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 January
13, 2017
January ,
2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Auto Callable Contingent Interest Notes Linked
to the Least Performing of the Common Stock of BlackRock, Inc., the Common Stock of The Bank of New York Mellon Corporation, the
Common Units Representing Limited Partnership Interests of The Blackstone Group L.P. and the Common Stock of State Street Corporation
due January 29, 2020
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a Contingent
Interest Payment with respect to each monthly Interest Review Date for which the closing price of one share of each of the Reference
Stocks is greater than or equal to 50.00% of its Initial Value, which we refer to as an Interest Barrier.
|
|
·
|
If the closing price of one share of each Reference Stock
is greater than or equal to its Interest Barrier on any Interest Review Date, investors will receive, in addition to the Contingent
Interest Payment with respect to that Interest Review Date, any previously unpaid Contingent Interest Payments for prior Interest
Review Dates.
|
|
·
|
The notes will be automatically called if the closing
price of one share of each Reference Stock on any quarterly Autocall Review Date is greater than or equal to its Initial Value.
|
|
·
|
The earliest date on which an automatic call may be initiated
is July 24, 2017.
|
|
·
|
Investors in the notes should be willing to accept the
risk of losing some or all of their principal and the risk that no Contingent Interest Payment may be made with respect to some
or all Interest Review Dates.
|
|
·
|
Investors should also be willing to forgo fixed interest
and dividend payments, in exchange for the opportunity to receive Contingent Interest Payments.
|
|
·
|
The notes are unsecured and unsubordinated obligations
of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan Financial, the payment on which is fully and unconditionally
guaranteed by JPMorgan Chase & Co.
Any payment on the notes is subject to the credit risk of JPMorgan Financial, as issuer
of the notes, and the credit risk of JPMorgan Chase & Co., as guarantor of the notes.
|
|
·
|
Payments on the notes are not linked to a basket composed
of the Reference Stocks. Payments on the notes are linked to the performance of each of the Reference Stocks individually, as
described below.
|
|
·
|
Minimum denominations of $1,000 and integral multiples
thereof
|
|
·
|
The notes are expected to price on or about January 24,
2017 and are expected to settle on or about January 27, 2017.
|
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-10 of the accompanying product supplement and “Selected Risk Considerations” beginning
on page PS-6 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to
as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. If the notes priced today, the selling commissions would be approximately $35.00 per $1,000 principal
amount note and in no event will these selling commissions exceed $45.00 per $1,000 principal amount note. See “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
|
If the notes priced today, the estimated value of the notes would
be approximately $940.20 per $1,000 principal amount note. The estimated value of the notes, when the terms of the notes are set,
will be provided in the pricing supplement and will not be less than $920.00 per $1,000 principal amount note. See “The Estimated
Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no.
4-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Reference
Stocks:
As specified under “Key Terms Relating to the Reference Stocks”
in this pricing supplement
Contingent
Interest
Payments:
If the notes have not been automatically called and the closing price of one share of each Reference Stock on any Interest
Review Date is greater than or equal to its Interest Barrier, you will receive on the applicable Interest Payment Date for each
$1,000 principal amount note a Contingent Interest Payment equal to at least $8.3333 (equivalent to a Contingent Interest Rate
of at least 10.00% per annum, payable at a rate of at least 0.83333% per month) (to be provided in the pricing supplement),
plus
any previously unpaid Contingent Interest Payments for any prior Interest Review Dates.
If the
Contingent Interest Payment is not paid on any Interest Payment Date, that unpaid Contingent Interest Payment will be paid on
a later Interest Payment Date if the closing price of one share of each Reference Stock on the Interest Review Date related to
that later Interest Payment Date is greater than or equal to its Interest Barrier. You will not receive any unpaid Contingent
Interest Payments if the closing price of one share of any Reference Stock on each subsequent Interest Review Date is less than
its Interest Barrier.
Contingent
Interest
Rate:
At least 10.00% per annum, payable at a rate of at least 0.83333% per month (to be provided in the pricing supplement)
Interest
Barrier / Trigger Value:
With respect to each Reference Stock, 50.00% of its Initial Value, as specified under “Key
Terms Relating to the Reference Stocks” in this pricing supplement
Pricing
Date:
On or about January 24, 2017
Original
Issue Date (Settlement Date):
On or about January 27, 2017
Interest
Review Dates*:
February 24, 2017, March 24, 2017, April 24, 2017, May 24, 2017, June
26, 2017, July 24, 2017, August 24, 2017, September 25, 2017, October 24, 2017, November 24, 2017, December 26, 2017, January
24, 2018, February 26, 2018, March 26, 2018, April 24, 2018, May 24, 2018, June 25, 2018, July 24, 2018, August 24, 2018, September
24, 2018, October 24, 2018, November 26, 2018, December 24, 2018, January 24, 2019, February 25, 2019, March 25, 2019, April 24,
2019, May 24, 2019, June 24, 2019, July 24, 2019, August 26, 2019, September 24, 2019, October 24, 2019, November 25, 2019, December
24, 2019 and January 24, 2020 (the “final Review Date”)
Autocall
Review Dates*:
July 24, 2017, October 24, 2017, January 24, 2018, April 24, 2018,
July 24, 2018, October 24, 2018, January 24, 2019, April 24, 2019, July 24, 2019 and October 24, 2019
Interest
Payment Dates*:
March 1, 2017, March 29, 2017, April 27, 2017, May 30, 2017, June 29, 2017, July 27, 2017, August 29,
2017, September 28, 2017, October 27, 2017, November 29, 2017, December 29, 2017, January 29, 2018, March 1, 2018, March 29, 2018,
April 27, 2018, May 30, 2018, June 28, 2018, July 27, 2018, August 29, 2018, September 27, 2018, October 29, 2018, November 29,
2018, December 28, 2018, January 29, 2019, February 28, 2019, March 28, 2019, April 29, 2019, May 30, 2019, June 27, 2019, July
29, 2019, August 29, 2019, September 27, 2019, October 29, 2019, November 29, 2019, December 30, 2019 and the Maturity Date
Maturity
Date*:
January 29, 2020
Call
Settlement Date*:
If the notes are automatically called on any Autocall Review Date, the first Interest Payment
Date immediately following that Autocall Review Date
* Subject
to postponement in the event of a market disruption event and as described under “General Terms of Notes — Postponement
of a Determination Date — Notes Linked to Multiple Underlyings” and “General Terms of Notes — Postponement
of a Payment Date” in the accompanying product supplement
Automatic
Call:
If the closing
price of one share of each Reference Stock on any Autocall Review Date is greater than or equal to its Initial Value, the notes
will be automatically called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the
Contingent Interest Payment applicable to the Interest Review Date corresponding to that Autocall Review Date
plus
(c)
any previously unpaid Contingent Interest Payments for any prior Interest Review Dates, payable on the applicable Call Settlement
Date. No further payments will be made on the notes.
Payment
at Maturity:
If the notes
have not been automatically called and the Final Value of each Reference Stock is greater than or equal to its Trigger Value,
you will receive a cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Contingent
Interest Payment applicable to the final Review Date
plus
(c) any previously unpaid Contingent Interest Payments for any
prior Interest Review Dates.
If the notes
have not been automatically called and the Final Value of any Reference Stock is less than its Trigger Value, your payment at
maturity per $1,000 principal amount note will be calculated as follows:
$1,000 +
($1,000 × Least Performing Stock Return)
If the
notes have not been automatically called and the Final Value of any Reference Stock is less than its Trigger Value, you will lose
more than 50.00% of your principal amount at maturity and could lose all of your principal amount at maturity.
Least
Performing Reference Stock:
The Reference Stock with the Least Performing
Stock Return
Least
Performing Stock Return:
The lowest of the Stock Returns of the Reference
Stocks
Stock
Return:
With respect
to each Reference Stock,
(Final
Value – Initial Value)
Initial Value
Initial
Value:
With respect to each Reference Stock
, t
he
closing price of one share of that Reference Stock on the Pricing Date, as specified under “Key Terms Relating to the Reference
Stocks” in this pricing supplement.
Final
Value:
With respect to each Reference Stock, the closing price of one share of that
Reference Stock on the final Review Date
Stock
Adjustment Factor:
With respect to each Reference Stock, the Stock Adjustment Factor is referenced in determining the
closing price of one share of that Reference Stock and is set equal to 1.0 on the Pricing Date. The Stock Adjustment Factor of
each Reference Stock is subject to adjustment upon the occurrence of certain corporate events affecting that Reference Stock.
See “The Underlyings — Reference Stocks — Anti-Dilution Adjustments” and “The Underlyings —
Reference Stocks — Reorganization Events” in the accompanying product supplement for further information.
PS-
1
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
Key
Terms Relating to the Reference Stocks
Reference Stock
|
Bloomberg Ticker Symbol
|
Initial Value
|
Interest Barrier / Trigger Value
|
Common stock of BlackRock, Inc., par value $0.01
per share
|
BLK
|
$
|
$
|
Common stock of The Bank of New York Mellon Corporation, par value $
0.01 per share
|
BK
|
$
|
$
|
Common units representing limited partnership interests of The Blackstone Group L.P.
|
BX
|
$
|
$
|
Common stock of State Street Corporation, par value $1.00 per share
|
STT
|
$
|
$
|
How
the Notes Work
Payments in Connection with Interest Review
Dates Preceding the Final Review Date
PS-
2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
Payment at Maturity
If the Notes Have Not Been Automatically Called
Total Contingent Interest Payments
The table below illustrates the hypothetical total
Contingent Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Contingent Interest
Rate of 10.00% per annum, depending on how many Contingent Interest Payments are made prior to automatic call or maturity. The
actual Contingent Interest Rate will be provided in the pricing supplement and will be at least 10.00% per annum.
Number of Contingent Interest
Payments
|
Total Contingent Interest
Payments
|
36
|
$300.0000
|
35
|
$291.6667
|
34
|
$283.3333
|
33
|
$275.0000
|
PS-
3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
32
|
$
266.6667
|
31
|
$
258.3333
|
30
|
$
250.0000
|
29
|
$
241.6667
|
28
|
$
233.3333
|
27
|
$
225.0000
|
26
|
$
216.6667
|
25
|
$
208.3333
|
24
|
$
200.0000
|
23
|
$
191.6667
|
22
|
$
183.3333
|
21
|
$
175.0000
|
20
|
$
166.6667
|
19
|
$
158.3333
|
18
|
$
150.0000
|
17
|
$
141.6667
|
16
|
$
133.3333
|
15
|
$
125.0000
|
14
|
$
116.6667
|
13
|
$
108.3333
|
12
|
$
100.0000
|
11
|
$
91.6667
|
10
|
$
83.3333
|
9
|
$
75.0000
|
8
|
$
66.6667
|
7
|
$
58.3333
|
6
|
$
50.0000
|
5
|
$
41.6667
|
4
|
$
33.3333
|
3
|
$
25.0000
|
2
|
$
16.6667
|
1
|
$
8.3333
|
0
|
$
0.0000
|
Hypothetical
Payout Examples
The
following examples illustrate payments on the notes linked to four hypothetical Reference Stocks, assuming a range of performances
for the hypothetical Least Performing Reference Stock on the Interest Review Dates and Autocall Review Dates
.
Each hypothetical
payment set forth below assumes that the closing price of one share of each Reference Stock that is not the Least Performing Reference
Stock on (i) each Autocall Review Date is greater than or equal to its Initial Value and (ii) on each Interest Review Date is
greater than or equal to its Interest Barrier (and therefore its Trigger Value).
In
addition, the hypothetical payments set forth below assume the following:
|
·
|
an Initial Value for the Least Performing Reference Stock
of $100.00;
|
|
·
|
an Interest Barrier and a Trigger Value for the Least Performing
Reference Stock of $50.00 (equal to 50.00% of its hypothetical Initial Value); and
|
|
·
|
a Contingent Interest Rate of 10.00% per annum (payable at
a rate of 0.83333% per month).
|
PS-
4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
The
hypothetical Initial Value of the Least Performing Reference Stock of $100.00 has been chosen for illustrative purposes only and
may not represent a likely actual Initial Value of any Reference Stock. The actual Initial Value of each Reference Stock will
be the closing price of one share of that Reference Stock on the Pricing Date and will be provided in the pricing supplement.
For historical data regarding the actual closing prices of one share of each Reference Stock, please see the historical information
set forth under “The Reference Stocks” in this pricing supplement.
Each
hypothetical payment set forth below is for illustrative purposes only and may not be the actual payment applicable to a purchaser
of the notes. The numbers appearing in the following examples have been rounded for ease of analysis.
Example
1 — Notes are automatically called on the first Autocall Review Date.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Interest Review Date
|
$75.00
|
$8.3333
|
Second Interest Review Date
|
$40.00
|
$0
|
Third through Fifth Interest Review Dates
|
Less than Interest Barrier
|
$0
|
Sixth Interest Review Date (First Autocall Review Date)
|
$105.00
|
$1,041.6667
|
|
Total Payment
|
$1,050.00 (5.00% return)
|
Because
the closing price of one share of each Reference Stock on the first Autocall Review Date, which is also the sixth Interest Review
Date, is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment, for each $1,000
principal amount note, of 1,041.6667 (or $1,000
plus
the Contingent Interest Payment applicable to the sixth Interest Review
Date
plus
the unpaid Contingent Interest Payments for any prior Interest Review Dates), payable on the applicable Call
Settlement Date. When added to the Contingent Interest Payment received with respect to the prior Interest Review Dates, the total
amount paid, for each $1,000 principal amount note, is $1,050.00. No further payments will be made on the notes.
Example
2 — Notes have NOT been automatically called and the Final Value of the Least Performing Reference Stock is greater than
or equal to its Trigger Value.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Interest Review Date
|
$85.00
|
$8.3333
|
Second Interest Review Date
|
$90.00
|
$8.3333
|
Third through Thirty-Fifth Interest Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$60.00
|
$1,283.3333
|
|
Total Payment
|
$1,300.00 (30.00% return)
|
Because
the notes have not been automatically called and the Final Value of the Least Performing Reference Stock is greater than or equal
to its Trigger Value, the payment at maturity, for each $1,000 principal amount note, will be $1,283.3322 (or $1,000
plus
the Contingent Interest Payment applicable to the final Review Date
plus
the unpaid Contingent Interest Payments for any
prior Interest Review Dates). When added to the Contingent Interest Payments received with respect to the prior Interest Review
Dates, the total amount paid, for each $1,000 principal amount note, is $1,300.00.
PS-
5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
Example
3 — Notes have NOT been automatically called and the Final Value of the Least Performing Reference Stock is less than its
Trigger Value
.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Interest Review Date
|
$45.00
|
$0
|
Second Interest Review Date
|
$35.00
|
$0
|
Third through Thirty-Fifth Interest Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$40.00
|
$400.00
|
|
Total Payment
|
$400.00 (-60.00% return)
|
Because
the notes have not been automatically called, the Final Value of the Least Performing Reference Stock is less than its Trigger
Value and the Least Performing Stock Return is -60.00%, the payment at maturity will be $400.00 per $1,000 principal amount note,
calculated as follows:
$1,000
+ [$1,000 × (-60.00%)] = $400.00
The
hypothetical returns and hypothetical payments on the notes shown above apply
only if you hold the notes for their entire term
or until automatically called.
These hypotheticals do not reflect the fees or expenses that would be associated with any sale
in the secondary market. If these fees and expenses were included, the hypothetical returns and hypothetical payments shown above
would likely be lower.
Selected
Risk Considerations
An
investment in the notes involves significant risks. These risks are explained in more detail in the “Risk Factors”
section of the accompanying product supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The
notes do not guarantee any return of principal. If the notes have not been automatically called and the Final Value of any Reference
Stock is less than its Trigger Value, you will lose 1% of the principal amount of your notes for every 1% that the Final Value
of the Least Performing Reference Stock is less than its Initial Value. Accordingly, under these circumstances, you will lose
more than 50.00% of your principal amount at maturity and could lose all of your principal amount at maturity.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND
MAY NOT PAY ANY INTEREST AT ALL —
|
If
the notes have not been automatically called, we will make a Contingent Interest Payment with respect to an Interest Review Date
(and we will pay you any previously unpaid Contingent Interest Payments for any prior Interest Review Dates) only if the closing
price of one share of each Reference Stock on that Interest Review Date is greater than or equal to its Interest Barrier. If the
closing price of one share of any Reference Stock on that Interest Review Date is less than its Interest Barrier, no Contingent
Interest Payment will be made with respect to that Interest Review Date. You will not receive any unpaid Contingent Interest Payments
if the closing price of one share of the Reference Stock on each subsequent Interest Review Date is less than its Interest Barrier.
Accordingly, if the closing price of one share of any Reference Stock on each Interest Review Date is less than its Interest Barrier,
you will not receive any interest payments over the term of the notes.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE
& CO. —
|
Investors
are dependent on our and JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential
change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that
credit risk, is likely to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment
obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT
OPERATIONS AND HAS LIMITED ASSETS —
|
As
a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of
our securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate
to
PS-
6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
obligations
of our affiliates to make payments under loans made by us or other intercompany agreements. As a result, we are dependent upon
payments from our affiliates to meet our obligations under the notes. If these affiliates do not make payments to us and we fail
to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that
guarantee will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO
THE SUM OF ANY CONTINGENT INTEREST PAYMENTS THAT MAY BE PAID OVER THE TERM OF THE NOTES,
|
regardless
of any appreciation in the price of any Reference Stock, which may be significant. You will not participate in any appreciation
in the price of any Reference Stock.
We
and our affiliates play a variety of roles in connection with the notes. In performing these duties, our and JPMorgan Chase &
Co.’s economic interests are potentially adverse to your interests as an investor in the notes. It is possible that hedging
or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our
affiliates while the value of the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest”
in the accompanying product supplement.
|
·
|
YOU ARE EXPOSED TO THE RISK
OF DECLINE IN THE
PRICE OF EACH REFERENCE STOCK
—
|
Payments
on the notes are not linked to a basket composed of the Reference Stocks and are contingent upon the performance of each individual
Reference Stock. Poor performance by any of the Reference Stocks over the term of the notes may result in the notes not being
automatically called on an Autocall Review Date, may negatively affect whether you will receive a Contingent Interest Payment
on any Interest Payment Date and your payment at maturity and will not be offset or mitigated by positive performance by any other
Reference Stock.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST
PERFORMING REFERENCE STOCK.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE
ON THE FINAL REVIEW DATE —
|
If
the Final Value of any Reference Stock is less than its Trigger Value and the notes have not been automatically called, the benefit
provided by the Trigger Value will terminate and you will be fully exposed to any depreciation in the closing price of one share
of the Least Performing Reference Stock.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY
EXIT —
|
If
your notes are automatically called, the term of the notes may be reduced to as short as approximately six months and you will
not receive any Contingent Interest Payments after the applicable Call Settlement Date. There is no guarantee that you would be
able to reinvest the proceeds from an investment in the notes at a comparable return and/or with a comparable interest rate for
a similar level of risk. Even in cases where the notes are called before maturity, you are not entitled to any fees and commissions
described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON ANY REFERENCE STOCK
OR HAVE ANY RIGHTS WITH RESPECT TO ANY REFERENCE STOCK.
|
|
·
|
NO AFFILIATION WITH ANY REFERENCE STOCK ISSUER —
|
We
have not independently verified any of the information about any Reference Stock issuer contained in this pricing supplement.
You should undertake your own investigation into each Reference Stock and its issuer. We are not responsible for any Reference
Stock issuer’s public disclosure of information, whether contained in SEC filings or otherwise.
|
·
|
THE ANTI-DILUTION PROTECTION FOR EACH REFERENCE STOCK
IS LIMITED AND MAY BE DISCRETIONARY —
|
The
calculation agent will not make an adjustment in response to all events that could affect a Reference Stock. The calculation agent
may make adjustments in response to events that are not described in the accompanying product supplement to account for any diluting
or concentrative effect, but the calculation agent is under no obligation to do so or to consider your interests as a holder of
the notes in making these determinations.
PS-
7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF A REFERENCE
STOCK FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE IS GREATER IF THE PRICE OF ONE SHARE OF THAT REFERENCE STOCK IS VOLATILE.
|
The
notes will not be listed on any securities exchange. Accordingly, the price at which you may be able to trade your notes is likely
to depend on the price, if any, at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are
not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
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THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED
IN THE PRICING SUPPLEMENT —
|
You
should consider your potential investment in the notes based on the minimums for the estimated value of the notes and the Contingent
Interest Rate.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE
ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES —
|
The
estimated value of the notes is only an estimate determined by reference to several factors. The original issue price of the notes
will exceed the estimated value of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our
affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of
hedging our obligations under the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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·
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THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE
VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE
TO AN INTERNAL FUNDING RATE —
|
The
internal funding rate used in the determination of the estimated value of the notes is based on, among other things, our and our
affiliates’ view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management
costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an
internal funding rate and any potential changes to that rate may have an adverse effect on the terms of the notes and any secondary
market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
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·
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THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH
MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED
TIME PERIOD —
|
We
generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in
connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period.
See “Secondary Market Prices of the Notes” in this pricing supplement for additional information relating to this
initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the notes
as published by JPMS (and which may be shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER
THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
|
Any
secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things,
secondary market prices take into account our internal secondary market funding rates for structured debt issuances and, also,
because secondary market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated
hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be
willing to buy the notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price.
Any sale by you prior to the Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED
BY MANY ECONOMIC AND MARKET FACTORS —
|
The
secondary market price of the notes during their term will be impacted by a number of economic and market factors, which may either
offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and
the prices of the Reference Stocks. Additionally, independent pricing vendors and/or third party broker-dealers may publish a
price for the notes, which may also be reflected on customer account statements. This price may be different (higher or
PS-
8
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
lower)
than the price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary market. See “Risk
Factors — Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices
of the notes will be impacted by many economic and market factors” in the accompanying product supplement.
PS-
9
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
The
Reference Stocks
All information contained herein on the Reference
Stocks and on the Reference Stock issuers is derived from publicly available sources, without independent verification. Each Reference
Stock is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and is listed
on the exchange provided in the table below, which we refer to as the relevant exchange for purposes of that Reference Stock in
the accompanying product supplement. Information provided to or filed with the SEC by a Reference Stock issuer pursuant to the
Exchange Act can be located by reference to the SEC file number provided in the table below, and can be accessed through www.sec.gov.
We do not make any representation that these publicly available documents are accurate or complete. We obtained the closing prices
below from the Bloomberg Professional
®
service (“Bloomberg”) without independent verification.
Reference Stock
|
Bloomberg Ticker Symbol
|
Relevant Exchange
|
SEC File Number
|
Closing Price on January 12, 2017
|
Common stock of BlackRock, Inc., par value $0.01 per share
|
BLK
|
New York Stock Exchange
|
001-33099
|
$378.29
|
Common stock of The Bank of New York Mellon Corporation, par value $
0.01 per share
|
BK
|
New York Stock Exchange
|
001-35651
|
$47.46
|
Common units representing limited partnership interests of The Blackstone Group L.P.
|
BX
|
New York Stock Exchange
|
001-33551
|
$30.20
|
Common stock of State Street Corporation, par value $1.00 per share
|
STT
|
New York Stock Exchange
|
001-07511
|
$82.09
|
Each of the Reference Stocks is issued by a company
whose primary line of business is associated with the financial industry.
According to publicly available filings of the
relevant Reference Stock issuer with the SEC:
|
·
|
BlackRock, Inc. is an investment management firm, which provides a range of investment and risk management services to its
clients worldwide.
|
|
·
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The Bank of New York Mellon Corporation
is a global investments company, which manage and service
assets of financial institutions, corporations and individual investors.
|
|
·
|
The Blackstone Group is a global alternative asset
manager, which, through its subsidiaries, provides a range of financial products and services to institutional investors worldwide.
|
|
·
|
State Street Corporation is a financial holding
company.
|
Historical Information
The following graphs set forth the historical
performance of each Reference Stock based on the weekly historical closing prices of one share of each Reference Stock from January
6, 2012 through January 6, 2017. The closing prices above and below may have been adjusted by Bloomberg for corporate actions,
such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
The historical closing prices of one share
of each Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing
price of one share of any Reference Stock on the Pricing Date or any Interest Review Date or Autocall Review Date. There can be
no assurance that the performance of the Reference Stocks will result in the return of any of your principal amount or the payment
of any interest.
PS-
10
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
PS-
11
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
Tax
Treatment
You
should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. 4-I. In determining our reporting responsibilities we intend to treat (i) the notes for U.S. federal income tax
purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Interest Payments as ordinary
income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to
U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying
product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable
treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character
of any income or loss on the notes could be materially 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
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. 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 affect the tax consequences of an investment in the notes, possibly with
retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in
the notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S.
Holders — Tax Considerations
. The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and
although we believe it is reasonable to take a position that Contingent Interest Payments are not subject to U.S. withholding
tax (at least if an applicable Form W-8 is provided), a withholding agent may nonetheless withhold on these payments (generally
at a rate of 30%, subject to the possible reduction of that rate under an applicable income tax treaty), unless income from your
notes is effectively connected with your conduct of a trade or business in the United States (and, if an applicable treaty so
requires, attributable to a permanent establishment in the United States). If you are not a United States person, you are urged
to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes in light of your
particular circumstances.
Section
871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding
tax (unless an income tax treaty applies) on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain
financial instruments linked to U.S. equities or indices that include U.S. equities. Section 871(m) provides certain exceptions
to this withholding regime, including for instruments linked to certain broad-based indices that meet requirements set forth in
the applicable Treasury regulations (such an index, a “Qualified Index”). Additionally, a recent IRS notice
excludes from the scope of Section 871(m) instruments issued in 2017 that are not “delta-one” with respect to underlying
securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an “Underlying Security”).
Based on certain determinations made by us, we expect that Section 871(m) will not apply to the notes with regard to Non-U.S.
Holders. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m)
is complex and its application may depend on your particular circumstances, including whether you enter into other transactions
with respect to an Underlying Security. If necessary, further information regarding the
PS-
12
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
potential
application of Section 871(m) will be provided in the pricing supplement for the notes. You should consult your tax adviser
regarding the potential application of Section 871(m) to the notes.
FATCA.
Withholding under legislation commonly referred to as “FATCA” could apply to payments with respect to the notes
that are treated as U.S.-source “fixed or determinable annual or periodical” income (“FDAP Income”) for
U.S. federal income tax purposes (such as interest, if the notes are recharacterized, in whole or in part, as debt instruments,
or Contingent Interest Payments if they are otherwise treated as FDAP Income). If the notes are recharacterized, in whole or in
part, as debt instruments, withholding could also apply to payments of gross proceeds of a taxable disposition, including an early
redemption or redemption at maturity. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds
(other than any amount treated as FDAP Income) with respect to dispositions occurring before January 1, 2019. You should consult
your tax adviser regarding the potential application of FATCA to the notes.
In
the event of any withholding on the notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
The Estimated Value of the Notes
The
estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following
hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding
rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of
the notes does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any
exists) at any time. The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan
Chase & Co. For additional information, see “Selected Risk Considerations — The Estimated Value of the Notes Is
Derived by Reference to an Internal Funding Rate” in this pricing supplement.
The
value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our
affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on
various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and
other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the
notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions
existing at that time.
The
estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Different
pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of
the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which
may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
The
estimated value of the notes will be lower than the original issue price of the notes because costs associated with selling, structuring
and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid
to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may
result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized
in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of
our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value
of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For
information about factors that will impact any secondary market prices of the notes, see “Risk Factors — Risks Relating
to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted
by many economic and market factors” in the accompanying product supplement. In addition, we generally expect that some
of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases
of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected
hedging profits, if
PS-
13
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
any,
and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt issuances.
This initial predetermined time period is intended to be the shorter of six months and one-half of the stated term of the notes.
The length of any such initial period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection
with our hedging activities, the estimated costs of hedging the notes and when these costs are incurred, as determined by our
affiliates. See “Selected Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period”
in this pricing supplement.
Supplemental
Use of Proceeds
The
notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the
notes. See “How the Notes Work” and “Hypothetical Payout Examples” in this pricing supplement for an illustration
of the risk-return profile of the notes and “The Reference Stocks” in this pricing supplement for a description of
the market exposure provided by the notes.
The
original issue price of the notes is equal to the estimated value of the notes plus the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You
may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable
agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection
with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You
should read this pricing supplement together with the accompanying prospectus, as supplemented by the accompanying prospectus
supplement relating to our Series A medium-term notes of which these notes are a part, and the more detailed information contained
in the accompanying product supplement. This pricing supplement, together with the documents listed below, contains the terms
of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including
preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets,
brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in
the “Risk Factors” section of the accompanying product supplement, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest
in the notes.
You
may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
Our
Central Index Key, or CIK, on the SEC website is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing
supplement, “we,” “us” and “our” refer to JPMorgan Financial.
PS-
14
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of BlackRock, Inc., the Common Stock of The Bank of
New York Mellon Corporation, the Common Units Representing Limited
Partnership Interests of The Blackstone Group L.P. and the Common Stock
of State Street Corporation
|
|
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