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Pricing supplement
To prospectus dated
April 15, 2016,
prospectus supplement dated April 15, 2016,
product supplement no. 2-I dated April 15, 2016 and
underlying supplement no. 1-I dated April 15,
2016
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Registration Statement Nos. 333-209682 and 333-209682-01
Dated September 27, 2016
Rule
424(b)(2)
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$2,543,000
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index
Excess Return due September 30,
2019
Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
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General
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The notes are designed for investors who seek a return of 2 times the appreciation of the S&P GSCI
®
Index Excess Return, up to a maximum return of 36.00%, at maturity.
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Investors should be willing to forgo interest payments and to lose up to 90% of their principal at maturity, if the Ending Index Level is less than the Initial
Index Level by more than the Buffer Amount of 10%.
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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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Minimum denominations of $1,000 and integral multiples in excess thereof
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Key Terms
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Index:
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The S&P GSCI
®
Index Excess Return (Bloomberg ticker: SPGCCIP)
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Upside Leverage Factor:
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2
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Buffer Amount:
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10%
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Payment at Maturity:
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If the Ending Index Level is greater than the Initial Index Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the
Index Return multiplied by 2, subject to the Maximum Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Index Return × 2), subject
to the Maximum Return
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If the Ending Index Level is equal to the Initial Index Level or is less than the Initial Index Level by up to the Buffer Amount, you will receive the principal amount of your notes at
maturity.
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If the Ending Index Level is less than the Initial Index Level by more than the Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index
Level is less than the Initial Index Level by more than the Buffer Amount. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + [$1,000 × (Index Return + 10%)]
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If the Ending Index Level is less than the Initial Index Level by more than the Buffer Amount of 10%, you will lose up to $900 per $1,000 principal amount note at
maturity.
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Maximum Return:
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36.00%. For example, if the Index Return is equal to or greater than 18.00%, you will receive the Maximum Return of 36.00%, which entitles you to a maximum payment at maturity of $1,360
per $1,000 principal amount note. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,360.
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Index Return:
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Ending Index Level Initial Index Level
Initial Index Level
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Initial Index Level:
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The closing level of the Index on the Pricing Date, which was 212.2925
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Ending Index Level:
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The closing level of the Index on the Observation Date
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Pricing Date:
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September 27, 2016
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Original Issue Date:
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On or about September 30, 2016 (Settlement Date)
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Observation Date:
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September 25, 2019
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Maturity Date:
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September 30, 2019
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CUSIP:
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46646EZJ4
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Subject to postponement in the event of certain market disruption events and as described under General Terms of Notes Postponement of a
Determination Date Notes Linked to a Single Underlying Notes Linked to a Single Index and General Terms of Notes Postponement of a Payment Date in the accompanying product supplement or early acceleration in
the event of a commodity hedging disruption event as described under General Terms of Notes Consequences of a Commodity Hedging Disruption Event Acceleration of the Notes in the accompanying product supplement and in
Selected Risk Considerations We May Accelerate Your Notes If a Commodity Hedging Disruption Event Occurs in this pricing supplement
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Investing in the notes involves a number of risks. See Risk Factors beginning on page PS-9 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-3 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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$1,000
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Total
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$2,543,000
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$2,543,000
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(1)
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See Supplemental Use of Proceeds in this pricing supplement for information about the components of the price to public of the notes.
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(2)
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All sales of the notes will be made to certain fee-based advisory accounts for which an affiliated or unaffiliated financial intermediary is an investment adviser. These
financial intermediaries will forgo any commissions related to these sales. See Plan of Distribution (Conflicts of Interest) in the accompanying product supplement.
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The estimated value of the notes, when the terms of the notes were set, was $993.60 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.
September 27, 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.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the
SEC website):
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Product supplement no. 2-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012640/crt-dp64829_424b2.pdf
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Underlying supplement no. 1-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
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Prospectus supplement and prospectus, each dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
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.
Supplemental Terms of the Notes
For purposes of the notes offered by this pricing supplement, the consequences of a commodity hedging disruption event are described under General Terms of
Notes Consequences of a Commodity Hedging Disruption Event Acceleration of the Notes in the accompanying product supplement.
The
notes are not commodity futures contracts or swaps and are not regulated under the Commodity Exchange Act of 1936, as amended (the Commodity Exchange Act).
The notes are offered pursuant to an exemption from regulation under the
Commodity Exchange Act, commonly known as the hybrid instrument exemption, that is available to securities that have one or more payments indexed to the value, level or rate of one or more commodities, as set out in section 2(f) of that statute.
Accordingly, you are not afforded any protection provided by the Commodity Exchange Act or any regulation promulgated by the Commodity Futures Trading Commission.
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JPMorgan Structured
Investments
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index Excess Return
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PS-1
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Selected Purchase Considerations
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CAPPED APPRECIATION POTENTIAL
The notes provide the opportunity to enhance returns by multiplying a positive Index Return by 2, up to the Maximum
Return of 36.00%. Accordingly, the maximum payment at maturity is $1,360 per $1,000 principal amount note.
Because the notes are our unsecured and unsubordinated obligations, the payment of which is fully and unconditionally guaranteed by
JPMorgan Chase & Co., payment of any amount on the notes is subject to our ability to pay our obligations as they become due and JPMorgan Chase & Co.s ability to pay its obligations as they become due.
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LIMITED PROTECTION AGAINST LOSS
We will pay you your principal back at maturity if the Ending Index Level is not less than the Initial Index Level
by more than the Buffer Amount of 10%. If the Ending Index Level is less than the Initial Index Level by more than the Buffer Amount, for every 1% that the Ending Index Level is less than the Initial Index Level by more than the Buffer Amount, you
will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose up to 90% of your principal amount at maturity.
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RETURN LINKED TO THE S&P GSCI
®
INDEX EXCESS RETURN
The return on
the notes is linked to the S&P GSCI
®
Index Excess Return, the excess return version of the S&P GSCI
®
, a composite index of commodity sector returns, calculated, maintained and published daily by S&P Dow Jones Indices LLC.
The S&P GSCI
®
is a world production-weighted index that is designed to reflect the relative significance of principal
non-financial commodities (
i.e.
, physical commodities) in the world economy. The S&P GSCI
®
represents the
return of a portfolio of the futures contracts for the underlying commodities. The S&P GSCI
®
Index Excess Return is an
excess return index and not a total return index. An excess return index reflects the returns that are potentially available through an unleveraged investment in the contracts composing the index (which, in the case of the Index, are the designated
crude oil futures contracts). By contrast, a total return index, in addition to reflecting those returns, also reflects interest that could be earned on funds committed to the trading of the underlying futures contracts. See
Commodity Index Descriptions The S&P GSCI
®
Indices in the accompanying underlying supplement.
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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. 2-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax
consequences of owning and disposing of notes.
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Based on current market conditions, in the opinion of our special tax
counsel it is reasonable to treat the notes as open transactions that are not debt instruments for U.S. federal income tax purposes, as more fully described in Material U.S. Federal Income Tax Consequences Tax Consequences
to U.S. Holders Notes Treated as Open Transactions That Are Not Debt Instruments in the accompanying product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital
gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price. However, the IRS or a court may not respect this treatment, in which case the timing and character of any income
or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar
instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of
income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S.
investors should be subject to withholding tax; and whether these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary
income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as FATCA
may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity, of a note. However,
under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the
potential application of FATCA to the notes.
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JPMorgan Structured
Investments
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index Excess Return
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PS-2
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Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Index, any of the futures contracts underlying the Index, the commodity to which those
commodity futures contracts relate or any futures contracts or exchange-traded or over-the-counter instruments based on, or other instruments related to, any of the foregoing. These risks are explained in more detail in the Risk Factors
section of the accompanying product supplement and the Risk Factors section of the accompanying underlying supplement.
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
The notes do not guarantee any return of principal at maturity in excess of $100 per $1,000
principal amount note, subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co. The return on the notes at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the Index
Return is positive or negative. Your investment will be exposed to a loss if the Ending Index Level is less than the Initial Index Level by more than the Buffer Amount of 10%. For every 1% that the Ending Index Level is less than the Initial Index
Level by more than the Buffer Amount, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose up to 90% of your principal amount at maturity.
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN
If the Ending Index Level is greater than the Initial Index Level, for each $1,000
principal amount note, you will receive at maturity $1,000
plus
an additional return that will not exceed the Maximum Return of 36.00%, regardless of the appreciation in the Index, which may be significant.
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
The notes are subject to our and JPMorgan Chase & Co.s credit
risks., and our and JPMorgan Chase & Co.s credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our and JPMorgan Chase & Co.s ability to pay all amounts due on
the notes. Any actual or potential change in our or JPMorgan Chase & Co.s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely affect the value of the notes. If we and
JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
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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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POTENTIAL CONFLICTS
We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation
agent and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we
refer to as the estimated value of the notes. In performing these duties, our and JPMorgan Chase & Co.s economic interests and the economic interests of the calculation agent and other affiliates of ours are potentially adverse to
your interests as an investor in the notes. In addition, our and JPMorgan Chase & Co.s business activities, including hedging and trading activities, could cause our and JPMorgan Chase & Co.s economic interests to be
adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or
our affiliates while the value of the notes declines. Please refer to Risk Factors Risks Relating to Conflicts of Interest in the accompanying product supplement for additional information about these risks.
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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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THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS ESTIMATES
The estimated value of
the notes is determined by reference to internal pricing models of our affiliates when the terms of the notes are set. This estimated value of the notes is based on market conditions and other relevant factors existing at that time and assumptions
about market parameters, which can include volatility, interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of the notes. In
addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
See The Estimated Value of the Notes in this pricing supplement.
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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
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JPMorgan Structured
Investments
Capped Contingent Buffered Notes Linked to the S&P GSCI Crude Oil Index Excess Return
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PS-3
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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.
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF
THE NOTES FOR A LIMITED TIME PERIOD
We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that
will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt issuances.
See Secondary Market Prices of the Notes in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the
notes as published by JPMS (and which may be shown on your customer account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES
Any secondary market prices of the notes will
likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to
buy notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk
consideration for information about additional factors that will impact any secondary market prices of the notes.
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The
notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See Lack of Liquidity below.
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SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS
The secondary market price of the notes during their term
will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the level of the Index, including:
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any actual or potential change in our or JPMorgan Chase & Co.s creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured debt issuances;
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the actual and expected volatility of the Index;
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the time to maturity of the notes;
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supply and demand trends for the commodities upon which the futures contracts that compose the Index are based or the exchange-traded futures contracts on those
commodities;
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the market prices of the commodities upon which the futures contracts that compose the Index are based or the exchange-traded futures contracts on those
commodities;
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interest and yield rates in the market generally; and
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a variety of other economic, financial, political, regulatory, geographical, meteorological and judicial events.
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Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary market.
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WE MAY ACCELERATE YOUR NOTES IF A COMMODITY HEDGING DISRUPTION EVENT OCCURS
If we or our affiliates are unable to effect transactions necessary to
hedge our obligations under the notes due to a commodity hedging disruption event, we may, in our sole and absolute discretion, accelerate the payment on your notes and pay you an amount determined in good faith and in a commercially reasonable
manner by the calculation agent. If the payment on your notes is accelerated, your investment may result in a loss and you may not be able to reinvest your money in a comparable investment. Please see General Terms of Notes Consequences
of a Commodity Hedging Disruption Event Acceleration of the Notes in the accompanying product supplement for more information.
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COMMODITY FUTURES CONTRACTS ARE SUBJECT TO UNCERTAIN LEGAL AND REGULATORY REGIMES
The commodity futures contracts that underlie the Index are
subject to legal and regulatory regimes that may change in ways that could adversely affect our ability to hedge our obligations under the notes and affect the level of the Index. Any future regulatory changes, including but not limited to
changes resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), may have a substantial adverse effect on the value of your notes. Additionally, under authority provided by the Dodd-Frank Act,
the U.S. Commodity Futures Trading Commission on November 5, 2013 proposed rules to establish position limits that will apply to 28 agricultural, metals and energy futures contracts and futures, options and swaps that are economically
equivalent to those futures contracts. The limits will apply to a persons combined position in futures, options and swaps on the same underlying commodity. The rules also would set new aggregation standards for purposes of these
position limits and would specify the requirements for designated contract markets and swap execution facilitates to impose position limits on contracts traded on those markets. The rules, if enacted in their proposed form, may reduce liquidity in
the exchange-traded market for those commodity-based futures contracts, which may, in turn, have an adverse effect on any payments on the notes. Furthermore, we or our affiliates may be unable as a result of those restrictions to effect
transactions necessary to hedge our obligations under the notes resulting in a commodity hedging disruption event, in which case we may, in our sole and absolute discretion, accelerate the payment on your notes. See We May
Accelerate Your Notes If a Commodity Hedging Disruption Event Occurs above.
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JPMorgan Structured
Investments
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index Excess Return
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PS-4
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PRICES OF COMMODITY FUTURES CONTRACTS ARE CHARACTERIZED BY HIGH AND UNPREDICTABLE VOLATILITY, WHICH COULD LEAD TO HIGH AND UNPREDICTABLE VOLATILITY IN THE
INDEX
Market prices of the commodity futures contracts included in the Index tend to be highly volatile and may fluctuate rapidly based on numerous factors, including the factors that affect the price of the commodities underlying the
commodity futures contracts included in the Index. See The Market Prices of the Commodities Underlying the Futures Contracts Included in the Index Will Affect the Value of the Notes below. The prices of commodities and commodity
futures contracts are subject to variables that may be less significant to the values of traditional securities, such as stocks and bonds. These variables may create additional investment risks that cause the value of the notes to be more volatile
than the values of traditional securities. As a general matter, the risk of low liquidity or volatile pricing around the Maturity Date of a commodity futures contract is greater than in the case of other futures contracts because (among other
factors) a number of market participants take physical delivery of the underlying commodities. Many commodities are also highly cyclical. The high volatility and cyclical nature of commodity markets may render such an investment inappropriate as the
focus of an investment portfolio.
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THE MARKET PRICES OF THE COMMODITIES UNDERLYING THE FUTURES CONTRACTS INCLUDED IN THE INDEX WILL AFFECT THE VALUE OF THE NOTES
The prices of the
commodities upon which the futures contracts that compose the Index are based are affected by numerous factors, including: changes in supply and demand relationships, governmental programs and policies, national and international monetary, trade,
political and economic events, wars and acts of terror, changes in interest and exchange rates, speculation and trading activities in commodities and related contracts, general weather conditions, and agricultural, trade, fiscal and exchange control
policies. Many commodities are also highly cyclical. These factors, some of which are specific to the market for each such commodity, may cause the value of the different commodities upon which the futures contracts that compose the Index are based,
as well as the futures contracts themselves, to move in inconsistent directions at inconsistent rates. This, in turn, will affect the value of the notes. It is not possible to predict the aggregate effect of all or any combination of these factors.
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A DECISION BY AN EXCHANGE ON WHICH THE FUTURES CONTRACTS UNDERLYING THE INDEX ARE TRADED TO INCREASE MARGIN REQUIREMENTS FOR THOSE FUTURES CONTRACTS MAY
AFFECT THE LEVEL OF THE INDEX
If an exchange on which the futures contracts underlying the index are traded increases the amount of collateral required to be posted to hold positions in those futures contracts (
i.e.,
the margin
requirements), market participants who are unwilling or unable to post additional collateral may liquidate their positions, which may cause the level of the Index to decline significantly.
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THE NOTES DO NOT OFFER DIRECT EXPOSURE TO COMMODITY SPOT PRICES
The notes are linked to the Index, which tracks commodity futures contracts, not
physical commodities (or their spot prices). The price of a futures contract reflects the expected value of the commodity upon delivery in the future, whereas the spot price of a commodity reflects the immediate delivery value of the commodity. A
variety of factors can lead to a disparity between the expected future price of a commodity and the spot price at a given point in time, such as the cost of storing the commodity for the term of the futures contract, interest charges incurred to
finance the purchase of the commodity and expectations concerning supply and demand for the commodity. The price movements of a futures contract are typically correlated with the movements of the spot price of the referenced commodity, but the
correlation is generally imperfect and price movements in the spot market may not be reflected in the futures market (and vice versa). Accordingly, the notes may underperform a similar investment that is linked to commodity spot prices.
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OWNING THE NOTES IS NOT THE SAME AS OWNING ANY COMMODITIES OR COMMODITY FUTURES CONTRACTS
The return on your notes will not reflect the return you
would realize if you actually purchased the futures contracts that compose the Index, the commodities upon which the futures contracts that compose the Index are based, or other exchange-traded or over-the-counter instruments based on the Index. You
will not have any rights that holders of those assets or instruments have.
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HIGHER FUTURES PRICES OF THE COMMODITY FUTURES CONTRACTS UNDERLYING THE INDEX RELATIVE TO THE CURRENT PRICES OF THOSE CONTRACTS MAY AFFECT THE LEVEL OF THE
INDEX AND THE VALUE OF THE NOTES
The Index is composed of futures contracts on physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify
a certain date for delivery of the underlying physical commodity. As the exchange-traded futures contracts that compose the Index approach expiration, they are replaced by contracts that have a later expiration. Thus, for example, a contract
purchased and held in August may specify an October expiration. As time passes, the contract expiring in October is replaced with a contract for delivery in November. This process is referred to as rolling. If the market for these
contracts is (putting aside other considerations) in contango, where the prices are higher in the distant delivery months than in the nearer delivery months, the purchase of the November contract would take place at a price that is
higher than the price of the October contract, thereby creating a
negative
roll yield. Contango could adversely affect the level of the Index and thus the value of notes linked to the Index. The futures contracts underlying the
Index have historically been in contango.
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SUSPENSION OR DISRUPTIONS OF MARKET TRADING IN THE COMMODITY MARKETS AND RELATED FUTURES MARKETS MAY ADVERSELY AFFECT THE LEVEL OF THE INDEX, AND THEREFORE
THE VALUE OF THE NOTES
The commodity markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation and
intervention. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in futures contract prices that may occur during a single day. These limits are generally referred to as daily
price fluctuation limits and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a limit price. Once the limit price has been reached in a particular contract, no trades may be
made at a different price. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at
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JPMorgan Structured
Investments
Capped Contingent Buffered Notes Linked to the S&P GSCI Crude Oil Index Excess Return
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PS-5
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disadvantageous times or prices. These circumstances could adversely affect the level of the Index and, therefore, the value of your notes.
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THE NOTES ARE LINKED TO AN EXCESS RETURN INDEX AND NOT A TOTAL RETURN INDEX
The notes are linked to an excess return index and not a total return
index. An excess return index, such as the Index, reflects the returns that are potentially available through an unleveraged investment in the contracts composing that index. By contrast, a total return index, in addition to
reflecting those returns, also reflects interest that could be earned on funds committed to the trading of the underlying futures contracts.
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NO INTEREST PAYMENTS
As a holder of the notes, you will not receive any interest payments.
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LACK OF LIQUIDITY
The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but
is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you
may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes.
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|
|
JPMorgan Structured
Investments
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index Excess Return
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PS-6
|
What Is the Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index?
The following table and examples illustrate the hypothetical total return and payment at maturity on the notes. The total return as used
in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. Each hypothetical total return or payment at maturity set forth below assumes an
Initial Index Level of 210 and reflects the Maximum Return of 36.00%, the Upside Leverage Factor of 2 and the Buffer Amount of 10%. Each hypothetical total return or payment at maturity set forth below is for illustrative purposes only and may not
be the actual total return or payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
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Ending
Index
Level
|
|
Index
Return
|
|
Total Return
|
378.000
|
|
80.00%
|
|
36.00%
|
357.000
|
|
70.00%
|
|
36.00%
|
336.000
|
|
60.00%
|
|
36.00%
|
315.000
|
|
50.00%
|
|
36.00%
|
294.000
|
|
40.00%
|
|
36.00%
|
273.000
|
|
30.00%
|
|
36.00%
|
252.000
|
|
20.00%
|
|
36.00%
|
247.800
|
|
18.00%
|
|
36.00%
|
241.500
|
|
15.00%
|
|
30.00%
|
231.000
|
|
10.00%
|
|
20.00%
|
220.500
|
|
5.00%
|
|
10.00%
|
215.250
|
|
2.50%
|
|
5.00%
|
212.100
|
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1.00%
|
|
2.00%
|
210.000
|
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0.00%
|
|
0.00%
|
204.750
|
|
-2.50%
|
|
0.00%
|
199.500
|
|
-5.00%
|
|
0.00%
|
189.000
|
|
-10.00%
|
|
0.00%
|
188.979
|
|
-10.01%
|
|
-0.01%
|
178.500
|
|
-15.00%
|
|
-5.00%
|
168.000
|
|
-20.00%
|
|
-10.00%
|
147.000
|
|
-30.00%
|
|
-20.00%
|
126.000
|
|
-40.00%
|
|
-30.00%
|
105.000
|
|
-50.00%
|
|
-40.00%
|
84.000
|
|
-60.00%
|
|
-50.00%
|
63.000
|
|
-70.00%
|
|
-60.00%
|
42.000
|
|
-80.00%
|
|
-70.00%
|
21.000
|
|
-90.00%
|
|
-80.00%
|
0.000
|
|
-100.00%
|
|
-90.00%
|
Hypothetical Examples of Amount Payable at Maturity
The following examples illustrate how the payment at maturity in different hypothetical scenarios is calculated.
Example 1: The level of the Index increases from the Initial Index Level of 210 to an Ending Index Level of 220.50.
Because the Ending Index Level of 220.50
is greater than the Initial Index Level of 210, and the Index Return of 5.00% multiplied by 2 does not exceed the Maximum Return of 36.00%, the investor receives a payment at maturity of $1,100 per $1,000 principal amount note, calculated as
follows:
$1,000 + ($1,000 × 5.00% × 2) = $1,100
Example 2: The level of the Index decreases from the Initial Index Level of 210 to an Ending Index Level of 199.50.
Although the Ending Index Level of 199.50 is less than the Initial Index Level of 210,
because the Ending Index Level is not less than the Initial Index Level by more than the Buffer Amount of 10%, the investor receives a payment at maturity of $1,000 per $1,000 principal amount note.
Example 3: The level of the Index increases from the Initial Index Level of 210 to an Ending Index Level of 294.
Because the Ending Index Level of 294 is
greater than the Initial Index Level of 210 and the Index Return of 40% multiplied by 2 exceeds the Maximum Return of 36.00%, the investor receives a payment at maturity of $1,360 per $1,000 principal amount note, the maximum payment on the
notes.
Example 4: The level of the Index decreases from the Initial Index Level of 210 to an Ending Index Level of 126.
Because the Ending
Index Level of 126 is less than the Initial Index Level of 210 by more than the Buffer Amount of 10% and the Index Return is -40%, the investor receives a payment at maturity of $700 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-40% + 10%)] = $700
Example 5: The level of the Index decreases from the Initial Index Level of 210 to an Ending Index Level of 0.
Because the Ending Index Level of 0 is less than the Initial Index Level of 210 by more than the Buffer Amount of 10% and the Index Return is -100%, the investor
receives a payment at maturity of $100 per $1,000 principal amount note, calculated as follows:
|
|
|
JPMorgan Structured
Investments
Capped Contingent Buffered Notes Linked to the S&P GSCI Crude Oil Index Excess Return
|
|
PS-7
|
$1,000 + [$1,000 × (-100% + 10%)] = $100
The hypothetical returns and hypothetical payments on the notes shown above apply
only if you hold the notes for their entire term
. These hypotheticals do not reflect fees or expenses that would be
associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Historical Information
The following graph sets forth the historical
performance of the Index based on the weekly historical closing levels of the Index from January 7, 2011 through September 23, 2016. The closing level of the Index on September 27, 2016 was 212.2925. We obtained the closing levels of
the Index above and below from the Bloomberg Professional
®
service (Bloomberg), without independent
verification.
The historical closing levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to
the closing level of the Index on the Observation Date. There can be no assurance that the performance of the Index will result in the return of any of your principal amount in excess of $100 per $1,000 principal amount note, subject to the credit
risks of JPMorgan Financial and JPMorgan Chase & Co.
The Estimated Value of the Notes
The estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with the same
maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS
would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates view of the
funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional
information, see Selected Risk Considerations The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate in this pricing supplement. The value of the derivative or derivatives underlying the economic
terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, interest rates and other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are
set based on market conditions and other relevant factors and assumptions existing at that time. See Selected Risk Considerations The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from
Others Estimates in this pricing supplement.
The estimated value of the notes is lower than the original issue price of the notes because
costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the projected profits, if
any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced
by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed to other
affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits. See Selected Risk Considerations The Estimated Value of the Notes Is Lower Than the Original Issue Price (Price to
Public) of the Notes in this pricing supplement.
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|
|
JPMorgan Structured
Investments
Capped Buffered Return Enhanced Notes Linked to the S&P GSCI
®
Index Excess Return
|
|
PS-8
|
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market prices of the notes, see Selected Risk Considerations Secondary Market Prices of the Notes Will Be Impacted by Many Economic and
Market Factors in this pricing supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in
an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the notes,
whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See Selected Risk Considerations The
Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period.
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 What Is The Total Return at Maturity, Assuming a Range of
Performances for the Index? and Hypothetical Examples of Amount Payable on the Notes at Maturity in this pricing supplement for an illustration of the risk-return profile of the notes and Selected Purchase Considerations
Return Linked to the S&P GSCI
®
Index Excess Return in this pricing supplement for a description of the
market exposure provided by the notes.
The original issue price of the notes is equal to the estimated value of the notes plus the selling commissions
paid to JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging
our obligations under the notes.
Validity of the Notes and the Guarantee
In the opinion of Davis Polk & Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes offered by this pricing supplement have been executed and
issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations of JPMorgan Financial and the related guarantee will
constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, concepts of
reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to the effect of fraudulent
conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of
Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustees authorization, execution and delivery of the indenture and its authentication of the notes and the
validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated February 24, 2016, which was filed as an exhibit to the Registration Statement on Form S-3 by JPMorgan
Financial and JPMorgan Chase & Co. on February 24, 2016.
|
|
|
JPMorgan Structured
Investments
Capped Contingent Buffered Notes Linked to the S&P GSCI Crude Oil Index Excess Return
|
|
PS-9
|
JP Morgan Chase (NYSE:JPM)
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