Key Terms
Issuer:
|
JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Commodities:
|
The spot price of Gold (Bloomberg ticker: GOLDLNPM), the spot price of Silver (Bloomberg ticker: SLVRLN) and the spot price of Grade A Copper (Bloomberg ticker: LOCADY) (each, a “Commodity” and collectively, the “Commodities”)
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Payment at Maturity:
|
If the Final Value of each Commodity is greater than or equal to its Trigger Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Contingent Digital Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
|
|
$1,000 + ($1,000 × Contingent Digital Return)
|
|
If the Final Value of any Commodity is less than its Trigger Level, at maturity you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Least Performing Commodity is less than its Initial Value. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
|
|
$1,000 + ($1,000 × Least Performing Commodity Return)
|
|
If the Final Value of any Commodity is less than its Trigger Level, you will lose more than 35% of your principal amount at maturity and may lose all of your principal amount at maturity.
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Contingent Digital Return:
|
At least 6.00%, which reflects the maximum return on the notes. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,060.
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Trigger Level:
|
With respect to each Commodity, an amount that represents 65% of its Initial Value
|
Commodity Return:
|
With respect to each Commodity,
(Final Value – Initial
Value)
Initial Value
|
Least Performing Commodity:
|
The Commodity with the Least Performing Commodity Return
|
Least Performing
Commodity Return:
|
The lowest of the Commodity Returns of the Commodities
|
Pricing Date:
|
On or about January 24, 2017
|
Original Issue Date:
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On or about January 27, 2017 (Settlement Date)
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Ending Averaging Dates*:
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January 25, 2018, January 26, 2018, January 29, 2018, January 30, 2018 and January 31, 2018
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Maturity Date*:
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February 5, 2018
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CUSIP:
|
46646QVZ5
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Other Key Terms:
|
See “Additional Key Terms” on PS-1 of this pricing supplement
|
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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 Multiple Underlyings” and “General Terms of Notes
— Postponement of a Payment Date” in the accompanying product supplement
|
Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-9 of the accompanying product supplement and “Selected Risk Considerations”
beginning on page PS-5 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, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
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Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
|
(1)
|
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)
|
J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling
commissions it receives from us to other affiliated or unaffiliated dealers. In no event will these selling commissions exceed
$8.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” in the accompanying product
supplement
|
If the notes priced
today, the estimated value of the notes would be approximately $978.40 per $1,000 principal amount note. The estimated value of
the notes, when the terms of the notes are set, will be provided in the pricing supplement and will not be less than $960.00 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.
Additional Terms Specific to the
Notes
You may revoke your offer to purchase the notes
at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes,
we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes,
of which these notes are a part, and the more detailed information contained in the accompanying product supplement.
This pricing
supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade
ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours.
You
should carefully consider, among other things, the matters set forth in the “Risk Factors” section of the accompanying
product supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at
www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
·
Product supplement no. 2-I dated April 15, 2016:
https://www.sec.gov/Archives/edgar/data/19617/000095010316012640/crt-dp64829_424b2.pdf
·
Prospectus supplement and prospectus, each dated April 15, 2016:
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.
Additional Key Terms
Initial Value:
|
With respect to each Commodity, the Commodity Price of that Commodity on the Pricing Date
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Final Value:
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With respect to each Commodity, the arithmetic average of the Commodity Prices of that Commodity on the Ending Averaging Dates
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Commodity Price:
|
With respect to Gold, on any day, the official afternoon London
gold price for delivery in London through a member of the London Bullion Market Association (the “LBMA”) authorized
to effect such delivery, stated in U.S. dollars per troy ounce, as calculated and administered by independent service provider(s)
pursuant to an agreement with the LBMA and displayed on the Bloomberg Professional® service (“Bloomberg”) under
the symbol “GOLDLNPM” on that day
With respect to Silver, on any day, the official London silver price
for delivery in London through a member of the LBMA authorized to effect such delivery, stated in U.S. cents per troy ounce, as
calculated and administered by independent service provider(s) pursuant to an agreement with the LBMA and displayed on Bloomberg
under the symbol “SLVRLN” on that day
With respect to Copper Grade A, on any day, the official cash offer
price of Copper Grade A on the London Metal Exchange (the “LME”) for the spot market, stated in U.S. dollars per metric
ton, as determined by the LME and displayed on Bloomberg under the symbol “LOCADY” on that day
|
Supplemental Terms of the Notes
For purposes of the notes offered by this pricing supplement:
each of the Ending Averaging Dates is a “Determination Date” as described in the accompanying product supplement and
is subject to postponement as described under “General Terms of Notes — Postponement of a Determination Date —
Notes Linked to Multiple Underlyings” in the accompanying product supplement.
The notes are not 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.
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
|
PS-
1
|
What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Commodities?
The following table and examples illustrate
the hypothetical total return and the hypothetical 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 that the Least
Performing Commodity is Gold. We make no representation or warranty as to which of the Commodities will be the Least Performing
Commodity for purposes of calculating your actual payment at maturity.
In addition, each hypothetical total return or payment
at maturity set forth below assumes an Initial Value of the Least Performing Commodity of $1,200 and a Trigger Level of the Least
Performing Commodity of $780 (equal to 65% of its hypothetical Initial Value) and reflects the Contingent Digital Return of at
least 6.00%. 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 in the examples below have been rounded for ease of analysis.
Final Value of the Least Performing Commodity
|
Least Performing Commodity Return
|
Total Return
|
$2,160.00
|
80.00%
|
6.00%
|
$1,980.00
|
65.00%
|
6.00%
|
$1,800.00
|
50.00%
|
6.00%
|
$1,680.00
|
40.00%
|
6.00%
|
$1,560.00
|
30.00%
|
6.00%
|
$1,440.00
|
20.00%
|
6.00%
|
$1,380.00
|
15.00%
|
6.00%
|
$1,320.00
|
10.00%
|
6.00%
|
$1,260.00
|
5.00%
|
6.00%
|
$1,230.00
|
2.50%
|
6.00%
|
$1,200.00
|
0.00%
|
6.00%
|
$1,170.00
|
-2.50%
|
6.00%
|
$1,140.00
|
-5.00%
|
6.00%
|
$1,080.00
|
-10.00%
|
6.00%
|
$960.00
|
-20.00%
|
6.00%
|
$840.00
|
-30.00%
|
6.00%
|
$780.00
|
-35.00%
|
6.00%
|
$779.88
|
-35.01%
|
-35.01%
|
$720.00
|
-40.00%
|
-40.00%
|
$600.00
|
-50.00%
|
-50.00%
|
$480.00
|
-60.00%
|
-60.00%
|
$360.00
|
-70.00%
|
-70.00%
|
$240.00
|
-80.00%
|
-80.00%
|
$120.00
|
-90.00%
|
-90.00%
|
$0.00
|
-100.00%
|
-100.00%
|
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
|
PS-
2
|
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 price of the Least Performing
Commodity increases from its Initial Value of $1,200 to a Final Value of $1,260.
Because the Final Value of the Least Performing
Commodity of $1,260 is greater than its Trigger Level of $780, regardless of the Least Performing Commodity Return, the investor
receives a payment at maturity of $1,060 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
6%) = $1,060
Example 2: The price of the Least Performing
Commodity decreases from its Initial Value of $1,200 to a Final Value of $780.
Although the Least Performing Commodity Return
is negative, because the Final Value of the Least Performing Commodity of $780 is greater than or equal to its Trigger Level of
$780, the investor receives a payment at maturity of $1,060 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
6%) = $1,060
Example 3: The price of the Least Performing
Commodity increases from its Initial Value of $1,200 to a Final Value of $1,440.
Because the Final Value of the Least Performing
Commodity of $1,440 is greater than its Trigger Level of $780 and although the Least Performing Commodity Return of 20% exceeds
the Contingent Digital Return of 6%, the investor is entitled only to the Contingent Digital Return and receives a payment at maturity
of $1,060 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
6%) = $1,060
Example 4: The price of the Least Performing
Commodity decreases from its Initial Value of $1,200 to a Final Value of $600.
Because the Final Value of the Least Performing
Commodity of $600 is less than its Trigger Level of $780 and the Least Performing Commodity Return is -50%, the investor receives
a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-50%) = $500
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term.
These hypotheticals do not reflect fees
or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical
returns and hypothetical payments shown above would likely be lower.
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
|
PS-
3
|
Selected Purchase Considerations
|
·
|
FIXED APPRECIATION POTENTIAL
—
If the Final Value of each Commodity is greater than or equal to its Trigger Level, you will receive a fixed return equal to the
Contingent Digital Return of at least 6.00% at maturity, which also reflects the maximum return on the notes at maturity.
Because
the notes are our unsecured and unsubordinated obligations, the payment of which is fully and unconditionally guaranteed by JPMorgan
Chase & Co., payment of any amount on the notes is subject to our ability to pay our obligations as they become due and JPMorgan
Chase & Co.’s ability to pay its obligations as they become due.
|
|
·
|
LIMITED PROTECTION AGAINST LOSS
— We will pay you your principal back at maturity if the Final Value of each Commodity is greater than or equal to its Trigger
Level. If the Final Value of any Commodity is less than its Trigger Level, for every 1% that the Final Value of the Least Performing
Commodity is less than its Initial Value, you will lose an amount equal to 1% of the principal amount of your notes. Under these
circumstances, you will lose more than 35% of your principal amount at maturity and may lose all of your principal amount at maturity.
|
|
·
|
RETURN DEPENDENT ON THE LEAST PERFORMING
OF THE COMMODITIES
— The return on the notes is linked to the Least Performing Commodity, which will be Gold, Silver
or Grade A Copper. For additional information about the Commodities, see the information set forth under “The Underlyings
— Commodities” in the accompanying product supplement.
|
|
·
|
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.
|
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. 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 notes. You should
consult your tax adviser regarding the potential application of FATCA to the notes.
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
|
PS-
4
|
Selected Risk Considerations
An investment in
the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Commodities
or in any exchange-traded or over-the-counter instruments based on, or other instruments linked
to, any of the Commodities. These risks are explained in more detail in the “Risk Factors” section of the accompanying
product supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT
IN A LOSS
— The notes do not guarantee any return of principal. The return on the notes at maturity is linked to
the performance of the Least Performing Commodity and will depend on whether, and the extent to which, the Least Performing Commodity
Return is positive or negative. If the Final Value of any Commodity declines below its Trigger Level, you will lose 1% of
the principal amount of your notes for every 1% that the Final Value of the Least Performing Commodity is less than its Initial
Value. Under these circumstances, you will lose more than 35% of your principal amount at maturity and may lose all of your principal
amount at maturity.
|
|
·
|
YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE CONTINGENT
DIGITAL RETURN
— If the Final Value of each Commodity is greater than or equal to its Trigger Level, for each $1,000
principal amount note, you will receive at maturity $1,000
plus
an additional return equal to the Contingent Digital Return
of at least 6.00%, regardless of the appreciation of any Commodity, which may be significant.
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN MAY TERMINATE
ON THE FINAL ENDING AVERAGING DATE
— If the Final Value of any Commodity is less than its Trigger Level, you will not
be entitled to receive the Contingent Digital Return at maturity. Under these circumstances, you will lose more than 35% of your
principal amount at maturity and may lose all of your principal amount at maturity.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER LEVEL MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE
— If the Final Value of any Commodity is less than its Trigger Level, the benefit provided by the Trigger Level will
terminate and you will be fully exposed to any depreciation in the Final Value of the Least Performing Commodity from its Initial
Value.
|
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE &
CO.
— The notes are subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase &
Co.’s credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our
and JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT
OPERATIONS AND HAS LIMITED ASSETS —
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations
beyond the issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan Chase &
Co., substantially all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany
agreements. As a result, we are dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates
do not make payments to us and we fail to make payments on the notes, you may have to seek payment under the related guarantee
by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations
of JPMorgan Chase & Co.
|
|
·
|
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.
|
Furthermore, the spot prices of
gold and silver are administered by the LBMA or an independent service provider appointed by the LBMA, and
one of our affiliates is a price participant that contributes to the determination of the spot prices of gold andsilver.
We and our affiliates will have no obligation to consider your interests as a holder of the notes in taking any
actions in connection with our role as a price participant that might affect the notes.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH COMMODITY
— Your return
on the notes and your payment at maturity is not linked to a basket consisting of the Commodities. Your payment at maturity is
contingent upon the performance of each individual Commodity such that you will be equally exposed to the risks related to
each
Commodity. The performance of the Commodities may not be correlated. Poor performance by any Commodity over the term of
the notes may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the other
Commodity. Accordingly, your investment is subject to the risk of decline in the value of each Commodity.
|
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
|
PS-
5
|
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST PERFORMING COMMODITY
—
Because the payment at maturity will be determined based on the performance of the Least Performing Commodity, you will not benefit
from the performance of any other Commodity. Accordingly, if the Final Value of the Least Performing Commodity is less than its
Trigger Level, you will lose some or all of your principal amount at maturity, even if the Final Value of any other Commodity is
greater than or equal to its Trigger Level.
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE 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 will exceed the estimated value of the notes because costs associated
with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the
selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated Value
of the Notes” in this pricing supplement.
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES
OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
— The estimated value of the notes is determined by reference
to internal pricing models of our affiliates when the terms of the notes are set. This estimated value of the notes is based on
market conditions and other relevant factors existing at that time and assumptions about market parameters, which can include volatility,
interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes that are greater
than or less than the estimated value of the notes. In addition, market conditions and other relevant factors in the future may
change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based
on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements
and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary
market transactions. See “The Estimated Value of the Notes” in this pricing supplement.
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL
FUNDING RATE
— The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan
Chase & Co. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the notes and any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
|
·
|
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).
|
|
·
|
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 prices of the Commodities, 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 in
the Commodity Prices of the Commodities;
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supply and demand trends for the Commodities;
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the time to maturity of the notes;
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interest and yield rates in the market
generally;
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the actual and expected positive or negative
correlation among the Commodities, or the actual or expected absence of any such correlation; and
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a variety of other economic, financial,
political, regulatory, geographical, agricultural, 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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NO INTEREST PAYMENTS
— As
a holder of the notes, you will not receive any interest payments.
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OWNING THE NOTES IS NOT THE SAME AS
OWNING ANY COMMODITY OR COMMODITY-RELATED FUTURES CONTRACTS DIRECTLY
— The return on your notes will not reflect the
return you would realize if you actually purchased any Commodity or exchange-traded or over-the-counter instruments based on any
Commodity. You will not have any rights that holders of such assets or instruments have.
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INVESTMENTS RELATED TO THE PRICES
OF THE COMMODITIES MAY BE MORE VOLATILE THAN TRADITIONAL SECURITIES INVESTMENTS —
The price of gold, silver and copper
are subject to variables that may be less significant to the prices of traditional securities such as stocks and bonds, and where
the return on the securities is not related to commodities. Variables such as those described under “— The Market Price
of Gold Will Affect the Value of the Notes”, “— The Market Price of Silver Will Affect the Value of the Notes”
or “— The Market Price of Copper Will Affect the Value of the Notes” below may have a larger impact on the price
of the Commodities than on traditional securities. These additional variables may create additional investment risks that may cause
the price of the Commodities to move in unpredictable and unanticipated directions and at unpredictable or unanticipated rates
and cause the value of the notes to be more volatile than the prices of traditional securities.
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THE MARKET PRICE OF GOLD WILL AFFECT
THE VALUE OF THE NOTES —
Because the notes are linked in part to gold, we expect that generally the market value of the
notes will depend in part on the market price of gold. The price of gold is primarily affected by the global demand for and supply
of gold. The market for gold bullion is global, and gold prices are subject to volatile price movements over short periods of time
and are affected by numerous factors, including macroeconomic factors such as the structure of and confidence in the global monetary
system, expectations regarding the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the
currency in which the price of gold is usually quoted), interest rates, gold borrowing and lending rates, and global or regional
economic, financial, political, regulatory, judicial or other events. Gold prices may be affected by industry factors such as industrial
and jewelry demand as well as lending, sales and purchases of gold by the official sector, including central banks and other governmental
agencies and multilateral institutions which hold gold. Additionally, gold prices may be affected by levels of gold production,
production costs and short-term changes in supply and demand due to trading activities in the gold market. From time to time, above-ground
inventories of gold may also influence the market. It is not possible to predict the aggregate effect of all or any combination
of these factors. The price of gold has recently been, and may continue to be, extremely volatile.
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THE MARKET PRICE OF SILVER WILL AFFECT
THE VALUE OF THE NOTES
—
Because the notes are linked in part to silver, we expect that generally the market value
of the notes will depend in part on the market price of silver. The price of silver is primarily affected by global demand for
and supply of silver. Silver prices can fluctuate widely and may be affected by numerous factors. These include general economic
trends, technical developments, substitution issues and regulation, as well as specific factors including industrial and jewelry
demand, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar (the currency in which the
price of silver is generally quoted) and other currencies, interest rates, central bank sales, forward sales by producers, global
or regional political or economic events and production costs and disruptions in major silver-producing countries, such as Mexico,
China and Peru. The demand for and supply of silver affect silver prices, but not necessarily in the same manner as supply and
demand affect the prices of other commodities. The supply of silver consists of a combination of new mine production and existing
stocks of bullion and fabricated silver held by governments, public and private financial institutions, industrial organizations
and private individuals. In addition, the price of silver has on occasion been subject to very rapid short-term changes due to
speculative activities. From time to time, above-ground inventories of silver may also influence the market. The major end uses
for silver include industrial applications, jewelry and silverware. It is not possible to predict the aggregate effect of all or
any combination of these factors.
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THE MARKET PRICE OF COPPER WILL AFFECT
THE VALUE OF THE NOTES
— Because the notes are linked in part to the performance of the price of copper, we expect that
generally the market value of the notes will depend in large part on the market price of copper. The price of copper is primarily
affected by the global demand for and supply of copper, but is also influenced significantly from time to time by speculative actions
and by currency exchange rates. Demand for copper is significantly influenced by the level of global industrial economic activity.
Industrial sectors which are particularly important to demand for copper include the electrical and construction sectors. In recent
years, demand has been supported by strong consumption from newly industrializing countries due to their copper-intensive economic
growth and industrial development. An additional, but highly volatile, component of demand is adjustments to inventory in response
to changes in economic activity and/or pricing levels. There are substitutes for copper in various applications. Their availability
and price will also affect demand for copper. Apart from the United States, Canada and Australia, the majority of copper concentrate
supply (the raw material) comes from outside the Organization for Economic Cooperation and Development countries. The supply of
copper is also affected by current and previous price levels, which will
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JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
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influence investment decisions in new smelters.
In previous years, copper supply has been affected by strikes, financial problems and terrorist activity. It is not possible to
predict the aggregate effect of all or any combination of these factors.
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SINGLE COMMODITY PRICES TEND TO BE
MORE VOLATILE THAN, AND MAY NOT CORRELATE WITH, THE PRICES OF COMMODITIES GENERALLY
— The notes are not linked to a diverse
basket of commodities or a broad-based commodity index. The prices of the Commodities may not correlate to the price of commodities
generally and may diverge significantly from the prices of commodities generally. Because the notes are linked to the least performing
of a limited number of commodities, they carry greater risk and may be more volatile than notes linked to the prices of a larger
number of commodities or a broad-based commodity index.
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AN INVESTMENT IN THE NOTES MAY BE
SUBJECT TO RISKS ASSOCIATED WITH THE LBMA
— The notes are linked in part to gold and silver, whose prices are determined
by the LBMA or an independent service provider appointed by the LBMA. Gold and silver are traded on the LBMA. The LBMA is a self-regulatory
association of bullion market participants. Although all market-making members of the LBMA are supervised by the Bank of England
and are required to satisfy a capital adequacy test, the LBMA itself is not a regulated entity. If the LBMA should cease operations,
or if trading gold or silver should become subject to a value added tax or other tax or any other form of regulation currently
not in place, the role of LBMA prices as a global benchmark for the value of gold or silver may be adversely affected. The LBMA
is a principals’ market, which operates in a manner more closely analogous to an over-the-counter physical commodity market
than regulated futures markets, and certain features of U.S. futures contracts are not present in the context of LBMA trading.
For example, there are no daily price limits on the LBMA, which would otherwise restrict fluctuations in the prices of LBMA contracts.
In a declining market, it is possible that prices would continue to decline without limitation within a trading day or over a period
of trading days. The LBMA may alter, discontinue or suspend calculation or dissemination of the official prices of gold or silver,
which could adversely affect the value of the notes. The LBMA has no obligation to consider your interests in calculating or revising
the official prices of gold or silver.
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ON THE ENDING AVERAGING DATES, THE
COPPER PRICE IS DETERMINED BY REFERENCE TO THE OFFICIAL CASH SETTLEMENT PRICE OF COPPER AS DETERMINED BY THE LME, AND THERE ARE
CERTAIN RISKS RELATING TO THE COPPER PRICE BEING DETERMINED BY THE LME
— The Commodity Price of copper will be determined
by reference to the official cash settlement price of copper as determined by the LME. The LME is a principals’ market that
operates in a manner more closely analogous to the over-the-counter physical commodity markets than regulated futures markets.
For example, there are no daily price limits on the LME, which would otherwise restrict the extent of daily fluctuations in the
prices of LME contracts. In a declining market, therefore, it is possible that prices would continue to decline without limitation
within a trading day or over a period of trading days. In addition, a contract may be entered into on the LME calling for delivery
on any day from one day to three months following the date of that contract and for monthly delivery up to 123 months forward following
that third month, in contrast to trading on futures exchanges, which call for delivery in stated delivery months. As a result,
there may be a greater risk of a concentration of positions in LME contracts on particular delivery dates, which in turn could
cause temporary aberrations in the prices of LME contracts for certain delivery dates. If such aberrations occur during the term
of the notes, the official cash settlement prices of copper and, consequently, the Commodity Return of Grade A Copper, could be
adversely affected. The LME has no obligation to consider your interests in calculating or revising the official cash settlement
price of copper.
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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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THE FINAL TERMS AND VALUATION OF THE
NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
— The final terms of the notes will be based on relevant market conditions
when the terms of the notes are set and will be provided in the pricing supplement. In particular, the estimated value of the notes
and the Contingent Digital Return will be provided in the pricing supplement and may be as low as the minimum for the estimated
value of the notes and the Contingent Digital Return set forth on the cover of this pricing supplement. Accordingly, you should
consider your potential investment in the notes based on the minimum for the estimated value of the notes and the Contingent Digital
Return.
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Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
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Historical Information
The following graphs sets forth the historical
weekly performance of the Commodities from January 6, 2012 through January 20, 2017. The Commodity Price of Gold on January 23,
2017 was $1,212.85. The Commodity Price of Silver on January 23, 2017 was 1,714¢. The Commodity Price of Grade A Copper on
January 23, 2017 was $5,775.00.
We obtained the Commodity Prices of the Commodities
above and below from Bloomberg, without independent verification. The historical Commodity Prices of each Commodity should not
be taken as an indication of future performance, and no assurance can be given as to the Commodity Prices of any Commodity on the
Pricing Date or any Ending Averaging Date. There can be no assurance that the performance of the Commodities will result in the
return of any of your principal amount.
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
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JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
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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 will be lower than the
original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the
original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. We or one or more of our affiliates will retain any profits realized in hedging our obligations under
the notes. See “Selected Risk Considerations — The Estimated Value of the Notes Will Be Lower Than the Original Issue
Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any
secondary market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes Will
Be Impacted by Many Economic and Market Factors ” in this pricing supplement. In addition, we generally expect that some
of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases
of your notes by JPMS in an amount that 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
on the Notes at Maturity, Assuming a Range of Performances for the Commodities?” and “Hypothetical Examples of Amount
Payable at Maturity” in this pricing supplement for an illustration of the risk-return profile of the notes and “Selected
Purchase Considerations — Return Dependent on the Least Performing of the Commodities” 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.
JPMorgan Structured Investments —
Digital Notes Linked to the Least Performing of Gold, Silver and Grade A Copper
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