CALCULATION OF REGISTRATION FEE |
Title
of Each Class of
Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
Notes |
$2,500,000 |
$251.75 |
Pricing supplement no. 1768 |
|
To prospectus dated November 7, 2014,
prospectus supplement dated November 7, 2014,
product supplement no. 4a-I dated November 7, 2014 and
underlying supplement no. 1a-I dated November 7, 2014
|
Registration Statement No. 333-199966
Dated February 10, 2016
Rule 424(b)(2) |
|
Structured
Investments |
|
$2,500,000
Digital Dual Directional Contingent Buffered
Notes Linked to the S&P 500® Index due March 1, 2017
|
General
| · | The
notes are designed for investors who seek a fixed return of 9.46% if the Ending Index Level is greater than or equal to the Initial
Index Level or is less than the Initial Index Level by up to 15%. |
| · | Investors
should be willing to forgo interest and dividend payments and, if the Ending Index Level is less than the Initial Index Level
by more than 15%, be willing to lose some or all of their principal amount at maturity. |
| · | The
notes are unsecured and unsubordinated obligations of JPMorgan Chase & Co. Any payment on the notes is subject to the credit
risk of JPMorgan Chase & Co. |
| · | Minimum
denominations of $10,000 and integral multiples of $1,000 in excess thereof |
Key
Terms
Index: |
The S&P 500® Index (Bloomberg ticker: SPX). |
Payment at Maturity:
|
If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Contingent Digital Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
|
$1,000 + ($1,000 × Contingent Digital Return) |
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
|
$1,000 + ($1,000 × Index Return) |
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 15%, you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount at maturity. |
Contingent Digital Return: |
9.46%, which reflects the maximum return on the notes. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,094.60. |
Contingent Buffer Amount |
15% |
Index Return: |
(Ending Index Level –
Initial Index Level)
Initial Index Level |
|
Initial Index Level: |
The closing level of the Index on the Pricing Date, which was 1,851.86 |
Ending Index Level: |
The arithmetic average of the closing levels of the Index on the Ending Averaging Dates |
Pricing Date |
February 10, 2016 |
Original Issue Date (Settlement Date): |
On or about February 16, 2016 |
Ending Averaging Dates*: |
February 17, 2017, February 21, 2017, February 22, 2017, February 23, 2017 and February 24, 2017 |
Maturity Date*: |
March 1, 2017 |
CUSIP: |
48128GNG1 |
| * | Subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes
— Postponement of a Determination Date — Notes Linked to a Single Underlying — Notes Linked to a Single Underlying
(Other Than a Commodity Index)” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement no. 4a-I |
Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-8 of the accompanying product supplement no. 4a-I, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement no. 1a-I and “Selected Risk Considerations” beginning on page
PS-3 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
Per note |
$1,000 |
$10 |
$990 |
Total |
$2,500,000 |
$25,000 |
$2,475,000 |
| (1) | See “Supplemental Use of Proceeds” in this pricing supplement for information about the components of the price
to public of the notes. |
| (2) | 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 $10.00 per $1,000 principal amount note it receives from us to other affiliated or unaffiliated dealers. See “Plan
of Distribution (Conflicts of Interest)” beginning on page PS-87 of the accompanying product supplement no. 4a-I. |
The estimated value of the notes as determined by JPMS,
when the terms of the notes were set, was $984.30 per $1,000 principal amount note. See “JPMS’s Estimated Value
of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by
the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
February 10, 2016
Additional Terms Specific to the
Notes
You should read this pricing supplement together with the
prospectus, as supplemented by the prospectus supplement, each dated November 7, 2014 relating to our Series E medium-term notes
of which these notes are a part, and the more detailed information contained in product supplement no. 4a-I dated November 7, 2014
and underlying supplement no. 1a-I dated November 7, 2014. This pricing supplement, together with the documents listed below,
contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written
materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample
structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things,
the matters set forth in “Risk Factors” in the accompanying product supplement no. 4a-I and “Risk Factors”
in the accompanying underlying supplement no. 1a-I, as the notes involve risks not associated with conventional debt securities.
We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 19617.
As used in this pricing supplement, “we,” “us” and “our” refer to JPMorgan Chase & Co.
JPMorgan Structured Investments — |
PS-1 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
What
Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index?
The following
table and examples illustrate the hypothetical total return and the hypothetical payment at maturity on the notes. The “total
return” as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment
at maturity per $1,000 principal amount note to $1,000. Each hypothetical total return or payment at maturity set forth below
assumes an Initial Index Level of 2,000 and reflects the Contingent Digital Return of 9.46% and the Contingent Buffer Amount of
15%. Each hypothetical total return or payment at maturity set forth below is for illustrative purposes only and may not be the
actual total return or payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table
and in the examples below have been rounded for ease of analysis.
Ending Index
Level |
Index Return |
Total Return |
3,600.00 |
80.00% |
9.46% |
3,300.00 |
65.00% |
9.46% |
3,000.00 |
50.00% |
9.46% |
2,800.00 |
40.00% |
9.46% |
2,600.00 |
30.00% |
9.46% |
2,300.00 |
15.00% |
9.46% |
2,200.00 |
10.00% |
9.46% |
2,189.20 |
9.46% |
9.46% |
2,100.00 |
5.00% |
9.46% |
2,050.00 |
2.50% |
9.46% |
2,000.00 |
0.00% |
9.46% |
1,950.00 |
-2.50% |
9.46% |
1,900.00 |
-5.00% |
9.46% |
1,800.00 |
-10.00% |
9.46% |
1,700.00 |
-15.00% |
9.46% |
1,699.80 |
-15.01% |
-15.01% |
1,600.00 |
-20.00% |
-20.00% |
1,500.00 |
-25.00% |
-25.00% |
1,400.00 |
-30.00% |
-30.00% |
1,200.00 |
-40.00% |
-40.00% |
1,000.00 |
-50.00% |
-50.00% |
800.00 |
-60.00% |
-60.00% |
600.00 |
-70.00% |
-70.00% |
400.00 |
-80.00% |
-80.00% |
200.00 |
-90.00% |
-90.00% |
0.00 |
-100.00% |
-100.00% |
Hypothetical
Examples of Amount Payable at Maturity
The following
examples illustrate how the total payment at maturity in different hypothetical scenarios is calculated.
Example
1: The level of the Index increases from the Initial Index Level of 2,000 to an Ending Index Level of 2,100.
Because
the Ending Index Level of 2,100 is greater than the Initial Index Level of 2,000, regardless of the Index Return, the investor
receives a payment at maturity of $1,094.60 per $1,000 principal amount note, calculated as follows:
$1,000
+ ($1,000 × 9.46%) = $1,094.60
Example
2: The level of the Index decreases from the Initial Index Level of 2,000 to an Ending Index Level of 1,700.
Although
the Index Return is negative, because the Ending Index Level of 1,700 is less than the Initial Index Level of 2,000 by up to the
Contingent Buffer Amount of 15%, the investor receives a payment at maturity of $1,094.60 per $1,000 principal amount note, calculated
as follows:
$1,000
+ ($1,000 × 9.46%) = $1,094.60
Example
3: The level of the Index increases from the Initial Index Level of 2,000 to an Ending Index Level of 2,800.
Because
the Ending Index Level of 2,800 is greater than the Initial Index Level of 2,000 and although the Index Return of 40% exceeds
the Contingent Digital Return of 9.46%, the investor is entitled to only the Contingent Digital Return and receives a payment
at maturity of $1,094.60 per $1,000 principal amount note, calculated as follows:
$1,000
+ ($1,000 × 9.46%) = $1,094.60
Example
4: The level of the Index decreases from the Initial Index Level of 2,000 to an Ending Index Level of 1,000.
Because
the Ending Index Level of 1,000 is less than the Initial Index Level of 2,000 by more than the Contingent Buffer Amount of 15%
and the Index Return is -50%, the investor receives a payment at maturity of $500 per $1,000 principal amount note, calculated
as follows:
$1,000
+ ($1,000 × -50%) = $500
The hypothetical
returns and hypothetical payments on the notes shown above apply only if you hold the notes for their entire term. These
hypotheticals do not reflect fees or expenses that would be associated with any sale in the
JPMorgan Structured Investments — |
PS-2 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
secondary
market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely
be lower.
Selected
Purchase Considerations
| · | FIXED
APPRECIATION POTENTIAL — If the Ending Index Level is greater than or equal to the Initial Index Level or is less than
the Initial Index Level by up to the Contingent Buffer Amount, you will receive a fixed return equal to the Contingent Digital
Return of 9.46% at maturity, which also reflects the maximum return on the notes at maturity. 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. |
| · | LIMITED
PROTECTION AGAINST LOSS — We will pay you your principal back at maturity if the Ending Index Level is equal to the
Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount of 15%. If the Ending Index
Level is less than the Initial Index Level by more than the Contingent Buffer Amount, for every 1% that the Ending Index Level
is less than the Initial Index Level, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances,
you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount at maturity. |
| · | RETURN
LINKED TO THE S&P 500® INDEX — The return on the notes is linked to the S&P 500®
Index. The S&P 500® Index consists of 500 component stocks selected to provide a performance benchmark for
the U.S. equity markets. See “Equity Index Descriptions — The S&P 500® Index” in the accompanying
underlying supplement no. 1a-I. |
| · | TAX
TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement no. 4a-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. |
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, as more fully described in “Material U.S. Federal Income
Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments”
in the accompanying product supplement no. 4a-I. 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 IRS or a court may not respect this treatment, in which case the timing and character
of any 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.
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. Notwithstanding anything to the contrary in the accompanying product
supplement no. 4a-I, under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than
any amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You should consult your
tax adviser regarding the potential application of FATCA to the notes.
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 notes.
Selected
Risk Considerations
An investment
in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index or any of
the equity securities underlying the Index. These risks are explained in more detail in the “Risk Factors” section
of the accompanying product supplement no. 4a-I dated November 7, 2014 and “Risk Factors” in the accompanying underlying
supplement no. 1a-I dated November 7, 2014.
| · | YOUR
INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. The return on the
notes at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the Index Return
is positive or negative. If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount
of 15%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial
Index Level. Accordingly, |
JPMorgan Structured Investments — |
PS-3 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
under
these circumstances, you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount
at maturity.
| · | YOUR
MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE CONTINGENT DIGITAL RETURN — If
the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to the
Contingent Buffer Amount, for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional
return equal to the Contingent Digital Return of 9.46%, regardless of the appreciation in the Index, which may be significant. |
| · | YOUR
ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE — If the Ending Index
Level is less than the Initial Index Level by more than the Contingent Buffer Amount, you will not be entitled to receive the
Contingent Digital Return at maturity. Under these circumstances, you will lose more than 15% of your principal amount at maturity
and may lose all of your principal amount at maturity. |
| · | 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. |
| · | 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 Conflicts of Interest” in the
accompanying product supplement no. 4a-I for additional information about these risks. |
We
are also 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.
| · | THE
BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE — If the Ending Index
Level is less than the Initial Index Level by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer
Amount will terminate and you will be fully exposed to any depreciation in the Index. |
| · | JPMS’S
ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated
value is only an estimate using several factors. The original issue price of the notes exceeds JPMS’s estimated value because
costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These
costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks
inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “JPMS’s
Estimated Value of the Notes” in this pricing supplement. |
| · | JPMS’S
ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES — 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. |
| · | JPMS’S
ESTIMATED VALUE IS NOT DETERMINED BY REFERENCE TO CREDIT SPREADS FOR OUR CONVENTIONAL FIXED-RATE DEBT — The internal
funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit spreads
for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the notes
as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for
our conventional fixed-rate debt. If JPMS were to use the interest rate implied by our conventional fixed-rate credit spreads,
we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate
would have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “JPMS’s Estimated
Value of the Notes” in this pricing supplement. |
| · | THE
VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN JPMS’S
THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — We generally expect that some of the costs included
in the original issue price of the notes will be partially paid back to you in connection with any |
JPMorgan Structured Investments — |
PS-4 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
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).
| · | 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. |
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.
| · | 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 level of the Index, including: |
| · | any
actual or potential change in our creditworthiness or credit spreads; |
| · | customary
bid-ask spreads for similarly sized trades; |
| · | secondary
market credit spreads for structured debt issuances; |
| · | the
actual and expected volatility of the Index; |
| · | the
time to maturity of the notes; |
| · | the
dividend rates on the equity securities included in the Index; |
| · | interest
and yield rates in the market generally; |
| · | the
exchange rates and the volatility of the exchange rates between the U.S. dollar and the European Union euro; and |
| · | 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 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.
| · | 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 securities
included in the Index would have. |
| · | 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. |
JPMorgan Structured Investments — |
PS-5 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
Historical
Information
The following
graph sets forth the historical performance of the Index based on the weekly historical closing levels of the Index from January
7, 2011 through February 5, 2016. The closing level of the Index on February 10, 2016 was 1,851.86. We obtained the closing levels
of the Index above and below from the Bloomberg Professional® service (“Bloomberg”), without independent
verification.
The historical
closing levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the
closing level of the Index on any Ending Averaging Date. We cannot give you assurance that the performance of the Index will result
in the return of any of your principal amount.
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 realized 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
JPMorgan Structured Investments — |
PS-6 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
stated
term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates expect to
earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred,
as determined by JPMS. See “Selected Risk Considerations — The Value of the Notes as Published by JPMS (and Which
May Be Reflected on Customer Account Statements) May Be Higher Than JPMS’s Then-Current Estimated Value of the Notes for
a Limited Time Period.”
Supplemental
Use of Proceeds
The notes
are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the notes.
See “What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index?” and “Hypothetical
Examples of Amount Payable 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 S&P 500® Index” in this
pricing supplement for a description of the market exposure provided by the notes.
The original
issue price of the notes is equal to JPMS’s estimated value of the notes plus the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Validity
of the Notes
In the
opinion of Davis Polk & Wardwell LLP, as our special products counsel, when the notes offered by this pricing supplement have
been executed and issued by us and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated
herein, such notes will be our valid and binding obligations, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable
principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision
of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the federal
laws of the United States of America, the laws of the State of New York and the General Corporation Law of the State of Delaware.
In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery
of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture with
respect to the trustee, all as stated in the letter of such counsel dated November 7, 2014, which was filed as an exhibit to the
Registration Statement on Form S-3 by us on November 7, 2014.
JPMorgan Structured Investments — |
PS-7 |
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500® Index |
|
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