Key Terms
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Fund:
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The iShares
®
MSCI Brazil Capped ETF (Bloomberg ticker: EWZ)
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Upside Leverage Factor:
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1.16
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Payment at Maturity:
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If the Final Share Price is greater than the Initial Share Price, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Fund Return
multiplied
by 1.16. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Fund Return × 1.16)
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If the Final Share Price is equal to the Initial Share Price or is less than the Initial Share Price by up to 40%, you will receive the principal amount of your notes at maturity.
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If the Final Share Price is less than the Initial Share Price by more than 40%, you will lose 1 % of the principal amount of your notes for every 1% that the Final Share Price is less than the Initial Share Price. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + ($1,000 × Fund Return)
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If the Final Share Price is less than the Initial Share Price by more than 40%, you will lose more than 40% of your principal amount at maturity and may lose all of your principal amount at maturity.
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Contingent Buffer Amount:
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40%
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Fund Return:
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(Final Share Price
– Initial Share Price)
Initial Share Price
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Initial Share Price:
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The closing price of one share of the Fund on the Pricing Date
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Final Share Price:
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The arithmetic average of the closing prices of one share of the Fund on the Ending Averaging Dates
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Share Adjustment Factor:
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The Share Adjustment Factor is referenced in determining the closing price of one share of the Fund and is set initially at 1.0 on the Pricing Date. The Share Adjustment Factor is subject to adjustment upon the occurrence of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the accompanying product supplement for further information about these adjustments.
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Pricing Date:
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On or about August 24, 2016
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Original Issue Date:
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On or about August 29, 2016 (Settlement Date)
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Ending Averaging Dates*:
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August 18, 2021, August 19, 2021, August 20, 2021, August 23, 2021 and August 24, 2021
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Maturity Date*:
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August 27, 2021
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CUSIP:
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46646EWA6
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*
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Subject to postponement in the event of certain market
disruption events and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “General
Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
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Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement and “Selected Risk Considerations”
beginning on page PS-4 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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See “Supplemental Use of Proceeds” in this
pricing supplement for information about the components of the price to public of the notes.
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(2)
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J.P. Morgan Securities LLC, which we refer to as JPMS,
acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated or unaffiliated
dealers. In no event will these selling commissions exceed $30.00 per $1,000 principal amount note. See
“Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement
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If the notes priced
today, the estimated value of the notes would be approximately $985.80 per $1,000 principal amount note. The estimated
value of the notes, when the terms of the notes are set, will be provided in the pricing supplement and will not be less than $965.80
per $1,000 principal amount note.
See “The Estimated Value of the Notes” in this pricing supplement
for additional information.
The notes are not bank deposits, are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
August , 2016
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes
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 notes prior to their issuance. In the event of any changes
to the terms of the notes, 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 pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term notes,
of which these notes are a part, and the more detailed information contained in the accompanying product supplement and underlying
supplement.
This pricing supplement, together with the documents listed below, contains the terms of the notes and
supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative
pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational
materials of ours.
You should carefully consider, among other things, the matters set forth in the “Risk Factors”
sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve risks not associated
with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers
before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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·
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Product supplement no. 4-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
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·
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Underlying supplement no 1-I dated April 15, 2016:
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http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/dp64909_424b2-usn1i.htm
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·
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Prospectus supplement and prospectus, each dated April
15, 2016:
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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 pricing supplement, “we,”
“us” and “our” refer to JPMorgan Financial.
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JPMorgan Structured Investments —
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PS-
1
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|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
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What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Fund?
The following table and examples illustrate
the hypothetical total return and the hypothetical payment at maturity on the notes. The “total return”
as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity
per $1,000 principal amount note to $1,000. Each hypothetical total return or payment at maturity set forth below assumes
an Initial Share Price of $34 and reflects the Upside Leverage Factor of 1.16 and the Contingent Buffer Amount of 40%. Each
hypothetical total return or payment at maturity set forth below is for illustrative purposes only and may not be the actual total
return or payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and
in the examples below have been rounded for ease of analysis.
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Final Share Price
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Fund Return
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Total Return
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$61.2000
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80.00%
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92.80%
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$56.1000
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65.00%
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75.40%
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$51.0000
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50.00%
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58.00%
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$47.6000
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40.00%
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46.40%
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$44.2000
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30.00%
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34.80%
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$40.8000
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20.00%
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23.20%
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$39.1000
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15.00%
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17.40%
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$37.4000
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10.00%
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11.60%
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$35.7000
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5.00%
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5.80%
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$34.8500
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2.50%
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2.90%
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$34.0000
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0.00%
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0.00%
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$33.1500
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-2.50%
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0.00%
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$32.3000
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-5.00%
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0.00%
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$30.6000
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-10.00%
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0.00%
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$27.2000
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-20.00%
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0.00%
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$23.8000
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-30.00%
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0.00%
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$20.4000
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-40.00%
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0.00%
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$20.3966
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-40.01%
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-40.01%
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$17.0000
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-50.00%
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-50.00%
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$13.6000
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-60.00%
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-60.00%
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$10.2000
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-70.00%
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-70.00%
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$6.8000
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-80.00%
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-80.00%
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$3.4000
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-90.00%
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-90.00%
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$0.0000
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-100.00%
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-100.00%
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JPMorgan Structured Investments —
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PS-
2
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|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
Hypothetical Examples of
Amount Payable at Maturity
The following examples illustrate how the payment
at maturity in different hypothetical scenarios is calculated.
Example 1: The price of one share of the
Fund increases from the Initial Share Price of $34 to an Final Share Price of $35.70.
Because the Final Share Price of $35.70 is greater
than the Initial Share Price of $34 and the Fund Return is 5%, the investor receives a payment at maturity of $1,058 per $1,000
principal amount note, calculated as follows:
$1,000 + ($1,000 ×
5% × 1.16) = $1,058
Example 2: The price of one share of the
Fund decreases from the Initial Share Price of $34 to a Final Share Price of $20.40.
Although the Fund Return is negative, because
the Final Share Price of $20.40 is less than the Initial Share Price of $34 by up to the Contingent Buffer Amount of 40%, the investor
receives a payment at maturity of $1,000 per $1,000 principal amount note.
Example 3: The price of one share of the
Fund decreases from the Initial Share Price of $34 to a Final Share Price of $13.60.
Because the Final Share Price of $13.60 is less
than the Initial Share Price of $34 by more than the Contingent Buffer Amount of 40% and the Fund Return is -60%, the investor
receives a payment at maturity of $400 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-60%) = $400
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term.
These hypotheticals do not reflect
fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included,
the hypothetical returns and hypothetical payments shown above would likely be lower.
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JPMorgan Structured Investments —
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PS-
3
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Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
Selected Purchase Considerations
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·
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UNCAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to enhance equity returns by multiplying a positive Fund Return by 1.16. The
notes are not subject to a predetermined maximum gain and, accordingly, any return at maturity will be determined based on the
price movement of the Fund.
Because the notes are our unsecured and unsubordinated obligations, the payment of which
is fully and unconditionally guaranteed by JPMorgan Chase & Co., payment of any amount on the notes is subject to our ability
to pay our obligations as they become due and JPMorgan Chase & Co.’s ability to pay its obligations as they become due.
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·
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LIMITED PROTECTION AGAINST LOSS
— We will pay you your principal back at maturity if the Final Share Price is equal to the Initial Share Price or is less
than the Initial Share Price by up to the Contingent Buffer Amount of 40%. If the Final Share Price is less than the
Initial Share Price by more than the Contingent Buffer Amount, for every 1% that the Final Share Price is less than the Initial
Share Price, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you
will lose more than 40% of your principal amount at maturity and may lose all of your principal amount at maturity.
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·
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RETURN LINKED TO THE iSHARES
®
MSCI BRAZIL CAPPED ETF
— The return on the notes is linked to the iShares
®
MSCI Brazil Capped ETF. The
iShares
®
MSCI Brazil Capped ETF is an exchange-traded fund of iShares
®
, Inc., a registered investment
company, that seeks to trade the investment results, before fees and expenses, of an index composed of Brazilian equities, which
we refer to as the Underlying Index with respect to the Fund. The Underlying Index with respect to the iShares
®
MSCI Brazil Capped ETF is currently the MSCI Brazil 25/50 Index. The MSCI Brazil 25/50 Index is designed to measure
the performance of the large- and mid-cap segments of the Brazilian equity market. For additional information about
the Fund, see “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
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·
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TAX TREATMENT
—
You should review carefully the
section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The
following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis
Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
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Based on current market conditions,
in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt
instruments for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders—Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, subject to the possible application of the “constructive
ownership” rules, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes
for more than a year, whether or not you are an initial purchaser of notes at the issue price. The notes could be treated
as “constructive ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as
amended, in which case any gain recognized in respect of the notes that would otherwise be long-term capital gain and that was
in excess of the “net underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary
income, and a notional interest charge would apply as if that income had accrued for tax purposes at a constant yield over the
notes’ term. Our special tax counsel has not expressed an opinion with respect to whether the constructive ownership
rules apply to the notes. Accordingly, U.S. Holders should consult their tax advisers regarding the potential application
of the constructive ownership rules.
The IRS or a court may not respect
the treatment of the notes described above, in which case the timing and character of any income or loss on your notes could be
materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on
the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any,
to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the constructive ownership regime described above. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive
effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the
notes, including the potential application of the constructive ownership rules, possible alternative treatments and the issues
presented by this notice.
Withholding under legislation commonly
referred to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest
paid with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a note. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than
any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your
tax adviser regarding the potential application of FATCA to the notes.
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 notes.
|
JPMorgan Structured Investments —
|
PS-
4
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Fund, the Underlying Index or any of the
component securities of the Fund or the Underlying. These risks are explained in more detail in the “Risk Factors”
sections of the accompanying product supplement and the accompanying underlying supplement.
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·
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YOUR INVESTMENT IN THE NOTES MAY
RESULT IN A LOSS
— The notes do not guarantee any return of principal. The return on the notes at maturity
is linked to the performance of the Fund and will depend on whether, and the extent to which, the Fund Return is positive or negative. If
the Final Share Price is less than the Initial Share Price by more than the Contingent Buffer Amount of 40%, the benefit provided
by the Contingent Buffer Amount will terminate and you will be exposed to a loss. In this case, for every 1% that the
Final Share Price is less than the Initial Share Price, you will lose an amount equal to 1% of the principal amount of your notes. Under
these circumstances, you will lose more than 40% of your principal amount at maturity and may all of your principal amount at maturity.
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·
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CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
— The notes are
subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase & Co.’s credit ratings and
credit spreads may adversely affect the market value of the notes. Investors are dependent on our and JPMorgan Chase
& Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase
& Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely
affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may
not receive any amounts owed to you under the notes and you could lose your entire investment.
|
|
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·
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AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED
ASSETS —
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and
administration of our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially
all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany agreements. As
a result, we are dependent upon payments from our affiliates to meet our obligations under the notes. If these affiliates
do not make payments to us and we fail to make payments on the notes, you may have to seek payment under the related guarantee
by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations
of JPMorgan Chase & Co.
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·
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POTENTIAL CONFLICTS
— We and our affiliates play a variety of roles in connection
with the issuance of the notes, including acting as calculation agent and as an agent of the offering of the notes, hedging our
obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the
notes when the terms of the notes are set, which we refer to as the estimated value of the notes. In performing these
duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation agent and other
affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our and JPMorgan
Chase & Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan
Chase & Co.’s economic interests to be adverse to yours and could adversely affect any payment on the notes and the value
of the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes
could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to
“Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement for additional
information about these risks.
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·
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THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING
DATE
— If the Final Share Price is less than the Initial Share Price by more than the Contingent Buffer Amount, the benefit
provided by the Contingent Buffer Amount will terminate and you will be fully exposed to any depreciation in the Fund.
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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 selling, structuring and hedging the notes are included in the original issue price of the notes. These
costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks
inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See
“The Estimated Value of the Notes” in this pricing supplement.
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|
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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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·
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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
|
|
JPMorgan Structured Investments —
|
PS-
5
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
ongoing liability management costs
of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The
use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and
any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED
ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD
—
We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you
in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These
costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary
market funding rates for structured debt issuances. See “Secondary Market Prices of the Notes” in this pricing
supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes
during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer
account statements).
|
|
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·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE
ORIGINAL ISSUE PRICE OF THE NOTES
— Any secondary market prices of the notes will likely be lower than
the
original issue price of the notes because, among other things, secondary market prices take into account our internal secondary
market funding rates for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and
(b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of
the notes. As a result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions,
if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result
in a substantial loss to you. See the immediately following risk consideration for information about additional factors
that will impact any secondary market prices of the notes.
|
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.
|
|
·
|
SECONDARY MARKET PRICES OF THE NOTES
WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS
— The secondary market price of the notes during their term will
be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions,
projected hedging profits, if any, estimated hedging costs and the price of one share of the Fund, 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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·
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our internal secondary market funding
rates for structured debt issuances;
|
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·
|
the actual and expected volatility of
the Fund;
|
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|
·
|
the time to maturity of the notes;
|
|
|
·
|
the dividend rates on the Fund and the
equity securities held by the Fund;
|
|
|
·
|
interest and yield rates in the market
generally;
|
|
|
·
|
the exchange rates and the volatility
of the exchange rates between the U.S. dollar and each of the currencies in which the equity securities included in the Fund trade
and the correlation among those rates and the price of one share of the Fund;
|
|
|
·
|
the occurrence of certain events to the
Fund that may or may not require an adjustment to the Share Adjustment Factor; and
|
|
|
·
|
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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NO INTEREST OR DIVIDEND PAYMENTS
OR VOTING RIGHTS
— As a holder of the notes, you will not receive interest payments, and you will not have voting rights
or rights to receive cash dividends or other distributions or other rights that holders of shares of the Fund or securities held
by the Fund or included in the Underlying Index would have.
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·
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THERE ARE RISKS ASSOCIATED WITH THE
FUND
— Although the shares of the Fund are listed for trading on a securities exchange and a number of similar products
have been traded on securities exchanges for varying periods of time, there is no assurance that an active trading market will
continue for the shares of the Fund or that there will be liquidity in the trading market. The Fund is subject to management
risk, which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. These constraints could adversely affect the market
price of the shares of the Fund, and consequently, the value of the notes.
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THE PERFORMANCE AND MARKET VALUE OF
THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE PERFORMANCE OF THE FUND’S UNDERLYING
INDEX AS WELL AS THE NET ASSET VALUE PER SHARE
— The Fund does not fully replicate its Underlying Index and may hold
securities different from those included in its Underlying Index. In addition, the performance of the Fund will reflect
additional transaction costs and fees that are not included in the calculation of its Underlying Index. All of these
factors may lead to a lack of correlation between the performance of the Fund and its Underlying Index. In addition,
corporate actions with respect to the equity securities underlying the Fund (such as mergers and spin-offs) may impact the variance
between the
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JPMorgan Structured Investments —
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PS-
6
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|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
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performances of the Fund and
its Underlying Index. Finally, because the shares of the Fund are traded on a securities exchange and are subject to
market supply and investor demand, the market value of one share of the Fund may differ from the net asset value per share of the
Fund.
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market
volatility may also disrupt the ability of market participants to create and redeem shares of the Fund. Further, market
volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares
of the Fund. As a result, under these circumstances, the market value of shares of the Fund may vary substantially from
the net asset value per share of the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate
with the performance of its Underlying Index as well as the net asset value per share of the Fund, which could materially and adversely
affect the value of the notes in the secondary market and/or reduce any payment on the notes.
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·
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NON-U.S. SECURITIES RISK WITH RESPECT
TO THE FUND
— The equity securities held by the Fund have been issued by non-U.S. companies. Investments in
securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the home
countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental intervention
in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available
information about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting
requirements of the SEC.
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EMERGING MARKETS RISK WITH RESPECT
TO THE FUND
— The equity securities held by the Fund have been issued by non-U.S. companies located primarily in Brazil,
which is an emerging markets country. Countries with emerging markets may have relatively unstable governments, may
present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets,
and may have less protection of property rights than more developed countries. The economies of countries with emerging
markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number
of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
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THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO
THE FUND
— Because the prices of the equity securities held by the Fund are converted into U.S. dollars for purposes
of calculating the net asset value of the Fund, your notes will be exposed to currency exchange rate risk with respect to each
of the currencies in which the equity securities held by the Fund trade (primarily the Brazilian real). Your net exposure
will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of the
equity securities held by the Fund denominated in those currencies. If, taking into account the relevant weighting,
the U.S. dollar strengthens against those currencies, the price of the Fund will be adversely affected and any payment on the notes
may be reduced. Of particular importance to potential currency exchange risk are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments in Brazil and the United States and between
each country and its major trading partners;
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political, civil or military unrest in Brazil and the United States;
and
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the extent of government surpluses or deficits in Brazil and the United
States.
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All of these factors are in
turn sensitive to the monetary, fiscal and trade policies pursued by the governments of Brazil and the United States and other
countries important to international trade and finance.
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·
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VOLATILITY RISK
— Greater
expected volatility with respect to the Fund indicates a greater likelihood as of the Pricing Date that the Final Share Price could
be less than the Initial Share Price by more than the Contingent Buffer Amount. The Fund’s volatility, however,
can change significantly over the term of the notes. The closing price of one share of the Fund could fall sharply during
the term of the notes, which could result in your losing some or all of your principal amount at maturity.
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THE ANTI-DILUTION PROTECTION FOR
THE FUND IS LIMITED
— The calculation agent will make adjustments to the Share Adjustment Factor for certain events affecting
the shares of the Fund. However, the calculation agent will not make an adjustment in response to all events that could
affect the shares of the Fund. If an event occurs that does not require the calculation agent to make an adjustment, the value
of the notes may be materially and adversely affected.
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LACK OF LIQUIDITY
— The
notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market
but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you
to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the
price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the
notes.
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THE FINAL TERMS AND VALUATION OF
THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
— The final terms of the notes will be based on relevant market
conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, the estimated
value of the notes will be provided in the pricing supplement and may be as low as the minimum for the estimated value of the notes
set
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JPMorgan Structured Investments —
|
PS-
7
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
forth on the cover of this
pricing supplement. Accordingly, you should consider your potential investment in the notes based on the minimum for
the estimated value of the notes.
|
JPMorgan Structured Investments —
|
PS-
8
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
Historical Information
The following
graph sets forth the historical performance of the Fund based on the weekly historical closing prices of one share of the Fund
from January 7, 2011 through August 19, 2016. The closing price of one share of the Fund on August 23, 2016 was
$33.46.
We obtained the closing prices of one share
of the Fund above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The closing prices above and below may have been adjusted by Bloomberg for actions taken by the Fund,
such as stock splits. The historical prices of one share of the Fund should not be taken as an indication of future
performance, and no assurance can be given as to the closing price of one share of the Fund on the Pricing Date or any Ending Averaging
Date. There can be no assurance that the performance of the Fund will result in the return of any of your principal
amount.
The Estimated Value of the Notes
The estimated value of the notes set forth on the
cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum
price at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information,
see “Selected Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding
Rate” in this pricing supplement. The value of the derivative or derivatives underlying the economic terms of
the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as the
traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and
which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events
and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are set
based on market conditions and other relevant factors and assumptions existing at that time. See “Selected Risk
Considerations — The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’
Estimates” in this pricing supplement.
The estimated value of the notes will be lower than
the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in
the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated
or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our
obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is
more or less than expected, or it may result in a loss. We or one or more of our affiliates will retain any profits
realized in hedging our obligations under the notes. See “Selected Risk Considerations — The Estimated Value
of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices of the
Notes
For information about factors that will impact any
secondary market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes Will
Be Impacted by Many Economic and Market Factors ” in this pricing supplement. In addition, we generally expect
that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with
any repurchases of your notes by JPMS in an amount that will decline to zero over an initial
|
JPMorgan Structured Investments —
|
PS-
9
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
predetermined period that is intended to be the shorter
of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure
of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of
hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected Risk Considerations
— The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than
the Then-Current Estimated Value of the Notes for a Limited Time Period.”
Supplemental Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “What Is the
Total Return on the Notes at Maturity, Assuming a Range of Performances for the Index?” and “Hypothetical Examples
of Amount Payable at Maturity” in this pricing supplement for an illustration of the risk-return profile of the notes and
“Selected Purchase Considerations — Return Linked to the iShares
®
MSCI Brazil Capped ETF” in this
pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal
to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus
(minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus
the estimated cost of hedging our obligations under the notes.
|
JPMorgan Structured Investments —
|
PS-
10
|
|
Contingent Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Brazil Capped ETF
|
|
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