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.
Pricing supplement to product supplement no. 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC, an indirect, wholly owned finance
subsidiary of JPMorgan Chase & Co.
Guarantor:
JPMorgan Chase & Co.
Funds:
The
iShares
®
MSCI EAFE ETF (Bloomberg Ticker: EFA) and the iShares
®
MSCI Emerging Markets ETF (Bloomberg
Ticker: EEM)
Upside Leverage
Factor:
1.52
Contingent
Buffer Amount:
25.00%
Pricing
Date:
October 18, 2017
Original
Issue Date (Settlement Date):
On or about October 23, 2017
Observation
Date
*
:
October
19, 2020
Maturity Date*:
October 22, 2020
* Subject to postponement in the event of a market
disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Payment
at Maturity:
If the Final Value of each Fund is greater than its Initial Value,
your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Fund Return × Upside Leverage Factor)
If (i) the Final Value of one Fund is greater than its Initial
Value and the Final Value of the other Fund is equal to its Initial Value or is less than its Initial Value by up to the Contingent
Buffer Amount or (ii) the Final Value of each Fund is equal to its Initial Value or is less than its Initial Value by up to the
Contingent Buffer Amount, you will receive the principal amount of your notes at maturity.
If the Final Value of either Fund is less than its Initial Value
by more than the Contingent Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Fund Return)
If the Final Value of either
Fund is less than its Initial Value by more than the Contingent Buffer Amount, you will lose more than 25.00% of your principal
amount at maturity and could lose all of your principal amount at maturity.
Lesser Performing
Fund:
The Fund with the Lesser Performing Fund Return
Lesser Performing
Fund Return:
The lower of the Fund Returns of the Funds
Fund Return:
With respect to each Fund,
(Final
Value – Initial Value)
Initial Value
Initial Value:
With respect to each Fund, the closing on the Pricing Date, which was
$69.54 for the iShares
®
MSCI EAFE ETF and $46.50 for the iShares
®
MSCI EAFE ETF
Final Value:
With respect to each Fund, the closing price of one share of that Fund
on the Observation Date
Share
Adjustment Factor:
With respect
to each Fund, the Share Adjustment Factor is referenced in determining the closing price of one share of that Fund, and is set
equal to 1.0 on the Pricing Date. The Share Adjustment Factor of each Fund is subject to adjustment upon the occurrence of certain
events affecting that Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the accompanying
product supplement for further information.
|
PS-
1
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Hypothetical Payout Profile
The following table illustrates the hypothetical
total return and payment at maturity on the notes linked to two hypothetical Funds. The “total return” as used in this
pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal
amount note to $1,000. The hypothetical total returns and payments set forth below assume the following:
|
·
|
an Initial Value for the Lesser Performing Fund of $100.00;
|
|
·
|
an Upside Leverage Factor of 1.52; and
|
|
·
|
a Contingent Buffer Amount of 25.00%.
|
The hypothetical
Initial Value of the Lesser Performing Fund of $100.00 has been chosen for illustrative purposes only and does not represent the
actual Initial Value of either Fund. The actual Initial Value of each Fund is the closing price of one share of the Fund on the
Pricing Date and is specified under “
Key Terms - Initial Value” in this pricing supplement.
For historical data regarding the actual closing prices of each Fund, please see the historical information set forth under “The
Funds” in this pricing supplement.
Each hypothetical total return or hypothetical
payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity
applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
Final Value of the Lesser Performing Fund
|
Lesser Performing Fund Return
|
Total Return on the Notes
|
Payment at Maturity
|
180.00
|
80.00%
|
121.60%
|
$2,216.00
|
170.00
|
70.00%
|
106.40%
|
$2,064.00
|
160.00
|
60.00%
|
91.20%
|
$1,912.00
|
150.00
|
50.00%
|
76.00%
|
$1,760.00
|
140.00
|
40.00%
|
60.80%
|
$1,608.00
|
130.00
|
30.00%
|
45.60%
|
$1,456.00
|
120.00
|
20.00%
|
30.40%
|
$1,304.00
|
110.00
|
10.00%
|
15.20%
|
$1,152.00
|
105.00
|
5.00%
|
7.60%
|
$1,076.00
|
101.00
|
1.00%
|
1.52%
|
$1,015.20
|
100.00
|
0.00%
|
0.00%
|
$1,000.00
|
95.00
|
-5.00%
|
0.00%
|
$1,000.00
|
90.00
|
-10.00%
|
0.00%
|
$1,000.00
|
80.00
|
-20.00%
|
0.00%
|
$1,000.00
|
75.00
|
-25.00%
|
0.00%
|
$1,000.00
|
74.99
|
-25.01%
|
-25.01%
|
$749.90
|
70.00
|
-30.00%
|
-30.00%
|
$700.00
|
60.00
|
-40.00%
|
-40.00%
|
$600.00
|
50.00
|
-50.00%
|
-50.00%
|
$500.00
|
40.00
|
-60.00%
|
-60.00%
|
$400.00
|
30.00
|
-70.00%
|
-70.00%
|
$300.00
|
20.00
|
-80.00%
|
-80.00%
|
$200.00
|
10.00
|
-90.00%
|
-90.00%
|
$100.00
|
0.00
|
-100.00%
|
-100.00%
|
$0.00
|
PS-
2
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
How
the Notes Work
Upside Scenario:
If the Final Value of each Fund is greater than
its Initial Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Lesser Performing
Fund Return
times
the Upside Leverage Factor of at 1.52.
|
·
|
If the closing price of one share of the Lesser Performing Fund increases 10.00%, investors will receive at maturity a 15.20%
return, or $1,152.00 per $1,000 principal amount note.
|
Par Scenario:
If (i) the Final Value of one Fund is greater
than its Initial Value and the Final Value of the other Fund is equal to its Initial Value or is less than its Initial Value by
up to the Contingent Buffer Amount of 25.00% or (ii) the Final Value of each Fund is equal to its Initial Value or is less than
its Initial Value by up to the Contingent Buffer Amount of 25.00%, investors will receive at maturity the principal amount of their
notes.
Downside Scenario:
If the Final Value of either Fund is less than
its Initial Value by more than the Contingent Buffer Amount of 25.00%, investors will lose 1% of the principal amount of their
notes for every 1% that the Final Value of the Lesser Performing Fund is less than its Initial Value.
|
·
|
For example, if the closing price of one share of the Lesser Performing Fund
declines 60.00%, investors will lose 60.00% of their principal amount and receive only $400.00 per $1,000 principal amount note
at maturity.
|
The hypothetical
returns and hypothetical payments on the notes shown above apply
only if you hold the notes for their entire term.
These
hypotheticals do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees
and expenses were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
PS-
3
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the Final Value of either Fund is less than its Initial Value by more than 25.00%, you will lose 1% of the principal
amount of your notes for every 1% that the Final Value of the Lesser Performing Fund is less than its Initial Value. Accordingly,
under these circumstances, you will lose more than 25.00% of your principal amount at maturity and could lose all of your principal
amount at maturity.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
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.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE PRICE OF ONE SHARE OF EACH FUND —
|
Payments on the notes are not linked
to a basket composed of the Funds and are contingent upon the performance of each individual Fund. Poor performance by either of
the Funds over the term of the notes may negatively affect your payment at maturity and will not be offset or mitigated by positive
performance by the other Fund.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING FUND.
|
|
·
|
THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE OBSERVATION DATE —
|
If the Final Value of either Fund is
less than its Initial Value 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 Lesser Performing Fund.
|
·
|
THE NOTES DO NOT PAY INTEREST.
|
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON EITHER FUND OR THE SECURITIES HELD BY EITHER FUND OR HAVE ANY
RIGHTS WITH RESPECT TO EITHER FUND OR THOSE SECURITIES.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUNDS —
The Funds are subject to management risk, which is the risk that the investment strategies of the applicable Fund’s investment
adviser, the implementation of which is subject to a number of constraints, may not produce the intended results. These constraints
could adversely affect the market price of the shares of each Fund and, consequently, the value of the notes.
|
PS-
4
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
|
·
|
THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH
THE PERFORMANCE OF THAT FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
Each Fund does not fully replicate
its Underlying Index (as defined under “The Funds” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of each Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of each Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying a Fund (such
as mergers and spin-offs) may impact the variance between the performances of that Fund and its Underlying Index. Finally, because
the shares of each Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value
of one share of each Fund may differ from the net asset value per share of that Fund.
During periods of market volatility,
securities underlying each Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of that Fund and the liquidity of that Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of a Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of a Fund. As a result,
under these circumstances, the market value of shares of a Fund may vary substantially from the net asset value per share of that
Fund. For all of the foregoing reasons, the performance of each Fund may not correlate with the performance of its Underlying Index
as well as the net asset value per share of that Fund, which could materially and adversely affect the value of the notes in the
secondary market and/or reduce any payment on the notes.
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE FUNDS —
|
The
equity securities held by the Funds have been issued by non-U.S. companies. Investments in securities linked to the value of such
non-U.S. equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S.
equity securities. Also, there is generally less publicly available information about companies in some of these jurisdictions
than there is about U.S. companies that are subject to the reporting requirements of the SEC.
|
·
|
EMERGING MARKETS RISK WITH RESPECT TO THE iSHARES
®
MSCI EMERGING MARKETS ETF —
|
The
equity securities held by the iShares
®
MSCI Emerging Markets ETF
have been
issued by non-U.S. companies located in emerging markets countries. Countries with emerging markets may have relatively unstable
governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the
repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries
with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions,
and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number
of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO EACH FUND —
|
Because the prices of the equity securities
held by each Fund are converted into U.S. dollars for purposes of calculating the net asset value of that Fund, holders of the
notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held
by that Fund trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S.
dollar and the relative weight of equity securities held by a Fund denominated in each of those currencies. If, taking into account
the relevant weighting, the U.S. dollar strengthens against those currencies, the price of a Fund will be adversely affected and
any payment on the notes may be reduced.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent
will not make an adjustment in response to all events that could affect the shares of the Funds. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
|
·
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS INITIAL VALUE BY MORE THAN THE CONTINGENT BUFFER AMOUNT
IS GREATER IF THE VALUE OF THAT UNDERLYING IS VOLATILE.
|
PS-
5
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
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, if any, the projected profits, if any, that our affiliates expect to
realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations
under the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in the
determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the funding
value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate and any potential
changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The
Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE
NOTES —
|
Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions, if any, and (b) may exclude projected hedging profits, if any, and estimated hedging costs that
are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the
notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you
prior to the Maturity Date could result in a substantial loss to you.
|
·
|
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, if any, projected hedging profits, if any, estimated hedging costs and the prices of one share of
the Funds. Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which
may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the notes,
if any, at which JPMS may be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating
to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by
many economic and market factors” in the accompanying product supplement.
PS-
6
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
The
Funds
The iShares
®
MSCI EAFE ETF is an exchange-traded fund of iShares
®
Trust, a registered investment company, that seeks to track
the investment results, before fees and expenses, of an index composed of large- and mid-capitalization developed market equities,
excluding the United States and Canada, which we refer to as the Underlying Index with respect to the Fund. The Underlying Index
for the iShares
®
MSCI EAFE ETF is currently the MSCI EAFE
®
Index. The MSCI EAFE
®
Index
is a free float-adjusted market capitalization index intended to measure the equity market performance of the developed equity
markets in Europe, Asia, Australia and New Zealand. For additional information about the iShares
®
MSCI EAFE ETF,
see “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
The iShares
®
MSCI Emerging Markets ETF is an exchange-traded fund of iShares
®
, Inc., a registered investment company, that seeks
to track the investment results, before fees and expenses, of an index composed of large- and mid-capitalization emerging market
equities, which we refer to as the Underlying Index with respect to the iShares
®
Emerging Markets ETF. The Underlying
Index for the iShares
®
Emerging Markets ETF is currently the MSCI Emerging Markets Index. The MSCI Emerging Markets
Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of global emerging
markets. For additional information about the iShares
®
Emerging Markets ETF, see “Fund Descriptions —
The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Fund based on the weekly historical closing prices of one share of the Funds from January 6, 2012 through October
13, 2017. The closing price of one share of the iShares
®
MSCI EAFE ETF on October 18, 2017 was $69.54. The closing
price of one share of the iShares
®
MSCI Emerging Markets ETF on October 18, 2017 was $46.50. We obtained the closing
prices 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 closing prices of one share of
each Fund should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of
one share of either Fund on the Observation Date. There can be no assurance that the performance of the Funds will result in the
return of any of your principal amount.
Historical Performance
of the iShares
®
MSCI EAFE ETF
Source: Bloomberg
|
PS-
7
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Historical Performance
of the iShares
®
MSCI Emerging Markets ETF
Source: Bloomberg
|
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The following discussion,
when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell
LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
Based on current market conditions, in the
opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt instruments
for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders—Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, subject to the possible application of the “constructive ownership”
rules, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than
a year, whether or not you are an initial purchaser of notes at the issue price. The notes could be treated as “constructive
ownership transactions” within the meaning of Section 1260 of the Code, 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 your holding period for the notes. 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
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8
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, the applicable regulations exclude from the scope of Section 871(m) instruments
issued in 2017 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S.
federal income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, our
special tax counsel is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders.
Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex
and its application may depend on your particular circumstances, including whether you enter into other transactions with respect
to an Underlying Security. You should consult your tax adviser regarding the potential application of Section 871(m) to the
notes.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a note. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount
treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding
the potential application of FATCA to the notes.
The
Estimated Value of the Notes
The estimated value of the notes set forth
on the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives
underlying the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent
on inputs such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are
market-observable, and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about
future market events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes
are set based on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could
provide valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions
and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value
of the notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase &
Co.’s creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
JPMS would be willing to buy notes from you in secondary market transactions.
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, if any, paid to JPMS and other affiliated
or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations
entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less
than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes
sold to brokerage accounts may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates
will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value of the Notes Is
Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by
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9
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
JPMS in an amount that will decline to zero over
an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated
hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined time period
is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial period
reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Funds” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is
equal to the estimated value of the notes plus the selling commissions, if any, 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.
Supplemental
Plan of Distribution
We expect that delivery of the notes will be
made against payment for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement,
which will be the third business day following the Pricing Date of the notes (this settlement cycle being referred to as “T+3”).
Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to
settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish
to trade notes on any date prior to two business days before delivery will be required to specify an alternate settlement cycle
at the time of any such trade to prevent a failed settlement and should consult their own advisors.
Validity
of the Notes and the Guarantee
In
the opinion of Davis Polk & Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when
the notes offered by this pricing supplement have been executed and issued by JPMorgan Financial and authenticated by the trustee
pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations
of JPMorgan Financial and the related guarantee will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts
of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent
conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given
as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware
and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the indenture and its authentication of the notes and the validity, binding nature and
enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated February 24, 2016,
which was filed as an exhibit to the Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan Chase & Co. on February
24, 2016.
Additional
Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as 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.
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10
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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.
PS-
11
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked
to the Lesser Performing of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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