October 20, 2016
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Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
$3,751,000
Auto Callable Yield Notes Linked to the Least
Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI
Emerging Markets ETF due January 25, 2018
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a higher interest rate than the yield on a conventional debt security with the
same maturity issued by us. The notes will pay 6.50% per annum interest over the term of the notes, assuming no automatic call,
payable at a rate of 0.54167% per month.
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·
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The notes will be automatically called if the closing value of each Underlying on any Review Date (other than the final Review
Date) is greater than or equal to its Initial Value.
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·
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Investors in the notes should be willing to accept the risk of losing some or all of their principal and be willing to forgo
dividend payments, in exchange for Interest Payments.
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|
·
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The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
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|
·
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Payments on the notes are not linked to a basket composed of the Underlyings. Payments on the notes are linked to the performance
of each of the Underlyings individually, as described below.
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·
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Minimum denominations of $1,000 and integral multiples thereof
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·
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The notes priced on October 20, 2016 and are expected to settle on or about October 25, 2016.
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Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-4 of
this pricing supplement.
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.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$24.75
|
$975.25
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Total
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$3,751,000
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$92,837.25
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$3,658,162.75
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(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 $24.75 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.
|
The estimated value of the notes, when the terms of the notes
were set, was $964.10 per $1,000 principal amount note. See “The Estimated Value of the Notes” in this pricing supplement
for additional information.
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
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.
Underlyings:
The S&P 500
®
Index (Bloomberg ticker: SPX) and the
Russell 2000
®
Index (Bloomberg ticker: RTY) (each, an “Index” and collectively, the “Indices”)
and the iShares
®
MSCI Emerging Markets ETF (Bloomberg ticker: EEM) (the “Fund”) (each of the Indices
and the Fund, an “Underlying” and collectively, the “Underlyings”)
Interest Payments:
If the notes have not been automatically called, you will receive
on the applicable Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to $5.4167 (equivalent
to an Interest Rate of 6.50% per annum, payable at a rate of 0.54167% per month).
Interest Rate:
6.50% per annum, payable at a rate of 0.54167% per month
Trigger Value:
With respect to each Underlying, 60.00% of its Initial Value, which is 1,284.804 for
the S&P 500
®
Index, 731.8722 for the Russell 2000
®
Index and $22.566 for the iShares
®
MSCI Emerging Markets ETF
Pricing
Date:
October 20, 2016
Original Issue
Date (Settlement Date):
On or about October 25, 2016
Review Dates*:
January 20, 2017, April 20, 2017, July 20, 2017, October 20, 2017 and
January 22, 2018 (final Review Date)
Interest Payment
Dates*:
November 25, 2016, December 23, 2016, January 25, 2017, February
24, 2017, March 23, 2017, April 25, 2017, May 25, 2017, June 23, 2017, July 25, 2017, August 24, 2017, September 25, 2017, October
25, 2017, November 24, 2017, December 26, 2017 and the Maturity Date
Maturity Date*:
January 25, 2018
Call Settlement
Date*:
If the notes are automatically called on any Review Date (other than the final
Review Date), the first Interest Payment Date immediately following that Review Date
* 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
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Automatic Call:
If the closing value of each Underlying on any Review Date
(other than the final Review Date) is greater than or equal to its Initial Value, the notes will be automatically called for a
cash payment, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Interest Payment for the Interest
Payment Date occurring on the applicable Call Settlement Date, payable on that Call Settlement Date. No further payments will be
made on the notes.
Payment at Maturity:
If the notes have not been automatically called and (i) the
Final Value of each Underlying is greater than or equal to its Initial Value or (ii) a Trigger Event has not occurred, you will
receive a cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Interest Payment
applicable to the Maturity Date.
If the notes
have not been automatically called and (i) the Final Value of any Underlying is less than its Initial Value and (ii) a Trigger
Event has occurred,
your payment at maturity per $1,000 principal amount note, in addition
to the Interest Payment applicable to the Maturity Date, will be calculated as follows:
$1,000 + ($1,000 × Least Performing
Underlying Return)
If the notes have not been
automatically called and (i) the Final Value of any Underlying is less than its Initial Value and (ii) a Trigger Event has occurred,
you will lose some or all of your principal amount at maturity.
Trigger Event:
A Trigger Event occurs if, on any day during the Monitoring Period, the closing value of any Underlying
is less than its Trigger Value.
Monitoring Period:
The period from but excluding the Pricing Date to and including the final Review Date
Least Performing
Underlying:
The Underlying with the Least Performing Underlying Return
Least Performing
Underlying Return:
The lowest of the Underlying Returns of the Underlyings
Underlying
Return:
With respect to each Underlying,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Underlying, the closing value of that Underlying
on the Pricing Date, which was 2,141.34 for the S&P 500
®
Index, 1,219.787 for the Russell 2000
®
Index and $37.61 for the iShares
®
MSCI Emerging Markets ETF
Final Value:
With respect to each Underlying, the closing value of that Underlying
on the final Review Date
Share Adjustment
Factor:
The Share Adjustment Factor is referenced in determining the closing value of
the Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor is subject to adjustment upon the occurrence
of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the
accompanying product supplement no. 4-I for further information.
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PS-
1
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Supplemental
Terms of the Notes
All references in this pricing supplement to the
closing value of each Index mean the closing level of that Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payments in Connection with Review Dates
Preceding the Final Review Date
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Interest Payments
The table below illustrates the total Interest
Payments per $1,000 principal amount note over the term of the notes based on the Interest Rate of 6.50% per annum, depending on
how many Interest Payments are made prior to automatic call or maturity. If the notes have not been automatically called, the hypothetical
total Interest Payments per $1,000 principal amount note over the term of the notes will be equal to the maximum amount shown in
the table below.
Number of Interest Payments
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Total Interest Payments
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15
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$81.25
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12
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$65.00
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9
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$48.75
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6
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$32.50
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PS-
2
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Number of Interest Payments
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Total Interest Payments
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3
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$16.25
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Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to three hypothetical Underlyings, assuming a range of performances for the hypothetical Least Performing Underlying
on the Review Dates.
Each hypothetical payment set forth below assumes that the closing value of each Underlying that is not
the Least Performing Underlying on each Review Date is greater than or equal to its Initial Value.
In addition, the hypothetical payments set forth
below assume the following:
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·
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an Initial Value for the Least Performing Underlying of 100.00;
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·
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a Trigger Value for the Least Performing Underlying of 60.00 (equal to 60.00% of its hypothetical Initial Value); and
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·
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an Interest Rate of 6.50% per annum (payable at a rate of 0.54167% per month).
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The hypothetical Initial Value of the Least Performing
Underlying of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of any Underlying.
The actual Initial Value of each Underlying is the closing value of that Underlying on the Pricing Date and is specified under
“Key Terms – Initial Value” in this pricing supplement. For historical data regarding the actual closing values
of each Underlying, please see the historical information set forth under “The Underlyings” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date
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Closing Value of Least Performing Underlying
|
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First Review Date
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105.00
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Notes are automatically called
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Total Payment
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$1,016.25 (1.625% return)
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Because the closing value of each Underlying on
the first Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,005.4167 (or $1,000
plus
the Interest Payment applicable to the corresponding
Interest Payment Date), payable on the applicable Call Settlement Date. When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,016.25.
No further payments will be made on the notes.
Example 2 — Notes have NOT been automatically
called and the Final Value of the Least Performing Underlying is greater than or equal to its Initial Value and a Trigger Event
has occurred.
Date
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Closing Value of Least Performing Underlying
|
|
First Review Date
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95.00
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Notes NOT automatically called
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Second Review Date
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90.00
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Notes NOT automatically called
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Third Review Date
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85.00
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Notes NOT automatically called
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Fourth Review Date
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90.00
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Notes NOT automatically called
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Final Review Date
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105.00
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Final Value of Least Performing Underlying is greater than its Initial Value
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Total Payment
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$1,081.25 (8.125% return)
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Because the notes have not been automatically
called and the Final Value of the Least Performing Underlying is greater than or equal to its Initial Value, even though a Trigger
Event has occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,005.4167 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior
Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,081.25.
PS-
3
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Example 3 — Notes have NOT been automatically
called, the Final Value of the Least Performing Underlying is less than its Initial Value and a Trigger Event has NOT occurred.
Date
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Closing Value of Least Performing Underlying
|
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First Review Date
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95.00
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Notes NOT automatically called
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Second Review Date
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95.00
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Notes NOT automatically called
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Third Review Date
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95.00
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Notes NOT automatically called
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Fourth Review Date
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95.00
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Notes NOT automatically called
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Final Review Date
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70.00
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Final Value of Least Performing Underlying is less than its Initial Value
|
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Total Payment
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$1,081.25 (8.125% return)
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Because the notes have not been automatically
called and a Trigger Event has not occurred, even though the Final Value of the Least Performing Underlying is less than its Initial
Value, the payment at maturity, for each $1,000 principal amount note, will be $1,005.4161 (or $1,000
plus
the Interest
Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment
Dates, the total amount paid, for each $1,000 principal amount note, is $1,081.25.
Example 4 — Notes have NOT been automatically
called and the Final Value of the Least Performing Underlying is less than its Initial Value and a Trigger Event has occurred.
Date
|
Closing Value of Least Performing Underlying
|
|
First Review Date
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80.00
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Notes NOT automatically called
|
Second Review Date
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70.00
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Notes NOT automatically called
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Third Review Date
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75.00
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Notes NOT automatically called
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Fourth Review Date
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70.00
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Notes NOT automatically called
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Final Review Date
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50.00
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Final Value of Least Performing Underlying is less than its Initial Value
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Total Payment
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$581.25 (-41.875% return)
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Because the notes have not been automatically
called, the Final Value of the Least Performing Underlying is less than its Initial Value, a Trigger Event has occurred and the
Least Performing Underlying Return is -50.00%, the payment at maturity will be $505.4167 per $1,000 principal amount note, calculated
as follows:
$1,000 + [$1,000 × (-50.00%)] + $5.4167
= $505.4167
When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $581.25.
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.
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·
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
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The notes do not guarantee any return
of principal. If the notes have not been automatically called and (i) the Final Value of any Underlying is less than its Initial
Value and (ii) a Trigger Event has occurred, you will lose 1% of the principal amount of your notes
PS-
4
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
for every 1% that the Final Value of
the Least Performing Underlying is less than its Initial Value. Accordingly, under these circumstances, you will lose some or all
of your principal amount at maturity.
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·
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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.
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·
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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.
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·
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THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER
THE TERM OF THE NOTES,
|
regardless of any appreciation in the
value of any Underlying, which may be significant. You will not participate in any appreciation in the value of any Underlying.
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.
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·
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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.
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·
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YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH UNDERLYING —
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Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by any of the Underlyings over the term of the notes may result in the notes not being automatically called on a Review Date, may
negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the other Underlying.
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·
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YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST PERFORMING UNDERLYING.
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·
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THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD
—
|
If, on any day during the Monitoring
Period, the closing value of any Underlying is less than its Trigger Value (
i.e.,
a Trigger Event occurs) and the notes
have not been automatically called, the benefit provided by the Trigger Value will terminate and you will be fully exposed to any
depreciation in the closing value of the Least Performing Underlying. You will be subject to this potential loss of principal
even if that Underlying subsequently recovers such that the closing value of that Underlying is greater than or equal to its Trigger
Value.
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·
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THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called,
the term of the notes may be reduced to as short as approximately three months and you will not receive any Interest Payments after
the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment in
the notes at a comparable return and/or with a comparable interest rate for a similar level of risk.
Even
in cases where the notes are called before maturity, noteholders are not entitled to any fees and commissions described on the
front cover of this pricing supplement.
PS-
5
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN ANY UNDERLYING 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.
|
|
·
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THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject to management risk,
which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. These constraints could adversely affect the market price of
the shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY,
MAY NOT CORRELATE WITH THE PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate its
Underlying Index (as defined under “The Underlyings” below) and may hold securities different from those included in
the Underlying Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of the Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying the Fund
(such as mergers and spin-offs) may impact the variance between the performances of the Fund and its Underlying Index. Finally,
because the shares in the Fund are traded on a securities exchange and are subject to market supply and investor demand, the market
value of one share of the Fund may differ from the net asset value per share of the Fund.
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares in the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce your payment at maturity.
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE FUND —
|
The equity securities held by the Fund
have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve
risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities. Also, there
is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies
that are subject to the reporting requirements of the SEC.
|
·
|
EMERGING MARKETS RISK —
|
The equity securities held by the Fund
have been issued by non-U.S. companies located in emerging markets countries. Countries with emerging markets may have relatively
unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions
on the repatriation of assets, and may have less protection of property rights than more developed countries. The economies
of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may
trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making
prompt liquidation of holdings difficult or impossible at times.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND —
|
Because the prices of the equity securities
held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the Fund, holders of the notes
will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by the
Fund trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar
and the relative weight of equity securities held by the Fund denominated in each of those currencies. If, taking into account
the relevant weighting, the U.S. dollar strengthens against those currencies, the price of the Fund will be adversely affected
and any payment on the notes may be reduced.
PS-
6
| Structured Investments
Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will not make
an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
|
·
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE
VALUE OF THAT UNDERLYING IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE
NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes exceeds the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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·
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THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
|
Any secondary market prices of the notes
will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into
account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices (a)
exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the values of the Underlyings. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower)
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MSCI EAFE ETF
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than the price of the notes, if any,
at which JPMS may be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many
economic and market factors” in the accompanying product supplement.
The Underlyings
The S&P 500
®
Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the
S&P 500
®
Index, see “Equity Index Descriptions — The S&P
U.S. Indices” in the accompanying underlying supplement.
The 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.
The Fund is an exchange-traded
fund of iShares
®
, Inc., a registered investment company, which seeks to track the investment results, before fees
and expenses, of an index composed of large- and mid-capitalization emerging market equities, which we refer to as the Underlying
Index with respect to the Fund. The Underlying Index for the Fund is currently the MSCI Emerging Markets Index. The MSCI Emerging
Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of global
emerging markets. For additional information about the Fund, see “Fund Descriptions — The iShares
®
ETFs”
in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 7, 2011 through October 14, 2016. The
closing value of the S&P 500
®
Index on October 20, 2016 was 2,141.34. The closing value of the Russell 2000
®
Index on October 20, 2016 was 1,219.787. The closing value of the Fund on October 20, 2016 was $37.61. We obtained the closing
values above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The closing values of the Fund above and below may have been adjusted by Bloomberg for actions taken by the Fund, such as stock
splits
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of any Underlying
on any Review Date. There can be no assurance that the performance of the Underlyings will result in the return of any of your
principal amount.
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Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
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Tax
Treatment
You should review carefully the section
entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. Based on the
advice of Sidley Austin LLP, our special tax counsel, and on current market conditions, in determining our reporting responsibilities
we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x) a Put Option written by you that
is terminated if an Automatic Call occurs and that, if not terminated, in circumstances where the payment due at maturity is less
than $1,000 (excluding accrued and unpaid interest), requires you to pay us an amount equal to $1,000 multiplied by the absolute
value of the Least Performing Underlying Return and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential
obligation under the Put Option. By purchasing the notes, you agree (in the absence of an administrative determination or judicial
ruling to the contrary) to follow this treatment and the allocation described in the following paragraph. However, there are other
reasonable treatments that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing
and character of any income or loss on the notes could be significantly and adversely affected. In addition, in 2007, the Treasury
Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward
contracts” and similar instruments. While it is not clear whether the notes would be viewed as similar to the typical prepaid
forward contract described in the notice, it is possible that 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. The notice focuses on a number of issues, the most relevant of which for holders of the notes are the character of income
or loss (including whether the Put
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MSCI EAFE ETF
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Premium might be currently included as ordinary
income) and the degree, if any, to which income realized by Non-U.S. Holders should be subject to withholding tax.
In determining our reporting responsibilities,
we intend to treat 21.54% of each interest payment to interest on the Deposit and 78.46% of each interest payment to Put Premium.
Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated as interest
on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale or settlement,
including a settlement following an Automatic Call.
Non-U.S. Holders – Additional Tax
Consideration
Non-U.S. Holders should note that final Treasury
regulations were released on legislation that imposes a withholding tax of 30% on payments to certain foreign entities unless information
reporting and diligence requirements are met, as described in “Material U.S. Federal Income Tax Consequences-FATCA”
in the accompanying product supplement. Pursuant to the final regulations, such withholding tax will generally apply to obligations
that are issued on or after July 1, 2014; therefore, the notes will generally be subject to this withholding tax. However, the
withholding tax described above will not apply to payments of gross proceeds from the sale, exchange, redemption or other disposition
(including upon maturity) of the notes made before January 1, 2019.
Non-U.S. holders should also note that recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the notes.
Both U.S. and Non-U.S. Holders should consult
their tax advisors regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue
price should also consult their tax advisors with respect to the tax consequences of an investment in the notes, including possible
alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
The
Estimated Value of the Notes
The estimated
value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical
components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding rate described
below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of the notes does
not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time.
The internal funding rate used in the determination of the estimated value of the notes is based on, among other things, our and
our affiliates’ view of the funding value of the notes as well as the higher issuance, operational and ongoing liability
management costs of the notes
in comparison to those costs for the conventional fixed-rate
debt of JPMorgan Chase & Co
. For additional information, see “Selected Risk Considerations
— The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives
underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent
on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about
future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes
are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could
provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions
and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value
of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase &
Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions.
The estimated value of the notes is lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS 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
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Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
“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 Sidley Austin
LLP
,
as counsel to the Company and the Guarantor, when the notes offered by this pricing supplement have been executed and issued by
the Company and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, (a)
such notes will be valid and binding obligations of the Company, 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 and (b) the related guarantee will be a valid and binding obligation of the Guarantor, enforceable
in accordance with its 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 Limited Liability Company Act of Delaware and the General
Corporation Law of the State of Delaware as in effect on the date hereof. In addition, this opinion is subject to customary assumptions
about the trustee’s authorization, execution and delivery of the indenture and the genuineness of signatures and certain
factual matters, all as stated in the letter of such counsel dated February 24, 2016, which has been filed as Exhibit 5.4 to the
Company’s registration statement on Form S-3 filed with the Securities and Exchange Commission on February 24, 2016.
Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among 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.
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®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
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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®
Index, the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
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