The information in this preliminary pricing supplement is not complete and may be
changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated August 23, 2016
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Pricing supplement no.
To prospectus
dated April 15, 2016,
prospectus supplement dated April 15, 2016,
product supplement no. 4-I dated April 15, 2016 and
underlying supplement no. 1-I dated April 15,
2016
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Registration Statement Nos. 333-209682 and 333-209682-01
Dated August , 2016
Rule 424(b)(2)
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JPMorgan Chase Financial Company LLC
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$
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Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600
Index due October 4, 2017
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Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
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General
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●
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The notes are designed for investors who seek a fixed return of 8.27% if the Ending Index Level of the STOXX
®
Europe 600 Index is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to 15%.
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●
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Investors should be willing to forgo interest and dividend payments and, if the Ending Index Level is less than the Initial Index Level by more than 15%, be
willing to lose some or all of their principal amount at maturity.
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●
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The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan Financial, the payment on which is
fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as guarantor of the
notes.
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●
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
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Key Terms
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Index:
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The STOXX
®
Europe 600 Index (Bloomberg ticker: SXXP)
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Payment at Maturity:
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If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, at maturity you will receive a
cash payment that provides you with a return per $1,000 principal amount note equal to the Contingent Digital Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as
follows:
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$1,000 + ($1,000 × Contingent Digital Return)
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If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the
Ending Index Level is less than the Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Index Return)
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If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 15%, you will lose more than 15% of your principal amount at maturity and may
lose all of your principal amount at maturity.
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Contingent Digital Return:
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8.27%, which reflects the maximum return on the notes. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,082.70.
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Contingent Buffer Amount
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15%
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Index Return:
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(Ending Index Level Initial Index Level)
Initial Index Level
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Initial Index Level:
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The closing level of the Index on the Pricing Date
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Ending Index Level:
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The arithmetic average of the closing levels of the Index on the Ending Averaging Dates
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Pricing Date
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On or about August 26, 2016
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Original Issue Date:
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On or about August 31, 2016 (Settlement Date)
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Ending Averaging Dates*:
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September 25, 2017, September 26, 2017, September 27, 2017, September 28, 2017 and September 29, 2017
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Maturity Date*:
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October 4, 2017
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CUSIP:
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46646EVX7
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*
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Subject to postponement in the event of certain market disruption events and as described under General Terms of Notes Postponement of a Determination Date
Notes Linked to a Single Underlying Notes Linked to a Single Underlying (Other Than a Commodity Index) and General Terms of Notes Postponement of a Payment Date in the accompanying product supplement
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Investing in the notes involves a number of risks. See Risk Factors beginning on page PS-10 of the accompanying
product supplement, Risk Factors beginning on page US-2 of the accompanying underlying supplement and Selected Risk Considerations beginning on page PS-3 of this pricing supplement.
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.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per
note
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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See Supplemental Use of Proceeds in this pricing supplement for information about the components of the price to public of the notes.
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(2)
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J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated or
unaffiliated dealers. In no event will these selling commissions exceed $10.40 per $1,000 principal amount note. See Plan of Distribution (Conflicts of Interest) in the accompanying product supplement
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If the notes priced today, the estimated value of the notes would be approximately $985.60 per $1,000 principal amount note. The estimated value of the
notes, when the terms of the notes are set, will be provided in the pricing supplement and will not be less than $970.60 per $1,000 principal amount note. See The Estimated Value of the Notes in this pricing supplement for
additional information.
The notes are not bank deposits, are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency and are not obligations of, or guaranteed by, a bank.
August , 2016
Additional Terms Specific to the Notes
You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any
offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together with the 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.
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):
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●
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Product supplement no. 4-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
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●
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Underlying supplement no. 1-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
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●
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Prospectus supplement and prospectus, each dated April 15, 2016:
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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.
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
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PS-1
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What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index?
The following table and examples illustrate the hypothetical total return and the hypothetical payment at maturity on the notes. The
total return as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. Each hypothetical total return or payment at
maturity set forth below assumes an Initial Index Level of 342 and reflects the Contingent Digital Return of 8.27% and the Contingent Buffer Amount of 15%. Each hypothetical total return or payment at maturity set forth below is for
illustrative purposes only and may not be the actual total return or payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and in the examples below have been rounded for ease of analysis.
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Ending Index
Level
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Index Return
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Total Return
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615.6000
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80.00%
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8.27%
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564.3000
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65.00%
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8.27%
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513.0000
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50.00%
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8.27%
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478.8000
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40.00%
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8.27%
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444.6000
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30.00%
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8.27%
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393.3000
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15.00%
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8.27%
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376.2000
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10.00%
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8.27%
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369.8730
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8.27%
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8.27%
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359.1000
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5.00%
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8.27%
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350.5500
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2.50%
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8.27%
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342.0000
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0.00%
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8.27%
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333.4500
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-2.50%
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8.27%
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324.9000
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-5.00%
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8.27%
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307.8000
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-10.00%
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8.27%
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290.7000
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-15.00%
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8.27%
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290.6658
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-15.01%
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-15.01%
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273.6000
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-20.00%
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-20.00%
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256.5000
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-25.00%
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-25.00%
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239.4000
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-30.00%
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-30.00%
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205.2000
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-40.00%
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-40.00%
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171.0000
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-50.00%
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-50.00%
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136.8000
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-60.00%
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-60.00%
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102.6000
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-70.00%
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-70.00%
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68.4000
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-80.00%
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-80.00%
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34.2000
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-90.00%
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-90.00%
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0.0000
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-100.00%
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-100.00%
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Hypothetical Examples of Amount Payable at Maturity
The following examples illustrate how the total payment at maturity in different hypothetical scenarios is calculated.
Example 1: The level of the Index increases from the Initial Index Level of 342 to an Ending Index Level of 350.55.
Because the Ending Index Level of 350.55 is greater than the Initial Index Level of 342, regardless of the Index Return, the investor receives a payment at maturity
of $1,082.70 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 8.27%) = $1,082.70
Example 2: The level of the Index decreases from the Initial Index Level of 342 to an Ending Index Level of 290.70.
Although the Index Return is negative, because the Ending Index Level of 290.70 is less than the Initial Index Level of 342 by up to the Contingent Buffer Amount of
15%, the investor receives a payment at maturity of $1,082.70 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000
× 8.27%) = $1,082.70
Example 3: The level of the Index increases from the Initial Index Level of 342 to an Ending Index Level of 478.80.
Because the Ending Index Level of 478.80 is greater than the Initial Index Level of 342 and although the Index Return of 40% exceeds the Contingent
Digital Return of 8.27%, the investor is entitled to only the Contingent Digital Return and receives a payment at maturity of $1,082.70 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 8.27%) = $1,082.70
Example 4: The level of the Index decreases from the Initial Index Level of 342 to an Ending Index Level of 171.00.
Because the Ending Index Level of 171.00 is less than the Initial Index Level of 342 by more than the Contingent Buffer Amount of 15% and the Index Return is -50%,
the investor receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-50%) = $500
The hypothetical returns and hypothetical payments on the notes shown above apply
only if you hold the notes for their entire
term.
These hypotheticals do not reflect 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.
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
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PS-2
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Selected Purchase Considerations
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●
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FIXED APPRECIATION POTENTIAL
If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level
by up to the Contingent Buffer Amount, you will receive a fixed return equal to the Contingent Digital Return of 8.27% at maturity, which also reflects the maximum return on the notes at maturity.
Because the notes are our unsecured and
unsubordinated obligations, the payment of which is fully and unconditionally guaranteed by JPMorgan Chase & Co., payment of any amount on the notes is subject to our ability to pay our obligations as they become due and JPMorgan Chase &
Co.s ability to pay its obligations as they become due.
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●
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LIMITED PROTECTION AGAINST LOSS
We will pay you your principal back at maturity if the Ending Index Level is equal to the Initial Index Level or is
less than the Initial Index Level by up to the Contingent Buffer Amount of 15%. If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, for every 1% that the Ending Index Level is less than the
Initial Index Level, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount at maturity.
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●
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RETURN LINKED TO THE STOXX
®
EUROPE 600 INDEX
The return on the notes
is linked to the performance of the STOXX
®
Europe 600 Index. The STOXX
®
Europe 600 Index is composed of the 600 largest stocks by free float market capitalization traded on the major exchanges of 18 European countries. For additional
information about the STOXX
®
Europe 600 Index, see the information set forth under Annex A in this pricing
supplement.
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●
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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. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax
consequences of owning and disposing of notes.
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Based on current market conditions, in the opinion of our special tax
counsel it is reasonable to treat the notes as open transactions that are not debt instruments for U.S. federal income tax purposes, as more fully described in Material U.S. Federal Income Tax Consequences Tax Consequences
to U.S. Holders Notes Treated as Open Transactions That Are Not Debt Instruments in the accompanying product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital
gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of any income
or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar
instruments. The notice focuses 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; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S.
investors should be subject to withholding tax; and whether these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary
income and impose a notional interest charge. 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
and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as FATCA
may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the notes. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than any
amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You should consult your tax adviser regarding the potential application of FATCA to the notes.
Selected Risk Considerations
An investment
in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index or any of the component securities of the Index. These risks are explained in more detail in the Risk Factors
sections of the accompanying product supplement and the accompanying underlying supplement.
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●
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
The notes do not guarantee any return of principal. The return on the notes at maturity is
linked to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative. If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of
15%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Accordingly, under these circumstances, you will lose more than 15% of your principal amount at maturity
and may lose all of your principal amount at maturity.
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●
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE CONTINGENT DIGITAL RETURN
If the Ending Index Level is greater than or equal to the Initial Index
Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, for each $1,000 principal amount note, you will receive at maturity $1,000
plus
an
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-3
|
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additional return equal to the Contingent Digital Return of 8.27%, regardless of the appreciation in the Index, which may be significant.
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●
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YOUR ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE
If the Ending Index Level is less than the
Initial Index Level by more than the Contingent Buffer Amount, you will not be entitled to receive the Contingent Digital Return at maturity. Under these circumstances, you will lose more than 15% of your principal amount at maturity and may
lose all of your principal amount at maturity.
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●
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
The notes are subject to our and JPMorgan Chase & Co.s credit risks, and
our and JPMorgan Chase & Co.s credit ratings and credit spreads may adversely affect the market value of the notes. 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.
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●
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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.
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●
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POTENTIAL CONFLICTS
We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation
agent and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we
refer to as the estimated value of the notes. In performing these duties, our and JPMorgan Chase & Co.s economic interests and the economic interests of the calculation agent and other affiliates of ours are potentially adverse to
your interests as an investor in the notes. In addition, our and JPMorgan Chase & Co.s business activities, including hedging and trading activities, could cause our and JPMorgan Chase & Co.s economic interests to be adverse
to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our
affiliates while the value of the notes declines. Please refer to Risk Factors Risks Relating to Conflicts of Interest in the accompanying product supplement for additional information about these risks.
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●
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THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE
If the Ending Index Level is less than the
Initial Index Level by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer Amount will terminate and you will be fully exposed to any depreciation in the Index.
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●
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THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included in the
original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost
of hedging our obligations under the notes. See The Estimated Value of the Notes in this pricing supplement.
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●
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THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS ESTIMATES
The estimated value of
the notes is determined by reference to internal pricing models of our affiliates when the terms of the notes are set. This estimated value of the notes is based on market conditions and other relevant factors existing at that time and
assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for notes that are greater than or less than the estimated
value of the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other
things, changes in market conditions, our or JPMorgan Chase & Co.s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary
market transactions. See The Estimated Value of the Notes in this pricing supplement.
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●
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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.
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●
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF
THE NOTES FOR A LIMITED TIME PERIOD
We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that
will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt
issuances. See Secondary Market Prices of the Notes in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower
than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
|
|
|
|
JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-4
|
|
●
|
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES
Any secondary market prices of the notes will
likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy
notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk
consideration for information about additional factors that will impact any secondary market prices of the notes.
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The
notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See Lack of Liquidity below.
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●
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|
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 level of the Index, including:
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●
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any actual or potential change in our or JPMorgan Chase & Co.s creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured debt issuances;
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the actual and expected volatility of the Index;
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the time to maturity of the notes;
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the dividend rates on the equity securities included in the Index;
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interest and yield rates in the market generally;
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the equity securities included in the
Index trade and the correlation among those rates and the level of the Index; and
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a variety of other economic, financial, political, regulatory and judicial events.
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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.
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS
As a holder of the notes, you will not receive interest payments, and you will not have voting
rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Index would have.
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NON-U.S. SECURITIES RISK
The equity securities included in the Index have been issued by non-U.S. companies. Investments in securities linked to
the value of such non-U.S. equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental intervention in
those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting
requirements of the SEC.
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NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES
The value of your notes will not be adjusted for exchange rate fluctuations between
the U.S. dollar and the currencies upon which the equity securities included in the Index are based, although any currency fluctuations could affect the performance of the Index. Therefore, if the applicable currencies appreciate or depreciate
relative to the U.S. dollar over the term of the notes, you will not receive any additional payment or incur any reduction in any payment on the notes.
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LACK OF LIQUIDITY
The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market
but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price
at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes.
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THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
The final terms of the notes will be based on relevant market
conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, the estimated value of the notes will be provided in the pricing supplement and may be as low as the minimum for the estimated value
of the notes set forth on the cover of this pricing supplement. Accordingly, you should consider your potential investment in the notes based on the minimum for the estimated value of the notes.
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
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PS-5
|
Historical Information
The following graph sets forth the historical performance of the Index based on the weekly historical closing levels of the Index from January
7, 2011 through August 19, 2016. The closing level of the Index on August 22, 2016 was 340.43. We obtained the closing levels of the Index above and below from the Bloomberg Professional
®
service (Bloomberg), without independent verification.
The
historical closing levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the Pricing Date or any Ending Averaging Date. There can be no assurance that
the performance of the Index will result in the return of any of your principal amount.
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. See Selected Risk Considerations The Estimated Value of the Notes
Does Not Represent Future Values of the Notes and May Differ from Others Estimates in this pricing supplement.
The estimated value of the
notes will be lower than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid to
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. We or one or more of our
affiliates will retain any profits realized in hedging our obligations under the notes. See Selected Risk Considerations The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the
Notes in this pricing supplement.
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-6
|
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market prices of the notes, see Selected Risk Considerations Secondary Market Prices of the Notes Will Be Impacted by Many Economic and
Market Factors in this pricing supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by
JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be 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.
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 What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index? and
Hypothetical Examples of Amount Payable at Maturity in this pricing supplement for an illustration of the risk-return profile of the notes and Annex A 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.
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-7
|
Annex A
THE STOXX
®
EUROPE 600 INDEX
All information contained in this pricing supplement regarding the STOXX
®
Europe 600 Index, including, without limitation, its make-up, method of calculation and changes in its components, has been derived from publicly available
information, without independent verification. This information reflects the policies of, and is subject to change by, STOXX Limited. The STOXX
®
Europe 600 Index is calculated, maintained and published by STOXX Limited. STOXX Limited has no obligation to continue to publish, and may discontinue
publication of, the STOXX
®
Europe 600 Index.
The STOXX
®
Europe 600 Index is calculated in euros and is reported by Bloomberg L.P.
under the ticker symbol SXXP.
The STOXX
®
Europe 600 Index was created by STOXX Limited, a joint venture between Deutsche Börse AG and SIX Group AG. Publication of the STOXX
®
Europe 600 Index began on September 16, 1998, based on an initial STOXX
®
Europe 600 Index value of 100 at December 31, 1991. The STOXX
®
Europe 600 Index is disseminated on the STOXX Limited website: http://www.stoxx.com, which sets forth, among other things, the country and industrial sector
weightings of the securities included in the STOXX
®
Europe 600 Index. Information contained in the STOXX Limited
website is not incorporated by reference in, and should not be considered a part of, this pricing supplement.
STOXX
®
Europe 600 Index Composition and Maintenance
The STOXX
®
Europe 600 Index is composed of the 600 largest stocks by free float market capitalization traded on the major exchanges of 18 European countries. The selection list is composed of each companys most liquid stock with a minimum liquidity
of greater than one million EUR measured over 3-month average daily trading value and is ranked in terms of free-float market capitalization. From the selection list, the largest 550 stocks qualify for selection. The remaining 50 stocks
are selected from the largest remaining current components ranked between 551 and 750. If the number of stocks selected is still below 600, the largest remaining stocks are selected until there are enough stocks.
The composition of the
STOXX
®
Europe 600 Index is reviewed quarterly, based on the closing stock data on the last trading day of the month
following the implementation of the last quarterly index review. The component stocks are announced on the fourth Tuesday of the month immediately prior to the review implementation month. Changes to the component stocks are implemented
after the close on the third Friday in each of March, June, September and December and are effective the following trading day.
The
free float factors and weighting cap factors for each component stock used to calculate the STOXX
®
Europe 600 Index, as
described below, are reviewed, calculated and implemented on a quarterly basis and are fixed until the next quarterly review.
The
STOXX
®
Europe 600 Index is also reviewed on an ongoing basis. Corporate actions (including initial public offerings,
mergers and takeovers, spin-offs, delistings and bankruptcy) that affect the STOXX
®
Europe 600 Index composition are
immediately reviewed. Any changes are announced, implemented and effective in line with the type of corporate action and the magnitude of the effect.
STOXX
®
Europe 600 Index Calculation
The STOXX
®
Europe 600 Index is calculated with the Laspeyres formula, which
measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the
STOXX
®
Europe 600 Index value at any time can be expressed as follows:
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Index =
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free float market capitalization of the STOXX
®
Europe 600 Index
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Divisor
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The free float market capitalization of the STOXX
®
Europe 600 Index is equal to the sum of the products of the price, number of shares, free float factor and weighting cap factor for each component stock as of
the time the STOXX
®
Europe 600 Index is being calculated. All components of the STOXX
®
Europe 600 Index are subject to a 20% cap.
The divisor for the STOXX
®
Europe 600 Index is adjusted to maintain the continuity of
STOXX
®
Europe 600 Index values despite changes due to corporate actions. The following is a summary of the
adjustments to any component stock made for corporate actions and the effect of such adjustment on the divisor, where shareholders of the component stock will receive B number of shares for every A share held (where
applicable).
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(1)
Special cash dividend:
Cash distributions that are outside the scope of the regular dividend policy or that the
company defines as an extraordinary distribution
Adjusted price = closing price
dividend announced by the company × (1 withholding tax if
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-8
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applicable)
Divisor: decreases
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(2)
Split and reverse split:
Adjusted price = closing price × A / B
New number of shares = old number of shares × B / A
Divisor: unchanged
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(3)
Rights offering:
If the subscription price is not available or if the subscription price is equal to or greater
than the closing price on the day before the effective date, then no adjustment is made.
In case the share increase is greater than or equal to 100% (B / A
³
1), the adjustment of the shares and weight factors are delayed until the new shares are
listed.
Adjusted price = (closing price × A + subscription price × B) /
(A + B)
New number of shares = old number of shares × (A + B)/ A
Divisor: increases
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(4)
Stock dividend:
Adjusted price = closing price × A / (A + B)
New number of shares = old number of
shares × (A + B) / A
Divisor: unchanged
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(5) S
tock dividend
(from treasury stock):
Adjusted only if treated as extraordinary
dividend.
Adjusted close = close close × B / (A + B)
Divisor: decreases
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(6) S
tock dividend of another company:
Adjusted price = (closing price × A price of
other company × B) / A
Divisor:
decreases
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(7)
Return of capital
and share consolidation:
Adjusted price = (closing price
capital
return announced by company × (1-withholding tax)) × A / B
New number of shares = old number of shares × B / A
Divisor: decreases
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(8)
R
epurchase of shares / self-tender:
Adjusted price = ((price before tender × old
number of shares) (tender price × number of tendered shares)) / (old number of shares number of tendered shares)
New number of shares = old number of shares number of tendered shares
Divisor: decreases
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(9)
Spin-off:
Adjusted price = (closing price × A price of spun-off
shares × B) / A
Divisor: decreases
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(10)
Combination stock distribution (dividend or
split) and rights offering:
For this corporate action, the following additional assumptions apply:
Shareholders receive B new shares from the distribution and C new shares from the rights offering for every A share held.
If A is not equal to one share, all the following new number of shares formulae need to be divided by A:
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- If rights are applicable after stock distribution (one action applicable to
other):
Adjusted price = (closing price × A +
subscription price × C × (1 + B / A)) / ((A + B) × (
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- If stock
distribution is applicable after rights (one action applicable to other):
Adjusted price = (closing price × A +
subscription price × C) /((A + C) × (1 + B / A))
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JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-9
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1 + C / A))
New number of shares = old number of
shares × ((A + B) ×
(1 + C / A)) / A
Divisor: increases
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New number of shares =
old number of
shares × ((A + C) × (1 + B / A))
Divisor: increases
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- Stock distribution and rights (neither action is applicable to the other):
Adjusted price = (closing price × A + subscription price × C) / (A + B + C)
New number of shares = old number of shares × (A + B + C) / A
Divisor: increases
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(11)
Addition /
deletion of a company:
No price adjustments are made. The net change in
market capitalization determines the divisor adjustment.
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(12)
Free float and shares
changes:
No price adjustments are made. The net change in market
capitalization determines the divisor adjustment.
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License Agreement with STOXX Limited
One of our affiliates has entered into an agreement with STOXX Limited (STOXX) providing it and certain of its affiliates or subsidiaries with a non-exclusive license and, for a fee, with the right to
use the STOXX
®
Europe 600 Index, which is owned and published by STOXX Limited, in connection with certain securities,
including the notes.
STOXX and its licensors (the Licensors) have no relationship to JPMorgan Chase & Co. or
JPMorgan Financial, other than the licensing of the STOXX
®
Europe 600 Index and the related trademarks for use in
connection with the notes.
STOXX and its Licensors do
not
:
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sponsor, endorse, sell or promote the notes;
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recommend that any person invest in the notes or any other securities;
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have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes;
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have any responsibility or liability for the administration, management or marketing of the notes; or
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consider the needs of the notes or the holders of the notes in determining, composing or calculating the STOXX
®
Europe 600 Index or have any obligation to do so.
|
STOXX and its Licensors will not have any liability in connection with the notes. Specifically,
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STOXX and its Licensors do not make any warranty, express or implied and disclaim any and all warranty about:
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The results to be obtained by the notes, the holders of the notes or any other person in connection with the use of the STOXX
®
Europe 600 Index and the data included in the STOXX
®
Europe 600 Index;
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The accuracy or completeness of the STOXX
®
Europe 600 Index and its data; or
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The merchantability and the fitness for a particular purpose or use of the
STOXX
®
Europe 600 Index and its data;
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STOXX and its Licensors will have no liability for any errors, omissions or interruptions in the STOXX
®
Europe 600 Index or its data; and
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Under no circumstances will STOXX or its Licensors be liable for any lost profits or indirect, punitive, special or consequential damages or losses, even if
STOXX or its Licensors knows that they might occur.
|
The licensing agreement with STOXX is solely for the benefit of the parties
to that agreement and not for the benefit of the holders of the notes or any other third parties.
|
|
|
JPMorgan Structured
Investments
Digital Dual Directional Contingent Buffered Notes Linked to the STOXX
®
Europe 600 Index
|
|
PS-10
|
JP Morgan Chase (NYSE:JPM)
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From Mar 2024 to Apr 2024
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From Apr 2023 to Apr 2024