Pricing supplement no. 599
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 19, 2016
Rule 424(b)(2)
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JPMorgan Chase Financial Company LLC
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Structured
Investments
|
|
$1,435,000
Contingent Buffered Equity Notes Linked
to the S&P 500
®
Index due August 21, 2019
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 return of 1.22 times
the appreciation of
S&P 500
®
Index at maturity.
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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 25.00%, 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
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 S&P 500
®
Index (Bloomberg ticker: SPX)
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Upside Leverage Factor:
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1.22
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Payment at Maturity:
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If the Ending Index Level is greater than the Initial Index Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Index 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 x (Index Return x 1.22)]
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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, you will receive the principal amount of your notes at maturity.
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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 25.00%, you will lose more than 25.00% of your principal amount at maturity and may lose all of your principal amount at maturity.
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Contingent Buffer Amount:
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25.00%
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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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2,183.87, which was 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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August 19, 2016
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Original Issue Date:
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On or about August 24, 2016 (Settlement Date)
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Ending Averaging Dates*:
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August 12, 2019, August 13, 2019, August 14, 2019, August 15, 2019 and August 16, 2019
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Maturity Date*:
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August 21, 2019
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CUSIP:
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46646EVP4
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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-4 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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$20
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$980
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Total
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$1,435,000
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$28,700
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$1,406,300
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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 of $20.00 per $1,000 principal amount note it receives from us to other affiliated or unaffiliated dealers. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
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The estimated value of the notes, when the terms of the
notes were set, was $990.60 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 19, 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.
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):
·
Prospectus supplement and prospectus, each dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 1665650,
and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us” and “our”
refer to JPMorgan Financial.
JPMorgan Structured Investments
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PS-
1
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Contingent Buffered Equity Notes Linked to the S&P 500
®
Index
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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, graph and examples illustrate the hypothetical total return 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. The hypothetical total returns set forth below assume an Initial Index Level of 2,000. Each hypothetical total return or hypothetical 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, graph and examples 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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Payment at Maturity
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3,600.0000
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80.00%
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97.60%
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$1,976.00
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3,400.0000
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70.00%
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85.40%
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$1,854.00
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3,200.0000
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60.00%
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73.20%
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$1,732.00
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3,000.0000
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50.00%
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61.00%
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$1,610.00
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2,800.0000
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40.00%
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48.80%
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$1,488.00
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2,600.0000
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30.00%
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36.60%
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$1,366.00
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2,400.0000
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20.00%
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24.40%
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$1,244.00
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2,300.0000
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15.00%
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18.30%
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$1,183.00
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2,200.0000
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10.00%
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12.20%
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$1,122.00
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2,100.0000
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5.00%
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6.10%
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$1,061.00
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2,020.0000
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1.00%
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1.22%
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$1,012.20
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2,000.0000
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0.00%
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0.00%
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$1,000.00
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1,900.0000
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-5.00%
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0.00%
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$1,000.00
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1,800.0000
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-10.00%
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0.00%
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$1,000.00
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1,600.0000
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-20.00%
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0.00%
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$1,000.00
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1,500.0000
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-25.00%
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0.00%
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$1,000.00
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1,499.8000
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-25.01%
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-25.01%
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$749.90
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1,400.0000
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-30.00%
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-30.00%
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$700.00
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1,200.0000
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-40.00%
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-40.00%
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$600.00
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1,000.0000
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-50.00%
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-50.00%
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$500.00
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800.0000
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-60.00%
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-60.00%
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$400.00
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600.0000
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-70.00%
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-70.00%
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$300.00
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400.0000
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-80.00%
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-80.00%
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$200.00
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200.0000
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-90.00%
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-90.00%
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$100.00
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0.0000
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-100.00%
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-100.00%
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$0.00
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JPMorgan Structured Investments
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PS-
2
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Contingent Buffered Equity Notes Linked to the S&P 500
®
Index
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Hypothetical Examples of Amounts Payable
at Maturity
The following examples illustrate how a total payment set
forth in the table above is calculated.
Example 1: The level of the Index increases from the Initial Index Level of 2,000.00 to an Ending Index Level of 2,100.00.
Because the Ending Index Level of 2,100.00 is greater than the Initial Index Level of 2,000.00, the investor receives a payment at maturity of $1,061.00 per $1,000 principal amount note, calculated as follows:
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$1,000 + [$1,000 x (5% x 1.22)] = $1,061.00
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Example 2: The level of the Index decreases from the Initial Index Level of 2,000.00 to an Ending Index Level of 1,800.00.
Although the Index Return is negative, because the Ending Index Level of 1,800.00 is less than the Initial Index Level of 2,000.00 by not more than the Contingent Buffer Amount of 25.00%, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note.
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Example 3: The level of the Index decreases from the Initial Index Level of 2,000.00 to an Ending Index Level of 1,000.00.
Because the Index Return is negative and the Ending Index Level of 1,000.00 is less than the Initial Index Level of 2,000.00 by more than the Contingent Buffer Amount of 25.00%, the investor receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
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$1,000 + [$1,000 x (-50%)] = $500
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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
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PS-
3
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Contingent Buffered Equity Notes Linked to the S&P 500
®
Index
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Selected Purchase Considerations
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·
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UNCAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to enhance equity returns by multiplying a positive Index Return by the Upside Leverage
Factor of 1.22.
The notes are not subject
to a predetermined maximum gain and, accordingly, any return at maturity will be determined based on the movement of the Index.
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 25.00%. 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 25.00% 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 S&P 500
®
INDEX
— The S&P 500
®
Index consists of stocks of 500 companies selected to provide a performance benchmark
for the U.S. equity markets. For additional information about the S&P 500
®
Index, see the information set forth
under “Equity Index Descriptions — The S&P U.S. Indices” in the accompanying underlying 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, as well as to payments of gross proceeds of a taxable disposition, including redemption
at maturity, of a note. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other
than any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your
tax adviser regarding the potential application of FATCA to the notes.
Non-U.S. holders should also
note that recently promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under
certain “equity linked instruments” will not apply to the notes.
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 25.00%, 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 25.00% 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
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JPMorgan Structured Investments
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PS-
4
|
Contingent Buffered Equity Notes Linked to the S&P 500
®
Index
|
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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In addition, JPMorgan Chase
& Co. is currently one of the companies that make up the S&P 500
®
Index, but JPMorgan Chase & Co. will
have no obligation to consider your interests as a holder of the notes in taking any corporate action that might affect the value
of the S&P 500
®
Index.
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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 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.
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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
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JPMorgan Structured Investments
|
PS-
5
|
Contingent Buffered Equity Notes Linked to the S&P 500
®
Index
|
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 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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·
|
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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·
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customary bid-ask spreads for similarly
sized trades;
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·
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our internal secondary market funding
rates for structured debt issuances;
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·
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the actual and expected volatility of
the Index;
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·
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the time to maturity of the notes;
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·
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the dividend rates on the equity securities
included in the Index;
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·
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interest and yiel
d
rates in the market generally; and
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·
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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.
|
·
VOLATILITY RISK
— Greater expected volatility with respect to the Index indicates a greater likelihood as
of the Pricing Date that the Ending Index Level could be less than the Initial Index Level by more than the Contingent Buffer Amount.
The Index’s volatility, however, can change significantly over the term of the notes. The Index closing level could
fall sharply during the term of the notes, which could result in your losing some or all of your principal amount at maturity.
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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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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 19, 2016 was 2,183.87.
We obtained the closing levels of the Index
above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as
to the closing level of the Index on 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 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. 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 Is Lower Than the Original Issue Price
(Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of
the Notes
For information about factors that will impact
any secondary market prices of the notes, see “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
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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 “Selected Purchase
Considerations — Return Linked to the S&P 500
®
Index” 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 valid and binding obligations 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.
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