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 July
20, 2017
JPMorgan Chase Financial Company LLC
|
July 2017
|
Pricing Supplement
Registration Statement Nos. 333-209682
and 333-209682-01
Dated July ,
2017
Filed pursuant to Rule 424(b)(2)
Structured Investments
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due July
31, 2020, with Step-Up Redemption Threshold Level Feature
Based on the Performance of the Common Stock
of Celgene Corporation
Principal at Risk Securities
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
Contingent Income Auto-Callable Securities do not guarantee
the payment of interest or the repayment of principal. Instead, the securities offer the opportunity for investors to earn a contingent
quarterly payment equal to at least 2.0625% of the stated principal amount with respect to each determination date on which the
closing price of the underlying stock is greater than or equal to 80% of the initial stock price, which we refer to as the downside
threshold level. However, if, on any determination date, the closing price of the underlying stock is less than the downside threshold
level, you will not receive any contingent quarterly payment for that quarterly period. In addition, if the closing price of the
underlying stock is greater than or equal to the then-applicable redemption threshold level (which will be equal to a percentage
of the initial stock price that increases progressively over the term of the securities, starting at 105% of the initial stock
price for the first four determination dates) on any determination date (other than the final determination date), the securities
will be automatically redeemed for an amount per security equal to the stated principal amount
plus
the contingent quarterly
payment. If the securities have not been automatically redeemed prior to maturity and the final stock price is greater than or
equal to the downside threshold level, the payment at maturity due on the securities will be the stated principal amount and the
contingent quarterly payment with respect to the final determination date. If, however, the securities have not been automatically
redeemed prior to maturity and the final stock price is less than the downside threshold level, you will be exposed to the decline
in the underlying stock, as compared to the initial stock price, on a 1-to-1 basis and will receive a cash payment at maturity
that is less than 80% of the stated principal amount of the securities and could be zero. The securities are for investors who
are willing to risk their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange for
the risk of receiving few or no contingent quarterly payments and also the risk of receiving a cash payment at maturity that is
significantly less than the stated principal amount of the securities and could be zero.
Accordingly, investors could lose their
entire initial investment in the securities.
Investors will not participate in any appreciation of the underlying stock. The
securities 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 securities is subject to the credit risk of JPMorgan
Financial, as issuer of the securities, and the credit risk of JPMorgan Chase & Co., as guarantor of the securities.
SUMMARY TERMS
|
|
Issuer:
|
JPMorgan Chase Financial Company LLC
|
Guarantor:
|
JPMorgan Chase & Co.
|
Underlying
stock:
|
Common stock of Celgene Corporation
|
Aggregate
principal amount:
|
$
|
Early
redemption:
|
If, on any determination date (other than the final determination date), the closing price of the underlying stock is
greater than or equal to
the then-applicable redemption threshold level, the securities will be automatically redeemed for an early redemption payment on the first contingent payment date immediately following the related determination date. No further payments will be made on the securities once they have been redeemed.
|
Redemption
threshold levels:
|
Determination dates:
1
st
, 2
nd
, 3
rd
and 4
th
5
th
, 6
th
, 7
th
and 8
th
9
th
, 10
th
and 11
th
|
Applicable redemption threshold level:
$
, which is equal to 105% of the initial stock
price
$
, which is equal to 110% of the initial stock
price
$
, which is equal to 115% of the initial stock
price
|
Early
redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) the contingent quarterly payment with respect to the related determination date.
|
Contingent
quarterly payment:
|
·
If, on any determination date, the closing price of the underlying stock is greater than
or equal to the downside threshold level, we will pay a contingent
quarterly
payment of at least $0.2063 (at least 2.0625% of the stated principal amount) per security on the related contingent payment date.
The actual contingent
quarterly
payment will be provided
in the pricing supplement.
·
If, on any determination date, the closing price of the underlying stock is less than the
downside threshold level, no contingent quarterly payment will be made with respect to that determination date.
|
Determination
dates:
|
October 30, 2017, January 29, 2018, April 30, 2018, July 30, 2018, October 29, 2018, January 28, 2019, April 29, 2019, July 29, 2019, October 28, 2019, January 28, 2020, April 28, 2020 and July 28, 2020, subject to postponement for non-trading days and certain market disruption events.
|
Contingent
payment dates:
|
November 2, 2017, February 1, 2018, May 3, 2018, August 2, 2018, November 1, 2018, January 31, 2019, May 2, 2019, August 1, 2019, October 31, 2019, January 31, 2020, May 1, 2020 and the maturity date, subject to postponement in the event of certain market disruption events and as described under “General Terms of the Notes — Postponement of Payment Date” in the accompanying product supplement
|
Payment
at maturity:
|
·
If the final stock price is
greater than or equal to
the downside threshold level:
|
(i) the stated principal amount
plus
(ii) the contingent quarterly payment with respect to the final determination date
|
|
·
If the final stock price is
less than
the downside threshold level:
|
(i) the stated principal amount
times
(ii) the stock performance factor. This cash payment will be less than 80% of the stated principal amount of the securities and could be zero.
|
Downside
threshold level:
|
$ , which is equal to 80% of the initial stock price
|
Initial
stock price:
|
The closing price of the underlying stock on the pricing date
|
Final
stock price:
|
The closing price of the underlying stock on the final determination date
|
Stock
adjustment factor:
|
The stock adjustment factor is referenced in determining the closing price of the underlying stock and is set initially at 1.0 on the pricing date. The stock adjustment factor is subject to adjustment in the event of certain corporate events affecting the underlying stock.
|
Stock
performance factor:
|
final stock price / initial stock price
|
Stated
principal amount:
|
$10 per security
|
Issue
price:
|
$10 per security (see “Commissions and issue price” below)
|
Pricing
date:
|
July , 2017 (expected to price on or about July 28, 2017)
|
Original
issue date (settlement date):
|
August , 2017 (3 business days after the pricing date)
|
Maturity
date:
|
July 31, 2020, 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
|
CUSIP/ISIN:
|
48129G299 / US48129G2993
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
J.P. Morgan Securities LLC (“JPMS”)
|
Commissions
and issue price:
|
|
Price to public
(1)
|
Fees and commissions
|
Proceeds to issuer
|
Per
security
|
|
$10.00
|
$0.20
(2)
|
$9.75
|
|
|
|
$0.05
(3)
|
|
Total
|
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
(1)
|
See “Additional Information about the Securities — Supplemental use of proceeds and hedging” in this document
for information about the components of the price to public of the securities.
|
|
(2)
|
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 $0.20 per
$10 stated principal amount security. See “Plan of Distribution (Conflicts of Interest)” in the accompanying product
supplement.
|
|
(3)
|
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 security
|
If the securities priced today and assuming a contingent
quarterly payment equal to the minimum listed above, the estimated value of the securities would be approximately $9.624 per $10
stated principal amount security. The estimated value of the securities on the pricing date will be provided in the pricing supplement
and will not be less than $9.40 per $10 stated principal amount security.
See “Additional Information about the Securities
— The estimated value of the securities” in this document for additional information.
Investing in the securities involves a number of risks. See
“Risk Factors” beginning on page PS-10 of the accompanying product supplement and “Risk Factors” beginning
on page 8 of this document.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of
this document or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
The securities 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, prospectus supplement and prospectus, each of which can be accessed via the hyperlinks below.
Please also see “Additional Information about the Securities” 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
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
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Investment Summary
The Contingent Income Auto-Callable Securities
due July 31, 2020, with Step-Up Redemption Threshold Level Feature Based on the Performance of the Common Stock of Celgene Corporation,
which we refer to as the securities, do not provide for the regular payment of interest. Instead, the securities provide an opportunity
for investors to earn a contingent quarterly payment, which is an amount equal to at least $0.2063 (at least 2.0625% of the stated
principal amount) per security, with respect to each quarterly determination date on which the closing price is greater than or
equal to 80% of the initial stock price, which we refer to as the downside threshold level. The actual contingent quarterly payment
will be provided in the pricing supplement. The contingent quarterly payment, if any, will be payable quarterly on the contingent
payment date immediately following the related determination date. However, if the closing price of the underlying stock is less
than the downside threshold level on any determination date, investors will receive no contingent quarterly payment for the related
quarterly period. It is possible that the closing price of the underlying stock could be below the downside threshold level on
most or all of the determination dates so that you will receive few or no contingent quarterly payments during the term of the
securities. We refer to these payments as contingent, because there is no guarantee that you will receive a payment on any contingent
payment date. Even if the underlying stock was at or above the downside threshold level on some quarterly determination dates,
the underlying stock may fluctuate below the downside threshold level on others.
If the closing price of the underlying
stock is greater than or equal to the then-applicable redemption threshold level on any determination date (other than the final
determination date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal
amount
plus
the contingent quarterly payment with respect to the related determination date. If the securities have not
previously been redeemed and the final stock price is greater than or equal to the downside threshold level, the payment at maturity
will also be the sum of the stated principal amount and the contingent quarterly payment with respect to the final determination
date. However, if the securities have not previously been redeemed and the final stock price is less than the downside threshold
level, investors will be exposed to the decline in the closing price of the underlying stock, as compared to the initial stock
price, on a 1-to-1 basis. Under these circumstances, the payment at maturity will be (i) the stated principal amount
times
(ii) the stock performance factor, which will be less than 80% of the stated principal amount of the securities and could be zero.
Investors in the securities must be willing to accept the risk of losing their entire principal and also the risk of receiving
few or no contingent quarterly payments over the term of the securities. In addition, investors will not participate in any appreciation
of the underlying stock.
Supplemental Terms of the Securities
For purposes of the accompanying product supplement, the underlying
stock is a “Reference Stock.”
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities offer investors an opportunity to earn a contingent quarterly payment equal to at least 2.0625% of the
stated principal amount with respect to each determination date on which the closing price of the underlying stock is greater than
or equal to 80% of the initial stock price, which we refer to as the downside threshold level. The actual contingent quarterly
payment will be provided in the pricing supplement. The securities may be redeemed prior to maturity for the stated principal amount
per security
plus
the applicable contingent quarterly payment, and the payment at maturity will vary depending on the final
stock price, as follows:
Scenario
1
|
On any determination date (other than
the final determination date), the closing price of the underlying stock is
greater than or equal to
the then-applicable
redemption threshold level.
§
The securities will be automatically redeemed for (i) the stated principal amount
plus
(ii) the contingent quarterly
payment with respect to the related determination date.
§
Investors will not participate in any appreciation of the underlying stock from the initial stock price.
|
Scenario
2
|
The securities are not automatically
redeemed prior to maturity, and the final stock price is
greater than or equal to
the downside threshold level.
§
The payment due at maturity will be (i) the stated principal amount
plus
(ii) the contingent quarterly payment with
respect to the final determination date.
§
Investors will not participate in any appreciation of the underlying stock from the initial stock price.
|
Scenario
3
|
The securities are not automatically
redeemed prior to maturity, and the final stock price is
less than
the downside threshold level.
§
The payment due at maturity will be (i) the stated principal amount
times
(ii) the stock performance factor.
§
Investors will lose some, and may lose all, of their principal in this scenario.
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for the
securities depending on (1) the closing price and (2) the final stock price.
Diagram
#1: Determination Dates (Other Than the Final Determination Date)
Diagram #2: Payment at Maturity if No
Automatic Early Redemption Occurs
For more information about the payment upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 5.
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Hypothetical Examples
The below examples are based on the following terms:
Stated principal amount:
|
$10 per security
|
Hypothetical initial stock price:
|
$135.00
|
Hypothetical downside threshold level:
|
$108.00, which is 80% of the hypothetical initial stock price
|
Hypothetical stock adjustment factor:
|
1.0
|
Hypothetical contingent quarterly payment:
|
$0.2063 (2.0625% of the stated principal amount) per security
|
Hypothetical Redemption Threshold Levels:
Determination Dates:
1
st
, 2
nd
, 3
rd
and 4
th
5
th
, 6
th
, 7
th
and 8
th
9
th
, 10
th
and 11
th
|
Applicable Redemption Threshold Level:
$141.75, which is equal to 105% of the hypothetical initial
stock price
$148.50, which is equal to 110% of the hypothetical initial
stock price
$155.25, which is equal to 115% of the hypothetical initial
stock price
|
In Examples 1 and 2, the closing price
of the underlying stock fluctuates over the term of the securities and the closing price of the underlying stock is greater than
or equal to the then-applicable redemption threshold level on one of the first eleven determination dates. Because the closing
price of the underlying stock is greater than or equal to the then-applicable redemption threshold level on one of the first eleven
determination dates, the securities are automatically redeemed following the relevant determination date. In Examples 3 and 4,
the closing price of the underlying stock on the first eleven determination dates is less than the then-applicable redemption threshold
level, and, consequently, the securities are not automatically redeemed prior to, and remain outstanding until, maturity.
|
Example 1
|
Example 2
|
Determination Dates
|
Hypothetical Closing Price
|
Contingent Quarterly Payment
|
Early Redemption Payment*
|
Hypothetical Closing Price
|
Contingent Quarterly Payment
|
Early Redemption Payment*
|
#1
|
$130.00
|
$0.2063
|
N/A
|
$115.00
|
$0.2063
|
N/A
|
#2
|
$135.00
|
$0.2063
|
N/A
|
$90.00
|
$0
|
N/A
|
#3
|
$140.00
|
$0.2063
|
N/A
|
$75.00
|
$0
|
N/A
|
#4
|
$141.00
|
$0.2063
|
N/A
|
$95.00
|
$0
|
N/A
|
#5
|
$150.00
|
—*
|
$10.2063
|
$144.00
|
$0.2063
|
N/A
|
#6
|
N/A
|
N/A
|
N/A
|
$147.00
|
$0.2063
|
N/A
|
#7
|
N/A
|
N/A
|
N/A
|
$105.00
|
$0
|
N/A
|
#8
|
N/A
|
N/A
|
N/A
|
$135.00
|
$0.2063
|
N/A
|
#9
|
N/A
|
N/A
|
N/A
|
$115.00
|
$0.2063
|
N/A
|
#10
|
N/A
|
N/A
|
N/A
|
$162.00
|
—*
|
$10.2063
|
#11
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Final Determination Date
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
* The early redemption payment includes the
unpaid contingent quarterly payment with respect to the determination date on which the closing price is greater than or equal
to the then-applicable redemption threshold level and the securities are redeemed as a result.
|
§
|
In
Example 1
, the securities are automatically redeemed following the fifth determination date as the closing price
of the underlying stock on the fifth determination date is equal to the then-applicable redemption threshold level. In this example,
the securities are redeemed early following the fifth determination date as this is the first determination date on which the closing
price of the underlying stock is greater than or equal to the then-applicable redemption threshold level, even though the closing
price of the underlying stock is greater than the initial share price and progressively increasing on each successive previous
determination date. This illustrates the impact of the step-up redemption threshold feature, as well as the fact that each redemption
threshold level is greater than 100% of the initial stock price. As the closing price of the underlying stock on each of the first,
second, third and fourth determination date is greater than the downside threshold level, you receive the contingent quarterly
payment of $0.2063 with respect to each of those determination dates. Following the fifth determination date, you receive the early
redemption payment, which includes the contingent quarterly payment with respect to the fifth determination date, calculated as
follows:
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
stated principal
amount + contingent quarterly payment = $10 + $0.2063 = $10.2063
In this example, the early redemption
feature limits the term of your investment to approximately 15 months and you may not be able to reinvest at comparable terms or
returns. If the securities are redeemed early, you will stop receiving contingent quarterly payments. The total payments on the
securities will amount to $11.0315 per security.
|
§
|
In
Example 2
, the securities are automatically redeemed following the tenth determination date as the closing price
on the tenth determination date is greater than the then-applicable redemption threshold level. Even though the closing prices
of the underlying stock on the fifth, sixth and eighth determination dates were greater than both the initial stock price and redemption
threshold level applicable to the first four determination dates, the securities were not redeemed on any of those dates as the
closing price of the underlying stock was never greater than the then-applicable redemption threshold level, which “stepped
up” from 105% of the initial share price for the first four determination dates to 110% of the initial share price on the
fifth determination date. As the closing price of the underlying stock on each of the first, fifth, sixth, eighth and ninth determination
dates is greater than the downside threshold level, you receive the contingent quarterly payment of $0.2063 with respect to each
of those determination dates. Following the tenth determination date, you receive an early redemption payment of $10.2063, which
includes the contingent quarterly payment with respect to the tenth determination date.
|
In this example, the early redemption
feature limits the term of your investment to approximately 30 months and you may not be able to reinvest at comparable terms or
returns. If the securities are redeemed early, you will stop receiving contingent quarterly payments. Further, although the underlying
stock has appreciated by 20% from the initial stock price on the tenth determination date, you only receive $10.2063 per security
upon redemption and do not benefit from this appreciation. The total payments on the securities will amount to $11.2378 per security.
|
Example 3
|
Example 4
|
Determination Dates
|
Hypothetical Closing Price
|
Contingent Quarterly Payment
|
Early Redemption Payment
|
Hypothetical Closing Price
|
Contingent Quarterly Payment
|
Early Redemption Payment
|
#1
|
$100.00
|
$0
|
N/A
|
$90.00
|
$0
|
N/A
|
#2
|
$95.00
|
$0
|
N/A
|
$85.00
|
$0
|
N/A
|
#3
|
$84.00
|
$0
|
N/A
|
$100.00
|
$0
|
N/A
|
#4
|
$90.00
|
$0
|
N/A
|
$102.00
|
$0
|
N/A
|
#5
|
$80.00
|
$0
|
N/A
|
$80.00
|
$0
|
N/A
|
#6
|
$90.00
|
$0
|
N/A
|
$75.00
|
$0
|
N/A
|
#7
|
$75.00
|
$0
|
N/A
|
$65.00
|
$0
|
N/A
|
#8
|
$55.00
|
$0
|
N/A
|
$60.00
|
$0
|
N/A
|
#9
|
$60.00
|
$0
|
N/A
|
$55.00
|
$0
|
N/A
|
#10
|
$65.00
|
$0
|
N/A
|
$80.00
|
$0
|
N/A
|
#11
|
$70.00
|
$0
|
N/A
|
$85.00
|
$0
|
N/A
|
Final Determination Date
|
$74.25
|
$0
|
N/A
|
$108.00
|
—*
|
N/A
|
Payment at Maturity
|
$5.50
|
$10.2063
|
* The final contingent quarterly payment, if any,
will be paid at maturity.
Examples 3 and 4 illustrate the payment
at maturity per security based on the final stock price.
|
§
|
In
Example 3
, the closing price of the underlying stock remains below the downside threshold level throughout the term
of the securities. As a result, you do not receive any contingent quarterly payment during the term of the securities and, at maturity,
you are fully exposed to the decline in the closing price of the underlying stock. As the final stock price is less than the downside
threshold level, you receive a cash payment at maturity calculated as follows:
|
stated principal
amount × stock performance factor = $10 × $74.25 / $135.00 = $5.50
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
In this example, the payment you receive
at maturity is significantly less than the stated principal amount.
|
§
|
In
Example 4
, the closing price of the underlying stock decreases to a final stock price of $108.00. Although the final
stock price is less than the initial stock price, because the final stock price is still not less than the downside threshold level,
you receive the stated principal amount
plus
a contingent quarterly payment with respect to the final determination date.
Your payment at maturity is calculated as follows:
|
$10 + $0.2063 = $10.2063
In this example, although the final stock
price represents a 20% decline from the initial stock price, you receive the stated principal amount per security plus the contingent
quarterly payment, equal to a total payment of $10.2063 per security at maturity.
The hypothetical returns and hypothetical
payments on the securities shown above apply
only if you hold the securities for their entire term or until early redemption.
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
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk factors
for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” of the accompanying product supplement. We urge you to consult your investment, legal, tax, accounting and other
advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal and your investment in the securities may result in a loss.
The terms of the securities differ from those of ordinary debt securities in that the securities do not guarantee the return of
any of the principal amount at maturity. Instead, if the securities have not been automatically redeemed prior to maturity and
if the final stock price is less than the downside threshold level, you will be exposed to the decline in the closing price of
the underlying stock, as compared to the initial stock price, on a 1-to-1 basis and you will receive for each security that you
hold at maturity a cash payment equal to the stated principal amount
times
the stock performance factor. In this case, your
payment at maturity will be less than 80% of the stated principal amount and could be zero.
|
|
§
|
You will not receive any contingent quarterly payment for any quarterly period where the closing price on the relevant determination
date is less than the downside threshold level.
The terms of the securities differ from those of ordinary debt securities in
that the securities do not guarantee the payment of regular interest. Instead, a contingent quarterly payment will be made with
respect to a quarterly period only if the closing price of the underlying stock on the relevant determination date is greater than
or equal to the downside threshold level. If the closing price of the underlying stock is below the downside threshold level on
any determination date, you will not receive a contingent quarterly payment for the relevant quarterly period.
It is possible that the closing price of the underlying
stock
could be below the downside threshold level on most or all of the determination dates so that you will
receive
few or no contingent quarterly payments. If you do not earn sufficient contingent quarterly payments over the term of the securities,
the overall return on the securities may be less than the amount that would be paid on one of our conventional debt securities
of comparable maturity.
|
|
§
|
The contingent quarterly payment is based solely on the closing prices on the specified determination dates
.
Whether the contingent quarterly payment will be made with respect to a determination date will be based on the closing
price of the underlying stock on that determination date. As a result, you will not know whether you will receive the contingent
quarterly payment until the related determination date. Moreover, because the contingent quarterly payment is based solely on the
closing price of the underlying stock on a specific determination date, if that closing price is less than the downside threshold
level, you will not receive any contingent quarterly payment with respect to that determination date, even if the closing price
of the underlying stock was higher on other days during the term of the securities.
|
|
§
|
The securities 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 securities.
Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the securities. 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 securities. If we and JPMorgan Chase &
Co. were to default on our payment obligations, you may not receive any amounts owed to you under the securities 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 securities. If these affiliates
do not make payments to us and we fail to make payments on the securities, 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.
|
|
§
|
Investors will not participate in any appreciation in the price
of the underlying stock.
Investors will not participate in any appreciation in the price
of the underlying stock from the initial stock price, and the return on the securities will be limited to the contingent quarterly
payment that is paid with respect to each determination date on which the closing price is greater than or equal to the downside
threshold level.
|
|
§
|
Early redemption risk.
The term of your investment in the securities
may be limited to as short as approximately three months by the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent quarterly payments and you may be forced to reinvest in a lower
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
interest rate environment
and may not be able to reinvest the proceeds from an investment in the securities at a comparable return for a similar level of
risk.
|
§
|
The redemption threshold level applicable to each determination date is greater than the initial stock price, and the redemption
threshold level increases progressively over the term of the securities.
The securities will be redeemed only if the closing
price of the underlying stock increases from the initial share price to be greater than or equal to the then-applicable redemption
threshold level. Even if the closing price of the underlying stock appreciates over the term of the securities, it may not appreciate
sufficiently for the securities to be redeemed early (including because, due to the step-up redemption threshold level feature,
the redemption threshold level increases progressively over the term of the securities).
|
|
§
|
Economic interests of the issuer, the guarantor, the calculation agent, the agent of the offering of the securities 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 securities, including acting as calculation agent
and as an agent of the offering of the securities, hedging our obligations under the securities and making the assumptions used
to determine the pricing of the securities and the estimated value of the securities, which we refer to as the estimated value
of the securities. 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 securities.
The calculation agent will determine the initial stock price, the redemption threshold levels, the downside threshold level and
the final stock price and whether the closing price of the underlying stock on any determination date is greater than or equal
to the then-applicable redemption threshold level or is below the downside threshold level. Determinations made by the calculation
agent, including with respect to the occurrence or non-occurrence of market disruption events, may affect the payment to you at
maturity or whether the securities are redeemed early.
|
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 securities
and the value of the securities. It is possible that hedging or trading activities of ours or our affiliates in connection with
the securities could result in substantial returns for us or our affiliates while the value of the securities declines. Please
refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement for
additional information about these risks.
|
§
|
The estimated value of the securities will be lower than the original
issue price (price to public) of the securities.
The estimated value of the securities is
only an estimate determined by reference to several factors. The original issue price of the securities will exceed the estimated
value of the securities because costs associated with selling, structuring and hedging the securities are included in the original
issue price of the securities. 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 securities and the estimated
cost of hedging our obligations under the securities. See “Additional Information about the Securities — The estimated
value of the securities” in this document.
|
|
§
|
The estimated value of the securities does not represent future
values of the securities and may differ from others’ estimates. The estimated value of the securities is determined by reference
to internal pricing models of our affiliates.
This estimated value of the securities 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 securities that are greater than or less than the estimated value of the securities. 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 securities 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 securities from you in secondary market transactions. See “Additional Information about
the Securities — The estimated value of the securities” in this document.
|
|
§
|
The estimated value of the securities is derived by reference to
an internal funding rate.
The internal funding rate used in the determination of the estimated
value of the securities is based on, among other things, our and our affiliates’ view of the funding value of the securities
as well as the higher issuance, operational and ongoing liability management costs of the securities
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 securities
and any secondary market prices of the securities. See “Additional Information about the Securities — The estimated
value of the securities” in this document.
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
|
§
|
The value of the securities as published by JPMS (and which may
be reflected on customer account statements) may be higher than the then-current estimated value of the securities for a limited
time period.
We generally expect that some of the costs included in the original issue price
of the securities will be partially paid back to you in connection with any repurchases of your securities 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 Securities — Secondary market prices of
the securities” in this document for additional information relating to this initial period. Accordingly, the estimated value
of your securities during this initial period may be lower than the value of the securities as published by JPMS (and which may
be shown on your customer account statements).
|
|
§
|
Secondary market prices of the securities will likely be lower than
the original issue price of the securities.
Any secondary market prices of the securities
will likely be lower than the original issue price of the securities 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 securities. As a result, the price, if any, at which JPMS will be willing
to buy securities 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 securities.
|
The
securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your securities
to maturity. See “— Secondary trading may be limited” below.
|
§
|
Secondary market prices of the securities will be impacted by many
economic and market factors.
The secondary market price of the securities 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, structuring fee, projected hedging profits, if any, estimated hedging costs and the closing price of one share
of the underlying stock, including:
|
|
o
|
any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness or credit spreads;
|
|
o
|
customary bid-ask spreads for similarly sized trades;
|
|
o
|
our internal secondary market funding rates for structured debt issuances;
|
|
o
|
the actual and expected volatility in the prices of the underlying stock;
|
|
o
|
the time to maturity of the securities;
|
|
o
|
whether the closing price of one share of the underlying stock has been, or is expected to be, less than the downside threshold
level on any determination date and whether the final stock price is expected to be less than the downside threshold level;
|
|
o
|
the likelihood of an early redemption being triggered;
|
|
o
|
the dividend rate on the underlying stock;
|
|
o
|
interest and yield rates in the market generally;
|
|
o
|
the occurrence of certain events affecting the issuer of the underlying stock that may or may not require an adjustment to
the stock adjustment factor, including a merger or acquisition; and
|
|
o
|
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 securities, which may also be reflected on customer account
statements. This price may be different (higher or lower) than the price of the securities, if any, at which JPMS may be willing
to purchase your securities in the secondary market.
|
§
|
Investing in the securities is not equivalent to investing in the
common stock of Celgene Corporation.
Investors in the securities will not have voting rights
or rights to receive dividends or other distributions or any other rights with respect to the underlying stock.
|
|
§
|
No affiliation with Celgene Corporation.
Celgene Corporation is not an affiliate of ours, is not involved with this offering in any way, and has no obligation to consider
your interests in taking any corporate actions that might affect the value of the securities. We have not made any due diligence
inquiry with respect to Celgene Corporation in connection with this offering.
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
|
§
|
We may engage in business with or involving Celgene Corporation
without regard to your interests.
We or our affiliates may presently or from time to time
engage in business with Celgene Corporation without regard to your interests and thus may acquire non-public information about
Celgene Corporation. Neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, we or
our affiliates from time to time have published and in the future may publish research reports with respect to Celgene Corporation,
which may or may not recommend that investors buy or hold the underlying stock.
|
|
§
|
The anti-dilution protection for the underlying stock is limited
and may be discretionary.
The calculation agent will make adjustments to the stock adjustment
factor and other adjustments for certain corporate events affecting the underlying stock. However, the calculation agent will not
make an adjustment in response to all events that could affect the underlying stock. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the securities may be materially and adversely affected. You should also
be aware that the calculation agent may make adjustments in response to events that are not described in the accompanying product
supplement to account for any diluting or concentrative effect, but the calculation agent is under no obligation to do so or to
consider your interests as a holder of the securities in making these determinations.
|
|
§
|
Hedging and trading activities by the issuer and its affiliates could potentially affect the value of the
securities
.
The hedging or trading activities of the issuer’s affiliates and of any other hedging counterparty with respect to the
securities
on
or prior to the pricing date and prior to maturity could adversely affect the value of the underlying stock. Any of these hedging
or trading activities
on or prior to the pricing date could potentially affect the initial stock price and, as a result,
the redemption threshold levels, which are the prices at or above which the securities will be automatically redeemed, and the
downside threshold level, which is the price at or above which the underlying stock must close on each determination date in order
for you to earn a contingent quarterly payment or, if the securities are not redeemed prior to maturity, in order for you to avoid
being exposed to the negative price performance of the underlying stock at maturity. Additionally, these hedging or trading activities
during the term of the securities could potentially affect the price of the underlying stock on the determination dates and, accordingly,
whether investors will receive one or more contingent quarterly payments, whether the securities are automatically redeemed prior
to maturity and, if the securities are not redeemed prior to maturity, the payment to you at maturity. It is possible that these
hedging or trading activities could result in substantial returns for us or our affiliates while the value of the securities declines.
|
|
§
|
Secondary trading may be limited.
Th
e securities will not be listed on a securities exchange. There may be little or no secondary market for the securities.
Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily
.
JPMS
may act as a market maker for the securities, 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 securities, the price at which you may be able to trade your
securities is likely to depend on the price, if any, at which
JPMS
is willing to buy the securities. 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 securities.
|
|
§
|
The final terms and valuation of the securities will be provided in the pricing supplement.
The final terms of the securities
will be provided in the pricing supplement. In particular, each of the estimated value of the securities and the contingent quarterly
payment 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 securities based on the minimums for the estimated
value of the securities and the contingent quarterly payment.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
There is no direct legal
authority as to the proper U.S. federal income tax treatment of the securities, 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 securities as prepaid forward contracts with
associated contingent coupons, as described in “Additional Information about the Securities — 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 securities, the timing and character
of any income or loss on the securities could be materially affected. Although the U.S. federal income tax treatment of contingent
quarterly payments (including any contingent quarterly payments paid in connection with an early redemption or at maturity) is
uncertain, in determining our reporting responsibilities we intend (in the absence of an administrative determination or judicial
ruling to the contrary) to treat any contingent quarterly payments as ordinary income. In addition, in 2007 Treasury and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term
of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect
to these instruments and the relevance of factors such as the nature of the underlying property to which the instruments are linked.
While the notice requests comments on appropriate
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
transition rules and effective dates, any Treasury
regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences of an
investment in the securities, 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 securities, including possible alternative treatments and the issues presented
by this notice.
Non-U.S. Holders — Tax Consideration.
The U.S. federal income tax treatment of contingent quarterly payments is uncertain, and although we believe it is reasonable
to take a position that contingent quarterly payments are not subject to U.S. withholding tax (at least if an applicable Form W-8
is provided), a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible
reduction of that rate under an applicable income tax treaty), unless income from your securities is effectively connected with
your conduct of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent
establishment in the United States). In the event of any withholding, we will not be required to pay any additional amounts with
respect to amounts so withheld. If you are not a United States person, you are urged to consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the securities in light of your particular circumstances.
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Celgene Corporation Overview
Celgene Corporation is a global biopharmaceutical
company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory
diseases through solutions in protein homeostasis, immuno-oncology, epigenetics and neuro-inflammation.. The underlying stock is
registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to or filed
with the SEC by Celgene Corporation pursuant to the Exchange Act can be located by reference to the SEC file number 001-34912 through
the SEC’s website at www.sec.gov. In addition, information regarding Celgene Corporation may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Information as of market close on July 19, 2017:
Bloomberg
Ticker Symbol:
|
CELG
|
52 Week
High (on 7/19/2017):
|
$135.00
|
Current Closing Price:
|
$135.00
|
52 Week Low (on 10/25/2016):
|
$97.63
|
52 Weeks Ago (on 7/19/2016):
|
$102.26
|
|
|
The table below sets forth the published high and low closing
prices of, as well as dividends on, the underlying stock for each quarter in the period from January 1, 2012 through July 19, 2017.
The associated graph following the table shows the closing prices of the underlying stock for each day in the same period. The
closing price of the underlying stock on July 19, 2017 was $135.00. We obtained the closing price information above and the information
in the table and graph below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The closing prices may have been adjusted by Bloomberg for corporate actions such as stock splits, public offerings,
mergers and acquisitions, spin-offs, delistings and bankruptcy.
Since its inception, the closing price of the underlying stock
has experienced significant fluctuations. The historical performance of the underlying stock should not be taken as an indication
of the underlying stock’s future performance, and no assurance can be given as to the price of the underlying stock at any
time, including on the determination dates.
Common
Stock of Celgene Corporation
(CUSIP: 151020104)
|
High
|
Low
|
Dividends
(Declared)
|
2012
|
|
|
|
First Quarter
|
$39.25
|
$33.61
|
—
|
Second Quarter
|
$40.15
|
$29.72
|
—
|
Third Quarter
|
$38.64
|
$31.48
|
—
|
Fourth Quarter
|
$41.04
|
$35.65
|
—
|
2013
|
|
|
|
First Quarter
|
$57.96
|
$40.55
|
—
|
Second Quarter
|
$65.09
|
$56.10
|
—
|
Third Quarter
|
$77.31
|
$59.46
|
—
|
Fourth Quarter
|
$85.39
|
$72.25
|
—
|
2014
|
|
|
|
First Quarter
|
$85.97
|
$69.65
|
—
|
Second Quarter
|
$86.80
|
$68.45
|
—
|
Third Quarter
|
$96.21
|
$83.13
|
—
|
Fourth Quarter
|
$118.68
|
$86.38
|
—
|
2015
|
|
|
|
First Quarter
|
$128.50
|
$110.51
|
—
|
Second Quarter
|
$120.34
|
$107.54
|
—
|
Third Quarter
|
$139.01
|
$104.79
|
—
|
Fourth Quarter
|
$127.20
|
$106.55
|
—
|
2016
|
|
|
|
First Quarter
|
$117.96
|
$96.69
|
—
|
Second Quarter
|
$110.57
|
$94.85
|
—
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Common
Stock of Celgene Corporation
(CUSIP: 151020104)
|
High
|
Low
|
Dividends
(Declared)
|
Third Quarter
|
$116.27
|
$100.25
|
—
|
Fourth Quarter
|
$124.16
|
$97.63
|
—
|
2017
|
|
|
|
First Quarter
|
$126.88
|
$111.53
|
—
|
Second Quarter
|
$134.31
|
$114.41
|
—
|
Third Quarter (through July 19, 2017)
|
$135.00
|
$130.18
|
—
|
We make no representation as to the amount of dividends, if
any, that Celgene Corporation may pay in the future. In any event, as an investor in the securities, you will not be entitled to
receive dividends, if any, that may be payable on the common stock of Celgene Corporation
The Common Stock
of Celgene Corporation – Daily Closing Prices
January 3, 2012 to
July 19, 2017
|
|
*The dotted line in the graph indicates the hypothetical
downside threshold level, equal to 80% of the closing price of the underlying stock on July 19, 2017. The actual downside
threshold level will be based on the closing price of the underlying stock on the pricing date.
|
This document relates only to the securities offered hereby
and does not relate to the underlying stock or other securities of Celgene Corporation. We have derived all disclosures contained
in this document regarding the common stock of Celgene Corporation from the publicly available documents described in the first
paragraph under this “Celgene Corporation Overview” section without independent verification. In connection with the
offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence
inquiry with respect to Celgene Corporation. Neither we nor the agent makes any representation that such publicly available documents
or any other publicly available information regarding Celgene Corporation is accurate or complete. Furthermore, we cannot give
any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness
of the publicly available documents described in the first paragraph under this “Celgene Corporation Overview” section)
that would affect the trading price of the underlying stock (and therefore the price of the underlying stock at the time we price
the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose
material future events concerning Celgene Corporation could affect the value received at maturity with respect to the securities
and therefore the trading prices of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the underlying stock.
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
Additional Information about the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional
Provisions
|
|
Record date:
|
The record date for each contingent payment date is the date one business day prior to that contingent payment date.
|
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 final determination date is not a trading day or if a market disruption event occurs on that day so that the final determination date is postponed and falls less than three business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the third business day following that final determination date as postponed.
|
Minimum ticketing size:
|
$1,000/100 securities
|
Trustee:
|
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)
|
Calculation agent:
|
JPMS
|
The estimated value of the securities:
|
The estimated value of the securities 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 securities, valued using the internal funding rate described below, and (2) the derivative
or derivatives underlying the economic terms of the securities. The estimated value of the securities does not represent a minimum
price at which JPMS would be willing to buy your securities in any secondary market (if any exists) at any time. The internal funding
rate used in the determination of the estimated value of the securities is based on, among other things, our and our affiliates’
view of the funding value of the securities as well as the higher issuance, operational and ongoing liability management costs
of the securities 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 securities 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 securities 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 securities 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 securities does not represent future values of
the securities and may differ from others’ estimates” in this document.
The estimated value of the securities will be lower than
the original issue price of the securities because costs associated with selling, structuring and hedging the securities are included
in the original issue price of the securities. 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 securities and the estimated cost of hedging our obligations under the securities.
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 securities. See “Risk Factors — The estimated value of the securities
will be lower than the original issue price (price to public) of the securities” in this document.
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Secondary market prices of the securities:
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For information about factors that will impact any secondary market prices of the securities, see “Risk Factors — Secondary market prices of the securities 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 securities will be partially paid back to you in connection with any repurchases of your securities 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 securities. The length of any such initial period reflects the structure of the securities, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the securities and when these costs are incurred, as determined by our affiliates. See “Risk Factors — The value of the securities as published by JPMS (and which may be reflected on customer account statements) may be higher than the then-current estimated value of the securities for a limited time period.”
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Tax considerations:
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You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. MS-1-I. In determining our reporting responsibilities we intend to treat (i) the securities for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any contingent quarterly payments as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying product supplement. Based on the advice of Davis Polk &
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JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
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Wardwell LLP, our special tax counsel, we believe that this
is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the
timing and character of any income or loss on the securities could be materially affected. In addition, in 2007 Treasury and the
IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and
similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments and the relevance of factors such as the nature of the underlying property to which the instruments
are linked. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or
other guidance promulgated after consideration of these issues could materially affect the tax consequences of an investment in
the securities, possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments and the issues presented by this notice.
Non-U.S. Holders — Tax Considerations.
The U.S.
federal income tax treatment of contingent quarterly payments is uncertain, and although we believe it is reasonable to take a
position that contingent quarterly payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided),
a withholding agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of
that rate under an applicable income tax treaty), unless income from your securities is effectively connected with your conduct
of a trade or business in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment
in the United States). If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal
income tax consequences of an investment in the securities in light of your particular circumstances.
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies) on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments linked
to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations (such an index, a “Qualified
Index”). Additionally, the applicable regulations exclude from the scope of Section 871(m) instruments issued in 2017 that
do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal income tax
purposes (each an “Underlying Security”). Based on certain determinations made by us, we expect that Section 871(m)
will not apply to the securities 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 securities. You should consult your
tax adviser regarding the potential application of Section 871(m) to the securities.
FATCA
. Withholding under legislation commonly referred to
as “FATCA” could apply to payments with respect to the securities that are treated as U.S.-source “fixed or determinable
annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest, if the securities
are recharacterized, in whole or in part, as debt instruments, or contingent quarterly payments if they are otherwise treated as
FDAP Income). If the securities are recharacterized, in whole or in part, as debt instruments, withholding could also apply to
payments of gross proceeds of a taxable disposition, including an early redemption or redemption at maturity. However, under a
recent IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) with
respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential application
of FATCA to the securities.
In the event of any withholding on the securities, we will
not be required to pay any additional amounts with respect to amounts so withheld.
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Supplemental use of proceeds and hedging:
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The securities are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the securities. See “How the Securities
Work” in this document for an illustration of the risk-return profile of the securities and “Celgene Corporation Overview”
in this document for a description of the market exposure provided by the securities.
The original issue price of the securities is equal
to the estimated value of the securities 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 securities, plus the estimated cost of hedging our obligations under the securities.
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Benefit plan investor considerations:
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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 securities 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
|
JPMorgan Chase Financial Company LLC
Contingent Income Auto-Callable Securities due July 31, 2020
Based on the Performance of the Common Stock of Celgene Corporation
Principal at Risk Securities
|
Management. In addition, Morgan Stanley Wealth Management
will receive a structuring fee as set forth on the cover of this document for each security.
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 securities
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.
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Contact:
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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).
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Where you can find more information:
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You may revoke your offer to purchase the securities 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 securities prior to their issuance. In the event of any changes to the terms of the securities,
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
securities are a part, and the more detailed information contained in the accompanying product supplement.
This document, together with the documents listed below, contains
the terms of the securities 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” section of the accompanying product supplement, as the securities 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 securities.
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
• 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.
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