February 23, 2017
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Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
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JPMorgan Chase Financial Company LLC
Structured Investments
$600,000 (XLV Notes); $525,000 (XLB Notes);
$825,000 (XLF Notes)
Capped Buffered Equity Notes due February 28,
2020
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
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This pricing supplement relates to three separate note offerings, each linked to the performance of a different Fund:
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Capped Buffered Equity Notes Linked to the Health Care Select Sector SPDR
®
Fund (“XLV Notes”)
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Capped Buffered Equity Notes Linked to the Materials Select Sector SPDR
®
Fund (“XLB Notes”)
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Capped Buffered Equity Notes Linked to the Financial Select Sector SPDR
®
Fund (“XLF Notes”)
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Each issue of offered notes is linked
to one, and only one, Fund. While you may participate in one or more of the offerings, this pricing supplement does not offer notes
linked to a basket of the Funds.
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The notes are designed for investors who seek an unleveraged exposure to any appreciation of the Fund, up to the maximum return,
at maturity.
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Investors should be willing to forgo interest and dividend payments and, if the Final Value is less than the Initial Value
by more than the Buffer Amount of 10.00%, be willing to lose up to 90.00% of their principal amount at maturity.
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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 thereof
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The notes priced on February 23, 2017 and are expected to settle on or about February 28, 2017.
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Fund
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Bloomberg Ticker
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Initial Value
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Maximum Return / Maximum Payment at Maturity per $1,000 Principal Amount Note
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CUSIP
|
Health Care Select Sector SPDR
®
Fund
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XLV
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$74.42
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29.00% / $1,290.00
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46646QKZ7
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Materials Select Sector SPDR
®
Fund
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XLB
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$52.32
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36.60% / $1,366.00
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46646QLB9
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Financial Select Sector SPDR
®
Fund
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XLF
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$24.61
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38.75% / $1,387.50
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46646QLA1
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Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-4 of
this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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XLV Notes (per note / total)
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$1,000 / $600,000
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$25.00 / $15,000
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$975.00 / $585,000
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XLB Notes (per note / total)
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$1,000 / $525,000
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$25.00 / $13,125
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$975.00 / $511,875
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XLF Notes (per note / total)
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$1,000 / $825,000
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$25.00 / $20,625
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$975.00 / $804,375
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(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to
as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions of $25.00 per $1,000 principal amount
note for each of the offerings it receives from us to other affiliated or unaffiliated dealers. 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 $967.30, $960.60 and $963.60 per $1,000 principal amount of XLV Notes, XLB Notes and XLF Notes, respectively. See
“The Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
General
Key Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Fund:
As specified on the cover of this pricing supplement.
Maximum Return:
As specified on the cover of this pricing supplement
Buffer Amount:
10.00%
Pricing Date:
February 23, 2017
Original Issue
Date (Settlement Date):
On or about February 28, 2017
Observation
Date *:
February 25, 2020
Maturity Date*:
February 28, 2020
* Subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to
a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “General Terms
of Notes — Postponement of a Payment Date” in the accompanying product supplement
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Payment at Maturity:
If the Final Value is greater than the Initial Value, your payment
at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Fund Return), subject
to the Maximum Return
If the Final Value is equal to the Initial Value or is less
than the Initial Value by up to the Buffer Amount, you will receive the principal amount of your notes at maturity.
If the Final Value is less than the Initial Value by more than
the Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + [$1,000 × (Fund Return +
Buffer Amount)]
If the Final Value is less than the Initial Value by more
than the Buffer Amount, you will lose some or most of your principal amount at maturity.
Fund Return:
With respect to each Fund,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Fund, the closing price of one share of that Fund
on the Pricing Date, as specified on the cover of this pricing supplement
Final Value:
With respect to each Fund, the closing price of one share of that Fund
on the Observation Date
Share
Adjustment Factor:
With
respect to each Fund, the Share Adjustment Factor is referenced in determining the closing price of one share of that Fund and
is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor of each Fund is subject to adjustment upon the occurrence
of certain events affecting that Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the
accompanying product supplement for further information.
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PS-
1
| Structured Investments
Capped Buffered Equity Notes
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Hypothetical Payout Profile
The following table illustrates the hypothetical
total return at maturity on
hypothetical notes linked to a hypothetical Fund
and
may not reflect the actual terms of
any note offered by this pricing supplement.
See the cover of this pricing supplement and “General Key Terms” in
this pricing supplement for the actual terms of each note offered by this pricing supplement. 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. The hypothetical total returns set forth below assume the following:
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an Initial Value of $100.00;
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a Maximum Return of 15.00%; and
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a Buffer Amount of 10.00%.
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The hypothetical Initial Value of $100.00 has
been chosen for illustrative purposes only and does not represent the actual Initial Value. The actual Initial Value is the closing
price of one share of the Fund on the Pricing Date and is specified on the cover of this pricing supplement. For historical data
regarding the actual closing prices of the Fund, please see the historical information set forth under “The Funds”
in this pricing supplement.
Each hypothetical total return or hypothetical
payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity
applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
Final Value
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Fund Return
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Total Return on the Notes
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Payment at Maturity
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$180.00
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80.00%
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15.00%
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$1,150.00
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$165.00
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65.00%
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15.00%
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$1,150.00
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$150.00
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50.00%
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15.00%
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$1,150.00
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$140.00
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40.00%
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15.00%
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$1,150.00
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$130.00
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30.00%
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15.00%
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$1,150.00
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$120.00
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20.00%
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15.00%
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$1,150.00
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$115.00
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15.00%
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15.00%
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$1,150.00
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$110.00
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10.00%
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10.00%
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$1,100.00
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$105.00
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5.00%
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5.00%
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$1,050.00
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$101.00
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1.00%
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1.00%
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$1,010.00
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$100.00
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0.00%
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0.00%
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$1,000.00
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$95.00
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-5.00%
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0.00%
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$1,000.00
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$90.00
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-10.00%
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0.00%
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$1,000.00
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$85.00
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-15.00%
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-5.00%
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$950.00
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$80.00
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-20.00%
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-10.00%
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$900.00
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$70.00
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-30.00%
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-20.00%
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$800.00
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$60.00
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-40.00%
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-30.00%
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$700.00
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$50.00
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-50.00%
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-40.00%
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$600.00
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$40.00
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-60.00%
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-50.00%
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$500.00
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$30.00
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-70.00%
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-60.00%
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$400.00
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$20.00
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-80.00%
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-70.00%
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$300.00
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$10.00
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-90.00%
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-80.00%
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$200.00
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$0.00
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-100.00%
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-90.00%
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$100.00
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PS-
2
| Structured Investments
Capped Buffered Equity Notes
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How
the Notes Work
Upside Scenario:
If the Final Value is greater than the Initial
Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Fund Return, up to the
Maximum Return. Assuming a hypothetical Maximum Return of 15.00%:
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if the closing price of one share of the Fund increases 5.00%, investors
will receive at maturity a 5.00% return, or $1,050.00 per $1,000 principal amount note; or
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if the closing price of one share of the Fund increases 30.00%, investors
will receive at maturity a return equal to the 15.00% Maximum Return, or $1,150.00 per $1,000 principal amount note, which is the
maximum payment at maturity.
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Par Scenario:
If the Final Value is equal to the Initial Value
or is less than the Initial Value by up to the Buffer Amount of 10.00%, investors will receive at maturity the principal amount
of their notes.
Downside Scenario:
If the Final Value is less than the Initial Value
by more than the Buffer Amount of 10.00%, investors will lose 1% of the principal amount of their notes for every 1% that the Final
Value is less than the Initial Value by more than the Buffer Amount.
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For example, if the closing price of one share of the Fund declines 50.00%,
investors will lose 40.00% of their principal amount and receive only $600.00 per $1,000 principal amount note at maturity, calculated
as follows:
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$1,000
+ [$1,000 × (-50.00% + 10.00%)] = $600.00
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 the
fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the
hypothetical returns and hypothetical payments shown above would likely be lower.
PS-
3
| Structured Investments
Capped Buffered Equity Notes
|
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Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
Risks Relating to the Notes Generally
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
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The notes do not guarantee any return
of principal. If the Final Value is less than the Initial Value by more than 10.00%, you will lose 1% of the principal amount of
your notes for every 1% that the Final Value is less than the Initial Value by more than 10.00%. Accordingly, under these circumstances,
you will lose up to 90.00% of your principal amount at maturity.
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE MAXIMUM RETURN —
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regardless of the appreciation of the
Fund, which may be significant.
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
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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
—
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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.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
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THE NOTES DO NOT PAY INTEREST.
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YOU WILL NOT RECEIVE DIVIDENDS ON ANY FUND OR THE SECURITIES HELD BY ANY FUND OR HAVE ANY RIGHTS
WITH RESPECT TO ANY FUND OR THOSE SECURITIES.
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The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
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THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE
NOTES —
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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 —
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See “The Estimated Value of the
Notes” in this pricing supplement.
PS-
4
| Structured Investments
Capped Buffered Equity Notes
|
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THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
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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.
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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 —
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We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
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Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
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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 price of the Fund. 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. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
Risks Relating to the Individual Offerings
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WITH RESPECT TO THE XLF NOTES, JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT
MAKE UP THE FINANCIAL SELECT SECTOR SPDR
®
FUND AND ITS UNDERLYING INDEX,
|
But JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the price of the Financial Select
Sector SPDR® Fund or the level of the Underlying Index (as defined under “The Funds” below).
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THERE ARE RISKS ASSOCIATED WITH THE FUNDS —
|
Each Fund is subject to management
risk, which is the risk that the investment strategies of that Fund’s investment adviser, the implementation of which is
subject to a number of constraints, may not produce the intended results. These constraints could adversely affect the market price
of the shares of each Fund and, consequently, the value of the notes.
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THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY,
MAY NOT CORRELATE WITH THE PERFORMANCE OF THAT FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
Each Fund does not fully replicate
its Underlying Index (as defined under “The Funds” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of each Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of each Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying a Fund (such
as mergers and spin-offs) may impact the variance between the performances of that Fund and its Underlying Index. Finally, because
the shares in each Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value
of one share of each Fund may differ from the net asset value per share of that Fund.
PS-
5
| Structured Investments
Capped Buffered Equity Notes
|
|
During periods of market volatility,
securities underlying each Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of that Fund and the liquidity of that Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of a Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of a Fund. As a result,
under these circumstances, the market value of shares of a Fund may vary substantially from the net asset value per share of that
Fund. For all of the foregoing reasons, the performance of each Fund may not correlate with the performance of its Underlying Index
as well as the net asset value per share of that Fund, which could materially and adversely affect the value of the notes in the
secondary market and/or reduce any payments on the notes.
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THE XLV NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH THE HEALTH CARE SECTOR —
|
All or substantially all of the equity
securities held by the Health Care Select Sector SPDR
®
Fund are issued by companies whose primary line of business
is directly associated with the health care sector. As a result, the value of the notes may be subject to greater volatility and
be more adversely affected by a single economic, political or regulatory occurrence affecting this sector than a different investment
linked to securities of a more broadly diversified group of issuers. Companies in the health care sector are subject to extensive
government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical
expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines
and an increased emphasis on the delivery of healthcare through outpatient services. Companies in the health care sector are heavily
dependent on obtaining and defending patents, which may be time consuming and costly, and the expiration of patents may also adversely
affect the profitability of these companies. Health care companies are also subject to extensive litigation based on product liability
and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies or other
market developments. Many new products in the health care sector require significant research and development and may be subject
to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market.
These factors could affect the health care sector and could affect the value of the equity securities held by the Health Care Select
Sector SPDR
®
Fund and the price of the Health Care Select Sector SPDR
®
Fund during the term of the
notes, which may adversely affect the value of your notes.
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THE XLB NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH THE MATERIALS SECTOR —
|
All or substantially all of the equity
securities held by the Materials Select Sector SPDR
®
Fund are issued by companies whose primary line of business
is directly associated with the materials sector. As a result, the value of the notes may be subject to greater volatility and
be more adversely affected by a single economic, political or regulatory occurrence affecting this sector than a different investment
linked to securities of a more broadly diversified group of issuers. Many materials companies are significantly affected by the
level and volatility of commodity prices, exchange rates, import controls, worldwide competition, environmental policies and consumer
demand. At times, worldwide production of industrial materials has exceeded demand as a result of over-building or economic downturns,
leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities,
depletion of resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by
economic cycles, technical progress, labor relations, and government regulations. These factors could affect the materials sector
and could affect the value of the equity securities held by the Materials Select Sector SPDR
®
Fund and the price
of the Materials Select Sector SPDR
®
Fund during the term of the notes, which may adversely affect the value of
your notes.
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THE XLF NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH THE FINANCIAL SECTOR —
|
All or substantially all of the equity
securities held by the Financial Select Sector SPDR
®
Fund are issued by companies whose primary line of business
is directly associated with the financial sector. As a result, the value of the notes may be subject to greater volatility
and be more adversely affected by a single economic, political or regulatory occurrence affecting this sector than a different
investment linked to securities of a more broadly diversified group of issuers. Financial services companies are subject
to extensive government regulation, which may limit both the amounts and types of loans and other financial commitments they can
make, the interest rates and fees they can charge, the scope of their activities, the prices they can charge and the amount of
capital they must maintain. Profitability is largely dependent on the availability and cost of capital funds and can fluctuate
significantly when interest rates change or due to increased competition. In addition, deterioration of the credit markets
generally may cause an adverse impact in a broad range of markets, including U.S. and international credit and interbank money
markets generally, thereby affecting a wide range of financial institutions and markets. Certain events in the financial
sector may cause an unusually high degree of volatility in the financial markets, both domestic and foreign, and cause certain
financial services companies to incur large losses. Securities of financial services companies may experience a dramatic
decline in value when such companies experience substantial declines in the valuations of their assets, take action to raise capital
(such as the issuance of
PS-
6
| Structured Investments
Capped Buffered Equity Notes
|
|
debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers and financial losses associated with investment
activities can negatively impact the financial sector. Insurance companies may be subject to severe price competition.
These factors could affect the financial sector and could affect the value of the equity securities held by the Financial Select
Sector SPDR
®
Fund and the price of the Financial Select Sector SPDR
®
Fund during the term of the
notes, which may adversely affect the value of your notes.
|
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|
WITH RESPECT TO THE XLF NOTES, THE FINANCIAL SELECT SECTOR SPDR
®
FUND RECENTLY
CEASED PROVIDING EXPOSURE TO THE REAL ESTATE SECTOR —
|
The Financial Select Sector SPDR
®
Fund seeks to track the Financial Select Sector Index. On September 19, 2016, the Financial Select Sector Index was reconstituted
to eliminate the stocks of real estate management and development companies and real estate investment trusts (“REITs”)
(other than mortgage REITs) (“real estate stocks”). In order to implement a corresponding change to its portfolio,
the Financial Select Sector SPDR
®
Fund exchanged its real estate stocks for shares of the Real Estate Select Sector
SPDR
®
Fund and then distributed those shares to its holders as a special share distribution with an ex-date of September
19, 2016. As of September 19, 2016, the Financial Select Sector SPDR
®
Fund no longer holds real estate stocks.
The Financial Select Sector SPDR
®
Fund now tracks the performance of only those financial company stocks that remain
in the Financial Select Sector Index following its reconstitution, which exclude real estate stocks. Consequently, the Financial
Select Sector SPDR
®
Fund is less diversified, and is more concentrated in the financial sector, than it was before
this change to its portfolio.
The net asset value of the shares of
the Real Estate Select Sector SPDR
®
Fund distributed for each share of the Financial Select Sector SPDR
®
Fund represented approximately 18.8% of the net asset value of the Financial Select Sector SPDR
®
Fund as of September
16, 2016. Accordingly, the changes to the Financial Select Sector SPDR
®
Fund described above represent a significant
change in the nature of the Financial Select Sector SPDR
®
Fund and its holdings. These changes could adversely
affect the performance of the Financial Select Sector SPDR
®
Fund and, in turn, the value of the notes.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent
will not make an adjustment in response to all events that could affect the shares of a Fund. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
The
Funds
The Health Care Select Sector SPDR
®
Fund is an exchange-traded fund of the Select Sector SPDR
®
Trust, a registered investment company, that seeks to
provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity
securities of companies in the Health Care Select Sector Index, which we refer to as the Underlying Index with respect to the Health
Care Select Sector SPDR
®
Fund. The Health Care Select Sector Index is a modified market capitalization-based index
that measures the performance of the GICS
®
health care sector of the S&P 500
®
Index. The Health
Care Select Sector Index includes companies in the following industries: health care equipment and supplies; health care providers
and services; health care technology; biotechnology; pharmaceuticals; and life sciences tools and services. For additional information
about the Health Care Select Sector SPDR
®
Fund, see “Fund Descriptions — The Select Sector SPDR
®
Funds” in the accompanying underlying supplement.
The Materials Select Sector SPDR
®
Fund is an exchange-traded fund of the Select Sector SPDR
®
Trust, a registered investment company, that seeks to
provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity
securities of companies in the Materials Select Sector Index, which we refer to as the Underlying Index with respect to the Materials
Select Sector SPDR
®
Fund. The Materials Select Sector Index is a modified market capitalization-based index that
measures the performance of the GICS
®
materials sector of the S&P 500
®
Index. The Materials Select
Sector Index includes companies in the following industries: chemicals; construction materials; containers and packaging; metals
and mining; and paper and forest products. For additional information about the Materials Select Sector SPDR
®
Fund,
see “Fund Descriptions — The Select Sector SPDR
®
Funds” in the accompanying underlying supplement.
The Financial Select Sector SPDR
®
Fund is an exchange-traded fund of the Select Sector SPDR
®
Trust, a registered investment company, that seeks to
provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity
securities of companies in the Financial Select Sector Index, which we refer to as the Underlying Index with respect to the Financial
Select Sector SPDR
®
Fund. The Financial Select Sector Index is a modified market capitalization-based index
that measures the performance of the GICS
®
financial sector of the S&P 500
®
Index. The
Financial Select Sector Index includes companies in the following industries: banks; thrifts and mortgage finance; diversified
financial services; consumer finance; capital
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markets; mortgage real estate investment trusts
(“REITs”); and insurance. Prior to September 19, 2016, the Financial Select Sector Index also included companies
in the following industries: equity REITs and real estate management and development. For additional information about the
Financial Select Sector SPDR
®
Fund, see “Fund Descriptions — The Select Sector SPDR
®
Funds” in the accompanying underlying supplement, as supplemented by the following paragraph.
On September 19, 2016, the Financial Select Sector
Index was reconstituted to eliminate the stocks of real estate management and development companies and REITs (other than mortgage
REITs) (“real estate stocks”). In order to implement a corresponding change to its portfolio, the Financial Select
Sector SPDR
®
Fund exchanged its real estate stocks for shares of the Real Estate Select Sector SPDR
®
Fund and then distributed those shares to its holders as a special share distribution with an ex-date of September 19, 2016.
As of September 19, 2016, the Financial Select Sector SPDR
®
Fund no longer holds real estate stocks.
Historical Information
The following table sets forth the closing price
of one share of each Fund on February 23, 2017. The following graphs set forth the historical performance of each Fund, based on
the weekly historical closing prices from January 6, 2012 through February 17, 2017. We obtained the closing prices below from
the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. The closing prices
of one share of each Fund may have been adjusted by Bloomberg for actions taken by that Fund, such as stock splits.
On September 19, 2016, the Financial Select
Sector SPDR
®
Fund made a significant change to its portfolio so that it no longer holds real estate stocks.
The Financial Select Sector SPDR
®
Fund now tracks the performance of only those financial company stocks that remain
in the Financial Select Sector Index following its reconstitution, which exclude real estate stocks. The historical performance
of the Financial Select Sector SPDR
®
Fund shown below might have been meaningfully different had the Financial Select
Sector SPDR
®
Fund not held real estate stocks prior to September 19, 2016.
The historical closing prices of one share of
each Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing price of
one share of any Fund on the Observation Date. There can be no assurance that the performance of the Fund will result in the return
of any of your principal amount.
Fund
|
Closing Price of One Share
on February 23, 2017
|
Health Care Select Sector SPDR
®
Fund
|
$74.42
|
Materials Select Sector SPDR
®
Fund
|
$52.32
|
Financial Select Sector SPDR
®
Fund
|
$24.61
|
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Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. 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, subject to the possible application of the “constructive ownership”
rules, 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. The notes could be treated as “constructive
ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended, in which case
any gain recognized in respect of the notes that would otherwise be long-term capital gain and that was in excess of the “net
underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest
charge would apply as if that income had accrued for tax purposes at a constant yield over the notes’ term. Our special tax
counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the notes. Accordingly,
U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
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The IRS or a court may not respect the treatment
of the notes described above, in which case the timing and character of any income or loss on your 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 described above. While the notice requests comments on appropriate transition rules and effective
dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the 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 the potential application of the constructive
ownership rules, possible alternative treatments and the issues presented by this notice.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, the applicable regulations exclude from the scope of Section 871(m) instruments issued
in 2017 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal
income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, our special tax counsel
is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding
on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your
particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. You should
consult your tax adviser regarding the potential application of Section 871(m) to the notes.
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.
The
Estimated Value of the Notes
The estimated
value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical
components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding rate described
below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of the notes does
not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time.
The internal funding rate used in the determination of the estimated value of the notes is based on, among other things, our and
our affiliates’ view of the funding value of the notes as well as the higher issuance, operational and ongoing liability
management costs of the notes
in comparison to those costs for the conventional fixed-rate
debt of JPMorgan Chase & Co
. For additional information, see “Selected Risk Considerations
— The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives
underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent
on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about
future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes
are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could
provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions
and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value
of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase &
Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions.
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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.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Funds” 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 trustee’s 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.
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
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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):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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