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 27, 2016
October , 2016
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Review Notes Linked to the Lesser Performing
of the Energy Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration
& Production ETF due October 12, 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 any Review Date, the closing
price of one share of each of the Energy Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF, which we refer to as the Funds, is at or above its Call Level.
·
The notes are also designed for investors who seek a fixed return at maturity equal to the Contingent Minimum Return of
10.00% if the notes have not been automatically called and the Final Value of each Fund is greater than or equal to 60.00% of
its Initial Value.
·
Investors in the notes should be willing to forgo interest and dividend payments and be willing to accept the risk of losing
some or all 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.
·
Payments on the notes are not linked to a basket composed of the Funds. Payments on the notes are linked to the performance
of each of the Funds individually, as described below.
·
Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
·
The notes are expected to price on or about October 7, 2016 and are expected to settle on or about October 14, 2016.
·
CUSIP: 46646EH21
|
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-4 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. If the notes priced today, the selling commissions would be approximately $21.50 per $1,000
principal amount note and in no event will these selling commissions exceed $24.00 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
|
If the notes priced today, the estimated value of the notes
would be approximately $939.50 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 $925.00 per $1,000 principal amount note. See “The
Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no 4-I
dated April 15, 2016, underlying supplement no. 1-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
|
|
Guarantor:
JPMorgan
Chase & Co.
Funds:
The
Energy Select Sector SPDR
®
Fund (Bloomberg ticker: XLE) and the SPDR
®
S&P
®
Oil
& Gas Exploration & Production ETF (Bloomberg ticker: XOP)
Call Premium
Amount:
The Call Premium Amount with respect to each Review Date is
set forth below:
·
first
Review Date: at least 16.50% × $1,000
·
second
Review Date: at least 33.00% × $1,000
·
third
Review Date: at least 49.50% × $1,000
·
final
Review Date: at least 66.00% × $1,000
(in each case, to be provided in the pricing supplement)
|
Call Value:
With respect to each Fund, 100.00% of its Initial Value
|
|
Contingent Minimum Return:
10.00%
|
|
Trigger Value:
With respect to each Fund, 60.00% of its Initial Value
|
|
Pricing Date:
On or about October 7, 2016
|
|
Original Issue Date (Settlement Date):
On or about October 14, 2016
|
|
Review Dates*:
October 17, 2017, October 9, 2018, October 7, 2019 and October 7, 2020 (final Review Date)
|
|
Call Settlement Dates*:
If the notes are automatically called on any Review Date, the third business day after that Review Date, except that the final Call Settlement Date is the Maturity Date
|
|
Maturity Date*:
October 12, 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 price of one share of each Fund on any Review Date
is greater than or equal to its 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 applicable to that Review Date, payable on the applicable
Call Settlement Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final
Value of each Fund is greater than or equal to its Trigger Value, your payment at maturity per $1,000 principal amount note will
be calculated as follows:
$1,000 + ($1,000 × Contingent Minimum
Return)
If the notes have not been automatically called and the Final
Value of either Fund is less than its Trigger Value, your payment at maturity per $1,000 principal amount note will be calculated
as follows:
$1,000 + ($1,000 × Lesser Performing
Fund Return)
If the notes have not been
automatically called and the Final Value of either Fund is less than its Trigger Value, you will lose more than 40.00% of your
principal amount at maturity and could lose all of your principal amount at maturity.
Lesser Performing
Fund:
The Fund with the Lesser Performing Fund Return
Lesser Performing
Fund Return:
The lower of the Fund Returns of the Funds
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 final Review 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
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
How
the Notes Work
Payment upon an Automatic Call
Payment at Maturity If the Notes Have Not
Been Automatically Called
Call Premium Amount
The table below illustrates the hypothetical Call
Premium Amount per $1,000 principal amount note for each Review Date based on the minimum Call Premium Amounts set forth under
“Key Terms — Call Premium Amount” above. The actual Call Premium Amounts will be provided in the pricing supplement
and will be not less than the minimum Call Premium Amounts set forth under “Key Terms — Call Premium Amount.”
Review Date
|
Call Premium Amount
|
First
|
$165.00
|
Second
|
$330.00
|
Third
|
$495.00
|
Final
|
$660.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Funds, assuming a range of performances for the hypothetical Lesser Performing Fund on the
Review Dates.
Each hypothetical payment set forth below assumes that the closing price of one share of the Fund that is not
the Lesser Performing Fund on each Review Date is greater than or equal to its Call Value (and therefore its Trigger Value).
PS-
2
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Lesser Performing Fund of $100.00;
|
|
·
|
a Call Value for the Lesser Performing Fund of $100.00 (equal to 100.00% of the hypothetical Initial Value);
|
|
·
|
a Trigger Value for the Lesser Performing Fund of $60.00 (equal to 60.00% of the hypothetical Initial Value); and
|
|
·
|
the Call Premium Amounts are equal to the minimum Call Premium Amounts set forth under “Key Terms — Call Premium
Amount” above.
|
The hypothetical Initial Value of the Lesser Performing
Fund of $100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of either Fund.
The actual Initial Value of each Fund will be the closing price of one share of that Fund on the Pricing Date and will be provided
in the pricing supplement. For historical data regarding the actual closing prices of one share of each Fund, please see the historical
information set forth under “The Funds” in this pricing supplement.
Each hypothetical payment set forth below is for
illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the
following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,165.00 (16.50% return)
|
Because the closing price of one share of each
Fund on the first Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,165.00 (or $1,000
plus
the Call Premium Amount applicable to the first Review
Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 2 — Notes are automatically
called on the final Review Date.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$90.00
|
Notes NOT automatically called
|
Second Review Date
|
$85.00
|
Notes NOT automatically called
|
Third Review Date
|
$95.00
|
Notes NOT automatically called
|
Final Review Date
|
$110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,660.00 (66.00% return)
|
Because the closing price of one share of each
Fund on the final Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,660.00 (or $1,000
plus
the Call Premium Amount applicable to the final Review
Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Fund is greater than or equal to its Trigger Value.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$90.00
|
Notes NOT automatically called
|
Second Review Date
|
$85.00
|
Notes NOT automatically called
|
Third Review Date
|
$95.00
|
Notes NOT automatically called
|
Final Review Date
|
$70.00
|
Notes NOT automatically called; Final Value of Lesser Performing Fund is greater than or equal to Trigger Value
|
|
Total Payment
|
$1,100.00 (10.00% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Fund is greater than or equal to its Trigger Value, the payment at maturity,
for each $1,000 principal amount note, will be $1,100.00, calculated as follows:
$1,000 + ($1,000 × 10.00%) = $1,100.00
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
Example 4 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Fund is less than its Trigger Value.
Date
|
Closing Price of Lesser Performing Fund
|
|
First Review Date
|
$80.00
|
Notes NOT automatically called
|
Second Review Date
|
$70.00
|
Notes NOT automatically called
|
Third Review Date
|
$60.00
|
Notes NOT automatically called
|
Final Review Date
|
$50.00
|
Notes NOT automatically called; Final Value of Lesser Performing Fund is less than Trigger Value
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Fund is less than its Trigger Value and the Lesser Performing Fund Return is -50.00%,
the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been automatically called and the Final Value of either Fund is less than its Trigger Value,
you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Lesser Performing Fund is less
than its Initial Value. Accordingly, under these circumstances, you will lose more than 40.00% 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.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO ANY CALL PREMIUM AMOUNT PAID ON THE NOTES IF THE NOTES ARE AUTOMATICALLY
CALLED,
|
regardless of any appreciation in the
price of one share of either Fund, which may be significant. You will not participate in any appreciation in the price of one share
of either Fund.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN MAY TERMINATE ON THE FINAL REVIEW DATE IF THE NOTES HAVE NOT BEEN AUTOMATICALLY
CALLED
—
|
If the notes have not been automatically
called and the Final Value of either Fund is less than its Trigger Value, you will not be entitled to receive the Contingent Minimum
Return at maturity. Under these circumstances, you may lose some or all of your principal amount at maturity.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE PRICE OF EACH FUND —
|
Payments on the notes are not linked
to a basket composed of the Funds and are contingent upon the performance of each individual Fund. Poor performance by either of
the Funds over the term of the notes may result in the notes not being automatically called on a Review Date, may negatively affect
your payment at maturity and will not be offset or mitigated by positive performance by the other Fund.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING FUND.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Fund is
less than its Trigger Value and the notes have not been automatically called, the benefit provided by the Trigger Value will terminate
and you will be fully exposed to any depreciation in the closing price of one share of the Lesser Performing Fund.
|
·
|
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 one year. 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 level of risk. Even in cases where the notes
are called before maturity, you are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON EITHER FUND OR THE SECURITIES HELD BY EITHER FUND OR HAVE ANY RIGHTS WITH RESPECT TO THE
FUNDS OR THOSE SECURITIES.
|
|
·
|
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 prices 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 Funds” 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 that 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
PS-
5
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
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 payment on the notes.
|
·
|
RISKS ASSOCIATED WITH THE ENERGY SECTOR WITH RESPECT TO THE ENERGY SELECT SECTOR SPDR
®
FUND —
|
All or substantially all of the equity
securities held by the shares of the Energy Select Sector SPDR
®
Fund are issued by companies whose primary line
of business is directly associated with the energy sector. Market or economic factors impacting companies in the energy sector
could have a major effect on the value of the Energy Select Sector SPDR
®
Fund. Issuers in energy-related industries
can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels. Markets for various energy-related
commodities can have significant volatility, and are subject to control or manipulation by large producers or purchasers. Companies
in the energy sector may need to make substantial expenditures, and to incur significant amounts of debt, in order to maintain
or expand their reserves. Oil and gas exploration and production can be significantly affected by natural disasters as well as
changes in exchange rates, interest rates, government regulation, world events and economic conditions. These companies may
be at risk for environmental damage claims. As a result, the value of the notes may be subject to greater volatility and be more
adversely affected by a single economic, political or regulatory occurrence affecting this sector than a different investment linked
to securities of a more broadly diversified group of issuers.
|
·
|
RISKS ASSOCIATED WITH THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY WITH RESPECT TO THE SPDR
®
S&P
®
OIL & GAS EXPLORATION & PRODUCTION ETF
—
|
All or substantially all of the equity
securities held by the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF are issued by
companies whose primary line of business is directly associated with the oil and gas exploration and production industry.
Market or economic factors impacting companies in this industry could have a major effect on the value of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF. Issuers in energy-related industries can be significantly
affected by fluctuations in energy prices and supply and demand of energy fuels. Markets for various energy-related commodities
can have significant volatility, and are subject to control or manipulation by large producers or purchasers. Companies in
the energy sector may need to make substantial expenditures, and to incur significant amounts of debt, in order to maintain or
expand their reserves. Companies in the oil and gas sector develop and produce crude oil and natural gas and provide drilling
and other energy resources production and distribution related services. Stock prices for these types of companies are affected
by supply and demand both for their specific product or service and for energy products in general. The price of oil and
gas, exploration and production spending, government regulation, world events and economic conditions will likewise affect the
performance of these companies. Correspondingly, securities of companies in the energy field are subject to swift price and
supply fluctuations caused by events relating to international politics, energy conservation, the success of exploration projects,
and tax and other governmental regulatory policies. Weak demand for the companies’ products or services or for energy
products and services in general, as well as negative developments in these other areas, would adversely impact the Fund’s
performance. Oil and gas exploration and production can be significantly affected by natural disasters as well as changes
in exchange rates, interest rates, government regulation, world events and economic conditions. These companies may be at risk
for environmental damage claims. As a result, the value of the notes may be subject to greater volatility and be more adversely
affected by a single economic, political or regulatory occurrence affecting this industry than a different investment linked to
securities of a more broadly diversified group of issuers.
|
·
|
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 the Funds. 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.
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF A FUND FALLING BELOW ITS TRIGGER VALUE IS GREATER
IF THE PRICE OF ONE SHARE OF THAT FUND IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
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 Amounts.
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
|
·
|
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 prices of the Funds. 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.
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7
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
The
Funds
The Energy Select
Sector SPDR
®
Fund is an exchange-traded fund of the Select Sector SPDR
®
Trust, a registered investment
company, that seeks to provide investment results that, before expenses, correspond generally to the price and yield performance
of publicly traded equity securities of companies in the Energy Select Sector Index, which we refer to as the Underlying Index
with respect to the Energy Select Sector SPDR
®
Fund. The Energy Select Sector Index is a modified market capitalization-based
index that measures the performance of the GICS
®
energy sector, which currently includes companies in the following
industries: energy equipment and services; and oil, gas and consumable fuels. For additional information about the Energy Select
Sector SPDR
®
Fund, see “Fund Descriptions — The Select Sector SPDR
®
Funds” in the
accompanying underlying supplement.
The SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF is an exchange-traded fund of the SPDR
®
Series
Trust, a registered investment company, which seeks to provide investment results that, before fees and expenses, correspond generally
to the total return performance of an index derived from the oil and gas exploration and production segment of a U.S. total market
composition index, which we refer to as the Underlying Index with respect to the SPDR
®
S&P
®
Oil
& Gas Exploration & Production ETF. The Underlying Index with respect to the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF is currently the S&P
®
Oil & Gas Exploration & Production
Select Industry
TM
Index. The S&P
®
Oil & Gas Exploration & Production Select Industry
TM
Index is a modified equal-weighted index that is designed to measure the performance of the following GICS
®
sub-industries:
integrated oil & gas, oil & gas exploration & mining and oil & gas refining & marketing. For additional information
about the Fund, see “Fund Descriptions — The SPDR
®
S&P
®
Industry ETFs” in the
accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Fund based on the weekly historical closing prices of one share from January 7, 2011 through September 23,
2016. The closing price of one share of the Energy Select Sector SPDR
®
Fund on September 26, 2016 was $67.34. The
closing price of one share of the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF on
September 26, 2016 was $36.06. We obtained the closing prices of one share above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. The closing values above and below may have been adjusted
by Bloomberg for actions taken by the Funds, such as stock splits.
PS-
8
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
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 price of
one share of either Fund on the Pricing Date or any Review Date. There can be no assurance that the performance of the Funds will
result in the return of any of your principal amount.
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, 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.
However, the IRS or a court may not respect this treatment, in which case the timing and character of any income or loss on the
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
PS-
9
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
whether to require investors in these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional
interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of
an investment in the notes, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income
tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice.
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 an automatic call or 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.
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 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.
PS-
10
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
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 “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Funds” 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.
Supplemental
Plan of Distribution
We expect that delivery of the notes will be made
against payment for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement, which
will be the fifth business day following the expected Pricing Date of the notes (this settlement cycle being referred to as T+5).
Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required
to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish
to trade notes on the Pricing Date or the succeeding business day will be required to specify an alternate settlement cycle at
the time of any such trade to prevent a failed settlement and should consult their own advisors.
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.
PS-
11
| Structured Investments
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
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
Review Notes Linked to the Lesser Performing of the Energy Select Sector
SPDR
®
Fund and the SPDR
®
S&P
®
Oil & Gas Exploration & Production ETF
|
|
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