February 23, 2017
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Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
$332,000
Capped Dual Directional Contingent Buffered Return
Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
due March 1, 2018
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a capped return of 1.25 times any appreciation (with a Maximum Upside Return
of 13.00%), or a capped, unleveraged return equal to the absolute value of any depreciation (up to the Contingent Buffer Amount
of 15.00%), of the lesser performing of the Russell 2000
®
Index and the S&P 500
®
Index at maturity.
|
|
·
|
Investors should be willing to forgo interest and dividend payments and be willing to lose some or all of their principal amount
at maturity.
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|
·
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
·
|
Payments on the notes are not linked to a basket composed of the Indices. Payments on the notes are linked to the performance
of each of the Indices individually, as described below.
|
|
·
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Minimum denominations of $1,000 and integral multiples thereof
|
|
·
|
The notes priced on February 23, 2017 and are expected to settle on or about February 28, 2017.
|
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning on page US-2
of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-3 of this pricing
supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$3.9443
|
$996.0557
|
Total
|
$332,000
|
$1,309.50
|
$330,690.50
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer
to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. These selling commissions will vary and will be up to $6.00 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
|
The estimated value of the notes, when the terms of the
notes were set, was $982.80 per $1,000 principal amount note. See “The Estimated Value of the Notes” in this pricing
supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
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
Guarantor:
JPMorgan Chase & Co.
Indices:
The
Russell 2000
®
(Bloomberg Ticker: RTY) and the S&P 500
®
Index (Bloomberg ticker: SPX)
Maximum Upside
Return:
13.00% (corresponding to a maximum payment at maturity of $1,130.00 per $1,000
principal amount note)
Upside Leverage
Factor:
1.25
Contingent
Buffer Amount:
15.00%
Pricing Date:
February 23, 2017
Original Issue
Date (Settlement Date):
On or about February 28, 2017
Observation
Date*:
February 26, 2018
Maturity Date*:
March 1, 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 Index 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 Index Return
× Upside Leverage Factor), subject to the Maximum Upside Return
If (i) the
Final Value of one Index is greater than its Initial Value and the Final Value of the other Index is equal to or is less than its
Initial Value by up to the Contingent Buffer Amount or (ii) the Final Value of each Index is equal to its Initial Value or is less
than its Initial Value by up to the Contingent Buffer Amount, your payment at maturity per $1,000 principal amount note will be
calculated as follows:
$1,000
+ ($1,000 × Absolute Index Return of the Lesser Performing Index)
If the Final
Value of either Index 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 Index Return)
If the
Final Value of either Index is less than its Initial Value by more than the Contingent Buffer Amount, you will lose more than 15.00%
of your principal amount at maturity and could lose all of your principal amount at maturity.
Absolute Index Return:
With respect to each Index, the absolute value of the Index Return. For example, if the Index Return of an Index is -5%, its Absolute
Index Return will equal 5%.
Lesser Performing
Index:
The Index with the Lesser Performing Index Return
Lesser Performing
Index Return:
The lower of the Index Returns of the Indices
Index Return:
With respect to each Index,
(Final
Value – Initial Value)
Initial Value
Initial Value:
With
respect to each Index, the closing level of that Index on the Pricing Date, which was 1,394.623 for the Russell 2000
®
Index and 2,363.81 for the S&P 500
®
Index
Final Value:
With
respect to each Index, the closing level of that Index on the Observation Date
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PS-
1
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
Hypothetical
Payout Profile
The following table illustrates the hypothetical
total return and payment at maturity on the notes linked to two hypothetical Indices. 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:
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·
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an Initial Value for the Lesser Performing Index of 100.00;
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·
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a Maximum Upside Return of 13.00%;
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·
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an Upside Leverage Factor of 1.25; and
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·
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a Contingent Buffer Amount of 15.00%.
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The hypothetical Initial Value of the Lesser Performing
Index of 100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of either Index.
The actual Initial Value of each Index is the closing level of that Index on the Pricing Date and is specified under “Key
Terms — Initial Value” in this pricing supplement. For historical data regarding the actual closing levels of each
Index, please see the historical information set forth under “The Indices” 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 Index
|
Lesser Performing Index Return
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Absolute Index Return of the Lesser Performing Index
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Total Return on the Notes
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Payment at Maturity
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170.00
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70.00%
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N/A
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13.00%
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$1,130.00
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160.00
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60.00%
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N/A
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13.00%
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$1,130.00
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150.00
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50.00%
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N/A
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13.00%
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$1,130.00
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140.00
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40.00%
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N/A
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13.00%
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$1,130.00
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130.00
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30.00%
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N/A
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13.00%
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$1,130.00
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120.00
|
20.00%
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N/A
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13.00%
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$1,130.00
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110.40
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10.40%
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N/A
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13.00%
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$1,130.00
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110.00
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10.00%
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N/A
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12.50%
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$1,125.00
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105.00
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5.00%
|
N/A
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6.25%
|
$1,062.50
|
101.00
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1.00%
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N/A
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1.25%
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$1,012.50
|
100.00
|
0.00%
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0.00%
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0.00%
|
$1,000.00
|
95.00
|
-5.00%
|
5.00%
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5.00%
|
$1,050.00
|
90.00
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-10.00%
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10.00%
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10.00%
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$1,100.00
|
85.00
|
-15.00%
|
15.00%
|
15.00%
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$1,150.00
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84.99
|
-15.01%
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N/A
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-15.01%
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$849.90
|
80.00
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-20.00%
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N/A
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-20.00%
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$800.00
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70.00
|
-30.00%
|
N/A
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-30.00%
|
$700.00
|
60.00
|
-40.00%
|
N/A
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-40.00%
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$600.00
|
50.00
|
-50.00%
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N/A
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-50.00%
|
$500.00
|
40.00
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-60.00%
|
N/A
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-60.00%
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$400.00
|
30.00
|
-70.00%
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N/A
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-70.00%
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$300.00
|
20.00
|
-80.00%
|
N/A
|
-80.00%
|
$200.00
|
10.00
|
-90.00%
|
N/A
|
-90.00%
|
$100.00
|
0.00
|
-100.00%
|
N/A
|
-100.00%
|
$0.00
|
PS-
2
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
How
the Notes Work
Index Appreciation Upside Scenario:
If the Final Value of each Index is greater than
its Initial Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Lesser Performing
Index Return
times
the Upside Leverage Factor of 1.25, subject to the Maximum Upside Return of 13.00%, at maturity. An investor
will realize the maximum upside payment at maturity at a Final Value of the Lesser Performing Index of approximately 10.40% or
more of its Initial Value.
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·
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If the closing level of the Lesser Performing Index increases 5.00%, investors will receive at maturity a 6.25% return, or
$1,062.50 per $1,000 principal amount note.
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|
·
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If the closing level of the Lesser Performing Index increases 30.00%, investors will receive at maturity a return equal to
the 13.00% Maximum Upside Return, or $1,130.00 per $1,000 principal amount note, which is the maximum upside payment at maturity.
|
Index Par or Index Depreciation Upside
Scenario:
If (i) the
Final Value of one Index is greater than its Initial Value and the Final Value of the other Index is equal to or is less than its
Initial Value by up to the Contingent Buffer Amount of 15.00% or (ii) the Final Value of each Index is equal to its Initial Value
or is less than its Initial Value by up to the Contingent Buffer Amount of 15.00%, investors will receive at maturity the $1,000
principal amount
plus
a return equal to the Absolute Index Return of the Lesser Performing Index.
|
·
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For example, if the closing level of the Lesser Performing Index declines 10.00%, investors will receive at maturity a 10.00%
return, or $1,100.00 per $1,000 principal amount note.
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Downside Scenario:
If the Final Value of either Index is less than
its Initial Value by more than the Contingent Buffer Amount of 15.00%, investors will lose 1% of the principal amount of their
notes for every 1% that the Final Value of the Lesser Performing Index is less than its Initial Value.
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·
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For example, if the closing level of the Lesser Performing Index declines
50.00%, investors will lose 50.00% of their principal amount and receive only $500.00 per $1,000 principal amount note at maturity.
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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.
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·
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
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The notes do not guarantee any return
of principal. If the Final Value of either Index is less than its Initial Value by more than 15.00%, you will lose 1% of the principal
amount of your notes for every 1% that the Final Value of the Lesser Performing Index is less than its Initial Value. Accordingly,
under these circumstances, you will lose more than 15.00% of your principal amount at maturity and could lose all of your principal
amount at maturity.
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM UPSIDE RETURN IF THE LESSER PERFORMING
INDEX RETURN IS POSITIVE —
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regardless of the appreciation in the
value of either Index, which may be significant.
|
·
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE CONTINGENT BUFFER AMOUNT IF THE LESSER PERFORMING
INDEX RETURN IS NEGATIVE —
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Because the payment at maturity will
not reflect the Absolute Index Return of the Lesser Performing Index if its Final Value is less than its Initial Value by more
than the Contingent Buffer Amount, the Contingent Buffer Amount is effectively a cap on your return at maturity if the Lesser Performing
Index Return is negative. The maximum payment at maturity if the Lesser Performing Index Return is negative is $1,150.00 per $1,000
principal amount note.
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·
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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
PS-
3
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
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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·
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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.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
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JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
|
but JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the level of the S&P 500
®
Index.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
|
Payments on the notes are not linked
to a basket composed of the Indices and are contingent upon the performance of each individual Index. Poor performance by either
of the Indices 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 Index.
|
·
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YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING INDEX.
|
|
·
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THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE OBSERVATION DATE —
|
If the Final Value of either Index
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 in the Lesser Performing Index.
|
·
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THE NOTES DO NOT PAY INTEREST.
|
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·
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YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN EITHER INDEX OR ANY RIGHTS WITH RESPECT
TO THOSE SECURITIES.
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·
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AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION
STOCKS WITH RESPECT TO THE RUSSELL 2000
®
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.
|
·
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THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS INITIAL VALUE BY MORE THAN THE CONTINGENT
BUFFER AMOUNT IS GREATER IF THE VALUE OF THAT INDEX IS VOLATILE.
|
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
PS-
4
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
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.
|
·
|
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 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, projected hedging profits, if any, estimated hedging costs and the levels of the Indices. 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-
5
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
The Indices
The Russell 2000
®
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 Russell 2000
®
Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
The S&P 500
®
Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500
®
Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 6, 2012 through February 17, 2017. The closing
level of the Russell 2000
®
Index on February 23, 2017 was 1,394.623. The closing level of the S&P 500
®
Index on February 23, 2017 was 2,363.81. We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical closing levels of each Index
should not be taken as an indication of future performance, and no assurance can be given as to the closing level of either Index
on the Observation Date. There can be no assurance that the performance of the Indices will result in the return of any of your
principal amount.
PS-
6
| Structured Investments
Capped Dual Directional Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the S&P 500
®
Index
|
|
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, 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.
However, the IRS or a court may not respect this treatment, 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 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 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.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, the applicable regulations exclude from the scope of Section 871(m) instruments issued
in 2017 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal
income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, our special tax counsel
is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding
on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your
particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. You should
consult your tax adviser regarding the potential application of Section 871(m) to the notes.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes. 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.
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
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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 paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
See “Selected Risk Considerations — The Estimated Value of the Notes Is Lower Than the Original Issue Price (Price
to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Indices” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is
equal to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
Validity
of the Notes and the Guarantee
In the opinion of Davis Polk & Wardwell LLP,
as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes offered by this pricing supplement
have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered against
payment as contemplated herein, such notes will be valid and binding obligations of JPMorgan Financial and the related guarantee
will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and
equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack
of bad faith),
provided
that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer
or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited
to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company
Act.
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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):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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