Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
You should read this pricing supplement together with the
accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes,
of which these notes are a part, and the more detailed information contained in the accompanying product supplement.
This pricing
supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade
ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours.
You
should carefully consider, among other things, the matters set forth in the “Risk Factors” section of the accompanying
product supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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.
100 × [1
+ (BRL Return × 25%) + (INR Return × 25%) + (RUB Return × 25%) + (ZAR Return × 25%)]
The BRL Return, INR Return, RUB Return
and ZAR Return are the Reference Currency Returns of the Brazilian real, the Indian rupee, the Russian ruble and the South African
rand, respectively, on the Observation Date.
How Do Exchange Rates Work?
Exchange rates reflect the amount of one currency that can
be exchanged for a unit of another currency.
With expect to each Reference Currency, the Spot Rate is expressed
as a number of units of the applicable Reference Currency per one U.S. dollar.
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As a result, a
decrease
in the Spot Rate from the Starting Spot
Rate to the Ending Spot Rate means that the relevant Reference Currency has
appreciated / strengthened
relative to the U.S.
dollar from the Starting Spot Rate to the Ending Spot Rate. This means that one unit of the applicable Reference Currency could
purchase more U.S. dollar on the Observation Date than it could on the Pricing Date. Viewed another way, it would take fewer units
of the applicable Reference Currency to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date.
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Conversely, an
increase
in the Spot Rate from the Starting Spot
Rate to the Ending Spot Rate means that the relevant Reference Currency has
depreciated / weakened
relative to the U.S.
dollar from the Starting Spot Rate to the Ending Spot Rate. This means that it would take more units of the relevant Reference
Currency to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date. Viewed another way, one unit of the
relevant Reference Currency could purchase fewer U.S. dollar on the Observation Date than it could on the Pricing Date.
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How Does the Reference Currency Return
Formula Work?
Each Reference Currency Return reflects the return of the
applicable Reference Currency relative to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate, calculated using
the formula set forth above under “Additional Key Terms — Reference Currency Return.” While each Reference Currency
Return for purposes of the notes is determined using the formula set forth above under “Additional Key Terms — Reference
Currency Return,” there are other reasonable ways to determine the return of a Reference Currency relative to the U.S. dollar
that would provide different results. For example, another way to calculate the return of a Reference Currency relative to the
U.S. dollar would be to calculate the return that would be achieved by converting U.S. dollar into that Reference Currency at the
Starting Spot Rate on the Pricing Date and then, on the Observation Date, converting back into U.S. dollar at the applicable Ending
Spot Rate. In this pricing supplement, we refer to the return of a Reference Currency relative to the U.S. dollar calculated using
that method, which is not used for purposes of the notes, as a “conversion return.”
As demonstrated by the examples below, under the Reference
Currency Return formula, any appreciation of a Reference Currency relative to the U.S. dollar will be diminished, as compared to
a conversion return, while any depreciation of a Reference Currency relative to the U.S. dollar will be magnified, as compared
to a conversion return. In addition, the diminishing effect on any appreciation of a Reference Currency relative to the U.S. dollar
increases as the applicable Reference Currency Return increases, and the magnifying effect on any depreciation of a Reference Currency
relative to the U.S. dollar increases as the applicable Reference Currency Return decreases. Accordingly, your payment at maturity
may be less than if you had invested in similar notes that reflected conversion returns.
The following examples assume a Starting Spot Rate of 65 for
the Indian rupee relative to the U.S. dollar.
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Example 1: The Indian rupee strengthens from the Starting Spot Rate
of 65 to the Ending Spot Rate of 58.50.
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The Reference Currency Return is equal to 10.00%, calculated
as follows:
(65 – 58.50) / 65 = 10.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be 11.11%.
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Example 2: The Indian rupee strengthens from the Starting Spot Rate
of 65 to the Ending Spot Rate of 0.65.
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The Reference Currency Return is equal to 99.00%, which demonstrates
the effective cap of 100% on the Reference Currency Return, calculated as follows:
(65 – 0.65) / 65 = 99.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, which would not be subject to the effective cap of 100%, the return would be 9,900.00%.
As Examples 1 and 2 above demonstrate, the diminishing effect
on any appreciation of a Reference Currency relative to the Base Currency increases as the applicable Reference Currency Return
increases.
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Example 3: The Indian rupee weakens from the Starting Spot Rate of
65 to the Ending Spot Rate of 71.50.
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The Reference Currency Return is equal to -10.00%, calculated
as follows:
(65 – 71.50) / 65 = -10.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be
-9.09%.
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JPMorgan Structured Investments —
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PS-
2
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Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
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Example 4: The Indian rupee weakens from the Starting Spot Rate of
65 to the Ending Spot Rate of 260.
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The Reference Currency Return is equal to -300.00%, which
demonstrates that there is no limit on the downside for the Reference Currency Return, calculated as follows:
(65 – 260) / 65 = -300.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be -75.00%.
As Examples 3 and 4 above demonstrate, the magnifying effect
on any depreciation of a Reference Currency relative to the Base Currency increases as the applicable Reference Currency Return
decreases.
The hypothetical Starting Spot Rate, Ending Spot Rates and
Reference Currency Returns set forth above are for illustrative purposes only and have been rounded for ease of analysis.
Selected Purchase Considerations
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FIXED APPRECIATION POTENTIAL
— If the Basket Return is
positive or zero (
i.e.
, the Basket appreciates from the Starting Basket Level to the Ending Basket Level or remains flat),
in addition to the principal amount, you will receive at maturity the Contingent Digital Return of 7.50% at maturity, which also
reflects the maximum return on the notes at maturity.
Because the notes are our unsecured and unsubordinated obligations, the
payment of which is fully and unconditionally guaranteed by JPMorgan Chase & Co., payment of any amount on the notes is subject
to our ability to pay our obligations as they become due and JPMorgan Chase & Co.’s ability to pay its obligations as
they become due.
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LIMITED PROTECTION AGAINST LOSS
— We will pay you your
principal back at maturity if the Basket Return is negative (
i.e.
, the Basket depreciates from the Starting Basket Level
to the Ending Basket Level) but the Basket Return is greater than or equal to the Buffer Percentage of -25%. If the Basket Return
is negative (
i.e.
, the Basket depreciates from the Starting Basket Level to the Ending Basket Level) and the Basket Return
is less than the Buffer Percentage of -25%, you will lose 1.33333% of the principal amount of your notes for every 1% of decline
in the Basket Return below the Buffer Percentage. Accordingly, under these circumstances, you will lose some or all of your principal
amount at maturity.
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EXPOSURE TO THE REFERENCE CURRENCIES VERSUS THE U.S. DOLLAR
—
The return on the notes is linked to the performance of a basket of currencies, which we refer to as the Reference Currencies,
relative to the U.S. dollar, and will enable you to participate in potential increases in the value of the Basket relative to the
U.S. dollar, from the Starting Basket Level to the Ending Basket Level.
The Basket derives
its value from an equally weighted group of currencies consisting of the Brazilian real, the Indian rupee, the Russian ruble and
the South African rand, each measured relative to the U.S. dollar.
The Reference Currency Return with respect to each Reference Currency is effectively capped at 100%,
with no limit on the downside. See “How Does the Reference Currency Return Formula Work?”, “Selected Risk Considerations
— Each Reference Currency Return is Subject to an Embedded Maximum of 100%” and “What Is the Basket Return, Assuming
a Range of Performances for the Reference Currencies?” in this pricing supplement for more information.
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TAX
TREATMENT
— In determining our reporting responsibilities, we intend to treat the notes for U.S. federal income tax
purposes as “open transactions” that are not debt instruments, as described in the section entitled “Material
U.S. Federal Income Tax Consequences – Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement no. 2-I. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this
is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the
timing and character of any income or loss on the notes could be materially and adversely affected.
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No statutory, judicial or administrative
authority directly addresses the characterization of the notes (or similar instruments) for U.S. federal income tax purposes, and
no ruling is being requested from the IRS with respect to their proper characterization and treatment. Assuming that “open
transaction” treatment is respected, the gain or loss on your notes will generally be ordinary foreign currency income or
loss under Section 988 of the Code. Ordinary foreign currency losses are potentially subject to certain reporting requirements.
However, investors in certain forward contracts, futures contracts or option contracts generally are entitled to make an election
to treat foreign currency gain or loss as capital gain or loss (a “Section 988 Election”). Due to the lack of authority
directly addressing the availability of the Section 988 Election for instruments such as these, it is unclear whether the Section
988 Election is available. If the Section 988 Election is available and you make this election before the close of the day on which
you acquire a note, all gain or loss you recognize on a sale or exchange of that note should be treated as capital gain or loss,
and as long-term capital gain or loss if you have held the note for more than one year at that time. A Section 988 Election with
respect to a note is made by (a) clearly identifying the note on your books and records, on the date you acquire it, as being subject
to this election and filing the relevant statement verifying this election with your U.S. federal income tax return or (b) obtaining
independent verification under procedures set forth in the Treasury regulations under Section 988. You should consult your tax
adviser regarding the advisability, availability, mechanics and consequences of a Section 988 Election, as well as the special
reporting requirements that apply to foreign currency losses in excess of specified thresholds.
The IRS or a court may not respect
the treatment of the notes as “open transactions,” in which case the timing and character of any income or loss on
the notes could be materially and adversely affected. For instance, the notes could be treated as contingent payment debt instruments,
in which case you would be required to accrue original issue discount on your notes in each taxable year at the “comparable
yield,” as determined by us,
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JPMorgan Structured Investments —
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PS-
3
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Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
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although we will not make any payment
with respect to the notes until maturity, and no Section 988 Election would be available. In particular, in 2007 the IRS issued
a revenue ruling holding that a financial instrument with some similarity to the notes is properly treated as a debt instrument
denominated in a foreign currency. The notes are distinguishable in some respects from the instrument described in the revenue
ruling. If the revenue ruling were applied to the notes, it could materially and adversely affect the tax consequences of an investment
in the notes for U.S. Holders, possibly with retroactive effect.
In addition, in 2007 Treasury and
the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income
over the term of their investment. It also asks for comments on a number of related topics, including the character of income or
loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime,
which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest
charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the notes, possibly with retroactive effect. You should review carefully the section entitled “Material U.S. Federal Income
Tax Consequences” in the accompanying product supplement and consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly
referred to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest
paid with respect to the notes. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds
(other than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You should
consult your tax adviser regarding the potential application of FATCA to the notes.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference Currencies, the U.S. dollar or the respective exchange rates
between the Reference Currencies and the U.S. dollar or any contracts related to the Reference Currencies, the U.S. dollar or the
respective exchange rates between the Reference Currencies and the U.S. dollar. These risks are explained in more detail in the
“Risk Factors” section of the accompanying product supplement.
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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 Reference
Currencies relative to the U.S. dollar and will depend on whether, and the extent to which, the Basket Return is positive or negative.
If the Basket Return is negative (
i.e.
, the Basket depreciates from the Starting Basket Level to the Ending Basket Level)
and the Basket Return is less than the Buffer Percentage of -25%, you will lose 1.33333% of the principal amount of your notes
for every 1% of decline in the Basket Return below the Buffer Percentage. Under these circumstances, you will lose some or all
of your principal amount at maturity.
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YOUR
MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE CONTINGENT DIGITAL RETURN
— If the Basket Return is positive or zero (
i.e.
,
the Basket appreciates from the Starting Basket Level to the Ending Basket Level), for each $1,000 principal amount note, you
will receive at maturity $1,000 plus an additional return equal to the Contingent Digital Return, regardless of the appreciation
of the Basket, which may be significant.
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
— The notes are subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase & Co.’s
credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase &
Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely
affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive
any amounts owed to you under the notes and you could lose your entire investment.
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AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS
AND HAS LIMITED ASSETS
— As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond
the issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially
all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany agreements.
As a result, we are dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates do
not make payments to us and we fail to make payments on the notes, you may have to seek payment under the related guarantee by
JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations
of JPMorgan Chase & Co.
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POTENTIAL CONFLICTS
— We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering of
the notes, hedging our obligations
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JPMorgan Structured Investments —
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PS-
4
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Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
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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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EACH REFERENCE CURRENCY RETURN IS SUBJECT TO AN EMBEDDED MAXIMUM
OF 100%
— Because the Reference Currency Returns are expressed as the Starting Spot Rate
minus
the Ending Spot
Rate,
divided
by the Starting Spot Rate, the Reference Currency Return with respect to each Reference Currency is effectively
capped at 100%, with no limit on the downside. See “— The Method of Calculating the Reference Currency Returns Will
Diminish Any Appreciation of the Reference Currencies and Magnify Any Depreciation of the Reference Currencies Relative to the
U.S. Dollar” and “— Changes in the Values of the Reference Currencies Relative to the U.S. Dollar May Offset
Each Other” below.
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YOUR
ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN OF 7.50% MAY TERMINATE ON THE OBSERVATION DATE
— If the Basket Return
is less than the Buffer Percentage, you will not be entitled to receive the Contingent Digital Return of 7.50% on the notes. Under
these circumstances, you will lose some or all of your principal amount at maturity.
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THE
ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES
— The estimated value
of the notes is only an estimate determined by reference to several factors. The original issue price of the notes exceeds the
estimated value of the notes because costs associated with selling, structuring and hedging the notes are included in the original
issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect
to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations
under the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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THE
ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
—
The estimated value of the notes is determined by reference to internal pricing models of our affiliates when the terms of the
notes are set. This estimated value of the notes is based on market conditions and other relevant factors existing at that time
and assumptions about market parameters, which can include volatility, interest rates and other factors. Different pricing models
and assumptions could provide valuations for the notes that are greater than or less than the estimated value of the notes. In
addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect.
On future dates, the value of the notes could change significantly based on, among other things, changes in market conditions,
our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact
the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions. See “The Estimated
Value of the Notes” in this pricing supplement.
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THE
ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE
— The internal funding rate used in
the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the
funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in
comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate
and any potential changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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THE
VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT
ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD
— We generally expect that some of the costs included in the
original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS
in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging profits,
if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt
issuances. See “Secondary Market Prices of the Notes” in this pricing supplement for additional information relating
to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value
of the notes as published by JPMS (and which may be shown on your customer account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE
ORIGINAL ISSUE PRICE OF THE NOTES
— Any secondary market prices of the notes will likely be lower than the original issue
price of the notes because, among other things, secondary market prices take into account our internal secondary market funding
rates for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a
result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is
likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss
to you. See the immediately
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JPMorgan Structured Investments —
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PS-
5
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Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
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following
risk consideration for information about additional factors that will impact any secondary market prices of the notes.
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The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “— Lack of Liquidity”
below.
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SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC
AND MARKET FACTORS
— The secondary market price of the notes during their term will be impacted by a number of economic
and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits,
if any, estimated hedging costs and the level of the Basket, including:
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any actual or potential change in our or JPMorgan Chase & Co.’s
creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured debt issuances;
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the exchange rates and the volatility of the exchange rates of the Reference
Currencies relative to the U.S. dollar;
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suspension or disruption of market trading in the Reference Currencies
and the U.S. dollar;
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the time to maturity of the notes;
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interest and yield rates in the market generally; and
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a variety of other economic, financial, political, regulatory and judicial
events.
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Additionally, independent pricing vendors and/or third
party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements. This price
may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes in
the secondary market.
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THE METHOD OF CALCULATING THE REFERENCE CURRENCY RETURNS WILL DIMINISH
ANY APPRECIATION OF THE REFERENCE CURRENCIES AND MAGNIFY ANY DEPRECIATION OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR
— Each Reference Currency Return reflects the return of a Reference Currency relative to the U.S. dollar from the Starting
Spot Rate to the Ending Spot Rate, calculated using the formula set forth above under “Additional Key Terms — Reference
Currency Return.” While each Reference Currency Return for purposes of the notes is determined using the formula set forth
above under “Additional Key Terms — Reference Currency Return,” there are other reasonable ways to determine
the return of a Reference Currency relative to the U.S. dollar that would provide different results. For example, another way to
calculate the return of a Reference Currency relative to the U.S. dollar would be to calculate the return that would be achieved
by converting U.S. dollar into that Reference Currency at the Starting Spot Rate on the Pricing Date and then, on the Observation
Date, converting back into U.S. dollar at the Ending Spot Rate. In this pricing supplement, we refer to the return of a Reference
Currency relative to the U.S. dollar calculated using that method, which is not used for purposes of the notes, as a “conversion
return.”
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Under the Reference Currency Return
formula, any appreciation of a Reference Currency relative to the U.S. dollar will be diminished, as compared to a conversion return,
while any depreciation of a Reference Currency relative to the U.S. dollar will be magnified, as compared to a conversion return.
The diminishing effect on any appreciation of a Reference Currency relative to the U.S. dollar, which we refer to as an embedded
variable decelerating upside leverage, increases as the Reference Currency Return increases. The magnifying effect on any depreciation
of a Reference Currency relative to the U.S. dollar, which we refer to as an embedded variable downside leverage, increases as
the Reference Currency Return decreases. Accordingly, your payment at maturity may be less than if you had invested in similar
notes that reflected conversion returns. See “How Does the Reference Currency Return Formula Work?” in this pricing
supplement for more information.
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MOVEMENTS IN THE EXCHANGE RATES OF THE REFERENCE CURRENCIES RELATIVE
TO THE U.S. DOLLAR MAY BE HIGHLY CORRELATED
— Because the performance of the Basket is determined by the performances
of the Reference Currencies relative to the U.S. dollar, your notes will be exposed to currency exchange rate risk with respect
to Brazil, India, Russia and South Africa (the “Reference Currency Countries”) and the United States. High correlation
of movements in the exchange rates of the Reference Currencies relative to the U.S. dollar during periods of negative returns could
have an adverse effect on your return on your investment at maturity. However, the movements in the exchange rates of the
Reference Currencies relative to the U.S. dollar may not be correlated. See the immediately following risk consideration
for more information.
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CHANGES IN THE VALUES OF THE REFERENCE CURRENCIES RELATIVE TO THE
U.S. DOLLAR MAY OFFSET EACH OTHER
— Changes in the values of the Reference Currencies relative to the U.S. dollar may
not correlate with each other. At a time when one of the Reference Currencies appreciates relative to the U.S. dollar, one or more
of the other Reference Currencies may depreciate relative to the U.S. dollar or may not appreciate as much. Therefore, in calculating
the Ending Basket Level, appreciation by one of the Reference Currencies relative to the U.S. dollar may be moderated, or more
than offset, by depreciation or lesser appreciation of the other Reference Currencies relative to the U.S. dollar. Because each
Reference Currency Return is subject to an embedded maximum return of 100%, with no limit on the downside, and because of the embedded
variable decelerating upside leverage and the embedded variable downside leverage, depreciation by one Reference Currency relative
to the U.S. dollar may result in a loss of some of all of your principal amount at maturity, even when the other Reference Currencies
appreciate significantly relative to the U.S. dollar. See “What Is the Basket Return, Assuming a Range of Performances for
the Reference Currencies?” in this pricing supplement for more information.
|
|
JPMorgan Structured Investments —
|
PS-
6
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
|
|
·
|
THE NOTES MIGHT NOT PAY AS MUCH AS A DIRECT INVESTMENT IN THE REFERENCE
CURRENCIES
— You may receive a lower payment at maturity than you would have received if you had invested directly in
the Reference Currencies individually, a combination of Reference Currencies or contracts related to the Reference Currencies for
which there is an active secondary market.
|
|
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE
RISK
— Foreign currency exchange rates vary over time,
and may vary considerably during the term of the notes. The value of a Reference Currency or the U.S. dollar is at any moment a
result of the supply and demand for that currency. Changes in foreign currency exchange rates result over time from the interaction
of many factors directly or indirectly affecting economic and political conditions in the Reference Currency Countries, the United
States and other relevant countries or regions.
|
Of particular importance to potential
currency exchange risk are:
|
|
·
|
existing and expected rates of inflation;
|
|
|
·
|
existing and expected interest rate levels;
|
|
|
·
|
the balance of payments in the Reference Currency Countries and the
United States, and between each country or region and its major trading partners;
|
|
|
·
|
political, civil or military unrest in the Reference Currency Countries
and the United States; and
|
|
|
·
|
the extent of governmental surplus or deficit in the Reference Currency
Countries and the United States.
|
All of these factors are, in turn,
sensitive to the monetary, fiscal and trade policies pursued by the Reference Currency Countries and the United States, and those
of other countries important to international trade and finance.
|
|
·
|
THE VALUES OF THREE OF THE REFERENCE CURRENCIES MAY BE CORRELATED
TO THE DEMAND FOR COMMODITIES
— Brazil, Russia and South Africa, three of the Reference Currency Countries, depend heavily
on the export of commodities and the values of the Brazilian real, Russian ruble and the South African rand have historically exhibited
high correlation to the demand for certain commodities. As a result, a decrease in the demand for the relevant commodities may
negatively affect the value of those Reference Currencies and, therefore, the value of the notes.
|
|
|
·
|
GOVERNMENTAL INTERVENTION COULD MATERIALLY AND ADVERSELY AFFECT THE
VALUE OF THE NOTES
— Foreign exchange rates can be fixed by the sovereign government, allowed to float within a range
of exchange rates set by the government or left to float freely. Governments, including those of the Reference Currency Countries
and the United States, use a variety of techniques, such as intervention by their central bank or imposition of regulatory controls
or taxes, to affect the exchange rates of their respective currencies. They may also issue a new currency to replace an existing
currency, fix the exchange rate or alter the exchange rate or relative exchange characteristics by devaluation or revaluation of
a currency. Thus, a special risk in purchasing the notes is that their trading value and amount payable could be affected by the
actions of sovereign governments, fluctuations in response to other market forces and the movement of currencies across borders.
|
|
|
·
|
BECAUSE THE REFERENCE CURRENCIES ARE EMERGING MARKETS CURRENCIES,
THE BASKET IS SUBJECT TO AN INCREASED RISK OF SIGNIFICANT ADVERSE FLUCTUATIONS
— The notes are linked to the performance
of an equally weighted Basket of four emerging markets currencies, relative to the U.S. dollar. There is an increased risk of significant
adverse fluctuations in the performances of the emerging markets currencies as they are currencies of less developed and less stable
economies without a stabilizing component that could be provided by one of the major currencies. As a result, emerging markets
currencies may be subject to higher volatility than major currencies, especially in environments of risk aversion and deleveraging.
With respect to any emerging or developing nation, there is the possibility of nationalization, expropriation or confiscation,
political changes, government regulation and social instability. Currencies of emerging economies are often subject to more frequent
and larger central bank interventions than the currencies of developed countries and are also more likely to be affected by drastic
changes in monetary or exchange rate policies of the relevant countries, which may negatively affect the value of the notes. Global
events, even if not directly applicable to the Reference Currency Countries or their respective currencies, may increase volatility
or adversely affect the Reference Currency Returns and the value of your notes.
|
|
|
·
|
EVEN THOUGH THE REFERENCE CURRENCIES AND
THE U.S. Dollar TRADE AROUND-THE-CLOCK, THE NOTES WILL NOT
—
Because the inter-bank market in foreign currencies is a global, around-the-clock market, the hours of trading for the notes, if
any, will not conform to the hours during which the Reference Currencies and the U.S. dollar are traded. Consequently, significant
price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the
price of the notes. Additionally, there is no systematic reporting of last-sale information for foreign currencies which, combined
with the limited availability of quotations to individual investors, may make it difficult for many investors to obtain timely
and accurate data regarding the state of the underlying foreign exchange markets.
|
|
|
·
|
CURRENCY EXCHANGE RISKS CAN BE EXPECTED
TO HEIGHTEN IN PERIODS OF FINANCIAL TURMOIL
— In periods
of financial turmoil, capital can move quickly out of regions that are perceived to be more vulnerable to the effects of the crisis
than others with sudden and severely adverse consequences to the currencies of those regions. In addition, governments around the
world, including the United States government and governments of other major world currencies, have recently made, and may be expected
to continue to make, very significant interventions in their economies, and sometimes directly in their currencies. Such interventions
affect currency exchange rates globally and, in particular, the value of the Reference Currencies
|
|
JPMorgan Structured Investments —
|
PS-
7
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
relative to the U.S. dollar. Further interventions,
other government actions or suspensions of actions, as well as other changes in government economic policy or other financial or
economic events affecting the currency markets, may cause currency exchange rates to fluctuate sharply in the future, which could
have a material adverse effect on the value of the notes and your return on your investment in the notes at maturity.
|
|
·
|
CURRENCY MARKET DISRUPTIONS MAY ADVERSELY AFFECT YOUR RETURN
— The calculation agent may, in its sole discretion, determine that the currency markets have been affected in a manner that
prevents it from properly determining, among other things, the Spot Rates and the Reference Currency Returns. These events may
include disruptions or suspensions of trading in the currency markets as a whole, and could be a Convertibility Event, a Deliverability
Event, a Liquidity Event, a Taxation Event, a Discontinuity Event or a Price Source Disruption Event. See “The Underlyings
— Currencies — Market Disruption Events for a Reference Currency Relative to a Base Currency” in the accompanying
product supplement for further information on what constitutes a market disruption event.
|
|
|
·
|
NO INTEREST PAYMENTS
— As a holder of the notes, you will
not receive interest payments.
|
|
|
·
|
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.
|
|
JPMorgan Structured Investments —
|
PS-
8
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
What Is the Payment at Maturity on the Notes,
Assuming a Range of Performances for the Basket?
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 reflects the Contingent Digital Return of 7.50%
and the Buffer Percentage of -25%. 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.
|
Ending Basket Level
|
Basket Return
|
Total Return
|
|
180.00
|
80.00%
|
7.50%
|
|
165.00
|
65.00%
|
7.50%
|
|
150.00
|
50.00%
|
7.50%
|
|
140.00
|
40.00%
|
7.50%
|
|
130.00
|
30.00%
|
7.50%
|
|
125.00
|
25.00%
|
7.50%
|
|
120.00
|
20.00%
|
7.50%
|
|
110.00
|
10.00%
|
7.50%
|
|
105.00
|
5.00%
|
7.50%
|
|
100.00
|
0.00%
|
7.50%
|
|
95.00
|
-5.00%
|
0.00%
|
|
90.00
|
-10.00%
|
0.00%
|
|
80.00
|
-20.00%
|
0.00%
|
|
75.00
|
-25.00%
|
0.00%
|
|
70.00
|
-30.00%
|
-6.67%
|
|
60.00
|
-40.00%
|
-20.00%
|
|
50.00
|
-50.00%
|
-33.33%
|
|
40.00
|
-60.00%
|
-46.67%
|
|
30.00
|
-70.00%
|
-60.00%
|
|
20.00
|
-80.00%
|
-73.33%
|
|
10.00
|
-90.00%
|
-86.67%
|
|
0.00
|
-100.00%
|
-100.00%
|
|
-10.00
|
-110.00%
|
-100.00%
|
Hypothetical Examples of Amount Payable
at Maturity
The following examples illustrate how the total payment at
maturity in different hypothetical scenarios is calculated.
Example 1: The level of the Basket increases from the Starting
Basket Level of 100 to an Ending Basket Level of 105.
Because the Basket Return of 5.00% is positive or zero, regardless
of the Basket Return, the investor receives a payment at maturity of $1,075 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 7.50%) = $1,075
Example 2: The level of the Basket increases from the Starting
Basket Level of 100 to an Ending Basket Level of 130.
Because the Basket Return is positive and although the Basket
Return of 30% exceeds the Contingent Digital Return of 7.50%, the investor is entitled only to the Contingent Digital Return and
receives a payment at maturity of $1,075 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 7.50%) = $1,075
Example 3: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 75.
Although the Basket Return is negative, because the Basket
Return is greater than or equal to the Buffer Percentage of -25%, the investor receives a payment at maturity of $1,000 per
$1,000 principal amount note.
Example 4: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 50.
Because the Ending Basket Level of 50 is less than the Starting
Basket Level of 100 and the Basket Return is -50%, which is less than the Buffer Percentage of -25%, the investor receives a payment
at maturity of $666.67 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50% + 25%)
× 1.33333] = $666.67
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-
9
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
What Is the Basket Return, Assuming a Range
of Performances for the Reference Currencies?
The examples
below illustrate hypothetical Basket Returns, assuming a range of performances for the Reference Currencies. The hypothetical Basket
Returns set forth below assume Starting Spot Rates of 3.00, 65.00, 57.00 and 13.00 for
the
Brazilian real, the Indian Rupee, the Russian ruble and the South African rand, respectively, relative to the U.S. dollar. The
Basket Returns set forth below are for illustrative purposes only and may not be the actual Basket Returns applicable to the notes.
You should consider carefully whether the notes are suitable to your investment goals. The numbers appearing in the examples below
have been rounded for ease of analysis.
Example
1
|
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
|
|
Brazilian real
|
25%
|
3.00
|
2.40
|
20.00%
|
|
Indian rupee
|
25%
|
65.00
|
58.50
|
10.00%
|
|
Russian ruble
|
25%
|
57.00
|
45.60
|
20.00%
|
|
South African rand
|
25%
|
13.00
|
11.70
|
10.00%
|
|
|
|
Basket Return:
|
15.00%
|
In this example, each of the Reference Currencies appreciated in value relative to the U.S. dollar, resulting in Reference Currency
Returns for each Reference Currency relative to the U.S. dollar of 20%, 10%, 20% and 10%. Accordingly, the Basket Return is 15%.
Example
2
|
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
|
|
Brazilian real
|
25%
|
3.00
|
3.60
|
-20.00%
|
|
Indian rupee
|
25%
|
65.00
|
71.50
|
-10.00%
|
|
Russian ruble
|
25%
|
57.00
|
68.40
|
-20.00%
|
|
South African rand
|
25%
|
13.00
|
14.30
|
-10.00%
|
|
|
|
Basket Return:
|
-15.00%
|
In this example, each of the Reference Currencies depreciated in value relative to the U.S. dollar, resulting in Reference Currency
Returns for each Reference Currency relative to the U.S. dollar of -20%, -10%, -20% and -10%. Accordingly, the Basket Return is
-15%.
Example
3
|
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
|
|
Brazilian real
|
25%
|
3.00
|
0.03
|
99.00%
|
|
Indian rupee
|
25%
|
65.00
|
0.65
|
99.00%
|
|
Russian ruble
|
25%
|
57.00
|
342.00
|
-500.00%
|
|
South African rand
|
25%
|
13.00
|
0.13
|
99.00%
|
|
|
|
Basket Return:
|
-50.75%
|
In this example, the Brazilian real, the Indian rupee and
the South African rand each appreciated in value relative to the U.S. dollar, resulting in Reference Currency Returns for each
of those Reference Currencies of 99%, and the Russian ruble depreciated in value relative to the U.S. dollar, resulting in a Reference
Currency Return for the Russian ruble of -500%. Accordingly, the Basket Return is -50.75%. This example demonstrates that (a)
no Reference Currency Return will be greater than 100% and (b) depreciation by one Reference Currency relative to the U.S. dollar
can result in a loss of some or all of your principal amount at maturity, even when the other Reference Currencies appreciate significantly
relative to the U.S. dollar.
|
JPMorgan Structured Investments —
|
PS-
10
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
Historical Information
The graph below shows the weekly performance of the Basket
from January 6, 2012 through March 17, 2017, assuming that the Basket Closing Level on January 6, 2012 was 100 and that the exchange
rates (as described below) of each Reference Currency relative to the U.S. dollar on the relevant dates were the Spot Rates on
such dates. The exchange rates and the historical weekly Basket performance data in this graph were determined using the rates
reported by the Bloomberg Professional
®
service (“Bloomberg”) and may not be indicative of the Basket
performance using the Spot Rates of the Reference Currencies relative to the U.S. dollar that would be derived from the applicable
Reuters pages.
The four graphs below show the historical weekly performance
of each Reference Currency relative to the U.S. dollar, expressed in terms of the conventional market quotation (
i.e.
, the
amount of the applicable Reference Currency that can be exchanged for one U.S. dollar, which, in each case, we refer to in this
pricing supplement as the exchange rate) as shown on Bloomberg, from January 6, 2012 through March 17, 2017. The following table
sets forth for each Reference Currency relative to the U.S. dollar (a) the exchange rates, based on data from Bloomberg, and (b)
the Spot Rates, calculated in the manner set forth under “Additional Key Terms — Spot Rates” on page PS-2 of
this pricing supplement, on March 22, 2017.
|
Reference Currency
|
Exchange Rate
|
Spot Rate
|
|
Brazilian real (BRL)
|
3.0879
|
3.0939
|
|
Indian rupee (INR)
|
65.4413
|
65.4881
|
|
Russian ruble (RUB)
|
57.7540
|
57.9710
|
|
South African rand (ZAR)
|
12.5656
|
12.5600
|
The exchange rates above and displayed in the graphs below are
for illustrative purposes only and do not form part of the calculation of the Reference Currency Returns.
The value of the Basket,
and thus the Basket Return, increases when the individual Reference Currencies appreciate in value against the U.S. dollar.
|
JPMorgan Structured Investments —
|
PS-
11
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
|
JPMorgan Structured Investments —
|
PS-
12
|
|
Buffered Digital Notes Linked to the Performance of an Equally Weighted Basket of Four Currencies Relative to the U.S. dollar
|
We obtained the data needed to construct the graph that displays
the weekly performance of the Basket and the Reference Currencies from Bloomberg, without independent verification, and we obtained
the Spot Rates from Reuters Group PLC, without independent verification. The historical performance of each Reference Currency
relative to the U.S. dollar and the Basket should not be taken as indications of future performance, and no assurance can be given
as to the Spot Rate of any of the Reference Currencies on the Observation Date. There can be no assurance that the performance
of the Basket 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, 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 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.”