Additional
Information about JPMorgan Financial, JPMorgan Chase & Co. and the Securities
|
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 Securities 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 Securities 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 Securities involve risks not associated with conventional
debt securities.
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, the “Issuer,” “JPMorgan
Financial,” “we,” “us” and “our” refer to JPMorgan Chase Financial Company LLC.
Supplemental
Terms of the Securities
|
For
purposes of the accompanying product supplement, the
Financial Select
Sector SPDR
®
Fund is a “Fund.”
Investor Suitability
The Securities may be suitable for you if, among other considerations:
♦
You fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire principal
amount.
♦
You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that has
the same downside market risk as a hypothetical investment in the Underlying.
♦
You believe the price of the Underlying will increase over the term of the Securities and that the appreciation is unlikely
to exceed an amount equal to the Maximum Gain indicated on the cover hereof.
♦
You understand and accept that your potential return is limited by the Maximum Gain and you are willing to invest in the
Securities based on the Maximum Gain indicated on the cover hereof.
♦
You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside
price fluctuations of the Underlying.
♦
You do not seek current income from your investment and are willing to forgo dividends paid on the Underlying.
♦
You are willing and able to hold the Securities to maturity.
♦
You accept that there may be little or no secondary market for the Securities and that any secondary market will depend
in large part on the price, if any, at which J.P. Morgan Securities LLC, which we refer to as JPMS, is willing to trade the Securities.
♦
You understand and accept the risks associated with the Underlying.
♦
You are willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under the
Securities, and understand that if JPMorgan Financial and JPMorgan Chase & Co. default on their obligations, you may not receive
any amounts due to you including any repayment of principal.
|
|
The Securities may not be suitable for you if, among other considerations:
♦
You do not fully understand the risks inherent in an investment in the Securities, including the risk of loss of your entire
principal amount.
♦
You require an investment designed to provide a full return of principal at maturity.
♦
You cannot tolerate a loss of all or a substantial portion of your investment, or you are not willing to make an investment
that has the same downside market risk as a hypothetical investment in the Underlying.
♦
You believe the price of the Underlying will decline over the term of the Securities, or you believe the Underlying will
appreciate over the term of the Securities by more than the Maximum Gain indicated on the cover hereof.
♦
You seek an investment that has unlimited return potential without a cap on appreciation.
♦
You are unwilling to invest in the Securities based on the Maximum Gain indicated on the cover hereof.
♦
You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside
price fluctuations of the Underlying.
♦
You seek current income from your investment or prefer not to forgo dividends paid on the Underlying.
♦
You are unwilling or unable to hold the Securities to maturity and seek an investment for which there will be an active
secondary market.
♦
You do not understand or accept the risks associated with the Underlying.
♦
You are not willing to assume the credit risks of JPMorgan Financial and JPMorgan Chase & Co. for all payments under
the Securities, including any repayment of principal.
|
The suitability considerations identified above are not exhaustive.
Whether or not the Securities are a suitable investment for you will depend on your individual circumstances, and you should reach
an investment decision only after you and your investment, legal, tax, accounting and other advisers have carefully considered
the suitability of an investment in the Securities in light of your particular circumstances. You should also review carefully
the “Key Risks” section of this pricing supplement and the “Risk Factors” sections of the accompanying
product supplement and the accompanying underlying supplement for risks related to an investment in the Securities. For
more information on the Underlying, please see the section titled “The Underlying” below.
Final
Terms
|
Issuer:
|
|
JPMorgan Chase Financial Company LLC
|
Guarantor:
|
|
JPMorgan Chase & Co.
|
Issue Price:
|
|
$10.00 per Security (subject to a minimum purchase of 100 Securities or $1,000)
|
Principal Amount:
|
|
$10.00 per Security. The payment at maturity will be based on the principal amount.
|
Underlying:
|
|
Financial Select Sector SPDR
®
Fund
|
Term:
|
|
Approximately 15 months
|
Payment at Maturity (per $10 principal amount Security):
|
|
If the
Underlying Return is positive,
JPMorgan Financial will pay you a
cash payment at maturity per $10 principal amount Security equal to:
$10.00 + ($10.00 × Underlying Return × Upside Gearing)
provided, however,
that in no event will JPMorgan Financial
pay you at maturity an amount greater than:
$10.00 + ($10.00 × Maximum Gain)
If the
Underlying Return is zero,
JPMorgan Financial will pay you a cash
payment at maturity of $10.00 per $10 principal amount Security.
If the
Underlying Return is negative,
JPMorgan Financial will pay you a
cash payment at maturity per $10 principal amount Security equal to:
$10.00 + ($10.00 × Underlying Return)
In this scenario, you will be exposed to the decline
of the Underlying and you will lose some or all of your principal amount in an amount proportionate to the negative Underlying
Return.
|
Underlying Return:
|
|
(Final Value –
Initial Value)
Initial Value
|
Upside Gearing:
|
|
3.00
|
Maximum Gain:
|
|
18.60%. In no event will the return on the Principal Amount be greater than the Maximum Gain.
|
Initial Value:
|
|
The closing price of one share of the Underlying on the Trade Date, as specified on the cover of this pricing supplement.
|
Final Value:
|
|
The closing price
1
of one share of the Underlying on the Final Valuation Date
|
Share Adjustment
Factor
1
:
|
|
The Share Adjustment Factor is referenced in determining the closing price of one share of the Underlying. The Share Adjustment Factor is set initially at 1.0 on the Trade Date.
|
1
The closing price and the Share Adjustment Factor of the Underlying are subject to adjustments in the case of certain events described in the accompanying product supplement under “The Underlyings — Funds — Anti-Dilution Adjustments.”
|
Investment Timeline
|
|
|
|
Trade Date
|
|
The Initial Value is observed. The Maximum Gain is determined.
|
|
|
|
|
Maturity Date
|
|
The Final Value and the Underlying Return are determined.
If the
Underlying Return is positive,
JPMorgan Financial will pay you a
cash payment at maturity per $10 principal amount Security equal to:
$10.00 + ($10.00 × Underlying Return ×
Upside Gearing)
provided, however,
that in no event will you receive
at maturity an amount greater than:
$10.00 + ($10.00 × Maximum Gain)
If the
Underlying Return is zero,
JPMorgan Financial will pay you a cash
payment at maturity of $10.00 per $10 principal amount Security.
If the
Underlying Return is negative,
JPMorgan Financial will pay you a
cash payment at maturity per $10 principal amount Security equal to:
$10.00 + ($10.00 × Underlying Return)
Under these circumstances, you will be exposed to the decline
of the Underlying and you will lose some or all of your principal amount.
|
|
|
|
INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. IF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. WERE TO DEFAULT ON THEIR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
|
|
|
|
|
|
What Are the
Tax Consequences of the Securities?
|
You should review carefully the section entitled “Material U.S. Federal
Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. The following discussion, when read in combination
with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material
U.S. federal income tax consequences of owning and disposing of Securities.
Based on current market conditions, in the opinion of our special tax counsel
it is reasonable to treat the Securities as “open transactions” that are not debt instruments for U.S. federal income
tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S.
Holders — Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying product supplement.
Assuming this treatment is respected, subject to the possible application of the “constructive ownership” rules, the
gain or loss on your Securities should be treated as long-term capital gain or loss if you hold your Securities for more than a
year, whether or not you are an initial purchaser of Securities at the issue price. The Securities could be treated as “constructive
ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended, in which case
any gain recognized in respect of the Securities that would otherwise be long-term capital gain and that was in excess of the “net
underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest
charge would apply as if that income had accrued for tax purposes at a constant yield over the Securities’ term. Our special
tax counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the Securities. Accordingly,
U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
The IRS or a court may not respect the treatment of the Securities described
above, in which case the timing and character of any income or loss on your Securities could be materially and adversely affected.
In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the constructive ownership regime
described above. 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 Securities, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Securities, including the potential application of the constructive ownership rules,
possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as “FATCA”
may (if the Securities are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the Securities.
Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than any amount treated
as interest) of a taxable disposition, including redemption at maturity, of the Securities. You should consult your tax adviser
regarding the potential application of FATCA to the Securities.
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 Securities.
An investment in the Securities involves significant risks.
Investing in the Securities is not equivalent to investing directly in the Underlying. These risks are explained in more detail
in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying supplement. We
also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Securities.
Risks Relating to the Securities Generally
|
♦
|
Your Investment in the Securities May Result in a Loss
—
The Securities differ from ordinary debt securities in that we will not necessarily repay the full principal amount of the Securities.
We will pay you the principal amount of your Securities in cash only if the Final Value has not declined below the Initial Value.
If the Underlying Return is negative, you will lose some or all of your principal amount in an amount proportionate to the negative
Underlying Return. Accordingly, you could lose up to your entire principal amount.
|
|
♦
|
Credit
Risks of JPMorgan Financial and JPMorgan Chase & Co
.
— The Securities are unsecured and unsubordinated
debt obligations of the Issuer, JPMorgan Chase Financial Company LLC, the payment on which is fully and unconditionally guaranteed
by JPMorgan Chase & Co. The Securities will rank
pari passu
with all of our other unsecured and unsubordinated obligations,
and the related guarantee JPMorgan Chase & Co. will rank
pari passu
with all of JPMorgan Chase & Co.’s other
unsecured and unsubordinated obligations. The Securities and related guarantees are not, either directly or indirectly, an obligation
of any third party. Any payment to be made on the Securities, including any repayment of principal, depends on the ability of
JPMorgan Financial and JPMorgan Chase & Co. to satisfy their obligations as they come due. As a result, the actual and perceived
creditworthiness of JPMorgan Financial and JPMorgan Chase & Co. may affect the market value of the Securities and, in the
event JPMorgan Financial and JPMorgan Chase & Co. were to default on their obligations, you may not receive any amounts owed
to you under the terms of the Securities and you could lose your entire investment.
|
|
♦
|
As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations
and 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 Securities. If these
affiliates do not make payments to us and we fail to make payments on the Securities, you may have to seek payment under the related
guarantee by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated
obligations of JPMorgan Chase & Co.
|
|
♦
|
The Appreciation Potential of the Securities Is Limited by the Maximum
Gain
— The appreciation potential of the Securities is limited by the Maximum Gain of 18.60%. Accordingly, the appreciation
potential of the Securities will be limited by the Maximum Gain even if the Underlying Return times the Upside Gearing is greater
than the Maximum Gain.
|
|
♦
|
The Upside Gearing Applies Only If You Hold the Securities to Maturity
— You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity in
the secondary market, if any, the price you receive likely will not reflect the full economic value of the Upside Gearing or the
Securities themselves, and the return you realize may be less than the product of the performance of the Underlying and the Upside
Gearing and may be less than the Underlying return, even if that return is positive and does not exceed the Maximum Gain. You can
receive the full benefit of the Upside Gearing, subject to the Maximum Gain, only if you hold your Securities to maturity.
|
|
♦
|
No Interest Payments
— JPMorgan Financial will not make
any interest payments to you with respect to the Securities.
|
|
♦
|
Potential Conflicts
— We and our affiliates play a variety
of roles in connection with the issuance of the Securities, including acting as calculation agent and hedging our obligations under
the Securities and making the assumptions used to determine the pricing of the Securities and the estimated value of the Securities
when the terms of the Securities are set, which we refer to as the estimated value of the Securities. 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 Securities. 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 Securities and the value of the Securities. It is possible
that hedging or trading activities of ours or our affiliates in connection with the Securities could result in substantial returns
for us or our affiliates while the value of the Securities declines. Please refer to “Risk Factors — Risks Relating
to Conflicts of Interest” in the accompanying product supplement for additional information about these risks.
|
|
♦
|
The Probability That the Final Value Will Fall Below the Initial Value
on the Final Valuation Date Will Depend on the Volatility of the Underlying —
“Volatility" refers to the
frequency and magnitude of changes in the price of the Underlying. Greater expected volatility with respect to the Underlying reflects
a higher expectation as of the Trade Date that the Underlying could close below the Initial Value on the Final Valuation Date of
the Securities, resulting in the loss of some or all of your investment. However, the Underlying’s volatility can change
significantly over the term of the Securities. The price of the Underlying could fall sharply, which could result in a significant
loss of principal.
|
|
♦
|
The Estimated Value of the Securities Is Lower Than the Original Issue
Price (Price to Public) of the Securities
— The estimated value of the Securities is only an estimate determined by
reference to several factors. The original issue price of the Securities exceeds the estimated value of the Securities because
costs associated with selling, structuring and hedging the Securities are included in the original issue price of the Securities.
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 Securities and the estimated cost of hedging our obligations under the Securities.
See “The Estimated Value of the Securities” in this pricing supplement.
|
|
♦
|
The Estimated Value of the Securities Does Not Represent Future Values
of the Securities and May Differ from Others’ Estimates
— The estimated value of the Securities is determined
by reference to internal pricing models of our affiliates when the terms of the Securities are set. This estimated value of the
Securities is based on market conditions and other relevant factors existing at that time and assumptions about market parameters,
which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could
provide valuations for the Securities that are greater than or less than the estimated value of the Securities. 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 Securities 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 Securities from you in secondary market transactions. See “The Estimated Value of the
Securities” in this pricing supplement.
|
|
♦
|
The
Estimated Value of the Securities Is Derived by Reference to an Internal Funding Rate
— The internal funding
rate used in the determination of the estimated value of the Securities is based on, among other things, our and our affiliates’
view of the funding value of the Securities as well as the higher issuance, operational and ongoing liability management costs
of the Securities 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 Securities and any
secondary market prices of the Securities. See “The Estimated Value of the Securities” in this pricing supplement.
|
|
♦
|
The Value of the Securities as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Securities for a Limited Time Period
— We generally expect that some of the costs included in the original issue price of the Securities will be partially paid
back to you in connection with any repurchases of your Securities by JPMS in an amount that will decline to zero over an initial
predetermined period. These costs can include selling commissions, 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 Securities” in this pricing supplement for additional information relating to this initial period. Accordingly,
the estimated value of your Securities during this initial period may be lower than the value of the Securities as published by
JPMS (and which may be shown on your customer account statements).
|
|
♦
|
Secondary
Market Prices of the Securities Will Likely Be Lower Than the Original Issue Price of the Securities
— Any secondary
market prices of the Securities will likely be lower than the original issue price of the Securities 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 Securities. As a result, the price, if any, at which JPMS will
be willing to buy Securities 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
factor for information about additional factors that will impact any secondary market prices of the Securities.
|
The Securities are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your Securities to maturity. See “— Lack of
Liquidity” below.
|
♦
|
Many Economic and Market Factors Will Impact the Value of the Securities
—
As described under “The Estimated Value of the Securities” in this pricing supplement, the Securities
can be thought of as securities that combine a fixed-income debt component with one or more derivatives. As a result, the factors
that influence the values of fixed-income debt and derivative instruments will also influence the terms of the Securities at issuance
and their value in the secondary market. Accordingly, the secondary market price of the Securities 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 price of one share of the Underlying, including:
|
|
♦
|
any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
|
|
♦
|
customary bid-ask spreads for similarly sized trades;
|
|
♦
|
our internal secondary market funding rates for structured debt issuances;
|
|
♦
|
the actual and expected volatility in the price of one share of the Underlying;
|
|
♦
|
the time to maturity of the Securities;
|
|
♦
|
the dividend rates on the Underlying and the equity securities held by the Underlying;
|
|
♦
|
the occurrence of certain events affecting the Underlying that may or may not require an adjustment to the closing price and
the Share Adjustment Factor of the Underlying;
|
|
♦
|
interest and yield rates in the market generally;
|
|
♦
|
the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the
equity securities held by the Underlying trade and the correlation among those rates and the price of the Underlying; and
|
|
♦
|
a variety of other economic, financial, political, regulatory and judicial events.
|
Additionally, independent pricing vendors and/or
third party broker-dealers may publish a price for the Securities, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the Securities, if any, at which JPMS may be willing to purchase
your Securities in the secondary market.
|
♦
|
Investing in the Securities Is Not Equivalent to Investing in the Underlying
or the Equity Securities Held by the Underlying
— Investing in the Securities is not equivalent to investing in the
Underlying or the equity securities held by the Underlying. As an investor in the Securities, you will not have any ownership interest
or rights in the Underlying or the equity securities held by the Underlying, such as voting rights, dividend payments or other
distributions.
|
|
♦
|
Your Return on the Securities Will Not Reflect Dividends on the Underlying
or the Equity Securities held by the Underlying
— Your return on the Securities will not reflect the return you would
realize if you actually owned the Underlying or the equity securities held by the Underlying and received the dividends on the
Underlying or those equity securities. This is because the calculation agent will calculate the amount payable to you at maturity
of the Securities by reference to the Final Value, which reflects the closing price of one share of the Underlying on the Final
Valuation Date without taking into consideration the value of dividends on the Underlying or the equity securities held by the
Underlying.
|
|
♦
|
No
Affiliation with the Underlying or the Issuers of the Equity Securities held by the Underlying —
We are not
affiliated with the Underlying or, to our knowledge, the issuers of the equity securities held by the Underlying. We have not
independently verified the information about the Underlying or the issuers of the equity securities held by the Underlying contained
in this pricing supplement. You should make your own investigation into the Underlying and the issuers of the equity securities
held by the Underlying. We are not responsible for the public disclosure of information by the Underlying or the issuers of the
equity securities held by the Underlying, whether contained in SEC filings or otherwise.
|
|
♦
|
Lack of Liquidity
— The Securities will not be listed on
any securities exchange. JPMS intends to offer to purchase the Securities 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 Securities easily. Because
other dealers are not likely to make a secondary market for the Securities, the price at which you may be able to trade your Securities
is likely to depend on the price, if any, at which JPMS is willing to buy the Securities.
|
|
♦
|
Potentially Inconsistent Research, Opinions or Recommendations by JPMS,
UBS or Their Affiliates
— JPMS, UBS or their affiliates may publish research, express opinions or provide recommendations
that are inconsistent with investing in or holding the Securities, and that may be revised at any time. Any such research, opinions
or recommendations may or may not recommend that investors buy or hold investments linked to the Underlying and could affect the
value of the Underlying, and therefore the market value of the Securities.
|
|
♦
|
Tax Treatment
— Significant aspects of the tax treatment
of the Securities are uncertain. You should consult your tax adviser about your tax situation.
|
|
♦
|
Potential JPMorgan Financial Impact on the Market Price of the Underlying
— Trading or transactions by JPMorgan Financial or its affiliates in the Underlying or in futures, options or other derivative
products on the Underlying may adversely affect the market value of the Underlying and, therefore, the market value of the Securities.
|
Risks Relating to the Underlying
|
♦
|
There Are Risks Associated with the Underlying
— Although shares of the Underlying are listed for trading on a securities exchange and a number of similar products have
been trading on a securities exchange for varying periods of time, there is no assurance that an active trading market will continue
for the shares of the Underlying or that there will be liquidity in the trading market. The Underlying is subject to management
risk, which is the risk that the investment strategies of the Underlying’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 Underlying, and consequently, the value of the Securities.
|
|
♦
|
The
Performance and Market Value of the Underlying, Particularly During Periods of Market Volatility, May Not Correlate with the Performance
of the Underlying’s Underlying Index as well as the Net Asset Value per Share
—
The Underlying does not fully replicate its Underlying Index (as defined under “The Underlying” below)
and may hold securities different from those included in its Underlying Index. In addition, the performance of the Underlying
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 Underlying and its Underlying Index. In addition, corporate
actions with respect to the equity securities underlying the Underlying (such as mergers and spin-offs) may impact the variance
between the performances of the Underlying and its Underlying Index. Finally, because the shares of the Underlying are traded
on a securities exchange and are subject to market supply and investor demand, the market value of one share of the Underlying
may differ from the net asset value per share of the Underlying.
|
During periods of market volatility, securities
underlying the Underlying may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Underlying and the liquidity of the Underlying may be adversely affected. This kind of market
volatility may also disrupt the ability of market participants to create and redeem shares of the Underlying. Further, market volatility
may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Underlying.
As a result, under these circumstances, the market value of shares of the Underlying may vary substantially from the net asset
value per share of the Underlying. For all of the foregoing reasons, the performance of the Underlying may not correlate with the
performance of its Underlying Index as well as the net asset value per share of the Underlying, which could materially and adversely
affect the value of the Securities in the secondary market and/or reduce any payment on the Securities.
|
♦
|
Risks Associated with the Financial Sector
—
All or substantially all of the equity securities held by the shares of the Underlying are issued by companies
whose primary line of business is directly associated with the financial sector. As a result, the value of the Securities
may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting
this sector than a different investment linked to securities of a more broadly diversified group of issuers. Financial
services companies are subject to extensive government regulation, which may limit both the amounts and types of loans and other
financial
|
commitments they can make, the interest rates
and fees they can charge, the scope of their activities, the prices they can charge and the amount of capital they must maintain.
Profitability is largely dependent on the availability and cost of capital funds and can fluctuate significantly when interest
rates change or due to increased competition. In addition, deterioration of the credit markets generally may cause an adverse
impact in a broad range of markets, including U.S. and international credit and interbank money markets generally, thereby affecting
a wide range of financial institutions and markets. Certain events in the financial sector may cause an unusually high degree
of volatility in the financial markets, both domestic and foreign, and cause certain financial services companies to incur large
losses. Securities of financial services companies may experience a dramatic decline in value when such companies experience
substantial declines in the valuations of their assets, take action to raise capital (such as the issuance of debt or equity securities),
or cease operations. Credit losses resulting from financial difficulties of borrowers and financial losses associated
with investment activities can negatively impact the financial sector. Insurance companies may be subject to severe price
competition. These factors could affect the financial sector and could affect the value of the equity securities held by
the Underlying and the price of the Underlying during the term of the Securities, which may adversely affect the value of your
Securities.
|
♦
|
The Underlying Recently Ceased Providing Exposure
to the Real Estate Sector
—
The Underlying seeks
to track the Financial Select Sector Index. On September 19, 2016, the Financial Select Sector Index was reconstituted to
eliminate the stocks of real estate management and development companies and real estate investment trusts (“REITs”)
(other than mortgage REITs) (“real estate stocks”). In order to implement a corresponding change to its portfolio,
the Underlying exchanged its real estate stocks for shares of the Real Estate Select Sector SPDR
®
Fund and then
distributed those shares to its holders as a special share distribution with an ex-date of September 19, 2016. As of September
19, 2016, the Underlying no longer holds real estate stocks. The Underlying now tracks the performance of only those financial
company stocks that remain in the Financial Select Sector Index following its reconstitution, which exclude real estate stocks.
Consequently, the Underlying is less diversified, and is more concentrated in the financial sector, than it was before this change
to its portfolio.
|
The net asset value of the shares of the Real
Estate Select Sector SPDR
®
Fund distributed for each share of the Underlying represented approximately 18.8% of
the net asset value of the Underlying as of September 16, 2016. Accordingly, the changes to the Underlying described above
represent a significant change in the nature of Underlying and its holdings. These changes could adversely affect the performance
of the Underlying and, in turn, the value of the Securities.
|
♦
|
Anti-Dilution Protection Is Limited
—
Although the calculation agent will adjust the closing price of one share of the Underlying for certain events affecting the Underlying,
the calculation agent is not required to make an adjustment for every event that can affect the Underlying. If an event occurs
that does not require the calculation agent to adjust the closing price of one share of the Fund, the market value of your Securities
and any payment on the Securities may be materially and adversely affected.
|
Hypothetical
Examples and Return Table
|
Hypothetical terms only. Actual terms
may vary. See the cover page for actual offering terms.
The following table and hypothetical examples below illustrate
the payment at maturity per $10.00 principal amount Security for a hypothetical range of Underlying Returns from -100.00% to +100.00%
on an offering of the Securities linked to a hypothetical Underlying, and assume a hypothetical Initial Value of 100, a hypothetical
Upside Gearing of 1.50 and a hypothetical Maximum Gain of 12.00%. The hypothetical Initial Value of 100 has been chosen for illustrative
purposes only and does not represent the actual Initial Value. The actual Initial Value is based on the closing price of one share
of the Underlying on the Trade Date and is specified on the cover of this pricing supplement. For historical data regarding the
actual closing prices of one share of the Underlying, please see the historical information set forth under “The Underlying”
in this pricing supplement. The actual Upside Gearing and Maximum Gain are specified on the cover of this pricing supplement. The
hypothetical payment at maturity examples set forth below are for illustrative purposes only and may not be the actual returns
applicable to a purchaser of the Securities. The actual payment at maturity may be more or less than the amounts displayed below
and will be determined based on the actual terms of the Securities, including the Upside Gearing, the Initial Value and the Maximum
Gain, and the Final Value on the Final Valuation Date. You should consider carefully whether the Securities are suitable to your
investment goals. The numbers appearing in the table below have been rounded for ease of analysis.
Final Value
|
Underlying Return (%)
|
Payment at Maturity ($)
|
Return at Maturity per
$10.00 issue price (%)
|
$200.00
|
100.00%
|
$11.20
|
12.00%
|
$190.00
|
90.00%
|
$11.20
|
12.00%
|
$180.00
|
80.00%
|
$11.20
|
12.00%
|
$170.00
|
70.00%
|
$11.20
|
12.00%
|
$160.00
|
60.00%
|
$11.20
|
12.00%
|
$150.00
|
50.00%
|
$11.20
|
12.00%
|
$140.00
|
40.00%
|
$11.20
|
12.00%
|
$130.00
|
30.00%
|
$11.20
|
12.00%
|
$120.00
|
20.00%
|
$11.20
|
12.00%
|
$110.00
|
10.00%
|
$11.20
|
12.00%
|
$108.00
|
8.00%
|
$11.20
|
12.00%
|
$106.00
|
6.00%
|
$10.90
|
9.00%
|
$104.00
|
4.00%
|
$10.60
|
6.00%
|
$102.00
|
2.00%
|
$10.30
|
3.00%
|
$100.00
|
0.00%
|
$10.00
|
0.00%
|
$95.00
|
-5.00%
|
$9.50
|
-5.00%
|
$90.00
|
-10.00%
|
$9.00
|
-10.00%
|
$80.00
|
-20.00%
|
$8.00
|
-20.00%
|
$70.00
|
-30.00%
|
$7.00
|
-30.00%
|
$60.00
|
-40.00%
|
$6.00
|
-40.00%
|
$50.00
|
-50.00%
|
$5.00
|
-50.00%
|
$40.00
|
-60.00%
|
$4.00
|
-60.00%
|
$30.00
|
-70.00%
|
$3.00
|
-70.00%
|
$20.00
|
-80.00%
|
$2.00
|
-80.00%
|
$10.00
|
-90.00%
|
$1.00
|
-90.00%
|
$0.00
|
-100.00%
|
$0.00
|
-100.00%
|
Example 1 — The price of the Underlying increases by 2%
from the Initial Value of $100 to the Final Value of $102.
Because the Upside Gearing of 1.50 times the Underlying Return
of 2% is less than the Maximum Gain of 12.00%, JPMorgan Financial will pay you your principal amount
plus
a return equal
to the Underlying Return
times
the Upside Gearing, resulting in a payment at maturity of $10.30 per $10 principal amount
Security, calculated as follows:
$10.00 + ($10.00 × Underlying Return
× Upside Gearing)
$10.00 + ($10.00 × 2% × 1.50) = $10.30
Example 2 — The price of the Underlying increases by 10%
from the Initial Value of $100 to the Final Value of $110.
Because the Upside Gearing of 1.50 times the Underlying Return
of 10% is greater than the Maximum Gain of 12.00%, JPMorgan Financial will pay you your principal amount
plus
a return equal
to the Maximum Gain of 12.00%, resulting in a payment at maturity of $11.20 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 × Maximum Gain)
$10.00 + ($10.00 × 12.00%) = $11.20
Example 3 — The price of the Underlying increases by 40%
from the Initial Value of $100 to the Final Value of $140.
Because the Upside Gearing of 1.50 times the Underlying Return
of 40% is significantly greater than the Maximum Gain of 12.00%, JPMorgan Financial will pay you your principal amount
plus
a return equal to only the Maximum Gain of 12.00%, resulting in a payment at maturity of $11.20 per $10 principal amount Security,
calculated as follows:
$10.00 + ($10.00 × Maximum Gain)
$10.00 + ($10.00 × 12.00%) = $11.20
Example 4 — The price of the Underlying decreases by 40%
from the Initial Value of $100 to the Final Value of $60.
Because the Underlying Return is -40%, JPMorgan Financial will
pay you a payment at maturity of $6.00 per $10 principal amount Security, calculated as follows:
$10.00 + ($10.00 × Underlying Return)
$10.00 + ($10.00 × -40.00%) = $6.00
If the Underlying Return is negative, investors will be
exposed to the negative Underlying Return at maturity, resulting in a loss of principal that is proportionate to the Underlying’s
decline from the Initial Value to the Final Value. Investors could lose some or all of their principal amount.
The
hypothetical returns and hypothetical payments on the Securities shown above apply
only
if you hold the Securities 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.
The Financial Select Sector SPDR
®
Fund is an exchange-traded
fund of the Select Sector SPDR
®
Trust, a registered investment company, that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies
in the Financial Select Sector Index, which we refer to as the Underlying Index with respect to the Financial Select Sector SPDR
®
Fund. The Financial Select Sector Index is a modified market capitalization-based index that measures the performance of the financial
sector of the S&P 500
®
Index. The Financial Select Sector Index includes companies in the following industries:
diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts (“REITs”),
consumer finance, thrifts and mortgage finance. Prior to September 19, 2016, the Financial Select Sector Index also included
companies in the following industries: equity REITs and real estate management and development. For additional information
about the Financial Select Sector SPDR
®
Fund, see “Fund Descriptions — The Select Sector SPDR
®
Funds” in the accompanying underlying supplement, as supplemented by the following paragraph.
On September 19, 2016, the Financial Select Sector Index was
reconstituted to eliminate the stocks of real estate management and development companies and REITs (other than mortgage REITs)
(“real estate stocks”). In order to implement a corresponding change to its portfolio, the Financial Select Sector
SPDR
®
Fund exchanged its real estate stocks for shares of the Real Estate Select Sector SPDR
®
Fund
and then distributed those shares to its holders as a special share distribution with an ex-date of September 19, 2016. As
of September 19, 2016, the Financial Select Sector SPDR
®
Fund no longer holds real estate stocks.
Historical Information
The following table sets forth the quarterly high and low closing
prices of one share of the Underlying, based on daily closing prices of one share of the Underlying as reported by the Bloomberg
Professional
®
service (“Bloomberg”), without independent verification. The information given below is
for the four calendar quarters in each of 2011, 2012, 2013, 2014, 2015 and the first, second and third calendar quarters of 2016.
Partial data is provided for the fourth calendar quarter of 2016. The closing price of one share of the Underlying on December
5, 2016 was $22.92. We obtained the closing prices of one share of the Underlying above and below from Bloomberg, without independent
verification. The closing prices may have been adjusted by Bloomberg for certain actions, such as stock splits. You should not
take the historical prices of one share of the Underlying as an indication of future performance.
On September 19, 2016, the Underlying made a significant change to
its portfolio so that it no longer holds real estate stocks. The Underlying now tracks the performance of only those financial
company stocks that remain in the Financial Select Sector Index following its reconstitution, which exclude real estate stocks.
The historical performance of the Underlying shown below might have been meaningfully different had the Underlying not held real
estate stocks prior to September 19, 2016.
Quarter Begin
|
Quarter End
|
Quarterly Closing High
|
Quarterly Closing Low
|
Close
|
1/1/2011
|
3/31/2011
|
13.97
|
12.92
|
13.33
|
4/1/2011
|
6/30/2011
|
13.56
|
11.94
|
12.45
|
7/1/2011
|
9/30/2011
|
12.71
|
9.36
|
9.61
|
10/1/2011
|
12/31/2011
|
11.41
|
9.16
|
10.56
|
1/1/2012
|
3/31/2012
|
12.97
|
10.80
|
12.81
|
4/1/2012
|
6/30/2012
|
12.92
|
10.86
|
11.87
|
7/1/2012
|
9/30/2012
|
13.22
|
11.55
|
12.67
|
10/1/2012
|
12/31/2012
|
13.55
|
12.31
|
13.32
|
1/1/2013
|
3/31/2013
|
15.00
|
13.68
|
14.77
|
4/1/2013
|
6/30/2013
|
16.38
|
14.48
|
15.83
|
7/1/2013
|
9/30/2013
|
16.95
|
15.76
|
16.18
|
10/1/2013
|
12/31/2013
|
17.75
|
15.89
|
17.75
|
1/1/2014
|
3/31/2014
|
18.25
|
16.67
|
18.14
|
4/1/2014
|
6/30/2014
|
18.60
|
17.28
|
18.47
|
7/1/2014
|
9/30/2014
|
19.33
|
17.99
|
18.81
|
10/1/2014
|
12/31/2014
|
20.33
|
17.90
|
20.08
|
1/1/2015
|
3/31/2015
|
20.08
|
18.68
|
19.58
|
4/1/2015
|
6/30/2015
|
20.52
|
19.56
|
19.80
|
7/1/2015
|
9/30/2015
|
20.77
|
18.09
|
18.40
|
10/1/2015
|
12/31/2015
|
20.16
|
18.41
|
19.31
|
1/1/2016
|
3/31/2016
|
19.05
|
15.99
|
18.28
|
4/1/2016
|
6/30/2016
|
19.36
|
17.42
|
18.54
|
7/1/2016
|
9/30/2016
|
19.95
|
18.17
|
19.30
|
10/1/2016
|
12/5/16*
|
22.92
|
19.21
|
22.92
|
*As of the date of this pricing supplement, available information
for the fourth calendar quarter of 2016 includes data for the period from October 1, 2016 through December 5, 2016. Accordingly,
the “Quarterly Closing High,” “Quarterly Closing Low” and “Close” data indicated are for this
shortened period only and do not reflect complete data for the fourth calendar quarter of 2016.
The graph
below illustrates the daily performance of the Underlying from January 3, 2006 through December 5, 2016, based on information from
Bloomberg, without independent verification.
Past performance of the Underlying is not indicative of the future performance of the Underlying.
The historical performance of the Underlying should not be
taken as an indication of future performance, and no assurance can be given as to the closing price of one share of the Underlying
on the Final Valuation Date. We cannot give you assurance that the performance of the Underlying will result in the return of any
of your principal amount.