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.
Underlyings:
The Russell 2000
®
Index (Bloomberg ticker: RTY) (the “Index”) and the iShares
®
MSCI EAFE
ETF (Bloomberg ticker: EFA) (the “Fund”) (each of the Index and the Fund, an “Underlying” and collectively,
the “Underlyings”)
Interest
Payments:
You
will receive on each Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to $4.2917 (equivalent
to an Interest Rate of 5.15% per annum, payable at a rate of 0.42917% per month).
Interest
Rate:
5.15%
per annum, payable at a rate of 0.42917% per month
Buffer Amount:
20.00%
Downside Leverage Factor:
1.25
Pricing
Date:
May 24, 2017
Original
Issue Date (Settlement Date):
On or about May 30, 2017
Interest
Payment Dates*:
June 29, 2017, July 27, 2017, August 29, 2017, September 28, 2017, October 27, 2017, November 29, 2017,
December 29, 2017, January 29, 2018, March 1, 2018, March 29, 2018, April 27, 2018, May 30, 2018, June 28, 2018, July 27, 2018,
August 29, 2018, September 27, 2018, October 29, 2018, November 29, 2018 and the Maturity Date
Observation
Date*:
December 24, 2018
Maturity
Date*:
December 28, 2018
* 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 Underlying is greater than or equal to
its Initial Value or less than its Initial Value by up to the Buffer Amount, you will receive a cash payment at maturity, for each
$1,000 principal amount note, equal to (a) $1,000
plus
(b) the Interest Payment applicable to the Maturity Date.
If the Final Value of either Underlying is less than its Initial Value
by more than the Buffer Amount, your payment at maturity per $1,000 principal amount note, in addition to the Interest Payment
applicable to the Maturity Date, will be calculated as follows:
$1,000 + [$1,000 × (Lesser Performing Underlying
Return + Buffer Amount) × Downside Leverage Factor]
If the Final Value of either Underlying is less than its Initial
Value by more than the Buffer Amount, you will lose some or all of your principal amount at maturity.
Lesser Performing Underlying:
The Underlying with the Lesser Performing Underlying Return
Lesser Performing Underlying Return:
The lower of the Underlying Returns of the Underlyings
Underlying Return:
With respect to each Underlying,
(Final Value – Initial Value)
Initial Value
Initial
Value:
With respect to each Underlying
, t
he closing
value of that Underlying on the Pricing Date, which was 1,382.509 for the Index and $66.24 for the Fund
Final
Value:
With respect to each Underlying, the closing value of that Underlying on the
Observation Date
Share
Adjustment Factor:
The Share Adjustment Factor is referenced in determining the
closing value of the Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor is subject to adjustment upon
the occurrence of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments”
in the accompanying product supplement for further information.
|
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Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Supplemental
Terms of the Notes
All references in this pricing supplement to the
closing value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payment at Maturity
Total Interest Payments
The total Interest Payments per $1,000 principal amount
note over the term of the notes based on the Interest Rate of 5.15% per annum is $81.5417.
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the Lesser Performing Underlying on the
Observation Date.
The hypothetical payments set forth below assume
the following:
|
·
|
an Initial Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
a Buffer Amount of 20.00%;
|
|
·
|
a Downside Leverage Factor of 1.25; and
|
|
·
|
an Interest Rate of 5.15% per annum (payable at a rate of 0.42917% per month).
|
The hypothetical Initial Value of the Lesser
Performing Underlying of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value
of either Underlying. The actual Initial Value of each Underlying is the closing value of that Underlying on the Pricing Date and
is specified under “Key Terms — Initial Value” in this pricing supplement. For historical data regarding the
actual closing values of each Underlying, please see the historical information set forth under “The Underlyings” in
this pricing supplement.
Each hypothetical payment set forth below is
for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing
in the following examples have been rounded for ease of analysis.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Example 1 — The Final Value of the
Lesser Performing Underlying is less than its Initial Value by up to the Buffer Amount.
Date
|
Closing Value of Lesser Performing Underlying
|
|
Observation Date
|
90.00
|
Final Value of Lesser Performing Underlying is less than its Initial Value by up to the Buffer Amount
|
|
Total Payment
|
$1,081.5417 (8.15417% return)
|
Because the Final Value of the Lesser Performing
Underlying is less than its Initial Value by up to the Buffer Amount, the payment at maturity, for each $1,000 principal amount
note, will be $1,004.2917 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added to the Interest
Payments received with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note,
is $1,081.5417.
Example
2 — The Final Value of the Lesser Performing Underlying is less than its Initial Value by more than the Buffer Amount
.
Date
|
Closing Value of Lesser Performing Underlying
|
|
Observation Date
|
50.00
|
Final Value of Lesser Performing Underlying is less than its Initial Value by more than the Buffer Amount
|
|
Total Payment
|
$706.5417 (-29.34583% return)
|
Because the Final Value of the Lesser Performing
Underlying is less than its Trigger Value by more than the Buffer Amount and the Lesser Performing Underlying Return is -50.00%,
the payment at maturity will be $629.2197 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00% + 20.00%)
× 1.25] + $4.2917 = $629.2197
When added to the Interest Payments received
with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $706.5417.
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.
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 Underlying is less than its Initial Value by more than the Buffer Amount, you will lose
1.25% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Underlying is less than
its Initial Value by more than the Buffer Amount. Accordingly, under these circumstances, you will lose some or 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.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
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THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER THE TERM OF THE NOTES,
|
regardless of any appreciation in the
value of either Underlying, which may be significant. You will not participate in any appreciation in the value of either Underlying.
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 VALUE OF EACH UNDERLYING —
|
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by either of the Underlyings 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 Underlying.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING OR HAVE ANY RIGHTS
WITH RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH RESPECT TO THE INDEX —
|
Small capitalization companies may be
less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions.
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject
to management risk, which is the risk that the investment strategies of the Fund’s investment adviser, the implementation
of which is subject to a number of constraints, may not produce the intended results. These constraints could adversely affect
the market price of the shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE
PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate its
Underlying Index (as defined under “The Underlyings” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of the Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying the Fund
(such as mergers and spin-offs) may impact the variance between the performances of the Fund and its Underlying Index. Finally,
because the shares of the Fund are traded on a securities exchange and are subject to market supply and investor demand, the market
value of one share of the Fund may differ from the net asset value per share of the Fund.
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of the Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of the Fund may vary substantially from the net asset value per share of
the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of its Underlying
Index as well as the net asset value per share of the Fund, which could materially and adversely affect the value of the notes
in the secondary market and/or reduce any payment on the notes.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE FUND —
|
The equity securities held by the Fund
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.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND —
|
Because the prices of the equity securities
held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the 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 the
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 the 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 the Fund will be adversely affected
and any payment on the notes may be reduced.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will not make
an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
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
J.P. Morgan Securities LLC, which we refer to as 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 structuring and hedging the notes are included in the original issue price of the notes. These
costs include 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).
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5
| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
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 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 projected hedging profits, if any, estimated hedging costs and the values of the Underlyings. 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.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
The
Underlyings
The Index consists of the middle 2,000 companies included
in the Russell 3000E™ Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies
included in the Russell 3000
®
Index. The Index is designed to track the performance of the small capitalization
segment of the U.S. equity market. For additional information about the Index, see “Equity Index Descriptions — The
Russell Indices” in the accompanying underlying supplement.
The Fund 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 Fund 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 Fund, see “Fund Descriptions —
The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 6, 2012 through May 19, 2017. The closing
value of the Index on May 24, 2017 was 1,382.509. The closing value of the Fund on May 24, 2017 was $66.24. We obtained the closing
values above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The closing values of the Fund above and below may have been adjusted by Bloomberg for actions taken by the Fund, such as stock
splits.
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of either Underlying
on the Observation Date. There can be no assurance that the performance of the Underlyings will result in the return of any of
your principal amount.
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. Based on the advice
of Davis Polk & Wardwell LLP, our special tax counsel, and on current market conditions, in determining our reporting responsibilities
we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x) a cash-settled Put Option written
by you that in circumstances where the payment due at maturity is less than $1,000 (excluding accrued but unpaid interest) requires
you to pay us an amount equal to the product of (1) 1.25 and (2) the absolute value of the Lesser Performing Underlying Return
plus its Buffer Amount and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential obligation under the
Put Option, as more fully described in “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders
— Notes Treated as Units Each Comprising a Put Option and a Deposit” in the accompanying product supplement, and in
particular in the subsection thereof entitled “—Notes with a Term of More than One Year.” By purchasing the notes,
you agree (in the absence of an administrative determination or judicial ruling to the contrary) to follow this treatment and the
allocation described in the following paragraph. However, 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. 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 on a number of issues, the most relevant of which for investors in
the notes are the character of income or loss (including whether the Put Premium might be currently included as ordinary income)
and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax. While it is not clear
whether the notes would be viewed as similar to the typical prepaid forward contract described in the notice, it is possible that
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.
In determining our reporting responsibilities,
we intend to treat approximately 33.79% of each Interest Payment as interest on the Deposit and the remainder as Put Premium. Assuming
that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated as interest on
the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale or settlement.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, the applicable regulations exclude from the scope of Section 871(m) instruments issued
in 2017 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal
income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, our special tax counsel
is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding
on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your
particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. You should
consult your tax adviser regarding the potential application of Section 871(m) to the notes.
PS-
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| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Withholding under legislation commonly referred
to as “FATCA” will apply to amounts treated as interest or other “fixed or determinable annual or periodical”
income (“FDAP Income”) for U.S. federal income tax purposes paid with respect to the notes, and (if they are treated,
in whole or in part, as debt instruments) could also apply to payments of gross proceeds of a taxable disposition, including a
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 FDAP Income) with respect to dispositions occurring before January 1, 2019. You should consult
your tax adviser regarding the potential application of FATCA to the notes.
You should consult your tax adviser regarding
all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments
and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue price should also
consult their tax advisers with respect to the tax consequences of an investment in the notes, including possible alternative treatments,
as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
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 structuring and hedging the notes are included in the
original issue price of the notes. These costs include the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may
result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized in
hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our
affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value of the
Notes Is Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates.
PS-
9
| Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
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 “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Underlyings” 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 (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Validity
of the Notes and the Guarantee
In the opinion of Davis Polk & Wardwell
LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes offered by this pricing supplement
have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered against
payment as contemplated herein, such notes will be valid and binding obligations of JPMorgan Financial and the related guarantee
will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and
equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack
of bad faith),
provided
that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer
or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited
to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company
Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery
of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture with
respect to the trustee, all as stated in the letter of such counsel dated February 24, 2016, which was filed as an exhibit to the
Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan Chase & Co. on February 24, 2016.
Additional Terms Specific to the Notes
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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·
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Underlying supplement no. 1-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
|
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
PS-10 | Structured Investments
Yield Notes Linked to the Lesser Performing of the Russell
2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
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