CALCULATION OF REGISTRATION FEE
Title
of Each Class of Securities Offered |
Maximum
Aggregate
Offering Price |
Amount
of
Registration Fee |
Notes
|
$887,790 |
$89.40 |
|
September 2015
Pricing Supplement No. 1339
Registration Statement No. 333-199966
Dated September 30, 2015
Filed pursuant to Rule 424(b)(2)
|
Structured Investments
Opportunities in International
Equities
PLUS Based on the Performance of the iShares®
MSCI Emerging Markets ETF due
January 5, 2017
Performance Leveraged
Upside SecuritiesSM
Principal at Risk
Securities
The PLUS are unsecured and unsubordinated obligations of JPMorgan
Chase & Co., will pay no interest, do not guarantee any return of your principal at maturity and have the terms described in
the accompanying product supplement no. 4a-I, underlying supplement no. 1a-I, the prospectus supplement and the prospectus, as
supplemented or modified by this document. At maturity, if the ETF Shares have increased in price, investors will receive
the stated principal amount of their investment plus leveraged upside performance of the ETF Shares, subject to a maximum payment
at maturity. However, if the ETF Shares have decreased in price, at maturity investors will lose 1% for every 1% decline.
The PLUS are for investors who seek an equity-based return and who are willing to risk their principal and forgo current income
and upside above the maximum payment at maturity in exchange for the leverage feature that applies to a limited range of positive
performance of the ETF Shares. At maturity, an investor will receive an amount in cash that may be greater than, equal to, or less
than the stated principal amount based upon the price of one ETF Share on the valuation date. All payments on the PLUS are subject
to the credit risk of JPMorgan Chase & Co. The investor may lose some or all of the stated principal amount of the PLUS.
FINAL TERMS |
Issuer: |
JPMorgan Chase & Co. |
ETF Shares: |
Shares of the iShares® MSCI Emerging Markets ETF |
Aggregate principal amount: |
$887,790 |
Payment at maturity: |
· If the final share price is greater than the initial share price, for each $10 stated principal amount PLUS, |
|
$10 + leveraged upside payment |
|
In no event will the payment at maturity exceed the maximum payment at maturity. |
|
· If the final share price is less than or equal to the initial share price, for each $10 stated principal amount PLUS, |
|
$10 × share performance factor |
|
This amount will be less than or equal to the stated principal amount of $10 per PLUS. |
Leveraged upside payment: |
$10 × leverage factor × share percent increase |
Share percent increase: |
(final share price – initial share price) / initial share price |
Initial share price: |
The closing price of one ETF Share on the pricing date, which was $32.78 |
Final share price: |
The closing price of one ETF Share on the valuation date |
Share adjustment factor: |
The share adjustment factor is referenced in determining the closing price of one ETF Share and is set initially at 1.0 on the pricing date. The share adjustment factor is subject to adjustment in the event of certain events affecting the ETF Shares. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the accompanying product supplement no. 4a-I. |
Leverage factor: |
300% |
Share performance factor: |
final share price / initial share price |
Maximum payment at maturity: |
$12.20 (122.00% of the stated principal amount) per PLUS |
Stated principal amount: |
$10 per PLUS |
Issue price: |
$10 per PLUS (see “Commissions and issue price” below) |
Pricing date: |
September 30, 2015 |
Original issue date (settlement date): |
October 5, 2015 |
Valuation date: |
December 30, 2016, 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)” in the accompanying product supplement no. 4a-I |
Maturity date: |
January 5, 2017 , 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 |
CUSIP / ISIN: |
48127Y607 / US48127Y6077 |
Listing: |
The PLUS will not be listed on any securities exchange. |
Agent: |
J.P. Morgan Securities LLC (“JPMS”) |
Commissions
and issue price: |
Price
to public(1) |
Fees
and commissions |
Proceeds
to issuer |
Per PLUS |
$10.00 |
$0.175(2) |
$9.775 |
|
|
$0.05(3) |
|
Total |
$887,790.00 |
$19,975.28 |
$867,814.72 |
| (1) | See “Additional Information about the PLUS —
Supplemental use of proceeds and hedging” in this document for information about the components of the price to public of
the PLUS. |
| (2) | JPMS, acting as agent for JPMorgan Chase & Co., will
pay all of the selling commissions of $0.175 per $10 stated principal amount PLUS 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 PLUS |
The estimated value of the PLUS on the pricing date as determined
by JPMS was $9.643 per $10 stated principal amount PLUS. See “Additional Information about the PLUS — JPMS’s
estimated value of the PLUS” in this document for additional information.
Investing in the PLUS 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 5 of this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the PLUS 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 PLUS 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 PLUS” 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
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Investment Summary
Performance Leveraged Upside Securities
Principal at Risk Securities
The PLUS Based on the Performance of the
iShares® MSCI Emerging Markets ETF due January 5, 2017 (the “PLUS”) can be used:
| § | As an alternative to direct exposure to the ETF Shares that
enhances returns for a certain range of positive performance of the ETF Shares. |
| § | To potentially achieve similar levels of upside exposure
to the ETF Shares as a direct investment, subject to the maximum payment at maturity, while using fewer dollars by taking advantage
of the leverage factor. |
The PLUS are exposed on a 1:1 basis to
the negative performance of the ETF Shares.
Maturity: |
Approximately 15 months |
Leverage
factor: |
300% |
Maximum
payment at maturity: |
$12.20 (122.00% of the stated principal amount) per PLUS |
Minimum
payment at maturity: |
None. Investors may lose their entire initial investment in the
PLUS. |
Supplemental Terms of the PLUS
For purposes of the accompanying product supplement, the iShares®
MSCI Emerging Markets ETF is a “Fund.”
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Key Investment Rationale
PLUS offer leveraged exposure to an underlying
asset, which may be equities, commodities and/or currencies, without any protection against negative performance of the asset.
If the asset has decreased in value, investors are fully exposed to the negative performance of the asset. At maturity, if the
asset has appreciated, investors will receive the stated principal amount of their investment plus leveraged upside performance
of the underlying asset, subject to the maximum payment at maturity. At maturity, if the asset has depreciated, the investor will
lose 1% for every 1% decline. Investors may lose some or all of the stated principal amount of the PLUS.
Leveraged
Performance |
The PLUS offer investors an opportunity to capture enhanced returns for a certain range of positive performance relative to a direct investment in the ETF Shares. |
Upside
Scenario |
The ETF Shares increase in price and, at maturity, the PLUS pay the stated principal amount of $10 plus a return equal to 300% of the share percent increase, subject to the maximum payment at maturity of $12.20 (122.00% of the stated principal amount) per PLUS. |
Par
Scenario |
The final share price is equal to the initial share price and, at maturity, the PLUS pay the stated principal amount of $10 per PLUS. |
Downside
Scenario |
The ETF Shares decline in price and, at maturity, the PLUS pay an amount that is less than the stated principal amount by an amount that is proportionate to the percentage decline of the final share price from the initial share price. (Example: if the ETF Shares decrease in price by 20%, the PLUS will pay an amount that is less than the stated principal amount by 20%, or $8 per PLUS.) |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
How the PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment
at maturity on the PLUS based on the following terms:
Stated
principal amount: |
$10 per PLUS |
Leverage
factor: |
300% |
Maximum
payment at maturity: |
$12.20 (122.00% of the stated principal amount) per PLUS |
PLUS
Payoff Diagram |
|
How it works
| § | Upside
Scenario. If the final share price is greater than the initial share price, for each $10 principal amount PLUS investors
will receive the $10 stated principal amount plus a return equal to 300% of the appreciation of the ETF Shares over the
term of the PLUS, subject to the maximum payment at maturity. Under the terms of the PLUS, an investor will realize the maximum
payment at maturity at a final share price of approximately 107.333% of the initial share price. |
| § | Par
Scenario. If the final share price is equal to the initial share price, investors will receive the stated principal
amount of $10 per PLUS. |
| § | Downside
Scenario. If the final share price is less than the initial share price, investors will receive an amount that is less
than the stated principal amount by an amount proportionate to the percentage decrease of the final share price from the initial
share price. |
| § | For example, if the ETF Shares depreciate 50%, investors
will lose 50% of their principal and receive only $5 per PLUS at maturity, or 50% of the stated principal amount. |
The hypothetical returns and hypothetical
payments on the PLUS shown above apply only if you hold the PLUS for their entire term. 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.
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Risk Factors
The
following is a non-exhaustive list of certain key risk factors for investors in the PLUS. 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 also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment
in the PLUS.
| § | PLUS
do not pay interest or guarantee the return of any principal and your investment in the PLUS may result in a loss.
The terms of the PLUS differ from those of ordinary debt securities in that the PLUS do not pay interest or guarantee the payment
of any principal amount at maturity. If the final share price is less than the initial share price, the payment at maturity will
be an amount in cash that is less than the stated principal amount of each PLUS by an amount proportionate to the decrease in
the price of the ETF Shares and may be zero. |
| § | The
appreciation potential of the PLUS is limited by the maximum payment at maturity. The appreciation
potential of the PLUS is limited by the maximum payment at maturity of $12.20 (122.00% of the stated principal amount) per PLUS.
Because the maximum payment at maturity will be limited to 122.00% of the stated principal amount for the PLUS, any increase in
the final share price by more than approximately 7.333% will not further increase the return on the PLUS. |
| § | The
PLUS 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 PLUS. Investors are dependent
on JPMorgan Chase & Co.’s ability to pay all amounts due on the PLUS. 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 PLUS. If we were to default on our payment obligations, you may not receive any amounts owed to you under
the PLUS and you could lose your entire investment. |
| § | Economic interests of the issuer, the calculation agent,
the agent of the offering of the PLUS 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 PLUS, including acting as calculation agent
and as an agent of the offering of the PLUS, hedging our obligations under the PLUS and making the assumptions used to
determine the pricing of the PLUS and the estimated value of the PLUS, 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 PLUS. The calculation agent has determined the initial
share price, will determine the final share price and will calculate the amount of payment you will receive at maturity, if any.
Determinations made by the calculation agent, including with respect to the occurrence or non-occurrence of market disruption
events, the selection of a successor to the ETF Shares or calculation of the final share price in the event of a discontinuation
of the ETF Shares, and any anti-dilution adjustments, may affect the payment to you at maturity. 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 PLUS and the value of the PLUS. It is possible that hedging or trading
activities of ours or our affiliates in connection with the PLUS could result in substantial returns for us or our affiliates
while the value of the PLUS 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. |
| § | JPMS’s estimated value of the PLUS is lower than the original issue price (price to public) of the PLUS. JPMS’s
estimated value is only an estimate using several factors. The original issue price of the PLUS exceeds JPMS’s
estimated value because costs associated with selling, structuring and hedging the PLUS are included in the original issue
price of the PLUS. 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 PLUS and the estimated cost of
hedging our obligations under
the PLUS. See “Additional Information about the PLUS — JPMS’s estimated value of the PLUS” in this document. |
| § | JPMS’s estimated value does not represent future
values of the PLUS and may differ from others’ estimates.
JPMS’s estimated value of the PLUS 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, |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
| | interest
rates and other factors. Different pricing models and assumptions could provide valuations for PLUS 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 PLUS 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 PLUS from you in secondary market transactions. See “Additional
Information about the PLUS — JPMS’s estimated value of the PLUS” 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
PLUS as well as the higher issuance, operational and ongoing liability management costs of the PLUS 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 PLUS 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 PLUS and any secondary market prices of the PLUS. See “Additional
Information about the PLUS — JPMS’s estimated value of the PLUS” in this document. |
| § | The value of the PLUS 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 PLUS for
a limited time period. We
generally expect that some of the costs included in the original issue price of the PLUS will be partially paid
back to you in connection with any repurchases of your PLUS 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 PLUS — Secondary market prices of the PLUS” in this document for additional information relating to this
initial period. Accordingly, the estimated value of your PLUS during this initial period may be lower than the value of the PLUS
as published by JPMS (and which may be shown on your customer account statements). |
| § | Secondary market prices of the PLUS will likely be lower
than the original issue price of the PLUS. Any secondary market
prices of the PLUS will likely be lower than the original issue price of the PLUS 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 PLUS. As a result, the price, if any, at which JPMS will be
willing to buy PLUS 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 PLUS. |
The
PLUS are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your PLUS to maturity.
See “— Secondary trading may be limited” below.
| § | Secondary
market prices of the PLUS will be impacted by many economic
and market factors. The secondary market price of the PLUS 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 price of the ETF Shares, 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 in the prices of the
ETF Shares; |
| § | the time to maturity of the PLUS; |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
| § | the dividend rates on the ETF Shares and the equity securities
underlying the ETF Shares; |
| § | interest and yield rates in the market generally; |
| § | the exchange rates and the volatility of the exchange
rates between the U.S. dollar and each of the currencies in which the equity securities underlying the ETF Shares trade and the
correlation among those rates and the price of one ETF Share; |
| § | the occurrence of certain events to the ETF Shares that
may or may not require an adjustment to the share adjustment factor; 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 PLUS, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the PLUS, if any, at which JPMS may
be willing to purchase your PLUS in the secondary market.
| § | Investing
in the PLUS is not equivalent to investing in the ETF Shares. Investing in the PLUS is not
equivalent to investing in the ETF Shares, the index tracked by the ETF Shares, which we refer to as the underlying index, or
the stocks underlying the ETF Shares or the underlying index. Investors in the PLUS will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to the ETF Shares, the underlying index or the stocks underlying
the ETF Shares or the underlying index. |
| § | Adjustments
to the ETF Shares or the underlying index could adversely affect the value of the PLUS. Those responsible for calculating
and maintaining the ETF Shares and the underlying index, can add, delete or substitute the components of the ETF Shares or the
underlying index, or make other methodological changes that could change the value of the ETF Shares or the underlying index.
Any of these actions could adversely affect the price of the ETF Shares and, consequently, the value of the PLUS. |
| § | There are risks associated with the ETF Shares. Although
the ETF Shares are listed for trading on NYSE Arca, Inc. and a number of similar products have been traded on various national
securities exchanges for varying periods of time, there is no assurance that an active trading market will continue for the ETF
Shares or that there will be liquidity in the trading market. The ETF Shares are subject to management risk, which is the risk
that the investment strategy of the investment adviser to the ETF Shares, the implementation of which is subject to a number of
constraints, may not produce the intended results. These constraints could adversely affect the market price of the ETF Shares
and, consequently, the value of the PLUS. |
| § | There
are differences between the ETF Shares and the underlying index. The ETF Shares do not fully
replicate the underlying index and may hold securities different from those included in the underlying index. In addition, the
performance of the ETF Shares will reflect additional transaction costs and fees that are not included in the calculation of the
underlying index. All of these factors may lead to a lack of correlation between the ETF Shares and the underlying index. In addition,
corporate actions with respect to the equity securities underlying the ETF Shares (such as mergers and spin-offs) may impact the
variance between the performances of the ETF Shares and the underlying index. Finally, because the ETF Shares
are traded on NYSE Arca, Inc. and are subject to market supply and investor demand, the market value of one ETF Share
may differ from the net asset value per ETF Share.
For all of the foregoing reasons, the performance of the ETF Shares may not correlate with the performance of the underlying index. |
| § | The PLUS are subject to risks associated with securities
issued by non-U.S. companies. The equity securities underlying the ETF Shares have been issued by non-U.S. companies. Investments
in PLUS linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the
home countries of the issuers of those non-U.S. equity securities, 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 there is about U.S. companies that are subject to the
reporting requirements of the SEC. |
| § | The PLUS entail
emerging markets risk. The equity securities underlying the ETF Shares have been issued by non-U.S. companies located
in emerging markets countries. Countries with emerging markets may have relatively unstable governments, may present the risks
of nationalization of businesses, |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
| | restrictions
on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more
developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable
to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of holdings difficult or impossible at times. |
| § | The PLUS are subject
to currency exchange risk. Because the prices of the equity securities underlying the ETF Shares are converted into U.S. dollars
for the purposes of calculating the net asset value of the ETF Shares, holders of the PLUS will be exposed to currency exchange
rate risk with respect to each of the currencies in which securities underlying the ETF Shares are traded. Your net exposure will
depend on the extent to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of the equity
securities underlying the ETF shares denominated in each of those currencies. If, taking into account the relative weightings,
the U.S. dollar strengthens against those currencies, the price of the ETF Shares will be adversely affected and the amount we
pay you at maturity, if any, may be reduced. Of particular importance to potential currency exchange risk are: |
| o | existing and expected
rates of inflation; |
| o | existing and expected
interest rate levels; |
| o | the balance of payments
in the countries issuing those currencies and the United States and between each country and its major trading partners; |
| o | political, civil
or military unrest in the countries issuing those currencies and the United States; and |
| o | the extent of government
surpluses or deficits in the countries issuing those currencies and the United States. |
All
of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the countries
issuing those currencies and the United States and other countries important to international trade and finance.
| § | Owning the PLUS
is not the same as owning the ETF Shares. Owning the PLUS
is not the same as owning the ETF Shares. Accordingly, changes in the closing price of one ETF Share may not result in
a comparable change of the market value of the PLUS.
If the closing price of one ETF Share on any trading day increases above the initial share price, the value of the PLUS may not
increase comparably, if at all. It is possible for the closing price of the ETF Shares to increase moderately while the value
of the PLUS declines. |
| § | The
anti-dilution protection for the ETF Shares is limited. The calculation agent will make
adjustments to the share adjustment factor for certain events affecting the ETF Shares.
However, the calculation agent will not make an adjustment in response to all events that could affect the ETF Shares.
If an event occurs that does not require the calculation
agent to make an adjustment, the value of the PLUS may be materially and adversely affected. |
| § | Hedging and trading activities by the issuer and its affiliates
could potentially affect the value of the PLUS. The hedging
or trading activities of the issuer’s affiliates and of any other hedging counterparty with respect to the PLUS
on or prior to the pricing date and prior to maturity could have adversely affected, and may continue to adversely affect, the
value of the ETF Shares, and, as a result, could decrease the amount an investor may receive on the PLUS at maturity, if any.
Any of these hedging or trading activities on or prior to the pricing date could have affected the initial share price
and, therefore, could potentially increase the level that the final share price must reach before you receive a payment at maturity
that exceeds the issue
price of the PLUS or so that you do not suffer a loss on your initial investment in the PLUS. Additionally, these hedging or trading
activities during the term of the PLUS, including
on the valuation date, could adversely affect the final share price and, accordingly, the amount of cash an investor will receive
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 PLUS declines. |
| § | Secondary
trading may be limited. The PLUS will not be listed on a securities exchange.
There may be little or no secondary market for the PLUS. Even if there is a secondary market, it may not provide enough |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
| | liquidity
to allow you to trade or sell the PLUS easily. JPMS may act as a market maker for the
PLUS, 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 PLUS, the price at which
you may be able to trade your PLUS is likely to depend on the price, if any, at which
JPMS is willing to buy the PLUS. 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
PLUS. |
| § | The tax consequences of an investment in the PLUS are
uncertain. There is no direct legal authority as to the proper U.S. federal income tax characterization of the PLUS, and we
do not intend to request a ruling from the IRS regarding the PLUS. The IRS might not accept, and a court might not uphold, the
treatment of the PLUS described in “Additional Information about the PLUS ― 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 was successful in asserting an alternative treatment, the timing and character of any income or loss on the PLUS
could differ materially and adversely from our description herein. |
Even
if the treatment of the PLUS is respected, the IRS may assert that the PLUS constitute “constructive ownership transactions”
within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”), in which case any
gain recognized in respect of the PLUS that would otherwise be long-term capital gain and that is in excess of the “net
underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest
charge would apply as if that income had accrued for tax purposes at a constant yield over the term of the PLUS. Our special tax
counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the PLUS.
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
described above. 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 PLUS, 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 PLUS,
including the potential application of the constructive ownership rules, possible alternative treatments and the issues presented
by this notice.
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares®
MSCI Emerging Markets ETF Overview
The iShares®
MSCI Emerging Markets ETF is an exchange-traded fund of iShares®, Inc. (“iShares”), a registered
investment company that consists of numerous separate investment portfolios, including the iShares® MSCI Emerging
Markets ETF. BlackRock Fund Advisors (“BFA”) is currently the investment adviser for the iShares®
MSCI Emerging Markets ETF. The iShares® MSCI Emerging Markets ETF seeks to track the investment results,
before fees and expenses, of an index composed of large- and mid-capitalization emerging market equities, which we refer to as
the underlying index. The underlying index is currently the MSCI Emerging Markets Index. Information provided to or filed with
the SEC by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to
the SEC file numbers 033-97598 and 811-09102, respectively, through the SEC’s website at http://www.sec.gov. In addition,
information may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly
disseminated documents. For additional information about the iShares® MSCI Emerging Markets ETF, see “Fund
Descriptions — The iShares® MSCI Emerging Markets ETF” in the accompanying underlying supplement no.
1a-I.
Information
as of market close on September 30, 2015:
Bloomberg
Ticker Symbol: |
EEM |
Current
Closing Price: |
$32.78 |
52
Weeks Ago (on 9/30/2014): |
$41.56 |
52
Week High (on 4/28/2015): |
$44.09 |
52
Week Low (on 8/24/2015): |
$31.32 |
The following
table sets forth the published high and low closing prices, as well as end-of-quarter closing prices, of the ETF Shares for each
quarter in the period from January 1, 2010 through September 30, 2015. The closing price of one ETF Share on September 30, 2015
was $32.78. The associated graph shows the closing prices of one ETF Share for each day in the same period. We obtained the closing
price information above and in the table and graph below from the Bloomberg Professional® service (“Bloomberg”),
without independent verification. The closing prices may have been adjusted by Bloomberg for actions taken relating to the ETF
Shares, such as stock splits. The historical closing prices of the ETF Shares should not be taken as an indication of future performance,
and no assurance can be given as to the closing price of one ETF Share on the valuation date.
iShares®
MSCI Emerging Markets ETF |
High |
Low |
Period
End |
2010 |
|
|
|
First Quarter |
$43.22 |
$36.83 |
$42.12 |
Second Quarter |
$43.98 |
$36.16 |
$37.32 |
Third Quarter |
$44.77 |
$37.59 |
$44.77 |
Fourth Quarter |
$48.58 |
$44.77 |
$47.62 |
2011 |
|
|
|
First Quarter |
$48.69 |
$44.63 |
$48.69 |
Second Quarter |
$50.21 |
$45.50 |
$47.60 |
Third Quarter |
$48.46 |
$34.95 |
$35.07 |
Fourth Quarter |
$42.80 |
$34.36 |
$37.94 |
2012 |
|
|
|
First Quarter |
$44.76 |
$38.23 |
$42.94 |
Second Quarter |
$43.54 |
$36.68 |
$39.19 |
Third Quarter |
$42.37 |
$37.42 |
$41.32 |
Fourth Quarter |
$44.35 |
$40.14 |
$44.35 |
2013 |
|
|
|
First Quarter |
$45.20 |
$41.80 |
$42.78 |
Second Quarter |
$44.23 |
$36.63 |
$38.57 |
Third Quarter |
$43.29 |
$37.34 |
$40.77 |
Fourth Quarter |
$43.66 |
$40.44 |
$41.77 |
2014 |
|
|
|
First Quarter |
$40.99 |
$37.09 |
$40.99 |
Second Quarter |
$43.95 |
$40.82 |
$43.23 |
|
|
|
|
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares®
MSCI Emerging Markets ETF |
High |
Low |
Period
End |
Third Quarter |
$45.85 |
$41.56 |
$41.56 |
Fourth Quarter |
$42.44 |
$37.73 |
$39.29 |
2015 |
|
|
|
First Quarter |
$41.07 |
$37.92 |
$40.13 |
Second Quarter |
$44.09 |
$39.04 |
$39.62 |
Third Quarter |
$39.78 |
$31.32 |
$32.78 |
Shares of the iShares®
MSCI Emerging Markets ETF
Daily Closing Prices
January 4, 2010 to
September 30, 2015 |
|
This document relates only to the PLUS offered hereby and
does not relate to the ETF Shares. We have derived all disclosures contained in this document regarding the iShares®
MSCI Emerging Markets ETF from the publicly available documents described in the first paragraph under this “iShares®
MSCI Emerging Markets ETF Overview” section, without independent verification. In connection with the offering of the PLUS,
neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to
the iShares® MSCI Emerging Markets ETF. Neither we nor the agent makes any representation that such publicly available
documents or any other publicly available information regarding the iShares® MSCI Emerging Markets ETF is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that
would affect the accuracy or completeness of the publicly available documents described in the first paragraph under this “iShares®
MSCI Emerging Markets ETF Overview” section) that would affect the trading price of the ETF Shares (and therefore the price
of the ETF Shares at the time we priced the PLUS) have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of or failure to disclose material future events concerning the iShares® MSCI Emerging Markets ETF could
affect the value received at maturity with respect to the PLUS and therefore the trading prices of the PLUS.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the ETF Shares.
The MSCI Emerging Markets Index. The
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance
of global emerging markets. The MSCI Emerging Markets Index is described under the heading “Equity Index Descriptions —
The MSCI Indices” in the accompanying underlying supplement no. 1a-I.
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
Additional Information about the PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions: |
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 valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the PLUS will be postponed to the third business day following the valuation date as postponed. |
Minimum
ticketing size: |
$1,000 / 100 PLUS |
Trustee: |
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company) |
Calculation
agent: |
JPMS |
JPMS’s
estimated value of the
PLUS: |
JPMS’s estimated value of the PLUS 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 PLUS, valued using our internal funding rate for structured debt described below, and (2)
the derivative or derivatives underlying the economic terms of the PLUS. JPMS’s estimated value does not represent a minimum
price at which JPMS would be willing to buy your PLUS 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 PLUS 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 PLUS 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 PLUS and may differ from others’ estimates.”
JPMS’s
estimated value of the PLUS is lower than the original issue price of the PLUS because costs associated with selling, structuring
and hedging the PLUS are included in the original issue price of the PLUS. 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 PLUS and the estimated cost of hedging our obligations under the PLUS. 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 PLUS. See “Risk Factors — JPMS’s estimated value of the PLUS is lower than the original
issue price (price to public) of the PLUS” in this document. |
Secondary
market prices of the
PLUS: |
For information about factors that will impact any secondary market prices of the PLUS, see “Risk Factors — Secondary market prices of the PLUS 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 PLUS will be partially paid back to you in connection with any repurchases of your PLUS 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 PLUS. The length of any such initial period reflects the structure of the PLUS, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the PLUS and when these costs are incurred, as determined by JPMS. See “Risk Factors — The value of the PLUS 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 PLUS 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. 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 the PLUS.
Based on current market conditions, in the opinion
of our special tax counsel, your PLUS |
|
|
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
should be treated 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, subject to the possible application of
the “constructive ownership” rules, the gain or loss on your PLUS should be treated as long-term capital gain or loss
if you hold your PLUS for more than a year, whether or not you are an initial purchaser of PLUS at the issue price. The PLUS could
be treated as “constructive ownership transactions” within the meaning of Section 1260 of the Code, in which case
any gain recognized in respect of the PLUS that would otherwise be long-term capital gain and that was in excess of the “net
underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest
charge would apply as if that income had accrued for tax purposes at a constant yield over the term of the PLUS. Our special tax
counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the PLUS. Accordingly,
U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
The IRS or a court may not respect the treatment of
the PLUS described above, in which case the timing and character of any income or loss on the PLUS 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 described above. 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 PLUS, possibly with retroactive effect. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the PLUS, including the potential application of the constructive
ownership rules, possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as “FATCA”
may (if the PLUS are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the PLUS.
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 a PLUS occurring before January 1, 2019. You
should consult your tax adviser regarding the potential application of FATCA to the PLUS.
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” generally will not apply
to the PLUS. |
Supplemental use of proceeds
and hedging: |
The PLUS are offered to meet investor demand for products
that reflect the risk-return profile and market exposure provided by the PLUS. See “How the PLUS Work” in this document
for an illustration of the risk-return profile of the PLUS and “iShares® MSCI Emerging Markets ETF Overview”
in this document for a description of the market exposure provided by the PLUS.
The original issue price of the PLUS is equal to JPMS’s
estimated value of the PLUS 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 PLUS, plus the estimated cost of hedging our obligations under the PLUS. |
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 PLUS 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 PLUS.
We or our affiliate may enter into swap agreements or related
hedge transactions with one of |
PLUS
Based on the Performance of the iShares® MSCI Emerging Markets ETF due
January 5, 2017
Performance
Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
our other affiliates or unaffiliated counterparties
in connection with the sale of the PLUS 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 PLUS: |
In the opinion of Davis Polk & Wardwell LLP, as our special products counsel, when the PLUS 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 PLUS 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 PLUS 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
PLUS 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 PLUS, 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 PLUS 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 PLUS.
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.
“Performance Leveraged Upside SecuritiesSM”
and “PLUSSM” are service marks of Morgan Stanley. |
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