 |
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Total Payment |
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$1,041.00 (4.10% return) |
Because the closing level of each Index on the second Review Date is greater than or equal to its Initial Value and the closing level of
the Least Performing Index on each day during the second Quarterly Monitoring Period is greater than or equal to its Interest Barrier, the notes will be automatically called for a cash payment, for each $1,000 principal amount note, of $1,020.50 (or
$1,000 plus the Contingent Interest Payment applicable to the second Quarterly Monitoring Period), payable on the applicable Call Settlement Date. The notes are not automatically callable before the second Review Date, even though the closing
level of each Index on the first Review Date is greater than its Initial Value. When added to the Contingent Interest Payment received with respect to the prior Quarterly Monitoring Period, the total amount paid, for each $1,000 principal amount
note, is $1,041.00. No further payments will be made on the notes.
Example 2 Notes are automatically called on the third Review
Date.
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Date |
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Closing Level of Least
Performing Index on Review Date |
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Lowest Closing Level of Least
Performing Index During Quarterly Monitoring Period |
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Payment (per $1,000 principal amount note) |
First Review Date |
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95.00 |
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90.00 |
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$20.50 |
Second Review Date |
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70.00 |
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50.00 |
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$0 |
Third Review Date |
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105.00 |
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60.00 |
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$1,000.00 |
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Total Payment |
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$1,020.50 (2.05% return) |
Because the closing value of each Index on the third Review Date is greater than or equal to its Initial Value but the closing level of
the Least Performing Index on at least one day during the third Quarterly Monitoring Period is less than its Interest Barrier, the notes will be automatically called for a cash payment, for each $1,000 principal amount note, of $1,000.00, payable on
the applicable Call Settlement Date. When added to the Contingent Interest Payments received with respect to the prior Quarterly Monitoring Periods, the total amount paid, for each $1,000 principal amount note, is $1,020.50. No further payments will
be made on the notes.
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PS-4 | Structured Investments Auto Callable Contingent Interest 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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Example 3 Notes have NOT been automatically called, the Final Value of the Least Performing
Index is greater than or equal to its Trigger Value and the closing level of the Least Performing Index on each day during the final Quarterly Monitoring Period is greater than or equal to its Interest Barrier.
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Date |
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Closing Level of Least
Performing Index on Review Date |
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Lowest Closing Level of Least
Performing Index During Quarterly Monitoring Period |
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Payment (per $1,000 principal amount note) |
First Review Date |
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95.00 |
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90.00 |
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$20.50 |
Second Review Date |
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85.00 |
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80.00 |
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$20.50 |
Third through thirteenth Review Dates |
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Less than Initial Value |
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Less than Interest Barrier |
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$0 |
Final Review Date |
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90.00 |
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90.00 |
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$1,020.50 |
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Total Payment |
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$1,061.50 (6.15% return) |
Because the notes have not been automatically called, the Final Value of the Least Performing Index is greater than or equal to its
Trigger Value and the closing level of the Least Performing Index on each day during the final Quarterly Monitoring Period is greater than or equal to its Interest Barrier, the payment at maturity, for each $1,000 principal amount note, will be
$1,020.50 (or $1,000 plus the Contingent Interest Payment applicable to the final Quarterly Monitoring Period). When added to the Contingent Interest Payments received with respect to the prior Quarterly Monitoring Periods, the total amount
paid, for each $1,000 principal amount note, is $1,061.50.
Example 4 Notes have NOT been automatically called and the Final Value
of the Least Performing Index is less than its Trigger Value.
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Date |
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Closing Level of Least
Performing Index on Review Date |
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Lowest Closing Level of Least
Performing Index during Quarterly Monitoring Period |
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Payment (per $1,000 principal amount note) |
First Review Date |
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60.00 |
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55.00 |
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$0 |
Second Review Date |
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55.00 |
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50.00 |
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$0 |
Third through thirteenth Review Dates |
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Less than Initial Value |
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Less than Interest Barrier |
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$0 |
Final Review Date |
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50.00 |
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50.00 |
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$500.00 |
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Total Payment |
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$500.00 (-50.00% return) |
Because the notes have not been automatically called, the Final Value of the Least Performing Index is less than its Trigger Value (and,
therefore, the closing level of the Least Performing Index on at least one day during the final Quarterly Monitoring Period is less than its Interest Barrier) and the Least Performing Index Return is -50.00%, the payment at maturity will be $500.00
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 or until automatically called.
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.
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PS-5 | Structured Investments Auto Callable Contingent Interest 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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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.
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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 automatically called 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 35.00% of your principal amount at maturity and could lose all of your principal amount at maturity.
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THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL |
If the notes have not been automatically called, we will make a Contingent Interest Payment with respect to a Quarterly Monitoring Period only if the
closing level of each Index on each day during that Quarterly Monitoring Period is greater than or equal to its Interest Barrier. If the closing level of any Index on any day during a Quarterly Monitoring Period is less than its Interest Barrier, no
Contingent Interest Payment will be made with respect to that Quarterly Monitoring Period. Accordingly, if the closing level of any Index on any day during each Quarterly Monitoring Period is less than its Interest Barrier, you will not receive any
interest payments over the term of the notes.
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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.
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THE OPPORTUNITY TO RECEIVE A CONTINGENT INTEREST PAYMENT WITH RESPECT TO ANY QUARTERLY MONITORING PERIOD MAY TERMINATE ON ANY DAY DURING THAT QUARTERLY MONITORING PERIOD |
If the closing level of any Index on any day during a Quarterly Monitoring Period is less than its Interest Barrier, no Contingent Interest Payment will
be made with respect to that Quarterly Monitoring Period, even if the closing level of each Index on each of the other days during that Quarterly Monitoring Period, including the related Review Date, is greater than or equal to its Interest Barrier.
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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 level of any Index, which may be significant. You will not participate in any appreciation in the level 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 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.
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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.
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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 Interest Payment Date, and your payment at maturity and will not be offset or mitigated by positive performance by the other Indices.
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PS-6 | Structured Investments Auto Callable Contingent Interest 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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YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST PERFORMING INDEX. |
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THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE |
If
the Final Value of any Index is less than its Trigger Value and the notes have not been automatically called, 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.
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THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT |
If your notes are
automatically called, the term of the notes may be reduced to as short as approximately six months and you will not receive any Contingent Interest Payments after the applicable Call Settlement 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.
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YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN ANY INDEX OR HAVE ANY RIGHTS WITH RESPECT TO THOSE SECURITIES. |
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AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH RESPECT TO THE RUSSELL 2000® INDEX
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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.
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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.
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NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES WITH RESPECT TO 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 EURO STOXX 50® Index are based, although any currency fluctuations could affect the performance of the EURO STOXX 50®
Index.
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THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS INTEREST BARRIER OR 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.
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JPMSS ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES |
JPMSs estimated value is only an estimate using several factors. The original issue price of the notes exceeds JPMSs 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 JPMSs Estimated Value of the Notes in this pricing supplement.
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JPMSS ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS ESTIMATES |
See JPMSs Estimated Value of the Notes in this pricing supplement.
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PS-7 | Structured Investments Auto Callable Contingent Interest 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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JPMSS 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 JPMSs 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 JPMSs Estimated Value of the Notes in this pricing supplement.
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN JPMSS THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD
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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).
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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.
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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.
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 Indices in the accompanying underlying supplement.
The EURO STOXX 50® Index consists of 50 component stocks of market sector leaders from within the Eurozone. The
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 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.
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PS-8 | Structured Investments Auto Callable Contingent Interest 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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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 May 22, 2015.
The closing level of the S&P 500® Index on May 26, 2015 was 2,104.20. The closing level of the Russell 2000® Index on
May 26, 2015 was 1,238.756. The closing level of the EURO STOXX 50® Index on May 26, 2015 was 3,619.30. We obtained the closing levels above and 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 any
Index on any Review Date or any day during any Quarterly Monitoring Period. 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.
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PS-9 | Structured Investments Auto Callable Contingent Interest 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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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 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 automatic call 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.
JPMSs Estimated Value of the Notes
JPMSs 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
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PS-10 | Structured Investments Auto Callable Contingent Interest 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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rate for structured debt described below, and (2) the derivative or derivatives underlying the economic terms of the notes. JPMSs 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 JPMSs estimated value generally represents a discount from the credit spreads for our
conventional fixed-rate debt. For additional information, see Selected Risk Considerations JPMSs 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 JPMSs 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, JPMSs 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.
JPMSs 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 JPMSs 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.
JPMSs 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, if any, 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 JPMSs 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 JPMSs 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 term sheet for an illustration of the risk-return profile of the notes and The Indices in this term sheet for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to JPMSs 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
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PS-11 | Structured Investments Auto Callable Contingent Interest 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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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 trustees 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.
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):
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Product supplement no. 4a-I dated November
7, 2014: |
http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf
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Underlying supplement no. 1a-I dated November
7, 2014: |
http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf
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Prospectus supplement and prospectus, each dated November
7, 2014: |
http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf
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.
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PS-12 | Structured Investments Auto Callable Contingent Interest 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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