Observation
Dates and Coupon Payment Dates
Observation Dates
†
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Coupon Payment Dates
†
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October 23, 2017
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October 25, 2017
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January 22, 2018
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January 24, 2018
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April 23, 2018
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April 25, 2018
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July 23, 2018
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July 25, 2018
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October 22, 2018
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October 24, 2018
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January 22, 2019
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January 24, 2019
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April 22, 2019
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April 24, 2019
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July 22, 2019
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July 24, 2019
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October 21, 2019
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October 23, 2019
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January 21, 2020
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January 23, 2020
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April 21, 2020
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April 23, 2020
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July 21, 2020 (the Final Valuation Date)
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July 24, 2020 (the Maturity Date)
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†
The Notes are not callable until the second
Observation Date, January 22, 2018.
Each of the Observation
Dates
,
and therefore the Coupon Payment Dates, is 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.
What
Are the Tax Consequences of the Notes?
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. In determining our reporting responsibilities
we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons
and (ii) any Contingent Coupons as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax
Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent
Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel,
we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
Sale, Exchange or Redemption of a Note.
Assuming
the treatment described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call or
at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange
and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly
treated as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain
or loss unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss,
whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to
limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is
likely that you will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible
that proceeds received from the sale or exchange of your Notes prior to an Observation Date but that can be attributed to an expected
Contingent Coupon payment could be treated as ordinary income. You should consult your tax adviser regarding this issue.
As described above, there are other reasonable treatments
that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially
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 and the relevance of factors such as the nature of
the underlying property to which the instruments are linked. 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
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.
Non-U.S. Holders — Tax
Considerations
. The U.S. federal income tax treatment of Contingent Coupons is uncertain, and although we believe it is reasonable
to take a position that Contingent Coupons are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided),
a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of
that rate under an applicable income tax treaty), unless income from your Notes is effectively connected with your conduct of a
trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment in
the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Notes in light of your particular circumstances.
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, we
expect that Section 871(m) will 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. If necessary, further
information regarding the potential application of Section 871(m) will be provided in the pricing supplement for the Notes. You
should consult your tax adviser regarding the potential application of Section 871(m) to the Notes.
FATCA.
Withholding under
legislation commonly referred to as “FATCA” could apply to payments with respect to the Notes that are treated as U.S.-source
“fixed or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes
(such as interest, if the Notes are recharacterized, in whole or in part, as debt instruments, or Contingent Coupons if they are
otherwise treated as FDAP Income). If the Notes are recharacterized, in whole or in part, as debt instruments, withholding could
also apply to payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However,
under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income)
with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the Notes.
In the event of any withholding
on the Notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
Key
Risks
An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing directly in either or both of the Underlyings. These risks are explained in more detail
in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying supplement. We
also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
Risks Relating to the Notes Generally
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Your Investment in the Notes May Result in a Loss
— The
Notes differ from ordinary debt securities in that JPMorgan Financial will not necessarily repay the full principal amount of the
Notes. If the Notes are not called and the closing level of either Underlying has declined below its Downside Threshold on the
Final Valuation Date, you will be fully exposed to any depreciation of the Lesser Performing Underlying from its Initial Value
to its Final Value. In this case, JPMorgan Financial will repay less than the full principal amount at maturity, resulting in a
loss of principal that is proportionate to the negative Underlying Return of the Lesser Performing Underlying. Under these circumstances,
you will lose 1% of your principal for every 1% that the Final Value of the Lesser Performing Underlying is less than its Initial
Value and could lose your entire principal amount. As a result, your investment in the Notes may not perform as well as an investment
in a security that does not have the potential for full downside exposure to either Underlying.
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Credit Risks of JPMorgan Financial and JPMorgan Chase & Co.
— The Notes are unsecured and unsubordinated debt obligations of the Issuer, JPMorgan Chase Financial Company LLC, the
payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co. The Notes will rank
pari passu
with
all of our other unsecured and unsubordinated obligations, and the related guarantee JPMorgan Chase & Co. will rank
pari
passu
with all of JPMorgan Chase & Co.’s other unsecured and unsubordinated obligations. The Notes and related guarantees
are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes, including any repayment
of principal, depends on the ability of JPMorgan Financial and JPMorgan Chase & Co. to satisfy their obligations as they come
due. As a result, the actual and perceived creditworthiness of JPMorgan Financial and JPMorgan Chase & Co. may affect the market
value of the Notes and, in the event JPMorgan Financial and JPMorgan Chase & Co. were to default on their obligations, you
may not receive any amounts owed to you under the terms of the Notes and you could lose your entire investment.
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As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations
and 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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You Are Not Guaranteed Any Contingent Coupons
— We will
not necessarily make periodic coupon payments on the Notes. If the closing level of either Underlying on an Observation Date is
less than its Coupon Barrier, we will not pay you the Contingent Coupon for that Observation Date even if the closing level of
the other Underlying is greater than or equal to its Coupon Barrier on that Observation Date, and the Contingent Coupon that would
otherwise be payable will not be accrued and will be lost. If the closing level of either Underlying is less than its Coupon Barrier
on each of the Observation Dates, we will not pay you any Contingent Coupon during the term of, and you will not receive a positive
return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of principal
loss on your Notes.
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Return on the Notes Limited to the Sum of Any Contingent Coupons
and You Will Not Participate in Any Appreciation of Either Underlying
— The return potential of the Notes is limited
to the specified Contingent Coupon Rate, regardless of the appreciation of either Underlying, which may be significant. In addition,
the total return on the Notes will vary based on the number of Observation Dates on which the requirements for a Contingent Coupon
have been met prior to maturity or an automatic call. Further, if the Notes are called, you will not receive any Contingent Coupons
or any other payments in respect of any Observation Dates after the Call Settlement Date. Because the Notes could be called as
early as the second Observation Date, the total return on the Notes could be minimal. If the Notes are not called, you may be subject
to the risk of decline in the level of each Underlying, even though you are not able to participate in any potential appreciation
of either Underlying. Generally, the longer the Notes remain outstanding, the less likely it is that they will be automatically
called, due to the decline in the level of one or both of the Underlyings and the shorter time remaining for the level of either
Underlying to recover to or above its Initial Value on a subsequent Observation Date. As a result, the return on an investment
in the Notes could be less than the return on a hypothetical direct investment in either Underlying. In addition, if the Notes
are not called and the Final Value of either Underlying is below its Downside Threshold, you will have a loss on your principal
amount and the overall return on the Notes may be less than the amount that would be paid on a conventional debt security of JPMorgan
Financial of comparable maturity.
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Because the Notes Are Linked to the Lesser Performing Underlying,
You Are Exposed to Greater Risks of No Contingent Coupons and Sustaining a Significant Loss on Your Investment at Maturity Than
If the Notes Were Linked to a Single Underlying
— The risk that you will not receive any Contingent Coupons and lose
some or all of your initial investment in the Notes at maturity is greater if you invest in the Notes as opposed to substantially
similar securities that are linked to the performance of a single Underlying. With two Underlyings, it is more likely that the
closing level of either Underlying will be less than its Coupon Barrier on the Observation Dates or less than its Downside Threshold
on the Final Valuation Date. Therefore it is more likely that you will not receive any Contingent Coupons and that you will suffer
a significant loss on your investment at maturity. In addition, the performance of the Underlyings may not be correlated or may
be negatively correlated.
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The lower the correlation between
two Underlyings, the greater the potential for one of those Underlyings to close below its Coupon Barrier or Downside Threshold
on an Observation Date or the Final Valuation Date, respectively. See “Correlation of the Underlyings” below. Although
the correlation of the Underlyings’ performance may change over the term of the Notes, the Contingent Coupon Rate is determined,
in part, based on the correlation of the Underlyings’ performance, as calculated using internal models of our affiliates
at the time when the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated with lower correlation
of the Underlyings, which reflects a greater potential for loss on your investment at maturity. Furthermore, because the closing
level of each Underlying must be greater than or equal to its Initial Value on a quarterly Observation Date (after an initial six-month
non-call period) in order for the notes to be automatically called prior to maturity, the Notes are less likely to be automatically
called on any Observation Date than if the Notes were linked to a single Underlying.
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You Are Exposed to the Risk of Decline in the Level of Each Underlying
— Your return on the Notes and your payment at maturity, if any, is not linked to a basket consisting of the Underlyings.
If the Notes have not been automatically called, your payment at maturity is contingent upon the performance of each individual
Underlying such that you will be equally exposed to the risks related to either of the Underlyings. In addition, the performance
of the Underlyings may not be correlated. Poor performance by either of the Underlyings over the term of the Notes may negatively
affect whether you will receive a Contingent Coupon on any Coupon Payment Date and your payment at maturity and will not be offset
or mitigated by positive performance by the other Underlying. Accordingly, your investment is subject to the risk of decline in
the value of each Underlying.
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Your Payment at Maturity Will Be Determined By the Lesser Performing
Underlying
— Because the payment at maturity will be determined based on the performance of the Lesser Performing Underlying,
you will not benefit from the performance of the other Underlying. Accordingly, if the Notes have not been automatically
called and the Final Value of either Underlying is less than its Downside Threshold, you will lose some or all of your principal
amount at maturity, even if the Final Value of the other Underlying is greater than or equal to its Initial Value.
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Contingent Repayment of Principal Applies Only If You Hold the Notes
to Maturity
— If you are able to sell your Notes in the secondary market, if any, prior to maturity, you may have to
sell them at a loss relative to your initial investment even if the closing levels of both Underlyings are above their respective
Downside Thresholds. If by maturity the Notes have not been called, either JPMorgan Financial will repay you the full principal
amount per Note
plus
the Contingent Coupon, or, if either Underlying closes below its Downside Threshold on the Final Valuation
Date, JPMorgan Financial will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal
amount that is proportionate to the decline in the closing level of the Lesser Performing Underlying from its Initial Value to
its Final Value. This contingent repayment of principal applies only if you hold your Notes to maturity.
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A Higher Contingent Coupon Rate and/or a Lower Coupon Barrier and/or
Downside Threshold May Reflect Greater Expected Volatility of the Underlyings, Which Is Generally Associated With a Greater Risk
of Loss
— Volatility is a measure of the degree of variation in the levels of the Underlyings over a period of time.
The greater the expected volatilities of the Underlyings at the time the terms of the Notes are set, the greater the expectation
is at that time that the level of an Underlying could close below its Coupon Barrier on any Observation Date, resulting in the
loss of one or more, or all, Contingent Coupon payments, or below its Downside Threshold on the Final Valuation Date, resulting
in the loss of a significant portion or all of your principal at maturity. In addition, the economic terms of the Notes,
including the Contingent Coupon Rate, the Coupon Barrier and the Downside Threshold, are based, in part, on the expected volatilities
of the Underlyings at the time the terms of the Notes are set, where higher expected volatilities will generally be reflected in
a higher Contingent Coupon Rate than the fixed rate we would pay on conventional debt securities of the same maturity and/or on
otherwise comparable securities and/or a lower Coupon Barrier and/or a lower Downside Threshold as compared to otherwise comparable
securities. Accordingly, a higher Contingent Coupon Rate will generally be indicative of a greater risk of loss while a lower
Coupon Barrier or Downside Threshold does not necessarily indicate that the Notes have a greater likelihood of paying Contingent
Coupon payments or returning your principal at maturity. You should be willing to accept the downside market risk of each
Underlying and the potential loss of some or all of your principal at maturity.
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Reinvestment Risk
— If your Notes are called early, the
holding period over which you would have the opportunity to receive any Contingent Coupons could be as short as approximately six
months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the Notes at a comparable return
and/or with a comparable interest rate for a similar level of risk in the event the Notes are called prior to the maturity date.
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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 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 Contingent Coupon Is Based Solely on the Closing Levels of
the Underlyings on the Applicable Observation Date
— Whether a Contingent Coupon will be payable with respect to an Observation
Date will be based solely on the closing levels of the Underlyings on that Observation Date. As a result, you will not know whether
you will receive a Contingent Coupon until the related Observation Date. Moreover, because each Contingent Coupon is based solely
on the closing levels of the Underlyings on the applicable Observation Date, if the closing level of either Underlying is less
than its Coupon Barrier, you will not receive any Contingent Coupon with respect to that Observation Date, even if the closing
level of the other Underlying is equal to or greater than
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its Coupon Barrier and even
if the closing level of that Underlying was higher on other days during the period before that Observation Date.
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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 costs associated
with structuring and hedging the Notes are included in the original issue price of the Notes. These costs include the projected
profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Notes and
the estimated cost of hedging our obligations under the Notes. See “The Estimated Value of the Notes” in this pricing
supplement.
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The Estimated Value of the Notes Does Not Represent Future Values
of the Notes and May Differ from Others’ Estimates
— The estimated value of the Notes is determined by reference
to internal pricing models of our affiliates when the terms of the Notes are set. This estimated value of the Notes is based on
market conditions and other relevant factors existing at that time and assumptions about market parameters, which can include volatility,
dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for the Notes
that are greater than or less than the estimated value of the Notes. In addition, market conditions and other relevant factors
in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the Notes could change significantly
based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest
rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy Notes from
you in secondary market transactions. See “The Estimated Value of the Notes” in this pricing supplement.
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The Estimated Value of the Notes Is Derived by Reference to an Internal
Funding Rate
— The internal funding rate used in the determination of the estimated value of the Notes is based on, among
other things, our and our affiliates’ view of the funding value of the Notes as well as the higher issuance, operational
and ongoing liability management costs of the Notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan
Chase & Co. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the Notes and any secondary market prices of the Notes. See “The Estimated Value of the Notes” in this pricing supplement.
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The Value of the Notes as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period
— We generally expect that some of the costs included in the original issue price of the Notes will be partially paid back
to you in connection with any repurchases of your Notes by JPMS in an amount that will decline to zero over an initial predetermined
period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our
internal secondary market funding rates for structured debt issuances. See “Secondary Market Prices of the Notes” in
this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your Notes
during this initial period may be lower than the value of the Notes as published by JPMS (and which may be shown on your customer
account statements).
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Secondary Market Prices of the Notes Will Likely Be Lower Than the
Original Issue Price of the Notes
— Any secondary market prices of the Notes will likely be lower than the original issue
price of the Notes because, among other things, secondary market prices take into account our internal secondary market funding
rates for structured debt issuances and, also, because secondary market prices 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
factor 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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Many Economic and Market Factors Will Impact the Value of the Notes
— As described under “The Estimated Value of the Notes” in this pricing supplement, the Notes can be thought
of as securities that combine a fixed-income debt component with one or more derivatives. As a result, the factors that influence
the values of fixed-income debt and derivative instruments will also influence the terms of the Notes at issuance and their value
in the secondary market. Accordingly, the secondary market price of the Notes during their term will be impacted by a number of
economic and market factors, which may either offset or magnify each other, aside from the projected hedging profits, if any, estimated
hedging costs and the levels of the Underlyings, 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
actual and expected volatility in the levels of the Underlyings;
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the
time to maturity of the Notes;
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whether
the closing level of either Underlying has been, or is expected to be, less than its Coupon Barrier on any Observation Date and
whether the Final Value of either Underlying is expected to be less than its Downside Threshold;
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the
dividend rates on the equity securities underlying the Underlyings;
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the
actual and expected positive or negative correlation between the Underlyings, or the actual or expected absence of any such correlation;
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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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Investing in the Notes Is Not Equivalent to Investing in the Stocks
Composing the Underlyings
— Investing in the Notes is not equivalent to investing in the stocks included in the Underlyings.
As an investor in the Notes, you will not have any ownership interest or rights in the stocks included in the Underlyings, such
as voting rights, dividend payments or other distributions.
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We Cannot Control Actions by the Sponsor
of Either Underlying and That Sponsor Has No Obligation to Consider Your Interests
— We and our affiliates are not affiliated
with the sponsor of either Underlying and have no ability to control or predict its actions, including any errors in or discontinuation
of public disclosure regarding methods or policies relating to the calculation of that Underlying. The sponsor of each Underlying
is not involved in this Note offering in any way and has no obligation to consider your interest as an owner of the Notes in taking
any actions that might affect the market value of your Notes.
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Your Return on the Notes Will Not Reflect Dividends on the Stocks
Composing the Underlyings
— Your return on the Notes will not reflect the return you would realize if you actually owned
the stock included in the Underlyings and received the dividends on the stock included in the Underlyings. This is because the
calculation agent will determine whether the Notes will be called and whether a Contingent Coupon is payable and, if the Notes
are not called, will calculate the amount payable to you at maturity of the Notes by reference to the closing level of each Underlying
on the relevant Observation Date, without taking into consideration the value of dividends on the stock included in that Underlying.
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No Assurances That the Investment View Implicit in the Notes Will
Be Successful
— While the Notes are structured to provide for Contingent Coupons if each Underlying does not close below
its Coupon Barrier on the Observation Dates, we cannot assure you of the economic environment during the term or at maturity of
your Notes.
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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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Potentially Inconsistent Research, Opinions or Recommendations by
JPMS, UBS or Their Affiliates
— JPMS, UBS or their affiliates may publish research, express opinions or provide recommendations
that are inconsistent with investing in or holding the Notes, and that may be revised at any time. Any such research, opinions
or recommendations may or may not recommend that investors buy or hold the Underlyings and could affect the level of an Underlying,
and therefore the market value of the Notes.
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Tax Treatment
— Significant aspects of the tax treatment
of the Notes are uncertain. You should consult your tax adviser about your tax situation.
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Potential JPMorgan Financial Impact on the Level of an Underlying
— Trading or transactions by JPMorgan Financial or its affiliates in an Underlying and/or over-the-counter options, futures
or other instruments with returns linked to the performance of an Underlying may adversely affect the level of that Underlying
and, therefore, the market value of the Notes.
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The
Final Terms and Valuation of the Notes Will Be Finalized on the Trade Date and 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 finalized
on the Trade Date and provided in the pricing supplement. In particular, each of the estimated value of the Notes and the Contingent
Coupon Rate will be finalized on the Trade Date and 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 Coupon Rate.
|
Risks
Relating to the Underlyings
|
t
|
Non-U.S.
Securities Risk with Respect to the NASDAQ-100 Index
®
— Some of the equity securities included in the
NASDAQ-100 Index
®
have been issued by non-U.S. companies. Investments in securities linked to the value of
non-U.S. equity securities involve considerations associated with the home countries of the issuers of those non-U.S. equity securities.
The prices of non-U.S. equity securities may be adversely affected by political, economic, financial and social factors in the
home countries of the issuers of the non-U.S. companies, including changes in those countries’ government, economic and
fiscal policies, currency exchange laws or other laws or restrictions.
|
|
t
|
JPMorgan
Chase & Co. Is Currently One of the Companies that Make Up the S&P 500
®
Index —
JPMorgan Chase
& Co. is currently one of the companies that make up the S&P 500
®
Index. JPMorgan Chase & Co. will
not have any obligation to consider your interests as a holder of the Notes in taking any corporate action that might affect the
value of the S&P 500
®
Index and the Notes.
|
Hypothetical
Examples
Hypothetical terms only. Actual
terms may vary. See the cover page for actual offering terms.
The examples below illustrate the hypothetical payments
on a Coupon Payment Date, upon an automatic call or at maturity under different hypothetical scenarios for a $10.00 Note on an
offering of the Notes, with the assumptions set forth below.* We cannot predict the closing level of either Underlying on any day
during the term of the Notes, including on any Observation Date. You should not take these examples as an indication or assurance
of the expected performance of the Notes. Numbers in the examples below have been rounded for ease of analysis. In these examples,
we refer to the NASDAQ-100 Index
®
and the S&P 500
®
Index as the “NDX Index” and the
“SPX Index,” respectively.
Principal Amount:
|
$10.00
|
Term:
|
Approximately 3 years (unless earlier called)
|
Hypothetical Initial Value:
|
100.000 for the NDX Index and 100.00 for the SPX Index
|
Hypothetical Contingent Coupon Rate:
|
6.80% per annum (or 1.70% per quarter)
|
Observation Dates:
|
Quarterly (callable after six months)
|
Hypothetical Downside Threshold:
|
70.000 for the NDX Index and 70.00 for the SPX Index (which, with respect to each Underlying, is 70% of the hypothetical Initial Value of that Underlying)
|
Hypothetical Coupon Barrier:
|
70.000 for the NDX Index and 70.00 for the SPX Index (which, with respect to each Underlying, is 70% of the hypothetical Initial Value of that Underlying)
|
*
|
Terms used for purposes of these hypothetical examples may not represent the actual Contingent Coupon Rate, Initial Values, Coupon Barriers or Downside Thresholds. The actual Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing supplement. The hypothetical Initial Values of 100.000 for the NDX Index and 100.00 for the SPX Index have been chosen for illustrative purposes only and may not represent a likely actual Initial Value for either Underlying. The actual Initial Value and resulting Downside Threshold and Coupon Barrier of each Underlying will be based on the closing level of that Underlying on July 21, 2017. For historical data regarding the actual closing levels of the Underlyings, please see the historical information set forth under the sections titled “The NASDAQ-100 Index
®
” and “The S&P 500
®
Index” below.
|
The examples below are purely hypothetical. These examples are
intended to illustrate (a) under what circumstances the Notes will be subject to an automatic call, (b) how the payment of a Contingent
Coupon with respect to any Observation Date will depend on whether the closing level of either Underlying on that Observation Date
is less than its Coupon Barrier, (c) how the value of the payment at maturity on the Notes will depend on whether the Final Value
of either Underlying is less than its Downside Threshold and (d) how the total return on the Notes may be less than the total return
on a direct investment in either or both Underlyings in certain scenarios. The “total return” as used in this pricing
supplement is the number, expressed as a percentage, that results from comparing the total payments per $10.00 principal amount
Note over the term of the Notes to the $10.00 initial issue price.
Example 1 — Notes Are Automatically Called on the Second
Observation Date
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
NDX Index:
105.000
|
|
Closing level of each Underlying above its Initial Value; Notes NOT automatically callable because Observation Date is prior to the second Observation Date. Closing level of each Underlying above its Coupon Barrier; Issuer pays Contingent Coupon of $0.17 on first Coupon Payment Date.
|
SPX Index:
110.00
|
Second Observation Date
|
|
NDX Index:
110.000
|
|
Closing level of each Underlying at or above its Initial Value; Notes are automatically called; Issuer repays principal
plus
pays Contingent Coupon of $0.17 on Call Settlement Date.
|
SPX Index:
115.00
|
Total Payments (per $10.00 Note):
|
|
Payment on Call Settlement Date:
|
$10.17 ($10.00 + $0.17)
|
|
|
Prior Contingent Coupons:
|
$0.17 ($0.17 × 1)
|
|
|
Total:
|
$10.34
|
|
|
Total Return:
|
3.40%
|
Because the closing level of each Underlying is greater than
or equal to its Initial Value on the second Observation Date (which is approximately six months after the Trade Date and is the
first Observation Date on which the Notes are callable), the Notes are automatically called on that Observation Date. JPMorgan
Financial will pay you on the Call Settlement Date $10.17 per $10.00 principal amount Note, which is equal to your principal amount
plus
the Contingent Coupon due on the Coupon Payment Date that is also the Call Settlement Date. No further amounts will
be owed to you under the Notes.
In addition, because the closing level of each Underlying was
greater than or equal to its Coupon Barrier on the first Observation Date, JPMorgan Financial will pay the Contingent Coupon of
$0.17 on the first Coupon Payment Date. Accordingly, JPMorgan Financial will have paid a total of $10.34 per $10.00 principal amount
Note for a 3.40% total return over the shortened six (6) month term of the Notes as a result of the automatic call.
Example 2 — Notes Are NOT Automatically Called and the
Final Value of Each Underlying Is Above Its Downside Threshold and Coupon Barrier
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
NDX Index:
115.000
|
|
Closing level of each Underlying above its Initial Value; Notes NOT automatically callable because Observation Date is prior to the second Observation Date. Closing level of each Underlying above its Coupon Barrier; Issuer pays Contingent Coupon of $0.17 on first Coupon Payment Date.
|
SPX Index:
110.00
|
Second Observation Date
|
|
NDX Index:
80.000
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically called. Closing level of each Underlying above its Coupon Barrier; Issuer pays Contingent Coupon of $0.17 on second Coupon Payment Date.
|
SPX Index:
75.00
|
Third Observation Date
|
|
NDX Index:
85.000
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically called. Closing level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
SPX Index:
60.00
|
Fourth to Eleventh Observation Dates
|
|
Various (below Coupon Barrier)
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically called. Closing level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on any of the fourth to eleventh Coupon Payment Dates.
|
Twelfth Observation Date (the Final Valuation Date)
|
|
NDX Index:
110.000
|
|
Closing level of SPX Index below its Initial Value; Notes NOT automatically called. Final Value of each Underlying above its Downside Threshold; Issuer repays principal
plus
pays Contingent Coupon of $0.17 on Maturity Date.
|
SPX Index:
80.00
|
Total Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$10.17 ($10.00 + $0.17)
|
|
|
Prior Contingent Coupons:
|
$0.34 ($0.17 × 2)
|
|
|
Total:
|
$10.51
|
|
|
Total Return:
|
5.10%
|
Because the closing level of at least one Underlying was less
than its Initial Value on each Observation Date on and after the second Observation Date (which is approximately six months after
the Trade Date and is the first Observation Date on which the Notes are callable), the Notes are not automatically called. Because
the Final Value of each Underlying is greater than or equal to its Downside Threshold, JPMorgan Financial will pay you on the Maturity
Date $10.17 per $10.00 principal amount Note, which is equal to your principal amount
plus
the Contingent Coupon due on
the Coupon Payment Date that is also the Maturity Date.
In addition, because the closing level of each Underlying was
greater than or equal to its Coupon Barrier on the first and second Observation Dates, JPMorgan Financial will pay the Contingent
Coupon of $0.17 on the first and second Coupon Payment Dates. However, because the closing level of at least one Underlying was
less than its Coupon Barrier on the third through eleventh Observation Dates, JPMorgan Financial will not pay any Contingent Coupon
on the Coupon Payment Dates following those Observation Dates. Accordingly, JPMorgan Financial will have paid a total of $10.51
per $10.00 principal amount Note for a 5.10% total return over the approximately three (3) year term of the Notes.
Example 3 — Notes Are NOT Automatically Called and the
Final Value of Either Underlying Is Below Its Downside Threshold
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
NDX Index:
55.000
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically callable because Observation Date is prior to the second Observation Date. Closing level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date.
|
SPX Index:
60.00
|
Second Observation Date
|
|
NDX Index:
105.000
|
|
Closing level of the SPX Index below its Initial Value; Notes NOT automatically called. Closing level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date.
|
SPX Index:
60.00
|
Third Observation Date
|
|
NDX Index:
90.000
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically called. Closing level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
SPX Index:
60.00
|
Fourth to Eleventh Observation Dates
|
|
Various (below Coupon Barrier)
|
|
Closing level of each Underlying below its Initial Value; Notes NOT automatically called. Closing level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on any of the fourth to eleventh Coupon Payment Dates.
|
Twelfth Observation Date (the Final Valuation Date)
|
|
NDX Index:
45.000
|
|
Closing level of NDX Index below its Initial Value; Notes NOT automatically called. Closing level of NDX Index below its Downside Threshold; Issuer DOES NOT pay Contingent Coupon on Maturity Date, and Issuer will repay less than the principal amount resulting in a loss proportionate to the decline of the Lesser Performing Underlying.
|
SPX Index:
110.00
|
Total Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$4.50
|
|
|
Prior Contingent Coupons:
|
$0.00
|
|
|
Total:
|
$4.50
|
|
|
Total Return:
|
-55.00%
|
Because the closing level of at least one Underlying is less
than its Initial Value on each Observation Date on and after the second Observation Date (which is approximately six months after
the Trade Date and is the first Observation Date on which the Notes are callable), the Notes are not automatically called. Because
the Final Value of at least one Underlying is less than its Downside Threshold on the Final Valuation Date, at maturity, JPMorgan
Financial will pay you a total of $4.50 per $10.00 principal amount Note, for a -55.00% total return on the Notes, calculated as
follows:
$10.00 × (1 + Lesser Performing Underlying
Return)
Step 1: Determine the Underlying Return of each Underlying:
Underlying Return of the NDX Index:
(Final Value – Initial Value)
|
=
|
45.000
– 100.000
|
= -55.00%
|
Initial Value
|
100.000
|
Underlying Return of the SPX Index:
(Final Value – Initial Value)
|
=
|
110.00
– 100.00
|
= 10.00%
|
Initial Value
|
100.00
|
Step 2: Determine the Lesser Performing Underlying.
The
NDX Index is the Underlying with the lower Underlying Return.
Step 3: Calculate the Payment at Maturity:
$10.00 × (1 + Lesser Performing Underlying
Return) = $10.00 × (1 + -55.00%) = $4.50
In addition, because the closing level of at least one Underlying
is less than its Coupon Barrier on each Observation Date, JPMorgan Financial will not pay any Contingent Coupons over the term
of the Notes. Accordingly, JPMorgan Financial will have paid a total of $4.50 per $10.00 principal amount Note for a -55.00% total
return over the approximately three (3) year term of the Notes.
The hypothetical returns and hypothetical payments on the Notes
shown above apply
only if you hold the Notes for their entire term or until automatically called
. These hypotheticals do
not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included,
the hypothetical returns and hypothetical payments shown above would likely be lower.
The
Underlyings
Included on the following pages is a brief description
of the Underlyings. This information has been obtained from publicly available sources, without independent verification. Set forth
below is a table that provides the quarterly high and low closing levels of each Underlying. This information given below is for
the four calendar quarters in each of 2012, 2013, 2014, 2015 and 2016 and the first and second calendar quarters of 2017. Partial
data is provided for the third calendar quarter of 2017. We obtained the closing levels information set forth below from the Bloomberg
Professional
®
service (“Bloomberg”), without independent verification.
You should not take the historical levels of either Underlying as an indication of future performance.
The
NASDAQ-100 Index
®
The
NASDAQ-100 Index
®
is a modified market capitalization-weighted index of 100 of the largest non-financial securities
listed on The NASDAQ Stock Market based on market capitalization. For additional information about the NASDAQ-100 Index
®
,
see the information set forth under “Equity Index Descriptions — The NASDAQ-100 Index
®
” in the
accompanying underlying supplement.
Historical Information Regarding the NASDAQ-100
Index
®
The following table sets forth the quarterly high and low closing
levels of the NASDAQ-100 Index
®
, based on daily closing levels of the NASDAQ-100 Index
®
as reported
by Bloomberg, without independent verification. The closing level of the NASDAQ-100 Index
®
on July 20, 2017 was
5,921.223. The actual Initial Value of the NASDAQ-100 Index
®
will be the closing level of the NASDAQ-100 Index
®
on July 21, 2017. We obtained the closing levels of the NASDAQ-100 Index
®
above and below from Bloomberg, without
independent verification. You should not take the historical levels of the NASDAQ-100 Index
®
as an indication of
future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2012
|
3/31/2012
|
2,782.120
|
2,321.960
|
2,755.270
|
4/1/2012
|
6/30/2012
|
2,784.420
|
2,458.830
|
2,615.720
|
7/1/2012
|
9/30/2012
|
2,864.033
|
2,545.300
|
2,799.193
|
10/1/2012
|
12/31/2012
|
2,828.599
|
2,524.356
|
2,660.931
|
1/1/2013
|
3/31/2013
|
2,818.690
|
2,700.967
|
2,818.690
|
4/1/2013
|
6/30/2013
|
3,028.957
|
2,741.949
|
2,909.599
|
7/1/2013
|
9/30/2013
|
3,237.611
|
2,927.346
|
3,218.198
|
10/1/2013
|
12/31/2013
|
3,591.996
|
3,142.535
|
3,591.996
|
1/1/2014
|
3/31/2014
|
3,727.185
|
3,440.502
|
3,595.736
|
4/1/2014
|
6/30/2014
|
3,849.479
|
3,446.845
|
3,849.479
|
7/1/2014
|
9/30/2014
|
4,103.083
|
3,857.938
|
4,049.445
|
10/1/2014
|
12/31/2014
|
4,337.785
|
3,765.281
|
4,236.279
|
1/1/2015
|
3/31/2015
|
4,483.049
|
4,089.648
|
4,333.688
|
4/1/2015
|
6/30/2015
|
4,548.740
|
4,311.257
|
4,396.761
|
7/1/2015
|
9/30/2015
|
4,679.675
|
4,016.324
|
4,181.060
|
10/1/2015
|
12/31/2015
|
4,719.053
|
4,192.963
|
4,593.271
|
1/1/2016
|
3/31/2016
|
4,497.857
|
3,947.804
|
4,483.655
|
4/1/2016
|
6/30/2016
|
4,565.421
|
4,201.055
|
4,417.699
|
7/1/2016
|
9/30/2016
|
4,891.363
|
4,410.747
|
4,875.697
|
10/1/2016
|
12/31/2016
|
4,965.808
|
4,660.457
|
4,863.620
|
1/1/2017
|
3/31/2017
|
5,439.742
|
4,911.333
|
5,436.232
|
4/1/2017
|
6/30/2017
|
5,885.296
|
5,353.586
|
5,646.917
|
7/1/2017
|
7/20/2017*
|
5,921.223
|
5,596.956
|
5,921.223
|
|
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2017 includes data for the period from July 1, 2017 through July 20, 2017. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2017.
|
The
graph below illustrates the daily performance of the NASDAQ-100 Index
®
from January 3, 2007 through July 20, 2017,
based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Downside Threshold
and Coupon Barrier of 4,144.856, equal to 70% of the closing level of the NASDAQ-100 Index
®
on July 20, 2017. The
actual Downside Threshold and Coupon Barrier will be based on the closing level of the NASDAQ-100 Index
®
on July
21, 2017 (the Initial Value) and will each equal 70% of the Initial Value of the NASDAQ-100 Index
®
.
Past performance of the NASDAQ-100 Index
®
is not indicative of the future performance of the NASDAQ-100 Index
®
.
The
S&P 500
®
Index
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 the information set forth under “Equity
Index Descriptions — The S&P U.S. Indices” in the accompanying underlying supplement.
Historical
Information Regarding the S&P 500
®
Index
The
following table sets forth the quarterly high and low closing levels of the S&P 500
®
Index, based on daily
closing levels of the S&P 500
®
Index as reported by Bloomberg, without independent verification. The closing
level of the S&P 500
®
Index on July 20, 2017 was 2,473.45. The actual Initial Value of the S&P 500
®
Index will be the closing level of the S&P 500
®
Index on July 21, 2017. We obtained the closing levels
of the S&P 500
®
Index above and below from Bloomberg, without independent verification. You should not take
the historical levels of the S&P 500
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2012
|
3/31/2012
|
1,416.51
|
1,277.06
|
1,408.47
|
4/1/2012
|
6/30/2012
|
1,419.04
|
1,278.04
|
1,362.16
|
7/1/2012
|
9/30/2012
|
1,465.77
|
1,334.76
|
1,440.67
|
10/1/2012
|
12/31/2012
|
1,461.40
|
1,353.33
|
1,426.19
|
1/1/2013
|
3/31/2013
|
1,569.19
|
1,457.15
|
1,569.19
|
4/1/2013
|
6/30/2013
|
1,669.16
|
1,541.61
|
1,606.28
|
7/1/2013
|
9/30/2013
|
1,725.52
|
1,614.08
|
1,681.55
|
10/1/2013
|
12/31/2013
|
1,848.36
|
1,655.45
|
1,848.36
|
1/1/2014
|
3/31/2014
|
1,878.04
|
1,741.89
|
1,872.34
|
4/1/2014
|
6/30/2014
|
1,962.87
|
1,815.69
|
1,960.23
|
7/1/2014
|
9/30/2014
|
2,011.36
|
1,909.57
|
1,972.29
|
10/1/2014
|
12/31/2014
|
2,090.57
|
1,862.49
|
2,058.90
|
1/1/2015
|
3/31/2015
|
2,117.39
|
1,992.67
|
2,067.89
|
4/1/2015
|
6/30/2015
|
2,130.82
|
2,057.64
|
2,063.11
|
7/1/2015
|
9/30/2015
|
2,128.28
|
1,867.61
|
1,920.03
|
10/1/2015
|
12/31/2015
|
2,109.79
|
1,923.82
|
2,043.94
|
1/1/2016
|
3/31/2016
|
2,063.95
|
1,829.08
|
2,059.74
|
4/1/2016
|
6/30/2016
|
2,119.12
|
2,000.54
|
2,098.86
|
7/1/2016
|
9/30/2016
|
2,190.15
|
2,088.55
|
2,168.27
|
10/1/2016
|
12/31/2016
|
2,271.72
|
2,085.18
|
2,238.83
|
1/1/2017
|
3/31/2017
|
2,395.96
|
2,257.83
|
2,362.72
|
4/1/2017
|
6/30/2017
|
2,453.46
|
2,328.95
|
2,423.41
|
7/1/2017
|
7/20/2017*
|
2,473.83
|
2,409.75
|
2,473.45
|
|
|
*
|
As of the date of this pricing supplement, available information for the third calendar quarter of 2017 includes data for the period from July 1, 2017 through July 20, 2017. Accordingly, the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened period only and do not reflect complete data for the third calendar quarter of 2017.
|
The
graph below illustrates the daily performance of the S&P 500
®
Index from January 3, 2007 through July 20, 2017,
based on information from Bloomberg, without independent verification. The dotted line represents a hypothetical Downside Threshold
and Coupon Barrier of 1,731.42, equal to 70% of the closing level of the S&P 500
®
Index on July 20, 2017. The
actual Downside Threshold and Coupon Barrier will be based on the closing level of the S&P 500
®
Index on July
21, 2017 (the Initial Value) and will each equal 70% of the Initial Value of the S&P 500
®
Index.
Past
performance of the S&P 500
®
Index is not indicative of the future performance of the S&P 500
®
Index.
Correlation
of the Underlyings
The
graph below illustrates the daily performance of the NASDAQ-100 Index
®
and the S&P 500
®
Index
from January 3, 2007 through July 20, 2017. For comparison purposes, each Underlying has been normalized to have a closing level
of 100.00 on January 3, 2007 by dividing the closing level of that Underlying on each day by the closing level of that Underlying
on January 3, 2007 and multiplying by 100.00. We obtained the closing levels used to determine the normalized closing levels set
forth below from Bloomberg, without independent verification.
Past
performance of the Underlyings is not indicative of the future performance of the Underlyings.
The
correlation of a pair of Underlyings represents a statistical measurement of the degree to which the returns of those Underlyings
were similar to each other over a given period in terms of timing and direction (
i.e.
, positive or negative). Set forth
below is a table that provides the correlation of each pair of Underlyings, calculated based on the quarterly returns of the Underlyings
from July 20, 2007 through July 20, 2017, based on information from Bloomberg, without independent verification. You should not
take the historical correlations of the Underlyings as an indication of future correlation.
|
NASDAQ-100 Index
®
|
S&P 500
®
Index
|
NASDAQ-100 Index
®
|
—
|
0.898
|
S&P 500
®
Index
|
0.898
|
—
|
A
correlation of 1.000 for a pair of Underlyings represents a perfect positive correlation. This means that the closing levels of
that pair of Underlyings have moved in the same direction and the ratio of their quarterly returns has been constant. A correlation
of -1.000 for a pair of Underlyings represents a perfect negative correlation. This means that the closing levels of that pair
of Underlyings have moved in the opposite direction and the ratio of their quarterly returns has been constant. A correlation
of 0.000 for a pair of Underlyings means that the Underlyings are uncorrelated. This means that there is no statistical relationship
between the quarterly returns of that pair of Underlyings. The closer the correlation of a pair of Underlyings is to 1.000, the
more positively correlated those Underlyings are. The closer the correlation of a pair of Underlyings is to -1.000, the more negatively
correlated those Underlyings. The closer the correlation of a pair of Underlyings is to 0.000, the less correlated those Underlyings
are. The lower the correlation between two Underlyings, the greater the potential for one of those Underlyings to close below
its Coupon Barrier or Downside Threshold on any Observation Date or the Final Valuation Date, respectively.
The
correlations set forth above are based on the historical performance of the Underlyings, and you should not take those historical
correlations as an indication of future correlation. In addition, the correlations set forth above are not the same as the correlations
referenced in setting the terms of the Notes. The correlations referenced in setting the terms of the Notes are calculated using
internal models of our affiliates and are not derived from the quarterly returns of the Underlyings over the period set forth
above. Although the correlation of the Underlyings’ performance may change over the term of the Notes, the Contingent Coupon
Rate is determined, in part, based on the correlations of the Underlyings’ performance calculated using internal models
of our affiliates at the time when the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated
with lower correlation of the Underlyings, which reflects a greater potential for missed Contingent Coupons and for a loss on
your investment at maturity.