JPMorgan Chase Financial Company LLC Trigger
Autocallable Contingent Yield Notes
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.
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, 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, the VanEck
Vectors
TM
Gold Miners ETF is a “Fund.”
Investor
Suitability
The Notes may be suitable for you if, among other considerations:
t
You
fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
t
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 Underlying.
t
You
accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
t
You
believe the Underlying will close at or above the Coupon Barrier on the Observation Dates and the Downside Threshold on the Final
Valuation Date.
t
You
believe the Underlying will close at or above the Initial Value on one of the specified Observation Dates (after an initial one-year
non-call period).
t
You
understand and accept that you will not participate in any appreciation of the Underlying and that your potential return is limited
to the Contingent Coupons.
t
You
can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations
of the Underlying.
t
You
would be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the minimum Contingent Coupon Rate indicated
on the cover hereof (the actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement
and is expected to be, but will not be less than, the Contingent Coupon Rate listed on the cover).
t
You
do not seek guaranteed current income from this investment and are willing to forgo dividends paid on the stocks included in the
Underlying.
t
You
are able and willing to invest in Notes that may be called early (after an initial one-year non-call period) or you are otherwise
willing to hold the Notes to maturity.
t
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.
t
You
understand and accept the risks associated with the Underlying.
t
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.
|
|
The Notes may not be suitable for you if, among other considerations:
t
You
do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
t
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 Underlying.
t
You
require an investment designed to provide a full return of principal at maturity.
t
You
do not accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
t
You
believe that the Underlying will decline during the term of the Notes and is likely to close below the Coupon Barrier on the Observation
Dates and the Downside Threshold on the Final Valuation Date.
t
You
seek an investment that participates in the full appreciation of the Underlying or that has unlimited return potential.
t
You
cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations
of the Underlying.
t
You
would not be willing to invest in the Notes if the Contingent Coupon Rate were set equal to the minimum Contingent Coupon Rate
indicated on the cover hereof (the actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing
supplement and is expected to be, but will not be less than, the Contingent Coupon Rate listed on the cover).
t
You
prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities
and credit ratings.
t
You
seek guaranteed current income from this investment or prefer to receive the dividends paid on the stocks included in the Underlying.
t
You
are unable or unwilling to hold Notes that may be called early (after an initial one-year non-call period), 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 Underlying.
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.
|
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 Underlying,
please see the section titled “The Underlying” below.
Indicative
Terms
|
Issuer
|
|
JPMorgan Chase Financial Company LLC
|
Guarantor
|
|
JPMorgan Chase & Co.
|
Issue Price
|
|
$10 per Note
|
Underlying
|
|
VanEck Vectors
TM
Gold Miners ETF
|
Principal Amount
|
|
$10 per Note (subject to a minimum purchase of 100 Notes or $1,000)
|
Term
1
|
|
Approximately 5 years, unless called earlier
|
Automatic Call Feature
|
|
The Notes will be called automatically if the closing price
2
of one share of the Underlying on any Observation Date (beginning July 27, 2017) is equal to or greater than the Initial Value. 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 the Contingent Coupon otherwise due for the applicable Observation Date, and no further payments
will be made on the Notes.
|
Contingent Coupon
|
|
If the closing price
2
of the Underlying is equal to or greater
than the Coupon Barrier on any Observation Date, we will pay you the Contingent Coupon for that Observation Date on the relevant
Coupon Payment Date.
|
|
|
If the closing price
2
of one share of the Underlying is less
than the Coupon Barrier on any Observation Date, the Contingent Coupon for that Observation Date will not accrue or be payable,
and we will not make any payment to you on the relevant Coupon Payment Date.
|
|
|
Each Contingent Coupon will be a fixed amount based on equal monthly installments
at the Contingent Coupon Rate, which is a per annum rate.
You should be willing to invest in the Notes if the
Contingent Coupon Rate were set equal to the minimum Contingent Coupon Rate set forth in “Contingent Coupon Rate”
below.
|
|
|
Contingent Coupon payments on the Notes are not guaranteed. We
will not pay you the Contingent Coupon for any Observation Date on which the closing price of one share of the Underlying
is less than the Coupon Barrier.
|
Contingent Coupon Rate
|
|
At least 11.45% per annum. The actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement and is expected to be, but will not be less than, 11.45% per annum.
|
Contingent Coupon payments
|
|
At least $0.0954 per $10 principal amount Note. The actual Contingent Coupon payments will be based on the Contingent Coupon Rate and finalized on the Trade Date and provided in the pricing supplement.
|
Coupon Payment Dates
3
|
|
2nd business day following the applicable Observation Date, except that the Coupon Payment Date for the Final Valuation Date is the Maturity Date
|
Call Settlement Dates
3
|
|
First Coupon Payment Date following the applicable Observation Date
|
Payment at Maturity (per $10 Note)
|
|
If the Notes are not automatically called and the Final Value is equal
to or greater than the Downside Threshold,
we will pay you a cash payment at maturity per $10 principal amount Note equal
to $10 plus the Contingent Coupon otherwise due on the Maturity Date.
|
|
|
If the Notes are not automatically called and the Final Value is less
than the Downside Threshold
, we will 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, equal to:
|
|
|
$10 × (1 + Underlying Return)
|
Underlying Return
|
|
Final Value – Initial Value
Initial Value
|
Initial Value
|
|
The closing price of one share of the Underlying on the Trade Date, as specified on the cover of this pricing supplement
|
Final Value
|
|
The closing price2 of one share of the Underlying on the Final Valuation Date
|
Share Adjustment Factor
2
|
|
The Share Adjustment Factor is referenced in determining the closing price of one share of the Underlying. The Share Adjustment Factor is set initially at 1.0 on the Trade Date.
|
Downside Threshold
|
|
A percentage of the Initial Value, as specified on the cover of this pricing supplement
|
Coupon Barrier
|
|
A percentage of the Initial Value, as specified on the cover of this pricing supplement
|
1
|
See footnote 1 under “Key Dates” on the front cover
|
2
|
The closing price and the Share Adjustment Factor of the Fund are subject to adjustments, in the sole discretion of the calculation agent, in the case of certain events described in the accompanying product supplement under “The Underlyings — Funds — Anti-Dilution Adjustments.”
|
3
|
See footnote 2 under “Key Dates” on the front cover
|
Investment
Timeline
|
|
|
|
Trade Date
|
|
The closing price of one share of the Underlying (Initial Value) is observed and the Downside Threshold and the Coupon Barrier are determined. The Contingent Coupon Rate is finalized.
|
|
|
|
Monthly
(callable after an initial one-year non-call period)
|
|
If the closing price of one share of the Underlying is equal
to or greater than the Coupon Barrier on any Observation Date, JPMorgan Financial will pay you a Contingent Coupon on the Coupon
Payment Date.
The Notes will also be called if the closing price of
one share of the Underlying on any Observation Date (after an initial one-year non-call period) is equal to or greater than the
Initial Value. If the Notes are called, JPMorgan Financial will pay you a cash payment per Note equal to the principal amount
plus
the Contingent Coupon otherwise due for the applicable Observation Date, and no further payments will be made on the
Notes.
|
|
|
|
Maturity Date
|
|
The Final Value is determined
as of the Final Valuation Date.
If the Notes have
not been called and the Final Value is equal to or greater than the Downside Threshold, at maturity JPMorgan Financial will repay
the principal amount equal to $10.00 per Note
plus
the Contingent Coupon otherwise due on the Maturity Date.
If the Notes have
not been called and the Final Value is less than the Downside Threshold, JPMorgan Financial will repay less than the principal
amount, if anything, at maturity, resulting in a loss on your principal amount proportionate to the decline of the Underlying,
equal to a return of:
$10 × (1 + Underlying Return)
per Note
|
INVESTING IN THE NOTES INVOLVES SIGNIFICANT
RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. 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.
Observation
Dates and Coupon Payment Dates
Observation Dates
†
|
Coupon Payment Dates
†
|
August 29, 2016
|
August 31, 2016
|
September 27, 2016
|
September 29, 2016
|
October 27, 2016
|
October 31, 2016
|
November 28, 2016
|
November 30, 2016
|
December 27, 2016
|
December 29, 2016
|
January 27, 2017
|
January 31, 2017
|
February 27, 2017
|
March 1, 2017
|
March 27, 2017
|
March 29, 2017
|
April 27, 2017
|
May 1, 2017
|
May 30, 2017
|
June 1, 2017
|
June 27, 2017
|
June 29, 2017
|
July 27, 2017
|
July 31, 2017
|
August 28, 2017
|
August 30, 2017
|
September 27, 2017
|
September 29, 2017
|
October 27, 2017
|
October 31, 2017
|
November 27, 2017
|
November 29, 2017
|
December 27, 2017
|
December 29, 2017
|
January 29, 2018
|
January 31, 2018
|
February 27, 2018
|
March 1, 2018
|
March 27, 2018
|
March 29, 2018
|
April 27, 2018
|
May 1, 2018
|
May 29, 2018
|
May 31, 2018
|
June 27, 2018
|
June 29, 2018
|
July 27, 2018
|
July 31, 2018
|
August 27, 2018
|
August 29, 2018
|
September 27, 2018
|
October 1, 2018
|
October 29, 2018
|
October 31, 2018
|
November 27, 2018
|
November 29, 2018
|
December 27, 2018
|
December 31, 2018
|
January 28, 2019
|
January 30, 2019
|
February 27, 2019
|
March 1, 2019
|
March 27, 2019
|
March 29, 2019
|
April 29, 2019
|
May 1, 2019
|
May 28, 2019
|
May 30, 2019
|
June 27, 2019
|
July 1, 2019
|
July 29, 2019
|
July 31, 2019
|
August 27, 2019
|
August 29, 2019
|
September 27, 2019
|
October 1, 2019
|
October 28, 2019
|
October 30, 2019
|
November 27, 2019
|
December 2, 2019
|
December 27, 2019
|
December 31, 2019
|
January 27, 2020
|
January 29, 2020
|
February 27, 2020
|
March 2, 2020
|
March 27, 2020
|
March 31, 2020
|
April 27, 2020
|
April 29, 2020
|
May 27, 2020
|
May 29, 2020
|
June 29, 2020
|
July 1, 2020
|
July 27, 2020
|
July 29, 2020
|
August 27, 2020
|
August 31, 2020
|
September 28, 2020
|
September 30, 2020
|
October 27, 2020
|
October 29, 2020
|
November 27, 2020
|
December 1, 2020
|
December 28, 2020
|
December 30, 2020
|
January 27, 2021
|
January 29, 2021
|
February 26, 2021
|
March 2, 2021
|
March 29, 2021
|
March 31, 2021
|
April 27, 2021
|
April 29, 2021
|
May 27, 2021
|
June 1, 2021
|
June 28, 2021
|
June 30, 2021
|
July 27, 2021 (the Final Valuation Date)
|
July 30 2021 (the Maturity Date)
|
|
†
|
The Notes are not callable until the twelfth Observation Date, July 27, 2017.
|
Each of the Observation Dates, and therefore
the Coupon Payment Dates, 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 a Single Underlying — Notes Linked to
a Single Underlying (Other Than a Commodity Index)” and “General Terms of Notes — Postponement of a Payment Date”
in the accompanying product supplement.
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. 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 Coupons 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 reasonable treatments that the IRS or a court may adopt.
Sale, Exchange or Redemption of a Note.
Assuming
the treatment described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call or
at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange
and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly
treated as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain
or loss unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss,
whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to
limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is
likely that you will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible
that proceeds received from the sale or exchange of your Notes prior to an Observation Date but that can be attributed to an expected
Contingent Coupon payment could be treated as ordinary income. You should consult your tax adviser regarding this issue.
As described above, there are other 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 Coupons is uncertain, and although we believe it is reasonable
to take a position that Contingent Coupons 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 Coupons 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.
Key
Risks
An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing directly in the Underlying. 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
|
t
|
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 the Notes are not called and the closing price of one share of the Underlying has declined below the Downside Threshold
on the Final Valuation Date, you will be fully exposed to any depreciation of the Underlying from the Initial Value to the 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. Under these circumstances, you will lose 1% of your principal for every
1% that the Final Value is less than the 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 the Underlying.
|
|
t
|
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.
|
|
t
|
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.
|
|
t
|
You Are Not Guaranteed Any Contingent Coupons
— We will
not necessarily make periodic coupon payments on the Notes. If the closing price of one share of the Underlying on an Observation
Date is less than the Coupon Barrier, we will not pay you the Contingent Coupon for that Observation Date, and the Contingent Coupon
that would otherwise be payable will not be accrued and will be lost. If the closing price of one share of the Underlying is less
than the Coupon Barrier on each of the Observation Dates, we will not pay you any Contingent Coupon during the term of, and you
will not receive a positive return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period
of greater risk of principal loss on your Notes.
|
|
t
|
Return on the Notes Limited to the Sum of Any Contingent Coupons
and You Will Not Participate in Any Appreciation of the Underlying
— The return potential of the Notes is limited to
the specified Contingent Coupon Rate, regardless of the appreciation of the Underlying, which may be significant. In addition,
the total return on the Notes will vary based on the number of Observation Dates on which the requirements for a Contingent Coupon
have been met prior to maturity or an automatic call. Further, if the Notes are called, you will not receive any Contingent Coupons
or any other payments in respect of any Observation Dates after the Call Settlement Date. Because the Notes could be called as
early as the twelfth Observation Date, the total return on the Notes could be minimal. If the Notes are not called, you may be
subject to the risk of decline of the Underlying even though you are not able to participate in any potential appreciation
of the Underlying. Generally, the longer the Notes remain outstanding, the less likely it is that they will be automatically called,
due to the decline in the price of the Underlying and the shorter time remaining for the price to recover to or above the Initial
Value on a subsequent Observation Date. As a result, the return on an investment in the Notes could be less than the return
on a hypothetical direct investment in the Underlying. In addition, if the Notes are not called and the Final Value is below the
Downside Threshold, you will have a loss on 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.
|
|
t
|
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 price of one share of the Underlying is above the Downside Threshold.
If by maturity the Notes have not been called, either JPMorgan Financial will repay you the full principal amount per Note, plus
the Contingent Coupon, or, if the Underlying closes below the Downside Threshold on the Final Valuation Date, JPMorgan Financial
will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount that is proportionate
to the decline of the Underlying from the Initial Value to the Final Value. This contingent repayment of principal applies only
if you hold your Notes to maturity.
|
|
t
|
A Higher Contingent Coupon Rate and/or a Lower Coupon Barrier and/or
Downside Threshold May Reflect Greater Expected Volatility of the Underlying, Which Is Generally Associated With a Greater Risk
of Loss
— Volatility is a measure of the degree of variation in the price of the Underlying over a period of time.
The greater the expected volatility of the Underlying at the time the terms of the Notes are set, the greater the expectation is
at that time that the price of the Underlying could close below the Coupon Barrier on any Observation
Date, resulting in the loss of one or more, or all, Contingent Coupon payments, or below the 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 Contingent Coupon Rate, the Coupon Barrier and the Downside Threshold, are based, in part, on the expected
volatility of the Underlying at the time the terms of the Notes are set, where a higher expected volatility will generally be reflected
in a higher Contingent 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 Coupon Barrier and/or a lower Downside Threshold as compared to otherwise comparable
securities. Accordingly, a higher Contingent Coupon Rate will generally be indicative of a greater risk of loss while a lower
Coupon Barrier or Downside Threshold does not necessarily indicate that the Notes have a greater likelihood of paying Contingent
Coupon payments or 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.
|
|
t
|
Reinvestment Risk
— If your Notes are called early, the
holding period over which you would have the opportunity to receive any Contingent Coupons could be as short as approximately one
year. 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 in the event the Notes are called prior to the Maturity Date.
|
|
t
|
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
|
Each Contingent Coupon Is Based Solely on the Closing Price of One
Share of the Underlying on the Applicable Observation Date
— Whether a Contingent Coupon will be payable with respect
to an Observation Date will be based solely on the closing price of one share of the Underlying on that Observation Date. As a
result, you will not know whether you will receive a Contingent Coupon until the related Observation Date. Moreover, because each
Contingent Coupon is based solely on the closing price of one share of the Underlying on the applicable Observation Date, if the
closing price of one share of the Underlying is less than the Coupon Barrier, you will not receive any Contingent Coupon with respect
to that Observation Date, even if the closing price of one share of the Underlying was higher on other days during the period before
that Observation Date.
|
|
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, 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 price of the Underlying, 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 price of one share of the
Underlying;
|
|
t
|
the time to maturity of the Notes;
|
|
t
|
the likelihood of an automatic call being triggered;
|
|
t
|
whether the closing price of one share of the Underlying has been,
or is expected to be, less than the Coupon Barrier on any Observation Date and whether the Final Value is expected to be less than
the Downside Threshold;
|
|
t
|
the dividend rates on the Underlying and the equity securities held
by the Underlying;
|
|
t
|
the occurrence of certain events affecting the Underlying that may
or may not require an adjustment to the closing price and the Share Adjustment Factor of the Underlying, including a merger or
acquisition;
|
|
t
|
interest and yield rates in the market generally;
|
|
t
|
the exchange rates and the volatility of the exchange rates between
the U.S. dollar and each of the currencies in which the non U.S. equity securities held by the Underlying trade and the correlation
among those rates and the price of the Underlying; 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 Underlying
or the Equity Securities Composing the Underlying
— Investing in the Notes is not equivalent to investing in the Underlying
or the equity securities held by the Underlying. As an investor in the Notes, you will not have any ownership interest or rights
in the Underlying or the equity securities held by the Underlying, such as voting rights, dividend payments or other distributions.
|
|
t
|
Your Return on the Notes Will Not Reflect Dividends on the Underlying
or the Equity Securities Composing the Underlying
— Your return on the Notes will not reflect the return you would realize
if you actually owned the Underlying or the equity securities held by the Underlying and received the dividends on the Underlying
or those equity securities. This is because the calculation agent will determine whether the Notes will be called and whether a
Contingent Coupon is payable and will calculate the amount payable to you at maturity of the Notes by reference to the closing
price of one share of the Underlying on the relevant Observation Date without taking into consideration the value of dividends
on the Underlying or the equity securities held by the Underlying.
|
|
t
|
No Affiliation with the Underlying or the Issuers of the Equity
Securities Composing the Underlying
—
We are not affiliated with the Underlying or, to our knowledge,
the issuers of the equity securities held by the Underlying. We have not independently verified the information about the Underlying
or the issuers of the equity securities held by the Underlying contained in this pricing supplement. You should make your own investigation
into the Underlying and the issuers of the equity securities held by the Underlying. We are not responsible for the public disclosure
of information by the Underlying or the issuers of the equity securities held by the Underlying, whether contained in SEC filings
or otherwise
|
|
t
|
No Assurances That the Investment View Implicit in the Notes Will
Be Successful
— While the Notes are structured to provide for Contingent Coupons if the Underlying does not close below
the Coupon Barrier on the Observation Dates, 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 Underlying and could affect the price of the 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 Price of the Underlying
— Trading or transactions by JPMorgan Financial or its affiliates in the Underlying and/or over-the-counter options, futures
or other instruments with returns linked to the performance of the Underlying may adversely affect the price of the 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 Contingent 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 Contingent Coupon Rate.
|
Risks Relating to the Underlying
|
t
|
There Are Risks Associated with the Underlying
—
Although shares of the Underlying are listed for trading
on a securities exchange and a number of similar products have been trading on a securities exchange for varying periods of time,
there is no assurance that an active trading market will continue for the shares of the Underlying or that there will be liquidity
in the trading market. The Underlying is subject to management risk, which is the risk that the investment strategies of
the Underlying’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 Underlying, and consequently,
the value of the Notes.
|
|
t
|
The Performance and Market Value of the Underlying, Particularly
During Periods of Market Volatility, May Not Correlate with the Performance of the Underlying’s Underlying Fund as well as
the Net Asset Value per Share
— The Underlying does not fully replicate its Underlying Fund (as defined under “The
Underlying” below) and may hold securities different from those included in its Underlying Fund.
In
addition, the performance of the Underlying will reflect additional transaction costs and fees that are not included in the calculation
of its Underlying Fund.
All of these factors may lead to a
lack of correlation between the performance of the Underlying and its Underlying Fund.
In
addition, corporate actions with respect to the equity securities underlying the Underlying (such as mergers and spin-offs) may
impact the variance between the performances of the Underlying and its Underlying Fund.
Finally,
because the shares of the Underlying are traded on a securities exchange and are subject to market supply and investor demand,
the market value of one share of the Underlying may differ from the net asset value per share of the Underlying.
|
During
periods of market volatility, securities underlying the Underlying may be unavailable in the secondary market, market participants
may be unable to calculate accurately the net asset value per share of the Underlying and the liquidity of the Underlying may be
adversely affected.
This kind of market volatility may also
disrupt the ability of market participants to create and redeem shares of the Underlying.
Further,
market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell
shares of the Underlying.
As a result, under these circumstances,
the market value of shares of the Underlying may vary substantially from the net asset value per share of the Underlying.
For
all of the foregoing reasons, the performance of the Underlying may not correlate with the performance of its Underlying Fund as
well as the net asset value per share of the Underlying, which could materially and adversely affect the value of the Notes in
the secondary market and/or reduce any payment on the Notes.
|
t
|
Risks Associated with the Gold and Silver Mining Industries
— All or substantially all of the equity securities held by the Underlying are issued by gold or silver mining companies.
Because the value of the Notes is linked to the performance of the Underlying, an investment in these securities will be concentrated
in the gold and silver mining industries.
Competitive pressures
may have a significant effect on the financial condition of companies in these industries.
Also, these companies are highly dependent on the price of gold or silver, as applicable.
These prices fluctuate widely and may be affected by numerous factors.
Factors affecting gold prices include economic factors, including, among other things, the structure of and confidence in the global
monetary system, expectations of the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is generally quoted), interest rates, gold borrowing and lending rates, and global or regional
economic, financial, political, regulatory, judicial or other events.
Factors affecting silver prices include general economic trends, technical developments, substitution issues and regulation, as
well as specific factors including industrial and jewelry demand, expectations with respect to the rate of inflation, the relative
strength of the U.S. dollar (the currency in which the price of silver is generally quoted) and other currencies, interest rates,
central bank sales, forward sales by producers, global or regional political or economic events, and production costs and disruptions
in major silver producing countries such as Mexico, China and Peru.
|
|
t
|
Non-U.S. Securities Risk
— A portion of the equity securities
held by the Underlying have been issued by non-U.S. companies.
Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets
in the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental
intervention in those markets and cross shareholdings in companies in certain countries.
Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about
U.S. companies that are subject to the reporting requirements of the SEC.
|
|
t
|
The Notes Are Subject to Currency Exchange Risk
—
Because the
prices of the non-U.S. equity securities held by the Underlying are converted into U.S. dollars for purposes of calculating the
net asset value of the Underlying, holders of the Notes will be exposed to currency exchange rate risk with respect to each of
the currencies in which the non-U.S. equity securities held by the Underlying trade. Your net exposure will depend on the
extent to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of equity securities held
by the Underlying denominated in each of those currencies. If, taking into account the relevant weighting, the U.S. dollar
strengthens against those currencies, the price of the Underlying will be adversely affected and any payment on the Notes may be
reduced. Of particular importance to potential currency exchange risk are:
|
|
¨
|
existing and expected rates of inflation;
|
|
¨
|
existing and expected interest rate levels;
|
|
¨
|
the balance of payments in the countries issuing those currencies and
the United States and between each country and its major trading partners;
|
|
¨
|
political, civil or military unrest in the countries issuing those
currencies and the United States; and
|
|
¨
|
the extent of government surpluses or deficits in the countries issuing
those currencies and the United States.
|
All of these factors are in turn
sensitive to the monetary, fiscal and trade policies pursued by the governments of the countries issuing those currencies and the
United States and other countries important to international trade and finance.
|
¨
|
Anti-Dilution Protection Is Limited
—
Although the calculation
agent will adjust the closing price of one share of the Underlying for certain events affecting the Underlying, the calculation
agent is not required to make an adjustment for every event that can affect the Underlying. If an event occurs that does
not require the calculation agent to adjust the closing price of one share of the Underlying, the market value of your Notes and
any payment on the Notes may be materially and adversely affected.
|
Hypothetical
Examples
The examples below illustrate the hypothetical payments on a
Coupon Payment Date, upon an automatic call or at maturity under different hypothetical scenarios for a $10.00 Note on an offering
of the Notes linked to a hypothetical Underlying and assume an Initial Value of $100.00, a Downside Threshold and Coupon Barrier
of $60.00 (which is 60.00% of the hypothetical Initial Value) and a Contingent Coupon Rate of 11.45% per annum.* The hypothetical
Initial Value has been chosen for illustrative purposes only and does not represent the actual Initial Value. The actual Initial
Value, Downside Threshold and Coupon Barrier are based on the closing price of one share of the Underlying on the Trade Date and
will be provided in the pricing supplement. For historical data regarding the actual closing prices of one share of the Underlying,
please see the historical information set forth under “The Underlying” in this pricing supplement.
Principal Amount:
|
$10.00
|
Term:
|
Approximately five years (unless earlier called)
|
Hypothetical Initial Value:
|
$100.00
|
Hypothetical Contingent Coupon Rate:
|
11.45% per annum (or 0.954% per month)
|
Observation Dates:
|
Monthly (callable after one year)
|
Hypothetical Downside Threshold:
|
$60.00 (which is 60.00% of the hypothetical Initial Value)
|
Hypothetical Coupon Barrier:
|
$60.00 (which is 60.00% of the hypothetical Initial Value)
|
*
|
The actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement. The actual value of any Contingent Coupon payments you will receive over the term of the Notes and the actual value of the payment upon automatic call or at maturity applicable to your Notes may be more or less than the amounts displayed in these hypothetical scenarios.
|
|
|
|
The examples below are purely hypothetical and are not based
on any specific offering of Notes linked to any specific Underlying. These examples are intended to illustrate how the value of
any payment on the Notes will depend on the closing price of one share on the Observation Dates.
Example 1 — Notes Are Automatically Called on the Twelfth
Observation Date
Date
|
Closing Price
|
Payment (per Note)
|
First Observation Date
|
$110.00 (at or above Initial Value; Notes NOT called because Observation Date is prior to the fourth Observation Date)
|
$0.0954 (Contingent Coupon)
|
Second Observation Date
|
$50.00 (below Coupon Barrier)
|
$0.00
|
Third Observation Date
|
$55.00 (below Coupon Barrier)
|
$0.00
|
Fourth to Eleventh Observation Date
|
Various (all below Coupon Barrier)
|
$0.00
|
Twelfth Observation Date
|
$110.00 (at or above Initial Value)
|
$10.0954 (Payment Upon Automatic Call)
|
|
|
Total Payment:
|
$10.19084 (1.9084% return)
|
|
|
|
|
Although the closing price is above the Initial Value on the
first Observation Date, the Notes are not called because the Notes cannot be called before the twelfth Observation Date. Because
the Notes are automatically called on the twelfth Observation Date, we will pay you on the applicable Call Settlement Date a total
of $10.0954 per Note, reflecting your principal amount
plus
the applicable Contingent Coupon. When that amount is added
to the Contingent Coupon payment of $0.0954 received in respect of prior Observation Dates, we will have paid you a total of $10.1908
per Note for a 1.908% total return on the Notes. No further amounts will be owed on the Notes.
Example 2 — Notes Are NOT Automatically Called
and
the Final Value Is at or above the Downside Threshold
Date
|
Closing Price
|
Payment (per Note)
|
First Observation Date
|
$110.00 (at or above Coupon Barrier)
|
$0.0954 (Contingent Coupon)
|
Second Observation Date
|
$50.00 (below Coupon Barrier)
|
$0.00
|
Third Observation Date
|
$55.00 (below Coupon Barrier)
|
$0.00
|
Fourth to Fifty-Ninth Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
Final Valuation Date
|
$85.00 (at or above Downside Threshold; below Initial Value)
|
$10.0954 (Payment at Maturity)
|
|
|
Total Payment:
|
$10.1908 (1.9084% return)
|
|
|
|
|
At maturity, we will pay you a total of $10.0954 per Note, reflecting
your principal amount
plus
the applicable Contingent Coupon. When that amount is added to the Contingent Coupon payment
of $0.0954 received in respect of prior Observation Dates, we will have paid you a total of $10.1908 per Note for a 1.908% total
return on the Notes.
Example 3 — Notes Are NOT Automatically Called
and
the Final Value is below the Downside Threshold
Date
|
Closing Price
|
Payment (per Note)
|
First Observation Date
|
$50.00 (below Coupon Barrier)
|
$0.00
|
Second Observation Date
|
$50.00 (below Coupon Barrier)
|
$0.00
|
Third Observation Date
|
$55.00 (below Coupon Barrier)
|
$0.00
|
Fourth to Fifty-Ninth Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
Final Valuation Date
|
$50.00 (below Downside Threshold)
|
$10.00 × (1 + Underlying Return) =
$10.00 × (1 + -50%) =
$10.00 × 50% =
$5.00 (Payment at Maturity)
|
|
|
Total Payment:
|
$5.00 (-50.00% return)
|
|
|
|
|
Because the Notes are not automatically called, the Final Value
is below the Downside Threshold and the Underlying Return is -50%, at maturity we will pay you $5.00 per Note for a loss on the
Notes of 50.00%. Because there is no Contingent Coupon paid during the term of the Notes, that represents the total payment on
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 automatically 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
Underlying
The VanEck Vectors
TM
Gold Miners ETF is
an exchange-traded fund of the VanEck Vectors
TM
ETF Trust, a registered investment company. Effective May 1, 2016, the
name of the VanEck Vectors
TM
ETF Trust was changed from “Market Vectors ETF Trust” to its current name,
and the name of the VanEck Vectors
TM
Gold Miners ETF was changed from “Market Vectors Gold Miners ETF” to
its current name. The VanEck Vectors
TM
Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses,
the price and yield performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold Miners Index is a modified market capitalization
weighted index composed of publicly traded companies involved primarily in the mining of gold or silver. For additional information
about the VanEck Vectors
TM
Gold Miners ETF , see “Fund Descriptions — The Market Vectors Gold Miners ETF”
in the accompanying underlying supplement.
Historical Information
The following table sets forth the quartlerly high
and low closing prices of one share of the Underlying, based on daily closing prices of one share of the Underlying as reported
by the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. 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. The closing price of one share of the Underlying on July
26, 2016 was $28.50. We obtained the closing prices of one share of the Underlying above and below from Bloomberg, without independent
verification. The closing prices may have been adjusted by Bloomberg for certain actions, such as stock splits. You should not
take the historical prices of one share of the Underlying as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
3/31/2011
|
$60.79
|
$53.12
|
$60.06
|
4/1/2011
|
6/30/2011
|
$63.95
|
$51.80
|
$54.59
|
7/1/2011
|
9/30/2011
|
$66.69
|
$53.75
|
$55.19
|
10/1/2011
|
12/31/2011
|
$63.32
|
$50.07
|
$51.43
|
1/1/2012
|
3/31/2012
|
$57.47
|
$48.75
|
$49.57
|
4/1/2012
|
6/30/2012
|
$50.37
|
$39.34
|
$44.77
|
7/1/2012
|
9/30/2012
|
$54.81
|
$40.70
|
$53.71
|
10/1/2012
|
12/31/2012
|
$54.25
|
$44.85
|
$46.39
|
1/1/2013
|
3/31/2013
|
$47.09
|
$35.91
|
$37.85
|
4/1/2013
|
6/30/2013
|
$37.45
|
$22.22
|
$24.41
|
7/1/2013
|
9/30/2013
|
$30.43
|
$22.90
|
$25.06
|
10/1/2013
|
12/31/2013
|
$26.52
|
$20.39
|
$21.12
|
1/1/2014
|
3/31/2014
|
$27.73
|
$21.27
|
$23.60
|
4/1/2014
|
6/30/2014
|
$26.45
|
$22.04
|
$26.45
|
7/1/2014
|
9/30/2014
|
$27.46
|
$21.35
|
$21.35
|
10/1/2014
|
12/31/2014
|
$21.94
|
$16.59
|
$18.38
|
1/1/2015
|
3/31/2015
|
$22.94
|
$17.67
|
$18.24
|
4/1/2015
|
6/30/2015
|
$20.82
|
$17.76
|
$17.76
|
7/1/2015
|
9/30/2015
|
$17.85
|
$13.04
|
$13.74
|
10/1/2015
|
12/31/2015
|
$16.90
|
$13.08
|
$13.72
|
1/1/2016
|
3/31/2016
|
$20.86
|
$12.47
|
$19.98
|
4/1/2016
|
6/30/2016
|
$27.70
|
$19.53
|
$27.70
|
7/1/2016
|
7/26/2016*
|
$30.60
|
$27.73
|
$28.50
|
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the
period from April 1, 2016 through June 26, 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 Underlying
from May 22, 2006 through July 26, 2016, based on information from Bloomberg, without independent verification. The dotted line
represents the Downside Threshold and Coupon Barrier of $17.10, equal to 60% of the closing price of one share of the Underlying
on July 26, 2016.
Past performance of the Fund is not indicative of the future
performance of the
Underlying.
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.
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 nine 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.