Linked to the A ordinary shares of Royal Dutch Shell plc due
on or about September 3, 2021
Trigger Autocallable Contingent Yield Notes are unsecured and
unsubordinated debt securities issued by JPMorgan Chase Financial Company LLC (“JPMorgan Financial”), the payment
on which is fully and unconditionally guaranteed by JPMorgan Chase & Co., (each, a “Note” and collectively, the
“Notes”), linked to the performance of the ordinary shares of a specific company (the “Underlying”). If
the closing price of one share of the applicable Underlying on the applicable monthly Observation Date is equal to or greater
than the applicable Coupon Barrier, JPMorgan Financial will make a Contingent Coupon payment with respect to that Observation
Date. Otherwise, no coupon will be payable with respect to that Observation Date. JPMorgan Financial will automatically call the
Notes early if the closing price of one share of the applicable Underlying on any monthly Observation Date (after an initial one-year
non-call period) is equal to or greater than the applicable Initial Value. If the Notes are called, JPMorgan Financial will pay
the principal amount
plus
the applicable Contingent Coupon for that Observation Date and no further amounts will be owed
to you. If the Notes are not called prior to maturity and the applicable Final Value is equal to or greater than the applicable
Downside Threshold (which is the same price as the applicable Coupon Barrier), JPMorgan Financial will make a cash payment at
maturity equal to the principal amount of your Notes, in addition to the applicable Contingent Coupon. If the applicable Final
Value is less than the applicable Downside Threshold, JPMorgan Financial will pay you less than the full principal amount, if
anything, at maturity, resulting in a loss on your principal amount that is proportionate to the decline in the price of one share
of the applicable Underlying from the applicable Initial Value to the applicable Final Value. The closing price of the applicable
Underlying is subject to adjustments, in the sole discretion of the calculation agent, in the case of certain corporate events
described in the accompanying product supplement under “The Underlyings — Underlyings — Anti-Dilution Adjustments”
and “The Underlyings — Underlyings — Reorganization Events.”
Investing
in the Notes involves significant risks. You may lose some or all of your principal amount. Generally, a higher Contingent Coupon
Rate is associated with a greater risk of loss. The contingent repayment of principal applies only if you hold the Notes to maturity.
Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of JPMorgan Financial, as issuer
of the Notes, and the creditworthiness of JPMorgan Chase & Co., as guarantor of the Notes. If JPMorgan Financial and JPMorgan
Chase & Co. were to default on their payment obligations, you may not receive any amounts owed to you under the Notes and
you could lose your entire investment.
This pricing supplement relates to two (2) separate Note offerings.
Each issuance of offered Notes is linked to one, and only one, Underlying. You may participate in either of the two (2) Note offerings
or, at your election, in both of the offerings. This pricing supplement does not, however, allow you to purchase a Note linked
to a basket of some or all of the Underlyings described below. The Notes are offered at a minimum investment of $1,000 in denominations
of $10 and integral multiples thereof. Each of the two (2) Note offerings is linked to the ordinary shares of a different company,
and each of the two (2) Note offerings has its own Contingent Coupon Rate, Initial Value, Downside Threshold and Coupon Barrier,
each of which will be finalized on the Trade Date and provided in the pricing supplement. The Downside Threshold and Coupon Barrier
will be set to the same percentage for each Note. The actual Downside Threshold and Coupon Barrier for each Note will not be greater
than the top of the applicable range listed below, but you should be willing to invest in the Notes if the Downside Threshold
and Coupon Barrier were set equal to the top of the applicable range.
The
performance of each Note offering will not depend on the performance of any other Note offering.
Additional Information about JPMorgan Financial, JPMorgan Chase &
Co. and 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 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.
This pricing supplement relates to two (2) separate Note offerings.
Each issue of the offered Notes is linked to one, and only one, Underlying. The purchaser of a Note will acquire a Note linked
to a single Underlying (not to a basket or index that includes the other Underlying). You may participate in either of the two
(2) Note offerings or, at your election, in both of the offerings. We reserve the right to withdraw, cancel or modify any of the
offerings and to reject orders in whole or in part. While each Note offering relates only to a single Underlying identified on
the cover page, you should not construe that fact as a recommendation of the merits of acquiring an investment linked to that Underlying
(or the other Underlying) or as to the suitability of an investment in 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.
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” section of the accompanying
product supplement, as the Notes involve risks not associated with conventional debt securities.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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, the “Issuer,” “JPMorgan
Financial,” “we,” “us” and “our” refer to JPMorgan Chase Financial Company LLC.
Supplemental Terms of the Notes
|
For purposes of the accompanying product supplement,
each of the A ordinary shares of Royal Dutch Shell plc and the ordinary shares of Sanofi is an “Underlying.”
The Notes may be suitable for you if, among other
considerations:
t
You
fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
t
You
can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the
same downside market risk as an investment in the applicable Underlying.
t
You
accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
t
You
believe the applicable Underlying will close at or above the applicable Coupon Barrier on the Observation Dates and the applicable
Downside Threshold on the Final Valuation Date.
t
You
believe the applicable Underlying will close at or above the applicable Initial Value on one of the specified Observation Dates
(after an initial one-year non-call period).
t
You
understand and accept that you will not participate in any appreciation in the price of the applicable Underlying and that your
potential return is limited to the applicable Contingent Coupons.
t
You
can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations
of the applicable Underlying.
t
You
would be willing to invest in the Notes if the applicable Downside Threshold and Coupon Barrier were set equal to the top of the
applicable range indicated on the cover hereof (the actual Downside Threshold and Coupon Barrier for each Note will be finalized
on the Trade Date and provided in the pricing supplement and will not be greater than the top of the applicable range listed on
the cover).
t
You
do not seek guaranteed current income from this investment and are willing to forgo dividends paid on the applicable Underlying.
t
You
are able and willing to invest in Notes that may be called early (after an initial one-year non-call period) or you are otherwise
able and willing to hold the Notes to maturity.
t
You
accept that there may be little or no secondary market for the Notes and that any secondary market will depend in large part on
the price, if any, at which J.P. Morgan Securities LLC, which we refer to as JPMS, is willing to trade the Notes.
t
You
understand and accept the single stock risk associated with the Notes and you understand and are willing to accept the risks associated
with the applicable Underlying.
t
You
are willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under the Notes, and
understand that if JPMorgan Financial and JPMorgan Chase & Co. default on their obligations, you may not receive any amounts
due to you including any repayment of principal.
|
|
The Notes may not be suitable for you if, among other
considerations:
t
You
do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
t
You
cannot tolerate a loss of all or a substantial portion of your investment and are unwilling to make an investment that may have
the same downside market risk as an investment in the applicable Underlying.
t
You
require an investment designed to provide a full return of principal at maturity.
t
You
do not accept that you may not receive a Contingent Coupon on some or all of the Coupon Payment Dates.
t
You
believe that the price of the applicable Underlying will decline during the term of the Notes and is likely to close below the
applicable Coupon Barrier on the Observation Dates and the applicable Downside Threshold on the Final Valuation Date.
t
You
seek an investment that participates in the full appreciation in the price of the applicable Underlying or that has unlimited return
potential.
t
You
cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations
of the applicable Underlying.
t
You
would not be willing to invest in the Notes if the applicable Downside Threshold and Coupon Barrier were set equal to the top of
the applicable range indicated on the cover hereof (the actual Downside Threshold and Coupon Barrier for each Note will be finalized
on the Trade Date and provided in the pricing supplement and will not be greater than the top of the applicable range listed on
the cover).
t
You
prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities
and credit ratings.
t
You
seek guaranteed current income from this investment or prefer to receive the dividends paid on the applicable Underlying.
t
You
are unable or unwilling to invest in Notes that may be called early (after an initial one-year non-call period), or you are otherwise
unable or unwilling to hold the Notes to maturity, or you seek an investment for which there will be an active secondary market.
t
You
do not understand or accept the single stock risk associated with the Notes or you do not understand or are not willing to accept
the risks associated with the applicable Underlying.
t
You
are not willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under the Notes,
including any repayment of principal.
|
The suitability considerations identified above are not exhaustive.
Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you should reach
an investment decision only after you and your investment, legal, tax, accounting and other advisers have carefully considered
the suitability of an investment in the Notes in light of your particular circumstances. You should also review carefully the
“Key Risks” section of this pricing supplement and the “Risk Factors” section of the accompanying product
supplement for risks related to an investment in the Notes. For more information on the Underlyings, please see the section titled
“The Underlyings” below.
Issuer
|
|
JPMorgan Financial Company LLC
|
Guarantor
|
|
JPMorgan Chase & Co.
|
Issue Price
|
|
$10 per Note
|
Underlying
|
|
A ordinary shares of Royal Dutch Shell plc
Ordinary shares of Sanofi
|
Principal Amount
|
|
$10 per Note (subject to a minimum purchase of 100 Notes or $1,000)
|
Term
1
|
|
Approximately 5 years, unless called earlier
|
Automatic Call Feature
|
|
The Notes will be called automatically if the closing price
2
of one share of the applicable Underlying on any Observation Date (beginning September 1, 2017) is equal to or greater than the applicable Initial Value. If the Notes are called, JPMorgan Financial will pay you on the applicable Call Settlement Date a cash payment per Note equal to the principal amount
plus
the applicable Contingent Coupon otherwise due for the applicable Observation Date, and no further payments will be made on the Notes.
|
Contingent Coupon
|
|
If the closing price
2
of one share of the applicable
Underlying is equal to or greater than the applicable Coupon Barrier on any Observation Date, we will pay you the applicable Contingent
Coupon for that Observation Date on the relevant Coupon Payment Date.
If the closing price
2
of one share of the applicable
Underlying is less than the applicable Coupon Barrier on any Observation Date, the applicable Contingent Coupon for that Observation
Date will not accrue or be payable, and we will not make any payment to you on the relevant Coupon Payment Date.
Each Contingent Coupon will be a fixed amount based on equal monthly
installments at the applicable Contingent Coupon Rate, which is a per annum rate. The table below reflects the Contingent Coupon
Rate of (i) 9.00% per annum for Notes linked to the A ordinary shares of Royal Dutch Shell plc and (ii) 8.00% per annum for Notes
linked to the ordinary shares of Sanofi.
|
|
|
Contingent Coupon (per $10 Note)
|
Contingent Coupon Payments
|
|
Royal Dutch Shell plc
|
Sanofi
|
|
$0.075
|
$0.0667
|
|
|
Contingent Coupon payments on the Notes are not guaranteed. We will not pay you the applicable Contingent Coupon for any Observation Date on which the closing price of one share of the applicable Underlying is less than the applicable Coupon Barrier.
|
Contingent Coupon Rate
|
|
The Contingent Coupon Rate is (i) 9.00% per annum for Notes linked to the A ordinary shares of Royal Dutch Shell plc and (ii) 8.00% per annum for Notes linked to the ordinary shares of Sanofi.
|
Coupon Payment Dates
3
|
|
2nd business day following the applicable Observation Date, except that the Coupon Payment Date for the Final Valuation Date is the Maturity Date
|
Call Settlement Dates
3
|
|
First Coupon Payment Date following the applicable Observation Date
|
Payment at Maturity (per $10 Note)
|
|
If the Notes are not automatically called and the
applicable Final Value is equal to or greater than the applicable Downside Threshold,
we will pay you a cash payment at maturity
per $10 principal amount Note equal to $10
plus
the applicable Contingent Coupon otherwise due on the Maturity Date.
If the Notes are not automatically called and the applicable
Final Value is less than the applicable Downside Threshold,
we will pay you a cash payment at maturity that is less than $10
per $10 principal amount Note resulting in a loss on your principal amount proportionate to the negative Underlying Return, equal
to:
$10 × (1 + Underlying Return)
|
Underlying Return
|
|
(Final Value – Initial Value)
Initial Value
|
Initial Value
|
|
The closing price
2
of one share of the applicable Underlying on the Trade Date. The closing prices and, therefore, the Initial Value, the Final Value, the Downsid Threshold and the Coupon Barrier, for each Underlying are expressed in European Union euros.
|
Final Value
|
|
The closing price
2
of one share of the applicable Underlying on the Final Valuation Date
|
Downside Threshold
(4)
|
|
A percentage of the Initial Value of the applicable Underlying,
as specified on the cover of this pricing supplement
The actual Downside Threshold for each Note will be finalized
on the Trade Date and provided in the pricing supplement and will be set to the same percentage as the applicable Coupon Barrier
|
Coupon Barrier
(4)
|
|
A percentage of the Initial Value of the applicable Underlying,
as specified on the cover of this pricing supplement.
The actual Coupon Barrier for each Note will be finalized on the
Trade Date and provided in the pricing supplement and will be set to the same percentage as the applicable Downside Threshold.
|
Stock Adjustment Factor
2
|
|
The Stock Adjustment Factor is referenced in determining the closing price of the applicable Underlying. The Stock Adjustment Factor for the applicable Underlying is set initially at 1.0 on the Trade Date.
|
1
|
See footnote 1 under “Key Dates” on the front cover
|
2
|
The closing price of one share of the applicable Underlying is based on the exchange on which that Underlying is listed. The closing prices and, therefore, the Initial Value, the Final Value, the Downsid Threshold and the Coupon Barrier, for each Underlying are expressed in European Union euros. The closing price and the Stock Adjustment Factor of the applicable Underlying are subject to adjustments, in the sole discretion of the calculation agent, in the case of certain corporate events described in the accompanying product supplement under “The Underlyings — Underlyings — Anti-Dilution Adjustments” and “The Underlyings — Underlyings — Reorganization Events.”
|
3
|
See footnote 2 under “Key Dates” on the front cover
|
4
|
Rounded to three decimal places for the A ordinary shares of Royal
Dutch Shell plc and rounded to two decimal places for the ordinary shares of Sanofi
|
Trade
Date
|
|
The closing price of one share of the applicable Underlying (Initial Value) is observed, and the applicable Downside Threshold and the applicable Coupon Barrier are determined.
|
|
|
|
Monthly
(callable after an initial one-year non-call period)
|
|
If the closing price of one share of the applicable Underlying
is equal to or greater than the applicable Coupon Barrier on any Observation Date, JPMorgan Financial will pay you a Contingent
Coupon on the applicable Coupon Payment Date.
The Notes will also be called if the closing price of one share
of the applicable Underlying on any Observation Date (after an initial one-year non-call period) is equal to or greater than the
applicable Initial Value. If the Notes are called, JPMorgan Financial will pay you a cash payment per Note equal to the principal
amount
plus
the applicable Contingent Coupon otherwise due for the applicable Observation Date, and no further payments
will be made on the Notes.
|
|
|
|
Maturity
Date
|
|
The applicable Final Value
is determined as of the Final Valuation Date.
If the Notes have not been
called and the applicable Final Value is equal to or greater than the applicable Downside Threshold, at maturity JPMorgan Financial
will repay the principal amount equal to $10.00 per Note
plus
the applicable Contingent Coupon otherwise due on the Maturity
Date.
If the Notes have not been
called and the applicable Final Value is less than the applicable Downside Threshold, JPMorgan Financial will repay less than the
principal amount, if anything, at maturity, resulting in a loss on your principal amount proportionate to the decline of the applicable
Underlying, equal to a return of:
$10 × (1 + Underlying Return)
per Note
|
|
|
|
INVESTING
IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE NOTES,
INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. IF
JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. WERE TO DEFAULT ON THEIR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS
OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
|
Coupon Observation Dates and Coupon Payment Dates
|
Coupon
Observation Dates
†
|
Coupon
Payment Dates
|
September 29, 2016
|
October 3, 2016
|
October 31, 2016
|
November 2, 2016
|
November 29, 2016
|
December 1, 2016
|
December 29, 2016
|
January 3, 2017
|
January 30, 2017
|
February 1, 2017
|
February 28, 2017
|
March 2, 2017
|
March 29, 2017
|
March 31, 2017
|
April 28, 2017
|
May 3, 2017
|
May 30, 2017
|
June 1, 2017
|
June 29, 2017
|
July 3, 2017
|
July 31, 2017
|
August 2, 2017
|
September 1, 2017
|
September 6, 2017
|
September 29, 2017
|
October 3, 2017
|
October 30, 2017
|
November 1, 2017
|
November 29, 2017
|
December 1, 2017
|
December 29, 2017
|
January 3, 2018
|
January 29, 2018
|
January 31, 2018
|
February 28, 2018
|
March 2, 2018
|
March 29, 2018
|
April 4, 2018
|
April 30, 2018
|
May 2, 2018
|
May 29, 2018
|
May 31, 2018
|
June 29, 2018
|
July 3, 2018
|
July 30, 2018
|
August 1, 2018
|
August 29, 2018
|
August 31, 2018
|
September 28, 2018
|
October 2, 2018
|
October 29, 2018
|
October 31, 2018
|
November 29, 2018
|
December 3, 2018
|
December 31, 2018
|
January 3, 2019
|
January 29, 2019
|
January 31, 2019
|
February 28, 2019
|
March 4, 2019
|
March 29, 2019
|
April 2, 2019
|
April 29, 2019
|
May 1, 2019
|
May 29, 2019
|
May 31, 2019
|
June 28, 2019
|
July 2, 2019
|
July 29, 2019
|
July 31, 2019
|
August 29, 2019
|
September 3, 2019
|
September 30, 2019
|
October 2, 2019
|
October 29, 2019
|
October 31, 2019
|
November 29, 2019
|
December 3, 2019
|
December 30, 2019
|
January 2, 2020
|
January 29, 2020
|
January 31, 2020
|
February 28, 2020
|
March 3, 2020
|
March 30, 2020
|
April 1, 2020
|
April 29, 2020
|
May 1, 2020
|
May 29, 2020
|
June 2, 2020
|
June 29, 2020
|
July 1, 2020
|
July 29, 2020
|
July 31, 2020
|
August 28, 2020
|
September 2, 2020
|
September 29, 2020
|
October 1, 2020
|
Coupon
Observation Dates
†
|
Coupon
Payment Dates
|
October 29, 2020
|
November 2, 2020
|
November 30, 2020
|
December 2, 2020
|
December 29, 2020
|
December 31, 2020
|
January 29, 2021
|
February 2, 2021
|
February 26, 2021
|
March 2, 2021
|
March 29, 2021
|
March 31, 2021
|
April 29, 2021
|
May 4, 2021
|
May 28, 2021
|
June 2, 2021
|
June 29, 2021
|
July 1, 2021
|
July 29, 2021
|
August 2, 2021
|
August 31, 2021 (the Final Valuation
Date)
|
September 3, 2021 (the Maturity
Date)
|
†
The Notes are not callable until the twelfth
Coupon Observation Date, September 1, 2017.
Each of the Coupon Observation Dates, and therefore the Coupon
Payment Dates, is subject to postponement in the event of a market disruption event and as described under “General Terms
of Notes — Postponement of a Determination Date — Notes Linked to 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.
What Are the Tax Consequences of the Notes?
|
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. In determining our reporting responsibilities
we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons
and (ii) any Contingent Coupons as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax
Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent
Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel,
we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
Sale, Exchange or Redemption of a Note.
Assuming
the treatment described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call
or at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale
or exchange and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming
Contingent Coupons are properly treated as ordinary income, consistent with the position referred to above). 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. The deductibility of
capital losses is subject to limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed
and the time it is paid, it is likely that you will be treated as receiving ordinary income equal to the Contingent Coupon.
Although uncertain, it is possible that proceeds received from the sale or exchange of your Notes prior to an Observation
Date but that can be attributed to an expected Contingent Coupon payment could be treated as ordinary income. You should
consult your tax adviser regarding this issue.
As described above, there are other reasonable treatments that
the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially affected.
In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property
to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any
Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences
of an investment in the Notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Notes, including possible alternative treatments and the issues presented by this
notice.
Non-U.S. Holders — Tax Considerations.
The U.S. federal
income tax treatment of Contingent Coupons is uncertain, and although we believe it is reasonable to take a position that Contingent
Coupons are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided), a withholding agent may nonetheless
withhold on these payments (generally at a rate of 30%, subject to the possible reduction of that rate under an applicable income
tax treaty), unless income from your Notes is effectively connected with your conduct of a trade or business in the United States
(and, if an applicable treaty so requires, attributable to a permanent establishment in the United States). If you are not a United
States person, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in
the Notes in light of your particular circumstances.
Non-U.S. holders should also note that recently promulgated Treasury
regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity linked instruments”
will not apply to the Notes.
FATCA
. Withholding under legislation commonly referred
to as “FATCA” could apply to payments with respect to the Notes that are treated as U.S.-source “fixed or determinable
annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest, if the Notes
are recharacterized, in whole or in part, as debt instruments, or Contingent Coupons if they are otherwise treated as FDAP Income).
If the Notes are recharacterized, in whole or in part, as debt instruments, withholding could also apply to payments of gross proceeds
of a taxable disposition, including an early redemption or redemption at maturity. However, under a recent IRS notice, this regime
will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) with respect to dispositions occurring
before January 1, 2019. You should consult your tax adviser regarding the potential application of FATCA to the Notes.
In the event of any withholding on the Notes, we will not be required
to pay any additional amounts with respect to amounts so withheld.
An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing directly in the applicable Underlying. These risks are explained in more detail in
the “Risk Factors” section of the accompanying product supplement. We also urge you to consult your investment, legal,
tax, accounting and other advisers before you invest in the Notes.
Risks Relating to the Notes Generally
|
t
|
Your Investment in the Notes May Result in a Loss
— The Notes differ from ordinary debt securities in that JPMorgan
Financial
will not necessarily repay the full principal amount of
the Notes. If the Notes are not called and the closing price of one share of the applicable Underlying has declined below the applicable
Downside Threshold on the Final Valuation Date, you will be fully exposed to any depreciation in the closing price of one share
of the applicable Underlying from the applicable Initial Value to the applicable Final Value. In this case, JPMorgan Financial
will repay less than the full principal amount at maturity, resulting in a loss of principal that is proportionate to the negative
Underlying Return. Under these circumstances, you will lose 1% of your principal for every 1% that the applicable Final Value is
less than the applicable Initial Value and could lose your entire principal amount. As a result, your investment in the Notes may
not perform as well as an investment in a security that does not have the potential for full downside exposure to the applicable
Underlying at maturity.
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Credit Risks of JPMorgan Financial and JPMorgan Chase & Co.
— The Notes are unsecured and unsubordinated debt
obligations of the Issuer, JPMorgan Chase Financial Company LLC, the payment on which is fully and unconditionally guaranteed by
JPMorgan Chase & Co. The Notes will rank
pari passu
with all of our other unsecured and unsubordinated obligations,
and the related guarantee JPMorgan Chase & Co. will rank
pari passu
with all of JPMorgan Chase & Co.’s other
unsecured and unsubordinated obligations. The Notes and related guarantees are not, either directly or indirectly, an obligation
of any third party. Any payment to be made on the Notes, including any repayment of principal, depends on the ability of JPMorgan
Financial and JPMorgan Chase & Co. to satisfy their obligations as they come due. As a result, the actual and perceived creditworthiness
of JPMorgan Financial and JPMorgan Chase & Co. may affect the market value of the Notes and, in the event JPMorgan Financial
and JPMorgan Chase & Co. were to default on their obligations, you may not receive any amounts owed to you under the terms
of the Notes and you could lose your entire investment.
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As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations and 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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You
Are Not Guaranteed Any Contingent Coupons
— We will not necessarily
make periodic coupon payments on the Notes. If the closing price of one share of the
applicable Underlying on an Observation Date is less than the applicable Coupon Barrier,
we will not pay you the applicable Contingent Coupon for that Observation Date and the
applicable Contingent Coupon that would otherwise be payable will not be accrued and
will be lost. If the closing price of one share of the applicable Underlying is less
than the applicable Coupon Barrier on each of the Observation Dates, we will not pay
you any Contingent Coupon during the term of, and you will not receive a positive return
on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a
period of greater risk of principal loss on your Notes.
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Return
on the Notes Limited to the Sum of Any Contingent Coupons and You Will Not Participate
in Any Appreciation of the Applicable Underlying
— The return potential
of the Notes is limited to the specified Contingent Coupon Rate, regardless of the appreciation
in the closing price of one share of the applicable Underlying, which may be significant.
In addition, the total return on the Notes will vary based on the number of Observation
Dates on which the requirements for a Contingent Coupon have been met prior to maturity
or an automatic call. Further, if the Notes are called, you will not receive any Contingent
Coupons or any other payments in respect of any Observation Dates after the applicable
Call Settlement Date. Because the Notes could be called as early as the twelfth Coupon
Observation Date, the total return on the Notes could be minimal. If the Notes are not
called, you may be subject to the applicable Underlying’s risk of decline even
though you are not able to participate in any potential appreciation in the price
of the applicable Underlying. Generally, the longer the Notes remain outstanding, the
less likely it is that they will be automatically called, due to the decline in the price
of the applicable Underlying and the shorter time remaining for the price of the applicable
Underlying to recover to or above the applicable Initial Value on a subsequent Observation
Date. As a result, the return on an investment in the Notes could be less than the return
on a direct investment in the applicable Underlying. In addition, if the Notes are not
called and the applicable Final Value is below the applicable Downside Threshold, you
will have a loss on your principal amount and the overall return on the Notes may be
less than the amount that would be paid on a conventional debt security of JPMorgan Financial
of comparable maturity.
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Contingent
Repayment of Principal Applies Only If You Hold the Notes to Maturity
—
If you are able to sell your Notes in the secondary market, if any, prior to maturity,
you may have to sell them at a loss relative to your initial investment even if the applicable
stock price is above the applicable Downside Threshold. If by maturity the Notes have
not been called, either JPMorgan Financial will repay you the full principal amount per
Note
plus
the applicable Contingent Coupon, or if the price of one share of the
applicable Underlying closes below the applicable Downside Threshold on the Final Valuation
Date, JPMorgan Financial will repay less than the principal amount, if anything, at maturity,
resulting in a loss on your principal amount that is proportionate to the decline in
the closing price of one share of the applicable Underlying from the applicable Initial
Value to the applicable Final Value. This contingent repayment of principal applies only
if you hold your Notes to maturity.
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A
Higher Applicable Contingent Coupon Rate and/or a Lower Applicable Coupon Barrier and/or
Applicable Downside Threshold May Reflect Greater Expected Volatility of the Applicable
Underlying, Which Is Generally Associated With a Greater Risk of Loss
—
Volatility
is a measure of the degree of variation in the price of the applicable Underlying over
a period of time. The greater the expected volatility of the applicable Underlying at
the time the terms of the Notes are set, the greater the expectation is at that time
that the price of the applicable Underlying could close below the applicable Coupon Barrier
on any Observation Date, resulting in the loss of one or more, or all, Contingent Coupon
payments, or below the applicable Downside Threshold on the Final Valuation Date, resulting
in the loss of a significant portion or all of your principal at maturity. In addition,
the economic terms of the Notes, including the applicable Contingent Coupon Rate, the
applicable Coupon Barrier and the applicable Downside Threshold, are based, in part,
on the expected volatility of the applicable Underlying at the time the terms of the
Notes are set, where a higher expected volatility will generally be reflected in a higher
applicable Contingent Coupon Rate than the fixed rate we would pay on conventional debt
securities of the same maturity and/or on otherwise comparable securities and/or a lower
applicable Coupon Barrier and/or a lower applicable Downside Threshold as compared to
otherwise comparable securities. Accordingly, a higher applicable Contingent Coupon Rate
will generally be indicative of a greater risk of loss while a lower applicable Coupon
Barrier or applicable Downside Threshold does not necessarily indicate that the Notes
have a greater likelihood of paying Contingent Coupon payments or returning your principal
at maturity. You should be willing to accept the downside market risk of the applicable
Underlying and the potential loss of some or all of your principal at maturity.
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Reinvestment
Ris
k
— If your Notes are called early, the holding period over
which you would have the opportunity to receive any Contingent Coupons could be as short
as approximately one year. There is no guarantee that you would be able to reinvest the
proceeds from an investment in the Notes at a comparable return and/or with a comparable
interest rate for a similar level of risk in the event the Notes are called prior to
the maturity date.
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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 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. We and/or
our affiliates may also currently or from time to time engage in business with the issuer
of the applicable Underlying, including extending loans to, or making equity investments
in, the issuer of the applicable Underlying or providing advisory services to the issuer
of the applicable Underlying. As a prospective purchaser of the Notes, you should undertake
an independent investigation of the issuer of the applicable Underlying as in your judgment
is appropriate to make an informed decision with respect to an investment in the Notes.
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Each Contingent Coupon Is Based Solely on the Closing Price of One Share of the Applicable Underlying on the Applicable
Observation Date
— Whether a Contingent Coupon will be payable with respect to an Observation Date will be based solely
on the closing price of one share of the applicable Underlying on that Observation Date. As a result, you will not know whether
you will receive a Contingent Coupon until the related Observation Date. Moreover, because each Contingent Coupon is based solely
on the closing price of one share of the applicable Underlying on the applicable Observation Date, if that closing price is less
than the applicable Coupon Barrier, you will not receive any Contingent Coupon with respect to that Observation Date, even if the
closing price of one share of the applicable Underlying was higher on other days during the period before that Observation Date.
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Single
Stock Risk
— The price of the applicable Underlying can rise or fall
sharply due to factors specific to that Underlying and its issuer, such as stock price
volatility, earnings, financial conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as general market factors,
such as general stock market volatility and levels, interest rates and economic and political
conditions. For additional information regarding each Underlying and its issuer, please
see “The Underlyings” and the section applicable to that Underlying issuer
in this pricing supplement and that issuer’s SEC filings referred to in those sections.
We urge you to review financial and other information filed periodically with the SEC
by the applicable Underlying issuer.
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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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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 the Notes that are greater than or less than the estimated value of
the Notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the Notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant
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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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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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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 selling commissions,
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).
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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 factor 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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Many
Economic and Market Factors Will Impact the Value of the Notes
—
As described under “The Estimated Value of the Notes” in this pricing supplement,
the Notes can be thought of as securities that combine a fixed-income debt component
with one or more derivatives. As a result, the factors that influence the values
of fixed-income debt and derivative instruments will also influence the terms of the
Notes at issuance and their value in the secondary market. Accordingly, 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 price
of the applicable Underlying, including:
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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 in the closing
price of one share of the applicable Underlying;
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the time to maturity of the Notes;
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the likelihood of an automatic call being triggered;
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whether the closing price of one share of the applicable
Underlying has been, or is expected to be, less than the applicable Coupon Barrier on any Observation Date and whether the applicable
Final Value is expected to be less than the Downside Threshold;
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the dividend rate on the applicable Underlying;
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the occurrence of certain events affecting the issuer
of the applicable Underlying that may or may not require an adjustment to the closing price and the Stock Adjustment Factor of
the applicable Underlying, including a merger or acquisition;
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interest and yield rates in the market generally;
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
Dividend Payments or Voting Rights in the Applicable Underlying
— As
a holder of the Notes, you will not have any ownership interest or rights in the applicable
Underlying, such as voting rights or dividend payments. In addition, the issuer of the
applicable Underlying will not have any obligation to consider your interests as a holder
of the Notes in taking any corporate action that might affect the value of the applicable
Underlying and the Notes.
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No
Affiliation with the Applicable Underlying Issuer
— We are not affiliated
with the issuer of the applicable Underlying. We have not independently verified any
of the information about the applicable Underlying issuer contained in this pricing
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supplement. You should make your
own investigation into the applicable Underlying and its issuer. We are not responsible for the applicable Underlying issuer’s
public disclosure of information, whether contained in SEC filings or otherwise.
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No
Assurances That the Investment View Implicit in the Notes Will Be Successful
—
While the Notes are structured to provide for Contingent Coupons if the applicable Underlying
does not close below the applicable Coupon Barrier on the Observation Dates, we cannot
assure you of the economic environment during the term or at maturity of your 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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Anti-Dilution
Protection Is Limited and May Be Discretionary
— Although the calculation
agent will adjust the closing price and the Stock Adjustment Factor of the applicable
Underlying for certain corporate events (such as stock splits and stock dividends) affecting
the applicable Underlying, the calculation agent is not required to make an adjustment
for every corporate event that can affect the applicable Underlying. If an event occurs
that does not require the calculation agent to make these adjustments, the market value
of your Notes, whether the Notes will be automatically called and any payment on the
Notes may be materially and adversely affected. You should also be aware that the calculation
agent may make any such adjustment, determination or calculation in a manner that differs
from what is described in the accompanying product supplement as it deems necessary to
ensure an equitable result. Subject to the foregoing, the calculation agent is under
no obligation to consider your interests as a holder of the Notes in making these determinations.
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Potentially
Inconsistent Research, Opinions or Recommendations by JPMS, UBS or Their Affiliates
— JPMS, UBS or their affiliates may publish research, express opinions or
provide recommendations (for example, with respect to the issuer of the applicable Underlying)
that are inconsistent with investing in or holding the Notes, and that may be revised
at any time. Any such research, opinions or recommendations may or may not recommend
that investors buy or hold the applicable Underlying and could affect the value of the
applicable Underlying, and therefore the market value of the Notes.
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Tax
Treatment
— Significant aspects of the tax treatment of the Notes are
uncertain. You should consult your tax adviser about your tax situation.
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Potential
JPMorgan Financial Impact on the Market Price of the Applicable Underlying
— Trading or transactions by JPMorgan Financial or its affiliates in the applicable
Underlying and/or over-the-counter options, futures or other instruments with returns
linked to the performance of the applicable Underlying may adversely affect the market
price of the applicable Underlying and, therefore, the market value of the Notes.
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The
Final Terms and Valuation of the Notes Will Be Finalized on the Trade Date and 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 finalized
on the Trade Date and provided in the pricing supplement. In particular, the estimated
value of the applicable Notes will be finalized on the Trade Date and provided in the
pricing supplement and may be as low as the applicable minimum set forth on the cover
of this pricing supplement. In addition, the Downside Threshold and Coupon Barrier for
each Note will be finalized on the Trade Date and provided in the pricing supplement
and each may be as high as the applicable maximum set forth on the cover of this pricing
supplement. Accordingly, you should consider your potential investment in the Notes based
on the minimum for estimated value of the applicable Notes and the maximum for the Downside
Threshold and Coupon Barrier of the applicable Notes.
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Risks Relating to Securities Linked
to the A Ordinary Shares of Royal Dutch Shell plc or the Ordinary Shares of Sanofi
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Risks Associated with Non-U.S. Companies
— An investment in Notes linked to the A ordinary shares of Royal Dutch
Shell plc (which we refer to as Shell) or the ordinary shares of Sanofi involves risks associated with the home countries of Shell
and Sanofi, which are the United Kingdom and France, respectively. The A ordinary shares of Shell and the ordinary shares
of Sanofi, which are not traded in the United States, are subject to securities trading rules that are different from those applicable
to U.S.-listed securities. The prices of securities issued by non-U.S. companies may be affected by political, economic, financial
and social factors in the home country of the applicable non-U.S. issuer, including changes in that country’s government,
economic and fiscal policies, currency exchange laws or other laws or restrictions. Moreover, the economy of that country may differ
favorably or unfavorably from the economy of the United States in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resources and self-sufficiency. That country may be subjected to different and, in some cases, more adverse
economic environments.
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No Direct Exposure to Fluctuations in Foreign Exchange Rates
— The value of Notes linked to the A ordinary shares
of Shell or the ordinary shares of Sanofi will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currency
in which the applicable Underlying is denominated, although any currency fluctuations could affect the performance of the applicable
Underlying. Therefore, if the applicable currency appreciates or depreciates relative to the U.S. dollar over the term of the Notes,
you will not receive any additional payment or incur any reduction in payment with respect to the Notes.
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The examples below illustrate the hypothetical payments on a Coupon
Payment Date, upon an automatic call or at maturity under different hypothetical scenarios for a $10.00 Note on an offering of
the Notes linked to a hypothetical Underlying and assume an Initial Value of €100, a Downside Threshold and Coupon Barrier
of €80.00* (which is 80.00%* of the hypothetical Initial Value) and a Contingent Coupon Rate of 6.00% per annum. The hypothetical
Initial Value of €100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value
for any Underlying. The actual Initial Value and the resulting Downside Threshold and Coupon Barrier for each Underlying will be
based on the closing price of one share of that Underlying on the Trade Date and will be provided in the pricing supplement.**
For historical data regarding the actual closing prices of one share of each Underlying, please see the historical information
set forth under “The Underlyings” in this pricing supplement.
Principal Amount:
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$10.00
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Term:
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Five years (unless earlier called)
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Hypothetical Initial Value:
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€100.00
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Hypothetical Contingent Coupon Rate:
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6.00% per annum (or 0.50% per month)
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Observation Dates:
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Monthly (callable after one year)
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Hypothetical Downside Threshold:
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€80.00 (which is 80.00%* of the hypothetical Initial Value)
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Hypothetical Coupon Barrier:
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€80.00 (which is 80.00%* of the hypothetical Initial Value)
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*
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The actual Downside Threshold and Coupon Barrier for each Underlying will be finalized on the Trade Date and provided in the pricing supplement. If the actual Downside Threshold and Coupon Barrier for the applicable Underlying are greater than the assumed Downside Threshold and Coupon Barrier specified above, there will be a greater possibility that the closing price of one share of that Underlying will decline below its Coupon Barrier on an Observation Date and/or its Downside Threshold on the Final Valuation Date. Accordingly, the payments on the Notes may be less than the amounts shown below.
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**
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The actual value of any Contingent Coupon payments you will receive over the term of the Notes, the actual value of the payment upon automatic call or at maturity and the actual Initial Value, Downside Threshold and Coupon Barrier for each Underlying applicable to your Notes may be more or less than the amounts displayed in these hypothetical scenarios. The actual Contingent Coupon Rate for each Underlying is specified on the cover of this pricing supplement.
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The examples below are purely hypothetical and are not based
on any specific offering of Notes linked to any specific Underlying. These examples are intended to illustrate how the value of
any payment on the Notes will depend on the closing price on the Observation Dates.
Example 1 — Notes Are Automatically Called on the Twelfth
Observation Date
Date
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Closing
Price
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Payment (per Note)
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First Observation Date
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€105.00 (at or above Initial Value; Notes NOT
called because Observation Date is prior to the twelfth Observation Date)
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$0.05 (Contingent Coupon)
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Second Observation Date
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€60.00 (below Coupon Barrier)
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$0.00
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Third through Eleventh Observation Dates
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Various (all below Coupon Barrier)
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$0.00
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Twelfth Observation Date
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€110.00 (at or above Initial Value)
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$10.05
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Total Payment:
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$10.10 (1.00% return)
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Although the closing price is above the Initial Value on the first
Observation Date, the Notes are not called because the Notes cannot be called before the twelfth Observation Date. Because the
Notes are automatically called on the twelfth Observation Date, we will pay you on the applicable Call Settlement Date a total
of $10.05 per Note, reflecting your principal amount
plus
the applicable Contingent Coupon. When that amount is added to
the Contingent Coupon payment of $0.05 received in respect of prior Observation Dates, we will have paid you a total of $10.10
per Note for a 1.00% total return on the Notes. No further amounts will be owed on the Notes.
Example 2 — Notes Are Automatically Called on the Fifty-Ninth
Observation Date
Date
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Closing
Price
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Payment (per Note)
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First Observation Date
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€90.00 (at or above Coupon Barrier; below Initial
Value)
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$0.05 (Contingent Coupon)
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Second Observation Date
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€85.00 (at or above Coupon Barrier; below Initial
Value)
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$0.05 (Contingent Coupon)
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Third through Eleventh Observation Dates
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Various (all at or above Coupon Barrier, all below
Initial Value)
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$0.45 (Contingent Coupons)
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Twelfth through Fifty-Eighth Observation Dates
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Various (all below Coupon Barrier)
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$0.00
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Fifty-Ninth Observation Date
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€105.00 (at or above Initial Value)
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$10.05 (Payment upon Automatic Call)
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Total Payment:
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$10.60 (6.00% return)
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Because the Notes are automatically called on the fifty-ninth
Observation Date, we will pay you on the applicable Call Settlement Date a total of $10.05 per Note, reflecting your principal
amount
plus
the applicable Contingent Coupon. When that amount is added to the Contingent Coupon payments of $0.55 received
in respect of prior Observation Dates, we will have paid you a total of $10.60 per Note for a 6.00% total return on the Notes.
No further amounts will be owed on the Notes.
Example 3 — Notes Are NOT Automatically Called
and
the Final Value Is at or above the Downside Threshold
Date
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Closing
Price
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Payment (per Note)
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First Observation Date
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€90.00 (at or above Coupon Barrier; below Initial
Value)
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$0.05 (Contingent Coupon)
|
Second Observation Date
|
€85.00 (at or above Coupon Barrier; below Initial
Value)
|
$0.05 (Contingent Coupon)
|
Third through Fifty-Ninth Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
Final Valuation Date
|
€85.00 (at or above Downside Threshold; below
Initial Value)
|
$10.05 (Payment at Maturity)
|
|
|
|
|
|
Total Payment:
|
$10.15 (1.50% return)
|
|
|
|
|
At maturity, we will pay you a total of $10.05 per Note, reflecting
your principal amount
plus
the applicable Contingent Coupon. When that amount is added to the Contingent Coupon payments
of $0.10 received in respect of prior Observation Dates, we will have paid you a total of $10.15 per Note for a 1.50% total return
on the Notes.
Example 4 — Notes Are NOT Automatically Called
and
the Final Value Is below the Downside Threshold
Date
|
Closing
Price
|
Payment (per Note)
|
First Observation Date
|
€90.00 (at or above Coupon Barrier; below Initial
Value)
|
$0.05 (Contingent Coupon)
|
Second Observation Date
|
€85.00 (at or above Coupon Barrier; below Initial
Value)
|
$0.05 (Contingent Coupon)
|
Third through Eleventh Observation Dates
|
Various (all at or above Initial Value)
|
$0.45 (Contingent Coupons)
|
Twelfth through Fifty-Ninth Observation Dates
|
Various (all at or above Coupon Barrier; all below
Initial Value)
|
$2.40 (Contingent Coupons)
|
Final Valuation Date
|
€60.00 (below Downside Threshold)
|
$10.00 × (1 + Underlying Return) =
$10.00 × (1 + -40%) =
$10.00 × 60% =
$6.00 (Payment at Maturity)
|
|
|
|
|
|
Total Payment:
|
$8.95 (-10.50% return)
|
|
|
|
|
Although the closing price is at or above the Initial Value on
the third through eleventh Observation Dates, the Notes are not called because the Notes cannot be called before the twelfth Observation
Date. Because the Notes are not called and the Final Value of $60.00 is below the Downside Threshold, at maturity we will pay you
$6.00 per Note. When that amount is added to the Contingent Coupon payments of $2.95 received in respect of prior Observation Dates,
we will have paid you $8.95 per Note for a loss on the Notes of 10.50%.
Example 5 — Notes Are NOT Automatically Called
and
the Final Value is below the Downside Threshold
Date
|
Closing
Price
|
Payment (per Note)
|
First Observation Date
|
€65.00 (below Coupon Barrier)
|
$0.00
|
Second through Eleventh Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
Twelfth through Fifty-Ninth Observation Dates
|
Various (all below Coupon Barrier)
|
$0.00
|
Final Valuation Date
|
€50.00 (below Downside Threshold)
|
$10.00 × (1 + Underlying Return) =
$10.00 × (1 + -50%) =
$10.00 × 50% =
$5.00 (Payment at Maturity)
|
|
|
|
|
|
Total Payment:
|
$5.00 (-50.00% return)
|
|
|
|
|
Because the Notes are not called, the Final Value is below the
Downside Threshold and the Underlying Return is -50%, at maturity we will pay you $5.00 per Note for a loss on the Notes of 50.00%.
Because there is no Contingent Coupon paid during the term of the Notes, that represents the total payment on the Notes.
The hypothetical returns and hypothetical payments on the Notes
shown above apply
only if you hold the Notes for their entire term
or until called
. 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.
Included on the following pages is a brief description of the
issuers of the Underlyings. This information has been obtained from publicly available sources, without independent verification.
Set forth below is a table that provides the quarterly high and low closing prices of one share of each Underlying. The information
given below is for the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015 and the first and second calendar quarters
of 2016. Partial data is provided for the third calendar quarter of 2016. We obtained the closing price information set forth below
from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. You should
not take the historical prices of any Underlying as an indication of future performance.
Each of the Underlyings is registered under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Companies with securities registered under the Exchange Act are required
to file financial and other information specified by the SEC periodically. Information filed by the issuer of each Underlying with
the SEC can be reviewed electronically through a web site maintained by the SEC. The address of the SEC’s web site is http://www.sec.gov.
Information filed with the SEC by the issuer of each Underlying under the Exchange Act can be located by reference to its SEC file
number provided below. In addition, information filed with the SEC can be inspected and copied at the Public Reference Section
of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of this material can also be obtained from the Public
Reference Section, at prescribed rates. We do not make any representation that these publicly available documents are accurate
or complete.
According to its publicly available filings with the SEC, Royal
Dutch Shell plc, which we refer to as Shell, an England and Wales company, is an independent oil and gas company that explores
for crude oil and natural gas worldwide, both in conventional fields and from sources such as tight rock, shale and coal formations.
Shell’s portfolio of refineries and chemical plants turns the oil and gas that Shell produces into a range of refined and
petrochemical products, which are moved and marketed around the world for domestic, industrial and transport use. The products
Shell sells include gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants,
bitumen and sulphur. Shell also produces and sells ethanols from sugar cane in Brazil, through a joint venture. The A ordinary
shares of Shell, par value $0.07 per share (Bloomberg ticker: RDS/A NA), is listed on Euronext Amsterdam, which we refer to as
the relevant exchange for purposes of Shell in the accompanying product supplement. Shell’s SEC file number is 001-32575.
Historical Information Regarding the A Ordinary Shares of
Shell
The following table sets forth the quarterly high and low closing
prices of one A ordinary share of Shell, based on daily closing prices on the primary exchange for the A ordinary shares of Shell,
as reported by Bloomberg. The closing price of one A ordinary share of Shell on August 23, 2016 was €22.165. The actual Initial
Value will be the closing price of one A ordinary share of Shell on the Trade Date. We obtained the closing prices above and below
from Bloomberg, without independent verification. The closing prices may have been adjusted by Bloomberg for corporate actions
such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
Since its inception, the price of one A ordinary share of Shell
has experienced significant fluctuations. The historical performance of the A ordinary shares of Shell should not be taken as an
indication of future performance, and no assurance can be given as to the closing prices of one A ordinary share of Shell during
the term of the Notes. We cannot give you assurance that the performance of the A ordinary shares of Shell will result in the return
of any of your principal amount.
Quarter
Begin
|
Quarter
End
|
Quarterly
Closing High
|
Quarterly
Closing Low
|
Close
|
1/1/2011
|
3/31/2011
|
€26.595
|
€24.000
|
€25.645
|
4/1/2011
|
6/30/2011
|
€26.120
|
€23.780
|
€24.480
|
7/1/2011
|
9/30/2011
|
€25.985
|
€21.595
|
€23.175
|
10/1/2011
|
12/31/2011
|
€28.300
|
€22.365
|
€28.150
|
1/1/2012
|
3/31/2012
|
€29.105
|
€26.210
|
€26.250
|
4/1/2012
|
6/30/2012
|
€26.910
|
€24.515
|
€26.605
|
7/1/2012
|
9/30/2012
|
€28.910
|
€26.850
|
€26.900
|
10/1/2012
|
12/31/2012
|
€27.225
|
€25.365
|
€25.975
|
1/1/2013
|
3/31/2013
|
€26.985
|
€24.495
|
€25.190
|
4/1/2013
|
6/30/2013
|
€26.800
|
€24.100
|
€24.545
|
7/1/2013
|
9/30/2013
|
€25.985
|
€23.795
|
€24.380
|
10/1/2013
|
12/31/2013
|
€25.905
|
€23.470
|
€25.905
|
1/1/2014
|
3/31/2014
|
€26.890
|
€25.155
|
€26.520
|
4/1/2014
|
6/30/2014
|
€30.455
|
€26.425
|
€30.240
|
7/1/2014
|
9/30/2014
|
€31.020
|
€29.565
|
€30.325
|
10/1/2014
|
12/31/2014
|
€29.985
|
€24.560
|
€27.660
|
1/1/2015
|
3/31/2015
|
€29.520
|
€25.995
|
€27.835
|
4/1/2015
|
6/30/2015
|
€29.440
|
€25.370
|
€25.370
|
7/1/2015
|
9/30/2015
|
€26.810
|
€20.580
|
€21.185
|
10/1/2015
|
12/31/2015
|
€24.980
|
€19.635
|
€21.095
|
1/1/2016
|
3/31/2016
|
€22.180
|
€16.670
|
€21.340
|
4/1/2016
|
6/30/2016
|
€24.670
|
€20.530
|
€24.670
|
7/1/2016
|
8/23/2016*
|
€25.250
|
€22.050
|
€22.165
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the period from July 1, 2016 through August 23, 2016. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance of the A ordinary
shares of Shell from January 2, 2006 through August 23, 2016, based on information from Bloomberg, without independent verification.
The dotted line represents a hypothetical Downside Threshold and Coupon Barrier of €15.516, equal to 70.00% (based on the top
of the range of 65.00% to 70.00%) of the closing price on August 23, 2016. The actual Downside Threshold and Coupon Barrier will
be finalized on the Trade Date and provided in the pricing supplement based on the closing price of one A ordinary share of Shell
on the Trade Date and will not be greater than 70.00% of the Initial Value.
Past performance of the Underlying is not indicative of the
future performance of the Underlying.
According to its publicly available filings with the SEC, Sanofi
is a healthcare company engaged in research, development, manufacture and marketing of therapeutic solutions. The ordinary shares
of Sanofi, par value €2.00 per share (Bloomberg ticker: SAN FP), is listed on Euronext Paris, which we refer to as the relevant
exchange for purposes of Sanofi in the accompanying product supplement. Sanofi’s SEC file number is 001-31368.
Historical Information Regarding the Ordinary Shares of Sanofi
The following table sets forth the quarterly high and low closing
prices of one ordinary share of Sanofi based on daily closing prices on the primary exchange for ordinary shares of Sanofi, as
reported by Bloomberg. The closing price of one ordinary share of Sanofi on August 23, 2016 was €69.05. The actual Initial
Value will be the closing price of one ordinary share of Sanofi on the Trade Date. We obtained the closing prices above and below
from Bloomberg, without independent verification. The closing prices may have been adjusted by Bloomberg for corporate actions
such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
Since its inception, the price of one ordinary share of Sanofi
has experienced significant fluctuations. The historical performance of the ordinary shares of Sanofi should not be taken as an
indication of future performance, and no assurance can be given as to the closing prices of one ordinary share of Sanofi during
the term of the Notes. We cannot give you assurance that the performance of the ordinary shares of Sanofi will result in the return
of any of your principal amount.
Quarter
Begin
|
Quarter
End
|
Quarterly
Closing High
|
Quarterly
Closing Low
|
Close
|
1/1/2011
|
3/31/2011
|
€51.80
|
€46.12
|
€49.48
|
4/1/2011
|
6/30/2011
|
€56.26
|
€50.16
|
€55.44
|
7/1/2011
|
9/30/2011
|
€55.90
|
€44.19
|
€49.35
|
10/1/2011
|
12/31/2011
|
€56.75
|
€47.38
|
€56.75
|
1/1/2012
|
3/31/2012
|
€59.33
|
€55.44
|
€58.23
|
4/1/2012
|
6/30/2012
|
€59.74
|
€53.51
|
€59.74
|
7/1/2012
|
9/30/2012
|
€69.23
|
€59.75
|
€66.35
|
10/1/2012
|
12/31/2012
|
€72.29
|
€66.07
|
€71.39
|
1/1/2013
|
3/31/2013
|
€79.27
|
€66.60
|
€79.27
|
4/1/2013
|
6/30/2013
|
€86.67
|
€75.62
|
€79.62
|
7/1/2013
|
9/30/2013
|
€80.87
|
€72.09
|
€74.97
|
10/1/2013
|
12/31/2013
|
€80.20
|
€71.85
|
€77.12
|
1/1/2014
|
3/31/2014
|
€76.36
|
€69.40
|
€75.68
|
4/1/2014
|
6/30/2014
|
€80.12
|
€74.02
|
€77.58
|
7/1/2014
|
9/30/2014
|
€89.56
|
€75.47
|
€89.56
|
10/1/2014
|
12/31/2014
|
€88.85
|
€71.10
|
€75.66
|
1/1/2015
|
3/31/2015
|
€94.04
|
€73.27
|
€91.93
|
4/1/2015
|
6/30/2015
|
€98.98
|
€86.04
|
€88.24
|
7/1/2015
|
9/30/2015
|
€100.65
|
€83.09
|
€84.89
|
10/1/2015
|
12/31/2015
|
€93.30
|
€74.73
|
€78.60
|
1/1/2016
|
3/31/2016
|
€78.49
|
€67.27
|
€70.86
|
4/1/2016
|
6/30/2016
|
€78.67
|
€67.30
|
€74.92
|
7/1/2016
|
8/23/2016*
|
€76.70
|
€69.05
|
€69.05
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2016 includes data for the period from July 1, 2016 through August 23, 2016. Accordingly, the “Quarterly Closing High,” “Quarterly Closing Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance of the ordinary
shares of Sanofi from January 2, 2006 through August 23, 2016, based on information from Bloomberg, without independent verification.
The dotted line represents a hypothetical Downside Threshold and Coupon Barrier of €51.44, equal to 74.50% (based on the top
of the range of 69.50% to 74.50%) of the closing price on August 23, 2016. The actual Downside Threshold and Coupon Barrier will
be finalized on the Trade Date and provided in the pricing supplement based on the closing price of one ordinary share of Sanofi
on the Trade Date and will not be greater than 74.50% of the Initial Value.
Past performance of the Underlying is not indicative of
the future performance of the Underlying.