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
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Indices:
The
S&P 500
®
Index (Bloomberg ticker: SPX) and the
Russell
2000
®
Index (Bloomberg ticker: RTY)
Call Premium
Amount:
The Call Premium Amount with respect to each Review Date is
set forth below:
·
first Review Date:
9.00%
× $1,000
·
second Review Date: 18.00% × $1,000
·
third Review Date: 27.00% × $1,000
·
final Review Date: 36.00% × $1,000
Call Value:
With respect to each Index, 100.00% of its Initial Value
Contingent
Minimum Return:
10.00%
Trigger Value:
With respect to each Index, 70.00% of its Initial Value, which is 1,592.248
for the S&P 500
®
Index and 960.4329 for the Russell 2000
®
Index
Pricing
Date:
January 13, 2017
Original Issue
Date (Settlement Date):
On or about January 19, 2017
Review Dates*:
January 22, 2018, January 14, 2019, January 13, 2020 and January 13, 2021 (final Review Date)
Call Settlement
Dates*:
January 25, 2018, January 17, 2019, January 16, 2020 and the
Maturity Date
Maturity Date*:
January 19, 2021
* 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
Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Automatic Call:
If the closing level of each Index on any 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,
equal to (a) $1,000
plus
(b) the Call Premium Amount applicable to that Review Date, payable on the applicable Call Settlement
Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final
Value of each Index is greater than or equal to its Trigger Value, your payment at maturity per $1,000 principal amount note will
be calculated as follows:
$1,000 + ($1,000 × Contingent Minimum
Return)
If the notes
have not been automatically called and the Final Value of either Index is less than its Trigger Value,
your
payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Index Return)
If the notes have not been
automatically called and the Final Value of either Index is less than its Trigger Value, you will lose more than 30.00% of your
principal amount at maturity and could lose all of your principal amount at maturity.
Lesser Performing
Index:
The Index with the Lesser Performing Index Return
Lesser Performing
Index Return:
The lower of the Index Returns of the Indices
Index Return:
With respect to each Index,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Index, the closing level of that Index on the
Pricing Date, which was 2,274.64 for the S&P 500
®
Index and 1,372.047 for the Russell 2000
®
Index
Final Value:
With respect to each Index, the closing level of that Index on the
final Review Date
|
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| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
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
|
$90.00
|
Second
|
$180.00
|
Third
|
$270.00
|
Final
|
$360.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Indices, assuming a range of performances for the hypothetical Lesser Performing Index on
the Review Dates.
Each hypothetical payment set forth below assumes that the closing level of the Index that is not the Lesser
Performing Index on each Review Date is greater than or equal to its Call Value (and therefore its Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
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®
Index and
the Russell 2000
®
Index
|
|
|
·
|
an Initial Value for the Lesser Performing Index of 100.00;
|
|
·
|
a Call Value for the Lesser Performing Index of 100.00 (equal to 100.00% of its hypothetical Initial Value);
|
|
·
|
a Trigger Value for the Lesser Performing Index of 70.00 (equal to 70.00% of its 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
Index of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of either Index.
The actual Initial Value of each Index is the closing level of that Index on the Pricing Date and is specified under “Key
Terms — Initial Value” in this pricing supplement. For historical data regarding the actual closing levels of each
Index, please see the historical information set forth under “The Indices” in this pricing supplement.
Each hypothetical payment set forth below is
for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing
in the following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date
|
Closing Level of Lesser Performing Index
|
|
First Review Date
|
110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,090.00 (9.00% return)
|
Because the closing level of each Index 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 $1,090.00 (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 Level of Lesser Performing Index
|
|
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
|
$1,360.00 (36.00% return)
|
Because the closing level of each Index 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 $1,360.00 (or $1,000
plus
the Call Premium Amount applicable to the final Review Date),
payable on the applicable Call Settlement Date, which is the Maturity Date.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Index is greater than or equal to its Trigger Value.
Date
|
Closing Level of Lesser Performing Index
|
|
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 Index is greater than or equal to Trigger Value
|
|
Total Payment
|
$1,100.00 (10.00% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Index is greater than or equal to its 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
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
Example 4 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Index is less than its Trigger Value.
Date
|
Closing Level of Lesser Performing Index
|
|
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 Index 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 Index is less than its Trigger Value and the Lesser Performing Index Return is
-50.00%, the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been automatically called and the Final Value of either Index 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 Index is less
than its Initial Value. Accordingly, under these circumstances, you will lose more than 30.00% 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.
|
·
|
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
level of either Index, which may be significant. You will not participate in any appreciation in the level of either Index.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
|
·
|
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 Level of either Index 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 LEVEL OF EACH INDEX —
|
Payments on the notes are not linked
to a basket composed of the Indices and are contingent upon the performance of each individual Index. Poor performance by either
of the Indices over the term of the notes may 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 Index.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING INDEX.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Index
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 level of the Lesser Performing Index.
|
·
|
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 SECURITIES INCLUDED IN EITHER INDEX OR HAVE ANY RIGHTS WITH
RESPECT TO THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION
STOCKS WITH RESPECT TO THE RUSSELL 2000
®
INDEX —
|
Small capitalization companies may be
less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions.
|
·
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE
LEVEL OF THAT INDEX 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
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| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
|
Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the levels of the Indices. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may
be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Indices
The S&P
500
®
Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets.
For additional information about the S&P 500
®
Index, see “Equity Index Descriptions — The S&P
U.S. Indices” in the accompanying underlying supplement.
The Russell 2000
®
Index consists
of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 6, 2012 through January 13, 2017. The closing
level of the S&P 500
®
Index on January 13, 2017 was 2,274.64. The closing level of the
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
Russell 2000
®
Index on January
13, 2017 was 1,372.047. We obtained the closing levels above and below from the Bloomberg Professional
®
service
(“Bloomberg”), without independent verification.
The historical closing levels of each Index
should not be taken as an indication of future performance, and no assurance can be given as to the closing level of either Index
on any Review Date. There can be no assurance that the performance of the Indices will result in the return of any of your principal
amount.
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.
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
PS-
7
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
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.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, a recent IRS notice excludes from the scope of Section 871(m) instruments issued
in 2017 that are not “delta-one” with respect to underlying securities that could pay U.S.-source dividends for U.S.
federal income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, our special
tax counsel is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders. Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may
depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security.
You should consult your tax adviser regarding the potential application of Section 871(m) to the notes.
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.
The
Estimated Value of the Notes
The estimated value of the notes set forth
on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives
underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent
on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about
future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes
are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could
provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions
and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value
of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase &
Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions.
PS-
8
| Structured Investments
Review Notes Linked to the Lesser Performing of the S&P 500
®
Index and
the Russell 2000
®
Index
|
|
The estimated value of the notes is lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
See “Selected Risk Considerations — The Estimated Value of the Notes Is Lower Than the Original Issue Price (Price
to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Indices” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is
equal to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
Validity
of the Notes and the Guarantee
In the opinion of Davis Polk & Wardwell LLP,
as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes offered by this pricing supplement
have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered against
payment as contemplated herein, such notes will be 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.
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
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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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