The information in this preliminary
pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated September 30, 2016.
October , 2016
|
Registration Statement
Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan
Chase Financial Company LLC
Structured Investments
Capped Buffered Return Enhanced Notes due October
31, 2018
Fully
and Unconditionally Guaranteed by JPMorgan Chase & Co.
|
●
|
This pricing supplement relates to six separate note offerings, each linked to the performance of a different Underlying:
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the S&P 500
®
Index (“SPX Notes”)
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the Russell 2000
®
Index (“RTY Notes”)
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the EURO STOXX 50
®
Index (“SX5E Notes”)
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the FTSE
®
100 Index ("UKX Notes")
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the iShares
®
MSCI EAFE ETF (“EFA Notes”)
|
|
●
|
Capped Buffered Return Enhanced Notes Linked to the iShares
®
MSCI Emerging Markets ETF (“EEM Notes”)
|
Each issue of offered notes is linked
to one, and only one, Underlying. While you may participate in one or more of the offerings, this pricing supplement does not offer
notes linked to a basket of the Underlyings.
|
●
|
The notes are designed for investors who seek a return of 2.00 times any appreciation of the Underlying, up to a maximum return,
at maturity.
|
|
●
|
Investors should be willing to forgo interest and dividend payments and be willing to lose up to 90% of their principal.
|
|
●
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
●
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
●
|
The notes are expected to price on or about October 26, 2016 and are expected to settle on or about October 31, 2016.
|
Underlying
|
Bloomberg Ticker
|
Initial Value*
|
Maximum Return / Maximum Payment at Maturity per $1,000 Principal Amount Note*
|
CUSIP
|
S&P 500
®
Index
|
SPX
|
|
17.50% to 21.50% / $1,175.00 and $1,215.00
|
46646EL59
|
Russell 2000
®
Index
|
RTY
|
|
21.50% to 25.50% / $1,215.00 and $1,255.00
|
46646EL67
|
EURO STOXX 50
®
Index
|
SX5E
|
|
33.00% to 37.00% / $1,330.00 and $1,370.00
|
46646EL91
|
FTSE
®
100 Index
|
UKX
|
|
30.00% to 34.00% / $1,300.00 and $1,340.00
|
46646EM25
|
iShares
®
MSCI EAFE ETF
|
EFA
|
|
21.00% to 25.00% / $1,210.00 and $1,250.00
|
46646EL75
|
iShares
®
MSCI Emerging Markets ETF
|
EEM
|
|
24.50% to 28.50% / $1,245.00 and $1,285.00
|
46646EL83
|
* To be provided in the pricing supplement
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-3 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
|
SPX Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
RTY Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
SX5E Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
UKX Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
EFA Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
EEM Notes (per note / total)
|
$1,000 / $
|
$ / $
|
$ / $
|
(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 $2.50 per $1,000 principal amount
note for each of the offerings and in no event will these selling commissions exceed $6.00 per $1,000 principal amount note for
any of the offerings. 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 $989.70, $989.10, $987.60, $987.20, $987.10 and $986.40 per $1,000 principal amount of SPX Notes, RTY Notes,
SX5E Notes, UKX Notes, EFA Notes and EEM Notes, respectively. 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 $960.00 per $1,000 principal amount note for any of the
offerings. See “The Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no.
4-I dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
General
Key Terms
Issuer:
JPMorgan
Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Underlying:
As
specified on the cover of this pricing supplement
We
refer to the S&P 500
®
Index, the Russell 2000
®
Index, the EURO STOXX 50
®
Index, and the FTSE
®
100 Index as each, an “Index” and collectively, the “Indices.” We refer to the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF as each, a “Fund” and collectively, the “Funds.” We refer to the Indices and
Funds as each, an “Underlying” and collectively, the “Underlyings.”
Upside Leverage Factor:
2.00
Maximum Return:
As
specified on the cover of this pricing supplement
Buffer Amount:
10.00%
Pricing Date:
On
or about October 26, 2016
Original Issue Date (Settlement Date):
On or about October 31, 2016
Observation Date*:
October
26, 2018
Maturity Date*:
October
31, 2018
*
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 a Single Underlying
— Notes Linked to a Single Underlying
(Other Than a Commodity Index)
”
and “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
|
|
Payment at Maturity:
If the Final Value is greater than the Initial Value, your payment at maturity per $1,000 principal amount note will be calculated
as follows:
$1,000
+ ($1,000 × Underlying Return × Upside Leverage Factor),
subject to the Maximum Return
If the
Final Value is equal to the Initial Value or is less than the Initial Value by up to the Buffer Amount, you will receive the principal
amount of your notes at maturity.
If the
Final Value is less than the Initial Value by more than the Buffer Amount, your payment at maturity per $1,000 principal amount
note will be calculated as follows:
$1,000
+ [$1,000 × (Underlying Return + Buffer Amount)]
If the Final Value is less
than the Initial Value by more than the Buffer Amount, you will lose some or most of your principal amount at maturity.
Underlying Return:
With
respect to each Underlying,
(Final Value – Initial Value)
Initial Value
Initial Value:
With
respect to each Underlying, the closing value of that Underlying on the Pricing Date, as specified on the cover of this pricing
supplement
Final Value:
With
respect to each Underlying, the closing value of that Underlying on the Observation Date
Share Adjustment Factor:
With
respect to each Fund, the Share Adjustment Factor is referenced in determining the closing value 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.
|
Supplemental
Terms of the Notes
All references in this pricing supplement to
the closing value of each Index mean the closing level of that Index as defined in the accompanying product supplement, and all
references in this pricing supplement to the closing value of each Fund mean the closing price of one share of that Fund as defined
in the accompanying product supplement.
PS-
1
| Structured Investments
Capped Buffered Return Enhanced Notes
|
|
Hypothetical
Payout Profile
The following table illustrates the hypothetical
total return at maturity on
hypothetical notes linked to a hypothetical Underlying
and
may not reflect the actual terms
of any note offered by this pricing supplement
. See the cover of this pricing supplement and “General Key Terms”
in this pricing supplement for the actual terms of each note offered by this pricing supplement. 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:
|
●
|
an Initial Value of 100.00;
|
|
●
|
an Upside Leverage Factor of 2.00;
|
|
●
|
a Maximum Return of 15.00%; and
|
|
●
|
a Buffer Amount of 10.00%.
|
The hypothetical Initial Value of 100.00 has been
chosen for illustrative purposes only and may not represent a likely actual Initial Value. The actual Initial Value will be the
closing value of the Underlying on the Pricing Date and will be provided in the pricing supplement. For historical data regarding
the actual closing values of the Underlying, please see the historical information set forth under “The Underlyings”
in this pricing supplement.
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.
Final Value
|
Underlying Return
|
Total Return on the Notes
|
Payment at Maturity
|
180.00
|
80.00%
|
15.00%
|
$1,150.00
|
165.00
|
65.00%
|
15.00%
|
$1,150.00
|
150.00
|
50.00%
|
15.00%
|
$1,150.00
|
140.00
|
40.00%
|
15.00%
|
$1,150.00
|
130.00
|
30.00%
|
15.00%
|
$1,150.00
|
120.00
|
20.00%
|
15.00%
|
$1,150.00
|
115.00
|
15.00%
|
15.00%
|
$1,150.00
|
110.00
|
10.00%
|
15.00%
|
$1,150.00
|
107.50
|
7.50%
|
15.00%
|
$1,150.00
|
105.00
|
5.00%
|
10.00%
|
$1,100.00
|
101.00
|
1.00%
|
2.00%
|
$1,020.00
|
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%
|
-5.00%
|
$950.00
|
80.00
|
-20.00%
|
-10.00%
|
$900.00
|
70.00
|
-30.00%
|
-20.00%
|
$800.00
|
60.00
|
-40.00%
|
-30.00%
|
$700.00
|
50.00
|
-50.00%
|
-40.00%
|
$600.00
|
40.00
|
-60.00%
|
-50.00%
|
$500.00
|
30.00
|
-70.00%
|
-60.00%
|
$400.00
|
20.00
|
-80.00%
|
-70.00%
|
$300.00
|
10.00
|
-90.00%
|
-80.00%
|
$200.00
|
0.00
|
-100.00%
|
-90.00%
|
$100.00
|
How
the Notes Work
Upside Scenario:
If the Final Value is greater than the Initial
Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Underlying Return
times
the Upside Leverage Factor of
2.00
, up
to the Maximum Return. Assuming a hypothetical Maximum Return of
15.00%
:
|
●
|
if the closing value of the Underlying increases 5.00%, investors will receive at maturity a 10.00% return, or $1,100.00 per
$1,000 principal amount note; or
|
PS-
2
| Structured Investments
Capped Buffered Return Enhanced Notes
|
|
|
●
|
if the closing value of the Underlying increases 30.00%, investors will receive at maturity a return equal to the 15.00% Maximum
Return, or $1,150.00 per $1,000 principal amount note, which is the maximum payment at maturity.
|
Par Scenario:
If the Final Value is equal to the Initial Value
or is less than the Initial Value by up to the Buffer Amount of
10.00%
,
investors will receive at maturity the principal amount of their notes.
Downside Scenario:
If the Final Value is less than the Initial Value
by more than the Buffer Amount of
10.00%
,
investors will lose 1% of the principal amount of their notes for every 1% that the Final Value is less than the Initial Value
by more than the Buffer Amount.
|
●
|
For example, if the closing value of the Underlying declines 50.00%, investors will lose
40.00%
of their principal amount and receive only
$600.00
per $1,000 principal amount note at maturity, calculated as follows:
|
$1,000 + [$1,000 × (-50.00%
+
10.00%
)] =
$600.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term.
These hypotheticals do not reflect the
fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the
hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
Risks Relating to the Notes Generally
|
●
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
—
|
The notes do not guarantee any return
of principal. If the Final Value is less than the Initial Value by more than
10.00%
,
you will lose 1% of the principal amount of your notes for every 1% that the Final Value is less than the Initial Value by more
than
10.00%
. Accordingly, under
these circumstances, you will lose up to
90.00%
of your principal amount at maturity.
|
●
|
YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE MAXIMUM RETURN,
|
regardless of the appreciation of the
Underlying, which may be significant.
|
●
|
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.
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 NOTES DO NOT PAY INTEREST.
|
|
●
|
YOU WILL NOT RECEIVE DIVIDENDS ON ANY FUND OR THE SECURITIES INCLUDED IN OR HELD BY ANY UNDERLYING OR HAVE ANY RIGHTS WITH
RESPECT TO ANY FUND OR THOSE SECURITIES.
|
PS-
3
| Structured Investments
Capped Buffered Return Enhanced Notes
|
|
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 Maximum Return.
|
●
|
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, 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 value of the Underlying. 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.
Risks Relating to the Individual Offerings
PS-
4
| Structured Investments
Capped Buffered Return Enhanced Notes
|
|
|
●
|
WITH RESPECT TO THE SPX NOTES, JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500
®
INDEX,
|
but JPMorgan Chase & Co. will not
have any obligation to consider your interests in taking any corporate action that might affect the value of the S&P 500
®
Index.
|
●
|
THE RTY NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS —
|
Small capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization
companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits
downward stock price pressure under adverse market conditions.
|
●
|
THE SX5E NOTES, THE UKX NOTES, THE EFA NOTES AND THE EEM NOTES ARE SUBJECT TO NON-U.S. SECURITIES RISK —
|
The equity securities included in the
EURO STOXX 50
®
Index and the FTSE
®
100 Index or held by a Fund 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.
|
●
|
THE EEM NOTES ARE SUBJECT TO EMERGING MARKETS RISK —
|
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.
|
●
|
THE SX5E NOTES AND THE UKX NOTES PROVIDE NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES —
|
The value of your notes will not be
adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities included in
the EURO STOXX 50
®
Index or the FTSE
®
100 Index are based, although any currency fluctuations could
affect the performance of the EURO STOXX 50
®
Index or the FTSE
®
100 Index.
|
●
|
THE EFA NOTES AND THE EEM 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 that 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 EFA NOTES AND THE EEM NOTES ARE SUBJECT TO RISKS ASSOCIATED WITH THE FUNDS —
|
Each Fund is subject to management
risk, which is the risk that the investment strategies of that 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 each Fund and, consequently, the value of the notes.
|
●
|
WITH RESPECT TO THE EFA NOTES AND THE EEM 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 Underlyings” 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 in 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.
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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 a Fund. As a result,
under these circumstances, the market value of shares of a Fund may vary substantially from the net asset value per share of that
Fund. For all of the foregoing reasons, the performance of each Fund may not correlate with the performance of its Underlying 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.
|
●
|
WITH RESPECT TO THE EFA NOTES AND THE EEM NOTES, THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent
will not make an adjustment in response to all events that could affect the shares of a Fund. If an event occurs that does not
require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
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The
Underlyings
The S&P 500
®
Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500
®
Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
The Russell 2000
®
Index consists
of the middle 2,000 companies included in the Russell 3000E
TM
Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
The EURO STOXX 50
®
Index consists
of 50 component stocks of market sector leaders from within the Eurozone. The Index and STOXX are the intellectual property (including
registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”), which are used
under license. The notes based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors
and neither STOXX Limited nor any of its Licensors shall have any liability with respect thereto. For additional information about
the EURO STOXX 50
®
Index, see “Equity Index Descriptions — The EURO STOXX 50
®
Index”
in the accompanying underlying supplement.
The FTSE
®
100 Index measures the
composite price performance of stocks of the largest 100 companies (determined on the basis of market capitalization) traded on
the London Stock Exchange. For additional information about the FTSE
®
100 Index, see “Equity Index Descriptions
— The FTSE
®
100 Index” in the accompanying underlying supplement.
The iShares
®
MSCI EAFE ETF is an
exchange-traded fund of iShares
®
Trust, a registered investment company, which 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, which 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 equity market performance of global emerging
markets. For additional information about the iShares
®
MSCI Emerging Markets ETF, see the information set forth
under “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following table sets forth the closing value
of each Underlying on September 29, 2016. The following graphs set forth the historical performance of each Underlying, based on
the weekly historical closing values from January 7, 2011 through September 23, 2016. We obtained the closing values below from
the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. The closing values
of each Fund may have been adjusted by Bloomberg for actions taken by that Fund, such as stock splits.
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of any Underlying
on the Pricing Date or the Observation Date. There can be no assurance that the performance of the Underlying will result in the
return of any of your principal amount.
Underlying*
|
Closing Value on September 29, 2016
|
S&P 500
®
Index
|
2,151.13
|
Russell 2000
®
Index
|
1,237.751
|
EURO STOXX 50
®
Index
|
2,991.58
|
FTSE
®
100 Index
|
6,919.42
|
iShares
®
MSCI EAFE ETF
|
$58.67
|
iShares
®
MSCI Emerging Markets ETF
|
$37.29
|
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Historical Performance
of S&P 500
®
Index
Source: Bloomberg
|
Historical Performance
of Russell 2000
®
Index
Source: Bloomberg
|
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Historical Performance
of EURO STOXX 50
®
Index
Source: Bloomberg
|
Historical Performance
of FTSE
®
100 Index
Source: Bloomberg
|
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Historical Performance
of iShares
®
MSCI EAFE ETF
Source: Bloomberg
|
Historical Performance
of iShares
®
MSCI Emerging Markets ETF
Source: Bloomberg
|
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 with respect to the EFA Notes and the EEM Notes (together, the “Fund Notes”), as described below, the gain or
loss
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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 Fund 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 Fund 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 Fund Notes’ terms. Our special tax counsel has not expressed an opinion with respect to whether
the constructive ownership rules apply to the Fund Notes. Accordingly, U.S. Holders should consult their tax advisers regarding
the potential application of the constructive ownership rules to the Fund Notes.
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.
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. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other
than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You should consult
your tax adviser regarding the potential application of FATCA to the notes.
Non-U.S. holders should also note that recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the notes.
The
Estimated Value of the Notes
The estimated value of the notes set forth on
the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives underlying
the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs
such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable,
and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market
events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are set based
on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide
valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and
other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the
notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s
creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be
willing to buy notes from you in secondary market transactions.
The estimated value of the notes will be lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that
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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 Underlyings” 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 and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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