The information in this preliminary pricing supplement
is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated
June 28, 2016
JPMorgan Chase Financial Company LLC
|
July 2016
|
Pricing Supplement No.
Registration Statement Nos.
333-209682 and 333-209682-01
Dated July , 2016
Filed pursuant to Rule 424(b)(2)
Structured
Investments
Opportunities in U.S. Equities
Contingent Income Auto-Callable
Securities due July 18, 2019
All Payments on
the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Fully and Unconditionally
Guaranteed by JPMorgan Chase & Co.
Contingent Income Auto-Callable Securities do not guarantee the
payment of interest or the repayment of principal. Instead, the securities offer the opportunity for investors to earn a
contingent quarterly payment equal to at least 2.40% of the stated principal amount with respect to each determination date on
which the closing level of each of the Russell 2000
®
Index
and
the S&P 500
®
Index is
greater than or equal to
80% of its initial index value, which we refer to as a downside threshold level. However, if,
on any determination date, the closing level of
either
underlying index is less than its downside threshold level, you will
not receive any contingent quarterly payment for the related quarterly period. In addition, if the closing level of
each
underlying index is greater than or equal to its initial index value on any determination date (other than the final determination
date), the securities will be automatically redeemed for an amount per security equal to the stated principal amount
plus
the contingent quarterly payment. If the securities have not been automatically redeemed prior to maturity and the final
index value of
each
underlying index is greater than or equal to its downside threshold level, the payment at maturity due
on the securities will be the stated principal amount and the contingent quarterly payment with respect to the final determination
date. If, however, the securities have not been automatically redeemed prior to maturity and the final index value of
either
underlying index is less than its downside threshold level, you will be exposed to the decline in the worst performing of the underlying
indices, as compared to its initial index value, on a 1-to-1 basis and will receive a cash payment at maturity that is less than
80% of the stated principal amount of the securities and could be zero. The securities are for investors who are willing to risk
their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving
few or no contingent quarterly payments and also the risk of receiving a cash payment at maturity that is significantly less than
the stated principal amount of the securities and could be zero.
Accordingly, investors could lose their entire initial
investment in the securities
. Because all payments on the securities are based on the worst performing of the underlying indices,
a decline beyond the downside threshold level of either underlying index will result in few or no contingent quarterly payments
and/or significant loss of your initial investment, even if the other underlying index appreciates or has not declined as much.
Investors will not participate in any appreciation of either underlying index. The securities are unsecured and unsubordinated
obligations of JPMorgan Financial Company LLC, which we refer to as JPMorgan Financial, the payment on which is fully and unconditionally
guaranteed by JPMorgan Chase & Co., issued as part of JPMorgan Financial’s Medium-Term Notes, Series A, program.
Any
payment on the securities is subject to the credit risk of JPMorgan Financial, as issuer of the securities, and the credit risk
of JPMorgan Chase & Co., as guarantor of the securities.
SUMMARY TERMS
|
|
Issuer:
|
JPMorgan Chase Financial Company
LLC
|
Guarantor:
|
JPMorgan Chase & Co.
|
Underlying
indices:
|
Russell 2000
®
Index
(the “RTY Index”) and S&P 500
®
Index (the “SPX Index”) (each an “underlying
index”)
|
Aggregate
principal amount:
|
$
|
Early
redemption:
|
If, on any of the determination
dates (other than the final determination date), the closing level of each underlying index is
greater than or equal
to
its initial index value, the securities will be automatically redeemed for an early redemption payment on the first
contingent payment date immediately following the related determination date. No further payments will be made on the
securities once they have been redeemed.
The securities will
not be redeemed early on any contingent payment date if the closing level of either underlying index is below its initial
index value on the related determination date.
|
Early
redemption payment:
|
The early redemption payment will
be an amount equal to (i) the stated principal amount
plus
(ii) the contingent quarterly payment with respect to the
related determination date.
|
Contingent
quarterly payment:
|
·
If,
on any determination date, the closing level of each underlying index is greater than or equal to its downside threshold
level, we will pay a contingent quarterly payment of at least $0.24 (at least 2.40% of the stated principal amount) per
security on the related contingent payment date. The actual contingent quarterly payment will be provided in the pricing
supplement.
·
If,
on any determination date, the closing level of
either
underlying index is less than its downside threshold level,
no contingent quarterly payment will be payable with respect to that determination date. It is possible that one or both
of the underlying indices will remain below their respective downside threshold levels for extended periods of time or
even throughout the entire term of the securities so that you will receive few or no contingent quarterly payments.
|
Payment
at maturity:
|
·
If
the final index value of
each
underlying index is
greater than or equal to
its downside threshold level:
|
(i) the stated principal amount,
plus
(ii) the contingent quarterly payment with respect to the final determination date
|
|
·
If
the final index value of
either
underlying index is less than its downside threshold level:
|
(i) the stated principal amount
times
(ii) the index performance factor of the worst performing underlying index. This cash payment will be less than
80% of the stated principal amount of the securities and could be zero.
|
Downside
threshold level:
|
With respect to the RTY Index: ,
which is equal to 80% of its initial index value
With respect to the SPX Index: ,
which is equal to 80% of its initial index value
|
Stated
principal amount:
|
$10 per security
|
Issue
price:
|
$10 per security (see “Commissions
and issue price” below)
|
Pricing
date:
|
On or about July , 2016
(expected to price on or about July 15, 2016)
|
Original issue date (settlement
date):
|
July , 2016 (3 business
days after the pricing date)
|
Maturity
date:
|
July 18, 2019, subject to postponement
in the event of certain market disruption events and as described under “General Terms of Notes — Postponement
of a Payment Date” in the accompanying product supplement
|
|
Terms
continued on the following page
|
Agent:
|
J.P. Morgan Securities LLC (“JPMS”)
|
Commissions
and issue price:
|
|
Price
to public
(1)
|
Fees
and commissions
|
Proceeds
to issuer
|
Per
security
|
|
$10.00
|
$0.20
(2)
|
$9.75
|
|
|
|
$0.05
(3)
|
|
Total
|
|
$
|
$
|
$
|
|
(1)
|
See “Additional Information about the Securities
— Supplemental use of proceeds and hedging” in this document for information about the components of the price to
public of the securities.
|
|
(2)
|
JPMS, acting as agent for JPMorgan Financial, will
pay all of the selling commissions it receives from us to Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”).
In no event will these selling commissions exceed $0.20 per $10 stated principal amount security. See “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
|
|
(3)
|
Reflects a structuring fee payable to Morgan Stanley
Wealth Management by the agent or its affiliates of $0.05 for each $10 stated principal amount security
|
If the securities priced today and assuming a contingent
quarterly payment equal to the minimum listed above, the estimated value of the securities would be approximately $9.541 per $10
stated principal amount security. The estimated value of the securities on the pricing date will be provided in the pricing supplement
and will not be less than $9.40 per $10 stated principal amount security.
See “Additional Information about the Securities
— The estimated value of the securities” in this document for additional information.
Investing in the securities involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Risk Factors” beginning on page 9 of this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy
of this document or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
The securities are not bank deposits, are not insured by
the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
You should read this document together
with the related product supplement, underlying supplement, prospectus supplement and prospectus, each of which can be accessed
via the hyperlinks below. Please also see “Additional Information about the Securities” at the end of this document.
Product
supplement no. MS-1-I dated June 3, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.pdf
Underlying supplement no. 1-I dated April
15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
Prospectus supplement and prospectus, each
dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Terms continued from previous page:
|
Initial index value:
|
With respect to the RTY Index: , which is its closing level on the pricing date
With respect to the SPX Index: , which is its closing level on the pricing date
|
Final index value:
|
With respect to each underlying index, the closing level on the final determination date
|
Worst performing underlying index:
|
The underlying index with the worst index performance factor
|
Index performance factor:
|
With respect to each underlying index, final index value
divided by
the initial index value
|
Determination dates:
|
October 17, 2016, January 17, 2017, April 17, 2017, July 17, 2017, October 16, 2017, January 16, 2018, April 16, 2018, July 16, 2018, October 15, 2018, January 15, 2019, April 15, 2019 and July 15, 2019, subject to postponement for non-trading days and certain market disruption events.
|
Contingent payment dates:
|
With respect to each determination date other than the final determination date, the third business day after the related determination date. The payment of the contingent quarterly payment, if any, with respect to the final determination date will be made on the maturity date.
|
CUSIP/ISIN:
|
46646W417 / US46646W4179
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Investment Summary
The Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index, which we refer
to as the securities, do not provide for the regular payment of interest. Instead, the securities provide an opportunity for investors
to earn a contingent quarterly payment, which is an amount equal to at least $0.24 (at least 2.40% of the stated principal amount)
per security, with respect to each quarterly determination date on which the closing level of each underlying index is greater
than or equal to 80% of its initial index value, which we refer to as a downside threshold level. The actual contingent quarterly
payment will be provided in the pricing supplement. The contingent quarterly payment, if any, will be payable quarterly on the
relevant contingent payment date, which is the third business day after the related determination date or, in the case of the contingent
quarterly payment, if any, with respect to the final determination date, the maturity date. If the closing level of either underlying
index is less than its downside threshold level on any determination date, investors will receive no contingent quarterly payment
for the related quarterly period. It is possible that the closing level of each underlying index could be below its downside threshold
level on most or all of the determination dates so that you will receive few or no contingent quarterly payments during the term
of the securities. We refer to these payments as contingent, because there is no guarantee that you will receive a payment on any
contingent payment date. Even if both of the underlying indices were to be at or above their respective downside threshold levels
on some quarterly determination dates, one or both underlying indices may fluctuate below their respective downside threshold level(s)
on others.
If the closing level of each underlying index is greater than
or equal to its initial closing value on any determination date (other than the final determination date), the securities will
be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent quarterly
payment with respect to the related determination date. If the securities have not previously been redeemed and the final index
value of each underlying index is greater than or equal to its downside threshold level, the payment at maturity will be the sum
of the stated principal amount and the contingent quarterly payment with respect to the final determination date. However, if the
securities have not previously been redeemed and the final index value of either underlying index is less than its downside threshold
level, investors will be exposed to the decline in the worst performing underlying index, as compared to its initial index value,
on a 1-to-1 basis. Under these circumstances, the payment at maturity will be (i) the stated principal amount
times
(ii)
the index performance factor of the worst performing underlying index, which will be less than 80% of the stated principal amount
of the securities and could be zero. Investors in the securities must be willing to accept the risk of losing their entire principal
and also the risk of receiving few or no contingent quarterly payments over the term of the securities. In addition, investors
will not participate in any appreciation of the underlying indices.
Supplemental Terms of the Securities
For purposes of the accompanying product supplement, each underlying
index is an “Index.”
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities offer investors an opportunity to earn a contingent quarterly payment equal to at least 2.40% of the stated
principal amount with respect to each determination date on which the closing level of each underlying index is
greater than
or equal to
80% of its initial index value, which we refer to as a downside threshold level. The actual contingent quarterly
payment will be provided in the pricing supplement. The securities may be redeemed prior to maturity for the stated principal amount
per security
plus
the applicable contingent quarterly payment, and the payment at maturity will vary depending on the final
index value of each underlying index, as follows:
Scenario 1
|
This scenario assumes that, prior to early
redemption, each underlying index closes at or above its downside threshold level on some determination dates but one or both of
the underlying indices closes below their respective downside threshold levels on the others. On the 10
th
determination
date, the closing level of each underlying index is greater than or equal to its initial index value.
Investors receive the contingent quarterly payment for the quarterly
periods in which the closing level of each underlying index is at or above its downside threshold level on the related determination
date.
On the contingent payment date immediately following the 10
th
determination date, the securities will be automatically redeemed for the stated principal amount
plus
the contingent quarterly
payment with respect to the related determination date.
|
Scenario 2
|
This scenario assumes that each underlying
index closes at or above its downside threshold level on some determination dates but one or both of the underlying indices closes
below their respective downside threshold levels on the others, and each underlying index closes below its initial index value
on all the determination dates prior to the final determination date. On the final determination date, each underlying index closes
at or above its downside threshold level.
Consequently, the securities are not automatically redeemed,
and investors receive a contingent quarterly payment for the quarterly periods in which the closing level of each underlying index
is at or above its downside threshold level on the related determination date. At maturity, investors will receive the stated principal
amount and the contingent quarterly payment with respect to the final determination date.
|
Scenario 3
|
This scenario assumes that each underlying
index closes at or above its downside threshold level on some determination dates but one or both of the underlying indices closes
below their respective downside threshold levels on the others, and each underlying index closes below its initial index value
on all the determination dates prior to the final determination date. On the final determination date, one or both of the underlying
indices close below their downside threshold levels.
Consequently, the securities are not automatically redeemed,
and investors receive a contingent quarterly payment for the quarterly periods in which the closing level of each underlying index
is at or above its downside threshold level on the related determination date. At maturity, investors will receive the stated principal
amount
times
the index performance factor of the worst performing underlying index, which will be less than 80% of the stated
principal amount and could be zero.
Investors will lose some and may lose all of their principal
in this scenario.
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the closing levels and (2) the final index value.
Diagram #1: Determination Dates (Other Than
the Final Determination Date)
Diagram #2: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payment upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 6.
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly payment is payable with respect to a determination date, whether the securities will be automatically
redeemed on any determination date prior to the final determination date and how to calculate the payment at maturity if the securities
have not been redeemed early. The following examples are for illustrative purposes only. Whether you receive a contingent quarterly
payment or whether the securities will be automatically redeemed will be determined by reference to the closing level of each underlying
index on each quarterly determination date and the amount you will receive at maturity, if any, will be determined by reference
to the final index value of each underlying index. The actual initial index value and downside threshold level for each underlying
index will be provided in the pricing supplement. Any payment on the securities is subject to our and JPMorgan Chase & Co.’s
credit risks. The numbers in the hypothetical examples below may have been rounded for the ease of analysis. The examples below
are based on the following assumed terms:
Hypothetical contingent quarterly payment:
|
A contingent quarterly payment of $0.24 per quarter per security will be paid on the securities on each contingent payment date
but only if
the closing level of each underlying index is at or above its downside threshold level on the related determination date.
|
Early redemption:
|
If the closing level of each underlying index is
greater than or equal to
its initial index value on any quarterly determination date (other than the final determination date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent quarterly payment with respect to the related determination date.
|
Payment at maturity (if the securities have not been automatically redeemed early):
|
If the final index value of each
underlying index is
greater
than or equal to
its downside threshold level: the stated principal amount and the contingent quarterly payment with respect
to the final determination date
If the final index value of either
underlying index is
less than
its downside threshold level: (i) the stated principal amount
times
(ii) the index performance factor of
the worst performing underlying index
|
Stated principal amount:
|
$10 per security
|
Hypothetical initial index value:
|
With respect to the RTY Index: 1,100.00
With respect to the SPX Index: 2,100.00
|
Hypothetical downside threshold level:
|
With respect to the RTY Index: 880.00, which is 80% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,680.00, which is 80% of the
hypothetical initial index value for such index
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
How to determine whether a contingent quarterly
payment is payable with respect to a determination date:
|
Closing level
|
Contingent quarterly payment
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Determination Date 1
|
920 (
at or above
downside threshold level)
|
1,800 (
at or above
downside threshold level)
|
$0.24
|
Hypothetical Determination Date 2
|
650 (
below
downside threshold level)
|
1,900 (
at or above
downside threshold level)
|
$0
|
Hypothetical Determination Date 3
|
1,400 (
at or above
downside threshold level)
|
1,400 (
below
downside threshold level)
|
$0
|
Hypothetical Determination Date 4
|
700 (
below
downside threshold level)
|
1,400 (
below
downside threshold level)
|
$0
|
On hypothetical determination date 1, each underlying index closes
at or above its downside threshold level. Therefore, a contingent quarterly payment of $0.24 is payable on the relevant contingent
payment date.
On each of the hypothetical determination dates 2 and 3, one
underlying index closes at or above its downside threshold level but the other underlying index closes below its downside threshold
level. Therefore, no contingent quarterly payment is payable on the relevant contingent payment date.
On hypothetical determination date 4, each underlying index closes
below its downside threshold level and, accordingly, no contingent quarterly payment is payable on the relevant contingent payment
date.
You will not receive a contingent quarterly payment on any
contingent payment date if the closing level of either underlying index is below its downside threshold level on the related determination
date.
How to determine whether the securities will
be automatically redeemed on any determination date prior to the final determination date:
|
Closing level
|
Early Redemption Payment
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Determination Date 1
|
1,600 (
at or above
initial index value)
|
1,500 (
below
initial index value)
|
n/a (securities are not redeemed early)
|
Hypothetical Determination Date 2
|
700 (
below
initial index value)
|
1,500 (
below
initial index value)
|
n/a (securities are not redeemed early)
|
Hypothetical Determination Date 3
|
1,600 (
at or above
initial index value)
|
2,200 (
at or above
initial index value)
|
$10.24 (the stated principal amount
plus
the contingent quarterly payment with respect to the related determination date)
|
On hypothetical determination date 1, one underlying index closes
at or above its initial index value but the other underlying index closes below its initial index value. Therefore, the securities
remain outstanding and are not redeemed early.
On hypothetical determination date 2, each underlying index closes
below its initial index value. Therefore, the securities remain outstanding and are not redeemed early.
On hypothetical determination date 3, each underlying index closes
at or above its initial index value. Therefore, the securities are automatically redeemed and you receive an early redemption payment
equal to the stated principal amount
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
plus
the contingent quarterly payment with respect to
the related determination date. No further payments will be made on the securities once they have been redeemed.
How to calculate the payment at maturity (if
the securities have not been automatically redeemed early):
|
Final Index Value
|
Payment at Maturity
|
|
RTY Index
|
SPX Index
|
|
Example 1:
|
1,000 (
at or above
downside threshold level)
|
1,700 (
at or above
downside threshold level)
|
$10.24 (the stated principal amount
plus
the contingent quarterly payment with respect to the final determination date)
|
Example 2:
|
440 (
below
downside threshold level)
|
1,800 (
at or above
downside threshold level)
|
$10 × index performance factor
of the worst performing underlying index =
$10 × (440 / 1,100) = $4.00
|
Example 3:
|
1,400 (
at or above
downside threshold level)
|
1,050 (
below
downside threshold level)
|
$10 × (1,050 / 2,100) = $5.00
|
Example 4:
|
700 (
below
downside threshold level)
|
840 (
below
downside threshold level)
|
$10 × (840 / 2,100) = $4.00
|
Example 5:
|
330 (
below
downside threshold level)
|
1,200 (
below
downside threshold level)
|
$10 × (330 / 1,100) = $3.00
|
In example 1, the final index value of each underlying index
is at or above its downside threshold level. Therefore, you receive at maturity the stated principal amount of the securities and
the contingent quarterly payment with respect to the final determination date.
In examples 2 and 3, the final index value of one underlying
index is at or above its downside threshold level but the final index value of the other underlying index is below its downside
threshold level. Therefore, you are exposed to the downside performance of the worst performing underlying index at maturity and
receive a cash payment at maturity equal to the stated principal amount
times
the index performance factor of the worst
performing underlying index.
Similarly, in examples 4 and 5, the final index value of each
underlying index is below its downside threshold level, and you receive a cash payment at maturity equal to the stated principal
amount
times
the index performance factor of the worst performing underlying index.
If the final index value of EITHER underlying index is below
its downside threshold level, you will be exposed to the downside performance of the worst performing underlying index at maturity,
and your payment at maturity will be less than 80% of the stated principal amount per security and could be zero.
The hypothetical returns and hypothetical payments on the securities
shown above apply
only if you hold the securities for their entire term or until early redemption.
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.
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the sections entitled
“Risk Factors” of the accompanying product supplement and the accompanying underlying supplement. We urge you to consult
your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any
principal and your investment in the securities may result in a loss.
The terms of the securities differ from those of ordinary
debt securities in that the securities do not guarantee the return of any of the principal amount at maturity. Instead, if the
securities have not been automatically redeemed prior to maturity and if the final index value of
either
of the underlying
indices is less than its downside threshold level, you will be exposed to the decline in the closing level of the worst performing
underlying index, as compared to its initial index value, on a 1-to-1 basis and you will receive for each security that you hold
at maturity a cash payment equal to the stated principal amount
times
the index performance factor of the worst performing
underlying index.
In this case, your payment at maturity will be less than 80% of the stated principal amount and could be zero.
|
|
§
|
You will not receive any contingent quarterly payment
for any quarterly period where the closing level of either underlying index on the relevant determination date is less than its
downside threshold level.
The terms of the securities differ from those of ordinary debt securities in that the securities
do not guarantee the payment of regular interest. Instead, a contingent quarterly payment will be made with respect to a quarterly
period only if the closing level of each underlying index on the relevant determination date is greater than or equal to its
downside
threshold level
. If the closing level of either underlying index is below its
downside
threshold level
on any determination date, you will not receive a contingent quarterly payment for the relevant quarterly
period. It is possible that the closing level of each underlying index could be below its downside threshold level on most or all
of the determination dates so that you will receive few or no contingent quarterly payments. If you do not earn sufficient contingent
quarterly payments over the term of the securities, the overall return on the securities may be less than the amount that would
be paid on a conventional debt security of the issuer of comparable maturity.
|
|
§
|
The contingent quarterly payment is based solely
on the closing levels of the underlying indices on the specified determination dates.
Whether the contingent quarterly payment
will be made with respect to a determination date will be based on the closing level of each underlying index on that determination
date. As a result, you will not know whether you will receive the contingent quarterly payment until the related determination
date. Moreover, because the contingent quarterly payment is based solely on the closing level of each underlying index on a specific
determination date, if the closing level of either of the underlying indices on that determination date is below its
downside
threshold level
, you will not receive any contingent quarterly payment with respect to that determination date, even if
the closing level of that underlying index was higher on other days during the related quarterly period.
|
|
§
|
You are exposed to the price risk of both underlying
indices, with respect to both the contingent quarterly payments, if any, and the payment at maturity, if any.
Your return on
the securities is not linked to a basket consisting of the underlying indices. Rather, it will be contingent upon the independent
performance of each underlying index. Unlike an instrument with a return linked to a basket of underlying assets in which risk
is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each underlying
index. The performance of the underlying indices may not be correlated. Poor performance by
either
underlying index over
the term of the securities may negatively affect your return and will not be offset or mitigated by any positive performance by
the other underlying index. Accordingly, your investment is subject to the risk of decline in the closing level of each underlying
index.
|
To receive
any
contingent quarterly payments,
each
underlying index must close at or above its
downside threshold level
on
the applicable determination date. In addition, if
either
underlying index has declined to below its downside threshold
level as of the final determination date, you will be
fully exposed
to the decline in the worst performing underlying index,
as compared to its initial index value, on a 1-to-1 basis, even if the other underlying index has appreciated. Under this scenario,
the value of any such payment will be less than 80% of the stated principal amount and could be zero.
|
§
|
Because the securities
are linked to the performance of the worst performing underlying index, you are exposed to greater risks of no contingent quarterly
payments and sustaining a significant loss on your investment than if the securities were linked to just one underlying index.
The risk that you will not receive any contingent quarterly payments, or that you will suffer a significant loss on your investment
is greater if you invest in the securities than if you invest in substantially similar securities that are linked to the performance
of just one underlying index. With two underlying indices, it is more likely that either underlying index will close below its
downside threshold level on any determination date than if the securities were linked to only one underlying index.
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
In addition,
you will not benefit from the performance of the underlying index other than the worst performing underlying index. Therefore it
is more likely that you will not receive any contingent quarterly payments and that you will suffer a significant loss on your
investment.
|
§
|
The securities are subject to the credit risks
of JPMorgan Financial and JPMorgan Chase & Co., and any actual or anticipated changes to our or JPMorgan Chase & Co.’s
credit ratings or credit spreads may adversely affect the market value of the securities.
Investors are dependent on our and
JPMorgan Chase & Co.’s ability to pay all amounts due on the securities. Any actual or anticipated decline in our or
JPMorgan Chase & Co.’s credit ratings or increase in our or JPMorgan Chase & Co.’s credit spreads determined
by the market for taking that credit risk is likely to adversely affect the market value of the securities. If we and JPMorgan
Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you under the securities and
you could lose your entire investment.
|
|
§
|
As a finance subsidiary, JPMorgan Financial has
no independent operations and has limited assets.
As a finance subsidiary of JPMorgan Chase & Co., we have no independent
operations beyond the issuance and administration of our securities. Aside from the initial capital contribution from JPMorgan
Chase & Co., substantially all of our assets relate to obligations of our affiliates to make payments under loans made by us
or other intercompany agreements. As a result, we are dependent upon payments from our affiliates to meet our obligations under
the securities. If these affiliates do not make payments to us and we fail to make payments on the securities, 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.
|
|
§
|
Investors will not participate in any appreciation
in either underlying index.
Investors will not participate in any appreciation in either underlying index from its initial
index value, and the return on the securities will be limited to the contingent quarterly payment that is paid with respect to
each determination date on which the closing level of each underlying index is greater than or equal to its
downside
threshold level
, if any.
|
|
§
|
An investment in the securities is subject to risks
associated with small capitalization stocks with respect to the RTY Index.
The stocks that constitute the RTY 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. 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.
|
|
§
|
Early redemption risk.
The term of your investment
in the securities may be limited to as short as approximately three months by the automatic early redemption feature of the securities.
If the securities are redeemed prior to maturity, you will receive no more contingent quarterly payments and may be forced to reinvest
in a lower interest rate environment and may not be able to reinvest the proceeds from an investment in the securities at a comparable
return for a similar level of risk.
|
|
§
|
Economic interests of the issuer, the guarantor,
the calculation agent, the agent of the offering of the securities and other affiliates of the issuer may be different from those
of investors.
We and our affiliates play a variety of roles in connection with the issuance of the securities, including acting
as calculation agent and as an agent of the offering of the securities, hedging our obligations under the securities and making
the assumptions used to determine the pricing of the securities and the estimated value of the securities, which we refer to as
the estimated value of the securities. 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 securities. The calculation agent will determine the initial index values, the downside threshold levels and the
final index values and whether the closing level of each underlying index on any determination date is greater than or equal to
its initial index value or is below its downside threshold level. Determinations made by the calculation agent, including with
respect to the occurrence or non-occurrence of market disruption events, may affect the payment to you at maturity or whether the
securities are redeemed early.
|
In addition, JPMorgan Chase & Co. is currently
one of the companies that make up the SPX Index. JPMorgan Chase & Co. will not have any obligation to consider your interests
as a holder of the securities in taking any corporate action that might affect the value of the SPX Index or the securities.
Moreover, 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 securities and the value of the securities. It is possible
that hedging or trading activities of ours or our affiliates in connection with the securities could result in substantial returns
for us or our affiliates while
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
the value of the securities declines. Please refer
to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement for additional
information about these risks.
|
§
|
The estimated value of the securities will be lower
than the original issue price (price to public) of the securities.
The estimated value of the securities is only an estimate
determined by reference to several factors. The original issue price of the securities will exceed the estimated value of the securities
because costs associated with selling, structuring and hedging the securities are included in the original issue price of the securities.
These costs include the selling commissions, the structuring fee, the projected profits, if any, that our affiliates expect to
realize for assuming risks inherent in hedging our obligations under the securities and the estimated cost of hedging our obligations
under the securities. See “Additional Information about the Securities — The estimated value of the securities”
in this document.
|
|
§
|
The estimated value of the securities does not
represent future values of the securities and may differ from others’ estimates. The estimated value of the securities is
determined by reference to internal pricing models of our affiliates.
This estimated value of the securities is based on market
conditions and other relevant factors existing at the time of pricing 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 securities that are greater than or less than the estimated value of the securities. 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 securities
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 securities from you in secondary market transactions. See “Additional Information about the Securities —
The estimated value of the securities” in this document.
|
|
§
|
The estimated value of the securities is derived
by reference to an internal funding rate.
The internal funding rate used in the determination of the estimated value of the
securities is based on, among other things, our and our affiliates’ view of the funding value of the securities as well as
the higher issuance, operational and ongoing liability management costs of the securities 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 securities and any secondary market prices of the securities. See “Additional
Information about the Securities — The estimated value of the securities” in this document.
|
|
§
|
The value of the securities as published by JPMS
(and which may be reflected on customer account statements) may be higher than the then-current estimated value of the securities
for a limited time period.
We generally expect that some of the costs included in the original issue price of the securities
will be partially paid back to you in connection with any repurchases of your securities by JPMS in an amount that will decline
to zero over an initial predetermined period. These costs can include selling commissions, the structuring fee, projected hedging
profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured
debt issuances. See “Additional Information about the Securities — Secondary market prices of the securities”
in this document for additional information relating to this initial period. Accordingly, the estimated value of your securities
during this initial period may be lower than the value of the securities as published by JPMS (and which may be shown on your customer
account statements).
|
|
§
|
Secondary market prices of the securities will
likely be lower than the original issue price of the securities.
Any secondary market prices of the securities will likely
be lower than the original issue price of the securities because, among other things, secondary market prices take into account
our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices (a) exclude
selling commissions and the structuring fee and (b) may exclude projected hedging profits, if any, and estimated hedging costs
that are included in the original issue price of the securities. As a result, the price, if any, at which JPMS will be willing
to buy securities 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 securities.
|
The securities are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold your securities to maturity. See “— Secondary trading
may be limited” below.
|
§
|
Secondary market prices of the securities will
be impacted by many economic and market factors.
The secondary market price of the securities during their term will
be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions,
structuring fee, projected hedging profits, if any, estimated hedging costs and the closing level of each underlying index, including:
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
o
|
any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
|
|
o
|
customary bid-ask spreads for similarly sized trades;
|
|
o
|
our internal secondary market funding rates for structured debt issuances;
|
|
o
|
the actual and expected volatility in the closing level of each underlying index;
|
|
o
|
the time to maturity of the securities;
|
|
o
|
whether the closing level of either underlying index has been, or is expected to be, less than its downside threshold level
on any determination date;
|
|
o
|
the likelihood of an early redemption being triggered;
|
|
o
|
the dividend rates on the equity securities included in the underlying indices;
|
|
o
|
the actual and expected positive or negative correlation between the underlying indices, or the actual or expected absence
of any such correlation;
|
|
o
|
interest and yield rates in the market generally; and
|
|
o
|
a variety of other economic, financial, political, regulatory and judicial events.
|
Additionally, independent pricing vendors and/or third
party broker-dealers may publish a price for the securities, which may also be reflected on customer account statements. This price
may be different (higher or lower) than the price of the securities, if any, at which JPMS may be willing to purchase your securities
in the secondary market.
|
§
|
Investing in the securities is not equivalent to
investing in either underlying index.
Investing in the securities is not equivalent to investing in either underlying
index or its component stocks. Investors in the securities will not have voting rights or rights to receive dividends or
other distributions or any other rights with respect to stocks that constitute either underlying index.
|
|
§
|
Adjustments to either underlying index could adversely
affect the value of the securities.
The underlying index publisher of either underlying index may discontinue or suspend
calculation or publication of that underlying index at any time. In these circumstances, the calculation agent will have
the sole discretion to substitute a successor index that is comparable to the discontinued underlying index and is not precluded
from considering indices that are calculated and published by the calculation agent or any of its affiliates.
|
|
§
|
Hedging and trading activities by the issuer and
its affiliates could potentially affect the value of the securities.
The hedging or trading activities of the issuer’s
affiliates and of any other hedging counterparty with respect to the securities on or prior to the pricing date and prior to maturity
could adversely affect the closing levels of the underlying indices. Any of these hedging or trading activities on or prior to
the pricing date could potentially affect the initial index values and, as a result, the downside threshold levels, which are the
respective levels at or above which the underlying indices must close on each determination date in order for you to earn a contingent
quarterly payment or, if the securities are not called prior to maturity, in order for you to avoid being exposed to the negative
price performance of the worst performing underlying index at maturity. Additionally, these hedging or trading activities during
the term of the securities could potentially affect the values of the underlying indices on the determination dates and, accordingly,
whether investors will receive one or more contingent quarterly payments, whether the securities are automatically redeemed prior
to maturity and, if the securities are not called prior to maturity, the payment to you at maturity. It is possible that these
hedging or trading activities could result in substantial returns for us or our affiliates while the value of the securities declines.
|
|
§
|
Secondary trading may be limited.
The securities
will not be listed on a securities exchange. There may be little or no secondary market for the securities. Even if there is a
secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. JPMS may act as a market
maker for the securities, but is not required to do so. Because we do not expect that other market makers will participate significantly
in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on
the price, if any, at which JPMS is willing to buy the securities. If at any time JPMS or another agent does not act as a market
maker, it is likely that there would be little or no secondary market for the securities.
|
|
§
|
The final terms and valuation of the securities
will be provided in the pricing supplement.
The final terms of the securities will be provided in the pricing supplement. In
particular, the estimated value of the securities will be provided in the pricing supplement and may be as low as the minimum for
the estimated value of the securities set forth on the cover of this document. Accordingly, you should consider your potential
investment in the securities based on the minimum for the estimated value of the securities.
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain.
There is no direct legal authority as to the proper U.S. federal income tax treatment
of the securities, and we do not intend to request a ruling from the IRS. The IRS might not accept, and a court might not uphold,
the treatment of the securities as prepaid forward contracts with associated contingent coupons, as described in “Additional
Information about the Securities — Additional Provisions — Tax considerations” in this document and in “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement. If the IRS were successful in asserting an
alternative treatment for the securities, the timing and character of any income or loss on the securities could be materially
affected. Although the U.S. federal income tax treatment of contingent quarterly payments (including any contingent quarterly payments
paid in connection with an early redemption or at maturity) is uncertain, in determining our reporting responsibilities we intend
(in the absence of an administrative determination or judicial ruling to the contrary) to treat any contingent quarterly payments
as ordinary income. 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 securities, possibly with retroactive effect. You should review
carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement
and consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments and the issues presented by this notice.
|
Non-U.S. Holders — Tax Consideration.
The
U.S. federal income tax treatment of contingent quarterly payments is uncertain, and although we believe it is reasonable to take
a position that contingent quarterly payments 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 securities 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). In the event of any withholding, we will not be required to pay any additional amounts with respect to amounts
so withheld. 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 securities in light of your particular circumstances.
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index Overview
The Russell 2000
®
Index consists of the middle
2,000 companies included in the Russell 3000E
TM
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.
Information as of market close on June 27, 2016:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 6/24/2015):
|
1,283.917
|
Current Closing Level:
|
1,089.646
|
52 Week Low (on 2/11/2016):
|
953.715
|
52 Weeks Ago (on 6/24/2015):
|
1,283.917
|
|
|
The following table sets forth the published high and low closing
levels, as well as end-of-quarter closing levels, of the Russell 2000
®
Index for each quarter in the period from
January 1, 2011 through June 27, 2016. The graph following the table sets forth the daily closing levels of the Russell 2000
®
Index during the same period. The closing level of the Russell 2000
®
Index on June 27, 2016 was 1,089.646. We obtained
the closing level information above and the information in the table and graph below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical
levels of the Russell 2000
®
Index should not be taken as an indication of future performance, and no assurance can
be given as to the closing level of the Russell 2000
®
Index at any time, including on the determination dates. The
payment of dividends on the stocks that constitute the Russell 2000
®
Index are not reflected in its closing level
and, therefore, have no effect on the calculation of the payment at maturity.
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2011
|
|
|
|
First Quarter
|
843.549
|
773.184
|
843.549
|
Second Quarter
|
865.291
|
777.197
|
827.429
|
Third Quarter
|
858.113
|
643.421
|
644.156
|
Fourth Quarter
|
765.432
|
609.490
|
740.916
|
2012
|
|
|
|
First Quarter
|
846.129
|
747.275
|
830.301
|
Second Quarter
|
840.626
|
737.241
|
798.487
|
Third Quarter
|
864.697
|
767.751
|
837.450
|
Fourth Quarter
|
852.495
|
769.483
|
849.350
|
2013
|
|
|
|
First Quarter
|
953.068
|
872.605
|
951.542
|
Second Quarter
|
999.985
|
901.513
|
977.475
|
Third Quarter
|
1,078.409
|
989.535
|
1,073.786
|
Fourth Quarter
|
1,163.637
|
1,043.459
|
1,163.637
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.964
|
1,095.986
|
1,192.964
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter (through June 27, 2016)
|
1,188.954
|
1,092.785
|
1,089.646
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index Historical Performance – Daily Closing Levels
January 3, 2011 to June 27, 2016
|
|
*The dotted line in the graph indicates the
hypothetical downside threshold level, equal to 80% of the closing level on June 27, 2016. The actual downside threshold
level will be based on the closing level on the pricing date.
|
License Agreement
The “Russell 2000
®
Index” is a trademark of FTSE Russell and has been licensed for use by JPMorgan Chase Bank, National Association and its
affiliates. For more information, see “Equity Index Descriptions — The Russell Indices — Disclaimers”
in the accompanying underlying supplement.
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC, consists of stocks of 500 companies selected to provide a performance benchmark
for the U.S. equity markets. For additional information on 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.
Information as of market close on June 27, 2016:
Bloomberg Ticker Symbol:
|
SPX
|
52 Week High (on 7/20/2015):
|
2,128.28
|
Current Closing Level:
|
2,000.54
|
52 Week Low (on 2/11/2016):
|
1,829.08
|
52 Weeks Ago (on 6/24/2015):
|
2,108.58
|
|
|
The following table sets forth the published high and low closing
levels, as well as end-of-quarter closing levels, of the S&P 500
®
Index for each quarter in the period from
January 1, 2011 through June 27, 2016. The graph following the table sets forth the daily closing levels of the S&P 500
®
Index during the same period. The closing level of the S&P 500
®
Index on June 27, 2016 was 2,000.54. We obtained
the closing level information above and the information in the table and graph below from Bloomberg, without independent verification.
The historical levels of the S&P 500
®
Index should not be taken as an indication of future performance, and
no assurance can be given as to the closing level of the S&P 500
®
Index at any time, including on the determination
dates. The payment of dividends on the stocks that constitute the S&P 500
®
Index are not reflected in its closing
level and, therefore, have no effect on the calculation of the payment at maturity.
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2011
|
|
|
|
First Quarter
|
1,343.01
|
1,256.88
|
1,325.83
|
Second Quarter
|
1,363.61
|
1,265.42
|
1,320.64
|
Third Quarter
|
1,353.22
|
1,119.46
|
1,131.42
|
Fourth Quarter
|
1,285.09
|
1,099.23
|
1,257.60
|
2012
|
|
|
|
First Quarter
|
1,416.51
|
1,277.06
|
1,408.47
|
Second Quarter
|
1,419.04
|
1,278.04
|
1,362.16
|
Third Quarter
|
1,465.77
|
1,334.76
|
1,440.67
|
Fourth Quarter
|
1,461.40
|
1,353.33
|
1,426.19
|
2013
|
|
|
|
First Quarter
|
1,569.19
|
1,457.15
|
1,569.19
|
Second Quarter
|
1,669.16
|
1,541.61
|
1,606.28
|
Third Quarter
|
1,725.52
|
1,614.08
|
1,681.55
|
Fourth Quarter
|
1,848.36
|
1,655.45
|
1,848.36
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter (through June 27, 2016)
|
2,119.12
|
2,037.41
|
2,000.54
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index Historical Performance – Daily Closing Levels
January 3, 2011 to June 27, 2016
|
|
*The dotted line in the
graph indicates the hypothetical downside threshold level, equal to 80% of the closing level
on June 27, 2016. The
actual downside threshold level will be based on the closing level on the pricing date.
|
License Agreement
“Standard & Poor’s
®
,”
“S&P
®
,” “S&P 500
®
” and “Standard & Poor’s 500”
are trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by JPMorgan Chase & Co.
and its affiliates. See “Equity Index Descriptions — The S&P U.S. Indices — License Agreement” in the
accompanying underlying supplement.
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Additional Information about the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions
|
|
Record date:
|
The record date for each contingent payment date is the date one business day prior to that contingent payment date.
|
Postponement of maturity date:
|
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled final determination date is not a trading day or if a market disruption event occurs on that day so that the final determination date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the third business day following that final determination date as postponed.
|
Minimum ticketing size:
|
$1,000 / 100 securities
|
Trustee:
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
JPMS
|
The estimated value of the securities:
|
The estimated value of the securities set forth on the cover
of this document is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component
with the same maturity as the securities, valued using the internal funding rate described below, and (2) the derivative or derivatives
underlying the economic terms of the securities. The estimated value of the securities does not represent a minimum price at which
JPMS would be willing to buy your securities in any secondary market (if any exists) at any time. The internal funding rate used
in the determination of the estimated value of the securities is based on, among other things, our and our affiliates’ view
of the funding value of the securities as well as the higher issuance, operational and ongoing liability management costs of the
securities in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information,
see “Risk Factors — The estimated value of the securities is derived by reference to an internal funding rate”
in this document. The value of the derivative or derivatives underlying the economic terms of the securities is derived from internal
pricing models of our affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative
instruments and on various other inputs, some of which are market-observable, and which can include volatility, dividend rates,
interest rates and other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated
value of the securities on the pricing date is based on market conditions and other relevant factors and assumptions existing at
that time. See “Risk Factors — The estimated value of the securities does not represent future values of the securities
and may differ from others’ estimates” in this document.
The estimated value of the securities will be lower than the
original issue price of the securities because costs associated with selling, structuring and hedging the securities are included
in the original issue price of the securities. These costs include the selling commissions paid to JPMS and other affiliated or
unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates expect to realize for assuming risks
inherent in hedging our obligations under the securities and the estimated cost of hedging our obligations under the securities.
Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may result
in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates will retain any
profits realized in hedging our obligations under the securities. See “Risk Factors — The estimated value of the securities
will be lower than the original issue price (price to public) of the securities” in this document.
|
Secondary market prices of the securities:
|
For information about factors that will impact any secondary market prices of the securities, see “Risk Factors — Secondary market prices of the securities will be impacted by many economic and market factors” in this document. In addition, we generally expect that some of the costs included in the original issue price of the securities will be partially paid back to you in connection with any repurchases of your securities by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the securities. The length of any such initial period reflects the structure of the securities, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the securities and when these costs are incurred, as determined by our affiliates. See “Risk Factors — The value of the securities as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the securities for a limited time period.”
|
Tax considerations:
|
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-1-I. In determining our reporting responsibilities
we intend to treat (i) the securities for U.S. federal income tax purposes as prepaid forward contracts with associated contingent
coupons and (ii) any contingent quarterly payments as ordinary income, as
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
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, in which case the timing and character of any income or loss on the securities 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 securities, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the securities, 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 quarterly payments is uncertain, and although we believe it is reasonable to take a
position that contingent quarterly payments 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 securities 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 securities in light of your particular circumstances.
Non-U.S. holders should also note that recently promulgated Treasury
regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity linked instruments”
will not apply to the securities.
FATCA
. Withholding under legislation commonly referred
to as “FATCA” could apply to payments with respect to the securities 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 securities are recharacterized, in whole or in part, as debt instruments, or contingent quarterly payments if they are otherwise
treated as FDAP Income). If the securities 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 securities.
In the event of any withholding on the securities, we will not
be required to pay any additional amounts with respect to amounts so withheld.
|
Supplemental use of proceeds and hedging:
|
The securities are offered to meet investor demand for products
that reflect the risk-return profile and market exposure provided by the securities. See “How the Securities Work”
and “Hypothetical Examples” in this document for an illustration of the risk-return profile of the securities and “Russell
2000
®
Index Overview” and “S&P 500
®
Index Overview” in this document for a
description of the market exposure provided by the securities.
The original issue price of the securities is equal to the estimated
value of the securities plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers and the structuring
fee, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our
obligations under the securities, plus the estimated cost of hedging our obligations under the securities.
|
Benefit plan investor considerations:
|
See “Benefit Plan Investor Considerations” in the accompanying product supplement
|
Supplemental plan of distribution:
|
Subject to regulatory constraints, JPMS intends to use its reasonable
efforts to offer to purchase the securities in the secondary market, but is not required to do so. JPMS, acting as agent for JPMorgan
Financial, will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management. In addition, Morgan
Stanley Wealth Management will receive a structuring fee as set forth on the cover of this document for each security.
We or our affiliate may enter into swap agreements or related
hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the securities
and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions.
See “— Supplemental use of proceeds and hedging” above and “Use of Proceeds and Hedging” in the accompanying
product supplement.
|
Contingent Income Auto-Callable Securities due July 18, 2019
Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Contact:
|
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326).
|
Where you can find more information:
|
You may revoke your offer to purchase the securities at any time
prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of,
or reject any offer to purchase, the securities prior to their issuance. In the event of any changes to the terms of the securities,
we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes in which case we may reject your offer to purchase.
You should read this document together with the accompanying
prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term notes of which these
securities are a part, and the more detailed information contained in the accompanying product supplement and the accompanying
underlying supplement.
This document, together with the documents listed below, contains
the terms of the securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials
including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures,
stand-alone fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the
matters set forth in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying
supplement, as the securities involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the securities.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
●
Product supplement
no. MS-1-I dated June 3, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.pdf
• Underlying supplement no. 1-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
• Prospectus supplement and prospectus, each dated April
15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 1665650,
and JPMorgan Chase & Co.’s CIK is 19617.
As used in this document, “we,” “us,”
and “our” refer to JPMorgan Financial.
|
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