Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
Pricing supplement no.455 to product supplement
no. 4-I dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Underlyings:
The S&P 500
®
Index (Bloomberg ticker: SPX) (the
“Index”) and the SPDR
®
S&P
®
Biotech ETF
(Bloomberg
ticker: XBI) (the “Fund”), (each of the Index and the Fund, an “Underlying” and collectively, the “Underlyings”)
Contingent Interest Payments:
If the notes have not been automatically called and the closing
value of each Underlying on any Review Date is greater than or equal to its Interest Barrier, you will receive on the applicable
Interest Payment Date for each $1,000 principal amount note a Contingent Interest Payment equal to $22.50 (equivalent to a Contingent
Interest Rate of 9.00% per annum, payable at a rate of 2.25% per quarter).
If the closing value of either Underlying on any Review Date
is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date.
Contingent
Interest Rate:
9.00% per annum, payable at a rate of 2.25% per quarter
Interest Barrier
/ Trigger Value:
With respect to each Underlying, 60.00% of its Initial
Value, which is 1,305.018 for the Index and $35.586 for the Fund
Pricing
Date:
July 22, 2016
Original Issue
Date (Settlement Date):
On or about July 27, 2016
Review Dates*:
October 24, 2016, January 23, 2017, April 24, 2017, July 24, 2017 and
October 23, 2017 (final Review Date)
Interest Payment
Dates*:
October 27, 2016, January 26, 2017, April 27, 2017, July 27,
2017 and the Maturity Date
Maturity Date*:
October 26, 2017
Call Settlement
Date*:
If the notes are automatically called on any Review Date (other
than the final Review Date), the first Interest Payment Date immediately following that Review Date
* Subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to
Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Automatic Call:
If the closing value of each
Underlying on any Review Date (other than the final Review Date) is greater than or equal to its Initial Value, the notes will
be automatically called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Contingent
Interest Payment applicable to that Review Date, payable on the applicable Call Settlement Date. No further payments will be made
on the notes.
Payment at Maturity:
If the notes have not been automatically called and (i) the
Final Value of each Underlying 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 Contingent Interest
Payment applicable to the final Review Date.
If the notes have not been automatically called and (i) the
Final Value of either Underlying 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 any Contingent Interest Payment, will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Underlying Return)
If the notes have not been automatically called and (i) the
Final Value of either Underlying 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.
Trigger Event:
A Trigger Event occurs if, on any day during the Monitoring Period,
the closing value of either Underlying is less than its Trigger Value
Monitoring
Period:
The period from but excluding the Pricing Date to and including
the final Review Date
Lesser Performing
Underlying:
The Underlying with the Lesser Performing Underlying Return
Lesser Performing
Underlying Return:
The lower of the Underlying Returns of the Underlyings
Underlying
Return:
With respect to each Underlying,
(Final
Value – Initial Value)
Initial
Value
Initial Value:
With respect to each Underlying, the closing value of that Underlying
on the Pricing Date, which was 2,175.03 for the Index and $59.31 for the Fund
Final Value:
With respect to each Underlying, the closing value of that Underlying
on the final Review Date
Share Adjustment Factor:
The Share Adjustment Factor
is referenced in determining the closing value of the Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor
is subject to adjustment upon the occurrence of certain events affecting the Fund. See “The Underlyings — Funds —
Anti-Dilution Adjustments” in the accompanying product supplement for further information.
|
PS-
1
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
Supplemental
Terms of the Notes
All references in this pricing supplement to the
closing value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payments in Connection with Review Dates (Preceding
the Final Review Date)
Payment
at Maturity If the Notes Have Not Been Automatically Called
PS-
2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
Total
Contingent Interest Payments
The
table below illustrates the hypothetical total Contingent Interest Payments per $1,000 principal amount note over the term of
the notes based on the Contingent Interest Rate of 9.00% per annum, depending on how many Contingent Interest Payments are made
prior to automatic call or maturity.
Number
of Contingent Interest Payments
|
Total
Contingent Interest Payments
|
5
|
$112.50
|
4
|
$90.00
|
3
|
$67.50
|
2
|
$45.00
|
1
|
$22.50
|
0
|
$0.000
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the hypothetical Lesser Performing Underlying
on the Review Dates.
Each hypothetical payment set forth below assumes that the closing value of the Underlying that is not
the Lesser Performing Underlying on each Review Date is greater than or equal to its Initial Value (and therefore its Interest
Barrier and Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
an Interest Barrier and a Trigger Value for the Lesser Performing Underlying of 60.00 (equal to 60.00% of its hypothetical
Initial Value); and
|
|
·
|
a Contingent Interest Rate of 9.00% per annum (payable at a rate of 2.25% per quarter).
|
The
hypothetical Initial Value of the Lesser Performing Underlying of 100.00 has been chosen for illustrative purposes only and does
not represent the actual Initial Value of either Underlying. The actual Initial Value of each Underlying is the closing value
of that Underlying on the Pricing Date and is specified under “Key Terms
—
Initial Value” in this pricing supplement. For historical data regarding the actual closing
values of each Underlying, please see the historical information set forth under “The Underlyings” in this pricing
supplement.
Each
hypothetical payment set forth below is for illustrative purposes only and may not be the actual payment applicable to a purchaser
of the notes. The numbers appearing in the following examples have been rounded for ease of analysis.
Example
1 — Notes are automatically called on the first Review Date.
Date
|
Closing
Value of Lesser Performing Underlying
|
Payment (per
$1,000 principal amount note)
|
First Review Date
|
105.00
|
$1,022.50
|
|
Total Payment
|
$1,022.50 (2.25% return)
|
Because the closing value of each Underlying on
the first Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,022.50 (or $1,000
plus
the Contingent Interest Payment applicable to the first
Review Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
PS-
3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
Example
2 — Notes have NOT been automatically called, the Final Value of the Lesser Performing Underlying is greater than or equal
to its Initial Value and a Trigger Event has occurred.
Date
|
Closing
Value of Lesser Performing Underlying
|
Payment (per
$1,000 principal amount note)
|
First Review Date
|
95.00
|
$22.50
|
Second Review Date
|
85.00
|
$22.50
|
Third through Fourth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
105.00
|
$1,022.50
|
|
Total Payment
|
$1,067.50 (6.75% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Initial Value (and, therefore, the
Interest Barrier), even though a Trigger Event has occurred, the payment at maturity, for each $1,000 principal amount note, will
be $1,022.50 (or $1,000
plus
the Contingent Interest Payment applicable to the final Review Date). When added to the Contingent
Interest Payments received with respect to the prior Review Dates, the total amount paid, for each $1,000 principal amount note,
is $1,067.50.
Example
3 — Notes have NOT been automatically called, the Final Value of the Lesser Performing Underlying is less than its Initial
Value and a Trigger Event has NOT occurred.
Date
|
Closing
Value of Lesser Performing Underlying
|
Payment (per
$1,000 principal amount note)
|
First Review Date
|
95.00
|
$22.50
|
Second Review Date
|
95.00
|
$22.50
|
Third through Fourth Review Dates
|
Greater than Interest Barrier
|
$22.50
|
Final Review Date
|
60.00
|
$1,022.50
|
|
Total Payment
|
$1,112.50 (11.25% return)
|
Because
the notes have not been automatically called, the Final Value of the Lesser Performing Underlying is greater than or equal to its
Interest Barrier and a Trigger Event has not occurred, even though the Final Value of the Lesser Performing Underlying is less
than its Initial Value, the payment at maturity, for each $1,000 principal amount note, will be $1,022.50 (or $1,000
plus
the Contingent Interest Payment applicable to the final Review Date). When added to the Contingent Interest Payments received with
respect to the prior Review Dates, the total amount paid, for each $1,000 principal amount note, is $1,112.50.
Example
4 — Notes have NOT been automatically called, the Final Value of the Lesser Performing Underlying is less than its Initial
Value and its Interest Barrier and a Trigger Event has occurred.
Date
|
Closing
Value of Lesser Performing Underlying
|
Payment (per
$1,000 principal amount note)
|
First Review Date
|
65.00
|
$0
|
Second Review Date
|
60.00
|
$0
|
Third through Fourth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Underlying is less than its Initial Value and its Interest Barrier, a Trigger
Event has occurred and the Lesser Performing Underlying Return is -50.00%, the payment at maturity will be $500.00 per $1,000 principal
amount note, calculated as follows:
PS-
4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
$1,000 + [$1,000 × (-50.00%)]
= $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been automatically called and (i) the Final Value of either Underlying 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 Lesser Performing Underlying is less than its Initial Value. Accordingly, under these circumstances, you will lose
some or all of your principal amount at maturity.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL —
|
If the notes have not been automatically
called, we will make a Contingent Interest Payment with respect to a Review Date only if the closing value of each Underlying on
that Review Date is greater than or equal to its Interest Barrier. If the closing value of either Underlying on that Review Date
is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date. Accordingly, if
the closing value of either Underlying on each Review Date is less than its Interest Barrier, you will not receive any interest
payments over the term of the notes.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and
JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS —
|
As a finance
subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of our securities.
Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations
of our affiliates to make payments under loans made by us or other intercompany agreements. As a result, we are dependent upon
payments from our affiliates to meet our obligations under the notes. If these affiliates do not make payments to us and we fail
to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee
will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS
THAT MAY BE PAID OVER THE TERM OF THE NOTES,
|
regardless of any appreciation in the
value of either Underlying, which may be significant. You will not participate in any appreciation in the value of either Underlying.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE 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 Index.
PS-
5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH UNDERLYING —
|
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by either of the Underlyings over the term of the notes may negatively affect whether you will receive a Contingent Interest Payment
on any Interest Payment Date and your payment at maturity and will not be offset or mitigated by positive performance by the other
Underlying.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD
—
|
If, on any day during the Monitoring
Period, the closing value of either Underlying is less than its Trigger Value (
i.e.,
a Trigger Event occurs) and the notes
have not been automatically called, the benefit provided by the Trigger Value will terminate and you will be fully exposed to any
depreciation in the closing value of the Lesser Performing Underlying. You will be subject to this potential loss of principal
even if that Underlying subsequently recovers such that the closing value of that Underlying is greater than or equal to its Trigger
Value.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called,
the term of the notes may be reduced to as short as approximately three months and you will not receive any Contingent Interest
Payments after the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from
an investment in the notes at a comparable return and/or with a comparable interest rate for a similar level of risk. Even in cases
where the notes are called before maturity, you are not entitled to any fees and commissions described on the front cover of this
pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING
OR HAVE ANY RIGHTS WITH RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject to management risk,
which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. These constraints could adversely affect the market price of
the shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE
PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate its Underlying
Index (as defined under “The Underlyings” below) and may hold securities different from those included in its Underlying
Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not included in the
calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance of the Fund
and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying the Fund (such as mergers
and spin-offs) may impact the variance between the performances of the Fund and its Underlying Index. Finally, because the shares
of the Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value of one share
of the Fund may differ from the net asset value per share of the Fund.
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares in the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce your payment at maturity.
|
·
|
RISKS ASSOCIATED WITH THE BIOTECHNOLOGY INDUSTRY WITH
RESPECT TO THE FUND —
|
All or substantially all of the equity
securities held by the Fund are issued by companies whose primary line of business is directly associated with the biotechnology
industry. As a result, the value of the notes may be subject to greater volatility and be more adversely affected by a single economic,
political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly diversified
group of issuers. Companies within the biotechnology industry invest heavily in research and development, which may not necessarily
lead to commercially successful products. This industry is also subject to increased governmental regulation which may delay or
inhibit the release of new products. Many biotechnology companies are dependent
PS-
6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
upon their ability to use and enforce
intellectual property rights and patents. Any impairment of these rights may have adverse financial consequences. Biotechnology
stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Biotechnology companies
can be significantly affected by technological change and obsolescence, product liability lawsuits and consequential high insurance
costs. These factors could affect the biotechnology industry and could affect the value of the equity securities held by the Fund
and the price of the Fund during the term of the notes, which may adversely affect the value of your notes.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for the Fund for certain events affecting the shares of the Fund. However, the calculation agent
will not make an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
|
·
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE
IS GREATER IF THE VALUE OF THAT UNDERLYING IS VOLATILE.
|
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 ESTIMATED VALUE OF THE NOTES IS 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 exceeds the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
—
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN
THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
|
Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
PS-
7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the values of the Underlyings. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may
be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Underlyings
The
Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional
information about the
Index, see “Equity Index Descriptions — The S&P U.S. Indices”
in the accompanying underlying supplement.
The
Fund is an exchange-traded fund of the SPDR
®
Series Trust, a registered investment company, that seeks to provide
investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from
the biotechnology segment of a U.S. total market composite index, which we refer to as the Underlying Index with respect to the
Fund. The Underlying Index for the Fund is currently the S&P Biotechnology Select Industry
TM
Index.
The S&P Biotechnology Select Industry
TM
Index is a modified equal-weight index that is designed to measure the
performance of the GICS
®
biotechnology sub-industry. The S&P Biotechnology Select Industry
TM
Index may also include companies in the life sciences tools & services sub-industry. For additional information about
the Fund, see the information set forth under “Fund Descriptions — The SPDR
®
S&P Industry ETFs”
in the accompanying underlying supplement. For purposes of this pricing supplement, all references to an SPDR
®
S&P Industry ETF in the accompanying underlying supplement are deemed to include the Fund. For additional information
about the S&P Biotechnology Select Industry
TM
Index, see “Annex A” in this pricing supplement.
Historical
Information
The
following graphs set forth the historical performance of each Underlying based on the weekly historical closing values from January
7, 2011 through July 22, 2016. The closing value of the Index on July 22, 2016 was 2,175.03. The closing value of the Fund on
July 22, 2016 was $59.31. We obtained the closing values above and below from the Bloomberg Professional
®
service
(“Bloomberg”), without independent verification. The closing values of the Fund above and below may have been adjusted
by Bloomberg for actions taken by the Fund, such as stock splits.
The
historical closing values of each Underlying should not be taken as an indication of future performance, and no assurance can
be given as to the closing value of either Underlying on any Review Date. There can be no assurance that the performance of the
Underlyings will result in the return of any of your principal amount or the payment of any interest.
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Tax
Treatment
You
should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. 4-I. In determining our reporting responsibilities we intend to treat (i) the notes for U.S. federal income tax
purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Interest Payments as ordinary
income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to
U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying
product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable
treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character
of any income or loss on the notes could be materially affected. In addition, in 2007 Treasury and the IRS released a notice requesting
comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice
requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially affect the tax consequences of an investment in the notes, possibly with
retroactive effect. You should consult your tax adviser regarding the
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U.S.
federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented
by this notice.
Non-U.S.
Holders — Tax Considerations
. The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and
although we believe it is reasonable to take a position that Contingent Interest Payments are not subject to U.S. withholding
tax (at least if an applicable Form W-8 is provided), a withholding agent may nonetheless withhold on these payments (generally
at a rate of 30%, subject to the possible reduction of that rate under an applicable income tax treaty), unless income from your
notes is effectively connected with your conduct of a trade or business in the United States (and, if an applicable treaty so
requires, attributable to a permanent establishment in the United States). If you are not a United States person, you are urged
to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes in light of your
particular circumstances.
Non-U.S.
holders should also note that recently promulgated Treasury regulations imposing a withholding tax on certain “dividend
equivalents” under certain “equity linked instruments” generally will not apply to the notes.
FATCA
.
Withholding under legislation commonly referred to as “FATCA” could apply to payments with respect to the notes that
are treated as U.S.-source “fixed or determinable annual or periodical” income (“FDAP Income”) for U.S.
federal income tax purposes (such as interest, if the notes are recharacterized, in whole or in part, as debt instruments, or
Contingent Interest Payments if they are otherwise treated as FDAP Income). Under a recent IRS notice, withholding under FATCA
will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) of a taxable disposition, including
an early redemption or redemption at maturity, of the notes. You should consult your tax adviser regarding the potential application
of FATCA to the notes.
In
the event of any withholding on the notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
The
Estimated Value of the Notes
The
estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following
hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding
rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of
the notes does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any
exists) at any time. The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and ongoing liability management costs of the notes
in comparison to those costs for the
conventional fixed-rate debt of JPMorgan Chase & Co
. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The
value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our
affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on
various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and
other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the
notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions
existing at that time.
The
estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Different
pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of
the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which
may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
The
estimated value of the notes is lower than the original issue price of the notes because costs associated with selling, structuring
and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid
to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may
result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized
in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of
our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value
of the Notes Is Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
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®
Biotech ETF
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Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Underlyings” in this pricing supplement for a description of the market exposure provided by the notes.
The
original issue price of the notes is equal to the estimated value of the notes plus the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Validity
of the Notes and the Guarantee
In
the opinion of Davis Polk & Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co.,
when the notes offered by this pricing supplement have been executed and issued by JPMorgan Financial and authenticated by the
trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding
obligations of JPMorgan Financial and the related guarantee will constitute a valid and binding obligation of JPMorgan Chase &
Co., enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation,
concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to
the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above.
This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of
the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions
about the trustee’s authorization, execution and delivery of the indenture and its authentication of the notes and the validity,
binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated
February 24, 2016, which was filed as an exhibit to the Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan
Chase & Co. on February 24, 2016.
Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
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S&P
®
Biotech ETF
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You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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S&P
®
Biotech ETF
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Annex
A
The
S&P Biotechnology Select Industry
TM
Index
We
have derived all information contained in this pricing supplement regarding the S&P Biotechnology Select Industry
TM
Index, including, without limitation, its make-up, method of calculation and changes in their components, from publicly available
information, without independent verification. This information reflects the policies of, and is subject to change by S&P
Dow Jones Indices LLC. S&P Dow Jones LLC has no obligation to continue to calculate and publish, and may discontinue calculation
and publication of, the S&P Biotechnology Select Industry
TM
Index.
The
S&P Biotechnology Select Industry
TM
Index is a modified equal-weighted index that measures the performance of the
GICS
®
biotechnology sub-industry. As described in the accompanying underlying supplement, the S&P Biotechnology
Select Industry
TM
Index may also include companies in the following supplementary sub-industry: life sciences tools
& services. The S&P Biotechnology Select Industry
TM
Index is reported by Bloomberg L.P. under the ticker
symbol “SPSIBI.”
For
more information on the index calculation methodology used to formulate the S&P Biotechnology Select Industry
TM
Index, see “Equity Index Descriptions — The Select Industry Indices” in the accompanying underlying supplement.
For purposes of this pricing supplement, all references to a Select Industry Index contained in the accompanying underlying supplement
are deemed to include the S&P Biotechnology Select Industry
TM
Index.
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®
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®
Biotech ETF
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