Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)
March 28 2017 - 2:23PM
Edgar (US Regulatory)
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
March 28, 2017
JPMorgan Chase
Financial Company LLC
|
April
2017
Pricing
Supplement
Registration
Statement Nos. 333-209682 and 333-209682-01
Dated
April , 2017
Filed
pursuant to Rule 424(b)(2)
|
Structured Investments
Opportunities in International Equities
Trigger PLUS Based on the Value of the TOPIX
®
Index due
April 19, 2023
Trigger Performance Leveraged
Upside Securities
SM
Principal at Risk Securities
Fully and Unconditionally
Guaranteed by JPMorgan Chase & Co.
The Trigger PLUS will pay no interest
and do not guarantee any return of your principal at maturity. At maturity, if the underlying index has
appreciated
in
value, investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying
index. If the underlying index has declined in value but the final index value is greater than or equal to the trigger level,
investors will receive the stated principal amount of the Trigger PLUS at maturity. However, if the underlying index has
declined
in value so that the final index value is less than the trigger level, at maturity investors will lose a significant portion
or all of their investment, resulting in a 1% loss for every 1% decline in the closing level of the underlying index over the
term of the Trigger PLUS. The Trigger PLUS are for investors who seek an equity-based return and who are willing to risk their
principal and forgo current income in exchange for the leverage feature. At maturity, an investor will receive an amount in cash
that may be greater than, equal to, or less than the stated principal amount based upon the closing level of the underlying index
on the valuation date
.
The Trigger PLUS 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., issued as part of JPMorgan Financial’s Medium-Term Notes, Series A, program.
Any payment on the Trigger PLUS is
subject to the credit risk of JPMorgan Financial, as issuer of the Trigger PLUS, and the credit risk of JPMorgan Chase & Co.,
as guarantor of the Trigger PLUS. The investor may lose some or all of the stated principal amount of the Trigger PLUS.
SUMMARY TERMS
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Issuer:
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JPMorgan Chase Financial Company LLC
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Guarantor:
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JPMorgan Chase & Co.
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Underlying index:
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TOPIX
®
Index
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Aggregate principal amount:
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$
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Payment at maturity:
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If the final index value is
greater than
the initial index value, for
each $10 stated principal amount Trigger PLUS:
|
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$10 + leveraged upside payment
|
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If the final index value is
less than or equal to
the initial index value
but is greater than or equal to the trigger level, for each $10 stated principal amount Trigger PLUS:
|
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$10
|
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If the final index value is
less than
the trigger level, for each $10
stated principal amount Trigger PLUS:
|
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$10 × index performance factor
|
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This amount will be less than the stated principal amount of $10 per Trigger
PLUS and will represent a loss of more than 35%, and possibly all, of your investment.
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Leveraged upside payment:
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$10 × leverage factor × index percent increase
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Index percent increase:
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(final index value – initial index value) / initial index value
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Initial index value:
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The closing level of the underlying index on the pricing date
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Final index value:
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The closing level of the underlying index on the valuation date
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Trigger level:
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65% of the initial index value
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Leverage factor:
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At least
167%
.
The actual leverage factor
will be provided in the pricing supplement and will not be less than 167%.
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Index performance factor:
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final index value / initial index value
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Stated principal amount:
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$10 per Trigger PLUS
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Issue price:
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$10 per Trigger PLUS (see “Commissions and issue price” below)
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Pricing date:
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April , 2017 (expected to price on or about April 14, 2017)
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Original issue date (settlement
date):
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April , 2017 (3 business days after the pricing date)
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Valuation date:
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April 14, 2023, 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)” in the accompanying
product supplement
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Maturity date:
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April 19, 2023, subject to postponement in the event of certain market disruption
events and as described under “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
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CUSIP / ISIN:
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48129F564/ US48129F5641
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Listing:
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The Trigger PLUS will not be listed on any securities exchange.
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Agent:
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J.P. Morgan Securities LLC (“JPMS”)
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Commissions and issue price:
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Per Trigger PLUS
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Price
to public
(1)
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Fees
and commissions
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Proceeds
to issuer
|
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$10.00
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$0.30
(2)
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$9.65
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Total
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$
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$0.05
(3)
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|
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(1)
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See “Additional Information
about the Trigger PLUS — Supplemental use of proceeds and hedging” in this
document for information about the components of the price to public of the Trigger PLUS.
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(2)
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JPMS, acting as agent for
JPMorgan Financial, will pay all of the selling commissions it receives from us to Morgan
Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”). In no event
will these selling commissions exceed $0.30 per $10 stated principal amount Trigger PLUS.
See “Plan of Distribution (Conflicts of Interest)” in the accompanying product
supplement.
|
|
(3)
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Reflects a structuring fee
payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for
each $10 stated principal amount Trigger PLUS.
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If the Trigger PLUS priced
today and assuming a leverage factor equal to the minimum listed above, the estimated value of the Trigger PLUS would be approximately
$9.701 per $10 stated principal amount Trigger PLUS. The estimated value of the Trigger PLUS on the pricing date will be provided
in the pricing supplement and will not be less than $9.50 per $10 stated principal amount Trigger PLUS. See “Additional
Information about the Trigger PLUS — The estimated value of the Trigger PLUS” in this document for additional information.
Investing in the Trigger
PLUS 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 “Risk Factors” beginning
on page 6 of this document.
Neither the Securities and
Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the Trigger PLUS
or passed upon the accuracy or the adequacy of this document or the accompanying product supplement, underlying supplement, prospectus
supplement and prospectus. Any representation to the contrary is a criminal offense.
The Trigger PLUS 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.
You should read this document
together with the related product supplement, underlying supplement, prospectus supplement and prospectus, each of which can be
accessed via the hyperlinks below. Please also see “Additional Information about the Trigger PLUS” at the end of this
document.
Product
supplement no. MS-1-I dated June 3, 2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.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
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023 (the “Trigger PLUS”) can be used:
|
§
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As an alternative to direct exposure to the underlying index that enhances returns for any positive performance of the underlying
index.
|
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§
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To potentially achieve similar levels of upside exposure to the underlying index as a direct investment, while using fewer
dollars by taking advantage of the leverage factor.
|
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§
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To provide limited market downside protection against loss of principal in the event of a decline of the underlying index but
only if the final index value is
greater than or equal to
the trigger level.
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Maturity:
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6 years
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Leverage factor:
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At least 167% (to be provided in the pricing supplement)
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Trigger level:
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65% of the initial index value
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Minimum payment at maturity:
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None. Investors may lose their entire initial investment in the Trigger PLUS.
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Supplemental Terms of the Trigger PLUS
For purposes of the accompanying
product supplement, the underlying index is an “Index.”
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Key Investment Rationale
Trigger PLUS offer leveraged exposure to an underlying asset,
which may be equities, commodities and/or currencies, while providing limited protection against negative performance of the asset.
In exchange for enhanced returns from any positive performance of the asset, investors are exposed to the risk of loss or some
or all of their investment due to the trigger feature. At maturity, if the underlying asset has appreciated, investors will receive
the stated principal amount of their investment plus leveraged upside performance of the underlying asset. At maturity, if the
underlying asset has depreciated but is at or above the trigger level, investors will receive the stated principal amount of their
investment. At maturity, if the underlying asset has depreciated below the trigger level, investors are fully exposed to
the negative performance of the underlying asset.
Investors may lose some or all of the stated principal amount of the Trigger
PLUS.
Leveraged Performance
|
The Trigger PLUS offer investors an opportunity to capture enhanced returns for any of positive performance relative to a direct investment in the underlying index.
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Trigger Feature
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At maturity, even if the underlying index has declined over the term of the Trigger PLUS, investors will receive their stated principal amount but only if the final index value is
greater than or equal to
the trigger level.
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Upside Scenario
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The underlying index increases in value and, at maturity, the
Trigger PLUS pay the stated principal amount of $10 plus a return equal to at least 167% of the index percent increase. The actual
leverage factor will be provided in the pricing supplement.
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Par Scenario
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The final index value is less than or equal to the initial index value but is greater than or equal to the trigger level. In this case, the Trigger PLUS pay the stated principal amount of $10 per Trigger PLUS at maturity even when the underlying index has depreciated.
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Downside Scenario
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The final index value is less than the trigger level. In this case, the Trigger PLUS pay an amount that is over 35% less than the stated principal amount and this decrease will be by an amount that is proportionate to the percentage decline of the final index value from the initial index value. (Example: if the underlying index decreases in value by 40%, the Trigger PLUS will pay an amount that is less than the stated principal amount by 40%, or $6 per Trigger PLUS.)
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
How the Trigger PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Trigger PLUS based on the following terms:
Stated principal amount:
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$10 per Trigger PLUS
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Hypothetical leverage factor:
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167% (which represents the lowest hypothetical leverage factor)*
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Trigger level
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65% of the initial index value
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*The actual leverage factor will be provided in
the pricing supplement and will not be less than 167%.
Trigger PLUS Payoff Diagram
|
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How it works
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§
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Upside Scenario.
Under the hypothetical
terms of the Trigger PLUS, if the final index value is greater than the initial index value, for each $10 principal amount Trigger
PLUS investors will receive the $10 stated principal amount
plus
a return equal to 167% of the appreciation of the underlying
index over the term of the Trigger PLUS.
|
|
§
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For example, if the underlying index appreciates 5%, investors will receive a 8.35% return, or $10.835 per Trigger PLUS.
|
|
§
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Par Scenario.
If the final index value
is less than or equal to the initial index value but is greater than or equal to the trigger level, investors will receive the
stated principal amount of $10 per Trigger PLUS.
|
|
§
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For example, if the underlying index depreciates 5%, investors will receive the $10 stated principal amount.
|
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§
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Downside Scenario.
If the final index
value is less than the trigger level, investors will receive an amount that is significantly less than the stated principal amount
by an amount proportionate to the percentage decrease of the final index value from the initial index value.
|
|
§
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For example, if the underlying index depreciates 50%, investors will lose 50% of their principal and receive only $5.00 per
Trigger PLUS at maturity, or 50% of the stated principal amount.
|
The hypothetical returns and hypothetical payments
on the Trigger PLUS shown above apply
only if you hold the Trigger PLUS 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 Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
Risk Factors
The
following is a non-exhaustive list of certain key risk factors for investors in the Trigger PLUS.
For further discussion
of these and other risks, you should read the sections entitled “Risk Factors” of the accompanying product supplement
and the accompanying underlying supplement. We urge you to consult your investment, legal, tax, accounting and other advisers in
connection with your investment in the Trigger PLUS.
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§
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Trigger PLUS do not pay interest or guarantee the return of any
principal and your investment in the Trigger PLUS may result in a loss.
The terms of the Trigger PLUS differ from those
of ordinary debt securities in that the Trigger PLUS do not pay interest or guarantee the payment of any principal amount at maturity.
If the final index value is less than the trigger level (which is 65% of the initial index value), the payment at maturity will
be an amount in cash that is over 35% less than the stated principal amount of each Trigger PLUS, and this decrease will be by
an amount that is proportionate to the decrease in the value of the underlying index and may be zero. There is no minimum payment
at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
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§
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The Trigger PLUS are subject to the credit risks of JPMorgan Financial
and JPMorgan Chase & Co., and any actual or anticipated changes to our or JPMorgan Chase & Co.’s credit ratings or
credit spreads may adversely affect the market value of the Trigger PLUS.
Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the Trigger PLUS. Any actual or anticipated decline in our or JPMorgan
Chase & Co.’s credit ratings or increase in our or JPMorgan Chase & Co.’s credit spreads determined by the
market for taking that credit risk is likely to adversely affect the market value of the Trigger PLUS. If we and JPMorgan Chase
& Co. were to default on our payment obligations, you may not receive any amounts owed to you under the Trigger PLUS and you
could lose your entire investment.
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|
§
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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 Trigger PLUS. If these affiliates
do not make payments to us and we fail to make payments on the Trigger PLUS, 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.
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§
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Economic interests of the issuer, the guarantor, the calculation agent, the agent of the offering of the Trigger PLUS and
other affiliates of the issuer may be different from those of investors.
We
and our affiliates play a variety of roles in connection with the issuance of the Trigger PLUS, including acting as calculation
agent and as an agent of the offering of the Trigger PLUS, hedging our obligations under the Trigger PLUS and making the assumptions
used to determine the pricing of the Trigger PLUS and the estimated value of the Trigger PLUS, which we refer to as the estimated
value of the Trigger PLUS. 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
Trigger PLUS. The calculation agent will determine the initial index value, the trigger level and the final index value and will
calculate the amount of payment you will receive at maturity, if any. Determinations made by the calculation agent, including with
respect to the occurrence or non-occurrence of market disruption events, the selection of a successor to the underlying index or
calculation of the final index value in the event of a discontinuation or material change in method of calculation of the underlying
index, may affect the payment to you at maturity.
|
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 Trigger
PLUS and the value of the Trigger PLUS. It is possible that hedging or trading activities of ours or our affiliates in connection
with the Trigger PLUS could result in substantial returns for us or our affiliates while the value of the Trigger PLUS declines.
Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement
for additional information about these risks.
|
§
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The benefit provided by the trigger level may terminate on the valuation
date.
If the final index value is less than the trigger level, the benefit provided
by the trigger level will terminate and you will be fully exposed to any depreciation of the underlying index.
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
§
|
The estimated value of the Trigger PLUS will be lower than the original
issue price (price to public) of the Trigger PLUS.
The estimated value of the Trigger PLUS
is only an estimate determined by reference to several factors. The original issue price of the Trigger PLUS will exceed the estimated
value of the Trigger PLUS because costs associated with selling, structuring and hedging the Trigger PLUS are included in the original
issue price of the Trigger PLUS. These costs include the selling commissions, the structuring fee, the projected profits, if any,
that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated
cost of hedging our obligations under the Trigger PLUS. See “Additional Information about the Trigger PLUS — The estimated
value of the Trigger PLUS” in this document.
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|
§
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The estimated value of the Trigger PLUS does not represent future
values of the Trigger PLUS and may differ from others’ estimates. The estimated value of the Trigger PLUS is determined by
reference to internal pricing models of our affiliates.
This estimated value of the Trigger
PLUS is based on market conditions and other relevant factors existing at the time of pricing 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 the Trigger PLUS that are greater than or less than the estimated value of the Trigger PLUS. 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 Trigger PLUS 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 Trigger PLUS from you in secondary market transactions. See “Additional
Information about the Trigger PLUS — The estimated value of the Trigger PLUS” in this document.
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§
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The estimated value of the Trigger PLUS is derived by reference
to an internal funding rate.
The internal funding rate used in the determination of the estimated
value of the Trigger PLUS is based on, among other things, our and our affiliates’ view of the funding value of the Trigger
PLUS as well as the higher issuance, operational and ongoing liability management costs of the Trigger PLUS
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 Trigger
PLUS and any secondary market prices of the Trigger PLUS. See “Additional Information about the Trigger PLUS — The
estimated value of the Trigger PLUS” in this document.
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§
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The value of the Trigger PLUS as published by JPMS (and which may
be reflected on customer account statements) may be higher than the then-current estimated value of the Trigger PLUS for a limited
time period.
We generally expect that some of the costs included in the original issue price
of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger PLUS by JPMS in an amount
that will decline to zero over an initial predetermined period. These costs can include selling commissions, the structuring fee,
projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding
rates for structured debt issuances. See “Additional Information about the Trigger PLUS — Secondary market prices of
the Trigger PLUS” in this document for additional information relating to this initial period. Accordingly, the estimated
value of your Trigger PLUS during this initial period may be lower than the value of the Trigger PLUS as published by JPMS (and
which may be shown on your customer account statements).
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|
§
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Secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS
.
Any secondary market prices of the Trigger PLUS will likely be lower than the original issue price of the Trigger PLUS
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 the structuring fee and (b) may exclude
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the Trigger PLUS.
As a result, the price, if any, at which JPMS will be willing to buy Trigger PLUS 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 factor for information about additional factors that will impact any secondary
market prices of the Trigger PLUS.
|
The Trigger PLUS are not designed
to be short-term trading instruments. Accordingly, you should be able and willing to hold your Trigger PLUS to maturity. See “—
Secondary trading may be limited” below.
|
§
|
Secondary market prices of the Trigger PLUS will be impacted by
many economic and market factors.
The secondary market price of the Trigger PLUS during their term will be impacted
by a number
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JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
of economic and market factors,
which may either offset or magnify each other, aside from the selling commissions, structuring fee, projected hedging profits,
if any, estimated hedging costs and the closing level of the underlying index, including:
|
o
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any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
|
|
o
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customary bid-ask spreads for similarly sized trades;
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|
o
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our internal secondary market funding rates for structured debt issuances;
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|
o
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the actual and expected volatility of the underlying index;
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|
o
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the time to maturity of the Trigger PLUS;
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|
o
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the dividend rates on the equity securities included in the underlying index;
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|
o
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interest and yield rates in the market generally;
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o
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the
equity securities included in the underlying index trade and the correlation among those rates and the levels of the underlying
index; and
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|
o
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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 Trigger PLUS, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the Trigger PLUS, if any, at which JPMS may be willing
to purchase your Trigger PLUS in the secondary market.
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§
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Investing in the Trigger PLUS is not equivalent to investing in
the underlying index.
Investing in the Trigger PLUS is not equivalent to investing in the
underlying index or its component stocks. Investors in the Trigger PLUS will not have voting rights or rights to receive dividends
or other distributions or any other rights with respect to the stocks that constitute the underlying index.
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§
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Adjustments to the underlying index could adversely affect the value
of the Trigger PLUS.
The underlying index publisher may discontinue or suspend calculation
or publication of the underlying index at any time. In these circumstances, the calculation agent will have the sole discretion
to substitute a successor index that is comparable to the discontinued underlying index and is not precluded from considering indices
that are calculated and published by the calculation agent or any of its affiliates.
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§
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The Trigger PLUS are subject to risks associated with securities
issued by non-U.S. companies.
The equity securities included in the underlying 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,
including risks of volatility in those markets, governmental intervention in those markets and cross shareholdings in companies
in certain countries. 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, and generally non-U.S. companies
are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from
those applicable to U.S. reporting companies.
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§
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The Trigger PLUS are not directly exposed to fluctuations in foreign
exchange rates.
The value of your Trigger PLUS will not be adjusted for exchange rate fluctuations
between the U.S. dollar and the currencies upon which the equity securities included in the underlying index are based, although
any currency fluctuations could affect the performance of the underlying index. Therefore, if the applicable currencies appreciate
or depreciate relative to the U.S. dollar over the term of the Trigger PLUS, you will not receive any additional payment or incur
any reduction in any payment on the Trigger PLUS.
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§
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Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the
Trigger
PLUS
.
The hedging or trading activities of the issuer’s affiliates and of any other hedging counterparty with
respect to the
Trigger PLUS on or prior to the pricing
date and prior to maturity could adversely affect the value of the underlying index and, as a result, could decrease the amount
an investor
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
may
receive on the Trigger PLUS at maturity if any. Any of these hedging or trading activities
on or prior to the pricing date
could potentially affect the initial index value and the trigger level and, therefore, could potentially increase the level that
the final index value must reach before you receive a payment at maturity that exceeds the issue price of the
Trigger
PLUS or so that you do not suffer a loss on your initial investment in the Trigger PLUS
. Additionally, these hedging or
trading activities during the term of the
Trigger
PLUS
, including on the valuation date, could adversely affect the final index value and, accordingly, the amount of cash
an investor will receive at maturity if any. It is possible that these hedging or trading activities could result in substantial
returns for us or our affiliates while the value of the Trigger PLUS declines.
|
§
|
Secondary trading may be limited.
Th
e
Trigger PLUS will not be listed on a securities exchange. There may be little or no secondary market for the Trigger PLUS. Even
if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Trigger PLUS easily
.
JPMS
may act as a market maker for the Trigger PLUS, but is not required to do so. Because we do not expect that other market
makers will participate significantly in the secondary market for the Trigger PLUS, the price at which you may be able to trade
your Trigger PLUS is likely to depend on the price, if any, at which
JPMS
is willing to buy the Trigger PLUS. If at any time
JPMS
or another agent does not act as a market maker, it is likely that there would be little or no secondary market for the Trigger
PLUS.
|
|
§
|
The final terms and valuation of the Trigger PLUS will be provided in the pricing
supplement.
The final terms of the Trigger PLUS will be provided in the pricing supplement. In particular, each
of the estimated value of the Trigger PLUS and the leverage factor will be provided in the pricing supplement and each may be as
low as the applicable minimum set forth on the cover of this document. Accordingly, you should consider your potential investment
in the Trigger PLUS based on the minimums for the estimated value of the Trigger PLUS and the leverage factor.
|
|
§
|
The tax consequences of an investment in the Trigger PLUS are uncertain.
There is no direct legal authority as to the
proper U.S. federal income tax characterization of the Trigger PLUS, and we do not intend to request a ruling from the IRS. The
IRS might not accept, and a court might not uphold, the treatment of the Trigger PLUS described in “Additional Information
about the Trigger PLUS ― Additional Provisions ― Tax considerations” in this document and in “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement. If the IRS were successful in asserting an
alternative treatment for the Trigger PLUS, the timing and character of any income or loss on the Trigger PLUS could differ materially
and adversely from our description herein. 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 Trigger PLUS, possibly with retroactive effect.
You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying
product supplement and consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the Trigger
PLUS, including possible alternative treatments and the issues presented by this notice.
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
TOPIX
®
Index
Overview
The TOPIX
®
Index, also known as the Tokyo Stock
Price Index, is a capitalization weighted index of all the Japanese common stocks listed on the First Section of the Tokyo Stock
Exchange, Inc., which we refer to as the “TSE.” The TSE Japanese stock market is divided into two sections: the First
Section and the Second Section. Listings of stocks on the TSE are divided between these two sections, with stocks listed on the
First Section typically being limited to larger, longer established and more actively traded issues and the Second Section to smaller
and newly listed companies. For additional information about the TOPIX
®
Index, see “Equity Index Descriptions
— The TOPIX
®
Index” in the accompanying underlying supplement.
Information as of market close on March 27, 2017:
Bloomberg Ticker Symbol:
|
TPX
|
Current Closing Level:
|
1,524.39
|
52 Weeks Ago (on 3/28/2016):
|
1,381.85
|
52 Week High (on 3/13/2017):
|
1,577.40
|
52 Week Low (on 6/24/2016):
|
1,204.48
|
The following table sets forth the published high and low closing
levels, as well as end-of-quarter closing levels, of the underlying index for each quarter in the period from January 1, 2012 through
March 27, 2017. The graph following the table sets forth the daily closing levels of the underlying index during the same period.
The closing level of the underlying index on March 27, 2017 was 1,524.39. We obtained the closing level information above and in
the table and graph below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The historical levels of the underlying index should not be taken as an indication of future performance, and no
assurance can be given as to the closing level of the underlying index on the valuation date. The payment of dividends on the stocks
that constitute the underlying index are not reflected in its closing level and, therefore, have no effect on the calculation of
the payment at maturity.
TOPIX
®
Index
|
High
|
Low
|
Period
End
|
2012
|
|
|
|
First Quarter
|
872.42
|
725.24
|
854.35
|
Second Quarter
|
856.05
|
695.51
|
770.08
|
Third Quarter
|
778.70
|
706.46
|
737.42
|
Fourth Quarter
|
859.80
|
713.95
|
859.80
|
2013
|
|
|
|
First Quarter
|
1058.10
|
871.88
|
1034.71
|
Second Quarter
|
1276.03
|
991.34
|
1133.84
|
Third Quarter
|
1222.72
|
1106.05
|
1194.10
|
Fourth Quarter
|
1302.29
|
1147.58
|
1302.29
|
2014
|
|
|
|
First Quarter
|
1306.23
|
1139.27
|
1202.89
|
Second Quarter
|
1269.04
|
1132.76
|
1262.56
|
Third Quarter
|
1346.43
|
1228.26
|
1326.29
|
Fourth Quarter
|
1447.58
|
1177.22
|
1407.51
|
2015
|
|
|
|
First Quarter
|
1592.25
|
1357.98
|
1543.11
|
Second Quarter
|
1679.89
|
1528.99
|
1630.40
|
Third Quarter
|
1691.29
|
1375.52
|
1411.16
|
Fourth Quarter
|
1605.94
|
1442.74
|
1547.30
|
2016
|
|
|
|
First Quarter
|
1509.67
|
1196.28
|
1347.20
|
Second Quarter
|
1407.50
|
1204.48
|
1245.82
|
Third Quarter
|
1352.67
|
1209.88
|
1322.78
|
Fourth Quarter
|
1552.36
|
1301.16
|
1518.61
|
2017
|
|
|
|
First Quarter (through March 27, 2017)
|
1577.40
|
1506.33
|
1524.39
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
TOPIX
®
Index Historical Performance – Daily Closing Levels
January
4, 2012 to March 27, 2017
|
|
License Agreement.
JPMorgan Chase & Co. or its affiliate
has entered into a non-exclusive license agreement with the TSE providing for the license to it and certain of its affiliates or
subsidiaries, including JPMorgan Financial, with a non-exclusive license and, for a fee, with the right to use the TOPIX
®
Index in connection with certain securities, including the securities. For more information, see “Equity Index Descriptions
— The TOPIX
®
Index — License Agreement” in the accompanying underlying supplement.
Additional Information about the Trigger PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Provisions:
|
Postponement of maturity date:
|
If the scheduled maturity date is not a business day, then the maturity date will be the following business day. If the scheduled valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the third business day following the valuation date as postponed.
|
Minimum ticketing size:
|
$1,000 / 100 Trigger PLUS
|
Trustee:
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
JPMS
|
The estimated value of the Trigger PLUS:
|
The estimated value of the Trigger PLUS set forth on
the cover of this document 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 Trigger PLUS, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the Trigger PLUS. The estimated value of the Trigger PLUS does not represent a
minimum price at which JPMS would be willing to buy your Trigger PLUS in any secondary market (if any exists) at any time. The
internal funding rate used in the determination of the estimated value of the Trigger PLUS is based on, among other things, our
and our affiliates’ view of the funding value of the Trigger PLUS as well as the higher issuance, operational and ongoing
liability management costs of the Trigger PLUS in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase
& Co. For additional information, see “Risk Factors — The estimated value of the Trigger PLUS is derived by reference
to an internal funding rate” in this document. The value of the derivative or derivatives underlying the economic terms
of the Trigger PLUS 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 Trigger PLUS on the pricing date is based on market conditions and
other relevant factors and assumptions existing at that time. See “Risk Factors — The estimated value of the Trigger
PLUS does not represent future values of the Trigger PLUS and may
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
|
differ from others’ estimates” in this document.
The estimated value of the Trigger PLUS will be lower
than the original issue price of the Trigger PLUS because costs associated with selling, structuring and hedging the Trigger PLUS
are included in the original issue price of the Trigger PLUS. These costs include the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, the structuring fee, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the Trigger PLUS and the estimated cost of hedging our obligations
under the Trigger PLUS. 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 Trigger PLUS. See “Risk Factors — The estimated
value of the Trigger PLUS will be lower than the original issue price (price to public) of the Trigger PLUS” in this document.
|
Secondary market prices of the Trigger PLUS:
|
For information about factors that will impact any secondary market prices of the Trigger PLUS, see “Risk Factors — Secondary market prices of the Trigger PLUS will be impacted by many economic and market factors” in this document. In addition, we generally expect that some of the costs included in the original issue price of the Trigger PLUS will be partially paid back to you in connection with any repurchases of your Trigger PLUS 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 Trigger PLUS. The length of any such initial period reflects the structure of the Trigger PLUS, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the Trigger PLUS and when these costs are incurred, as determined by our affiliates. See “Risk Factors — The value of the Trigger PLUS as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the Trigger PLUS for a limited time period.”
|
Tax considerations:
|
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-1-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 the Trigger PLUS.
Based on current market conditions, in the opinion
of our special tax counsel, your Trigger PLUS should be treated 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 Trigger PLUS should be treated as long-term
capital gain or loss if you hold your Trigger PLUS for more than a year, whether or not you are an initial purchaser of Trigger
PLUS at the issue price. However, the IRS or a court may not respect this treatment of the Trigger PLUS, in which case the timing
and character of any income or loss on the Trigger PLUS 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 Trigger PLUS, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the Trigger PLUS, including possible alternative treatments and the issues presented by this notice.
Withholding under legislation commonly referred to as
“FATCA” may (if the Trigger PLUS are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the Trigger PLUS, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a Trigger PLUS. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any
amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser
regarding the potential application of FATCA to the Trigger PLUS.
|
Supplemental use of proceeds
|
The Trigger PLUS are offered to meet investor demand
for products that reflect the risk-
|
JPMorgan Chase Financial Company LLC
Trigger PLUS Based on the Value of the TOPIX
®
Index due April 19, 2023
Trigger Performance Leveraged Upside Securities
SM
Principal at Risk Securities
and hedging:
|
return profile and market exposure provided by the Trigger PLUS.
See “How the Trigger PLUS Work” in this document for an illustration of the risk-return profile of the Trigger PLUS
and “TOPIX
®
Index Overview” in this document for a description of the market exposure provided by the
Trigger PLUS.
The original issue price of the Trigger PLUS is equal
to the estimated value of the Trigger PLUS plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers
and the structuring fee, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming risks
inherent in hedging our obligations under the Trigger PLUS, plus the estimated cost of hedging our obligations under the Trigger
PLUS.
|
Benefit plan investor considerations:
|
See “Benefit Plan Investor Considerations” in the accompanying product supplement.
|
Supplemental plan of distribution:
|
Subject to regulatory constraints, JPMS intends to use its reasonable
efforts to offer to purchase the Trigger PLUS in the secondary market, but is not required to do so.
JPMS,
acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to Morgan Stanley Wealth Management.
In addition, Morgan Stanley Wealth Management will receive a structuring fee as set forth on the cover of this document for each
Trigger PLUS.
We or our affiliate may enter into swap agreements or
related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the
Trigger PLUS and JPMS and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge
transactions. See “— Supplemental use of proceeds and hedging” above and “Use of Proceeds and Hedging”
in the accompanying product supplement.
|
Contact:
|
Morgan Stanley Wealth Management clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (800) 869-3326).
|
Where you can find more information:
|
You may revoke your offer to purchase the Trigger PLUS 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 Trigger PLUS prior to their issuance. In the event of any changes to the terms of the
Trigger PLUS, 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 document together with the accompanying
prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes of which these
Trigger PLUS are a part, and the more detailed information contained in the accompanying product supplement and the accompanying
underlying supplement.
This document, together with the documents listed below, contains
the terms of the Trigger PLUS 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,
stand-alone 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 Trigger PLUS 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 Trigger PLUS.
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. MS-1-I dated June 3,
2016:
http://www.sec.gov/Archives/edgar/data/19617/000095010316013935/crt_dp64833-424b2.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 document, “we,” “us,”
and “our” refer to JPMorgan Financial.
“Performance Leveraged Upside Securities
SM
”
and “PLUS
SM
” are service marks of Morgan Stanley.
|
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