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
September 27, 2016
October , 2016
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Review Notes Linked to the Lesser Performing
of the SPDR
®
Gold Trust and the iShares
®
Silver Trust due October 12, 2020
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek early exit prior to maturity at a premium if, on any Review Date, the closing
price of one share of each of the SPDR
®
Gold Trust and the iShares
®
Silver Trust, which we refer
to as the Funds, is at or above its Call Level.
|
|
·
|
The notes are also designed for investors who seek a fixed return at maturity equal to the Contingent Minimum Return of 10.00%
if the notes have not been automatically called and the Final Value of each Fund is greater than or equal to 70.00% of its Initial
Value.
|
|
·
|
Investors in the notes should be willing to forgo interest and dividend payments and be willing to accept the risk of losing
some or all of their principal.
|
|
·
|
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 Funds. Payments on the notes are linked to the performance
of each of the Funds individually, as described below.
|
|
·
|
Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
|
|
·
|
The notes are expected to price on or about October 7, 2016 and are expected to settle on or about October 14, 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-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, 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 $21.50 per $1,000
principal amount note and in no event will these selling commissions exceed $24.00 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 $954.20 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 $945.00 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.
Funds:
The SPDR
®
Gold Trust (Bloomberg ticker: GLD) and the iShares
®
Silver Trust (Bloomberg ticker: SLV)
Call
Premium Amount:
The Call Premium Amount with respect to each Review
Date is set forth below:
·
first
Review Date: at least 8.80% × $1,000
·
second
Review Date: at least 17.60% × $1,000
·
third
Review Date: at least 26.40% × $1,000
·
final
Review Date: at least 35.20% × $1,000
(in each case, to be provided in the pricing supplement)
|
Call Value:
With
respect to each Fund, 100.00% of its Initial Value
|
Contingent Minimum
Return:
10.00%
|
Trigger Value:
With respect to each Fund, 70.00% of its Initial Value
|
Pricing
Date:
On or about October 7, 2016
|
Original Issue
Date (Settlement Date):
On or about October 14, 2016
|
Review Dates*:
October 17, 2017, October 9, 2018, October 7, 2019
and October 7, 2020 (final Review Date)
|
Call Settlement
Dates*:
If the notes are automatically called on any
Review Date, the third business day after that Review Date, except that the final Call Settlement Date is the Maturity Date
|
Maturity Date*:
October
12, 2020
|
* 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
|
Automatic Call:
If the closing price of one share of each Fund on any
Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment, for each $1,000
principal amount note, equal to (a) $1,000
plus
(b) the Call Premium Amount applicable to that Review Date, payable on
the applicable Call Settlement Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and
the Final Value of each Fund is greater than or equal to its Trigger Value, your payment at maturity per $1,000 principal amount
note will be calculated as follows:
$1,000 + ($1,000 × Contingent
Minimum Return)
If the notes have not been automatically called and
the Final Value of either Fund is less than its Trigger Value, your payment at maturity per $1,000 principal amount note will
be calculated as follows:
$1,000 + ($1,000 × Lesser
Performing Fund Return)
If the notes have
not been automatically called and the Final Value of either Fund is less than its Trigger Value, you will lose more than 30.00%
of your principal amount at maturity and could lose all of your principal amount at maturity.
Lesser
Performing Fund:
The Fund with the Lesser Performing Fund Return
Lesser
Performing Fund Return:
The lower of the Fund Returns of the Funds
Fund
Return:
With respect to each Fund,
(Final Value – Initial
Value)
Initial Value
Initial
Value:
With respect to each Fund, the closing price of one share of
that Fund on the Pricing Date
Final
Value:
With respect to each Fund, the closing price of one share of
that Fund on the final Review Date
Share
Adjustment Factor:
With respect to each Fund, the Share Adjustment Factor is referenced
in determining the closing price of one share of that Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor
of each Fund is subject to adjustment upon the occurrence of certain events affecting that Fund. See “The Underlyings —
Funds — Anti-Dilution Adjustments” in the accompanying product supplement for further information.
|
PS-
1
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
How
the Notes Work
Payment upon an Automatic Call
Payment at Maturity If the Notes Have Not
Been Automatically Called
Call Premium Amount
The table below illustrates the hypothetical
Call Premium Amount per $1,000 principal amount note for each Review Date based on the minimum Call Premium Amounts set forth under
“Key Terms — Call Premium Amount” above. The actual Call Premium Amounts will be provided in the pricing supplement
and will be not less than the minimum Call Premium Amounts set forth under “Key Terms — Call Premium Amount.”
Review Date
|
Call Premium Amount
|
First
|
$88.00
|
Second
|
$176.00
|
Third
|
$264.00
|
Final
|
$352.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Funds, assuming a range of performances for the hypothetical Lesser Performing Fund on the
Review Dates.
Each hypothetical payment set forth below assumes that the closing price of one share of the Fund that is not
the Lesser Performing Fund on each Review Date is greater than or equal to its Call Value (and therefore its Trigger Value).
PS-
2
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Fund of $100.00;
|
|
·
|
a Call Value for the Lesser Performing Fund of $100.00 (equal to 100.00% of the hypothetical Initial Value);
|
|
·
|
a Trigger Value for the Lesser Performing Fund of $70.00 (equal to 70.00% of the hypothetical Initial Value); and
|
|
·
|
the Call Premium Amounts are equal to the minimum Call Premium Amounts set forth under “Key Terms — Call Premium
Amount” above.
|
The hypothetical Initial Value of the Lesser
Performing Fund of $100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of
either Fund. The actual Initial Value of each Fund will be the closing price of one share of that Fund on the Pricing Date and
will be provided in the pricing supplement. For historical data regarding the actual closing prices of one share of each Fund,
please see the historical information set forth under “The Funds” 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 — Notes are automatically
called on the first Review Date.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,088.00 (8.80% return)
|
Because the closing price of one share of each
Fund on the first Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,088.00 (or $1,000
plus
the Call Premium Amount applicable to the first Review
Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 2 — Notes are automatically
called on the final Review Date.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$90.00
|
Notes NOT automatically called
|
Second Review Date
|
$85.00
|
Notes NOT automatically called
|
Third Review Date
|
$95.00
|
Notes NOT automatically called
|
Final Review Date
|
$110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,352.00 (35.20% return)
|
Because the closing price of one share of each
Fund on the final Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,352.00 (or $1,000
plus
the Call Premium Amount applicable to the final Review
Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Fund is greater than or equal to its Trigger Value.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$90.00
|
Notes NOT automatically called
|
Second Review Date
|
$85.00
|
Notes NOT automatically called
|
Third Review Date
|
$95.00
|
Notes NOT automatically called
|
Final Review Date
|
$70.00
|
Notes NOT automatically called; Final Value of Lesser Performing Fund is greater than or equal to Trigger Value
|
|
Total Payment
|
$1,100.00 (10.00% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Fund is greater than or equal to its Trigger Value, the payment at maturity,
for each $1,000 principal amount note, will be $1,100.00, calculated as follows:
$1,000 + ($1,000 × 10.00%) = $1,100.00
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
Example 4 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Fund is less than its Trigger Value.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$80.00
|
Notes NOT automatically called
|
Second Review Date
|
$70.00
|
Notes NOT automatically called
|
Third Review Date
|
$60.00
|
Notes NOT automatically called
|
Final Review Date
|
$50.00
|
Notes NOT automatically called; Final Value of Lesser Performing Fund is less than Trigger Value
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Fund is less than its Trigger Value and the Lesser Performing Fund Return is -50.00%,
the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect 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 the notes have not been automatically called and the Final Value of either Fund is less than its Trigger Value,
you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Fund is less
than its Initial Value. Accordingly, under these circumstances, you will lose more than 30.00% of your principal amount at maturity
and could lose 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.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO ANY CALL PREMIUM AMOUNT PAID ON THE NOTES IF THE NOTES ARE AUTOMATICALLY
CALLED,
|
regardless of any appreciation in
the price of one share of either Fund, which may be significant. You will not participate in any appreciation in the price of one
share of either Fund.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN MAY TERMINATE ON THE FINAL REVIEW DATE IF THE NOTES HAVE NOT BEEN AUTOMATICALLY
CALLED
—
|
If the notes have not been automatically
called and the Final Value of either Fund is less than its Trigger Value, you will not be entitled to receive the Contingent Minimum
Return at maturity. Under these circumstances, you may lose some or all of your principal amount at maturity.
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.
In addition, the benchmark price of
each Fund’s Underlying Commodity (as defined under “The Funds” below) is administered by the London Bullion Market
Association (“LBMA”) or an independent service provider appointed by the LBMA, and we are, or one of our affiliates
is, a price participant that contributes to the determination of that price. Furthermore, our affiliate is the custodian
of the iShares
®
Silver Trust We and our affiliates will have no obligation to consider your interests
as a holder of the notes in taking any actions in connection with our roles as a price participant and a custodian that might affect
the Funds or the notes.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE PRICE OF EACH FUND —
|
Payments on the notes are not linked
to a basket composed of the Funds and are contingent upon the performance of each individual Fund. Poor performance by either of
the Funds over the term of the notes may result in the notes not being automatically called on a Review Date, may negatively affect
your payment at maturity and will not be offset or mitigated by positive performance by the other Fund.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING FUND.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Fund
is less than its Trigger Value and the notes have not been automatically called, the benefit provided by the Trigger Value will
terminate and you will be fully exposed to any depreciation in the closing price of one share of the Lesser Performing Fund.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called,
the term of the notes may be reduced to as short as approximately one year. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the notes at a comparable return for a similar level of risk. Even in cases where the notes
are called before maturity, you are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON EITHER FUND OR HAVE ANY RIGHTS WITH RESPECT TO EITHER FUND OR THE COMMODITIES HELD BY EITHER
FUND.
|
|
·
|
THE FUNDS ARE NOT INVESTMENT COMPANIES OR COMMODITY POOLS AND WILL NOT BE SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED, OR THE COMMODITY EXCHANGE ACT, AS AMENDED —
|
Accordingly, you will not benefit
from any regulatory protections afforded to persons who invest in regulated investment companies or commodity pools.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE
PERFORMANCE OF THAT FUND’S UNDERLYING COMMODITY AS WELL AS THE NET ASSET VALUE PER SHARE —
|
Each Fund does not fully replicate
the performance of its Underlying Commodity due to the fees and expenses charged by the Funds or by restrictions on access to
the relevant Underlying Commodity due to other circumstances. Each Fund does not generate any income, and as each Fund regularly
sells its Underlying Commodity to pay for ongoing expenses, the amount of its Underlying Commodity represented by each share gradually
declines over time. Each Fund sells its Underlying Commodity to pay expenses on an ongoing basis irrespective of whether the trading
price of the shares rises or falls in response to changes in the price of its Underlying Commodity. The sale by a Fund of its
Underlying Commodity to pay expenses at a time of low prices for its Underlying Commodity could adversely affect the value of
the notes. Additionally, there is a risk that part or all of a Fund’s holdings
PS-
5
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
in its Underlying Commodity could be lost,
damaged or stolen due to war, terrorism, theft, natural disaster or otherwise. All of these factors may lead to a lack of
correlation between the performance of each Fund and its Underlying Commodity. In addition, because the shares of each Fund
are traded on a securities exchange and are subject to market supply and investor demand, the market value of one share of each
Fund may differ from the net asset value per share of that Fund.
During periods of market volatility,
a Fund’s Underlying Commodity may be unavailable in the secondary market, market participants may be unable to calculate
accurately the net asset value per share of that Fund and the liquidity of that Fund may be adversely affected. This kind
of market volatility may also disrupt the ability of market participants to create and redeem shares of a Fund. Further, market
volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares
of a Fund. As a result, under these circumstances, the market value of shares of a Fund may vary substantially from the net
asset value per share of that Fund. For all of the foregoing reasons, the performance of each Fund may not correlate with
the performance of its Underlying Commodity as well as the net asset value per share of that Fund, which could materially and adversely
affect the value of the notes in the secondary market and/or reduce any payment on the notes.
|
·
|
THE NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH GOLD WITH RESPECT TO THE SPDR
®
GOLD TRUST —
|
The investment objective of the SPDR
®
Gold Trust is to reflect the performance of the price of gold bullion, less the SPDR
®
Gold Trust’s expenses.
The price of gold is primarily affected by the global demand for and supply of gold. The market for gold bullion is global, and
gold prices are subject to volatile price movements over short periods of time and are affected by numerous factors, including
macroeconomic factors, such as the structure of and confidence in the global monetary system, expectations regarding the future
rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is usually
quoted), interest rates, gold borrowing and lending rates and global or regional economic, financial, political, regulatory, judicial
or other events. Gold prices may be affected by industry factors, such as industrial and jewelry demand as well as lending, sales
and purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions
that hold gold. Additionally, gold prices may be affected by levels of gold production, production costs and short-term changes
in supply and demand due to trading activities in the gold market. From time to time, above-ground inventories of gold may also
influence the market. It is not possible to predict the aggregate effect of all or any combination of these factors. The price
of gold has recently been, and may continue to be, extremely volatile.
|
·
|
THE NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH SILVER WITH RESPECT TO THE iSHARES
®
SILVER TRUST —
|
The iShares
®
Silver
Trust seeks to reflect generally the performance of the price of silver, less the iShares
®
Silver Trust’s
expenses and liabilities. The price of silver is primarily affected by global demand for and supply of silver. Silver prices can
fluctuate widely and may be affected by numerous factors. These include general economic trends, technical developments, substitution
issues and regulation, as well as specific factors including industrial and jewelry demand, expectations with respect to the rate
of inflation, the relative strength of the U.S. dollar (the currency in which the price of silver is generally quoted) and other
currencies, interest rates, central bank sales, forward sales by producers, global or regional political or economic events and
production costs and disruptions in major silver-producing countries, such as Mexico, China and Peru. The demand for and supply
of silver affect silver prices, but not necessarily in the same manner as supply and demand affect the prices of other commodities.
The supply of silver consists of a combination of new mine production and existing stocks of bullion and fabricated silver held
by governments, public and private financial institutions, industrial organizations and private individuals. In addition, the price
of silver has on occasion been subject to very rapid short-term changes due to speculative activities. From time to time, above-ground
inventories of silver may also influence the market. The major end uses for silver include industrial applications, jewelry and
silverware. It is not possible to predict the aggregate effect of all or any combination of these factors.
|
·
|
THERE ARE RISKS RELATING TO COMMODITIES TRADING ON THE LBMA —
|
The investment objective of the SPDR
®
Gold Trust is to reflect the performance of the price of gold bullion, less the SPDR
®
Gold Trust’s expenses,
and the iShares
®
Silver Trust seeks to reflect generally the performance of the price of silver, less the iShares
®
Silver Trust’s expenses and liabilities. The prices of gold and silver are determined by the LBMA or an independent service
provider appointed by the LBMA. The LBMA is a self-regulatory association of bullion market participants. Although all market-making
members of the LBMA are supervised by the Bank of England and are required to satisfy a capital adequacy test, the LBMA itself
is not a regulated entity. If the LBMA should cease operations, or if bullion trading should become subject to a value added tax
or other tax or any other form of regulation currently not in place, the role of the LBMA gold and silver prices as a global benchmark
for the values of gold and silver may be adversely affected. The LBMA is a principals’ market which operates in a manner
more closely analogous to an over-the-counter physical commodity market than regulated futures markets, and certain features of
U.S. futures contracts are not present in the context of LBMA trading. For example, there are no daily price limits on the LBMA
which would otherwise restrict fluctuations in the prices of LBMA contracts. In a declining market, it is possible that prices
would continue to decline without limitation within a trading day or over a period of trading days. The LBMA may alter, discontinue
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of the SPDR
®
Gold Trust and the iShares
®
Silver
|
|
or suspend calculation or dissemination of the LBMA gold and silver prices, which could adversely affect the value of the notes.
The LBMA, or an independent service provider appointed by the LBMA, will have no obligation to consider your interests in calculating
or revising the LBMA gold and silver prices.
|
·
|
SINGLE COMMODITY PRICES TEND TO BE MORE VOLATILE THAN, AND MAY NOT CORRELATE WITH, THE PRICES OF COMMODITIES GENERALLY —
|
Each Fund is linked to a single commodity
and not to a diverse basket of commodities or a broad-based commodity index. Each Fund’s Underlying Commodity may not correlate
to the price of commodities generally and may diverge significantly from the prices of commodities generally. As a result, the
notes carry greater risk and may be more volatile than notes linked to the prices of more commodities or a broad-based commodity
index.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent
will not make an adjustment in response to all events that could affect the shares of the Funds. 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.
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF A FUND FALLING BELOW ITS TRIGGER VALUE IS GREATER
IF THE PRICE OF ONE SHARE OF THAT FUND 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.
|
·
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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 Call Premium Amounts.
|
·
|
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.
|
·
|
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).
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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 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 prices of the Funds. 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
Funds
The SPDR
®
Gold Trust is an investment
trust sponsored by World Gold Trust Services, LLC. The investment objective of the SPDR
®
Gold Trust is to reflect
the performance of the price of gold bullion, less the SPDR
®
Gold Trust’s expenses. The SPDR
®
Gold Trust holds gold bars. We refer to gold as the Underlying Commodity with respect to the SPDR
®
Gold Trust. For
additional information about the SPDR
®
Gold Trust, see “Fund Descriptions — The SPDR
®
Gold Trust” in the accompanying underlying supplement.
The iShares
®
Silver Trust is an
investment trust sponsored by iShares
®
Delaware Trust Sponsor LLC. The iShares
®
Silver Trust seeks
to reflect generally the performance of the price of silver, less the iShares
®
Silver Trust’s expenses and
liabilities. The assets of the iShares
®
Silver Trust consists primarily of silver held by a custodian on behalf
of the iShares
®
Silver Trust. We refer to silver as the Underlying Commodity with respect to the iShares
®
Silver Trust. For additional information about the iShares
®
Silver Trust, see “Annex A” in this pricing
supplement.
Historical Information
The following graphs set forth the historical
performance of each Fund based on the weekly historical closing prices of one share from January 7, 2011 through September 23,
2016. The closing price of one share of the SPDR
®
Gold Trust on September 26, 2016 was $127.55. The closing price
of one share of the iShares
®
Silver Trust on September 26, 2016 was $18.41. We obtained the closing prices of one
share above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The closing values above and below may have been adjusted by Bloomberg for actions taken by the Funds, such as stock splits.
The historical closing prices of one share of
each 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 either Fund on the Pricing Date or any Review Date. There can be no assurance that the performance of the Funds will
result in the return of any of your principal amount.
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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.
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, 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.
However, the IRS or a court may not respect this treatment, in which case the timing and character of any income or loss on the
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
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to the “constructive ownership” regime, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. 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
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 an automatic call or 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.
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.
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
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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 Funds” 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.
Supplemental
Plan of Distribution
We expect that delivery of the notes will be
made against payment for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement,
which will be the fifth business day following the expected Pricing Date of the notes (this settlement cycle being referred to
as T+5). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are
required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers
who wish to trade notes on the Pricing Date or the succeeding business day will be required to specify an alternate settlement
cycle at the time of any such trade to prevent a failed settlement and should consult their own advisors.
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 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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®
Silver
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Annex
A
The iShares
®
Silver Trust
All information contained in this underlying
supplement regarding the iShares
®
Silver Trust (the “Silver Trust”), has been derived from publicly
available information, without independent verification. This information reflects the policies of, and is subject to change by,
iShares
®
Delaware Trust Sponsor LLC, a subsidiary of BlackRock, Inc., the sponsor of the Silver Trust. The Bank
of New York Mellon is the trustee of the Silver Trust, and JPMorgan Chase Bank, N.A. is the custodian of the Silver Trust. The
Silver Trust trades under the ticker symbol “SLV” on NYSE Arca, Inc.
The Silver Trust seeks to reflect generally the
performance of the price of silver, less the Silver Trust’s expenses and liabilities. The assets of the Silver Trust consist
primarily of silver held by a custodian on behalf of the Silver Trust. The Silver Trust issues shares in exchange for deposits
of silver and distributes silver in connection with the redemption of shares. The shares of the Silver Trust are intended to constitute
a means of making an investment similar to an investment in silver. The shares of the Silver Trust have been designed to remove
the obstacles represented by the expense and complications involved in an investment in physical silver, while at the same time
having an intrinsic value that reflects, at any given time, the price of the silver owned by the Silver Trust at such time less
the Silver Trust’s expenses and liabilities.
The Silver Trust does not engage in any activity
designed to derive a profit from changes in the price of silver. The Silver Trust’s only ordinary recurring expense is expected
to be the sponsor’s fee, which is accrued daily at an annualized rate equal to 0.50% of the net asset value of the Silver
Trust and is payable monthly in arrears. The Silver Trustee will, when directed by the sponsor, and, in the absence of such direction,
may, in its discretion, sell silver in such quantity and at such times as may be necessary to permit payment of the sponsor’s
fee and of Silver Trust expenses or liabilities not assumed by the sponsor. As a result of the recurring sales of silver necessary
to pay the sponsor’s fee and the Silver Trust expenses or liabilities not assumed by the sponsor, the net asset value of
the Silver Trust will decrease over the life of the Silver Trust.
Information provided to or filed with the Securities
and Exchange Commission (the “SEC”) by the Silver Trust pursuant to the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, can be located by reference to SEC file numbers 333-136506 and 001-32863, respectively,
through the SEC’s website at http://www.sec.gov. The Silver Trust is not a mutual fund or any other type of investment company
within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder. In addition,
the Silver Trust is not a commodity pool within the meaning of the Commodity Exchange Act, as amended, and is not subject to regulation
thereunder. For additional information regarding the Silver Trust, the sponsor, the trustee and the custodian, please see the Silver
Trust’s prospectus. In addition, information about the Silver Trust may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated documents and the public website of the Silver Trust
maintained by the sponsor at http://us.ishares.com. Information contained in the Silver Trust website is not incorporated by reference
in, and should not be considered a part of, this pricing supplement.
Silver
The price of silver is primarily affected by
global demand for and supply of silver. Silver prices can fluctuate widely and may be affected by numerous factors. These include
general economic trends, technical developments, substitution issues and regulation, as well as specific factors including industrial
and jewelry demand, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar (the currency
in which the price of silver is generally quoted) and other currencies, interest rates, central bank sales, forward sales by producers,
global or regional political or economic events and production costs and disruptions in major silver-producing countries, such
as Mexico, China and Peru. The demand for and supply of silver affect silver prices, but not necessarily in the same manner as
supply and demand affect the prices of other commodities. The supply of silver consists of a combination of new mine production
and existing stocks of bullion and fabricated silver held by governments, public and private financial institutions, industrial
organizations and private individuals. In addition, the price of silver has on occasion been subject to very rapid short-term changes
due to speculative activities. From time to time, above-ground inventories of silver may also influence the market. The major end
uses for silver include industrial applications, jewelry and silverware. It is not possible to predict the aggregate effect of
all or any combination of these factors.
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