Term sheet
To prospectus dated November 7, 2014, prospectus supplement dated November 7, 2014, product supplement no. 4a-I dated November 7, 2014 and underlying supplement no. 1a-I dated November 7, 2014
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Term sheet to
Product Supplement No. 4a-I
Registration Statement No. 333-199966
Dated July 1, 2015; Rule 433
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Structured Investments
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$
Review Notes Linked to the EURO STOXX 50® Index due July 20, 2016 |
· | The notes are designed for investors who seek early exit prior to maturity at a premium if, (i) with respect to any Review Date (other than the final Review Date), the closing level of the EURO STOXX 50® Index on that Review Date is at or above the Call Level or (ii) with respect to the final Review Date, the Ending Index Level is at or above the Call Level. If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 20%, investors will lose more than 20% of their principal amount at maturity and may lose all of their principal amount at maturity. |
· | Investors in the notes should be willing to accept this risk of loss and be willing to forgo interest and dividend payments, in exchange for the opportunity to receive a premium payment if the notes are automatically called. |
· | The earliest date on which an automatic call may be initiated is October 15, 2015†. |
· | The notes are unsecured and unsubordinated obligations of JPMorgan Chase & Co. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co. |
· | Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof |
Index:
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The EURO STOXX 50® Index (Bloomberg ticker: SX5E)
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Automatic Call:
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If (i) with respect to any Review Date (other than the final Review Date), the closing level of the Index on that Review Date is greater than or equal to the Call Level or, (ii) with respect to the final Review Date, the Ending Index Level is greater than or equal to the Call Level, the notes will be automatically called for a cash payment per note that will vary depending on the applicable Review Date and call premium that will be payable on the applicable Call Settlement Date.
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Call Level:
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100% of the Initial Index Level for each Review Date
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Payment if Called:
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For every $1,000 principal amount note, you will receive one payment of $1,000 plus a call premium amount, calculated as follows:
• at least 3.25%* ×$1,000 if automatically called on the first Review Date
• at least 6.50%* × $1,000 if automatically called on the second Review Date
• at least 9.75%* × $1,000 if automatically called on the third Review Date
• at least 13.00%* × $1,000 if automatically called on the final Review Date
*The actual call premiums applicable to the first, second, third and final Review Dates will be provided in the pricing supplement, and will not be less than 3.25%, 6.50%, 9.75% and 13.00%, respectively.
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Payment at Maturity:
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If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by up to 20%, you will receive the principal amount of your notes at maturity.
If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by more than 20%, you will lose 1% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Index Return)
If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by more than 20%, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity
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Contingent Buffer Amount:
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20%
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Index Return:
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(Ending Index Level – Initial Index Level)
Initial Index Level
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Initial Index Level:
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The closing level of the Index on the Pricing Date
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Ending Index Level:
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The arithmetic average of the closing levels of the Index on the Ending Averaging Dates
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Pricing Date:
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On or about July 2, 2015
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Original Issue Date (Settlement Date):
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On or about July 8, 2015
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Review Dates†:
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October 15, 2015, January 14, 2016, April 14, 2016 and July 15, 2016 (final Review Date)
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Call Settlement Dates†:
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October 20, 2015, January 20, 2016, April 19, 2016 and the Maturity Date
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Ending Averaging Dates†:
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July 11, 2016, July 12, 2016, July 13, 2016, July 14, 2016 and July 15, 2016
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Maturity Date†:
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July 20, 2016
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CUSIP:
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48125UZL9
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$
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$
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Total
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$
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$
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$
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(1) | See “Supplemental Use of Proceeds” in this term sheet for information about the components of the price to public of the notes. |
(2) | J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., will pay all of the selling commissions it receives from us to other affiliated or unaffiliated dealers. In no event will these selling commissions exceed $10.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-87 of the accompanying product supplement no. 4a-I. |
· | Product supplement no. 4a-I dated November 7, 2014: http://www.sec.gov/Archives/edgar/data/19617/000089109214008407/e61359_424b2.pdf |
· |
Underlying supplement no. 1a-I dated November 7, 2014:
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· |
Prospectus supplement and prospectus, each dated November 7, 2014:
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Review Dates Prior to the Final Review Date
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Final Review Date
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||||||
Closing Level
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Index Level
Appreciation/
Depreciation at
Review Date
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Total
Return at First
Call Settlement Date
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Total
Return at
Second
Call Settlement Date
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Total Return at Third
Call Settlement Date
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Ending Index Level
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Index Return
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Total Return
at
Maturity
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6,300.00
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80.00%
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3.25%
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6.50%
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9.75%
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6,300.00
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80.00%
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13.00%
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5,950.00
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70.00%
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3.25%
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6.50%
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9.75%
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5,950.00
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70.00%
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13.00%
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5,600.00
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60.00%
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3.25%
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6.50%
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9.75%
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5,600.00
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60.00%
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13.00%
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5,250.00
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50.00%
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3.25%
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6.50%
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9.75%
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5,250.00
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50.00%
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13.00%
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4,900.00
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40.00%
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3.25%
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6.50%
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9.75%
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4,900.00
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40.00%
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13.00%
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4,550.00
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30.00%
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3.25%
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6.50%
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9.75%
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4,550.00
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30.00%
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13.00%
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4,200.00
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20.00%
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3.25%
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6.50%
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9.75%
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4,200.00
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20.00%
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13.00%
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3,850.00
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10.00%
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3.25%
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6.50%
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9.75%
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3,850.00
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10.00%
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13.00%
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3,500.00
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0.00%
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3.25%
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6.50%
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9.75%
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3,500.00
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0.00%
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13.00%
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3,496.50
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-0.10%
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N/A
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N/A
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N/A
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3,496.50
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-0.10%
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0.00%
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3,325.00
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-5.00%
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N/A
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N/A
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N/A
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3,325.00
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-5.00%
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0.00%
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3,150.00
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-10.00%
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N/A
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N/A
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N/A
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3,150.00
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-10.00%
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0.00%
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2,800.00
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-20.00%
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N/A
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N/A
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N/A
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2,800.00
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-20.00%
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0.00%
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2,799.65
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-20.01%
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N/A
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N/A
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N/A
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2,799.65
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-20.01%
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-20.01%
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2,450.00
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-30.00%
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N/A
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N/A
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N/A
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2,450.00
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-30.00%
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-30.00%
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2,100.00
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-40.00%
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N/A
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N/A
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N/A
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2,100.00
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-40.00%
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-40.00%
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1,750.00
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-50.00%
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N/A
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N/A
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N/A
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1,750.00
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-50.00%
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-50.00%
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1,400.00
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-60.00%
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N/A
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N/A
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N/A
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1,400.00
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-60.00%
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-60.00%
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1,050.00
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-70.00%
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N/A
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N/A
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N/A
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1,050.00
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-70.00%
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-70.00%
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700.00
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-80.00%
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N/A
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N/A
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N/A
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700.00
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-80.00%
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-80.00%
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350.00
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-90.00%
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N/A
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N/A
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N/A
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350.00
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-90.00%
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-90.00%
|
0.00
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-100.00%
|
N/A
|
N/A
|
N/A
|
0.00
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-100.00%
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-100.00%
|
· | APPRECIATION POTENTIAL — If, (a) with respect to any Review Date (other than the final Review Date), the closing level of the Index is greater than or equal to the Call Level on that Review Date or, (b) with respect to the final Review Date, the Ending Index Level is greater than or equal to the Call Level, your investment will yield a payment per $1,000 principal amount note of $1,000 plus: (i) at least 3.25%* × $1,000 if automatically called on the first Review Date, (ii) at least 6.50%* × $1,000 if automatically called on the second Review Date, (iii) at least 9.75%* × $1,000 if automatically called on the third Review Date or (iv) at least 13.00%* × $1,000 if automatically called on the final Review Date. Because the notes are our unsecured and unsubordinated obligations, payment of any amount on the notes is subject to our ability to pay our obligations as they become due. |
· | POTENTIAL EARLY EXIT WITH APPRECIATION AS A RESULT OF AUTOMATIC CALL FEATURE — While the original term of the notes is just over one year, the notes will be automatically called before maturity if, (i) with respect to any Review Date (other than the final Review Date), the closing level of the Index on that Review Date is at or above the Call Level or, (ii) with respect to the final Review Date, the Ending Index Level is at or above the Call Level. You will be entitled to the applicable payment corresponding to that Review Date as set forth on the cover of this term sheet. |
· | LIMITED PROTECTION AGAINST LOSS — If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by up to the Contingent Buffer Amount of 20%, you will be entitled to the full repayment of your principal at maturity. If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer, for every 1% that the Ending Index Level is less than the Initial Index Level, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity. |
· | RETURN LINKED TO THE EURO STOXX 50® INDEX — The return on the notes is linked to the EURO STOXX 50® Index. The EURO STOXX 50® Index consists of 50 component stocks of market sector leaders from within the Eurozone. The EURO STOXX 50® Index and STOXX® are the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (the “Licensors”), which are used under license. The notes based on the EURO STOXX 50® Index are in no way sponsored, endorsed, sold or promoted by STOXX Limited and its Licensors and neither STOXX Limited nor any of its Licensors shall have any liability with respect thereto. For additional information about the EURO STOXX 50® Index, see the information set forth under “Equity Index Descriptions — The EURO STOXX 50® Index” in the accompanying underlying supplement no. 1a-I. |
· | CAPITAL GAINS TAX TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes. |
· | YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. If the notes are not automatically called, the return on the notes at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative. If the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount of 20%, the benefit provided by the Contingent Buffer Amount will terminate and for every 1% that the Ending Index Level is less than the Initial Index Level, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity. |
· | CREDIT RISK OF JPMORGAN CHASE & CO. — The notes are subject to the credit risk of JPMorgan Chase & Co. and our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our creditworthiness or credit spreads, as determined by the market for taking our credit risk, is likely to adversely affect the value of the notes. If we were to default on our payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment. |
· | POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent and as an agent of the offering of the notes, hedging our obligations under the notes and making the assumptions used to determine the pricing of the notes and the estimated value of the notes when the terms of the notes are set, which we refer to as JPMS’s estimated value. In performing these duties, our economic interests and the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, our business activities, including hedging and trading activities, could cause our economic interests to be adverse to yours and could adversely affect any payment on the notes and the value of the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement no. 4a-I for additional information about these risks. |
· | LIMITED RETURN ON THE NOTES — Your potential gain on the notes will be limited to the call premium applicable to the Review Dates, as set forth on the cover of this term sheet, regardless of the appreciation in the Index, which may be significant. Because the closing level of the Index at various times during the term of the notes could be higher than on the Review Dates, you may receive a lower payment if automatically called or at maturity, as the case may be, than you would have if you had invested directly in the Index. |
· | REINVESTMENT RISK — If your notes are automatically called early, the term of the notes may be reduced to as short as approximately three months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the notes at a comparable return for a similar level of risk in the event the notes are automatically called prior to the Maturity Date. |
· | THE BENEFIT PROVIDED BY THE CONTINGENT BUFFER AMOUNT MAY TERMINATE ON THE FINAL ENDING AVERAGING DATE — If the notes are not automatically called and the Ending Index Level is less than the Initial Index Level by more than the Contingent Buffer Amount, the benefit provided by the Contingent Buffer Amount will terminate and you will be fully exposed to any depreciation in the Index. |
· | JPMS’S ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — JPMS’s estimated value is only an estimate using several factors. The original issue price of the notes will exceed JPMS’s estimated value because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “JPMS’s Estimated Value of the Notes” in this term sheet. |
· | JPMS’S ESTIMATED VALUE DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES — JPMS’s estimated value of the notes is determined by reference to JPMS’s internal pricing models when the terms of the notes are set. This estimated value is based on market conditions and other relevant factors existing at that time and JPMS’s assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for notes that are greater than or less than JPMS’s estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions. See “JPMS’s Estimated Value of the Notes” in this term sheet. |
· | JPMS’S ESTIMATED VALUE IS NOT DETERMINED BY REFERENCE TO CREDIT SPREADS FOR OUR CONVENTIONAL FIXED-RATE DEBT — The internal funding rate used in the determination of JPMS’s estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison to those costs for our conventional fixed-rate debt. If JPMS were to use the interest rate implied by our conventional fixed-rate credit spreads, we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate would |
· | THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN JPMS’S THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — We generally expect that some of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our secondary market credit spreads for structured debt issuances. See “Secondary Market Prices of the Notes” in this term sheet for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements). |
· | SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES — Any secondary market prices of the notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our secondary market credit spreads for structured debt issuances and, also, because secondary market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk consideration for information about additional factors that will impact any secondary market prices of the notes. |
· | SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS — The secondary market price of the notes during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the level of the Index , including: |
· | any actual or potential change in our creditworthiness or credit spreads; |
· | customary bid-ask spreads for similarly sized trades; |
· | secondary market credit spreads for structured debt issuances; |
· | the actual and expected volatility of the Index; |
· | the time to maturity of the notes; |
· | the likelihood of an automatic call being triggered; |
· | the dividend rates on the equity securities included in the Index; |
· | interest and yield rates in the market generally; |
· | 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 Index trade and the correlation among those rates and the levels of the Index; and |
· | a variety of other economic, financial, political, regulatory and judicial events. |
· | NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities composing the Index would have. |
· | VOLATILITY RISK — Greater expected volatility with respect to the Index indicates a greater likelihood as of the Pricing Date that the Ending Index Level could be below its Call Level or below its Initial Index Level by more than the Contingent Buffer Amount. The Index’s volatility, however, can change significantly over the term of the notes. The closing level of the Index could fall sharply between the Pricing Date and the final Review Date, which could result in a significant loss of principal. |
· | NON-U.S. SECURITIES RISK — The equity securities included in the EURO STOXX 50® Index have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities, 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. |
· | NO DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES — The value of your notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the currencies upon which the equity securities included in the EURO STOXX 50® Index are based, although any currency fluctuations could affect the performance of the EURO STOXX 50® Index. Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the notes, you will not receive any additional payment or |
· | LACK OF LIQUIDITY — The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes. |
· | THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT — The final terms of the notes will be based on relevant market conditions when the terms of the notes are set and will be provided in the pricing supplement. In particular, each of JPMS’s estimated value and the call premium will be provided in the pricing supplement and each may be as low as the applicable minimum set forth on the cover of this term sheet. Accordingly, you should consider your potential investment in the notes based on the minimums for JPMS’s estimated value and the call premium. |