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
28, 2016
JPMorgan Chase Financial Company LLC
|
October 2016
|
Pricing Supplement
Registration Statement Nos. 333-209682
and 333-209682-01
Dated October ,
2016
Filed pursuant to Rule 424(b)(2)
Structured Investments
Opportunities in U.S. Equities
Buffered PLUS Based on the Value
of the S&P 500
®
Index due May 3, 2019
Buffered Performance Leveraged
Upside Securities
SM
Principal at Risk
Securities
Fully and Unconditionally Guaranteed
by JPMorgan Chase & Co.
The Buffered PLUS will pay no interest and provide a minimum
payment at maturity of only 10.00% of the stated principal amount. At maturity, if the underlying index has appreciated in value,
investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying index,
subject to a maximum payment at maturity. If the underlying index has declined in value but has not declined by more than the specified
buffer amount, investors will receive the stated principal amount of their investment. However, if the underlying index has declined
by more than the buffer amount, at maturity investors will lose 1% for every 1% decline beyond the specified buffer amount, subject
to the minimum payment at maturity of 10.00% of the stated principal amount.
Investors may lose up to 90.00% of the stated principal
amount of the Buffered PLUS at maturity.
The Buffered PLUS are for investors who seek an equity-based return and who are willing
to risk their principal and forgo current income and upside above the maximum payment at maturity in exchange for the leverage
and buffer features that in each case apply to a limited range of performance of the underlying index. At maturity, an investor
will receive an amount in cash that may be greater than, equal to, or less than the stated principal amount based upon the closing
level of the underlying index on the valuation date
.
The Buffered PLUS 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., issued as part of JPMorgan Financial’s Medium-Term Notes, Series A, program.
Any payment
on the Buffered PLUS is subject to the credit risk of JPMorgan Financial, as issuer of the Buffered PLUS, and the credit risk of
JPMorgan Chase & Co., as guarantor of the Buffered PLUS.
SUMMARY TERMS
|
Issuer:
|
JPMorgan Chase Financial Company LLC
|
Guarantor:
|
JPMorgan Chase & Co.
|
Underlying index:
|
S&P 500
®
Index
|
Aggregate principal amount:
|
$
|
Payment at maturity:
|
If the final index value is
greater than
the initial index value, for each $10 stated principal amount Buffered PLUS,
|
|
$10 + leveraged upside payment
|
|
In no event will the payment at maturity exceed the maximum payment at maturity.
|
|
If the final index value is
equal to
the initial index value
or is
less than
the initial index value but has decreased from the initial index value by an amount
less than or equal to
the buffer amount of 10.00%, for each $10 stated principal amount Buffered PLUS,
|
|
$10
|
|
If the final index value is
less than
the initial index value and has decreased from the initial index value by an amount
greater than
the buffer amount of 10.00%, for each $10 stated principal amount Buffered PLUS,
|
|
($10 × index performance factor) + $1.00
|
|
This amount will be less than the stated principal amount of $10 per Buffered PLUS. However, subject to the credit risk of JPMorgan Chase & Co., under no circumstances will the Buffered PLUS pay less than $1.00 per Buffered PLUS at maturity.
|
Leveraged upside payment:
|
$10 × leverage factor × index percent increase
|
Index percent increase:
|
(final index value – initial index value) / initial index value
|
Leverage factor:
|
200%
|
Buffer amount:
|
10.00%
|
Index performance factor:
|
final index value / initial index value
|
Maximum payment at maturity:
|
At least $11.98 (at least 119.80% of the stated principal amount) per Buffered PLUS. The actual maximum payment at maturity will be provided in the pricing supplement and will not be less than $11.98 per Buffered PLUS.
|
Minimum payment at maturity:
|
$1.00 per Buffered PLUS (10.00% of the stated principal amount)
|
Stated principal amount:
|
$10 per Buffered PLUS
|
Issue price:
|
$10 per Buffered PLUS (see “Commissions and issue price” below)
|
Pricing date:
|
October , 2016 (expected to price on or about October 14, 2016)
|
Original issue date (settlement date):
|
October , 2016 (3 business days after the pricing date)
|
Valuation date:
|
April 30, 2019, subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” in the accompanying product supplement
|
Maturity date:
|
May 3, 2019, subject to postponement in the event of certain market disruption events and as described under “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
|
Agent:
|
J.P. Morgan Securities LLC (“JPMS”)
|
|
Terms continued on the following page
|
Commissions and issue price:
|
Price to public
(1)
|
Fees and commissions
|
Proceeds to issuer
|
Per Buffered PLUS
|
$10.00
|
$0.25
(2)
|
$9.70
|
|
|
$0.05
(
3)
|
|
Total
|
$
|
$
|
$
|
|
(1)
|
See “Additional Information about the Buffered PLUS — Supplemental use of proceeds and hedging” in this
document for information about the components of the price to public of the Buffered PLUS.
|
|
(2)
|
JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to Morgan Stanley
Smith Barney LLC (“Morgan Stanley Wealth Management”). In no event will these selling commissions exceed $0.25 per
$10 stated principal amount Buffered PLUS. See “Plan of Distribution (Conflicts of Interest)” in the accompanying product
supplement.
|
|
3)
|
Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each
$10 stated principal amount Buffered PLUS.
|
If the Buffered PLUS priced today and assuming a maximum
payment at maturity equal to the minimum listed above, the estimated value of the Buffered PLUS would be approximately $9.763 per
$10 stated principal amount Buffered PLUS. The estimated value of the Buffered PLUS on the pricing date will be provided in the
pricing supplement and will not be less than $9.60 per $10 stated principal amount Buffered PLUS. See “Additional Information
about the Buffered PLUS — The estimated value of the Buffered PLUS” in this document for additional information.
Investing in the Buffered PLUS involves a number of risks.
See “Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Risk Factors” beginning on page 7 of this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the Buffered PLUS or passed upon the accuracy or the adequacy
of this document or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
The Buffered PLUS are not bank deposits, are not insured
by the Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
You should read this document
together with the related product supplement, underlying supplement,
prospectus
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Information
about the Buffered PLUS” at the end of this document.
Product supplement no. MS-1-I dated June 3,
2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.pdf
Underlying supplement no. 1-I dated April 15,
2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
Prospectus supplement and prospectus, each dated
April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Terms continued from previous page:
Initial index value:
|
The closing level of the underlying index on the pricing date
|
Final index value:
|
The closing level of the underlying index on the valuation date
|
CUSIP / ISIN:
|
48128P308 / US48128P3082
|
Listing:
|
The Buffered PLUS will not be listed on any securities exchange.
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Buffered Performance Leveraged Upside
Securities
Principal at Risk Securities
The Buffered PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019 (the “Buffered PLUS”) can be used:
|
§
|
As an alternative to direct exposure to the underlying index that enhances returns for a certain range of potential positive
performance of the underlying index.
|
|
§
|
To potentially achieve similar levels of upside exposure to the underlying index as a direct investment, subject to the maximum
payment at maturity, while using fewer dollars by taking advantage of the leverage factor.
|
|
§
|
To obtain a buffer against a specified level of negative performance in the underlying index.
|
|
Maturity:
|
Approximately 2.5 years
|
|
Leverage factor:
|
200%
|
|
Buffer amount:
|
10.00%
|
|
Maximum payment at maturity:
|
At least $11.98 (at least 119.80% of the stated principal amount) per Buffered PLUS (to be provided in the pricing supplement)
|
|
Minimum payment at maturity:
|
$1.00 per Buffered PLUS. Investors may lose up to 90.00% of the stated principal amount of the Buffered PLUS at maturity.
|
Supplemental Terms of the Buffered PLUS
For purposes of the accompanying
product supplement, the underlying index is an “Index.”
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Buffered PLUS offer leveraged exposure to an underlying asset,
which may be equities, commodities and/or currencies, while providing limited protection against negative performance of the asset.
If the asset has decreased in value by more than the specified buffer amount, investors are exposed to the negative performance
of the asset, subject to the minimum payment at maturity. At maturity, if the asset has appreciated, investors will receive the
stated principal amount of their investment plus leveraged upside performance of the underlying asset, subject to the maximum payment
at maturity. At maturity, if the asset has depreciated and (i) if the asset has not depreciated by more than the specified buffer
amount, investors will receive the stated principal amount of their investment, or (ii) if the asset has depreciated by more than
the buffer amount, the investor will lose 1% for every 1% decline beyond the specified buffer amount.
Investors may lose up
to 90.00% of the stated principal amount of the Buffered PLUS at maturity.
Leveraged Performance
|
The Buffered PLUS offer investors an opportunity to capture enhanced returns for a certain range of positive performance relative to a direct investment in the underlying index.
|
Upside Scenario
|
The underlying index increases in value and, at maturity, the Buffered PLUS pay the stated principal amount of $10
plus
a return equal to 200% of the index percent increase, subject to the maximum payment at maturity of at least $11.98 (at least 119.80% of the stated principal amount) per Buffered PLUS. The actual maximum payment at maturity will be provided in the pricing supplement.
|
Par Scenario
|
The final index value is equal to the initial index value or declines in value by no more than 10.00% and, at maturity, the Buffered PLUS pay the stated principal amount of $10 per Buffered PLUS.
|
Downside Scenario
|
The underlying index declines in value by more than 10.00% and, at maturity, the Buffered PLUS pay an amount that is less than the stated principal amount by an amount that is proportionate to the percentage decline of the final index value from the initial index value, plus the buffer amount of 10.00%. (Example: if the underlying index decreases in value by 20%, the Buffered PLUS will pay an amount that is less than the stated principal amount by 20% plus the buffer amount of 10.00%, or $9.00 per Buffered PLUS.) The minimum payment at maturity is $1.00 per Buffered PLUS, subject to the credit risk of JPMorgan Chase & Co.
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
How the Buffered PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Buffered PLUS based on the following terms:
Stated principal amount:
|
$10 per Buffered PLUS
|
Leverage factor:
|
200%
|
Hypothetical maximum payment at maturity:
|
$11.98 (119.80% of the stated principal amount) per Buffered PLUS (which represents the lowest hypothetical maximum payment at maturity)*
|
Minimum payment at maturity:
|
$1.00 per Buffered PLUS
|
* The actual maximum payment at maturity will be provided
in the pricing supplement and will not be less than $11.98 per Buffered PLUS.
Buffered
PLUS Payoff Diagram
|
|
How it works
|
§
|
Upside
Scenario.
If the final index value is greater than the initial index value, for each $10 principal amount Buffered
PLUS investors will receive the $10 stated principal amount
plus
a return equal to 200% of the appreciation of the underlying
index over the term of the Buffered PLUS, subject to the maximum payment at maturity. Under the hypothetical terms of the Buffered
PLUS, an investor will realize the hypothetical maximum payment at maturity at a final index value of 109.90% of the initial index
value.
|
|
§
|
Par
Scenario.
If the final index value is equal to the initial index value or is less than the initial index value but
has decreased from the initial index value by an amount less than or equal to the buffer amount of 10.00%, investors will receive
the stated principal amount of $10 per Buffered PLUS.
|
|
§
|
Downside
Scenario.
If the final index value is less than the initial index value and has decreased from the initial index value
by an amount greater than the buffer amount of 10.00%, investors will receive an amount that is less than the stated principal
amount by an amount proportionate to the percentage decrease of the final index value from the initial index value, plus the buffer
amount of 10.00%. The minimum payment at maturity is $1.00 per Buffered PLUS.
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
For example, if the underlying index depreciates 50%,
investors will lose 40.00% of their principal and receive only $6.00 per Buffered PLUS at maturity, or 60.00% of the stated principal
amount.
|
The hypothetical returns and hypothetical
payments on the Buffered PLUS shown above apply
only if you hold the Buffered PLUS for their entire term.
These hypotheticals
do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were
included, the hypothetical returns and hypothetical payments shown above would likely be lower.
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Risk Factors
The following
is a non-exhaustive list of certain key risk factors for investors in the Buffered PLUS.
For further discussion of
these and other risks, you should read the sections entitled “Risk Factors” of the accompanying product supplement
and the accompanying underlying supplement. We urge you to consult your investment, legal, tax, accounting and other advisers in
connection with your investment in the Buffered PLUS.
|
§
|
Buffered
PLUS do not pay interest and you could lose up to 90.00% of your principal at maturity.
The terms of the Buffered PLUS
differ from those of ordinary debt securities in that the Buffered PLUS do not pay interest and provide a minimum payment at maturity
of only 10.00% of your principal, subject to the credit risk of JPMorgan Chase & Co. If the final index value has declined
by an amount greater than the buffer amount of 10.00% from the initial index value, you will receive for each Buffered PLUS that
you hold a payment at maturity that is less than the stated principal amount of each Buffered PLUS by an amount proportionate
to the decline in the value of the underlying index, plus $1.00 per Buffered PLUS. Accordingly, you could lose up to 90.00% of
your principal.
|
|
§
|
The
appreciation potential of the Buffered PLUS is limited by the maximum payment at maturity.
The appreciation potential of the Buffered PLUS is limited by the maximum payment at maturity of at least $11.98 (at least 119.80%
of the stated principal amount) per Buffered PLUS. The actual maximum payment at maturity will be provided in the pricing supplement.
Because the maximum payment at maturity will be limited to at least 119.80% of the stated principal amount for the Buffered PLUS,
any increase in the final index value by more than 9.90% (if the maximum payment at maturity is set at 119.80% of the stated principal
amount) will not further increase the return on the Buffered PLUS. The actual maximum payment at maturity will be provided in
the pricing supplement.
|
|
§
|
The
Buffered PLUS are subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co., and any actual or anticipated
changes to our or JPMorgan Chase & Co.’s credit ratings or credit spreads may adversely affect the market value of the
Buffered PLUS.
Investors are dependent on our and JPMorgan Chase & Co.’s ability to pay all amounts due on
the Buffered PLUS. Any actual or anticipated decline in our or JPMorgan Chase & Co.’s credit ratings or increase in
our or JPMorgan Chase & Co.’s credit spreads determined by the market for taking that credit risk is likely to adversely
affect the market value of the Buffered PLUS. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the Buffered PLUS 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 Buffered PLUS. If these affiliates do not make payments to us and we fail
to make payments on the Buffered PLUS, 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.
|
|
§
|
Economic interests of the issuer, the guarantor, the calculation
agent, the agent of the offering of the Buffered PLUS and other affiliates of the issuer may be different from those of investors.
We and our affiliates play a variety of roles
in connection with the issuance of the Buffered PLUS, including acting as calculation agent and as an agent of the offering of
the Buffered PLUS, hedging our obligations under the Buffered PLUS and making the assumptions used to determine the pricing of
the Buffered PLUS and the estimated value of the Buffered PLUS, which we refer to as the estimated value of the Buffered PLUS.
In performing these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation
agent and other affiliates of ours are potentially adverse to your interests as an investor in the Buffered PLUS. The calculation
agent will determine the initial index value and the final index value and will calculate the amount of payment you will receive
at maturity. Determinations made by the calculation agent, including with respect to the occurrence or non-occurrence of market
disruption events, the selection of a successor to the underlying index or calculation of the final index value in the event of
a discontinuation or material change in method of calculation of the underlying index, may affect the payment to you at maturity.
|
In
addition, JPMorgan Chase & Co. is currently one of the companies that make up the underlying index. JPMorgan Chase & Co.
will not have any obligation to consider your interests as a holder of the Buffered
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
PLUS
in taking any corporate action that might affect the value of the underlying index or the Buffered PLUS.
Moreover,
our and JPMorgan Chase & Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan
Chase & Co.’s economic interests to be adverse to yours and could adversely affect any payment on the Buffered PLUS
and the value of the Buffered PLUS. It is possible that hedging or trading activities of ours or our affiliates in connection
with the Buffered PLUS could result in substantial returns for us or our affiliates while the value of the Buffered PLUS declines.
Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement
for additional information about these risks.
|
§
|
The
estimated value of the Buffered PLUS will be lower than the original issue price (price to public) of the Buffered PLUS.
The estimated value of the Buffered PLUS is only an estimate determined by reference to several factors. The original issue price
of the Buffered PLUS will exceed the estimated value of the Buffered PLUS because costs associated with selling, structuring and
hedging the Buffered PLUS are included in the original issue price of the Buffered PLUS. These costs include the selling commissions,
the structuring fee, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the Buffered PLUS and the estimated cost of hedging our obligations under the Buffered PLUS. See “Additional
Information about the Buffered PLUS — The estimated value of the Buffered PLUS” in this document.
|
|
§
|
The
estimated value of the Buffered PLUS does not represent future values of the Buffered PLUS and may differ from others’ estimates.
The estimated value of the Buffered PLUS is determined by reference to internal pricing models of our affiliates.
This estimated value of the Buffered PLUS is based on market conditions and other relevant factors existing at the time of pricing
and assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different
pricing models and assumptions could provide valuations for the Buffered PLUS that are greater than or less than the estimated
value of the Buffered PLUS. 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 Buffered PLUS 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 the Buffered PLUS from you in secondary market
transactions. See “Additional Information about the Buffered PLUS — The estimated value of the Buffered PLUS”
in this document.
|
|
§
|
The
estimated value of the Buffered PLUS is derived by reference to an internal funding rate.
The internal funding rate used in the determination of the estimated value of the Buffered PLUS is based on, among other things,
our and our affiliates’ view of the funding value of the Buffered PLUS as well as the higher issuance, operational and ongoing
liability management costs of the Buffered PLUS
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 Buffered PLUS and any secondary
market prices of the Buffered PLUS. See “Additional Information about the Buffered PLUS — The estimated value of the
Buffered PLUS” in this document.
|
|
§
|
The
value of the Buffered PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than
the then-current estimated value of the Buffered PLUS for a limited time period.
We generally
expect that some of the costs included in the original issue price of the Buffered PLUS will be partially paid back to you in
connection with any repurchases of your Buffered PLUS by JPMS in an amount that will decline to zero over an initial predetermined
period. These costs can include selling commissions, the structuring fee, projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. See “Additional Information
about the Buffered PLUS — Secondary market prices of the Buffered PLUS” in this document for additional information
relating to this initial period. Accordingly, the estimated value of your Buffered PLUS during this initial period may be lower
than the value of the Buffered PLUS as published by JPMS (and which may be shown on your customer account statements).
|
|
§
|
Secondary market prices of the Buffered PLUS will likely
be lower than the original issue price of the Buffered PLUS
.
Any
secondary market prices of the Buffered PLUS will likely be lower than the original issue price of the Buffered PLUS because,
among other things, secondary market prices take into account our internal secondary market funding rates for structured debt
issuances and, also, because secondary market prices (a) exclude selling commissions and the structuring fee and (b) may exclude
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
projected
hedging profits, if any, and estimated hedging costs that are included in the original issue price of the Buffered PLUS. As a
result, the price, if any, at which JPMS will be willing to buy Buffered PLUS from you in secondary market transactions, if at
all, is likely to be lower than the original issue price. Any sale by you prior to the maturity date could result in a substantial
loss to you. See the immediately following risk factor for information about additional factors that will impact any secondary
market prices of the Buffered PLUS.
The
Buffered PLUS are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your
Buffered PLUS to maturity. See “— Secondary trading may be limited” below.
|
§
|
Secondary
market prices of the Buffered PLUS will be impacted by many economic and market factors.
The secondary market
price of the Buffered PLUS during their term will be impacted by a number of economic and market factors, which may either offset
or magnify each other, aside from the selling commissions, structuring fee, projected hedging profits, if any, estimated hedging
costs and the closing level of the underlying index, including:
|
|
o
|
any actual or potential change in our or JPMorgan Chase
& Co.’s creditworthiness or credit spreads;
|
|
o
|
customary bid-ask spreads for similarly sized trades;
|
|
o
|
our internal secondary market funding rates for structured
debt issuances;
|
|
o
|
the actual and expected volatility of the underlying index;
|
|
o
|
the time to maturity of the Buffered PLUS;
|
|
o
|
the dividend rates on the equity securities included in
the underlying index;
|
|
o
|
interest and yield rates in the market generally; and
|
|
o
|
a variety of other economic, financial, political, regulatory
and judicial events.
|
Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the Buffered PLUS, which may also be reflected
on customer account statements. This price may be different (higher or lower) than the price of the Buffered PLUS, if any, at
which JPMS may be willing to purchase your Buffered PLUS in the secondary market.
|
§
|
Investing
in the Buffered PLUS is not equivalent to investing in the underlying index.
Investing in
the Buffered PLUS is not equivalent to investing in the underlying index or its component stocks. Investors in the Buffered PLUS
will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that
constitute the underlying index.
|
|
§
|
Adjustments
to the underlying index could adversely affect the value of the Buffered PLUS.
The underlying
index publisher may discontinue or suspend calculation or publication of the underlying index at any time. In these circumstances,
the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued underlying
index and is not precluded from considering indices that are calculated and published by the calculation agent or any of its affiliates.
|
|
§
|
Hedging and trading activities by the issuer and its affiliates
could potentially affect the value of the
Buffered PLUS
.
The
hedging or trading activities of the issuer’s affiliates and of any other hedging counterparty with respect to the
Buffered
PLUS
on or prior to the pricing date and prior
to maturity could adversely affect the value of the underlying index and, as a result, could decrease the amount an investor may
receive on the Buffered PLUS at maturity. Any of these hedging or trading activities
on or prior to the pricing date could
potentially affect the initial index value and, therefore, could potentially increase the level that the final index value must
reach before you receive a payment at maturity that exceeds the issue price of the
Buffered
PLUS or so that you do not suffer a loss on your initial investment in the Buffered PLUS
. Additionally, these hedging or
trading activities during the term of the
Buffered
PLUS
, including on the valuation date, could adversely affect the final index value and, accordingly, the amount of cash
an investor will receive at maturity. It is possible that these hedging or trading activities could result in substantial returns
for us or our affiliates while the value of the Buffered PLUS declines.
|
|
§
|
Secondary
trading may be limited.
Th
e Buffered PLUS will not be listed on a securities
exchange. There may be little or no secondary market for the Buffered PLUS. Even if there is a secondary market, it may not provide
enough liquidity to allow you to trade or sell the Buffered PLUS easily
.
JPMS
may act as
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
a
market maker for the Buffered PLUS, but is not required to do so. Because we do not expect that other market makers will participate
significantly in the secondary market for the Buffered PLUS, the price at which you may be able to trade your Buffered PLUS is
likely to depend on the price, if any, at which
JPMS
is willing to buy the Buffered PLUS. If at any time
JPMS
or another agent does not act as a market maker, it is likely that there would be little or no secondary market for the
Buffered PLUS.
|
§
|
The final terms
and valuation of the Buffered PLUS will be provided in the pricing supplement.
The final terms of the Buffered PLUS
will be provided in the pricing supplement. In particular, each of the estimated value of the Buffered PLUS and the maximum
payment at maturity will be provided in the pricing supplement and each may be as low as the applicable minimum set forth on the
cover of this document. Accordingly, you should consider your potential investment in the Buffered PLUS based on the minimums
for the estimated value of the Buffered PLUS and the maximum payment at maturity.
|
|
§
|
The tax consequences of an investment in the Buffered
PLUS are uncertain.
There is no direct legal authority as to the proper U.S. federal income tax characterization of the Buffered
PLUS, and we do not intend to request a ruling from the IRS. The IRS might not accept, and a court might not uphold, the treatment
of the Buffered PLUS described in “Additional Information about the Buffered PLUS ― Additional Provisions ―
Tax considerations” in this document and in “Material U.S. Federal Income Tax Consequences” in the accompanying
product supplement. If the IRS were successful in asserting an alternative treatment for the Buffered PLUS, the timing and character
of any income or loss on the Buffered PLUS could differ materially and adversely from our description herein. In addition, in
2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward
contracts” and similar instruments. The notice focuses in particular on whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime, 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 Buffered PLUS, possibly with retroactive effect. You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement and consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the Buffered PLUS, including possible alternative treatments and the
issues presented by this notice.
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated,
maintained and published by S&P Dow Jones Indices LLC consists of stocks of 500 companies selected to provide a performance
benchmark for the U.S. equity markets. For additional information on the S&P 500
®
Index, see the information
set forth under “Equity Index Descriptions — The S&P U.S. Indices” in the accompanying underlying supplement.
Information as of market close on September 27, 2016:
|
Bloomberg Ticker Symbol:
|
SPX
|
|
Current Closing Level:
|
2,159.93
|
|
52 Weeks Ago (on 9/28/2015):
|
1,881.77
|
|
52 Week High (on 8/15/2016):
|
2,190.15
|
|
52 Week Low (on 2/11/2016):
|
1,829.08
|
The following table sets forth the published high and low
closing levels, as well as end-of-quarter closing levels, of the underlying index for each quarter in the period from January 1,
2011 through September 27, 2016. The graph following the table sets forth the daily closing levels of the underlying index during
the same period. The closing level of the underlying index on September 27, 2016 was 2,159.93. We obtained the closing level information
above and in the table and graph below from the Bloomberg Professional
®
service (“Bloomberg”), without
independent verification. The historical values of the underlying index should not be taken as an indication of future performance,
and no assurance can be given as to the closing level of the underlying index on the valuation date. The payment of dividends on
the stocks that constitute the underlying index are not reflected in its closing level and, therefore, have no effect on the calculation
of the payment at maturity.
S&P
500
®
Index
|
High
|
Low
|
Period
End
|
2011
|
|
|
|
First Quarter
|
1,343.01
|
1,256.88
|
1,325.83
|
Second Quarter
|
1,363.61
|
1,265.42
|
1,320.64
|
Third Quarter
|
1,353.22
|
1,119.46
|
1,131.42
|
Fourth Quarter
|
1,285.09
|
1,099.23
|
1,257.60
|
2012
|
|
|
|
First Quarter
|
1,416.51
|
1,277.06
|
1,408.47
|
Second Quarter
|
1,419.04
|
1,278.04
|
1,362.16
|
Third Quarter
|
1,465.77
|
1,334.76
|
1,440.67
|
Fourth Quarter
|
1,461.40
|
1,353.33
|
1,426.19
|
2013
|
|
|
|
First Quarter
|
1,569.19
|
1,457.15
|
1,569.19
|
Second Quarter
|
1,669.16
|
1,541.61
|
1,606.28
|
Third Quarter
|
1,725.52
|
1,614.08
|
1,681.55
|
Fourth Quarter
|
1,848.36
|
1,655.45
|
1,848.36
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter (through September 27, 2016)
|
2,190.15
|
2,088.55
|
2,159.93
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
S&P 500
®
Index Historical Performance – Daily Closing Levels
January 3, 2011 to
September 27, 2016
|
|
License Agreement.
“Standard & Poor’s
®
,”
“S&P
®
,” “S&P 500
®
” and “Standard & Poor’s 500”
are trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by JPMorgan Chase & Co.
and its affiliates, including JPMorgan Financial. See “Equity Index Descriptions — The S&P U.S. Indices —
License Agreement” in the accompanying underlying supplement.
Additional Information about the Buffered
PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions:
|
Postponement of maturity date:
|
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the Buffered PLUS will be postponed to the third business day following the valuation date as postponed.
|
Minimum ticketing size:
|
$1,000 / 100 Buffered PLUS
|
Trustee:
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
JPMS
|
The estimated value of the Buffered PLUS:
|
The estimated value of the Buffered PLUS set forth on the cover of this document is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with the same maturity as the Buffered PLUS, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the Buffered PLUS. The estimated value of the Buffered PLUS does not represent a minimum price at which JPMS would be willing to buy your Buffered PLUS in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated value of the Buffered PLUS is based on, among other things, our and our affiliates’ view of the funding value of the Buffered PLUS as well as the higher issuance, operational and ongoing liability management costs of the Buffered PLUS in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Risk Factors — The estimated value of the Buffered PLUS is derived by reference to an internal funding rate” in this document. The value of the derivative or derivatives underlying the economic terms of the Buffered PLUS 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 Buffered PLUS on the pricing date is based on market conditions and
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
other relevant factors and assumptions existing at
that time. See “Risk Factors — The estimated value of the Buffered PLUS does not represent future values of the Buffered
PLUS and may differ from others’ estimates” in this document.
The estimated value of the Buffered PLUS will be lower
than the original issue price of the Buffered PLUS because costs associated with selling, structuring and hedging the Buffered
PLUS are included in the original issue price of the Buffered PLUS. These costs include the selling commissions paid to JPMS and
other affiliated or unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the Buffered PLUS and the estimated cost of hedging our obligations
under the Buffered PLUS. Because hedging our obligations entails risk and may be influenced by market forces beyond our control,
this hedging may result in a profit that is more or less than expected, or it may result in a loss. We or one or more of our affiliates
will retain any profits realized in hedging our obligations under the Buffered PLUS. See “Risk Factors — The estimated
value of the Buffered PLUS will be lower than the original issue price (price to public) of the Buffered PLUS” in this document.
|
Secondary market prices of the Buffered PLUS:
|
For information about factors that will impact any secondary market prices of the Buffered PLUS, see “Risk Factors — Secondary market prices of the Buffered PLUS will be impacted by many economic and market factors” in this document. In addition, we generally expect that some of the costs included in the original issue price of the Buffered PLUS will be partially paid back to you in connection with any repurchases of your Buffered PLUS by JPMS in an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half of the stated term of the Buffered PLUS. The length of any such initial period reflects the structure of the Buffered PLUS, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Buffered PLUS and when these costs are incurred, as determined by our affiliates. See “Risk Factors — The value of the Buffered PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the Buffered PLUS for a limited time period.”
|
Tax considerations:
|
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-1-I. 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 the Buffered PLUS.
Based on current market conditions, in the opinion
of our special tax counsel, your Buffered PLUS should be treated 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 Buffered PLUS should be treated as long-term
capital gain or loss if you hold your Buffered PLUS for more than a year, whether or not you are an initial purchaser of Buffered
PLUS at the issue price. However, the IRS or a court may not respect this treatment of the Buffered PLUS, in which case the timing
and character of any income or loss on the Buffered PLUS could be materially and adversely affected. In addition, in 2007 Treasury
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income
over the term of their investment. It also asks for comments on a number of related topics, including the character of income or
loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime,
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 Buffered PLUS, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the Buffered PLUS, including possible alternative treatments and the issues presented by this
notice.
Withholding under legislation commonly referred to as “FATCA”
may (if the Buffered PLUS are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the
Buffered PLUS, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity, of a Buffered
PLUS. 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
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
consult your tax adviser regarding the potential application
of FATCA to the Buffered PLUS.
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 Buffered PLUS.
|
Supplemental use of proceeds and hedging:
|
The Buffered PLUS are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the Buffered PLUS. See “How the Buffered
PLUS Work” in this document for an illustration of the risk-return profile of the Buffered PLUS and “S&P 500
®
Index Overview” in this document for a description of the market exposure provided by the Buffered PLUS.
The original issue price of the Buffered PLUS is equal
to the estimated value of the Buffered PLUS plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers
and the structuring fee, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent
in hedging our obligations under the Buffered PLUS, plus the estimated cost of hedging our obligations under the Buffered PLUS.
|
Benefit plan investor considerations:
|
See “Benefit Plan Investor Considerations” in the accompanying product supplement.
|
Supplemental plan of distribution:
|
Subject to regulatory constraints, JPMS intends to
use its reasonable efforts to offer to purchase the Buffered PLUS in the secondary market, but is not required to do so.
JPMS,
acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management.
In addition, Morgan Stanley Wealth Management will receive a structuring fee as set forth on the cover of this document for each
PLUS.
We or our affiliate may enter into swap agreements
or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the
Buffered PLUS and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge
transactions. See “— Supplemental use of proceeds and hedging” above and “Use of Proceeds and Hedging”
in the accompanying product supplement.
|
Contact:
|
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326).
|
JPMorgan Chase
Financial Company LLC
Buffered
PLUS Based on the Value of the S&P 500
®
Index due May 3, 2019
Buffered Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Where you can find more information:
|
You may revoke your offer to purchase the Buffered PLUS 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 Buffered PLUS prior to their issuance. In the event of any changes to the terms
of the Buffered PLUS, we will notify you and you will be asked to accept such changes in connection with your purchase. You may
also choose to reject such changes in which case we may reject your offer to purchase.
You should read this document together with the accompanying
prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term notes of which these
Buffered PLUS are a part, and the more detailed information contained in the accompanying product supplement and the accompanying
underlying supplement.
This document, together with the documents listed below, contains
the terms of the Buffered PLUS and supersedes all other prior or contemporaneous oral statements as well as any other written materials
including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures,
stand-alone fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the
matters set forth in the “Risk Factors” sections of the accompanying product supplement and the accompanying underlying
supplement, as the Buffered PLUS 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 Buffered PLUS.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
• Product supplement no. MS-1-I dated June 3, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.pdf
• Underlying supplement
no. 1-I dated April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
• Prospectus supplement and prospectus, each dated
April 15, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 1665650,
and JPMorgan Chase & Co.’s CIK is 19617.
As used in this document, “we,” “us,”
and “our” refer to JPMorgan Financial.
“Performance Leveraged Upside Securities
SM
”
and “PLUS
SM
” are service marks of Morgan Stanley.
|
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