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 March
28, 2017
March
, 2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Autocallable Contingent Buffered Return Enhanced
Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF due April 2, 2020
Fully and Unconditionally Guaranteed by
JPMorgan Chase & Co.
|
·
|
The notes are designed for investors who seek early exit prior to maturity at a premium if, on the Review Date, the Closing
Level of an equally weighted basket of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging
Markets ETF, which we refer to as the Basket, is at or above the Call Value.
|
|
·
|
The date on which an automatic call may be initiated is September 28, 2018.
|
|
·
|
The notes are also designed for investors who seek an uncapped return, if the notes have not been automatically called, of
1.75 times any appreciation of the Basket at maturity.
|
|
·
|
Investors should be willing to forgo interest and dividend payments and be willing to lose some or all of their principal amount
at maturity.
|
|
·
|
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.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
●
|
The notes are expected to price on or about March 28, 2017 and are expected to settle on or about
March 31, 2017.
|
Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-5 of
this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer
to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. In no event will these selling commissions exceed $33.50 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 $949.80 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 $940.00 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 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.
Basket:
The
notes are linked to an equally weighted basket consisting of the following:
·
50.00% of the iShares
®
MSCI EAFE ETF (Bloomberg ticker: EFA); and
·
50.00% of the iShares
®
MSCI Emerging Markets ETF (Bloomberg
ticker: EEM)
(each, a “Fund”
and collectively, the “Funds”).
Call Premium Amount:
At least 10.00% × $1,000
(to be provided in the pricing supplement)
Call
Value:
110, which is 110.00% of the Initial Basket
Value
Upside Leverage
Factor:
1.75
Contingent
Buffer Amount:
20.00%
Pricing Date:
On or about March 28, 2017
Original Issue
Date (Settlement Date):
On or about March 31, 2017
Review Date*:
September 28, 2018
Call Settlement
Date*:
October 3, 2018
Observation
Date *:
March 30, 2020
Maturity Date*:
April 2, 2020
* Subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to
Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Automatic Call:
If the Closing Level of the Basket on the Review Date is greater
than or equal to the Call Value, the notes will be automatically called for a cash payment, for each $1,000 principal amount note,
equal to (a) $1,000
plus
(b) the Call Premium Amount, payable on the Call Settlement Date. No further payments will be made
on the notes.
If the notes are automatically called, you will not benefit
from the Upside Leverage Factor that applies to the payment at maturity if the Final Basket Value is greater than the Initial Basket
Value. Because the Upside Leverage Factor does not apply to the payment upon an automatic call, the payment upon an automatic
call may be significantly less than the payment at maturity for the same level of appreciation in the Basket.
Payment at Maturity:
If the notes have not been automatically called and the Final
Basket Value is greater than the Initial Basket Value, your payment at maturity per $1,000 principal amount note will be calculated
as follows:
$1,000 + ($1,000 × Basket Return ×
Upside Leverage Factor)
If the notes have not been automatically called and the Final
Basket Value is equal to the Initial Basket Value or is less than the Initial Basket Value by up to the Contingent Buffer Amount,
you will receive the principal amount of your notes at maturity.
If the notes have not been automatically called and the Final
Basket Value is less than the Initial Basket Value by more than the Contingent Buffer Amount, your payment at maturity per $1,000
principal amount note will be calculated as follows:
$1,000 + ($1,000 × Basket Return)
If the notes have not been automatically called and the Final
Basket Value is less than the Initial Basket Value by more than the Contingent Buffer Amount, you will lose more than 20.00% of
your principal amount at maturity and could lose all of your principal amount at maturity.
Basket Return:
(Final Basket Value – Initial Basket
Value)
Initial Basket Value
Initial Basket
Value:
Set equal to 100 on the Pricing Date
Final Basket
Value:
The closing level of the Basket on the Observation Date
Closing Level of the Basket:
100 × [1 + (50.00% × Fund Return of the iShares
®
MSCI EAFE ETF) + (50.00% × Fund Return of the iShares
®
MSCI Emerging Markets ETF)]
Fund Return:
With respect to each Fund,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Fund, the closing price of one share of that Fund
on the Pricing Date
Final Value:
With respect to each Fund, the closing price of one share of that Fund
on the Observation Date
Share Adjustment
Factor:
With respect to each Fund, the Share Adjustment Factor is referenced in determining
the closing price of one share of that Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor of each Fund
is subject to adjustment upon the occurrence of certain events affecting that Fund. See “The Underlyings — Funds —
Anti-Dilution Adjustments” in the accompanying product supplement for further information.
|
PS-
1
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Hypothetical
Payout Profile
Payment upon an Automatic Call
Call Premium Amount
The table below illustrates the hypothetical Call
Premium Amount per $1,000 principal amount note if the notes are automatically called based on the minimum call premium set forth
under “Key Terms — Call Premium Amount” above. The actual Call Premium Amount will be provided in the pricing
supplement and will be not less than the minimum Call Premium Amount set forth under “Key Terms — Call Premium Amount.”
Call Premium Amount
|
$100.00
|
Payment at Maturity If the Notes Have Not
Been Automatically Called
The following table illustrates the hypothetical
total return at maturity on the notes. The “total return” as used in this pricing supplement is the number, expressed
as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical
total returns set forth below assume the following:
|
·
|
the notes have not been automatically called;
|
|
·
|
an Initial Basket Value of 100.00;
|
|
·
|
an Upside Leverage Factor of 1.75; and
|
|
·
|
a Contingent Buffer Amount of 20.00%.
|
Each hypothetical total return or hypothetical
payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity
applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
PS-
2
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Final Basket Value
|
Basket Return
|
Total Return on the Notes
|
Payment at Maturity
|
180.00
|
80.00%
|
140.00%
|
$2,400.00
|
165.00
|
65.00%
|
113.75%
|
$2,137.50
|
150.00
|
50.00%
|
87.50%
|
$1,875.00
|
140.00
|
40.00%
|
70.00%
|
$1,700.00
|
130.00
|
30.00%
|
52.50%
|
$1,525.00
|
125.00
|
25.00%
|
43.75%
|
$1,437.50
|
120.00
|
20.00%
|
35.00%
|
$1,350.00
|
115.00
|
15.00%
|
26.25%
|
$1,262.50
|
110.00
|
10.00%
|
17.50%
|
$1,175.00
|
105.00
|
5.00%
|
8.75%
|
$1,087.50
|
101.00
|
1.00%
|
1.75%
|
$1,017.50
|
100.00
|
0.00%
|
0.00%
|
$1,000.00
|
95.00
|
-5.00%
|
0.00%
|
$1,000.00
|
90.00
|
-10.00%
|
0.00%
|
$1,000.00
|
85.00
|
-15.00%
|
0.00%
|
$1,000.00
|
80.00
|
-20.00%
|
0.00%
|
$1,000.00
|
79.99
|
-20.01%
|
-20.01%
|
$799.90
|
70.00
|
-30.00%
|
-30.00%
|
$700.00
|
60.00
|
-40.00%
|
-40.00%
|
$600.00
|
50.00
|
-50.00%
|
-50.00%
|
$500.00
|
40.00
|
-60.00%
|
-60.00%
|
$400.00
|
30.00
|
-70.00%
|
-70.00%
|
$300.00
|
20.00
|
-80.00%
|
-80.00%
|
$200.00
|
10.00
|
-90.00%
|
-90.00%
|
$100.00
|
0.00
|
-100.00%
|
-100.00%
|
$0.00
|
PS-
3
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
How
the Notes Work
Upside Scenario If Automatic Call:
If the Closing Level of the Basket on the Review
Date is greater than or equal to the Call Value, the notes will be automatically called and investors will receive on the Call
Settlement Date the $1,000 principal amount
plus
the Call Premium Amount. No further payments will be made on the
notes.
|
·
|
Assuming a hypothetical Call Premium Amount of $100.00, if the Closing Level
of the Basket increases by at least 10.00% as of the Review Date, the notes will be automatically called and investors will receive
a 10.00% return, or $1,100.00 per $1,000 principal amount note.
|
Upside Scenario If No Automatic Call:
If the notes have not been automatically called
and the Final Basket Value is greater than the Initial Basket Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Basket Return
times
the Upside Leverage Factor of 1.75.
|
·
|
If the notes have not been automatically called and the Closing Level of
the Basket increases 10.00% as of the Observation Date, investors will receive at maturity a 17.50% return, or $1,175.00 per $1,000
principal amount note.
|
Par Scenario:
If the notes have not been automatically called
and the Final Basket Value is equal to the Initial Basket Value or is less than the Initial Basket Value by up to the Contingent
Buffer Amount of 20.00%, investors will receive at maturity the principal amount of their notes.
Downside Scenario:
If the notes have not been automatically called
and the Final Basket Value is less than the Initial Basket Value by more than the Contingent Buffer Amount of 20.00%, investors
will lose 1% of the principal amount of their notes for every 1% that the Final Basket Value is less than the Initial Basket Value.
|
·
|
For example, if the notes have not been automatically called and the Closing
Level of the Basket declines 50.00% as of the Observation Date, investors will lose 50.00% of their principal amount and receive
only $500.00 per $1,000 principal amount note at maturity.
|
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.
PS-
4
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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 Basket Value is less than the Initial Basket Value
by more than the Contingent Buffer Amount of 20.00%, you will lose 1% of the principal amount of your notes for every 1% that the
Final Basket Value is less than the Initial Basket Value. Accordingly, under these circumstances, you will lose more than 20.00%
of your principal amount at maturity and could lose all of your principal amount at maturity.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and
JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely
to adversely affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you
may not receive any amounts owed to you under the notes and you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS
—
|
As
a finance subsidiary of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of our
securities. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to
obligations of our affiliates to make payments under loans made by us or other intercompany agreements. As a result, we are dependent
upon payments from our affiliates to meet our obligations under the notes. If these affiliates do not make payments to us and we
fail to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that
guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
YOU WILL RECEIVE THE CALL PREMIUM AMOUNT ONLY IF THE CLOSING LEVEL OF THE BASKET HAS INCREASED
SUFFICIENTLY TO EXCEED THE CALL VALUE AS OF THE REVIEW DATE —
|
Because
the Call Value is equal to 110.00% of the Initial Basket Value, even if the Basket has appreciated, the notes will not be automatically
called unless the Basket has appreciated by at least 10.00% as of the Review Date. Under these circumstances, you will not
receive the Call Premium Amount on the Call Settlement Date and may lose some or all of your principal amount at maturity.
|
·
|
IF THE NOTES ARE AUTOMATICALLY CALLED, THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE
CALL PREMIUM AMOUNT PAID ON THE NOTES,
|
regardless of any appreciation in the
level of the Basket, which may be significant. In addition, if the notes are automatically called, you will not benefit from the
Upside Leverage Factor that applies to the payment at maturity if the Final Value is greater than the Initial Basket Value.
Because the Upside Leverage Factor does not apply to the payment upon an automatic call, the payment upon an automatic call may
be significantly less than the payment at maturity for the same level of appreciation in the Basket.
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.
|
·
|
THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE OBSERVATION DATE —
|
If the notes have not been automatically
called and the Final Basket Value is less than the Initial Basket Value by more than the Contingent Buffer Amount, the benefit
provided by the Contingent Buffer Amount will terminate, and you will be fully exposed to any depreciation of the Basket.
|
·
|
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 18 months. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the notes at a comparable return for a similar
PS-
5
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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.
|
·
|
THE NOTES DO NOT PAY INTEREST.
|
|
·
|
CORRELATION (OR LACK OF CORRELATION) OF THE FUNDS —
|
The notes are linked to an equally
weighted Basket consisting of two Funds. In calculating the Final Basket Value, an increase in the price of one of the Funds may
be moderated, or more than offset, by lesser increases or declines in the price of the other Fund. In addition, high correlation
of movements in the prices of the Funds during periods of negative returns between the Funds could have an adverse effect on the
payment at maturity on the notes.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON EITHER FUND OR THE SECURITIES HELD BY EITHER FUND OR HAVE ANY
RIGHTS WITH RESPECT TO THE FUNDS OR THOSE SECURITIES.
|
|
·
|
THE RISK OF THE CLOSING LEVEL OF THE BASKET FALLING BELOW THE INITIAL BASKET VALUE BY MORE THAN
THE CONTINGENT BUFFER AMOUNT IS GREATER IF THE LEVEL OF THE BASKET IS VOLATILE.
|
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUNDS —
|
The
Funds are subject to management risk, which is the risk that the investment strategies of the applicable Fund’s investment
adviser, the implementation of which is subject to a number of constraints, may not produce the intended results. These constraints
could adversely affect the market price of the shares of the Funds and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY,
MAY NOT CORRELATE WITH THE PERFORMANCE OF THAT FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
Each Fund does not fully replicate
its Underlying Index (as defined under “The Basket” below) and may hold securities different from those included in
its Underlying Index. In addition, the performance of each Fund will reflect additional transaction costs and fees that are not
included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation between the performance
of each Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities underlying a Fund (such
as mergers and spin-offs) may impact the variance between the performances of that Fund and its Underlying Index. Finally, because
the shares of each Fund are traded on a securities exchange and are subject to market supply and investor demand, the market value
of one share of each Fund may differ from the net asset value per share of that Fund.
During periods of market volatility,
securities underlying each Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of that Fund and the liquidity of that Fund may be adversely affected. This kind of market volatility
may also disrupt the ability of market participants to create and redeem shares of a Fund. Further, market volatility may adversely
affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Fund. As a result,
under these circumstances, the market value of shares of a Fund may vary substantially from the net asset value per share of that
Fund. For all of the foregoing reasons, the performance of each Fund may not correlate with the performance of its Underlying Index
as well as the net asset value per share of that Fund, which could materially and adversely affect the value of the notes in the
secondary market and/or reduce any payments on the notes.
|
·
|
NON-U.S. SECURITIES RISK
—
|
The equity securities held by the Funds
have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve
risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities. Also, there
is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies
that are subject to the reporting requirements of the SEC.
|
·
|
EMERGING MARKETS RISK WITH RESPECT TO THE
iSHARES
®
MSCI EMERGING MARKETS ETF
—
|
The equity securities held by the iShares
®
MSCI Emerging Markets ETF have been issued by non-U.S. companies located in emerging markets countries. Countries with emerging
markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign
ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more developed countries.
The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in
local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities
markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.
PS-
6
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK —
|
Because
the prices of the equity securities held by each Fund are converted into U.S. dollars for purposes of calculating the net asset
value of that Fund, holders of the notes will be exposed to currency exchange rate risk with respect to each of the currencies
in which the equity securities held by each Fund trade. Your net exposure will depend on the extent to which those currencies strengthen
or weaken against the U.S. dollar and the relative weight of equity securities held by a Fund denominated in each of those currencies.
If, taking into account the relevant weighting, the U.S. dollar strengthens against those currencies, the price of a Fund will
be adversely affected and any payment on the notes may be reduced.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED AND MAY BE DISCRETIONARY —
|
The calculation agent will not make
an adjustment in response to all events that could affect a Fund. 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.
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential
investment in the notes based on the minimums for the estimated value of the notes and the Call Premium Amount.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC)
OF THE NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER
FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the
Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in the
determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the funding
value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate and any potential
changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The
Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS)
MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
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,
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7
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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 level of the Basket. Additionally,
independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on
customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may
be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value
and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market
factors” in the accompanying product supplement.
The
Basket
The return on the notes is linked to an equally
weighted basket consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF.
The iShares
®
MSCI EAFE ETF is an exchange-traded fund of iShares
®
Trust, a registered investment company, that seeks to track
the investment results, before fees and expenses, of an index composed of large- and mid-capitalization developed market equities,
excluding the United States and Canada, which we refer to as the Underlying Index with respect to the iShares
®
MSCI
EAFE ETF. The Underlying Index for the iShares
®
MSCI EAFE ETF is currently the MSCI EAFE
®
Index.
The MSCI EAFE
®
Index is a free float-adjusted market capitalization index intended to measure the equity market
performance of the developed equity markets in Europe, Asia, Australia and New Zealand. For additional information about the iShares
®
MSCI EAFE ETF, see “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
The iShares
®
MSCI Emerging Markets
ETF is an exchange-traded fund of iShares
®
, Inc., a registered investment company, that seeks to track the investment
results, before fees and expenses, of an index composed of large- and mid-capitalization emerging market equities, which we refer
to as the Underlying Index with respect to the iShares
®
MSCI Emerging Markets ETF. The Underlying Index for the
iShares
®
MSCI Emerging Markets ETF is currently the MSCI Emerging Markets Index. The MSCI Emerging Markets Index
is a free float-adjusted market capitalization index that is designed to measure the equity market performance of global emerging
markets. For additional information about the iShares
®
MSCI Emerging Markets ETF, see “Fund Descriptions —
The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of the Basket as a whole, as well as each Fund, based on the weekly historical closing prices of one share of each
Fund from January 6, 2012 through March 24, 2017. The graph of the historical performance of the Basket assumes that the
closing level of the Basket on January 6, 2012 was 100 and that the weights of the Funds were as specified under “Key Terms
— Basket” in this pricing supplement on that date. The closing price of one share of the iShares
®
MSCI
EAFE ETF on March 27, 2017 was $62.30. The closing price of one share of the iShares
®
MSCI Emerging Markets ETF
on March 27, 2017 was $39.70. We obtained the closing prices above and below from the Bloomberg Professional
®
service
(“Bloomberg”), without independent verification. The closing prices above and below may have been adjusted by Bloomberg
for actions taken by the Funds, such as stock splits.
The historical closing levels of the Basket
and the historical closing prices of one share of each Fund should not be taken as an indication of future performance, and no
assurance can be given as to the closing level of the Basket on the Review Date or the Observation Date or the closing prices of
one share of either Fund on the Pricing Date, the Review Date or the Observation Date. There can be no assurance that the performance
of the Basket will result in the return of any of your principal amount.
PS-
8
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
PS-
9
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. The following discussion,
when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell
LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
Based on current market conditions, in the
opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt instruments
for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders—Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, subject to the possible application of the “constructive ownership”
rules, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than
a year, whether or not you are an initial purchaser of notes at the issue price. The notes could be treated as “constructive
ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended, in which case
any gain recognized in respect of the notes that would otherwise be long-term capital gain and that was in excess of the “net
underlying long-term capital gain” (as defined in Section 1260) would be treated as ordinary income, and a notional interest
charge would apply as if that income had accrued for tax purposes at a constant yield over the notes’ term. Our special tax
counsel has not expressed an opinion with respect to whether the constructive ownership rules apply to the notes. Accordingly,
U.S. Holders should consult their tax advisers regarding the potential application of the constructive ownership rules.
The IRS or a court may not respect the treatment
of the notes described above, in which case the timing and character of any income or loss on your notes could be materially and
adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to
require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number
of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as
the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated
accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject
to the constructive ownership regime described above. While the notice requests comments on appropriate transition rules and effective
dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the notes, including the potential application of the constructive
ownership rules, possible alternative treatments and the issues presented by this notice.
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, the applicable regulations exclude from the scope of Section 871(m) instruments issued
in 2017 that do not have a delta of 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
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.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a note. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount
treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding
the potential application of FATCA to the notes.
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
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10
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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 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 “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Basket” 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.
PS-
11
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes
at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes,
we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
PS-
12
| Structured Investments
Autocallable Contingent Buffered Return Enhanced Notes Linked to an Equally Weighted Basket Consisting of the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
|
|
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