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 October 21, 2016
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JPMorgan Chase Financial Company LLC
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October 2016
Pricing Supplement
Registration Statement Nos. 333-209682 and 333-209682-01
Dated October , 2016
Filed
pursuant to Rule 424(b)(2)
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STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Dual Directional Trigger PLUS Based on the Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Fully and Unconditionally Guaranteed by JPMorgan Chase & Co.
The Dual Directional Trigger PLUS, or Trigger PLUS, will pay no interest and do not guarantee any return of your principal at maturity. 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 depreciated in value but by no more than 20%, investors will receive at maturity the stated principal amount of the Trigger PLUS plus an unleveraged positive return equal to the absolute value of the percentage decline, which will
effectively be limited to a positive 20% return. However, if the underlying index has
depreciated
by more than 20% in value, at maturity investors will be negatively exposed to the full amount of the percentage decline in the underlying
index and will lose 1% of the stated principal amount for every 1% of decline in the value of the underlying index over the term of the Trigger PLUS. The Trigger PLUS are for investors who seek an equity index-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 absolute return features that in each case apply to a limited range of the 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
Trigger 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 Financials Medium-Term Notes, Series A, program.
Any payment on the Trigger PLUS is subject to the credit risk of JPMorgan Financial, as issuer of the Trigger PLUS, and the credit risk of JPMorgan Chase & Co., as
guarantor of the Trigger PLUS.
The investor may lose some or all of the stated principal amount of the Trigger PLUS.
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SUMMARY TERMS
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Underlying index:
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Russell 2000
®
Index
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Aggregate principal amount:
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$
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Payment at maturity:
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If the final index value is
greater than
the initial index value, for each $10 stated principal amount Trigger 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
less than or equal to
the initial index value but is
greater than or equal to
the trigger level, for each $10 stated principal
amount Trigger PLUS:
$10 + ($10 × absolute index return)
In this scenario,
you will receive a 1% positive return on the Trigger PLUS for each 1% negative return on the underlying index. In no event will this amount exceed the stated principal amount plus $2.00.
If the final index value is
less than
the trigger level, for each $10 stated principal amount Trigger PLUS:
$10 × index performance factor
This amount will be less than the stated
principal amount of $10 per Trigger PLUS and will represent a loss of more than 20%, and possibly all, of your investment.
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Leveraged upside payment:
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$10 × leverage factor × index percent change
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Index percent change:
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(final index value initial index value) / initial index value
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Absolute index return:
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The absolute value of the index percent change. For example, a -5% index percent change will result in a +5% absolute index return.
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Initial index value:
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The closing level of the underlying index on the pricing date
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Final index value:
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The closing level of the underlying index on the valuation date
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Trigger level:
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80% of the initial index value
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Leverage factor:
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200%
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Index performance factor:
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final index value / initial index value
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Maximum payment at maturity:
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At least $13.15 (at least 131.50% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement and will not be less than $13.15 per Trigger
PLUS.
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Stated principal amount:
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$10 per Trigger PLUS
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Issue price:
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$10 per Trigger PLUS (see Commissions and issue price below)
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Pricing date:
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October , 2016 (expected to price on or about October 31, 2016)
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Original issue date (settlement
date):
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November , 2016 (3 business days after the pricing date)
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Valuation date:
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October 31, 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
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Maturity date:
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November 5, 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
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CUSIP / ISIN:
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48128P795 / US48128P7950
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Listing:
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The Trigger PLUS will not be listed on any securities exchange.
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Agent:
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J.P. Morgan Securities LLC (JPMS)
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Commissions and issue price:
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Price to public
(1)
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Fees and commissions
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Proceeds to issuer
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Per Trigger PLUS
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$10.00
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$0.25
(2)
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$9.70
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$0.05
(3)
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Total
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$
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$
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$
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(1)
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See Additional Information about the Trigger PLUS Supplemental use of proceeds and hedging in this document for information about the components of the price to public of the Trigger PLUS.
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(2)
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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 Trigger PLUS. See Plan of Distribution (Conflicts of Interest) in the accompanying product supplement.
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(3)
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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 Trigger PLUS
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If the Trigger PLUS priced today, the estimated value of the Trigger PLUS would be approximately $9.726 per $10 stated
principal amount Trigger PLUS.
The estimated value of the Trigger PLUS on the pricing date will be provided in the pricing supplement and will not be less than $9.575 per $10 stated principal amount Trigger
PLUS.
See Additional Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document for additional information.
Investing in the Trigger 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 6 of this document.
Neither the
Securities and Exchange Commission (the SEC) nor any state securities commission has approved or disapproved of the Trigger 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 Trigger 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 Trigger 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
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Trigger
Performance Leveraged Upside Securities
Principal at Risk Securities
The Dual Directional Trigger PLUS Based on the Value of the Russell 2000
®
Index due November 5, 2019 (the
Trigger PLUS) can be used:
§
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As an alternative to direct exposure to the underlying index that enhances returns for a certain range of positive performance of the underlying index.
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To enhance returns and potentially outperform the underlying index in a moderately bullish scenario.
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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.
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To provide an unleveraged positive return in the event of a decline of the underlying index but only if the final index value is
greater than or equal to
the trigger level.
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Maturity:
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Approximately 3 years
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Leverage factor:
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200% (applicable only if the final index value is greater than the initial index value)
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Trigger level:
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80% of the initial index value
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Maximum payment at maturity:
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At least $13.15 (at least 131.50% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement.
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Minimum payment at maturity:
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None. Investors may lose their entire initial investment in the Trigger PLUS.
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Supplemental Terms of the Trigger PLUS
For purposes of the accompanying product supplement, the underlying index is an Index.
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged
upside exposure to an underlying asset and the opportunity, through the absolute return feature, to earn a positive return at maturity for a limited range of negative performance of the underlying asset. At maturity, if the underlying 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 underlying asset has
depreciated
in value but by no more than 20%, investors will receive the stated principal amount of their investment plus an unleveraged positive return equal to the absolute value of the percentage decline in the underlying asset, which will
effectively be limited to a positive 20% return. However, at maturity, if the underlying asset has
depreciated
in value by more than 20%, investors will be negatively exposed to the full amount of the percentage decline in the underlying
asset and will lose 1% of the stated principal amount for every 1% of decline, without any buffer.
Investors may lose some or all of the stated principal amount of the Trigger PLUS.
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Leveraged Upside
Performance
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The Trigger 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.
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Absolute Return
Feature
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The Trigger PLUS offer investors an opportunity to earn an unleveraged positive return if the final index value is less than or equal to the initial index value
but
is greater than or equal to the trigger level.
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Upside Scenario
if the Underlying Index Appreciates
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The final index value is greater than the initial index value and, at maturity, the Trigger PLUS pay the stated principal amount of $10
plus
a return equal to 200% of the index percent change, subject to the maximum
payment at maturity of at least $13.15 (at least 131.50% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement.
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Absolute Return
Scenario
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The final index value is less than or equal to the initial index value but is greater than or equal to the trigger level, which is 80% of the initial index value. In this case, the Trigger PLUS pay a 1% positive return for
each 1% negative return of the underlying index. For example, if the final index value is 5% less than the initial index value, the Trigger PLUS will provide a total positive return of 5% at maturity. The maximum return you may receive in
this scenario is a positive 20% return at maturity.
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Downside
Scenario
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The final index value is less than the trigger level. In this case, the Trigger PLUS pay an amount that is over 20% less than the stated principal amount and this decrease will be by an amount that is proportionate to the
percentage decline in the final index value from the initial index value. (Example: if the underlying index decreases in value by 30%, the Trigger PLUS will pay an amount that is less than the stated principal amount by 30%, or $7 per Trigger
PLUS.)
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JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
How the Dual Directional Trigger PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity on the Trigger PLUS based on the following terms:
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Stated principal amount:
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$10 per Trigger PLUS
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Leverage factor:
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200%
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Trigger level:
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80% of the initial index value
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Hypothetical maximum payment at maturity:
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$13.15 (131.50% of the stated principal amount) per Trigger PLUS (which represents the lowest hypothetical maximum payment at maturity)*
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*The actual maximum payment at maturity will be provided in the pricing supplement and will not be less than $13.15 per
Trigger PLUS.
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Dual Directional Trigger PLUS Payoff
Diagram
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How it works
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Upside Scenario.
If the final index value is greater than the initial index value, for each $10 principal amount Trigger 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 Trigger PLUS, subject to the maximum payment at maturity. Under the hypothetical terms of the Trigger PLUS, an investor will realize the
hypothetical maximum payment at maturity at a final index value of 115.75% of the initial index value.
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§
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For example, if the underlying index appreciates 5%, investors will receive a 10% return, or $11.00 per Trigger PLUS.
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§
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Absolute Return Scenario.
If the final index value is less than or equal to the initial index value but is greater than or equal to the trigger level, investors will receive a 1%
positive return on the Trigger PLUS for each 1% negative return of the underlying index.
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§
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For example, if the underlying index depreciates 5%, investors will receive a 5% return, or $10.50 per Trigger PLUS.
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§
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The maximum return you may receive in this scenario is a positive 20% return at maturity.
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§
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Downside Scenario.
If the final index value is less than the trigger level, investors will receive an amount that is significantly less than the stated principal amount by an
amount proportionate to the percentage decrease of the final index value from the initial index value. This amount will be less than 80% of the stated principal amount per Trigger PLUS.
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§
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For example, if the underlying index depreciates 50%, investors will lose 50% of their principal and receive only $5 per Trigger PLUS at maturity, or 50% of the stated principal amount.
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JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
The hypothetical returns and hypothetical payments on the Trigger PLUS shown above apply
only if you hold the Trigger 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
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger 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 Trigger 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 Trigger PLUS.
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The Trigger PLUS do not pay interest or guarantee return of any principal and your investment in the Trigger PLUS may result in a loss.
The terms of the Trigger PLUS differ from those of ordinary debt
securities in that the Trigger PLUS do not pay interest or guarantee the payment of any principal amount at maturity. If the final index value is less than the trigger level (which is 80% of the initial index value), the absolute return feature
will no longer be available and the payment at maturity will be an amount in cash that is over 20% less than the stated principal amount of each Trigger PLUS, and this decrease will be by an amount that is proportionate to the decrease in the value
of the underlying index and may be zero. There is no minimum payment at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
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§
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The appreciation potential of the Trigger PLUS is limited by the maximum payment at maturity.
The appreciation potential of Trigger PLUS is limited by the maximum payment at maturity of at least $13.15 (at
least 131.50% of the stated principal amount) per Trigger PLUS. The actual maximum payment at maturity will be provided in the pricing supplement. Although the leverage factor provides 200% exposure to any increase in the final index value
as compared to the initial index value on the valuation date, because the maximum payment at maturity will be limited to at least 131.50% of the stated principal amount for the Trigger PLUS, any increase in the final index value by more than 15.75%
(if the maximum payment at maturity is set at 131.50% of the stated principal amount) will not further increase the return on the Trigger PLUS.
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§
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Your maximum downside gain on the Trigger PLUS is limited by the trigger level.
If the final index value is less than or equal to the initial index value and greater than or equal to the trigger level, you
will receive at maturity $10
plus
a return equal to the absolute index return, which will reflect a 1% positive return for each 1% negative return on the underlying index, subject to an effective limit of 20%. Because you will not
receive a positive return if the underlying index has depreciated below the trigger level, your maximum downside payment will be $12.00 per $10.00 stated principal amount Trigger PLUS.
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§
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The Trigger 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 Trigger PLUS.
Investors are dependent on our and JPMorgan Chase & Co.s ability to pay all amounts due on the Trigger 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 Trigger 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 Trigger PLUS and you could lose your entire investment.
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§
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As a finance subsidiary, JPMorgan Financial has no independent operations and has limited assets.
As a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and
administration of our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of our affiliates to make payments under loans made by us or other intercompany
agreements. As a result, we are dependent upon payments from our affiliates to meet our obligations under the Trigger PLUS. If these affiliates do not make payments to us and we fail to make payments on the Trigger 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.
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§
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Economic interests of the issuer, the guarantor, the calculation agent, the agent of the offering of the Trigger 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 Trigger PLUS, including acting as calculation agent and as an agent of the
offering of the Trigger PLUS, hedging our obligations under the Trigger PLUS and making the assumptions used to determine the pricing of the Trigger PLUS and the estimated value of the Trigger PLUS, which we refer to as the estimated value of the
Trigger 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 Trigger 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, if any. Determinations made by the calculation agent, including
with respect to the occurrence or non-occurrence of market disruption events,
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JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
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.
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In addition, our and JPMorgan Chase & Co.s business activities, including hedging and trading activities, could
cause our and JPMorgan Chase & Co.s economic interests to be adverse to yours and could adversely affect any payment on the Trigger PLUS and the value of the Trigger PLUS. It is possible that hedging or trading activities of ours or
our affiliates in connection with the Trigger PLUS could result in substantial returns for us or our affiliates while the value of the Trigger PLUS declines. Please refer to Risk Factors Risks Relating to Conflicts of
Interest in the accompanying product supplement for additional information about these risks.
§
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The benefit provided by the trigger level may terminate on the valuation date.
If the final index value is less than the trigger level, the benefit provided by the trigger level will terminate and you will
be fully exposed to any depreciation of the underlying index.
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§
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The estimated value of the Trigger PLUS will be lower than the original issue price (price to public) of the Trigger PLUS.
The estimated value of the Trigger PLUS is only an estimate determined by reference
to several factors. The original issue price of the Trigger PLUS will exceed the estimated value of the Trigger PLUS because costs associated with selling, structuring and hedging the Trigger PLUS are included in the original issue price of the
Trigger 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 Trigger PLUS and the estimated
cost of hedging our obligations under the Trigger PLUS. See Additional Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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§
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The estimated value of the Trigger PLUS does not represent future values of the Trigger PLUS and may differ from others estimates. The estimated value of the Trigger PLUS is determined by reference to
internal pricing models of our affiliates.
This estimated value of the Trigger 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 Trigger PLUS that are greater than or less than the estimated value of the Trigger 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 Trigger 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 Trigger PLUS from you in secondary market
transactions. See Additional Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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§
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The estimated value of the Trigger PLUS is derived by reference to an internal funding rate.
The internal funding rate used in the determination of the estimated value of the Trigger PLUS is based on, among
other things, our and our affiliates view of the funding value of the Trigger PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger 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 Trigger PLUS and any secondary market prices of the Trigger PLUS. See
Additional Information about the Trigger PLUS The estimated value of the Trigger PLUS in this document.
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§
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The value of the Trigger 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 Trigger PLUS for a limited time
period.
We generally expect that some of the costs included in the original issue price of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger 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 Trigger PLUS Secondary market prices of the Trigger PLUS in this document for additional information relating to this initial period. Accordingly, the
estimated value of your Trigger PLUS during this initial period may be lower than the value of the Trigger PLUS as published by JPMS (and which may be shown on your customer account statements).
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
§
|
|
Secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS.
Any secondary market prices of the Trigger PLUS will likely be lower than the original
issue price of the Trigger 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 projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the Trigger PLUS. As a result, the price, if any, at which JPMS will be
willing to buy Trigger 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 Trigger PLUS.
|
The Trigger PLUS are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Trigger PLUS to
maturity. See Secondary trading may be limited below.
§
|
|
Secondary market prices of the Trigger PLUS will be impacted by many economic and market factors.
The secondary market price of the Trigger 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:
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¡
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any actual or potential change in our or JPMorgan Chase & Co.s creditworthiness or credit spreads;
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¡
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customary bid-ask spreads for similarly sized trades;
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|
¡
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|
our internal secondary market funding rates for structured debt issuances;
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|
¡
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|
the actual and expected volatility of the underlying index;
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|
¡
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the time to maturity of the Trigger PLUS;
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|
¡
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the dividend rates on the equity securities included in the underlying index;
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|
¡
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interest and yield rates in the market generally; and
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¡
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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 Trigger PLUS, which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the Trigger
PLUS, if any, at which JPMS may be willing to purchase your Trigger PLUS in the secondary market.
§
|
|
Investing in the Trigger PLUS is not equivalent to investing in the underlying index.
Investing in the Trigger PLUS is not equivalent to investing in the underlying index or its component
stocks. Investors in the Trigger PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the stocks that constitute the underlying index.
|
§
|
|
Adjustments to the underlying index could adversely affect the value of the Trigger 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.
|
§
|
|
An investment in the Trigger PLUS is subject to risks associated with small capitalization stocks
.
The stocks that constitute the underlying index are issued by companies with relatively small market
capitalization. The stock prices of smaller companies may be more volatile than stock prices of large capitalization companies. Small capitalization companies may be less able to withstand adverse economic, market, trade and competitive
conditions relative to larger companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits downward stock price pressure under adverse market
conditions.
|
§
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|
Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the Trigger PLUS.
The hedging or trading activities of the issuers affiliates and of any other hedging
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
counterparty with respect to the Trigger 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
Trigger PLUS at maturity, if any. Any of these hedging or trading activities on or prior to the pricing date could potentially affect the initial index value and the trigger level 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 Trigger PLUS or so that you do not suffer a loss on your initial investment in the Trigger PLUS. Additionally, these hedging or trading
activities during the term of the Trigger 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, if any. It is possible that these hedging
or trading activities could result in substantial returns for us or our affiliates while the value of the Trigger PLUS declines.
|
§
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|
Secondary trading may be limited.
The Trigger PLUS will not be listed on a securities exchange. There may be little or no secondary market for the Trigger PLUS. Even if there is a secondary market,
it may not provide enough liquidity to allow you to trade or sell the Trigger PLUS easily. JPMS may act as a market maker for the Trigger 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 Trigger PLUS, the price at which you may be able to trade your Trigger PLUS is likely to depend on the price, if any, at which JPMS is willing to buy the Trigger 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 Trigger PLUS.
|
§
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|
The final terms and valuation of the Trigger PLUS will be provided in the pricing supplement.
The final terms of the Trigger PLUS will be provided in the pricing supplement. In particular, each of the
estimated value of the Trigger 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 Trigger PLUS based on the minimums for the estimated value of the Trigger PLUS and the maximum payment at maturity.
|
§
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|
The tax consequences of an investment in the Trigger PLUS are uncertain.
There is no direct legal authority as to the proper U.S. federal income tax characterization of the Trigger 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 Trigger PLUS described in Additional Information about the Trigger 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 Trigger PLUS, the timing and
character of any income or loss on the Trigger 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 Trigger 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 Trigger PLUS, including possible alternative treatments and the
issues presented by this notice.
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Russell 2000
®
Index Overview
The Russell 2000
®
Index consists of the middle 2,000 companies included in the Russell 3000E
TM
Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell 2000
®
Index, see the information set forth under Equity Index Descriptions The Russell Indices in the accompanying underlying supplement.
Information as of market close on October 20, 2016:
|
|
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|
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|
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|
|
Bloomberg Ticker Symbol:
|
|
RTY
|
|
|
|
52 Week High (on 9/22/2016):
|
|
1,263.438
|
|
|
|
|
|
Current Closing Level:
|
|
1,219.787
|
|
|
|
52 Week Low (on 2/11/2016):
|
|
953.715
|
|
|
|
|
|
52 Weeks Ago (on 10/20/2015):
|
|
1,163.270
|
|
|
|
|
|
|
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 October 20, 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 October 20, 2016 was 1,219.787. We obtained the closing level information above and the information in the table and graph below from the Bloomberg Professional
®
service
(Bloomberg), without independent verification. The historical levels of the 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.
|
|
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Russell 2000
®
Index
|
|
High
|
|
Low
|
|
Period End
|
2011
|
|
|
|
|
|
|
First Quarter
|
|
843.549
|
|
773.184
|
|
843.549
|
Second Quarter
|
|
865.291
|
|
777.197
|
|
827.429
|
Third Quarter
|
|
858.113
|
|
643.421
|
|
644.156
|
Fourth Quarter
|
|
765.432
|
|
609.490
|
|
740.916
|
2012
|
|
|
|
|
|
|
First Quarter
|
|
846.129
|
|
747.275
|
|
830.301
|
Second Quarter
|
|
840.626
|
|
737.241
|
|
798.487
|
Third Quarter
|
|
864.697
|
|
767.751
|
|
837.450
|
Fourth Quarter
|
|
852.495
|
|
769.483
|
|
849.350
|
2013
|
|
|
|
|
|
|
First Quarter
|
|
953.068
|
|
872.605
|
|
951.542
|
Second Quarter
|
|
999.985
|
|
901.513
|
|
977.475
|
Third Quarter
|
|
1,078.409
|
|
989.535
|
|
1,073.786
|
Fourth Quarter
|
|
1,163.637
|
|
1,043.459
|
|
1,163.637
|
2014
|
|
|
|
|
|
|
First Quarter
|
|
1,208.651
|
|
1,093.594
|
|
1,173.038
|
Second Quarter
|
|
1,192.964
|
|
1,095.986
|
|
1,192.964
|
Third Quarter
|
|
1,208.150
|
|
1,101.676
|
|
1,101.676
|
Fourth Quarter
|
|
1,219.109
|
|
1,049.303
|
|
1,204.696
|
2015
|
|
|
|
|
|
|
First Quarter
|
|
1,266.373
|
|
1,154.709
|
|
1,252.772
|
Second Quarter
|
|
1,295.799
|
|
1,215.417
|
|
1,253.947
|
Third Quarter
|
|
1,188.954
|
|
1,083.907
|
|
1,100.688
|
Fourth Quarter
|
|
1,231.745
|
|
1,097.552
|
|
1,135.889
|
2016
|
|
|
|
|
|
|
First Quarter
|
|
1,114.028
|
|
935.715
|
|
1,114.028
|
Second Quarter
|
|
1,188.954
|
|
1,188.954
|
|
1,151.923
|
Third Quarter
|
|
1,248.581
|
|
1,139.453
|
|
1,244.943
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
|
|
|
|
Russell
2000
®
Index
|
|
High
|
|
Low
|
|
Period End
|
Fourth Quarter (through October 20, 2016)
|
|
1,250.764
|
|
1,210.136
|
|
1,219.787
|
License Agreement.
The Russell 2000
®
Index is a
trademark of FTSE Russell and has been licensed for use by JPMorgan Chase Bank, National Association and its affiliates. For more information, see Equity Index Descriptions The Russell Indices Disclaimers in the
accompanying underlying supplement.
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
Additional Information about the Trigger 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 Trigger PLUS will be postponed to
the third business day following the valuation date as postponed.
|
Minimum ticketing size:
|
|
$1,000 / 100 Trigger PLUS
|
Trustee:
|
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
|
JPMS
|
The estimated value of the Trigger PLUS:
|
|
The estimated value of the Trigger 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 Trigger PLUS, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic terms of the Trigger PLUS. The
estimated value of the Trigger PLUS does not represent a minimum price at which JPMS would be willing to buy your Trigger 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 Trigger PLUS is based on, among other things, our and our affiliates view of the funding value of the Trigger PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger 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 Trigger 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 Trigger 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 Trigger PLUS on the pricing date is based on market conditions and other relevant factors and assumptions existing at that time. See Risk Factors The
estimated value of the Trigger PLUS does not represent future values of the Trigger PLUS and may differ from others estimates in this document.
The estimated value of the Trigger PLUS will be lower than the original issue price of the Trigger PLUS because costs associated with selling, structuring and hedging
the Trigger PLUS are included in the original issue price of the Trigger 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 Trigger PLUS and the estimated cost of hedging our obligations under the Trigger 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 Trigger PLUS. See Risk Factors The estimated value of the Trigger PLUS will be lower than the original issue price (price to public) of the Trigger PLUS in this document.
|
Secondary market prices of the Trigger PLUS:
|
|
For information about factors that will impact any secondary market prices of the Trigger PLUS, see Risk Factors Secondary market prices of the Trigger 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 Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger 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 Trigger PLUS. The length of any such initial period reflects the structure of the Trigger PLUS,
whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Trigger PLUS and when these costs are incurred, as determined by our affiliates. See Risk Factors The
value of the Trigger 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 Trigger PLUS for a limited time period.
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
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 Trigger PLUS.
Based on current market conditions, in the opinion of our
special tax counsel, your Trigger 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 Trigger PLUS should be treated as
long-term capital gain or loss if you hold your Trigger PLUS for more than a year, whether or not you are an initial purchaser of Trigger PLUS at the issue price. However, the IRS or a court may not respect this treatment of the Trigger PLUS,
in which case the timing and character of any income or loss on the Trigger 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 Trigger PLUS, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the Trigger PLUS, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as FATCA may (if the Trigger PLUS are recharacterized as debt instruments) apply to amounts treated as
interest paid with respect to the Trigger PLUS, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity, of a Trigger 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 consult your tax adviser regarding the potential application of FATCA to the Trigger 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 Trigger PLUS.
|
Supplemental use of proceeds and hedging:
|
|
The Trigger PLUS are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the Trigger
PLUS. See How the Trigger PLUS Work in this document for an illustration of the risk-return profile of the Trigger PLUS and Russell 2000
®
Index Overview in this
document for a description of the market exposure provided by the Trigger PLUS.
The original
issue price of the Trigger PLUS is equal to the estimated value of the Trigger 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 Trigger PLUS, plus the estimated cost of hedging our obligations under the Trigger 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 Trigger 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 Trigger 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 Trigger 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 Stanleys principal executive offices at 1585 Broadway, New York, New
|
JPMorgan Chase Financial Company LLC
Dual Directional Trigger PLUS Based on the
Value of the Russell 2000
®
Index due November 5, 2019
Trigger Performance
Leveraged Upside Securities
SM
Principal at Risk Securities
|
|
|
|
|
York 10036 (telephone number (800) 869-3326).
|
Where you can find more information:
|
|
You may revoke your offer to purchase the Trigger 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 Trigger PLUS prior to their issuance. In the event of any changes to the terms of the Trigger 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 Trigger 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 Trigger 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 Trigger 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 Trigger 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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