How
the Notes Work
Payments in Connection with Review Dates Preceding
the Final Review Date
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Contingent Interest Payments
The
table below illustrates the total Contingent Interest Payments per $1,000 principal amount note over the term of the notes based
on the Contingent Interest Rate of 8.25% per annum, depending on how many Contingent Interest Payments are made prior to automatic
call or maturity.
Number of Contingent Interest Payments
|
Total Contingent Interest Payments
|
4
|
$82.500
|
3
|
$61.875
|
2
|
$41.250
|
1
|
$20.625
|
0
|
$0.000
|
PS-
2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Indices, assuming a range of performances for the hypothetical Lesser Performing Index on
the Review Dates.
Each hypothetical payment set forth below assumes that the closing level of the Index that is not the Lesser
Performing Index on each Review Date is greater than or equal to its Initial Value (and therefore its Interest Barrier and Trigger
Value).
In addition, the hypothetical payments set forth
below assume the following:
|
●
|
an Initial Value for the Lesser Performing Index of 100.00;
|
|
●
|
an Interest Barrier and a Trigger Value for the
Lesser Performing Index
of 70.00 (equal to
70.00% of its hypothetical Initial Value); and
|
|
●
|
a Contingent Interest Rate of
8.25%
per annum (payable at a rate of
2.0625%
per quarter).
|
The hypothetical Initial Value of the Lesser Performing
Index of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of either Index.
The actual Initial Value of each Index is the
closing level of that Index on the Pricing Date and is specified under “Key Terms - Initial Value” in this pricing
supplement. For historical data regarding the actual closing levels of each Index, please see the historical information set forth
under “The Indices” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
105.00
|
$1,020.625
|
|
Total Payment
|
$1,020.625 (2.0625% return)
|
Because the closing level of each Index on the
first Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment, for
each $1,000 principal amount note, of $1,020.625 (or $1,000
plus
the Contingent Interest Payment applicable to the first
Review Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 2 — Notes are automatically
called on the third Review Date.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
95.00
|
$20.625
|
Second Review Date
|
60.00
|
$0
|
Third Review Date
|
105.00
|
$1,020.625
|
|
Total Payment
|
$1,041.25 (4.125% return)
|
Because the closing level of each Index on the
third Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment, for
each $1,000 principal amount note, of $1,020.625 (or $1,000
plus
the Contingent Interest Payment applicable to the third
Review Date), payable on the applicable Call Settlement Date. When added to the Contingent Interest Payments received with respect
to the prior Review Dates, the total amount paid, for each $1,000 principal amount note, is $1,041.25. No further payments will
be made on the notes.
PS-
3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
Example 3 — Notes have NOT been
automatically called, the Final Value of the Lesser Performing Index
is greater than or equal to its Initial Value and a
Trigger Event has occurred.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
95.00
|
$20.625
|
Second Review Date
|
85.00
|
$20.625
|
Third Review Date
|
50.00
|
$0
|
Final Review Date
|
105.00
|
$1,020.625
|
|
Total Payment
|
$1,061.875 (6.1875% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Index is greater than or equal to its Initial Value (and, therefore, the Interest
Barrier), even though a Trigger Event has occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,020.625
(or $1,000
plus
the Contingent Interest Payment applicable to the final Review Date). When added to the Contingent Interest
Payments received with respect to the prior Review Dates, the total amount paid for each $1,000 principal amount note, is $1,061.875.
Example 4 — Notes have NOT been
automatically called, the Final Value of the Lesser Performing Index is less than its Initial Value but is greater than or equal
to its Interest Barrier and a Trigger Event has NOT occurred.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
95.00
|
$20.625
|
Second Review Date
|
95.00
|
$20.625
|
Third Review Date
|
85.00
|
$20.625
|
Final Review Date
|
70.00
|
$1,020.625
|
|
Total Payment
|
$1,082.50 (8.25% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Index is less than its Initial Value but is greater than or equal to its Interest
Barrier and a Trigger Event has not occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,020.625
(or $1,000 plus the Contingent Interest Payment applicable to the final Review Date). When added to the Contingent Interest Payments
received with respect to the prior Review Dates, the total amount paid, for each $1,000 principal amount note, is $1,082.50.
Example 5 — Notes have NOT been
automatically called, the Final Value of the Lesser Performing Index is less than its Initial Value but is greater than or equal
to its Interest Barrier and a Trigger Event has occurred.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
60.00
|
$0
|
Second Review Date
|
55.00
|
$0
|
Third Review Date
|
50.00
|
$0
|
Final Review Date
|
70.00
|
$
720.625
|
|
Total Payment
|
$
720.625
(-
27.9375%
return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Index is less than its Initial Value but is greater than or equal to its Interest
Barrier, a Trigger Event has occurred and the Lesser Performing Index Return is -
30.00
%,
the payment at maturity will be $
720.625
per
$1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-
30.00
%)]
+ $20.625 = $
720.625
PS-
4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
Example 6 — Notes have NOT been
automatically called, the Final Value of the Lesser Performing Index is less than its Initial Value and its Interest Barrier and
a Trigger Event has occurred.
Date
|
Closing Level of Lesser Performing Index
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
65.00
|
$0
|
Second Review Date
|
60.00
|
$0
|
Third Review Date
|
55.00
|
$0
|
Final Review Date
|
50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Index is less than its Initial Value and its Interest Barrier, a Trigger Event
has occurred and the Lesser Performing Index Return is -50.00%, the payment at maturity will be $500.00 per $1,000 principal amount
note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant risks. These risks
are explained in more detail in the “Risk Factors” sections of the accompanying product supplement and underlying supplement.
|
●
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
—
The notes do not guarantee any return of principal. If the notes have not been automatically called and (i) the Final Value of
either Index is less than its Initial Value and (ii) a Trigger Event has occurred, you will lose 1% of the principal amount of
your notes for every 1% that the Final Value of the Lesser Performing Index is less than its Initial Value. Accordingly, under
these circumstances, you will lose some or all of your principal amount at maturity.
|
|
●
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL
—
If the notes have not been automatically called we will make a Contingent Interest Payment with respect to a Review Date only if
the closing level of each Index on that Review Date is greater than or equal to its Interest Barrier. If the closing level of either
Index on that Review Date is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review
Date. Accordingly, if the closing level of either Index on each Review Date is less than its Interest Barrier, you will not receive
any interest payments over the term of the notes.
|
|
●
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
—
Investors are dependent on our and JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or
potential change in our or JPMorgan Chase & Co.'s creditworthiness or credit spreads, as determined by the market for taking
that credit risk, is likely to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our
payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
|
●
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS
—
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of
our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate
to obligations of our affiliates to make payments under loans made by us or other intercompany agreements. As a result, we are
dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates do not make payments to
us and we fail to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase &
Co., and that guarantee will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
|
●
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS THAT MAY BE PAID OVER
THE TERM OF THE NOTES,
regardless of any appreciation in the level of either Index, which may be significant. You will not participate in any appreciation
in the level of either Index.
|
|
●
|
POTENTIAL CONFLICTS
—
We and our affiliates play a variety of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.'s economic interests are potentially adverse to your interests as an investor in the notes. It is possible that hedging
or trading
|
PS-
5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
activities of ours or our affiliates
in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines.
Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement.
|
●
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
but JPMorgan Chase & Co. will not have any obligation to consider your interests in taking any corporate action that might
affect the level of the S&P 500
®
Index.
|
|
●
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
Payments on the notes are not linked to a basket composed of the Indices and are contingent upon the performance of each individual
Index. Poor performance by either of the Indices over the term of the notes may negatively affect whether you will receive a Contingent
Interest Payment on any Interest Payment Date and your payment at maturity and will not be offset or mitigated by positive performance
by the other Index.
|
|
●
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING INDEX.
|
|
●
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD —
If, on any day during the Monitoring Period, the closing level of either Index is less than its Trigger Value (
i.e.,
a Trigger
Event occurs) and the notes have not been automatically called, the benefit provided by the Trigger Value will terminate and you
will be fully exposed to any depreciation in the closing level of the Lesser Performing Index. You will be subject to this potential
loss of principal even if that Index subsequently recovers such that the closing level of that Index is greater than or equal to
its Trigger Value.
|
|
●
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
If your notes are automatically called, the term of the notes may be reduced to as short as approximately three months and you
will not receive any Contingent Interest Payments after the applicable Call Settlement Date. There is no guarantee that you would
be able to reinvest the proceeds from an investment in the notes at a comparable return and/or with a comparable interest rate
for a similar level of risk. Even in cases where the notes are called before maturity, noteholders are not entitled to any fees
and commissions described on the front cover of this pricing supplement.
|
|
●
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN EITHER INDEX OR HAVE ANY RIGHTS WITH RESPECT TO THOSE SECURITIES.
|
|
●
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH RESPECT TO THE RUSSELL 2000
®
INDEX —
Small capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative
to larger companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend
payment could be a factor that limits downward stock price pressure under adverse market conditions.
|
|
●
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE IS GREATER IF THE LEVEL OF
THAT INDEX IS VOLATILE.
|
|
●
|
LACK OF LIQUIDITY—
The notes will not be listed on any securities exchange. Accordingly, the price at which you may be able to trade your notes is
likely to depend on the price, if any, at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes
are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
|
●
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES —
The estimated value of the notes is only an estimate determined by reference to several factors. The original issue price of the
notes exceeds the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our
affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging
our obligations under the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
|
●
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
—
See “The Estimated Value of the Notes” in this pricing supplement.
|
|
●
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
The internal funding rate used in the determination of the estimated value of the notes is based on, among other things, our and
our affiliates’ view of the funding value of the notes as well as the higher issuance, operational and ongoing liability
management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The
use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and
any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
|
●
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN
THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME
|
PS-
6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
PERIOD —
We generally expect that some of the costs included in the original issue price of the notes will
be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero
over an initial predetermined period. See “Secondary Market Prices of the Notes” in this pricing supplement for additional
information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be
lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
|
●
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
Any secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things,
secondary market prices take into account our internal secondary market funding rates for structured debt issuances and, also,
because secondary market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated
hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be
willing to buy the notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price.
Any sale by you prior to the Maturity Date could result in a substantial loss to you.
|
|
●
|
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 levels of the Indices. Additionally, independent pricing vendors and/or third party broker-dealers may publish a price
for the notes, which may also be reflected on customer account statements. This price may be different (higher or lower) than the
price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary market. See “Risk Factors
— Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes
will be impacted by many economic and market factors” in the accompanying product supplement.
|
The
Indices
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 “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
The Russell 2000
®
Index consists
of the middle 2,000 companies included in the Russell 3000E
TM
Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
PS-
7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 7, 2011 through August 26, 2016. The closing
level of the S&P 500
®
Index on August 26, 2016 was 2,169.04. The closing level of the Russell 2000
®
Index on August 26, 2016 was 1,238.031. We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical closing levels of each Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of either Index on any
Review Date. There can be no assurance that the performance of the Indices will result in the return of any of your principal amount
or the payment of any interest.
Historical Performance
of the S&P 500
®
Index
Source: Bloomberg
|
Historical Performance
of the Russell 2000
®
Index
Source: Bloomberg
|
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. In determining our
reporting responsibilities we intend to treat (i) the notes for U.S. federal income tax purposes as prepaid forward contracts with
associated contingent coupons and (ii) any Contingent Interest Payments as ordinary income, as
PS-
8
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
described in the section entitled “Material
U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts
with Associated Contingent Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell
LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other reasonable treatments that
the IRS or a court may adopt, in which case the timing and character of any income or loss on the notes could be materially affected.
In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property
to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any
Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences
of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this
notice.
Non-U.S. Holders — Tax Considerations
.
The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to
take a position that Contingent Interest Payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is
provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible
reduction of that rate under an applicable income tax treaty), unless income from your notes is effectively connected with your
conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment
in the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the notes in light of your particular circumstances.
Non-U.S. holders should also note that recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the notes.
FATCA
. Withholding under legislation commonly
referred to as “FATCA” could apply to payments with respect to the notes that are treated as U.S.-source “fixed
or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest,
if the notes are recharacterized, in whole or in part, as debt instruments, or Contingent Interest Payments if they are otherwise
treated as FDAP Income). Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other
than any amount treated as FDAP Income) of a taxable disposition, including an early redemption or redemption at maturity, of the
notes. You should consult your tax adviser regarding the potential application of FATCA to the notes.
In the event of any withholding on the notes,
we will not be required to pay any additional amounts with respect to amounts so withheld.
The
Estimated Value of the Notes
The estimated value of the notes set forth on
the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives underlying
the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs
such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable,
and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market
events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are set based
on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide
valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and
other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the
notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.'s
creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be
willing to buy notes from you in secondary market transactions.
PS-
9
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
®
Index
|
|
The estimated value of the notes is lower than
the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in
the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
See “Selected Risk Considerations — The Estimated Value of the Notes Is Lower Than the Original Issue Price (Price
to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Indices” 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 a valid and binding obligation of JPMorgan Financial and the related guarantee
will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and
equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack
of bad faith),
provided
that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer
or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited
to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company
Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and
delivery of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture
with respect to the trustee, all as stated in the letter of such counsel dated February 24, 2016, which was filed as an exhibit
to the Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan Chase & Co. on February 24, 2016.
Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
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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):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the Russell 2000
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Index
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