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
February 22, 2017
February , 2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked
to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index due March 5, 2019
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The Notes are designed for investors who seek a Contingent Interest Payment with respect to each Observation Date for which
the closing level of each of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index, which we refer to as the Indices, is greater than or equal to 75.00% of its Initial Value, which we refer to as a Coupon
Barrier.
|
|
·
|
The Notes will be automatically called if the closing level of each Index on any Observation Date (other than the final Observation
Date, which we refer to as the Valuation Date) is greater than or equal to its Initial Value.
|
|
·
|
The earliest date on which an automatic call may be initiated is May 30, 2017.
|
|
·
|
Investors in the Notes should be willing to accept the risk of losing some or all of their principal and the risk that no Contingent
Interest Payment may be made with respect to some or all Observation Dates.
|
|
·
|
Investors should also be willing to forgo fixed interest and dividend payments, in exchange for the opportunity to receive
Contingent Interest Payments.
|
|
·
|
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 Indices. Payments on the Notes are linked to the
performance of each of the Indices individually, as described below.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
·
|
The Notes are expected to price on or about February 28, 2017 and are expected to settle on or about March 3, 2017.
|
Investing in the Notes involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-2 of the accompanying underlying supplement and “Selected Risk Considerations” beginning on page PS-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. In no event will these selling commissions exceed $17.50 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 $972.20 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 $960.00 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
.
Indices:
The
S&P 500
®
Index (Bloomberg ticker: SPX), the Russell 2000
®
Index (Bloomberg ticker: RTY) and
the EURO STOXX 50
®
Index (Bloomberg ticker: SX5E)
Contingent Interest Payments:
If the Notes have not been automatically called and the closing
level of each Index on any Observation Date is greater than or equal to its Coupon Barrier, you will receive on the applicable
Contingent Interest Payment Date for each $1,000 principal amount Note a Contingent Interest Payment equal to at least $24.375
(equivalent to a Contingent Interest Rate of at least 9.75% per annum, payable at a rate of at least 2.4375% per quarter) (to be
provided in the pricing supplement).
If the closing level of any Index on any Observation Date
is less than its Coupon Barrier, no Contingent Interest Payment will be made with respect to that Observation Date.
Contingent
Interest Rate:
At least 9.75% per annum, payable at a rate of at least
2.4375% per quarter (to be provided in the pricing supplement)
Coupon Barrier
/ Trigger Value:
With respect to each Index, 75.00% of its Initial
Value
Pricing
Date:
On or about February 28, 2017
Original Issue
Date (Settlement Date):
On or about March 3, 2017
Observation
Dates*:
May 30, 2017, August 28, 2017, November 28, 2017, February
28, 2018, May 29, 2018, August 28, 2018, November 28, 2018 and February 28, 2019 (the “Valuation Date”)
Contingent
Interest Payment Dates*:
June 2, 2017, August 31, 2017, December 1,
2017, March 5, 2018, June 1, 2018, August 31, 2018, December 3, 2018 and the Maturity Date
Maturity Date*:
March 5, 2019
Call
Settlement Date*:
If the Notes are automatically called on any Observation
Date (other than the Valuation Date), the first Contingent Interest Payment Date immediately following that Observation Date
* Subject to postponement in the event of a market
disruption event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Automatic Call:
If the closing level of each Index on any Observation Date (other
than the Valuation Date) is greater than or equal to its Initial 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 Contingent Interest Payment applicable to that Observation
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 Index is greater than or equal to its Trigger Value, you will receive a cash payment at maturity, for each $1,000
principal amount Note, equal to (a) $1,000
plus
(b) the Contingent Interest Payment applicable to the Valuation Date.
If the Notes have not been automatically called and the Final
Value of any Index 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 × Least Performing
Index Return)
If the Notes have not been automatically called and the Final
Value of any Index is less than its Trigger Value, you will lose more than 25.00% of your principal amount at maturity and could
lose all of your principal amount at maturity.
Least
Performing Index:
The Index with the Least Performing Index Return
Least Performing
Index Return:
The lowest of the Index Returns of the Indices
Index Return:
With respect to each Index,
(Final Value – Initial Value)
Initial Value
Initial Value:
With respect to each Index, the closing level of that Index on the
Pricing Date
Final Value:
With respect to each Index, the closing level of that Index on the
Valuation Date
|
PS-
1
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
How
the Notes Work
Payments in Connection with Observation
Dates Preceding the Valuation Date
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Contingent Interest Payments
The table below illustrates the hypothetical
total Contingent Interest Payments per $1,000 principal amount Note over the term of the Notes based on a hypothetical Contingent
Interest Rate of 9.75% per annum, depending on how many Contingent Interest Payments are made prior to automatic call or maturity. The
actual Contingent Interest Rate will be provided in the pricing supplement and will be at least 9.75% per annum.
Number of Contingent Interest Payments
|
Total Contingent Interest Payments
|
8
|
$195.000
|
7
|
$170.625
|
6
|
$146.250
|
5
|
$121.875
|
4
|
$97.500
|
3
|
$73.125
|
2
|
$48.750
|
1
|
$24.375
|
0
|
$0.000
|
PS-
2
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the Notes linked to three hypothetical Indices, assuming a range of performances for the hypothetical Least Performing Index on
the Observation Dates.
Each hypothetical payment set forth below assumes that the closing level of each Index that
is not the Least Performing Index on each Observation Date is greater than or equal to its Initial Value (and therefore its Coupon
Barrier and Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Least Performing Index of 100.00;
|
|
·
|
a Coupon Barrier and a Trigger Value for the Least Performing Index of 75.00 (equal to 75.00% of its hypothetical Initial Value);
and
|
|
·
|
a Contingent Interest Rate of 9.75% per annum (payable at a rate of 2.4375% per quarter).
|
The hypothetical Initial Value of the Least Performing
Index of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial Value of any Index. The
actual Initial Value of each Index will be the closing level of that Index on the Pricing Date and will be provided in the pricing
supplement. For historical data regarding the actual closing levels of each Index, please see the historical information
set forth under “The Indices” 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 Observation Date.
Date
|
Closing Level of Least Performing Index
|
Payment (per $1,000 principal amount Note)
|
First Observation Date
|
105.00
|
$1,024.375
|
|
Total Payment
|
$1,024.375 (2.4375% return)
|
Because the closing level of each Index on the
first Observation Date is greater than or equal to its Initial Value, the Notes will be automatically called for a cash payment,
for each $1,000 principal amount Note, of $1,024.375 (or $1,000
plus
the Contingent Interest Payment applicable to the first
Observation Date), payable on the applicable Call Settlement Date. No further payments will be made on the Notes.
Example 2 — Notes have NOT been automatically
called and the Final Value of the Least Performing Index is greater than or equal to its Trigger Value.
Date
|
Closing Level of Least Performing Index
|
Payment (per $1,000 principal amount Note)
|
First Observation Date
|
95.00
|
$24.375
|
Second Observation Date
|
85.00
|
$24.375
|
Third through Seventh Observation Dates
|
Less than Coupon Barrier
|
$0
|
Valuation Date
|
90.00
|
$1,024.375
|
|
Total Payment
|
$1,073.125 (7.3125% return)
|
Because the Notes have not been automatically
called and the Final Value of the Least Performing Index is greater than or equal to its Trigger Value, the payment at maturity,
for each $1,000 principal amount Note, will be $1,024.375 (or $1,000
plus
the Contingent Interest Payment applicable to
the Valuation Date). When added to the Contingent Interest Payments received with respect to the prior Observation Dates,
the total amount paid, for each $1,000 principal amount Note, is $1,073.125.
PS-
3
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
Example 3 — Notes have NOT been automatically
called and the Final Value of the Least Performing Index is less than its Trigger Value.
Date
|
Closing Level of Least Performing Index
|
Payment (per $1,000 principal amount Note)
|
First Observation Date
|
60.00
|
$0
|
Second Observation Date
|
55.00
|
$0
|
Third through Seventh Observation Dates
|
Less than Coupon Barrier
|
$0
|
Valuation Date
|
50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the Notes have not been automatically
called, the Final Value of the Least Performing Index is less than its Trigger Value and the Least Performing Index 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 any Index 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 Least Performing Index 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.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL —
|
If the Notes have not been automatically
called, we will make a Contingent Interest Payment with respect to an Observation Date only if the closing level of each Index
on that Observation Date is greater than or equal to its Coupon Barrier. If the closing level of any Index on that Observation
Date is less than its Coupon Barrier, no Contingent Interest Payment will be made with respect to that Observation Date. Accordingly,
if the closing level of any Index on each Observation Date is less than its Coupon Barrier, you will not receive any interest payments
over the term of the Notes.
|
·
|
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.
PS-
4
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS THAT MAY BE PAID OVER THE
TERM OF THE NOTES,
|
regardless of any appreciation in
the level of any Index, which may be significant. You will not participate in any appreciation in the level of any Index.
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
S&P 500
®
Index.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
|
Payments on the Notes are not linked
to a basket composed of the Indices and are contingent upon the performance of each individual Index. Poor performance
by any of the Indices over the term of the Notes may result in the notes not being automatically called on an Observation Date,
may negatively affect whether you will receive a Contingent Interest Payment on any Contingent Interest Payment Date and your payment
at maturity and will not be offset or mitigated by positive performance by the other Indices.
|
·
|
YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LEAST PERFORMING INDEX.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE VALUATION DATE —
|
If the Final Value of any Index 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 level of the Least Performing Index.
|
·
|
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 three months and you will not receive any Contingent Interest Payments after
the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment
in the Notes at a comparable return and/or with a comparable interest rate 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 THE SECURITIES INCLUDED IN ANY INDEX OR HAVE ANY RIGHTS WITH RESPECT TO THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH
RESPECT TO THE RUSSELL 2000
®
INDEX —
|
Small capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small
capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor
that limits downward stock price pressure under adverse market conditions.
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE EURO STOXX 50
®
INDEX —
|
The equity securities included in
the EURO STOXX 50
®
Index 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.
PS-
5
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
|
·
|
NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES WITH RESPECT TO THE EURO STOXX 50
®
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 EURO STOXX 50
®
Index are based, although any currency fluctuations could affect the performance of the EURO
STOXX 50
®
Index.
|
·
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS COUPON BARRIER OR TRIGGER VALUE IS GREATER IF THE LEVEL OF THAT
INDEX 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 Contingent Interest Rate.
|
·
|
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-
6
| Structured Investments
Contingent Coupon Auto Callable Yield Notes Linked to the Least Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the EURO STOXX 50
®
Index
|
|
|
·
|
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 Indices. 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
Indices
The S&P 500
®
Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500
®
Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
The Russell 2000
®
Index consists
of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000
®
Index. The Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional
information about the Russell 2000
®
Index, see “Equity Index Descriptions — The Russell Indices”
in the accompanying underlying supplement.
The EURO STOXX 50
®
Index consists
of 50 component stocks of market sector leaders from within the Eurozone. The Index and STOXX are the intellectual property (including
registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”), which are used
under license. The Notes based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors
and neither STOXX Limited nor any of its Licensors shall have any liability with respect thereto. For additional information about
the EURO STOXX 50
®
Index, see “Equity Index Descriptions — The EURO STOXX 50
®
Index”
in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 6, 2012 through February 17, 2017. The
closing level of the S&P 500
®
Index on February 21, 2017 was 2,365.38. The closing level of the Russell
2000
®
Index on February 21, 2017 was 1,410.344. The closing level of the EURO STOXX 50
®
Index on February 21, 2017 was 3,339.33. We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical closing levels of each Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of any Index on the
Pricing Date or any Observation Date. There can be no assurance that the performance of the Indices will result in the
return of any of your principal amount or the payment of any interest.
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Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. In determining
our reporting responsibilities we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts
with associated contingent coupons and (ii) any Contingent Interest Payments as ordinary income, as described in the section entitled
“Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid
Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement. Based on the advice
of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other
reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes
could be materially 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
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. 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 affect the tax consequences of an investment in the Notes, possibly with retroactive
effect. You should consult your tax adviser regarding the
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®
Index
|
|
U.S. federal income tax consequences of an investment
in the Notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S. Holders — Tax Considerations
. The
U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to take
a position that Contingent Interest Payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided),
a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of
that rate under an applicable income tax treaty), unless income from your Notes is effectively connected with your conduct of a
trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment in
the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S.
federal income tax consequences of an investment in the Notes in light of your particular circumstances.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies)
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including
for instruments linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such
an index, a “Qualified Index”). Additionally, the applicable regulations exclude from the scope of Section
871(m) instruments issued in 2017 that do not have a delta of one with respect to underlying securities that could pay U.S.-source
dividends for U.S. federal income tax purposes (each an “Underlying Security”). Based on certain determinations
made by us, we expect that Section 871(m) will not apply to the Notes with regard to Non-U.S. Holders. Our determination
is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application
may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying
Security. If necessary, further information regarding the potential application of Section 871(m) will be provided in
the pricing supplement for the Notes. You should consult your tax adviser regarding the potential application of Section
871(m) to the Notes.
FATCA.
Withholding under legislation commonly
referred to as “FATCA” could apply to payments with respect to the Notes that are treated as U.S.-source “fixed
or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest,
if the Notes are recharacterized, in whole or in part, as debt instruments, or Contingent Interest Payments if they are otherwise
treated as FDAP Income). If the Notes are recharacterized, in whole or in part, as debt instruments, withholding could also apply
to payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However, under
a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) with
respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the Notes.
In the event of any withholding on the Notes,
we will not be required to pay any additional amounts with respect to amounts so withheld.
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
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future dates, the value of the Notes could change
significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness,
interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy Notes
from you in secondary market transactions.
The estimated value of the Notes will be lower
than the original issue price of the Notes because costs associated with selling, structuring and hedging the Notes are included
in the original issue price of the Notes. These costs include the selling commissions paid to JPMS and other affiliated
or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the Notes and the estimated cost of hedging our obligations under the Notes. Because hedging our
obligations entails risk and may be influenced by market forces beyond our control, this hedging may result in a profit that is
more or less than expected, or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations
under the Notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain
any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value of the Notes Will
Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the Notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the Notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original
issue price of the Notes will be partially paid back to you in connection with any repurchases of your Notes by JPMS in an amount
that will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if
any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This
initial predetermined time period is intended to be the shorter of six months and one-half of the stated term of the Notes. The
length of any such initial period reflects the structure of the Notes, whether our affiliates expect to earn a profit in connection
with our hedging activities, the estimated costs of hedging the Notes and when these costs are incurred, as determined by our affiliates. See
“Selected Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer
Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing
supplement.
Supplemental
Use of Proceeds
The Notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the Notes. See “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 Indices” 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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®
Index and the EURO STOXX 50
®
Index
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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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®
Index and the EURO STOXX 50
®
Index
|
|
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