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 December 6, 2018
December , 2018
|
Registration Statement
Nos. 333-222672 and 333-222672-01; Rule 424(b)(2)
|
JPMorgan
Chase Financial Company LLC
Structured Investments
Review Notes Linked to the Lesser Performing
of the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF due December 21, 2023
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
value of each of the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF, which
we refer to as the Underlyings, is at or above its Call Value.
|
|
●
|
The earliest date on which an automatic call may be initiated is December 27, 2019.
|
|
●
|
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 Underlying 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 amount at maturity.
|
|
●
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
●
|
Payments on the notes are not linked to a basket composed of the Underlyings. Payments on the notes are linked to the performance
of each of the Underlyings individually, as described below.
|
|
●
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
●
|
The notes are expected to price on or about December
18, 2018 and are expected to settle on or about December 26, 2018.
|
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-1 of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-5 of
this pricing supplement.
Neither the Securities and Exchange Commission (the
“SEC”) nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or
the adequacy of this pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and
prospectus. Any representation to the contrary is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)(3)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to
as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. In no event will these selling commissions exceed $22.50 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
(3) JPMS will pay a referral fee of $4.50 per $1,000
principal amount note to an affiliated or unaffiliated dealer and may pay a structuring fee of $5.00 per $1,000 principal amount
note with respect to some or all of the notes to other affiliated or unaffiliated dealers.
|
If the notes priced today, the estimated value of
the notes would be approximately $957.00 per $1,000 principal amount note. The estimated value of the notes, when the terms of
the notes are set, will be provided in the pricing supplement and will not be less than $920.00 per $1,000 principal amount note.
See “The Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I
dated April 5, 2018, underlying supplement no. 1-I dated April 5, 2018 and the prospectus and prospectus supplement, each dated
April 5, 2018
Key
Terms
Issuer:
JPMorgan
Chase Financial Company LLC, an indirect, wholly owned finance subsidiary of JPMorgan Chase & Co.
Guarantor:
JPMorgan
Chase & Co.
Underlyings:
The
S&P 500
®
Index (Bloomberg ticker: SPX) (the “Index”) and the SPDR
®
S&P
®
Biotech ETF (Bloomberg ticker: XBI) (the “Fund”) (each of the Index and the Fund, an “Underlying” and collectively,
the “Underlyings”)
Call Premium Amount:
The
Call Premium Amount with respect to each Review Date is set forth below:
|
●
|
first Review Date:
|
at least 11.15% x $1,000
|
|
●
|
second Review Date:
|
at least 22.30% x $1,000
|
|
●
|
third Review Date:
|
at least 33.45% x $1,000
|
|
●
|
fourth Review Date:
|
at least 44.60% x $1,000
|
|
●
|
final Review Date:
|
at least 55.75% x $1,000
|
(in each case, to be provided in the pricing supplement)
Call Value:
With
respect to each Underlying, 100.00% of its Initial Value
Contingent Minimum Return:
10.00%
Trigger Value:
With
respect to each Underlying, 60.00% of its Initial Value
Pricing Date:
On
or about December 18, 2018
Original Issue Date (Settlement Date):
On or about December 26, 2018
Review Dates*:
December
27, 2019, December 18, 2020, December 20, 2021, December 19, 2022 and December 18, 2023 (final Review Date)
Call Settlement Dates*:
January
2, 2020, December 23, 2020, December 23, 2021, December 22, 2022 and the Maturity Date
Maturity Date*:
December
21, 2023
* 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 value of each
Underlying 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 Underlying 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 Underlying 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 Underlying Return)
If the notes have not been
automatically called and the Final Value of either Underlying 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 Underlying:
The
Underlying with the Lesser Performing Underlying Return
Lesser Performing
Underlying
Return:
The lower of the Underlying
Returns of the Underlyings
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
Final Value:
With
respect to each Underlying, the closing value of that Underlying on the final Review Date
Share Adjustment Factor:
The
Share Adjustment Factor is referenced in determining the closing value of the Fund and is set equal to 1.0 on the Pricing Date.
The Share Adjustment Factor is subject to adjustment upon the occurrence of certain events affecting the 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 S&P 500
®
Index and the SPDR
®
S&P
®
Biotech 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 not be less than the minimum Call Premium Amounts set forth under “Key Terms — Call Premium Amount.”
Review Date
|
Call Premium Amount
|
First
|
$111.50
|
Second
|
$223.00
|
Third
|
$334.50
|
Fourth
|
$446.00
|
Final
|
$557.50
|
PS-
2
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the hypothetical Lesser Performing Underlying
on the Review Dates.
Each hypothetical payment set forth below assumes that the closing value of the Underlying that is not
the Lesser Performing Underlying on each Review Date is greater than or equal to its Call Value (and therefore its Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
●
|
an Initial Value for the Lesser Performing Underlying of 100.00;
|
|
●
|
a Call Value for the Lesser Performing Underlying of 100.00 (equal to 100.00% of its hypothetical Initial Value);
|
|
●
|
a Trigger Value for the Lesser Performing Underlying of 60.00 (equal to 60.00% of its hypothetical Initial Value);
|
|
●
|
the Call Premium Amounts are equal to the minimum Call Premium Amounts set forth under “Key Terms — Call Premium
Amount” above; and
|
|
●
|
a Contingent Minimum Return of 10.00%.
|
The hypothetical Initial Value of the Lesser Performing
Underlying of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of either
Underlying. The actual Initial Value of each Underlying will be the closing value of that Underlying on the Pricing Date and will
be provided in the pricing supplement. For historical data regarding the actual closing values of each Underlying, please see the
historical information set forth under “The Underlyings” 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 Value of Lesser Performing Underlying
|
|
First Review Date
|
110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,111.50 (11.15% return)
|
Because the closing value of each Underlying 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 $1,111.50 (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 Value of Lesser Performing Underlying
|
|
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
|
Fourth Review Date
|
80.00
|
Notes NOT automatically called
|
Final Review Date
|
150.00
|
Notes are automatically called
|
|
Total Payment
|
$1,557.50 (55.75% return)
|
Because the closing value of each Underlying 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 $1,557.50 (or $1,000
plus
the Call Premium Amount applicable to the final Review Date),
payable on the applicable Call Settlement Date, which is the Maturity Date.
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
Example 3 — Notes have NOT been
automatically called and the Final Value of the Lesser Performing Underlying is greater than or equal to its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
|
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
|
Fourth Review Date
|
90.00
|
Notes NOT automatically called
|
Final Review Date
|
60.00
|
Notes NOT automatically called; Final Value of Lesser Performing Underlying 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 Underlying 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
Example 4 — Notes have NOT been
automatically called and the Final Value of the Lesser Performing Underlying is less than its Trigger Value.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
80.00
|
Notes NOT automatically called
|
Second Review Date
|
75.00
|
Notes NOT automatically called
|
Third Review Date
|
60.00
|
Notes NOT automatically called
|
Fourth Review Date
|
55.00
|
Notes NOT automatically called
|
Final Review Date
|
50.00
|
Notes NOT automatically called; Final Value of Lesser Performing Underlying 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 Underlying is less than its Trigger Value and the Lesser Performing Underlying
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.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
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
Underlying 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 Underlying 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 of either Underlying, which may be significant. You will not participate in any appreciation of
either Underlying.
|
|
●
|
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 Underlying is less than its Trigger Value, you will
not be entitled to receive the Contingent Minimum Return at maturity. Under these circumstances, you will lose some or all of your
principal amount at maturity.
|
|
●
|
POTENTIAL CONFLICTS —
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.
|
|
●
|
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 level of the Index.
|
|
●
|
RISKS ASSOCIATED WITH THE BIOTECHNOLOGY INDUSTRY WITH RESPECT TO THE SPDR
®
S&P
®
BIOTECH ETF —
All or substantially all of the equity securities held by the SPDR
®
S&P
®
Biotech ETF are issued
by companies whose primary line of business is directly associated with the biotechnology industry. 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.
Biotechnology companies invest heavily in research and development, which may not necessarily lead to commercially successful products. These
companies are also subject to increased governmental regulation, which may delay or inhibit the release of new products. Many
biotechnology companies are dependent upon their ability to use and enforce intellectual property rights and patents. Any impairment
of these rights may have adverse financial consequences. Biotechnology stocks, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Biotechnology companies can be significantly affected by technological
change and obsolescence, product liability lawsuits and consequential high insurance costs. These factors could affect the
biotechnology industry and could affect the value of the equity securities held by the SPDR
®
S&P
®
Biotech ETF and the price of the SPDR
®
S&P
®
Biotech ETF during the term of the notes, which may
adversely affect the value of your notes.
|
|
●
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH UNDERLYING —
Payments on the notes are not linked to a basket composed of the Underlyings and are contingent upon the performance of each individual
Underlying. Poor performance by either of the Underlyings 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 Underlying.
|
|
●
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
●
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
If the Final Value of either Underlying 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 of the Lesser Performing Underlying.
|
PS-
5
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
|
●
|
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.
|
|
●
|
THE NOTES DO NOT PAY INTEREST.
|
|
●
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING OR HAVE ANY RIGHTS
WITH RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
●
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
The Fund is subject to management risk, which is the risk that the investment strategies of the Fund’s investment adviser,
the implementation of which is subject to a number of constraints, may not produce the intended results. These constraints could
adversely affect the market price of the shares of the Fund and, consequently, the value of the notes.
|
|
●
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE
PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
The 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 the 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 the Fund and its Underlying Index. In addition, corporate actions with respect to the equity securities
underlying the Fund (such as mergers and spin-offs) may impact the variance between the performances of the Fund and its Underlying
Index. Finally, because the shares of the Fund are traded on a securities exchange and are subject to market supply and investor
demand, the market value of one share of the Fund may differ from the net asset value per share of the Fund.
During periods of market volatility, securities underlying the Fund may be unavailable in the secondary market, market participants
may be unable to calculate accurately the net asset value per share of the Fund and the liquidity of the Fund may be adversely
affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares of the
Fund. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing
to buy and sell shares of the Fund. As a result, under these circumstances, the market value of shares of the Fund may vary substantially
from the net asset value per share of the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate
with the performance of its Underlying Index as well as the net asset value per share of the Fund, which could materially and adversely
affect the value of the notes in the secondary market and/or reduce any payment on the notes.
|
|
●
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
The calculation agent will make adjustments to the Share Adjustment Factor for certain events affecting the shares of the Fund.
However, the calculation agent will not make an adjustment in response to all events that could affect the shares of the 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.
|
|
●
|
THE RISK OF THE CLOSING VALUE OF AN UNDERLYING FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE VALUE OF THAT UNDERLYING
IS VOLATILE.
|
|
●
|
LACK OF LIQUIDITY —
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.
|
|
●
|
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 referral fee, the structuring
fee, if any, 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.
|
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
|
●
|
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).
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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, the referral fee and the structuring fee, if any, 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.
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●
|
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, referral fee, structuring fee, if any, projected hedging
profits, if any, estimated hedging costs and the values of the Underlyings. 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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the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
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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 SPDR
®
S&P
®
Biotech ETF is an exchange-traded fund of the SPDR
®
Series Trust, a registered investment company, that seeks to
provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived
from the biotechnology segment of a U.S. total market composite index, which we refer to as the Underlying Index with respect to
the SPDR
®
S&P
®
Biotech ETF. The Underlying Index for the SPDR
®
S&P
®
Biotech ETF is currently the S&P
®
Biotechnology Select Industry
TM
Index. The S&P
®
Biotechnology Select Industry
TM
Index is a modified equal-weight index that is designed to measure the performance of
the GICS
®
biotechnology sub-industry of the S&P Total Market Index. The S&P
®
Biotechnology
Select Industry
TM
Index may also include companies in the life sciences tools & services sub-industry of the S&P
Total Market Index. For additional information about the SPDR
®
S&P
®
Biotech ETF, 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 Underlying based on the weekly historical closing values from January 4, 2013 through November 30, 2018. The
closing value of the Index on December 4, 2018 was 2,700.06. The closing value of the Fund on December 4, 2018 was $80.46. The
U.S. equity markets were closed on December 5, 2018 in observance of a National Day of Mourning for former U.S. President George
H.W. Bush. We obtained the closing values above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification. The closing values of the Fund above and below may have been adjusted by Bloomberg for actions
taken by the 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 either Underlying
on the Pricing Date or any Review Date. There can be no assurance that the performance of the Underlyings will result in the return
of any of your principal amount.
Historical Performance
of the S&P 500
®
Index
Source: Bloomberg
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the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
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Historical Performance
of the SPDR
®
S&P
®
Biotech 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, 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 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.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments
linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a
“Qualified Index”). Additionally, a recent IRS notice excludes from the scope of Section 871(m) instruments issued
prior to January 1, 2021 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends
for U.S. federal income tax purposes (each an “Underlying Security”). Based on certain determinations made by us, we
expect that Section 871(m) will not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding on the
IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular
circumstances, including whether you enter into other transactions with respect to an Underlying Security. If necessary, further
information regarding the potential application of Section 871(m) will be provided in the pricing supplement for the notes. You
should consult your tax adviser regarding the potential application of Section 871(m) to the notes.
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the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
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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 2015 IRS notice, this regime will not apply to payments of gross proceeds (other than
any amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser
regarding the potential application of FATCA to the notes.
The
Estimated Value of the Notes
The estimated value of the notes set forth on
the cover of this
pricing supplement
is equal
to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with the same maturity as
the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying the economic
terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would be willing to buy your
notes in any secondary market (if any exists) at 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 referral fee paid to an affiliated or unaffiliated dealer, the structuring fee, if any, paid to other affiliated or
unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations
entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less
than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes
may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging
profits. See “Selected Risk Considerations — The Estimated Value of the Notes Will Be Lower Than the Original Issue
Price (Price to Public) of the Notes” in this
pricing
supplement
.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
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the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
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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 Examples”
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
the referral fee paid to an affiliated or unaffiliated dealer, plus the structuring fee, if any, paid to 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 Pricing Date of the notes (this settlement cycle being referred to as “T+5”).
Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to
settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade
notes on any date prior to two business days before delivery 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.
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-
11
| Structured Investments
Review Notes Linked to the Lesser Performing of
the S&P 500
®
Index and the SPDR
®
S&P
®
Biotech ETF
|
|
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