Key Terms
Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Fund:
|
The Energy Select Sector SPDR
®
Fund (Bloomberg ticker: XLE)
|
Upside Leverage Factor:
|
1.10
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Payment at Maturity:
|
If the Final Share Price is greater than the Initial Share Price, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Fund Return
multiplied
by 1.10. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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|
$1,000 + ($1,000 × Fund Return × 1.10)
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If the Final Share Price is equal to the Initial Share Price or is less than the Initial Share Price by up to 50%, you will receive the principal amount of your notes at maturity.
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If the Final Share Price is less than the Initial Share Price by more than 50%, at maturity you will lose 1 % of the principal amount of your notes for every 1% that the Final Share Price is less than the Initial Share Price. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Fund Return)
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If the Final Share Price is less than the Initial Share Price by more than 50%, you will lose more than 50% of your principal amount at maturity and may lose all of your principal amount at maturity.
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Contingent Buffer Amount:
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50%
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Fund Return:
|
(Final Share Price –
Initial Share Price)
Initial Share Price
|
|
Initial Share Price:
|
The closing price of one share of the Fund on the Pricing Date, which was $69.746
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Final Share Price:
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The arithmetic average of the closing prices of one share of the Fund on the Ending Averaging Dates
|
Share Adjustment Factor:
|
The Share Adjustment Factor is referenced in determining the closing price of one share of the Fund and is set initially at 1.0 on the Pricing Date. The Share Adjustment Factor is subject to adjustment upon the occurrence of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the accompanying product supplement for further information.
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Pricing Date:
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March 20, 2017
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Original Issue Date:
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On or about March 23, 2017 (Settlement Date)
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Ending Averaging Dates*:
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March 15, 2022, March 16, 2022, March 17, 2022, March 18, 2022 and March 21, 2022
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Maturity Date*:
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March 24, 2022
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CUSIP:
|
46646QY25
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*
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Subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes
— Postponement of a Determination Date — Notes Linked to a Single Underlying — Notes Linked to a Single 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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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-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, underlying 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)
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Proceeds to Issuer
|
Per note
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$1,000
|
$30
|
$970
|
Total
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$1,500,000
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$45,000
|
$1,455,000
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(1)
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See “Supplemental Use of Proceeds” in this pricing supplement for information about the components of the price
to public of the notes.
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(2)
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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 $30.00 per $1,000 principal amount note it receives from us to other affiliated or unaffiliated dealers. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement
|
The estimated value
of the notes, when the terms of the notes were set, was $954.30 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 should read this pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes,
of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the accompanying
underlying supplement.
This pricing supplement, together with the documents listed below, contains the terms of the notes and
supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative
pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational
materials of ours.
You should carefully consider, among other things, the matters set forth in the “Risk Factors”
sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve risks not associated
with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you
invest in the notes.
You may access these documents on the SEC website at
www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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.
JPMorgan Structured Investments —
|
PS-
1
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Fund?
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 an Initial Share
Price of $70 and reflects the Upside Leverage Factor of 1.10 and the Contingent Buffer Amount of 50%. 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 Share Price
|
Fund Return
|
Total Return
|
$126.000
|
80.00%
|
88.00%
|
$115.500
|
65.00%
|
71.50%
|
$105.000
|
50.00%
|
55.00%
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$98.000
|
40.00%
|
44.00%
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$91.000
|
30.00%
|
33.00%
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$84.000
|
20.00%
|
22.00%
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$80.500
|
15.00%
|
16.50%
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$77.000
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10.00%
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11.00%
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$73.500
|
5.00%
|
5.50%
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$71.750
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2.50%
|
2.75%
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$70.000
|
0.00%
|
0.00%
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$68.250
|
-2.50%
|
0.00%
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$66.500
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-5.00%
|
0.00%
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$63.000
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-10.00%
|
0.00%
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$56.000
|
-20.00%
|
0.00%
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$49.000
|
-30.00%
|
0.00%
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$42.000
|
-40.00%
|
0.00%
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$35.000
|
-50.00%
|
0.00%
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$34.993
|
-50.01%
|
-50.01%
|
$28.000
|
-60.00%
|
-60.00%
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$21.000
|
-70.00%
|
-70.00%
|
$14.000
|
-80.00%
|
-80.00%
|
$7.000
|
-90.00%
|
-90.00%
|
$0.000
|
-100.00%
|
-100.00%
|
JPMorgan Structured Investments —
|
PS-
2
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
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 one share of the Fund
increases from the Initial Share Price of $70 to a Final Share Price of $73.50.
Because the Final Share Price of $73.50 is greater
than the Initial Share Price of $70 and the Fund Return is 5%, the investor receives a payment at maturity of $1,055 per $1,000
principal amount note, calculated as follows:
$1,000 + ($1,000 ×
5% × 1.10) = $1,055
Example 2: The price of one share of the Fund
decreases from the Initial Share Price of $70 to a Final Share Price of $35.
Although the Fund Return is negative, because
the Final Share Price of $35 is less than the Initial Share Price of $70 by up to the Contingent Buffer Amount of 50%, the investor
receives a payment at maturity of $1,000 per $1,000 principal amount note.
Example 3: The price of one share of the Fund
decreases from the Initial Share Price of $70 to a Final Share Price of $28.
Because the Final Share Price of $28 is less
than the Initial Share Price of $70 by more than the Contingent Buffer Amount of 50% and the Fund Return is -60%, the investor
receives a payment at maturity of $400 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-60%) = $400
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 —
|
PS-
3
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
Selected Purchase Considerations
|
·
|
UNCAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to enhance equity returns by multiplying a positive Fund Return by 1.10. The notes are
not subject to a predetermined maximum gain and, accordingly, any return at maturity will be determined based on the price movement
of the Fund.
Because the notes are our unsecured and unsubordinated obligations, the payment of which is fully and unconditionally
guaranteed by JPMorgan Chase & Co., payment of any amount on the notes is subject to our ability to pay our obligations as
they become due and JPMorgan Chase & Co.’s ability to pay its obligations as they become due.
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·
|
LIMITED PROTECTION AGAINST LOSS
— We will pay you your principal back at maturity if the Final Share Price is equal to the Initial Share Price or is less
than the Initial Share Price by up to the Contingent Buffer Amount of 50%. If the Final Share Price is less than the Initial Share
Price by more than the Contingent Buffer Amount, for every 1% that the Final Share Price is less than the Initial Share Price,
you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 50%
of your principal amount at maturity and may lose all of your principal amount at maturity.
|
|
·
|
RETURN LINKED TO THE ENERGY SELECT SECTOR SPDR
®
FUND
— The return on the notes is linked to the Energy Select Sector SPDR
®
Fund. The 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 Energy Select Sector Index, which we refer to as the Underlying Index with respect to the Fund. The Energy Select Sector
Index is a modified market capitalization-based index that measures the performance of the GICS
®
energy sector of
the S&P 500 Index
®,
which currently includes companies in the following industries: energy equipment and services;
and oil, gas and consumable fuels. For additional information about the Fund, see “Fund Descriptions — The Select Sector
SPDR
®
Funds” in the accompanying underlying supplement.
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·
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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.
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Based on current market conditions,
in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt
instruments for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders—Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, 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.
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
JPMorgan Structured Investments —
|
PS-
4
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
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.
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Fund, the Underlying Index or any of the component
securities of the Fund or the Underlying Index. These risks are explained in more detail in the “Risk Factors” sections
of the accompanying product supplement and the accompanying underlying supplement.
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·
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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 Fund and will depend on whether, and the extent to which, the Fund Return is positive or negative. If the Final
Share Price is less than the Initial Share Price by more than the Contingent Buffer Amount of 50%, the benefit provided by the
Contingent Buffer Amount will terminate and you will be exposed to a loss. In this case, for every 1% that the Final Share
Price is less than the Initial Share Price, you will lose an amount equal to 1% of the principal amount of your notes. Under these
circumstances, you will lose more than 50% of your principal amount at maturity and may lose all of your principal amount at maturity.
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|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE &
CO.
— The notes are subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase &
Co.’s credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our
and JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT
OPERATIONS AND HAS LIMITED ASSETS —
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations
beyond the issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan Chase &
Co., substantially all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany
agreements. As a result, we are dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates
do not make payments to us and we fail to make payments on the notes, you may have to seek payment under the related guarantee
by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations
of JPMorgan Chase & Co.
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|
·
|
POTENTIAL CONFLICTS
— We and our affiliates play
a variety of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering
of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and
the estimated value of the notes when the terms of the notes are set, which we refer to as the estimated value of the notes. In
performing these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation
agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our and
JPMorgan Chase & Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan Chase
& Co.’s economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of
the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result
in substantial returns for us or our affiliates while the value of the notes declines. Please refer to “Risk Factors —
Risks Relating to Conflicts of Interest” in the accompanying product supplement for additional information about these risks.
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|
·
|
THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE
ON THE FINAL ENDING AVERAGING DATE
— If the Final Share Price is less than the Initial Share Price by more than the Contingent
Buffer Amount, the benefit provided by the Contingent Buffer Amount will terminate and you will be fully exposed to any depreciation
of the Fund from the Initial Share Price to the Final Share Price.
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE
PRICE (PRICE TO PUBLIC) OF THE NOTES
— The estimated value of the notes is only an estimate determined by reference to
several factors. The original issue price of the notes exceeds the estimated value of the notes because costs associated with selling,
structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions,
the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under
the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated Value of the Notes”
in this pricing supplement.
|
JPMorgan Structured Investments —
|
PS-
5
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
|
·
|
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,
dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes
that are greater than or less than the estimated value of the notes. In addition, market conditions and other relevant factors
in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly
based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest
rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from
you in secondary market transactions. See “The Estimated Value of the Notes” in this pricing supplement.
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|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL
FUNDING RATE
— The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and 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).
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|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE
ORIGINAL ISSUE PRICE OF THE NOTES
— Any secondary market prices of the notes will likely be lower than
the
original issue price of the notes because, among other things, secondary market prices take into account our internal secondary
market funding rates for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and
(b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of
the notes. As a result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions,
if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial
loss to you. See the immediately following risk consideration for information about additional factors that will impact any secondary
market prices of the notes.
|
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.
|
·
|
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 one share of the Fund, including:
|
|
·
|
any actual or potential change in our
or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
|
|
·
|
customary bid-ask spreads for similarly
sized trades;
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|
·
|
our internal secondary market funding
rates for structured debt issuances;
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|
·
|
the actual and expected volatility of
the Fund;
|
|
·
|
the time to maturity of the notes;
|
|
·
|
the dividend rates on the Fund and the
equity securities held by the Fund;
|
|
·
|
interest and yield rates in the market
generally;
|
|
·
|
the occurrence of certain events relating
to the Fund that may or may not require an adjustment to the Share Adjustment Factor; and
|
|
·
|
a variety of other economic, financial,
political, regulatory and judicial events.
|
Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the 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.
|
·
|
NO INTEREST OR DIVIDEND PAYMENTS OR
VOTING RIGHTS
— As a holder of the notes, you will not receive interest payments, and you will not have voting rights
or rights to receive cash dividends or other distributions or other rights that holders of shares of the Fund or securities held
by the Fund or included in the Underlying Index would have.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE
FUND
— Although the shares of the Fund are listed for trading on a securities exchange and a number of similar products
have been traded on securities exchanges for varying periods of time, there is no assurance that an active trading market will
continue for the shares of the Fund or that there will be liquidity in the trading market. The Fund is subject to management risk,
which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of
|
JPMorgan Structured Investments —
|
PS-
6
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
constraints, may not produce the intended results.
These constraints could adversely affect the market price of the shares of the Fund, and consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF
THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE PERFORMANCE OF THE FUND’S UNDERLYING
INDEX AS WELL AS THE NET ASSET VALUE PER SHARE
— The Fund does not fully replicate its Underlying Index and may hold
securities different from those included in its Underlying Index. In addition, the performance of the Fund will reflect additional
transaction costs and fees that are not included in the calculation of its Underlying Index. All of these factors may lead to a
lack of correlation between the performance of the Fund and its Underlying Index. In addition, corporate actions with respect to
the equity securities underlying the Fund (such as mergers and spin-offs) may impact the variance between the performances of the
Fund and its Underlying Index. Finally, because the shares of the Fund are traded on a securities exchange and are subject to market
supply and investor demand, the market value of one share of the Fund may differ from the net asset value per share of the Fund.
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During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce any payment on the notes.
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·
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RISKS ASSOCIATED WITH THE ENERGY SECTOR
—
All or substantially all of the equity securities held by the shares of the Fund are issued by companies whose primary
line of business is directly associated with the energy 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. Issuers in energy-related industries can be significantly
affected by fluctuations in energy prices and supply and demand of energy fuels. Markets for various energy-related commodities
can have significant volatility, and are subject to control or manipulation by large producers or purchasers. Companies in the
energy sector may need to make substantial expenditures, and to incur significant amounts of debt, in order to maintain or expand
their reserves. Oil and gas exploration and production can be significantly affected by natural disasters as well as changes in
exchange rates, interest rates, government regulation, world events and economic conditions. These companies may be at risk for
environmental damage claims. These factors could affect the energy sector and could affect the value of the equity securities held
by the Fund and the price of the Fund during the term of the notes, which may adversely affect the value of your notes.
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·
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VOLATILITY RISK
— Greater
expected volatility with respect to the Fund indicates a greater likelihood as of the Pricing Date that the Final Share Price could
be less than the Initial Share Price by more than the Contingent Buffer Amount. The Fund’s volatility, however, can
change significantly over the term of the notes. The closing price of one share of the Fund could fall sharply during the
term of the notes, which could result in your losing some or all of your principal amount at maturity.
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·
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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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·
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THE ANTI-DILUTION PROTECTION FOR THE
FUND IS LIMITED
— The calculation agent will make adjustments to the Share Adjustment Factor for certain events affecting
the shares of the Fund. However, the calculation agent will not make an adjustment in response to all events that could affect
the shares of the Fund. If an event occurs that does not require the calculation agent to make an adjustment, the value of the
notes may be materially and adversely affected.
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JPMorgan Structured Investments —
|
PS-
7
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
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Historical Information
The following graph
sets forth the historical performance of the Fund based on the weekly historical closing prices of one share of the Fund from January
6, 2012 through March 17, 2017. The closing price of one share of the Fund on March 20, 2017 was
$69.746.
We obtained the closing prices of one share
of the Fund above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The closing prices above and below may have been adjusted by Bloomberg for actions taken by the Fund, such as stock
splits. The historical prices of one share of the 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 the Fund on any Ending Averaging Date. There can be no assurance that the
performance of the Fund will result in the return of any of your principal amount.
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. See “Selected Risk Considerations — The Estimated Value of the Notes Does Not Represent
Future Values of the Notes and May Differ from Others’ Estimates” in this pricing supplement.
The estimated value of the notes is lower than the original
issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original
issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under
the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may
be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it
may result in a loss. 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 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 “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
JPMorgan Structured Investments —
|
PS-
8
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
|
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 Fund?” 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 Linked to the Energy Select Sector SPDR
®
Fund” 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.
JPMorgan Structured Investments —
|
PS- 9
|
Contingent Buffered Return Enhanced Notes Linked to the Energy Select Sector SPDR® Fund
|
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