Observation
Dates and Coupon Payment Dates
Observation Dates
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Coupon Payment Dates
†
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June 29, 2017
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July 3, 2017
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September 29, 2017
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October 3, 2017
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December 29, 2017
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January 3, 2018
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March 29, 2018
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April 4, 2018
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June 29, 2018
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July 3, 2018
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September 28, 2018
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October 2, 2018
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December 31, 2018
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January 3, 2019
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March 29, 2019
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April 2, 2019
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June 28, 2019
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July 2, 2019
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September 30, 2019
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October 2, 2019
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December 30, 2019
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January 2, 2020
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March 30, 2020 (the Final Valuation Date)
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April 2, 2020 (the Maturity Date)
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†
The Notes are not callable until the second
Observation Date, September 29, 2017.
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 May 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
|
An Investment in the Notes is Subject to Risks Associated with Small Capitalization Stocks with Respect to the
Russell
2000
®
Index
— The equity securities included in the
Russell
2000
®
Index
are issued by companies with relatively small market capitalization. The stock prices
of smaller companies may be more volatile than stock prices of large capitalization companies. Small capitalization
companies may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. These
companies tend to be less well-established than large market capitalization companies. Small capitalization companies
are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits downward
stock price pressure under adverse market conditions.
|
|
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 Russell 2000
®
Index and the S&P 500
®
Index as the “RTY
Index” and the “SPX Index,” respectively.
Principal Amount:
|
$10.00
|
Term:
|
Approximately 3 years (unless earlier called)
|
Hypothetical Initial Value:
|
100.000 for the RTY Index and 100.00 for the SPX Index
|
Hypothetical Contingent Coupon Rate:
|
7.85% per annum (or 1.963% per quarter), based on the bottom of the range of 7.85% to 8.85% per annum
|
Observation Dates:
|
Quarterly (callable after six months)
|
Hypothetical Downside Threshold:
|
70.000 for the RTY 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 RTY 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 RTY 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 the Trade Date. For historical data regarding the actual closing levels of the Underlyings, please see the historical information set forth under the sections titled “The Russell 2000
®
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
|
|
RTY Index:
105.000
SPX Index:
110.00
|
|
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 $0.1963 on first Coupon Payment Date.
|
|
|
|
|
|
Second Observation Date
|
|
RTY Index:
110.000
SPX Index:
115.00
|
|
Closing level of each Underlying at or above its Initial Value; Notes are automatically called; Issuer repays principal
plus
pays Contingent Coupon of $0.1963 on Call Settlement Date.
|
|
|
|
|
|
Total Payments (per $10.00 Note):
|
|
Payment on Call Settlement Date:
|
$10.1963 ($10.00 + $0.1963)
|
|
|
Prior Contingent Coupons:
|
$0.1963 ($0.1963 × 1)
|
|
|
Total:
|
$10.3926
|
|
|
Total Return:
|
3.926%
|
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 $10.1963 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
$0.1963 on the first Coupon Payment Date. Accordingly, JPMorgan Financial will have paid a total of $10.3926 per $10.00
principal amount Note for a 3.926% 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
|
|
RTY Index:
115.000
SPX Index:
110.00
|
|
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 $0.1963 on first Coupon Payment Date.
|
|
|
|
|
|
Second Observation Date
|
|
RTY Index:
80.000
SPX Index:
75.00
|
|
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 $0.1963 on second Coupon Payment Date.
|
|
|
|
|
|
Third Observation Date
|
|
RTY Index:
85.000
SPX Index:
60.00
|
|
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.
|
|
|
|
|
|
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)
|
|
RTY Index:
110.000
SPX Index:
80.00
|
|
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 $0.1963 on Maturity Date.
|
|
|
|
|
|
Total Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$10.1963 ($10.00 + $0.1963)
|
|
|
Prior Contingent Coupons:
|
$0.3926 ($0.1963 × 2)
|
|
|
Total:
|
$10.5889
|
|
|
Total Return:
|
5.889%
|
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 $10.1963 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 $0.1963 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
$10.5889 per $10.00 principal amount Note for a 5.889% 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
|
|
RTY Index:
55.000
SPX Index:
60.00
|
|
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.
|
|
|
|
|
|
Second Observation Date
|
|
RTY Index:
105.000
SPX Index:
65.00
|
|
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.
|
|
|
|
|
|
Third Observation Date
|
|
RTY Index:
90.000
SPX Index:
60.00
|
|
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.
|
|
|
|
|
|
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)
|
|
RTY Index:
45.000
SPX Index:
110.00
|
|
Closing level of RTY Index below its Initial Value; Notes NOT automatically called. Closing level of RTY 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.
|
|
|
|
|
|
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 RTY 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 RTY 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. Partial data is provided for
the first 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
Russell 2000
®
Index
The Russell 2000
®
Index consists of
the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology, consists
of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U
.
S. equity market. For
additional information about the Russell 2000
®
Index, see the information set forth under “Equity Index Descriptions
— The Russell Indices” in the accompanying underlying supplement.
Historical Information Regarding the Russell 2000
®
Index
The following table sets forth the quarterly high
and low closing levels of the Russell 2000
®
Index, based on daily closing levels of the Russell 2000
®
Index as reported by Bloomberg, without independent verification. The closing level of the Russell 2000
®
Index on March 21, 2017 was 1,346.546. The actual Initial Value of the Russell 2000
®
Index will be the
closing level of the Russell 2000
®
Index on the Trade Date. We obtained the closing levels of the Russell
2000
®
Index above and below from Bloomberg, without independent verification. You should not take the
historical levels of the Russell 2000
®
Index as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2012
|
3/31/2012
|
846.129
|
747.275
|
830.301
|
4/1/2012
|
6/30/2012
|
840.626
|
737.241
|
798.487
|
7/1/2012
|
9/30/2012
|
864.697
|
767.751
|
837.450
|
10/1/2012
|
12/31/2012
|
852.495
|
769.483
|
849.350
|
1/1/2013
|
3/31/2013
|
953.068
|
872.605
|
951.542
|
4/1/2013
|
6/30/2013
|
999.985
|
901.513
|
977.475
|
7/1/2013
|
9/30/2013
|
1,078.409
|
989.535
|
1,073.786
|
10/1/2013
|
12/31/2013
|
1,163.637
|
1,043.459
|
1,163.637
|
1/1/2014
|
3/31/2014
|
1,208.651
|
1,093.594
|
1,173.038
|
4/1/2014
|
6/30/2014
|
1,192.964
|
1,095.986
|
1,192.964
|
7/1/2014
|
9/30/2014
|
1,208.150
|
1,101.676
|
1,101.676
|
10/1/2014
|
12/31/2014
|
1,219.109
|
1,049.303
|
1,204.696
|
1/1/2015
|
3/31/2015
|
1,266.373
|
1,154.709
|
1,252.772
|
4/1/2015
|
6/30/2015
|
1,295.799
|
1,215.417
|
1,253.947
|
7/1/2015
|
9/30/2015
|
1,273.328
|
1,083.907
|
1,100.688
|
10/1/2015
|
12/31/2015
|
1,204.159
|
1,097.552
|
1,135.889
|
1/1/2016
|
3/31/2016
|
1,114.028
|
953.715
|
1,114.028
|
4/1/2016
|
6/30/2016
|
1,188.954
|
1,089.646
|
1,151.923
|
7/1/2016
|
9/30/2016
|
1,263.438
|
1,139.453
|
1,251.646
|
10/1/2016
|
12/31/2016
|
1,388.073
|
1,156.885
|
1,357.130
|
1/1/2017
|
3/21/2017*
|
1,413.635
|
1,345.744
|
1,346.546
|
*
|
As of the date of this pricing supplement, available information for the first calendar quarter of 2017 includes data for the period from January 1, 2017 through March 21, 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 first calendar quarter of 2017.
|
The graph below illustrates the daily performance
of the Russell 2000
®
Index from January 3, 2007 through March 21, 2017, based on information from Bloomberg, without
independent verification. The dotted line represents a hypothetical Downside Threshold and Coupon Barrier of 942.582,
equal to 70% of the closing level of the Russell 2000
®
Index on March 21, 2017. The actual Downside Threshold
and Coupon Barrier will be based on the closing level of the Russell 2000
®
Index on the Trade Date (the Initial
Value) and will each equal 70% of the Initial Value of the Russell 2000
®
Index.
Past performance of the Russell 2000
®
Index is not indicative of the future performance of the Russell 2000
®
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 March 21, 2017 was 2,344.02. The actual Initial Value of the S&P 500
®
Index will be the
closing level of the S&P 500
®
Index on the Trade Date. 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
|
3/21/2017*
|
2,395.96
|
2,257.83
|
2,344.02
|
*
|
As of the date of this pricing supplement, available information for the first calendar quarter of 2017 includes data for the period from January 1, 2017 through March 21, 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 first calendar quarter of 2017.
|
The graph below illustrates the daily performance
of the S&P 500
®
Index from January 3, 2007 through March 21, 2017, based on information from Bloomberg, without
independent verification. The dotted line represents a hypothetical Downside Threshold and Coupon Barrier of 1,640.81,
equal to 70% of the closing level of the S&P 500
®
Index on March 21, 2017. The actual Downside Threshold
and Coupon Barrier will be based on the closing level of the S&P 500
®
Index on the Trade Date (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 Russell 2000
®
Index and the S&P 500
®
Index from January 3, 2007 through March 21, 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 March 21, 2007 through March 21,
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.
|
Russell 2000
®
Index
|
S&P 500
®
Index
|
Russell 2000
®
Index
|
—
|
0.939
|
S&P 500
®
Index
|
0.939
|
—
|
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.