Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
Pricing supplement to product supplement no 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
All references in this pricing supplement to the
closing value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payment upon an Automatic Call
Payment at Maturity If the Notes Have Not
Been Automatically Called
Call Premium Amount
The table below illustrates the Call Premium Amount
per $1,000 principal amount note for each Review Date based on the Call Premium Amounts set forth under “Key Terms —
Call Premium Amount” above.
Review Date
|
Call Premium Amount
|
First
|
$160.00
|
Second
|
$320.00
|
Third
|
$480.00
|
Final
|
$640.00
|
PS-
2
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the hypothetical Lesser Performing Underlying
on the Review Dates.
Each hypothetical payment set forth below assumes that the closing value of the Underlying that is not
the Lesser Performing Underlying on each Review Date is greater than or equal to its Call Value (and therefore its Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
a Call Value for the Lesser Performing Underlying of 100.00 (equal to 100.00% of the hypothetical Initial Value);
|
|
·
|
a Trigger Value for the Lesser Performing Underlying of 60.00 (equal to 60.00% of the hypothetical Initial Value); and
|
|
·
|
the Call Premium Amounts set forth under “Key Terms — Call Premium Amount” above.
|
The hypothetical Initial Value of the Lesser Performing
Underlying of 100.00 has been chosen for illustrative purposes only and may not represent the Initial Value of either Underlying.
The actual Initial Value of each Underlying is the closing value of that Underlying on the Pricing Date and is specified under
“ Key Terms — Initial Value” in this pricing supplement. For historical data regarding the actual closing values
of each Underlying, please see the historical information set forth under “The Underlyings” in this pricing supplement.
Each hypothetical payment set forth below is
for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing
in the following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,160.00 (16.00% return)
|
Because the closing value of each Underlying on
the first Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment, for
each $1,000 principal amount note, of $1,160.00 (or $1,000
plus
the Call Premium Amount 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 final Review Date.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
|
Second Review Date
|
85.00
|
Notes NOT automatically called
|
Third Review Date
|
95.00
|
Notes NOT automatically called
|
Final Review Date
|
110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,640.00 (64.00% return)
|
Because the closing value of each Underlying on
the final Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment, for
each $1,000 principal amount note, of $1,640.00 (or $1,000
plus
the Call Premium Amount applicable to the final Review Date),
payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
|
Second Review Date
|
85.00
|
Notes NOT automatically called
|
Third Review Date
|
95.00
|
Notes NOT automatically called
|
Final Review Date
|
70.00
|
Notes NOT automatically called; Final Value of Lesser Performing Underlying is greater than or equal to Trigger Value
|
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
|
Total Payment
|
$1,100.00 (10.00% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Trigger Value, the payment at maturity,
for each $1,000 principal amount note, will be $1,100.00, calculated as follows:
$1,000 + ($1,000 × 10.00%) = $1,100.00
Example 4 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
80.00
|
Notes NOT automatically called
|
Second Review Date
|
70.00
|
Notes NOT automatically called
|
Third Review Date
|
60.00
|
Notes NOT automatically called
|
Final Review Date
|
50.00
|
Notes NOT automatically called; Final Value of Lesser Performing Underlying is less than Trigger Value
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Underlying is less than its Trigger Value and the Lesser Performing Underlying
Return is -50.00%, the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$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 the Final Value of either Underlying is less than its Trigger
Value, you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Underlying
is less than its Initial Value. Accordingly, under these circumstances, you will lose more than 40.00% of your principal amount
at maturity and could lose all of your principal amount at maturity.
|
·
|
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.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO ANY CALL PREMIUM AMOUNT PAID ON THE NOTES
IF THE NOTES ARE AUTOMATICALLY CALLED,
|
regardless of any appreciation in the
value of either Underlying, which may be significant. You will not participate in any appreciation in the value of either Underlying.
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN MAY TERMINATE ON THE FINAL REVIEW DATE IF
THE NOTES HAVE NOT BEEN AUTOMATICALLY CALLED
—
|
If the notes have not been automatically
called and the Final Value of either Underlying is less than its Trigger Value, you will not be entitled to receive the Contingent
Minimum Return at maturity. Under these circumstances, you may lose some or all of your principal amount at maturity.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE 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 PRICE OF EACH UNDERLYING —
|
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by either of the Underlyings over the term of the notes may result in the notes not being automatically called on a Review Date,
may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the other Underlying.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Underlying
is less than its Trigger Value and the notes have not been automatically called, the benefit provided by the Trigger Value will
terminate and you will be fully exposed to any depreciation in the closing value of the Lesser Performing Underlying.
|
·
|
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 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 for a similar level of risk. Even in cases where the notes
are called before maturity, you are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING
OR HAVE ANY RIGHTS WITH RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject to management risk,
which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. These constraints could adversely affect the market price of
the shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY,
MAY NOT CORRELATE WITH THE PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate its
Underlying Index (as defined under “The Underlyings” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of the Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying the Fund
(such as mergers and spin-offs) may impact the variance between the performances of the Fund and its
PS-
5
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
Underlying Index. Finally, because the
shares of the Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value of
one share of the Fund may differ from the net asset value per share of the Fund.
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce any payment on the notes.
|
·
|
RISKS ASSOCIATED WITH THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY WITH RESPECT TO THE
FUND
—
|
All or substantially all of the equity
securities held by the Fund are issued by companies whose primary line of business is directly associated with the oil and gas
exploration and production industry. Market or economic factors impacting companies in this industry could have a major effect
on the value of the Fund. Issuers in energy-related industries can be significantly affected by fluctuations in energy prices
and supply and demand of energy fuels. Markets for various energy-related commodities can have significant volatility, and
are subject to control or manipulation by large producers or purchasers. Companies in the energy sector may need to make
substantial expenditures, and to incur significant amounts of debt, in order to maintain or expand their reserves. Companies
in the oil and gas sector develop and produce crude oil and natural gas and provide drilling and other energy resources production
and distribution related services. Stock prices for these types of companies are affected by supply and demand both for their
specific product or service and for energy products in general. The price of oil and gas, exploration and production spending,
government regulation, world events and economic conditions will likewise affect the performance of these companies. Correspondingly,
securities of companies in the energy field are subject to swift price and supply fluctuations caused by events relating to international
politics, energy conservation, the success of exploration projects, and tax and other governmental regulatory policies. Weak
demand for the companies’ products or services or for energy products and services in general, as well as negative developments
in these other areas, would adversely impact the Fund’s performance. Oil and gas exploration and production can be
significantly affected by natural disasters as well as changes in exchange rates, interest rates, government regulation, world
events and economic conditions. These companies may be at risk for environmental damage claims. As a result, the value of
the notes may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence
affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will not make
an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
|
·
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS TRIGGER VALUE IS GREATER IF
THE VALUE OF THAT UNDERLYING IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE
NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes exceeds the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
|
Any secondary market prices of the notes
will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into
account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices (a)
exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the values of the Underlyings. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may
be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Underlyings
The 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 Fund is
an exchange-traded fund of the SPDR
®
Series Trust, a registered investment company, which seeks to provide investment
results that, before fees and expenses, correspond generally to the total return performance of an index derived from the oil and
gas exploration and production segment of a U.S. total market composition index, which we refer to as the Underlying Index with
respect to the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF. The Underlying Index
with respect to the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF is currently the
S&P
®
Oil & Gas Exploration & Production Select Industry™ Index. The S&P
®
Oil
& Gas Exploration & Production Select Industry™ Index is a modified equal-weighted index that is designed to measure
the performance of the following GICS
®
sub-industries: integrated oil & gas, oil & gas exploration &
mining and oil & gas refining & marketing. For additional information about the Fund, see “Fund Descriptions —
The SPDR
®
S&P
®
Industry ETFs” in the accompanying underlying supplement.
PS-
7
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
Historical Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 7, 2011 through October 21, 2016. The
closing value of the S&P 500
®
Index on October 26, 2016 was 2,139.43. The closing value of the Fund on October
26, 2016 was $36.77. We obtained the closing values above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification. The closing values of the Fund above and below may have been adjusted by Bloomberg for actions
taken by the Fund, such as stock splits.
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of either Underlying
on any Review Date. There can be no assurance that the performance of the Underlyings will result in the return of any of your
principal amount.
Tax
Treatment
You should review carefully the section
entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The following
discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk &
Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
PS-
8
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
Based on current
market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions”
that are not debt instruments for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income
Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments”
in the accompanying product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated
as long-term capital gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes
at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of any income
or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting
comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any,
to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive
effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including
possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including an automatic call or redemption
at maturity, of a note. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than
any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser
regarding the potential application of FATCA to the notes.
Non-U.S. holders should also note that recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the notes.
The
Estimated Value of the Notes
The estimated value of the notes set forth
on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives
underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent
on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about
future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes
are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could
provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions
and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value
of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase &
Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions.
The estimated value of the notes is lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS
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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 Underlyings” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal
to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus
(minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
Supplemental
Plan of Distribution
We expect that delivery of the notes will
be made against payment for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement,
which will be the fifth business day following the Pricing Date of the notes (this settlement cycle being referred to as T+5).
Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required
to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish
to trade notes on the Pricing Date or the succeeding business day will be required to specify an alternate settlement cycle at
the time of any such trade to prevent a failed settlement and should consult their own advisors.
Validity
of the Notes and the Guarantee
In the opinion
of Davis Polk & Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes
offered by this pricing supplement have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant
to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations of JPMorgan
Financial and the related guarantee will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally,
concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith,
fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to the effect of fraudulent
conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given
as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware
and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the indenture and its authentication
of the notes and the
validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated
in the letter of such counsel dated February 24, 2016, which was filed as an exhibit to the Registration Statement on Form S-3
by JPMorgan Financial and JPMorgan Chase & Co. on February 24, 2016.
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Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
You may access these documents on the SEC
website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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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