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 S&P 500
®
Index (Bloomberg ticker: SPX) (the
“Index”) and the Energy Select Sector SPDR
®
Fund (Bloomberg ticker: XLE) (the “Fund”) (each
of the Index and the Fund, an “Underlying” and collectively, the “Underlyings”)
Contingent Interest Payments:
If the notes have not been automatically called and the closing
value of each Underlying on any Review Date is greater than or equal to its Interest Barrier, you will receive on the applicable
Interest Payment Date for each $1,000 principal amount note a Contingent Interest Payment equal to at least $16.50 (equivalent
to a Contingent Interest Rate of at least 6.60% per annum, payable at a rate of at least 1.65% per quarter) (to be provided in
the pricing supplement).
If the closing value of either Underlying on any Review Date
is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date.
Contingent
Interest Rate:
At least 6.60% per annum, payable at a rate of at least
1.65% per quarter) (to be provided in the pricing supplement)
Interest Barrier
/ Trigger Value:
With respect to each Underlying, 60.00% of its Initial
Value
Pricing
Date:
On or about September 15, 2016
Original Issue
Date (Settlement Date):
On or about September 20, 2016
Review Dates*:
December 15, 2016, March 15, 2017, June 15, 2017, September 15, 2017, December 15, 2017,
March 15, 2018, June 15, 2018, September 17, 2018, December 17, 2018, March 15, 2019, June 17, 2019 and September 16, 2019 (final
Review Date)
Interest Payment
Dates*:
December 20, 2016, March 20, 2017, June 20, 2017, September 20, 2017, December
20, 2017, March 20, 2018, June 20, 2018, September 20, 2018, December 20, 2018, March 20, 2019, June 20, 2019 and the Maturity
Date
Maturity
Date*:
September 19, 2019
Call
Settlement Date*:
If the notes are automatically called on any Review Date (other than
the first, second, third and final Review Dates), the first Interest Payment Date immediately following that Review Date
* 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
|
Automatic Call:
If the closing value of each Underlying on any Review Date
(other than the first, second, third and final Review Dates) is greater than or equal to its Initial Value, the notes will be automatically
called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Contingent Interest Payment
applicable to that Review Date, payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final
Value of each Underlying is greater than or equal to its Trigger Value, you will receive a cash payment at maturity, for each $1,000
principal amount note, equal to (a) $1,000
plus
(b) the Contingent Interest Payment applicable to the final Review Date.
If the notes
have not been automatically called and the Final
Value of either Underlying is less than
its Trigger Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Underlying Return)
If the notes have not been automatically called and the
Final Value of either Underlying is less than its Trigger Value, you will lose more than 40.00% of your principal amount at maturity
and could lose 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 – Initial Value)
Initial Value
Initial Value:
With respect to each Underlying, 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 final Review Date
Share Adjustment
Factor:
The Share
Adjustment Factor is referenced in determining the closing price of one share 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 no. 4-I for further information.
|
PS-
1
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
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.
How the Notes Work
Payment in Connection with the First, Second
and Third Review Dates
Payments in Connection with Review Dates (Other
than the First, Second, Third and Final Review Dates)
PS-
2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Contingent Interest Payments
The table below illustrates the hypothetical total
Contingent Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Contingent Interest
Rate of 6.60% per annum, depending on how many Contingent Interest Payments are made prior to automatic call or maturity. The actual
Contingent Interest Rate will be provided in the pricing supplement and will be at least 6.60% per annum.
Number of Contingent
Interest Payments
|
Total Contingent Interest
Payments
|
12
|
$198.00
|
11
|
$181.50
|
10
|
$165.00
|
9
|
$148.50
|
8
|
$132.00
|
7
|
$115.50
|
6
|
$99.00
|
5
|
$82.50
|
4
|
$66.00
|
3
|
$49.50
|
2
|
$33.00
|
1
|
$16.50
|
0
|
$0.00
|
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 Review Dates.
Each hypothetical payment set forth below assumes that the closing value of the Underlying that is not
the Lesser Performing Underlying on each Review Date is greater than or equal to its Initial Value (and therefore its Interest
Barrier and Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Underlying of
100.00;
|
|
·
|
an Interest Barrier and a Trigger Value for the Lesser Performing
Underlying of 60.00 (equal to 60.00% of its hypothetical Initial Value); and
|
|
·
|
a Contingent Interest Rate of 6.60% per annum (payable at
a rate of 1.65% per quarter).
|
The hypothetical Initial Value of the Lesser Performing
Underlying of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of either
Underlying. The actual Initial Value of each Underlying will be the closing value of that
PS-
3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
Underlying on the Pricing Date and will be provided
in the 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 — Notes are automatically called on the fourth Review Date.
Date
|
Closing Value of Lesser Performing Underlying
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
105.00
|
$16.50
|
Second Review Date
|
110.00
|
$16.50
|
Third Review Date
|
105.00
|
$16.50
|
Fourth Review Date
|
105.00
|
$1,016.50
|
|
Total Payment
|
$1,066.00 (6.60% return)
|
Because the closing value of each Underlying on
the fourth Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,016.50 (or $1,000
plus
the Contingent Interest Payment applicable to the fourth
Review Date), payable on the applicable Call Settlement Date. The notes are not automatically callable before the fourth Review
Date, even though the closing value of each Underlying on each of the first, second and third Review Dates is greater than its
Initial Value. When added to the Contingent Interest Payments received with respect to the prior Review Dates, the total amount
paid, for each $1,000 principal amount note, is $1,066.00. No further payments will be made on the notes.
Example 2 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
95.00
|
$16.50
|
Second Review Date
|
85.00
|
$16.50
|
Third through Eleventh Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
90.00
|
$1,016.50
|
|
Total Payment
|
$1,049.50 (4.95% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Trigger Value, the payment at maturity,
for each $1,000 principal amount note, will be $1,016.50 (or $1,000
plus
the Contingent Interest Payment applicable to the
final Review Date). When added to the Contingent Interest Payments received with respect to the prior Review Dates, the total amount
paid, for each $1,000 principal amount note, is $1,049.50.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
55.00
|
$0
|
Second Review Date
|
50.00
|
$0
|
Third through Eleventh Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
PS-
4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Underlying is less than its Trigger Value and the Lesser Performing Underlying
Return is -50.00%, the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect 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 notes have not been automatically called and the Final Value of either Underlying is less than its Trigger
Value, you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Underlying
is less than its Initial Value. Accordingly, under these circumstances, you will lose more than 40.00% of your principal amount
at maturity and could lose all of your principal amount at maturity.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL —
|
If the notes have not been automatically
called, we will make a Contingent Interest Payment with respect to a Review Date only if the closing value of each Underlying on
that Review Date is greater than or equal to its Interest Barrier. If the closing value of either Underlying on that Review Date
is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date. Accordingly, if
the closing value of either Underlying on each Review Date is less than its Interest Barrier, you will not receive any interest
payments over the term of the notes.
|
·
|
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 ANY CONTINGENT INTEREST PAYMENTS
THAT MAY BE PAID OVER THE TERM OF THE NOTES,
|
regardless of any appreciation in the
level of either Underlying, which may be significant. You will not participate in any appreciation in the level of either Underlying.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s 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.
PS-
5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
|
·
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
|
but JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the level of the S&P 500
®
Index.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL 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 whether you will receive a Contingent Interest Payment
on any Interest Payment Date, and 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.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Underlying
is less than its Trigger Value and the notes have not been automatically called, the benefit provided by the Trigger Value will
terminate and you will be fully exposed to any depreciation in the closing value of the Lesser Performing Underlying.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called,
the term of the notes may be reduced to as short as one year and you will not receive any Contingent Interest Payments after the
applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment in the
notes at a comparable return and/or with a comparable interest rate for a similar level of risk. Even in cases where the notes
are called before maturity, you are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN EITHER UNDERLYING OR HAVE ANY RIGHTS
WITH RESPECT TO THOSE SECURITIES.
|
|
·
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE
IS GREATER IF THE VALUE OF THAT UNDERLYING IS VOLATILE.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
Although the shares of the Fund are listed
for trading on NYSE Arca and a number of similar products have been traded on NYSE Arca and other securities exchanges for varying
periods of time, there is no assurance that an active trading market will continue for the shares of the Fund or that there will
be liquidity in the trading market. 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 Fund” 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.
PS-
6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
|
·
|
RISKS ASSOCIATED WITH THE ENERGY SECTOR —
|
All or substantially all of the equity
securities held by the shares of the Fund are issued by companies whose primary line of business is directly associated with the
energy sector. Energy companies typically develop and produce crude oil and natural gas and provide drilling and other energy resources
products and distribution related services. Market or economic factors impacting energy companies and companies that rely heavily
on energy advances could have a major effect on the value of the Fund. Weak demand for energy companies’ products or services
or for energy products and services in general, as well as negative developments in these other areas, including natural disasters
or terrorist attacks, would adversely impact the Fund’s performance. As a result, the value of the Notes may be subject to
greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting this sector
than a different investment linked to securities of a more broadly diversified group of issuers.
|
·
|
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 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 FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential
investment in the notes based on the minimums for the estimated value of the notes and the Contingent Interest Rate.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE 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 will exceed the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, 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).
PS-
7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
|
·
|
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
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price if any, at which JPMS will be willing to buy 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 selling commissions, 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 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 stocks of 500 companies
selected to provide a performance benchmark for the U.S. equity markets. For additional information about the
Index,
see “Equity Index Descriptions — The S&P U.S. Indices” in the accompanying underlying supplement.
The Fund is an exchange-traded fund of the Select
Sector SPDR
®
Trust, a registered investment company, that seeks to provide investment results that, before expenses,
correspond generally to the performance of an index derived from the energy sector of the S&P 500
®
Index, which
we refer to as the Underlying Index with respect to the Fund. The Underlying Index for the Fund is currently the Energy Select
Sector Index. For additional information about the Fund, see “Fund Descriptions — The Select Sector SPDR
®
Funds" in the accompanying underlying supplement.
PS-
8
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
|
|
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 26, 2016. The
closing level of the Index on August 30, 2016 was 2,176.12. The closing price of one share of the Fund on August 30, 2016 was $69.57
.
We obtained the closing levels and prices above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification.
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 Pricing Date or any Review Date. There can be no assurance that the performance of the Underlyings will result in the return
of any of your principal amount or the payment of any interest.
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. In determining our
reporting responsibilities we intend to treat (i) the notes for U.S. federal income tax purposes as prepaid forward contracts with
associated contingent coupons and (ii) any Contingent Interest Payments as ordinary income, as described in the section entitled
“Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid
Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement. Based on the advice of Davis
Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
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Index and the Energy Select Sector SPDR
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reasonable treatments that the IRS or a court
may adopt, in which case the timing and character of any income or loss on the notes could be materially affected. In addition,
in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward
contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property
to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any
Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences
of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this
notice.
Non-U.S. Holders — Tax Considerations
.
The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to
take a position that Contingent Interest Payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is
provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible
reduction of that rate under an applicable income tax treaty), unless income from your notes is effectively connected with your
conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment
in the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the notes in light of your particular circumstances.
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.
FATCA.
Withholding under legislation
commonly referred to as “FATCA” could apply to payments with respect to the notes that are treated as U.S.-source “fixed
or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest,
if the notes are recharacterized, in whole or in part, as debt instruments, or Contingent Interest Payments if they are otherwise
treated as FDAP Income). If the notes are recharacterized, in whole or in part, as debt instruments, withholding could also apply
to payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However, under
a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) with
respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the notes.
In the event of any withholding on the notes,
we will not be required to pay any additional amounts with respect to amounts so withheld.
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.
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
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The estimated value of the notes will be
lower than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. 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 Will Be 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 the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes
at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes,
we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes, in which case we may reject your offer to purchase.
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 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.
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
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Index and the Energy Select Sector SPDR
®
Fund
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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.
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| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Energy Select Sector SPDR
®
Fund
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