Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Indices:
The
S&P 500
®
Index (Bloomberg ticker: SPX), the Russell 2000
®
Index (Bloomberg ticker: RTY) and
the
EURO STOXX 50
®
Index (Bloomberg ticker: SX5E)
Interest Payments:
If the notes have not been redeemed early, you will receive
on each Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to at least $5.00 per month (equivalent
to an Interest Rate of at least 6.00% per annum, payable at a rate of at least 0.50% per month) (to be provided in the pricing
supplement).
Interest Rate:
At least 6.00% per annum, payable at a rate of at least 0.50% per month
(to be provided in the pricing supplement)
Pricing
Date:
On or about May 19, 2016
Original Issue
Date (Settlement Date):
On or about May 24, 2016
Review Date*:
August 21, 2017
Interest Payment
Dates*:
June 27, 2016, July 26, 2016, August 26, 2016, September 26,
2016, October 26, 2016, November 29, 2016, December 27, 2016, January 26, 2017, February 28, 2017, March 27, 2017, April 26, 2017,
May 26, 2017, June 26, 2017, July 26, 2017 and the Maturity Date
Maturity Date*:
August 24, 2017
Trigger Value:
With respect to each Index, 60.00% of its Initial Value
Call Dates*:
the August 26, 2016, November 29, 2016, February 28, 2017 and May 26,
2017 Interest Payment Dates
* 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 no. 4a-I
|
Least Performing
Index:
The Index with the Least Performing Index Return
Least Performing
Index Return:
The lowest of the Index Returns of the Indices
Index Return:
With respect to each Index,
(Final
Value – Initial Value)
Initial Value
Initial Value:
With respect to each Index, the closing level of that Index on the
Pricing Date.
Final Value:
With respect to each Index, the closing level of that Index on the
Review Date
Trigger Event:
A Trigger Event occurs if, on any day during the Monitoring Period,
the closing level of any Index is less than its Trigger Value
Monitoring
Period:
The period from but excluding the Pricing Date to and including
the Review Date
Early Redemption:
We, at our election, may redeem
the notes early, in whole but not in part, on any of the Call Dates at a price, for each $1,000 principal amount note, equal to
$1,000 plus any accrued and unpaid Interest Payment. If we intend to redeem your notes early, we will deliver notice to The Depository
Trust Company, or DTC, at least five business days before the applicable Call Date on which the notes are to be redeemed.
Payment at Maturity:
If the notes have not been redeemed early and (i) the Final
Value of each Index is greater than or equal to its Initial Value or (ii) a Trigger Event has not occurred, you will receive a
cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Interest Payment applicable to
the Maturity Date.
If the notes have not been redeemed early and (i) the Final
Value of any Index is less than its Initial Value and (ii) a Trigger Event has occurred, your payment at maturity per $1,000 principal
amount note, in addition to the Interest Payment, will be calculated as follows:
$1,000 + ($1,000 × Least Performing
Index Return)
If the notes have not been redeemed early and (i) the Final
Value of any Index is less than its Initial Value and (ii) a Trigger Event has occurred, you will lose some or all of your principal
amount at maturity.
|
PS-
1
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
How
the Notes Work
Payment at Maturity If the Notes Have Not
Been Redeemed Early
Total Interest Payments
The table below illustrates the hypothetical total
Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Interest Rate of 6.00% per
annum, depending on how many Interest Payments are made prior to early redemption or maturity. If the notes have not been redeemed
early, the hypothetical total Interest Payments per $1,000 principal amount note over the term of the notes will be equal to the
maximum amount shown in the table below. The numbers appearing in the following table have been rounded for ease of analysis. The
actual Interest Rate will be provided in the pricing supplement and will be at least 6.00% per annum.
Number
of Interest Payments
|
Total
Interest Payments
|
15
|
$75.00
|
12
|
$60.00
|
9
|
$45.00
|
6
|
$30.00
|
3
|
$15.00
|
Hypothetical Payout Examples
The following examples illustrate payments on
the notes linked to three hypothetical Indices, assuming a range of performances for the hypothetical Least Performing Index on
the Review Date.
The hypothetical payments set forth below assume
the following:
|
·
|
The notes have not been redeemed early;
|
|
·
|
An Initial Value for the Least Performing Index of 100.00;
|
|
·
|
A Trigger Value for the Least Performing Index of 60.00 (equal to 60.00% of its hypothetical Initial Value); and
|
|
·
|
An Interest Rate of 6.00% per annum (payable at a rate of 0.50% per month).
|
The hypothetical Initial Value of the Least Performing
Index of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of any Index.
The actual Initial Value of each Index will be
the closing level of that Index on the Pricing Date and will be provided in the pricing supplement. For historical data regarding
the actual closing levels of each Index, please see the historical information set forth under “The Indices” in this
pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
PS-
2
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
Example 1 — Notes have NOT been redeemed
early, the Final Value of the Least Performing Index is greater than or equal to its Initial Value and a Trigger Event has occurred
Date
|
Closing
Level of Least Performing Index
|
|
Review Date
|
105.00
|
Final Value is greater than or equal to Initial Value
|
|
Total Payment
|
$1,075.00 (7.50% return)
|
Because the notes have not been redeemed early
and the Final Value of the Least Performing Index is greater than or equal to its Initial Value, even though a Trigger Event has
occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,005.00 (or $1,000
plus
the Interest
Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment
Dates, the total amount paid, for each $1,000 principal amount note, is $1,075.00.
Example 2 — Notes have NOT been redeemed
early, the Final Value of the Least Performing Index is less than its Initial Value and a Trigger Event has NOT occurred
Date
|
Closing
Level of Least Performing Index
|
|
Review Date
|
90.00
|
Final Value is less than Initial Value
|
|
Total Payment
|
$1,075.00 (7.50% return)
|
Because the notes have not been redeemed early
and a Trigger Event has not occurred, even though the Final Value of the Least Performing Index is less than its Initial Value,
the payment at maturity, for each $1,000 principal amount note, will be $1,005.00 (or $1,000
plus
the Interest Payment applicable
to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment Dates, the total
amount paid, for each $1,000 principal amount note, is $1,075.00.
Example 3 — Notes have NOT redeemed
early, the Final Value of the Least Performing Index is less than its Initial Value and a Trigger Event has occurred
Date
|
Closing
Level of Least Performing Index
|
|
Review Date
|
50.00
|
Final Value is less than Initial Value
|
|
Total Payment
|
$575.00 (-42.50% return)
|
Because the notes have not been redeemed early,
the Final Value of the Least Performing Index is less than its Initial Value, a Trigger Event has occurred and the Least Performing
Index Return is -50.00%, the payment at maturity will be $500.00 per $1,000 principal amount note plus the Interest Payment then
due, calculated as follows.
[$1,000 × 50.00/ 100.00] + $5.00 = $505.00
When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $575.00.
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term.
These hypotheticals do not reflect the
fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the
hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been redeemed early and (i) the Final Value of any Index is less than its Initial Value and
(ii) a Trigger Event has occurred, you will lose 1% of the principal amount of your notes for every 1% that the Final Value of
the Least Performing Index is less than its Initial Value. Accordingly, under these circumstances, you will lose some or all of
your principal amount at maturity.
PS-
3
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and
JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS
—
|
As a finance subsidiary of JPMorgan
Chase & Co., we have no independent operations beyond the issuance and administration of our securities. Aside from the initial
capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of our affiliates to
make payments under loans made by us or other intercompany agreements. As a result, we are dependent upon payments from our affiliates
to meet our obligations under the notes. If these affiliates do not make payments to us and we fail to make payments on the notes,
you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER
THE TERM OF THE NOTES,
|
regardless of any appreciation in the
value of any Index, which may be significant. You will not participate in any appreciation in the value of any Index.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
|
but JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the level of the S&P 500
®
Index.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
|
Poor performance by either of the Indices
over the term of the notes may negatively affect whether you will receive your payment at maturity and will not be offset or mitigated
by positive performance by the other Index.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LEAST PERFORMING INDEX.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD
—
|
If, on any day during the Monitoring
Period, the closing level of any Index is less than its Trigger Value (
i.e.,
a Trigger Event occurs) and the notes have
not been redeemed early, the benefit provided by the Trigger Value will terminate and you will be fully exposed to any depreciation
in the closing level of the Least Performing Index. You will be subject to this potential loss of principal even if that Index
subsequently recovers such that the closing level of that Index is greater than or equal to its Trigger Value.
|
·
|
THE OPTIONAL EARLY REDEMPTION FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are redeemed early, the
term of the notes may be reduced to as short as three months and you will not receive any Interest Payments after the applicable
Call Date. There is no guarantee that you would be able to reinvest the proceeds from an investment in the notes at a comparable
return and/or with a comparable interest rate for a similar level of risk. Even in cases where the notes are called before maturity,
noteholders are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION
STOCKS WITH RESPECT TO THE RUSSELL 2000
®
INDEX —
|
Small capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions.
PS-
4
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE EURO STOXX 50
®
INDEX —
|
The equity
securities included in the EURO STOXX 50
®
Index have been issued by non-U.S. companies. Investments in securities
linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the home countries
of the issuers of those non-U.S. equity securities. Also, there is generally less publicly available information about companies
in some of these jurisdictions than there is about U.S. companies that are subject to the reporting requirements of the SEC.
|
·
|
NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES WITH RESPECT TO THE EURO STOXX 50
®
INDEX —
|
The value
of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity
securities included in the EURO STOXX 50
®
Index are based, although any currency fluctuations could affect the performance
of the EURO STOXX 50
®
Index.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN ANY INDEX OR HAVE ANY RIGHTS WITH
RESPECT TO THOSE SECURITIES.
|
|
·
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE LEVEL
OF THAT INDEX IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential
investment in the notes based on the minimum for the estimated value of the notes.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC)
OF THE NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in the
determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the funding
value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes. The use of
an internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and any secondary
market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
|
Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and,
PS-
5
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the values of the Indices. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may
be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value
of Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
PS-
6
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
The
Indices
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 “Equity Index Descriptions — The S&P
U.S. Indices” in the accompanying underlying supplement.
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 “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
The EURO STOXX 50
®
Index consists of 50 component stocks of market sector leaders from within the Eurozone. The Index and STOXX are the intellectual
property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”),
which are used under license. The notes based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited
and its Licensors and neither STOXX Limited nor any of its Licensors shall have any liability with respect thereto. For additional
information about the EURO STOXX 50
®
Index, see “Equity Index Descriptions — The EURO STOXX 50
®
Index” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 7, 2011 through April 29, 2016. The closing
level of the S&P 500
®
Index on April 29, 2016 was 2,065.30. The closing level of the Russell 2000
®
Index on April 29, 2016 was 1,130.845. The closing level of the EURO STOXX 50
®
Index on April 29, 2016 was
3,028.21. We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification.
The historical closing levels of each Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of any Index on the
Pricing Date or the Review Date. There can be no assurance that the performance of the Indices will result in the return of any
of your principal amount.
PS-
7
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
Tax
Treatment
You
should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. 4-I. Based on the advice of Sidley Austin
llp
, our special tax counsel,
and on current market conditions, in determining our reporting responsibilities we intend to treat the notes for U.S. federal
income tax purposes as units each comprising: (x) a Put Option written by you that is terminated if an Early Redemption occurs
and that, if not terminated, in circumstances where the payment due at maturity is less than $1,000 (excluding accrued and unpaid
interest), requires you to pay us an amount equal to $1,000 multiplied by the absolute value of the Least Performing Index Return
and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential obligation under the Put Option. By purchasing
the notes, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to follow this treatment
and the allocation described in the following paragraph. However,
PS-
8
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
there
are other reasonable treatments that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case
the timing and character of any income or loss on the notes could be significantly and adversely affected. In addition, in 2007,
the Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. 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. The notice focuses on a number of issues, the most relevant of which for holders of 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. Holders should be subject to withholding tax.
We
will determine the portion of each interest payment on the notes that we will allocate to interest on the Deposit and to Put Premium,
respectively, and will provide that allocation in the pricing supplement for the notes. If the notes had priced on May 2, 2016,
we would have allocated approximately 23.33% of each interest payment to interest on the Deposit and approximately 76.67% of each
interest payment to Put Premium. The actual allocation that we will determine for the notes may differ from this hypothetical
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 Pricing Date. Assuming that the treatment of the notes as units each comprising a Put Option and
a Deposit is respected, amounts treated as interest on the Deposit will be taxed as ordinary income, while the Put Premium will
not be taken into account prior to sale or settlement, including a settlement following an Early Redemption.
Non-U.S.
Holders – Additional Tax Consideration
Non-U.S.
Holders should note that final Treasury regulations were released on legislation that imposes a withholding tax of 30% on payments
to certain foreign entities unless information reporting and diligence requirements are met, as described in “Material U.S.
Federal Income Tax Consequences-FATCA” in the accompanying product supplement. Pursuant to the final regulations, such withholding
tax will generally apply to obligations that are issued on or after July 1, 2014; therefore, the notes will generally be subject
to this withholding tax. However, the withholding tax described above will not apply to payments of gross proceeds from the sale,
exchange or other disposition (including upon maturity) of the notes made before January 1, 2019.
Both
U.S. and Non-U.S. Holders should consult their tax advisors regarding all aspects of the U.S. federal income tax consequences
of an investment in the notes, including possible alternative treatments and the issues presented by the 2007 notice. Purchasers
who are not initial purchasers of notes at the issue price should also consult their tax advisors with respect to the tax consequences
of an investment in the notes, including possible alternative treatments, as well as the allocation of the purchase price of the
notes between the Deposit and the Put Option.
The
Estimated Value of the Notes
The
estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following
hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding
rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of
the notes does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any
exists) at any time. The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the issuance, operational and ongoing
liability management costs of the notes. For additional information, see “Selected Risk Considerations — The Estimated
Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The
value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our
affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on
various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and
other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the
notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions
existing at that time.
The
estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Different
pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of
the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which
may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
PS-
9
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
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The
estimated value of the notes will be lower than the original issue price of the notes because costs associated with selling, structuring
and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid
to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may
result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized
in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of
our affiliates will retain any remaining hedging profits, if any. See “Selected Risk Considerations — The Estimated
Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For
information about factors that will impact any secondary market prices of the notes, see “Risk Factors — Risks Relating
to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted
by many economic and market factors” in the accompanying product supplement. In addition, we generally expect that some
of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases
of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected
hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for
structured debt issuances. This initial predetermined time period is intended to be the shorter of six months and one-half of
the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates
expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs
are incurred, as determined by our affiliates. See “Selected Risk Considerations — The Value of the Notes as Published
by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the
Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The
notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the
notes. See “How the Notes Work” and “Hypothetical Payout Examples” in this pricing supplement for an illustration
of the risk-return profile of the notes and “The Indices” in this pricing supplement for a description of the market
exposure provided by the notes.
The
original issue price of the notes is equal to the estimated value of the notes plus the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You
may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable
agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection
with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You
should read this pricing supplement together with the prospectus, as supplemented by the prospectus supplement, each dated April
15, 2016, relating to our Series A medium-term notes of which these notes are a part, and the more detailed information contained
in product supplement no. 4-I dated April 15, 2016 and underlying supplement no. 1-I dated April 15, 2016. 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 “Risk Factors” in the accompanying product supplement no. 4-I
and “Risk Factors” in the accompanying underlying supplement no. 1-I, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest
in the notes.
You
may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
PS-
10
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
Our
Central Index Key, or CIK, on the SEC website is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing
supplement, “we,” “us” and “our” refer to JPMorgan Financial.
PS-
11
| Structured Investments
Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index,
the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
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