Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
You should read this pricing supplement together with the accompanying
prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes, of which these
notes are a part, and the more detailed information contained in the accompanying product supplement.
This pricing supplement,
together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral
statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours.
You should
carefully consider, among other things, the matters set forth in the “Risk Factors” section of the accompanying product
supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 1665650,
and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us” and “our”
refer to JPMorgan Financial.
How Do Exchange Rates Work?
Exchange rates reflect the amount of one currency that can be
exchanged for a unit of another currency.
With expect to each Reference Currency, the Spot Rate is expressed
as a number of units of the applicable Reference Currency per one U.S. dollar.
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·
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As a result, a
decrease
in the Spot Rate from the Starting Spot
Rate to the Ending Spot Rate means that the relevant Reference Currency has
appreciated / strengthened
relative to the U.S.
dollar from the Starting Spot Rate to the Ending Spot Rate. This means that one unit of the applicable Reference Currency could
purchase more U.S. dollars on the Observation Date than it could on the Pricing Date. Viewed another way, it would take fewer units
of the applicable Reference Currency to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date.
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·
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Conversely, an
increase
in the Spot Rate from the Starting Spot
Rate to the Ending Spot Rate means that the relevant Reference Currency has
depreciated / weakened
relative to the U.S.
dollar from the Starting Spot Rate to the Ending Spot Rate. This means that it would take more units of the relevant Reference
Currency to purchase one U.S. dollar on the Observation Date than it did on the Pricing Date. Viewed another way, one unit of the
relevant Reference Currency could purchase fewer U.S. dollars on the Observation Date than it could on the Pricing Date.
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JPMorgan Structured Investments —
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PS-
1
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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How Does the Reference Currency Return Formula
Work?
Each Reference Currency Return reflects the return of the applicable
Reference Currency relative to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate, calculated using the formula
set forth above under “Key Terms — Reference Currency Return.” While each Reference Currency Return for purposes
of the notes is determined using the formula set forth above under “Key Terms — Reference Currency Return,” there
are other reasonable ways to determine the return of a Reference Currency relative to the U.S. dollar that would provide different
results. For example, another way to calculate the return of a Reference Currency relative to the U.S. dollar would be to calculate
the return that would be achieved by converting U.S. dollar into that Reference Currency at the Starting Spot Rate on the Pricing
Date and then, on the Observation Date, converting back into U.S. dollar at the applicable Ending Spot Rate. In this pricing supplement,
we refer to the return of a Reference Currency relative to the U.S. dollar calculated using that method, which is not used for
purposes of the notes, as a “conversion return.”
As demonstrated by the examples below, under the Reference Currency
Return formula, any appreciation of a Reference Currency relative to the U.S. dollar will be diminished, as compared to a conversion
return, while any depreciation of a Reference Currency relative to the U.S. dollar will be magnified, as compared to a conversion
return. In addition, the diminishing effect on any appreciation of a Reference Currency relative to the U.S. dollar increases as
the applicable Reference Currency Return increases, and the magnifying effect on any depreciation of a Reference Currency relative
to the U.S. dollar increases as the applicable Reference Currency Return decreases. Accordingly, your payment at maturity may be
less than if you had invested in similar notes that reflected conversion returns.
The following examples assume a Starting Spot Rate of 65 for
the Indian rupee relative to the U.S. dollar.
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·
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Example 1: The Indian rupee strengthens from the Starting Spot Rate
of 65 to an Ending Spot Rate of 58.50.
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The Reference Currency Return is equal to 10.00%, calculated
as follows:
(65 – 58.50) / 65 = 10.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be approximately 11.11%.
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·
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Example 2: The Indian rupee strengthens from the Starting Spot Rate
of 65 to an Ending Spot Rate of 0.65.
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The Reference Currency Return is equal to 99.00%, which demonstrates
the effective cap of 100% on the Reference Currency Return, calculated as follows:
(65 – 0.65) / 65 = 99.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, which would not be subject to the effective cap of 100%, the return would be 9,900.00%.
As Examples 1 and 2 above demonstrate, the diminishing effect
on any appreciation of a Reference Currency relative to the U.S. dollar increases as the applicable Reference Currency Return increases.
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·
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Example 3: The Indian rupee weakens from the Starting Spot Rate
of 65 to an Ending Spot Rate of 71.50.
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The Reference Currency Return is equal to -10.00%, calculated
as follows:
(65 – 71.50) / 65 = -10.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be approximately -9.09%.
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Example 4: The Indian rupee weakens from the Starting Spot Rate
of 65 to an Ending Spot Rate of 260.
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The Reference Currency Return is equal to -300.00%, which demonstrates
that there is no limit on the downside for the Reference Currency Return, calculated as follows:
(65 – 260) / 65 = -300.00%
By contrast, if the return on the Indian rupee were determined
using a conversion return, the return would be -75.00%.
As Examples 3 and 4 above demonstrate, the magnifying effect
on any depreciation of a Reference Currency relative to the U.S. dollar increases as the applicable Reference Currency Return decreases.
The hypothetical Starting Spot Rate, Ending Spot Rates and Reference
Currency Returns set forth above are for illustrative purposes only and have been rounded for ease of analysis.
JPMorgan Structured Investments —
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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What Is the Payment at Maturity on the Notes,
Assuming a Range of Performances for the Basket?
The following table and examples illustrate the hypothetical
total return and the hypothetical payment at maturity on the notes. The “total return” as used in this pricing supplement
is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note
to $1,000. Each hypothetical total return or payment at maturity set forth below assumes a Contingent Digital Return of 15%. The
actual Contingent Digital Return will be provided in the pricing supplement and will not be less than 15%. Each hypothetical total
return or payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment
at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and in the examples below have
been rounded for ease of analysis.
Ending Basket Level
|
Basket Return
|
Total Return
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180.00
|
80.00%
|
15.00%
|
165.00
|
65.00%
|
15.00%
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150.00
|
50.00%
|
15.00%
|
140.00
|
40.00%
|
15.00%
|
130.00
|
30.00%
|
15.00%
|
125.00
|
25.00%
|
15.00%
|
120.00
|
20.00%
|
15.00%
|
114.00
|
14.00%
|
15.00%
|
110.00
|
10.00%
|
15.00%
|
105.00
|
5.00%
|
15.00%
|
100.00
|
0.00%
|
15.00%
|
99.00
|
-1.00%
|
-1.00%
|
97.50
|
-2.50%
|
-2.50%
|
95.00
|
-5.00%
|
-5.00%
|
90.00
|
-10.00%
|
-5.00%
|
85.00
|
-15.00%
|
-5.00%
|
80.00
|
-20.00%
|
-5.00%
|
70.00
|
-30.00%
|
-5.00%
|
60.00
|
-40.00%
|
-5.00%
|
50.00
|
-50.00%
|
-5.00%
|
40.00
|
-60.00%
|
-5.00%
|
30.00
|
-70.00%
|
-5.00%
|
20.00
|
-80.00%
|
-5.00%
|
10.00
|
-90.00%
|
-5.00%
|
0.00
|
-100.00%
|
-5.00%
|
-10.00
|
-110.00%
|
-5.00%
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Hypothetical Examples of Amount Payable at
Maturity
The following examples illustrate how the total payment at maturity
in different hypothetical scenarios is calculated.
Example 1: The level of the Basket increases from the Starting
Basket Level of 100 to an Ending Basket Level of 105.
Because the Basket Return of 5.00% is positive or zero, regardless
of the Basket Return, the investor receives a payment at maturity of $1,150 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 15%) = $1,150
Example 2: The level of the Basket increases from the Starting
Basket Level of 100 to an Ending Basket Level of 130.
Because the Basket Return is positive and although the Basket
Return of 30% exceeds the Contingent Digital Return of 15%, the investor is entitled only to the Contingent Digital Return and
receives a payment at maturity of $1,150 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × 15%) = $1,150
Example 3: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 97.50.
Because the Basket Return is negative and the Basket Return is
-2.50%, the investor receives a payment at maturity of $975 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 × -2.50%) = $975
Example 4: The level of the Basket decreases from the Starting
Basket Level of 100 to an Ending Basket Level of 85.
Because the Basket Return is negative and the Basket Return is
less than -5.00%, the investor receives a payment at maturity of $950 per $1,000 principal amount note.
The hypothetical returns and hypothetical payments on the notes
shown above apply
only if you hold the notes for their entire term.
These hypotheticals do not reflect fees or expenses
that would be associated with any sale in the
JPMorgan Structured Investments —
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PS-
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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secondary market. If these fees and expenses were included, the
hypothetical returns and hypothetical payments shown above would likely be lower.
What Is the Basket Return, Assuming a Range
of Performances for the Reference Currencies?
The examples below illustrate hypothetical
Basket Returns, assuming a range of performances for the Reference Currencies. The hypothetical Basket Returns set forth below
assume Starting Spot Rates of 3.00, 65.00 and 56.00 for the Brazilian real, the Indian Rupee and the Russian ruble, respectively,
relative to the U.S. dollar. The Basket Returns set forth below are for illustrative purposes only and may not be the actual Basket
Returns applicable to the notes. You should consider carefully whether the notes are suitable to your investment goals. The numbers
appearing in the examples below have been rounded for ease of analysis.
Example
1
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
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Brazilian real
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1/3
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3.00
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2.52
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16.00%
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Indian rupee
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1/3
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65.00
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56.55
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13.00%
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Russian ruble
|
1/3
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56.00
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47.04
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16.00%
|
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Basket Return:
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15.00%
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In this example, each of the Reference Currencies appreciated in value relative to the U.S. dollar, resulting in Reference Currency
Returns for each Reference Currency relative to the U.S. dollar of 16%, 13% and 16%. Accordingly, the Basket Return is 15%.
Example
2
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
|
Brazilian real
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1/3
|
3.00
|
3.48
|
-16.00%
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Indian rupee
|
1/3
|
65.00
|
73.45
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-13.00%
|
Russian ruble
|
1/3
|
56.00
|
64.96
|
-16.00%
|
|
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Basket Return:
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-15.00%
|
In this example, each of the Reference Currencies depreciated in value relative to the U.S. dollar, resulting in Reference Currency
Returns for each Reference Currency relative to the U.S. dollar of -16%, -13% and -16%. Accordingly, the Basket Return is -15%.
Example
3
Reference Currency
|
Reference Currency Weight
|
Hypothetical Starting Spot Rate
|
Hypothetical Ending Spot Rate
|
Reference Currency Return
|
Brazilian real
|
1/3
|
3.00
|
0.03
|
99.00%
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Indian rupee
|
1/3
|
65.00
|
0.65
|
99.00%
|
Russian ruble
|
1/3
|
56.00
|
257.60
|
-360.00%
|
|
|
Basket Return:
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-54.00%
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In this example, the Brazilian real and the Indian rupee each
appreciated in value relative to the U.S. dollar, resulting in Reference Currency Returns for each of those Reference Currencies
of 99%, and the Russian ruble depreciated in value relative to the U.S. dollar, resulting in a Reference Currency Return for the
Russian ruble of -360%. Accordingly, the Basket Return is -54.00%. This example demonstrates that (a) no Reference Currency Return
will be greater than 100% and (b) depreciation by one Reference Currency relative to the U.S. dollar can result in a loss of up
to 5% of your principal amount at maturity, even when the other Reference Currencies appreciate significantly relative to the U.S.
dollar.
JPMorgan Structured Investments —
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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Selected Purchase Considerations
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·
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POTENTIAL PARTIAL PRESERVATION OF CAPITAL AT MATURITY
—
Subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co., the payment at maturity will be at least $950 per
$1,000 principal amount note if you hold the notes to maturity, regardless of the performance of the Basket.
Because the notes
are unsecured and unsubordinated obligations of JPMorgan Financial and JPMorgan Chase & Co., payment of any amount on the notes
is subject to our and JPMorgan Chase & Co.’s ability to pay our and JPMorgan Chase & Co.’s obligations as they
become due.
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FIXED APPRECIATION POTENTIAL
— If the Basket Return is
positive or zero (
i.e.
, the Basket appreciates from the Starting Basket Level to the Ending Basket Level or remains flat),
in addition to the principal amount, you will receive at maturity the Contingent Digital Return of at least 15% at maturity, which
also reflects the maximum return on the notes at maturity. The actual Contingent Digital Return will be provided in the pricing
supplement and will not be less than 15%.
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·
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RETURN DEPENDENT ON THE REFERENCE CURRENCIES RELATIVE TO THE U.S.
DOLLAR
— The return on the notes is dependent on the performance of a basket of currencies, which we refer to as the
Reference Currencies, relative to the U.S. dollar, from the Starting Basket Level to the Ending Basket Level. The Basket derives
its value from an equally weighted group of currencies consisting of the Brazilian real, the Indian rupee and the Russian ruble,
each measured relative to the U.S. dollar. The Reference Currency Return with respect to each Reference Currency is effectively
capped at 100%, with no limit on the downside. See “How Does the Reference Currency Return Formula Work?”, “Selected
Risk Considerations — Each Reference Currency Return is Subject to an Embedded Maximum of 100%” and “What Is
the Basket Return, Assuming a Range of Performances for the Reference Currencies?” in this pricing supplement for more information.
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·
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TAXED AS CONTINGENT PAYMENT DEBT INSTRUMENTS —
You should
review carefully the section entitled “Material U.S. Federal Income Tax Consequences,” and in particular the subsection
thereof entitled “— Notes Treated as Debt Instruments That Have a Term of More than One Year,” in the accompanying
product supplement no. 2-I. Notwithstanding that the notes do not provide for the full repayment of their principal amount
at or prior to maturity, our special tax counsel, Davis Polk & Wardwell LLP is of the opinion that the notes should be treated
for U.S. federal income tax purposes as “contingent payment debt instruments.” Assuming this treatment is respected,
as discussed in that subsection, you generally will be required to accrue original issue discount on your notes in each taxable
year at the “comparable yield,” as determined by us, although we will not make any payment with respect to the notes
until maturity. Upon sale or exchange (including at maturity), you will recognize taxable income or loss equal to the difference
between the amount received from the sale or exchange, and your adjusted basis in the note, which generally will equal the cost
thereof, increased by the amount of original issue discount you have accrued in respect of the note. You generally must treat
any income as interest income and any loss as ordinary loss to the extent of previous interest inclusions, and the balance as capital
loss. The deductibility of capital losses is subject to limitations. You should consult your tax adviser concerning
the application of these rules. Purchasers who are not initial purchasers of notes at their issue price should consult their tax
advisers with respect to the tax consequences of an investment in notes, including the treatment of the difference, if any, between
the basis in their notes and the notes’ adjusted issue price.
|
Legislation commonly referred to
as “FATCA” will apply to the payment on your notes at maturity, and may also apply to the gross proceeds of a sale
or other disposition of a note prior to maturity. However, under a IRS notice, this regime will not apply to payments of gross
proceeds (other than any amount treated as interest) of a sale or other disposition of the notes. You should consult your tax adviser
regarding the potential application of FATCA to the notes.
The discussions in the preceding
paragraphs, when read in combination with the section entitled “Material U.S. Federal Income Tax Consequences” (and
in particular the subsection thereof entitled “— Notes Treated as Debt Instruments That Have a Term of More than One
Year”) in the accompanying product supplement, constitute the full opinion of Davis Polk & Wardwell LLP regarding the
material U.S. federal income tax consequences of owning and disposing of notes.
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COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE
— We will
determine the comparable yield for the notes and will provide that comparable yield, and the related projected payment schedule,
in the pricing supplement for the notes, which we will file with the SEC. If the notes had priced on April 24, 2017 and we
had determined the comparable yield on that date, it would have been an annual rate of 1.45%, compounded semiannually. The
actual comparable yield that we will determine for the notes may be higher or lower than 1.45%, and will depend upon a variety
of factors, including actual market conditions and our borrowing costs for debt instruments of comparable maturities.
Neither
the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual additional amount,
if any, that we will pay on the notes.
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JPMorgan Structured Investments —
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PS-
5
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference Currencies, the U.S. dollar or the respective exchange rates
between the Reference Currencies and the U.S. dollar or any contracts related to the Reference Currencies, the U.S. dollar or the
respective exchange rates between the Reference Currencies and the U.S. dollar. These risks are explained in more detail in the
“Risk Factors” section of the accompanying product supplement.
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·
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
Subject
to the credit risks of JPMorgan Financial and JPMorgan Chase & Co., the notes do not guarantee the return of more than 95%
of your principal amount at maturity. The return on the notes at maturity is linked to the performance of the Basket, and will
depend on whether, and the extent to which, the Basket Return is positive or negative. If the Basket Return is negative (
i.e.
,
the Basket depreciates from the Starting Basket Level to the Ending Basket Level) and the Basket Return is greater than or equal
to -5%, you will lose 1% of the principal amount of your notes for every 1% decline in the Basket Return. If the Basket Return
is negative and the Basket Return is less than -5%, at maturity you will receive $950 per $1,000 principal amount note. Accordingly,
you may lose up to 5% of your principal amount at maturity.
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|
·
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE CONTINGENT DIGITAL
RETURN
— If the Basket Return is positive or zero (
i.e.
, the Basket appreciates from the Starting Basket Level
to the Ending Basket Level), for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional return
equal to the Contingent Digital Return, regardless of the appreciation of the Basket, which may be significant.
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·
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
— The notes are subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase & Co.’s
credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase &
Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely
affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive
any amounts owed to you under the notes and you could lose your entire investment.
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|
·
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AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS
AND HAS LIMITED ASSETS
— As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond
the issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially
all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany agreements.
As a result, we are dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates do
not make payments to us and we fail to make payments on the notes, you may have to seek payment under the related guarantee by
JPMorgan Chase & Co., and that guarantee will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan
Chase & Co.
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|
·
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POTENTIAL CONFLICTS
— We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering of
the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the
estimated value of the notes when the terms of the notes are set, which we refer to as the estimated value of the notes. In performing
these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation agent and
other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our and JPMorgan Chase
& Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan Chase & Co.’s
economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is
possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial
returns for us or our affiliates while the value of the notes declines. Please refer to “Risk Factors — Risks Relating
to Conflicts of Interest” in the accompanying product supplement for additional information about these risks.
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|
·
|
EACH REFERENCE CURRENCY RETURN IS SUBJECT TO AN EMBEDDED MAXIMUM
OF 100%
— Because the Reference Currency Returns are expressed as the Starting Spot Rate
minus
the Ending Spot
Rate,
divided
by the Starting Spot Rate, the Reference Currency Return with respect to each Reference Currency is effectively
capped at 100%, with no limit on the downside. See “— The Method of Calculating the Reference Currency Returns Will
Diminish Any Appreciation of the Reference Currencies and Magnify Any Depreciation of the Reference Currencies Relative to the
U.S. Dollar” and “— Changes in the Values of the Reference Currencies Relative to the U.S. Dollar May Offset
Each Other” below.
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN OF AT LEAST
15% MAY TERMINATE ON THE OBSERVATION DATE
— If the Basket Return is negative, you will not be entitled to receive the
Contingent Digital Return of at least 15% on the notes. Under these circumstances, you will lose up to 5% of your principal amount
at maturity.
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE 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 will exceed the estimated value of the notes because
|
JPMorgan Structured Investments —
|
PS-
6
|
Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
|
costs associated with selling, structuring
and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected
profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and
the estimated cost of hedging our obligations under the notes. See “The Estimated Value of the Notes” in this pricing
supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES
OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
— The estimated value of the notes is determined by reference
to internal pricing models of our affiliates when the terms of the notes are set. This estimated value of the notes is based on
market conditions and other relevant factors existing at that time and assumptions about market parameters, which can include volatility,
interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes that are greater
than or less than the estimated value of the notes. In addition, market conditions and other relevant factors in the future may
change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based
on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements
and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary
market transactions. See “The Estimated Value of the Notes” in this pricing supplement.
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|
·
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THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL
FUNDING RATE
— The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan
Chase & Co. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the notes and any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED
ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD
— We generally expect that some of the costs included in the original issue price of the notes will be partially paid back
to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined
period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our
internal secondary market funding rates for structured debt issuances. See “Secondary Market Prices of the Notes” in
this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes
during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer
account statements).
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SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE
ORIGINAL ISSUE PRICE OF THE NOTES
— Any secondary market prices of the notes will likely be lower than the original issue
price of the notes because, among other things, secondary market prices take into account our internal secondary market funding
rates for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a
result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is
likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss
to you. See the immediately following risk consideration for information about additional factors that will impact any secondary
market prices of the notes.
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The notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. See “—
Lack of Liquidity” below.
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SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC
AND MARKET FACTORS
— The secondary market price of the notes during their term will be impacted by a number of economic
and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits,
if any, estimated hedging costs and the level of the Basket, including:
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any actual or potential change in our or JPMorgan Chase & Co.’s
creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured debt issuances;
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the exchange rates and the volatility of the exchange rates of the
Reference Currencies relative to the U.S. dollar;
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suspension or disruption of market trading in the Reference Currencies
and the U.S. dollar;
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the time to maturity of the notes;
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interest and yield rates in the market generally; and
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a variety of other economic, financial, political, regulatory and judicial
events.
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Additionally, independent pricing vendors and/or third
party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements. This price
may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes in
the secondary market.
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THE METHOD OF CALCULATING THE REFERENCE CURRENCY RETURNS WILL DIMINISH
ANY APPRECIATION OF THE REFERENCE CURRENCIES AND MAGNIFY ANY DEPRECIATION OF THE REFERENCE CURRENCIES RELATIVE TO THE U.S. DOLLAR
— Each Reference Currency Return reflects
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JPMorgan Structured Investments —
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PS-
7
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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the return of a Reference Currency
relative to the U.S. dollar from the Starting Spot Rate to the Ending Spot Rate, calculated using the formula set forth above under
“Key Terms — Reference Currency Return.” While each Reference Currency Return for purposes of the notes is determined
using the formula set forth above under “Key Terms — Reference Currency Return,” there are other reasonable ways
to determine the return of a Reference Currency relative to the U.S. dollar that would provide different results. For example,
another way to calculate the return of a Reference Currency relative to the U.S. dollar would be to calculate the return that would
be achieved by converting U.S. dollars into that Reference Currency at the Starting Spot Rate on the Pricing Date and then, on
the Observation Date, converting back into U.S. dollars at the Ending Spot Rate. In this pricing supplement, we refer to the return
of a Reference Currency relative to the U.S. dollar calculated using that method, which is not used for purposes of the notes,
as a “conversion return.”
Under the Reference Currency Return
formula, any appreciation of a Reference Currency relative to the U.S. dollar will be diminished, as compared to a conversion return,
while any depreciation of a Reference Currency relative to the U.S. dollar will be magnified, as compared to a conversion return.
The diminishing effect on any appreciation of a Reference Currency relative to the U.S. dollar, which we refer to as an embedded
variable decelerating upside leverage, increases as the Reference Currency Return increases. The magnifying effect on any depreciation
of a Reference Currency relative to the U.S. dollar, which we refer to as an embedded variable downside leverage, increases as
the Reference Currency Return decreases. Accordingly, your payment at maturity may be less than if you had invested in similar
notes that reflected conversion returns. See “How Does the Reference Currency Return Formula Work?” in this pricing
supplement for more information.
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MOVEMENTS IN THE EXCHANGE RATES OF THE REFERENCE CURRENCIES RELATIVE
TO THE U.S. DOLLAR MAY BE HIGHLY CORRELATED
— Because the performance of the Basket is determined by the performances
of the Reference Currencies relative to the U.S. dollar, your notes will be exposed to currency exchange rate risk with respect
to Brazil, India and Russia (the “Reference Currency Countries”) and the United States. High correlation of movements
in the exchange rates of the Reference Currencies relative to the U.S. dollar during periods of negative returns could have an
adverse effect on your return on your investment at maturity. However, the movements in the exchange rates of the Reference
Currencies relative to the U.S. dollar may not be correlated. See the immediately following risk consideration for more information.
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CHANGES IN THE VALUES OF THE REFERENCE CURRENCIES RELATIVE TO THE
U.S. DOLLAR MAY OFFSET EACH OTHER
— Changes in the values of the Reference Currencies relative to the U.S. dollar may
not correlate with each other. At a time when one of the Reference Currencies appreciates relative to the U.S. dollar, one or more
of the other Reference Currencies may depreciate relative to the U.S. dollar or may not appreciate as much. Therefore, in calculating
the Ending Basket Level, appreciation by one of the Reference Currencies relative to the U.S. dollar may be moderated, or more
than offset, by depreciation or lesser appreciation of the other Reference Currencies relative to the U.S. dollar. Because each
Reference Currency Return is subject to an embedded maximum return of 100%, with no limit on the downside, and because of the embedded
variable decelerating upside leverage and the embedded variable downside leverage, depreciation by one Reference Currency relative
to the U.S. dollar may result in a loss of up to 5% of your principal amount at maturity, even when the other Reference Currencies
appreciate significantly relative to the U.S. dollar. See “What Is the Basket Return, Assuming a Range of Performances for
the Reference Currencies?” in this pricing supplement for more information.
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THE NOTES MIGHT NOT PAY AS MUCH AS A DIRECT INVESTMENT IN THE REFERENCE
CURRENCIES
— You may receive a lower payment at maturity than you would have received if you had invested directly in
the Reference Currencies individually, a combination of Reference Currencies or contracts related to the Reference Currencies for
which there is an active secondary market.
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THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE
RISK
— Foreign currency exchange rates vary over time,
and may vary considerably during the term of the notes. The value of a Reference Currency or the U.S. dollar is at any moment a
result of the supply and demand for those currencies. Changes in foreign currency exchange rates result over time from the interaction
of many factors directly or indirectly affecting economic and political conditions in the Reference Currency Countries, the United
States and other relevant countries or regions.
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Of particular importance to potential
currency exchange risk are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments in the Reference Currency Countries and the
United States, and between each country or region and its major trading partners;
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political, civil or military unrest in the Reference Currency Countries
and the United States; and
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the extent of governmental surplus or deficit in the Reference Currency
Countries and the United States.
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All of these factors are, in turn,
sensitive to the monetary, fiscal and trade policies pursued by the Reference Currency Countries and the United States, and those
of other countries important to international trade and finance.
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THE VALUES OF TWO OF THE REFERENCE CURRENCIES MAY BE CORRELATED
TO THE DEMAND FOR COMMODITIES
— Brazil and Russia, two of the Reference Currency Countries, depend heavily on the export
of commodities and the values of the Brazilian real and Russian ruble have historically exhibited high correlation to the demand
for certain commodities. As a result, a decrease in the demand for the relevant
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JPMorgan Structured Investments —
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PS-
8
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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commodities may negatively affect
the value of those Reference Currencies and, therefore, the value of the notes.
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GOVERNMENTAL INTERVENTION COULD MATERIALLY AND ADVERSELY AFFECT
THE VALUE OF THE NOTES
— Foreign exchange rates can be fixed by the sovereign government, allowed to float within a range
of exchange rates set by the government or left to float freely. Governments, including those of the Reference Currency Countries
and the United States, use a variety of techniques, such as intervention by their central bank or imposition of regulatory controls
or taxes, to affect the exchange rates of their respective currencies. They may also issue a new currency to replace an existing
currency, fix the exchange rate or alter the exchange rate or relative exchange characteristics by devaluation or revaluation of
a currency. Thus, a special risk in purchasing the notes is that their trading value and amount payable could be affected by the
actions of sovereign governments, fluctuations in response to other market forces and the movement of currencies across borders.
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BECAUSE THE REFERENCE CURRENCIES ARE EMERGING MARKETS CURRENCIES,
THE BASKET IS SUBJECT TO AN INCREASED RISK OF SIGNIFICANT ADVERSE FLUCTUATIONS
— The notes are linked to the performance
of an equally weighted Basket of three emerging markets currencies, relative to the U.S. dollar. There is an increased risk of
significant adverse fluctuations in the performances of the emerging markets currencies as they are currencies of less developed
and less stable economies without a stabilizing component that could be provided by one of the major currencies. As a result, emerging
markets currencies may be subject to higher volatility than major currencies, especially in environments of risk aversion and deleveraging.
With respect to any emerging or developing nation, there is the possibility of nationalization, expropriation or confiscation,
political changes, government regulation and social instability. Currencies of emerging economies are often subject to more frequent
and larger central bank interventions than the currencies of developed countries and are also more likely to be affected by drastic
changes in monetary or exchange rate policies of the relevant countries, which may negatively affect the value of the notes. Global
events, even if not directly applicable to the Reference Currency Countries or their respective currencies, may increase volatility
or adversely affect the Reference Currency Returns and the value of your notes.
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EVEN THOUGH THE REFERENCE CURRENCIES
AND THE U.S. Dollar TRADE AROUND-THE-CLOCK, THE NOTES WILL NOT
—
Because the inter-bank market in foreign currencies is a global, around-the-clock market, the hours of trading for the notes, if
any, will not conform to the hours during which the Reference Currencies and the U.S. dollar are traded. Consequently, significant
price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the
price of the notes. Additionally, there is no systematic reporting of last-sale information for foreign currencies which, combined
with the limited availability of quotations to individual investors, may make it difficult for many investors to obtain timely
and accurate data regarding the state of the underlying foreign exchange markets.
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CURRENCY EXCHANGE RISKS CAN BE EXPECTED
TO HEIGHTEN IN PERIODS OF FINANCIAL TURMOIL
— In periods
of financial turmoil, capital can move quickly out of regions that are perceived to be more vulnerable to the effects of the crisis
than others with sudden and severely adverse consequences to the currencies of those regions. In addition, governments around the
world, including the United States government and governments of other major world currencies, have recently made, and may be expected
to continue to make, very significant interventions in their economies, and sometimes directly in their currencies. Such interventions
affect currency exchange rates globally and, in particular, the value of the Reference Currencies relative to the U.S. dollar.
Further interventions, other government actions or suspensions of actions, as well as other changes in government economic policy
or other financial or economic events affecting the currency markets, may cause currency exchange rates to fluctuate sharply in
the future, which could have a material adverse effect on the value of the notes and your return on your investment in the notes
at maturity.
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CURRENCY MARKET DISRUPTIONS MAY ADVERSELY AFFECT YOUR RETURN
— The calculation agent may, in its sole discretion, determine that the currency markets have been affected in a manner that
prevents it from properly determining, among other things, the Spot Rates and the Reference Currency Returns. These events may
include disruptions or suspensions of trading in the currency markets as a whole, and could be a Convertibility Event, a Deliverability
Event, a Liquidity Event, a Taxation Event, a Discontinuity Event or a Price Source Disruption Event. See “The Underlyings
— Currencies — Market Disruption Events for a Reference Currency Relative to a Base Currency” in the accompanying
product supplement for further information on what constitutes a market disruption event.
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NO INTEREST PAYMENTS
— As a holder of the notes, you will
not receive interest payments.
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LACK OF LIQUIDITY
— The notes will not be listed on any
securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is not required to do so. Even if
there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other
dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely
to depend on the price, if any, at which JPMS is willing to buy the notes.
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THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE
PRICING SUPPLEMENT
— The final terms of the notes will be based on relevant market conditions when the terms of the notes
are set and will be provided in the pricing supplement. In particular, each of the estimated value of the notes and the Contingent
Digital Return will be provided in the pricing supplement and each may be as low as the applicable minimum set forth on the cover
of this pricing supplement. Accordingly, you should consider your potential investment in the notes based on the minimums for the
estimated value of the notes and the Contingent Digital Return.
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JPMorgan Structured Investments —
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PS-
9
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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Historical Information
The graph below shows the weekly performance of the Basket from
January 6, 2012 through April 21, 2017, assuming that the Starting Basket Level was set equal to 100 on January 6, 2012 and that
the exchange rates (as described below) of each Reference Currency relative to the U.S. dollar on the relevant dates were the Spot
Rates on those dates. The exchange rates and the historical weekly Basket performance data in this graph were determined using
the rates reported by the Bloomberg Professional
®
service (“Bloomberg”) and may not be indicative of
the Basket performance using the Spot Rates of the Reference Currencies relative to the U.S. dollar that would be derived from
the applicable Reuters pages.
The three graphs below show the historical weekly performance
of each Reference Currency relative to the U.S. dollar, expressed in terms of the conventional market quotation (
i.e.
, the
amount of the applicable Reference Currency that can be exchanged for one U.S. dollar, which, in each case, we refer to in this
pricing supplement as the exchange rate) as shown on Bloomberg, from January 6, 2012 through April 21, 2017. The following table
sets forth for each Reference Currency relative to the U.S. dollar (a) the exchange rates, based on data from Bloomberg, and (b)
the Spot Rates, calculated in the manner set forth under “Additional Key Terms — Spot Rate” on page PS-2 of this
pricing supplement, on April 24, 2017.
Reference Currency
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Exchange Rate
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Spot Rate
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Brazilian real (BRL)
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3.1279
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3.1251
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Indian rupee (INR)
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64.4375
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64.4757
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Russian ruble (RUB)
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55.8164
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55.8585
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The exchange rates above and displayed in the graphs below are
for illustrative purposes only and do not form part of the calculation of the Reference Currency Returns.
The value of the Basket,
and thus the Basket Return, increases when the individual Reference Currencies strengthen against the U.S. dollar.
JPMorgan Structured Investments —
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10
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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We obtained the data needed to construct the graph that displays
the weekly performance of the Basket and the Reference Currencies from Bloomberg, without independent verification, and we obtained
the Spot Rates from Reuters Group PLC, without independent verification. The historical performance of each Reference Currency
relative to the U.S. dollar and the Basket should not be taken as indications of future performance, and no assurance can be given
as to the Spot Rate of any of the Reference Currencies on the Pricing Date or the Observation Date. There can be no assurance that
the performance of the Basket will result in the return of any of your principal amount in excess of $950 per $1,000 principal
amount note, subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co.
The Estimated Value of the Notes
The estimated value of the notes set forth on the cover of this
pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component
with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives
underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would
be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination
of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the funding value of
the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those
costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected Risk Considerations
— The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of
our affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and
on various other inputs, some of which are market-observable, and which can include volatility, interest rates and other factors,
as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the notes is determined
when the terms of the notes are set based on market conditions and other relevant factors and assumptions existing at that time.
See “Selected Risk Considerations — The Estimated Value of the Notes Does Not Represent Future Values of the Notes
and May Differ from Others’ Estimates” in this pricing supplement.
JPMorgan Structured Investments —
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PS-
11
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Digital Notes Linked to the Performance of an Equally Weighted Basket of Three Currencies Relative to the U.S. dollar
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The estimated value of the notes will be lower than the original
issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original
issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers,
the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under
the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may
be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or it
may result in a loss. We or one or more of our affiliates will retain any profits realized in hedging our obligations under the
notes. See “Selected Risk Considerations — The Estimated Value of the Notes Will Be Lower Than the Original Issue Price
(Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary
market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes Will Be Impacted
by Many Economic and Market Factors” in this pricing supplement. In addition, we generally expect that some of the costs
included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your
notes by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of
six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the notes,
whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes
and when these costs are incurred, as determined by our affiliates. See “Selected Risk Considerations — The Value of
the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current
Estimated Value of the Notes for a Limited Time Period.”