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, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
(1) See “Supplemental Use of Proceeds” in this pricing
supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to as JPMS, acting
as agent for JPMorgan Financial, will pay all of the selling commissions of $10.00 per $1,000 principal amount note it receives
from us to other affiliated or unaffiliated dealers. See “Plan of Distribution (Conflicts of Interest)” in the accompanying
product supplement.
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):
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.
How Do Exchange Rates Work?
Exchange rates reflect the amount of one currency that can
be exchanged for a unit of another currency.
The Reference Currency Return reflects the return of the Brazilian
real relative to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate, calculated using the formula set forth above
under “Key Terms — Reference Currency Return.” While the Reference Currency Return for purposes of the notes
is determined using the formula set forth above under “Key Terms — Reference Currency Return,” there are other
reasonable ways to determine the return of the Brazilian real relative to the U.S. dollar that would provide different results.
For example, another way to calculate the return of the Brazilian real relative to the U.S. dollar would be to calculate the return
that would be achieved by converting U.S. dollars into Brazilian reais at the Starting Spot Rate on the Pricing Date and then,
on the Observation Date, converting back into U.S. dollars at the Ending Spot Rate. In this pricing supplement, we refer to the
return of the Brazilian real relative to the U.S. dollar calculated using that method, which is not used for purposes of the notes,
as a “conversion return.”
As demonstrated by the examples below, under the Reference
Currency Return formula, any appreciation of the Brazilian real relative to the U.S. dollar will be diminished, as compared to
a conversion return, while any depreciation of the Brazilian real relative to the U.S. dollar will be magnified, as compared to
a conversion return. In addition, the diminishing effect on any appreciation of the Brazilian real relative to the U.S. dollar
increases as the Reference Currency Return increases, and the magnifying effect on any depreciation of the Brazilian real relative
to the U.S. dollar increases as the Reference Currency Return decreases. Accordingly, your return on the notes may be less than
if you had invested in similar notes that reflected conversion returns.
The Spot Rate is expressed as the number of Brazilian reais
per one U.S. dollar. As a result, a
decrease
in the Spot Rate from the Starting Spot Rate to the Ending Spot Rate means
that the Brazilian real has
appreciated / strengthened
relative to the U.S. dollar from the Starting Spot Rate to the Ending
Spot Rate. This means that one Brazilian real could purchase more U.S. dollars at the Ending Spot Rate on the Observation Date
than it could on the Pricing Date. Viewed another way, it would take fewer Brazilian reais to purchase one U.S. dollar at the Ending
Spot Rate on the Observation Date than it did at the Starting Spot Rate on the Pricing Date.
The following examples assume a Starting Spot Rate of 4.00
for the Brazilian real relative to the U.S. dollar.
Example 1: The Brazilian real strengthens from the Starting
Spot Rate of 4.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 3.80 Brazilian reais per U.S. dollar.
The Reference Currency Return is equal to 5.00%, calculated
as follows:
(4.00 – 3.80) / 4.00 = 5.00%
By contrast, if the return on the Brazilian real were determined
using a conversion return, the return would be 5.26%.
Example 2: The Brazilian real strengthens from the Starting
Spot Rate of 4.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 0.04 Brazilian reais per U.S. dollar.
The Reference Currency Return is equal to 99.00%, calculated
as follows:
(4.00 – 0.04) / 4.00 = 99.00%
By contrast, if the return on the Brazilian real were determined
using a conversion return, the return would be 9,900%. The payment at maturity will not reflect a return greater than the Contingent
Minimum Return if the Brazilian real has appreciated relative to the U.S. dollar.
As Examples 1 and 2 above demonstrate, the diminishing effect
on any appreciation of the Brazilian real relative to the U.S. dollar increases as the Reference Currency Return increases.
Conversely, an
increase
in the Spot Rate from the Starting
Spot Rate to the Ending Spot Rate means that the Brazilian real has
depreciated / weakened
relative to the U.S. dollar from
the Starting Spot Rate to the Ending Spot Rate. This means that it would take more Brazilian reais to purchase one U.S. dollar
at the Ending Spot Rate on the Observation Date than it did on the Pricing Date. Viewed another way, one Brazilian real could purchase
fewer U.S. dollars at the Ending Spot Rate on the Observation Date than it could at the Starting Spot Rate on the Pricing Date.
Example 3: The Brazilian real weakens from the Starting
Spot Rate of 4.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 4.40 Brazilian reais per U.S. dollar.
The Reference Currency Return is equal to -10.00%, calculated
as follows:
(4.00 – 4.40) / 4.00 = -10.00%
By contrast, if the return on the Brazilian real were determined
using a conversion return, the return would be -9.09%.
Example 4: The Brazilian real weakens from the Starting
Spot Rate of 4.00 Brazilian reais per U.S. dollar to the Ending Spot Rate of 8.00 Brazilian reais per U.S. dollar.
The Reference Currency Return is equal to -100.00%, calculated
as follows:
(4.00 – 8.00) / 4.00 = -100.00%
By contrast, if the return on the Brazilian real were determined
using a conversion return, the return would be -50.00%.
As Examples 3 and 4 above demonstrated, the magnifying effect
on any depreciation of the Brazilian real relative to the U.S. dollar increases as the Reference Currency Return decreases.
The hypothetical Starting Spot Rate, Ending Spot Rates and
Reference Currency Returns set forth above are for illustrative purposes only and have been rounded for ease of analysis.
|
JPMorgan Structured Investments —
|
PS-
2
|
|
Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
|
What Is the Total Return on the Notes at Maturity,
Assuming a Range of Performances for the Reference Currency Relative to the Base Currency?
The following table and examples illustrate
the hypothetical total return at maturity on the notes. The “total return” as used in this pricing supplement is the
number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000.
Each hypothetical total return set forth below assumes a Starting Spot Rate of 4.00 and a Trigger Value of 4.80 (equal to 120%
of the hypothetical Starting Spot Rate) and reflects the Contingent Minimum Return of 6.01%. Each hypothetical total return or
hypothetical payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment
at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded
for ease of analysis.
Ending Spot
Rate
|
Reference Currency
Return
(1)
|
Total Return
|
|
0.0000
|
100.00%
|
100.00%
|
|
0.8000
|
80.00%
|
80.00%
|
|
1.4000
|
65.00%
|
65.00%
|
|
2.0000
|
50.00%
|
50.00%
|
|
2.4000
|
40.00%
|
40.00%
|
|
2.8000
|
30.00%
|
30.00%
|
|
3.2000
|
20.00%
|
20.00%
|
|
3.6000
|
10.00%
|
10.00%
|
|
3.7596
|
6.01%
|
6.01%
|
|
3.8000
|
5.00%
|
6.01%
|
|
3.9600
|
1.00%
|
6.01%
|
|
4.0000
|
0.00%
|
6.01%
|
|
4.0400
|
-1.00%
|
6.01%
|
|
4.2000
|
-5.00%
|
6.01%
|
|
4.4000
|
-10.00%
|
6.01%
|
|
4.8000
|
-20.00%
|
6.01%
|
|
4.8004
|
-20.01%
|
-20.01%
|
|
5.2000
|
-30.00%
|
-30.00%
|
|
5.6000
|
-40.00%
|
-40.00%
|
|
6.0000
|
-50.00%
|
-50.00%
|
|
6.6000
|
-65.00%
|
-65.00%
|
|
7.2000
|
-80.00%
|
-80.00%
|
|
8.0000
|
-100.00%
|
-100.00%
|
(1)
In no event will the Reference
Currency Return be less than -100%.
Hypothetical Examples of Amount Payable at
Maturity
The following examples illustrate how the payment at maturity in
different hypothetical scenarios is calculated.
Example 1: The Reference Currency appreciates from the Starting
Spot Rate of 4.00 to an Ending Spot Rate of 3.80.
Because the Reference Currency Return is positive or zero and the Reference
Currency Return of 5% is less than the Contingent Minimum Return of 6.01%, the investor receives a payment at maturity of $1,060.10
per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 6.01%) = $1,060.10
Example 2: The Reference Currency appreciates from the Starting
Spot Rate of 4.00 to an Ending Spot Rate of 3.60.
Because the Reference Currency Return is positive or zero and the Reference
Currency Return is 10%, which exceeds the Contingent Minimum Return of 6.01%, the investor receives a payment at maturity of $1,100
per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 10%) = $1,100
Example 3: The Reference Currency depreciates from the
Starting Spot Rate of 4.00 to an Ending Spot Rate of 4.20.
Although the Currency Return is negative, because the Ending Spot
Rate of 4.20 is less than or equal to the Trigger Value of 4.80, the investor receives a payment at maturity of $1,060.10 per $1,000
principal amount note, calculated as follows:
$1,000 + ($1,000 × 6.01%) = $1,060.10
Example 4: The Reference Currency depreciates from the Starting
Spot Rate of 4.00 to an Ending Spot Rate of 6.00.
Because the Reference Currency Return is -50%, which is negative, and the
Ending Spot Rate of 6.00 is greater than the Trigger Value of 4.80, the investor receives a payment at maturity of $500 per $1,000
principal amount note, calculated as follows:
|
JPMorgan Structured Investments —
|
PS-
3
|
|
Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
|
$1,000 + ($1,000 × -50%) = $500
The hypothetical returns and hypothetical payments 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
and hypothetical payments shown above would likely be lower.
Selected Purchase Considerations
|
|
·
|
CAPPED, UNLEVERAGED APPRECIATION POTENTIAL
— The notes
provide the opportunity to earn (i) a capped, unleveraged return equal to any positive Reference Currency Return, subject to the
Contingent Minimum Return or (ii) a fixed return equal to the Contingent Minimum Return if the Reference Currency Return is zero
or negative but the Ending Spot Rate is less than or equal to the Trigger Value. If the Reference Currency Return is positive or
zero (
i.e
., the Brazilian real appreciates or remains flat relative to the U.S. dollar from the Starting Spot Rate to the
Ending Spot Rate) or is negative (
i.e.,
the Brazilian real depreciates relative to the U.S. dollar from the Starting Spot
Rate to the Ending Spot Rate) but the Ending Spot Rate is less than or equal to the Trigger Value, you will receive at least the
Contingent Minimum Return of 6.01% at maturity for a minimum payment at maturity of $1,060.10 for every $1,000 principal amount
note. However, because of the effective cap on the Reference Currency Return of 100%, the maximum payment at maturity is $2,000
per $1,000 principal amount note. See “How Do Exchange Rates Work?” and “Selected Risk Considerations —
Your Notes Are Subject to an Embedded Maximum Payment at Maturity” in this pricing supplement for more information.
Because
the notes are our unsecured and unsubordinated obligations, the payment of which is fully and unconditionally guaranteed by JPMorgan
Chase & Co., payment of any amount on the notes is subject to our ability to pay our obligations as they become due and JPMorgan
Chase & Co.'s ability to pay its obligations as they become due.
|
|
|
·
|
LIMITED PROTECTION AGAINST LOSS
— We will pay you at least
your principal back at maturity if the Reference Currency Return is negative (
i.e.
, the Brazilian real depreciates relative
to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate) but Ending Spot Rate is less than or equal to the Trigger
Value. If the Reference Currency Return is negative (
i.e.
, the Brazilian real depreciates relative to the U.S. dollar
from the Starting Spot Rate to the Ending Spot Rate) and the Ending Spot Rate is greater than the Trigger Value, you will lose
1% of the principal amount of your notes for every 1% of decline in the Reference Currency Return. Under these circumstances,
you will lose some or all of your principal amount at maturity.
|
|
|
·
|
RETURN DEPENDENT ON THE BRAZILIAN REAL RELATIVE TO THE U.S. DOLLAR
— The return on the notes is dependent on the performance of the Brazilian real, which we refer to as the Reference Currency,
relative to the U.S. dollar, which we refer to as the Base Currency, and will vary based on changes in the value of the Brazilian
real relative to the U.S. dollar as described under “Key Terms” in this pricing supplement.
Please see “How
Do Exchange Rates Work?” and “Selected Risk Considerations — The Method of Calculating the Reference Currency
Return Will Diminish Any Appreciation and Magnify Any Depreciation of the Reference Currency Relative to the Base Currency”
in this pricing supplement for more information.
|
|
|
·
|
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 example, there can be no assurance that the IRS would not seek to recharacterize
the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount
on the securities every year at a “comparable yield”
|
JPMorgan Structured Investments —
|
PS-
4
|
|
Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
|
determined at the time of issuance and recognize all
income and gain in respect of the securities as ordinary income. 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 Brazilian reais), 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, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a note, although under recently proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on
them pending finalization), no withholding will apply to payments of gross proceeds (other than any amount treated as interest).
You should consult your tax adviser regarding the potential application of FATCA to the notes.
Selected
Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Brazilian real, the U.S. dollar or the exchange rate between the Brazilian
real and U.S. dollar or any contracts related to the Brazilian real, the U.S. dollar or the exchange rate between the Brazilian
real and the U.S. dollar. These risks are explained in more detail in the “Risk Factors” section of the accompanying
product supplement.
|
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
— The
notes do not guarantee any return of principal. The return on the notes at maturity is linked to the performance of the Brazilian
real relative to the U.S. dollar and whether, and the extent to which, the Reference Currency Return is positive or negative. Your
investment will be exposed to a loss if the Reference Currency Return is negative (
i.e.,
the Brazilian real depreciates
relative to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate) and the Ending Spot Rate is greater than the Trigger
Value. In this case, you will lose 1% of the principal amount of your notes for every 1% of decline in the Reference Currency Return.
Accordingly, you will lose some or all of your principal amount at maturity.
|
|
|
·
|
YOUR NOTES ARE SUBJECT TO AN EMBEDDED MAXIMUM PAYMENT AT MATURITY
— Because of the Reference Currency Return formula, your payment at maturity is subject to an embedded maximum payment at
maturity. In no event will the Reference Currency Return be greater than 100%. As a result, the payment at maturity will not be
greater than $2,000 per $1,000 principal amount note.
|
|
|
·
|
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.
|
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN WILL TERMINATE
IF THE REFERENCE CURRENCY RETURN IS NEGATIVE
— If the Reference Currency Return is negative (
i.e.
, the Brazilian
real
|
|
JPMorgan Structured Investments —
|
PS-
5
|
|
Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
|
depreciates relative to the U.S. dollar from the Starting
Spot Rate to the Ending Spot Rate) and the Ending Spot Rate is greater than the Trigger Value, you will not be entitled to receive
the Contingent Minimum Return at maturity. Under these circumstances, you will lose some or all of your principal amount
at maturity.
|
|
·
|
POTENTIAL CONFLICTS
— We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as calculation agent and 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 when the terms of the notes are set, which we refer to as the estimated value of the notes. In performing
these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation agent and
other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our and JPMorgan Chase
& Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan Chase & Co.’s
economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is
possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial
returns for us or our affiliates while the value of the notes declines. Please refer to “Risk Factors — Risks Relating
to Conflicts of Interest” in the accompanying product supplement for additional information about these risks.
|
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE OBSERVATION
DATE
— If the Reference Currency Return is negative (
i.e.
, the Brazilian real depreciates relative to the U.S.
dollar from the Starting Spot Rate to the Ending Spot Rate) and the Ending Spot Rate is greater than the Trigger Value, the benefit
provided by the Trigger Value will terminate and you will lose 1% of the principal amount of your notes for every 1% of decline
in the Reference Currency Return. Under these circumstances, you will lose some or all of your principal amount at maturity.
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE
PRICE (PRICE TO PUBLIC) OF THE NOTES
— The estimated value of the notes is only an estimate determined by reference to
several factors. The original issue price of the notes exceeds the estimated value of the notes because costs associated with selling,
structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions,
the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under
the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated Value of the Notes”
in this pricing supplement.
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES
OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
— 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 “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.
|
|
|
·
|
T
HE 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 “Secondary Market Prices of the Notes” in
this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes
during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer
account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE
ORIGINAL ISSUE PRICE OF THE NOTES
— Any secondary market prices of the notes will likely be lower than the original issue
price of the notes because, among other things, secondary market prices take into account our internal secondary market funding
rates for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a
result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is
likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss
to you. See the immediately following risk consideration for information about additional factors that will impact any secondary
market prices of the notes.
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JPMorgan Structured Investments —
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PS-
6
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Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
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The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “—
Lack of Liquidity” below.
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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 value of the Reference Currency relative to the Base Currency, including:
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any actual or potential change in our and 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 exchange rate of the Reference Currency relative to the Base Currency
and the volatility of that exchange rate;
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suspension or disruption of market trading in the Reference Currency
or the Base Currency;
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the time to maturity of the notes;
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interest and yield rates in the market generally; and
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a variety of other economic, financial, political, regulatory and judicial
events.
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Additionally, independent pricing vendors and/or
third party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements. This
price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes
in the secondary market.
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THE METHOD OF CALCULATING THE REFERENCE CURRENCY RETURN WILL DIMINISH
ANY APPRECIATION AND MAGNIFY ANY DEPRECIATION OF THE REFERENCE CURRENCY RELATIVE TO THE BASE CURRENCY
— The Reference
Currency Return reflects the return of the Brazilian real relative to the U.S. dollar from the Starting Spot Rate to the Ending
Spot Rate, calculated using the formula set forth above under “Key Terms — Reference Currency Return.” While
the Reference Currency Return for purposes of the notes is determined using the formula set forth above under “Key Terms
— Reference Currency Return,” there are other reasonable ways to determine the return of the Brazilian real relative
to the U.S. dollar that would provide different results. For example, another way to calculate the return of the Brazilian real
relative to the U.S. dollar would be to calculate the return that would be achieved by converting U.S. dollars into Brazilian reais
at the Starting Spot Rate on the Pricing Date and then, on the Observation Date, converting back into U.S. dollars at the Ending
Spot Rate. In this pricing supplement, we refer to the return on the Brazilian real relative to the U.S. dollar calculated using
that method, which is not used for purposes of the notes, as a “conversion return.”
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Under the Reference Currency Return
formula, any appreciation of the Brazilian real relative to the U.S. dollar will be diminished, as compared to a conversion return,
while any depreciation of the Brazilian real relative to the U.S. dollar will be magnified, as compared to a conversion return.
In addition, the diminishing effect on any appreciation of the Brazilian real relative to the U.S. dollar increases as the Reference
Currency Return increases, and the magnifying effect on any depreciation of the Brazilian real relative to the U.S. dollar increases
as the Reference Currency Return decreases. Accordingly, your payment at maturity may be less than if you had invested in similar
notes that reflected a conversion return. See “How Do Exchange Rates Work?” in this pricing supplement for more information.
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THE NOTES MIGHT NOT PAY AS MUCH AS A DIRECT INVESTMENT IN THE REFERENCE
CURRENCY
— You may receive a lower payment at maturity than you would have received if you had invested directly in the
Brazilian real or contracts related to the Brazilian real for which there is an active secondary market.
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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 Brazilian real or the U.S. dollar is at any moment a result
of the supply and demand for that currency. Changes in foreign currency exchange rates result over time from the interaction of
many factors directly or indirectly affecting economic and political conditions in Brazil and the United States, and other relevant
countries or regions.
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Of particular importance to potential
currency exchange risk are:
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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 Brazil and the United States, and between
each country and its major trading partners;
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political, civil or military unrest in Brazil and the United States;
and
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the extent of governmental surplus or deficit in Brazil and the United
States.
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All of these factors are, in turn,
sensitive to the monetary, fiscal and trade policies pursued by Brazil and the United States, and those of other countries important
to international trade and finance.
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THE VALUE OF THE REFERENCE CURRENCY MAY BE CORRELATED TO THE DEMAND
FOR COMMODITIES
— Brazil depends heavily on the export of commodities and the value of the Brazilian real has historically
exhibited high correlation to the demand for certain commodities. As a result, a decrease in the demand for the relevant commodities
may negatively affect the value of the Brazilian real and, therefore, the value of the notes.
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JPMorgan Structured Investments —
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PS-
7
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Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
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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 of Brazil and the United States,
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.
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BECAUSE THE REFERENCE CURRENCY IS AN EMERGING MARKETS CURRENCY, THE
VALUE OF THE NOTES IS SUBJECT TO AN INCREASED RISK OF SIGNIFICANT ADVERSE FLUCTUATIONS
— The notes are linked to the
performance of the Brazilian reais, which is an emerging markets currency, relative to the U.S. dollar. There is an increased risk
of significant adverse fluctuations in the performances of the emerging markets currencies as they are currencies of less developed
and less stable economies without a stabilizing component that could be provided by one of the major currencies. As a result, emerging
markets currencies may be subject to higher volatility than major currencies, especially in environments of risk aversion and deleveraging.
With respect to any emerging or developing nation, there is the possibility of nationalization, expropriation or confiscation,
political changes, government regulation and social instability. 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 relevant countries, which may negatively affect the value of the notes. Global
events, even if not directly applicable to Brazil or its currency, may increase volatility or adversely affect the Reference Currency
Return and the value of your notes.
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EVEN THOUGH THE REFERENCE CURRENCY AND
THE BASE CURRENCY 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 Brazilian real 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.
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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 governments of Brazil and the United States and the 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 Brazilian real 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.
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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 Spot Rate and the Reference 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 “General Terms
of Notes — Market Disruption Events” in the accompanying product supplement for further information on what constitutes
a market disruption event.
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NO INTEREST PAYMENTS
— As a holder of the notes, you will
not receive interest payments.
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LACK OF LIQUIDITY
— The notes will not be listed on any
securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is not required to do so. Even if
there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other
dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely
to depend on the price, if any, at which JPMS is willing to buy the notes.
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JPMorgan Structured Investments —
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PS-
8
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Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
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Historical
Information
The following graph shows the historical weekly performance
of the Spot Rate, determined in the manner set forth under “Additional Key Terms — Spot Rate” in this pricing
supplement“, from January 3, 2014 through May 10, 2019. The Spot Rate on May 15, 2019 was 4.0031.
The Reference
Currency Return increases when the Brazilian real appreciates in value against the U.S. dollar.
We obtained the historical Spot Rates above and below
from Reuters, without independent verification. The historical Spot Rates should not be taken as an indication of future
performance, and no assurance can be given as to the Spot Rate on any Ending Averaging Date. There can be no assurance that
the performance of the Brazilian real relative to the U.S. dollar will result in the return of any of your principal amount.
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, 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 Considerations — The Estimated Value of the Notes Does Not Represent Future Values
of the Notes and May Differ from Others’ Estimates” in 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 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. We or one or more of our affiliates will retain any profits realized in hedging our obligations under
the notes. 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 “Selected Risk Considerations — Secondary Market Prices of the Notes Will
Be Impacted by Many Economic and Market Factors” in 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
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JPMorgan Structured Investments —
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PS-
9
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Contingent Buffered Notes Linked to the Performance of the Brazilian Real Relative to the U.S. Dollar
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will decline to zero over an initial predetermined
period that 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.”