CALCULATION OF REGISTRATION FEE
Title
of Each Class of Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
Notes
|
$5,403,040 |
$544.09 |
|
November
2015
Pricing Supplement No. 1505
Registration Statement No. 333-199966
Dated November 20, 2015
Filed pursuant to Rule 424(b)(2)
|
Structured Investments
Opportunities in U.S. Equities
Contingent Income Callable Securities
due November 25, 2020
All Payments on the Securities Based on the Worst
Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Contingent Income Callable Securities do not guarantee the payment
of interest or the repayment of principal. Instead, the securities offer the opportunity for investors to earn a contingent
quarterly payment equal to 1.5925% of the stated principal amount with respect to each determination date on which the closing
level of each of the S&P 500® Index and the Russell 2000® Index is greater than or
equal to 60% of its initial index value, which we refer to as a downside threshold level. However, if, on any determination
date, the closing level of either underlying index is less than its downside threshold level, you will not receive any contingent
quarterly payment for the related quarterly period. In addition, we will have the right to redeem the securities at our
discretion on any contingent payment date (other than the first and final contigent payment dates) for an early redemption
payment equal to the stated principal amount plus any contingent quarterly payment with respect to the related determination
date. Any early redemption of the securities will be at our discretion and will not automatically occur based on the performance
of the underlying indices. If the securities have not been redeemed prior to maturity and the final index value of each
underlying index is greater than or equal to its downside threshold level, the payment at maturity due on the securities will be
the stated principal amount and the contingent quarterly payment with respect to the final determination date. If, however,
the securities have not been redeemed prior to maturity and the final index value of either underlying index is less than
its downside threshold level, you will be exposed to the decline in the worst performing of the underlying indices, as compared
to its initial index value, on a 1-to-1 basis and will receive a cash payment at maturity that is less than 60% of the stated principal
amount of the securities and could be zero. The securities are for investors who are willing to risk their principal and seek an
opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving few or no contingent quarterly
payments and also the risk of receiving a cash payment at maturity that is significantly less than the stated principal amount
of the securities and could be zero. Accordingly, investors could lose their entire initial investment in the securities.
Because all payments on the securities are based on the worst performing of the underlying indices, a decline beyond the downside
threshold level of either underlying index will result in few or no contingent quarterly payments and/or significant loss of your
initial investment, even if the other underlying index appreciates or has not declined as much. Investors will not participate
in any appreciation of either underlying index. The securities are unsecured and unsubordinated obligations of JPMorgan Chase &
Co., issued as part of JPMorgan Chase & Co.’s Medium-Term Notes, Series E, program. Any payment on the securities
is subject to the credit risk of JPMorgan Chase & Co.
FINAL TERMS |
|
Issuer: |
JPMorgan Chase & Co. |
Underlying indices: |
S&P 500® Index (the “SPX Index”) and Russell 2000® Index (the “RTY Index”) (each an “underlying index”) |
Aggregate principal amount: |
$5,403,040 |
Optional early redemption: |
We, at our discretion, may redeem the securities early, in whole but not in part, on any of the contingent payment dates (other than the first and final contingent payment dates) for the early redemption payment. If we intend to redeem your securities early, we will deliver notice to The Depository Trust Company, or DTC, at least three business days before the applicable contingent payment date. Any early redemption of the securities will be at our discretion and will not automatically occur based on the performance of the underlying indices. No further payments will be made on the securities after they have been redeemed. No further payments will be made on the securities once they have been redeemed. |
Early redemption payment: |
The early redemption payment will be an amount equal to (i) the stated principal amount plus (ii) any contingent quarterly payment with respect to the related determination date. |
Contingent quarterly payment: |
·
If, on any determination date, the closing level of each underlying index is greater than
or equal to its downside threshold level, we will pay a contingent quarterly payment of $0.1593 (1.5925% of the stated principal
amount) per security on the related contingent payment date.
·
If, on any determination date, the closing level of either underlying index is less
than its downside threshold level, no contingent quarterly payment will be payable with respect to that determination date. It
is possible that one or both of the underlying indices will remain below their respective downside threshold levels for extended
periods of time or even throughout the entire term of the securities so that you will receive few or no contingent quarterly payments. |
Payment at maturity: |
· If the final index value of each underlying index is greater than or equal to its downside threshold level: |
(i) the stated principal amount plus (ii) the contingent quarterly payment with respect to the final determination date |
|
· If the final index value of either underlying index is less than its downside threshold level: |
(i) the stated principal amount times (ii) the index performance factor of the worst performing underlying index. This cash payment will be less than 60% of the stated principal amount of the securities and could be zero. |
Downside threshold level: |
With respect to the SPX Index: 1,253.502, which is equal to 60% of its initial index value
With respect to the RTY Index: 705.0906, which is equal to 60% of its initial index value |
Stated principal amount: |
$10 per security |
Issue price: |
$10 per security (see “Commissions and issue price” below) |
Pricing date: |
November 20, 2015 |
Original issue date (settlement date): |
November 25, 2015 |
Maturity date: |
November 25, 2020, subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I |
|
Terms continued on the following page |
Agent: |
J.P. Morgan Securities LLC (“JPMS”) |
Commissions and issue price: |
|
Price to public(1) |
Fees and commissions |
Proceeds to issuer |
Per security |
|
$10.00 |
$0.25(2) |
$9.70 |
|
|
|
$0.05(3) |
|
Total |
|
$5,403,040.00 |
$162,091.20 |
$5,240,948.80 |
|
|
|
|
|
|
| (1) | See “Additional Information about the Securities — Supplemental use of proceeds and hedging” in this document
for information about the components of the price to public of the securities. |
| (2) | JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions of $0.25 per $10 stated principal
amount security it receives from us to Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”). See “Plan
of Distribution (Conflicts of Interest)” beginning on page PS-87 of the accompanying product supplement no. 4a-I. |
| (3) | Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each
$10 stated principal amount security |
The estimated value of the securities on the pricing
date as determined by JPMS was $9.504 per $10 stated principal amount security. See “Additional Information about the
Securities — JPMS’s estimated value of the securities” in this document for additional information.
Investing in the securities 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 “Risk Factors” beginning on page 10 of
this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of
this document or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
The securities 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.
You should
read this document together with the related product supplement no. 4a-I, underlying
supplement no. 1a-I, prospectus supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also
see “Additional Information about the Securities” at the end of this document.
Product
supplement no. 4a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf
Underlying supplement no. 1a-I dated November
7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf
Prospectus supplement and prospectus, each dated
November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008397/e61348_424b2.pdf
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Terms continued from previous page: |
Initial index value: |
With respect to the SPX Index: 2,089.17, which is its closing level on the pricing date
With respect to the RTY Index: 1,175.151, which is its closing level on the pricing date |
Final index value: |
With respect to each underlying index, the closing level on the final determination date |
Worst performing underlying index: |
The underlying index with the worst index performance factor |
Index performance factor: |
With respect to each underlying index, the final index value divided by the initial index value |
Determination dates: |
February 22, 2016, May 20, 2016, August 22, 2016, November 21, 2016, February 21, 2017, May 22, 2017, August 21, 2017, November 20, 2017, February 20, 2018, May 21, 2018, August 20, 2018, November 20, 2018, February 20, 2019, May 20, 2019, August 20, 2019, November 20, 2019, February 20, 2020, May 20, 2020, August 20, 2020 and November 20, 2020, subject to postponement for non-trading days and certain market disruption events. |
Contingent payment dates: |
With respect to each determination date other than the final determination date, the third business day after the related determination date. The payment of the contingent quarterly payment, if any, with respect to the final determination date will be made on the maturity date. |
CUSIP/ISIN: |
48127Y383 / US48127Y3835 |
Listing: |
The securities will not be listed on any securities exchange. |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Investment Summary
The Contingent Income Callable Securities
due November 25, 2020 Based on the Worst Performing of the S&P 500® Index and the Russell 2000®
Index, which we refer to as the securities, do not provide for the regular payment of interest. Instead, the securities provide
an opportunity for investors to earn a contingent quarterly payment, which is an amount equal to $0.1593 (1.5925% of the stated
principal amount) per security, with respect to each quarterly determination date on which the closing level of each underlying
index is greater than or equal to 60% of its initial index value, which we refer to as a downside threshold level. The contingent
quarterly payment, if any, will be payable quarterly on the relevant contingent payment date, which is the third business day after
the related determination date or, in the case of the contingent quarterly payment, if any, with respect to the final determination
date, the maturity date. If the closing level of either underlying index is less than its downside threshold level on any determination
date, investors will receive no contingent quarterly payment for the related quarterly period. It is possible that the closing
level of each underlying index could be below its downside threshold level on most or all of the determination dates so that you
will receive few or no contingent quarterly payments during the term of the securities. We refer to these payments as contingent,
because there is no guarantee that you will receive a payment on any contingent payment date. Even if both of the underlying indices
were to be at or above their respective downside threshold levels on some quarterly determination dates, one or both underlying
indices may fluctuate below their respective downside threshold level(s) on others.
In addition, we will have the right
to redeem the securities at our discretion on any contingent payment date (other than the first and final contingent payment
dates) for the early redemption payment equal to the stated principal amount plus any
contingent quarterly payment with respect to the related determination date. Any early redemption of the securities will be at
our discretion and will not automatically occur based on the performance of the underlying indices.
If the securities have not previously been redeemed and the final index value of each underlying index is greater than
or equal to its downside threshold level, the payment at maturity will be the sum of the stated principal amount and the contingent
quarterly payment with respect to the final determination date. However, if the securities have not previously been redeemed and
the final index value of either underlying index is less than its downside threshold level, investors will be exposed to the decline
in the worst performing underlying index, as compared to its initial index value, on a 1-to-1 basis. Under these circumstances,
the payment at maturity will be (i) the stated principal amount times (ii) the index performance factor of the worst performing
underlying index, which will be less than 60% of the stated principal amount of the securities and could be zero. Investors in
the securities must be willing to accept the risk of losing their entire principal and also the risk of receiving few or no contingent
quarterly payments over the term of the securities. In addition, investors will not participate in any appreciation of the underlying
indices.
Supplemental Terms of the Securities
For purposes of the accompanying product supplement, each
underlying index is an “Index.”
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities offer investors an opportunity to earn a contingent quarterly payment equal to 1.5925% of the stated principal
amount with respect to each determination date on which the closing level of each underlying index is greater than or equal
to 60% of its initial index value, which we refer to as a downside threshold level. The securities may be redeemed prior to
maturity for the stated principal amount per security plus the applicable contingent quarterly payment, and the payment
at maturity will vary depending on the final index value of each underlying index, as follows:
Scenario 1 |
On any contingent payment date (other
than the first and final contingent payment dates), we elect to redeem the securities.
§
The securities will be redeemed for (i) the stated principal amount plus (ii) any contingent quarterly payment with
respect to the related determination date.
§
Investors will not participate in any appreciation of either underlying index from its initial index value.
Any early redemption of the securities
will be at our discretion and will not automatically occur based on the performance of the underlying indices. It is more likely
that we will redeem the securities when it would otherwise be advantageous for you to continue to hold the securities. As such,
we will be more likely to redeem the securities when the closing level of each underlying index on the determination dates is at
or above its downside threshold level, which would otherwise result in an amount of interest payable on the securities that is
greater than instruments issued by us of a comparable maturity and credit rating trading in the market. In other words, we will
be more likely to redeem the securities when the securities are paying above-market interest.
If the securities are redeemed prior
to maturity, you will receive no more contingent quarterly payments and may be forced to reinvest in a lower interest rate environment.
Under these circumstances, you may not be able to reinvest the proceeds from an investment in the securities at a comparable return
for a similar level of risk. On the other hand, we will be less likely to exercise our redemption right when the closing level
of either underlying index on the determination dates is below its downside threshold level, such that you will receive no contingent
quarterly payments and/or that you will suffer a significant loss on your investment in the securities at maturity. Therefore,
if we do not exercise our redemption right, it is more likely that you will receive few or no contingent quarterly payments and
that you will suffer a significant loss on your investment at maturity. |
Scenario 2 |
The securities are not redeemed prior
to maturity, and the final index value of each underlying index is greater than or equal to its downside threshold level.
§
The payment due at maturity will be (i) the stated principal amount plus (ii) the contingent quarterly payment with
respect to the final determination date.
§
Investors will not participate in any appreciation of either underlying index from its initial index value. |
Scenario 3 |
The securities are not redeemed prior
to maturity, and the final index value of either underlying index is less than its downside threshold level.
§
The payment due at maturity will be (i) the stated principal amount times (ii) the index performance factor of the
worst performing underlying index.
Investors will lose some, and may lose
all, of their principal in this scenario. |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for the
securities depending on (1) the closing levels, (2) the final index values and (3) whether we exercise our option to redeem the
securities.
Diagram #1: First Determination Date
Diagram #2: Determination Dates (Other
Than the First and Final Determination Dates)
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Diagram #3: Payment at Maturity if No
Early Redemption Occurs
For more information about the payment upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 7.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly payment is payable with respect to a determination date, how to calculate the early redemption payment
if we elect to redeem the securities early and how to calculate the payment at maturity if the securities have not been redeemed
early. The following examples are for illustrative purposes only. Whether you receive a contingent quarterly payment will be determined
by reference to the closing level of each underlying index on each quarterly determination date and the amount you will receive
at maturity, if any, will be determined by reference to the final index value of each underlying index. Any early redemption of
the securities will be at our discretion and will not automatically occur based on the performance of the underlying indices. The
actual initial index value and downside threshold level for each underlying index will be provided in the pricing supplement. All
payments on the securities, if any, are subject to the credit risk of JPMorgan Chase & Co. The numbers in the hypothetical
examples below may have been rounded for the ease of analysis. The examples below are based on the following assumed terms:
Contingent quarterly payment: |
A contingent quarterly payment of $0.1593 per quarter per security will be paid on the securities on each contingent payment date but only if the closing level of each underlying index is at or above its downside threshold level on the related determination date. |
Early redemption: |
We, at our discretion, may redeem the securities early, in whole but not in part, on any of the contingent payment dates (other than the first and final contingent payment dates) for the early redemption payment equal to the stated principal amount plus the contingent quarterly payment with respect to the related determination date. |
Payment at maturity (if the securities have not been redeemed early): |
If the final index value of each underlying index is greater
than or equal to its downside threshold level: the stated principal amount and the contingent quarterly payment with respect
to the final determination date
If the final index value of either underlying index is
less than its downside threshold level: (i) the stated principal amount times (ii) the index performance factor of
the worst performing underlying index |
Stated principal amount: |
$10 per security |
Hypothetical initial index value: |
With respect to the SPX Index: 2,100.00
With respect to the RTY Index: 1,200.000 |
Hypothetical downside threshold level: |
With respect to the SPX Index: 1,260.00, which is 60% of the hypothetical
initial index value for such index
With respect to the RTY Index: 720.000, which is 60% of the hypothetical
initial index value for such index |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
How to determine whether a contingent quarterly
payment is payable with respect to a determination date:
|
Closing level |
Contingent quarterly payment |
|
SPX Index |
RTY Index |
|
Hypothetical Determination Date 1 |
1,400 (at or above downside threshold level) |
900 (at or above downside threshold level) |
$0.1593 |
Hypothetical Determination Date 2 |
1,200 (below downside threshold level) |
800 (at or above downside threshold level) |
$0 |
Hypothetical Determination Date 3 |
1,500 (at or above downside threshold level) |
600 (below downside threshold level) |
$0 |
Hypothetical Determination Date 4 |
1,000 (below downside threshold level) |
500 (below downside threshold level) |
$0 |
On hypothetical determination date 1, each underlying index
closes at or above its downside threshold level. Therefore, a contingent quarterly payment of $0.1593 is payable on the relevant
contingent payment date.
On each of the hypothetical determination dates 2 and 3, one
underlying index closes at or above its downside threshold level but the other underlying index closes below its downside threshold
level. Therefore, no contingent quarterly payment is payable on the relevant contingent payment date.
On hypothetical determination date 4, each underlying index
closes below its downside threshold level and, accordingly, no contingent quarterly payment is payable on the relevant contingent
payment date.
You will not receive a contingent quarterly payment on any
contingent payment date if the closing level of either underlying index is below its downside threshold level on the related determination
date.
How to calculate the early redemption payment
if we elect to redeem the securities early:
|
Closing level on related determination date |
Early redemption payment |
|
SPX Index |
RTY Index |
|
Example 1: |
1,400 (at or above downside threshold level) |
1,100 (below downside threshold level) |
$10.00 (the stated principal amount) |
Example 2: |
2,100 (at or above downside threshold level) |
900 (at or above downside threshold level) |
$10.1593 (the stated principal amount plus the contingent quarterly payment with respect to the related determination date) |
In example 1, we elect to redeem the securities early on a contingent
payment date (other than the first and final contingent payment dates). On the related determination date, one underlying index
closes at or above its downside threshold level but the other underlying index close below its downside threshold level. Therefore,
you receive an early redemption payment equal to the stated principal amount of the securities. No further payments will be made
on the securities once they have been redeemed.
In example 2, we elect to redeem the securities early on a contingent
payment date (other than the first and final contingent payment dates). On the related determination date, each underlying index
closes at or above its downside threshold level. Therefore, you receive an early redemption payment equal to the stated principal
amount plus the contingent quarterly payment with respect to the related determination date. No further payments will be
made on the securities once they have been redeemed.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
How to calculate the payment at maturity (if
the securities have not been redeemed early):
|
Final index value |
Payment at maturity |
|
SPX Index |
RTY Index |
|
Example 1: |
1,500 (at or above downside threshold level) |
800 (at or above downside threshold level) |
$10.1593 (the stated principal amount plus the contingent quarterly payment with respect to the final determination date) |
Example 2: |
840 (below downside threshold level) |
900 (at or above downside threshold level) |
$10 × index performance factor of
the worst performing underlying index =
$10 × (840 / 2,100) = $4.00 |
Example 3: |
1,400 (at or above downside threshold level) |
600 (below downside threshold level) |
$10 × (600 / 1,200) = $5.00 |
Example 4: |
1,100 (below downside threshold level) |
480 (below downside threshold level) |
$10 × (480 / 1,200) = $4.00 |
Example 5: |
630 (below downside threshold level) |
700 (below downside threshold level) |
$10 × (630 / 2,100) = $3.00 |
In example 1, the final index value of each underlying index
is at or above its downside threshold level. Therefore, you receive at maturity the stated principal amount of the securities and
the contingent quarterly payment with respect to the final determination date.
In examples 2 and 3, the final index value of one underlying
index is at or above its downside threshold level but the final index value of the other underlying index is below its downside
threshold level. Therefore, you are exposed to the downside performance of the worst performing underlying index at maturity and
receive a cash payment at maturity equal to the stated principal amount times the index performance factor of the worst
performing underlying index.
Similarly, in examples 4 and 5, the final index value of each
underlying index is below its downside threshold level, and you receive a cash payment at maturity equal to the stated principal
amount times the index performance factor of the worst performing underlying index.
If the final index value of EITHER underlying index is below
its downside threshold level, you will be exposed to the downside performance of the worst performing underlying index at maturity,
and your payment at maturity will be less than 60% of the stated principal amount per security and could be zero.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk factors
for investors in the securities. For further discussion of these and other risks, you should read the sections entitled “Risk
Factors” beginning on page PS-8 of the accompanying product supplement no. 4a-I and “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement no. 1a-I. We urge you to consult your investment, legal, tax, accounting
and other advisers in connection with your investment in the securities.
| § | The securities do not guarantee the return of any principal and your investment in the securities may result in a loss.
The terms of the securities differ from those of ordinary debt securities in that the securities do not guarantee the return of
any of the principal amount at maturity. Instead, if the securities have not been redeemed prior to maturity and if the final index
value of either of the underlying indices is less than its downside threshold level, you will be exposed to the decline
in the closing level of the worst performing underlying index, as compared to its initial index value, on a 1-to-1 basis and you
will receive for each security that you hold at maturity a cash payment equal to the stated principal amount times the index
performance factor of the worst performing underlying index. In this case, your payment at maturity will be less than 60% of
the stated principal amount and could be zero. |
| § | You will not receive any contingent quarterly payment for any quarterly period where the closing level of either underlying
index on the relevant determination date is less than its downside threshold level. The terms of the securities differ from
those of ordinary debt securities in that the securities do not guarantee the payment of regular interest. Instead, a contingent
quarterly payment will be made with respect to a quarterly period only if the closing level of each underlying index on the relevant
determination date is greater than or equal to its downside threshold level. If the
closing level of either underlying index is below its downside threshold level on
any determination date, you will not receive a contingent quarterly payment for the relevant quarterly period. It
is possible that the closing level of each underlying index
could be below its downside threshold level on most or all of the determination dates so that you will receive
few or no contingent quarterly payments. If you do not earn sufficient contingent quarterly payments over the term of the securities,
the overall return on the securities may be less than the amount that would be paid on a conventional debt security of the issuer
of comparable maturity. |
| § | The contingent quarterly payment is based solely on the closing levels of the underlying indices on the specified determination
dates. Whether the contingent quarterly payment will be made
with respect to a determination date will be based on the closing level of each underlying index on that determination date. As
a result, you will not know whether you will receive the contingent quarterly payment until the related determination date. Moreover,
because the contingent quarterly payment is based solely on the closing level of each underlying index on a specific determination
date, if the closing level of either of the underlying indices on that determination date is below its downside
threshold level, you will not receive any contingent quarterly payment with respect to that determination date, even if
the closing level of that underlying index was higher on other days during the related quarterly period. |
| § | You are exposed to the price risk of both underlying indices, with respect to both the contingent quarterly payments, if
any, and the payment at maturity, if any. Your return on the securities is not linked to a basket consisting of the underlying
indices. Rather, it will be contingent upon the independent performance of each underlying index. Unlike an instrument with a return
linked to a basket of underlying assets in which risk is mitigated and diversified among all the components of the basket, you
will be exposed to the risks related to each underlying index. The performance of the underlying indices may not be correlated.
Poor performance by either underlying index over the term of the securities may negatively affect your return and will not
be offset or mitigated by any positive performance by the other underlying index. Accordingly, your investment is subject to the
risk of decline in the closing level of each underlying index. |
To receive any contingent
quarterly payments, each underlying index must close at or above its downside threshold
level on the applicable determination date. In addition, if either underlying index has declined to below its downside
threshold level as of the final determination date, you will be fully exposed to the decline in the worst performing underlying
index, as compared to its initial index value, on a 1-to-1 basis, even if the other underlying index has appreciated. Under this
scenario, the value of any such payment will be less than 60% of the stated principal amount and could be zero.
| § | Because the securities are linked to the performance of the worst performing underlying
index, you are exposed to greater risks of no contingent quarterly payments and sustaining a significant loss on your investment
than if the securities were linked to just one underlying index. The risk that you will not receive any contingent quarterly
payments, or that you will suffer a significant loss on your investment is greater if you invest in the securities than if you
invest in substantially similar securities that are linked to the performance of just one underlying index. With two underlying
indices, it is more likely that either underlying index will close below its downside threshold level on any determination date
than if the securities were linked to only one underlying index. In |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
addition, you
will not benefit from the performance of the underlying index other than the worst performing underlying index. Therefore it is
more likely that you will not receive any contingent quarterly payments and that you will suffer a significant loss on your investment.
| § | The securities are subject to the credit risk of JPMorgan Chase
& Co., and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value
of the securities. Investors are dependent on JPMorgan Chase & Co.’s ability to pay all amounts due on the
securities. Any actual or anticipated decline in our credit ratings or increase in the credit spreads determined by the market
for taking our credit risk is likely to adversely affect the market value of the securities. If we were to default on our payment
obligations, you may not receive any amounts owed to you under the securities and you could lose your entire investment. |
| § | Investors will not participate in any appreciation in either underlying
index. Investors will not participate in any appreciation in either underlying index from
its initial index value, and the return on the securities will be limited to the contingent quarterly payment that is paid with
respect to each determination date on which the closing level of each underlying index is greater than or equal to its downside
threshold level, if any. |
| § | An investment in the securities is subject to risks associated with
small capitalization stocks with respect to the RTY Index. The stocks that constitute the
RTY Index are issued by companies with relatively small market capitalization. The stock prices of smaller companies may be more
volatile than stock prices of large capitalization companies. 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. |
| § | Early redemption risk.
The term of your investment in the securities may be limited to as short as approximately six months by the optional
early redemption feature of the securities. Any early redemption of the securities will be at our discretion and will not automatically
occur based on the performance of the underlying indices. It is more likely that we will redeem the securities when it would otherwise
be advantageous for you to continue to hold the securities. As such, we will be more likely to redeem the securities when the closing
level of each underlying index on the determination dates is at or above its downside threshold level, which would otherwise result
in an amount of interest payable on the securities that is greater than instruments issued by us of a comparable maturity and credit
rating trading in the market. In other words, we will be more likely to redeem the securities when the securities are paying above-market
interest. |
If the securities are redeemed prior
to maturity, you will receive no more contingent quarterly payments and may be forced to reinvest in a lower interest rate environment.
Under these circumstances, you may not be able to reinvest the proceeds from an investment in the securities at a comparable return
for a similar level of risk. On the other hand, we will be less likely to exercise our redemption right when the closing level
of either underlying index on the determination dates is below its downside threshold level, such that you will receive no contingent
quarterly payments and/or that you will suffer a significant loss on your investment in the securities at maturity. Therefore,
if we do not exercise our redemption right, it is more likely that you will receive few or no contingent quarterly payments and
that you will suffer a significant loss on your investment at maturity.
| § | Economic interests of the issuer, the calculation agent, the agent of the offering of the securities and other affiliates
of the issuer may be different from those of investors. We
and our affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent
and as an agent of the offering of the securities, hedging our obligations under the securities and making the assumptions used
to determine the pricing of the securities and the estimated value of the securities, which we refer to as JPMS’s estimated
value. In performing these duties, our economic interests and the economic interests of the calculation agent and other affiliates
of ours are potentially adverse to your interests as an investor in the securities. The calculation agent has determined the initial
index values and the downside threshold levels and will determine the final index values and whether the closing value of each
underlying index on any determination date is below its downside threshold level. Determinations made by the calculation agent,
including with respect to the occurrence or non-occurrence of market disruption events, may affect the payment to you at maturity
or upon an early redemption. |
In
addition, we are currently one of the companies that make up the SPX Index. We will not have any obligation to consider your interests
as a holder of the securities in taking any corporate action that might affect the value of the SPX Index or the securities.
Moreover,
our business activities, including hedging and trading activities, could cause our economic interests to be adverse to yours and
could adversely affect any payment on the securities and the value of the securities. It is possible that hedging or trading activities
of ours or our affiliates in connection with the securities could result in substantial returns for us or our affiliates while
the value of the securities declines. Please refer to “Risk Factors —
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Risks Relating to
Conflicts of Interest” in the accompanying product supplement no. 4a-I for additional information about these risks.
| § | JPMS’s estimated value of the securities is lower than the
original issue price (price to public) of the securities. JPMS’s estimated value is
only an estimate using several factors. The original issue price of the securities exceeds JPMS’s estimated value because
costs associated with selling, structuring and hedging the securities are included in the original issue price of the securities.
These costs include the selling commissions, the structuring fee, the projected profits, if any, that our affiliates expect to
realize for assuming risks inherent in hedging our obligations under the securities and the estimated cost of hedging our obligations
under the securities. See “Additional Information about the Securities — JPMS’s estimated value of the securities”
in this document. |
| § | JPMS’s estimated value does not represent future values of
the securities and may differ from others’ estimates. JPMS’s estimated value of the securities is determined by reference
to JPMS’s internal pricing models. This estimated value is based on market conditions
and other relevant factors existing at the time of pricing and JPMS’s assumptions about market parameters, which can include
volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations
for securities 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 securities 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 securities from you in secondary
market transactions. See “Additional Information about the Securities — JPMS’s estimated value of the securities”
in this document. |
| § | 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 securities as well as the higher issuance, operational
and ongoing liability management costs of the securities 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 securities to be more favorable to you. In addition, JPMS’s estimated value might be lower if it were based on the interest
rate implied by our conventional fixed-rate credit spreads. Consequently, our use of an internal funding rate would have an adverse
effect on the terms of the securities and any secondary market prices of the securities. See “Additional Information about
the Securities — JPMS’s estimated value of the securities” in this document. |
| § | The value of the securities as published by JPMS (and which may
be reflected on customer account statements) may be higher than JPMS’s then-current estimated value of the securities for
a limited time period. We generally expect that some of the costs included in the original
issue price of the securities will be partially paid back to you in connection with any repurchases of your securities by JPMS
in an amount that will decline to zero over an initial predetermined period. These costs can include selling commissions, the structuring
fee, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads
for structured debt issuances. See “Additional Information about the Securities — Secondary market prices of the securities”
in this document for additional information relating to this initial period. Accordingly, the estimated value of your securities
during this initial period may be lower than the value of the securities as published by JPMS (and which may be shown on your customer
account statements). |
| § | Secondary market prices of the securities will likely be lower than
the original issue price of the securities. Any secondary market prices of the securities
will likely be lower than the original issue price of the securities 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 the structuring fee and (b) may exclude projected hedging profits, if any, and estimated hedging costs
that are included in the original issue price of the securities. As a result, the price, if any, at which JPMS will be willing
to buy securities from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any
sale by you prior to the maturity date could result in a substantial loss to you. See the immediately following risk factor for
information about additional factors that will impact any secondary market prices of the securities. |
The
securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your securities
to maturity. See “— Secondary trading may be limited” below.
| § | Secondary market prices of the securities will be impacted by many
economic and market factors. The secondary market price of the securities 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, structuring fee, projected hedging profits, if any, estimated hedging costs and the closing level of each
underlying index, including: |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
| o | any actual or potential change in our creditworthiness or credit spreads; |
| o | customary bid-ask spreads for similarly sized trades; |
| o | secondary market credit spreads for structured debt issuances; |
| o | the actual and expected volatility in the closing level of each underlying index; |
| o | the time to maturity of the securities; |
| o | whether the closing level of either underlying index has been, or is expected to be, less than its downside threshold level
on any determination date; |
| o | whether we are expected to exercise our right to redeem the securities early; |
| o | the dividend rates on the equity securities included in the underlying indices; |
| o | the actual and expected positive or negative correlation between the underlying indices, or the actual or expected absence
of any such correlation; |
| o | interest and yield rates in the market generally; and |
| o | a variety of other economic, financial, political, regulatory and judicial events. |
Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the securities, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the securities, if any, at which JPMS may be willing
to purchase your securities in the secondary market.
| § | Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the securities.
The hedging or trading activities of the issuer’s affiliates and of any other hedging counterparty with respect to the
securities on
or prior to the pricing date and prior to maturity could have adversely affected, and may continue to adversely affect, the closing
levels of the underlying indices. Any of these hedging or trading activities on or prior to the pricing date could have
affected the initial index values and, as a result, the downside threshold levels, which are the respective levels at or above
which the underlying indices must close on each determination date in order for you to earn a contingent quarterly payment or,
if the securities are not redeemed prior to maturity, in order for you to avoid being exposed to the negative price performance
of the worst performing underlying index at maturity. Additionally, these hedging or trading activities during the term of the
securities could potentially affect the values of the underlying indices on the determination dates and, accordingly, whether investors
will receive one or more contingent quarterly payments and, if the securities are not redeemed prior to maturity, the payment to
you at maturity. It is possible that these hedging or trading activities could result in substantial returns for us or our affiliates
while the value of the securities declines. |
| § | Secondary trading may be limited.
The securities will not be listed on a securities exchange. There may be little or no secondary market for the securities.
Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily.
JPMS may act as a market maker for the securities, but is not required to do so. Because we do not expect that other market
makers will participate significantly in the secondary market for the securities, the price at which you may be able to trade your
securities is likely to depend on the price, if any, at which JPMS
is willing to buy the securities. If at any time JPMS
or another agent does not act as a market maker, it is likely that there would be little or no secondary market for the securities. |
| § | The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper U.S. federal income tax treatment of the securities, and we do not intend to request a ruling from the
IRS. The IRS might not accept, and a court might not uphold, the treatment of the securities as prepaid forward contracts with
associated contingent coupons, as described in “Additional Information about the Securities — Additional Provisions
— Tax considerations” in this document and in “Material U.S. Federal Income Tax Consequences” in the accompanying
product supplement no. 4a-I. If the IRS were successful in asserting an alternative treatment for the securities, the timing and
character of any income or loss on the securities could be materially affected. Although the U.S. federal income tax treatment
of contingent quarterly payments (including any contingent quarterly payments paid in connection with an early redemption or at
maturity) is uncertain, in determining our reporting responsibilities we intend (in the absence of an administrative determination
or judicial ruling to the contrary) to treat any contingent quarterly payments as ordinary income. 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 |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
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 securities,
possibly with retroactive effect. You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement no. 4a-I and consult your tax adviser regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments and the issues presented by this notice.
Non-U.S. Holders — Tax Consideration.
The U.S. federal income tax treatment of contingent quarterly payments is uncertain, and although we believe it is reasonable
to take a position that contingent quarterly 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 securities 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). In the event of any withholding, we will not be required to pay any additional amounts with
respect to amounts so withheld. 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 securities in light of your particular circumstances.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
S&P 500® Index Overview
The S&P 500® Index, which is calculated,
maintained and published by S&P Dow Jones Indices LLC consists of stocks of 500 companies selected to provide a performance
benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based on the relative value
of the float adjusted aggregate market capitalization of 500 component companies as of a particular time as compared to the aggregate
average market capitalization of the 500 similar companies during the base period of the years 1941 through 1943. For additional
information on the S&P 500® Index, see the information set forth under “Equity Index Descriptions —
The S&P 500® Index” in the accompanying underlying supplement no. 1a-I.
Information as of market close on November 20, 2015:
Bloomberg Ticker Symbol: |
SPX |
52 Week High (on 5/21/2015): |
2,130.82 |
Current Closing Level: |
2,089.17 |
52 Week Low (on 8/25/2015): |
1,867.61 |
52 Weeks Ago (on 11/20/2014): |
2,052.75 |
|
|
The following table sets forth the published high and low closing
levels, as well as end-of-quarter closing levels, of the S&P 500® Index for each quarter in the period from
January 1, 2010 through November 20, 2015. The graph following the table sets forth the daily closing levels of the S&P 500®
Index during the same period. The closing level of the S&P 500® Index on November 20, 2015 was 2,089.17. We
obtained the closing level information above and in the table and graph below from the Bloomberg Professional® service
(“Bloomberg”), without independent verification. The historical levels of the S&P 500® Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of the S&P 500®
Index at any time, including on the determination dates. The payment of dividends on the stocks that constitute the S&P 500®
Index are not reflected in its closing level and, therefore, have no effect on the calculation of the payment at maturity.
S&P 500® Index |
High |
Low |
Period End |
2010 |
|
|
|
First Quarter |
1,174.17 |
1,056.74 |
1,169.43 |
Second Quarter |
1,217.28 |
1,030.71 |
1,030.71 |
Third Quarter |
1,148.67 |
1,022.58 |
1,141.20 |
Fourth Quarter |
1,259.78 |
1,137.03 |
1,257.64 |
2011 |
|
|
|
First Quarter |
1,343.01 |
1,256.88 |
1,325.83 |
Second Quarter |
1,363.61 |
1,265.42 |
1,320.64 |
Third Quarter |
1,353.22 |
1,119.46 |
1,131.42 |
Fourth Quarter |
1,285.09 |
1,099.23 |
1,257.60 |
2012 |
|
|
|
First Quarter |
1,416.51 |
1,277.06 |
1,408.47 |
Second Quarter |
1,419.04 |
1,278.04 |
1,362.16 |
Third Quarter |
1,465.77 |
1,334.76 |
1,440.67 |
Fourth Quarter |
1,461.40 |
1,353.33 |
1,426.19 |
2013 |
|
|
|
First Quarter |
1,569.19 |
1,457.15 |
1,569.19 |
Second Quarter |
1,669.16 |
1,541.61 |
1,606.28 |
Third Quarter |
1,725.52 |
1,614.08 |
1,681.55 |
Fourth Quarter |
1,848.36 |
1,655.45 |
1,848.36 |
2014 |
|
|
|
First Quarter |
1,878.04 |
1,741.89 |
1,872.34 |
Second Quarter |
1,962.87 |
1,815.69 |
1,960.23 |
Third Quarter |
2,011.36 |
1,909.57 |
1,972.29 |
Fourth Quarter |
2,090.57 |
1,862.49 |
2,058.90 |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
S&P 500® Index |
High |
Low |
Period End |
2015 |
|
|
|
First Quarter |
2,117.39 |
1,992.67 |
2,067.89 |
Second Quarter |
2,130.82 |
2,057.64 |
2,063.11 |
Third Quarter |
2,128.28 |
1,867.61 |
1,920.03 |
Fourth Quarter (through November 20, 2015) |
2,109.79 |
1,923.82 |
2,089.17 |
S&P 500® Index Historical Performance – Daily Closing Levels
January 4, 2010 to November 20, 2015 |
|
*The dotted line in the graph indicates the downside threshold
level, equal to 60% of the initial index value.
License
Agreement between S&P Dow Jones Indices LLC and JPMorgan Chase & Co. “Standard
& Poor’s®,” “S&P®,” “S&P 500®” and
“Standard & Poor’s 500” are trademarks of Standard & Poor’s Financial Services LLC and have been
licensed for use by JPMorgan Chase & Co. and its affiliates. See “Equity Index Descriptions — The S&P 500®
Index — License Agreement with S&P Dow Jones Indices LLC” in the accompanying underlying supplement no. 1a-I.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Russell 2000® Index Overview
The Russell 2000® Index consists of the middle
2,000 companies included in the Russell 3000ETM 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 the information set forth under “Equity Index Descriptions — The Russell Indices”
in the accompanying underlying supplement no.1a-I.
Information as of market close on November 20, 2015:
Bloomberg Ticker Symbol: |
RTY |
52 Week High (on 6/23/2015): |
1,295.799 |
Current Closing Level: |
1,175.151 |
52 Week Low (on 9/29/2015): |
1,083.907 |
52 Weeks Ago (on 11/20/2014): |
1,170.752 |
|
|
The following table sets forth the published high and low closing
levels, as well as end-of-quarter closing levels, of the Russell 2000® Index for each quarter in the period from
January 1, 2010 through November 20, 2015. The graph following the table sets forth the daily closing levels of the Russell 2000®
Index during the same period. The closing level of the Russell 2000® Index on November 20, 2015 was 1,175.151.
We obtained the closing level information above and in the table and graph below from 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
levels of the Russell 2000® Index should not be taken as an indication of future performance, and no assurance
can be given as to the closing level of the Russell 2000® Index at any time, including on the determination dates.
The payment of dividends on the stocks that constitute the Russell 2000® Index are not reflected in its closing
level and, therefore, have no effect on the calculation of the payment at maturity.
Russell 2000® Index |
High |
Low |
Period End |
2010 |
|
|
|
First Quarter |
690.303 |
586.491 |
678.643 |
Second Quarter |
741.922 |
609.486 |
609.486 |
Third Quarter |
677.642 |
590.034 |
676.139 |
Fourth Quarter |
792.347 |
669.450 |
783.647 |
2011 |
|
|
|
First Quarter |
843.549 |
773.184 |
843.549 |
Second Quarter |
865.291 |
777.197 |
827.429 |
Third Quarter |
858.113 |
643.421 |
644.156 |
Fourth Quarter |
765.432 |
609.490 |
740.916 |
2012 |
|
|
|
First Quarter |
846.129 |
747.275 |
830.301 |
Second Quarter |
840.626 |
737.241 |
798.487 |
Third Quarter |
864.697 |
767.751 |
837.450 |
Fourth Quarter |
852.495 |
769.483 |
849.350 |
2013 |
|
|
|
First Quarter |
953.068 |
872.605 |
951.542 |
Second Quarter |
999.985 |
901.513 |
977.475 |
Third Quarter |
1,078.409 |
989.535 |
1,073.786 |
Fourth Quarter |
1,163.637 |
1,043.459 |
1,163.637 |
2014 |
|
|
|
First Quarter |
1,208.651 |
1,093.594 |
1,173.038 |
Second Quarter |
1,192.964 |
1,095.986 |
1,192.964 |
Third Quarter |
1,208.150 |
1,101.676 |
1,101.676 |
Fourth Quarter |
1,219.109 |
1,049.303 |
1,204.696 |
2015 |
|
|
|
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Russell 2000® Index |
High |
Low |
Period End |
First Quarter |
1,266.373 |
1,154.709 |
1,252.772 |
Second Quarter |
1,295.799 |
1,215.417 |
1,253.947 |
Third Quarter |
1,273.328 |
1,083.907 |
1,100.688 |
Fourth Quarter (through November 20, 2015) |
1,199.747 |
1,097.552 |
1,175.151 |
Russell 2000® Index Historical Performance – Daily Closing Levels
January 4, 2010 to November 20, 2015 |
|
*The dotted line in the graph indicates the downside threshold
level, equal to 60% of the initial index value.
License Agreement between an affiliate of JPMorgan Chase
& Co. and Russell. The “Russell 2000® Index” is a trademark of Russell and has been licensed
for use by JPMorgan Chase Bank, National Association and its affiliates. For more information, see “Equity Index
Descriptions — The Russell Indices — Disclaimers” in the accompanying underlying supplement no. 1a-I.
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
Additional Information about the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions |
|
Record date: |
The record date for each contingent payment date is the date one business day prior to that contingent payment date. |
Postponement of maturity date: |
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled final determination date is not a trading day or if a market disruption event occurs on that day so that the final determination date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the third business day following that final determination date as postponed. |
Minimum ticketing size: |
$1,000 / 100 securities |
Trustee: |
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company) |
Calculation agent: |
JPMS |
JPMS’s estimated value of the securities: |
JPMS’s estimated value of the securities set
forth on the cover of this document is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the securities, valued using our internal funding rate for structured debt described below,
and (2) the derivative or derivatives underlying the economic terms of the securities. JPMS’s estimated value does not represent
a minimum price at which JPMS would be willing to buy your securities in any secondary market (if any exists) at any time. The
internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit
spreads for our conventional fixed-rate debt. For additional information, see “Risk Factors — JPMS’s estimated
value is not determined by reference to credit spreads for our conventional fixed-rate debt.” The value of the derivative
or derivatives underlying the economic terms of the securities is derived from JPMS’s internal pricing models. These models
are dependent on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some
of which are market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as
assumptions about future market events and/or environments. Accordingly, JPMS’s estimated value of the securities on the
pricing date is based on market conditions and other relevant factors and assumptions existing at that time. See “Risk Factors
— JPMS’s estimated value does not represent future values of the securities and may differ from others’ estimates.”
JPMS’s estimated value of the securities is lower
than the original issue price of the securities because costs associated with selling, structuring and hedging the securities are
included in the original issue price of the securities. These costs include the selling commissions paid to JPMS and other affiliated
or unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the securities and the estimated cost of hedging our obligations under the securities.
Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result
in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates will retain any
profits realized in hedging our obligations under the securities. See “Risk Factors — JPMS’s estimated value
of the securities is lower than the original issue price (price to public) of the securities” in this document. |
Secondary market prices of the securities: |
For information about factors that will impact any secondary market prices of the securities, see “Risk Factors — Secondary market prices of the securities will be impacted by many economic and market factors” in this document. In addition, we generally expect that some of the costs included in the original issue price of the securities will be partially paid back to you in connection with any repurchases of your securities by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the securities. The length of any such initial period reflects the structure of the securities, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the securities and when these costs are incurred, as determined by JPMS. See “Risk Factors — The value of the securities as published by JPMS (and which may be reflected on customer account statements) may be higher than JPMS’s then-current estimated value of the securities for a limited time period.” |
Tax considerations: |
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 securities for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any contingent quarterly 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
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
|
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 securities 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 securities, possibly with retroactive
effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the securities,
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 quarterly payments is uncertain, and although we believe it is reasonable to take
a position that contingent quarterly 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 securities 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 securities in light of your particular circumstances.
Non-U.S. holders should also note that, notwithstanding
anything to the contrary in the accompanying product supplement no. 4a-I, recently promulgated Treasury regulations imposing a
withholding tax on certain “dividend equivalents” under certain “equity linked instruments” will not apply
to the securities.
FATCA. Withholding under legislation commonly referred
to as “FATCA” could apply to payments with respect to the securities that are treated as U.S.-source “fixed or
determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest,
if the securities are recharacterized, in whole or in part, as debt instruments, or Contingent Interest Payments if they are otherwise
treated as FDAP Income). If the securities are recharacterized, in whole or in part, as debt instruments, withholding could also
apply to payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However,
under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income)
with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the securities.
In the event of any withholding on the securities, we will
not be required to pay any additional amounts with respect to amounts so withheld.
|
Supplemental use of proceeds and hedging: |
The securities are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the securities. See “How the Securities
Work” in this document for an illustration of the risk-return profile of the securities and “S&P 500®
Index Overview” and “Russell 2000® Index Overview” in this document for a description of the market
exposure provided by the securities.
The original issue price of the securities is equal
to JPMS’s estimated value of the securities plus the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers and the structuring fee, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the securities, plus the estimated cost of hedging our obligations under the securities. |
Benefit plan investor considerations: |
See “Benefit Plan Investor Considerations” in the accompanying product supplement no. 4a-I |
Supplemental plan of distribution: |
Subject to regulatory constraints, JPMS intends to use its
reasonable efforts to offer to purchase the securities in the secondary market, but is not required to do so. JPMS, acting as agent
for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management.
In addition, Morgan Stanley Wealth Management will receive a structuring fee as set forth on the cover of this document for each
security.
We or our affiliate may enter into swap agreements or related
hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the securities
and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions.
See “— Supplemental use of proceeds and hedging” above and “Use of Proceeds and Hedging” on page
PS-42 of the accompanying product supplement no. 4a-I. |
Validity of the securities: |
In the opinion of Davis Polk & Wardwell
LLP, as our special products counsel, when the securities offered by this pricing supplement have been executed and issued by
us and authenticated by the |
Contingent
Income Callable Securities due November 25, 2020
Based on the
Worst Performing of the S&P 500® Index and the Russell 2000® Index
Principal at Risk Securities
|
trustee pursuant to the indenture, and delivered against payment as contemplated herein, such securities 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 securities 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. |
Contact: |
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326). |
Where you can find more information: |
You should read this document 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 securities 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 document, together with the documents listed below, contains
the terms of the securities, supplements the preliminary terms 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, stand-alone 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 securities 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 securities.
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):
• Product supplement no. 4a-I dated November 7, 2014:
http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf
• Underlying supplement no. 1a-I dated November 7,
2014:
http://www.sec.gov/Archives/edgar/data/19617/000089109214008410/e61337_424b2.pdf
• 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 document, “we,” “us,”
and “our” refer to JPMorgan Chase & Co. |
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