Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-209682 and
333-209682-01
Pricing
Supplement to the Prospectus and Prospectus Supplement, each dated April 15, 2016
and the
Product
Supplement No. 2-I dated April 15, 2016
JPMorgan
Chase Financial Company LLC
Medium-Term
Notes, Series A
$19,096,000
Capped Enhanced Participation Currency-Linked Notes due 2018
Fully and
Unconditionally Guaranteed by JPMorgan Chase & Co.
The notes do not bear interest.
The amount that you will
be paid on your notes on the stated maturity date (February 8, 2018, subject to adjustment) is based on the performance of the
U.S. dollar (USD) / offshore Chinese renminbi (CNH) exchange rate, as measured from and including the trade date (December 5, 2016)
based on the strike rate of 7.1350 to and including the determination date (February 5, 2018, subject to adjustment). The exchange
rate is expressed as the number of offshore Chinese renminbi needed to buy one U.S. dollar. The currency return on your notes will
be calculated by subtracting the strike rate from the final exchange rate and dividing the resulting number by the final exchange
rate and expressing this result as a percentage.
The strike rate is a USD/CNH exchange rate determined by the calculation agent
in its discretion on the trade date and is not the exchange rate on the trade date.
By purchasing these notes, you are taking the view that the
currency return will be positive, which means that the final exchange rate will be greater than the strike rate (it will take
more offshore Chinese renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate). This means that
the U.S. dollar has strengthened relative to the offshore Chinese renminbi. If the currency return is positive, you will receive
$1,000
plus
$1,000
times
the upside participation rate of 2.15
times
the currency return, up to a maximum
settlement amount of $1,107.50 per $1,000 principal amount note. If the currency return is zero or negative, which means that
the final exchange rate will be equal to or less than the strike rate (it will take the same number of or fewer offshore Chinese
renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate), the return on your notes will be zero
or negative.
You could lose your entire investment in the notes. Any payment on the notes is subject to the credit risk of
JPMorgan Chase Financial Company LLC (“JPMorgan Financial”), as issuer of the notes, and the credit risk of JPMorgan
Chase & Co., as guarantor of the notes.
To determine your payment at maturity, we will calculate the
currency return. On the stated maturity date, for each $1,000 principal amount note, you will receive an amount in cash equal to:
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if the currency return is
positive
(
i.e.
, the final exchange rate is
greater than
the strike rate), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate of 2.15
times
(c) the currency return, subject to the maximum settlement amount; or
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if the currency return is
zero
or
negative
(
i.e.
, the final exchange rate is
equal to
or
less
than
the strike rate), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the
currency return, subject to a minimum payment of $0.00. You will receive less than $1,000 if the final exchange rate is less than
the strike rate and, if the final exchange rate is
equal to
or
less than
50% of the strike rate, you will lose your
entire investment in the notes.
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The return on your notes is linked to the currency return,
calculated using the USD/CNH exchange rate. If you were to calculate the return on your notes using the CNH/USD exchange rate (
i.e.
,
an exchange rate expressed as the number of U.S. dollars needed to buy one offshore Chinese renminbi) instead, the return on your
notes might be materially different from the results obtained using the USD/CNH exchange rate.
Your investment in the notes involves certain risks, including,
among other things, our credit risk. See “Risk Factors” on page PS-9 of the accompanying product supplement and “Selected
Risk Factors” on page PS- 13 of this pricing supplement.
The foregoing is only a brief summary of the terms of your notes.
You should read the additional disclosure provided herein so that you may better understand the terms and risks of your investment.
The estimated value of the notes, when the terms of the
notes were set, was $985.20 per $1,000 principal amount note.
See “Summary Information — The Estimated Value
of the Notes” on page PS-8 of this pricing supplement for additional information about the estimated value of the notes and
“Summary Information — Secondary Market Prices of the Notes” on page PS-9 of this pricing supplement for information
about secondary market prices of the notes.
Original issue date (settlement date):
December 12, 2016
Original issue price:
100.00% of the principal amount*
Underwriting commission/discount:
1.00% of the principal
amount*
Net proceeds to the issuer:
99.00% of the principal amount
See “Summary Information — Supplemental Use of Proceeds”
on page PS-9 of this pricing supplement for information about the components of the original issue price of the notes.
*J.P. Morgan Securities LLC, which we refer to as JPMS, acting
as agent for JPMorgan Financial, will pay all of the selling commissions it receives of 1.00% of the principal amount from us to
an unaffiliated dealer. See “Plan of Distribution (Conflicts of Interest)” on page PS-78 of the accompanying product
supplement. The original issue price is 99.00% of the principal amount for investors in certain fee-based advisory accounts; see
“Summary Information — Key Terms — Supplemental Plan of Distribution” on page PS-6 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this pricing
supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus. Any representation
to the contrary is a criminal offense.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing Supplement dated December 5, 2016
The original issue price, fees and commissions and net proceeds
listed above relate to the notes we sell initially. We may decide to sell additional notes after the date of this pricing supplement,
at issue prices and with fees and commission and net proceeds that differ from the amounts set forth above. The return (whether
positive or negative) on your investment in notes will depend in part on the price you pay for your notes.
We may use this pricing supplement in the initial sale of the
notes. In addition, JPMS or any other affiliate of ours may use this pricing supplement in a market-making transaction in a note
after its initial sale.
Unless JPMS or its agents inform the purchaser otherwise in the confirmation of sale, this pricing
supplement is being used in a market-making transaction.
SUMMARY INFORMATION
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. We urge you to consult your investment, legal, tax,
accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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Product supplement no. 2-I dated April 15, 2016:
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Prospectus supplement and prospectus, each dated April
15, 2016:
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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.
Key Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Exchange rate:
the USD/CNH exchange rate, on any relevant
day, will equal an exchange rate of offshore Chinese renminbi per one U.S. dollar, as determined by the calculation agent, expressed
as the offshore Chinese renminbi (CNH) value of one U.S. dollar (USD), as reported by Thomson Reuters (“Reuters”) on
Reuters page “CNHFIX=” (or any substitute Reuters page) at approximately 11:15 a.m., Hong Kong time, on that day. In
certain circumstances, the level of the USD/CNH exchange rate will be based on the alternative calculation of the exchange rate
described under “Description of Notes — Postponement of a Determination Date — Notes Linked to a Single Underlying
— Notes Linked to a Single Reference Currency Relative to a Single Base Currency” on page PS-41 of the accompanying
product supplement or “The Underlyings — Currencies — Succession Events” on page PS-53 of the accompanying
product supplement. Notwithstanding anything to the contrary in the accompanying product supplement, the exchange rate will
not be rounded.
By purchasing this note, you are taking the view that the currency
return will be positive, which means that the final exchange rate will be greater than the strike rate (it will take more offshore
Chinese renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate). This means that the U.S. dollar
has strengthened relative to the offshore Chinese renminbi.
Principal amount:
each note will have a principal
amount of $1,000; $19,096,000 in the aggregate for all the offered notes; the aggregate principal amount of the offered notes
may be increased if the issuer, at its sole option, decides to sell an additional amount of the offered notes on a date
subsequent to the date of this pricing supplement
Purchase at amount other than principal amount:
the amount
we will pay you at the stated maturity date for your notes will not be adjusted based on the price you pay for your notes, so if
you acquire notes at a premium (or discount) to the principal amount and hold them to the stated maturity date, it could affect
your investment. The return on your investment in the notes will be lower (or higher) than it would
have been had you purchased
the notes at the principal amount. See “Selected Risk Factors — If You Purchase Your Notes at a Premium to the Principal
Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the Principal Amount and the Impact of
Certain Key Terms of the Notes Will Be Negatively Affected” on page PS-16 of this pricing supplement.
Payment on the stated maturity date:
for each $1,000 principal
amount note, we will pay you on the stated maturity date an amount in cash equal to:
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if the currency return is positive (
i.e.
, the final exchange rate is
greater than
the strike rate, which means
it will take more offshore Chinese renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate
times
(c) the currency return, subject to the maximum settlement amount; or
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if the currency return is
zero or negative
(
i.e.,
the final exchange rate is
equal to
or
less than
the strike rate, which means it will take the same number of or fewer offshore Chinese renminbi to purchase one U.S. dollar at
the final exchange rate than at the strike rate), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the currency return, subject to a minimum payment of $0.00. You will receive less than $1,000 if the final exchange
rate is less than the strike rate and, if the final exchange rate is
equal to
or
less than
50% of the strike rate,
you will lose your entire investment in the notes.
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Strike rate:
7.1350, which is a USD/CNH exchange rate,
expressed as the offshore Chinese renminbi value of one U.S. dollar, determined by the calculation agent in its discretion on the
trade date. The strike rate is not the exchange rate on the trade date. Although the calculation agent has made all determinations
and has taken all actions in relation to establishing the strike rate in good faith, the discretion exercised by the calculation
agent could have an impact (positive or negative) on the value of your notes. The calculation agent is under no obligation to consider
your interests as a holder of the notes in taking any actions, including the determination of the strike rate, that might affect
the value of your notes. For information about the risks related to this discretion, see “Selected Risk Factors — Potential
Conflicts of Interest” on page PS-14 of this this pricing supplement.
Final exchange rate:
the exchange rate on the determination
date. In certain circumstances, the final exchange rate will be based on the alternative calculation of the exchange rate described
under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to a Single Underlying —
Notes Linked to a Single Reference Currency Relative to a Single Base Currency” on page PS-41 of the accompanying product
supplement or “The Underlyings — Currencies — Succession Events” on page PS-53 of the accompanying product
supplement.
Currency return:
the
quotient
of (i) the final
exchange rate
minus
the strike rate
divided
by (ii) the final exchange rate, expressed as a percentage. By purchasing
these notes, you are taking the view that the currency return will be positive, which means that the final exchange rate will be
greater than the strike rate (
i.e.
, it will take more offshore Chinese renminbi to purchase one U.S. dollar at the final
exchange rate than at the strike rate). This means that the U.S. dollar has strengthened relative to the offshore Chinese renminbi.
If the final exchange rate is less than the strike rate, the currency return will be negative (
i.e.
, it will take fewer
offshore Chinese renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate).
Upside participation rate:
2.15
Cap level:
the
quotient
of the strike rate
divided
by 95%, which is approximately 7.5105
Maximum settlement amount:
$1,107.50
Trade date:
December 5, 2016
Original issue date (settlement date):
December 12, 2016
Determination date:
February 5, 2018, 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 Reference Currency Relative to a Single Base
Currency” on page PS-41 of the accompanying product supplement
Stated maturity date:
February 8, 2018, subject to postponement
in the event of a market disruption event and as described under “General Terms of Notes — Postponement of a Payment
Date” on page PS-41 of the accompanying product supplement. The accompanying product supplement refers to the stated maturity
date as the “maturity date.”
No interest:
The offered notes do not bear interest.
No listing:
The offered notes will not be listed on any
securities exchange or interdealer quotation system.
No redemption:
The offered notes will not be subject to
redemption right or price dependent redemption right.
Business day:
as described under “General Terms
of Notes — Postponement of a Payment Date” on page PS-41 of the accompanying product supplement
Trading day:
notwithstanding anything to the contrary
under “General Terms of Notes — Postponement of a Determination Date — Additional Defined Terms” on PS-45
of the accompanying product supplement, with respect to the offshore Chinese renminbi relative to the U.S. dollar, a day, as determined
by the calculation agent, on which (a) dealings in foreign currency in accordance with the practice of the foreign exchange market
occur in the principal financial center for the offshore Chinese renminbi (which is Hong Kong) and (b) banking institutions in
the principal financial center for the offshore Chinese renminbi are not otherwise authorized or required by law, regulation or
executive order to close. The accompanying product supplement refers to a trading day as a “currency business day.”
Use of proceeds and hedging:
as described under “Use
of Proceeds and Hedging” on page PS-39 of the accompanying product supplement, as supplemented by “ — Supplemental
Use of Proceeds” below
Tax treatment:
In determining our reporting
responsibilities, we intend to treat the notes for U.S. federal income tax purposes as “open transactions” that are
not debt instruments, as described in the section entitled “Material U.S. Federal Income Tax Consequences – Notes Treated
as Open Transactions That Are Not Debt Instruments” in the accompanying product supplement no. 2-I. 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 and adversely affected.
No statutory, judicial or administrative
authority directly addresses the characterization of the notes (or similar instruments) for U.S. federal income tax purposes,
and no ruling is being requested from the IRS with respect to their proper characterization and treatment. Assuming
that “open transaction” treatment is respected, the gain or loss on your notes will generally be ordinary foreign
currency income or loss under Section 988 of the Code. Ordinary foreign currency losses are potentially subject to
certain reporting requirements. However, investors in certain forward contracts, futures contracts or option contracts
generally are entitled to make an election to treat foreign currency gain or loss as capital gain or loss (a “Section
988 Election”). Due to the lack of authority directly addressing the availability of the Section 988 Election for
instruments such as these, it is unclear whether the Section 988 Election is available. If the Section 988 Election is
available and you make this election before the close of the day on which you acquire a note, all gain or loss you recognize
on a sale or exchange of that note should be treated as capital gain or loss, and as long-term capital gain or loss if you
have held the note for more than one year at that time. A Section 988 Election with respect to a note is made by (a)
clearly identifying the note on your books and records, on the date you acquire it, as being subject to this election and
filing the relevant statement verifying this election with your U.S. federal income tax return or (b) obtaining independent
verification under procedures set forth in the Treasury regulations under Section 988. You should consult your tax
adviser regarding the advisability, availability, mechanics and consequences of a Section 988 Election, as well as the
special reporting requirements that apply to foreign currency losses in excess of specified thresholds.
The IRS or a court may not respect the treatment
of the notes as “open transactions,” in which case the timing and character of any income or loss on the notes could
be materially and adversely affected. For instance, the notes could be treated as contingent payment debt instruments (which
might be viewed as denominated either in U.S. dollars or in offshore Chinese renminbi), in which case you would be required to
accrue original issue discount on your notes in each taxable year at the “comparable yield,” as determined by us, although
we will not make any payment with respect to the notes until maturity, and no Section 988 Election would be available. In
particular, in 2007 the IRS issued a revenue ruling holding that a financial instrument with some similarity to the notes is properly
treated as a debt instrument denominated in a foreign currency. The notes are distinguishable in some respects from the instrument
described in the revenue ruling. If the revenue ruling were applied to the notes, it could materially and adversely affect
the tax consequences of an investment in the notes for U.S. Holders, possibly with retroactive effect.
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 review carefully the section entitled “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement and consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the notes, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds
(other than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You
should consult your tax adviser regarding the potential application of FATCA to the notes.
ERISA:
as described under “Benefit Plan Investor
Considerations” on page PS-90 of the accompanying product supplement
Supplemental plan of distribution:
as described under
“Plan of Distribution (Conflicts of Interest)” on page PS-78 of the accompanying product supplement; we estimate that
our share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $10,000. We have
agreed to sell to JPMS, and JPMS has agreed to purchase from us, the aggregate principal amount of the notes specified on the front
cover of this pricing supplement. JPMS proposes initially to offer the notes to the public at the original issue price set forth
on the cover page of this pricing supplement, and to certain unaffiliated securities dealers at that price less a concession of
1.00% of the principal amount. The original issue price for notes purchased by certain fee-based advisory accounts is 99.00% of
the principal amount of the notes, which reduces the selling commissions specified on the cover of this pricing supplement with
respect to those notes to 0.00%.
We will deliver the notes against payment therefor in New
York, New York on December 12, 2016, which is the fifth scheduled business day following the date of this pricing supplement
and of the pricing of the notes. Under Rule 15c6-1 of 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 any such trade expressly
agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business days before delivery
will be required, by virtue of the fact that the notes will initially settle in five business days (T + 5), to specify
alternative settlement arrangements to prevent a failed settlement.
Conflicts of interest:
JPMS has a “conflict of interest”
within the meaning of FINRA Rule 5121 in any offering of the notes in which it participates because JPMorgan Chase & Co. owns,
directly or indirectly, all of the outstanding equity securities of JPMS, because JPMS and we are under common control by JPMorgan
Chase & Co. and because the net proceeds received from the sale of the notes will be used, in part, by JPMS or its affiliates
in connection with hedging our obligations under the notes. The offering of the notes will comply with the requirements of Rule
5121 of Financial Industry Regulatory Authority, Inc. (“FINRA”) regarding a FINRA member firm’s underwriting
of securities of an affiliate. In accordance with FINRA Rule 5121, neither JPMS nor any other affiliated agent of ours may make
sales in the offering of the notes to any of its discretionary accounts without the specific written approval of the customer.
Calculation agent:
JPMS
CUSIP no.:
46646QBD6
ISIN no.:
US46646QBD60
FDIC:
the notes are not bank deposits and are not insured
by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a
bank.
Supplemental Terms of the Notes
For purposes of the notes offered by this pricing supplement:
(a) the offshore Chinese renminbi is the Reference Currency and
the U.S. dollar is the Base Currency, as those terms are used in the accompanying product supplement; and
(b) all references to each of the following terms used in the
accompanying product supplement will be deemed to refer to the corresponding term used in this pricing supplement, as set forth
in the table below:
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Product Supplement Term
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Pricing Supplement Term
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Spot Rate
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exchange rate
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Initial Value / Strike Value
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strike rate
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Final Value
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final exchange rate
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currency business day
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trading day
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pricing date
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trade date
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maturity date
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stated maturity date
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term sheet
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preliminary pricing supplement
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In addition, the following terms used in this pricing supplement
are not defined in the accompanying product supplement: currency return, upside participation rate, maximum settlement amount and
cap level. Accordingly, please refer to “Key Terms” on page PS-3 of this pricing supplement for the definitions of
these terms.
The Estimated Value of the Notes
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, 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 Factors — The Estimated
Value of the Notes Is Derived by Reference to an Internal Funding Rate” on page PS-15 of 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, interest rates and other factors, as well as assumptions
about future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the
notes are set based on market conditions and other relevant factors and assumptions existing at that time. See “Selected
Risk Factors — The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’
Estimates” on page PS-14 of this pricing supplement.
The estimated value of the notes is lower than the original issue
price of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue
price of the notes. These costs include the selling commissions paid to JPMS and the unaffiliated dealer, 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 realized in hedging our obligations under the notes, if any, 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 Factors — The Estimated Value of the
Notes Is Lower Than the Original Issue Price of the Notes” on page PS-14 of this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary
market prices of the notes, see “Selected Risk Factors — Secondary Market Prices of the Notes Will Be Impacted by Many
Economic and Market Factors” on page PS-15 of this pricing supplement. In addition, we generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over the period from the date of this pricing supplement through March
6, 2017. 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 Factors — 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”
on page PS-15 of 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 “Hypothetical Examples” on page PS-10
of this pricing supplement for an illustration of the risk-return profile of the notes and “Historical Exchange Rates”
on page PS-21 of 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 the unaffiliated dealer, plus (minus) the projected profits (losses)
that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the estimated
cost of hedging our obligations under the notes.
Validity of the Notes and the Guarantee
In
the opinion of Davis Polk & Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when
the notes offered by this pricing supplement have been executed and issued by JPMorgan Financial and authenticated by the trustee
pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations
of JPMorgan Financial and the related guarantee will constitute 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.
HYPOTHETICAL EXAMPLES
The following table and chart are provided for purposes of illustration
only. They should not be taken as an indication or prediction of future investment results and are intended merely to illustrate
the impact that the various hypothetical exchange rates on the determination date could have on the payment at maturity assuming
all other variables remain constant.
Depreciation of the U.S. dollar relative to the offshore Chinese
renminbi will cause the exchange rate to decrease, and appreciation of the U.S. dollar relative to the offshore Chinese renminbi
will cause the exchange rate to increase. By purchasing this note, you are taking the view that the currency return will
be positive, which means that the final exchange rate will be greater than the strike rate (it will take more offshore Chinese
renminbi to purchase one U.S. dollar at the final exchange rate than at the strike rate). This means that the U.S. dollar has strengthened
relative to the offshore Chinese renminbi. If the currency return is positive, the return on your notes will be positive, subject
to the maximum settlement amount of $1,107.50 per $1,000 principal amount note. If the currency return is zero or negative (it
will take the same number of or fewer offshore Chinese renminbi to purchase one U.S. dollar at the final exchange rate than at
the strike rate), the return on your notes will be zero or negative.
The examples below are based on a range of final exchange rates
that are entirely hypothetical; no one can predict what the exchange rate will be on any day throughout the term of your notes,
and no one can predict what the final exchange rate will be on the determination date. The exchange rate has been highly volatile
in the past — meaning that the exchange rate has changed considerably in relatively short periods — and its performance
cannot be predicted for any future period.
The information in the following examples reflects hypothetical
rates of return on the offered notes assuming that they are purchased on the original issue date at the principal amount and held
to the stated maturity date. If you sell your notes in a secondary market prior to the stated maturity date, your return will depend
upon the market value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in
the table below, such as interest rates, the volatility of the exchange rate and our and JPMorgan Chase & Co.’s creditworthiness.
In addition, the estimated value of the notes is less than the original issue price. For more information on the estimated value
of the notes, see “Summary Information — The Estimated Value of the Notes” on page PS-8 of this pricing supplement.
The information in the table also reflects the key terms and assumptions in the box below.
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Key Terms and Assumptions
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Principal amount
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$1,000
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Upside participation rate
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2.15
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Cap level
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Approximately 7.5105, equal to the
quotient
of the strike rate
divided
by 95%
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Strike rate
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7.1350
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Maximum settlement amount
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$1,107.50
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Neither a market disruption event nor a non-trading day occurs
on the originally scheduled determination date
During the term of the notes, a currency succession event does
not occur
Notes purchased on original issue date at the principal amount
and held to the stated maturity date
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For these reasons, the actual performance of the exchange rate
over the term of your notes, as well as the amount payable at maturity, if any, may bear little relation to the hypothetical examples
shown below or to the historical levels of the exchange rate shown elsewhere in this pricing supplement. For information about
the exchange rate during recent periods, see “Historical Exchange Rates” below. Before investing in the offered notes,
you should consult publicly available information to determine the exchange rate between the date of this pricing supplement and
the date of your purchase of the offered notes.
Also, the hypothetical examples shown below do not take into
account the effects of applicable taxes. Because of the U.S. tax treatment applicable to your notes, tax liabilities could affect
the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the applicable currencies.
The levels in the first column of the table below represent hypothetical
final exchange rates based on the strike rate of 7.1350 (
i.e.
, 7.1350 offshore Chinese renminbi are needed to buy one U.S.
dollar). The levels in the second column represent the hypothetical currency returns. The amounts in the third column represent
the hypothetical payments at maturity, based on the corresponding hypothetical currency return, and are expressed as percentages
of the principal amount of a note (rounded to the nearest one-thousandth of a percent). Thus, a hypothetical payment at maturity
of 100.000% means that the value of the cash payment that we would deliver for each $1,000 of the outstanding principal amount
of the offered notes on the stated maturity date would equal 100.000% of the principal amount of a note, based on the corresponding
hypothetical final exchange rate (expressed as number of offshore Chinese renminbi per one U.S. dollar) and the assumptions noted
above.
The final exchange rate will be determined on the determination
date. The currency return will be equal to the
quotient
of (1) the final exchange rate
minus
the strike rate
divided
by (2) the final exchange rate expressed as a percentage. The payment at maturity per $1,000 principal amount note will not be
less than $0.00. The values in the table below have been rounded for ease of analysis.
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Hypothetical Final Exchange Rate (Expressed as Number of Offshore Chinese Renminbi Per One U.S. Dollar)
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Hypothetical Currency Return
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Hypothetical Payment at Maturity
(as Percentage of Principal Amount)
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14.2700
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50.000%
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110.750%
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9.5133
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25.000%
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110.750%
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7.9278
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10.000%
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110.750%
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7.5105
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5.000%
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110.750%
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7.2071
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1.000%
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102.150%
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7.1350
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0.000%
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100.000%
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7.0644
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-1.000%
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99.000%
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6.7952
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-5.000%
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95.000%
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6.4864
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-10.000%
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90.000%
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5.7080
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-25.000%
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75.000%
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4.7567
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-50.000%
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50.000%
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4.0771
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-75.000%
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25.000%
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3.5675
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-100.000%
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0.000%
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If, for example, the final exchange rate were determined to be
approximately 4.0771, the currency return would be -75.000%, and the payment that we would deliver on your notes at maturity would
be 25.000% of the principal amount of your notes, as shown in the table above. As a result, if you purchased your notes on the
original issue date at the principal amount and held them to the stated maturity date, you would lose 75.000% of your investment
(if you purchased your notes at a premium to principal amount you would lose a correspondingly higher percentage of your investment).
In addition, if the currency return were determined to be 50.000%, the payment that we would deliver on your notes at maturity
would be capped at the maximum settlement amount (expressed as a percentage of the principal amount), or 110.750% of each $1,000
principal amount note, as shown in the table above. As a result, if you held your notes to the stated maturity date, you would
not benefit from any increase in the final exchange rate over approximately 7.5105 (resulting in a currency return of 5.000%).
The following chart also shows a graphical illustration of the
hypothetical payments at maturity (expressed as a percentage of the principal amount of your notes) that we would pay on your notes
on the stated maturity date, if the currency return were any of the hypothetical percentages shown on the horizontal axis. The
chart shows that any hypothetical currency return of less than 0.000% (the section left of the 0.000% marker on the horizontal
axis) would result in a hypothetical payment at maturity of less than 100.000% of the principal amount of your notes (the section
below the 100.000% marker on the vertical
axis) and, accordingly, in a loss of principal to the holder
of the notes. The chart also shows that any hypothetical currency return of greater than or equal to 5.000% (the section right
of the 5.000% marker on the horizontal axis) would result in a capped return on your investment.
The payments at maturity shown above are entirely hypothetical;
they are based on exchange rates that may not be achieved on the determination date and on assumptions that may prove to be erroneous.
The actual market value of your notes on the stated maturity date or at any other time, including any time you may wish to sell
your notes, may bear little relation to the hypothetical payments at maturity shown above, and these amounts should not be viewed
as an indication of the financial return on an investment in the offered notes. The hypothetical payments at maturity on notes
held to the stated maturity date in the examples above assume you purchased your notes at their principal amount and have not been
adjusted to reflect the actual price you pay for your notes. The return on your investment (whether positive or negative) in your
notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the principal amount,
the return on your investment will differ from, and may be significantly lower than, the hypothetical returns suggested by the
above examples. Please read “Selected Risk Factors — Secondary Market Prices of the Notes Will Be Impacted by Many
Economic and Market Factors” on page PS-15 of this pricing supplement.
The hypothetical returns on the notes shown above apply
only
if you hold the notes for their entire term
. These hypotheticals do not reflect fees or expenses that would be associated with
any sale in the secondary market. If these fees and expenses were included, the hypothetical returns shown above would likely be
lower.
We cannot predict the actual final
exchange rate or what the market value of your notes will be on any particular day, nor can we predict the relationship between
the exchange rate and the market value of your notes at any time prior to the stated maturity date. The actual amount that you
will receive, if any, at maturity and the rate of return on the offered notes will depend on the actual final exchange rate determined
by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out
to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if any, on the stated maturity date may
be very different from the information reflected in the table and chart above.
Selected
Risk Factors
An investment in your notes is subject
to the risks described below, as well as the risks described under the “Risk Factors” section of the accompanying product
supplement. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing
directly in the applicable currencies or other instruments linked to the exchange rate. You should carefully consider whether the
offered notes are suited to your particular circumstances.
You May Lose Some or All of Your Investment
in the Notes
The notes do not guarantee any return of principal. The return
on the notes at maturity is linked to the performance of the exchange rate and will depend on whether, and the extent to which,
the currency return is positive or negative. Your investment will be exposed to loss if the final exchange rate is less than the
strike rate. Accordingly, you could lose some of your initial investment and, if the final exchange rate is
equal to
or
less than
50% of the strike rate, you will lose your entire investment in the notes at maturity. Also, the market price
of your notes prior to the stated maturity date may be significantly lower than the purchase price you pay for your notes. Consequently,
if you sell your notes before the stated maturity date, you may receive far less than the amount of your investment in the notes.
See also “— If You Purchase Your Notes at a Premium to the Principal Amount, the Return on Your Investment Will Be
Lower Than The Return on Notes Purchased at the Principal Amount and the Impact of Certain Key Terms of the Notes Will Be Negatively
Affected.”
Your Payment at Maturity Will Be Greater
Than the Principal Amount Only If the Final Exchange Rate Is Greater Than the Strike Rate
By purchasing the notes, you are taking the view that the final
exchange rate will be greater than the strike rate (
i.e.
, the number of offshore Chinese renminbi required to purchase one
U.S. dollar at the final exchange rate will be greater than the number required to purchase one U.S. dollar at the strike rate).
This means that the U.S. dollar has strengthened relative to the offshore Chinese renminbi. If the final exchange rate is equal
to or less than the strike rate (
i.e.
, the number of offshore Chinese renminbi required to purchase one U.S. dollar at the
final exchange rate is equal to or less than the number required to purchase one U.S. dollar at the strike rate), the return on
your notes will be zero or negative.
Your Maximum Gain on the Notes Is Limited
to the Maximum Settlement Amount
If the final exchange rate is greater than the strike rate, for
each $1,000 principal amount note, you will receive at maturity a payment that will not exceed the maximum settlement amount, regardless
of the appreciation in the exchange rate, which may be significant. Accordingly, the amount payable on your notes may be significantly
less than it would have been had you invested directly in the applicable currencies or other instruments linked to the exchange
rate. The maximum settlement amount is $1,107.50.
The Notes Are Subject to the Credit
Risks of JPMorgan Financial and JPMorgan Chase & Co.
The notes are subject to our and JPMorgan Chase & Co.’s
credit risks, and our and JPMorgan Chase & Co.’s credit ratings and credit spreads may adversely affect the market value
of the notes. Investors are dependent on our and JPMorgan Chase & Co.’s ability to pay all amounts due on the notes.
Any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads, as determined by
the market for taking that credit risk, is likely to adversely affect the value of the notes. If we and JPMorgan Chase & Co.
were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your
entire investment.
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.
Potential Conflicts of Interest
We and our affiliates play a variety of roles in connection with
the issuance of the notes, including acting as calculation agent and as an agent of the offering of the notes, hedging our obligations
under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes. Also,
the distributor from which you purchase the notes may conduct hedging activities for us in connection with the notes. In performing
these duties, our and JPMorgan Chase & Co.’s economic interests, the economic interests of any distributor performing
such duties 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. For example, one of the duties of the calculation agent involves determining the strike rate as described
under “Key Terms — Strike Rate” in this pricing supplement. Although the calculation agent has made all
determinations and has taken all actions in relation to establishing the strike rate in good faith, the discretion exercised by
the calculation agent could have an impact (positive or negative) on the value of your notes. The calculation agent is under
no obligation to consider your interests as a holder of the notes in taking any actions, including the determination of the strike
rate, that might affect the value of your notes. The strike rate may vary, and may vary significantly, from the exchange
rate on the trade date or another USD/CNH exchange rate available from publicly available sources at any time on the trade date.
In addition, our and JPMorgan Chase & Co.’s business
activities, and the business activities of any distributor from which you purchase the notes, 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. If the distributor
from which you purchase notes is to conduct hedging activities for us in connection with the notes, that distributor may profit
in connection with such hedging activities and such profit, if any, will be in addition to the compensation that the distributor
receives for the sale of the notes to you. You should be aware that the potential to earn fees in connection with hedging activities
may create a further incentive for the distributor to sell the notes to you in addition to the compensation they would receive
for the sale of the notes. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” on page PS-15
of the accompanying product supplement for additional information about these risks.
The Estimated Value of the Notes Is Lower
Than the Original Issue Price 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 “Summary Information
— The Estimated Value of the Notes” on page PS-8 of this pricing supplement.
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,
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 factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions. See “Summary Information — The Estimated
Value of the Notes” on page PS-8 of 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 “Summary Information —
The Estimated Value of the Notes” on page PS-8 of 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. These costs can include projected hedging profits, if any, and,
in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt issuances. See
“Summary Information — Secondary Market Prices of the Notes” on page PS-9 of 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 notes from you in secondary market transactions,
if at all, is likely to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial
loss to you. See the immediately following risk consideration for information about additional factors that will impact any secondary
market prices of the notes.
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” on page
PS-20 of this pricing supplement.
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 exchange rate, 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 of the exchange rate of the offshore Chinese renminbi relative to the U.S. dollar;
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·
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the time to maturity of the notes;
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·
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the suspension or disruption of market trading in the offshore Chinese renminbi or the U.S. dollar;
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interest and yield rates in the market generally; and
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·
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a variety of other economic, financial, political, regulatory and judicial events.
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Additionally, independent pricing vendors and/or third party
broker-dealers may publish a price for the notes, which may also be reflected on customer account statements. This price may be
different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary
market.
Your Notes Do Not Bear Interest
You will not receive any interest payments
on your notes. Unless the payment at maturity date substantially exceeds the amount you paid for your notes, the overall return
you earn on your notes may be less than you would have earned by investing in a non-indexed debt security of comparable maturity
that bears interest at a prevailing market rate.
The Amount that Will Be Paid on Your Notes
at Maturity Will Not Be Affected by the Exchange Rate on Any Date Other Than the Determination Date
The amount that will be paid on your notes at maturity will be
based on the final exchange rate on the determination date. Although the actual exchange rate on the stated maturity date
or at other times during the life of your notes may be higher than the final exchange rate, you will not benefit from the exchange
rate at any time other than on the determination date.
If You Were to Calculate the Return on
Your Notes Using the CNH/USD Exchange Rate, the Return on Your Notes Might Be Materially Different from the Results Obtained Using
the USD/CNH Exchange Rate
The amount that you will be paid on your notes on the stated
maturity date is based on the performance of the USD/CNH exchange rate, as measured by the currency return formula. The exchange
rate is expressed as the number of offshore Chinese renminbi needed to purchase one U.S. dollar. If you were to calculate
the return on your notes using the CNH/USD exchange rate (
i.e.
, an exchange rate expressed as the number of U.S. dollars
needed to purchase one offshore Chinese renminbi) instead, the return on your notes might be materially different from the results
obtained using the USD/CNH exchange rate. For example, based on the USD/CNH strike rate of 7.1350 (
i.e.
, 7.1350 offshore
Chinese renminbi are needed to buy one U.S. dollar), if the hypothetical final exchange rate decreases to 5.7080 (
i.e.
,
5.7080 offshore Chinese renminbi are needed to buy one U.S. dollar), then the currency return would equal -25%. If the equivalent
exchange rate were instead presented in terms of CNH/USD, then the hypothetical CNH/USD strike rate would be approximately 0.14015
and the hypothetical final CNH/USD exchange rate would be approximately 0.17519 and the currency return would equal 20%.
We May Sell an Additional Aggregate Principal
Amount of the Notes at a Different Issue Price
At our sole option, we may decide to sell an additional aggregate
principal amount of the notes subsequent to the date of this pricing supplement. The issue price of the notes in the subsequent
sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing
supplement.
If You Purchase Your Notes at a Premium
to the Principal Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the Principal Amount
and the Impact of Certain Key Terms of the Notes Will Be Negatively Affected
The amount you will be paid for your notes on the stated maturity
date will not be adjusted based on the price you pay for the notes. If you purchase notes at a price that differs from the principal
amount of the notes, then the return on your investment in the notes held to the stated maturity date will differ from, and
may be substantially less than, the return on notes purchased
at the principal amount. If you purchase your notes at a premium to the principal amount and hold them to the stated maturity date
the return on your investment in the notes will be lower than it would have been had you purchased the notes at the principal amount
or a discount to the principal amount. For example, if you purchase your notes at a premium to the principal amount, the cap level
will permit only a lower percentage increase in your investment in the notes than would have been the case for notes purchased
at the principal amount or a discount to the principal amount.
The Notes Might Not Pay as Much as a Direct
Investment in the Offshore Chinese Renminbi or the U.S. Dollar
You may receive a lower payment at maturity than you would have
received if you had invested directly in the offshore Chinese renminbi or the U.S. dollar individually, a combination of the offshore
Chinese renminbi and the U.S. dollar or contracts related to the offshore Chinese renminbi and the U.S. dollar for which there
is an active secondary market.
The Notes Are Linked to the U.S. Dollar/“Offshore”
Chinese Renminbi Exchange Rate and Not The U.S. Dollar/“Onshore” Chinese Renminbi Exchange Rate
The notes are linked to the rate of exchange between the “offshore”
Chinese renminbi and the U.S. dollar (CNH) that trades in the interbank market in Hong Kong and is currently only deliverable in
Hong Kong. This rate is not the same as the rate of exchange between the “onshore” Chinese renminbi and the U.S. dollar
that trades in, and is currently only deliverable in, China, excluding Hong Kong, Macau and Taiwan (CNY). The USD/CNH exchange
rate has differed, and will likely continue to differ, from the USD/CNY exchange rate. Accordingly, the return on the notes may
be less than the potential returns on a note with similar terms linked to CNY. In addition, historical data of CNH is available
only since August 23, 2010; therefore, in comparison with CNY, less information about its performance is available to help you
make your investment decision. Moreover, the offshore Chinese renminbi deliverable in Hong Kong has historically not been as liquid
as the onshore Chinese renminbi deliverable in China, excluding Hong Kong, Macau and Taiwan. If the lesser liquidity of the offshore
Chinese renminbi vis-a-vis the onshore Chinese renminbi continues, or if the CNH/USD exchange rate ceases to serve as a benchmark
for the performance of the offshore Chinese renminbi deliverable in Hong Kong, your return on the notes may be adversely affected.
See also “— The Notes Are Linked to the Performance of a Single Emerging Markets Currency Relative to the U.S. Dollar
and Therefore Expose You to Significant Currency Risk” below.
The Notes Are Subject to Currency Exchange
Risk
Foreign currency exchange rates vary over time,
and may vary considerably during the term of the notes. The value of the offshore Chinese renminbi relative to the U.S. dollar
is at any moment a result of the supply and demand for those currencies. Changes in foreign currency exchange rates result over
time from the interaction of many factors directly or indirectly affecting economic and political conditions in the United States,
China and other relevant countries or regions.
Of particular importance to potential currency exchange risk
are:
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•
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments in the United States and China and between each country and its major trading partners;
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•
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political, civil or military unrest in the United States and China; and
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•
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the extent of governmental surplus or deficit in the United States and China.
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All of these factors are, in turn, sensitive
to the monetary, fiscal and trade policies pursued by the United States, China and those of other countries important to international
trade and finance.
It has been reported that several financial
firms have entered into settlements with regulators in the United States and other countries in connection with potential manipulation
of published currency exchange rates, and regulators in the United States and other countries are continuing to investigate the
potential manipulation of published currency exchange rates. If this manipulation has occurred or is continuing, certain published
exchange rates may have been, or may be in the future, artificially lower (or higher) than they would otherwise have been. Any
such manipulation could have an adverse impact on any payments on, and the value of, your notes and the trading market for your
notes. In addition, we cannot predict whether any changes or reforms affecting the determination or publication of exchange rates
or the supervision of currency trading will be implemented in connection with these investigations. Any of these changes or reforms
could also adversely impact your notes.
Governmental Intervention Could Materially
and Adversely Affect the Value of the Notes
Foreign exchange rates can be fixed by the sovereign government,
allowed to float within a range of exchange rates set by the government or left to float freely. Governments, including those issuing
the offshore Chinese renminbi and the U.S. dollar, use a variety of techniques, such as intervention by their central bank or imposition
of regulatory controls or taxes, to affect the exchange rates of their respective currencies. They may also issue a new currency
to replace an existing currency, fix the exchange rate or alter the exchange rate or relative exchange characteristics by devaluation
or revaluation of a currency. Thus, a special risk in purchasing the notes is that their trading value and amount payable could
be affected by the actions of sovereign governments, fluctuations in response to other market forces and the movement of currencies
across borders.
The Notes Are Linked to the Performance
of a Single Emerging Markets Currency Relative to the U.S. Dollar and Therefore Expose You to Significant Currency Risk
An investment in the notes is subject to risk of significant
adverse fluctuations in the performance of a single emerging market currency, the CNH, relative to the U.S. dollar. Currencies
of emerging economies are often subject to more frequent and larger central bank interventions than the currencies of developed
countries and are also more likely to be affected by drastic changes in monetary or exchange rate policies of the issuing countries,
which may negatively affect the value of the notes.
The “onshore” Chinese renminbi/U.S. dollar exchange
rate is managed by the Chinese government and may also be influenced by political or economic developments in China or elsewhere
and by macroeconomic factors and speculative actions. The People’s Bank of China, the monetary authority in China, sets the
spot rate of the Chinese renminbi, and may also use a variety of techniques, such as intervention by its central bank or imposition
of regulatory controls or taxes, to affect the USD/CNH exchange rate. From 1994 to 2005, the Chinese government used a managed
floating exchange rate system, under which the People’s Bank of China allowed the “onshore” Chinese renminbi/U.S.
dollar exchange rate to float within a very narrow band around the central exchange rate published daily by the People’s
Bank of China. In July 2005, the People’s Bank of China revalued the renminbi by 2% and announced that in the future it would
set the value of the renminbi with reference to a basket of currencies rather than solely with reference to the U.S. dollar. In
addition, the People’s Bank of China announced that the reference basket of currencies used to set the value of the renminbi
would be based on a daily poll of “onshore” market dealers and other undisclosed factors. Movements in the “onshore”
Chinese renminbi/U.S. dollar exchange rate within the narrow band established by the People’s Bank of China result from the
supply of, and the demand for, those two currencies and fluctuations in the reference basket of currencies. However, in 2011,
China adopted its 12
th
Five-Year Plan, which calls for continued economic reform and market-oriented policies.
Inasmuch as these policies are accepted and carried out, the value of the Chinese renminbi could be affected. In the future,
the Chinese government may also issue a new currency to replace its existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of the Chinese renminbi in ways that may be adverse to your interests. Further, the
Chinese renminbi is not fully convertible into other currencies. The exchange rate is also influenced by political or economic
developments in China, the United States or elsewhere and by macroeconomic factors and speculative actions.
While the inflow and outflow of renminbi in China has historically
been tightly controlled by the People’s Bank of China, there have been signs in recent years of a nascent but fast growing
offshore renminbi
market, with foreign exchange reforms implemented in 2010 serving
as the catalyst. These reforms allow the renminbi to move to Hong Kong from mainland China without restriction if it is for
the purpose of international trade settlement (
e.g.
, import payments). Once moved offshore, this renminbi is reclassified
from “CNY” renminbi to so-called “CNH” renminbi, which has no mainland restriction as to its end-use if
it remains offshore. However, the growth of the CNH market may be impeded as China still tightly regulates the “back
flow” of CNH into the onshore mainland market, in part to protect domestic markets. This creates a separate currency
market for onshore versus offshore renminbi with different levels of exchange rates driven by capital control measures, supply
and demand and arbitrage opportunities. No assurance can be given with respect to any future changes in the policy of China
dealing with offshore renminbi trading. To the extent that management of the renminbi by the People’s Bank of China
has resulted in and currently results in trading levels that do not fully reflect market forces, any further changes in the government’s
management of “onshore” Chinese renminbi/U.S. dollar exchange rate could result in significant movement in the value
of the “offshore” Chinese renminbi/U.S. dollar exchange rate. China may regulate the “offshore”
Chinese renminbi/ U.S. dollar exchange rate, or the delivery of renminbi in Hong Kong, in a manner that is adverse to your interest
in the notes. Changes in the exchange rate result over time from the interaction of many factors directly or indirectly affecting
economic and political conditions in China and the United States, including capital control measures and economic and political
developments in other countries.
Even Though the Offshore Chinese Renminbi
and the U.S. Dollar Trade Around-the-Clock, the Notes Will Not
Because the inter-bank market in foreign currencies is a global,
around-the-clock market, the hours of trading for the notes, if any, will not conform to the hours during which the offshore Chinese
renminbi and the U.S. dollar are traded. Consequently, significant price and rate movements may take place in the underlying foreign
exchange markets that will not be reflected immediately in the price of the notes. Additionally, there is no systematic reporting
of last-sale information for foreign currencies which, combined with the limited availability of quotations to individual investors,
may make it difficult for many investors to obtain timely and accurate data regarding the state of the underlying foreign exchange
markets.
Currency Exchange Risks Can Be Expected
to Heighten in Periods of Financial Turmoil
In periods of financial turmoil, capital can move quickly out
of regions that are perceived to be more vulnerable to the effects of the crisis than others with sudden and severely adverse consequences
to the currencies of those regions. In addition, governments around the world, including the United States government and governments
of other major world currencies, have recently made, and may be expected to continue to make, very significant interventions in
their economies, and sometimes directly in their currencies. Such interventions affect currency exchange rates globally and, in
particular, the value of the offshore Chinese renminbi relative to the U.S. dollar. Further interventions, other government actions
or suspensions of actions, as well as other changes in government economic policy or other financial or economic events affecting
the currency markets, may cause currency exchange rates to fluctuate sharply in the future, which could have a material adverse
effect on the value of the notes and your return on your investment in the notes at maturity.
Currency Market Disruptions May Adversely
Affect Your Return
The calculation agent may, in its sole discretion, determine
that the currency markets have been affected in a manner that prevents it from properly determining, among other things, the exchange
rates and the currency return. These events may include disruptions or suspensions of trading in the currency markets as a whole,
and could be a Convertibility Event, a Deliverability Event, a Liquidity Event, a Taxation Event, a Discontinuity Event or a Price
Source Disruption Event. See “The Underlyings — Currencies — Market Disruption Events for a Reference Currency
Relative to a Base Currency” in the accompanying product supplement for further information on what constitutes a market
disruption event.
Past Performance Is No Guide to Future
Performance
The actual performance of the exchange rate during the term of
your notes cannot be predicted based on its historical performance. Changes in the value of each currency will affect the market
value of the notes. However, it is impossible to predict whether the exchange rate will increase or decrease during the term of
the notes.
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.
The Tax Consequences of an Investment
in the Notes Are Uncertain
There is no direct legal authority as to the proper U.S. federal
income tax characterization of the notes, and we do not intend to request a ruling from the IRS. The IRS might not accept, and
a court might not uphold, the treatment of the notes described in “Key Terms — Tax treatment” in this pricing
supplement and in “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement. If the IRS
were successful in asserting an alternative treatment for the notes, the timing and character of any income or loss on the notes
could differ materially and adversely from our description herein. 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. In addition, in 2007 the IRS issued a revenue ruling holding that a financial instrument issued and redeemed for U.S. dollars,
but providing a return determined by reference to a foreign currency and related market interest rates, is a debt instrument denominated
in the foreign currency. The revenue ruling, or future guidance relating thereto, could materially and adversely affect the tax
consequences for U.S. investors of an investment in notes, possibly with retroactive effect. Both U.S. and non-U.S. investors should
review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement
and consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments.
Historical
Exchange rates
The exchange rate has fluctuated in the past and may, in the
future, experience significant fluctuations. Any historical upward or downward trend in the exchange rate during any period shown
below is not an indication that the exchange rate is more or less likely to increase or decrease at any time during the term of
your notes.
You should not take the historical levels of the exchange
rate as an indication of the future performance of the exchange rate.
We cannot give you any assurance that the future performance
of the exchange rate will result in a return of any of your initial investment on the stated maturity date. Neither we nor any
of our affiliates make any representation to you as to the performance of the exchange rate. The actual performance of the exchange
rate over the term of the offered notes, as well as the amount payable at maturity, may bear little relation to the historical
rates shown below.
The graph below shows the USD/CNH exchange rates on each day
from January 3, 2011 through December 5, 2016, as shown on the Bloomberg Professional
®
service (“Bloomberg”). The USD/CNH exchange rate on December 5, 2016 as shown on Bloomberg was 6.8656.
The historical exchange rates shown above and in the graph below
were determined using the rates reported by Bloomberg and may not be indicative of the exchange rate that would be derived from
the applicable Reuters page. The exchange rate derived from the applicable Reuters page at approximately 11:15 a.m., Hong Kong
time, on December 5, 2016 was 6.8851, determined in the manner set forth under “Summary Information — Key Terms —
Exchange rate” on page PS-3 of this pricing supplement.
The exchange rates are expressed as the amount of offshore Chinese
renminbi per U.S. dollar. An increase in the exchange rate for a given day indicates a strengthening of the U.S. dollar against
the offshore Chinese renminbi (
i.e.
, the number of offshore Chinese renminbi required to purchase one U.S. dollar increases),
while a decrease in the exchange rate indicate a relative weakening of the U.S. dollar against the offshore Chinese renminbi (
i.e.
,
the number of offshore Chinese renminbi required to purchase one U.S. dollar decreases). We obtained the exchange rates listed
above and in the graph below from Bloomberg or Reuters, as applicable, without independent verification.
We and JPMorgan Chase & Co. have not authorized anyone to
provide any information other than that contained or incorporated by reference in this pricing supplement, the accompanying product
supplement and the accompanying prospectus supplement and prospectus with respect to the notes offered by this pricing supplement
and with respect to JPMorgan Financial or JPMorgan Chase & Co. We and JPMorgan Chase & Co. take no responsibility for,
and can provide no assurance as to the reliability of, any other information that others may give you. This pricing supplement,
together with the accompanying product supplement and the accompanying prospectus supplement and prospectus, 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. The information in this pricing supplement, the accompanying product supplement
and the accompanying prospectus supplement and prospectus may be accurate only as of the dates of each of these documents, respectively.
This pricing supplement, the accompanying product supplement and the accompanying prospectus supplement and prospectus do not constitute
an offer to sell or a solicitation of an offer to buy the notes in any circumstances in which such offer or solicitation is unlawful.
TABLE OF CONTENTS
Pricing Supplement
Page
|
Summary Information
|
PS-3
|
|
Hypothetical Examples
|
PS-10
|
|
Selected Risk Factors
|
PS-13
|
|
The Exchange rate
|
PS-21
|
Product Supplement No. 2-I dated April 15,
2016
|
Description of Notes
|
PS-1
|
|
Estimated Value and Secondary Market Prices of the Notes
|
PS-7
|
|
Risk Factors
|
PS-9
|
|
Use of Proceeds and Hedging
|
PS-39
|
|
General Terms of Notes
|
PS-41
|
|
The Underlyings
|
PS-51
|
|
Commodity Markets and Exchanges
|
PS-63
|
|
Material U.S. Federal Income Tax Consequences
|
PS-68
|
|
Plan of Distribution (Conflicts of Interest)
|
PS-78
|
|
Notice to Investors
|
PS-80
|
|
Benefit Plan Investor Considerations
|
PS-90
|
Prospectus Supplement dated April 15, 2016
|
About This Prospectus Supplement
|
S-1
|
|
Foreign Currency Risks
|
S-2
|
|
Description of Notes of JPMorgan Chase & Co.
|
S-4
|
|
Description of Warrants of JPMorgan Chase & Co.
|
S-10
|
|
Description of Units of JPMorgan Chase & Co.
|
S-13
|
|
Description of Notes of JPMorgan Chase Financial Company LLC
|
S-16
|
|
Description of Warrants of JPMorgan Chase Financial Company LLC
|
S-22
|
|
United States Federal Taxation
|
S-27
|
|
Plan of Distribution (Conflicts of Interest)
|
S-28
|
Prospectus dated April 15, 2016
|
Where You Can Find More Information
|
1
|
|
JPMorgan Chase & Co.
|
2
|
|
JPMorgan Chase Financial Company LLC.
|
2
|
|
Consolidated Ratios of Earnings to Fixed Charges
|
3
|
|
Use of Proceeds
|
3
|
|
Important Factors That May Affect Future Results
|
4
|
|
Description of Debt Securities of JPMorgan Chase & Co.
|
6
|
|
Description of Warrants of JPMorgan Chase & Co.
|
12
|
|
Description of Units of JPMorgan Chase & Co.
|
15
|
|
Description of Purchase Contracts of JPMorgan Chase & Co.
|
17
|
|
Description of Debt Securities of JPMorgan Chase Financial Company LLC
|
19
|
|
Description of Warrants of JPMorgan Chase Financial Company LLC
|
27
|
|
Forms of Securities
|
33
|
|
Plan of Distribution (Conflicts of Interest)
|
37
|
|
Independent Registered Public Accounting Firm
|
40
|
|
Legal Matters
|
40
|
|
Benefit Plan Investor Considerations
|
40
|
$19,096,000
JPMorgan Chase Financial Company LLC
Capped Enhanced Participation Currency-Linked Notes due 2018
Medium-Term Notes, Series A
Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
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