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 5, 2016
December , 2016
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Uncapped Contingent Buffered Return Enhanced
Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
due December 26, 2018
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek an uncapped return of at least 2.20 times any appreciation of the lesser performing
of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF, which we refer to as the Underlyings,
at maturity.
|
|
·
|
Investors should be willing to forgo interest and dividend payments and be willing to lose some or all of their principal amount
at maturity.
|
|
·
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
·
|
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 20, 2016 and are expected to settle on or about December 23, 2016.
|
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning on page US-2
of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-3 of this pricing
supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
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.
|
If the notes priced today, the estimated value of the notes
would be approximately $968.00 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 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.
Underlyings:
The EURO STOXX 50
®
Index (Bloomberg ticker: SX5E) (the
“Index”) and the iShares
®
MSCI EAFE ETF (Bloomberg ticker: EFA) (the “Fund”) (each of the
Index and the Fund, an “Underlying” and collectively, the “Underlyings”)
Upside Leverage
Factor:
At least 2.20 (to be provided in the pricing supplement)
Contingent
Buffer Amount:
25.00%
Pricing
Date:
On or about December 20, 2016
Original Issue
Date (Settlement Date):
On or about December 23, 2016
Observation
Date
*
:
December
20, 2018
Maturity Date*:
December 26, 2018
* Subject to postponement in the event of
a market disruption event and as described under “General Terms of Notes — Postponement of a Determination Date —
Notes Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in
the accompanying product supplement
|
Payment at Maturity:
If the Final Value of each Underlying is greater than its Initial
Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing
Underlying Return × Upside Leverage Factor)
If (i) the Final Value of one Underlying is greater than its
Initial Value and the Final Value of the other Underlying is equal to its Initial Value or is less than its Initial Value by up
to the Contingent Buffer Amount or (ii) the Final Value of each Underlying is equal to its Initial Value or is less than its Initial
Value by up to the Contingent Buffer Amount, you will receive the principal amount of your notes at maturity.
If the Final Value of either Underlying is less than its Initial
Value by more than the Contingent Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated as
follows:
$1,000 + ($1,000 × Lesser Performing
Underlying Return)
If the Final Value of either
Underlying is less than its Initial Value by more than the Contingent Buffer Amount, you will lose more than 25.00% 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 Observation 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
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Supplemental
Terms of the Notes
All references in this pricing supplement to
the closing value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
Hypothetical
Payout Profile
The following table illustrates the hypothetical
total return and payment at maturity on the notes linked to two hypothetical Underlyings. The “total return” as used
in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000
principal amount note to $1,000. The hypothetical total returns and payments set forth below assume the following:
|
·
|
an Initial Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
an Upside Leverage Factor of 2.20; and
|
|
·
|
a Contingent Buffer Amount of 25.00%.
|
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 total return or hypothetical
payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity
applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
Final Value of the Lesser Performing Underlying
|
Lesser Performing Underlying Return
|
Total Return on the Notes
|
Payment at Maturity
|
165.00
|
65.00%
|
143.00%
|
$2,430.00
|
150.00
|
50.00%
|
110.00%
|
$2,100.00
|
140.00
|
40.00%
|
88.00%
|
$1,880.00
|
130.00
|
30.00%
|
66.00%
|
$1,660.00
|
120.00
|
20.00%
|
44.00%
|
$1,440.00
|
110.00
|
10.00%
|
22.00%
|
$1,220.00
|
105.00
|
5.00%
|
11.00%
|
$1,110.00
|
102.50
|
2.50%
|
5.50%
|
$1,055.00
|
100.00
|
0.00%
|
0.00%
|
$1,000.00
|
95.00
|
-5.00%
|
0.00%
|
$1,000.00
|
90.00
|
-10.00%
|
0.00%
|
$1,000.00
|
80.00
|
-20.00%
|
0.00%
|
$1,000.00
|
75.00
|
-25.00%
|
0.00%
|
$1,000.00
|
74.99
|
-25.01%
|
-25.01%
|
$749.90
|
70.00
|
-30.00%
|
-30.00%
|
$700.00
|
60.00
|
-40.00%
|
-40.00%
|
$600.00
|
50.00
|
-50.00%
|
-50.00%
|
$500.00
|
40.00
|
-60.00%
|
-60.00%
|
$400.00
|
30.00
|
-70.00%
|
-70.00%
|
$300.00
|
20.00
|
-80.00%
|
-80.00%
|
$200.00
|
10.00
|
-90.00%
|
-90.00%
|
$100.00
|
0.00
|
-100.00%
|
-100.00%
|
$0.00
|
How
the Notes Work
Upside Scenario:
If the Final Value of each Underlying is greater
than its Initial Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Lesser
Performing Underlying Return
times
the Upside Leverage Factor of at least 2.20.
PS-
2
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
Assuming a hypothetical Upside Leverage Factor of 2.20, if the closing value of the Lesser Performing Underlying increases
10.00%, investors will receive at maturity a 22.00% return, or $1,220.00 per $1,000 principal amount note.
|
Par Scenario:
If (i) the Final Value of one Underlying is greater
than its Initial Value and the Final Value of the other Underlying is equal to its Initial Value or is less than its Initial Value
by up to the Contingent Buffer Amount of 25.00% or (ii) the Final Value of each Underlying is equal to its Initial Value or is
less than its Initial Value by up to the Contingent Buffer Amount of 25.00%, investors will receive at maturity the principal amount
of their notes.
Downside Scenario:
If the Final Value of either Underlying is less
than its Initial Value by more than the Contingent Buffer Amount of 25.00%, investors will lose 1% of the principal amount of their
notes for every 1% that the Final Value of the Lesser Performing Underlying is less than its Initial Value.
|
·
|
For example, if the closing value of the Lesser Performing Underlying declines
60.00%, investors will lose 60.00% of their principal amount and receive only $400.00 per $1,000 principal amount note at maturity.
|
The hypothetical
returns and hypothetical payments on the notes shown above apply
only if you hold the notes for their entire term.
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 Final Value of either Underlying is less than its Initial Value by more than 25.00%, 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 25.00% 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.
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.
PS-
3
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
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 negatively affect your payment at maturity and will not be offset or
mitigated by positive performance by the other Underlying.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING
|
|
·
|
THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE OBSERVATION DATE —
|
If the Final Value of either Underlying
is less than its Initial Value by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer Amount
will terminate, and you will be fully exposed to any depreciation in the closing value of the Lesser Performing Underlying.
|
·
|
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.
|
|
·
|
NON-U.S. SECURITIES RISK —
|
The equity securities included in
or held by the Underlyings have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S.
equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity
securities. Also, there is generally less publicly available information about companies in some of these jurisdictions than there
is about U.S. companies that are subject to the reporting requirements of the SEC.
|
·
|
NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES WITH RESPECT TO THE INDEX —
|
The value
of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity
securities included in the Index are based, although any currency fluctuations could affect the performance of the Index
.
|
·
|
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 in 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 payments on the notes.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND —
|
Because the prices of the equity securities
held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the Fund, holders of the notes
will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by the
Fund trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar
and the relative weight of equity securities held by a Fund denominated in each of
PS-
4
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
|
those currencies. If, taking into account the
relevant weighting, the U.S. dollar strengthens against those currencies, the price of a Fund will be adversely affected and any
payment on the notes may be reduced.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for the Fund 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 INITIAL VALUE BY MORE THAN THE CONTINGENT BUFFER AMOUNT IS
GREATER IF THE VALUE OF THAT UNDERLYING 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 Upside Leverage Factor.
|
·
|
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.
PS-
5
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
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 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.
The
Underlyings
The Index consists of 50 component stocks of
market sector leaders from within the Eurozone. The Index and STOXX are the intellectual property (including registered trademarks)
of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”), which are used under license. The notes
based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors and neither STOXX Limited
nor any of its Licensors shall have any liability with respect thereto. For additional information about the Index, see “Equity
Index Descriptions — The EURO STOXX 50
®
Index” in the accompanying underlying supplement.
The Fund is an exchange-traded fund of iShares
®
Trust, a registered investment company, which seeks to track the investment results, before fees and expenses, of an index composed
of large- and mid-capitalization developed market equities, excluding the United States and Canada, which we refer to as the Underlying
Index with respect to the Fund. The Underlying Index for the Fund is currently the MSCI EAFE
®
Index. The MSCI EAFE
®
Index is a free float-adjusted market capitalization index intended to measure the equity market performance of the developed equity
markets in Europe, Asia, Australia and New Zealand. For additional information about the Fund, see “Fund Descriptions —
The iShares
®
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 7, 2011 through December 2, 2016. The
closing value of the Underlying on December 2, 2016 was 3,015.13. The closing value of the Fund on December 2, 2016 was $56.71.
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.
PS-
6
| Structured Investments
Uncapped Contingent Buffered Return Enhanced Notes Linked to the Lesser Performing of the EURO STOXX 50
®
Index and the iShares
®
MSCI EAFE ETF
|
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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 the Observation Date. There can be no assurance that the performance of the Underlyings 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, subject to the possible application of the “constructive ownership”
rules, the gain or loss on your notes should be treated as long-term capital gain or loss if you hold your notes for more than
a year, whether or not you are an initial purchaser of notes at the issue price. The notes
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could be treated as “constructive
ownership transactions” within the meaning of Section 1260 of the Internal Revenue Code of 1986, as amended, in which case
any gain recognized in respect of the notes that would otherwise be long-term capital gain and that was in excess of the “net
underlying long-term capital gain (as defined in Section 1260) would be treated as ordinary income, and a notional interest charge
would apply as if that income had accrued for tax purposes at a constant yield over the notes’ term. Our special tax counsel
has not expressed an opinion with respect to whether the constructive ownership rules apply to the notes. Accordingly, U.S. Holders
should consult their tax advisers regarding the potential application of the constructive ownership rules.
The IRS or a court may not respect the treatment
of the notes described above, in which case the timing and character of any income or loss on your notes could be materially and
adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to
require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number
of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as
the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated
accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject
to the constructive ownership regime described above. While the notice requests comments on appropriate transition rules and effective
dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the notes, possibly with retroactive effect. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the notes, including the potential application of the constructive
ownership rules, possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other
than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the notes. You should consult
your tax adviser regarding the potential application of FATCA to the notes.
Non-U.S. holders should also note that recently
promulgated Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity
linked instruments” will not apply to the notes.
The
Estimated Value of the Notes
The estimated value of the notes set forth on
the cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income
debt component with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. The estimated value of the notes does not represent a minimum price
at which JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate
used in the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view
of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. For additional information, see “Selected
Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate” in this
pricing supplement.
The value of the derivative or derivatives underlying
the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs
such as the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable,
and which can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market
events and/or environments. Accordingly, the estimated value of the notes is determined when the terms of the notes are set based
on market conditions and other relevant factors and assumptions existing at that time.
The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide
valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and
other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the
notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s
creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be
willing to buy notes from you in secondary market transactions.
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The estimated value of the notes will be lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
See “Selected Risk Considerations — The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price
to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Underlyings” in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal
to the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus
(minus) the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes
at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes,
we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject
such changes, in which case we may reject your offer to purchase.
You should read this pricing supplement together
with the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term
notes of which these notes are a part, and the more detailed information contained in the accompanying product supplement and the
accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures
or other educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk
Factors” sections of the accompanying product supplement and the accompanying underlying supplement, as the notes involve
risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other
advisers before you invest in the notes.
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You may access these documents on the SEC
website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us”
and “our” refer to JPMorgan Financial.
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