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.
Pricing supplement to product supplement no. 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Underlyings:
The Russell 2000
®
Index (Bloomberg ticker: RTY) (the
“Index”) and the iShares
®
MSCI EAFE ETF (Bloomberg ticker: EFA) (the “Fund”) (each of the
Index and the Fund, an “Underlying” and collectively, the “Underlyings”)
Interest Payments:
You will receive on each Interest Payment Date for each $1,000
principal amount note an Interest Payment equal to $4.25 (equivalent to an Interest Rate of 5.10% per annum, payable at a rate
of 0.425% per month).
Interest Rate:
5.10% per annum, payable at a rate of 0.425% per month
Buffer Amount:
20.00%
Downside Leverage
Factor:
1.25
Strike Date:
August 24, 2016
Pricing
Date:
August 25, 2016
Original Issue
Date (Settlement Date):
On or about August 30, 2016
Interest Payment
Dates*:
September 29, 2016, October 31, 2016, December 1, 2016, December
30, 2016, January 31, 2017, March 2, 2017, March 30, 2017, May 1, 2017, June 1, 2017, June 29, 2017, July 31, 2017, August 31,
2017, September 29, 2017, October 31, 2017 and the Maturity Date
Observation
Date*:
November 24, 2017
Maturity Date*:
November 29, 2017
* Subject to postponement in the event of a market
disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Payment at Maturity:
If the Final Value of each Underlying is greater than or equal
to its Strike Value or less than its Strike Value by up to the Buffer Amount, you will receive a cash payment at maturity, for
each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Interest Payment applicable to the Maturity Date.
If the Final
Value of either Underlying is less than its Strike Value by more than the Buffer Amount,
your
payment at maturity per $1,000 principal amount note, in addition to the Interest Payment applicable to the Maturity Date, will
be calculated as follows:
$1,000 + [$1,000 × (Lesser Performing
Underlying Return + Buffer Amount) × Downside Leverage Factor]
If the Final Value of either
Underlying is less than its Strike Value by more than the Buffer Amount, you will lose some or all of your principal amount at
maturity.
Lesser Performing
Underlying:
The Underlying with the Lesser Performing Underlying Return
Lesser Performing
Underlying Return:
The lower of the Underlying Returns of the Underlyings
Underlying
Return:
With respect to each Underlying,
(Final Value – Strike Value)
Strike Value
Strike Value:
With respect to each Underlying, the closing value of that Underlying
on the Strike Date, which was 1,237.250 for the Index and $58.96 for the Fund.
The Strike
Value of each Underlying is not the closing value of that Underlying on the Pricing Date.
Final Value:
With respect to each Underlying, the closing value of that Underlying
on the Observation Date
Share Adjustment
Factor:
The Share Adjustment Factor is referenced in determining the
closing value of the Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor is subject to adjustment upon
the occurrence of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments”
in the accompanying product supplement for further information.
|
Supplemental
Terms of the Notes
All
references in this pricing supplement to the closing value of the Index mean the closing level of the Index as defined in the accompanying
product supplement, and all references in this pricing supplement to the closing value of the Fund mean the closing price of one
share of the Fund as defined in the accompanying product supplement.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
How
the Notes Work
Payment
at Maturity
Total
Interest Payments
The
total Interest Payments per $1,000 principal amount note over the term of the notes based on the Interest Rate of 5.10% per annum
is $63.75.
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the hypothetical Lesser Performing Underlying
on the Observation Date.
The hypothetical payments set forth below assume
the following:
|
·
|
a Strike Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
a Buffer Amount of 20.00%;
|
|
·
|
a Downside Leverage Factor of 1.25; and
|
|
·
|
an Interest Rate of 5.10% per annum (payable at a rate of 0.425% per month).
|
The hypothetical Strike Value of the Lesser Performing
Underlying of 100.00 has been chosen for illustrative purposes only and does not represent the actual Strike Value of either Underlying.
The actual Strike Value of each Underlying is the closing value of that Underlying on the Strike Date and is specified under “Key
Terms – Strike Value” in this pricing supplement. For historical data regarding the actual closing values of each Underlying,
please see the historical information set forth under “The Underlyings” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example
1 — The Final Value of the Lesser Performing Underlying is less than its Strike Value by up to the Buffer Amount.
Date
|
Closing
Value of Lesser Performing Underlying
|
|
Observation Date
|
80.00
|
Final Value of Lesser Performing Underlying is less than its Strike Value by up to the Buffer Amount
|
|
Total Payment
|
$1,063.75 (6.375% return)
|
Because the Final Value of the Lesser Performing
Underlying is less than its Strike Value by up to the Buffer Amount, the payment at maturity, for each $1,000 principal amount
note, will be $1,004.25 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added to the Interest
Payments received with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note,
is $1,063.75.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
Example
2 — The Final Value of the Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount.
Date
|
Closing
Value of Lesser Performing Underlying
|
|
Observation Date
|
50.00
|
Final Value of Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount
|
|
Total Payment
|
$629.25 (-37.075% return)
|
Because the Final Value of the Lesser Performing
Underlying is less than its Strike Value by more than the Buffer Amount and the Lesser Performing Underlying Return is -50.00%,
the payment at maturity will be $629.25 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00% + 20.00%) ×
1.25] + $4.25 = $629.25
When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $688.75.
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 the
fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the
hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the Final Value of either Underlying is less than its Strike Value by more than the Buffer Amount, you will lose
1.25% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Underlying is less than
its Strike Value by more than the Buffer Amount. Accordingly, under these circumstances, you will lose some or all of your principal
amount at maturity.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and
JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. 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.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS
—
|
As a finance subsidiary of JPMorgan
Chase & Co., we have no independent operations beyond the issuance and administration of our securities. Aside from the initial
capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of our affiliates to
make payments under loans made by us or other intercompany agreements. As a result, we are dependent upon payments from our affiliates
to meet our obligations under the notes. If these affiliates do not make payments to us and we fail to make payments on the notes,
you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER
THE TERM OF THE NOTES,
|
regardless of any appreciation in the
value of either Underlying, which may be significant. You will not participate in any appreciation in the value of either Underlying.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our economic interests are potentially adverse to your interests
as an investor in the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the
notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to “Risk
Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
|
·
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YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH UNDERLYING —
|
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by either of the Underlyings over the term of the notes may negatively affect your payment at maturity and will not be offset or
mitigated by positive performance by the other Underlying.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING
OR HAVE ANY RIGHTS WITH RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION
STOCKS WITH RESPECT TO THE INDEX —
|
Small
capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger
companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment
could be a factor that limits downward stock price pressure under adverse market conditions.
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject to management risk,
which is the risk that the investment strategies of the Fund’s investment adviser, 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 shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY,
MAY NOT CORRELATE WITH THE PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate its
Underlying Index (as defined under “The Underlyings” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of the Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying the Fund
(such as mergers and spin-offs) may impact the variance between the performances of the Fund and its Underlying Index. Finally,
because the shares of the Fund are traded on a securities exchange and are subject to market supply and investor demand, the market
value of one share of the Fund may differ from the net asset value per share of the Fund. During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares in the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce any payment on the notes.
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE FUND —
|
The equity securities held by the Fund
have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve
risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities. Also, there
is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies
that are subject to the reporting requirements of the SEC.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND —
|
Because the prices of the equity securities
held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the Fund, holders of the notes
will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by the
Fund trade. 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 equity securities held by the Fund denominated in each of those currencies. If, taking into account
the relevant weighting, the U.S. dollar strengthens against those currencies, the price of the Fund will be adversely affected
and any payment on the notes may be reduced.
PS-
4
| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will not make
an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which J.P. Morgan Securities LLC, which we refer to as JPMS, is willing to buy the notes. You may not be able to sell your notes.
The notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes
to maturity.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE
NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes exceeds the estimated value
of the notes because costs associated with structuring and hedging the notes are included in the original issue price of the notes.
These costs include 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 “The Estimated Value
of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
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 the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The 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 THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. 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 internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the
notes. As a result, the price if any, at which JPMS will be willing to buy the notes from you in secondary market transactions,
if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial
loss to you.
|
·
|
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 projected hedging profits, if any, estimated hedging costs and the values of the Underlyings. Additionally, independent
pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to
purchase your notes in the secondary market. See “Risk Factors — Risks Relating
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
to the Estimated Value and Secondary
Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors”
in the accompanying product supplement.
The
Underlyings
The Index consists of the middle 2,000 companies
included in the Russell 3000E™ Index and, as a result of the index calculation methodology, consists of the smallest 2,000
companies included in the Russell 3000
®
Index. The Index is designed to track the performance of the small capitalization
segment of the U.S. equity market. For additional information about the Index, see “Equity Index Descriptions — The
Russell Indices” in the accompanying underlying supplement.
The Fund is an exchange-traded fund of iShares
®
Trust, a registered investment company, which seeks to track the investment results of an index composed of large and mid-capitalization
developed market equities, excluding the United States and Canada, which we refer to as the Underlying Index with respect to the
Fund. The Underlying Index for the Fund is currently the MSCI EAFE
®
Index. The MSCI EAFE
®
Index is
a free float-adjusted market capitalization index intended to measure the equity market performance of the developed equity markets
in Europe, Asia, Australia and New Zealand. For additional information about the iShares
®
MSCI EAFE ETF, see “Fund
Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
Historical
Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 7, 2011 through August 19, 2016. The
closing value of the Index on August 25, 2016 was 1,240.005. The closing value of the Fund on August 25, 2016 was $58.71. We obtained
the closing values above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. Although FTSE publishes the official closing levels of the Index to six decimal places, Bloomberg publishes the closing
levels of the Index to only three decimal places. The closing values of the Fund above and below may have been adjusted by Bloomberg
for actions taken by the Fund, such as stock splits.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of either Underlying
on the Observation Date. There can be no assurance that the performance of the Underlyings will result in the return of any of
your principal amount.
Tax
Treatment
You
should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. 4-I. Based on the advice of Sidley Austin LLP, our special tax counsel, and on current market conditions, in determining
our reporting responsibilities we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x)
a Put Option written by you that, in circumstances where the payment due at maturity is less than $1,000 (excluding accrued and
unpaid interest) requires you to pay us an amount equal to the product of (1) 1.25 and (2) the absolute value of the Lesser Performing
Underlying Return plus its Buffer Amount and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential
obligation under the Put Option, as more fully described in “Material U.S. Federal Income Tax Consequences — Tax Consequences
to U.S. Holders — Notes Treated as Units Each Comprising a Put Option and a Deposit” in the accompanying product supplement
no. 4-I, and in particular in the subsection thereof entitled “—Notes with a Term of More than One Year.” By
purchasing the notes, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to follow
this treatment and the allocation described in the following paragraph. However, there are other reasonable treatments that the
IRS or a court may adopt, in which case the timing
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
|
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 on a number of issues, the most relevant of which for investors in the notes are the
character of income or loss (including whether the Put Premium might be currently included as ordinary income) and the degree,
if any, to which income realized by non-U.S. investors should be subject to withholding tax. While it is not clear whether the
notes would be viewed as similar to the typical prepaid forward contract described in the notice, it is possible that 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.
In
determining our reporting responsibilities, we intend to treat 25.00% of each interest payment as interest on the Deposit and
75.00% of each interest payment as Put Premium. Assuming that the treatment of the notes as units each comprising a Put Option
and a Deposit is respected, amounts treated as interest on the Deposit will be taxed as ordinary income, while the Put Premium
will not be taken into account prior to sale or settlement.
Non-U.S.
Holders should note that final Treasury regulations were released on legislation that imposes a withholding tax of 30% on payments
to certain foreign entities unless information reporting and diligence requirements are met, as described in “Material U.S.
Federal Income Tax Consequences-FATCA” in the accompanying product supplement. Pursuant to the final regulations, such withholding
tax will generally apply to obligations that are issued on or after July 1, 2014; therefore, the notes will generally be subject
to this withholding tax. However, the withholding tax described above will not apply to payments of gross proceeds from the sale,
exchange or other disposition (including upon maturity) of the notes made before January 1, 2019.
Non-U.S.
holders should also note that recently promulgated Treasury regulations imposing a withholding tax on certain “dividend
equivalents” under certain “equity linked instruments” will not apply to the notes.
You
should consult your tax adviser regarding all aspects of the U.S. federal income tax consequences of an investment in the notes,
including possible alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers
of notes at the issue price should also consult their tax advisers with respect to the tax consequences of an investment in the
notes, including possible alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit
and the Put Option.
The
Estimated Value of the Notes
The
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 the internal funding
rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of
the notes 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 the estimated value of the notes is based on, among
other things, our and our affiliates’ 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 the conventional fixed-rate debt of JPMorgan
Chase & Co. For additional information, see “Selected Risk Considerations — The Estimated Value of the Notes Is
Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The
value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our
affiliates. 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, the 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.
The
estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Different
pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of
the notes. 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 or JPMorgan Chase & Co’s 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.
The
estimated value of the notes is lower than the original issue price of the notes because costs associated with structuring and
hedging the notes are included in the original issue price of the notes. These costs include 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
PS-
8
| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
|
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obligations
under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this
hedging may result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any,
realized in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one
or more of our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated
Value of the Notes Is Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. 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 the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Underlyings” 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 the estimated value of the notes 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 Sidley Austin LLP, as counsel to the Company and the Guarantor, when the notes offered by this pricing supplement
have been executed and issued by the Company and authenticated by the trustee pursuant to the indenture, and delivered against
payment as contemplated herein, (a) such notes will be valid and binding obligations of the Company, 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 and (b) the related guarantee will
be a valid and binding obligation of the Guarantor, enforceable in accordance with its 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 laws of the
State of New York, the Limited Liability Company Act of Delaware and the General Corporation Law of the State of Delaware as in
effect on the date hereof. In addition, this opinion is subject to customary assumptions about the trustee’s authorization,
execution and delivery of the indenture and the genuineness of signatures and certain factual matters, all as stated in the letter
of such counsel dated February 24, 2016, which has been filed as Exhibit 5.4 to the Company’s registration statement on
Form S-3 filed with the Securities and Exchange Commission on February 24, 2016.
Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. 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
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Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
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implementation,
sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things,
the matters set forth in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying
supplement, 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 1665650,
and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,”
“us” and “our” refer to JPMorgan Financial.
PS-
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and
the iShares
®
MSCI EAFE ETF
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