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
January 23, 2017
Pricing supplement
|
Registration Statement Nos. 333-209682 and 333-209682-01
|
To prospectus dated April 15, 2016,
|
Dated January , 2017
|
prospectus supplement dated April 15, 2016,
|
Rule 424(b)(2)
|
product supplement no. 4-I dated April 15, 2016 and
|
|
underlying supplement no. 1-I dated April 15, 2016
|
|
JPMorgan Chase Financial Company LLC
|
|
$
Digital
Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index due May 2, 2018
Fully and Uncondit
i
onally Guaranteed
by JPMorgan Chase & Co.
|
General
|
·
|
The
notes are designed for investors who seek a fixed return of 8.00% if the Ending Index Level of the S&P 500
®
Index is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to 15%.
|
|
·
|
Investors should be willing to forgo interest and dividend payments
and, if the Ending Index Level is less than the Initial Index Level by more than 15%, 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.
|
|
·
|
Minimum denominations of $10,000 and integral multiples of $1,000 in
excess thereof
|
Key Terms
Issuer:
|
JPMorgan Chase Financial Company LLC
|
Guarantor:
|
JPMorgan Chase & Co.
|
Index:
|
The S&P 500
®
Index (Bloomberg ticker: SPX).
|
Payment at Maturity:
|
If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Contingent Digital Return. Accordingly, under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
|
|
$1,000 + ($1,000 × Contingent Digital Return)
|
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
|
|
$1,000 + ($1,000 × Index Return)
|
|
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 15%, you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount at maturity.
|
Contingent Digital Return:
|
8.00%, which reflects the maximum return on the notes. Accordingly, the maximum payment at maturity per $1,000 principal amount note is $1,080.00.
|
Contingent Buffer Amount
|
15%
|
Index Return:
|
(Ending Index Level –
Initial Index Level)
Initial
Index Level
|
|
Initial Index Level:
|
The closing level of the Index on the Pricing Date
|
Ending Index Level:
|
The arithmetic average of the closing levels of the Index on the Ending Averaging Dates
|
Pricing Date
|
On or about January 27, 2017
|
Original Issue Date:
|
On or about February 1, 2017 (Settlement Date)
|
Ending Averaging Dates*:
|
April 23, 2018, April 24, 2018, April 25, 2018, April 26, 2018 and April 27, 2018
|
Maturity Date*:
|
May 2, 2018
|
CUSIP:
|
46646QWA9
|
|
*
|
Subject to postponement in the event of certain market
disruption events and as described under “General Terms of Notes — Postponement of a Determination Date — Notes
Linked to a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “General
Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
|
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 $11.20 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 $988.80 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 $973.80 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.
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):
|
·
|
Product supplement no. 4-I dated April 15, 2016:
|
http://www.sec.gov/Archives/edgar/data/19617/000095010316012644/crt_dp64831-424b2.pdf
|
·
|
Underlying supplement no. 1-I dated April 15, 2016:
|
http://www.sec.gov/Archives/edgar/data/19617/000095010316012649/crt-dp64909_424b2.pdf
|
·
|
Prospectus supplement and prospectus, each dated April 15, 2016:
|
http://www.sec.gov/Archives/edgar/data/19617/000095010316012636/crt_dp64952-424b2.pdf
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.
JPMorgan Structured Investments —
|
PS-
1
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
|
What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Index?
The following table and examples illustrate
the hypothetical total return and the hypothetical payment at maturity on the notes. 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. Each hypothetical total return or payment at maturity set forth below assumes an Initial Index
Level of 2,000 and reflects the Contingent Digital Return of 8.00% and the Contingent Buffer Amount of 15%. Each hypothetical total
return or 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 and in the examples below have
been rounded for ease of analysis.
Ending Index
Level
|
Index Return
|
Total Return
|
3,600.00
|
80.00%
|
8.00%
|
3,300.00
|
65.00%
|
8.00%
|
3,000.00
|
50.00%
|
8.00%
|
2,800.00
|
40.00%
|
8.00%
|
2,600.00
|
30.00%
|
8.00%
|
2,300.00
|
15.00%
|
8.00%
|
2,200.00
|
10.00%
|
8.00%
|
2,160.00
|
8.00%
|
8.00%
|
2,100.00
|
5.00%
|
8.00%
|
2,050.00
|
2.50%
|
8.00%
|
2,000.00
|
0.00%
|
8.00%
|
1,950.00
|
-2.50%
|
8.00%
|
1,900.00
|
-5.00%
|
8.00%
|
1,800.00
|
-10.00%
|
8.00%
|
1,700.00
|
-15.00%
|
8.00%
|
1,699.80
|
-15.01%
|
-15.01%
|
1,600.00
|
-20.00%
|
-20.00%
|
1,500.00
|
-25.00%
|
-25.00%
|
1,400.00
|
-30.00%
|
-30.00%
|
1,200.00
|
-40.00%
|
-40.00%
|
1,000.00
|
-50.00%
|
-50.00%
|
800.00
|
-60.00%
|
-60.00%
|
600.00
|
-70.00%
|
-70.00%
|
400.00
|
-80.00%
|
-80.00%
|
200.00
|
-90.00%
|
-90.00%
|
0.00
|
-100.00%
|
-100.00%
|
Hypothetical Examples of
Amount Payable at Maturity
The following examples illustrate how the total
payment at maturity in different hypothetical scenarios is calculated.
Example 1: The level of the Index increases
from the Initial Index Level of 2,000 to an Ending Index Level of 2,050.
Because the Ending Index Level of 2,050 is greater
than the Initial Index Level of 2,000, regardless of the Index Return, the investor receives a payment at maturity of $1,080.00
per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
8.00%) = $1,080.00
Example 2: The level of the Index decreases
from the Initial Index Level of 2,000 to an Ending Index Level of 1,700.
Although the Index Return is negative, because
the Ending Index Level of 1,700 is less than the Initial Index Level of 2,000 by up to the Contingent Buffer Amount of 15%, the
investor receives a payment at maturity of $1,080.00 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
8.00%) = $1,080.00
Example 3: The level of the Index increases
from the Initial Index Level of 2,000 to an Ending Index Level of 2,800.
Because the Ending Index Level of 2,800 is greater
than the Initial Index Level of 2,000 and although the Index Return of 40% exceeds the Contingent Digital Return of 8.00%, the
investor is entitled to only the Contingent Digital Return and receives a payment at maturity of $1,080.00 per $1,000 principal
amount note, calculated as follows:
$1,000 + ($1,000 ×
8.00%) = $1,080.00
Example 4: The level of the Index decreases
from the Initial Index Level of 2,000 to an Ending Index Level of 1,000.
Because the Ending Index Level of 1,000 is less
than the Initial Index Level of 2,000 by more than the Contingent Buffer Amount of 15% and the Index Return is -50%, the investor
receives a payment at maturity of $500 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 ×
-50%) = $500
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 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.
JPMorgan Structured Investments —
|
PS-
2
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
|
Selected Purchase Considerations
|
·
|
FIXED APPRECIATION POTENTIAL
— If the Ending Index Level is greater than or equal to the Initial Index Level or is less than the Initial Index Level by
up to the Contingent Buffer Amount, you will receive a fixed return equal to the Contingent Digital Return of 8.00% at maturity,
which also reflects the maximum return on the notes at maturity.
Because the notes are our unsecured and unsubordinated obligations,
the payment of which is fully and unconditionally guaranteed by JPMorgan Chase & Co., payment of any amount on the notes is
subject to our ability to pay our obligations as they become due and JPMorgan Chase & Co.’s ability to pay its obligations
as they become due.
|
|
·
|
LIMITED PROTECTION AGAINST LOSS
— We will pay you your principal back at maturity if the Ending Index Level is equal to the Initial Index Level or is less
than the Initial Index Level by up to the Contingent Buffer Amount of 15%. If the Ending Index Level is less than the Initial Index
Level by more than the Contingent Buffer Amount, for every 1% that the Ending Index Level is less than the Initial Index Level,
you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 15%
of your principal amount at maturity and may lose all of your principal amount at maturity.
|
|
·
|
RETURN LINKED TO THE S&P 500
®
INDEX
—
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 the information set forth under “Equity
Index Descriptions — The S&P U.S. Indices” in the accompanying underlying supplement.
|
|
·
|
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, in particular 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 in 2017 that are not “delta-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.
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.
JPMorgan Structured Investments —
|
PS-
3
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
|
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Index or any of the component securities of the Index.
These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement and
the accompanying underlying supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY
RESULT IN A LOSS
— The notes do not guarantee any return of principal. The return on the notes at maturity is linked
to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative.
If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 15%, you will lose
1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Accordingly,
under these circumstances, you will lose more than 15% of your principal amount at maturity and may lose all of your principal
amount at maturity.
|
|
·
|
YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE CONTINGENT DIGITAL
RETURN
—
If the Ending Index Level is greater than or
equal to the Initial Index Level or is less than the Initial Index Level by up to the Contingent Buffer Amount, for each $1,000
principal amount note, you will receive at maturity $1,000
plus
an additional return equal to the Contingent Digital Return
of 8.00%, regardless of the appreciation in the Index, which may be significant.
|
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT DIGITAL RETURN MAY TERMINATE
ON THE FINAL ENDING AVERAGING DATE
— If the Ending Index Level is less than the Initial Index Level by more than the
Contingent Buffer Amount, you will not be entitled to receive the Contingent Digital Return at maturity. Under these circumstances,
you will lose more than 15% of your principal amount at maturity and may lose all of your principal amount at maturity.
|
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO.
— The notes are subject to our and JPMorgan Chase & Co.’s credit risks, and our and JPMorgan Chase & Co.’s
credit ratings and credit spreads may adversely affect the market value of the notes. 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.
|
|
·
|
POTENTIAL CONFLICTS
— We and our affiliates play a variety
of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering of
the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the
estimated value of the notes when the terms of the notes are set, which we refer to as the estimated value of the notes. In performing
these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests of the calculation agent and
other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our and JPMorgan Chase
& Co.’s business activities, including hedging and trading activities, could cause our and JPMorgan Chase & Co.’s
economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of 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 for additional information about these risks.
|
In addition, JPMorgan Chase &
Co. is currently one of the companies that make up the S&P 500
®
Index, but JPMorgan Chase & Co. will have
no obligation to consider your interests as a holder of the notes in taking any corporate action that might affect the value of
the S&P 500
®
Index.
|
·
|
THE BENEFIT
PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE
— If the Ending Index Level
is less than the Initial Index Level 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 Index.
|
|
·
|
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.
|
JPMorgan Structured Investments —
|
PS-
4
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES
OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
— The estimated value of the notes is determined by reference
to internal pricing models of our affiliates when the terms of the notes are set. This estimated value of the notes is based on
market conditions and other relevant factors existing at that time and assumptions about market parameters, which can include volatility,
dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for 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. 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.
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. 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 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. See the immediately following risk consideration for information about additional factors that will impact any secondary
market prices of the notes.
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The
notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to
maturity. See “— Lack of Liquidity” below.
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·
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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, projected hedging profits,
if any, estimated hedging costs and the level of the Index, including:
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·
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any actual or potential change in our
or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
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·
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customary bid-ask spreads for similarly
sized trades;
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·
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our internal secondary market funding
rates for structured debt issuances;
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·
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the actual and expected volatility of
the Index;
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·
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the time to maturity of the notes;
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·
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the dividend rates on the equity securities
included in the Index;
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·
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interest and yield rates in the market
generally; and
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·
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a variety of other economic, financial,
political, regulatory and judicial events.
|
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.
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·
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS
— As
a holder of the notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends
or other distributions or other rights that holders of securities included in the Index would have.
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·
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LACK OF LIQUIDITY
— The
notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is
not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the
notes easily. Because other dealers are not likely to make a secondary market for the notes, 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.
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·
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THE FINAL TERMS AND VALUATION OF
THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
— The final terms of the notes will be based on relevant market
conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, the estimated value
of the notes will be provided in the pricing supplement and may be as low as the minimum for the estimated value of the notes set
forth on the cover of this pricing supplement. Accordingly, you should consider your potential investment in the notes based on
the minimum for the estimated value of the notes.
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JPMorgan Structured Investments —
|
PS-
5
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
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Historical Information
The following graph sets forth the historical
performance of the Index based on the weekly historical closing levels of the Index from January 6, 2012 through January 20, 2017.
The closing level of the Index on January 20, 2017 was 2,271.31. We obtained the closing levels of the Index above and below from
the Bloomberg Professional
®
service (“Bloomberg”), without independent verification.
The historical closing levels of the Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the
Pricing Date or any Ending Averaging Date. There can be no assurance that the performance of the Index will result in the return
of any of your principal amount.
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. See “Selected Risk Considerations — The Estimated Value of the Notes Does Not Represent
Future Values of the Notes and May Differ from Others’ Estimates” in this pricing supplement.
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. We or one or more of our affiliates will retain any profits realized in hedging our obligations under
the notes. 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.
JPMorgan Structured Investments —
|
PS-
6
|
Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
|
|
Secondary Market Prices of
the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes
Will Be Impacted by Many Economic and Market Factors ” in this pricing 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 that 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.”
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 “What Is the Total Return
on the Notes at Maturity, Assuming a Range of Performances for the Index?” and “Hypothetical Examples of Amount Payable
at Maturity” in this pricing supplement for an illustration of the risk-return profile of the notes and “Selected Purchase
Considerations — Return Linked to the S&P 500
®
Index” 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.
JPMorgan Structured Investments —
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PS-
7
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Digital Dual Directional Contingent Buffered Notes Linked to the S&P 500
®
Index
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