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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
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Notes
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$3,028,000
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$390.01
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Pricing supplement no. 2948
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011,
product supplement no. 4-I dated November 14, 2011 and
underlying supplement no. 1-I dated November 14, 2011
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Registration Statement No. 333-177923
Dated September 26, 2014
Rule 424(b)(2)
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Structured
Investments
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$3,028,000
Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index due September 29, 2017
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General
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The notes are designed for investors who seek early exit prior to maturity at a premium if, on any Review Date, the Basket Closing Level of an equally weighted basket consisting of the S&P 500® Index and the EURO STOXX 50® Index is at or above the Call Level applicable to that Review Date. If the notes have not been automatically called, investors will receive their principal back at maturity if the Ending Basket Level is less than the Starting Basket Level by up to the Buffer Amount of 10%, but will lose up to 90% of their principal if the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%. Investors in the notes should be willing to accept this risk of loss and be willing to forgo interest and dividend payments, in exchange for the opportunity to receive a premium if the notes are automatically called. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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The first Review Date, and therefore the earliest date on which an automatic call may be initiated, is October 2, 2015*.
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Unsecured and unsubordinated obligations of JPMorgan Chase & Co. maturing September 29, 2017*
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Minimum denominations of $1,000 and integral multiples thereof
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The notes priced on September 26, 2014 and are expected to settle on or about October 1, 2014.
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Key Terms
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Basket:
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The notes are linked to an equally weighted basket consisting of the S&P 500® Index (Bloomberg ticker: SPX) and the EURO STOXX 50® Index (Bloomberg ticker: SX5E) (each an “Index” and together, the “Indices”) (each, a “Component” and together, the “Components”).
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Component Weights:
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The SPX Weight is 50.00% and the SX5E Weight is 50.00% (each, a “Component Weight” and together, the “Component Weights”)
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Automatic Call:
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If the Basket Closing Level on any Review Date is greater than or equal to the applicable Call Level, the notes will be automatically called for a cash payment per $1,000 principal amount note that will vary depending on the applicable Review Date and call premium and that will be payable on the applicable Call Settlement Date.
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Call Level:
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100% of the Starting Basket Level for each Review Date
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Payment if Called:
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For every $1,000 principal amount note, you will receive one payment of $1,000 plus a call premium amount, calculated as follows:
• 7.80% × $1,000 if automatically called on the first Review Date
• 15.60% × $1,000 if automatically called on the second Review Date
• 23.40% × $1,000 if automatically called on the final Review Date
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Payment at Maturity:
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If the notes have not been automatically called and the Ending Basket Level is less than the Starting Basket Level by up to the Buffer Amount, you will receive the principal amount of your notes at maturity.
If the notes have not been automatically called and the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount, and your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + [$1,000 × (Basket Return + Buffer Amount%)]
If the notes have not been automatically called and the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%, you could lose up to $900 per $1,000 principal amount note.
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Buffer Amount:
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10%
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Basket Return:
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(Ending Basket Level – Starting Basket Level)
Starting Basket Level
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Starting Basket Level:
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Set equal to 100 on September 26, 2014 (the “Pricing Date”)
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Ending Basket Level:
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The Basket Closing Level on the final Review Date
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Basket Closing Level:
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On any relevant day, the Basket Closing Level will be calculated as follows:
100 × [1+ (SPX Return × SPX Weight) + (SX5E Return × SX5E Weight)]
Each of the returns set forth in the formula above refers to the Index Return for the relevant Index, which reflects the performance of the relevant Index, expressed as a percentage, from the Index closing level of that Index on the Pricing Date, which was 1,982.85 for the S&P 500® Index and 3,219.58 for the EURO STOXX 50® Index, to the Index closing level of that Index on the Observation Date.
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Review Dates*:
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October 2, 2015 (first Review Date), September 26, 2016 (second Review Date) and September 26, 2017 (final Review Date)
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Call Settlement Dates*:
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The third business day after the applicable Review Date, except that the final Call Settlement Date is the Maturity Date
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Original Issue Date (Settlement Date):
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On or about October 1, 2014
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Maturity Date*:
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September 29, 2017
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CUSIP:
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48127DB23
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*
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Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Postponement of a Determination Date — B. Notes Linked to a Basket” and “Description of Notes — Payment at Maturity” in the accompanying product supplement no. 4-I
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Investing in the Review Notes involves a number of risks. See “Risk Factors” beginning on page PS-21 of the accompanying product supplement no. 4-I, “Risk Factors” beginning on page US-1 of the accompanying underlying supplement no. 1-I and “Selected Risk Considerations” beginning on page PS-3 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
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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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$1
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$999
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Total
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$3,028,000
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$3,028
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$3,024,972
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(1)
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See “Supplemental Use of Proceeds” in this pricing supplement for information about the components of the price to public of the notes.
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(2)
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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 $1.00 per $1,000 principal amount note it receives from us to other affiliated or unaffiliated dealers. In no event will these selling commissions exceed. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-77 of the accompanying product supplement no. 4-I.
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The estimated value of the notes as determined by JPMS, when the terms of the notes were set, was $980.00 per $1,000 principal amount note. See “JPMS’s Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
September 26, 2014
Additional Terms Specific to the Notes
You should read this pricing supplement together with the prospectus dated November 14, 2011, as supplemented by the prospectus supplement dated November 14, 2011 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. 4-I dated November 14, 2011 and underlying supplement no. 1-I dated November 14, 2011. 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. 4-I and “Risk Factors” in the accompanying underlying supplement no. 1-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. 4-I dated November 14, 2011:
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Underlying supplement no. 1-I dated November 14, 2011:
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Prospectus supplement dated November 14, 2011:
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Prospectus dated November 14, 2011:
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Our Central Index Key, or CIK, on the SEC website is 19617. As used in this pricing supplement, the “Company,” “we,” “us” and “our” refer to JPMorgan Chase & Co.
Selected Purchase Considerations
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CAPPED APPRECIATION POTENTIAL —If the Basket Closing Level is greater than or equal to the applicable Call Level on any Review Date, your investment will yield a payment per $1,000 principal amount note of $1,000 plus: (i) 7.80% × $1,000 if automatically called on the first Review Date, (ii) 15.60% × $1,000 if automatically called on the second Review Date or (iii) 23.40% × $1,000 if automatically called on the final Review Date. Because the notes are our unsecured and unsubordinated obligations, payment of any amount on the notes is subject to our ability to pay our obligations as they become due.
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POTENTIAL EARLY EXIT WITH APPRECIATION AS A RESULT OF AUTOMATIC CALL FEATURE — While the original term of the notes is approximately three years, the notes will be automatically called before maturity if the Basket Closing Level is at or above the applicable Call Level on any Review Date and you will be entitled to the applicable payment corresponding to that Review Date as set forth on the cover of this pricing supplement.
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LIMITED PROTECTION AGAINST LOSS — If the notes have not been automatically called, we will pay you your principal back at maturity if the Ending Basket Level is less than the Starting Basket Level by up to the Buffer Amount. If the notes have not been automatically called and the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%, for every 1% that the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount, you will lose an amount equal to 1% of the principal amount of your notes. Accordingly, you could lose up to $900 per each $1,000 principal amount note.
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RETURN LINKED TO THE INDICES — The return on the notes is linked to an equally weighted basket consisting of the S&P 500® Index and the EURO STOXX 50® Index.
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The S&P 500® Index consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets. For additional information about 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. 1-I.
The EURO STOXX 50® Index consists of 50 component stocks of market sector leaders from within the Eurozone. The EURO STOXX 50® Index and STOXX® are the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”), which are used under license. The notes based on the EURO STOXX 50® Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors and neither STOXX Limited nor any of the Licensors shall have any liability with respect thereto. For additional information about the Index, see the information set forth under “Equity Index Descriptions — The EURO STOXX 50® Index” in the accompanying underlying supplement no. 1-I.
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CAPITAL GAINS TAX TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
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Based on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt instruments for U.S. federal income tax purposes. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price. However, the Internal Revenue Service (the “IRS”) or a court may not respect this treatment, in which case the timing and character of any
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JPMorgan Structured Investments —
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PS- 1
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Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
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income or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice.
Notwithstanding the discussion under “Material U.S. Federal Income Tax Consequences — Tax Consequences to Non-U.S. Holders — Recent Legislation” in the accompanying product supplement, withholding under legislation commonly referred to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the notes, as well as to the payment of gross proceeds of a sale of a note after December 31, 2016 (including redemption at maturity). You should consult your tax adviser regarding the potential application of FATCA to the notes.
Non-U.S. Holders should also note that recently proposed Treasury regulations could impose a 30% (or lower treaty rate) withholding tax on amounts paid or deemed paid after December 31, 2015 that are treated as attributable to U.S.-source dividends on equities underlying financial instruments such as the notes. While it is not clear whether or in what form these regulations will be finalized, under recent Treasury guidance, these regulations would not apply to the notes. Non-U.S. Holders should consult their tax advisers regarding the potential application of these proposed regulations.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket, the Indices or any of the equity securities included in the Indices. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 4-I dated November 14, 2011 and the “Risk Factors” section in the accompanying underlying supplement no. 1-I dated November 14, 2011.
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal in excess of $100 per $1,000 principal amount note, subject to the credit risk of JPMorgan Chase & Co. If the notes have not been automatically called, the return on the notes at maturity is linked to the performance of the Basket and will depend on the extent to which the Basket Return is negative. If the notes have not been automatically called and the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%, for every 1% that the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount, you will lose an amount equal to 1% of the principal amount of your notes. Accordingly, under these circumstances, you could lose up to 90% of your principal amount at maturity.
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CREDIT RISK OF JPMORGAN CHASE & CO. — The notes are subject to the credit risk of JPMorgan Chase & Co., and our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our creditworthiness or credit spreads, as determined by the market for taking our credit risk, is likely to adversely affect the value of the notes. If we were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
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LIMITED RETURN ON THE NOTES — Your potential gain on the notes will be limited to the call premium applicable to the Review Dates, as set forth on the cover of this pricing supplement, regardless of the appreciation in the level of the Basket, which may be significant. The Basket Closing Level at various times during the term of the notes could be higher than on the Review Dates. You may receive a lower payment if the notes were automatically called or at maturity, as the case may be, than you would have if you had invested directly in one or both of the Indices.
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POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we refer to as JPMS’s estimated value. In performing these duties, our economic interests and the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our business activities, including hedging and trading activities, could cause our economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to “Risk Factors — Risks Relating to the Notes Generally” in the accompanying product supplement no. 4-I for additional information about these risks.
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In addition, we are currently one of the companies that make up the S&P 500® Index. We will not have any obligation to consider your interests as a holder of the notes in taking any corporate action that might affect the value of the S&P 500® Index and the notes.
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REINVESTMENT RISK — If your notes are automatically called early, the term of the notes may be reduced to as short as approximately 12 months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the notes at a comparable return for a similar level of risk in the event the notes are automatically called prior to the Maturity Date.
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JPMorgan Structured Investments —
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PS- 2
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Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
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JPMS’S ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated value is only an estimate using several factors. The original issue price of the notes exceeds JPMS’s estimated value because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “JPMS’s Estimated Value of the Notes” in this pricing supplement.
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JPMS’S ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES — JPMS’s estimated value of the notes is determined by reference to JPMS’s internal pricing models when the terms of the notes are set. This estimated value is based on market conditions and other relevant factors existing at that time and JPMS’s assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for notes that are greater than or less than JPMS’s estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions. See “JPMS’s Estimated Value of the Notes” in this pricing supplement.
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JPMS’S ESTIMATED VALUE IS NOT DETERMINED BY REFERENCE TO CREDIT SPREADS FOR OUR CONVENTIONAL FIXED-RATE DEBT — The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for our conventional fixed-rate debt. If JPMS were to use the interest rate implied by our conventional fixed-rate credit spreads, we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate would have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “JPMS’s Estimated Value of the Notes” in this pricing supplement.
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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 JPMS’S THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads for structured debt issuances. See “Secondary Market Prices of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
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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 notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk consideration for information about additional factors that will impact any secondary market prices of the notes.
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The notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “— Lack of Liquidity” below.
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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 closing levels of the Indices, including:
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any actual or potential change in our creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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secondary market credit spreads for structured debt issuances;
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the actual and expected volatility of the Indices;
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the time to maturity of the notes;
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the dividend rates on the equity securities included in the Indices;
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interest and yield rates in the market generally; and
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a variety of other economic, financial, political, regulatory and judicial events.
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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.
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CORRELATION (OR LACK OF CORRELATION) OF THE INDICES — The notes are linked to an equally weighted Basket composed of Indices. Changes in the value of the Indices may not correlate with each other. Changes in the value of the Indices may not correlate with each other. At a time when the level of one of the Indices increases, the level of the other Index may not increase as much or may even decline. Therefore, in calculating the Ending Basket Level, an increase in the level of one of the Indices may be moderated, or more than offset, by a lesser increase or decline in the level of the other Index. In addition, high correlation of movements in the levels of the Indices during periods of negative returns between the Indices could have an adverse effect on the payment at maturity on the notes. There can be no assurance that the Ending Basket Level will be higher than the Starting Basket Level.
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JPMorgan Structured Investments —
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PS- 3
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Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of the equity securities included in the Indices would have.
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NON-U.S. SECURITIES RISK — The equity securities that compose 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 those countries, including risks of volatility in those markets, governmental intervention in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than about U.S. companies that are subject to the reporting requirements of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable to U.S. reporting companies. The prices of securities in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
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NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES — The value of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities underlying the EURO STOXX 50® Index are based, although any currency fluctuations could affect the performance of the Index. Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the notes, you will not receive any additional payment or incur any reduction in your payment at maturity.
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LACK OF LIQUIDITY — The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes.
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JPMorgan Structured Investments —
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PS- 4
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Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
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Hypothetical Examples of Amount Payable upon Automatic Call or at Maturity
The following table and examples illustrate the hypothetical simple total return (i.e., not compounded) on the notes that could be realized with respect to the applicable Review Date for a range of movements in the Basket as shown under the column “Basket Appreciation/Depreciation at Review Date.” The following table and examples reflect a Call Level for the Basket of 100 (equal to the Starting Basket Level) and the Buffer Amount of 10% and reflect that the call premiums used to calculate the call premium amount applicable to the first, second and final Review Dates are 7.80%, 15.60% and 23.40%, respectively. There will be only one payment on the notes whether called or at maturity. An entry of “N/A” indicates that the notes would not be called on the applicable Review Date and no payment would be made on the applicable Call Settlement Date. Each hypothetical total return or payment on the notes set forth below is for illustrative purposes only and may not be the actual total return or payment on the notes applicable to a purchaser of the notes.
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Basket
Closing Level
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Basket Appreciation/
Depreciation at Review Date
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Total Return at First Review Date
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Total Return at Second Review Date
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Total Return at Final Review
Date
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180.00
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80.00%
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7.80%
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15.60%
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23.40%
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170.00
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70.00%
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7.80%
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15.60%
|
23.40%
|
|
160.00
|
60.00%
|
7.80%
|
15.60%
|
23.40%
|
|
150.00
|
50.00%
|
7.80%
|
15.60%
|
23.40%
|
|
140.00
|
40.00%
|
7.80%
|
15.60%
|
23.40%
|
|
130.00
|
30.00%
|
7.80%
|
15.60%
|
23.40%
|
|
120.00
|
20.00%
|
7.80%
|
15.60%
|
23.40%
|
|
110.00
|
10.00%
|
7.80%
|
15.60%
|
23.40%
|
|
100.00
|
0.00%
|
7.80%
|
15.60%
|
23.40%
|
|
97.50
|
-2.50%
|
N/A
|
N/A
|
0.00%
|
|
95.00
|
-5.00%
|
N/A
|
N/A
|
0.00%
|
|
90.00
|
-10.00%
|
N/A
|
N/A
|
0.00%
|
|
85.00
|
-15.00%
|
N/A
|
N/A
|
-5.00%
|
|
80.00
|
-20.00%
|
N/A
|
N/A
|
-10.00%
|
|
70.00
|
-30.00%
|
N/A
|
N/A
|
-20.00%
|
|
60.00
|
-40.00%
|
N/A
|
N/A
|
-30.00%
|
|
50.00
|
-50.00%
|
N/A
|
N/A
|
-40.00%
|
|
40.00
|
-60.00%
|
N/A
|
N/A
|
-50.00%
|
|
30.00
|
-70.00%
|
N/A
|
N/A
|
-60.00%
|
|
20.00
|
-80.00%
|
N/A
|
N/A
|
-70.00%
|
|
10.00
|
-90.00%
|
N/A
|
N/A
|
-80.00%
|
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-90.00%
|
Hypothetical Examples of Amount Payable at Maturity
The following examples illustrate how the payment at maturity in different hypothetical scenarios is calculated.
Example 1: The Basket Closing Level increases from the Starting Basket Level of 100 to a Basket Closing Level of 110 on the first Review Date. Because the Basket Closing Level on the first Review Date of 110 is greater than the corresponding Call Level of 100, the notes are automatically called, and the investor receives a single payment of $1,078 per $1,000 principal amount note on the first Call Settlement Date.
Example 2: The Basket Closing Level decreases from the Starting Basket Level of 100 to a Basket Closing Level of 95 on the first Review Date, 85 on the second Review Date and 120 on the final Review Date. Because the Basket Closing Level on each of the first and second Review Dates (95 and 85) is less than the corresponding Call Level of 100, the notes are not automatically called on these Review Dates. However, because the Basket Closing Level on the final Review Date of 120 is greater than the corresponding Call Level of 100, the notes are automatically called on the final Review Date, and the investor receives a single payment of $1,234 per $1,000 principal amount note on the Maturity Date. This represents the maximum total payment an investor may receive over the term of the notes.
Example 3: The Basket Closing Level decreases from the Starting Basket Level of 100 to a Basket Closing Level of 60 on the first Review Date, 80 on the second Review Date and 95 on the final Review Date. Because (a) the Basket Closing Level on each of the Review Dates (60, 80 and 95) is less than the corresponding Call Level of 100 and (b) the Ending Basket Level is less than the Starting Basket Level by up to the Buffer Amount of 10%, the notes are not automatically called and the payment at maturity is the principal amount of $1,000 per $1,000 principal amount note.
Example 4: The Basket Closing Level decreases from the Starting Basket Level of 100 to a Basket Closing Level of 90 on the first Review Date, 85 on the second Review Date and 50 on the final Review Date. Because (a) the Basket Closing Level on each of the Review Dates (90, 85 and 50) is less than the corresponding Call Level of 100 and (b) the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%, the notes are not automatically called and the investor receives a payment at maturity of $600 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50% + 10%)] = $600
Example 5: The Basket Closing Level decreases from the Starting Basket Level of 100 to a Basket Closing Level of 80 on the first Review Date, 50 on the second Review Date and 0 on the final Review Date. Because (a) the Basket Closing Level on each of the Review Dates (80, 50 and 0) is less than the corresponding Call Level of 100 and (b) the Ending Basket Level is less than the Starting Basket Level by more than the Buffer Amount of 10%, the notes are not
|
JPMorgan Structured Investments —
|
PS- 5
|
|
Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
|
automatically called and the investor receives a payment at maturity of $100 per $1,000 principal amount note, which reflects the benefit provided by the Buffer Amount of 10%, calculated as follows:
$1,000 + [$1,000 × (-100% + 10%)] = $100
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 fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
|
JPMorgan Structured Investments —
|
PS- 6
|
|
Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
|
Historical Information
The following graphs show the historical weekly performance of the Basket as a whole, as well as each Index, from January 2, 2009 through September 26, 2014. The graph of the historical Basket performance assumes the Basket Closing Level on January 2, 2009 was 100 and the Component Weights were as specified on the cover of this pricing supplement on that date. The Index closing level of the S&P 500® Index on September 26, 2014 was 1,982.85. The Index closing level of the EURO STOXX 50® Index on September 26, 2014 was 3,219.58.
We obtained the various Index closing levels below from Bloomberg Financial Markets, without independent verification. The historical levels of each Index and the historical levels of the Basket should not be taken as an indication of future performance, and no assurance can be given as to the Index closing level of either Index on any Review Date. We cannot give you assurance that the performance of the Basket will result in the return of any of your principal.
|
JPMorgan Structured Investments —
|
PS- 7
|
|
Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
|
JPMS’s Estimated Value of the Notes
JPMS’s estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using our internal funding rate for structured debt described below, and (2) the derivative or derivatives underlying the economic terms of the notes. JPMS’s estimated value does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. For additional information, see “Selected Risk Considerations — JPMS’s Estimated Value Is Not Determined by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt.” The value of the derivative or derivatives underlying the economic terms of the notes is derived from JPMS’s internal pricing models. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or environments. Accordingly, JPMS’s estimated value of the notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions existing at that time. See “Selected Risk Considerations — JPMS’s Estimated Value Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates.”
JPMS’s estimated value of the notes is lower than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates will retain any profits we realize in hedging our obligations under the notes. See “Selected Risk Considerations — JPMS’s Estimated Value of the Notes Is Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes Will Be Impacted by Many Economic and Market Factors” in this pricing supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by JPMS. See “Selected Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMS’s Then-Current Estimated Value of the Notes for a Limited Time Period.”
Supplemental Use of Proceeds
The net proceeds we receive from the sale of the notes will be used for general corporate purposes and, in part, by us or one or more of our affiliates in connection with hedging our obligations under the notes.
The notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Examples of Amount Payable upon Automatic Call or at Maturity” in this pricing supplement for an illustration of the risk-return profile of the notes and “Selected Purchase Considerations — Return Linked to the Indices” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to JPMS’s estimated value of the notes, plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
For purposes of the notes offered by this pricing supplement, the first and second paragraph of the section entitled “Use of Proceeds and Hedging” on page PS-48 of the accompanying product supplement no. 4-I are deemed deleted in their entirety. Please refer instead to the discussion set forth above.
Validity of the Notes
In the opinion of Davis Polk & Wardwell LLP, as our special products counsel, when the notes offered by this pricing supplement have been executed and issued by us and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be our valid and binding obligations, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the federal laws of the United States of America, the laws of the State of New York and the General Corporation Law of the State of Delaware. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated March 29, 2012, which was filed as an exhibit to a Current Report on Form 8-K by us on March 29, 2012.
|
JPMorgan Structured Investments —
|
PS- 8
|
|
Review Notes Linked to an Equally Weighted Basket Consisting of the S&P 500® Index and the EURO STOXX 50® Index
|