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 August
31, 2016
September , 2016
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Yield Notes Linked to the Lesser Performing
of the S&P 500
®
Index and the Russell 2000
®
Index due August 31, 2017
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a higher interest rate than the yield on a conventional debt security with the
same maturity issued by us. The notes will pay between 4.25% and 6.25% per annum interest over the term of the notes, payable at
a rate of between 0.35417% and 0.52083% per month.
|
|
·
|
Investors in the notes should be willing to accept the risk of losing some or all of their principal and be willing to forgo
dividend payments, in exchange for Interest Payments.
|
|
·
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
·
|
Payments on the notes are not linked to a basket composed of the Indices. Payments on the notes are linked to the performance
of each of the Indices individually, as described below.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
·
|
The notes are expected to price on or about September 27, 2016 and are expected to settle on or about September 30, 2016.
|
Investing in the notes 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 “Selected Risk Considerations” beginning on page PS-3 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, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) 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. If the notes priced today, the selling commissions would be approximately $10.00 per $1,000 principal
amount note and in no event will these selling commissions exceed $16.25 per $1,000 principal amount note. See “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
|
If the notes priced today, the estimated value of the
notes would be approximately $970.30 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 $950.00 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.
Pricing supplement to product supplement no. 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan
Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Indices:
The
S&P 500
®
Index (Bloomberg ticker: SPX) and
the
Russell 2000
®
Index (Bloomberg ticker: RTY)
Interest Payments:
You will receive
on each Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to between $4.1667 and $5.2083 (equivalent
to an Interest Rate of between
4.25% and 6.25%
per annum,
payable at a rate of between
0.35417% and 0.52083%
per
month) (to be provided in the pricing supplement).
Interest Rate:
Between 4.25% and 6.25% per annum, payable at a rate of between 0.35417%
and 0.52083% per month (to be provided in the pricing supplement)
Trigger Value:
With respect to each Index, 70.00% of its Initial Value
Pricing
Date:
On or about
September 27
,
2016
Original
Issue Date (Settlement Date):
On or about
September
30
, 2016
Interest Payment
Dates*:
October 31, 2016, November 30, 2016, December 30, 2016, January
31, 2017, February 28, 2017, March 31, 2017, April 28, 2017, May 31, 2017, June 30, 2017, July 31, 2017 and the Maturity Date
Observation
Date*:
August 28, 2017
Maturity Date*:
August 31, 2017
* Subject to postponement in the event of a market
disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Payment at Maturity:
If (i) the Final Value of each Index is greater than or equal
to its Initial Value or (ii) a Trigger Event has not occurred, you will receive a cash payment at maturity, for each $1,000 principal
amount note, equal to (a) $1,000
plus
(b) the Interest Payment applicable to the Maturity Date.
If (i) the Final
Value of either Index is less than its Initial Value and (ii) a Trigger Event has occurred,
your
payment at maturity per $1,000 principal amount note, in addition to the Interest Payment applicable to the Maturity Date, will
be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Index Return)
If (i) the Final Value
of either Index is less than its Initial Value and (ii) a Trigger Event has occurred, you will lose some or all of your principal
amount at maturity.
Trigger Event:
A Trigger Event occurs if, on any day during the Monitoring Period, the closing level of either
Index is less than its Trigger Value.
Monitoring Period:
The period from but excluding the Pricing Date to and including the Observation Date
Lesser Performing
Index:
The Index with the Lesser Performing Index Return
Lesser Performing
Index Return:
The lower of the Index Returns of the Indices
Index Return:
With respect to each Index,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Index, the closing level of that Index on the
Pricing Date
Final Value:
With respect to each Index, the closing level of that Index on the
Observation Date
|
PS-
1
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
How
the Notes Work
Payment at Maturity
Total Interest Payments
The total Interest Payments per $1,000 principal
amount note over the term of the notes based on a hypothetical Interest Rate of 4.25% per annum is $33.33. The actual Interest
Rate will be provided in the pricing supplement and will be between 4.25% and 6.25% per annum.
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Indices, assuming a range of performances for the hypothetical Lesser Performing Index on
the Observation Date.
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Index of 100.00;
|
|
·
|
a Trigger Value for the Lesser Performing Index of 70.00 (equal to 70.00% of its hypothetical Initial Value); and
|
|
·
|
an Interest Rate of 4.25% per annum (payable at a rate of 0.35417% per month).
|
The hypothetical Initial Value of the Lesser Performing
Index of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of either Index.
The actual Initial Value of each Index will be the closing level of that Index on the Pricing Date and will be provided in the
pricing supplement. For historical data regarding the actual closing levels of each Index, please see the historical information
set forth under “The Indices” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example 1 — The Final Value of the
Lesser Performing Index is greater than or equal to its Initial Value and a Trigger Event has occurred.
Date
|
Closing Level of Lesser Performing Index
|
|
Observation Date
|
105.00
|
Final Value of Lesser Performing Index is greater than its Initial Value
|
|
Total Payment
|
$1,045.8337 (4.58337% return)
|
Because the Final Value of the Lesser Performing
Index is greater than or equal to its Initial Value, even though a Trigger Event has occurred, the payment at maturity, for each
$1,000 principal amount note, will be $1,004.1667 (or $1,000
plus
the Interest Payment applicable to the Maturity Date).
When added to the Interest Payments received with respect to the prior Interest Payment Dates, the total amount paid, for each
$1,000 principal amount note, is $1,045.8337.
PS-
2
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
Example 2 — The Final Value of the
Lesser Performing Index is less than its Initial Value and a Trigger Event has NOT occurred.
Date
|
Closing Level of Lesser Performing Index
|
|
Observation Date
|
70.00
|
Final Value of Lesser Performing Index is less than its Initial Value
|
|
Total Payment
|
$1,045.8337 (4.58337% return)
|
Because a Trigger Event has not occurred, even
though the Final Value of the Lesser Performing Index is less than its Initial Value, the payment at maturity, for each $1,000
principal amount note, will be $1,004.1667 (or $1,000
plus
the Interest Payment applicable to the Maturity Date). When added
to the Interest Payments received with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal
amount note, is $1,045.8337.
Example 3 — The Final Value of the
Lesser Performing Index is less than its Initial Value and a Trigger Event has occurred.
Date
|
Closing Level of Lesser Performing Index
|
|
Observation Date
|
50.00
|
Final Value of Lesser Performing Index is less than its Initial Value
|
|
Total Payment
|
$545.8337 (-45.41663% return)
|
Because the Final Value of the Lesser Performing
Index is less than its Initial Value, a Trigger Event has occurred and the Lesser Performing Index Return is -50.00%, the payment
at maturity will be $503.5417 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] + $3.5417
= $503.5417
When added to the
Interest Payments received with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount
note, is $
545.8337
.
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 the
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.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If (i) the Final Value of either Index is less than its Initial Value and (ii) a Trigger Event has occurred, you
will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Index is less than
its Initial Value. Accordingly, under these circumstances, you will lose some or all of your principal amount at maturity.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
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.
|
·
|
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.
PS-
3
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER
THE TERM OF THE NOTES,
|
regardless of any appreciation in the
level of either Index, which may be significant. You will not participate in any appreciation in the level of either Index.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in 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.
|
·
|
JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
|
but JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the level of the S&P 500
®
Index.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
|
Payments on the notes are not linked
to a basket composed of the Indices and are contingent upon the performance of each individual Index. Poor performance by either
of the Indices over the term of the notes may negatively affect your payment at maturity and will not be offset or mitigated by
positive performance by the other Index.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING INDEX.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD
—
|
If, on any day during the Monitoring
Period, the closing level of either Index is less than its Trigger Value (
i.e.,
a Trigger Event occurs), the benefit provided
by the Trigger Value will terminate and you will be fully exposed to any depreciation in the closing level of the Lesser Performing
Index. You will be subject to this potential loss of principal even if that Index subsequently recovers such that the closing
level of that Index is greater than or equal to its Trigger Value.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN EITHER INDEX OR HAVE
ANY RIGHTS WITH RESPECT TO THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH
RESPECT TO THE RUSSELL 2000
®
INDEX —
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.
|
|
·
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE LEVEL
OF THAT INDEX IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, 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. You may not be able to sell your 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.
|
·
|
THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential
investment in the notes based on the minimums for the estimated value of the notes and the Interest Rate.
|
·
|
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
PS-
4
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See
“The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal
funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the
notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co
. The use of an internal funding rate and any potential changes to that rate may have
an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
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. 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).
|
·
|
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 the 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.
|
·
|
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 levels of the Indices. 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. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Indices
The S&P 500
®
Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500
®
Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
The Russell 2000
®
Index consists
of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 7, 2011 through August 26, 2016. The closing
level of the S&P 500
®
Index on August 30, 2016 was 2,176.12. The closing level of the Russell 2000
®
Index on August 30, 2016 was 1,246.030. We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
PS-
5
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
The historical closing levels of each Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of either Index on the
Pricing Date or the Observation Date. There can be no assurance that the performance of the Indices will result in the return of
any of your principal amount.
Tax Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. Based on the advice
of Sidley Austin
llp
, our special tax counsel, and on current market conditions,
in determining our reporting responsibilities we intend to treat the notes for U.S. federal income tax purposes as units each comprising:
(x) a Put Option written by you that in circumstances where the payment due at maturity is less than $1,000 (excluding accrued
and unpaid interest), requires you to pay us an amount equal to $1,000 multiplied by the absolute value of the Lesser Performing
Index Return and
PS-
6
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
®
Index
|
|
(y) a Deposit of $1,000 per $1,000 principal
amount note to secure your potential obligation under the Put Option, as more fully described in “Material U.S. Federal Income
Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Units Each Comprising a Put Option and a Deposit”
in the accompanying product supplement, and in particular in the subsection thereof entitled “— Notes with a Term of
Not More than One Year.” By purchasing the notes, you agree (in the absence of an administrative determination or judicial
ruling to the contrary) to follow this treatment and the allocation described in the following paragraph. However, there are other
reasonable treatments that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing
and character of any income or loss on the notes could be significantly and adversely affected. In addition, in 2007, the Treasury
Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward
contracts” and similar instruments. While it is not clear whether the notes would be viewed as similar to the typical prepaid
forward contract described in the notice, it is possible that 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. The notice focuses on a number of issues, the most relevant of which for holders of the notes are the character of income
or loss (including whether the Put Premium might be currently included as ordinary income) and the degree, if any, to which income
realized by Non-U.S. Holders should be subject to withholding tax.
We will determine the portion of each interest
payment on the notes that we will allocate to interest on the Deposit and to Put Premium, respectively, and will provide that allocation
in the pricing supplement for the notes. If the notes had priced on August 31, 2016 we would have allocated approximately 28.47%
of each interest payment to interest on the Deposit and approximately 71.53% of each interest payment to Put Premium. The actual
allocation that we will determine for the notes may differ from this hypothetical allocation, and will depend upon a variety of
factors, including actual market conditions and our borrowing costs for debt instruments of comparable maturities on the Pricing
Date. Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated
as interest on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale
or settlement. Because the term of the notes is not more than one year, the Deposit will be treated as a short-term obligation
for U.S. federal income tax purposes. For a more detailed discussion of short-term obligations, you should review the discussion
entitled “Material U.S. Federal Income Tax Consequences — Notes Treated as Units Each Comprising of a Put Option and
a Deposit — Notes with a Term of Not More than One Year” in the accompanying product supplement.
Non-U.S. Holders – Additional Tax
Consideration
Non-U.S. Holders should note that final Treasury
regulations were released on legislation that imposes a withholding tax of 30% on payments to certain foreign entities unless information
reporting and diligence requirements are met, as described in “Material U.S. Federal Income Tax Consequences — FATCA”
in the accompanying product supplement. Pursuant to the final regulations, such withholding tax will generally apply to obligations
that are issued on or after July 1, 2014; therefore, the notes will generally be subject to this withholding tax. However, the
withholding tax described above will not apply to payments of gross proceeds from the sale, exchange or other disposition (including
upon maturity) of the notes made before January 1, 2019.
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.
Both U.S. and Non-U.S. Holders should consult
their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue
price should also consult their tax advisers with respect to the tax consequences of an investment in the notes, including possible
alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
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.
PS-
7
| Structured Investments
Yield Notes Linked to the Lesser Performing of the S&P 500
®
Index and the Russell 2000
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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.
The estimated value of the notes does not
represent future values of the notes and may differ from others’ estimates. 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.
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. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
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 “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. 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. This initial predetermined
time period 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” in this pricing supplement.
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 “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Indices” 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.
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
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Yield Notes Linked to the Lesser Performing of the S&P 500
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contained in the accompanying product supplement
and the accompanying 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):
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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Yield Notes Linked to the Lesser Performing of the S&P 500
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