As further described below, for each day that (i) the index
closing value of the S&P 500
®
Index is
greater than or equal to
the index reference level and (ii) the
difference between (a) the 30-Year U.S. Dollar ICE Swap Rate (“30ICE”)
minus
(b) the 2-Year U.S. Dollar ICE
Swap Rate (“2ICE”) is
greater than or equal to
0.00% interest will accrue on the securities at the per annum
rate applicable to such interest period (for years one to five, 8.00%, for years six to ten, 8.50% and for years eleven to maturity,
9.00%). At maturity, if the index closing value on the valuation date is
greater than or equal to
the trigger level, we
will pay you the principal amount of your securities plus any accrued and unpaid interest to but excluding the maturity date. However,
if the securities have not been redeemed and the index closing value of the S&P 500
®
Index on the valuation
date is
less than
trigger level, an investor in the securities will lose at least 50%, and may lose all, of the initial
investment in the securities. During any interest payment period, interest will not accrue on any day on which (i) the index closing
value is
less than
the index reference level, or (ii) 30ICE
minus
2ICE is
less than
0.00%. If on
each
day during an interest payment period either (i) the index closing value is
less than
the index reference level or (ii)
30ICE
minus
2ICE is
less than
0.00%, the securities will not pay any interest for such interest payment period. We,
JPMorgan Financial Company LLC, which we refer to as JPMorgan Financial, the payment on which is fully and unconditionally guaranteed
by JPMorgan Chase & Co., have the right to redeem the securities on any quarterly redemption date beginning June 30, 2017.
You could lose your entire investment in the securities
.
Any payment on the securities is subject to the credit risk
of JPMorgan Financial, as issuer of the securities, and the credit risk of JPMorgan Chase & Co., as guarantor of the securities.
SUMMARY TERMS
|
Issuer:
|
JPMorgan Chase Financial Company LLC
|
Guarantor:
|
JPMorgan Chase & Co.
|
Aggregate principal amount:
|
$2,250,000. We may increase the aggregate principal amount prior to the original issue date but are not required to do so.
|
Index:
|
The S&P 500
®
Index. Please see “Additional Provisions” beginning on page 3 below.
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and Issue Price” below)
|
Pricing date:
|
June 27, 2016
|
Original issue date (settlement date):
|
June 30, 2016 (3 business days after the pricing date),
subject to the business day convention
|
Interest accrual date:
|
June 30, 2016, subject to the business day convention
|
Valuation date*:
|
June 25, 2031
|
Maturity date*:
|
June 30, 2031,
subject to the business day convention
|
Payment at maturity:
|
If the final index value is
greater than or equal to
the trigger level, you will receive the principal amount of your securities at maturity.
If the final index value is
less than
the trigger level,
you will lose 1% of the principal amount of your securities for every 1% that the final index value is
less than
the initial
index value, and your payment at maturity per $1,000 principal amount security will be calculated as follows:
$1,000 + ($1,000 × index return)
If the final index value is
less than
the trigger
level, you will lose at least 50.00% of your principal and may lose your entire principal at maturity.
Regardless of whether the final index value is greater than,
equal to or less than the initial index value, at maturity you will also receive any accrued and unpaid interest on your securities.
|
Initial index value:
|
2,000.54, which is the index closing value on the pricing date
|
Final index value:
|
The index closing value on the valuation date
|
Index return:
|
(final index value – initial index value)
initial index value
|
Trigger level:
|
1,000.27, which is 50.00% of the initial index value
|
Index closing value:
|
The daily closing value of the Index. Please see “Additional Provisions” beginning on page 3 below.
|
Interest rate:
|
For each interest payment period:
(x) the applicable per annum interest factor times
(y) N/ACT; where
“N” = the aggregate number of calendar
days in the applicable interest payment period on which (i) the index closing value is greater than or equal to the index reference
level and (ii) the spread is greater than or equal to 0.00%, as determined on the corresponding accrual determination date; and
“ACT” = the total number of calendar days
in the applicable interest payment period.
It is possible that you could receive little or no interest
on the securities during the entire term of the securities. If on the accrual determination date corresponding to any calendar
day either (i) the index closing value is less than the index reference level or (ii) the spread is less than 0.00%, interest will
accrue at a rate of 0.00% per annum for that day.
|
Interest factor:
|
With respect to interest payment periods in years one through five, 8.00%; with respect interest payment periods in years six through ten, 8.50%; and with respect to interest payment periods in years eleven through maturity, 9.00%
|
Spread:
|
On the applicable accrual determination date, the difference of (a) 30ICE
minus
(b)
2ICE
|
Maximum interest rate:
|
For any interest payment period, the maximum interest rate per annum is equal to the applicable interest factor
|
Minimum interest rate:
|
0.00% per annum
|
Index reference level:
|
1,500.405, which is 75.00% of the initial index value
|
Index cutoff:
|
For any interest payment period, the index closing value for any day from and including the sixth scheduled business day prior to but excluding the related interest payment date shall be the index closing value for the trading day immediately preceding such sixth scheduled business day. Please see “Additional Provisions” beginning on page 3 below.
|
Spread cutoff:
|
For any interest payment period, the spread for any day from and including the sixth scheduled business day prior to but excluding the related interest payment date shall be the spread for the trading day immediately preceding such sixth scheduled business day. Please see “Additional Provisions” beginning on page 3 below.
|
Interest:
|
Subject to the interest accrual convention described below and in
the accompanying product supplement, with respect to each interest payment period, for each $1,000 principal amount security, we
will pay you interest in arrears on each interest payment date in accordance with the following formula:
$1,000 × interest rate × day count
fraction
|
Interest payment period:
|
Quarterly (the period beginning on and including the original issue date of the securities and ending on but excluding the first interest payment date and each successive period beginning on and including an interest payment date and ending on but excluding the next succeeding interest payment date, subject to the interest accrual convention described below and in the accompanying product supplement).
|
Interest payment dates:
|
The 30
th
day of each March, June, September and December, beginning on September 30, 2016 to and including the maturity date, or, if the securities have been redeemed, the applicable redemption date, subject to the business day convention and interest accrual convention described below and in the accompanying product supplement.
|
Redemption percentage:
|
With respect to a redemption date, if any, 100%
|
|
Redemption:
|
Beginning June 30, 2017, we have the right to redeem all of these securities on any quarterly redemption date and pay to you 100% of the stated principal amount per security plus accrued and unpaid interest to but excluding the date of such redemption, subject to the business day convention and the interest accrual convention described below and in the accompanying product supplement. If we decide to redeem the securities, we will give you notice at least 5 business days before the redemption date specified in the notice.
|
Redemption date:
|
The 30
th
day of each March, June, September and December, beginning on June 30, 2017, subject to the business day convention and the interest accrual convention described below and in the accompanying product supplement.
|
|
ICE Swap rate:
|
30ICE or 2ICE. Please see “Additional Provisions” beginning on page 3 below.
|
Business day convention:
|
Following
|
Interest accrual convention:
|
Unadjusted
|
Day count fraction:
|
30/360
|
Calculation agent:
|
J.P. Morgan Securities LLC (“JPMS”). All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence of manifest error, be conclusive for all purposes and binding on you and on us
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Denominations:
|
$1,000 / $1,000
|
CUSIP / ISIN:
|
46646EGE6 / US46646EGE68
|
Book-entry or certificated security:
|
Book-entry
|
Business day:
|
New York
|
Agent:
|
JPMS
|
* Subject to postponement in the event of a market disruption
event and as described under “Description of Securities—Payment on the Securities—Payment At Maturity”
and “Description of Notes — Payment on the Notes — Postponement of an Observation Date” in the accompanying
product supplement.
|
Commissions and issue price:
|
Price to Public
(1)
|
Fees and Commissions
|
Proceeds to Issuer
|
Per Security
|
$1,000
|
$30.00
(2)
|
$965.00
|
|
|
$5.00
(3)
|
|
Total
|
$2,250,000
|
$78,750
|
$2,171,250
|
|
|
|
|
|
|
|
(1)
|
The price to the public includes the estimated cost of hedging our obligations under the securities through one or more
of our affiliates, which includes our affiliates’ expected cost of providing such hedge as well as the profit our affiliates
expect to realize in consideration for assuming the risks inherent in providing such hedge. For additional related information,
please see “Use of Proceeds” in the accompanying product supplement.
|
|
(2)
|
JPMS, acting as agent for JPMorgan Financial, received a commission and used $30.00 per $1,000 stated principal amount security
of that commission to allow selling concessions to Morgan Stanley Wealth Management (“MSWM”). See “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
|
|
(3)
|
Reflects a structuring fee payable to MSWM by the agent or its affiliates of $5.00 per $1,000 stated principal amount security.
|
The estimated value of the securities, when the terms of the securities
were set, was $907.00 per $1,000 principal amount security. See “Additional Information About the Securities —The Estimated
Value of the Securities” in this document for additional information. Neither the Securities and Exchange Commission (the
“SEC”) nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy
or the adequacy of this pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
The securities are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed
by, a bank.
You should read this
pricing supplement together with the related product supplement no. 1-1, underlying supplement no. 1-I, prospectus supplement and
prospectus, each of which can be accessed via the hyperlinks below, before you decide to invest.
Product supplement no. 1-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000089109216014194/e00048_424b2.pdf
Underlying supplement
no. 1-I dated April 15, 2016
https://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
Prospectus supplement and prospectus, each dated
April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
The Securities
The
securities are issued by JPMorgan Chase & Co. We describe the basic features of these securities in the sections of the accompanying
product supplement called “Description of Notes” and “General Terms of Notes” subject to and as modified
by the provisions described above. The terms of the securities as set forth in this pricing supplement, to the extent they differ
or conflict with those set forth in the accompanying product supplement, will supersede the terms set forth in the accompanying
product supplement . Among other things, your interest rate will be determined as described above under “Summary Terms —
Interest Rate.” At maturity, if we have not redeemed the securities, r
egardless of the performance of the ICE Swap
rates, the payment at maturity will be determined based on the index closing value on the valuation date. If the index closing
value on the valuation date is greater than or equal to the trigger level, we will pay you the principal amount of your securities
plus any accrued and unpaid interest to but excluding the maturity date. However, if the index closing value on the valuation date
is less than the trigger level, you will lose at least 50% of principal and may lose your entire principal at maturity. All payments
on the securities are subject to the creditworthiness of
JPMorgan Chase
& Co
.
The securities offer periodic interest payments on each interest
payment date. For each interest payment period, the securities will pay interest at a rate per annum equal to the applicable interest
factor, provided that
interest will accrue at such per annum rate only
on each day on which (i) the index closing value is greater than or equal to the index reference level
and
(ii) the spread
is greater than or equal to 0.00%, each as determined on the corresponding accrual determination date. If on each accrual determination
date during such interest payment period,
either
(a) the index closing value is less than the index reference level or (b)
the spread is less than 0%, interest will not accrue during the related interest payment period.
Interest, if any, will
be paid in arrears on each interest payment date, to the holders of record at the close of business on the business day immediately
preceding the applicable interest payment date. The yield on the securities may be less than the overall return you would receive
from a conventional debt security that you could purchase today with the same maturity as the securities.
At our option, we may redeem the securities, in whole but not
in part, on any redemption date, at a price equal to the principal amount being redeemed plus any accrued and unpaid interest,
subject to the business day convention and the interest accrual convention described on the cover of this pricing supplement and
in the accompanying product supplement. Any accrued and unpaid interest on the securities redeemed will be paid to the person who
is the holder of record of such securities at the close of business on the business day immediately preceding the applicable redemption
date.
Additional Provisions
The S&P 500
®
Index.
The S&P 500
®
Index consists of stocks
of 500 component companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
on the S&P 500
®
Index, see the information set forth under “Equity Index Descriptions — The S&P
500
®
Index” in the accompanying underlying supplement no. 1-I.
The ICE Swap Rate
What are the 30-Year U.S. Dollar ICE Swap Rate (“30ICE”)
and the 2-Year U.S. Dollar ICE Swap Rate (“2ICE”)?
The 30ICE is the rate for U.S. dollar swap with a Designated
Maturity of 30 years that appears on Reuters page “ICESWAP1” (or any successor page) at approximately 11:00 a.m., New
York City time, on any accrual determination date, as determined by the calculation agent.
The 2ICE is the rate for U.S. dollar swap with a Designated
Maturity of 2 years that appears on Reuters page “ICESWAP1” (or any successor page) at approximately 11:00 a.m., New
York City time, on any accrual determination date, as determined by the calculation agent.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
An interest rate swap rate, at any given time, generally indicates
the fixed rate of interest (paid semi-annually) that a counterparty in the swaps market would have to pay for a given maturity,
in order to receive a floating rate (paid quarterly) equal to 3-month LIBOR for that same maturity.
ICE Swap Rate Fallback Provisions
On any accrual determination date, if the 30ICE or the 2ICE
cannot be determined by reference to Reuters page “ICESWAP1” (or any successor page), then the calculation agent will
determine such affected rate for such day on the basis of the mid-market semi-annual swap rate quotations to the calculation agent
provided by five leading swap dealers in the New York City interbank market (the “Reference Banks”) at approximately
11:00 a.m., New York City time, on such accrual determination date, and, for this purpose, the mid-market semi-annual swap rate
means the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating
U.S. Dollar interest rate swap transaction with a term equal to the applicable 30 year or 2 year maturity commencing on such accrual
determination date and in an amount that is representative for a single transaction in the relevant market at the relevant time
with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis,
is equivalent to USD LIBOR with a designated maturity of three months. The calculation agent will request the principal New York
City office of each of the Reference Banks to provide a quotation of its rate. If at least three quotations are provided, the rate
for that day will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of the lowest). If fewer than three quotations are
provided as requested, the rate will be determined by the calculation agent in good faith and in a commercially reasonable manner.
Index Closing Value
For each accrual determination date, the official closing
level of the S&P 500
®
Index (the “Index”) published following the regular official weekday close
of trading for the S&P 500
®
Index on Bloomberg Professional
®
Service page “SPX Index HP”
on such accrual determination date. If a market disruption event exists with respect to the S&P 500
®
Index on
any accrual determination date, the index closing value on the immediately preceding accrual determination date for which no market
disruption event occurs or is continuing will be the index closing value for such disrupted accrual determination date (and will
also be the index closing value for the originally scheduled accrual determination date). In certain circumstances, the index closing
value will be based on the alternative calculation of the S&P 500
®
Index as described under “General Terms
of Notes — Discontinuation of an Equity Index; Alteration of Method of Calculation” in the accompanying product supplement
no. 1-I.
Accrual Determination Date
For each calendar day, the second
trading day prior to such calendar day;
provided
that
for
the period commencing on the sixth scheduled business day prior to but excluding each interest payment date, the accrual determination
date will be the first trading day that immediately precedes such period. For purposes of product supplement no. 1-I, an accrual
determination date is (i) an index determination date and (ii) a USD ICE Swap determination date.
Trading Day
A day, as determined by the calculation agent, (i) on which
trading is generally conducted on (a) the relevant exchanges for securities underlying the S&P 500
®
Index or
the relevant successor index, if applicable, and (b) the exchanges on which futures or options contracts related to the S&P
500
®
Index or the relevant successor index, if applicable, are traded, other than a day on which trading on such
relevant exchange or exchange on which such futures or options contracts are traded is scheduled to close prior to its regular
weekday closing time and (ii) which is a U.S. government securities business day.
U.S. Government Securities Business Day
Any day, other than a Saturday, Sunday or a day on which the
Securities Industry and Financial Markets Association (“SIFMA”) recommends that the fixed income departments of its
members be closed for the entire day for purposes of trading in U.S. government securities.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
Business Day
Any day, other than a Saturday, Sunday or a day on which
banking institutions in The City of New York are authorized or obligated by law, regulation or executive order to close or a day
on which transactions in U.S. dollars are not conducted.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
Hypothetical Examples
Hypothetical Examples of Calculation of
the Interest Rate on the Securities for an Interest Payment Period
The following examples illustrate how to calculate the interest
rate on the securities for four hypothetical interest payment periods. The following examples assume that we have not called the
securities prior to their scheduled maturity date, the interest factor is 8.00% and the total number of calendar days in the applicable
interest payment period is 90. The hypothetical spread, index closing values and interest rates in the following examples are for
illustrative purposes only and may not correspond to the actual spread, index closing values or interest rates for any interest
payment period applicable to a purchaser of the securities. The numbers appearing in the following examples have been rounded for
ease of analysis.
Example 1: The spread is greater than or equal to 0.00%
and the index closing value is greater than or equal to the index reference level on 70 calendar days during the interest payment
period.
Because (i) the spread is greater than 0.00% and (ii) the index closing value is greater than the index reference level
for 70 calendar days and the interest factor for the interest payment period is 8.00%, the interest rate for the interest payment
period is 6.22% per annum, calculated as follows:
8.00% × (70 / 90) = 6.22% per annum
Example 2: The spread is greater than or equal to 0.00%
and the index closing value is greater than or equal to the index reference level on 50 calendar days during the interest payment
period.
Because (i) the spread is greater than 0.00% and (ii) the index closing value is greater than the index reference level
for 50 calendar days and the interest factor for the interest payment period is 8.00%, the interest rate for the interest payment
period is 4.44% per annum, calculated as follows:
8.00% × (50 / 90) = 4.44% per annum
Example 3: The spread is greater than or equal to 0.00%
and the index closing value is greater than or equal to the index reference level on 90 calendar days during the interest payment
period.
Because (i) the spread is greater than 0.00% and (ii) the index closing value is greater than the index reference level
for all 90 calendar days and the interest factor for the interest payment period is 8.00%, the interest rate for the interest payment
period is 8.00% per annum, calculated as follows:
8.00% × (90 / 90) = 8.00% per annum
Example 4: The spread is greater than or equal to 0.00%
but and the index closing value is less than the index reference level on each calendar day during the interest payment period.
Regardless of the interest factor, because the index closing value is less than the index reference level for each day during
the interest payment period, the interest rate for the interest payment period is 0.00% per annum. Under these circumstances, investors
would not receive any interest for the given interest payment period.
Hypothetical Examples of Amounts Payable
at Maturity
The following examples illustrate how to calculate the payment
at maturity. For purposes of the following examples, we have assumed a hypothetical initial index value of 2,000 and a hypothetical
trigger level of 1,000, and that the securities are not called prior to their scheduled maturity date. Each hypothetical payment
at maturity set forth below is for illustrative purposes only and may not be the actual payment at maturity applicable to a purchaser
of the securities. In addition, the effect of any accrued and unpaid interest has been excluded.
Example 1: The level of the index increases from the
initial index value of 2,000 to a final index value of 2,500.
Because the final index value of 2,500 is greater than the initial
index value of 2,000, the investor receives a payment at maturity of $1,000 per $1,000 principal amount security. Investors do
not participate in any appreciation of the index.
Example 2: The level of the index decreases from the
initial index value of 2,000 to a final index value of 1,400.
Although the index return is negative, because the final index
value of 1,400 is not less than the trigger level of 1,000, the investor receives a payment at maturity of $1,000 per $1,000 principal
amount security.
Example 3: The level of the index decreases from the
initial index value of 2,000 to a final index value of 900.
Because the index return is negative and the final index value
of 900 is less than the trigger level of 1,000, the investor receives a payment at maturity of $450.00 per $1,000 principal amount
security, calculated as follows:
$1,000 + ($1,000 × -55.00%) = $450.00
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
Example 4: The level of the index decreases from the
initial index value of 2,000 to a final index value of 0.
Because the index return is negative and the final index value of
0 is less than the trigger level of 1,000, the investor receives a payment at maturity of $0.00 per $1,000 principal amount security,
calculated as follows:
$1,000 + ($1,000 × -100%) = $0.00
If the securities are not redeemed prior to maturity
and the final index value is less than the trigger level, investors will lose a significant portion or all of their investment.
The hypothetical payments on the securities shown above
apply
only if the securities are not called prior to maturity and you hold the securities for their entire term
. 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 payments shown above would likely be lower.
Historical Information
ICE Swap Rates
The following graphs set forth the weekly historical performance
of the ICE Swap rates and the spread from January 7, 2011 through June 27, 2016. We obtained the rates used to construct the graph
below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of the information
obtained from Bloomberg Financial Markets.
The 30ICE, as it appeared on Reuters page “ICESWAP1”
on June 27, 2016 was 1.821%. The 2ICE, as it appeared on Reuters page “ICESWAP1” on June 27, 2016 was 0.712%. The spread
on June 27, 2016 was 1.109%.
The ICE Swap rates and the spread data in the following graphs
were obtained from Bloomberg Financial Markets at approximately 3:30 p.m. on the relevant dates and may not be indicative of the
spread, which is determined on any date of determination by reference to the ICE Swap rates published on Reuters page "ICESWAP1"
at approximately 11:00 a.m., New York City time.
The historical ICE Swap rates and the spread should not be taken as an indication
of future performance, and no assurance can be given as to the ICE Swap rates or the spread on any accrual determination date.
We cannot give you assurance that the performance of the ICE Swap rates and the spread will result in any positive interest payments
in any interest payment period.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
The historical performance shown above is not indicative
of future performance. The spread may in the future be negative for extended periods of time.
During the entire term of the
securities, you will not receive interest for any day on which the spread is negative.
Moreover, even if the spread is greater than or equal
to zero on any day, if the index closing value is less than the index reference level on any day, you will not receive any interest
for that day.
S&P 500
®
Index
The following table sets forth the published high and low
index closing values, as well as end-of-quarter index closing values, for each quarter in the period from January 3, 2011 through
June 27, 2016. The graph following the table sets forth the daily closing values of the Index for the period from January 3, 2011
through June 27, 2016. The index closing value on June 27, 2016 was 2,000.54.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
We obtained the index closing values used to construct the graph
below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of the information
obtained from Bloomberg Financial Markets. The historical levels of the index should not be taken as an indication of future performance,
and no assurance can be given as to the index closing value on any of the accrual determination dates. We cannot give you assurance
that the performance of the index will result in any interest payments or any return of principal at maturity.
|
|
|
|
SPX Index
|
High
|
Low
|
Period End
|
2011
|
|
|
|
First Quarter
|
1,343.01
|
1,256.88
|
1,325.83
|
Second Quarter
|
1,363.61
|
1,265.42
|
1,320.64
|
Third Quarter
|
1,353.22
|
1,119.46
|
1,131.42
|
Fourth Quarter
|
1,285.09
|
1,099.23
|
1,257.60
|
2012
|
|
|
|
First Quarter
|
1,416.51
|
1,277.06
|
1,408.47
|
Second Quarter
|
1,419.04
|
1,278.04
|
1,362.16
|
Third Quarter
|
1,465.77
|
1,334.76
|
1,440.67
|
Fourth Quarter
|
1,461.40
|
1,353.33
|
1,426.19
|
2013
|
|
|
|
First Quarter
|
1,569.19
|
1,457.15
|
1,569.19
|
Second Quarter
|
1,669.16
|
1,541.61
|
1,606.28
|
Third Quarter
|
1,725.52
|
1,614.08
|
1,681.55
|
Fourth Quarter
|
1,848.36
|
1,655.45
|
1,848.36
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
(
through June 27, 2016)
|
2119.12
|
2000.54
|
2036.09
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
**The dotted black line in the graph indicates a hypothetical
index reference level of 1,500.405 (75% of the S&P 500
®
Index Closing Level on June 27, 2016 of 2,000.54).
|
Total number of days in the historical period, beginning on January 3, 2011
|
1,381
|
|
|
Number of days on or after January 3, 2011 that the index was greater than or equal to the hypothetical index reference level above
|
848
|
|
|
Number of days on or after January 3, 2011 that the index was less than the hypothetical index reference level above
|
533
|
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
Risk Factors
The securities involve risks not associated with an investment
in ordinary floating rate securities. An investment in the securities entails significant risks not associated with similar investments
in a conventional debt security, including, but not limited to, fluctuations in 30ICE, 2ICE and the index, and other events that
are difficult to predict and beyond our control.
The following is a non-exhaustive list of certain key risk factors
for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement.
|
§
|
Your investment may result in a loss.
The securities do not guarantee any return of principal. The return on the securities
at maturity is linked to the performance of the index and will depend on whether or not the final index value is greater than or
equal to the trigger level. Your investment will be exposed to significant loss if the final index value is less than the trigger
level. For every 1% that the final index value is less than the trigger level, you will lose an amount equal to 1% of the principal
amount of your securities.
Accordingly, if the final index value is less than the trigger level, you will lose at least 50.00%
of your principal and may lose your entire principal at maturity.
|
|
§
|
The securities are not ordinary debt securities and are subject to an interest accrual provision; the interest rate on the
securities is variable and may equal the minimum rate of 0.00%.
The terms of the securities differ from those of ordinary debt
securities in that the rate of interest you will receive is not fixed, but will vary based on both the level of the S&P 500
®
Index and the spread over the course of each interest payment period. The variable interest rate on the securities, while determined
by reference to the spread and the official closing level of the S&P 500
®
Index as described herein, does not
actually pay an amount based directly on such levels. Moreover, each calendar day during an interest payment period for which (i)
the index closing value of the S&P 500
®
Index is less than the index reference level or (ii) the spread is less
than 0.00% (each as determined based on the level of the S&P 500
®
Index and the spread on the applicable accrual
determination date) will result in a reduction of the interest rate per annum payable for the corresponding interest payment period,
potentially down to 0.00%. If, for an entire interest payment period, either (i) the official closing level of S&P 500
®
Index is less than the index reference level or (ii) the spread is less than 0.00%, the interest rate for such interest payment
period will be equal to 0.00% and you will not receive any interest payment for such interest payment period. In that event, you
will not be compensated for any loss in value due to inflation and other factors relating to the value of money over time during
such period.
|
|
§
|
The securities reference an equity index and the ICE Swap rates.
If the index closing value of the S&P 500
®
Index is less than the index reference level on any accrual determination date, the securities will not accrue interest on that
day. If the index closing value of the S&P 500
®
Index is less than the index reference level on each accrual
determination date in an interest payment period, the interest rate payable on the securities will be equal to 0.00% per annum
for such interest payment period. Similarly, if the 30ICE is less than or equal to the 2ICE on any accrual determination date,
the securities will not accrue interest on that day. Therefore, you are exposed to risks relating to both equity markets and swap
rates. You should carefully consider the movement, current level and overall trend in equity markets and swap rates, prior to purchasing
these securities. Although the securities do not directly reference the level of the S&P 500
®
Index or the ICE
Swap Rates, the amount of interest, if any, payable on your securities is contingent upon, and related to, each of these levels.
|
|
§
|
You are exposed to the performance risks of each of the ICE Swap rates and the S&P 500
®
Index.
Your interest rate applicable to each interest payment period is not linked to the aggregate performance of the ICE
Swap rates and the S&P 500
®
Index. For instance, whether or not interest accrues on a calendar day within an
interest payment period will be contingent upon the performance of the S&P 500
®
Index and the spread, each as
determined on the applicable accrual determination date. Unlike an investment in an instrument with a return linked to a basket
of underlying assets, in which risk is mitigated through diversification among all of the components of the basket, an investment
in the securities will expose you to the risks related to each of the ICE Swap rates and the S&P 500
®
Index.
Poor performance of the 30ICE, as compared to the 2ICE (meaning that the spread would be lower), or the S&P 500
®
Index (meaning that
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
it decreases to be less than the index reference level)
during the term of the securities will negatively affect your return on the securities and will not be offset or mitigated by a
positive performance of the other. Accordingly, your investment is subject to the performance risk of each of the ICE Swap rates
and the S&P 500
®
Index.
|
§
|
The interest rate on the securities may be below the rate otherwise payable on similar variable rate securities issued by
us.
The value of the securities will depend on the interest rate on the securities, which will be affected by the spread and
the level of the S&P 500
®
Index. If on any accrual determination date (i) the level of the S&P 500
®
Index is less than the index reference level or (ii) the spread is less than 0.00%, the interest rate on the securities may be
less than returns on similar variable rate securities issued by us that are not linked to the ICE Swap rates and the S&P 500
®
Index, or that are linked to only one of the ICE Swap rates or the S&P 500
®
Index. We have no control over any
fluctuations in the ICE Swap rates or the S&P 500
®
Index.
|
|
§
|
The method of determining whether interest accrues on an accrual determination date may not directly correlate to the actual
value of the index or the actual spread.
The determination of the interest rate per annum payable for any interest payment
period will be based on the actual number of days in that interest payment period on which (i) the index closing value of the index
is greater than or equal to the index reference level and (ii) the spread is greater than or equal to 0.00%, each as determined
on each accrual determination date. However, we will use the same index closing value of the S&P 500
®
Index
and the same spread for the period commencing on the sixth business day prior to but excluding each applicable interest payment
date. The index closing value used will be the index closing value of the S&P 500
®
Index on the first trading
day immediately preceding the sixth business day prior to but excluding each applicable interest payment date, regardless of what
the actual closing level of the S&P 500
®
Index is for the calendar days in that period or whether the index
closing value would have been greater than or equal to the index reference level during such accrual determination dates if actually
tested in such period. Likewise, the spread used will be the spread on the first trading day immediately preceding the sixth business
day prior to but excluding each applicable interest payment date, regardless of what the actual spread is for the calendar days
in that period or whether the spread would have been greater than or equal to 0.00% during such accrual determination dates if
actually tested in such period. As a result, the determination as to whether (i) the index closing value is greater than or equal
to the index reference level or (ii) the spread is greater than or equal to 0.00% for any interest payment period may not directly
correlate to the actual index closing values of the S&P 500
®
Index or the spread, which will in turn affect
the interest rate calculation.
|
|
§
|
Your return on the securities is limited to the principal amount plus accrued and unpaid interest regardless of any appreciation
in the value of the index.
If the securities are not called and the final index value is greater than or equal to the trigger
level, for each $1,000 principal amount security, you will receive $1,000 at maturity plus any accrued and unpaid interest, regardless
of any appreciation in the value of the index, which may be significant. In addition, if the securities are called, for each $1,000
principal amount security, you will receive $1,000 plus any accrued and unpaid interest, regardless of the appreciation in the
value of the index, which may be significant. Accordingly, the return on the securities may be significantly less than the return
on a direct investment in the index during the term of the securities.
|
|
§
|
We may call your securities prior to their scheduled maturity date.
We may choose to call the securities early or choose
not to call the securities early on any redemption date in our sole discretion. If the securities are called early, you will receive
the principal amount of your securities plus any accrued and unpaid interest to, but not including, the redemption date. The aggregate
amount that you will receive through and including the redemption date may be less than the aggregate amount that you would have
received had the securities not been called early. If we call the securities early, your overall return may be less than the yield
which the securities would have earned if you held your securities to maturity and you may not be able to reinvest your funds at
the same rate as the original securities. We may choose to call the securities early, for example, if U.S. interest rates decrease
significantly or if volatility of U.S. interest rates decreases significantly. In other words, we will be more likely to redeem
the securities when the securities are paying an above-market interest rate. If the securities are redeemed prior to maturity,
you
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
will receive no more quarterly interest payments, may
be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
On the other hand, we will be less
likely to exercise our redemption right when the index closing value of the underlying index is below the index reference level
or when the spread is negative, and/or when the final index value is expected to be below the trigger level, such that you will
receive reduced interest payments, or no quarterly interest payments, and/or that you will suffer a significant loss on your initial
investment in the securities at maturity. Therefore, if we do not exercise our redemption right, it is more likely that you will
receive reduced interest payments, or no quarterly interest payments, and suffer a significant loss at maturity.
|
§
|
The interest rate on the securities for an interest payment period is subject to the maximum interest rate.
The interest
rate for an interest payment period is variable; however, it will never exceed the interest factor applicable to such interest
payment period set forth on the front cover of this pricing supplement, regardless of the performance of the index or ICE Swap
rates. In addition, although the interest factor increases over the term of the securities, you will not benefit from such increase
if the securities are called early.
|
|
§
|
The interest rate on the securities is based, in part, on the spread, which may result in application of the minimum interest
rate of 0.00%.
The spread is calculated as (a) 30ICE
minus
(b) 2ICE. The ICE Swap rates may be influenced by a number
of factors, including (but not limited to) monetary policies, fiscal policies, inflation, general economic conditions and public
expectations with respect to such factors. The effect that any single factor may have on the ICE Swap rates may be partially offset
by other factors. We cannot predict the factors that may cause the ICE Swap rates, and consequently the spread, to increase or
decrease. A negative spread (indicating that the 30ICE is less than the 2ICE) on an accrual determination date will cause the interest
rate for the corresponding interest payment period to decline below the applicable interest factor. The amount of interest you
accrue on the securities in any interest payment period may decrease even if either or both of the ICE Swap rates increase.
Under
these circumstances, particularly if short term interest rates rise significantly relative to long term interest rates, the interest
rate during any interest payment period may adversely affected and may be equal to 0.00% per annum, and you will not be compensated
for any loss in value due to inflation and other factors relating to the value of money over time during such period.
|
|
§
|
Longer dated securities may be more risky than shorted dated securities.
By purchasing a security with a longer tenor,
you are more exposed to fluctuations in interest rates than if you purchased a security with a shorter tenor. Specifically, you
may be negatively affected if certain interest rate scenarios occur, or if the index closing value of the S&P 500
®
Index is less than the index reference level or the spread is less than 0.00% for an entire interest payment period. The applicable
discount rate, which is the prevailing rate in the market for securities of the same tenor, will likely be higher for securities
with longer tenors than if you had purchased a security with a shorter tenor. Therefore, assuming that short term rates rise, the
market value of a longer dated security will be lower than the market value of a comparable short term security with similar terms.
|
|
§
|
Market disruption events may adversely affect the rate at which the securities accrue interest.
The rate at which the
securities accrue interest for an interest payment period will be based on the index closing value of the S&P 500
®
Index and the spread, each as determined on the applicable accrual determination date. Notwithstanding anything to the contrary
herein or in the accompanying product supplement, if a market disruption event occurs or is continuing on any accrual determination
date, the index closing value on the immediately preceding accrual determination date for which no market disruption event occurs
or is continuing will be the index closing value for such disrupted accrual determination date (and will also be the index closing
value for the originally scheduled accrual determination date). Because your securities will not accrue interest unless the index
closing value is less greater than or equal to the index reference level, if a market disruption event continues for an extended
period of time, the amount of interest that accrues on the securities may be severely limited.
|
|
§
|
The historical performance of 30ICE, 2IEC and the Index are not an indication of their future performance.
The historical
performance of 30ICE, 2ICE and the index should not be taken as indications of their future performance during the term of the
securities. Changes in the levels of 30ICE, 2ICE and the
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
index will affect the trading price of the securities,
but it is impossible to predict whether such levels will rise or fall. There can be no assurance that the spread will be positive
and the index closing value will be equal to or greater than the index reference level on any day during the term of the securities.
In addition, there can be no assurance that the index closing value of the index on the final determination date will be greater
than or equal to the trigger level. Furthermore, the historical performance of each of the spread and the index does not reflect
the return the securities would have yielded, because each does not take into account the other’s performance
.
|
§
|
The securities are subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co
.
T
he securities are subject to the credit risk of JPMorgan Financial and
JPMorgan Chase & Co., and our credit ratings and credit spreads may adversely affect the market value of the securities. Investors
are dependent on JPMorgan Financial and JPMorgan Chase & Co.’s ability to pay all amounts due on the securities. Any
actual or potential change in our creditworthiness or credit spreads, as determined by the market for taking our and JPMorgan Chase
& Co.’s credit risk, is likely to adversely affect the value of the securities. If we or JPMorgan Chase & Co.
were to default on our payment obligations, you may not receive any amounts owed to you under the securities 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 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 securities. If these affiliates do not make payments to us and we fail to
make payments on the securities, 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.
|
|
§
|
Potential conflicts.
We and our affiliates play a variety of roles in connection with the issuance of the securities,
including acting as calculation agent and as an agent of the offering of the securities, hedging our obligations under the securities
and making the assumptions used to determine the pricing of the securities and the estimated value of the securities when the terms
of the securities are set, which we refer to as the estimated value. In performing these duties, our 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 securities. In addition, our business activities, including hedging and trading activities as well as modeling and structuring
the economic terms of the securities, could cause our economic interests to be adverse to yours and could adversely affect any
payment on the securities and the value of the securities. It is possible that hedging or trading activities of ours or our affiliates
in connection with the securities could result in substantial returns for us or our affiliates while the value of the securities
declines. Please refer to “Risk Factors — Risks Relating to the Notes Generally” in the accompanying product
supplement for additional information about these risks.
|
In
addition, 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 as a holder of the securities in taking any
corporate action that might affect the level of
the S&P 500
®
Index and the securities
.
|
§
|
Adjustments to the Index could adversely affect the value of the securities.
The underlying index publisher for the
index can add, delete or substitute the stocks underlying such index, and can make other methodological changes required by certain
events relating to the underlying stocks, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary
dividends, that could change the value of such index. Any of these actions could adversely affect the value of the securities.
The underlying index publisher may also discontinue or suspend calculation or publication of such index at any time. In these circumstances,
the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued index.
The calculation agent could have an economic interest that is different than that of investors in the securities insofar as, for
example, the calculation agent is permitted to consider indices that are calculated and published by the calculation agent or any
of its affiliates. If the calculation agent determines that there is no appropriate successor index, on any day on which the index
closing value of an index is to be determined, the index closing value for such day will be based on the
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
stocks underlying the discontinued index at the time
of such discontinuance, without rebalancing or substitution, computed by the calculation agent, in accordance with the formula
for calculating the index closing value for the index last in effect prior to the discontinuance of the index.
|
§
|
The estimated value of the securities is lower than the original issue price (price to public) of the securities.
The
estimated value of the securities is only an estimate determined by reference to several factors. The original issue price of the
securities exceeds the estimated value of the securities because costs associated with selling, structuring and hedging the securities
are included in the original issue price of the securities. These costs include the selling commissions, the structuring fee, the
projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the
securities and the estimated cost of hedging our obligations under the securities. See “Additional Information about the
Securities — The estimated value of the notes” in this document.
|
|
§
|
The estimated value does not represent future values of the securities and may differ from others’ estimates.
This estimated value is based on market conditions and other relevant factors existing at the time of pricing 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 securities that are greater than or less than the estimated value. 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 securities could change significantly based on, among other things, changes in market conditions, our creditworthiness,
interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy securities
from you in secondary market transactions. See “Additional Information About the Securities –The Estimated Value of
the Securities” in this document.
|
|
§
|
The estimated value of the securities is derived by reference to an internal funding rate
.
The internal funding rate used in the determination of the estimated value of the securities is based on, among other
things, our and our affiliates’ view of the funding value of the securities as well as the higher issuance, operational and
ongoing liability management costs of the securities 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 would have an adverse effect on the
terms of the securities and any secondary market prices of the securities. See “Additional Information About the Securities
—The Estimated Value of the Securities” in this document.
|
|
§
|
The value of the securities as published (and which may be reflected on customer account statements) may be higher than
the then-current estimated value of the securities for a limited time period
.
We generally expect that
some of the costs included in the issue price of the
securities will be partially paid back to you in connection with any repurchases of your securities 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. See “Additional Information
About the Securities — Secondary Market Prices of the Securities” in this document for additional information relating
to this initial period. Accordingly, the estimated value of your securities during this initial period may be lower than the value
of the securities as published by JPMS (and which may be shown on your customer account statements).
|
|
§
|
Secondary market prices of the securities will likely be lower than the issue price of the securities.
Any secondary
market prices of the securities will likely be lower than the issue price of the securities 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 issue price of the securities. As a result, the price, if any, at which JPMS will be willing to buy securities
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 two immediately following risk factors for information
about additional factors that will impact any secondary market prices of the securities.
|
The securities are not designed to
be short-term trading instruments. Accordingly, you should be able and willing to hold your securities to maturity. See “—
Lack of Liquidity” below.
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
|
§
|
Secondary market prices of the securities will be impacted by many economic and market factors.
The secondary market
price of the securities 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, and estimated hedging costs, including
but not limited to:
|
|
o
|
the performance of the ICE Swap rates;
|
|
o
|
the performance of the index;
|
|
o
|
any actual or potential change in our or JPMorgan Chase
& Co.’s creditworthiness or credit spreads;
|
|
o
|
customary bid-ask spreads for similarly sized trades;
|
|
o
|
our internal secondary market funding rates for structured
issuances;
|
|
o
|
the time to maturity of the securities;
|
|
o
|
dividend rates on the equity securities underlying the
index;
|
|
o
|
the expected positive or negative correlation between
the ICE Swap rates and the S&P 500
®
Index or the expected absence of such correlation;
|
|
o
|
interest and yield rates in the market generally, as well
as the volatility of those rates;
|
|
o
|
the likelihood, or expectation, that the securities will
be redeemed by us, based on prevailing market interest rates or otherwise; and
|
|
o
|
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 securities, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the securities, if any, at which JPMS may be willing
to purchase your securities in the secondary market.
|
§
|
JPMS and its affiliates may have published research, expressed opinions or provided recommendations that are inconsistent
with investing in or holding the securities, and may do so in the future. Any such research, opinions or recommendations could
affect the market value of the securities.
JPMS and its affiliates publish research from time to time on financial markets
and other matters that may influence the value of the securities, or express opinions or provide recommendations that are inconsistent
with purchasing or holding the securities. JPMS and its affiliates may have published research or other opinions that call into
question the investment view implicit in an investment in the securities. Any research, opinions or recommendations expressed by
JPMS or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should
undertake their own independent investigation of the merits of investing in the securities.
|
|
§
|
Secondary market prices of the securities are sensitive to both interest rates and the performance of the index.
If
interest rates rise generally, the secondary market prices of the securities will be adversely impacted because of the relatively
long term of the securities and the increased probability that that the interest rate for the securities will be less than such
rates. Additionally, if the index closing value declines, even if the index closing value has not declined below the trigger
level, the secondary market prices of the securities will also be adversely impacted because of the increased probability that
the index closing value may decline below the index reference level and may be less than the index reference level over the remaining
term of the securities and the increased probability that you may lose some or all of your principal at maturity. If both
interest rates rise and the index closing value declines, the secondary market prices of the securities may decline more rapidly
than those of other securities that are linked to only the ICE Swap rates or the index, or than if the amount payable at maturity
were not linked to the performance of the Index relative to the trigger level.
|
|
§
|
Reinvestment risk.
If we redeem the securities, the term of the securities may be reduced and you will not receive
interest payments after the applicable redemption date. There is no guarantee that you would be able to reinvest the proceeds from
an investment in the securities at a comparable return and/or with a comparable interest rate for a similar level of risk in the
event the securities are redeemed prior to the maturity date.
|
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
|
§
|
Variable rate securities differ from fixed rate securities.
The variable interest rate for all interest payment periods
will be determined in part based on the spread and the index closing value of the S&P 500
®
Index and may be
less than returns otherwise payable on debt securities issued by us with similar maturities. You should consider, among other things,
the overall potential annual percentage rate of interest to maturity of the securities as compared to other investment alternatives.
|
|
§
|
Market factors may influence whether we exercise our right to redeem the securities prior to their scheduled maturity.
We have the right to redeem the securities prior to the maturity date, in whole but not in part, on the specified redemption dates.
It is more likely that we will redeem the securities prior to the maturity date if the index closing value of the S&P 500
®
Index is greater than or equal to the index reference level and the spread is greater than 0.00% on the applicable accrual determination
dates. If the securities are called prior to the maturity date, you may be unable to invest in securities with similar risk and
yield as the securities. Your ability to realize a higher than market yield on the securities is limited by our right to redeem
the securities prior to their scheduled maturity, which may adversely affect the value of the securities in the secondary market,
if any.
|
On the other hand, we are less likely
to redeem the securities when the value of the S&P 500
®
Index is less than the index reference level or when
the spread is less than or equal to 0.00%. Therefore, if we do not redeem the securities, it is more likely that you will not receive
interest payments and/or that you will suffer a substantial loss at maturity.
|
§
|
The spread will be affected by a number of factors.
The amount of interest, if any, payable on the securities will depend
on the ICE Swap rates and the spread on the applicable accrual determination dates. A number of factors can affect the spread by
causing changes in the relative values of the ICE Swap rates including, but not limited to:
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o
changes in, or perceptions about, future ICE Swap rates;
o
general economic conditions;
o
prevailing interest rates; and
o
policies of the Federal Reserve Board regarding interest rates.
These and other factors may have
a negative impact on the payment of interest on the securities and on the value of the securities in the secondary market.
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§
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The ICE Swap rates may be volatile.
The ICE Swap rates are subject to volatility due to a variety of factors affecting
interest rates generally, including but not limited to:
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o
sentiment regarding underlying strength in the U.S. and global economies;
o
expectation regarding the level of price inflation;
o
sentiment regarding credit quality in U.S. and global credit markets;
o
central bank policy regarding interest rates; and
o
performance of capital markets.
Increases or decreases in the ICE
Swap rates could result in the corresponding spread decreasing or being negative and thus in the reduction of interest, if any,
payable on the securities.
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§
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Lack of liquidity.
The securities will not be listed on any securities exchange. JPMS intends to offer to purchase the
securities 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 securities easily. Because other dealers are not likely to make a secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
JPMS is willing to buy the securities.
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Supplemental Plan of Distribution
Subject to regulatory constraints, JPMS intends to use
its reasonable efforts to offer to purchase the securities in the secondary market, but is not required to do so.
We or our affiliate 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 securities
and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions.
See “Use of Proceeds and Hedging” on page PS-37 in the accompanying product supplement.
Tax Considerations
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 1-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 securities for U.S. federal income tax purposes as income-bearing pre-paid derivative
contracts. By purchasing the securities, you agree (in the absence of an administrative determination or judicial ruling to the
contrary) to follow this treatment. However, 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 securities 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 securities would be viewed as similar to
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
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 securities, possibly with retroactive effect. The notice focuses
on a number of issues, the most relevant of which for holders of the securities are the character of income or loss and the degree,
if any, to which income realized by Non-U.S. Holders should be subject to withholding tax.
Assuming that the treatment of the securities as income-bearing
pre-paid derivative contracts is respected, interest payments that you receive should be included in ordinary income at the time
you receive the payments or when the payments accrue, in accordance with your regular method of accounting for U.S. federal income
tax purposes.
Under this treatment, any gain or loss recognized upon
the sale, exchange or maturity of the securities should be treated as capital gain or loss. Any such capital gain or loss should
be treated as long-term capital gain or loss if you held the securities for more than one year.
Non-U.S. Holders should note that because the United
States federal income tax treatment (including the applicability of withholding) of the interest payments on the securities is
uncertain, and although the Company believes it is reasonable to take a position that the interest payments are not subject to
U.S. withholding tax (at least if the applicable IRS Form W-8 is provided), a withholding agent could possibly nonetheless withhold
on these payments (generally at a rate of 30%, subject to the possible reduction or elimination of that rate under an applicable
income tax treaty), unless income from your securities 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). In the
event of any withholding, we will not be required to pay any additional amounts with respect to amounts so withheld. If you are
a Non-U.S. Holder, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the securities in light of your particular circumstances.
Non-U.S. Holders should also 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-Tax Consequences
to Non-U.S. Holders” 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 securities will generally be subject to
this withholding tax. The withholding tax described above will not apply to payments of gross proceeds from the sale, exchange
or other disposition of the securities 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 securities, including possible
alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of securities at
the issue price should also consult their tax advisors with respect to the tax consequences of an investment in the securities,
including possible alternative treatments.
Subject
to certain assumptions and representations received from us, the discussion in this section entitled “Tax Considerations”,
when read in combination with the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying
product supplement, constitutes the full opinion of Sidley Austin LLP regarding the material U.S. federal income tax treatment
of owning and disposing of the securities.
Where You Can Find More Information
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 securities
of which these securities are a part, and the more detailed information contained in the accompanying product supplement.
This pricing supplement, together with the documents
listed below, contains the terms of the securities 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, stand-alone fact sheets, brochures or other educational materials of ours.
You should carefully consider,
among other things, the matters set forth in the “Risk Factors” section of the accompanying product supplement . We
urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the 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):
• Underlying supplement no. 1-I dated April 15, 2016:
https://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
• Product supplement no. 1-I dated April 15,
2016:
http://www.sec.gov/Archives/edgar/data/19617/000089109216014194/e00048_424b2.pdf
JPMorgan Chase Financial Company LLC
Callable Range Accrual Securities due June 30, 2031
• Prospectus supplement and prospectus dated
April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
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.