Additional
Information about JPMorgan Financial, JPMorgan Chase & Co. and 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 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.
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, the “Issuer,” “JPMorgan
Financial,” “we,” “us” and “our” refer to JPMorgan Chase Financial Company LLC.
Supplemental
Terms of the Notes
For purposes of the accompanying product supplement,
each of the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the S&P 500
®
Index
is an “Index.”
Investor
Suitability
The Notes may be suitable for you if, among other considerations:
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial
investment.
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You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have
the same downside market risk as an investment in the Least Performing Underlying.
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You are willing to accept the individual market risk of each Underlying and understand that any decline in the level of one
Underlying will not be offset or mitigated by a lesser decline or any potential increase in the levels of the other
Underlyings.
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You believe each Underlying will close at or above its Downside Threshold on the Final Valuation Date.
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You understand and accept that you will not participate in any appreciation in the level of any Underlying and that your
potential return is limited to the Coupon payments.
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You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the
downside fluctuations in the levels of the Underlyings.
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You would be willing to invest in the Notes if the Coupon Rate were set equal to the bottom of the range indicated on
the cover hereof (the actual Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement
and will not be less than the minimum Coupon Rate listed on the cover).
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You are willing to forgo dividends paid on the stocks included in the Underlyings.
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You are able and willing to invest in Notes that may be called early at JPMorgan Financial’s election or you are
otherwise able and willing to hold the Notes to maturity.
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You accept that there may be little or no secondary market for the Notes and that any secondary market will depend in
large part on the price, if any, at which J.P. Morgan Securities LLC, which we refer to as JPMS, is willing to trade
the Notes.
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You understand and accept the risks associated with the Underlyings.
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You are willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under
the Notes, and understand that if JPMorgan Financial and JPMorgan Chase & Co. default on their obligations, you
may not receive any amounts due to you including any repayment of principal.
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The Notes may not be suitable for you if, among other considerations:
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire
initial investment.
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You cannot tolerate a loss of all or a substantial portion of your investment and are unwilling to make an investment
that may have the same downside market risk as an investment in the Least Performing Underlying.
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You are unwilling to accept the individual market risk of each Underlying or do not understand that any decline in the level
of one Underlying will not be offset or mitigated by a lesser decline or any potential increase in the levels of the other
Underlyings.
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You
require an investment designed to provide a full return of principal at maturity.
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You
believe that any Underlying will decline during the term of the Notes and is likely to close below its Downside Threshold on the
Final Valuation Date.
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You
seek an investment that participates in the full appreciation in the level of any or all of the Underlyings or that has unlimited
return potential.
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You
cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the levels of the Underlyings.
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You
would not be willing to invest in the Notes if the Coupon Rate were set equal to the bottom of the range indicated on the cover
hereof (the actual Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement and will not be less
than the minimum Coupon Rate listed on the cover).
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You
prefer to receive the dividends paid on the stocks included in the Underlyings.
t
You
are unable or unwilling to invest in Notes that may be called early at JPMorgan Financial’s election, or you are otherwise
unable or unwilling to hold the Notes to maturity or you seek an investment for which there will be an active secondary market.
t
You
do not understand or accept the risks associated with the Underlyings.
t
You
are not willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under the Notes,
including any repayment of principal.
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The suitability considerations identified above are not exhaustive.
Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you should reach an
investment decision only after you and your investment, legal, tax, accounting and other advisers have carefully considered the
suitability of an investment in the Notes in light of your particular circumstances. You should also review carefully the “Key
Risks” section of this pricing supplement and the “Risk Factors” sections of the accompanying product supplement
and the accompanying underlying supplement for risks related to an investment in the Notes. For more information on the Underlyings,
please see the sections titled “The NASDAQ-100 Index
®
,” “The Russell 2000
®
Index” and “The S&P 500
®
Index” below.
Indicative
Terms
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Issuer
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JPMorgan
Chase Financial Company LLC
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Guarantor
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JPMorgan Chase
& Co.
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Issue Price
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$10 per Note
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Underlyings
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NASDAQ-100 Index
®
Russell 2000
®
Index
S&P 500
®
Index
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Principal Amount
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$10 per Note
(subject to a minimum purchase of 100 Notes or $1,000)
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Term
1
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Approximately
2.5 years, unless called earlier
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Issuer
Call Feature
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JPMorgan
Financial may elect to call the Notes on any Optional Call Notice Date, regardless of the closing level of any Underlying
on that Optional Call Notice Date. If the Notes are called, JPMorgan Financial will pay you on the applicable Call Settlement
Date a cash payment per Note equal to the principal amount
plus
a Coupon, and no further payments will be made on the
Notes. Before JPMorgan Financial elects to call the Notes on an Optional Call Notice Date, JPMorgan Financial will
deliver written notice to The Depository Trust Company (“DTC”) on or before that Optional Call Notice Date.
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Coupon Rate
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Expected to
be between 5.50% and 6.00% per annum. The actual Coupon Rate will be finalized on the Trade Date and provided in the pricing
supplement and will not be less than 5.50% per annum.
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Coupon payments
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Between $0.1375
and $0.15 per $10 principal amount Note. The actual Coupon payments will be based on the Coupon Rate and finalized on the
Trade Date and provided in the pricing supplement.
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Coupon Payment
Dates
2
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As specified
under “Optional Call Notice Dates, Final Valuation Date and Coupon Payment Dates/Call Settlement Dates”
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Call Settlement
Dates
2
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First Coupon
Payment Date following the applicable Optional Call Notice Date
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Payment
at Maturity
(per $10 Note)
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If JPMorgan Financial
does not elect to call the Notes and the Final Value of each Underlying is equal to or greater than
its
Downside
Threshold,
we will pay you a cash payment at maturity per $10 principal amount Note equal to $10
plus
a Coupon.
If JPMorgan Financial
does not elect to call the Notes and the Final Value of any Underlying is less than its Downside Threshold,
we will, in addition
to paying the final Coupon, pay you a cash payment at maturity that is less than $10 per $10 principal amount Note, resulting
in a loss on your principal amount proportionate to the negative Underlying Return of the Least Performing Underlying, equal to:
$10
× (1 + Least Performing Underlying Return)
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Underlying
Return
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With respect
to each Underlying:
Final
Value – Initial Value
Initial
Value
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Least Performing
Underlying:
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The
Underlying with the lowest Underlying Return
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Least Performing
Underlying Return:
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The
lowest of the Underlying Returns of the Underlyings
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Initial Value
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With
respect to each Underlying, the closing level of that Underlying on the Trade Date
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Final Value
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With respect
to each Underlying, the closing level of that Underlying on the Final Valuation Date
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Downside Threshold
3
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With respect
to each Underlying, a percentage of the Initial Value of that Underlying, as specified on the cover of this pricing supplement
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1
See
footnote 1 under “Key Dates” on the front cover
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2
See footnote 2 under “Key Dates” on the front cover
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3
Rounded
to three decimal places for the NASDAQ-100 Index® and the Russell 2000® Index
and rounded to two decimal places for the S&P 500® Index
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Investment
Timeline
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Trade Date:
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The closing level of each
Underlying (Initial Value) is observed and the Downside Threshold of each Underlying is determined. The Coupon Rate is
finalized.
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Quarterly
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If the Notes have not been
called, JPMorgan Financial will pay you a Coupon on each Coupon Payment Date.
JPMorgan Financial may,
at its election and upon written notice to DTC, call the Notes on any Optional Call Notice Date, regardless of the closing
level of any Underlying on that Optional Call Notice Date. If JPMorgan Financial elects to call the Notes, JPMorgan Financial
will pay you a cash payment per Note equal to the principal amount
plus
a Coupon and no further payments will be
made on the Notes.
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Maturity Date
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The
Final Value of each Underlying is determined as of the Final Valuation Date.
If
JPMorgan Financial does not elect to call the Notes and the Final Value of each Underlying is equal to or greater
than
its Downside
Threshold
, at maturity
JPMorgan Financial will repay the principal amount equal to $10.00 per Note
plus
the final Coupon.
If
JPMorgan Financial does not elect to call the Notes and the Final Value of any Underlying is less than its Downside Threshold,
JPMorgan Financial will, in addition to paying the final Coupon, repay less than the principal amount, if anything, at
maturity, resulting in a loss on your principal amount proportionate to the decline of the Least Performing Underlying,
equal to a return of:
$10
× (1 + Least Performing Underlying Return) per Note
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. YOU WILL BE EXPOSED TO THE MARKET RISK OF EACH UNDERLYING AND ANY DECLINE IN THE LEVEL OF ONE UNDERLYING MAY NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE LEVELS OF THE OTHER UNDERLYINGS. ANY PAYMENT ON THE NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. IF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. WERE TO DEFAULT ON THEIR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
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Optional
Call Notice Dates, Final Valuation Date and Coupon Payment Dates / Call Settlement Dates
Optional Call Notice Dates
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Final Valuation Date
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Coupon Payment Dates/Call Settlement Dates
(if called)
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December 22, 2016
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—
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December 30, 2016
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March 24, 2017
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—
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March 31, 2017
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June 23, 2017
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—
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June 30, 2017
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September 22, 2017
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—
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September 29, 2017
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December 21, 2017
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—
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December 29, 2017
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March 22, 2018
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—
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March 29, 2018
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June 22, 2018
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—
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June 29, 2018
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September 21, 2018
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—
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September 28, 2018
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December 21, 2018
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—
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December 31, 2018
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—
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March 22, 2019
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March 29, 2019 (the Maturity Date)
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The Final Valuation Date, and therefore, the Maturity Date, is
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.
Each of the other Coupon Payment Dates is subject to postponement
as described under “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement.
What
Are the Tax Consequences of the Notes?
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. The following discussion, when
read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP,
regarding the material U.S. federal income tax consequences of owning and disposing of Notes.
Based on current market conditions, in the opinion of our special
tax counsel it is reasonable to treat the Notes as units each comprising a Put Option and a debt component for U.S. federal income
tax purposes. We will determine the portion of each Coupon Payment that we will allocate to interest on the debt component and
to Put Premium, respectively, and will provide that allocation in the pricing supplement for the Notes. By purchasing the Notes,
you agree to treat the Notes for U.S. federal income tax purposes consistently with the treatment and allocation as described above.
We will follow this approach in determining our information reporting responsibilities, if any. If the Notes had priced on September
22, 2016, we would have allocated approximately 1.70% per annum to interest on the debt component and 3.80% per annum to Put Premium.
The actual Coupon Rate and allocation that we will determine for
this Note offering will be finalized on the Trade Date and provided in the pricing supplement, may differ from the hypothetical
Coupon Rate and allocation, and will depend upon a variety of factors, including actual market conditions and our borrowing costs
for debt instruments of comparable maturities on the Trade Date. Assuming the treatment and allocation described above are respected,
(a) interest on the debt component will be taxed as ordinary income, while the Put Premium will not be taken into account prior
to maturity, sale or early redemption, and (b) assuming that you are an initial purchaser of Notes purchasing the Notes at the
Issue Price for cash, at maturity or upon early redemption you will recognize short-term capital gain in an amount equal to the
total Put Premium received.
There are, however, other reasonable treatments that the IRS or
a court may adopt for the Notes, in which case the timing and character of your income or loss 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.
Withholding under legislation commonly referred to as “FATCA”
will apply to amounts treated as interest or other “fixed or determinable annual or periodical” income (“FDAP
Income”) for U.S. federal income tax purposes paid with respect to the Notes, and (if they are treated, in whole or in part,
as debt instruments) could also apply to payments of gross proceeds of a taxable disposition, including an early redemption or
redemption at maturity, of a Note. 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.
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, the issues presented
by the notice and the potential application of the withholding requirements under FATCA to the Notes. 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
debt component and the Put Option.
Key
Risks
An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing directly in any or all of the Underlyings. These risks are explained in more detail
in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying supplement. We
also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
Risks Relating to the Notes Generally
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Your Investment in the Notes May Result in a Loss
— The Notes differ from ordinary debt securities in that JPMorgan
Financial will not necessarily repay the full principal amount of the Notes. If JPMorgan Financial does not elect to call the Notes
and the closing level of any Underlying has declined below its Downside Threshold on the Final Valuation Date, you will be fully
exposed to any depreciation of the Least Performing Underlying from its Initial Value to its Final Value. In this case, JPMorgan
Financial will repay less than the full principal amount at maturity, resulting in a loss of principal that is proportionate to
the negative Underlying Return of the Least Performing Underlying. Under these circumstances, you will lose 1% of your principal
for every 1% that the Final Value of the Least Performing Underlying is less than its Initial Value and could lose your entire
principal amount. As a result, your investment in the Notes may not perform as well as an investment in a security that does not
have the potential for full downside exposure to any Underlying.
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Credit Risks of JPMorgan Financial and JPMorgan Chase & Co.
— The Notes are unsecured and unsubordinated debt
obligations of the Issuer, JPMorgan Chase Financial Company LLC, the payment on which is fully and unconditionally guaranteed by
JPMorgan Chase & Co. The Notes will rank
pari passu
with all of our other unsecured and unsubordinated obligations,
and the related guarantee JPMorgan Chase & Co. will rank
pari passu
with all of JPMorgan Chase & Co.’s other
unsecured and unsubordinated obligations. The Notes and related guarantees are not, either directly or indirectly, an obligation
of any third party. Any payment to be made on the Notes, including any repayment of principal, depends on the ability of JPMorgan
Financial and JPMorgan Chase & Co. to satisfy their obligations as they come due. As a result, the actual and perceived creditworthiness
of JPMorgan Financial and JPMorgan Chase & Co. may affect the market value of the Notes and, in the event JPMorgan Financial
and JPMorgan Chase & Co. were to default on their obligations, you may not receive any amounts owed to you under the terms
of the Notes and you could lose your entire investment.
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As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations and 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.
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Your Return on the Notes Is Limited to the Sum of the Coupon Payments and You Will Not Participate in Any Appreciation of
Any Underlying
— The return potential of the Notes is limited to the specified Coupon Rate, regardless of any appreciation
of any of the Underlyings, which may be significant. In addition, if JPMorgan Financial elects to call the Notes, you will not
receive any Coupons or any other payments after the Call Settlement Date. Because the Notes could be called as early as the first
Optional Call Notice Date, the total return on the Notes could be minimal. If JPMorgan Financial does not elect to call the Notes,
you may be subject to the risk of decline in the level of each Underlying, even though you are not able to participate in
any potential appreciation of any Underlying. As a result, the return on an investment in the Notes could be less than the return
on a hypothetical direct investment in any Underlying. In addition, if JPMorgan Financial does not elect to call the Notes and
the Final Value of any Underlying is below its Downside Threshold, you will lose some or all of your principal amount and the overall
return on the Notes may be less than the amount that would be paid on a conventional debt security of JPMorgan Financial of comparable
maturity.
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Because the Notes Are Linked to the Least Performing Underlying, You Are Exposed to a Greater Risk of Sustaining a Significant
Loss on Your Investment at Maturity Than If the Notes Were Linked to a Single Underlying
— The risk that you will lose
some or all of your principal amount at maturity is greater if you invest in the Notes as opposed to substantially similar securities
that are linked to the performance of a single Underlying or two Underlyings. With three Underlyings, it is more likely that the
closing level of an Underlying will be less than its Downside Threshold on the Final Valuation Date. Therefore, it is more likely
that you will suffer a significant loss on your investment at maturity. In addition, the performance of the Underlyings may not
be correlated or may be negatively correlated.
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The lower the correlation between
any two of the Underlyings, the greater the potential for one of those Underlyings to close below its Downside Threshold on the
Final Valuation Date and with three Underlyings there is a greater potential that one pair of Underlyings will have low or negative
correlation. See “Correlation of the Underlyings” below. Although the correlation of the Underlyings’ performance
may change over the term of the Notes, the Coupon Rate is determined, in part, based on the correlation of the Underlyings’
performance, as calculated using internal models of our affiliates at the time when the terms of the Notes are finalized. A higher
Coupon Rate is generally associated with lower correlation of the Underlyings, which reflects a greater potential for loss on your
investment at maturity.
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You Are Exposed to the Risk of Decline in the Level of Each Underlying
— Your return on the Notes and your payment
at maturity, if any, is not linked to a basket consisting of the Underlyings. If JPMorgan Financial does not elect to call the
Notes, your payment at maturity is contingent upon the performance of each individual Underlying such that you will be equally
exposed to the risks related to each of the Underlyings. In addition, the performance of the Underlyings may not be correlated.
Poor performance by any of the Underlyings over the term of the Notes may negatively affect your payment at maturity and will not
be offset or mitigated by
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positive performance by any of the
other Underlyings. Accordingly, your investment is subject to the risk of decline in the value of each Underlying.
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Your Payment at Maturity May Be Determined By the Least Performing Underlying
— Because the payment at maturity
will be determined based on the performance of the Least Performing Underlying, you will not benefit from the performance of any
of the other Underlyings. Accordingly, if JPMorgan Financial does not elect to call the Notes and the Final Value of any Underlying
is less than its Downside Threshold, you will lose some or all of your principal amount at maturity, even if the Final Value of
either or both of the other Underlyings is greater than or equal to its Initial Value.
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Contingent Repayment of Principal Applies Only If You Hold the Notes to Maturity
— If you are able to sell your
Notes in the secondary market prior to maturity, you may have to sell them at a loss relative to your initial investment even if
the closing levels of all of the Underlyings are above their respective Downside Thresholds. If by maturity the Notes have not
been called, either JPMorgan Financial will repay you the full principal amount per Note plus the final Coupon, or, if any Underlying
closes below its Downside Threshold on the Final Valuation Date, JPMorgan Financial will, in addition to paying the final Coupon,
repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate
to the decline in the closing level of the Least Performing Underlying from its Initial Value to its Final Value. This contingent
repayment of principal applies only if you hold your Notes to maturity.
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A Higher Coupon Rate and/or a Lower Downside Threshold May Reflect Greater Expected Volatility of the Underlyings, Which
Is Generally Associated With a Greater Risk of Loss
— Volatility is a measure of the degree of variation in the levels
of the Underlyings over a period of time. The greater the expected volatilities of the Underlyings at the time the terms of the
Notes are set, the greater the expectation is at that time that the level of an Underlying could close below its Downside Threshold
on the Final Valuation Date, resulting in the loss of a significant portion or all of your principal at maturity. In addition,
the economic terms of the Notes, including the Coupon Rate and the Downside Threshold, are based, in part, on the expected volatilities
of the Underlyings at the time the terms of the Notes are set, where higher expected volatilities will generally be reflected in
a higher Coupon Rate than the fixed rate we would pay on conventional debt securities of the same maturity and/or on otherwise
comparable securities and/or a lower Downside Threshold as compared to otherwise comparable securities. Accordingly, a higher Coupon
Rate will generally be indicative of a greater risk of loss while a lower Downside Threshold does not necessarily indicate that
the Notes have a greater likelihood of returning your principal at maturity. You should be willing to accept the downside
market risk of each Underlying and the potential loss of some or all of your principal at maturity.
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Call and Reinvestment Risk
— JPMorgan Financial may, in its sole discretion, elect to call the Notes on any Optional
Call Notice Date, regardless of the closing level of any Underlying on that Optional Call Notice Date. If JPMorgan Financial elects
to call your Notes early, you will no longer have the opportunity to receive any Coupons after the applicable Call Settlement Date.
The first Optional Call Notice Date, and the first potential date on which JPMorgan Financial may elect to call the Notes, occurs
after approximately three months and therefore you may not have the opportunity to receive any Coupons after approximately three
months. In the event JPMorgan Financial elects to call the Notes, there is no guarantee that you will 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.
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It is more likely that JPMorgan Financial
will elect to call the Notes prior to maturity when the expected interest payable on the Notes is greater than the interest that
would be payable on other instruments issued by JPMorgan Financial of comparable maturity, terms and credit rating trading in the
market. The greater likelihood of JPMorgan Financial calling the Notes in that environment increases the risk that you will not
be able to reinvest the proceeds from the called Notes in an equivalent investment with a similar interest rate. JPMorgan Financial
is less likely to call the Notes prior to maturity when the expected interest payable on the Notes is less than the interest that
would be payable on other comparable instruments issued by JPMorgan Financial. Therefore, the Notes are more likely to remain outstanding
when the expected interest payable on the Notes is less than what would be payable on other comparable instruments.
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Potential Conflicts
— We and our affiliates play a variety of roles in connection with the issuance of the Notes,
including acting as calculation agent and hedging our obligations under the Notes and making the assumptions used to determine
the pricing of the Notes and the estimated value of the Notes when the terms of the Notes are set, which we refer to as the estimated
value of the Notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests
of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes. In
addition, our and JPMorgan Chase & Co.’s business activities, including hedging and trading activities, could cause our
and JPMorgan Chase & Co.’s economic interests to be adverse to yours and could adversely affect any payment on the Notes
and the value of the Notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the
Notes could result in substantial returns for us or our affiliates while the value of the Notes declines. Please refer to “Risk
Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement for additional information
about these risks.
|
|
t
|
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.
|
|
t
|
The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates
— The estimated value of the Notes is determined by reference to internal pricing models of our affiliates when the terms
of the Notes are set. This estimated value of the Notes is based on market conditions and other relevant factors existing at that
time and assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. 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. See “The Estimated Value of the Notes” in this pricing
supplement.
|
t
|
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.
|
|
t
|
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. These costs can include selling commissions,
projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding
rates for structured debt issuances. See “Secondary Market Prices of the Notes” in this pricing supplement for additional
information relating to this initial period. Accordingly, the estimated value of your Notes during this initial period may be lower
than the value of the Notes as published by JPMS (and which may be shown on your customer account statements).
|
|
t
|
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
Notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you
prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk factor for information
about additional factors that will impact any secondary market prices of the Notes.
|
The Notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity. See “—
Lack of Liquidity” below.
|
t
|
Many Economic and Market Factors Will Impact the Value of the Notes
— As described under “The Estimated
Value of the Notes” in this pricing supplement, the Notes can be thought of as securities that combine a fixed-income debt
component with one or more derivatives. As a result, the factors that influence the values of fixed-income debt and derivative
instruments will also influence the terms of the Notes at issuance and their value in the secondary market. Accordingly, 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 levels
of the Underlyings, including:
|
|
t
|
any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads;
|
|
t
|
customary bid-ask spreads for similarly sized trades;
|
|
t
|
our internal secondary market funding rates for structured
debt issuances;
|
|
t
|
the actual and expected volatility in the levels of
the Underlyings;
|
|
t
|
the time to maturity of the Notes;
|
|
t
|
whether the Final Value of any Underlying is expected
to be less than its Downside Threshold;
|
|
t
|
the dividend rates on the equity securities underlying
the Underlyings;
|
|
t
|
the actual and expected positive or negative correlation
between any two of the Underlyings, or the actual or expected absence of any such correlation;
|
|
t
|
interest and yield rates in the market generally;
and
|
|
t
|
a variety of other economic, financial, political,
regulatory and judicial events.
|
Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the Notes, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the Notes, if any, at which JPMS may be willing to purchase your
Notes in the secondary market.
|
t
|
Investing in the Notes Is Not Equivalent to Investing in the Stocks Composing the Underlyings
— Investing in the
Notes is not equivalent to investing in the stocks included in the Underlyings. As an investor in the Notes, you will not have
any ownership interest or rights in the stocks included in the Underlyings, such as voting rights, dividend payments or other distributions.
|
|
t
|
We Cannot Control Actions by the Sponsor of Any Underlying and That Sponsor Has No
Obligation to Consider Your Interests
— We and our affiliates are not affiliated with the sponsor of any Underlying and
have no ability to control or predict its actions, including any errors in or discontinuation of public disclosure regarding methods
or policies relating to the calculation of that
|
Underlying.
The sponsor of each Underlying is not involved in this Note offering in any way and has no obligation to consider your interest
as an owner of the Notes in taking any actions that might affect the market value of your Notes.
|
t
|
Your Return on the Notes Will Not Reflect Dividends on the Stocks Composing the Underlyings
— Your return on the
Notes will not reflect the return you would realize if you actually owned the stock included in the Underlyings and received the
dividends on the stock included in the Underlyings. This is because the calculation agent will determine whether the Notes will
be called and, if the notes are not called, will calculate the amount payable to you at maturity of the Notes by reference to the
closing level of each Underlying on the Final Valuation Date, without taking into consideration the value of dividends on the stock
included in that Underlying.
|
|
t
|
No Assurances That the Investment View Implicit in the Notes Will Be Successful
— While the Notes are structured
to provide for the payment of Coupons and the return of principal at maturity if the Final Value of the Least Performing Underlying
is at or above its Downside Threshold on the Final Valuation Date, we cannot assure you of the economic environment during the
term or at maturity of your Notes.
|
|
t
|
Lack of Liquidity
— The Notes will not be listed on any securities exchange. JPMS intends to offer to purchase
the Notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough
liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market for the
Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which JPMS is willing
to buy the Notes.
|
|
t
|
Potentially Inconsistent Research, Opinions or Recommendations by JPMS, UBS or Their Affiliates
— JPMS, UBS or
their affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding
the Notes, and that may be revised at any time. Any such research, opinions or recommendations may or may not recommend that investors
buy or hold the Underlyings and could affect the level of an Underlying, and therefore the market value of the Notes.
|
|
t
|
Tax Treatment
— Significant aspects of the tax treatment of the Notes are uncertain. You should consult your tax
adviser about your tax situation.
|
|
t
|
Potential JPMorgan Financial Impact on the Level of an Underlying
— Trading or transactions by JPMorgan Financial
or its affiliates in an Underlying and/or over-the-counter options, futures or other instruments with returns linked to the performance
of an Underlying may adversely affect the level of that Underlying and, therefore, the market value of the Notes.
|
|
t
|
The Final Terms and Valuation of the Notes Will Be Finalized on the Trade Date and
Provided in the Pricing Supplement
— The final terms of the Notes will be based on relevant market conditions when the
terms of the Notes are set and will be finalized on the Trade Date and provided in the pricing supplement. In particular, each
of the estimated value of the Notes and the Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement,
and each may be as low as the applicable minimum set forth on the cover of this pricing supplement. Accordingly, you should consider
your potential investment in the Notes based on the minimums for the estimated value of the Notes and the Coupon Rate.
|
Risks Relating to the Underlyings
|
t
|
Non-U.S. Securities Risk with Respect to the NASDAQ-100 Index
®
— Some of the equity securities included in the NASDAQ-100 Index
®
have been issued by non-U.S. companies.
Investments in securities linked to the value of non-U.S. equity securities involve considerations associated with the home
countries of the issuers of those non-U.S. equity securities. The prices of non-U.S. equity securities may be adversely affected
by political, economic, financial and social factors in the home countries of the issuers of the non-U.S. companies, including
changes in those countries’ government, economic and fiscal policies, currency exchange laws or other laws or restrictions.
|
|
t
|
An Investment in the Notes is Subject to Risks Associated with Small Capitalization Stocks with Respect to the
Russell
2000
®
Index
— The equity securities included in the
Russell
2000
®
Index
are issued by companies with relatively small market capitalization. The stock prices of smaller
companies may be more volatile than stock prices of large capitalization companies. Small capitalization companies may be less
able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. These companies tend
to be less well-established than large market capitalization 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.
|
|
t
|
JPMorgan Chase & Co. Is Currently One of the Companies that Make Up the S&P 500
®
Index
—
JPMorgan Chase & Co. is currently one of the companies that make up the S&P 500
®
Index. JPMorgan Chase &
Co. will not have any obligation to consider your interests as a holder of the Notes in taking any corporate action that might
affect the value of the S&P 500
®
Index and the Notes.
|
Hypothetical
Examples
The examples below illustrate the hypothetical payments
on a Coupon Payment Date, upon an issuer-elected call or at maturity under different hypothetical scenarios for a $10.00 Note on
an offering of the Notes, with the assumptions set forth below.* We cannot predict the closing level of any Underlying on any day
during the term of the Notes, including on the Final Valuation Date. You should not take these examples as an indication or assurance
of the expected performance of the Notes. Numbers in the examples below have been rounded for ease of analysis. In these examples,
we refer to the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the S&P 500
®
Index
as the “NDX Index,” the “RTY Index” and the “SPX Index,” respectively.
Principal Amount:
|
$10.00
|
Term:
|
Approximately 2.5 years (unless earlier called)
|
Hypothetical Initial Value:
|
100.000 for the NDX Index, 100.000 for the RTY Index and 100.00 for the SPX Index
|
Hypothetical Coupon Rate:
|
5.50% per annum (or 1.375% per quarter) (based on the bottom of the range of 5.50% to 6.00% per annum)
|
Optional Call Notice Dates:
|
Quarterly
|
Hypothetical Downside Threshold:
|
60.000 for the NDX Index, 60.000 for the RTY Index and 60.00 for the SPX Index (which, with respect to each Underlying, is 60% of the hypothetical Initial Value of that Underlying)
|
*
|
Terms used for purposes of these hypothetical examples may not represent the actual Coupon Rate, Initial Values or Downside Thresholds. The actual Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement. The hypothetical Initial Values of 100.000 for the NDX Index, 100.000 for the RTY Index and 100.00 for the SPX Index have been chosen for illustrative purposes only and may not represent a likely Initial Value for any Underlying. The actual Initial Value and resulting Downside Threshold of each Underlying will be based on the closing level of that Underlying on the Trade Date. For historical data regarding the actual closing levels of the Underlyings, please see the historical information set forth under the sections titled “The NASDAQ-100 Index
®
,” “The Russell 2000
®
Index” and “The S&P 500
®
Index” below.
|
The examples below are hypothetical. These examples are intended
to illustrate (a) the effect of an issuer-elected call, (b) how the value of the payment at maturity on the Notes will depend on
whether the Final Value of any Underlying is less than its Downside Threshold and (c) how the total return on the Notes may be
less than the total return on a direct investment in any or all Underlyings in certain scenarios. The “total return”
as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the total payments per
$10.00 principal amount Note over the term of the Notes to the $10.00 initial issue price.
Example 1
—
JPMorgan Financial Elects to Call
the Notes on the First Optional Call Notice Date
Date
|
|
Payment (per Note)
|
First Optional Call Notice Date
|
Issuer elects to call the Notes. Issuer repays principal
plus
pays Coupon of $0.1375 on Call Settlement Date.
|
Total Payments (per $10.00 Note):
|
|
Payment on Call Settlement Date
:
|
$10.1375 ($10.00 + $0.1375)
|
|
|
Total
:
|
$10.1375
|
|
|
Total Return
:
|
1.375%
|
On the first Optional Call Notice Date, JPMorgan Financial elects
to call the Notes. JPMorgan Financial will pay you on the Call Settlement Date $10.1375 per $10.00 principal amount Note, which
is equal to your principal amount
plus
the Coupon due on the Coupon Payment Date that is also the Call Settlement Date.
No further amounts will be owed to you under the Notes.
Example 2
—
Notes Are NOT Called and the Final
Value of Each Underlying Is Above Its Downside Threshold
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First to Ninth Optional Call Notice Dates
|
|
N/A
|
|
Notes NOT called at the
election of the Issuer. Issuer pays Coupon of $0.1375 on each of the first to ninth Coupon Payment Dates.
|
Final Valuation Date
|
|
NDX
Index:
65.000
RTY
Index:
80.000
SPX
Index:
75.00
|
|
Notes NOT callable. Final Value of each Underlying above its Downside Threshold;
Issuer repays principal
plus
pays Coupon of $0.1375 on Maturity Date.
|
Total
Payments (per $10.00 Note)
:
|
|
Payment
at Maturity
:
|
$10.1375 ($10.00 + $0.1375)
|
|
|
Prior Coupons
:
|
$1.2375 ($0.1375 × 9)
|
|
|
Total
:
|
$11.375
|
|
|
Total Return
:
|
13.75%
|
In this example, the Issuer does not elect to call the Notes and
the Notes remain outstanding until maturity. Because the Final Value of each Underlying is greater than or equal to its Downside
Threshold, JPMorgan Financial will pay you on the Maturity Date $10.1375 per $10.00 principal amount Note, which is equal to your
principal amount
plus
the final Coupon.
In addition, JPMorgan Financial will also pay the Coupon of $0.1375
on each of the first to ninth Coupon Payment Dates. Accordingly, JPMorgan Financial will have paid a total of $11.375 per $10.00
principal amount Note, for a 13.75% total return over the approximately 2.5 year term of the Notes.
Example 3
—
Notes Are NOT Called and the Final
Value of Any Underlying Is Below Its Downside Threshold
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First to Ninth Optional Call Notice Dates
|
|
N/A
|
|
Notes NOT called at the
election of the Issuer. Issuer pays Coupon of $0.1375 on each of the first to ninth Coupon Payment Dates.
|
Final Valuation Date
|
|
NDX
Index:
45.000
RTY
Index:
110.000
SPX
Index:
80.00
|
|
Notes NOT callable. Final Value of NDX Index below its Downside Threshold; Issuer
pays Coupon on Maturity Date, and Issuer will repay less than the principal amount resulting in a loss proportionate to the
decline of the Least Performing Underlying.
|
Total
Payments (per $10.00 Note)
:
|
|
Payment at Maturity
:
|
$4.6375 ($4.50 + $0.1375)
|
|
|
Prior Coupons
:
|
$1.2375 ($0.1375 × 9)
|
|
|
Total
:
|
$5.875
|
|
|
Total Return
:
|
-41.25%
|
In this example, the Issuer does not elect to call the Notes and
the Notes remain outstanding until maturity.. Because the Final Value of at least one Underlying is less than its Downside Threshold
on the Final Valuation Date and the Least Performing Underlying Return is -55%, at maturity, JPMorgan Financial will pay you $4.6375
per $10.00 principal amount Note, which is equal to your principal amount
plus
the final Coupon, calculated as follows:
$10.00 × (1 + Least Performing Underlying
Return) + the final Coupon
Step 1
:
Determine the Underlying Return of each Underlying
:
Underlying Return of
the NDX Index:
(Final Value –
Initial Value)
|
=
|
45.000 – 100.000
|
= -55.00%
|
Initial Value
|
100.000
|
Underlying Return of
the RTY Index:
(Final Value –
Initial Value)
|
=
|
110.000 – 100.000
|
= 10.00%
|
Initial Value
|
100.000
|
Underlying Return of
the SPX Index:
(Final Value –
Initial Value)
|
=
|
80.00 – 100.00
|
= -20.00%
|
Initial Value
|
100.00
|
Step 2
:
Determine the Least Performing Underlying
.
The NDX Index is the Underlying with the lowest Underlying Return.
Step 3
:
Calculate the Payment at Maturity
:
$10.00 × (1 + Least Performing Underlying
Return) + final Coupon = $10.00 × (1 + -55.00%) + $0.1375 = $4.6375
In addition, JPMorgan Financial will also pay the Coupon of $0.1375
on each of the first to ninth Coupon Payment Dates. Accordingly, JPMorgan Financial will have paid a total of $5.875 per $10.00
principal amount Note, for a -41.25% total return over the approximately 2.5 year term of the Notes.
The hypothetical returns and hypothetical payments on the Notes
shown above apply
only if you hold the Notes for their entire term or until called
. These hypotheticals do not reflect fees
or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical
returns and hypothetical payments shown above would likely be lower.
The
Underlyings
Included on the following pages is a brief description
of the Underlyings. This information has been obtained from publicly available sources, without independent verification. Set forth
below is a table that provides the quarterly high and low closing levels of each Underlying. This information given below is for
the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015 and the first and second calendar quarters of 2016. Partial
data is provided for the third calendar quarter of 2016. We obtained the closing levels information set forth below from the Bloomberg
Professional
®
service (“Bloomberg”), without independent verification.
You should not take the historical levels of any Underlying as an indication of future performance.
The
NASDAQ-100 Index
®
The NASDAQ-100 Index
®
is a modified market
capitalization-weighted index of 100 of the largest non-financial securities listed on The NASDAQ Stock Market based on market
capitalization. For additional information about the NASDAQ-100 Index
®
, see the information set forth under “Equity
Index Descriptions — The NASDAQ-100 Index
®
” in the accompanying underlying supplement.
Historical Information Regarding the NASDAQ-100
Index
®
The following table sets forth the quarterly high and
low closing levels of the NASDAQ-100 Index
®
, based on daily closing levels of the NASDAQ-100 Index
®
as reported by Bloomberg, without independent verification. The closing level of the NASDAQ-100 Index
®
on September
21, 2016 was 4,853.748. The actual Initial Value of the NASDAQ-100 Index
®
will be the closing level of the NASDAQ-100
Index
®
on the Trade Date. We obtained the closing levels of the NASDAQ-100 Index
®
above and below
from Bloomberg, without independent verification. You should not take the historical levels of the NASDAQ-100 Index
®
as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
|
3/31/2011
|
|
2,397.940
|
2,202.970
|
2,338.990
|
4/1/2011
|
|
6/30/2011
|
|
2,413.590
|
2,192.960
|
2,325.070
|
7/1/2011
|
|
9/30/2011
|
|
2,429.500
|
2,038.220
|
2,139.180
|
10/1/2011
|
|
12/31/2011
|
|
2,401.290
|
2,085.040
|
2,277.830
|
1/1/2012
|
|
3/31/2012
|
|
2,782.120
|
2,321.960
|
2,755.270
|
4/1/2012
|
|
6/30/2012
|
|
2,784.420
|
2,458.830
|
2,615.720
|
7/1/2012
|
|
9/30/2012
|
|
2,864.033
|
2,545.300
|
2,799.193
|
10/1/2012
|
|
12/31/2012
|
|
2,828.599
|
2,524.356
|
2,660.931
|
1/1/2013
|
|
3/31/2013
|
|
2,818.690
|
2,700.967
|
2,818.690
|
4/1/2013
|
|
6/30/2013
|
|
3,028.957
|
2,741.949
|
2,909.599
|
7/1/2013
|
|
9/30/2013
|
|
3,237.611
|
2,927.346
|
3,218.198
|
10/1/2013
|
|
12/31/2013
|
|
3,591.996
|
3,142.535
|
3,591.996
|
1/1/2014
|
|
3/31/2014
|
|
3,727.185
|
3,440.502
|
3,595.736
|
4/1/2014
|
|
6/30/2014
|
|
3,849.479
|
3,446.845
|
3,849.479
|
7/1/2014
|
|
9/30/2014
|
|
4,103.083
|
3,857.938
|
4,049.445
|
10/1/2014
|
|
12/31/2014
|
|
4,337.785
|
3,765.281
|
4,236.279
|
1/1/2015
|
|
3/31/2015
|
|
4,483.049
|
4,089.648
|
4,333.688
|
4/1/2015
|
|
6/30/2015
|
|
4,548.740
|
4,311.257
|
4,396.761
|
7/1/2015
|
|
9/30/2015
|
|
4,679.675
|
4,016.324
|
4,181.060
|
10/1/2015
|
|
12/31/2015
|
|
4,719.053
|
4,192.963
|
4,593.271
|
1/1/2016
|
|
3/31/2016
|
|
4,497.857
|
3,947.804
|
4,483.655
|
4/1/2016
|
|
6/30/2016
|
|
4,565.421
|
4,201.055
|
4,417.699
|
7/1/2016
|
|
9/21/2016*
|
|
4,853.748
|
4,410.747
|
4,853.748
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the period from July 1, 2016 through September 21, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance of
the NASDAQ-100 Index
®
from January 3, 2006 through September 21, 2016, based on information from Bloomberg, without
independent verification. The dotted line represents a hypothetical Downside Threshold of 2,912.249, equal to 60% of the closing
level of the NASDAQ-100 Index
®
on September 21, 2016. The actual Downside Threshold will be based on the closing
level of the NASDAQ-100 Index
®
on the Trade Date (the Initial Value) and will equal 60% of the Initial Value of
the NASDAQ-100 Index
®
.
Past performance of the NASDAQ
-
100
Index
®
is not indicative of the future performance of the NASDAQ
-
100 Index
®
.
The
Russell 2000
®
Index
The Russell 2000
®
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 Russell 2000
®
Index is designed
to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell
2000
®
Index, see the information set forth under “Equity Index Descriptions — The Russell Indices”
in the accompanying underlying supplement.
Historical Information Regarding the Russell 2000
®
Index
The following table sets forth the quarterly high and
low closing levels of the Russell 2000
®
Index, based on daily closing levels of the Russell 2000
®
Index as reported by Bloomberg, without independent verification. The closing level of the Russell 2000
®
Index on
September 21, 2016 was 1,245.040. The actual Initial Value of the Russell 2000
®
Index will be the closing level
of the Russell 2000
®
Index on the Trade Date. We obtained the closing levels of the Russell 2000
®
Index above and below from Bloomberg, without independent verification. You should not take the historical levels of the Russell
2000
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
|
3/31/2011
|
|
843.549
|
773.184
|
843.549
|
4/1/2011
|
|
6/30/2011
|
|
865.291
|
777.197
|
827.429
|
7/1/2011
|
|
9/30/2011
|
|
858.113
|
643.421
|
644.156
|
10/1/2011
|
|
12/31/2011
|
|
765.432
|
609.490
|
740.916
|
1/1/2012
|
|
3/31/2012
|
|
846.129
|
747.275
|
830.301
|
4/1/2012
|
|
6/30/2012
|
|
840.626
|
737.241
|
798.487
|
7/1/2012
|
|
9/30/2012
|
|
864.697
|
767.751
|
837.450
|
10/1/2012
|
|
12/31/2012
|
|
852.495
|
769.483
|
849.350
|
1/1/2013
|
|
3/31/2013
|
|
953.068
|
872.605
|
951.542
|
4/1/2013
|
|
6/30/2013
|
|
999.985
|
901.513
|
977.475
|
7/1/2013
|
|
9/30/2013
|
|
1,078.409
|
989.535
|
1,073.786
|
10/1/2013
|
|
12/31/2013
|
|
1,163.637
|
1,043.459
|
1,163.637
|
1/1/2014
|
|
3/31/2014
|
|
1,208.651
|
1,093.594
|
1,173.038
|
4/1/2014
|
|
6/30/2014
|
|
1,192.964
|
1,095.986
|
1,192.964
|
7/1/2014
|
|
9/30/2014
|
|
1,208.150
|
1,101.676
|
1,101.676
|
10/1/2014
|
|
12/31/2014
|
|
1,219.109
|
1,049.303
|
1,204.696
|
1/1/2015
|
|
3/31/2015
|
|
1,266.373
|
1,154.709
|
1,252.772
|
4/1/2015
|
|
6/30/2015
|
|
1,295.799
|
1,215.417
|
1,253.947
|
7/1/2015
|
|
9/30/2015
|
|
1,273.328
|
1,083.907
|
1,100.688
|
10/1/2015
|
|
12/31/2015
|
|
1,204.159
|
1,097.552
|
1,135.889
|
1/1/2016
|
|
3/31/2016
|
|
1,114.028
|
953.715
|
1,114.028
|
4/1/2016
|
|
6/30/2016
|
|
1,188.954
|
1,089.646
|
1,151.923
|
7/1/2016
|
|
9/21/2016*
|
|
1,261.008
|
1,139.453
|
1,245.040
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the period from July 1, 2016 through September 21, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance of
the Russell 2000
®
Index from January 3, 2006 through September 21, 2016, based on information from Bloomberg, without
independent verification. The dotted line represents a hypothetical Downside Threshold of 747.024, equal to 60% of the closing
level of the Russell 2000
®
Index on September 21, 2016. The actual Downside Threshold will be based on the closing
level of the Russell 2000
®
Index on the Trade Date (the Initial Value) and will equal 60% of the Initial Value of
the Russell 2000
®
Index.
Past performance of the Russell 2000
®
Index is not indicative of the future performance of the Russell 2000
®
Index.
The
S&P 500
®
Index
The S&P 500
®
Index consists of stocks of 500
companies selected to provide a performance benchmark for the U.S. equity markets. For additional information about the S&P
500
®
Index, see the information set forth under “Equity Index Descriptions — The S&P U.S. Indices”
in the accompanying underlying supplement.
Historical Information Regarding the S&P 500
®
Index
The following table sets forth the quarterly high and
low closing levels of the S&P 500
®
Index, based on daily closing levels of the S&P 500
®
Index
as reported by Bloomberg, without independent verification. The closing level of the S&P 500
®
Index on September
21, 2016 was 2,163.12. The actual Initial Value of the S&P 500
®
Index will be the closing level of the S&P
500
®
Index on the Trade Date. We obtained the closing levels of the S&P 500
®
Index above and
below from Bloomberg, without independent verification. You should not take the historical levels of the S&P 500
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
|
3/31/2011
|
|
1,343.01
|
1,256.88
|
1,325.83
|
4/1/2011
|
|
6/30/2011
|
|
1,363.61
|
1,265.42
|
1,320.64
|
7/1/2011
|
|
9/30/2011
|
|
1,353.22
|
1,119.46
|
1,131.42
|
10/1/2011
|
|
12/31/2011
|
|
1,285.09
|
1,099.23
|
1,257.60
|
1/1/2012
|
|
3/31/2012
|
|
1,416.51
|
1,277.06
|
1,408.47
|
4/1/2012
|
|
6/30/2012
|
|
1,419.04
|
1,278.04
|
1,362.16
|
7/1/2012
|
|
9/30/2012
|
|
1,465.77
|
1,334.76
|
1,440.67
|
10/1/2012
|
|
12/31/2012
|
|
1,461.40
|
1,353.33
|
1,426.19
|
1/1/2013
|
|
3/31/2013
|
|
1,569.19
|
1,457.15
|
1,569.19
|
4/1/2013
|
|
6/30/2013
|
|
1,669.16
|
1,541.61
|
1,606.28
|
7/1/2013
|
|
9/30/2013
|
|
1,725.52
|
1,614.08
|
1,681.55
|
10/1/2013
|
|
12/31/2013
|
|
1,848.36
|
1,655.45
|
1,848.36
|
1/1/2014
|
|
3/31/2014
|
|
1,878.04
|
1,741.89
|
1,872.34
|
4/1/2014
|
|
6/30/2014
|
|
1,962.87
|
1,815.69
|
1,960.23
|
7/1/2014
|
|
9/30/2014
|
|
2,011.36
|
1,909.57
|
1,972.29
|
10/1/2014
|
|
12/31/2014
|
|
2,090.57
|
1,862.49
|
2,058.90
|
1/1/2015
|
|
3/31/2015
|
|
2,117.39
|
1,992.67
|
2,067.89
|
4/1/2015
|
|
6/30/2015
|
|
2,130.82
|
2,057.64
|
2,063.11
|
7/1/2015
|
|
9/30/2015
|
|
2,128.28
|
1,867.61
|
1,920.03
|
10/1/2015
|
|
12/31/2015
|
|
2,109.79
|
1,923.82
|
2,043.94
|
1/1/2016
|
|
3/31/2016
|
|
2,063.95
|
1,829.08
|
2,059.74
|
4/1/2016
|
|
6/30/2016
|
|
2,119.12
|
2,000.54
|
2,098.86
|
7/1/2016
|
|
9/21/2016
|
*
|
2,190.15
|
2,088.55
|
2,163.12
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the period from July 1, 2016 through September 21, 2016. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance of
the S&P 500
®
Index from January 3, 2006 through September 21, 2016, based on information from Bloomberg, without
independent verification. The dotted line represents a hypothetical Downside Threshold of 1,297.87, equal to 60% of the closing
level of the S&P 500
®
Index on September 21, 2016. The actual Downside Threshold will be based on the closing
level of the S&P 500
®
Index on the Trade Date (the Initial Value) and will equal 60% of the Initial Value of
the S&P 500
®
Index.
Past performance of the S&P 500
®
Index is not indicative of the future performance of the S&P 500
®
Index
.
Correlation
of the Underlyings
The graph below illustrates the daily performance of
the NASDAQ-100 Index
®
, the Russell 2000
®
Index and the S&P 500
®
Index from January
3, 2006 through September 21, 2016. For comparison purposes, each Underlying has been normalized to have a closing level of 100.00
on January 3, 2006 by dividing the closing level of that Underlying on each day by the closing level of that Underlying on January
3, 2006 and multiplying by 100.00. We obtained the closing levels used to determine the normalized closing levels set forth below
from Bloomberg, without independent verification.
Past performance of the Underlyings is not indicative
of the future performance of the Underlyings
.
The correlation of a pair of Underlyings represents
a statistical measurement of the degree to which the returns of those Underlyings were similar to each other over a given period
in terms of timing and direction (
i
.
e
., positive or negative). Set forth below is a table that provides the correlation
of each pair of Underlyings, calculated based on the daily returns of the Underlyings from September 21, 2006 through September
21, 2016, based on information from Bloomberg, without independent verification. You should not take the historical correlations
of the Underlyings as an indication of future correlation.
|
NASDAQ-100
Index
®
|
Russell
2000
®
Index
|
S&P
500
®
Index
|
NASDAQ-100 Index
®
|
—
|
0.884
|
0.934
|
Russell 2000
®
Index
|
0.884
|
—
|
0.926
|
S&P 500
®
Index
|
0.934
|
0.926
|
—
|
A correlation of 1.000 for a pair of Underlyings represents
a perfect positive correlation. This means that the closing levels of that pair of Underlyings have moved in the same direction
and the ratio of their daily returns has been constant. A correlation of -1.000 for a pair of Underlyings represents a perfect
negative correlation. This means that the closing levels of that pair of Underlyings have moved in the opposite direction and the
ratio of their daily returns has been constant. A correlation of 0.000 for a pair of Underlyings means that the Underlyings are
uncorrelated. This means that there is no statistical relationship between the daily returns of that pair of Underlyings. The closer
the correlation of a pair of Underlyings is to 1.000, the more positively correlated those Underlyings are. The closer the correlation
of a pair of Underlyings is to -1.000, the more negatively correlated those Underlyings. The closer the correlation of a pair of
Underlyings is to 0.000, the less correlated those Underlyings are. The lower the correlation between two Underlyings, the greater
the potential for one of those Underlyings to close below its Downside Threshold on the Final Valuation Date.
The correlations set forth above are based on the historical
performance of the Underlyings, and you should not take those historical correlations as an indication of future correlation. In
addition, the correlations set forth above are not the same as the correlations referenced in setting the terms of the Notes. The
correlations referenced in setting the terms of the Notes are calculated using internal models of our affiliates and are not derived
from the daily returns of the Underlyings over the period set forth above. Although the correlation of the Underlyings’ performance
may change over the term of the Notes, the Coupon Rate is determined, in part, based on the correlations of the Underlyings’
performance calculated using internal models of our affiliates at the time when the terms of the Notes are finalized. A higher
Coupon Rate is generally associated with lower correlation of the Underlyings, which reflects a greater potential for a loss on
your investment at maturity.
Supplemental
Plan of Distribution
We and JPMorgan Chase & Co. have agreed to indemnify UBS and
JPMS against liabilities under the Securities Act of 1933, as amended, or to contribute to payments that UBS may be required to
make relating to these liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS may sell
all or a part of the Notes that it purchases from us to the public or its affiliates at the price to public indicated on the cover
hereof.
Subject to regulatory constraints, JPMS intends to offer to purchase
the Notes in the secondary market, but it is not required to do so.
We or our affiliates may enter into swap agreements or related
hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Notes, 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” in this pricing supplement and “Use of Proceeds and Hedging” in the
accompanying product supplement.
We expect that delivery of the Notes will be made against payment
for the Notes on or about the Original Issue Date set forth on the front cover of this pricing supplement, which will be the fifth
business day following the expected Trade Date of the Notes (this settlement cycle being referred to as T+5). Under Rule 15c6-1
under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three
business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes on the
Trade Date or the succeeding business day will be required to specify an alternate settlement cycle at the time of any such trade
to prevent a failed settlement and should consult their own advisors.
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 values 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 “Key
Risks — Risks Relating to the Notes Generally — 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. See “Key Risks — Risks Relating to the Notes Generally
— The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates”
in this pricing supplement.
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 UBS, the projected profits, if any,
that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Notes and the estimated
cost of hedging our obligations under the Notes. Because hedging our obligations entails risk and may be influenced by market forces
beyond our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. We or one
or more of our affiliates will retain any profits realized in hedging our obligations under the Notes. See “Key Risks —
Risks Relating to the Notes Generally — 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 “Key Risks — Risks Relating to the Notes Generally — Secondary Market
Prices of the Notes Will Be Impacted by Many Economic and Market Factors” in this pricing supplement. In addition, we generally
expect that some of the costs included in the original issue price of the Notes will be partially paid back to you in connection
with any repurchases of your Notes by JPMS in an amount that will decline to zero over an initial predetermined period that is
intended to be up to five months. The length of any such initial period reflects secondary market volumes for the Notes, 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 “Key Risks — Risks Relating
to the Notes Generally — 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.